Thursday May 29, 05:25 PM
Jessops finance package staves off 'death'
By Tom Braithwaite, Retail Correspondent
Jessops (LSE: JSP.L - news) , the struggling camera retailer, has successfully refinanced its onerous debt terms, holding out the prospect it
could escape "death by a thousand cuts".David Adams, executive chairman, who was brought in to save the business after profits collapsed, had previously used the morbid phrase as he described reducing finance costs as one of his priorities. An agreement in outline with HSBC, revealed in interim results on Thursday, gives Jessops a lifeline as it seeks to restructure into a smaller, more profitable company. However, continued poor trading at the company, hurt by "heavy discounting from our competitors", caused Jessops to warn it would not make a profit this year. "We could have sold more if we'd been happy to enter the price wars that are going on in our areas," said Mr Adams. He added that the increasingly fierce competition was now "across the market", having started among cheaper compact cameras sold increasingly in supermarkets. Sales fell 25 per cent to £134.8m in the six months to March 30 after the closure of 81 stores. The loss before finance fees and non-recurring items fell from £7.9m to £6.1m but the onerous debt servicing left pre-tax losses at £11.2m against £24.7m a year earlier. Last June the company announced it had agreed facilities of £66.5m with HSBC and was paying 5.25 per cent above Libor as well as giving the bank warrants over 10 per cent of its share capital and a fee of £7m. The new agreement for £49m in senior debt and an overdraft facility sees the £7m fee converted into a further 10 per cent warrant as HSBC gambles on either an acquisition or recovery at its debtor. Mr Adams pointed to improved gross margins, a reduced fixed-cost base, much lower stock levels and fresh bank facilities as evidence of the turnround he has brought in his first year at Jessops. He said he had scheduled conference calls with suppliers over the next few days to explain the new security from the financing arrangements. Last year suppliers took fright at the deteriorating creditworthiness of the business. Losses per share narrowed from 18.8p to 10.9p; there is again no interim dividend. Shares in Jessops closed 0.2p lower at 7¼p.
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