Homestyle in £13.3 million placing
Article Date: May 16 2001Beds and textiles retailer Homestyle has launched a £13.3 million placing at 405p after doubling turnover in the year to March to £461 million and increasing profits by a lesser 27 per cent to £17.8 million, writes Nancy Smith.
During the year, fully-listed Homestyle (HME) paid £137.3 million to buy furniture chain Harveys, which contributed more than a quarter of total group sales for 2000-01. Harveys itself made money, increasing its own pre-tax profits by 21 per cent to £14.1 million.
With a 12 per cent share of the UK household textiles market, fully-listed Homestyle is benefiting from increased buying power, allowing it to buy directly from overseas suppliers. However, the acquisition has put added pressure on the group's balance sheet.
Homestyle was forced to increase borrowings to pay for the Harveys takeover, which involved closing under-performing Harveys stores and paying redundancies.
Homestyle's net interest charge increased threefold by the end of the financial year to £5.4 million. Its net debt reached £109.6 million.
The company hopes to complete the sale of some of Homestyle's freehold property during the first half of the new financial year in a bid to reduce borrowings by £15 million. Homestyle is also expanding further by buying furniture company Sleepmasters for up to £9.2 million.
Sleepmasters, based in the North of England, has 71 stores including 47 concessions. For the year to March, it made pre-tax profits of £1 million on turnover of £22.2 million.
Homestyle is seeking to raise £13.3 million by placing new shares at 405p each to part fund the Sleepmasters acquisition and accelerate its Harveys store re-formatting programme.
Some £8.3 million of the funds will be used to accelerate the refurbishment of the Harveys portfolio over the next two years.
Shares in Homestyle rose 1 per cent to 440p following the news.
If you want more of this incisive comment - Join the Club. Click here for details.
This story is from Growth Company Investor, the independent voice on fast-growing companies. Subscribe today for the latest AIM recommendations.
