BHS has won creditor support for its turnaround plans, but it’s only starting on the road to recovery boss Darren Topp tells George MacDonald.
“The hard work starts now.”
That was the message from BHS chief executive Darren Topp, who I spoke to immediately following creditor approval of the retailer’s CVA.
While clearly pleased with the 95% backing for the rescue plan, without which BHS would have been destined for administration, Topp is under no illusions that he can sit back and breathe a sigh of relief.
“It’s not a time for celebration, but it’s a time to be pleased,” he maintained.
The CVA means he has at least the chance to ensure the famous high street name, founded in 1928, sees out a century in business.
While the deal with creditors, notably landlords, should release BHS from the burden of rents that were frequently far in excess of market levels, there’s a daunting task ahead.
“It’s not a time for celebration, but it’s a time to be pleased”
Darren Topp, BHS
About half of BHS’s 164 shops are already profitable, so the CVA means the retailer can radically cut its costs.
But there will still be perspiration aplenty to restore BHS’s fortunes from a retail point of view.
Plans include improvements to stores, from layout to the addition of a food offer through to international and multichannel growth.
Such changes, where they have been introduced so far, have achieved encouraging results.
But there are two big issues BHS needs to address in order to fully secure its future: funding and its pension deficit.
The approval of the CVA should smooth the way towards financing, and the retailer is on the hunt for up to £100m.
BHS owner Retail Acquisitions is leading on that, and clarity on the CVA should aid the search.
“Unsurprisingly, people were awaiting the outcome of the vote. But it needs to be done quickly,” observes Topp.
“There are two big issues BHS needs to address in order to fully secure its future: funding and its pension deficit”
Fundraising plans include the disposal of the lease on the BHS’s Oxford Street store and branches likely to appeal to other retailers. A deal on Oxford Street specifically is thought to be progressing well.
Successful completion of the financing push, which also may include asset-backed loans, will give BHS “headroom for the next few years”, said Topp.
But BHS’s pension deficit of £570m is perhaps the most pressing matter.
The Pension Protection Fund (PPF), the retailer’s biggest creditor, abstained from the CVA vote.
However, it has the right to call in its debt in six months if is unhappy with how the deficit is being addressed.
The abstention was a sign that the PPF, which will end up involved in some way with handling the deficit, is encouraged that the right steps are being taken.
Topp is optimistic that a solution will be found.
He said: “We’ve been working with the PPF and stakeholders. We’re making progress, as illustrated by the fact that the PPF didn’t vote. We’d hope to conclude [a satisfactory arrangement] in the next few months.”
So Topp is likely to be burning the midnight oil for a while yet in order to safeguard BHS’s stratus – albeit tarnished at present – as a high street institution.
As he told me: “The CVA was always part of a bigger picture. Now we have to roll our sleeves up.”