DSGi has raised £311m to accelerate its turnaround plans after credit insurance difficulties led to a sharp rise in debt.
The retailer, which has been under pressure to address its balance sheet, will raise £100m through a placing of new shares at 30p per share. The five-for-seven rights issue at 14p will raise a further £211m.
The electricals retailer, which operates Currys and PC World, said net debt as of March 7 hit £503m – three times higher than the levels given at its interims in November. It has also renegotiated £400m of banking facilities.
Chief executive John Browett said that it would take “something really quite extreme” for DSGi to breach banking covenants and that the shoring up of its capital base “puts a firm line under the balance sheet”.
Browett said that DSGi’s debt ballooned as a result of £130m to £150m of deferred payments to trade credit insurers past its financial year-end.
It also made one-off early payments of between £40m and £80m to small suppliers and deferred the sale and leaseback of its Swedish distribution centre. The fundraising will also contribute to the revamp of a further 100 stores over the next 18 months.
Gross profits at the retailer’s overhauled stores have risen by up to 65 per cent and gross margins have improved since DSGi updated the market in early March.
In the 26 weeks to April 28, total sales fell 3 per cent, with like-for-like sales down 11 per cent. Like-for-likes at its UK and Ireland computing division PC World slumped 14 per cent and electricals sales at its Currys chain dropped 12 per cent.
DSGi forecast that pre-tax profits for the year to the end of April would not be lower than £30m, including the £12m operating losses from the closure of Markantalo and PC City Sweden stores.
Pali International analyst Nick Bubb said: “DSGi has timed its equity raise perfectly, to capture the new – and no doubt temporary – enthusiasm that investors have for cyclical recovery stocks.
“On another day, the market would have been seriously disappointed by another mini-profit warning and the revelation that year-end net debt will be more than double the level expected.”