£21.8 million windfall follows talk of emergency sales meeting
Troubled bedrooms-to-kitchens retailer MFI is to receive a£21.8 million payment from HM Revenue & Customs over its VAT dispute on its insurance-backed structural guarantees.

The retailer has already paid all of the relevant VAT. This was shown as a receivable on its balance sheet of£60.5 million from HM Revenue & Customs without any provision.

Today, both parties agreed to settle and HM Revenue & Customs is paying£21.8 million to MFI. As a result, MFI will write off the balance of£38.7 million in the accounts prepared for the year to December 24. It anticipates that the cash will be received in mid-February.

The news follows industry speculation of an emergency meeting being held at the retailer today as sales flopped at MFI's stores during the January Sales.

MFI is already one of the most actively shorted stocks in the market, with traders selling stock they do not own in the hope that the price will go down by the time they have to complete the transaction.

Analyst Nick Bubb said in a note this morning: 'The shorts will be pleased to hear the latest trade rumours that MFI has called an emergency meeting of store managers to unveil downsizing plans, after an awful January trading period. It appears that the Boxing Day Sale got off to a bad start, with the snow and intense competition from B&Q and Homebase in kitchens and that MFI couldn't regain ground, with sales thought to be 25 per cent to 30 per cent below last year.'

He believes that the performance of MFI Retail could put pressure on the retailer's£100 million debt position and banking facilities, and that a rescue rights issue is looking more likely again.

MFI was unavailable for comment this morning.