The owners of Wilko took £3m in dividends this past year despite the cut price chain falling almost £37m into the red before seeking emergency funding.
The homewares-to-cosmetics retailer, whose managing director Alison Hands is to exit in January, about 18 months after taking the job, is understood to be trying to secure a £30m debt facility with alternative lenders.
One of the lenders Wilko is understood to have engaged with is Bantry Bay, a firm backed by the hedge fund Elliott Advisers which is reported to be in similar discussions with the fashion retailer Superdry, amid tough trading conditions.
However, Wilko said it had paid its owners, led by the Wilkinson family, £2.25m in the year to the end of January and a further £750,000 in February despite a near 3% fall in sales to £1.3bn and a slide to a £36.8m pre-tax loss from a £2.5m profit a year before.
The company said it had reviewed sources of funding as trading conditions “remained challenging, with consumer confidence continuing to be fragile, [with] ongoing supply chain disruption and rising cost inflation”. It said it expected underlying sales to continue to fall throughout 2022 and it had begun to make cuts as it expected further pressure on costs from rising energy bills.
The company said there was no immediate issue with liquidity but its auditors said in their report the accounts indicated that the company was a going concern but had “insufficient committed financing” to withstand a “severe but plausible downturn in trading activity”.
Jerome Saint-Marc, the Wilko chief executive, said: “Our relationship with our lending partners is solid. The recent sale and leaseback of our distribution centre to DHL earlier this week unlocked £48m which has enabled us to repay our revolving credit facility in full.
“We’re taking this opportunity, now that the deal is done, to review how we manage our ongoing financing to best trade through the current retail environment while continuing to invest in our future.”
He said the company was trying to drive growth by making its products available on the Amazon, eBay and OnBuy online marketplaces as well as enabling shoppers to pick up items ordered online in 69 stores.
In accounts for Wilkinson Hardware Stores Ltd filed at Companies House this week, the company said it had sufficient funds at its year end to meet its liabilities until the end of January 2024 if trading continued as hoped.
That came after Wilko sold and leased back its distribution centre in Worksop for initial proceeds of £48m, £25m of which was used to repay a short-term loan called a revolving credit facility. The deal left it with £63m of cash against debts of £261m and provision for further liabilities of £39m at the year end.
The company admitted in the accounts that it might have to seek additional financing if it suffered a “severe but plausible” scenario in which it saw a significant reduction in the amount of goods it was selling. In that scenario, it said its available facilities “would be extinguished by December 2023”. It said if the economic downside was even worse that it feared, it could need financing earlier.
The Wilkinson family has been approached for comment.
