In another brand new trading update posted this morning, Safestyle UK have stated that they are in talks to find new third party investors and renegotiating their credit facility with their providers.
This is their new trading update in full:
Safestyle UK plc (AIM: SFE), the leading UK focused retailer and manufacturer of PVCu replacement windows and doors for the homeowner market, today issues the following update.
As reported in our recent Interim Results announcement, the Group has been engaging with its stakeholders to discuss ways to strengthen the balance sheet in order to support its recovery and help facilitate future growth. As part of these discussions, the Group has also engaged with a number of third parties who have expressed interest in investing in the Group.
These discussions with both existing shareholders and other third parties have been productive and remain ongoing. In order to achieve a working capital injection, which will not be in the form of an equity placing, an alternative financing structure that realises the aims stated above is currently being sought.
As previously updated, the Group expects its year-end net debt to be between £(5.5)m and £(6.5)m. At this point and into early January 2024, the full revolving credit facility with the Group’s bank (the “RCF”) will be required to support the working capital and liquidity requirements of the business.
At this time, the Group remains compliant with the covenants of its £7.5m borrowing facility. However, if the losses forecast for the remainder of the year materialise, this would generate a material shortfall versus the existing covenants of the RCF in November. Therefore, under the current facility terms, access to the RCF at that time could be fully restricted.
Alongside the discussions with existing shareholders and other third parties described above, the Board has had good discussions with the Group’s bank, who have remained supportive, regarding renegotiating terms of the RCF in the form of a covenant waiver. This is yet to be formally agreed and is expected to be inter-conditional with the working capital injection referred to above.
The Board remains confident that it will secure the ongoing support required to enable the Group to navigate the near-term challenges presented by what is a difficult market context.
Looking further ahead, the Board maintains that growth recovery prospects are strong and data of an ageing housing stock in need of repair underpins this.
The Group will provide a further update on this process in due course.
As a result of this update, shares plunged on the market open, with prices dipping to an intra-day low of just 1.79p per share, and company market cap below £3m.
Be in no doubt that this is a company in deep distress. If we read between the lines of this statement, it would seem that the renegotiation of the credit facility is dependent on the success of finding new investors for the business.
Unfortunately, this comes just as the UK Windows And Doors Group falls into administration and the wider economic circumstances for the UK darken. The background commentary is not going to be helpful at this very moment.
The share price, predictably, took a hit:
The next few days and weeks are going to be vital for the short term future of the company. Suppliers to the company will undoubtedly have a worried eye on the business, as well as those who work for the company.
Read the original trading update here: https://otp.investis.com/clients/uk/safestyle/rns/regulatory-story.aspx?newsid=1719322&cid=656
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