Dick Smith collapses into voluntary administration

Electronics retail chain Dick Smith has collapsed into voluntary administration.

Shares in Dick Smith Holdings were placed in a trading halt on Monday morning ahead of an announcement about the retailer’s debt financing.

In a statement to shareholders this morning, Dick Smith chairman Rob Murray said the company’s board has appointed voluntary administrators “with considerable regret”.

“Sales and cash generation in December were below management expectations, continuing a trend experienced during 2015,” Murray said.

“The company explored alternative funding, however, the directors formed the view that any success in obtaining alternative funding would not have been sufficiently timely to support short-term funding requirements and allow the company to order required inventory during the next four to six weeks.”

McGrathNicol has been appointed to manage the voluntary administration and Murray said the Dick Smith board and senior management will work with the administrators to “explore all options to allow the company to continue as a going concern”.

“The board believes the appointment of a voluntary administrator as this time is the best way to protect the interests of shareholders, creditors, employees, suppliers and other stakeholders,” Murray said.

The Australian reported last night that lead bankers for Dick Smith, National Australia Bank and HSBC, had appointed James Stewart of Ferrier Hodgson as receiver to the company. 

Shares in Dick Smith last traded at 35.5 cents, which is a decline of more than 80% from the company’s debut share price of $2.20 when it listed on the Australian Securities Exchange in December 2013.

Private equity firm Anchorage Capital purchased the Dick Smith business from Woolworths for $115 million in November 2012, paying just $20 million upfront, and floated the company on the ASX with a market valuation of $520 million 12 months later. 

Speaking at an event in September 2014 about the acquisition and subsequent float, Dick Smith chief executive Nick Abboud said the retail chain was planning to grow from 380 stores at the time to 450 and grow its online sales to 10% of total sales in the space of two years. At the same event, Phil Cave, managing director of Anchorage Capital and then chairman of Dick Smith Holdings, said the company was growing at well over 10% a year. 

The retailer’s share price began to lose ground in the second half of 2015 following two profit warnings and weaker than expected sales. Net profit after tax for the 2016 financial year had previously been forecasted to come in at between $45 million to $48 million, however, Dick Smith said in a trading update at the end of October that that figure was likely to be between $5 million and $8 million lower. 

At the end of November, Dick Smith revealed it was writing off 20% of its stock to the tune of $60 million.

Shortly after the retailer rolled out what it called a “mammoth” clearance sale, slashing prices on old stock by as much as 70%.

Entrepreneur Dick Smith, who founded the electronics company in 1968, has not owned shares in the company since he sold the business to Woolworths in 1982.