Dick Smith in receivership and for sale as crisis bites, but Atomic 212 says ‘business as usual’
The future of electronics retailer Dick Smith is uncertain after the company went into receivership just hours after being placed into voluntary administration this morning.
The move comes just a day after trading in shares was suspended as the company looked to refinance its debt.
Administrators McGrath Nicol were called in this morning with Dick Smith announcing it had been unable to find a way through the financial mire.
Just three hours after the revelation Ferrier Hodgson announced it been appointed receiver for the embattled business and would seek a buyer for the retailer.
Stores will continue to trade; however, in a massive blow to consumer confidence, gift vouchers will not be honoured and deposits will not be refunded, forcing customers onto the list of unsecured creditors.
It is not clear what will happen in terms of the retailer’s current marketing plans.
Creditors are expected to include media agency Atomic 212, which holds the account.
Jason Dooris, founder and CEO of Atomic, told Mumbrella this morning that it was “business as usual”.
Ferrier Hodgson receiver James Stewart, which was appointed by a syndicate of lenders, said the business was now for sale as a going concern.
“Dick Smith is one of the best known brands associated with consumer electronics in Australia and New Zealand,” said Mr Stewart. “We are immediately calling for expressions of interest for a sale of the business as a going concern.”
He said it was not yet clear what the primary causes of the collapse of the business had been.
The company invested heavily in marketing over the past year as it sought to resurrect the brand but, faced with a huge surplus of stock, it ran a series of massive sales in the lead up to Christmas.
Rob Murray
These sales left the stores depleted of stock.
In a statement to the market, Dick Smith chairman Rob Murray said the decision to place the business in administration was done with “considerable regret”.
“Sales and cash generation in December were below management expectations, continuing a trend experienced during 2Q [second quarter] 2016.
“The company explored alternate 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.”
The statement said the company directors remained confident in the long-term viability of the business but “there was no option other than to appoint a voluntary administrator”.
Consumer concern about the viability of the brand reached a peak in recent weeks with the announcement of voluntary administration prompting many on social media to warn that gift cards should be used immediately in case the company was placed into receivership.
Simon Canning
Duplicate sentence: “Creditors are expected to include media agency Atomic 212, which holds the account.”
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Hi Joe,
Thanks for flagging – my fault not Simon’s. Changed now.
Cheers,
Alex- editor, Mumbrella
Let’s hope the media agency has watertight credit insurance in place.
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Corporate Australia needs to have a long hard look at themselves over this disaster.
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Amazing what one little literal will do:
Ferrier Hodgson receiver James Stewart, which was appointed by a syndicate of lenders, said the business was no for sale as a going concern
Hmm: NOT for sale? NOW for sale? NON for sale? NOR for sale?
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Hi Rosco,
That’s been changed now, thanks for flagging.
Alex – editor, Mumbrella
How to turn a $90m business into a $550m business in 12 months (and buy it with less than $10m of cash), then it collapses 2 years later.
ASIC has some serious explaining to do…….
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There’s been some expert analysis online about how Anchorage (the PREMIUM ECONOMY firm which picked up DSE from Woolworths) managed to make its initial numbers look amazing – “Dick Smith is the Greatest Private Equity Heist of All Time” is a superb example ( at https://foragerfunds.com/bristlemouth/dick-smith-is-the-greatest-private-equity-heist-of-all-time).
Another part of the ‘smoke and mirrors’ which Anchorage used to make DSE look mega-profitable after Woolies offloaded it, was that DSE – like all other parts of Woolworths – paid Woolies a large sum for “Shared Services” such as HR, Security Monitoring, and anything else that was routed through or done through Woolworths Ltd rather than Dick Smith.
Take Shared Services out of the equation, which is exactly what happened when Anchorage took on DSE, and a business that made a <$10m profit FY 2011/2012 suddenly lists a $40-50m profit without Anchorage actually doing anything.
This massive increase in EBIT once Shared Services was off the books gave the impression that the business had turned around under Anchorage's management, something with Abboud and the rest of his senior team – most of whom who like Abboud were ex-Woolies – knew from the get-go, so they knew right away that they could make the bottom line appear to show a massive turnaround when all that changed was the removal of one line from an Excel spreadsheet.
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You’re not as dump as you look, Jack.
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(in above comment, should be ‘private equity’ not ‘premium economy’!)
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Not newsworth at all for the Private Equity firm….
http://www.anchoragecapital.com.au/latest-news/
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3300 staff looking at unemployment, thanks Anchorage.
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welcomes your continent to the commencement of the AFC, nihao
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Another triumph for ASIC?
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@ Jack. Should the decision makers at Anchorage be prosecuted? Can they be?
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First of ASIC don’t care about shareholders, they’re paid by the government who gets paid by big business like Anchorage Capital Partners, there will be a little song and dance for a while until it finally blows over, money in the right peoples pockets will make sure no one will go to jail.
Still a class action lawsuit is needed here by the shareholders and employees.
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Maybe Quickflix can do a reverse share buyout equity backflip and merge with Dick Smith, via China.
They have mates at ASIC so all should be sweet
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@Jack
Cheers for the input. Very insightful.
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They were trying to compete with MSY and Force that operate out of industrial lock-ups and internet companies based in China, working from shopping malls with massive rents and fit-out costs. Was never gunna happen.
BTW, Harvey Norman and JB aren’t doing that well either. Officeworks has been saved by Uncle Wesfarmers several times.
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