Focus DIY calls in bankers as debts mount
Published: 01 November, 2010
CREWE: Focus has called in investment bankers to look for radical ways to revive the fortunes of the heavily indebted business – a move that could lead to a sale, according to the Observer newspaper.
US private equity firm Cerberus is taking advice from Lazard on the future of Focus, which struggled through the recession. The UK's fourth largest DIY chain last changed hands, for a £1, three years ago.
A likely buyer could be Home Retail Group, which controls Homebase and Argos chain, and has a £300m cash pile. However, Argos is struggling and it is unlikely that shareholders would approve such a distracting acquisition. Another rival, Kingfisher, which owns market leader B&Q, would probably be blocked from any acquisition on competition grounds. According to analysts Verdict, B&Q has a market share of 27%, with Focus on 3.5%.
Focus, which has 180 stores in Britain, made a loss of £21m on sales of nearly £490m in the year to 21 February, according to accounts filed at Companies House in August. In its directors' report, the company says the trading environment was "extremely competitive" during the period but it was in "significantly better" shape at the financial year's end than at the start.
Last year it negotiated a company voluntary arrangement that enabled it to cut leases on a number of empty stores that were draining its cash reserves, and also secured a two-year extension on its £50m overdraft. That arrangement expires in December 2011 but Focus is in talks with its banks about refinancing.