- Joules’ shares fall to fresh low on cash flow concerns
- Market frets over possible rescue fundraise
- Broker suggests shares could be worthless
Shares in Joules (JOUL:AIM) slumped 23% to an all-time low of 25.5p after the embattled clothing, footwear and homeware brand confirmed weekend reports that it has drafted in advisers from KPMG to assist with its liquidity position as the cost of living crisis bites.
While Joules expects to have ‘sufficient liquidity’ to manage its working capital requirements over its seasonal borrowing peak, investors flocked to the exits on fears a rescue fundraising could be on the way.
Just last week, the online electricals seller AO World (AO.) raised £40 million at a deeply-discounted 43p to strengthen its balance sheet and increase liquidity back to historic levels following reports one of its credit insurance providers had cut cover for AO World’s suppliers.
SUFFICIENT LIQUIDITY?
In response to an article published in The Sunday Times, Joules said it has indeed appointed KPMG debt advisory to assist the retailer in improving its profitability, cash generation and liquidity headroom.
According to the weekend article, consultants from KPMG’s debt advisory practice are exploring options, including raising fresh capital, after inflationary pressures drained the retailer’s cash reserves.
As at 29 May, Joules had net debt of £21.4 million, which the premium British lifestyle group believes gives it ‘£11.3 million headroom within its banking facilities, in line with the board’s expectations.
‘Whilst the group continues to manage its cash resources carefully over its seasonal borrowing peak, it expects to have sufficient liquidity to manage its working capital requirements over this time.’
Hit hard by the squeeze on household budgets, Joules insisted that it is making good progress against initiatives aimed at simplifying the business and optimising the cost base to improve long-term profitability.
‘This includes implementing significant changes to its wholesale operations to focus on fewer, profitable wholesale accounts and improving and simplifying the group’s end-to-end product process to reduce costs and shorten lead times.’
THE SHORE CAPITAL VIEW
‘Joules is a multi-channel play that has incredibly unravelled over the past year, which in truth is not something that we would have highlighted as the most “at risk” British apparel retailer a year or so ago,’ commented broker Shore Capital.
‘Like AO, emergency operating surgery is also underway, with the business exiting the wholesale market whilst evolving its supply chain. Quite whether or not there is equity value in Joules remains to be seen, the market is likely to mark it down today in the absence of reassurance.’
