Shares in Laura Ashley have bounced back strongly after its main shareholder and leading creditor reached an agreement on financing for the struggling UK homeware and fashion retailer.
It said in a regulatory statement on Wednesday that following discussions between US bank Wells Fargo and Malaysian group MUI Asia, it “should be able to utilise requisite funds from its working capital facility . . . to meet its immediate funding requirements”.
The retailer added that it would “continue to review its working capital needs” and stressed that the agreement was “not a cash injection by MUI Asia into the group”.
Shares in Laura Ashley, which trade on the London Stock Exchange’s main board despite its tiny market value, fell sharply this week after it confirmed media reports that it was unable to access all of a £20m financing facility provided by Wells Fargo.
News of the agreement sent shares 45 per cent higher, to 2.4p, giving it a market value of £17.5m.
The company is due to report half-year results on Thursday, but has already stated that sales in the six months to December were down 11 per cent year on year, a marked acceleration from the 3.5 per cent decline reported for the 12 months to June 2019.
In that year, it lost £9.8m before tax and exceptional items and repaid debt using the proceeds of property sales. It has not paid a dividend since 2017.
Laura Ashley operates from 155 stores in the UK, although it is in the process of closing up to 40 under a rationalisation plan announced in 2018, and another 80 franchised units overseas.
Other sales channels have also shrunk. About 22 concessions in Homebase stores were closed in 2016, after the DIY group was acquired by Australian conglomerate Wesfarmers. Online sales fell 14.2 per cent last year, which Laura Ashley attributed to a relaunch of its website.
Faced with a seemingly inexorable decline in sales in its home market, the group pursued other ventures in an attempt to monetise its brand. It has a licensing agreement with Corus Hotels, also controlled by the MUI group, which manages two hotels and three tea rooms in the UK. A further six are licensed by other parties.
MUI rescued Laura Ashley in 1998 after its botched expansion into the US, acquiring a 40 per cent stake in a deal that valued it at £110m. The chairman is Andrew Khoo, the son of MUI patriarch Khoo Kay Peng.
The group was launched in 1953 by eponymous founder Laura Ashley, who died following an accident at her Wales home shortly before its heavily oversubscribed flotation in 1985.
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