HHGL Limited (Homebase) has announced the next phase of its restructuring plan. The company is to launch a Company Voluntary Arrangement (CVA) and is seeking approval from creditors on a proposed plan to reduce its cost base in the UK and the Republic of Ireland. Homebase’s sales performance and profitability declined significantly under the previous ownership over the last two years. In addition, the company has faced an extremely challenging retail trading environment reflecting weak consumer confidence and reduced consumer spending. These factors have had a significant adverse impact on Homebase’s trading position.
After a comprehensive review, Homebase has concluded that its current store portfolio mix is no longer viable. Rental costs associated with stores are unsustainable and many stores are loss-making. The CVA enables Homebase to make essential changes to its store portfolio, reducing its cost base and providing a stable platform on which to continue its turnaround.
It is anticipated that 42 stores will close during late 2018 and early 2019. The process is expected to lead to a reduction of up to 1,500 roles. The creditors will vote on the CVA on 31 August 2018.
Damian McGloughlin, CEO of Homebase, said: “Launching a CVA has been a difficult decision and one that we have not taken lightly. Homebase has been one of the most recognisable retail brands for almost 40 years, but the reality is we need to continue to take decisive action to address the underperformance of the business and deal with the burden of our cost base, as well as to protect thousands of jobs. The CVA is, therefore, an essential measure for the business to take and will enable us to refocus our operations and rebuild our offer for the years ahead.”
Stephanie Pollitt, Assistant Director of Real Estate Policy, British Property Federation (BPF), said: “These situations are never easy as property owners need to take into consideration the impact on their investors, including those protecting their investors’ pensioners’ savings, as they vote on the CVA proposal. Homebase and Alvarez & Marsal have, however, demonstrated best practice, engaging with the BPF in the process and therefore ensuring property owners’ interests have been properly taken into account. Ultimately, it will be for individual property owners to decide how they will vote on the CVA, but the proposal has sought to find a solution that provides a sustainable future for Homebase.”
