How to make your money go further
Mike Ashley’s Sports Direct (LON: SPD) has its sights firmly set on Debenhams (LON: DEB). But the department store owner is not playing ball. For reasons that we cannot fathom, management is sticking firmly to its debt-for-equity refinancing plans which will see it raise £200m of new money from its current lenders. Shareholders who own the existing £27m company will be all but wiped out by the transaction.
That includes Sports Direct which currently owns just under a third of the struggling retailer. It hasn’t been a great investment – profits at Sports Direct were hammered in the financial year to April 2018 as its 30% stake in Debenhams lost £85m in value in one year. Since then, the department store’s share price has fallen another 90%.
Let’s back up to the root of the problem. Debenhams is trapped in whirlwind of woes including crushing debt, high capital expenditure, falling sales, narrowing margins and long-term property leases which makes it impossible to…
Register to continue reading this article.
Already a member? Login
For access to the top news and insights from the investment worldREGISTER FREE TODAY
Weak corporate governance can have a major impact on shareholder returns and is therefore seen as…