Wilko’s owners raked in £3m in dividends last year despite the cut-price chain slipping nearly £37m into the red before seeking emergency funding.
The household goods to cosmetics retailer, whose CEO Alison Hands will step down in January, some 18 months after taking office, is understood to be looking to secure a £30m credit facility with lenders alternatives.
One of the lenders Wilko engaged with is believed to be Bantry Bay, a company backed by hedge fund Elliott Advisers and reported being in similar discussions with fashion retailer Superdry, amid difficult trading conditions.
However, Wilko said it had paid its owners, the Wilkinson family, £2.25m in the year to the end of January and then another £750,000 in February despite a nearly 3% drop in sales. sales to £1.3bn and a drop to a pre-tax loss of £36.8m from a profit of £2.5m a year earlier.
The company said it had reviewed funding sources as business conditions “remain challenging, with consumer confidence remaining fragile, continued supply chain disruption and rising cost inflation.” It said it expected underlying sales to continue to fall through 2022 and had begun cutting back as it expected further cost pressure from rising energy bills.
The company said there were no immediate problems with liquidity, but its auditors said in their report that accounts indicated the company was a going concern but had “insufficient committed funding” to withstand a “severe but plausible downturn in business.” commercial”.
Jerome Saint-Marc, Chief Executive Officer of Wilko, said: “Our relationship with our lending partners is strong. The recent sale and leaseback of our distribution center to DHL earlier this week unlocked £48m, enabling us to pay off our revolving credit facility in full.
“We take this opportunity, now that the deal is closed, to review how we manage our ongoing funding to better market through today’s retail environment while continuing to invest in our future.”
He said the company was trying to fuel growth by making its products available on Amazon, eBay and OnBuy online marketplaces, as well as allowing shoppers to pick up items ordered online at 69 stores.
In accounts for Wilkinson Hardware Stores Ltd filed with Companies House this week, the company said it had sufficient funds at the end of the year to meet its obligations until the end of January 2024 if operations continued as expected.
That came after Wilko sold and leased its distribution center in Worksop for initial proceeds of £48m, £25m of which was used to pay off a short-term loan called a revolving line of credit. The deal left it with £63m of cash against debts of £261m and a provision for additional liabilities of £39m at the end of the year.
The company admitted in the accounts that it might have to seek additional financing if it suffered a “serious but plausible” scenario in which it saw a significant reduction in the amount of goods it was selling. In that scenario, he said his available facilities “would be extinguished by December 2023.” He said that if the economic downside was even worse than he feared, he might need financing sooner.
The Wilkinson family has been contacted for comment.