UK discount retailer Wilko has secured fresh funding and replaced the granddaughter of the company’s founder as chair as it moves to protect its future after a turbulent period.
The asset-backed £40mn credit facility will be provided by Hilco, the special situations investor that also owns DIY retailer Homebase and crockery manufacturer Denby.
The terms have not been disclosed but they are likely to be more expensive than a conventional bank credit facility. A similar loan agreed recently by fashion retailer Superdry was priced at 7.5 percentage points above the Bank of England’s benchmark overnight rate.
According to documents filed at Companies House, the lender has also been given security over much of Wilko’s intellectual property, including its logo, marketing slogans and various own-label product names.
The family-controlled retailer had previously warned that if trading deteriorated further and it did not secure access to additional funding, it could run out of cash by the end of this year. It has already sold and leased back its headquarters building in Nottinghamshire to raise additional funds.
It said the facility would enable it “to significantly increase financial flexibility”.
The company said that Chris Howell would join as chair in place of family director Lisa Wilkinson, the granddaughter of the company’s founder, although she will remain on the board.
Howell has extensive restructuring experience and previously worked with Mark Jackson, who was appointed as Wilko’s new chief executive in December, at Bensons for Beds. The furniture retailer was acquired in a prepack in 2020 and has since returned to profit.
Natasja Laheij, a senior finance director at Google’s European subsidiary, will also become a non-executive and chair the audit and risk committee.
Wilkinson said Wilko, which employs 16,000 people, was “making necessary changes to restore confidence and safeguard the future of the business” and that the new appointments created “one aligned team with the right expertise”.
Wilko endured a particularly difficult pandemic. Although its 400 stores were permitted to remain open during the lockdowns, they are mostly located in high streets and shopping centres, where the falls in shopper numbers were most pronounced.
Same-store sales declined 7.7 per cent in the year to January 2021 and dropped a further 3.3 per cent the following year.
Although it competes with “variety discounters” such as B&M, Home Bargains and Poundland, Wilko has a greater focus on own-label products and greater exposure to homewares, gardening and DIY, while a greater proportion of its product ranges remains constant throughout the year.
Its profit margins have also been weaker. In the year to February 2020, the last pre-Covid year, Wilko’s earnings before interest, tax, depreciation and amortisation were £48.5mn, or 3 per cent of sales. At quoted rival B&M, they were almost 8 per cent of sales.
The company acknowledged that it “has not been performing to its full potential” and said it was “making strategic changes, including accelerating its omnichannel offer”.
In a separate agreement the trustees of Wilko’s defined-benefit pension scheme have been granted security over a freehold distribution centre in Wales. The latest accounts show the scheme had a deficit of about £15mn.
