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Retail

WH Smith Posts Half-Year Loss Amidst COVID Challenges

Britain's WH Smith Plc has warned of the possible risk of breaching its covenant tests in 2022 after it reported a first-half loss and launched a potential £325 million bonds offering, with the retailer still navigating the COVID-19 crisis.

The company, which sells everything from books and sandwiches to Bluetooth headphones, said in a statement under a severe but plausible scenario, "it was likely that the group would not meet the conditions of the August 2022 covenant tests."

"If this situation prevailed, the group would engage its lending banks in advance of this date to secure a further covenant amendment," it added.

The severe but plausible scenario replicates the group's forecast performance in the financial year ending Aug. 31, 2021 by applying the same cash flows to the next financial year, while excluding non-recurring restructuring costs incurred and government support received.

COVID Impact

The company's network of airport, train station and workplace kiosks has been hit hard by the COVID-19 pandemic. The health crisis forced the 200-year-old company, founded as a news vendor in London, to announce up to 1,500 job cuts last year.

Besides the offering of guaranteed senior unsecured convertible bonds due 2026, the company said it had agreed to new bank financing arrangements including a revised revolving credit facility of £250 million, raised from £200 million, with an extended maturity to 2025 from 2023.

WH Smith said it would use funds from the offering and the financing arrangements to open new travel stores across all territories, particularly North America.

WH Smith said it expects annual outturn to be modestly ahead of current expectations, adding it was continuing to see encouraging signs of recovery in North America.

It reported headline group loss before tax of £17 million for the six months ending February 28, compared with a profit of £80 million a year earlier. [Pic: ©Roger Utting/123RF.COM]

News by Reuters, edited by ESM. For more Retail stories, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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