Jessops loss leads to debt restructuring

UK-based camera retailer Jessops made a loss before tax of nearly GBP50 million (USD74.38 million) in the year to 30 September. Sales on a like-for-like basis were down 6.5% last year. In the past two months, sales rose 3.8%, but the increase was achieved only through price promotions that damaged profit margins. Jessops said the digital camera market grew by 7.9% in volume last year but was flat in value terms as customers went for cheaper models and retailers discounted heavily. "This is the first time for many years that the digital camera market as a whole has seen such a slowdown," Jessops said. In a desperate attempt to revive the business, Jessops is refitting its stores. It has opened a shop in the new Westfield shopping centre in west London, which serves as the blueprint for the refurbishments and future new stores.

Following the results, the company warned that it was close to breaching its covenants under its existing banking facilities with HSBC. But Executive Chairman David Adams was confident the debt restructuring would happen within "weeks rather than months". "The bank are supportive of the position and want to work with us to find a solution to the balance sheet problem and that's why we're confident of it happening," he said. "We can't carry on carrying GBP57 million (USD84.79 million) worth of debt on a business which is generating GBP4 million (USD5.95 million)." He hinted that this could take the form of HSBC swapping a chunk of the debt for equity. The bank already holds warrants over 15% of the retailer's shares since extending Jessops' banking facilities to 2011 in September.

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