Asos raises £240m in share placing to deal with coronavirus

On-line trend retailer Asos has raised greater than £200m from shareholders because it seeks to mitigate the consequences of a coronavirus lockdown that has decreased customers’ urge for food for trend.

It’s the second UK retailer to faucet shareholders for funds this week, after WHSmith raised £165m of recent fairness on Tuesday.

Asos on Tuesday additionally mentioned it might add £60m-£80m to its present £350m revolving credit score facility, which runs to 2024; negotiate modifications to the covenant exams on that facility; and apply to entry the Financial institution of England’s Covid-19 company finance facility set as much as lend cash to bigger corporations.

It expects to boost as much as 18.eight per cent of its present share capital through a bookbuilt inventory inserting. Based mostly on its market capitalisation of £1.31bn on the shut, that might equate to £246m.

Fairness market sources mentioned on Tuesday evening that demand had been greater than adequate to cowl the shares supplied.

As an online-only participant, Asos has not been affected by the enforced closure of non-essential shops. However demand for trend has fallen nonetheless.

In half-year outcomes released alongside the placing announcement, it mentioned gross sales had fallen between 20 and 25 per cent in latest weeks.

Nick Beighton, chief govt, mentioned there have been repeating patterns within the completely different territories the place it operated, with demand falling sharply earlier than web site visits picked up once more.

He added that leisurewear and well being and sweetness gross sales had been seeing good development however formal menswear and “going-out put on” for girls had fallen sharply.

Earlier than the onset of the coronavirus pandemic, Asos had appeared to be recovering from a poor yr through which it warned on profits twice.

Gross sales development within the first half of its new monetary yr was 21 per cent, with statutory pre-tax revenue of £30.1m and a margin — earlier than curiosity, tax, depreciation and amortisation — of 4.9 per cent in contrast with 2.eight per cent in the identical interval a yr in the past.

Sherri Malek, an analyst at RBC, mentioned the first-half figures beat forecasts and had been “very spectacular”. However she warned that the corporate would in all probability see no gross sales development in any respect within the second interval and {that a} “important degree of discounting” could be wanted to clear extra inventory.

The corporate itself gave no monetary steering for the total yr, and had beforehand stopped offering forecasts round gross sales development and margins, saying they imposed too many constraints and prevented managers taking a long-term view.

Analysts at Liberum had earlier estimated that Asos must promote greater than £500m of spring and summer season inventory to make sure adequate house in its distribution centres for autumn and winter traces.

However Mr Beighton mentioned the corporate’s warehouses had been working under capability due to social-distancing measures and decreased demand, and that discounting would solely be wanted to clear slow-selling traces.

Like many different retailers, Asos had cancelled orders and paid just for these delivered or in transit, he mentioned. “We now have had conversations with all our suppliers. We didn’t ship a blanket e-mail. And we’ll proceed to help our suppliers.”

The corporate’s comparatively quick ordering cycle of six to eight weeks “provides us the pliability to reply shortly”, he added.

Asos’s Intention-traded shares closed up 34 per cent after information emerged of the inserting, which was first reported by Bloomberg. However they’re nonetheless buying and selling at half their degree at the start of 2020.

Mr Beighton mentioned the corporate had modelled varied eventualities, together with one in every of complete shutdown, and was assured the corporate had sufficient money and credit score to climate any of them. “We now have reacted early, decisively and swiftly . . . we don’t wish to be compelled to take short-term selections which may cease us seizing the long-term alternative,” he mentioned.

He added that he would donate a fifth of his wage to charities working close to the group’s warehouse in Barnsley, though this was a private resolution not binding on different board members.

Sophie Lund-Yates at Hargreaves Lansdown mentioned the online-only retailer was better-off than many opponents that had been compelled to shut retailers, however she warned that didn’t assure “clean crusing”.

“If the group’s provide chains had been to wrestle or clients determine to cease spending on new garments — which isn’t unimaginable with thousands and thousands of us caught at dwelling — Asos’ monetary scenario may begin to look lacklustre fairly shortly,” she mentioned.

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