Retailer Dick Smith enters administration 'to protect suppliers'

Adam Leach is a freelance business journalist
18 January 2016

Australia's oldest electronics retailer Dick Smith has entered into voluntary administration in a move it says will best protect the interests of suppliers.

Australia's oldest electronics retailer Dick Smith has entered into voluntary administration in a move it says will best protect the interests of suppliers.

The decision, which has seen McGrathNicol appointed administrator and Ferrier Hodgson as receivers, follows lower than expected sales over the crucial Christmas period and a disastrous year that saw the share price fall by 82%.
In recent days, numerous reports have suggested that the company has struggled to pay suppliers on time or in full and that confidence in its long term future had fallen to the point suppliers were unwilling to provide inventory on credit.
Speaking prior to the announcement to enter into administration, Steve Johnson, chief investment officer at Forager Funds, said: "In recent weeks, we have heard reports of suppliers worried about getting paid, demanding cash on delivery and this has only exacerbated Dick Smith's balance sheet woes." He suggested that the current turmoil may well spell "the end of the road".
The decision to enter administration followed an unsuccessful attempt to secure further financing from lenders. The company said it was the "best way" to protect shareholders, creditors, employees, suppliers and other stakeholders. When approached by SM to comment on the reports of delayed or incomplete payments to suppliers, a spokesman declined.
While the chain's 393 stores will remain open throughout the administration period, the receivers are already looking to sell the business. James Stewart, one of the partners at Ferrier Hodgson acting as receiver, said: "We are immediately calling for expressions of interest for a sale of the business as a going concern."
Original founder Dick Smith, who has not held any interest in the company since he sold it in 1982, suggested that the sale of the company by Anchorage Capital for $520 million when it was publicly listed set ambitions that were too high to achieve. He said it was "a classic case of people going for quick growth and getting into very quick problems".

The decision, which has seen McGrathNicol appointed administrator and Ferrier Hodgson as receivers, follows lower than expected sales over the crucial Christmas period and a disastrous year that saw the share price fall by 82%.

In recent days, numerous reports have suggested that the company has struggled to pay suppliers on time or in full and that confidence in its long term future had fallen to the point suppliers were unwilling to provide inventory on credit.

Speaking prior to the announcement to enter into administration, Steve Johnson, chief investment officer at Forager Funds, said: "In recent weeks, we have heard reports of suppliers worried about getting paid, demanding cash on delivery and this has only exacerbated Dick Smith's balance sheet woes." He suggested that the current turmoil may well spell "the end of the road".

The decision to enter administration followed an unsuccessful attempt to secure further financing from lenders. The company said it was the "best way" to protect shareholders, creditors, employees, suppliers and other stakeholders. When approached by SM to comment on the reports of delayed or incomplete payments to suppliers, a spokesman declined.
While the chain's 393 stores will remain open throughout the administration period, the receivers are already looking to sell the business. James Stewart, one of the partners at Ferrier Hodgson acting as receiver, said: "We are immediately calling for expressions of interest for a sale of the business as a going concern."

Original founder Dick Smith, who has not held any interest in the company since he sold it in 1982, suggested that the sale of the company by Anchorage Capital for $520 million when it was publicly listed set ambitions that were too high to achieve. He said it was "a classic case of people going for quick growth and getting into very quick problems".

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