BHS owners reveal bold rescue plan
THE little-known new owners of BHS have spoken out for the first time to reveal their ambitious plans to turn around the department store chain, claiming it is a “very big challenge” and will take “at least two years” to get it back into profit.
Keith Smith, chairman of the vehicle that has bought BHS, told The Sunday Telegraph that the “biggest challenge” facing the retailer was its estimated pension deficit of more than £100m, but insisted they had a “credible plan” to fund it.
Mr Smith said Retail Acquisitions Limited had “mutually agreed” a deal with Sir Philip Green whereby they would both top up the pension fund with annual payments in each of the next three years.
The new owner of BHS will meet pension trustees and the Pensions Regulator this week to discuss their plans for the deficit. As well as annual top-ups, the consortium could sell off property to raise funds.
The retail industry was shocked last week when Sir Philip, one of Britain’s best known businessmen, sold loss-making BHS to a little-known collection of financiers, lawyers, and accountants. The consortium paid a nominal £1 for BHS and the department store group’s debts were written off by Sir Philip. Mr Smith, a 76-year-old former broker, said the group was being backed by a collection of “less than 10” private individuals and small corporates, all of whom are thought to be British.
However, the deal “had not happened overnight”, he said, and the group had been in negotiations for more than a year. Mr Smith said Sir Philip was made aware of the group after he was introduced to Dominic Chappell, a key member of the consortium and a former racing driver, by a mutual friend based in Monaco.
The chairman of Retail Acquisitions said: “Basically we think it is a company that has significant potential. There are problems, which is why the deal looks the way it does. We think we have got enough working capital to keep it going and keep it going over with a profit. But it will be at least two years before we will see it coming back to profit.”
BHS has an estimated £90m of cash on the balance sheet for Retail Acquisitions to use as funding. This is split roughly half and half between cash left in BHS by Sir Philip and funding provided by the consortium, according to Mr Smith. Mr Smith said he had known the accountants in the group for 30 years and had also previously worked with the lawyers, who include Eddie Parladorio, an adviser to celebrities.
The deal also involved a commitment from Retail Acquisitions to put any funds raised from asset sales back into the retailer, reducing the prospects of BHS being asset-stripped. The retailer’s property portfolio is estimated to be worth between £100m and £200m.
Mr Smith said the new owners of BHS accept that it is inevitable that the Pensions Regulator will look at the deal. However, he insisted: “A lot of work has been done on that.”
BHS has 171 stores and 11,000 staff. The retailer was founded in 1928 in Brixton and went on to become one of the best-known brands on the high street. The deal has led to industry analysts questioning how a little-known group of investors can do a better job of running BHS than Sir Philip, a veteran of the industry who also controls Arcadia, owner of Topshop.
“My message to them would be to watch this space,” he said. “I think we have got to change the image [of BHS].”
Mr Smith said BHS was split between profitable and loss-making stores. “We have got to create a situation where all the stores are receiving the right stock and footfall, he said.
This raises the prospect of BHS stores potential closing. Mr Smith said the consortium would consider “closing them or using them for other purposes”, suggesting that BHS might sublet space to other retailers. He added: “We have ideas to bring in other retailers. We also need to expand e-tailing [online retailing].”