Vacuum cleaner chain Godfreys threw in the towel yesterday in desperation and told shareholders to take the money and run after revealing a nasty 27% slide in sales in the past fortnight.
The company’s independent directors told shareholders to accept a takeover bid made by the company’s 99-year-old co-founder at 32 cents a share.
The news saw the shares closed unchanged at 30 cents a share as punters realised there wouldn’t be a white night or competing bid.
John Johnston, who joined Godfreys as a partner in 1936 and owns 28% of the company, lodged the 32 cents a share bid for the stock he does not already own in early April.
Directors have been dithering since about whether to accept or try and get a higher offer. Customers seem to have voted by staying away.
Godfreys floated on the ASX at $2.75 per share in 2014 but has been hammered by competition from the likes of JB Hi-Fi and Harvey Norman and by missing a couple of major trend changes in cleaners.
The company has about 220 stores across the Australia and New Zealand and judging by yesterday’s statement, they must have been lonely affairs in the past couple of weeks.
Godfreys’ chairman Brendan Fleiter said in a statement a takeover was the best option considering the uncertain outcome of the business’ turnaround plan, and the fact it was on track to breach its covenants on a $30 million debt owed to Mr Johnston.
The 27% slump in sales had played a major part, according to the company’s statement yesterday. This came after an already poor April, and contributed to an 8% fall in comparable sales for the year to date. Comparable sore sales were down 6.2% in the six months to last December, so the worsening was appreciable.
The company blamed this on changing its television advertising in April and May from being focused on discounts and sales to focusing on product features. This did not work, and it has since reverted to the old ads, Godfreys said.
While Mr Johnston had agreed to waive the fixed cover charge ratio covenant on its debt, which Godfreys expects to breach, the waiver was on the condition that the company held “negotiations” with Mr Johnston about “debt reduction strategies” no later than this Friday (that’s like a gun to the head of the board).
That would include possibly swapping the debt for greater ownership of the company, Mr Fleiter said.
