Weston family may need to pump cash into Selfridges and other department stores
The company has been faced with a devastating drop in tourist flows as well as enforced store closures and is also dealing with the end of the previous tax-free shopping regime for tourists who visit Britain.
Those are the key points to come out of the accounts filing of SHEL Holdings Europe, parent company of the department stores operator.
The firm filed its accounts at Companies House covering the year to February 2020 and said that in the year concerned, its revenue rose to £1.522 billion from £1.452 billion. Pre-tax profit fell to £37.8 million from £103.3 million and net profit fell to £31.1 million from £82.2 million. But EBITDA rose to £299 million from £206 million.
But what was more interesting was that it warned of a “severe but plausible” situation in which its UK banking covenants might be breached due to the ongoing coronavirus restrictions.
And while it also said it's confident it would be able to renegotiate these, it also said that Wittington Investments – the ultimate parent company controlled by the Weston family – has committed to supporting the business in the “unlikely event” it can’t successfully renegotiate those covenants.
Not that it expects that worst-case scenario to play out. But the filing made it clear that times are tough with multiple challenges. As well as Covid, the firm has had to take the removal of Britain’s VAT Retail Export Scene, into account in its budget and future plans. That removal means that tourists who eventually come back to Britain won't be able to claim VAT refunds on their luxury purchases unless they choose the option of having them shipped home rather than carrying the items themselves.
Retailers and brands – including Selfridges – have consistently claimed that this will seriously dent the appeal of the UK as a tourist shopping destination. The government is convinced that the change means it will increase the amount of money it gets in from VAT payments, but retailers disagree. They think that many of the transactions that would have happened in the UK will now happen in key cities such as Paris and Milan, costing both money and jobs in Britain.
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