DFS Furniture PLC (LON:DFS) is making preparations for an emergency fundraising and is close to agreeing an extra £60-70mln of borrowing from its banks as trading is restricted due to coronavirus.
The sofa retailer said in a statement on Monday that it was looking to issue shares equivalent to just under 20% of its existing capital to give it enough liquidity “to see through an extended lock-down”.
Given the current market cap of £278mln, this means the company is looking to potential raise £55mln from an accelerated equity issue, which may suggest that smaller investors might miss out, contrary to a call from senior City figures issued on the same day.
READ: Listed companies should 'protect' smaller investors in coronavirus fundraisings
Last month DFS cancelled its interim dividend and closed all of its showrooms, manufacturing and distribution operations in the UK, Ireland and Spain in response to the governments’ coronavirus lockdown measures, saying its reduced cash outflow will be around £15mln per month.
Even though deliveries have been suspended, the furniture chain said its website has seen “strong momentum” in orders, with its order banks having grown to a total of £192mln on Friday from £185mln on 25 March.
Sofa deliveries will be restarted, DFS said, “once it is clear there is a safe and workable approach for two-person installations into customer homes”.
The DFS and Sofology trading subsidiaries are receiving inbound deliveries of customer orders from manufacturers in Asia, and the Dwell website has kept up selling and dispatching homeware accessories.
Shares in the company rose 6% to 139.4p on Monday morning, where they are still down 52% since the start of the year.
Analysts at broker Shore Capital, after noting that the board is confident that the Group can navigate the Covid19 crisis and with the proposed additional financing, said “the additional financing looks a sensible approach to give the company extra headroom given the uncertain outlook across the UK and no clarity on when store showrooms will reopen”.
“DFS is a well-run company and has reacted quickly to put in place additional financing to see it through the current Covid19 crisis.”
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