Thorntons has secured new deal with lenders

Thorntons has secured new deal with lenders

Shares in Thorntons jumped today (3 July) as the UK confectioner revealed it had secured new credit facilities with lenders.

Thorntons said existing lenders had agreed in principle to provide an increased unsecured committed revolving credit facility of GBP75m (US$128.6m), which will run to October 2018.

"This increased facility will provide headroom for the increased working capital requirements associated with serving third-party retailers," said Investec analyst Nicola Mallard.

Alongside news of the deal, Thorntons also revealed its borrowing limit had been "inadvertently" breached "on a number of occasions" in recent years but said lenders were still "supportive" of the business.

Thorntons also said it should hit market expectations for annual pre-tax profits for the year to 28 June.

The company said its annual pre-tax profits, before exceptional items, is "anticipated" to be in-line with market expectations of GBP7.1m. In the previous financial year, it booked pre-tax profits of GBP4.7m.

It also revealed its commerical division, which sells to customers including the UK's leading supermarket chains, had seen sales increase at a "double-digit" rate during the fourth quarter of its financial year.

Shares in Thorntons were up 7.94% at 115.5p at 15:00 BST.

Show the press release

Trading Update

Ahead of its Fourth Quarter Trading Update on 9th July, Thorntons is today pleased to announce a positive overall performance across the business in the year ended 28th June 2014.  The Company's UK Commercial channel returned to double-digit percentage revenue growth in Q4 and full year pre-exceptional PBT is anticipated to be in line with the market expectation of £7.1 million* compared with £4.7 million (restated) last year.  The Board remains confident that its strategy for the business continues to be effective.

Refinancing

The Company's existing banking facilities totalling £57.5m run until October 2015.  In order to support the continuing growth of Thorntons and its transformation into a fast moving consumer goods company with increasing sales to third party retailers, the Board is delighted to have secured the continued support of its existing lenders who have agreed in principle to provide an increased unsecured committed revolving credit facility of £75m which will run to October 2018.

Proposed amendment to Articles of Association to amend technical breaches

Since the borrowing limit contained in the Articles of Association of the Company was last amended in October 2005 the requirement under International Accounting Standard 19 to account for the Company's defined benefit pension scheme deficit on the Company's consolidated balance sheet has resulted in a reduction in the Company's consolidated reserves.  The Articles currently require the Board to limit the borrowing of the Company to a maximum of two-and-a-half times the adjusted capital and reserves (as defined in the Company's Articles of Association), and these were shown as £16.6m as at the last audited financial statements of the Company.  The Board consequently will be seeking to increase the limit in the Articles of Association on the Company's borrowing to the greater of £100m or two-and-a-half times the adjusted capital and reserves.  This will provide for sufficient headroom over its new banking facilities and more appropriately reflect the Company's cash flow and working capital requirements necessary to support the Company as it continues its transformation.

As part of the due diligence in securing the new facilities it became evident that this limit had inadvertently been exceeded on a number of occasions over the last few years.  The Company's lenders remain supportive of the Company despite these technical breaches.

The Company intends to convene a General Meeting later in July, at which shareholders will be asked to approve a Special Resolution to amend the borrowing limit in the Company's Articles of Association.  A circular convening a General Meeting will be mailed to shareholders shortly. 

The Board believes that it is imperative that the Company's shareholders vote in favour of the proposed amendment to the Articles.  Without such approval the Company is likely to again exceed its current borrowing limit and be in breach of its existing facilities and accordingly would be required to take all possible steps to correct this.

Original source: Thorntons