Struggling electronic retailer Dick Smith Holdings Ltd (ASX:DSH) has announced to its investors that the company has gone into voluntary administration. Following this announcement, in adherence to the ASX listing rule 17.3, Dick Smith was suspended from trading.
The board of Dick Smith set the voluntary administration into motion due to a multitude of factors. Namely, their recent chain of poor performance, in garnering sufficient sales and cash used to support the ongoing operations of the business, along with the onset of debt obligations, to which they owe an outstanding $40 million to their creditors. The company was unable to obtain the necessary support of the banking syndicate which left management no choice but to appoint a voluntary administrator.
The voluntary administration is set on a backdrop of recent instability within their retail business, where prior to Christmas, Dick Smith decreased the value of its inventory by 20%, being around $60 million. This coincided with Dick Smith initiating a mass clearance of their stock, where they were offering discounts of up to 70% off.
In accordance with ASX listing rule 17.3, the ASX is able to suspend a company from trading if it’s unwilling, unable, or it is breaking a listing rule. Alternatively, it could also suspend a company from trading if the ASX finds it in the best interests of the investors.
DSH shares have been on a downward slope as of late, losing over 83% of its value within a year, decreasing its market capitalisation to $83.96 million.
Author: Simon Herrmann
Jan 05, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.