Brown & Jackson at odds with its lenders

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The Independent Online
ALMOST 60 per cent was wiped off the value of Brown & Jackson yesterday after the discount retailer announced it had failed to reach agreement with its bankers and may not be able to continue trading.

The shares slumped from 6.5p to 2.75p, leaving the company worth just pounds 17.6m - about a tenth of its annual sales. At their peak in 1990, the shares stood at 71.7p and the company was worth pounds 460m.

Brown & Jackson, which owns the 225-store Poundstretcher chain, ended 1993 with pounds 6.3m of cash. But it estimates that it would have needed up to pounds 14m during 1994 to fund its expansion plans and the purchase of Christmas stock. The banks, led by Midland, have refused to agree the facility although negotiations are continuing.

'The board disagrees strongly with the stance adopted by the banks and is reviewing urgently options for the future of the business,' it said yesterday. Ian Gray, chief executive, said it was in discussions with an overseas investor considering a stake in the group, which employs more than 4,000 people.

A sale and leaseback of some of its stores, which would have raised pounds 5.9m, will not go ahead now.

A spokesman for Midland said discussions with customers were confidential. But analysts said lenders appear to have lost patience with the group after three years of losses.

Brown & Jackson has raised pounds 37m in rights issues in less than two years. The first, in June 1992, was part of a restructuring package aimed at saving it from receivership, but last year's pounds 21m cash call was for the purchase of up to 60 new stores.

Despite the rights issues, the group made losses. According to estimates yesterday, it lost pounds 12.7m before tax in 1993, up from pounds 6.6m the previous year. Financial uncertainty meant it was unable to prepare accounts on the assumption it will stay a going concern.

Poundstretcher was below expectations. Margins were cut to clear surplus stock while store changes had not had an impact on sales.