Courts in talks with banks after fresh profits warning

Courts, the disaster-struck furniture retailer, lurched into a fresh crisis yesterday after admitting it was talking to bankers after UK sales collapsed.

Courts, the disaster-struck furniture retailer, lurched into a fresh crisis yesterday after admitting it was talking to bankers after UK sales collapsed.

In the latest in a string of profits warnings, Courts said its UK business would make a loss during its all-important second half. Its annual losses would be "significantly greater" than current forecasts, it revealed. Shares plunged 31 per cent to 46.5p - an 18-year low.

Numis Securities, its house broker, widened its forecast for losses before tax for the year to March to £30m from £25m. It expects Courts' UK business to rack up losses of £27m, up from £22m. Rory Codd, at Numis, said: "The company is nearing the critical Christmas and January trading period in difficult shape and this does not bode well for an improving trend."

The group, which is under new management, said like-for-like sales had dived 20 per cent during the past eight weeks. It admitted it was struggling to persuade people even to visit its stores. "The UK business has generated orders below expectations primarily due to customer footfall being below forecast," Courts said. Leo McKee recently replaced the last member of the founding Cohen family as the group's executive chairman.

Just weeks after renegotiating its banking covenants, the group said it had to go back to its principal lenders for "preliminary discussions", which it described as "constructive" but admitted were continuing. It has a revolving credit facility of £280m.

Although Courts has drafted in a new UK management team, Alan Fort, its UK head, is rumoured to be considering leaving. The company has sacked 400 staff and ended the practice of some employees not working on Saturday and Sunday, its busiest days.

To compound Courts' UK misery, its Caribbean business was savaged by the region's recent hurricanes, forcing it to delay plans to hive off its overseas operations into separate businesses. In its September profits warning, Courts said Hurricane Ivan, which destroyed its three shops in Grenada and six in Jamaica, would cost it £7m. Yesterday it said its businesses in the Caribbean and Asia-Pacific areas were trading in line with expectations.

Richard Ratner, an analyst at Seymour Pierce, said the shares were "purely a punt, with the danger that the company could end up in administration". He said it was "very dubious" as to whether there was any value left in the business, which had a market capitalisation of just £28.5m yesterday.