Alexon to raise capital to speed recovery

Alexon, the mainstream womenswear retailer which owns the Alexon, Ann Harvey, Minuet, Dash, Kaliko and Eastex chains, said it would raise the capital through the selling of 33,333,333 firm placed new ordinary shares and 68,267,652 open offer shares, each at 20p per share. The share issue price represents a 40.7% discount to the closing price of 33.75p per ordinary share yesterday. The offer is open to existing shareholders who can purchase three shares for every two held.

Alexon said the capital raising, which will equate to £18.5m net of expenses, would help to accelerate its turnaround plan, which involves exiting 63 properties which have unfavourable commercial terms or are in inappropriate locations.

The group has already exited eight leases and is in talks to renogotiate several more, which it said would result in a saving of approximately £5.2m. Alexon has already negotiated improved commercial terms for ten further leases, which it said would save £300,000 annually in rents.

The chain plans to use £10m of the new capital raised to pay debts relating to the property portfolio changes. The remaining £8m would be used to invest in outdated systems at the group, re-fit existing concessions and invest in new concessions and new store openings.

Alexon said its pre-tax losses for the year to January 30 2010 were not expected to be below £1m and added that trading had continued on an encouraging trend since the start of the new financial year, with sales declining at a slower rate. Like-for-like sales were down 3.7% for the four weeks to February 28.

In the six months to August 1 2009, Alexon’s said like-for-like sales fell 12.6% and it reported a pretax loss of £8.1m.

Alexon chairman Richard Handover said: “Alexon Group has strong brand equity and has historically been profitable and cash generative but in recent times the group has lost market share due to underinvestment over several years. In addition the group’s financial performance continues to be significantly affected by a large number of onerous property leases, as well as cash constraints on investment. The new management team has developed a turnaround strategy which is now being implemented and there is good evidence of this working.”

He added: “Today’s announcement will enable Alexon to accelerate its turnaround plan and is in the best interests of Alexon, its shareholders and other stakeholders. The property portfolio reorganisation will establish a more appropriate operational structure for the business, whilst the increased investment in systems, concessions and store openings will ensure Alexon has a strong platform to grow going forward.”

The capital raising will result in the issue of 101,600,985 new ordinary shares, representing approximately 69.1% of the enlarged share capital of Alexon.