The incentives will be targeted at employees below board level, the retailer said in last week’s regulatory statement on the refinancing. “The exact details are still to be finalised, but the incentives are likely to be aimed at regional managers and key positions within the business,” said a spokesman.
Land of Leather is raising emergency cash in response to punishing trading conditions that have sent sales into a tailspin. Investec and Kaupthing have underwritten the deal, which is only open to existing shareholders, meaning that Agilo, which was understood to have wanted to take a holding in the store group, will not take a stake.
The retailer anticipates that the share placing will raise about£13.5 million net and management has forecast that the company will record a pre-tax profit before exceptional items of£2 million for the year to August 3. The expected cash balances for July this year, following receipt of the additional equity funds, are about£14.8 million.
Land of Leather will use some of the concession space freed as a result of the collapse of previous concessionaire Sleep Depot – not all of which was subsequently taken up by new concessionaire Homestyle – to display a new range of fabric sofas.
In last week’s filing, Land of Leather reported that like-for-like sales in the six weeks to June 6 had plummeted 35 per cent and that comparable store sales for the rest of this financial year were likely to remain “particularly difficult”. Shore Capital analyst John Stevenson estimates from management projections that there is the potential, if necessary, for a further£6 million in further marketing and staff cost savings. The company could tolerate a 20 per cent decline in like-for-like sales next year before reaching zero cash balances.
However, he said: “The appetite for big-ticket purchases is unlikely to recover or even stabilise for some time. We see scope for double-digit like-for-like declines to continue. We would not recommend investors take part in the placing.”
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