London - The UK furniture-retailing sector has been facing challenging times recently with two major retailers running into financial difficulty.
Leather furniture specialist Land of Leather, which issued three profit warnings after Christmas, recently unveiled a rescue package to raise £15 million ($29.7 million) by persuading new and existing shareholders to buy more equity. The group, headquartered in Northfleet, Kent, had a turnover for fiscal 2007 (to end of July) of £240 million and operating profit of £17.6 million.
Meanwhile, ScS Upholstery plc announced 11 June, that "the sudden withdrawal of credit insurance from the market has placed a strain on the working capital needs of our suppliers."
Sunderland-headquartered SCF Upholstery, which specialises in lounge sofas and easy chairs, has 95 stores across the UK and had a turnover for 2007 of £184 million, with trading profit of £6.6 million.
Following this statement, the company held discussions with a number of external parties to raise additional working capital. In a 23 June statement ScS announced that it had received a direct approach from one of the parties to acquire the entire share capital of its sole trading subsidiary, therefore providing substantial working capital facilities that would "fully resolve the working capital issues and ensure all suppliers have a strong and ongoing relationship with the business."
The company added, however, that "as these discussions have developed, it has become clear to the directors of ScS that the extent of the additional working capital funding required may result in only negligible value being attributed to the shares in ScS Upholstery plc."
For this reason ScS directors have requested a suspension in the trading of the company's shares with immediate effect. ScS said a further announcement will be made in due course.