Calida Holding has made a formal proposal to refinance the starving Lafuma Group, owner of Oxbow and various outdoor brands. The Swiss company would inject €35 million worth of new equity into Lafuma, raising its stake to 50.6 percent, or 51.01 percent including the shares of Felix Sulzerger, chief executive at both Calida and Lafuma, up from the 15.2 percent stake that Calida acquired in the French company at the beginning of this year.
The offer values Lafuma's shares at €14, down from the €26 price that Calida had paid to the family of the former CEO, Philippe Joffard, for its initial stake. An independent auditing firm and a strategic committee of shareholders, headed up by Jean-Pierre Millet, concluded that it was a fair price and supported Calida's offer, in view of the business plan and the fact that it has to repay loans of €23 million by Dec. 20. The price is equal to a minimum of 10.8 times operating profits (Ebit) for 2015 and 8.4 times in 2016.
As previously reported, Calida doesn't want a controlling interest in Lafuma. It has already proposed to let other shareholders buy additional shares in Lafuma at a lower price per share.
Just before Calida issued a formal takeover and refinancing proposal, Lafuma announced a big loss for the financial year ended Sept. 30. The net loss amounted to €71.2 million, which compares with €15.2 million the year before, in spite of an improvement of the gross margin from 48.1 to 49.8 percent of the revenues, thanks to better margins on products delivered for the autumn 2013 season and better inventory management.
The operating results (Ebit) for the financial year show a loss of €65.6 million, up from €7.7 million in the previous year, due in large part to extraordinary charges of €58.9 million. Excluding them and before amortization and depreciation, the company still managed to make an operating profit (Ebitda) of €0.2 million, down from €10.2 million, but its adjusted operating results after amortization and depreciation (Ebit) show a loss of €6.6 million against an operating profit of €1.6 million.
The extraordinary charges include write-offs of €10.5 million for inventories and receivables, €39.3 million for depreciation of intangibles (€37.1 million for the Oxbow brand alone) and €15.2 million for reorganization costs. These charges were partly compensated by a gain of €6.5 million on the sale of the group's 49 percent share in Lafuma Beijing, its Chinese joint venture with LG Fashion.
As previously reported, the group suffered a 13.8 percent drop in its total turnover for the past year to €193.6 million, with declines of 11.5 percent for the Lafuma brand and 29.3 percent for its struggling surf brand, Oxbow. On a comparable basis, total sales were down by 12.3 percent.
The proportion derived from direct retail increased to 24 percent of the turnover from 20 percent in the previous year. The direct-to-consumer business consisted at year-end of three online stores and 86 mono-brand physical stores. There were also three Oxbow franchises in operation.
The company's net debt increased by €5.9 million as compared to a year earlier to €23.1 million, mainly due to negative cash flow of €8.5 million, leading the company to break its bank covenants.
Lafuma predicts a further decline in its sales for the current quarter, but adds that its operating losses will gradually decline from 2014 on, thanks to the recent restructuring measures.
The current three-month period will also constitute an exceptional fiscal year. In fact, in the future, Lafuma's financial year will coincide with the calendar year and with the financial year of Calida.
