ASSET SALES ON THE CARDS FOR E-TAILER SURFSTITCH AS LEGAL COSTS LOOM
Written on the 27 July 2017 by Ben Hall
EMBATTLED online sport clothing retailer Surfstitch (ASX: SRF) is looking at selling some of its assets as it faces cost pressures from a complex mix of legal proceedings, an ASIC investigation and separate class actions.
Surfstitch says it is considering selling its media assets along with other assets as it weighs up the "cost and disruption" from litigation from Crown Financial Group along with separate class actions in the Queensland and NSW Supreme Courts and a continuing ASIC investigation.
In a statement released on the ASX, the Gold Coast-based company says all of these proceedings will have an impact on its cash position.
"The company is working steadily to stem losses within the business, improve the key underlying retail business operations and deal with the litigation challenges in an orderly fashion," the retailer says.
"In light of the challenges facing the business, the company is exploring sales of its media assets and the potential for sales of other assets.
Surfstitch, which sells brands such as Billabong, Quiksilver, Vans and Converse, says the potential cost and disruption from the legal issues and the ASIC probe will not affect its ability to continue trading and remain viable.
"For the past year the company has implemented operational and technology improvements, reduced expenses and improved the financial performance of the two key business units, SurfStitch (in Australia) and Surfdome (in the UK)."
An Extraordinary General Meeting has been called by Crown Financial for 2 August, as it owns more than five per cent of SRF shares, with the only item of business being the removal of director Sam Weiss.
SurfStitch's board has urged shareholders to vote against the resolution.
Crown Financial has taken legal action against SurfStitch, which has suffered a spectacular fall from grace in 2016 and 2017, over the fallout from a failed content sharing deal with its subsidiary Three Crowns Media Group which was one of the major causes of its share price wipeout.
The company downgraded its earnings three times, largely because of a dispute with surf technology group Coastalwatch and Crown Financial over the licencing deals which fell through, and this wiped around $20 million off revenues.
The market capitalisation of Surfstitch has fallen rapidly from its peak in November 2015 of $590 million to its recent value of $18.9 million.
Since its much-hyped IPO in 2014, SurfStitch has endured a series of major setbacks with a massive loss in FY16, a share price wipeout and the acrimonious departure of co-founder and CEO Justin Cameron.
Investors who piled into the IPO at $1.00 a share have suffered a 93 per cent loss.
Business News Australia
Author: Ben Hall