Godfreys warns of poor cash flow

Possible earnings downgrade.

A financial review is currently underway at Godfreys, following a recent management shakeup, including the appointment of a new CEO and CFO. Upon a preliminary assessment of numbers, the retailer has warned of cash flow challenges, an extra financial injection and potential earnings downgrade.

“The Godfreys business may, without further financial support, experience cash flow challenges in early July 2018,” the company said in an ASX statement to shareholders. “These indications are based on a high level analysis by the new executive team…work is currently underway to verify this position.”

Godfreys has commenced discussions with its principal financier, 1918 Finance, about an extension to the limit on its existing $30 million senior debt facility.

The executive team and external advisers are also verifying earnings projections and the retailer confirmed that a further announcement in the near future is likely. “In the meantime, it would be prudent for shareholders and investors not to rely on previously published earnings guidance,” the statement said.

As indicated in the Arcade Finance bidders’ statement, should Arcade reach a 90% relevant interest in Godfreys, it will proceed to compulsorily acquire all outstanding shares under provisions of the Corporations Act 2001. As of Monday 5 June, Arcade received acceptances from more than 80% of shareholders.


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