A decision by credit insurers not to cover transactions was the final blow that led to movie rental chain Xtra-vision being placed into receivership, leaving more than 1,000 jobs hanging in the balance.
The company had no bank debt after exiting a receivership in 2011 with its rent roll reduced by around €5m. However, the withdrawal of credit insurance meant it could not secure trade credit and would have had to pay cash on delivery for all of its stock.
“Although Xtra-vision generated ebitda [earnings before interest, taxes, depreciation, and amortisation] of €1.5m in 2012 and is forecasted to do the same in 2013, it has become unable to meets its debts as they fall due as a result of the withdrawal of trade credit by a number of its key suppliers,” a company statement said.
From yesterday, receivers from Ernst & Young, Luke Charleton and Colin Farquharson, will take over the day-to-day running of the business with a view to selling 152 stores, the majority of which are profitable.
The businesses will continue to run as normal, with all gift vouchers and customer credit balances remaining fully redeemable.
“We are advised that the majority of stores are profitable and collectively will be attractive to potential purchasers,” said Mr Charleton. “We will work closely with management to assess the viability of each of the company’s stores.”
Xtra-vision has been moving away from its traditional rental model as the profits from this area as the returns from this area have been in decline for the last number of years.
The company’s business model is now 60% retail, 40% rental, but as the roll out of high-speed internet continues, downloading has eaten further into the rental market.
“While the company’s retail business continues to grow, its movie rental business has declined more rapidly than anticipated most noticeably in areas with high-speed broadband which is linked to high levels of illegal downloading,” the company statement added.
The receivers are seeking expressions of interest from parties that may wish to buy the chain.
“We will advertise the business seeking expressions of interest from third parties with a view to securing the early and successful disposal of Xtra-vision, thereby ensuring the continuation of the business,” said Mr Charleton.
David Fitzsimons, CEO of Retail Excellence Ireland, said the move was another sign of how tough retail survival has become.
“It is indicative of the nightmare on main street,” said Mr Fitzsimons. “Here is a company that has been through the examinership process and restructured its debts and is still struggling.”
When the company exited examinership in 2011, it did so with reduced rent and a cash injection of €8m from its parent firm, Birchall Investments.
Retail Excellence Ireland is calling on the Government to put the same emphasis on saving consumer spending and the retail sector as it places on encouraging foreign direct investment.
Mr Fitzsimons said that he would have serious concerns for any businesses that rely on a settled residential sector, middle market female fashion and any retail sector that is migrating online, such as books, toys, games, and movies.
Minister for Jobs Richard Bruton rejected claims that the Government has not done enough for the retail sector, and said that his sympathies were with the Xtra-vision workers.
“I would reject that,” said Mr Bruton. “In the action plan for jobs, we are proposing rationalisation of licences for retailers. We are also proposing incentives for businesses to go online and use the facilities of online trading to develop new business.
“Michael Noonan reduced Vat and PRSI contributions to make it easier for business, but of course it is a very difficult environment.”
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