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Very Group, the online retailer owned by billionaire family Barclay, is going to resume dividend payments to the family after a four-year hiatus and before a possible stock market trade.
According to the £ 575m tender offer document, the group plans to pay a dividend of “up to £ 25m” to its immediate parent VGL Finco “in the first quarter” of its current financial year, which started on 1 July .
Among the directors of VGL are Aidan and Howard Barclay, sons of the late David Barclay. It is eventually controlled by the family settlements of David and his twin brother Frederick, who this year end a bitter legal battle with his nephews over allegations of corporate espionage.
If paid, the dividend is the first since 2017, when the business made a hefty £ 400m payout to the family – more than half of what they paid for the business in 2014.
The next year, it makes investors angry by borrowing from banks to transfer cash to its wealthy shareholders, even if it provided for resale of payment protection insurance. It offers PPI along with the credit it offers to three-quarters of the Very Group customers.
The dividends for the family dried up after the prices of Very’s bonds fell sharply and in the intervening years funds flowed the other way around. The family injected a total of £ 250 million in equity in various transactions after the group, then known as Shop Direct, was forced to make further PPI provisions that threatened its ability to continue as a going concern.
But the pandemic led to strong trading at the company in Liverpool, which started as the Littlewoods catalog business.
Sales in the fourth quarter to end-June are expected to be up 5 percent higher than last year and 40 percent above the same period of 2019, before the pandemic.
In the nine months to the end of March, the profit before tax for extraordinary items was £ 82.5 million, not far from the £ 91 million reported for the entire financial year 2020. Very strong market positions in categories such as electronics and computer games which enjoyed a strong boost in sales during the collapse.
Under CEO Henry Birch, who took over in 2018, the business also cut £ 23 million a year from its cost base by moving the distribution to a large new automated warehouse near Derby.
The improvement in performance led the family to reconsider an initial public offering, possibly as early as next year. The terms of the latest debt, a five-year issue that refinances a 2017 mortgage, offer options for repaying the debt at just over the face value using the proceeds of a scholarship.
This limited potential benefit has led some to question the point of buying the bonds, while one fixed-income analyst has described the terms as ‘aggressive’.
He added that the collapse of Greensill, which provided financing to the group, could reduce the cash it generates from its operations. Shop Direct Holdings, the ultimate parent company of Very Group, recently said it would happen all outstanding debt repaid to the administrators of Greensill.
‘Management was quick to say their exposure [to Greensill] is very limited, but they have relied heavily on supply chain financing in the past, and I think that could affect their working capital and free cash generation, ”said the analyst.
The company declined to comment.