The Spanish subsidiary of the Douglas perfume chain, which in March completed a ERE in the country with an impact on 500 workers and the closure of 82 stores, describes in its latest annual accounts the delicate financial situation that the German group is going through, both in Spain and globally. A situation as a result of the continuous losses that, in the first case, it has registered in recent years and that have been aggravated by the Covid-19 pandemic.
This is stated in the financial report of Douglas Spain SA, recently deposited in the Mercantile Registry. This includes the information related to the year 2019 but they were signed in February of this year, and they include the consequences of the health crisis in its accounting year 2020. They are mentioned by its auditor, KPMG, who explains in his report that these can “raise significant doubts about the ability of society to continue as a going concern.”
One of these risk factors is the evolution of the business itself. The Spanish subsidiary does not detail the results and sales of its 2020 accounting year, but it does indicate that the sector’s revenues fell by 22% on average once the stores reopened. It also refers to the “significant losses” suffered at the group level, which were 517 million euros.
A relevant point, because the parent company has been the main financial support for Douglas’s business in Spain to remain afloat despite its lack of profitability, through successive loans and injections of funds.
Support that is now limited. The Spanish subsidiary acknowledges that “there is material uncertainty” about its ability to continue in operation, although it notes that the German parent company “will financially support the company” in a “maximum amount of 60 million euros”, to be distributed among Douglas herself. Spain and the other group company in the country, Compañía de Almacenaje Distribución y Servicios.
This figure means limiting this support, since in previous years the company claimed to have the “necessary financial support” from its owner. In addition, it occurs after it forgives a good part of the debt that it had pending repayment.
As reflected in the accounts, as of June 30, 2020 Douglas Spain had a liability of 162.1 million with its parent company: 82.1 for the amounts drawn down from a line of credit, including interest, and another 80 for a participating loan. A month later, on July 31, both companies signed a partial debt forgiveness contract, specifically for an amount of 90 million. After discounting interest, the balance pending repayment by the Spanish subsidiary is 66 million.
In addition, it had to undertake a capital reduction for accumulated losses amounting to 172 million euros to restore equity balance.
The limitation of Douglas’s support for his Spanish business is no accident. At the end of 2020, the parent company had a net debt of 2,220 million, of which almost 635 corresponded to bond issues maturing in 2022 and 2023. Douglas Spain’s accounts acknowledge that the group did not have a treasury to deal with them. .
A situation that he was able to correct just a few weeks ago. In the second half of March the company announced a restructuring of its debt through various instruments. First with a syndicated loan for 1,080 million euros, which it will use to buy back the two issues it has on the market, together with a revolving line for another 170; and with the issuance of debt for a total value of 1,780 million with maturity in 2026, of which 1,305 are senior bonds with an interest of 6%.
Fiscal year 2019. Douglas Spain managed to significantly reduce its losses in fiscal year 2019, prior to the arrival of the pandemic. These were 18.8 million, compared to the 58 that it registered in the previous year, which represents a reduction of close to 70%. This was in part thanks to an improvement in revenue, which rose to $ 245 million. It is true that the company undertook a process of integration of the different companies that make up the group in Spain and that it acquired in recent years as a result of its growth strategy. These are the cases, for example, of the Bodybell companies, the chain of perfumeries that Douglas bought in 2017.