Shoe maker’s CVA proposal passed with 99.5% approval by creditors
A proposed CVA (Company Voluntary Arrangement) by a Skelmersdale-based shoes manufacturer has been approved, which will avoid more job losses, it said.
Hotter Shoes announced the move a month ago, which it said would result in the closure of 65 of its 80-strong store portfolio.
The business is owned by private equity firm Electra, which provided an update on the process today.
It said the CVA proposal has been approved by 99.5% in value of creditors who voted, with a majority vote in favour of the proposals from each category of creditor.
There is now a 28-day period in which creditors may challenge the CVA outcome.
A further announcement regarding the outcome is expected in late August.
Hotter Shoes chief executive, Ian Watson, said: “I would like to thank my colleagues for their support and understanding through this process.
“Following the impact of COVID-19 the CVA was a regrettable but necessary step to avoid the likelihood of Hotter going into administration causing a much larger number of job losses, and was critical to ensure a viable future for the business.
“Now, we can focus on accelerating the implementation of our strategy to develop the respected and valuable Hotter brand with a greater emphasis on its online offering, which should establish a successful long-term future for the business.”
Hotter Shoes is expected to emerge from the CVA process with its targeted sales channel structure in place and its fixed cost base significantly reduced.
This, combined with the delivery of a number of strategic initiatives, including an enhanced web platform launched in June, and the anticipated benefits of enhanced product development and design activity reflected in the upcoming Autumn/Winter product, leaves the business well placed to face the uncertainties of the current market.
The COVID-19 crisis has accelerated Hotter’s strategy of digitisation, which will refocus the business on its online and direct-to-consumer channels.
This strategy will also see a return to the company’s core area of success, which is a focus on comfort and fit, supported by industry-leading, bespoke technology.
UK e-commerce sales growth of 11% year-to-date with 35% coming from new customers gives confidence that, as an e-commerce-focused, business Hotter has the opportunity for a positive future with profitable growth and value creation.
On a pro-forma basis, using actual results for the year to January 2020, and therefore excluding any retail revenue retained through channel shift, following the significant structural changes being implemented before the end of August, Hotter’s total revenue would be reduced from £85.6m to £59.8m, with 80% of sales being direct to consumer compared with 55% in the prior year.
Non marketing overheads would be reduced by approximately £15.4m, resulting in a 30% increase in EBITDA margin prior to the significant marketing efficiencies enabled by the transformed sales channel structure.