'Business as usual' at the rescued ScS

Jul 25 2008 by Karen Dent, The Journal

THE NEW owner of ScS says it’s business as usual at the furniture chain as it revealed plans for further expansion before the end of the year.

Private equity group Sun European Partners paid an undisclosed sum to rescue the Sunderland-based group three weeks ago in a deal which saved jobs at the 96-store chain but wiped out shareholders’ hopes of a dividend.

“The retail market is incredibly tough at the moment. We are certainly not going to damage the business, we have no plans to fundamentally change the business,” said Sun European vice-president Paul Daccus. “Our intention is to keep all the stores. There may be some minor tweaking and we may open a few new stores – maybe three or four more this year. We want to operate as efficiently as possible.”

ScS, which employs 1,300 staff including more than 200 at its Sunderland headquarters, distribution centre and 10 North East stores, was one of the high profile victims of the credit crunch and the rapid fall in the housing market.

ScS suspended its shares in June and put itself into administration when an insurer refused to cover five of its suppliers against the chain being unable to pay them, leaving ScS under severe financial pressure. US-owned Sun European, which entered exclusive negotiations about a rescue deal after ScS suspended its shares, then bought the group from administration.

Mr Daccus said he was confident there would be no repeat of the problems that led to ScS’s collapse because Sun European has pumped sufficient cash into the business.

“The reason why ScS didn’t succeed in its historical form is that it ran out of money,” he said. “We have funded it so there are no issues with liquidity. It is really getting the house in order for when the market returns. This is what we do, we turn businesses around.”

Mr Daccus added that ScS’s current management team remained in place and was working with Sun European, with the long-term aim of steering a steady course, then growing the business again when the economy improves. Chairman Mike Browne agreed it was “business as usual” and said he was keen move the business forward.

Vinay Bedi, divisional director of Brewin Dolphin stockbrokers in Newcastle, said ScS’s immediate future would be governed by consumer spending, which would benefit hugely from a cut in interest rates.

“Oil prices are starting to come back a bit and there is some scope for the Bank of England’s Monetary Policy Committee to reduce interest rates and that gives us some hope. That’s what the high street and ScS’s of this world will be looking out for,” he said. “One hopes the business itself is now on a much sounder financial footing to work through what could still be a difficult 12 months.”