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Dick Smith won’t honour gift cards or return lay-by deposits as the company calls in the receivers

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Dick Smith have appointed a voluntary administrator and receiver to the company a day after the troubled retailer chose to suspend its shares, as it prepares to announce a last-ditch debt financing plan.

NAB and HSBC appointed James Stewart from Ferrier Hodgson as receiver, while the board have elected for McGrathNicol to take over as administrator,The Australian reported.

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Dick Smith Holdings, which have lost more than 80 per cent of its value since August, have decided not to honour any outstanding gift vouchers or return deposits on lay-by’s, with Mr Stewart stating it is ‘too early’ to understand how the retailer became so ‘cash constrained’.

He said Dick Smith’s 3,300 employees would continue to be paid by Ferrier Hodgson as the group calls for potential buyers to stand up and express interest in acquiring the company.

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Mr Stewart, who claimed the retailer pulls in annual sales of approximately $1.3 billion, noted that the New Zealand branch has remained profitable, which would likely attract interest from cashed up investors.

According to the Australian Securities and Investment Commission, a voluntary administrator’s role is to make recommendations to creditors about whether a company should go into liquidation or be returned to directors.

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On Monday the embattled electronics retailer asked that the Australian Securities Exchange cease trading its shares until the market opens on Wednesday, or the plan for its financial recovery is announced.

Forager Funds chief investment officer Steve Johnson told the Sydney Morning Herald that the move could indicate the troubled company is headed for receivership.

‘The announcement is very negative. This could be the end of the road for Dick Smith,’ Mr Johnson said.

‘I wouldn’t be surprised if the company is not able to resume trading on Wednesday and instead seeks an extension of time to continue trying to re-finance its debt’.

Shares for the electronics retailer, which started in 1968 as a car radio installation business, fell almost 60 per cent in November last year after the company revealed that its stock was worth $60 million less than expected, with profits also forecast to fall short of Dick Smith’s $48 million target.

Dick Smith was purchased from Woolworths for $94 million in November 2012 and floated on the ASX in December 2013 with a market value of $520 million, more than five times what it sold for.

However, after two profit warnings and consistently weak sales, the group’s value has dropped considerably, trading at 35.5c, a whopping 83 per cent lower than its original value, the Herald Sun reported.

The electronics store made a bid to clear unwanted stock by offering discounts of up to 80 per cent before Christmas, in a move labelled ‘suicidal’ by rivals, the Australian reported.

Unfortunately, the sale did little to boost the troubled retailer’s sales.

Dick Smith encouraged staff to take part in the ‘mammoth sale’ which caused customers to claim greedy staff had hidden heavily discounted items for themselves or friends.

Other commenters mocked the trivial deals, or the ‘sexist’ decision to have gender specific gifts – with ‘gifts for her’ being comprised of cooking and cleaning products.

In another devastating blow to the embattled retailer, Dick Smith lost its spot in the Australian share market’s list of top 200 companies.

Daily Mail contacted Dick Smith but they are unable to comment until the trading halt has finished.

An announcement is expected to be made before Wednesday that will detail the company’s position to acquire funding and debt financing.

Online Source

The Indian Telegraph Sydney Australia

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