NOT FOR DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, HONG KONG OR JAPAN, OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER OF ANY OF THE SECURITIES DESCRIBED HEREIN.
XXL ASA (“XXL” or the “Company”) today announces an agreement with its senior secured lenders regarding extension of its senior secured financing facilities and amendment of the financial covenants, and a fully underwritten rights issue of NOK 500 million (the “Rights Issue”). This is expected to provide the Company with sufficient financial flexibility while undertaking significant improvement initiatives to position the Company for profitability from a position as market leader. The Company operates in a structurally attractive market that has shown healthy growth rates historically, but is currently facing challenges due to weaker consumer sentiment. A continued weak market has triggered a need for further financial flexibility.
Ongoing improvement initiatives
As earlier communicated, the Company has already initiated significant actions to improve its financial performance that are well under way. Focus in 2023 is on top line quick wins and cost control. Over the next 12 – 24 months, the Company has an ambition to improve its EBITDA ex IFRS 16 effects with NOK 500 – 750 million through: (i) Reduction in purchasing prices, (ii) Improving product availability, (iii) Upselling and improving store operations, (iv) Pricing and (v) E-com initiatives. The Company, under the leadership of its new CEO Freddy Sobin, is in the process of defining a new strategy and financial targets for the period beyond the next 12 – 24 months, which will be communicated to the market once concluded. In order to successfully implement the improvement initiatives, sufficient financial flexibility is required. With the financing, a normalized inventory and successful implementation of the improvement initiatives, the Company will be well placed when the market recovers.
Agreement with the senior secured lenders
The agreement with DNB Bank ASA and Nordea Bank Abp, filial i Norge, includes an extension of the current facilities to 25 June 2026 and the following amended covenants: (i) NIBD/EBITDA LTM ex IFRS 16 effects not exceeding 4.0x from December 2024, (ii) minimum liquidity reserve of NOK 200 million from September 2023 to May 2024 and thereafter minimum liquidity reserve of no less than NOK 300 million until and including November 2024, (iii) maximum outstanding gross loan facilities of 50% of book value of inventory, excluding value of supplier bonuses (limited upwards to NOK 1,300 million) starting 1 September 2023, and (iv) certain new restrictions on the size of the inventory of XXL Sport & Vildmark AB without providing additional floating charges over its assets.
The fully underwritten Rights Issue
The proposed fully underwritten Rights Issue will raise gross proceeds of NOK 500 million. The size of equity raise is based on the Company’s current business plan, which assumes gradual improvement in market conditions and positive effects from the ongoing improvement initiatives. The Company will as previously announced apply for further deferred payment of the Swedish tax amount of SEK 345 million from 12 September 2023 until 12 September 2024, which will provide liquidity upside in the short-term if granted. The Company expects to receive response on its application by end of August 2023.
The proposed terms for the Rights Issue, including the subscription price and number of shares to be issued will be determined by the Company’s board of directors in consultation with the Global Coordinators (as defined below) and Altor (as defined below) and are expected to be announced on or about 16 August 2023.
Each shareholder will be granted tradeable subscription rights (“Subscription Rights”) in proportion to the number of existing shares held at the date of the extraordinary general meeting resolving the Rights Issue (the “EGM”), expected to be held on or about 17 August 2023, as registered in the Norwegian Central Securities Depository (VPS) on the second Norwegian business day thereafter (the record date), cf section 10-4 of the Norwegian Public Limited Liability Companies Act. Each Subscription Right will, subject to applicable securities laws, give the right to subscribe for and be allocated one offer share in the Rights Issue. Oversubscription and subscription without Subscription Rights will be allowed.
Altor Invest 5 AS, Altor Invest 6 AS (together “Altor”), Arctic Asset Management, fund managed by Odin Forvaltning, MP Pensjon PK, Funkybiz AS, Bjerknes Eiendom AS, Anavio Equity Capital Markets Master Fund Limited, Nordkronen II AS and Stormberg Group AS (the “Underwriters”) have, subject to customary conditions, pre-committed to subscribe for a portion of the Rights Issue based on current shareholding and / or underwrite the remaining part of the Rights Issue. The Underwriters have pre-committed to subscribe for approximately 46 per cent in aggregate of the Rights Issue and have underwritten the remaining approximately 54 per cent of the Rights Issue.
An underwriting fee of 6 per cent will be paid on the basis of the underwriting commitment by each Underwriter, payable in cash or in new shares. These new shares will be in addition to the shares to be issued in the Rights Issue, and will be issued at a subscription price equal to the volume weighted average price for trades in the Company’s shares on the Oslo Stock Exchange during the subscription period. Approximately 83 per cent of the underwriting fee is expected to be paid in new shares.
In order to secure a full underwriting of the required NOK 500 million, Altor has underwritten a significant portion of the Rights Issue. However, Altor shall not be obliged to subscribe for new ordinary shares that will result in Altor’s ownership in the Company exceeding 33.33 per cent of the votes in the Company and thus triggering a mandatory offer obligation under the Norwegian Securities Trading Act. Therefore, Altor will, if allocation of offer shares to Altor under the underwriting would otherwise have resulted in the mandatory offer threshold being reached, take delivery of unlisted non-voting shares convertible into listed ordinary shares for the excess number of shares. The receipt by Altor of these non-voting shares will not trigger a mandatory offer obligation for Altor.
The Company will call for an EGM to be held on or about 17 August 2023 to resolve the Rights Issue. Shareholders, including the Underwriters, currently representing 68.7 per cent of the shares in the Company have undertaken or confirmed that they will vote in favour of the Rights Issue at the EGM.
According to the current timetable, and subject to the approval by the EGM, the Company’s shares are expected to trade exclusive of Subscription Rights from 18 August 2023, the record date is expected to be 21 August 2023 and the subscription period for the Rights Issue is expected to commence on or about 22 August 2023 and end on or about 5 September 2023. The period during which the Subscription Rights are expected to be tradable is expected to commence on or about 22 August 2023 and end on or about 30 August 2023.
The Company will prepare and publish a prospectus for the Rights Issue that will include the full terms and conditions of the Rights Issue and is subject to approval by the Norwegian Financial Supervisory Authority prior to publication.
All dates and other figures with respect to the Rights Issue included herein remain tentative and subject to change. Any changes will be announced at the EGM or through stock exchange announcements.
DNB Markets, a part of DNB Bank ASA, and Nordea Bank Abp, filial i Norge, have been retained as global coordinators (the “Global Coordinators”) for the Rights Issue. Advokatfirmaet Thommessen AS is legal advisor to the Company.
For further queries, please contact:
Investor Relations
Tolle O. R. Grøterud
Tel: +47 902 72 959
E-mail: ir@xxlasa.com
Press contact:
Andreas Nyheim
Phone: + 47 952 11 779
Email: presse@xxl.no
This information is considered to be inside information pursuant to the EU Market Abuse Regulation and is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. This stock exchange announcement was published by Tolle O. R. Grøterud, Investor Relations Officer at XXL ASA, on 14 July 2023 at 08:00 CEST.
ABOUT XXL ASA
XXL is a leading sports retailer with stores and e-commerce in Norway, Sweden, Finland, Denmark and Austria. It is the largest among the major sports retailers in the Nordics. XXL pursues a broad customer appeal, offering a one stop shop experience with a wide range of products for sports, hunting, skiing, biking and other outdoor activities. XXL’s concept is to have the largest stores with the best prices and the widest assortment of products, focusing on branded goods.
ALTERNATIVE PERFORMANCE MEASURES (APM)
Certain financial measures and ratios related thereto in this release, including gross profit / gross margin, EBIT, EBITDA, EBITDA ex IFRS 16 effects, OPEX, CAPEX, net interest-bearing debt, leverage ratio, liquidity reserve / liquidity covenant (collectively, the “Non-GAAP Measures”), are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented in this release because they are among the measures used by Management to evaluate the cash available to fund ongoing, long-term obligations and they are frequently used by other interested parties for valuation purposes or as a common measure of the ability of a company to incur and meet debt service obligations. These measures may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you should not consider such items as alternatives to profit for the year, total operating revenues, operating income or any other performance measures derived in accordance with IFRS, and they may be different from similarly titled measures used by other companies. Please also see our quarterly reports or annual reports for further information, reconciliations and historical figures.
1) EBIT
Our EBIT represents operating income.
2) EBITDA
Earnings before interest, tax, depreciation and amortisation (EBITDA) is a key financial parameter for XXL. Our EBITDA represents operating income plus depreciation
3) EBITDA ex IFRS 16 effects
IFRS 16 effects affecting EBITDA and EBIT IFRS 16 was implemented for the Group 1 January 2019. EBITDA ex IFRS 16 effects and EBIT ex IFRS 16 effects represent our EBITDA and EBIT if IFRS 16 had not been implemented, respectively
4) Gross profit / Gross margin
Gross profit represents operating revenue less cost of goods sold. Gross margin is gross profit in per cent of revenue
5) Net interest-bearing debt (NIBD)
Net interest-bearing liabilities is defined as non-current interest bearing debt and current interest-bearing liabilities less cash and cash equivalents. NIBD does not include lease liabilities due to IFRS 16. Net debt is a measure of the Group’s net indebtedness that provides an indicator of the overall balance sheet strength
6) OPEX
OPEX is defined as other operating expenses including personnel expenses, but excluding depreciation and amortization
7) CAPEX
Capital expenditure is the sum of purchases of fixed assets and intangible assets as used in our cash flow. CAPEX is a measure of investments made in the operations in the relevant period and is useful to users of XXL’s financial information in evaluating the capital intensity of the operations
8) Leverage ratio
Leverage ratio is defined as NIBD/EBITDA (ex IFRS 16 effects), a measure for the strength of our financial position
9) Liquidity reserve / liquidity covenant
Our liquidity reserve is defined as our available cash and cash equivalents plus available liquidity through overdraft and credit facilities
Important information
The release is not for publication or distribution, in whole or in part directly or indirectly, in or into Australia, Canada, Japan or the United States (including its territories and possessions, any state of the United States and the District of Columbia). This release is an announcement issued pursuant to legal information obligations. It is issued for information purposes only, and does not constitute or form part of any offer or solicitation to purchase or subscribe for securities, in the United States or in any other jurisdiction. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “US Securities Act”). The securities may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the US Securities Act.
The Company does not intend to register any portion of the offering of the securities in the United States or to conduct a public offering of the securities in the United States. Copies of this announcement are not being made and may not be distributed or sent into Australia, Canada, Japan or the United States.
Any offering of the securities referred to in this announcement will be made by means of a prospectus. This announcement is an advertisement and is not a prospectus for the purposes of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (as amended) as implemented in any Member State. Investors should not subscribe for any securities referred to in this announcement except on the basis of information contained in the aforementioned prospectus, if a prospectus is published. Copies of any such prospectus will, following publication, be available from the Company’s registered office and, subject to certain exceptions, on the websites of DNB Markets, a part of DNB Bank ASA (www.dnb.no/emisjoner) and Nordea Bank Abp, filial i Norge (www.nordeamarkets.com/xxl).
The issue, subscription or purchase of shares in the Company is subject to specific legal or regulatory restrictions in certain jurisdictions. Neither the Company nor the Global Coordinators assume any responsibility in the event there is a violation by any person of such restrictions. The distribution of this release may in certain jurisdictions be restricted by law. Persons into whose possession this release comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
The Global Coordinators are acting for the Company and no one else in connection with the offering and will not be responsible to anyone other than the Company providing the protections afforded to their respective clients or for providing advice in relation to the offering and/or any other matter referred to in this release.
Forward-looking statements: This release and any materials distributed in connection with this release may contain certain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they reflect the Company’s current expectations and assumptions as to future events and circumstances that may not prove accurate. A number of material factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.