Shop Direct faces collapse after surge in PPI claims
UK retail group Shop Direct needs £150m to cover ‘unexpected increase’ in PPI claims or faces closure
Shop Direct has revealed it needs to find £150m ($192m, €174m) to cover a huge increase in losses, which it blames on a surge in payment protection insurance (PPI) claims.
The parent company of online stores Very and Littlewoods reported a £185.5m loss before tax, more than seven times the loss of £24.7m in 2018.
Shop Direct blames the poor performance on a “very late emergence and unexpected increase” in PPI compensation, costing an additional £241m. A total of 276,000 PPI claims were submitted in August 2019, versus the typical monthly figure of 40,000.
The UK retail group, which is owned by the billionaire Barclay brothers, now needs to raise £150m additional funding. The directors say they are “confident” the funding will be secured. Its auditor Deloitte, however, has stated there is “material uncertainty… about the group and parent company’s ability to continue as a going concern”.
In its annual report group chief executive Henry Birch states: “In view of the significantly increased customer redress claims, we are actively evaluating a number of options to raise additional funding, including both debt and equity funding.”
The cash crisis adds further problems to Sir David and Sir Frederick Barclay’s failing empire, Over the last 18 months the 85-year-old businessmen have already ploughed £325m into the Ritz hotel and Telegraph Media Group and are reviewing the assets for possible sale.
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