ASX:CCX
City Chic Collective Ltd
Investment Summary
The fund managers believe that City Chic Collective Ltd (CCX.ASX) is facing significant challenges as evidenced by its recent share price decline of over 50%, falling to approximately $0.13 following a capital raise announcement. In their opinion, this downturn is largely due to trading conditions remaining difficult, with anticipated sales down 30% for the 2024 financial year because of rising interest rates that have impacted consumer spending. The company is undergoing a strategic review to streamline operations, aiming to reduce costs by $20.3 million. The $23 million capital raise, which includes $17.5 million underwritten at a 50% discount, is designed to bolster the balance sheet post the sale of its UK and US businesses, leaving it with about $10 million in cash and a $10 million debt facility. Despite the disappointing trading update, the fund managers hold a cautiously optimistic view, believing that the company's simplification back to its Australian core and a stronger financial position will enable it to navigate the challenging economic landscape.
Commentary From The Managers
Spheria Asset Management
30 June 2024
$0.13
- Spheria Asset Management notes that City Chic Collective (CCX.ASX) share price fell over 50% in June.
- The decline followed the announcement of a capital raise and trading update for the financial year.
- Sales are expected to be down 30% for the 2024 financial year due to higher interest rates impacting consumer spending.
- As a result, the company is undergoing a strategic review to simplify operations and realign the cost base, aiming to strip out $20.3m of costs.
- The capital raise of $23m (with $17.5m underwritten) is offered at a 50% discount to the last closing price.
- Funds from the capital raise will support the balance sheet and restructuring after the sale of the UK and US businesses.
- Post-raise, the business will have approximately $10m cash and a $10m debt facility available.
- The recent trading update was disappointing and Spheria had expected a stabilization in trading conditions.
- With a simplified focus on the Australian core and a stronger balance sheet, Spheria believes the business can navigate through the challenging economic environment.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.