6 Jan 2016

Dick Smith vouchers likely to be worthless

12:18 pm on 6 January 2016

People with Dick Smith vouchers and deposits are unlikely to get their money back after the electronics retailer was put into receivership.

The company is being sold after its banks refused to give it more money following poor Christmas sales.

In Wellington, people reacted to the news with a mixture of shock and sadness.

One person said Dick Smith was thought of as a "long-standing institution" and that he was sad to see it go, while many others said they were surprised to hear it was struggling.

Consumer New Zealand chief executive Sue Chetwin said a lot of people who had Dick Smith vouchers or deposits would be disappointed.

"They are best to register with the receivers. They really become unsecured creditors so, you know, the chances of them actually being able to redeem the vouchers are probably quite slim."

But she said it was worth registering just in case Dick Smith managed to trade its way out of receivership or the new buyers allowed the vouchers to be used.

The company, which has nearly 400 stores in Australia and New Zealand, has been trading as usual, as receivers Ferrier Hodgson ponder the options.

"We are immediately calling for expressions of interest for a sale of the business as a going concern," receiver James Stewart said.

It was too early to say why the company was in its current financial position but it had been "cash constrained" in recent times, he said.

The company has been struggling for some time, issuing two profit warnings in two months as it said it had too much of the wrong sort of stock, with softening demand at its shops and squeezed profit margins.

Mr Stewart said the New Zealand operation of 62 shops was profitable and should be an attractive proposition.

This is despite the company's last report showing New Zealand sales falling nearly 7 percent, margins under pressure, and an annual profit down two-thirds on the year before.

Greatest heist

An Australian fund management company has described the stock market listing of the company two years ago as the greatest private equity heist of all time.

Forager Funds Management analyst Steve Johnson told the ABC the company was dressed up for the float two years ago but was also stripped of cash.

"It's very clear that shareholders are going to get nothing. I'd say it's quite likely that the supplier is going to take some very big haircuts and it will be interesting to see what the bank gets back," Mr Johnson said.

Receivership won't affect NRL Nines

Dick Smith is the primary sponsor of the NRL Nines in Auckland, but organisers said its receivership wouldn't affect the rugby league tournament.

DUCO Events, the manager of the Eden Park tournament, said fans shouldn't be worried.

DUCO chief executive Martin Snedden said they will have to work through contractual agreements with the company in the next few months, while it starts looking for a new sponsor for next year.