The English Courts has managed in recent years to bring order to its financial situation, after reaching high levels of indebtedness that have led the company to something that not long ago was unthinkable: selling part of its extensive real estate portfolio, including some shopping centers.
An ace up his sleeve that, together with the improvement of the business in recent years and the greater generation of cash, has allowed him to reduce that debt. To this are added the refinancing with the banks of his financial liabilities, which has provided him with better interest rates and, automatically, to ostensibly alleviate the invoice that he had to pay each year in the form of interest.
Proof of this are the 113 million euros that El Corte Inglés paid in financial year 2019 as financial costs, as recorded in the profit and loss account included in the documentation sent to investors.
This is an amount ostensibly less than the previous year, when they amounted to 195 million euros. In that 12-month period, El Corte Inglés managed to reduce its financial bill by 42%, basically made up of interest on the debt, which went from more than 16 million a month to just over 9.
At the end of the last accounting year, the group’s net financial debt reached 2,729 million, 19% less than in the previous year and 30% less than the balance sheet presented at the end of 2016. Financial expenses then exceeded 203 million annually, which means that since that year that expense has been reduced by 45%, almost half.
In these three years that have passed until today, two refinancing agreements have been mediated, although the last one was signed in late February and, therefore, its effects will be seen in the coming years.
The first was sealed in early 2018, and led to the refinancing of 3,650 million debt. A key agreement to understand the current reality of the group and that prepared the ground for the subsequent market launch through the launch of 690 million in bonds.
The prospectus of this issue indicated that, as of February 28, 2018, El Corte Inglés had financial commitments of 1,814 million euros within one year. A year later, as of February 28, 2019, these fell to 306 million, of which 236 corresponded to bank loans.
At year-end 2020, commitments for next year are 733 million, of which 375 correspond to the renewal of the MARF promissory note program and only 28 to bank debt. The refinancing signed on February 26 just before the end of the fiscal year already comes into play on that calendar, with a total amount of 2,000 million euros for a period of five years, extendable to two more and with an average interest rate of 0 , 7%.
What it does not contemplate, having signed later, is the 1,311 million anti-Covid loan signed in April.
Keep the rating
A better financial structure that is allowing you to maintain your credit rating despite the strong impact that the coronavirus is having on your business. In April, in full confinement, the agencies kept the note. Moody’s, Fitch, Standard & Poor’s and Axesor decided not to modify it, although the first three placed it on negative surveillance, while Axesor kept it stable.
On Monday, Moody’s reaffirmed itself, for a double reason: the generation of online and food income during the confinement, and the improvement in the company’s debt thanks to the deleveraging of recent years, which allows it to have solid liquidity. This despite the fact that Moody’s calculates a fall in revenues of 4.4 billion this year. The rest of the agencies have yet to rule on it.
Moody’s also highlighted the cost containment measures applied during the crisis, and specifically the ERTE applied to 26,000 workers. In labor matters, El Corte Inglés also reduced its costs during the 2019 financial year.
These amounted to 2,391 million euros, 1.5% less than in 2018 and 8.3% below the figure for 2016. Disinvestments must also be taken into account here. Since that year, El Corte Inglés has sold Ópticas 2000 or its computer business, which has allowed it to remove the labor costs of these subsidiaries from the income statement.
El Corte Inglés allocated a total of 344 million euros to investments last year, a 12% reduction compared to the figure declared in the previous accounting year. This is stated in the financial documentation sent to investors, which details that the vast majority of these contributions were destined to activities related to retail, specifically 319 million.
“Our capital expenditures consist mainly of the reform and maintenance of our stores, the technological transformation, digitization and improvements in our core activities,” says the company in that documentation. Of the total figure, 319 million corresponded to maintenance of facilities or equipment, while 25 million were dedicated to expansion, four million less than in the previous year.
Those 344 million represent the lowest figure in capital investments since at least fiscal year 2016. Then El Corte Inglés allocated 355 million, a figure that a year later increased to 360 and in 2017 to 424. In that year, the item destined for expansion It was 42 million, almost double that of last year, according to the information reflected in the 2018 bond issue prospectus. In 2018, it fell slightly to 390 million.
A decrease that is also related to the fact that in the last two years El Corte Inglés has disengaged from two subsidiaries, Óptica 2000 in 2018, in this case belonging to the retail perimeter, and the IT division.