Cape Town - The owner of South African luxury brand stores Hilton Weiner, Jenni Button, Urban, Aca Joe and Vertigo has accepted new terms from its landlord that will allow it to revitalise its five surviving retail stores in one of the country’s most prestigious shopping centres.
In an exclusive with Fin24 on Monday, The Platinum Group CEO Marcel Joubert also revealed that the group's store base has officially plummeted from its original fleet of 68 stores nationwide to just five flagship stores at Umhlanga’s Gateway Theatre of Shopping in KwaZulu-Natal.
While the rest of the stores have shut down across the country, including the very recent closure of five stores at Cavendish shopping centre in Cape Town, Joubert said he is hopeful that the remaining flagship stores will be the beginning of a new “rejuvenated” chapter.
Fin24 has had sight of a freshly approved lease structure with Gateway landlord Old Mutual Property, which could enable the embattled company to launch a comeback campaign.
“Although certainly not ideal, those five flagship stores have historically generated a staggering 35-40% of the group's turnover and almost 100% of the group’s profit,” said Joubert. “So, if needs be, we can fly the plane on just that engine as we recover, rebuild and regrow from there.”
Joubert is aware that the 30-year-old company is definitely “not yet out (of) the woods”, but he is determined to return to former heights.
“I apologise for not giving you more time, but I am totally focused on rescuing the business rather than on public relations,” he told Fin24 by phone.
Joubert said the staff headcount had reduced from about 350 this time last year to about 75 now. With the prospect of only the Gateway stores remaining open for now, he said the group's headquarters in Cape Town will likely be scaled down.
"As for the management team, there are a lot of key players still on board at all levels, as we ready ourselves to regroup and rebuild," he said via text message on Tuesday.
Voluntary business rescue process
The Platinum Group was placed into voluntary business rescue on August 25 2015 under the guidance of practitioners Jacques du Toit and Hans Klopper.
The ailing group was most affected by its biggest landlords, Old Mutual Property (landlord of 18 stores) and Hyprop Investments (landlord of 19 stores), which started to take a tough stance towards the retailer when its financial woes started in 2013.
Joubert has often attributed the rapid decline in financial performance in this period to his poor health, which he says critically affected the company’s previously successful track record.
He revealed on Monday that further illness in the form of an unexpected ruptured intestine seven weeks ago sent him back to emergency surgery, the operating table and ICU for all of October 2015, further denting his efforts to rebuild the company at a crucial time in the recovery period.
In a memorandum to The Platinum Group on November 30, which is in Fin24’s possession, practitioners Du Toit and Klopper said the business rescue process had originally also hit a major stumbling block because efforts to conclude arrangements with certain landlords had been thwarted.
This resulted in certain leasehold entities being placed in liquidation, the memo said.
“Discussions are currently still underway with landlords for the key Gateway and Cavendish premises, which the business rescue practitioners, management and shareholders are hopeful will be concluded positively in the very near future,” it said in the memo.
The way forward
A week after the memo was sent, the group decided to focus on the flagship Gateway stores and handed back the Cavendish stores to Old Mutual Property.
Old Mutual Property told Fin24 on November 30 in an emailed statement that it had originally launched 14 applications in the Cape Town High Court in early August, in which it requested the court to set aside the business rescue proceedings of the affected Platinum Group entities and simultaneously place them under liquidation.
In that application, it asked the court to eject The Platinum Group tenants from Menlyn Park Shopping Centre in Pretoria, “as all the affected entities had fallen into arrears in respect of their rental payments”.
This was partially settled by mutual agreement as the Platinum entities voluntarily vacated the Menlyn stores.
The Old Mutual Property media desk was not able to add more to its original media statement on Monday, which indicated that the matter around the Gateway and Cavendish stores would be finalised in December.
Hyprop also affected
Hyprop Investments said it had taken legal action to recover unpaid rent at its stores. It said in its interim report on June 30 2015 that the Platinum Group occupied 19 stores or 2 700m² in its portfolio.
“This group ran into financial trouble towards the end of the financial year,” it said.
“We have taken legal action to recover unpaid rent and, depending on the outcome of the court process, this group will probably be replaced with new tenants. Most of these stores occupy prime areas and replacing them with new tenants will not be unduly difficult.”
The Platinum Group’s business rescue practitioners said in their November 30 memo that its lead banker, Merchant Finance, continued to show support for operations and reaffirmed its willingness to support the recovery process.
“Parallel discussions are also underway with key financiers to finalise funding for capitalisation of operations to allow adequate stock and trade,” it said.
“The business rescue practitioners, management and shareholders are hopeful these will also be positively finalised in the very near future … (and are) hopeful these initiatives will allow adequate refinancing of operations in the very near future.
“The business rescue practitioners therefore hope to report back with positive results for the resuscitation, recovery and rebuilding of Gateway and Cavendish operations in the very near future.”
The recent issue of the inability to meet full salary commitments has been an extra thorn in the company’s side in the last two months, with a twitter campaign with the hashtag #marceljoubertmustpay revealing a flurry of complaints from some staff not being paid full salaries.
I am a former employee of this establishment. It is sad to hear that last month my former co-workers were not paid #MarcelJoubertMustPay— Setso . (@Tiisetso_Phetla) November 18, 2015
Urban employees have not been paid.They were promised 20% then nothing happened. This surely is illegal.#marcelJoubermustpay.— nqobile (@nqobileOpholile) November 18, 2015
Regarding these payments due to employees, the business rescue practitioners state in their memo:
“For the sake of good order, we place on record that the paltry results in the few stores remaining after the above closures has, in the last 30 days, now become woefully inadequate to cover even basic expenses and/or first ranked business rescue payments - far less second ranked employee payments."
Joubert told Fin24 that he is wracked with responsibility towards his team, explaining that the company has historically had a very tight team culture “before the mountain came down on us” and said he is determined to restore the fortunes of the group for everyone concerned.
“This period has been very traumatic for all of us, but we remain absolutely resolutely committed to doing everything in our power to restore these iconic South African brands back to their former glory,” he said.
GRAPH: Details of Platinum Group stores (before closing) by geography, shopping centre and landlord (see the key of each store at the bottom)
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