Troubled online retailer SurfStitch has sold its surfboard subsidiary Surf Hardware International at a loss to investment company Gowing Bros Ltd for $17 million.
A short time ago, SurfStitch shares were 12% higher at $0.185.
The surfwear company says the business it bought 12 months ago for $23.7 million wasn’t a good strategic fit. The company also sunk cash into repaying debt at Surf Hardware International.
“This strategic decision to divest SHI (Surf Hardware International) enables the group to focus management’s attention and financial resources on its core business, e-commerce retailing,” says SurfStitch.
Gowing managing director John Gowing says Surf Hardware is a unique Australian business in a niche industry in which Australians have both a strong presence and competitive advantage.
“The SHI business, which operates largely as a standalone entity, will make a good fit within the Gowings investment portfolio,” he says.
Surf Hardware International holds the global brands FCS, Gorilla, Hydro and Softech.
SurfStitch CEO Mike Sonand says the sale is a good outcome for the company.
However, the sale means a widening of the loss expected in the full 2017 financial year.
The company says underlying EBITDA for is now expected to be a loss of $4 million to $5 million.. The previous ghudiance was $2 million to $3 million.
SurfStitch in August announced a full year loss of $155.35 million. The company is forecasting single digit sales growth for 2017 while it restructures.
The company says the integration of companies acquired over the last year has been slower than anticipated and the benefits lower than expected.
Potential suitors have been sniffing at the company since founder and former CEO Justin Cameron resigned in March. The surf wear retailer was started by Cameron and Lex Pedersen in Sydney’s northern beaches eight years ago.
The company then said it understood Cameron was pursuing a potential acquisition in conjunction with private equity. There has been no news since.
SurfStitch has since confirmed it’s received a “number” of unsolicited, non-binding and indicative expressions of interest.