Mitre 10 has suffered a massive debt increase from its software upgrade.
Mitre 10 has suffered a massive debt increase from its software upgrade.
On December 9, it will sell a Hamilton store for $23m.
It tried to sell its Whangārei store for just under $20m.
Business under pressure as debt rises 135% to $161.8m.
Under pressure Mitre 10 has quietly been selling off its property assets as it grapples with the $161.8 million spiralling debt from its software upgrade, described by one insider as “horrific”.
The parent of the national garden, DIY and home business sold its Manukau mega store for $32m lastmonth and will settle the sale of a big Hamilton store for $23m early next month. It has also tried to sell its Whangārei property for just under $20m.
In a deal not announced by the business, the parent company sold Mitre 10 Mega Manukau, 61 Lambie Drive for $32m, according to the agent.
JLL’s capital markets New Zealand director John Davies, said three weeks ago that he and colleague Harry Fergusson had “concluded the off-market sale of this large format retail investment property on behalf of our client Mitre 10 Holdings New Zealand”.
“After a targeted off-market process, we secured multiple offers on the property before a NZ-based private investor saw off the competition to acquire this strategic asset,” Davies said.
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Andrea Scown, Mitre 10 chief executive, has conceded the business is a property vendor.
The company’s debt shot up 135% from $68.5m in the June 30, 2023, year to $161.8m in the June 30, 2024, year.
“We have renegotiated our debt facilities through until the end of December 2025 and have initiatives under way to support further cost control including changes at our support centre and the sale of several non-strategic property assets which will allow us to re-cycle capital and reduce debt,” she said.
Mitre 10 (New Zealand) latest accounts listed for-sale properties:
Lambie Dr, Manukau, due to settle on October 30 (now sold for $32m);
A Hamilton store expected to settle on December 9 (Mitre 10 Mega Ruakura);
A third undisclosed property (said to be Whangārei, where attempts to sell failed).
An insider, who spoke to the Herald anonymously as he was not authorised to speak publicly about the company, said the sales showed how under pressure the chain has become: “I bleed orange but this is awful!”
The 2024 annual report said: “As at June 30, 2024, three properties are actively being marketed for sale. The group is committed to completing these sales within one year.
“One property was classified as ‘held for sale’, however, the involved parties could not agree on terms and the sale did not proceed.”
A Mitre 10 spokesman said: “We regularly review our property portfolio and other sales are likely to enable us to recycle and reinvest our capital, including on other development opportunities. As a co-operative, we are not required to disclose further details and instead discuss these matters directly with our members and team.”
Latest accounts for the parent company based at the head office support centre, 67 Corinthian Dr, North Shore, show revenue fell from $315m to $267m although gross profit remained fairly stable, from 2023’s $121m to $120m in the 2024 year.
The cost of sales fell from $194m to $147m but finance expenses rose from $45m to $54m from that spiralling debt sparked by what is intended to be a transformational IT upgrade.
Property records indicate Mitre 10 Holdings owns its Albany head office as well as a number of stores. Auckland Council valued the chain’s Corinthian Dr property at $35.3m, comprising the 7050sq m multi-level offices at $24.3m and 2390sq m site at $11m.
The parent company also owns the site of the highly attractive recently opened $30m Mitre 10 Mega at Silverdale at 13 Emirali Road.
Back in August 2023: the new Silverdale store with staff, all ready to go.
Last year, the Herald reported how that 11,000sq m shop was to be the chain’s 85th store when it opened on August 11.
The insider said planned property sales show just how stretched the chain is.
“The real question is, how much is that $161.8m debt costing Mitre 10 in interest payments? What exactly are those store owners being charged? It’s the store owners themselves who have to pay that interest bill,” the person said referring to the co-operative nature of the business.
Andrew Smith is Mitre 10's new chairman. Photo / Alex Burton
The Herald’s Power List: Who owns Mitre 10, our biggest garden, DIY and hardware chain showed the largest Mitre 10 shareholder is Riviera Hardware Holdings with more than 5% of the co-op. That trades as Mitre 10 Mega Albany, New Lynn and Warkworth and Mitre 10 Whangaparaoa, and was established in 2009.
Businesses like Riviera and others are now paying the debt incurred during the software upgrade.
The insider raised concerns about owner/operators breaching their own debt covenants due to repayments on the big interest bill.
“That is precisely why Mitre 10 is looking to sell the properties it owns. It is the landlord for some stores, but not all of them,” that person said.
Levers the co-op has at its disposal include selling properties or laying off more staff. Both would be extremely unpalatable to the business, the person said.
Property sales and layoffs were anticipated talking points at yesterday’s annual meeting at Rydges in Wellington.
Notes to the financial statements reveal a stretched business and the need for cash.
Notes also tell of how Mitre 10 “engaged in negotiations with BNZ to extend the maturity dates of its bank facilities and revise certain covenants”.
Andrea Scown. Photo / Dean Purcell
The insider said that showed a deal was struck between Mitre 10’s parent and the BNZ to avoid potential breaches.
The accounts say more: “....there was limited headroom when assessing forecast covenant compliance on this ratio as at December 31, 2024 and March 31, 2025 test dates. As a result the covenant was amended to create more headroom,” a note says.
“The directors are considering additional options available to improve the group’s position in relation to funding and covenant compliance,” the note said, citing options. Those are:
Deferring spending on certain projects;
Reviewing levies charged to member stores;
Altering supplier rebate agreements;
Pursuing additional property sales beyond those held for sale as at June 30;
Reducing operating expenditures.
Accounts also indicated how crucial the BNZ loan is.
“The group is reliant on the debt facilities ... to finance its ongoing operations,” the annual report said.
Non-current assets held for sale appeared in the accounts at $62.5m.
Current assets are $306m (previously $222.9m) and non-current assets $803m (previously $862m) giving total assets of $1.11 billion (previously $1.08b). Total liabilities are $1.08b (previously $989m), according to the consolidated balance sheet.
Auditors PwC says the group’s property portfolio is valued at $180.3m and comprises land and buildings.
They noted how the $161.8m debt resulted from significant expenditure on the customisation and configuration of cloud-based software. The $161.8m is made up of $131.8m revolving credit and a $30m overdraft repayable on demand.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
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