Best & Less may be preparing for IPO

Best & Less may be being prepared for an ASX float.

Best & Less is believed to be holding investor education meetings next week for a potential initial public offering of the business.

The move comes after the owner of the general merchandise retailer, Allegro Funds Management, recently hired Macquarie Capital to work on a potential IPO to capitalise on the strong equity market.

The understanding is that the aspirations are to list Best & Less for a price that values the business at about $400m.

Annual earnings before interest, tax, depreciation and amortisation for Best & Less are understood to be about $55m.

 

Best & Less is understood to have been a strong performer despite COVID-19 and is expected to achieve similar or better results in the aftermath of the pandemic.

The discount clothing and household linens chain was purchased by Allegro Funds Management last year from the local arm of Steinhoff International, Greenlit Brands.

The acquisition was part of a wider deal by Allegro in which it also purchased Harris Scarfe, which was later placed into receivership and sold off to the Spotlight Group.

Greenlit Brands recently made efforts to list its Fantastic Furniture business, but opted to retain the operation when investors were only prepared to pay between eight and 8.5 times annual earnings before interest and tax, rather than the nine times the company was after.

Steinhoff almost collapsed in recent years following the discovery of accounting irregularities, resulting in a sudden fall in its share price in Germany and South Africa.

 

The Best & Less Group is made up of brands that include Best & Less and Postie in New Zealand. Collectively, the brands operate more than 250 stores across Australia and New Zealand and employ more than 4000 people.

Allegro has a track record of turning around unloved businesses in the retail space. New Zealand’s Hannahs shoes and Pizza Hut are among its acquisitions.

This week, Best & Less chief executive Rodney Orrock told The Australian the company only started a click-and-collect service last week.

The company reported total annual sales of $629m as of November 30, with like-for-like sales growth of 8 per cent and total sales growth of 2.9 per cent. Online sales grew 80 per cent over 12 months to $57m, representing 9.1 per cent of total sales.

Between 2017 and 2020, online sales for Best & Less grew 50 per cent in terms of compound annual growth rate, as it invested in digital initiatives including click-and-collect.