(Alliance News) - Ted Baker PLC on Monday announced a GBP95 million fundraise and a swing to a loss on expenses, including a substantial charge relating to inventory.
The luxury fashion retailer reported a GBP79.9 million pretax loss for its year ended January 25 after a GBP30.7 million pretax profit the year before.
Ted Baker explained that this was: "Due to the group booking GP84.6 million of non-underlying expenses, mainly comprising total charges of GBP45.8 million related to inventory, GBP16.2 million related to impairment of store assets, GBP7.6 million related to losses on the disposal of the Asian business and GBP6.5 million for legal and professional costs".
On top of these, Ted Baker also incurred GBP5.0 million of charges relating to the first-time application of IFRS16.
Revenue fell 1.4% to GBP630.5 million from GBP639.6 million thanks to "significant discounting" in the apparel industry as a whole and the UK in particular due to a "weak consumer spending and channel shift to online".
Ted Baker separately announced plans to raise GBP95 million through a placing and open offer, as well as a firm placing which are all underwritten. It may also raise up to an additional GBP10 million through a subscription offer that is not underwritten. All shares will be issued at a price of 75 pence each.
Shares in Ted Baker were down 9.8% at 138.30 pence in London on Monday morning.
In total. 101.2 million new share will be issued through the firm placing, raising around GBP75.9 million. A further 25.5 million new shares will be issued through the placing an open offer, raising another GBP19.1 million.
Directors plan to subscribe for 233,331 firm placing shares, while incoming Non-Executive Chair John Barton will subscribe for 133,333 firm placing shares.
The placing and firm placing are taking place through a bookbuild by joint bookrunners Liberum and Goldman Sachs International.
Back in March, Ted Baker also agreed to the sale and leaseback of its Ugly Brown Building headquarters in London for GBP78.8 million in cash, with the proceeds to be used to reduce debt. Shareholder approval for the disposal in required and, if obtained, the deal should complete by the end of June.
Ted Baker has inked an amendment and restatement agreement with its lender to increase one of its loan facilities, facility B, for an additional GBP11.5 million taking total available bank credit facilities to GBP205 million.
Disposal proceeds will reduce indebtedness to the company's lenders, while the placing and open offer will be used for general corporate purposes to support the company's new "Ted's Formula for Growth" strategy.
The company's strategy is broken town into three sections, known as building blocks. Building block 1 focuses on stabilising Ted Baker's foundations and includes things like the appointment of Barton as chair, the selections of a new chief executive, chief financial officer, and chief creative director are also part of this.
The sale and leaseback is also part of building block 1, as is an operational and efficiency review that has found GBP5 million of cost savings for the currently financial year that will cost GBP2.7 million to achieve and will produce GP7 million of annualised savings. Ted Baker's response to Covid-19, including a focus on stock on hand and minimum orders to meet sales demand, is part of the first building block
Building block 2 is all about driving growth. This includes deepening and broadening customer relationships, re-energising the brand, making clothes that are relevant to all day or week occasions.
Building block 3 is about improving operations. "Initiatives in this building block are focused on creating a digital and data led operating model, creating a high-performance business culture, and creating a commercial and agile business, enabled by a more effective organisation," Ted Baker explained.
Ted Baker also commented on current trading, noting that revenue has fallen 36% for the 14 weeks from January 26 - although online retail channel sales were were up 50% in the period. It intends to focus intensely on its online business going forward and has deferred all of its non-essential capital spending.
In financial 2021, Ted Baker will aim to consolidate its supplier base to 100 suppliers from more than 150 and to reduce its stock cycle to two years from three. It plans to limit it capital expenditure to GBP15 million annually and cut global payroll costs.
It also has financial targets to financial 2023, including medium-term revenue growth of about 5%, an earnings before interest, tax, depreciation, and amortisation margin of between 7% and 10%, free cash flow generation after capex of at least GBP30 million and a net debt to Ebitda ratio of 1.0 times or less by financial 2023.
CEO Rachel Osborne said: "Today we are excited to launch 'Ted's Formula for Growth', a comprehensive strategy for the Ted Baker brand which is supported by a significant recapitalisation of the business, that strengthens our position and enables us to both execute that transformation, and navigate through the disruption caused by Covid-19".
Ted Baker's final dividend has been temporarily suspended, It paid a 7.8p per share interim dividend, having paid out a total dividend per share for the prior period of 58.6p.
The company also has appointed BDO LLP as its new auditor,
By Anna Farley; annafarley@alliancenews.com
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