Up market fashion company Ted Baker has become the latest British company to ask investors to bail it out with a £95 million ‘emergency cash call’, seeing its share price drop by over 11% today. The company has already seen its market value slump by 95% over the past two years following accounting irregularities and the resignation of founder Ray Kelvin on allegations of improper conduct.
The £95 million Ted Baker says it needs to weather the blow to non-discretionary retail inflicted by the Covid-19 pandemic lockdown is to be raised through a combination of a £75.9 million placing offered to institutional investors only and £19.1 million from an ‘open offer’.
The latter will be priced at 75p a share, which represents a 50% discount on the company’s closing share price last week. A further £10 million in funds will be targeted from a subscription offer that will be open to both new and existing investors.
Mr Kelvin, who denies accusations of inappropriate behaviour, still currently owns 35% of the company but that holding will be significantly diluted by the new share offer placements. If the company succeeds in raising all of the cash it is aiming for, the money coming in will notably surpass Ted Baker’s current market capitalisation of just £63 million.
The fashion retailer recorded a loss of £80 million over the 12 months to the end of January and has net debts of £127 million. That probably means that without a major injection of fresh capital it will be in breach of the terms of its credit facilities. The company raised £79 million in March from the sale of its London headquarters.
The first Ted Baker store was opened in Glasgow in 1988 and grew into a global fashion label selling clothes, accessories, home fixtures, watches, sunglasses, spectacles and luggage as well as branded jewellery. Founder Kelvin was a prominent persona behind the brand, enthusiastically cultivating an iconic image of himself and rarely photographed minus a prop covering his face.
Suggestions of a darker side to that personality emerged in 2018 after several former employees accused Mr Kelvin of forcing them to hug him against their will, allegations he “stroked people’s necks”, and a habit of making sexual innuendos in the work environment. While denying the allegations made against him he stepped down from an active role at Ted Baker in March last year “in the best interests of the company”.
The company calling ‘forensic accountants’ after it had found that the value of inventory had been overstated by £58 million hasn’t helped. Especially after accountants KPMG were fined £2.1 million by the industry watchdog for its role in the company’s public accounting figures between 2013 and 2014. KPMG is to be replaced by BDOas Ted Baker’s auditor.
The fashion brand currently runs 416 stores and employs 3600 people, 85% of which have been furloughed during the Covid-19 pandemic. That has cut overheads by £17.2 million but the company today reported revenues also dropped 36% over the 14 weeks leading up to May 2nd.
In a statement to investors, Ted Baker announced:
“The board recognises that last year’s performance was disappointing for all of Ted Baker’s stakeholders, reflecting a challenging external environment as well as significant internal disruption, driven by a number of senior leadership departures.”
The company’s recovery strategy is to cut head office costs in both the UK and USA and to rely less on concessions with third-party retailers to generate sales.
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