Philip Green's retail empire faces uncertain future without new funds
Sir Philip Green’s retail empire is facing “material uncertainty” about its ability to continue trading without new funds, after slumping to a £177.3m loss last year.
Taveta Investments, the owner of Arcadia Group, parent of high street brands such as Topshop, Miss Selfridge, Wallis and Evans, said difficulties refinancing a £310m loan on Topshop’s Oxford Street store, due to expire in December, could mean it would have to raise new funds.
It also warned that “difficult trading conditions”, particularly in the event of a no-deal Brexit, might leave it without sufficient cash to deliver its three-year rescue plan.
Green’s retail empire staved off collapse in June after winning backing from creditors for a rescue plan that involves the closure of about 50 stores, 1,000 redundancies and rent cuts of up to 50%.
The slump into the red was revealed in the company’s latest accounts, which were published at Companies House on Friday.
In a statement accompanying the figures, Taveta said: “There are certain scenarios that could arise in the event of continued challenging and volatile market conditions in the retail sector, including a disorderly exit from the European Union, that would create uncertainties around the ability of the group to operate within the liquidity available from existing funding arrangements.”
This was underlined in a similar statement by Taveta’s auditor, Paul Cragg at PricewaterhouseCoopers, who noted “a material uncertainty which may cast significant doubt about the group’s and company’s ability to continue as a going concern”.
The accounts cover the year to 1 September 2018, but both statements are dated 30 August 2019, indicating that fears for the company’s future persist even after agreement on the rescue plan.
Since then, the group’s interim chairman, Jamie Drummond-Smith, a restructuring expert who was hired to replace Karren Brady, has stepped down. The company is searching for a replacement.
Sales slid by 4.5% to £1.8bn over the year including a 5.2% decline in the UK and 11% slump in the US division, which has been put into administration.The group fell into the red by £177.3m after hefty one-off costs of almost £217m, mostly relating to leases on loss-making stores. In the previous year the group made a profit of £53.5m.
One-off costs also include more than £11m in provisions against debts and termination payments relating to Topshop’s Ivy Park clothing joint venture with Beyoncé, which the singer took sole control of last year.
Chloe Collins, a senior retail analyst at the industry consultancy GlobalData, said the sales fall was the result of “decreased desirability of ranges and a lack of relevance in a competitive market”. She said Topshop was devaluing its brand with heavy discounting and needed to increase its products’ appeal.
The business troubles come after a difficult year for Green. He is facing charges of inappropriately touching a pilates instructor in the US and has been accused of bullying staff in the UK. Green has denied any unlawful behaviour.
Despite the losses, the accounts show his Monaco-based wife, Tina Green, theowner of Taveta, was paid more than £23m last year. Taveta redeemed £20m of loan notes and paid interest of nearly £3.4m relating to the purchase of BHS in 2009.
The Green family was owed a further £43.4m in relation to BHS, which collapsed in 2016 shortly after Green had sold it for £1, but the accounts show this debt has now been written off.
Tina Green has also loaned the company £50m and agreed to invest £50m of new cash to help with its turnaround plans. She was also forced to pump £100m into Arcadia’s pension scheme over three years to win support for Arcadia’s restructuring plan from the Pensions Regulator and the group’s pension fund trustees. Arcadia has put an additional £285m contribution in property assets and cash payments into the scheme.
That comes after the family collected more than £1.5bn from Taveta since 2005 including a £1.2bn dividend and at least £356m in interest, rent and property deals.
Taveta’s highest-paid director enjoyed a pay rise despite poor trading at the group. The unknown executive’s remuneration rose to £1.9m from £1.8m a year before.