Losses have spiralled to almost £40m at Typhoo Tea as trespassers occupied and damaged its mothballed factory in Merseyside, dealing an unexpected setback to the embattled company’s turnaround attempt.
Newly filed accounts revealed one-off exceptional costs totalled £24.1m in the year ended 30 September 2023, with a “significant portion” attributed to a group of “organised trespassers” who broke into the closed factory and occupied it for several days in August, causing “extensive” damage to its fabric and contents, as well as rendering “a material quantity” of stock unusable.
The incident added to the significant costs already incurred by Typhoo during the year to pay redundancy costs for workers at the factory and scale down operations as part of a transformation plan, which also resulted in the value of some of its brands being written down.
Revenues also tumbled another 25% to £25.3m in 2022/23 as Typhoo rationalised SKUs and exited unprofitable lines, including own-label products for UK and international customers. It represents a massive decline in sales from the £82m generated in 2014/15.
Cost of sales were almost equal to turnover at £24.4m, wiping out margins, with the one-off exceptional costs widening pre-tax losses at the group from £8.5m in the prior year to £38m. Losses at Typhoo have now surpassed £120m in total since 2017/18.
The trespassing incident also delayed a planned sale of the factory and caused “significant business interruption” as the troubled company scrambled to rapidly relocate to co-packers earlier than was planned, leading to stock and production issues. Typhoo was also unable to fully meet its customer order obligations in the immediate aftermath.
Stock availability was further hit by general tea paper shortages in the UK.
Despite all the problems, the directors said in the accounts that the business had made “robust progress” in its turnaround and added they were “excited” for the 2024 financial year.
Typhoo was “now set up for growth” and would “add value to our customers and consumers”.
CEO Andrew Reardon, who was appointed by private equity owner Zetland as CTO in 2022 before being promoted in 2023, told The Grocer that Typhoo’s 120th anniversary was one of the company’s “most critical years in securing a positive, progressive future”.
“As a board, we knew this was a year when big, strategic decisions had to be made to ensure Typhoo remained a beloved brand in an ever more competitive industry,” he said.
“Status quo was not an option and we have worked hard to overhaul our operations, and to deal with legacy challenges that had threatened to hold us back, including the closure of the old Typhoo factory.
“We are now poised for growth in 2024 and beyond with our transformed and optimised operating model, and I am confident in our ability to deliver greater value and improved quality for customers and consumers alike.”
Typhoo has taken a battering on multiple fronts in recent years with weakened consumer demand for black tea hitting the business alongside Brexit challenges, currency headwinds and soaring raw material prices.
In the new 2023/24 financial year, the business continued to reduce its fixed cost base, launched new products, repositioned theTyphoo brand and upgraded machinery and processes to improve efficiency.
The accounts noted that customer levels had also improved since the disruption of 2023.
An insurance claim of £4.7m was made for the damage caused by the trespassers and £4.3m has since been recovered, with the claim ongoing. The delayed sale of the Moreton factory was also completed in June 2024 for £4.6m.
Neither of the two sums were reflected in the 2022/23 accounts.
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