logo-loader

Ted Baker drops as RBC downgrades with “little relief in sight”

Published: 21:24 13 Jan 2020 AEDT

Ted Baker plc -

Ted Baker plc (LON:TED) is facing challenging trading conditions and has “little relief in sight”, RBC Capital Markets said as it downgraded its rating on the fashion brand’s shares.

RBC downgraded to an ‘underperform’ rating from ‘sector perform’, slashing its share price target to 300p from 440p.

READ: Rain makes start of January sales a damp squib for high street

Nine months after the departure of founder Ray Kelvin in March last year, the discovery of a black hole in the company’s accounts led to the swift departure of its newly promoted chief executive Lindsay Page and chairman David Bernstein just before Christmas.

Chief financial officer Rachel Osborne, who discovered the accounting irregularities, has taken on an acting CEO role, with non-executive director Sharon Baylay acting chair.

RBC analysts welcomed the change of chairman “as we have felt a change in board stewardship would be welcome” but felt the resignation of Page “will have a more noticeable impact on the business” as it gives Osborne “too much responsibility so early in her tenure which may affect her ability to carry out either role effectively”.

“Both vacancies need to be filled, which in time should resolve this situation however in the interim there may be a shortage of adequate experience in senior management.”

RBC has cut its financial estimates for the current year, with revenues trimmed 2% and PBT by 80% to £5.5mln, then forecasting only a “gradual rebuild” of earnings in the subsequent years.

Furthermore, there are worries about the capital structure, with reports last week suggested TED's banking syndicate has hired advisers to carry out an independent review.

TED’s gross debt pile of £138mln implies a “relatively high” 62% gearing ratio, which the analysts said if coupled with continued earnings erosion in the current year will drive the ratio of net debt to underlying earnings (EBITDA) above 15 times, with annual interest costs around £5mln.

“Assuming some stabilisation or recovery in earnings this should improve in FY21E, however in a worse case scenario where earnings further deteriorate, the capital structure would require addressing,” RBC suggested.

 

Australian Strategic Materials signs US$600 million LoI

Rowena Smith, CEO and managing director of Australian Strategic Materials Ltd (ASX:ASM, OTC:ASMMF), joins Jonathan Jackson in the Proactive studio to discuss the company’ s Dubbo Project, in Central West New South Wales. This project aims to extract and process critical minerals and rare earth...

6 hours ago