Typhoo Tea has faced substantial financial setbacks due to unforeseen disruptions. The company’s latest accounts show a notable increase in pre-tax losses.
The tea manufacturer reported a pre-tax loss of £37.9 million for the year ending September 30, 2023, a dramatic rise from the previous year’s £9.6 million loss.
Financial Impact and Losses
Typhoo Tea has recorded a significant financial blow with a pre-tax loss nearing £40 million for the fiscal year ending in September 2023. This marks a steep increase from the prior year’s figures, escalating from £9.6 million to £37.9 million. The financial documents submitted to Companies House reveal a decrease in revenue from £33.6 million to £25.3 million during the same period.
Factors Contributing to Financial Distress
The substantial loss was primarily due to extraordinary costs exceeding £20 million, incurred when trespassers caused considerable damage to its factory in Moreton, Merseyside, in August 2023. Typhoo Tea had to bear one-off expenses related to its major transformation plan, alongside unforeseen events that further impaired their financial position.
The firm has not achieved a pre-tax profit since 2017, with cumulative losses now exceeding £100 million. This escalation in costs has been a significant factor impacting Typhoo Tea’s financial health.
Operations and Strategic Adjustments
Alongside the financial losses, Typhoo Tea initiated strategic shifts within its operations.
This included ceasing unprofitable product lines and shutting down the Moreton factory, leading to around 100 job losses. The decision was driven by the inefficiency of the site and its misalignment with the company’s rationalised product portfolio.
In an attempt to streamline its operations, the company focused on profitable items and discontinued production of marginally profitable own label products, aiming to serve both domestic and international markets efficiently.
Impact of Trespassing and Operational Shifts
In August 2023, the Moreton site experienced a severe setback due to organised trespassers who occupied the premises for several days, causing extensive damage. This resulted in the abrupt closure of the factory.
Production was redirected to third-party co-packers, resulting in increased direct costs, impaired assets, and inefficient operations as partners increased their production capacity. Despite these challenges, Typhoo Tea was able to recoup £4.3 million through an insurance claim after the financial year ended.
Transformation Plan and Future Outlook
Typhoo Tea embarked on a comprehensive transformation plan to address longstanding structural issues. This effort has been aimed at paving a sustainable path to profitability.
The transformation strategy included a radical rationalisation of operations. The company’s directors are now optimistic about 2024, having dealt with many legacy issues and positioned for growth and improved product offerings.
The expectation is for incremental distribution in new channels and improved efficiency and profitability. The workforce was also reduced from 198 to 116 as part of these streamlining efforts.
Ownership and Strategic Direction
Zetland Capital Partners took over Typhoo Tea in July 2021, steering the company through turbulent times.
Under new leadership, the firm has aimed to rationalise its operations and enhance product value, focusing on expanding distribution channels and market penetration for better fiscal outcomes.
Production and Market Challenges
The company faced additional challenges with stock availability, impacted by a UK-wide shortage of tea paper. This shortage inhibited their ability to meet strong customer demand, further affecting sales.
The strategic moves and transformation plans at Typhoo Tea are poised to bring about a positive turnaround. While the past year has been challenging due to exceptional costs and operational shifts, forward-looking strategies and structural adjustments are expected to drive growth and profitability.
