Redan continues close cooperation with Top Secret

Redan has issued its financial statements for 2020. Although the Company incurred a separate net loss of PLN 3.8m for the period, it marked a considerable improvement relative to the previous year. The Management Board of Redan sees potential for further growth and consistent efficiency improvement based on close cooperation with the apparel brand Top Secret. It also plans to expand business, mainly in logistics services, and ultimately in IT services provided to other entities.

“In 2020, we achieved much better financial performance than in the previous year, although we were still at a loss. We managed to improve our results despite the fact that this was a very difficult and challenging period. On the one hand, the entire economy, in particular the clothing industry, was significantly restricted due to the pandemic of SARS-CoV-2 coronavirus, which reduced revenue considerably. Large changes also occurred in the structure of the Redan Group following the sale of shares in the subsidiary Top Secret. As a result, in August of the previous year the consolidation of results of the entity was discontinued and from that time financial reporting has been based on separate reports,” said Bogusz Kruszyński, the President of the Redan Management Board.

In 2020, Redan recorded a separate net loss of PLN 3.8m, with revenue at PLN 84.5m (in connection with the instigation of restructuring proceedings with respect to Top Secret, in accordance with IFRS 15 Redan recognised an impairment loss for unpaid sales to that company in the amount of PLN 7.7m, which is why the amount of revenue disclosed in the financial statements was PLN 76.7m). However, the net result was nearly PLN 109m higher than in 2019 (when numerous impairment losses were recognised related to Top Secret and receivables from counterparties operating in Ukraine and Russia). Revenue dropped year on year by 46% (51% after taking into account the impairment loss).

Last year, it was necessary to support the operations of the Top Secret brand with additional financing. One of the reasons for that was the deterioration of the financial situation caused by unrealised sales plans for the autumn-winter 2018 collection. The need for the capital injection also resulted from the SARS-CoV-2 pandemic. The only possible source of new financing needed to ensure stable supplies of new goods and the prospect of restoring the business’s viability proved to be the financial support from Mr Radosław Wiśniewski (the founder of the brand and the principal shareholder of Redan). The solution worked out at that time consisted in investing new funds in the purchase of new collections. As security, Mr Wiśniewski took full control over Top Secret. However, the executed agreement gives Redan the right to buy back the shares in Top Secret within five years.

“Despite the sale of shares in Top Secret, handling of operations related to that brand has been and remains our core business. Redan will continue to handle the logistics of goods sold under the brand Top Secret (by purchasing goods from suppliers, storing them in the warehouse, carrying out their customs clearance operations, packing them before they are shipped to stores or customers etc.) and their sales outside Poland. We also assume consistent improvement of operational efficiency. Last year, the margin on sales to Top Secret was 11.7% (net of the impairment loss), while the forecast for 2021 is 15.4%,” added Bogusz Kruszyński.

There is still a positive outlook for the Top Secret business. A large number of retail stores is located in smaller towns or smaller shopping centres. In the current pandemic situation a clear trend can be observed that customer traffic in such locations recovers much faster than in typical shopping centres in large cities. Goods are supplied on a just-in-time basis, which ensures greater flexibility in reacting to changes in demand. Therefore, the potential surplus of stock at Top Secret stores was limited already at the beginning of the pandemic. “We believe that these are strong arguments showing that Redan, which cooperates closely with the Top Secret brand, has the potential for further growth,” said Bogusz Kruszyński.

In the coming periods, in addition to developing its domestic (to Top Secret) and foreign sales, Redan will also look for new customers in the field of logistics and IT services.