Top 10 stories of 2015: 5 Katy Perry legal action puts GHD owners in red

A LEGAL entanglement with global pop star Katy Perry has caused Leeds hair care group ghd to file a loss in its first accounts after its £300m buyout.

When private equity firm Lion Capital bought GHD Hair Group in 2013, one of its first decisions was to not renew the sponsorship deal with Katy Perry, which had cost $4.5m for the initial two years.

It was reported at the time that ghd’s market research had found that she was losing popularity in Europe. Ms Perry – who divorced Russell Brand in 2012 – claimed an oral agreement was in place for a $2m renewal, which led to ghd launching a pre-emptive legal strike blocking the pop star from suing them.

The dispute was settled out of court, with neither side disclosing the terms of the agreement struck which resulted in both sides giving up the right to re-file their suits.

However the accounts for Jemella – the trading company which manufactures and sells ghd hair staighteners and hair-styling products – record an exceptional item of £5.1m, caused by “termination and related litigation costs incurred during the period on a material contract and internal restructuring costs”. This is understood to principally relate to the dispute with Ms Perry.

Jemella has reported pre-tax losses of £2.9m for the 18 months to June 2014, its first accounts following the purchase of its parent company in March 2013.

Sales were £120.1m for the accounting period, which showed an adjusted fall of 7% as average monthly sales fell from £7.15m to £6.67m. Exports continued to account for 30% of its sales.

Michael Doyle, who became a director of Jemella in January 2014, attributed an £11.8m impairment of its investments in the holding and non-trading companies as “a legacy issue” associated with the restructuring of the wider group.

He added: “Given that the period of accounts relates to an 18 month period, it is difficult to compare performance to the prior year period.”

Despite the use of hedging instruments, a strengthening Pound against the basket of currencies it trades in resulted in a £2.18m loss in the accounting period.

In 2013, Jemella launched hair-styler ghd Eclipse followed by hair dryer ghd Aura in 2014. After the accounting period it launched four hair curling products under the brand ghd Curve.