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RNS
Ted Baker PLC  -  TED   

Final Results

Released 07:00 22-Mar-2018

RNS Number : 5330I
Ted Baker PLC
22 March 2018
 

 

22 March 2018

 

 

Ted Baker Plc

("Ted Baker", the "Group")

 

Annual Results for the 52 weeks ended 27 January 2018

 

"Continued progress in Ted Baker's expansion as a global lifestyle brand"

 

Highlights:

 

2018

2017

Change

 

 

 

 

Group Revenue

£591.7m

£531.0m

11.4%

Profit Before Tax and Exceptional Items

£73.5m

£65.8m

11.7%

Profit Before Tax

£68.8m

£61.3m

12.3%

Adjusted EPS

127.7p

114.0p

12.0%

Basic EPS

119.0p

105.7p

12.6%

Total Dividend

60.1p

53.6p

12.1%

 

·    Group revenue up 11.4% (9.6% in constant currency) to £591.7m

·    Retail sales up 10.4% (8.5% in constant currency) to £442.5m

UK and Europe retail sales up 7.7% (6.4% in constant currency) to £301.1m

US and Canada retail sales up 16.2% (12.4% in constant currency) to £120.1m

E-commerce sales up 39.8 % (38.7% in constant currency) to £101.1m

·    Wholesale sales up 14.6% (13.3% in constant currency) to £149.2m

·    Licence income up 17.6% to £21.4m

·    Proposed final dividend of 43.5p bringing total dividend to 60.1p, an increase of 12.1%

 

Ray Kelvin CBE, Founder and Chief Executive, said:

 

"I am pleased to report a year of continued progress in Ted Baker's expansion as a global lifestyle brand.  The Group's good performance demonstrates the strength of the brand as well as the quality and appeal of our collections.

 

Ted Baker's continued success is driven by the passion and talent of our global teams. I would like to take this opportunity to thank our colleagues across the world for their hard work and Tedication during the year.

 

Our new collections have been received positively and although we anticipate external trading conditions will remain challenging across many of our global markets, the strength of our brand and business model mean that we remain well positioned to continue the Group's momentum and long-term development. We have a clear strategy for growth across both established and new markets which is underpinned by our controlled, multi-channel distribution as well as the design, quality and attention to detail that are at the heart of everything we do."

 

 

 

 

This document contains inside information.

 

Enquiries:

 

 

 

Ted Baker Plc

Tel: 020 7796 4133 on 22 March 2018 only

Ray Kelvin CBE, Founder & Chief Executive

Tel: 020 7255 4800 thereafter

Lindsay Page, Chief Operating Officer & Group Finance Director

 

Charles Anderson, Company Secretary & Finance Director

 

 

 

Hudson Sandler

Tel: 020 7796 4133

Alex Brennan

Hattie O'Reilly

 

     

 

www.tedbaker.com

 

www.tedbakerplc.com

 

Media images available for download at:

http://www.tedbakerplc.com/ted/en/mediacentre/imagelibrary

 

Notes to editors:

 

Ted Baker Plc - "No Ordinary Designer Label"

Ted Baker is a global lifestyle brand that operates through three main distribution channels: retail, which includes e-commerce; wholesale; and licensing, which includes territorial and product licences.

 

We distribute through our own and licensed retail outlets, leading department stores and selected independent stores in the UK and Europe, North America, the Middle East, Africa, Asia and Australasia.

The brand continues to go from strength to strength driven along in part by its unconventional approach to product and design. Never forgetting its roots as a shirt specialist but always with an eye on the future, Ted is continuously innovating through its collections, store environments and now with digital and social media initiatives that foster a truly omnichannel view for its growing and highly engaged global audience. 

Ted Baker is a truly global lifestyle brand with 532 stores and concessions worldwide, comprised of 195 in the UK, 113 in Europe, 127 in North America, 88 in the Middle East, Africa and Asia and 9 in Australasia.

The brand offers a wide range of collections including: Menswear; Womenswear; Global; Phormal; Endurance; Accessories; Bedding; Childrenswear; Crockery; Eyewear; Footwear; Fragrance and Skinwear; Gifting and Stationery; Jewellery; Lingerie and Sleepwear; Luggage; Neckwear; Rugs; Suiting; Technical Accessories; Tiles; and Watches.

 

 

Strategic Report

 

Chairman's Statement

 

I am pleased to report that Group revenue increased by 11.4% (9.6% in constant currency)1 to £591.7m (2017: £531.0m) and profit before tax and exceptional items2 increased by 11.7% to £73.5m (2017: £65.8m) for the 52 weeks ended 27 January 2018 (the "period"). Profit before tax increased by 12.3% to £68.8m (2017: £61.3m). This good performance reflects the strength of the Ted Baker brand and business model and was achieved despite a backdrop of on-going challenging external factors across our global markets.

 

The retail channel performed well, with retail sales including e-commerce up 10.4% (8.5% in constant currency)1 to £442.5m (2017: £400.7m) on an increase in average square footage of 5.9%. Our e-commerce business is an integral and increasingly important component within our retail proposition and has performed very well, delivering strong sales growth of 39.8% (38.7% in constant currency)1 to £101.1m (2017: £72.3m). We continued our controlled geographic expansion with openings across the UK and Europe, North America and the Rest of the World and we continue to invest and build brand awareness in our newer markets for the long-term development of the brand.

 

The wholesale channel delivered a strong performance, with sales up 14.6% (13.3% in constant currency)1 to £149.2m (2017: £130.3m). This reflects a good performance from our UK wholesale business, which includes the supply of goods to our licensed stores and our export business, as well as a strong performance from our North American wholesale business.

 

Licence income delivered strong growth of 17.6% to £21.4m (2017: £18.2m). During the period, our licence partners opened further stores and concessions in Australia, Dubai, Indonesia, Kuwait, Lebanon, Mexico, Qatar, Saudi Arabia and Turkey.

 

In May 2017, we launched the next phase of the Microsoft Dynamics AX system across our UK and European businesses to fully support our retail, e-commerce and wholesale channels. We anticipate completing the final phases of this project towards the end of this year, and this will allow us to continue to enhance efficiency, streamline our operations and support the development of the business. 

 

We have now successfully completed the transition from our three legacy distribution centres to our single European distribution centre in the UK. The new distribution centre now handles all logistic operations for our retail, e-commerce and wholesale businesses across the UK and Europe, supporting our long-term growth strategy. In September 2017, we successfully assigned the leases for our three UK legacy distribution centres to third parties.

 

The Group continues to consider its expansion and development plans for The Ugly Brown Building and has decided not to exercise the option to purchase 50% of neighbouring Block A, as future capacity requirements will be accommodated within our enhanced plans for the current site.

 

Financial Results

Group revenue for the period increased by 11.4% (9.6% in constant currency)1 to £591.7m (2017: £531.0m). The Group gross margin remained constant at 61.0% (2017: 61.0%). This was a result of an increased retail margin driven by an improved full price sell-through and change in mix of full price and outlet sales, offset by a decrease in the wholesale margin, reflecting a prior-year foreign exchange benefit that was not expected to re-occur and a greater proportion of wholesale sales to our territorial licence partners which carry a lower margin.

 

Profit before tax and exceptional items2 increased by 11.7% to £73.5m (2017: £65.8m) and profit before tax increased by 12.3% to £68.8m (2017: £61.3m). Adjusted basic earnings per share, which excludes exceptional items, increased by 12.0% to 127.7p (2017: 114.0p) and basic earnings per share increased by 12.6% to 119.0p (2017: 105.7p).

 

Exceptional items in the period amounted to £4.7m (2017: £4.5m) and comprised the impairment of retail assets, relating to three stores in the US and one store in Europe of £4.5m, and restructuring costs of £1.3m, partially offset by income of £1.1m related to the release of provisions against the Group's legacy warehouses following assignment of the leases. Exceptional items in the 52 weeks ended 28 January 2017 of £4.5m included a provision for lease commitments relating to the Group's legacy warehouses of £2.9m along with £0.7m of other closure costs and £0.9m in respect of closure costs for a concept store in London.

 

The Group's net borrowing position at the end of the period was £111.8m (2017: £95.2m) being the secured term loan of £52.5m (2017: £58.5m) used to purchase The Ugly Brown Building and other net debt of £59.3m (2017: £36.7m). The increase in other net debt primarily reflects the ongoing capital expenditure during the period and increased working capital.

 

Dividends

Reflecting the Group's continued good performance and the Board's confidence in the outlook, the Board is recommending a final dividend of 43.5p per share (2017: 38.8p), making a total for the period of 60.1p per share (2017: 53.6p per share), an increase of 12.1% on the prior period. Subject to approval by shareholders at the Annual General Meeting to be held on 12 June 2018, the final dividend will be paid on 22 June 2018 to shareholders on the register on 18 May 2018.

 

People

I would like to take this opportunity to thank all of my colleagues across the world for their continued hard work and commitment. The performance in the period is testament to our talented teams, whose skill and passion are key to our success as we continue to grow the business and develop Ted Baker as a global lifestyle brand.

 

Current Trading and Outlook

 

Retail

In the UK and Europe, we have opened a new store in London Luton Airport and plan to open new stores in Barcelona Airport and London Bridge station, an outlet in Lyon and our first outlet in Neumunster, Germany, along with further concessions in the UK, France, Germany and Spain. We will continue to invest in our e-commerce sites to enhance the customer experience.

 

In North America, we will continue to develop our presence with plans to open stores in Austin and Orlando, along with further licence partner concessions in Mexico.

 

In the Rest of the World, we remain focused on building brand awareness, as we are still in the relatively early stages of investment. In line with our development strategy in this territory, we plan to open a further concession in Japan.

 

Wholesale

We anticipate further growth across our wholesale businesses, which should result in high single-digit sales growth (in constant currency)1 in the coming period.

 

Licence Income

Our product and territorial licences continue to perform well. We have opened a store in India, with further store openings planned in Egypt, India, Indonesia, Kazakhstan, Saudi Arabia, Singapore and Thailand. 

 

Group

The recent unseasonal weather across Europe and the East Coast of America has had an impact on the early part of trading for Spring/Summer and we anticipate that external trading conditions will remain challenging across many of our global markets.  However, the new season collections have been well received and the strength of our brand and business model mean that we remain well positioned to continue the Group's momentum and long-term development.  We have a clear strategy for the continued expansion of Ted Baker as a global lifestyle brand across both established and newer markets. This is underpinned by our controlled distribution across channels as well as the design, quality and attention to detail that are central to everything we do.

 

To deliver our expansion plans, capital expenditure in the new financial period is planned to be at £30.0m (2018: £36.6m). This relates to further store openings and refurbishments, and the ongoing investment in new IT systems across the business.

 

We intend to make our trading statement covering trading from the start of the financial period in mid-June 2018.

 

David Bernstein CBE

Non-Executive Chairman

22 March 2018

 

 

Notes:

1 Constant currency comparatives are obtained by applying the exchange rates that were applicable for the 52 weeks ended 28 January 2017 to the financial results in overseas subsidiaries for the 52 weeks ended 27 January 2018 to remove the impact of exchange rate fluctuations. 

 

2 Profit before tax and exceptional items is a non-GAAP measure. For further information about this measure, and the reasons why we believe it is important for an understanding of the performance of the business, please refer to page 14 in the Financial Review, and Note 1 and Note 3 of the Financial Statements.

 

The Directors believe these measures provide a consistent and comparable view of the underlying performance of the Group's ongoing business. 

 

 

 

Business model and strategy

 

Ted Baker has grown steadily from its origins as a specialist shirt store in Glasgow to the global lifestyle brand it is today. In order to protect the ethos and persona for which we have gained an enviable reputation, we always ask ourselves the question: "Would Ted do it that way?"

 

Product

Ted Baker is a quintessentially British brand with a quirky yet commercial fashion offering that prides itself in always being able to satisfy the needs of our customer. Our approach is focused on unwavering attention to detail and firm commitment to quality.

 

We offer a wide range of collections including: Menswear; Womenswear; Global; Phormal; Endurance; Accessories; Bedding; Childrenswear; Crockery; Eyewear; Footwear; Fragrance and Skinwear; Gifting and Stationery; Jewellery; Lingerie and Sleepwear; Luggage; Neckwear; Rugs; Suiting; Technical Accessories; Tiles; and Watches.

 

The menswear collection is a reflection of popular contemporary culture, with a sense of humour and style mixed in. It also includes our Phormalwear range, offering a number of distinctive suiting collections that combine heritage British tailoring with a modern outlook. The womenswear collection is a fresh and feminine mix of European elegance with London flair, and is a celebration of beauty, individuality and exquisite attention to detail.

 

Distribution channels

The brand operates through three main distribution channels: retail, which includes e-commerce; wholesale; and licensing, which includes territorial and product licences. We want our customers to enjoy a seamless experience regardless of how they choose to shop and interact with the brand.

 

The retail channel comprises stores, concessions and e-commerce, which is now an integral part of our retail experience. We operate stores and concessions across the UK, Europe, North America and Asia, and localised e-commerce sites for the UK, Europe, US, Canada and Australia. We also have e-commerce businesses with some of our concession partners.

 

Stores and concessions are designed to showcase the brand's unique style of retail theatre and to ensure our customers enjoy a welcoming and pleasurable shopping experience. Each store boasts a fully bespoke design that is full of innovative and distinctive touches.

 

E-commerce enables us to offer our customers access to an extended product range and provides us with a means to talk directly with our customers and engage them with the brand in non-traditional ways. We focus on ensuring that we provide a user-friendly online brand and shopping experience across multiple devices.

 

The wholesale business in the UK serves countries across the world, primarily in the UK and Europe, as well as supplying products to stores operated by our territorial licence partners. In addition, we operate a wholesale business in North America serving the US and Canada. Our wholesale partners ("Trustees") are custodians of our collections and uphold our brand integrity by ensuring that their retail environment and brand adjacencies are in keeping with the profile and positioning of the brand. We have built up strong relationships with some of the best independent retailers and department stores around the world.

 

We operate both territorial and product licences. Our licence partners are all experts in their field and share our passion for unwavering attention to detail and firm commitment to quality.

 

Territorial licences cover specific countries or regions in Asia, Australasia, Europe, the Middle East and North America, where our partners operate licensed retail stores and, in some territories, wholesale operations.

 

Product licences cover: Bedding; Childrenswear; Crockery; Eyewear; Footwear; Fragrance and Skinwear; Gifting and Stationery; Jewellery; Lingerie and Sleepwear; Luggage; Neckwear; Rugs; Suiting; Technical Accessories; Tiles; and Watches.

 

Geographic reach

Ted Baker is a truly global lifestyle brand with 532 stores and concessions worldwide, comprised of 195 in the UK, 113 in Europe, 127 in North America, 88 in the Middle East, Africa and Asia and 9 in Australasia.

 

The Group opened its first shop in the UK in Glasgow in 1988 and has since established itself in all the major fashion destinations in the UK. We have also built a growing presence in Europe with stores and concessions in Belgium, France, Germany, Ireland, the Netherlands, Portugal, and Spain. Our e-commerce and wholesale businesses complement our locations in Europe.

 

In 1998, the Group opened its first store in North America in New York. Since then, the Group has established a presence across the US from the East to West coasts and into Canada through both own stores and concessions. In addition, the Group has a standalone e-commerce site in North America that is localised to each of Canada and the US, and a fast-growing wholesale business.

 

As part of our strategy to invest for the longer-term development of the brand, we have launched the brand in Asia with stores and concessions in China, Hong Kong and Japan. We also understand the growing desire of our customers to buy our products online and trade on renowned local websites in this region.

 

Through our territorial licences we also trade in many other countries across Africa, Asia, Australasia and the Middle East.

 

Strategy

Our strategy is to enhance our position as a leading global lifestyle brand by the continuous development of three main elements of our business model:

 

·              considered extension of the Ted Baker collections to achieve our brand growth potential. We review our collections continually to ensure we anticipate and react to trends and meet our customers' expectations. In addition, we look for opportunities to extend the breadth of collections and enhance our offer;

·              controlled distribution through three main channels: retail (including e-commerce); wholesale; and licensing. We consider each new opportunity to ensure it is right for the brand and will deliver margin led growth; and

·              further international growth through carefully managed development of overseas markets. We continue to manage growth in existing territories while considering new territories for expansion.

 

Underlying our strategy is an emphasis on design, product quality and attention to detail, delivered by the passion, commitment and skill of our teams, licence partners and wholesale customers.

 

 

 

Key Performance Indicators

We review the ongoing performance of the business using key performance indicators.

 

The Key Performance Indicators ("KPI's") that the Directors judge to be most effective in assessing progress against the Group's objectives and strategy have been detailed below and are considered throughout the Strategic Report.

 

 

Key Performance Indicator

52 weeks ended 27 January 2018

52 weeks ended 28 January 2017

Variance

Constant currency variance1

Group

Revenue

£591.7m

£531.0m

11.4%

9.6%

 

Gross margin

61.0%

61.0%

-

 

 

Operating contribution (excluding exceptional items) %2

12.7%

12.6%

10 bps

 

 

Operating contribution (including exceptional items) %2

12.0%

11.8%

20 bps

 

 

Profit before tax (excluding exceptional items) as a % of revenue2

12.4%

12.4%

-

 

 

Profit before tax (including exceptional items) as a % of revenue2

11.6%

11.5%

10 bps

 

 

 

 

 

 

 

Retail

Total revenue

£442.5m

£400.7m

10.4%

8.5%

 

Store revenue

£341.4m

£328.4m

4.0%

1.8%

 

E-commerce revenue

£101.1m

£72.3m

39.8%

38.7%

 

Gross margin

67.0%

66.1%

90 bps

 

 

Average square footage3

410,190

387,373

5.9%

 

 

Closing square footage3

420,158

395,088

6.3%

 

 

Sales per square foot excluding e-commerce sales

£832

£848

(1.9%)

(3.9%)

 

 

 

 

 

 

Wholesale

Revenue

£149.2m

£130.3m

14.6%

13.3%

 

Gross margin

43.3%

45.1%

(180 bps)

 

 

 

 

 

 

 

Licence income

Revenue

£21.4m

£18.2m

17.6%

 

 

 

 

 

 

 

Group

Operating cashflow per share4

98.4p

118.4p

(16.9%)

 

 

Working capital5

£168.6m

£136.8m

23.3%

 

 

 

 

 

 

 

 

1 Constant currency comparatives are obtained by applying the exchange rates that were applicable for the 52 weeks ended 28 January 2017 to the financial results in overseas subsidiaries for the 52 weeks ended 27 January 2018 to remove the impact of exchange rate fluctuations. 

 2 Operating contribution is defined as operating profit as a percentage of revenue. For information about exceptional items please refer to page 14 in the Financial Review, and Note 1 and Note 3 of the Financial Statements.

3  Excludes licensed partner stores.

4 Operating cashflow per share is defined as net cash generated from operating activities divided by the weighted number of ordinary shares (diluted).

5 Working capital comprises inventories, trade and other receivables and trade and other payables.

               

 

Business Review

 

Distribution channels

 

The brand operates through three main distribution channels: retail, which includes e-commerce; wholesale; and licensing, which includes territorial and product licences. As part of our strategy we look to further develop each of these routes to market, whilst ensuring the controlled distribution of our product.

 

Retail

Our retail channel comprises stores, concessions and e-commerce, which is now an integral part of our retail experience. We operate stores and concessions across the UK, Europe, North America and the Rest of the World, and localised e-commerce sites for the UK, Europe, the US, Canada and Australia. We also have e-commerce businesses with some of our concession partners. Our unique stores showcase the Ted Baker brand and are key to the growth and success of our e-commerce business. Our relatively low number of own stores and higher number of concession locations allows us to maintain a flexible store business model.

 

The retail division performed well, with sales up 10.4% (8.5% in constant currency)1 to £442.5m (2017: £400.7m) despite a challenging trading environment across some of our global markets. The growth was driven by continued investment across the retail channel in new and existing stores and our e-commerce platform. We are particularly pleased with our strong e-commerce performance, where sales grew by 39.8% (38.7% in constant currency)1 to £101.1m (2017: £72.3m) and represented 22.8% (2017: 18.0%) of our total retail sales.

 

The growth in retail sales (including e-commerce) of 10.4% (8.5% in constant currency)1 exceeded the increase in
 
average retail square footage of 5.9% to 410,190 sq ft (2017: 387,373 sq ft). Retail sales per square foot (excluding e-commerce) decreased 1.9% (decrease of 3.9% in constant currency)1 to £832 (2017: £848) demonstrating the changing
 
customer behaviour with customers shopping both online and in store.

 

The retail gross margin increased to 67.0% (2017: 66.1%), reflecting a change in mix between full price and outlet sales and also an improved full price sell-through in our retail channel.

 

Retail operating costs increased 10.8% (8.6% in constant currency)1 to £225.2m (2017: £203.3m) and as a percentage of retail sales, slightly increased to 50.9% (2017: 50.7%) due to investment in online marketing costs to increase awareness of local e-commerce sites offset by the decrease in dual running costs associated with the transition to our new single European distribution centre.

 

Wholesale

Our wholesale business in the UK serves countries across the world, primarily in the UK and Europe, as well as supplying products to stores operated by our territorial licence partners. In addition, we operate a wholesale business in North America serving the US and Canada.

 

Group wholesale sales increased by 14.6% (13.3% in constant currency)1 to £149.2m (2017: £130.3m), reflecting a good performance from our UK wholesale business, with sales increasing by 9.3% to £94.1m (2017: £86.1m), and a strong performance from our North American wholesale business, with sales increasing by 24.7% (21.0% in constant currency)1 to £55.1m (2017: £44.2m).

 

The wholesale gross margin decreased to 43.3% (2017: 45.1%), reflecting a prior-year foreign exchange benefit that was not expected to re-occur and a greater proportion of sales to our territorial licence partners, which carry a lower margin.

 

Collections

Ted Baker Menswear performed well with sales up 10.1% to £249.7m (2017: £226.7m). Menswear represented 42.2% of total sales in the period (2017: 42.7%). Ted Baker Womenswear delivered a good performance with sales up 12.4% to £342.0m (2017: £304.3m). Womenswear represented 57.8% of total sales (2017: 57.3%). The growth in the womenswear mix was driven by allocation of space as well as the increased proportion of e-commerce sales where we experience a higher percentage of womenswear sales.

 

Licence income

We operate both territorial and product licences. Our licence partners are carefully selected as experts in their field and share our passion for unwavering attention to detail and firm commitment to quality.

 

Both territorial and product licences delivered good performances, with licence income up 17.6% to £21.4m (2017: £18.2m). There were notable performances from our product licencees in Childrenswear, Eyewear, Skinwear and Suiting.

 

In the second half of the period, we transitioned our retail operations in South Korea to a distributor with the knowledge and experience to drive growth locally.

 

 

 

Geographic Performance

 

United Kingdom and Europe

 

 

52 weeks ended 27 January 2018

52 weeks ended 28 January 2017

Variance

Constant currency variance1

Total retail revenue*

£301.1m

£279.5m

7.7%

6.4%

Store revenue

£218.6m

£218.4m

0.1%

(1.4%)

E-commerce revenue

£82.5m

£61.1m

35.0%

34.7%

Average square footage*

257,367

246,826

4.3%

 

Closing square footage*

261,261

250,624

4.2%

 

Sales per square foot including e-commerce sales

£1,170

£1,132

3.4%

2.2%

Sales per square foot excluding e-commerce sales

£849

£885

(4.1%)

(5.5%)

 

 

 

 

 

Wholesale revenue

£94.1m

£86.1m

9.3%

 

 

 

 

 

 

Own stores

37

36

1

 

Concessions

252

237

15

 

Outlets

15

14

1

 

Partner stores

4

3

1

 

Total

308

290

18

 

* Excludes licensed partner stores

 

Retail sales in UK and Europe increased by 7.7% (6.4% in constant currency)1 to £301.1m (2017: £279.5m) despite ongoing challenging trading conditions.

 

Our e-commerce business performed very well during the period with sales increasing by 35.0% to £82.5m (2017: £61.1m) demonstrating that e-commerce sales are an integral part of the retail proposition in the UK and European markets. As a percentage of UK and Europe retail sales, e-commerce sales represented 27.4% (2017: 21.9%).

 

Sales per square foot excluding e-commerce sales decreased reflecting the move to online. However our stores remain key to the success of the e-commerce business through initiatives such as order in store and click and collect as well as showcasing the brand and the collections and contribute a healthy financial return.

 

Expansion continued with store openings in London, Oxford and Paris and outlets in Gloucester and Roermond. We also relocated three of our stores which included Heathrow T3, and our outlets in Bicester and La Vallee. We opened further concessions with premium department stores in the UK, France, Germany, the Netherlands and Spain. We also opened two licence partner stores in Turkey. We are pleased with the performance of the new openings and remain positive about further growth opportunities for our brand across these markets. During the period, we closed a concept store in London, and temporarily closed a store and an outlet for refurbishment. Given the ongoing challenging trading conditions, in the period the Group has impaired one store in Europe that failed to deliver on its potential.

 

Sales from our UK wholesale division, which include our wholesale export business and the supply of product to our retail licence partners, increased by 9.3% to £94.1m (2017: £86.1m) reflecting a good performance from sales to Trustees, particularly those with a strong online customer proposition.

 

 

North America

 

 

52 weeks ended 27 January 2018

52 weeks ended 28 January 2017

Variance

Constant currency variance1

Total retail revenue*

£120.1m

£103.4m

16.2%

12.4%

Store revenue

£103.8m

£93.6m

10.9%

7.3%

E-commerce revenue

£16.3m

£9.8m

66.3%

61.4%

Average square footage *

121,081

112,110

8.0%

 

Closing square footage *

126,524

116,590

8.5%

 

Sales per square foot including e-commerce sales

£992

£922

7.6%

4.1%

Sales per square foot excluding e-commerce sales

£857

£835

2.6%

(1.3%)

 

 

 

 

 

Wholesale revenue

£55.1m

£44.2m

24.7%

21.0%

 

 

 

 

 

Own stores

32

31

1

 

Concessions

61

55

6

 

Outlets

12

11

1

 

Partner Stores

22

14

8

 

Total

127

111

16

 

* Excludes licensed partner stores

 

We are confident that the Ted Baker brand is becoming more established and continues to gain recognition in this territory.

 

Sales from our retail division in North America increased by 16.2% (12.4% in constant currency)1 to £120.1m (2017:
 
£103.4m). Our e-commerce business performed particularly well with sales increasing 66.3% (61.4% in constant currency)
1 to £16.3m (2017: £9.8m). As a percentage of North America retail sales, e-commerce sales represented 13.6%
 
(2017: 9.5%).

 

Sales per square foot excluding e-commerce sales decreased in constant currency1 due to in part higher levels of
 
competitor promotional activity in the North American market and lower international tourism in the first half of the year. However, the second half of the year has seen an improving trend in this territory.

 

During the period, we opened new stores in Houston, Los Angeles and Montreal and expanded our Miami Aventura store. We opened an outlet in Chicago and concessions in Canada with a premium department store. We also opened concessions in Mexico with our licence partner. We closed one store in Los Angeles and one in New York and impaired three stores in light of the above trading conditions.

 

Sales from our North American wholesale business increased by 24.7% (21.0% in constant currency)1 to £55.1m (2017:
 
£44.2m) reflecting a strengthening relationship with key trustees that attract domestic customers across North America, further demonstrating increased brand recognition in this territory.

 

 

Rest of the World

 

 

52 weeks ended 27 January 2018

52 weeks ended 28 January 2017

Variance

Constant currency variance1

Total retail revenue*

£21.3m

£17.8m

19.7%

17.3%

Store revenue

£19.0m

£16.4m

15.9%

13.8%

E-commerce revenue

£2.3m

£1.4m

64.3%

57.8%

Average square footage *

31,742

28,438

11.6%

 

Closing square footage *

32,373

27,874

16.1%

 

Sales per square foot including e-commerce sales

£670

£625

7.2%

5.1%

Sales per square foot excluding e-commerce sales

£599

£576

4.0%

1.9%

 

 

 

 

 

Own stores

12

8

4

 

Concessions

14

15

(1)

 

Outlets

2

3

(1)

 

Partner stores

69

63

6

 

Total

97

89

8

 

* Excludes licensed partner stores

 

We continue to develop the Ted Baker brand across the Middle East, Asia, Africa and Australasia through our retail and licensing channels.

 

We remain positive about the long-term opportunities in Asia. However, as has been widely reported, the trading environment continues to be challenging.  Retail sales in Asia increased 19.7% (17.3% in constant currency)1 to £21.3m (2017: £17.8m). In China, we opened a store in Shanghai; and in Japan, we relocated our Tokyo store and opened a concession. In South Korea, we closed our concessions and transitioned our retail operations to a distributor with the knowledge and experience to drive growth locally.

 

During the period, our Middle Eastern licence partners performed particularly well and opened stores in each of Dubai, Kuwait, Lebanon, Qatar and Saudi Arabia. Our South East Asian licence partner opened a store in Indonesia and Malaysia. As at 27 January 2018, our licence partners operated 60 stores and concessions across the Middle East, South East Asia and Africa (2017: 54).

 

The joint venture with our Australasian licence partner, Flair Industries Pty Ltd, continued to perform well. During the period, we opened one new store in Bondi and closed one in Melbourne. As at 27 January 2018, we operated 9 stores in Australasia (2017: 9 stores).

 

Notes:

1 Constant currency comparatives are obtained by applying the exchange rates that were applicable for the 52 weeks ended 28 January 2017 to the financial results in overseas subsidiaries for the 52 weeks ended 27 January 2018 to remove the impact of exchange rate fluctuations. 

 

The Directors believe this measure provides a consistent and comparable view of the underlying performance of the Group's ongoing business.

 

 

Financial Review

 

Revenue and Gross Margin

Group revenue increased by 11.4% (9.6% in constant currency)1 to £591.7m (2017: £531.0m), driven by a 10.4% (8.5% in constant currency)1 increase in retail sales to £442.5m (2017: £400.7m) and a 14.6% (13.3% in constant currency)1 increase in wholesale sales to £149.2m (2017: £130.3m).

 

The gross margin for the Group remained constant at 61.0% (2017: 61.0%) as a result of improved full price sell-through in our retail channel offset by an increased proportion of wholesale sales to trustees, which carry a lower margin.

 

Operating Expenses before exceptional items2

Distribution costs, which comprise the cost of retail operations and distribution centres increased by 11.4% (9.3% in constant currency)1 to £232.0m (2017: £208.2m) and as a percentage of sales remained consistent at 39.2% (2017: 39.2%). During the period we invested in online marketing costs to increase awareness of local e-commerce sites which was offset by a decrease in dual running costs associated with the transition to our new single European distribution centre.

 

Administrative costs increased by 14.3% to £80.2m (2017: £70.1m). Administration expenses excluding exceptional costs2 increased by 15.1% (14.3% in constant currency)1 to £75.5m (2017: £65.6m). This increase is due to the growth in our central functions, both in the UK and overseas, the continued deployment of our information technology infrastructure to support our growth and investment in customer engagement.

 

Dual running costs incurred in respect of our new European distribution centre and the systems roll-out were £2.1m (2017: £4.0m) in the period, some of these are expected to continue into the next financial year.

 

Profit Before Tax and exceptional items3 and Profit Before Tax

Profit before tax and exceptional items3 increased by 11.7% to £73.5m (2017: £65.8m) and profit before tax increased by 12.3% to £68.8m (2017: £61.3m).

 

Exceptional Items2

Exceptional items in the period amounted to £4.7m (2017: £4.5m) and comprised the impairment of retail assets, relating to three stores in the US and one store in Europe of £4.5m, and restructuring costs of £1.3m, partially offset by income of £1.1m related to the release of provisions against the Group's legacy warehouses following assignment of the leases. Exceptional items in the 52 weeks ended 28 January 2017 of £4.5m included a provision for lease commitments relating to the Group's legacy warehouses of £2.9m along with £0.7m of other closure costs and £0.9m in respect of closure costs for a concept store in London.

 

For further information about this measure, and the reasons why we believe it is important for an understanding of the performance of the business, please refer to Note 1 of the Financial Statements.

 

Finance Income and Expenses

Net interest payable during the period was £3.2m (2017: £2.9m). The increase was largely due to higher average borrowings on the Revolving Credit Facility as well as an increase in LIBOR rates in the fourth quarter of the year.

 

The net foreign exchange gain during the period of £0.7m (2017: £1.1m) was due to the translation of monetary assets and liabilities denominated in foreign currencies. The decrease from the prior period was due to the appreciation of sterling this year compared to the devaluation in the prior year following the UK's EU referendum result.

 

Taxation

The Group tax charge for the year was £16.0m (2017: £14.7m), an effective tax rate of 23.3% (2017: 24.0%). This effective tax rate is higher than the UK tax rate for the period of 19.16% largely due to higher overseas tax rates and to the non-recognition of losses in overseas territories. The UK corporation tax rate reduced to 19% from 1 April 2017 and will reduce to 17% from 1 April 2020. The US federal corporate income tax rate has reduced to 21% with effect from 1 January 2018.

 

Our closing UK deferred tax assets and liabilities have been measured at 19% based on the corporation tax rate at which they are largely anticipated to unwind.  Overseas deferred tax assets and liabilities have been measured at the applicable overseas tax rates.

 

Our future effective tax rate is expected to be higher than the UK tax rate as a result of overseas profits arising in jurisdictions with higher tax rates than the UK.  The Group's effective tax rate will however benefit from the fall in the US federal tax rate to 21%.  We would expect future reductions in the effective tax rate given the US federal rate reduction and the UK rate reduction to 17% from 1 April 2020.

 

Cash Flow

The net decrease in cash and cash equivalents of £21.9m (2017: £13.5m) primarily reflected an increase in working capital and further capital expenditure to support our long-term development.

 

Total working capital, which comprises inventories, trade and other receivables and trade and other payables, increased by £31.8m to £168.6m (2017: £136.8m). This was mainly driven by an increase in inventories of £28.7m to £187.2m (2017: £158.5m) reflecting the growth of our business, stock on hand for our wholesale customers and territorial licence partners and the impact of the movement in foreign exchange rates.

                                                                                           

Group capital expenditure of £36.6m (2017: £43.8m) relates to the opening and refurbishment of stores, concessions and outlets and the ongoing investment in business-wide IT systems to support our continued growth.

 

The Group's net borrowing position at the end of the period was £111.8m (2017: £95.2m).

 

Shareholder Return

Basic earnings per share increased by 12.6% to 119.0p (2017: 105.7p). Adjusted earnings per share, which exclude exceptional items4, increased by 12.0% to 127.7p (2017: 114.0p).

 

The proposed final dividend of 43.5p per share will make a total for the period of 60.1p per share (2017: 53.6p per share), an increase of 12.1% on the previous period.

 

Operating cash flow per share was 98.4p (2017: 118.4p) and reflected a decrease in cash generated from operating activities. The decrease was largely due to increased working capital, in particular inventory, reflecting the growth of our business and increased stock on hand.

 

Borrowing Facilities

During the period, the Group agreed an extension of its multi-currency Revolving Credit Facility. A new agreement was signed on 25 September 2017 which increased the Group's committed borrowing facility from £110.0m to £135.0m, expiring in September 2020.

 

The increased facility provides the resources to fund the planned investment in capital expenditure and working capital required to support the Group's long term growth strategy. The new borrowing facility is on the same terms and contains the same covenants as the previous facility. The Group monitors actual and prospective compliance on a regular basis.

 

Treasury Risk Management

The most significant exposure to foreign exchange fluctuation relates to purchases made in foreign currencies, principally the US Dollar and the Euro.

 

A proportion of the Group's purchases are hedged in accordance with the Group's risk management policy, which allows for foreign currency to be hedged for up to 24 months in advance. The balance of purchases is hedged naturally as the business operates internationally and income is generated in the local currencies. In June 2016, ahead of the UK referendum on Brexit, the Group extended its hedging arrangements for US Dollars to April 2018. At the balance sheet date, the Group has hedged its projected commitments in respect of the period ending 26 January 2019 as well as a proportion of its requirements for the following period.

 

The Group is exposed to movements in UK interest rates as both the Revolving Credit Facility and term loan accrue interest based on LIBOR plus a fixed margin.

 

During the previous period, the Group entered into interest rate swap agreements, fixing £30.0m of the floating rate net debt.

 

 

Notes:

1 Constant currency variances are calculated by applying the exchange rates for the 52 weeks ended 28 January 2017 to financial results in overseas subsidiaries for the 52 weeks ended 27 January 2018 to remove the impact of exchange rate fluctuations.

2 For information about exceptional items and Note 1 and Note 3 of the Financial Statements.

3 Profit before tax and exceptional items is a non-GAAP measure, adjusted for exceptional items.

4 Adjusted earnings per share is a non-GAAP measure, adjusted for exceptional items.

 

 

Principal Risks and Uncertainties

 

The Board is ultimately responsible for the Group's system of risk management, internal control and for reviewing its effectiveness, and for determining the Group's risk appetite. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, which has been in place for the period and up to the date of approval of these financial statements, and that this process is regularly reviewed by the Board. However, such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

 

Risk Management Process

In order to help manage the Group's risks and uncertainties, the Board has delegated responsibility for monitoring the effectiveness of the Group's systems of internal control and risk management to the Audit Committee.

 

In addition, the Group has established a Risk Committee that includes the Finance Director and various members of the Executive Board and heads of department. The Risk Committee helps the Executive Board review the risk management and control process in each key business area on an ongoing basis, and provides a platform for management to drive improvement across the business. The Risk Committee considers:

 

•              the authority, resources and co-ordination of those involved in the identification, assessment and management of significant risks faced by the Group;

 

•               the response to the significant risks which have been identified by management and others;

 

•               the maintenance of a controlled environment directed towards the proper management of risk; and

 

•               the annual reporting procedures.

 

 

Having considered the key risks inherent in the business and the system of control necessary to manage such risks, the Finance Director presents the Risk Committee's findings to the Board on a regular basis. In addition, the Chief Executive reports to the Board on changes in the business and the external environment which affect significant risks.

 

In turn, the Audit Committee assesses the findings and recommendations of the Risk Committee and the Group's external and internal audit processes and looks critically at how the Business responds, as well as investigating material issues and what actions they implement to prevent future issues.

 

On behalf of the Board, the Audit Committee has reviewed the effectiveness of the system of risk management and internal control during the period, covering all material controls, including financial, operational and compliance controls. In particular, it has reviewed and updated the process for identifying and evaluating the significant risks affecting the business and the policies and procedures by which these risks are managed. Management is responsible for the identification and evaluation of significant risks applicable to their areas of the business together with the design and operation of suitable internal controls. These risks are assessed on a continual basis and may be associated with a variety of internal or external sources including control breakdowns, disruption in information systems, competition, natural catastrophes and regulatory requirements, and also by reference to the Group's five year strategic and financial plan. During the period, the Board has continued to place significant focus on risk management.  Following the Audit Committee's engagement of PricewaterhouseCoopers LLP ("PwC") to undertake a detailed review of the Group's risk framework and internal audit function in the prior period, the Board has again retained PwC to assist the Risk Committee and Audit Committee in managing the Group's risk profile and increasing engagement with stakeholders in the Group. 

 

The Group has an independent internal audit function whose findings are regularly reviewed by the Board and the Executive Committee. The Audit Committee monitors and reviews the effectiveness of the internal audit activities.

 

The Chief Operating Officer and Group Finance Director provides the Board with monthly financial information which includes updates by reference to the Group's key performance indicators.

 

The Board has carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. The following list highlights the principal risks identified by the Group (which are not shown in order of importance). Additional risks and uncertainties not presently known, or currently considered to be less material, may also have an adverse effect on the Group:

 

 

Issue

Potential impact

Mitigation

Change in level of risk

Strategic Risks

Brand and Reputational Risk

The strength and reputation of the Ted Baker brand is important to the business. There is a risk that our brand may be undermined or damaged by our actions or those of our partners or supply chain.

We carefully consider each new partner with whom we do business. Such partners are subject to due diligence and are monitored on an ongoing basis to ensure they remain appropriate to the brand.

 

Our dedicated social media team closely monitors social media channels and addresses any reputational issues in accordance with our protocol.

 

 

 

 

No material change

Development of Overseas Markets

Failure in growing the international business through franchise operations, licencees and e-commerce.  Risk that the Group fails to prioritise the right territories or investment or fails to support these markets with systems and supply chain capability.

We perform extensive due diligence on all potential partners and territories and to assess our appropriate routes to market. We operate in a range of international markets, which helps to mitigate over-reliance and exposure to any one territory.

 

 

 

 

No material change

Fashion and Design

As with all fashion brands there is a risk that our offer will not satisfy the needs of our customers or we fail to correctly identify trends in an increasingly competitive market, resulting in lower sales and reduced market share.

We maintain a high level of market awareness and an understanding of consumer trends and fashion to ensure that we remain able to respond to changes in consumer preference.  We use customer data to develop targeted marketing and promotional activity.

 

We continue to focus on product design, quality and attention to detail.

 

 

 

 

No material change

 

External Events

External events may occur which may affect the global, economic and financial environment in which we operate. These events can affect our suppliers, customers and partners, increasing our cost base and adversely affecting our revenue.

These risk factors are monitored closely on an ongoing basis ensuring that we are prepared for and can react to changes in the external environment, allowing us to reduce our exposure as early as possible.

 

The geographic spread of our business and supply chain also helps to mitigate these risks.

 

 

 

 

Increased risk

 

Brexit

The UK's decision to leave the European Union has increased the level of economic and consumer uncertainty.

 

 

 

The Group has established a Brexit Committee which, together with its external advisers, continues to carefully monitor the potential impact of Brexit. Scenario planning includes: the impact of additional customs duties, VAT and customs duty declarations; and the restriction on the free movement of people. 

 

In addition to this ongoing monitoring and mitigation, our presence in a range of international markets helps mitigate the impact of this risk.

 

 

 

 

 

Increased risk

Operational Risks

Supply Chain

If garments do not reach us on time and to specification, there is a risk of a loss of revenue and customer confidence. Over reliance on key suppliers could also have an impact on our business.

 

Our supply chain is diversified across a number of suppliers in different regions, reducing reliance on a small number of key suppliers. Suppliers are treated as key business partners and we work closely with them to mitigate these risks. The Group continues to improve and evolve its supply chain.

 

 

 

 

No material change

Retail Sector Outlook

Outlook in the retail sector remains uncertain, with increasing pressures on the Group's customers.

 

The Group's Credit Committee closely monitors any outstanding debts and takes appropriate action where necessary.

 

The Group manages its credit risk through insurance, stand-by letters of credit or other supplier financing products wherever possible.

 

 

 

 

Increased risk

Infrastructure

There is a risk of operational problems, including disruption to the infrastructure that supports our business, which may lead to a loss of revenue, data and inventory.

 

The business continuity plan is constantly reviewed and updated by the Risk Committee. In addition, business disruption is covered by our insurance policies.

 

 

No material change

Social Responsibility

We are committed to operating in a responsible and sustainable manner as regards our supply chain, environment and community. If we fail to operate in a manner that supports our philosophy, this could damage the trust and confidence of our stakeholders.

A sub-committee of the Executive Committee has been tasked with overseeing specific areas of our social responsibility agenda. Ted's Conscience Team is responsible for monitoring this agenda and ensure our practices fall in line with it.

 

 

 

 

No material change

Cyber Security

The business is subject to threats from hacking or viruses or other unauthorised data breaches.

 

There is the possibility of unintentional loss of controlled data by authorised users.

 

The Group has invested in additional specialist IT resources.

 

The continual upgrading of security equipment and software also mitigates these risks.

 

Tightly controlled security controls, an extensive penetration testing programme, and data recovery and business continuity plans have been implemented with the support of specialist third parties.

 

 

 

 

Increased risk

IT Infrastructure and Implementation of ERP

The Group's IT infrastructure is key to the operation of its business.

 

We are in the process of implementing  the final phases of Microsoft Dynamics AX across the business.  With any project of this scale, there is a risk of a poorly managed implementation or take-up of new systems, which could lead to business disruptions.

 

This, and the implementation of other new business systems, has potential to impact interdependent systems and the business.

The Group's IT Steering Committee meets on a two weekly basis to review the implementation and all other major IT projects.  This Committee comprises members of the Executive Committee and is advised by external professional advisers. The IT Steering Committee has established a Design Authority charged with overseeing the scheduling of the implementation of any new system.

 

Robust change management and professional project managers recruited to oversee the project team which includes key business stakeholders.

 

 

 

 

 

No material change

People

Our performance is linked to the performance of our people and, in particular, to the leadership of key individuals. The loss of a key individual whether at management level or within a specialist skill set could have a detrimental effect on our operations and, in some cases, the creative vision for the brand.

Identification and retention of key talent is important and we take active steps to provide stability and security to the key team. We carry out an annual benchmarking review to ensure that we provide competitive remuneration and total reward packages. We also utilise long-term incentive schemes to retain key talent. Employee engagement through our culture and environment strengthen the commitment of team members and has a positive impact on our retention rate.

 

Succession plans are in place and have been reviewed during the period.

 

 

 

 

No material change

 

 

Regulatory and Legal Framework

 

 

We operate in a range of international markets and must comply with various regulatory requirements. Failure to do so could lead to financial penalties and/or reputational damage.

 

 

The Group closely monitors changes in the legal and regulatory framework within the markets in which it operates. We work closely with specialist advisers in each market to ensure compliance with local laws and regulations.

 

For example, the Group has established a cross-functional GDPR steering committee that has worked with external advisors to ensure the Group's policies and procedures are GDPR compliant.

 

 

 

 

 

No material change

Infringement of the Group's Intellectual Property

Unauthorised use of the Group's designs, trademarks and other intellectual property rights could damage the Ted Baker brand and the Group's reputation.

The Group, with its external advisers, rigorously manages and defends its intellectual property.

 

The Group deals with counterfeit goods in accordance with its robust enforcement strategy.

 

 

 

 

No material change

Financial Risks

Currency,  Interest, Credit and Counterparty Credit Risks, including Financial Covenants under the Group's credit facilities

 

In the course of its operations, we are exposed to these financial risks which, if they were to arise, may have material financial impacts on the Group.

The Group's policies for dealing with these risks are discussed in detail in Note 23 to the financial statements.

 

 

 

 

 

No material change

 

Foreign Exchange

 

The Group is exposed to fluctuations in the exchange rates of key currencies.

 

The Group's Foreign Exchange strategy is closely managed by the Finance Director and the Group's external advisers. The Group has adopted a hedging policy to mitigate short-term foreign exchange risk.

 

 

 

 

No material change

 

 

Viability statement

In accordance with provision C.2.2 of the UK Corporate Governance Code dated April 2016 (the "Code"), the Directors have assessed the prospects and viability of the Group over a five year period, taking into account the Group's current position and the potential impact of the principal risks documented above.

 

The Group operates a five year plan, which is updated and reviewed regularly by the Board.  Within the five year plan, detailed scenario planning and stress testing has been carried out over a five year period. The Directors therefore consider the five year period to 29 January 2022 to be the appropriate period to assess the viability and prospects of the Group with a high level of certainty. 

 

The Directors' assessment has been further enhanced by analysing the current and future risks, controls and assurances available, resulting in a clear picture of the risk profile across the whole business.  The principal risks, including specific operational risks, that could affect the future viability of the Group over the next five years are identified on pages 17 to 21 in Principal Risks and Uncertainties.

 

In making this assessment, the Directors have considered the resilience of the Group to the occurrence of these risks in severe but plausible scenarios, including by reference to certain principal risks, and taking into account the effectiveness of any mitigating actions. In addition, the Board has considered the impact on the Group's cash flows, headroom, covenants and other key financial ratios having stress tested the potential impact of these scenarios, both individually and in combination. 

 

Sensitivity analysis was also used to stress test the Group's strategic plan and to confirm that sufficient headroom would remain available under the Group's credit facilities.  The Board considers that under each scenario tested, the mitigating actions would be effective and sufficient to ensure the continued viability of the Group. For the reasons stated above, based on the robust assessment undertaken, the Directors confirm they have a reasonable expectation that the Group will be able to continue in operation, and meet its liabilities as they fall due, over the period of assessment.

 

 

Going Concern

The Directors have reviewed the Group's budgets and long-term projections. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for 12 months from the approval of these accounts. For this reason, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

 

Group Income Statement

 

 

 

 

For the 52 weeks ended 27 January 2018

 

 

 

 

 

Note

52 weeks ended

52 weeks

 ended

 

27 January

28 January

 

2018

2017

 

 

 

£'000

£'000

 
 

 

 

 

 

 

Revenue

2

591,670

530,986

 

Cost of sales

 

(230,865)

(207,257)

 
 

Gross profit

 

360,805

323,729

 
 

 

 

 

 

 
 

Distribution costs

 

(231,996)

(208,221)

 
 

Administrative expenses

 

(80,160)

(70,103)

 

 

 

 

 

 

Administrative expenses before exceptional items

 

(75,484)

(65,590)

 
 

Exceptional items

3

(4,676)

(4,513)

 

 

 

 

 

 

Licence income

 

21,443

18,237

 
 

Other operating income / (expense)

 

635

(1,145)

 

Operating profit

 

70,727

62,497

 
 
 

Finance income

4

802

1,597

 
 

Finance expense

4

(3,314)

(3,373)

 
 

Share of profit of jointly controlled entity, net of tax

 

574

550

 
 

Profit before tax

3

68,789

61,271

 

 

 

 

 

 

Profit before tax and exceptional items

 

73,465

65,784

 

Exceptional items

 

(4,676)

(4,513)

 

 

 

 

 

 

Income tax expense

5

(16,045)

(14,703)

 

 

 

 

 

 

Income tax expense before exceptional items

 

(16,868)

(15,605)

 

Income tax relating to exceptional items

 

823

902

 

 

 

 

 

 

Profit for the period

 

52,744

46,568

 
 

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

7

119.0p

105.7p

 
 

Diluted

7

118.3p

104.5p

 
         

 

 

 

 

 

 

Group Statement of Comprehensive Income

 

 

For the 52 weeks ended 27 January 2018

 

 

 

 

 

 

52 weeks ended

27 January

2018 

52 weeks ended

28 January

2017 

 

 

 

 

£'000

£'000

 

 

 

Profit for the period

52,744

46,568

 

 

 

Other comprehensive income / (expense)

 

 

Items that may be reclassified to the Income Statement

 

 

Net effective portion of changes in fair value of cash flow hedges

(5,139)

10,521

Net change in fair value of cash flow hedges transferred to profit or loss

(4,599)

(5,435)

Exchange differences on translation of foreign operations net of tax

(7,926)

5,580

Other comprehensive (expense) / income for the period

(17,664)

10,666

 

 

 

Total comprehensive income for the period

35,080

57,234

         

 

 

 

Group Statement of Changes in Equity

 

For the 52 weeks ended 27 January 2018

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium

Cash flow hedging reserve

Translation reserve

Retained earnings

Total equity attributable to equity shareholders of the parent

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 28 January 2017

2,208

9,935

6,736

7,891

183,774

210,544

Comprehensive income for the period

 

 

 

 

 

 

Profit for the period

-

-

-

-

52,744

52,744

Exchange differences on translation of foreign operations

-

-

-

(9,889)

-

(9,889)

Current tax on foreign currency translation

-

-

-

1,963

-

1,963

Effective portion of changes in fair value of cash flow hedges

-

-

(7,423)

-

-

(7,423)

Net change in fair value of cash flow hedges transferred to profit or loss

-

-

(4,599)

-

-

(4,599)

Deferred tax associated with movement in hedging reserve

-

-

2,284

-

-

2,284

Total comprehensive income for the period

-

-

(9,738)

(7,926)

52,744

35,080

Transactions with owners recorded directly in equity

 

 

 

 

 

 

Increase in issued share capital

16

552

-

-

-

568

Share-based payments charges

-

-

-

-

1,876

1,876

Movement on current and deferred tax on share-based payments

-

-

-

-

535

535

Dividends paid

-

-

-

-

(24,553)

(24,553)

Total transactions with owners

16

552

-

-

(22,142)

(21,574)

 

 

 

 

 

 

 

Balance at 27 January 2018

2,224

10,487

(3,002)

(35)

214,376

224,050

                   

 

 

 

Group Statement of Changes in Equity

 

 

For the 52 weeks ended 28 January 2017

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium

Cash flow hedging reserve

Translation reserve

Retained earnings

Total equity attributable to equity shareholders of the parent

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 30 January 2016

2,199

9,617

1,650

2,311

156,822

172,599

Comprehensive income for the period

 

 

 

 

 

 

Profit for the period

-

-

-

-

46,568

46,568

Exchange differences on translation of foreign operations

-

-

-

7,038

-

7,038

Current tax on foreign currency translation

-

-

-

(1,458)

-

(1,458)

Effective portion of changes in fair value of cash flow hedges

-

-

11,714

-

-

11,714

Net change in fair value of cash flow hedges transferred to profit or loss

-

-

(5,435)

-

-

(5,435)

Deferred tax associated with movement in hedging reserve

-

-

(1,193)

-

-

(1,193)

Total comprehensive income for the period

-

-

5,086

5,580

46,568

57,234

Transactions with owners recorded directly in equity

 

 

 

 

 

 

Increase in issued share capital

9

318

-

-

-

327

Share-based payments charges

-

-

-

-

1,839

1,839

Movement on current and deferred tax on share-based payments

-

-

-

-

281

281

Dividends paid

-

-

-

-

(21,736)

(21,736)

Total transactions with owners

9

318

-

-

(19,616)

(19,289)

 

 

 

 

 

 

 

Balance at 28 January 2017

2,208

9,935

6,736

7,891

183,774

210,544

                       

 

 

 

Company Statement of Changes in Equity

For the 52 weeks ended 27 January 2018

 

 

Share capital

 

Share premium

 

Other reserves

 

Retained earnings

Total equity

 

 

£'000

£'000

£'000

£'000

£'000

 Balance at 28 January 2017

2,208

9,935

20,680

44,426

77,249

 

 

 

 

 

 

 Profit for the period

-

-

-

25,825

25,825

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

Increase in issued share capital

16

552

-

-

568

Share-based payments charges

-

-

-

185

185

Share-based payments charges for awards granted to subsidiary employees

-

-

1,691

-

1,691

Dividends paid

-

-

-

(24,553)

(24,553)

 Total transactions with owners

16

552

1,691

(24,368)

(22,109)

 

 

 

 

 

 

 Balance at 27 January 2018

2,224

10,487

22,371

45,883

80,965

 

 

Company Statement of Changes in Equity

For the 52 weeks ended 28 January 2017

 

 

Share capital

 

Share premium

 

Other reserves

 

Retained earnings

Total equity

 

 

£'000

£'000

£'000

£'000

£'000

 Balance at 30 January 2016

2,199

9,617

19,060

38,697

69,573

 

 

 

 

 

 

 Profit for the period

-

-

-

27,246

27,246

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

Increase in issued share capital

9

318

-

-

327

Share-based payments charges

-

-

-

219

219

Share-based payments charges for awards granted to subsidiary employees

-

-

1,620

-

1,620

Dividends paid

-

-

-

(21,736)

(21,736)

 Total transactions with owners

9

318

1,620

(21,517)

(19,570)

 

 

 

 

 

 

 Balance at 28 January 2017

2,208

9,935

20,680

44,426

77,249

 

 

Group and Company Balance Sheet

At 27 January 2018

 

Note

Group

Group

Company

Company

 

 

27-Jan-18

28-Jan-17

27-Jan-18

28-Jan-17

 

 

£'000

£'000

£'000

£'000

Intangible assets

8

34,373

24,445

-

-

Property, plant and equipment

9

139,075

144,354

-

-

Investment in subsidiary

 

-

-

24,793

23,102

Investment in equity accounted investee

 

1,893

1,897

-

-

Deferred tax assets

 

4,114

4,446

-

-

Prepayments

 

353

401

-

-

Non-current assets

 

179,808

175,543

24,793

23,102

 

 

 

 

 

 

Inventories

 

187,227

158,500

-

-

Trade and other receivables

 

64,273

59,251

55,232

51,932

Amount due from equity accounted investee

 

666

653

-

-

Derivative financial assets

 

478

8,974

-

-

Cash and cash equivalents

 

16,712

21,401

940

2,238

Current assets

 

269,356

248,779

56,172

54,170

 

 

 

 

 

 

Trade and other payables

 

(82,858)

(80,995)

-

(23)

Bank overdraft

 

(76,043)

(58,074)

-

-

Term loan

 

(5,500)

(6,000)

-

-

Income tax payable

 

(8,522)

(10,327)

-

-

Provisions for liabilities and charges

 

-

(915)

-

-

Derivative financial liabilities

 

(3,918)

(616)

-

-

Current liabilities

 

(176,841)

(156,927)

-

(23)

 

 

 

 

 

 

Deferred tax liability

 

(1,273)

(2,349)

-

-

Provisions for liabilities and charges

 

-

(2,002)

-

-

Term loan

 

(47,000)

(52,500)

-

-

Non-current liabilities

 

(48,273)

(56,851)

-

-

Net assets

 

224,050

210,544

80,965

77,249

 

Equity

 

 

 

 

 

Share capital

 

2,224

2,208

2,224

2,208

Share premium

 

10,487

9,935

10,487

9,935

Other reserves

 

(3,002)

6,736

22,371

20,680

Translation reserve

 

(35)

7,891

-

-

Retained earnings

 

214,376

183,774

45,883

44,426

Total equity attributable to equity shareholders of the parent company

 

224,050

210,544

80,965

77,249

Total equity

 

224,050

210,544

80,965

77,249

             

 

These financial statements were approved by the Board of Directors on 22 March 2018 and were signed on its behalf by:

 

 

Lindsay Page

Director

Company number:  03393836

 

 

Group and Company Cash Flow Statement

For the 52 weeks ended 27 January 2018

 

 

Group

52 weeks ended

27 January

2018

Group

52 weeks ended

28 January

2017

Company

52 weeks ended

27 January

2018

Company

52 weeks ended

28 January

2017

 

£'000

£'000

£'000

£'000

Cash generated from operations

 

 

 

 

Profit for the period

52,744

46,568

25,825

27,246

Adjusted for:

 

 

 

 

Income tax expense

16,045

14,703

-

-

Depreciation and amortisation

23,238

20,966

-

-

Impairments

4,533

-

-

-

Loss on disposal of property, plant and equipment

166

416

-

-

Share-based payments

1,876

1,839

185

219

Net finance expense

2,512

1,776

-

-

Net change in derivative financial assets and liabilities carried at fair value through profit or loss

1,517

677

-

-

Share of profit in joint venture

(574)

(550)

-

-

Decrease in non-current prepayments

63

59

-

-

Increase in inventory

(34,067)

(27,128)

-

-

(Increase) in trade and other receivables

(6,779)

(16,335)

(3,299)

(4,446)

Increase / (decrease) in trade and other payables

2,845

20,392

(24)

13

(Decrease) / increase in provisions for liabilities and charges

(2,917)

2,917

-

-

Interest paid

(3,341)

(2,886)

-

-

Income taxes paid

(13,975)

(10,644)

-

-

Net cash generated from operating activities

43,886

52,770

22,687

23,032

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Purchases of property, plant and equipment and intangibles

(36,562)

(43,753)

-

-

Proceeds from sale of property, plant and equipment

115

93

-

-

Dividends received from joint venture

578

294

-

-

Interest received

61

15

-

-

Net cash from investing activities

(35,808)

(43,351)

-

-

 

 

 

 

 

Cash flow financing activities

 

 

 

 

Repayment of term loan

(6,000)

(1,500)

-

-

Dividends paid

(24,553)

(21,736)

(24,553)

(21,736)

Proceeds from issue of shares

568

327

568

327

Net cash from financing activities

(29,985)

(22,909)

(23,985)

(21,409)

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

(21,907)

(13,490)

(1,298)

1,623

 

 

 

 

 

Net cash and cash equivalents at the beginning of the period

(36,673)

(24,574)

2,238

615

Exchange rate movement

(751)

1,391

-

-

Net cash and cash equivalents at the end of the period

(59,331)

(36,673)

940

2,238

 

 

 

 

 

Cash and cash equivalents at the end of the period

16,712

21,401

940

2,238

Bank overdraft at the end of the period

(76,043)

(58,074)

-

-

Net cash and cash equivalents at the end of the period

(59,331)

(36,673)

940

2,238

 

 

 

 

Notes to the Financial Statements

1.     Summary of Significant Accounting Policies

 

Basis of preparation

EU law (IAS Regulation EC 1606/2002) requires that the Group financial statements, for the 52 weeks ended 27

January 2018 are prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the EU ("adopted IFRSs").

 

The financial information set out above does not constitute the company's statutory accounts for the 52 weeks ended 27 January 2018 or 28 January 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the registrar of companies, and those for 2018 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

Statutory accounts for 28 January 2017 have been delivered to the Registrar of Companies. The auditor has reported on those accounts; their reports were i) unqualified and, ii) did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

 

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 3 to 16. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chairman's Statement on pages 3 to 5. In addition, the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

 

The Group meets its day-to-day working capital requirements through a committed overdraft facility expiring in September 2020 which is a multi-currency Revolving Credit Facility with The Royal Bank of Scotland, Barclays and HSBC. The facility will be used to the extent necessary to fund working capital and capital expenditure to support the Group's growth strategy.

 

The Group's forecasts and projections, taking into account reasonably possible changes in trading performance, show that the Group has sufficient financial resources. As a consequence, the Directors have a reasonable expectation that the Company and the Group are well placed to manage their business risks and to continue in operational existence for the twelve months from the date of signing the financial statements, despite the current uncertain global economic outlook.  Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements.

 

Non-GAAP performance measures

Exceptional items are added back/deducted to derive certain non-GAAP measures as follows:

·              Profit attributable to the owners of the Company, to arrive at adjusted earnings per share (after the tax effect of exceptional items), and

·              Profit before tax, to arrive at Profit before tax and exceptional items. 

 

Exceptional items are those items which, in the opinion of the Directors, should be excluded in order to provide a consistent and comparable view of the underlying performance of the Group's ongoing business. Generally, exceptional items include those items that do not occur often and are material.

 

We believe the non-GAAP performance measures presented along with comparable GAAP measurements is useful to provide information with which to measure our performance, and our ability to invest in new opportunities. Management uses these measures with the most directly comparable GAAP financial measures in evaluating our operating performance and value creation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. The requirements for identifying exceptional items are on a consistent basis each period and presented consistently, and a reconciliation of profit before tax and exceptional items to profit before tax is included in Note 3 to the financial statements.

 

Exceptional items in the period included:

·     The impairment of assets in three retail stores in the US and one in Europe. The Directors believe this to be exceptional as the Group does not frequently impair assets of this quantum.

·     Restructuring costs incurred in aligning internal structures to the Group's strategic aims. The Directors believe this to be exceptional due to the infrequent occurrence of such costs.

·     The release of the provision for the Group's legacy warehouses following assignment of the leases. The Directors believe this to be exceptional as the initial recognition of the cost of provision was treated as exceptional.

 

Exceptional items in the prior period included:

·     Costs in relation to the closure of the Group's legacy warehouses in the UK. The Directors believe this cost to be infrequent in nature as the Group do not close existing warehouses or move to new warehouses regularly.

·     Costs in relation to the closure of a concept store in London. The Directors believe this cost to be infrequent in nature as the Group does not open concept stores frequently.

 

The Directors believe that the profit before tax and exceptional items and adjusted earnings per share measures provide useful information for shareholders on the underlying performance of the business. These measures are also consistent with how underlying business performance is measured internally.

 

The profit before tax and exceptional items and adjusted earnings per share are not recognised measures under IFRS and may not be directly comparable with adjusted profit and earnings per share measures used by other companies.

 

Constant currency comparatives are obtained by applying the exchange rates that were applicable for the 52 weeks ended 28 January 2017 to the financial results in overseas subsidiaries for the 52 weeks ended 27 January 2018 to remove the impact of exchange rate fluctuations.

 

Significant accounting policies

No new standards, amendments or interpretations, effective for the first time for the period beginning on or after 29 January 2017 have had a material impact on the Group or Company.

 

IFRS 15, 'Revenue from Contracts with Customers' which is effective from 1 January 2018 has been considered by the Group and it was concluded this will not be significant to the Group's financial statements in the future.

 

At the balance sheet date there are a number of new standards and amendments to existing standards in issue but not yet effective. None of these is expected to have a significant effect on the financial statements of the Group or Company, except the following, set out below:

 

IFRS 9, 'Financial instruments', which is effective for periods beginning on or after 1 January 2018, replaces IAS 39 and addresses the classification, measurement and recognition of financial assets and financial liabilities. This was endorsed by the EU in November 2016 and as such the full impact on the Group is currently being assessed. If the Group adopted this standard in the financial statements for the 52 weeks ended 27 January 2018, the impact of the change in hedge accounting for financial instruments on the consolidated income statement would have been an decrease in profit before tax of £767,000 with no impact on net assets.

IFRS 16, 'Leases' addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees. The standard replaces IAS 17 'Leases', and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019. The quantitative impact of IFRS 16 on the Group's net assets and results is being assessed and will be quantified closer to the date of adoption. IFRS 16 is expected to have a material impact on the balance sheet as both assets and liabilities will increase and is also expected to have a material impact on key components within the income statements because operating lease rental charges will be replaced by depreciation and finance costs. IFRS 16 will not have any impact on the underlying commercial performance of the Group or the cash flow generated in the period.

 

 

2. Segment information

 

The Group has three reportable segments: retail, wholesale and licensing.

 

For each of the three segments, the Executive Committee reviews internal management reports on a four weekly basis.

 

The accounting policies of the reportable segments are the same as described in the Group's financial statements. Information regarding the results of each reportable segment is included below. Performance for the retail segment is measured based on operating contribution, whereas performance of the wholesale segment is measured based on gross profit and performance of the licensing segment is measured based on royalty income, as included in the internal management reports that are reviewed by the Board.

 

Segment results before exceptional items are used to measure performance as management believes that such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm's length basis.

 

a)            Segment revenue and segment result

 

52 weeks ended 27 January 2018

Retail

Wholesale

Licensing

Total

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Revenue

442,451

149,219

-

591,670

Cost of sales

(146,230)

(84,635)

-

(230,865)

Gross profit

296,221

64,584

 

360,805

Operating costs

(225,224)

-

-

(225,224)

Operating contribution

70,997

64,584

-

135,581

Licence income

-

-

21,443

21,443

Segment result

70,997

64,584

21,443

157,024

 

 

 

 

 

Reconciliation of segment

result to profit before tax

 

 

 

 

 

 

 

 

 

Segment result

70,997

64,584

21,443

157,024

Other operating costs

-

-

-

(82,256)

Exceptional costs

-

-

-

(4,676)

Other operating income

-

-

-

635

Operating profit

-

-

-

70,727

Net finance expense

-

-

-

(2,512)

Share of profit of jointly controlled entity, net of tax

-

-

-

574

Profit before tax

-

-

-

68,789

 

 

 

 

 

Capital expenditure

21,621

396

-

22,017

Unallocated capital expenditure

-

-

-

14,821

Total capital expenditure

-

-

-

36,838

 

 

 

 

 

Depreciation and amortisation

16,386

455

-

16,841

Unallocated depreciation and amortisation

-

-

-

6,397

Total depreciation and amortisation

-

-

-

23,238

 

 

 

 

 

Segment assets

241,427

92,343

-

333,770

Deferred tax assets

-

-

-

4,114

Derivative financial assets

-

-

-

478

Intangible assets - head office

-

-

-

79,279

Property, plant and equipment - head office

-

-

-

28,611

Other assets

-

-

-

2,912

Total assets

-

-

-

449,164

 

 

 

 

 

Segment liabilities

(117,940)

(40,961)

-

(158,901)

Income tax payable

-

-

-

(8,522)

Provisions for liabilities and charges

-

-

-

-

Term loan

-

-

-

(52,500)

Other liabilities

-

-

-

(5,191)

Total liabilities

-

-

-

(225,114)

 

 

 

 

 

Net assets

-

-

-

224,050

 

Wholesale sales are shown after the elimination of inter-company sales of £113,081,488 (2017: £89,695,272).

 

52 weeks ended 28 January 2017

Retail

Wholesale

Licensing

Total

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Revenue

400,724

130,262

-

530,986

Cost of sales

(135,704)

(71,553)

-

(207,257)

Gross profit

265,020

58,709

-

323,729

Operating costs

(203,253)

-

-

(203,253)

Operating contribution

61,767

58,709

-

120,476

Licence income

-

-

18,237

18,237

Segment result

61,767

58,709

18,237

138,713

 

 

 

 

 

Reconciliation of segment

result to profit before tax

 

 

 

 

 

 

 

 

 

Segment result

61,767

58,709

18,237

138,713

Other operating costs

-

-

-

(70,558)

Exceptional costs

-

-

-

(4,513)

Other operating expense

-

-

-

(1,145)

Operating profit

-

-

-

62,497

Net finance expense

-

-

-

(1,776)

Share of profit of jointly controlled entity, net of tax

-

-

-

550

Profit before tax

-

-

-

61,271

 

 

 

 

 

Capital expenditure

21,358

411

-

21,769

Unallocated capital expenditure

-

-

-

21,985

Total capital expenditure

-

-

-

43,754

 

 

 

 

 

Depreciation and amortisation

16,588

397

-

16,985

Unallocated depreciation and amortisation

-

-

-

3,981

Total depreciation and amortisation

-

-

-

20,966

 

 

 

 

 

Segment assets

225,632

83,161

-

308,793

Deferred tax assets

-

-

-

4,446

Derivative financial assets

-

-

-

8,974

Intangible assets - head office

-

-

-

21,718

Property, plant and equipment - head office

-

-

-

77,440

Other assets

-

-

-

2,951

Total assets

-

-

-

424,322

 

 

 

 

 

Segment liabilities

(104,953)

(34,116)

-

(139,069)

Income tax payable

-

-

-

(10,327)

Provisions for liabilities and charges

-

-

-

(2,917)

Term loan

-

-

-

(58,500)

Other liabilities

-

-

-

(2,965)

Total liabilities

-

-

-

(213,778)

 

 

 

 

 

Net assets

-

-

-

210,544

 

 

 

 

 

 

 

 

 

b) Geographical information

 

UK

US

Rest of World

Total

 

£'000

£'000

£'000

£'000

52 weeks ended 27 January 2018

 

 

 

 

 

 

 

 

 

Revenue

336,056

153,603

102,011

591,670

Non-current assets*

127,429

26,795

21,470

175,694

 

 

 

 

 

52 weeks ended 28 January 2017

 

 

 

 

 

 

 

 

 

Revenue

316,542

130,941

83,503

530,986

Non-current assets*

118,879

34,571

17,647

171,097

 

 

 

 

 

*Non-current assets exclude deferred tax assets.

 

c) Revenue by collection

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

 

 

 

Menswear

249,685

226,731

Womenswear

341,985

 

591,670

530,986

 

 

 

3. Profit before tax

 

Profit before tax is stated after charging/(crediting):

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

Depreciation and amortisation

23,238

20,966

Exceptional items

4,676

4,513

Leasehold properties:

 

 

     Fixed lease payments*

41,238

38,022

     Variable rental payments*

3,725

2,780

Concessions:

 

 

     Fixed lease payments*

18,177

18,536

     Variable rental and commission payments*

34,866

33,345

Loss on sale of property, plant & equipment and intangibles

166

416

 

Auditor remuneration:

 

 

    Audit of these financial statements

12

12

 

Amounts receivable by the Company's auditor and its associates in respect of:

 

 

    Audit of financial statements of subsidiaries of the Company    

348

300

    Interim financial statements review

17

17

    Other assurance services

20

21

    Taxation compliance and other advisory services

-

10

 

 

 

 

 

 

 

 

             

*Disclosed above are the costs charged in the period relating to leasehold properties and concession arrangements. These are either fixed in nature or variable based on revenue levels for a particular store or concession, where relevant, including e-commerce sales with concession partners.

 

 

Reconciliation of profit before tax to profit before tax and exceptional items

 

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

 

 

 

Profit before tax

68,789

61,271

 

 

 

Impairment of retail assets, relating to three stores in the US and one store in Europe

4,533

-

Restructuring costs

1,251

-

Movement in provisions related to the Group's legacy warehouses

(1,108)

2,917

Other closure costs

-

659

Closure costs for a concept store in London

-

937

Exceptional items

4,676

4,513

Profit before tax and exceptional items

73,465

65,784

 

 

 

 

 

4. Finance income and expenses

 

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

Finance income

 

 

- Interest receivable

61

15

- Foreign exchange gains

741

1,582

 

802

1,597

Finance expenses

 

 

- Interest payable

(3,301)

(2,933)

- Foreign exchange losses

(13)

(440)

 

(3,314)

(3,373)

 

 

 

 

5. Income tax expense

 

a) The tax charge comprises

 

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

Current tax

 

 

      United Kingdom Corporation tax

12,190

12,343

              Overseas tax

5,499

3,625

Deferred tax

 

 

              United Kingdom Corporation tax

827

977

              Overseas tax

(1,833)

(1,038)

Prior period (over)/under provision

 

 

Current tax

(2,403)

(4,481)

Deferred tax

1,765

3,277

 

16,045

14,703

 

 

 

The movements in prior year current and deferred tax provisions are largely as a result of claiming interest deductions in US tax returns previously not taken (2017: movements largely due to accelerated tax relief claims on fixed assets in the US).

 

 

b) Deferred tax movement by type

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

Property, plant and equipment

(388)

(464)

Share-based payments

(174)

(49)

Overseas losses

757

379

Inventory

475

(41)

Other

336

236

 

1,006

61

 

 

 

c) Factors affecting the tax charge for the period

The tax assessed for the period is higher than the tax calculated at domestic rates applicable to profits in the respective countries. The differences are explained below.

 

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

Profit before tax

68,789

61,271

 

 

 

Profit multiplied by the standard rate in the UK - 19.16%, (2017: standard rate in the UK of 20%)

13,180

12,254

 

 

 

Income not taxable/expenses not deductible for tax purposes

771

675

Overseas losses not recognised

1,334

1,494

Movement in current and deferred tax on share awards and options

103

31

Prior period over provision

(638)

(1,204)

Difference due to overseas tax rates

1,295

1,453

Total income tax expense

16,045

14,703

 

 

 

d) Deferred and current tax recognised directly in equity

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

Current tax credit on share awards and options

(1,058)

(554)

Deferred tax charge on share awards and options

523

273

Deferred tax (credit) / charge associated with movement in hedging reserve

(2,284)

1,193

Current tax (credit) / charge associated with foreign exchange movements in reserves

(1,963)

1,458

 

(4,782)

2,370

 

There was a reduction in the UK corporation tax rate to 19% from 1 April 2017 and there will be a further reduction to 17% from 1 April 2020.  There was a reduction in the US federal corporate income tax rate to 21% from 1 January 2018.

 

As the deferred tax assets and liabilities should be recognised based on the corporation tax rate at which they are anticipated to unwind, the assets and liabilities on UK operations have been recognised at a rate of 19%. Assets and liabilities arising on foreign operations have been recognised at the applicable overseas tax rates. 

 

 

 

 

6. Dividends per share

 

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

 

£'000

 

Final dividend paid for prior period of 38.8p per ordinary share (2017: 34.6p)

 

 17,176

 15,215

Interim dividend paid of 16.6p per ordinary share (2017: 14.8p)

 

7,377

6,521

 

24,553

21,736

 

A final dividend in respect of 2018 of 43.5p per share, amounting to a dividend payable of £19,346,280 is to be proposed at the Annual General Meeting on 12 June 2018.

 

 

7. Earnings per share

 

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

Number of shares:

No.

No.

Weighted number of ordinary shares outstanding

44,306,134

44,034,459

Effect of dilutive options

289,241

516,310

Weighted number of ordinary shares outstanding - diluted

44,595,375

44,550,769

 

 

 

Earnings:

£'000

£'000

Profit for the period basic and diluted

52,744

46,568

Profit for the period adjusted *

56,597

50,178

 

 

 

Basic earnings per share

119.0p

105.7p

Adjusted earnings per share *

127.7p

114.0p

Diluted earnings per share

118.3p

104.5p

Adjusted diluted earnings per share*

126.9p

112.6p

 

 

Diluted earnings per share and adjusted diluted earnings per share have been calculated using additional ordinary shares of 5p each available under the Ted Baker Sharesave Scheme and the Ted Baker Plc Long-Term Incentive Plan 2013.

 

There were no share related events after the balance sheet date that may affect earnings per share.

 

* Adjusted profit for the period and adjusted earnings per share are shown before the exceptional items (net of tax) of £3.9m (2017: £3.6m).

 

 

 

8. Intangible assets

 

 

Key money

Computer software

Computer software under development

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 28 January 2017

624

13,619

14,854

29,097

Additions / transfers

738

14,300

(1,739)

13,299

Disposals

-

-

-

-

Exchange rate movement

19

(119)

-

(100)

At 27 January 2018

1,381

27,800

13,115

42,296

 

 

 

 

 

Amortisation

 

 

 

 

At 28 January 2017

 -

4,652

-

4,652

Charge for the period

-

3,377

-

3,377

Disposals

-

-

Exchange rate movement

-

(106)

-

(106)

At 27 January 2018

-

7,923

-

7,923

 

 

 

 

 

Net book value

 

 

 

 

At 28 January 2017

624

8,967

14,854

24,445

At 27 January 2018

1,381

19,877

13,115

34,373

 

 

Key money

Computer software

Computer software under development

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 30 January 2016

879

8,361

10,649

19,889

Additions / transfers

-

5,134

4,205

9,339

Disposals

(351)

-

-

(351)

Exchange rate movement

96

124

-

220

At 28 January 2017

624

13,619

14,854

29,097

 

 

 

 

 

Amortisation

 

 

 

 

At 30 January 2016

 -

2,642

-

2,642

Charge for the period

-

1,925

-

1,925

Disposals

-

-

Exchange rate movement

-

85

-

85

At 28 January 2017

-

4,652

-

4,652

 

 

 

 

 

Net book value

 

 

 

 

At 30 January 2016

879

5,719

10,649

17,247

At 28 January 2017

624

8,967

14,854

24,445

 

 

The key money brought forward relates to the right to lease stores that have a guaranteed residual value. The guaranteed value arises because the next tenants based on current market conditions are required to pay these amounts to the Group. Due to the nature of this, the assets are considered recoverable and no amortisation is charged each period as the residual value of the asset is considered to be in excess of the carrying value. The current market rate rents, for both stores included within the intangible assets, continue to be above the rent under the lease terms and hence no decline in values is foreseen.

 

Additions included within key money relate to the right to lease a new store that has a guaranteed residual value. Additions included within computer software relate to the Microsoft Dynamics AX system and further development of our e-commerce platforms and other business systems. Additions included within the computer software under development category relate to the Microsoft Dynamics AX system and are stated net of transfers to computer software. Transfers from the computer software under development category in the period amounted to £14,300,000 (2017: £5,134,000) whilst additions into this category were £12,561,000 (2017: £9,339,000).

 

 

9. Property, plant and equipment

 

 

Freehold land and buildings

 

Leasehold improvements

Fixtures, fittings and office equipment

Motor

vehicles

Assets under

construction

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

At 28 January 2017

57,973

116,013

80,163

111

6,204

260,464

Additions / transfers

-

10,570

10,789

-

2,180

23,539

Disposals

-

(3,608)

(2,799)

-

-

(6,407)

Exchange rate movement

-

(5,225)

(1,991)

-

(270)

(7,486)

At 27 January 2018

57,973

117,750

86,162

111

8,114

270,110

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 28 January 2017

483

56,654

58,866

107

-

116,110

Charge for the period

448

10,573

8,839

1

-

19,861

Disposals

-

(3,435)

(2,690)

-

-

(6,125)

Impairment

-

4,072

461

-

-

4,533

Exchange rate movement

-

(2,018)

(1,326)

-

-

(3,344)

At 27 January 2018

931

65,846

64,150

108

-

131,035

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 28 January 2017

57,490

59,359

21,297

4

6,204

144,354

At 27 January 2018

57,042

51,904

22,012

3

8,114

139,075

 

 

 

 

 

 

Freehold land and buildings

 

Leasehold improvements

Fixtures, fittings and office equipment

Motor

vehicles

Assets under

construction

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

At 30 January 2016

57,973

87,384

69,813

110

3,308

218,588

Additions / transfers

-

23,816

8,038

1

2,560

34,415

Disposals

-

(1,538)

(986)

-

-

(2,524)

Exchange rate movement

-

6,351

3,298

-

336

9,985

At 28 January 2017

57,973

116,013

80,163

111

6,204

260,464

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 30 January 2016

32

45,120

49,934

105

-

95,191

Charge for the period

451

10,562

8,026

2

-

19,041

Disposals

-

(1,466)

(898)

-

-

(2,364)

Impairment

-

-

-

-

-

-

Exchange rate movement

-

2,438

1,804

-

-

4,242

At 28 January 2017

483

56,654

58,866

107

-

116,110

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 30 January 2016

57,941

42,264

19,879

5

3,308

123,397

At 28 January 2017

57,490

59,359

21,297

4

6,204

144,354

 

 

 

Additions included within the assets under construction category are stated net of transfers to other property, plant and equipment categories. Transfers from the assets under construction category in the period amounted to £21,359,000 (2017: £31,855,000) whilst additions into this category were £23,539,000 (2017: £34,415,000).

 

Impairment of leasehold improvements

The Group has determined that for the purposes of impairment testing, each store and outlet is tested for impairment if there are indications of impairment at the balance sheet date.

 

Recoverable amounts for cash-generating units are based on value in use, which is calculated from cash flow projections using data from the Group's latest internal forecasts, the results of which are reviewed by the Board. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes in margins. Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the cash-generating units. Changes in selling prices and direct costs are based on past experience and expectations of future changes in the market.

 

The pre-tax discount rate used to calculate value in use is derived from the Group's adjusted weighted average cost of capital.

 

The impairment losses relate to stores whose recoverable amounts (value in use) did not exceed the asset carrying values. In all cases, impairment losses arose due to stores performing below projected trading levels.

 

The impairment charge of £4.5m (2017: £nil)  for the 52 weeks ended 27 January 2018 is in respect of three stores in the US and one store in Europe that have not performed as expected.

 

 

 

10. Related Parties

 

The Group considers its Executive and Non-Executive Directors as key management and their compensation therefore comprises a related-party transaction.

 

Total compensation in respect of key management for the period was as follows:

 

 

52 weeks ended

27 January

2018

52 weeks ended

28 January

2017

 

£'000

£'000

Salaries & short-term benefits

2,852

2,582

Contributions to money-purchase pension schemes

54

53

Share-based payment charges

364

427

 

3,270

3,062

 

 

Directors of the Company and their immediate relatives control 35.2% per cent of the voting shares of the Company.

 

At 27 January 2018, No Ordinary Designer Label Limited ("NODL"), the main trading company owed Ted Baker Plc £55,232,000 (2017: £51,932,000). NODL was owed £138,911,000 (2017: £136,813,000) from the other subsidiaries within the Group. Transactions between subsidiaries were priced on an arm's length basis.

 

The Group has a 50% interest in the ordinary share capital of No Ordinary Retail Company Pty*, a company incorporated in Australia, through its wholly owned subsidiary No Ordinary Designer Label Limited. As at 27 January 2018, the joint venture owed £666,000 to the main trading company (2017: £653,000). In the period the value of sales made to the joint venture by the Group was £2,648,000 (2017: £2,696,000).

 

Ray Kelvin and Lindsay Page are both directors of, and shareholders in, THAT Bournemouth Company Limited*, THAT TopCo Limited* and THAT Bournemouth Big Hotel Limited* and as such, these entities are a related party of the Company for the purposes of Chapter 11 of the Listing Rules.

 

Previously the Group provided design services to THAT Bournemouth Company Limited for which licence income fees were charged. No services were provided in the year ended 27 January 2018. No amounts were outstanding as at 27 January 2018 (2017: £nil).

 

During the period the main trading company provided office space to THAT TopCo Limited for which rental charges were made of £122,550 (2017: £34,560) and other miscellaneous charges of £8,946 (2017: £3,446). As at 27 January 2018, THAT TopCo Limited owed £102,418 to the main trading company (2017: £nil).

 

During the period the main trading company supplied services to THAT Bournemouth Big Hotel Limited for which charges were made of £6,741 (2017: £16,551). As at 27 January 2018, THAT Bournemouth Big Hotel Limited owed £1,849 to the main trading company (2017: £nil).

 

*The registered office addresses are as follows:

 

Related Party

Registered Office Address

No Ordinary Retail Company Pty

6 Albert St, Preston VIC 3072, Australia

THAT Bournemouth Company Limited

6A St Pancras Way, London, NW1 0TB

THAT TopCo Limited

6A St Pancras Way, London, NW1 0TB

THAT Bournemouth Big Hotel Limited

6A St Pancras Way, London, NW1 0TB

 

 

 


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