Annual Results

Released : 17 Mar 2016 07:00

RNS Number : 3684S
Ted Baker PLC
17 March 2016
 

 

17 March 2016

 

 

Ted Baker Plc

("Ted Baker", the "Group")

 

Annual Results for the 52 weeks ended 30 January 2016

 

Highlights:

 

2016

2015

Change

Group Revenue

£456.2m

£387.6m

17.7%

Profit Before Tax and Exceptional Items

£58.7m

£49.5m

18.6%

Profit Before Tax

£58.7m

£48.8m

20.3%

Adjusted EPS

100.6p

83.2p

20.9%

Basic EPS

100.6p

82.0p

22.7%

Total Dividend

47.8p

40.3p

18.6%

 

·    Group revenue up 17.7% (17.0% in constant currency) to £456.2m

·    Retail sales up 13.5% (13.2% in constant currency) to £348.4m

UK and Europe retail sales up 8.9% (10.7% in constant currency) to £252.5m

US and Canada retail sales up 27.3% (20.6% in constant currency) to £80.6m

E-commerce sales up 45.8% (44.7% in constant currency) to £53.5m

·    Wholesale sales up 33.6% (31.2% in constant currency) to £107.7m

·    Licence income up 23.3% to £14.4m

·    Proposed final dividend of 34.6p bringing total dividend to 47.8p, an increase of 18.6%

·    Freehold purchase of "The Ugly Brown Building" completed

·    Agreement signed for the lease of a new distribution facility in the UK, which will serve as the Group's European Distribution Centre

 

Ray Kelvin CBE, Founder and Chief Executive, said:

"I am pleased to report another year of strong progress in Ted Baker's continued development as a global lifestyle brand. We have again traded very well - despite an uncertain backdrop in some of our markets - which is testament to the strength of the Ted Baker brand as well as our unwavering focus on quality, design and attention to detail.

                                                                                                                          

We have further developed the brand's presence across international markets including first store openings in Amsterdam, Azerbaijan, Hawaii, Mexico and Qatar and we have new openings planned across our markets in the year ahead.

 

The Group is continuing to invest in its team and infrastructure to support Ted Baker's stability and long-term growth.  This includes the purchase of our iconic Central London home at the Ugly Brown Building as well as investment in a new, state-of-the-art European distribution centre in the UK. 

 

The strength and success of Ted Baker is underpinned by the skill, talent and 'pashion' of our global team. I would like to take this opportunity to thank all of my colleagues for their hard work and commitment during the year and we look forward with continued confidence as we further develop Ted Baker across the world."

 

 

Enquiries:

 

 

 

Ted Baker Plc

Tel: 020 7796 4133 on 17 March 2016 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

Fern Duncan

 

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, 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 omni-channel view for its growing and highly engaged global audience. 

Ted Baker has 448 stores and concessions worldwide, comprising of 185 in the UK, 93 in Europe, 97 in the US and Canada, 64 in the Middle East and Asia and 9 in Australasia.

 

The brand offers a wide range of collections including: Menswear; Womenswear; Global; Phormal; Endurance; Accessories; Audio; 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 another successful year in Ted Baker's development as a global lifestyle brand.  For the 52 weeks ended 30 January 2016 (the "period") we delivered a strong performance across all channels and established territories, which resulted in a 17.7% (17.0% in constant currency) increase in Group revenue to £456.2m (2015: £387.6m) and an 18.6% increase in profit before tax and exceptional items to £58.7m (2015: £49.5m).

 

The retail division performed well, with sales up 13.5% (13.2% in constant currency) to £348.4m (2015: £306.9m) on an increase in average square footage of 7.5%.  We saw a good performance across our established territories and we continue to invest and build brand awareness in our newer markets for the long-term development of the brand. We continued our geographic expansion with openings across the UK and Europe, North America and Asia. Our e-commerce business delivered another strong performance, with sales up 45.8% (44.7% in constant currency) to £53.5m (2015: £36.7m) as we benefit from continued investment in our platform. E-commerce sales now represent 15.4% of our retail sales (2015: 12.0%).

 

The wholesale division delivered a strong performance, with sales up 33.6% (31.2% in constant currency) to £107.7m (2015: £80.7m). 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.

 

Our territorial and product licences delivered good performances, as licence income increased by 23.3% to £14.4m (2015: £11.7m). During the period, our licence partners opened stores and concessions in Azerbaijan, Dubai, Kuwait, Mexico, Qatar, Saudi Arabia, Singapore, Taiwan and Thailand and our joint venture in Australasia opened two outlet stores. We launched new product licences in bedding, rugs and tiles, which were well received.

 

In January 2016, we completed the purchase of the freehold of Block B, Canal Reach, St Pancras Way, London, also known as The Ugly Brown Building and currently occupied by the Group as its head office, for £58.25m using a new term loan facility. The Ugly Brown Building has become an iconic building in a rapidly developing Central London location and is a very important ingredient of Ted Baker's history and unique personality. We are delighted to have secured our future in this excellent location. We are confident that this will help us preserve our culture and continue to attract and retain great talent. This acquisition also enables the Group to consider expansion as its operations continue to grow and provides certainty over operating costs whilst removing exposure to rising rent reviews.

 

In December 2015, we entered into an agreement for lease of a new state-of-the-art distribution facility in the UK. Once fully operational, it will serve as our European Distribution Centre, handling all operations for our Retail, Wholesale and e-commerce businesses across the UK and Europe and supporting our long-term growth strategy.

 

During the period, we successfully launched further phases of the Microsoft Dynamics AX business system, as planned. We will continue to roll out this system globally across the Group over the next year to enhance efficiency, streamline our operations and support the continued evolution of the business.

 

Financial Results

Group revenue for the period increased by 17.7% (17.0% in constant currency) to £456.2m (2015: £387.6m). The composite gross margin decreased to 59.9% (2015: 60.7%), as a result of a change in the mix of retail and wholesale sales.

 

Profit before tax and exceptional items increased by 18.6% to £58.7m (2015: £49.5m) and profit before tax increased by 20.3% to £58.7m (2015: £48.8m). Adjusted basic earnings per share, which exclude exceptional items, increased by 20.9% to 100.6p (2015: 83.2p) and basic earnings per share increased by 22.7% to 100.6p (2015: 82.0p).

 

There were no exceptional costs in the period, compared to £5.3m in the previous period which related to a legal dispute with a former insurer. There was no exceptional income for the period, compared to £4.7m in the previous period which comprised of £3.7m in relation to the early termination of a licence agreement and £1.0m relating to settlement of an intellectual property dispute.

 

The Group's net borrowing position at the end of the period was £84.6m (2015: £18.8m). This reflects the addition of a secured term loan of £60.0m (2015: £nil) to the Group's existing multi-currency revolving credit facility to finance the purchase of The Ugly Brown Building and other net debt of £24.6m (2015: £18.8m). The increase in other net debt reflects the on-going significant investment in capital expenditure during the period and increased working capital in line with the Group's growth.

 

 

Dividends

The Board is recommending a final dividend of 34.6p per share (2015: 29.0p), making a total for the year of 47.8p per share (2015: 40.3p per share), an increase of 18.6% on the prior period. Subject to approval by shareholders at the Annual General Meeting to be held on 14 June 2016, the final dividend will be paid on 17 June 2016 to shareholders on the register on 20 May 2016.

 

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 Group's strong performance is dependent on our talented teams, whose creativity and passion are key to our success as we continue to grow the business and further develop Ted Baker as a global lifestyle brand.

 

Current Trading and Outlook

We are pleased by the initial reaction to our Spring/Summer collections, which has been positive. Trading is in line with our expectations, with the exception of Asia, where, as has been widely reported, the trading environment continues to be challenging. Whilst Asia currently represents a small part of our business at 3.4% of revenue, we remain positive about the long term opportunities to develop the brand in this territory.

 

Further store openings are planned across new and established markets and we continue to develop and invest in our e-commerce business. In our newer markets, we continue to build brand awareness for the long-term development of the brand. 

 

Retail

In the UK and Europe, we plan to open a new store in Paris, and further concessions in France, Germany and Spain during the year.  We will continue to invest in our e-commerce sites to enhance the customer experience and enhance the local content provided to our European customers, including launching our first language specific website in Germany.

 

In North America, we remain focused on developing our presence and have opened a store in Seattle and plan to open a further five new stores, including two in New York and one in Calgary, Miami and Ottawa.  We are also relocating our Dallas store.

 

In Asia, we remain focused on building brand awareness in this market where we are in the relatively early stages of investment. In line with our development strategy in this territory, we have opened another store in Beijing and we are opening further concessions in China and Japan.

 

Wholesale

We anticipate further growth across our wholesale businesses, which should result in low double digit sales growth in the coming year.

 

Licence Income

Our product and territorial licences continue to perform well, with further openings planned in Azerbaijan, Dubai, Egypt, Malaysia, Mexico, Saudi Arabia and Taiwan, along with our first store in Chile.

 

Group

The strength of the Ted Baker brand and collections support our confidence in the continued development of the brand and further growth of the business, however, we remain mindful of the economic and political uncertainties in some of our markets.

 

We will continue to ensure that costs and commitments are controlled. To deliver our expansion plans, capital expenditure in the new financial year is anticipated to be above the previous year at £45m as a result of the investment in the new distribution facility, further store openings and refurbishments, and the on-going investment in new systems across the business.

 

We intend to make our next interim management statement, covering trading since the start of the 2016-17 financial year, in mid-June 2016.

 

 

David Bernstein CBE

Non-Executive Chairman

17 March 2016

 

 

Business Model and Strategy

 

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.

 

The brand has grown steadily from its origins as a single shirt specialist store in Glasgow to the global lifestyle brand it is today. We distribute through our own and licensed retail stores, leading department stores and selected independent stores in the UK and Europe, North America, the Middle East, Asia and Australasia.

 

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

 

Our strategy is to further our position as a leading global lifestyle brand, based on three main elements:

 

·  considered expansion of the Ted Baker collections. 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; wholesale; and licensing. We consider each new opportunity to ensure it is right for the brand and will deliver margin led growth; and

·   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 which is delivered by the passion, commitment and skill of our teams, licence partners and wholesale customers (our "trustees").

 

Key Performance Indicators

 

We review the on-going performance of the business using key performance indicators for our global business and each of our distribution channels.

 

The KPIs have been detailed below and considered throughout the Strategic Report.

 

 

 

Key Performance Indicator

52 weeks ended 30 January 2016

53 weeks ended 31 January 2015

Variance

Constant currency variance

Group

Revenue

£456.2m

£387.6m

17.7%

17.0%

 

Gross margin

59.9%

60.7%

-80bps

 

 

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

12.9%

12.8%

10bps

 

 

Operating contribution %*

13.0%

13.0%

-

 

 

 

 

 

 

 

Retail

Revenue

£348.4m

£306.9m

13.5%

13.2%

 

Gross margin

64.8%

65.5%

-70bps

 

 

Average square footage **

357,096

332,089

7.5%

 

 

Closing square footage **

377,830

344,898

9.5%

 

 

Sales per square foot***

£826

£814

1.5%

1.3%

 

 

 

 

 

 

Wholesale

Revenue

£107.7m

£80.7m

33.6%

31.2%

 

Gross margin

43.8%

42.4%

+140bps

 

 

 

 

 

 

 

Licence income

Revenue

£14.4m

£11.7m

23.3%

 

 

 

 

 

 

 

Group

Operating cashflow per share ****

93.3p

68.7p

35.8%

 

 

Working capital*****

£113.5m

£90.9m

24.9%

 

 

 

 

 

 

 

 

 

*Operating contribution is defined as operating profit before exceptional items as a percentage of revenue

**Excludes licensed partner stores

*** Excludes online sales

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

                ***** Working capital comprises inventories, trade and other receivables and trade and other payables

 

Business Review

 

Global Group Performance

 

Retail

Ted Baker operates stores and concessions across the UK, Europe, North America and Asia and an e-commerce business based in the UK, primarily serving the UK and Europe, with separate US and Canadian sites dedicated to North America, and a separate site serving Australia. We also have e-commerce businesses with some of our concession partners.

 

The retail division performed well, with sales up 13.5% (13.2% in constant currency) to £348.4m (2015: £306.9m). Average retail square footage rose by 7.5% over the period to 357,096 sq ft (2015: 332,089 sq ft). Total retail square footage at 30 January 2016 was 377,830 sq ft (2015: 344,898 sq ft), an increase of 9.5% on the prior year. Retail sales per square foot rose 1.5% (1.3% in constant currency) from £814 to £826.

 

Our e-commerce business delivered another strong performance with sales increasing by 45.8% (44.7% in constant currency) to £53.5m (2015: £36.7m) driven by growth across our e-commerce business. We continue to invest in each of our UK, USA, Canadian and Rest Of World sites, aiming to provide a more relevant customer experience through improved design, performance and personalised content.

 

The retail gross margin reduced slightly to 64.8% (2015: 65.5%), largely reflecting an increase in our outlet sales as a proportion of total sales. Retail operating costs increased 13.9% in line with our expectations, to £163.5m (2015: £143.5m) and as a percentage of retail sales, increased slightly to 46.9% (2015: 46.8%).

 

Wholesale

Our wholesale business in the UK serves countries across the world, particularly 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 USA and Canada.

 

Group wholesale sales increased by 33.6% (31.2% in constant currency) to £107.7m (2015: £80.7m), reflecting a good performance from both our UK wholesale business, with sales increasing by 20.2% to £78.0m (2015: £64.9m), and a strong performance from our North American wholesale business, with sales increasing by 94.1% (81.7% in constant currency) to £29.7m (2015: £15.3m) as the brand continues to gain traction.  

 

The wholesale gross margin increased to 43.8% (2015: 42.4%), which was principally the result of a greater proportion of wholesale sales to our trustee partners which carry a higher margin.

 

Licence income

We operate both territorial and product licences. Our territorial licences cover specific countries in Asia, Australasia, Europe, the Middle East and North America, where our partners operate licensed retail stores and, in some territories, wholesale operations.

 

Our product licences cover Audio, Bedding, Childrenswear, Crockery, Eyewear, Footwear, Fragrance and Skinwear, Gifting and Stationery, Jewellery, Lingerie and Sleepwear, Luggage, Neckwear, Rugs, Suiting, Technical Accessories, Tiles, and Watches.

 

Both territorial and product licences delivered good performances, with licence income up 23.3% to £14.4m (2015: £11.7m). There were notable performances from our product licensees in childrenswear, footwear, eyewear, homeware, skinwear and suiting.

 

In October, we opened our first concessions in Mexico with our new licence partner Multimoda and we are encouraged by performance to date. Our licensed stores in Saudi Arabia, operated by our territorial partner, RSH Limited, also performed particularly well during the period.

 

Collections

Ted Baker Womenswear delivered a good performance with sales up 15.9% to £254.1m (2015: £219.3m). Womenswear represented 55.7% of total sales (2015: 56.6%).

 

Ted Baker Menswear performed well with sales up 20.1% to £202.1m (2015: £168.3m). Menswear represented 44.3% of total sales in the period (2015: 43.4%).

 

Geographic Performance

 

United Kingdom and Europe

 

 

52 weeks ended 30 January 2016

53 weeks ended 31 January 2015

Variance

Constant currency variance

Retail revenue*

£252.5m

£231.8m

8.9%

10.7%

Average square footage*

236,685

228,584

3.5%

 

Closing square footage*

244,007

233,387

4.6%

 

Sales per square foot**

£869

£869

0.0%

1.9%

 

 

 

 

 

Wholesale revenue

£78.0m

£64.9m

20.2%

20.0%

 

 

 

 

 

Own stores

38

37

1

 

Concessions

224

214

10

 

Outlets

13

12

1

 

Partner stores

3

3

0

 

Total

278

266

12

 

* Excludes licensed partner stores

** Excludes online sales

 

Sales in our UK and Europe retail division were up 8.9% to £252.5m (2015: £231.8m) (10.7% in constant currency), reflecting a good performance in our established UK market and a very good performance in continental Europe where we continue to expand.

 

In the UK, we opened new stores during the year in London Spitalfields and Stansted Airport along with three new concessions with our UK concession partners. We closed our accessories store in Gatwick Airport and our store in Richmond along with one other concession. Our European expansion continued as we opened our first store in the Netherlands, in Amsterdam, and our first outlet in Spain, in Barcelona. We also opened further concessions with premium department stores in France, Germany, Ireland, the Netherlands and Spain.  We are pleased with their performances and remain confident about growth opportunities for the brand in these markets.

 

Our e-commerce business performed very well during the period with sales increasing by 40.5% to £46.8m (2015: £33.3m), primarily reflecting continuing growth in the UK.

 

Sales from our UK wholesale division increased by 20.2% to £78.0m (2015: £64.9m) reflecting strong sales of product to our licence partners, and continued growth in our wholesale export business.

 

North America

 

 

52 weeks ended 30 January 2016

53 weeks ended 31 January 2015

Variance

Constant currency variance

Retail revenue

£80.6m

£63.3m

27.3%

20.6%

Average square footage *

94,496

82,360

14.7%

 

Closing square footage *

106,471

89,240

19.3%

 

Sales per square foot**

£784

£726

8.0%

2.3%

 

 

 

 

 

Wholesale revenue

£29.7m

£15.3m

94.1%

81.7%

 

 

 

 

 

Own stores

25

20

5

 

Concessions

55

48

7

 

Outlets

10

6

4

 

Partner Stores

7

1

6

 

Total

97

75

22

 

* Excludes licensed partner stores

** Excluding online sales

 

We continue to be very pleased with our progress across the retail and wholesale channels in North America, both of which performed very well.  We are confident that the Ted Baker brand is becoming more established and continuing to gain recognition in this territory.

 

Sales from our retail division in North America increased by 27.3% to £80.6m (2015: £63.3m) (20.6% in constant currency).  During the period, we continued our expansion with new stores in Hawaii, Malibu, Toronto and Vancouver, and outlets in Florida (two outlets), Los Angeles, San Francisco and seven further concessions through a leading department store. We also opened six concessions in Mexico with our licence partner.


Our US and Canadian e-commerce businesses delivered strong performances with sales increasing 91.4% to £6.6m (77.8% in constant currency).

 

Sales from our North American wholesale business increased by 94.1% to £29.7m (2015: £15.3m) (81.7% in constant currency) reflecting further growth of our business as the brand continues to gain traction.

 

Middle East, Asia and Australasia

 

 

52 weeks ended 30 January 2016

53 weeks ended 31 January 2015

Variance

Constant currency variance

Retail revenue

£15.4m

£11.8m

30.5%

24.1%

Average square footage *

25,915

21,145

22.6%

 

Closing square footage *

27,352

22,271

22.8%

 

Sales per square foot

£593

£559

6.1%

1.3%

 

 

 

 

 

Own stores

8

7

1

 

Concessions

8

7

1

 

Outlets

3

2

1

 

Partner stores

54

41

13

 

Total

73

57

16

 

* Excludes licensed partner stores

 

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

 

In Asia, we remain encouraged by reactions to the brand and are positive about the long term opportunities in this territory; however, as has been widely reported, the trading environment continues to be challenging.  Retail sales in Asia increased 30.5% to £15.4m (2015: £11.8m) (24.1% in constant currency).  In Hong Kong, we opened our first street side store. In China, we opened a further concession. In South Korea, we opened an outlet store and one concession and closed one concession.

 

During the period, our Middle East licence partners performed particularly well and opened three further stores in Saudi Arabia and one store in each of Dubai, Azerbaijan, Qatar and a concession in each of Dubai and Kuwait.  Our South East Asia licence partners opened two stores in Singapore, one store in Taiwan, one store in Thailand, two new concessions in Taiwan and closed one concession in Taiwan. As at 30 January 2016, our licence partners operated 45 stores and concessions across the Middle East and South East Asia (2015: 34).

 

The joint venture with our Australasian licence partner, Flair Industries Pty Ltd continued to perform well. During the period, we opened new outlet stores in Sydney and Melbourne. As at 30 January 2016, we operated 9 stores in Australasia (2015: 7 stores).

 

 

Financial Review

 

Revenue and Gross Margin

Group revenue increased by 17.7% (17.0% in constant currency) to £456.2m (2015: £387.6m), driven by a 13.5% (13.2% in constant currency) increase in retail sales to £348.4m (2015: £306.9m) and a 33.6% (31.2% in constant currency) increase in wholesale sales to £107.7m (2015: £80.7m).

 

The composite gross margin for the Group decreased to 59.9% (2015: 60.7%) mainly as a result of a change in sales mix between wholesale and retail sales.

 

Operating Expenses Pre-Exceptional items

Distribution costs increased by 17.4% in line with our expectations to £169.8m (2015: £144.6m) and as a percentage of sales slightly decreased to 37.2% (2015: 37.3%).

 

Administration expenses increased by 12.5% to £57.4m (2015: £51.0m). Excluding the employee performance related bonus of £2.7m (2015: £4.9m), administration expenses rose by 18.7% due to our growth in central functions, both in the UK and overseas, and the continued deployment of our distribution and information technology infrastructures to support our growth.

 

Profit Before Tax

Profit before tax and exceptional items increased by 18.6% to £58.7m (2015: £49.5m) and profit before tax increased by 20.3% to £58.7m (2015: £48.8m).

 

Exceptional items

There were no exceptional costs or income during the period. 

 

The prior year's exceptional income of £4.7m comprised £3.7m in relation to the early termination of a licence partner agreement and £1.0m in relation to the settlement of an intellectual property dispute. The prior year's exceptional costs of £5.3m related to a legal dispute with a previous insurer.

 

Finance Income and Expenses

Net finance costs during the period were £1.4m (2015: £1.2m). This increase reflects higher Group borrowing compared to the prior year as a result of an increase in the on-going significant investment in capital expenditure and increased working capital to support our long-term expansion.

 

The net foreign exchange loss during the year was £nil (2015: net loss of £0.3m).

 

Taxation

The Group tax charge for the year was £14.4m (2015: £12.9m), an effective tax rate of 24.6% (2015: 26.5%). This effective tax rate is higher than the UK tax rate for the period of 20.16% largely due to higher overseas tax rates and the non-recognition of losses in overseas territories where the businesses are still in their development phase. On 1 April 2015, the UK corporation tax rate fell from 21% to 20% and further reductions to 19% from 1 April 2017 and to 18% from 1 April 2020 have been substantively enacted. The Budget on 16 March 2016 announced that there will be a further cut in the corporation tax rate to 17% from 1 April 2020.

 

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

Cash Flow

The net decrease in cash and cash equivalents of £5.9m (2015: £10.1m decrease) primarily reflected an increase in working capital and further capital expenditure to support our long term development.

 

Total Group working capital, which comprises inventories, trade and other receivables and trade and other payables, increased by £22.6m to £113.5m (2015: £90.9m). This was mainly driven by an increase in inventories of £14.2m to £125.3m (2015: £111.1m) reflecting the growth of our business and stock on hand for our wholesale customers and licence partners. Working capital is further driven by an increase in trade and other receivables of £12.4m to £49.3m (2015: £36.9m) as a result of stronger wholesale sales.

 

Group capital expenditure amounted to £89.5m (2015: £25.7m) reflecting the purchase of The Ugly Brown Building for £58.0m, which was financed by the new term loan. Further capital expenditure relates to the opening and refurbishment of stores, concessions and outlets and investment in business wide systems to support our future growth.

 

The Group's net borrowing position at the end of the period was £84.6m (2015: £18.8m). The Group added a secured term loan of £60.0m (2015: £nil) to the Group's existing multi-currency revolving credit facility to finance the purchase of The Ugly Brown Building.

 

Shareholder Return

Basic earnings per share increased by 22.7% to 100.6p (2015: 82.0p). Adjusted earnings per share, which exclude net exceptional items, increased by 20.9% to 100.6p (2015: 83.2p).

 

The proposed final dividend of 34.6p per share will make a total for the period of 47.8p per share (2015: 40.3p per share), an increase of 18.6% on the previous year.

 

Operating cash flow per share, which is calculated using the net cash generated from operating activities, was 93.3p (2015: 68.7p) and reflected an increase in cash generated from operating activities.

 

Currency 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, typically 12 months in advance. The balance of purchases is hedged naturally as the business operates internationally and income is generated in the local currencies.

 

At the balance sheet date, the Group had hedged its projected commitments in respect of the year ending 28 January 2017.

 

Borrowing Facilities

In July 2015, the Group increased its borrowing facility to £85.0m (2015: £65.0m). The facility is a multi-currency revolving credit facility with The Royal Bank of Scotland and Barclays which is due to expire on 29 March 2018. The increase is a function of the growth in our business and is necessary to fund capital expenditure to support the Group's long term strategy.

 

In December 2015, the Group agreed a £60.0m secured term loan, in addition to the existing multi-currency revolving credit facility with The Royal Bank of Scotland and Barclays.  The term loan is repayable over 5 years and the proceeds were used to finance the purchase of The Ugly Brown Building.

 

The facility and term loan contain appropriate financial covenants and are tested on a quarterly basis. The Group monitors actual and prospective compliance with these on a regular basis.

 

 

 

Principal Risks and Uncertainties

 

The Board is ultimately responsible for the Group's system of risk management and internal control and risk management systems and for reviewing their effectiveness. 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.

 

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

 

In addition, the Group has established a Risk Committee that includes the Finance Director and various members of the Executive Committee and heads of department. The Risk Committee reviews the risk management and control process in each key business area on an ongoing basis and 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 of the Subsidiaries (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 significant changes in the business and the external environment which affect significant risks.

 

The Board has reviewed the effectiveness of the system of risk management and internal control during the period. 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 catastrophe and regulatory requirements, and also by reference to the Group's five year strategic and financial plan.

 

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 provides the Board with monthly financial information which includes 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. Although not exhaustive, the following list highlights some of the principal risks identified by the Group (which are not shown in order of importance):

 

 

 

Issue

Potential impact

Mitigation

 

Strategic Risks

Brand and reputational risk

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

 

Incorrect management of social media interactions could have an adverse effect on our reputation.

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

 

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

 

 

 

 

Development of overseas markets

Failure in growing the international business through franchise operations, licensees and e-commerce.  Risk that the Group fails to prioritise the right territories or investment or 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 route to market. We operate in a range of international markets, which helps to mitigate over reliance and exposure to any one territory.

 

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, both 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.

 

 

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, risking an increase in our cost base and adversely affecting our revenue.

All factors affecting these stakeholders 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.

 

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.

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.

 
 
 

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.

 

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.

 
 

IT and Cyber security

The business is reliant on data being transmitted electronically, and is subject to threats from hacking or viruses of other unauthorised data breaches. There is also the possibility of unintentional loss of controlled data by authorised users.

Ted has committed additional specialist resources and the continual upgrading of security equipment and software mitigate these risks. Tightly controlled security controls and data recovery and business continuity plans have been implemented.

 

 

Implementation of ERP and other IT infrastructure

We are in the process of implementing 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.

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 the Board and is advised by external professional advisers. The Steering Committee has established a Design Authority charged with overseeing the scheduling of the implementation of any new system.

 

 

 

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

 

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.

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 attrition rate.

 

 

 

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

 

Regulatory and legal framework

 

 

 

Infringement of the Group's intellectual property

We operate within many markets globally and must comply with various regulatory requirements. Failure to do so could lead to financial penalties and/or reputational damage.

 

 

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

 

 

 

 

 

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.

 

 

 

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 the Group's financial statements.

 

 

 

Viability statement

           

In accordance with provision 2.2 of the UK Corporate Governance Code dated September 2014 (the "Code") the Directors have assessed the viability of the Group over a three 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 annually by the Board.  Within the five year plan, detailed scenario planning and stress testing has been carried out over a three year period. The Directors consider the three year period to 30 January 2019 to be the appropriate period to assess the viability and prospects of the Group with a high level of certainty, and also aligns with the typical borrowing period of the Group. 

 

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 that could affect the future viability of the Group over the next three years are identified in the Principal Risks and Uncertainties section.

 

In making this assessment the Directors have considered the resilience of the Group to the occurrence of these risks in severe but plausible scenarios, 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.

 

The Strategic Report was approved by the Board of Directors on 17 March 2016 and signed on its behalf by:

 

 

Charles Anderson

Company Secretary

 

Registered Office:               The Ugly Brown Building, 6a St. Pancras Way, London NW1 0TB

Company No:                       03393836

 

 

Group Income Statement

 

 

 

 

For the 52 weeks ended 30 January 2016

 

 

 

 

 

Note

52 weeks ended

53 weeks

ended

 

30 January

31 January

 

2016

2015

 

 

 

£'000

£'000

 
 

 

 

 

 

 

Revenue

2

456,169

387,564

 

 

 

 

Cost of sales

 

(183,147)

(152,359)

 
 

Gross profit

 

273,022

235,205

 
 

 

 

 

 

 
 

Distribution costs

 

 

(169,762)

 

(144,584)

 
 

Administrative Expenses

 

(57,435)

(56,373)

 

 

 

 

 

 

Administrative expenses before exceptional costs

 

(57,435)

(51,034)

 
 

Exceptional costs

3

-

(5,339)

 

 

 

 

 

 

Licence income

 

14,384

11,665

 
 

Other operating (expense) / income

 

(840)

3,846

 

 

 

 

 

 

Other operating (expense) before exceptional income

 

(840)

(812)

 
 

Exceptional income

3

-

4,658

 

 

 

 

 

 

Operating profit

 

59,369

49,759

 
 
 

Finance income

4

531

108

 
 

Finance expense

4

(1,931)

(1,621)

 
 

Share of profit of jointly controlled entity, net of tax

 

695

525

 
 

Profit before tax

3

58,664

48,771

 

 

 

 

 

 

Profit before tax and exceptional items

 

58,664

49,452

 

Exceptional costs

 

-

(5,339)

 

Exceptional income

 

-

4,658

 

 

 

 

 

 

Income tax expense

5

(14,429)

(12,921)

 

 

 

 

 

 

Profit for the period

 

44,235

35,850

 
 

 

 

 

 

 

Earnings per share

7

 

 

 

Basic

 

100.6p

82.0p

 
 

Diluted

 

99.3p

81.0p

 
         

 

 

 

Group Statement of Comprehensive Income

 

 

For the 52 weeks ended 30 January 2016

 

 

 

 

 

 

52 weeks ended

53 weeks ended

30 January

31 January

2016

2015

 

 

 

 

£'000

£'000

 

 

 

Profit for the period

44,235

35,850

 

 

 

Other comprehensive income

 

 

Items that may be reclassified to the Income Statement

 

 

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

951

1,328

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

(669)

1,890

Exchange differences on translation of foreign operations net of tax

2,599

2,692

Other comprehensive income for the period

2,881

5,910

 

 

 

Total comprehensive income for the period

47,116

41,760

         

 

 

Group Statement of Changes in Equity

 

 

For the 52 weeks ended 30 January 2016

 

 

 

 

 

 

             

 

 

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 31 January 2015

2,196

9,331

1,368

(288)

127,967

140,574

Comprehensive income for the period

 

 

 

 

 

 

Profit for the period

-

-

-

-

44,235

44,235

Exchange differences on translation of foreign operations

-

-

-

3,242

-

3,242

Current tax on foreign currency translation

-

-

-

(643)

-

(643)

Effective portion of changes in fair value of cash flow hedges

-

-

996

-

-

996

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

-

-

(669)

-

-

(669)

Deferred tax associated with movement in hedging reserve

-

-

(45)

-

-

(45)

Total comprehensive income for the period

-

-

282

2,599

44,235

47,116

Transactions with owners recorded directly in equity

 

 

 

 

 

 

Increase in issued share capital

3

286

-

-

-

289

Share based payments charges

-

-

-

-

2,019

2,019

Movement on current and deferred tax on share based payments

-

-

-

-

1,144

1,144

Dividends paid

-

-

-

-

(18,543)

(18,543)

Total transactions with owners

3

286

-

-

(15,380)

(15,091)

 

 

 

 

 

 

 

Balance at 30 January 2016

2,199

9,617

1,650

2,311

156,822

172,599

 

 

 

 

Group Statement of Changes in Equity

For the 53 weeks ended 31 January 2015

 

 

Share capital

 

Share

premium

Cash flow

hedging reserve

Translation Reserve

 

Retained earnings

 

Total equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 25 January 2014

2,194

9,139

(1,850)

(2,980)

105,561

112,064

Comprehensive income for the period

 

 

 

 

 

 

Profit for the period

-

-

-

-

35,850

35,850

Exchange differences on translation of foreign operations

-

-

-

3,475

-

3,475

Current tax on foreign currency translation

-

-

-

(783)

-

(783)

Effective portion of changes in fair value of cash flow hedges

-

-

2,132

-

-

2,132

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

-

-

1,890

-

-

1,890

Deferred tax associated with movement in hedging reserve

-

-

    (804)

-

-

(804)

Total comprehensive income for the period

-

-

3,218

2,692

35,850

41,760

Transactions with owners recorded directly in equity

 

 

 

 

 

 

Increase in issued share capital

2

192

-

-

194

Share based payments charges

-

-

-

-

1,390 

1,390

Movement on current and deferred tax on share based payments

-

-

-

-

672 

672

Dividends paid

-

-

-

-

(15,506)

(15,506)

Total transactions with owners

2

192

-

-

(13,444)

(13,250)

 

 

 

 

 

 

 

Balance at 31 January 2015

2,196

9,331

1,368

(288)

127,967

140,574

 

 

 

 

Company Statement of Changes in Equity

For the 52 weeks ended 30 January 2016

 

 

Share capital

 

Share premium

 

Other reserves

 

Retained earnings

Total Equity 

 

 

£'000

£'000

£'000

£'000 

£'000 

Balance at 31 January 2015

2,196

9,331

17,287

32,978 

61,792

 

 

 

 

 

 

Profit for the period

-

-

-

24,016 

24,016

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

Increase in issued share capital

3

286

-

289

Share based payments charges

-

-

-

246 

246

Share based payments charges for awards granted to subsidiary employees

-

-

1,773

1,773

Dividends paid

-

-

-

(18,543) 

(18,543)

Total transactions with owners

3

286

1,773

5,719 

7,781

 

 

 

 

 

 

Balance at 30 January 2016

2,199

9,617

19,060

38,697 

69,573

               

 

Company Statement of Changes in Equity

For the 53 weeks ended 31 January 2015

 

 

Share capital

 

Share  premium 

 

Other  reserves 

 

Retained  earnings 

Total Equity  

 

 

£'000

£'000

£'000

£'000  

£'000  

Balance at 25 January 2014

2,194

9,139

16,073

30,295 

57,701

 

 

 

 

 

 

Profit for the period

-

-

-

18,013 

18,013

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

Increase in issued share capital

2

192

-

194

Share based payments charges

-

-

-

176 

176

Share based payments charges for awards granted to subsidiary employees

-

-

1,214

  1,214

Dividends paid

-

-

-

(15,506) 

(15,506)

Total transactions with owners

2

192

1,214

2,683 

4,091

 

 

 

 

 

 

Balance at 31 January 2015

2,196

9,331

17,287

32,978 

61,792

 
 

Group and Company Balance Sheet

At 30 January 2016

 

Note

Group

Group

Company

Company

 

 

30-Jan

31-Jan

30-Jan

31-Jan

 

 

2016

2015

2016

2015

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

Intangible assets

8

17,247

12,855

-

-

Property, plant and equipment

9

123,397

51,804

-

-

Investments in subsidiary

 

-

-

21,482

19,709

Investment in equity accounted investee

 

1,641

1,290

-

-

Deferred tax assets

 

6,313

5,659

-

-

Prepayments

 

414

461

-

-

 Non-current assets

 

149,012

72,069

21,482

19,709

 

 

 

 

 

 

Inventories

 

125,323

111,114

-

-

Trade and other receivables

 

49,303

36,873

47,486

41,510

Amount due from equity accounted investee

 

563

679

-

-

Derivative financial assets

 

2,850

3,547

-

-

Cash and cash equivalents

 

13,295

7,380

615

583

Current assets

 

191,334

159,593

48,101

42,093

 

 

 

 

 

 

Trade and other payables

 

(61,088)

(57,046)

(10)

(10)

Bank overdraft

 

(37,869)

(26,204)

-

-

Term loan

 

(1,500)

-

-

-

Income tax payable

 

(8,382)

(7,202)

-

-

Derivative financial liabilities

 

(352)

(636)

-

-

 Current liabilities

 

(109,191)

(91,088)

(10)

(10)

Deferred tax liability

 

(56)

-

-

-

Term Loan

 

(58,500)

-

-

-

Non-current liabilities

 

(58,556)

-

-

-

Net assets

 

172,599

140,574

69,573

61,792

 

 

 

 

 

 

 Equity

 

 

 

 

 

Share capital

 

2,199

2,196

2,199

2,196

Share premium

 

9,617

9,331

9,617

9,331

Other reserves

 

1,650

1,368

19,060

17,287

Translation reserve

 

2,311

(288)

-

-

Retained earnings

 

156,822

127,967

38,697

32,978

Total equity attributable to equity shareholders of the parent company

 

172,599

140,574

69,573

61,792

Total equity

 

172,599

140,574

69,573

61,792

 

These financial statements were approved by the Board of Directors on 17 March 2016 and were signed on its behalf by:

 

L D Page

Director

 

 

Group and Company Cash Flow Statement

For the 52 weeks ended 30 January 2016

 

Group

52 weeks ended

30 January

2016

Group

53 weeks ended

31 January

2015

Company

52 weeks ended

30 January

2016

Company

53 weeks ended

31 January

2015

 

£'000

£'000

£'000

£'000

Cash generated from operations

 

 

 

 

Profit for the period

44,235

35,850

24,016

18,013

Adjusted for:

 

 

 

 

Income tax expense

14,429

12,921

-

-

Depreciation and amortisation

14,929

12,536

-

-

Impairment

188

-

-

-

Loss on disposal of property, plant & equipment

58

462

-

-

Share based payments

2,019

1,390

247

176

Net finance expense

1,400

1,513

-

-

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

840

(1,507)

-

-

Share of profit in joint venture

(695)

(525)

-

-

Decrease in non-current prepayments

52

71

-

-

Increase in inventory

(12,142)

(29,131)

-

-

Increase in trade and other receivables

(10,805)

(1,815)

(5,977)

(2,401)

 

Increase in trade and other payables

1,566

11,653

-

-

Interest paid

(1,376)

(1,594)

-

-

Income taxes paid

(13,127)

(11,419)

-

-

Net cash generated from operating activities

41,571

30,405

18,286

15,788

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Purchases of property, plant & equipment and intangibles

(89,535)

(25,476)

-

-

Proceeds from sale of property, plant & equipment

-

5

-

-

Investment in subsidiaries

-

-

-

(333)

Dividends received from joint venture

344

259

-

-

Interest received

-

1

-

-

Net cash from investing activities

(89,191)

(25,211)

-

(333)

 

 

 

 

 

Cash flow financing activities

 

 

 

 

Proceeds from term loan

60,000

-

-

-

Dividends paid

(18,543)

(15,506)

(18,543)

(15,506)

Proceeds from issue of shares

289

194

289

194

Net cash from financing activities

41,746

(15,312)

(18,254)

(15,312)

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

(5,874)

(10,118)

32

143

 

 

 

 

 

Net cash and cash equivalents at the beginning of the period

(18,824)

(8,761)

583

440

Exchange rate movement

124

55

-

-

Net cash and cash equivalents at the end of the period

(24,574)

(18,824)

615

583

 

 

 

 

 

Cash and cash equivalents at the end of the period

13,295

7,380

615

583

Bank overdraft at the end of the period

(37,869)

(26,204)

-

 

-

Net cash and cash equivalents at the end of the period

(24,574)

(18,824)

615

583

 

 

Notes to the Financial Statements

 

Basis of preparation

EU law (IAS Regulation EC 1606/2002) requires that the Group financial statements, for the 52 weeks ended 30

January 2016 are prepared in accordance with International Financial Reporting Standards (IFRSs) adopted for use in the EU ("adopted IFRSs").

 

This financial information has been prepared on the basis of the recognition and measurement requirements of adopted IFRSs as at 30 January 2016. The financial information set out above does not constitute the Group's statutory accounts for the 52 weeks ended 30 January 2016 or 53 weeks ended 31 January 2015. The annual financial information presented in this annual results announcement for the 52 weeks ended 30 January 2016 is based on, and is consistent with, that in the Group's audited financial statements for the 52 weeks ended 30 January 2016, and those financial statements will be delivered in May 2016. The auditor's report on those financial statements is unqualified and does not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.

 

Statutory accounts for 31 January 2015 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 12. 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 includes 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 Company meets its day-to-day working capital requirements through a committed overdraft facility expiring on 29 March 2018 which is multi-currency revolving facility with the Royal Bank of Scotland and Barclays. The facility will be used to the extent necessary to fund 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 these financial statements. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements.

 

Non-GAAP performance measures

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

 

The exceptional profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies.

 

There were no exceptional items in the current year.

 

Exceptional items in the prior year include:

 

·      costs in relation to a legal dispute with a previous insurer;

·      income for an early termination of a licence partner agreement; and

·      receipt for a settlement of an intellectual property dispute.

 

 

Significant accounting policies

Except as described below, the accounting policies applied by the Group in this annual results announcement are the same as those applied by the Group in its consolidated financial statements for the 53 weeks ended 31 January 2015.

 

There were no revisions to adopted IFRS that became applicable in the period which had a significant impact on the Group's financial statements.

 

IFRS 16, Leases, is not yet EU endorsed and has an effective date of 1 January 2019. Management will conduct a review of the impact this will have on the Group.

 

The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statements in future years.

 

2. Segment information

 

The Group has three reportable segments; retail, wholesale and licence income.

 

For each of the three segments, the Group's chief operating decision maker (the "Board") reviews internal management reports on a four weekly basis.

 

The accounting policies of the reportable segments are 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 licence 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 30 January 2016

Retail

Wholesale

Licence income

Total

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Revenue

348,433

107,736

-

456,169

Cost of sales

(122,557)

(60,590)

-

(183,147)

Gross profit

225,876

47,146

-

273,022

Operating costs

(163,484)

-

-

(163,484)

Operating contribution

62,392

47,146

-

109,538

Licence income

-

-

14,384

14,384

Segment result

62,392

47,146

14,384

123,922

 

 

 

 

 

Reconciliation of segment

result to profit before tax

 

 

 

 

 

 

 

 

 

Segment result

62,392

47,146

14,384

123,922

Other operating costs

-

-

-

(63,713)

Exceptional costs

-

-

-

-

Exceptional income

-

-

-

-

Other operating expense

-

-

-

(840)

Operating profit

-

-

-

59,369

Net finance expense

-

-

-

(1,400)

Share of profit of jointly controlled entity, net of tax

-

-

-

695

Profit before tax

-

-

-

58,664

 

 

 

 

 

Capital expenditure

19,386

1,153

-

20,539

Unallocated capital expenditure

-

-

-

68,994

Total capital expenditure

-

-

-

89,533

 

 

 

 

 

Depreciation and amortisation

11,966

258

-

12,224

Unallocated depreciation and amortisation

-

-

-

2,705

Total depreciation and amortisation

-

-

-

14,929

 

 

 

 

 

Segment assets

186,826

60,468

-

247,294

Deferred tax assets

-

-

-

6,313

Derivative financial assets

-

-

-

2,850

Intangible assets - head office

-

-

-

14,199

Property, plant and equipment - head office

-

-

-

67,072

Other assets

-

-

-

2,618

Total assets

-

-

-

340,346

 

 

 

 

 

Segment liabilities

(75,232)

(23,726)

-

(98,958)

Income tax payable

-

-

-

(8,382)

Term loan

-

-

-

(60,000)

Other liabilities

-

-

-

(407)

Total liabilities

-

-

-

(167,747)

 

 

 

 

 

Net assets

-

-

-

172,599

 

 

 

 

 

 

Wholesale sales are shown after the elimination of inter-company sales of £65,535,811 (2015: £54,541,000)

           

53 weeks ended 31 January 2015

Retail

Wholesale

Licence income

Total

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Revenue

306,914

80,650

-

387,564

Cost of sales

(105,940)

(46,419)

-

(152,359)

Gross profit

200,974

34,231

-

235,205

Operating costs

(143,484)

-

-

(143,484)

Operating contribution

57,490

34,231

-

91,721

Licence income

-

-

11,665

11,665

Segment result

57,490

34,231

11,665

103,386

 

 

 

 

 

Reconciliation of segment

result to profit before tax

 

 

 

 

 

 

 

 

 

Segment result

57,490

34,231

11,665

103,386

Other operating costs

-

-

-

(52,134)

Exceptional costs

-

-

-

(5,339)

Exceptional income

-

-

-

4,658

Other operating expense

-

-

-

(812)

Operating profit

-

-

-

49,759

Net finance expense

-

-

-

(1,513)

Share of profit of jointly controlled entity, net of tax

-

-

-

525

Profit before tax

-

-

-

48,771

 

 

 

 

 

Capital expenditure

16,550

42

-

16,592

Unallocated capital expenditure

-

-

-

9,112

Total capital expenditure

-

-

-

25,704

 

 

 

 

 

Depreciation and amortisation

10,392

116

-

10,508

Unallocated depreciation and amortisation

-

-

-

2,028

Total depreciation and amortisation

-

-

-

12,536

 

 

 

 

 

Segment assets

162,617

43,418

-

206,035

Deferred tax assets

-

-

-

5,659

Derivative financial assets

-

-

-

3,547

Intangible assets - head office

-

-

-

9,279

Property, plant and equipment - head office

-

-

-

4,712

Other assets

-

-

-

2,430

Total assets

-

-

-

231,662

 

 

 

 

 

Segment liabilities

(65,926)

(17,324)

-

(83,250)

Income tax payable

-

-

-

(7,202)

Other liabilities

-

-

-

(636)

Total liabilities

-

-

-

(91,088)

 

 

 

 

 

Net assets

-

-

-

140,574

 

 

 

 

 

 

b) Geographical information

 

UK

US

Rest of World

Total

 

£'000

£'000

£'000

£'000

52 weeks ended 30 January 2016

 

 

 

 

 

 

 

 

 

Revenue

291,804

99,931

64,434

456,169

Non-current assets*

103,642

25,578

13,479

142,699

 

 

 

 

 

53 weeks ended 31 January 2015

 

 

 

 

 

 

 

 

 

Revenue

261,157

72,950

53,457

387,564

Non-current assets*

38,061

17,230

11,119

66,410

 

 

 

 

 

*Non-current assets exclude deferred tax assets.

 

 

c) Revenue by collection

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

 

 

 

Menswear

202,083

168,310

Womenswear

254,086

219,254

 

456,169

387,564

 

 

 

3. Profit before tax

 

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

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

Depreciation and amortisation

14,929

12,536

Impairment of property, plant and equipment

188

-

Exceptional costs

-

5,339

Exceptional income

-

(4,658)

Leasehold properties & concession rentals*

 

 

     Fixed lease payments

41,171

37,080

     Variable rental and commission payments

29,724

29,072

 

Loss on sale of property, plant & equipment

Auditor remuneration

58

462

 

 Audit of these financial statements

11

10

 

 

 Audit of financial statements of subsidiaries of the company    

205

179

 

 

 Interim financial statements review

17

17

 

 

Audit related assurance services

20

21

 

 

Taxation compliance and other advisory services

114

114

 

 

 All other services (forensic services)

-

569

 

 

 

 

 

 

               

*Disclosed above are the costs charged in the year 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, excluding e-commerce sales with concession partners.

 

There were no amounts recognised as exceptional costs or income during the 52 weeks ended 30 January 2016.

 

Exceptional costs in the 53 weeks ended 31 January 2015 of £5.3m relate to a legal dispute with a previous insurer.

 

Exceptional income in the 53 weeks ended 31 January 2015 of £4.7m comprises £3.7m relating to the early termination of a licence partner agreement and £1.0m in relation to the settlement of an intellectual property dispute. 

 

               

 

 

 

4. Finance income and expenses

 

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

Finance income

 

 

- Interest receivable

-

7

- Foreign exchange gains

531

101

 

531

108

Finance expenses

 

 

- Interest payable

(1,430)

(1,184)

- Foreign exchange losses

(501)

(437)

 

(1,931)

(1,621)

 

 

5. Income tax expense

 

a)    The tax charge comprises
 

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

Current tax

 

 

               United Kingdom Corporation Tax

11,609

11,394

               Overseas Tax

5,060

2,957

Deferred tax

 

 

               United Kingdom Corporation Tax

46

(64)

               Overseas Tax

(854)

(715)

Prior year (over)/under provision

 

 

  Current tax

(2,854)

869

  Deferred tax

1,422

(1,520)

 

14,429

12,921

 

 

b) Deferred tax movement by type
 

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

(107)

(94)

Share based payments

336

32

Overseas losses

412

20

Inventory

(65)

514

Other

232

307

 

808

779

 

 

 

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

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

Profit before tax

58,664

48,771

 

 

 

Profit multiplied by the standard rate in the UK - 20.16%, (2015: standard rate in the UK of 21.32%)

11,827

10,398

 

 

 

Income not taxable/expenses not deductible for tax purposes

759

902

Overseas losses not recognised

678

912

Movement in current and deferred tax on share awards and options

30

210

Prior year (over)/under provision

(1,432)

(651)

Effect of rate change on corporation tax

41

-

Difference due to overseas tax rates

2,526

1,150

Total income tax expense

14,429

12,921

 

 

d) Deferred and current tax recognised directly in equity

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

Current tax credit on share awards and options

(190)

(1,201)

Deferred tax (credit) / charge on share awards and options

(954)

529

Deferred tax charge associated with movement in hedging reserve

45

804

Current tax charge associated with foreign exchange movements in reserves

643

783

 

        (456)

915

 

There was a reduction in the UK corporation tax rate from 21% to 20% with effect from 1 April 2015.  Further reductions to 19% from 1 April 2017 and 18% from 1 April 2020 have been substantively enacted. The Budget on 16 March 2016 announced that there will be a further cut in the corporation tax rate to 17% from 1 April 2020.

 

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%. Those assets and liabilities arising on foreign operations have been recognised at the applicable overseas tax rates.

 

  

6. Dividends per share

 

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

 

£'000

 

 

Final dividend paid for prior year of 29.0p per ordinary share (2015: 24.2p)

 

12,739

10,566

 

Interim dividend paid of 13.2p per ordinary share (2015: 11.3p)

 

5,804

4,940

 

18,543

15,506

       

 

A final dividend in respect of 2016 of 34.6p per share, amounting to a dividend payable of £15,214,123, is to be proposed at the Annual General Meeting on 14 June 2016.

 

7. Earnings per share

 

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

Number of shares:

No.

No.

Weighted number of ordinary shares outstanding

43,950,203

43,703,369

Effect of dilutive options

612,138

542,027

Weighted number of ordinary shares outstanding - diluted

44,562,341

44,245,396

 

 

 

Earnings:

£'000

£'000

Profit for the period basic and diluted

44,235

35,850

Profit for the period adjusted *

44,235

36,372

 

 

 

Basic earnings per share

100.6p

82.0p

Adjusted earnings per share *

100.6p

83.2p

Diluted earnings per share

99.3p

81.0p

Adjusted diluted earnings per share

99.3p

82.2p

 

 

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 net exceptional costs (net of tax) of £nil (2015: £522,000).

 

 

 

8. Intangible assets

 

 

Key Money

Computer software

Computer software under development

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 31 January 2015

865

3,669

9,278

13,812

Additions/transfers

-

4,634

1,371

6,005

Exchange rate movement

14

58

72

At 30 January 2016

879

8,361

10,649

19,889

 

 

 

 

 

Amortisation

 

 

 

 

At 31 January 2015

-

957

-

957

Charge for the year

-

1,652

-

1,652

Exchange rate movement

 -

33

-

33

At 30 January 2016

 -

2,642

-

2,642

 

 

 

 

 

Net book value

 

 

 

 

At 31 January 2015

865

2,712

9,278

12,855

At 30 January 2016

879

5,719

10,649

17,247

 

 

 

Key Money

Computer software

Computer software under development

Total

 

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 25 January 2014

949

2,670

2,598

6,217

Additions

-

999

6,680

7,679

Exchange rate movement

(84)

-

-

(84)

At 31 January 2015

865

 3,669

9,278

13,812

 

 

 

 

 

Amortisation

 

 

 

 

At 25 January 2014

-

137

-

137

Charge for the year

-

811

-

811

Exchange rate movement

-

9

-

9

At 31 January 2015

-

957

-

957

 

 

 

 

 

Net book value

 

 

 

 

At 25 January 2014

949

2,533

2,598

6,080

At 31 January 2015

865

2,712

9,278

12,855

 

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 year 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 the computer software under development category relate to the Microsoft Dynamics AX systems and are stated net of transfers to computer software. Transfers from the computer software under development category in the period amounted to £3,620,000 (2015: £nil) whilst additions into this category were £4,991,000 (2015: £6,680,000).

 

 

9. Property, plant and equipment

 

 

Freehold Land & Buildings

 

Leasehold Improvements

Fixtures, fittings & office equipment

Motor

vehicles

Assets under

construction

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

At 31 January 2015

-

73,447

58,160

110

790

132,507

Additions / transfers

57,973

12,470

10,704

-

2,381

83,528

Disposals

-

(280)

(105)

-

-

(385)

Exchange rate movement

-

1,747

1,054

-

137

2,938

At 30 January 2016

57,973

87,384

69,813

110

3,308

218,588

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 31 January 2015

-

37,238

43,362

103

-

80,703

Charge for the year

32

7,218

6,025

2

-

13,277

Disposals

-

(250)

(77)

-

-

(327)

Impairment

-

187

1

-

-

188

Exchange rate movement

-

727

623

-

-

1,350

At 30 January 2016

32

45,120

49,934

105

-

95,191

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

At 31 January 2015

-

36,209

14,798

7

790

51,804

At 30 January 2016

57,941

42,264

19,879

5

3,308

123,397

 

 

 

 

 

 

Leasehold Improvements

Fixtures, fittings & office equipment

Motor

vehicles

Assets under

construction

Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

At 25 January 2014

60,905

49,813

110

2,839

113,667

Additions / transfers

12,010

8,095

-

(2,080)

18,025

Disposals

(711)

(218)

-

-

(929)

Exchange rate movement

1,243

470

-

31

1,744

At 31 January 2015

73,447

58,160

110

790

132,507

 

 

 

 

 

 

Depreciation

 

 

 

 

 

At 25 January 2014

30,791

37,692

101

-

68,584

Charge for the year

6,375

5,348

2

-

11,725

Disposals

(465)

(52)

-

-

(517)

Exchange rate movement

537

374

-

-

911

At 31 January 2015

37,238

43,362

103

-

80,703

 

 

 

 

 

 

Net book value

 

 

 

 

 

At 25 January 2014

30,114

12,121

9

2,839

45,083

At 31 January 2015

36,209

14,798

7

790

51,804

 

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 £30,642,000 (2015: £20,995,000) whilst additions into this category were £33,023,000 (2015: £18,915,000).

 

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 for the 52 weeks ended 30 January 2016 includes a charge in respect to one retail asset in the UK that has failed to deliver on its potential.

 

There was no impairment charge for the 53 weeks ended 31 January 2015.

 

 

 

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 year was as follows:

 

 

52 weeks ended

30 January

2016

53 weeks ended

31 January

2015

 

£'000

£'000

Salaries & short-term benefits

1,513

1,693

Contributions to money-purchase pension schemes

53

44

Share-based payment charges

480

342

 

2,046

2,079

 

Directors of the Company and their immediate relatives control 35.5% per cent of the voting shares of the Company.

 

At 30 January 2016, No Ordinary Designer Label Limited ("NODL"), the main trading company owed Ted Baker Plc £47,486,000 (2015: £41,510,000). NODL was owed £55,931,309 (2015: £50,025,000) 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 30 January 2016, the joint venture owed £563,179 to the main trading company (2015: £679,000). In the period the value of sales made to the joint venture by the Group was £2,426,921 (2015: £2,507,000).

 

During the year the Group provided design services to THAT Bournemouth Company Limited ("THAT BCL") for which licence income fees were charged of £170,000. No amounts were outstanding as at 30 January 2016. R S Kelvin and L D Page are both directors of, and shareholders in, THAT BCL and as such, THAT BCL is a related party of the Company for the purposes of Chapter 11 of the Listing Rules.

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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