Final Results

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:

· 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

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

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

o 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."

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.

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

* 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

* 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

* 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:

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.

Company Statement of Changes in Equity

For the 52 weeks ended 27 January 2018

Company Statement of Changes in Equity

For the 52 weeks ended 28 January 2017

Group and Company Balance Sheet

At 27 January 2018

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

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

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

b) Geographical information

*Non-current assets exclude deferred tax assets.

c) Revenue by collection