Interim Results

RNS Number : 9921T

Ted Baker PLC

07 October 2010

 

 

 

    7 October 2010

 

Ted Baker PLC

 

Interim Results for the 28 weeks ended 14 August 2010

 

Highlights

 

·; Strong Group performance

·; Retail sales up 17.2% on an 8.2% increase in average retail square footage

o UK and European retail sales up 14.4% to £64.2m

o US retail sales up 20.0% to $9.6m

·; Retail stores opened in Phoenix and Santa Monica

·; Wholesale sales up 6.3%, driven largely by encouraging start to US wholesale business

·; Licence sales up 19.8% to £3.0m

 

	28 weeks ended 14 August 2010	28 weeks ended 15 August 2009	Change
Group Revenue	£88.1m	£76.6m	15.0%
Profit Before Tax	£7.5m	£6.0m	24.6%
Basic EPS	12.9p	10.4p	24.0%
Interim Dividend	6.3p	5.25p	20.0%

 

Commenting, Ray Kelvin, Founder and Chief Executive, said:

"This is a strong performance for the first half of 2010. We continue to expand the Ted Baker brand in new and existing territories, whilst maintaining our focus on design, quality, innovation and attention to detail.

 

The passion and commitment of the Ted Baker team is a key strength of this business and I would like to take this opportunity to thank them all for their ongoing hard work and dedication."

 

 

Enquiries:
Ted Baker PLC	Tel: 020 7796 4133 on 7 October 2010 only
Ray Kelvin, Chief Executive	Tel: 020 7255 4800 thereafter
Lindsay Page, Finance Director
Hudson Sandler	Tel: 020 7796 4133
Michael Sandler
Kate Hough Alex Brennan

 

 

Chairman's Statement

I am pleased to report a strong performance across the Group in the first half of the year, which resulted in a 15.0% increase in Group revenue to £88.1m and a 24.6% improvement in profit before tax to £7.5m

 

Through our robust multi-channel distribution strategy, we continue to expand the Ted Baker brand in existing and new international markets. Our retail division has continued to perform well with sales up 17.2% on an 8.2% increase in average retail square footage. A good performance in the UK was supported by improved trading conditions in our overseas markets.

 

Wholesale sales were up 6.3%, which was largely due to our US wholesale business and a 2.5% increase in underlying UK wholesale sales. Total UK wholesale sales were slightly down on the prior year because the comparative period included sales from wholesale accounts which have transferred to retail concessions.

 

Licence income from our product and territorial licences increased by 19.8% to £3.0m and included a full contribution in the period from our US product licences.

 

Financial Results

Group revenue increased by 15.0% to £88.1m (2009: £76.6m) for the 28 weeks ended 14 August 2010 ("the period"). The composite gross margin increased to 61.2% (2009: 59.5%) reflecting buying efficiencies and less promotional activity in our overseas markets.

 

Operating expenses increased by 18.3% in the period to £49.3m (2009: £41.6m). Distribution costs, which mainly comprise the cost of retail stores, outlets and concessions, increased by 15.9% to £37.1m (2009: £32.0m), reflecting the increase in average retail square footage and an increase in turnover related property costs. Administrative expenses increased by 26.6% to £12.2m (2009: £9.6m). Excluding employee performance related bonus costs of £0.9m (2009: nil), administration expenses increased by 17.2% reflecting growth in the US team to support our US retail and wholesale businesses and growth in other central functions to support our expansion into international markets.

 

Profit before tax increased by 24.6% to £7.5m (2009: £6.0m) resulting in basic earnings per share of 12.9p (2009: 10.4p). The effective tax rate of 29.3% was in line with our expectations for the full financial year.

 

Net cash generated from operating activities increased to £4.8m (2009: £4.1m). Capital expenditure of £4.8m (2009: £2.5m) reflected two store openings compared to one in the comparative period last year and some refurbishment of existing locations, including a major refurbishment of our store in Floral Street, London.

 

Dividends

The Board has declared an interim dividend of 6.3p (2009: 5.25p), representing an increase of 20.0%, which will be payable on 26 November 2010 to shareholders on the register at the close of business on 22 October 2010.

 

Board

On 15 June 2010 we were delighted to announce that Anne Sheinfield was appointed to the Board as an Independent Non-Executive Director. Anne is a commercial lawyer with 19 years' post qualification experience in the theatre, TV and music areas of entertainment. Anne brings with her a wealth of intellectual property and commercial legal experience and we look forward to her contribution going forward. After a suitable induction with the Company, it is intended that Anne will be appointed to the Audit, Nomination and Remuneration Committees.

 

The Brand

Our strategy is to become a leading global designer brand, based on three main elements:

 

·; considered expansion of our collections. We review our collections continually to ensure we 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 existing and new international 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 dedication of our teams, licence partners and wholesale customers ("trustees").

 

 

Global Group Performance

 

Retail

We currently operate stores and concessions across the UK, Europe, US and Hong Kong. Trading in the UK continued strongly and was well supported by an improved trend in our overseas markets and an encouraging start in Hong Kong. Retail sales were up 17.2% to £71.9m (2009: £61.3m) with average retail square footage increasing by 8.2% to 219,936 sq.ft (2009: 203,325 sq.ft). Sales per square foot rose by 6.4% to £315 (2009: £296). Our e-commerce business benefited from the further enhancements made to our transactional website last year, with a significant increase in sales compared to the same period last year.

 

The retail gross margin was 65.4% (2009: 63.9%) reflecting buying efficiencies and less promotional activity in our overseas markets.

Wholesale

Wholesale sales were 6.3% above last year at £16.2m (2009: £15.3m) with gross margins of 42.9% (2009: 41.6%). The growth in sales largely reflects the encouraging start of our US wholesale business with underlying UK wholesale sales and gross margins in line with expectations and slightly above last year.

 

Licence Income

We operate two types of licences: territorial licences covering the Middle East, Asia, Australia and New Zealand; and product licences covering lingerie & sleepwear, perfume & fragrance, watches, footwear, eyewear, neckwear and childrenswear.

 

Licence income for the period increased in line with expectations to £3.0m (2009: £2.5m).

 

We are pleased with the performances from our territorial and product licences. We have seen continued good performances from our licensed childrenswear collection, exclusive to Debenhams, with whom we have also launched B by Ted Baker, a new and exclusive lingerie and sleepwear collection, during the period.

 

The improvement in licence income was largely due to a full contribution in the period from our US product licences signed directly with companies who had previously held product sub-licences with Hartmarx Corporation.

 

Collections

Ted Baker Womenswear delivered another strong performance in the period with sales up 17.3% to £43.3m (2009: £36.9m). Womenswear represented 49.1% of total sales (2009: 48.2%). Ted Baker Menswear also delivered a strong performance with sales increasing 12.8% to £44.8m (2009: £39.7m). Menswear represented 50.9% of total sales (2009: 51.8%).

 

Geographic Performance

 

United Kingdom & Europe

Sales in the period in our UK and Europe retail division were up 14.4% to £64.2m (2009: £56.1m). The UK continued to perform well and was supported by improved trading conditions in the rest of Europe during the period.

 

Average square footage rose by 6.2% over the period to 185,780 sq.ft (2009: 175,007 sq.ft). At 14 August 2010, total retail square footage was 186,605 sq.ft (2009: 174,046 sq.ft), representing an increase of 7.2%. Retail sales per square foot increased 5.4% from £314 to £331.

 

At 14 August 2010, we operated 33 stores (2009: 32), 154 concessions (2009: 122) and 10 outlet stores (2009: 10).

 

Total UK wholesale sales were slightly down on the prior year at £14.9m (2009: £15.3m) because the comparative period included sales from wholesale accounts which have transferred to retail concessions. Underlying UK wholesale sales were 2.5% above the same period last year and in line with expectations.

 

US

Trading in the US improved against a difficult period last year, resulting in sales from our US retail division increasing by 20.0% to $9.6m (2009: $8.0m), which in sterling was equivalent to sales up 21.1% to £6.3m (2009: £5.2m). During the period we opened stores in Phoenix and Santa Monica and consequently now have 11 stores across the United States (2009: 8) and 2 outlet stores (2009: 2).

 

Average retail square footage rose 13.0% over the period to 32,006 sq.ft (2009: 28,318 sq.ft). At 14 August 2010 total retail square footage was up 18.4% on last year at 35,477 sq.ft (2009: 29,953 sq.ft). Retail sales per square foot rose 7.1% from £184 to £197.

 

As previously mentioned, the re-launch of our US wholesale business under our own management has started well and we are encouraged by the positive reaction received to date.

 

Middle East, Asia and Australasia

We continue to develop the Ted Baker brand across the Middle East, Asia and Australasia. In April we opened a store in the Dubai Marina Mall, Dubai, through our territorial licensee RSH Limited and are pleased with the performance at this early stage. Our licence partner in Taiwan, Yun San Corporation, is also making good progress.

At the start of the period we acquired two stores in Hong Kong from our former partner in the territory, Li & Fung, although one of these stores was scheduled to close in May. We are very pleased with the performance of these stores under our management and, although one store has now closed, we are actively seeking further opportunities in the territory. Consequently at 14 August 2010 we operated one store in Hong Kong.

Both of our stores in Melbourne, Australia, which are operated through a joint venture with our licence partner in that territory, continued to trade well during the period.

Current Trading and Outlook

 

Retail

The improving trends seen in the first half of 2010 across both our UK and overseas markets have continued into the first seven weeks of the second half of the year.

 

In Europe we opened seven further concessions in Eire at the end of the period and are encouraged by early trading. We have also recently opened ten concessions across Italy with a leading department store group and plan to open a further store in Paris early next year. We also plan to open a store in the Trafford Centre, Manchester, early next year.

 

In the US we plan to open further stores in Chicago and New York later in the year and will also be launching a US transactional website in October.

 

In Asia we have been pleased with the strong performance in Hong Kong during the period and plan to open a further store in Hong Kong early next year. We continue to explore further opportunities to expand in this region.

 

Wholesale

Trading in our UK wholesale business has been in line with expectations and we anticipate that the trend seen in the first half of the year will continue for the remainder of this year. In the US, our wholesale business continues to perform well.

 

Licence Income

Our product and territorial licences continue to perform in line with expectations. In the second half of the year we will be opening further stores in Kuwait, Taiwan, Abu Dhabi and Sydney, Australia with our respective partners in these territories.

 

Outlook

Whilst we have made a good start to the second half, the Group results for the full year will, as always, be dependent on trading during the key Christmas period and, at this stage, we remain cautious given the uncertain economic environment. Our costs and commitments remain under control and, with our strong balance sheet, we will continue to invest in the long term development of the Ted Baker brand.

 

We intend to make our next interim management statement, covering the period since the start of the second half of the financial year, in mid November.

 

Condensed Group Income Statement

For the 28 weeks ended 14 August 2010

 

	Note	Unaudited 28 weeks ended 14 August 2010		Unaudited 28 weeks ended 15 August 2009		Audited 52 weeks ended 30 January 2010
		£'000		£'000		£'000
Revenue	2	88,128		76,621		163,586
Cost of sales		(34,165)		(31,057)		(63,659)
Gross profit	2	53,963		45,564		99,927
Distribution costs		(37,131)		(32,044)		(64,573)
Administrative expenses
- Other administrative expenses		(12,151)		(9,597)		(20,395)
- Impairment losses	3	-		-		(750)
Licence income		2,971		2,479		5,493
Other operating income / (expense)		(130)		(50)		80
Operating profit	2	7,522		6,352		19,782
Finance income	4	37		3		10
Finance expenses	4	(107)		(347)		(374)
Share of profit of jointly controlled entity, net of tax		65		23		86
Profit before tax	2	7,517		6,031		19,504
Income tax expense	7	(2,202)		(1,749)		(5,977)
Profit for the period		5,315		4,282		13,527
Attributable to:
- Equity shareholders of the parent company		5,355		4,315		13,576
- Non-controlling interest		(40)		(33)		(49)
Profit for the period		5,315		4,282		13,527
Earnings per share	5
Basic		12.9p		10.4p		32.6p
Diluted		12.8p		10.4p		32.6p

 

 

Condensed Group Statement of Comprehensive Income

For the 28 weeks ended 14 August 2010

 

	Unaudited 28 weeks ended 14 August 2010		Unaudited 28 weeks ended 15 August 2009		Audited 52 weeks ended 30 January 2010
	£'000		£'000		£'000
Profit for the period	5,315		4,282		13,527
Other comprehensive income
Net effective portion of changes in fair value of cash flow hedges	228		(1,319)		(1,334)
Net change in fair value of cash flow hedges transferred to profit or loss	(292)		(835)		(391)
Exchange rate movement	276		(1,237)		(1,058)
Other comprehensive income for the period, net of tax	212		(3,391)		(2,783)
Total comprehensive income for the period	5,527		891		10,744
Total comprehensive income attributable to:
- Owners of the parent	5,567		924		10,793
- Non-controlling interest	(40)		(33)		(49)
Total comprehensive income for the period	5,527		891		10,744

 

 

Condensed Group Statement of Changes in Equity - Unaudited

For the 28 weeks ended 14 August 2010

 

	Share capital	Share premium	Cash flow hedging reserve	Translation reserve	Retained earnings	Total equity attributable to equity shareholders of the parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 January 2010	2,160	9,137	(12)	124	54,906	66,315	(85)	66,230
Comprehensive income for the period
Profit for the period	-	-	-	-	5,355	5,355	(40)	5,315
Deferred tax associated with movement in hedging reserve	-	-	-	-	-	-	-	-
Effective portion of changes in fair value of cash flow hedges	-	-	228	-	-	228	-	228
Net change in fair value of cash flow hedges transferred to profit or loss	-	-	(292)	-	-	(292)	-	(292)
Exchange rate movement	-	-	-	276	-	276	-	276
Total comprehensive income for the period	-	-	(64)	276	5,355	5,567	(40)	5,527
Transactions with owners recorded directly in equity
Share options / awards charge	-	-	-	-	228	228	-	228
Movement on current / deferred tax on share options / awards	-	-	-	-	7	7	-	7
Disposal of own / treasury shares	-	-	-	-	19	19	-	19
Dividends paid	-	-	-	-	(4,953)	(4,953)	-	(4,953)
Total transactions with owners	-	-	-	-	(4,699)	(4,699)	-	(4,699)
Balance at 14 August 2010	2,160	9,137	(76)	400	55,562	67,183	(125)	67,058

 

 

 

Condensed Group Statement of Changes in Equity - Unaudited

For the 28 weeks ended 15 August 2009

	Share capital	Share premium	Cash flow hedging reserve	Translation reserve	Retained earnings	Total equity attributable to equity shareholders of the parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2009	2,160	9,137	1,713	1,182	48,010	62,202	(36)	62,166
Comprehensive income for the period
Profit for the period	-	-	-	-	4,315	4,315	(33)	4,282
Deferred tax associated with movement in hedging reserve	-	-	(375)	-	-	(375)	-	(375)
Effective portion of changes in fair value of cash flow hedges			(944)			(944)		(944)
Net change in fair value of cash flow hedges transferred to profit or loss	-	-	(835)	-	-	(835)	-	(835)
Exchange rate movement	-	-	-	(1,237)	-	(1,237)	-	(1,237)
Total comprehensive income for the period	-	-	(2,154)	(1,237)	4,315	924	(33)	891
Transactions with owners recorded directly in equity
Share options / awards charge	-	-	-	-	22	22	-	22
Movement on current / deferred tax on share options / awards	-	-	-	-	(1)	(1)	-	(1)
Disposal of own / treasury shares	-	-	-	-	43	43	-	43
Dividends paid	-	-	-	-	(4,743)	(4,743)	-	(4,743)
Total transactions with owners	-	-	-	-	(4,679)	(4,679)	-	(4,679)
Balance at 15 August 2009	2,160	9,137	(441)	(55)	47,646	58,447	(69)	58,378

 

Condensed Group Statement of Changes in Equity - Audited

For the 52 weeks ended 30 January 2010

	Share capital	Share premium	Cash flow hedging reserve	Translation reserve	Retained earnings	Total equity attributable to equity shareholders of the parent	Non-controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2009	2,160	9,137	1,713	1,182	48,010	62,202	(36)	62,166
Comprehensive income for the period
Profit for the period	-	-	-	-	13,576	13,576	(49)	13,527
Deferred tax associated with movement in hedging reserve	-	-	(375)	-	-	(375)	-	(375)
Effective portion of changes in fair value of cash flow hedges	-	-	(959)	-	-	(959)	-	(959)
Net change in fair value of cash flow hedges transferred to profit or loss	-	-	(391)	-	-	(391)	-	(391)
Exchange rate movement	-	-	-	(1,058)	-	(1,058)	-	(1,058)
Total comprehensive income for the period	-	-	(1,725)	(1,058)	13,576	10,793	(49)	10,744
Transactions with owners recorded directly in equity
Share options / awards charge	-	-	-	-	192	192	-	192
Movement on current / deferred tax on share options / awards	-	-	-	-	13	13	-	13
Disposal of own / treasury shares	-	-	-	-	43	43	-	43
Dividends paid	-	-	-	-	(6,928)	(6,928)	-	(6,928)
Total transactions with owners	-	-	-	-	(6,680)	(6,680)	-	(6,680)
Balance at 30 January 2010	2,160	9,137	(12)	124	54,906	66,315	(85)	66,230

Condensed Group Balance Sheet

At 14 August 2010

 

	Note	Unaudited 14 August 2010		Unaudited 15 August 2009		Audited 30 January 2010
		£'000		£'000		£'000
Non-current assets
Intangible assets		601		630		634
Property, plant and equipment		26,707		26,919		25,508
Investments in equity accounted investee		237		121		171
Deferred tax assets		1,648		777		1,598
Prepayments		767		866		842
		29,960		29,313		28,753
Current assets
Inventories		40,117		35,451		33,450
Trade and other receivables		20,987		18,180		19,698
Amount due from equity accounted investee		307		117		261
Derivative financial assets		343		114		280
Cash and cash equivalents	9	8,905		2,229		13,698
		70,659		56,091		67,387
Current liabilities
Trade and other payables		(29,525)		(22,276)		(24,779)
Bank overdraft	9	-		(1,500)		-
Income tax payable		(2,183)		(1,743)		(3,511)
Derivative financial liabilities		(549)		(555)		(304)
		(32,257)		(26,074)		(28,594)
Non-current liabilities
Deferred tax liabilities		(1,304)		(952)		(1,316)
		(1,304)		(952)		(1,316)
Net assets		67,058		58,378		66,230
Equity
Share capital		2,160		2,160		2,160
Share premium account		9,137		9,137		9,137
Other reserves		(76)		(441)		(12)
Translation reserve		400		(55)		124
Retained earnings		55,562		47,646		54,906
Total equity attributable to equity shareholders of the parent company		67,183		58,447		66,315
Non-controlling interest		(125)		(69)		(85)
Total equity		67,058		58,378		66,230

 

Condensed Group Cash Flow Statement

For the 28 weeks ended 14 August 2010

 

 

	Note	Unaudited 28 weeks ended 14 August 2010		Unaudited 28 weeks ended 15 August 2009		Audited 52 weeks ended 30 January 2010
		£'000		£'000		£'000
Cash generated from operations
Profit for the period		5,315		4,282		13,527
Adjusted for:
Income tax expense		2,202		1,749		5,977
Depreciation		3,384		3,473		6,295
Impairment losses		-		-		750
Loss on disposal of property, plant & equipment		178		71		110
Share option charge		228		22		192
Net finance gains		7		88		138
Net change in derivative financial assets and liabilities		118		(1,779)		1,118
Share of profit in joint venture		(65)		(23)		(86)
Decrease in non current prepayments		33		34		64
(Increase) / decrease in inventories		(6,580)		864		3,026
(Increase) / decrease in trade and other receivables		(1,238)		5,852		1,649
Increase / (decrease) in trade and other payables		4,668		(6,755)		(4,908)
Interest paid		(42)		(94)		(157)
Income taxes paid		(3,425)		(3,731)		(6,602)
Net cash generated from operating activities		4,783		4,053		21,093
Cash flow from investing activities
Purchases of property, plant & equipment		(4,790)		(2,536)		(4,538)
Proceeds from sale of property, plant & equipment		18		-		-
Interest received		33		3		8
Net cash from investing activities		(4,739)		(2,533)		(4,530)
Cash flow from financing activities
Proceeds from option holders for exercise of options	10	19		43		43
Dividends paid	6	(4,953)		(4,743)		(6,928)
Net cash from financing activities		(4,934)		(4,700)		(6,885)
Net decrease in cash and cash equivalents		(4,890)		(3,180)		9,678
Cash and cash equivalents at 30 January 2010 / 31 January 2009		13,698		4,660		4,660
Exchange rate movement		97		(751)		(640)
Cash and cash equivalents at 14 August 2010 / 15 August 2009 / 30 January 2010	9	8,905		729		13,698

 

Notes to the Condensed Interim Financial Statements

For the 28 weeks ended 14 August 2010

 

1. Basis of preparation

 

a. Reporting entity

Ted Baker PLC is a company domiciled in the United Kingdom. The condensed interim financial statements ("interim financial statements") of Ted Baker PLC as at and for the 28 weeks ended 14 August 2010 comprise the Company and its subsidiaries (together referred to as "the Group").

 

The Group financial statements as at and for the 52 weeks ended 30 January 2010 are available upon request from the Company's registered office at Ted Baker PLC, The Ugly Brown Building, 6a St. Pancras Way, London NW1 0TB or at www.tedbaker.com.

 

b. Statement of compliance

These interim financial statements have been prepared in accordance with "IAS 34 Interim Financial Reporting" as adopted by the EU and the requirements of the Disclosures and Transparency Rules. They do not include all of the information required for full annual financial statements and should be read in conjunction with the Group financial statements as at and for the 52 weeks ended 30 January 2010. These interim financial statements were approved by the Board of Directors on 7 October 2010.

 

The comparative figures for the 52 weeks ended 30 January 2010 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified; (ii) did not include a reference to any matters to which the auditors 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. These sections address whether proper accounting records have been kept, whether the Company's accounts are in agreement with these records and whether the auditors have obtained all the information and explanations necessary for the purposes of the audit.

 

The financial information in this document is unaudited, but has been reviewed by the auditors in accordance with the Auditing Practices Board guidance on Review of Interim Financial Information.

 

c. Going concern

The Group financial statements for the 52 weeks ended 30 January 2010, approved by the Board on the 25 March 2010, included information on the business environment in which the Group operates, including the factors that are likely to impact the future prospects of the Group, together with the principal risks and uncertainties that the Group faces. In addition, the notes to the consolidated financial statements set out the Group's objectives, policies and processes for managing its financial and capital risk and its exposures to credit, market and liquidity risk. Many of the risks and uncertainties reported are such that their potential to impact the Group's operations are inherent and remain valid as regards to their potential impact during the second half of 2010. The impact of the economic environment in which the Group's businesses operates is considered in the Chairman's Statement.

 

The Directors have prepared trading and cash flow forecasts for a period of one year from the date of approval of these interim financial statements. The Directors have a reasonable expectation that the Group has adequate cash headroom and expects to meet all banking covenant requirements. Accordingly, they continue to adopt a going concern basis in preparing the financial statements of the Group.

 

d. Significant accounting policies

Except as noted below, these interim financial statements have been prepared using the same accounting policies as used in the preparation of the Group's financial statements for the 52 weeks ended 30 January 2010 and as discussed therein.

 

Revised and amended standards and interpretations

 

The following adopted accounting standards and interpretations, issued by the International Accounting Standards Board (IASB) or International Financial Reporting, Interpretations Committee (IFRIC), have been adopted for the first time by the Group in the current financial year with no significant impact on its consolidated results or financial position:

 

·; IFRS 3 (revised 2008), Business Combinations;

 

·; Amendment to IAS 27, Consolidated and Separate Financial Statements;

 

·; Amendment to IAS 39, Financial Instruments: Recognition and Measurement: Eligible Hedged Items;

 

·; Amendment to IAS 2, Share-based Payment: Group Cash-settled Share-based Payment Transactions;

 

·; Improvements to IFRS's 2009;

 

·; IFRIC 17, Distributions of Non-cash Assets to Owners; and

 

·; IFRIC 18, Transfers of Assets from Customers.

 

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 the same as described in note (s) on page 40 of the Group financial statements as at and for the 52 weeks ended 30 January 2010. 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 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.

 

Segment revenue and segment result

 

Unaudited - 28 weeks ended 14 August 2010	Retail	Wholesale	Licence income	Total
	£'000	£'000	£'000	£'000
Revenue	71,886	16,242	-	88,128
Cost of sales	(24,885)	(9,280)	-	(34,165)
Gross profit	47,001	6,962	-	53,963
Operating costs	(36,585)	-	-	(36,585)
Operating contribution	10,416	6,962	-	17,378
Licence income	-	-	2,971	2,971
Segment result	10,416	6,962	2,971	20,349
Reconciliation of segment result to profit before tax
Segment result	10,416	6,962	2,971	20,349
Impairment losses	-	-	-	-
Other operating costs				(12,697)
Other operating income / (expense)				(130)
Operating profit				7,522
Net finance expense				(70)
Share of profit of jointly controlled entity, net of tax				65
Profit before tax				7,517
Capital expenditure	3,103	219	-	3,322
Unallocated capital expenditure				1,355
Total capital expenditure				4,677
Depreciation	2,639	63	-	2,702
Unallocated depreciation				682
Total depreciation				3,384
Segment assets	76,735	18,592	-	95,327
Other assets				5,292
Total assets				100,619
Segment liabilities	(24,531)	(5,543)	-	(30,074)
Other liabilities				(3,487)
Total liabilities				(33,561)
Net assets				67,058

 

Wholesale sales are shown after the elimination of inter-company sales of £6,601,000 (15 August 2009: £3,623,000, 30 January 2010: £7,113,000).

 

 

 

 

 

Unaudited - 28 weeks ended 15 August 2009	Retail	Wholesale	Licence income	Total
	£'000	£'000	£'000	£'000
Revenue	61,335	15,286	-	76,621
Cost of sales	(22,130)	(8,927)	-	(31,057)
Gross profit	39,205	6,359	-	45,564
Operating costs	(31,582)	-	-	(31,582)
Operating contribution	7,623	6,359	-	13,982
Licence income	-	-	2,479	2,479
Segment result	7,623	6,359	2,479	16,461
Reconciliation of segment result to profit before tax
Segment result	7,623	6,359	2,479	16,461
Impairment losses	-	-	-	-
Other operating costs				(10,059)
Other operating income / (expense)				(50)
Operating profit				6,352
Net finance expense				(344)
Share of profit of jointly controlled entity, net of tax				23
Profit before tax				6,031
Capital expenditure	2,020	68	-	2,088
Unallocated capital expenditure				376
Total capital expenditure				2,464
Depreciation	2,739	56	-	2,795
Unallocated depreciation				679
Total depreciation				3,474
Segment assets	67,636	16,753	-	84,389
Other assets				1,015
Total assets				85,404
Segment liabilities	(19,477)	(4,854)	-	(24,331)
Other liabilities				(2,695)
Total liabilities				(27,026)
Net assets				58,378

 

 

Audited - 52 weeks ended 30 January 2010	Retail	Wholesale	Licence income	Total
	£'000	£'000	£'000	£'000
Revenue	136,455	27,131	-	163,586
Cost of sales	(47,884)	(15,775)	-	(63,659)
Gross profit	88,571	11,356	-	99,927
Operating costs	(63,641)	-	-	(63,641)
Operating contribution	24,930	11,356	-	36,286
Licence income	-	-	5,493	5,493
Segment result	24,930	11,356	5,493	41,779
Reconciliation of segment result to profit before tax
Segment result	24,930	11,356	5,493	41,779
Impairment losses	(750)	-	-	(750)
Other operating costs				(21,327)
Other operating income / (expense)				80
Operating profit				19,782
Net finance expense				(364)
Share of profit of jointly controlled entity, net of tax				86
Profit before tax				19,504
Capital expenditure	3,844	134	-	3,978
Unallocated capital expenditure				566
Total capital expenditure				4,544
Depreciation	4,958	102	-	5,060
Unallocated depreciation				1,235
Total depreciation				6,295
Segment assets	74,896	16,769	-	91,665
Other assets				4,475
Total assets				96,140
Segment liabilities	(20,923)	(4,160)	-	(25,083)
Other liabilities				(4,827)
Total liabilities				(29,910)
Net assets				66,230

 

 

3. Impairment losses

 

No impairment losses were recognised in the current period. Impairment losses of £750,000 were recognised in the Group's consolidated financial statements for the 52 weeks ended 30 January 2010, that related to cash-generating units 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.

 

Full details can be found in the Group's consolidated financial statements as at and for the 52 weeks ended 30 January 2010.

 

 

4. Finance income and expenses

 

		Unaudited		Unaudited		Audited
		28 weeks ended 14 August 2010		28 weeks ended 15 August 2009		52 weeks ended 30 January 2010
		£'000		£'000		£'000
Finance income
- Interest receivable		30		3		10
- Foreign exchange gains		7		-		-
		37		3		10
Finance expenses
- Interest payable		(37)		(91)		(148)
- Foreign exchange losses		(70)		(256)		(226)
		(107)		(347)		(374)

 

 

5. Earnings per share

 

		Unaudited		Unaudited		Audited
		28 weeks ended 14 August 2010		28 weeks ended 15 August 2009		52 weeks ended 30 January 2010
		No.		No.		No.
Number of shares:
Weighted number of ordinary shares outstanding		41,621,347		41,613,798		41,613,798
Effect of dilutive options		255,150		5,946		10,183
Weighted number of ordinary shares outstanding - diluted		41,876,497		41,619,744		41,623,981
Earnings:		£'000		£'000		£'000
Profit for the period, basic and diluted		5,355		4,315		13,576
Basic earnings per share		12.9p		10.4p		32.6p
Diluted earnings per share		12.8p		10.4p		32.6p

 

 

6. Dividends per share

 

		Unaudited		Unaudited		Audited
		28 weeks ended 14 August 2010		28 weeks ended 15 August 2009		52 weeks ended 30 January 2010
		£'000		£'000		£'000
Final dividend paid for the prior year of 0.5p per ordinary share (2009: 11.4p)		208		4,743		4,743
Second interim dividend paid 2010: 11.4p per ordinary share (2009: £Nil)		4,745		-		-
Interim dividend paid 2010: £Nil (2009: 5.25p)		-		-		2,185
		4,953		4,743		6,928

 

The Board has declared an interim dividend of 6.3p per share (2009: 5.25p) payable on 26 November 2010 to shareholders on the register at the close of business on 22 October 2010.

 

 

7. Income tax expense

 

The Group's effective tax rate in respect of continuing operations for the 28 weeks ended 14 August 2010 was 29.3% which is based on the full year forecast effective rate (28 weeks ended 15 August 2009: 29.0%, 52 weeks ended 30 January 2010: 30.6%).

 

The factors affecting the tax charge for the Group remain broadly consistent with the prior period. However, the reduction in the UK corporation tax rate from 28% to 27% will be reflected in a corresponding reduction in future effective tax rates for the Group. The impact of a reduction in the rate to 27% on the underlying effective tax rate for the full-year is not expected to be significant. The proposed future reduction in the UK corporation tax rate to 24% will be reflected when the relevant legislation is substantively enacted.

 

 

8. Share based payments

 

Share options and Long Term Incentive Plans "LTIP" awards

 

Equity settled awards are granted to employees in the form of share options, share awards or the award of units that can convert to nil-cost options.

 

Share options are granted at an option price equal to the Company share price at the grant date, or at a discount of 20% in the case of SAYE share options. No consideration is payable when share awards or nil-cost options vest. The vesting period is generally between three and five years and the share options expire between three and ten years after grant. Share options and awards will also expire if the employee leaves the Group prior to the exercise or vesting date.

The terms and conditions of the grants made during the 28 weeks ended 14 August 2010 are as follows:

 

Grant date	Type of award	Number of shares	Vesting conditions	Vesting period
14 May 2010	Share option	24,973	None	100% after three years
14 May 2010	Share option	17,120	None	100% after five years

 

The basis of measuring fair value is consistent with that disclosed in the consolidated financial statements for the 52 weeks ended 30 January 2010. The range of inputs into the Black-Scholes model were as follows:

 

	At 14 August 2010
Share price	539.0p
Exercise price	432.0p
Risk free interest rate	1.49% - 2.40%
Expected life of options	3 - 5 years
Share price volatility	26.40% - 28.60%
Dividend yield	3.87%

 

Value Creation Plan

 

The award of units is made under the Ted Baker 2009 Value Creation Plan ("2009 VCP"). Units have no value at grant, but subject to the satisfaction of earnings per share, share price and total shareholder return performance targets can convert and give participants the right to be granted nil-cost options at the end of the performance.

 

No awards were made under the 2009 VCP in the 28 weeks ended 14 August 2010.

 

The charge to the income statement for 28 weeks ended 14 August 2010 for VCP awards amounted to £208,527 (2009: £nil). Included in the charge for the period is an amount in respect of R S Kelvin, who is employed by the Company, amounting to £37,326 (2009: £nil).

 

 

9. Reconciliation of cash and cash equivalents per balance sheet to the cash flow statement

 

	Unaudited		Unaudited		Audited
	28 weeks  ended 14 August 2010		28 weeks  ended 15 August 2009		52 weeks ended 30 January 2010
	£'000		£'000		£'000
Cash and cash equivalents per balance sheet	8,905		2,229		13,698
Bank overdraft	-		(1,500)		-
Cash and cash equivalents per cash flow statement	8,905		729		13,698

 

 

10. Treasury shares

 

The Company acquired nil treasury shares (2009: nil) and disposed of 5,308 treasury shares for proceeds of £19,162 (2009: 13,823 for proceeds of £43,402) in the 28 weeks ended 14 August 2010.

 

11. Related Parties

 

The Company has a related party relationship with its directors and executive officers.

 

Directors of the Company and their immediate relatives control 41% of the voting shares of the Company.

 

At 14 August 2010, the main trading company owed the parent company £19,174,000 (15 August 2009: £9,249,000, 30 January 2010: £24,108,000). The main trading company was owed £15,321,000 (15 August 2009: £11,040,000, 30 January 2010: £11,869,000) from the other subsidiaries within the Group.

 

Transactions between subsidiaries and between the parent and subsidiaries were priced on an arms length basis.

 

The Group has a 50% interest in a joint venture. As at 14 August 2010, the joint venture owed £307,000 to the main trading company (15 August 2009: £117,000, 30 January 2010: £261,000). The value of sales made to the joint venture by the Group was £223,000 in the period to 14 August 2010 (15 August 2009: £115,000, 30 January 2010: £364,000).

 

 

12. Principal risks and uncertainties

 

The current unprecedented trading environment has affected, and will continue to affect, all areas of our business. We also recognise that we will be affected by the impact this will have on our customers, partners and suppliers.

 

The Board recognises there are a number of risks and uncertainties that face the Group. The Board has established a structured approach to identify, assess and manage these risks and this is regularly monitored and updated by the Risk Committee. The principal risks and uncertainties are detailed in the Group's consolidated financial statements as at and for the 52 weeks ended 30 January 2010, which have not changed since that report.

 

Responsibility statement of the directors in respect of the interim financial statements

 

The directors confirm that to the best of their knowledge:

 

·; the condensed financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU;

 

·; the interim management report includes a fair review of the information required by:

 

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first 28 weeks of the financial year and their impact on the condensed financial statements, and a description of the principal risks and uncertainties for the remaining 24 weeks of the financial year; and

 

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 28 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

The directors of Ted Baker PLC are listed on page 12 of the financial statements as at, and for, the 52 weeks to 30 January 2010. On 15 June 2010 Anne Sheinfield was appointed as an independent non-executive director of the company. There have been no other changes to the directors since that report.

 

 

 

By order of the Board

 

 

 

 

 

 

R S Kelvin L D Page

Chief Executive Finance Director

 

7 October 2010 7 October 2010

 

 

 

This interim report will be sent by post to all registered shareholders. Copies will be available to the public from the Company Secretary at the registered office: Ted Baker PLC, The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB.

 

 

Cautionary statement regarding forward-looking statements

 

This announcement contains certain forward-looking statements. These forward-looking statements include matters that are not historical facts or are statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies, and the industries in which the Company operates. Forward-looking statements are based on the information available to the Directors at the time of preparation of this announcement, and will not be updated during the year. The Directors can give no assurance that these expectations will prove to have been correct. Due to inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward-looking statements.

Independent Review Report on the Condensed Financial Statements to the members of Ted Baker PLC

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the interim financial statements for the 28 weeks ended 14 August 2010 which comprises the Condensed Group Income Statement, Condensed Group Statement of Comprehensive Income, the Condensed Group Statement of Changes in Equity, the Condensed Group Balance Sheet, the Condensed Group Cash Flow Statement and the related explanatory notes. We have read the other information contained in the interim financial statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

 

Directors' responsibilities

 

The interim financial statements are the responsibility of, and have been approved by, the directors. The directors are responsible for preparing the interim financial statements in accordance with the DTR of the UK FSA.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The condensed set of financial statements included in these interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial statements based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial statements for the 28 weeks ended 14 August 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

 

 

 

 

 

Mike Barradell

For and on behalf of KPMG Audit Plc

Chartered Accountants

15 Canada Square

London

E14 5GL

7 October 2010