Interim Results

Ted Baker Plc

("Ted Baker", the "Group")

Interim Results Announcement for the 28 weeks ended 12 August 2017

'Further brand growth across distribution channels'

· Group revenue up 14.0% (9.5% in constant currency) to £295.7m

· Retail sales including e-commerce up 13.9% (9.2% in constant currency) to £217.7m

· UK and Europe retail sales up 11.0% (9.1% in constant currency) to £145.6m

· North America retail sales up 18.8% (7.8% in constant currency) to £60.7m

· Asia retail sales up 29.5% (19.6% in constant currency) to £11.4m

· E-commerce sales up 43.8% (40.7% in constant currency) to £42.7m

· Planned expansion continued with:

· Two new stores in the US and one new store in each of the UK, China and France, a relocation in Japan, and one new outlet in each of the UK and the Netherlands

· Further concessions with leading department stores across the UK, Europe, and Asia

· Licencee openings in Australia, Dubai, Kuwait, Lebanon, Mexico, Qatar, Saudi Arabia and Turkey

· Wholesale sales up 14.1% (10.2% in constant currency) to £78.0m

· Licence income up 23.1% to £9.7m

· Profit before tax and exceptional items up 12.7% to £24.2m

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

'The Ted Baker brand has continued to perform well and in line with our expectations across all distribution channels. This good performance reflects the strength and appeal of the Ted Baker brand, our business model and the passion, creativity and innovation of our global teams.

We have a clear strategy for the development of the brand across both established and newer markets and this remains underpinned by the focus on design, quality and attention to detail that is at the core of everything we do.

We are dedicated to the long-term development of the Ted Baker brand and are continuing to invest in our infrastructure and people to support our future growth. Whilst trading conditions in some of our markets remain challenging, we are confident of making further progress for the full year, in line with our expectations.'

This announcement contains inside information. The person responsible for arranging the release of this announcement on behalf of the Company is Charles Anderson, Finance Director & Company Secretary.

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 leading global lifestyle brand distributing across five continents through its three main distribution channels: retail (including e-commerce); wholesale; and licensing.

Ted Baker has an increasing global presence with 511 stores, concessions and outlets worldwide comprising: 192 in the UK; 108 in Europe; 119 in North America; 82 in the Middle East, Asia and Africa; and 10 in Australasia.

We offer a wide range of collections: 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.

Development of the Brand

Our strategy is to further develop as a leading global lifestyle 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 (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

· 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.

Chairman's Statement

I am pleased to report that Group revenue increased by 14.0% (9.5% in constant currency1) and profit before tax and exceptional items2 increased by 12.7% to £24.2m (2016: £21.5m) for the 28 weeks ended 12 August 2017 (the "period"). Profit before tax increased by 17.8% to £25.3m (2016: £21.5m). This good performance reflects the strength of the Ted Baker brand and our business model and was achieved despite external factors continuing to impact trading conditions in some of our global markets. In North America, in particular, we continue to experience higher levels of competitor promotional activity and lower international tourism which have impacted retail sales.

The retail channel performed well, with retail sales (including e-commerce) up 13.9% to £217.7m (9.2% in constant currency1). Average retail square footage increased by 4.9%. Our e-commerce business is an integral and increasingly important component within our retail proposition and has performed very well, delivering sales growth of 43.8% (40.7% in constant currency1). We continued to invest in our retail channel with considered store openings across all territories and further development of our e-commerce platforms.

Wholesale sales increased by 14.1% (10.2% in constant currency1) to £78.0m with a good performance from our UK business and a strong performance from our North American business.

Licence income increased by 23.1% to £9.7m as both our product and territorial licences continued to perform well. During the period, our existing licence partners opened further stores in Australia, Dubai, 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 by the middle of next year, which will allow us to continue to enhance efficiency, streamline our operations and support the evolution 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, which handles all logistic operations for our retail, e-commerce and wholesale businesses across the UK and Europe, supporting our long-term growth strategy. Since the half year, we have 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 existing plans.

Financial Results

Group revenue increased by 14.0% (9.5% in constant currency1) to £295.7m (2016: £259.5m) for the 28 weeks ended 12 August 2017. The composite gross margin remained constant at 58.9% (2016: 58.9%).

Distribution costs, which comprise the cost of retail operations and distribution centres increased by 13.6% (8.5% in constant currency1) to £117.8m (2016: £103.7m). As a percentage of sales they decreased to 39.8% (2016: 40.0%) due to the decrease in dual running costs associated with the transition to our new single European distribution centre, partially offset by investment in online marketing costs to increase awareness of local e-commerce sites and some pre-opening costs in Asia.

Administrative expenses increased by 13.5% to £40.4m (2016: £35.5m). Administrative expenses before exceptional items2 increased by 16.7% (14.0% in constant currency1) to £41.5m (2016: £35.5m) and as a percentage of sales increased to 14.0% (2016: 13.7%). This was due to the growth in our central functions, both in the UK and overseas, the continued deployment of our information technology infrastructures to support our growth and investment in customer engagement.

Dual running costs incurred in respect of our new distribution centre and the systems roll-out were £1.2m (2016: £2.0m) in the first half of the year. We would expect to incur further costs of £0.9m in the second half of the year.

Exceptional income of £1.1m (2016: £Nil) related to the release of the provision for the Group's legacy warehouses following assignment of the leases.

The net foreign exchange gain during the period of £0.4m (2016: £1.2m) was due to the translation of monetary assets and liabilities denominated in foreign currencies. Net interest payable during the period was £1.6m (2016: £1.5m).

Profit before tax and exceptional items2 increased by 12.7% to £24.2m (2016: £21.5m) and profit before tax increased by 17.8% to £25.3m (2016: £21.5m). Adjusted basic earnings per share3, which exclude exceptional items, increased by 12.4% to 41.7p (2016: 37.1p) and basic earnings per share increased by 17.5% to 43.6p (2016: 37.1p).

The forecast effective tax rate of 23.8% (2016 full year effective rate: 24.0%) is higher than the forecast UK corporation tax rate for the period of 19.16%, largely due to higher overseas tax rates and the non-recognition of losses in overseas territories where the brand is still in its development phase. On 1 April 2017, the UK corporation tax rate fell from 20% to 19% and a further reduction to 17% from 1 April 2020 has been substantively enacted.

The net decrease in cash and cash equivalents of £30.6m (2016: £32.9m) primarily reflected an increase in working capital, further capital expenditure to support our long-term development and the payment of the full year dividend. During the period, we made repayments of £3.0m (2016: £Nil) on the secured term loan used to purchase The Ugly Brown Building.

Total working capital, which comprises inventories, trade and other receivables and trade and other payables, increased by £24.3m to £156.9m (2016: £132.5m). This was mainly driven by an increase in inventories of £40.8m to £176.4m (2016: £135.6m) reflecting the growth of our business, stock on hand for our wholesale customers and licence partners, some earlier phasing of stock deliveries between the first and second half of the year and the impact of the movement in foreign exchange rates.

The increase in trade and other receivables of £9.5m to £65.9m (2016: £56.4m) was driven by the growth in our wholesale and licensed businesses. Trade and other payables increased by £26.0m to £85.5m (2016: £59.5m) as a consequence of the timing of stock intake and other payments.

Capital expenditure of £19.4m (2016: £21.5m) comprised the costs of opening and refurbishing stores, concessions and outlets. It also reflected the on-going investment in business-wide systems to support our continued growth. We expect full year capital expenditure to be in line with previous guidance of £35m, subject to the timing of planned openings.

Borrowing Facilities

Since the half year, 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.

This 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.

Dividends

The Board has declared an interim dividend of 16.6p (2016: 14.8p), representing an increase of 12.2%, which will be payable on 17 November 2017 to shareholders on the register at the close of business on 20 October 2017.

People

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

As previously announced, on 29 September 2017 the Company appointed Anita Balchandani and Jennifer Roebuck as independent Non-Executive Directors. Anita and Jennifer will provide additional digital and retail experience to support the continued growth of the business. In addition, Anne Sheinfield stepped down as Non-Executive Director after more than 7 years in the role. The Board would like to thank Anne for her major contribution and dedicated service during her time with Ted Baker, in particular her stewardship of the Remuneration Committee.

Global Group Performance

*Operating contribution is defined as operating profit before exceptional2 items as a percentage of revenue

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

***Excludes license partner stores

Retail

Our retail channel comprises stores, concessions and e-commerce providing a seamless multichannel customer experience. We operate stores and concessions across the UK and Europe, North America and Asia and localised e-commerce sites in the UK, continental Europe, the US, Canada and Australia. We also operate e-commerce sites 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.

Retail sales were up 13.9% (9.2% in constant currency1) to £217.7m (2016: £191.1m), despite a challenging trading environment across some of our global markets. This growth was driven by continued investment across the retail channel in new stores and our e-commerce platforms. We are particularly pleased with our strong e-commerce performance, where sales grew 43.8% (40.7% in constant currency1) to £42.7m (2016: £29.7m) and represented 19.6% (2016: 15.5%) of total retail sales.

The total growth in retail sales of 13.9% (9.2% in constant currency1) exceeded the increase in average retail square footage of 4.9% to 400,313 sq ft (2016: 381,441 sq ft). Retail sales per square foot (excluding e-commerce) increased 3.3% (decrease of 1.5% in constant currency1) to £437 (2016: £423) demonstrating the changing customer behaviour with customers shopping both online and in store.

The retail gross margin remained constant at 65.6% (2016: 65.6%) as we continued to maintain the improved full price sell through experienced in the previous period.

Retail operating costs increased by 13.1% (11.5% in constant currency1) to £114.0m (2016: £100.8m), and as a percentage of retail sales decreased to 52.4% (2016: 52.8%). This was due to the decrease in dual running costs associated with the transition to our new single European distribution centre, partially offset by investment in online marketing costs to increase awareness of local e-commerce sites and some pre-opening costs in Asia.

Wholesale

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

Wholesale sales increased by 14.1% (10.2% in constant currency1) to £78.0m (2016: £68.4m) reflecting a good performance from our UK business and a strong result from our North American business.

The wholesale gross margin remained broadly consistent at 40.2% (2016: 40.1%).

Licence Income

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

Licence income was up 23.1% to £9.7m (2016: £7.9m) with both product and territorial licences performing well. There were notable performances from our product licensees in Eyewear, Fragrance and Skinwear and Suiting.

Collections

We are pleased with the positive reactions to our collections both in the UK and internationally. Ted Baker Womenswear performed well with sales up 19.1% to £177.4m (2016: £148.9m). Ted Baker Menswear delivered a good performance with sales increasing 7.0% to £118.3m (2016: £110.6m).

Womenswear represented 60.0% of total sales (2016: 57.4%) during the period and Menswear represented 40.0% of total sales (2016: 42.6%). 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.

Geographic Performance

United Kingdom & Europe

*Excludes licence partner stores

Retail sales in the period in the UK and Europe increased 11.0% (9.1% in constant currency1) to £145.6m (2016: £131.2m) despite challenging trading conditions.

E-commerce sales increased by 37.2% (36.5% in constant currency1) to £34.7m (2016: £25.3m) demonstrating how 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 23.8% (2016: 19.3%).

Sales per square foot excluding e-commerce sales decreased slightly in constant currency1. Our stores remain key to the success of the e-commerce business through initiatives such as order in store, click and collect as well as showcasing the brand.

During the period, we opened a store in London and one in Paris and outlets in Gloucester and Roermond. We opened further concessions with premium department stores in the UK, France, Germany and the Netherlands. We also opened two licence partner stores in Turkey. We are pleased with their performances and remain positive about growth opportunities for our brand in these markets.

Sales from our UK wholesale business increased 7.3% to £50.0m (2016: £46.6m). This reflected a good performance from sales to trustees, particularly those with a strong online customer proposition.

North America

*Excludes licence partner stores

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

Sales from our retail division increased by 18.8% (7.8% in constant currency1) to £60.7m (2016: £51.1m) driven by our continued expansion. Sales per square foot excluding e-commerce sales decreased in constant currency1 due to in part to higher levels of competitor promotional activity in the North American market and lower international tourism.

In the period, we opened new stores in Houston and Los Angeles and expanded our Miami Aventura store. We also closed a store in Los Angeles. In addition, we opened further licence partner concessions in Mexico.

Our e-commerce business delivered a strong performance with sales increasing by 56.8% (41.3% constant currency1) to £6.9m (2016: £4.4m). As a percentage of North America retail sales, e-commerce sales represented 11.4% (2016: 8.6%).

Sales from our North American wholesale business increased by 28.4% (16.7% in constant currency1), to £28.0m (2016: £21.8m) reflecting a strengthening relationship with key trustees that attract domestic customers across North America, further demonstrating increased brand recognition in this territory.

Middle East, Asia, Africa & Australasia

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

In Asia, we remain positive about the long term opportunities in this territory. Retail sales in Asia increased 29.5% (19.6% in constant currency1) to £11.4m (2016: £8.8m). During the period, we opened a store in Shanghai and relocated our Tokyo store, we also opened concessions in Japan and South Korea.

Our e-commerce concession businesses in China and Japan performed well with sales of £1.1m which as a percentage of Asian retail sales represented 9.6%.

Our licensed stores across the Middle East, Asia and Africa continued to perform well. Our existing licence partners opened new stores in Dubai, Kuwait, Lebanon, Qatar and Saudi Arabia. As at 12 August 2017, we operated a total of 53 partner stores (2016: 51).

The joint venture with our Australian licence partner, Flair Industries Pty Ltd, opened a new store in Bondi. As at 12 August 2017, we operated 10 stores in Australasia (2016: 9 stores).

Current Trading and Outlook

Retail

In the UK and Europe, we have continued our expansion with concession openings in Germany. We plan to open new stores in Oxford and London Luton Airport and further concessions in the UK, Germany and Spain later this year.

In North America, we have continued our expansion with six concession openings in Canada. We remain focused on developing our presence further in North America with plans to open a store in Montreal and an outlet in Chicago.

In Asia, we have closed our concessions in South Korea and transitioned our retail operations to a distributor with local knowledge and experience to drive growth in this country.

Wholesale

The good performance in our wholesale business in the first half of the year is expected to continue for the remainder of the year. As a result, we anticipate reporting high single digit sales growth (in constant currency1) for the full year.

Licence Income

Our product and territorial licences continue to perform well. We have opened a store in Kuwait with further store openings planned in Qatar, Malaysia, Mexico and our first store in India later this year.

Outlook

The Ted Baker brand continues to develop and expand as a global lifestyle brand across markets and distribution channels. We have a clear strategy for the development of the brand across both established and newer markets. This is underpinned by our controlled distribution as well as the design, quality and attention to detail that are at the core of everything we do.

Despite the continued challenging external market conditions, the Board is confident of making further progress for the full year in line with its expectations. We intend to make our next trading update, covering the period since the start of the second half of the financial year, in mid-November.

David Bernstein CBE

Non-Executive Chairman

10 October 2017

NOTES:

1Constant currency variances are calculated by applying the foreign exchange rates for the 28 weeks ended 13 August 2016 to results in overseas subsidiaries for the 28 weeks ended 12 August 2017 to remove the impact of exchange rate fluctuations.

2Exceptional items are excluded from profit before tax and exceptional items due to these items being one-off and material in nature.

3Exceptional items are excluded from adjusted basic earnings per share due to these items being one-off and material in nature.

The Directors believe measures 1 -3 provide a consistent and comparable view of the underlying performance of the Group's ongoing business.

Condensed Group Income Statement

For the 28 weeks ended 12 August 2017

Condensed Group Statement of Comprehensive Income

For the 28 weeks ended 12 August 2017

Condensed Group Statement of Changes in Equity - Unaudited

For the 28 weeks ended 12 August 2017

Condensed Group Statement of Changes in Equity - Unaudited

For the 28 weeks ended 13 August 2016

Condensed Group Statement of Changes in Equity - Audited

For the 52 weeks ended 28 January 2017

Condensed Group Balance Sheet

At 12 August 2017

Condensed Group Cash Flow Statement

For the 28 weeks ended 12 August 2017

Notes to the Condensed Interim Financial Statements

For the 28 weeks ended 12 August 2017

1. Basis of preparation

a. Reporting entity

Ted Baker Plc ("the Company") 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 12 August 2017 comprise the Company and its subsidiaries (together referred to as the "Group").

The Group financial statements as at, and for the 52 weeks ended 28 January 2017 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.tedbakerplc.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 28 January 2017. These interim financial statements were approved by the Board of Directors on 10 October 2017.

The comparative figures for the 52 weeks ended 28 January 2017 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (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. These sections address whether proper accounting records have been kept, whether the Company's accounts are in agreement with these records and whether the auditor has 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 auditor 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 28 January 2017, approved by the Board on 23 March 2017, 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 the financial year ending 27 January 2018.

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

The accounting policies adopted in these interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the 52 weeks ended 28 January 2017. Adoption of amendments to published standards and interpretations effective for the Group for the 28 weeks ended 12 August 2017 have had no significant impact on the financial position and performance of the Group.

2. Segment information

Segment revenue and segment result

3. Exceptional income and expenses

The directors believe that the profit before exceptional items and the adjusted earnings per share measures provide additional useful information for shareholders on the underlying performance of the business. These measures are consistent with how underlying business performance is measured internally. The exceptional profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies.

Exceptional income in the 28 weeks ended 12 August 2017 of £1.1m related to the release of the provision for the Group's legacy warehouses following assignment of the leases.

There were no exceptional items in the 28 weeks ended 13 August 2016.

Exceptional costs 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.

4. Finance income and expenses

5. Earnings per share