6th Oct 2005 07:00
Ted Baker PLC06 October 2005 6 October 2005 Ted Baker plc Interim Results for the 28 weeks ended 13 August 2005 Highlights • Group revenue up 16.8% to £57.2m (2004: £49.0m) • Retail sales up 16.6% to £35.7m (2004: £30.7m) • Wholesale sales up 17.1% to £21.4m (2004: £18.3m) • Licence income in line with last year at £1.8m (2004: £1.8m) • Profit before tax increased by 12.4% to £6.3m (2004 restated: £5.6m) • Basic earnings per share up 8.7% at 10.0p (2004 restated: 9.2p) • Interim dividend up 11.4% to 3.9p per share (2004: 3.5p per share) • US expansion progressing well with the successful launch in June of our ' Best in Show' store in Los Angeles, the extension to our New York store and the planned opening of a new store in Dallas in November. • First Asian territorial licence signed with the Li & Fung group of companies for retail and wholesale distribution in Hong Kong, Macau, China, Taiwan and South Korea. Commenting, Ray Kelvin, Chief Executive, said: "We are pleased to report strong first-half results despite a tough UK retailenvironment. Both turnover and profits have increased highlighting thecontinuing appeal of the brand as well as the resilience of our multi-channeldistribution strategy. Our expansion into the United States is progressing wellwith the successful launch of a "Best in Show" store in Los Angeles in June. We are delighted to report that we have signed our first territorial licence inAsia, covering, Hong Kong, Macau, China, Taiwan and South Korea. This representsa significant step in our long-term strategy to develop a global brand. We are very encouraged by the positive reaction from our customers to the autumn/ winter collections, although we have not been immune to the recent slowdown inthe UK retail market. While the Christmas period remains key to our overallperformance, the Board remains confident of a successful outcome for the year." Enquiries:Ted Baker plc Tel: 020 7796 4133 on 6 October 2005 onlyRay Kelvin, Chief Executive Tel: 020 7255 4800 thereafterLindsay Page, Finance Director Hudson Sandler Tel:020 7796 4133Noemie de AndiaSandrine Gallien Visit Ted's new e-commerce site at www.tedbaker.co.uk Notes to Editors Ted Baker is a leading UK fashion brand for men and women with three distinctdistribution channels: retail, wholesale and licensing. We pursue a policy ofcareful brand management and growth by extending the breadth of our collections,controlling our three distribution channels and developing our presence in keyoverseas markets, especially the United States. We do not advertise but rathersupport our brand profile by opening stores in selected retail locations andcultivating the unique personality of our brand and unrivalled attention todetail in our collections. Our innovative stance is illustrated by thesuccessful development of the "Endurance" suits collection which uses highperformance fabrics and cutting edge designs perfectly adapted to the Ted Bakercustomers' demanding lifestyles. CHAIRMAN'S STATEMENT I am pleased to report a strong first half performance despite a marked slowdownin the UK retail environment. Both turnover and profits are significantly up onlast year, reflecting the strength of the Ted Baker brand and the continuingappeal of our innovative collections. During the period we continued to build onour presence in the United States with the successful opening of a 'Best inShow' store in Los Angeles and we have made a significant step forward in ourglobal expansion plans with the signing of our first Asian licence. FINANCIAL RESULTS Group revenue increased by 16.8% to £57.2m (2004: £49.0m) in the 28 weeks ended13 August 2005, with increases in both the retail and wholesale businesses. The retail gross margin was broadly in line with last year while the wholesalegross margin was ahead by 1% due to buying efficiencies, particularly in some ofour newer collections. This resulted in an improvement in the composite grossmargin at 57.0% (2004: 56.8%). Distribution costs increased by 22.2% compared to last year, largely reflectingthe increase in our retail selling space. Administration expenses increased by11.0% compared to last year, which included the expansion of the head office tothe first floor of the Ugly Brown Building to support the growth of the brand. Operating profit increased by 9.7% to £6.2m (2004 restated: £5.7m). Profitbefore tax for the period improved by 12.4% to £6.3m (2004 restated: £5.6m). Theeffective tax rate of 32.0% compares to a rate of 29.7% for the same period lastyear, which benefited from one off deductions relating to the exercise of shareoptions. Basic earnings per share increased by 8.7% to 10.0p (2004 restated:9.2p). DIVIDENDS The Board has declared an increased interim dividend of 3.9p per share (2004:3.5p) payable on 25 November 2005 to shareholders on the register at the closeof business on 4 November 2005. RETAIL Retail sales were up 16.6% to £35.7m (2004: £30.7m). Gross margins remainedstrong and were broadly in line with last year at 65.9% (2004: 66.1%). Average retail square footage increased by 24.6% to 131,769 sq.ft. (2004:105,786 sq.ft.) as we expanded our retail space both in the UK and overseas.Sales per square foot were down at £271 (2004: £290) due to a significantincrease in retail space as a result of relocations and new openings, which havelower than average trading densities. Our retail expansion in the United States continued with the opening of our 'Best in Show' store in Los Angeles in June. The 3,310 sq.ft. store isquintessentially British and showcases the best of the menswear and womenswearcollections. The initial reaction to this store has been very positive. Ourother stores in the United States continue to trade in line with ourexpectations, apart from Miami, which has continued to disappoint due to theimmaturity of the shopping centre in which it is located. We have reached anagreement to exit this location in early 2006. There will be no profit impactassociated with this exit as the assets were fully written off in the previousfinancial year. WHOLESALE The wholesale division continued to grow strongly in the first half andrepresented 37.5% of group sales in the period (2004: 37.4%). Wholesale salesincreased by 17.1% to £21.5m (2004: £18.3m) reflecting growth across thecollections, particularly menswear and some earlier phasing of autumn / winterdeliveries. Gross margins were above last year at 42.1% (2004: 41.1%) due to buyingefficiencies, particularly in some of our newer ranges. LICENCE INCOME Our licence income was in line with last year at £1.8m (2004: £1.8m) reflectingthe impact of a weaker dollar on the US licence income and a change in phasingof licence income between the first and second half. We anticipate thatlicence income will be ahead of last year for the full financial year as thephasing unwinds. We are particularly pleased with the continued development of our eyewearlicence as well as the progress made by our partner in Australia and NewZealand. COLLECTIONS Sales of Ted Baker Menswear in the period enjoyed a strong performanceincreasing by 22.5% reflecting the continuing expansion of our menswearcollections and the success of the Endurance range. Menswear now represents56.3% of sales (2004: 53.8%). Womenswear increased by 15.4% and represented38.1% of our total sales (2004: 38.5%). Sales of other collections, comprisingChildrenswear, Homeware and Footwear, were £3.2m (2004: £3.8m) and thisreduction mainly reflected a tough branded clothing market for childrenswear.Other collections now represent 5.6% of sales (2004: 7.7%). IFRS For the year ending 28 January 2006, the Group will be required to prepare itsfinancial statements in accordance with International Financial ReportingStandards (IFRS). Accordingly, the Group's interim results for the 28 weeksended 13 August 2005 have been prepared and reported under IFRS. The adoption of IFRS represents an accounting change only and does not affectthe underlying business or cash flows. Details of the changes may be found innote five of the interim financial statements. The most significant change hasbeen in the recognition of a fair value charge for share options, which hasresulted in an additional net charge of £0.3m in the first half of the year. Weestimate that the full year net charge will amount to £0.5m. FIRST ASIAN LICENSING AGREEMENT We are very pleased to announce that we have signed our first Asian licenceagreement with Li & Fung Licensing Limited, part of Li & Fung (Retailing)Limited, a member of Li & Fung group of companies ('The Li & Fung Group'). TheLi & Fung Group operates three distinctive businesses - export trading, retailand distribution - in 40 countries and employs over 12,000 people worldwide.The licence agreement grants retail and wholesale distribution rights for theTed Baker brand in Hong Kong, Macau, China, Taiwan and South Korea. Theagreement, which is subject to minimum guarantees and distribution targets, runsto 31 December 2011, and may be renewed for a further five years subject tospecific performance criteria. We are delighted to be partnering with Li & Fung Licensing Ltd on thedevelopment of our Asian business and although the financial impact of theagreement will not be material in the short term, it represents significantprogress in our strategy to develop Ted Baker as a global brand. CURRENT TRADING AND PROSPECTS In the seven weeks to 1 October 2005, retail sales were 4.7% ahead of the sameperiod last year. We are encouraged by the positive reaction of our customersto our autumn / winter collections although we have not been immune to therecent slowdown in the UK retail market. Wholesale sales were 2.7% ahead of thesame period last year, reflecting in part the earlier phasing of deliveries inthe first half. We have recently launched a new specialist classic shirt collection, Ted BakerArchive, which combines tradition with a contemporary edge. The initialreaction has been encouraging. Our US expansion remains at the heart of our strategy. We are pleased toannounce the extension of our New York store in Soho to include a 1,700 sq.ft.dedicated area for womenswear and we will open a new store in North Park Centre,in Dallas in November. We continue to consider further opportunities within theUS retail market. While the Christmas period remains key to our overall performance, the Boardremains confident of a successful outcome for the year. Robert Breare6 October 2005 Unaudited consolidated income statementFor the 28 weeks ended 13 August 2005 28 weeks ended 28 weeks ended 52 weeks ended 13 August 14 August 29 January 2005 2004 2005 Note £'000 £'000 £'000 Revenue 57,182 48,968 105,753Cost of sales (24,603) (21,170) (43,357)Gross profit 32,579 27,798 62,396 Distribution costs (19,704) (16,118) (34,417)Administration expenses (8,757) (7,886) (15,089)Other operating income 2,088 1,862 3,515 Operating profit 6,206 5,656 16,405Financial income 2 99 35 68Financial expenses 2 (48) (125) (221)Profit before tax 6,257 5,566 16,252Income tax expense (2,002) (1,655) (4,884)Profit for the period 4,255 3,911 11,368 Attributable to:Equity shareholders 4,263 3,898 11,347Minority interests (8) 13 21Profit for the period 4,255 3,911 11,368 Earnings per share 3 Basic 10.0p 9.2p 26.6pDiluted 9.7p 9.1p 26.0p Unaudited consolidated statement of changes in equityFor the 28 weeks ended 13 August 2005 Share Share Other Retained Minority Total capital premium reserves earnings interest equity £'000 £'000 £'000 £'000 £'000 £'000 Balance at 29 January 2005 2,149 6,983 - 27,738 (40) 36,830Transitional IFRS adjustments - - 286 - - 286Balance at 30 January 2005 2,149 6,983 286 27,738 (40) 37,116 Share option charge - - - 337 - 337Deferred tax on share options - - - 222 - 222Change in fair value - - (66) - - (66) Change in hedge reserve - - 193 - - 193Exchange rate movement - - - 26 - 26Profit for the period - - - 4,263 (8) 4,255Purchase of own shares - - - (447) - (447)Shares vested - - - 229 - 229Gain on sale of own shares - - - 41 - 41Dividends paid - - - (3,138) - (3,138)Balance at 13 August 2005 2,149 6,983 413 29,271 (48) 38,768 Share Share Other Retained Minority Total capital premium reserves earnings interest equity £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2004 2,131 5,358 - 20,086 (61) 27,514 Share option charge - - - 322 - 322Deferred tax on share options - - - 177 - 177Exchange rate movement - - - 2 - 2Profit for the period - - - 3,898 13 3,911Shares issued 17 1,500 - (1,040) - 477Shares vested - - - 110 - 110Dividends paid - - - (2,746) - (2,746)Balance at 14 August 2004 2,148 6,858 - 20,809 (48) 29,767 Unaudited consolidated balance sheetAt 13 August 2005 13 August 14 August 29 January Note 2005 2004 2005 £'000 £'000 £'000Non-current assets Intangible assets 501 495 506Property, plant and equipment 18,021 15,128 17,346Deferred income tax assets 1,512 591 1,190Available-for-sale financial assets 362 - - 20,396 16,214 19,042Current assets Inventories 24,887 19,849 22,725Trade and other receivables 12,925 11,586 8,762Derivative financial assets 118 - -Cash and cash equivalents 4,954 5,593 9,603 42,884 37,028 41,090Total assets 63,280 53,242 60,132 Current liabilities Trade and other payables (18,023) (14,689) (15,806)Borrowings (1,308) (5,238) -Current tax payable (3,722) (3,068) (6,123)Derivative financial liabilities (86) - - (23,139) (22,995) (21,929)Non-current liabilities Borrowings (750) - (750)Deferred tax liabilities (623) (480) (623) (1,373) (480) (1,373)Total liabilities (24,512) (23,475) (23,302) Net assets 38,768 29,767 36,830 Equity Share capital 2,149 2,148 2,149Share premium account 6,983 6,858 6,983Other reserves 413 - -Retained earnings 29,271 20,809 27,738Total equity attributable to equityholders of the parent 38,816 29,815 36,870Minority interests (48) (48) (40)Total equity 38,768 29,767 36,830 Unaudited consolidated cash flow statementFor the 28 weeks ended 13 August 2005 28 weeks ended 28 weeks ended 52 weeks ended 13 August 14 August 29 January 2005 2004 2005 Note £'000 £'000 £'000Cash flows from operating activitiesCash generated from operations 4 2,553 2,821 18,535Interest paid (38) (101) (231)Income taxes paid (2,674) (3,142) (4,344)Net cash generated from operatingactivities (159) (422) 13,960 Cash flows from investing activitiesPurchases of property, plant & equipment (2,675) (2,912) (7,527)Proceeds from sale of property, plant andequipment 35 - (39)Interest received 43 30 59Net cash from investing activities (2,597) (2,882) (7,507) Cash flow from financing activities Proceeds from issue of ordinary shares - 477 550Purchase of own shares (447) - -Shares vested 229 110 380Loan repayment - - (4,000)Increase in borrowings - - 750Dividends paid (3,138) (2,746) (4,250)Net cash from financing activities (3,356) (2,159) (6,570) Net decrease in cash and cash equivalents (6,112) (5,463) (117) Reconciliation of cash flows to movementin net funds / (debt)Net funds at start of period 8,853 5,811 5,811Net decrease in cash and cash equivalents (6,112) (5,463) (117)Loan repayment - - 4,000Increase in borrowings - - (750)Non cash movements 42 - 5Exchange rate movement 113 7 (96)Net funds at end of period 2,896 355 8,853 Notes to the interim financial statementsFor the 28 weeks ended 13 August 2005 1. Basis of preparation EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the Company, for the 52 weeks ending 28 January 2006, beprepared in accordance with International Financial Reporting Standards (IFRSs)adopted for use in the EU ("adopted IFRSs"). This interim financial information has been prepared on the basis of therecognition and measurement requirements of adopted IFRSs as at 13 August 2005that are effective (or available for early adoption) at 28 January 2006, theGroup's first annual reporting date at which it is required to use adoptedIFRSs. Based on these adopted IFRSs, the directors have applied the accountingpolicies, as set out in note 5, which they expect to apply when the first annualIFRS financial statements are prepared for the 52 weeks ending 28 January 2006. The adopted IFRSs that will be effective (or available for early adoption) inthe annual financial statements for the 52 weeks ending 28 January 2006 arestill subject to change and to additional interpretations and therefore cannotbe determined with certainty. Accordingly, the accounting policies for thatannual period will be determined when the annual financial statements areprepared for the 52 weeks ending 28 January 2006. Due to the transition from UK Generally Accepted Accounting Principles (UK GAAP)to IFRS, the comparative figures for the 52 weeks ended 29 January 2005 for TedBaker PLC are not the statutory accounts for that period. The financialstatements for that period prepared under UK GAAP have been delivered to theRegistrar of Companies. The auditors' report on these financial statements wasunqualified and did not include a statement under Section 237 (2) or (3) of theCompanies Act 1985. 2. Financial income and expenses 28 weeks 28 weeks 52 weeks ended ended ended 13 August 14 August 29 January 2005 2004 2005 £'000 £'000 £'000Financial income- Interest receivable 46 35 68- Exchange rate movement 53 - - 99 35 68Financial expenses- Interest payable (48) (125) (221) (48) (125) (221) 3. Earnings per share (unaudited) 28 weeks 28 weeks 52 weeks ended ended ended 13 August 14 August 29 January 2005 2004 2005 No No NoNumber of shares:Weighted number of ordinary shares outstanding 42,504,123 42,289,521 42,375,426Effect of dilutive options 1,159,850 223,918 991,840Weighted number of ordinary shares outstanding- diluted 43,663,973 42,513,439 43,367,266 Earnings: £'000 £'000 £'000Profit attributable to equity shareholders' 4,263 3,898 11,347Less: dividends on own shares (19) (24) (66)Profit - basic and diluted 4,244 3,874 11,281 Basic earnings per share 10.0p 9.2p 26.6pDiluted earnings per share 9.7p 9.1p 26.0p 4. Cash generated from operations 28 weeks ended 28 weeks ended 52 weeks ended 13 August 14 August 29 January 2005 2004 2005 £'000 £'000 £'000 Profit for the period 4,255 3,911 11,368Adjusted for:- Tax 2,002 1,655 4,884- Depreciation 2,041 1,690 3,451- (Profit) / loss on disposal of property, plant & equipment 2 (10) 152- Impairment of fixed assets - - 381- Share option charge 337 322 605- Net finance costs 2 90 153- Change in hedge reserve 51 - -Changes in working capital- Increase in inventories (2,076) (2,526) (5,457)- Increase in trade and other receivables (4,489) (4,524) (1,554)- Increase in trade and other payables 428 2,213 4,552Cash generated from operations 2,553 2,821 18,535 5. Adoption of IFRS a. Revised accounting policies Revised accounting policies adopted as a result of the application of IFRS aregiven below. All other accounting policies applied are consistent with thosedisclosed in the financial statements of Ted Baker PLC for the 52 weeks ended 29January 2005. The Group has taken advantage of certain exemptions under IFRS 1 (first timeadoption of International Financial Reporting Standards) to assist in thetransition to reporting under IFRS, which are noted below. IFRS 2 - Share based payments In accordance with IFRS 2, the Group is required to recognise an expense for thefair value of share options issued at the date of grant. The fair value iscalculated using the Black Scholes Model and the expense is recognised over thevesting period of the scheme. The Group has elected to take the exemption toonly apply the measurement criteria of IFRS 2 to options granted after 7November 2002. Deferred tax is calculated on the basis of the difference betweenmarket price at the balance sheet date and the option exercise price. The excessof the deferred tax over the cumulative P&L charge at the prevailing tax rate isrecognised in equity. IFRS 3 - Business combinations The Group has elected not to apply IFRS 3, Business Combinations retrospectivelyto acquisitions that took place before the date of transition. IAS 10 - Proposed dividends Dividend distributions to the Company's shareholders are recognised asliabilities in the Group's financial statements in the period in which thedividends are approved by the Company's shareholders. IAS 12 - Income taxes Income tax on the profit and loss for the year comprises current and deferredtax. Current tax payable is provided on taxable profits using tax rates at thebalance sheet date. Deferred tax is provided using the balance sheet liabilitymethod, providing for temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and the amounts used fortaxation purposes. A deferred tax asset is only recognised to the extent that itis probable that future taxable profits will be available against which theasset can be utilised. IAS 17 - Leasing Payments made under operating leases are charged to the income statement on astraight-line basis over the period of the lease. Inducements to enter into alease are recognised over the lease term. Premiums paid to enter into leases arecapitalised and classified as an intangible asset. IAS 21 - Cumulative translation differences The Group has elected to take the exemption in IFRS 1 allowing all broughtforward translation gains and losses to be set to zero. IAS 32 and 39 - Financial instruments The Group has elected to take the exemption not to restate comparativeinformation for financial instruments for IAS 32. As a result, the comparativeinformation for the 28 weeks ended 14 August 2004 and the 52 weeks ended 29January 2005 is as previously reported under UK GAAP. Financial instruments thatare documented as part of an effective hedge of future cash flows are recogniseddirectly in equity and recycled to the income statement when the underlying cashflows occur, or are no longer expected to occur. Other financial instruments held by the Group are classified as being availablefor sale and are stated at fair value, with any resultant gain or loss beingrecognised in equity. When these investments are derecognised, the cumulativegain or loss is recognised in the income statement. b. Reconciliation of UK GAAP to IFRS profit 28 weeks 52 weeks ended ended 14 ended 29 August 2004 January 2005 £'000 £'000 Profit before tax as previously reported under UK GAAP 5,841 16,762IFRS Adjustments:- Share based payments (275) (510)Profit before tax in accordance with IFRS 5,566 16,252 Taxation as previously reported under UK GAAP (1,752) (5,066)Tax effect of IFRS adjustment 97 182 Profit for the period in accordance with IFRS 3,911 11,368 c. Reconciliation of equity under IFRS to UK GAAP 31 January 14 August 29 January 2004 2004 2005 £'000 £'000 £'000 Total equity previously reported under UK GAAP 24,470 27,795 32,407- Prior period adjustment UITF 38 under UK GAAP - (157) -Total equity as restated under UK GAAP 24,470 27,638 32,407IFRS Adjustments:- Deferred Taxation 317 591 1,190- Dividend recognition 2,727 1,491 3,138- Other - 47 95 Total equity in accordance with IFRS 27,514 29,767 36,830 6. Interim report This interim report will be sent by post to all registered shareholders. Copieswill be available to the public from the Company Secretary at the registeredoffice: Ted Baker PLC, The Ugly Brown Building, 6a St Pancras Way, London NW1OTB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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