Triumph Bancorp Inc
Annual Report 2011

Plain-text annual report

REPORT & ACCOUNTS 2010/11 Contents DIRECTORS’ REPORT: OVERVIEW 05 Chairman’s Statement 07 Business Review 10 12 Financial Review Principal Risks and Uncertainties DIRECTORS’ REPORT: GOVERNANCE 17 Corporate Governance Statements 20 Sustainability and The Environment 21 People DIRECTORS’ REPORT: OTHER STATUTORY DISCLOSURES 25 26 31 34 35 Board of Directors Directors’ Remuneration Report Other Disclosures Statement of Directors’ Responsibilities Independent Auditors’ Report to the Members of Ted Baker PLC FINANCIAL STATEMENTS Group and Company Primary Financial Statements Notes to the Financial Statements Five Year Summary 41 47 77 Ted’s advisers Registered Office: The Ugly Brown Building, 6a St. Pancras Way, London NW1 OTB Secretary: Charles Anderson ACMA Financial Advisers and Stockbrokers: Espirito Santo Investment Bank, 10 Paternoster Square, London, EC4M 7AL Solicitors: Jones Day, 21 Tudor Street, London EC4Y ODJ Auditors: KPMG Audit Plc, 15 Canada Square, Canary Wharf, E14 5GL Bankers: Barclays Bank PLC, 1 Churchill Place, London E14 5HP The Royal Bank of Scotland PLC, 62-63 Threadneedle Street, London EC2R 8LA Registrars: Capita Registrars, 34 Beckenham Road, Beckenham, Kent BR3 4TU Ted Baker PLC - Registered in England No: 03393836 Ted Baker Report and Accounts 2010 / 2011 Ted ’s Finest Materials Character, style and originality are key ingredients of the Ted Baker brand, and Ted’s unique imagination and bespoke attitude is reflected across all of his collections. When it comes to choosing the finest fabrics for his Phormalwear suiting range, all roads lead to Italy – and Ted always prefers to use 100% Italian wool or, for Pashion (illustrated here), mohair and silk blends. Ted Baker Report and Accounts 2009 / 2010 00 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OVERVIEW Cairman’s Statement I am delighted to report a strong performance across the Group, which resulted in a 14.7% increase in Group revenue to £187.7m and a 24.2% increase in profit before tax to £24.2m. This result reflects the strength of the Ted Baker brand and collections and the growing international reach of our multi-channel distribution strategy. The retail division delivered an increase in revenue of 11.9% to £152.7m on a 7.4% increase in average retail square footage. Trading in the UK was good and we were particularly pleased by the strong improvement in trading in our overseas markets. Wholesale sales for the Group increased by 28.9% to £35.0m. This was driven by the re-launch of our US wholesale business, under our own management, and a good performance in our UK wholesale business, which included growth in our wholesale export business. Licence income from our product and territorial licences increased by 13.4% to £6.2m and included a full contribution in the year from our US product licences. Results Group revenue for the 52 weeks ended 29 January 2011 increased by 14.7% to £187.7m (2010: £163.6m). The composite gross margin increased to 61.7% (2010: 61.1%) reflecting buying efficiencies and less promotional activity in our overseas markets. Profit before tax increased by 24.2% to £24.2m (2010: £19.5m) and by 19.6% excluding the impairment charge of £0.8m in the previous year. Basic earnings per share increased by 27.3% to 41.5p (2010: 32.6p). The Group has a strong balance sheet and continues to maintain its focus on cash management. Net cash generated from operating activities during the year was £18.1m (2010: £21.1m). Dividends The Board is recommending a final dividend of 14.3p per share, making a total for the year of 20.6p per share (2010: 17.15p per share), an increase of 20.1% on the prior year. Subject to approval the final dividend will be paid on 17 June 2011 to shareholders on the register on 13 May 2011. People This strong performance is testament to the dedication and commitment of the Ted Baker team. The passion and enthusiasm of our teams around the world is a key factor in our success and continuing development. On behalf of the Board, I would like to thank all of my colleagues for their contribution during the year. On 15 June 2010 we were delighted to announce the appointment to the Board of Anne Sheinfield as an Independent Non-Executive Director. Anne is a commercial lawyer with 20 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. Current Trading and Outlook We anticipate that 2011 will be a challenging year given the economic outlook, but are pleased by the positive reaction to our Spring/Summer collections. There has been much discussion on the pressures on consumer spending, but we believe that we are well positioned to meet these challenges due to the strength of the Ted Baker brand and collections. We continue to manage the risks arising from exchange rate fluctuations and rising input prices in order to minimise the impact on our business. Retail Following a strong post-Christmas sale period, we entered the new season with a clean stock position. Although retail trading at the start of the new financial year was subdued, recent trends are more encouraging. We opened a further store in Hong Kong in February and will be opening a second store in Paris and a store in the Trafford Centre, Manchester in March. We plan to open concessions through leading department stores in the US, Spain and Portugal during the first half of the financial year. 05 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OVERVIEW Cairman’s Statement continued Wholesale Trading in our UK wholesale business has started well and forward order commitments are in line with our expectations. In the US, our wholesale business continues to perform well and we will continue to develop and grow this business. Licence Income Our product and territorial licences continue to perform in line with our expectations. We plan to open a store in Auckland, New Zealand with our joint venture partner in the second half of the financial year. Our other territorial licence partners in the Middle East and Asia continue to seek further opportunities to expand the Ted Baker brand in those territories. Group The Ted Baker brand continues to perform well in an uncertain trading environment and we believe that we are well placed to deal with the challenges ahead. We continue to ensure that our costs and commitments are controlled and in line with the trends anticipated for 2011. We remain focused on our multi-channel distribution strategy and, with our strong balance sheet, will continue to expand the Ted Baker brand in existing and new international markets. We intend to make our next interim management statement, covering trading since the start of the financial year, on 14 June 2011. Robert Breare Non-Executive Chairman 24 March 2011 06 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OVERVIEW Business Review Ted Baker is a leading designer brand that operates through three main distribution channels: retail; wholesale; and licensing. We offer a wide range of collections including: Menswear; Womenswear; Global; Phormal; Endurance; Born; Accessories; Lingerie and Sleepwear; Childrenswear; Fragrance and Skinwear; Footwear; Neckwear; Eyewear; and Watches. Our Business The brand has grown steadily from its origins as a single shirt specialist store in Glasgow to the global business it is today. We distribute through our own and licensed retail outlets, leading department stores and selected independents in Europe, the US, the Middle East, Asia and Australasia. Our strategy is to become a leading global designer brand, based on three main elements: (cid:116)(cid:1) (cid:68)(cid:80)(cid:79)(cid:84)(cid:74)(cid:69)(cid:70)(cid:83)(cid:70)(cid:69)(cid:1) (cid:70)(cid:89)(cid:81)(cid:66)(cid:79)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1) (cid:80)(cid:71)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1) (cid:53)(cid:70)(cid:69)(cid:1) (cid:35)(cid:66)(cid:76)(cid:70)(cid:83)(cid:1) (cid:68)(cid:80)(cid:77)(cid:77)(cid:70)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:15)(cid:1) 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; (cid:116)(cid:1) (cid:68)(cid:80)(cid:79)(cid:85)(cid:83)(cid:80)(cid:77)(cid:77)(cid:70)(cid:69)(cid:1)(cid:69)(cid:74)(cid:84)(cid:85)(cid:83)(cid:74)(cid:67)(cid:86)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:73)(cid:83)(cid:80)(cid:86)(cid:72)(cid:73)(cid:1)(cid:85)(cid:73)(cid:83)(cid:70)(cid:70)(cid:1)(cid:78)(cid:66)(cid:74)(cid:79)(cid:1)(cid:68)(cid:73)(cid:66)(cid:79)(cid:79)(cid:70)(cid:77)(cid:84)(cid:27)(cid:1)(cid:83)(cid:70)(cid:85)(cid:66)(cid:74)(cid:77)(cid:28)(cid:1) wholesale; and licensing. We consider each new opportunity to ensure it is right for the brand and will deliver margin led growth; and (cid:116)(cid:1) (cid:68)(cid:66)(cid:83)(cid:70)(cid:71)(cid:86)(cid:77)(cid:77)(cid:90)(cid:1) (cid:78)(cid:66)(cid:79)(cid:66)(cid:72)(cid:70)(cid:69)(cid:1) (cid:69)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1) (cid:80)(cid:71)(cid:1) (cid:80)(cid:87)(cid:70)(cid:83)(cid:84)(cid:70)(cid:66)(cid:84)(cid:1) (cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:84)(cid:15)(cid:1) 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 operate stores and concessions across the UK, Europe, US and Hong Kong and an on-line business based in the UK, primarily serving the UK and Europe, with a separate site dedicated to the Americas. The retail division delivered a strong performance with sales up 11.9% to £152.7m (2010: £136.5m). Average retail square footage rose by 7.4% over the year to 225,828 sq ft (2010: 210,238 sq ft). Total retail square footage at 29 January 2011 was 229,026 sq ft (2010: 217,733 sq ft), representing an increase of 5.2% on the prior year. Retail sales per square foot rose 2.5% from £632 to £648. The retail gross margin was 65.5% (2010: 64.9%). This increase was driven by buying efficiencies and less promotional activity in our overseas markets during the year. Retail operating costs were in line with our expectations. The increase in these costs above the increase in average selling space is a result of the new space added towards the end of the year that will mature over time. This, combined with the improvement in sales and gross margin, resulted in a slight reduction in retail operating contribution from 18.3% to 18.0%. Wholesale We currently operate a wholesale business in the UK serving 15 countries across Europe and a wholesale business in the US. Group wholesale sales rose by 28.9% to £35.0m (2010: £27.1m) and the gross margin increased to 44.8% (2010: 41.9%) reflecting buying efficiencies and the mix of product sales. The growth in sales largely reflects the encouraging start to our US wholesale business and a good performance from our UK wholesale business, which includes our growing wholesale export business. 07 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OVERVIEW Business Review continued territorial and product Licence income We operate both licences. Our territorial licences cover the Middle East, Asia and Australasia, through which we operate licensed retail stores and, in some territories, wholesale operations. Our product licences cover lingerie & sleepwear, perfume & fragrance, watches, footwear, eyewear, neckwear and childrenswear. Licence income was up 13.4% to £6.2m (2010: £5.5m). Excluding the effect of our US product licences, underlying licence income increased by 6.4%. We are pleased with the performances from our territorial and product licences during the period. We have seen continued good performances from our collections with product licence partner, Debenhams, with whom we have an exclusive childrenswear collection and, B by Ted Baker, a new and exclusive lingerie & sleepwear collection. Our US product licences included 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 A good performance from Ted Baker Menswear was reflected by an increase in sales of 11.1% to £98.2m (2010: £88.4m). Menswear represented 52.3% of total sales (2010: 54.0%). Ted Baker Womenswear delivered another strong performance with sales up 19.0% to £89.5m (2010: £75.2m). Womenswear represented 47.7% of total sales (2010: 46.0%). 08 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OVERVIEW Geographic Performance United Kingdom and Europe Sales in our UK and Europe retail division were up 8.2% to £136.7m (2010: £126.4m). A good performance in the UK was supported by improved trading conditions in Europe. Average square footage rose by 4.1% over the period to 188,035 sq ft (2010: 180,606 sq ft). At 29 January 2011, total retail square footage was 187,043 sq ft (2010: 186,024 sq ft) representing an increase of 0.5%. Retail sales per square foot increased 2.1% from £680 to £694. During the year we opened seven further concessions in Eire, ten concessions across Italy and one further concession in the UK, offset by three concession closures in the UK and one in Eire. At 29 January 2011 we operated 33 stores (2010: 33), 165 concessions (2010: 151) and 10 outlet stores (2010:10). Middle East, Asia and Australasia We continue to develop the Ted Baker brand across the Middle East, Asia and Australasia working closely with our partners in those territories to ensure the visual merchandising of the stores and the training of the teams reflect the Ted Baker culture. As at 29 January 2011 we operated a total of 23 stores (2010: 20 stores) across these territories. We opened stores in the Dubai Marina Mall, Dubai, and the Abu Dhabi Marina Mall, Abu Dhabi during the year through our licence partner, RSH Limited. We opened a store in November in the 360 Degree Mall, Kuwait, with our licence partner in that territory, Al-Mutawa and Al-Khatib Retail Company, and are encouraged by early trading. As at 29 January 2011 we operated 7 stores across the Middle East (2010: 4 stores). Our e-commerce business benefited from the further enhancements made to our transactional website in the prior year, with a significant increase in the sales compared to last year. Our licence partner in Taiwan, Yun San, continued to make good progress and opened a concession in the Hanshin Arena Shopping Plaza in October. At the start of the year we acquired two stores in Hong Kong from our former licence 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 own management and as previously mentioned have now opened a further store in Hong Kong. We are also actively seeking further opportunities in the territory. Including the closure of our store in Kuala Lumpur, Malaysia, as at 29 January 2011 we operated a total of 13 stores across Asia (2010: 14 stores). In October we opened a store in the Pitt Street Mall, Sydney, Australia. This is our third store in Australia through a joint venture with our licence partner in that territory, Flair Industries Pty Ltd. Our existing stores continue to make good progress but the Sydney store has performed below our expectations to date as the redevelopment of the mall has not yet been completed. As at 29 January 2011 we operated 3 stores in Australasia (2010: 2). Sales in our UK wholesale division were up 13.1% to £30.7m (2010: £27.1m). This performance recognises growth in our wholesale export business and a strong performance from our UK wholesale business given that the comparative period included sales from wholesale accounts which have transferred to retail concessions. US Sales from our US retail division increased by 29.9%, against a difficult comparative period, to $20.6m (2010: $15.9m), which, in sterling resulted in a 33.0% increase to £13.4m (2010: £10.1m). We have taken advantage of the challenging conditions presented in the US to expand our business and opened four further stores during the year in Scottsdale, Santa Monica, New York and Chicago. Average square footage rose by 16.0% to 34,368 sq ft (2010: 29,632 sq ft) and retail sales per square foot increased 11.0% from $536 to $595. As at 29 January 2011 we now have 13 stores (2010: 9) and 2 outlets (2010: 2). Towards the end of the year we launched our US transactional website and are pleased with its progress at this early stage. As previously mentioned, we re-launched our US wholesale business under our own management during the year. This business traded well with total sales reaching $6.6m (2010: nil). 09 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OVERVIEW Financial Review Revenue and Gross Margin Group revenue increased by 14.7% to £187.7m (2010: £163.6m), driven by an 11.9% increase in retail sales to £152.7m (2010: £136.5m) and a 28.9% increase in wholesale sales to £35.0m (2010: £27.1m). The composite gross margin for the Group was 61.7% (2010: 61.1%), this net increase reflects buying efficiencies, which benefited both our wholesale and retail businesses, and the reduction in promotional activity throughout the year in our overseas retail markets. The improvement in the composite gross margin was partially offset by wholesale sales representing a greater proportion of our sales mix than in the comparative period. The retail gross margin increased to 65.5% (2010: 64.9%) and the wholesale gross margin increased to 44.8% (2010: 41.9%). Operating Expenses Operating expenses rose by 14.3% to £97.9m (2010: £85.7m). Excluding employee performance related bonus costs of £2.4m (2010: £1.9m), underlying operating expenses rose by 14.1%. Distribution costs, which include the costs of retail stores, outlets and concessions, increased by 14.1% to £73.7m (2010: £64.6m). The increase in these costs above the increase in average selling space reflects the addition of new space towards the end of the year that will mature over time. Administration expenses increased by 18.9% to £24.3m (2010: £20.4m). Excluding employee performance related bonus, administration expenses rose by 18.5% 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 Profit before tax grew by 24.2% to £24.2m (2010: £19.5m). This result was after the payment of an employee performance related bonus of £2.4m (2010: £1.9m). Bonus payments in both years were as a result of over achievement of internal targets in the financial year. Impairment Losses The Group incurred no impairment losses in the year (2010: £0.8m). The impairment loss in the prior year related to the carrying value of retail assets in Eire. This accounting charge had no cash flow effect on the Group. Finance Income and Expenses Net interest payable during the year was £30,000 (2010: £138,000). The reduction reflects the higher Group cash position for the majority of the year compared to last year. The foreign exchange loss during the year of £48,000 (2010: £226,000) was due to the retranslation of monetary assets and liabilities denominated in foreign currencies. Taxation The Group tax charge for the year was £6.9m (2010: £6.0m), an effective tax rate of 28.7% (2010: 30.6%). The prior year rate excluding impairment was 29.5%. The Emergency Budget, announced on 22 June 2010, announced that the UK corporation tax rate will fall from 28.0% to 24.0% over a four year period. As a result we expect to see a future reduction in our effective rate in line with these changes. Cash Flow Net cash generated from operating activities was £18.1m (2010: £21.1m). The decrease on the prior year was principally due to an increase in working capital as opposed to a decrease in the prior year, offset by increased profit. Total working capital as per the Group balance sheet, which comprises inventories, trade and other receivables and trade and other payables increased by £6.5m to £34.9m (2010: £28.4m). The movement in working capital as per the Group cash flow statement is lower due to translation differences. The timing of the Chinese New Year, which fell closer to the end of our financial year, resulted in stock being receipted earlier into the business, leading to an increase in inventories and trade payables. The increase in inventories also reflects the below average levels at the prior year end and the anticipated growth of our business in the coming year. The increase in trade receivables reflected the growth in the number of retail concessions and growth in our US wholesale business. Capital expenditure of £10.0m (2010: £4.5m) reflected the opening and refurbishment of stores, concessions and outlets and the continued investment in the infrastructure of the business. Included within this figure is £1.0m (2010: £0.5m) of expenditure which relates to stores that are due to open in 2011. The purchase of the non-controlling entity of £0.6m (2010: nil) relates to the purchase of the remaining shares in our joint venture, Ted Baker (New York) Inc, that were held by a third party. We now own 100.0% of this subsidiary (2010: 66.0%). Shareholder Return Basic earnings per share increased by 27.3% to 41.5p (2010: 32.6p). 10 Ted Baker Report and Accounts 2010 / 2011 The proposed final dividend of 14.3p per share will make a total for the year of 20.6p per share (2010: 17.15p per share), an increase of 20.1% on the previous year. Free cash flow per share, which is calculated using the net cash generated from operating activities, was 41.8p (2010: 48.8p), this reduction was due to the change in working capital. Currency Management The most significant exposure to foreign exchange fluctuation relates to purchases made in foreign currencies, principally the US Dollar and the Euro. A proportion of the Group’s purchases are hedged in accordance with the Group’s risk management policy, typically 12 months in advance. The balance of purchases is naturally hedged as the business operates internationally and income is generated in the local currency. At the balance sheet date, the Group had hedged its projected commitments in respect of the year ending January 2012. Borrowing Facilities The Group has borrowing facilities of £20.0m (2010: £15.0m) available to it. The facilities comprise an unsecured committed facility of £3.0m and a revolving advance facility of £7.0m with the Royal Bank of Scotland PLC and an uncommitted, unsecured multi-option facility of £10.0m with Barclays Bank PLC. The borrowing facilities held with The Royal Bank of Scotland PLC are made up by a £3.0m multi-currency facility and a £7.0m revolving credit facility. The facility held with Barclays Bank PLC is an uncommitted, unsecured multi-option facility of £10.0m. All facilities expire on 5 February 2012. The Group will seek to renew its facilities prior to these renewal dates. Based on current forecasts the Group does not envisage any difficulties with the renewal of these facilities. the balance sheet date, At were unutilised. the borrowing facilities Cautionary statement regarding forward-looking statements This document 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 document, and will not be updated during the year. The directors can give no assurance that these expectations will prove to be 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. 11 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OVERVIEW Principal Risks & Uncertainties The Board recognises there are a number of risks and uncertainties that the Group faces. The Board, with the help of the executive committee, that comprises the chief executive, the finance director and subsidiary directors (the “Executive Committee”), has established a structured approach to identify, assess and manage these risks and this is regularly monitored and updated by the Risk Committee. Although not exhaustive, the following list highlights some of the principal risks which are not shown in order of importance: Strategic Risks External events External events may occur which may affect the All factors affecting these stakeholders are Issue Potential impact Mitigation global, economic and financial environment in monitored closely on an ongoing basis ensuring which we operate. These events can affect our that we are prepared for, and can react to, changes suppliers, customers and partners, risking an in the external environment, allowing us to increase in our cost base and adversely affecting reduce our exposure as early as possible. The our revenue spread of our business and supply chain also helps to mitigate these risks Brand and The strength of our brand and its reputation are We carefully consider each new opportunity reputational risk important to the business. There is a risk that our and each wholesale customer and partner with brand may be undermined or damaged by our whom we do business. These are monitored on an actions or those of our partners ongoing basis to ensure they remain appropriate to the brand Fashion and Design As with all fashion brands there is a risk that our The Group maintains a high level of market offer will not satisfy the needs of our customers awareness and an understanding of consumer trends and fashion to ensure that we remain able to respond to changes in consumer preference Operational Risks Supply chain If garments do not reach us on time and to Our supply chain is diversified across a number specification, there is a risk of a loss of revenue and of suppliers in different regions, reducing reliance customer confidence on a small number of key suppliers. Suppliers are treated as key business partners and we work closely with them to mitigate these risks Cost inflation We may face increases in our operating costs due to Operating costs are monitored regularly to ensure growth in raw material, labour, property and other that any cost pressures are quickly identified and costs, some of which are outside the scope of appropriate action is taken our control Infrastructure There is a risk of operational problems, including The business continuity plan is constantly disruption to the infrastructure that supports our reviewed and updated by the Risk Committee. In business, which may lead to a loss of revenue, data addition, business disruption is covered by our and inventory insurance policies Social Responsibility We are committed to operating in a responsible and Four members of the Executive Committee have sustainable manner as regards our supply chain, been tasked with overseeing specific areas of our environment and community. If we fail to operate in social responsibility agenda. The Group has an a manner that supports our philosophy, this could employee whose sole responsibility is to monitor damage the trust and confidence of our stakeholders this agenda and ensure our practices fall in line with it 12 Ted Baker Report and Accounts 2010 / 2011 Operational Risks - (continued) IT security Advances in technology have resulted in more Commitment of additional specialist resources Issue Potential impact Mitigation data being transmitted electronically, posing an and the continual upgrading of security increased security risk. There is also the possibility equipment and software mitigate these risks of unintentional loss of controlled data by authorised users People The Group’s performance is linked to the Retention of key talent is important and we take performance of our people and, in particular, to the active steps to provide stability and security to the leadership from key individuals. The loss of a key key team. We carry out an annual benchmarking individual, whether at management level or within review to ensure that we provide competitive a specialist skill set, could have a detrimental affect remuneration and total reward packages. We also on our operations and, in some cases, the creative utilise long-term incentive schemes to retain key vision for the brand talent. Employee engagement through our culture and environment strengthens the commitment of team members and has a positive impact on our attrition rate Regulatory and legal The Group operates within many markets globally The Group closely monitors changes in the legal framework and is subject to regulations affecting its activities and regulatory framework within the markets in which it operates. We work closely with specialists in each market to ensure compliance with local laws and regulations Financial Risks Currency, interest, In the course of its operations, the Group is exposed The Group’s policies for dealing with these risks credit and to these financial risks which if they were to arise are discussed in detail in note 22 on pages 68 to 76 counterparty may have material financial impacts on the Group credit risks 13 Ted Baker Report and Accounts 2010 / 2011 Ted ’s Feminine Touch Recreating the delicacy and detail of vintage bird cages through fine pencil drawings, Ted developed this unforgettable print for his Spring/Summer 11 Womenswear collection. Featuring birds perched on or inside the various cages with a shot of colour and playfulness across all styles and fabrics, it offers a feminine and appealing design that women have taken to their hearts. 00 Ted Baker Report and Accounts 2009 / 2010 DIRECTORS' REPORT: GOVERNANCE CORPORATE GOVERNANCE STATEMENTS Statement of compliance with the Combined Code The Company has complied throughout the year with all of the provisions of the Combined Code on Corporate Governance issued in June 2008 (the “Combined Code”). The Board has noted and is aware of the recently introduced UK Corporate Governance Code (which will apply to the financial period of the Group ending 28 January 2012). The Board will seek to comply with the new code where it determines that to do so would be beneficial to the Company and its stakeholders. The Board meets regularly throughout the year. It considers all issues relating to the strategy, direction and future development of the Group. The Board has a schedule of matters reserved to it for decision that is regularly updated. The requirement for Board approval on these matters is understood and communicated widely throughout the Group. The non- executive directors meet with the chairman separately during the year. In addition the non-executive directors meet without the chairman present to appraise the chairman’s performance. Statement about applying the principles of Good Governance The Company has applied the principles of Good Governance set out in section 1 of the Combined Code by complying with the Code of Best Practice. Further explanation of how the principles have been applied is set out below and, in connection with directors’ remuneration, in the Directors’ Remuneration Report on pages 26 to 30. The Board The Board currently comprises a non-executive chairman, a chief executive, one other executive director and three non- executive directors. Biographies of these directors appear on page 25. David Bernstein has held the position of non-executive director since 2003 and has been confirmed by the Board as the Company’s senior independent director. All the non-executive directors are considered by the Board to be independent of management and free of any relationship that could materially interfere with the exercise of their independent judgement. Operational decision making, operational performance and the formulation of strategic proposals to the Board are controlled by the Executive Committee. The Executive Committee meets regularly throughout the year. To enable the Board to function effectively and the directors to discharge their responsibilities, full and timely access is provided to all relevant information. There is an agreed procedure for directors to take independent professional advice, if necessary, at the Company’s expense. This is in addition to the access every director has to the Company Secretary. On 15 June 2010 the Board appointed Anne Sheinfield as an independent non-executive director. Anne is a commercial lawyer with 20 years’ post qualification experience in the theatre, TV and music areas of entertainment. Board and committee attendance The table below details the number of Board and committee meetings held during the 52 weeks ended 29 January 2011 and the attendance record of each director. Number of meetings held Robert Breare David A Bernstein Ronald Stewart Anne Sheinfield Raymond S Kelvin Lindsay D Page Anne Sheinfield was appointed as a non-executive director on 15 June 2010. Board meetings Audit committee Remuneration committee Nomination committee 9 9 8 9 6 9 9 3 3 3 3 - - - 1 1 1 1 - - - 1 1 1 1 - - - 17 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: GOVERNANCE CORPORATE GOVERNANCE STATEMENTS continued Audit Committee The Audit Committee (the “Committee”) is chaired by Ronald Stewart and its other members are Robert Breare and David Bernstein, all of whom are independent non-executive Directors and served throughout the course of the year. The Committee met three times during the year with full attendance. The Committee meets to review and approve the interim and annual financial statements, before submission for approval by the Board and considers any matters raised by the auditors. The committee will consider significant financial reporting judgements contained in the financial statements, including accounting policies and compliance, areas of management judgements and estimates and the effectiveness of financial reporting and controls. The Board considers all members to have relevant financial experience. The Committee oversees the Company’s relationship with the external auditors and makes recommendations to the Board in relation to their appointment, re-appointment and removal and approves their remuneration and terms of engagement. The Committee also reviews the independence of the external auditors and the Company’s policy on the supply of non-audit services by the external auditors. The Company has adopted a formal policy on the supply of non- audit services by the external auditors. They may only provide such services on condition that such advice does not conflict with their statutory responsibilities and ethical guidance. The Committee Chairman’s pre-approval is required before the Company uses non-audit services that exceed financial limits set out by that policy and the aggregate spend is also reviewed by the Committee on an annual basis. Details of the auditors' remuneration for audit work and non-audit fees are disclosed in note 3 to the Financial Statements. The Committee is responsible for the review of the Company’s procedures for responding to the allegations of whistleblowers and the arrangements by which staff may, in confidence, raise concerns about possible financial reporting irregularities. The Committee is also responsible for reviewing the internal audit work plan, monitoring the delivery of that plan during the year and reviewing the effectiveness of the internal audit activities. It also considers the work of the Risk Committee, whose main role is to review, on behalf of the Board, the key risks inherent in the business and the system of control necessary to manage such risks. The terms of reference for the Committee are available on request from the Company Secretary. Nomination Committee The Nomination Committee (the “Committee”) is chaired by Robert Breare and its other members are David Bernstein and Ronald Stewart, all of whom are independent non-executive Directors and served throughout the course of the year. The Committee is responsible for nominating candidates for appointment to the Board and met once during the year with full attendance, resulting in the appointment of Anne Sheinfield as an independent non-executive director on 15 June 2010. All non-executive directors are advised of time commitment considered necessary to enable them to fulfil their responsibilities prior to appointment. the The terms of reference for the Committee are available on request from the Company Secretary. Appointments to the Board Newly appointed directors are given training appropriate to the level of their previous experience. Non-executive directors meet regularly with members of the executive committee and other personnel within the organisation. In addition, site visits ensure that the non-executive directors gain first hand experience of developments within the Group. Any director appointed during the year is required, under the provisions of the Company’s Articles of Association, to retire and seek re-election by the shareholders at the next Annual General Meeting. The Company’s Articles of Association require one third of the Directors for the time being to retire, and each Director to retire from office at least once every three years. A retiring Director is eligible for re-election. Communication with Shareholders The Group attaches considerable the effectiveness of its communication with its shareholders. The full report and accounts are sent to all shareholders and further copies are distributed to others with potential interest in the Group’s performance. importance to The directors seek to build on a mutual understanding of objectives between the Company and its institutional shareholders by making general presentations after the interim and preliminary results; meeting shareholders to discuss long- term issues and gather feedback; and communicating regularly throughout the year. All shareholders have access to these presentations, as well as to the annual report and accounts and to other information about the Company, through the website 18 Ted Baker Report and Accounts 2010 / 2011 at www.tedbaker.com. They may also attend the Company’s Annual General Meeting at which they have the opportunity to ask questions. Non-executive directors are kept informed of the views of shareholders by the executive directors and are provided with independent feedback from investor meetings. Conflicts of interests Following approval at the 2008 Annual General Meeting, the Company’s Articles of Association were amended to take account of certain provisions of the Companies Act 2006 relating to directors’ conflicts of interest. These provisions permit the Board to consider, and if thought fit, to authorise situations where a director has an interest that conflicts, or may possibly conflict, with the interests of the Company. The Board has adopted procedures for the approval of such conflicts. The Board’s powers to authorise conflicts are operating effectively and the procedures are being followed. Internal Control The Board is ultimately responsible for the Group’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. Following publication of guidance for directors on internal control “Internal Control: Guidance for Directors on the Combined Code” (the “Turnbull guidance”), the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, that has been in place for the year under review and up to the date of approval of the annual report and accounts, and that this process is regularly reviewed by the Board and accords with the Turnbull guidance. The Board has reviewed the effectiveness of the system of internal control. In particular, it has reviewed and updated the process for identifying and evaluating the significant risks affecting the business and the policies and procedures by which these risks are managed. Management is responsible for the identification and evaluation of significant risks applicable to their areas of the business together with the design and operation of suitable internal controls. These risks are assessed on a continual basis and may be associated with a variety of internal or external sources including control breakdowns, disruption in information systems, competition, natural catastrophe and regulatory requirements. The Group has an independent internal audit function whose findings are regularly reviewed by the Executive Committee and the Board. The Audit Committee monitors and reviews the effectiveness of the internal audit activities. Management reports regularly on its review of risks and how they are managed to the Risk Committee, whose main role is to review, on behalf of the Board, the key risks inherent in the business and the system of control necessary to manage such risks, and to present their findings to the Board. The Chief Executive reports to the Board on behalf of the Executive Committee on significant changes in the business and the external environment which affects significant risks. The Finance Director provides the Board with monthly financial includes key performance indicators. Where areas for improvement in the system are identified, the Board considers the recommendations made by the Risk Committee and the Audit Committee. information which The Risk Committee includes the Finance Director and various heads of department. It reviews, on a twice yearly basis, the risk management and control process and considers: (cid:116)(cid:1)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:86)(cid:85)(cid:73)(cid:80)(cid:83)(cid:74)(cid:85)(cid:90)(cid:13)(cid:1)(cid:83)(cid:70)(cid:84)(cid:80)(cid:86)(cid:83)(cid:68)(cid:70)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:68)(cid:80)(cid:14)(cid:80)(cid:83)(cid:69)(cid:74)(cid:79)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:80)(cid:84)(cid:70)(cid:1)(cid:74)(cid:79)(cid:87)(cid:80)(cid:77)(cid:87)(cid:70)(cid:69)(cid:1) in the identification, assessment and management of significant risks faced by the Group; (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1) (cid:83)(cid:70)(cid:84)(cid:81)(cid:80)(cid:79)(cid:84)(cid:70)(cid:1) (cid:85)(cid:80)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1) (cid:84)(cid:74)(cid:72)(cid:79)(cid:74)(cid:277)(cid:68)(cid:66)(cid:79)(cid:85)(cid:1) (cid:83)(cid:74)(cid:84)(cid:76)(cid:84)(cid:1) (cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1) (cid:73)(cid:66)(cid:87)(cid:70)(cid:1) (cid:67)(cid:70)(cid:70)(cid:79)(cid:1) identified by management and others; (cid:116)(cid:1)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:78)(cid:66)(cid:74)(cid:79)(cid:85)(cid:70)(cid:79)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:1)(cid:68)(cid:80)(cid:79)(cid:85)(cid:83)(cid:80)(cid:77)(cid:1)(cid:70)(cid:79)(cid:87)(cid:74)(cid:83)(cid:80)(cid:79)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:80)(cid:88)(cid:66)(cid:83)(cid:69)(cid:84) the proper management of risk; and (cid:116)(cid:1)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:79)(cid:79)(cid:86)(cid:66)(cid:77)(cid:1)(cid:83)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:81)(cid:83)(cid:80)(cid:68)(cid:70)(cid:69)(cid:86)(cid:83)(cid:70)(cid:84)(cid:15) Additionally, the Risk Committee keeps abreast of all changes made to the systems and follows up on areas that require improvement. It reports to the Board at twice yearly intervals or more frequently should the need arise. The UK Bribery Act The Board is aware of the forthcoming UK Bribery Act, which is expected to come into force during 2011. The Board is proactively reviewing its procedures in anticipation of this legislation. 19 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: GOVERNANCE SUSTAINABILITY AND THE ENVIRONMENT We believe in being open and honest in the way we do business and doing the right thing by all of our stakeholders; by operating in a responsible and sustainable manner. How we work Mr L D Page has been given specific responsibility for overseeing the formulation of the Group’s policies and procedures for managing risks arising from social, environmental and ethical matters (“SEE”). In addition, the Board has tasked four members of the Executive Committee to oversee specific areas of our SEE agenda for the Group. These Executive Committee members participate because of the relevance of their departments to our ongoing commitment in these areas, Brand Communication, Product Design, Production and Special Projects (Interior Design). We employed a full time Green Guardian in April 2010 to manage the Group’s cross-functional team (the “Green Team”) which is responsible for addressing SEE concerns of the Group. Key Issues Ethical and Sustainable Sourcing Ethical and sustainable sourcing is an area of great importance to the Group. We believe that our products should be produced in factories that are committed to providing a fair and safe environment for their workers. Our trusted partners within the supply chain are one of our most valuable assets. The Group is committed to reducing our impact on the environment, reducing our use of resources and increasing efficiencies wherever possible to ensure our business is sustainable. (cid:116)(cid:1) (cid:34)(cid:77)(cid:77)(cid:1)(cid:53)(cid:70)(cid:69)(cid:1)(cid:35)(cid:66)(cid:76)(cid:70)(cid:83)(cid:1)(cid:84)(cid:86)(cid:81)(cid:81)(cid:77)(cid:74)(cid:70)(cid:83)(cid:84)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:72)(cid:80)(cid:87)(cid:70)(cid:83)(cid:79)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:1)(cid:36)(cid:80)(cid:69)(cid:70)(cid:1) of Conduct, which is based on the Social Accountability International Code, an internationally recognised benchmark for ethical excellence, and can be found at www.tedbaker.com (cid:116)(cid:1) (cid:56)(cid:70)(cid:1) (cid:66)(cid:79)(cid:79)(cid:80)(cid:86)(cid:79)(cid:68)(cid:70)(cid:69)(cid:1) (cid:80)(cid:86)(cid:83)(cid:1) (cid:81)(cid:66)(cid:83)(cid:85)(cid:79)(cid:70)(cid:83)(cid:84)(cid:73)(cid:74)(cid:81)(cid:1) (cid:88)(cid:74)(cid:85)(cid:73)(cid:1) (cid:79)(cid:80)(cid:85)(cid:14)(cid:71)(cid:80)(cid:83)(cid:14)(cid:81)(cid:83)(cid:80)(cid:277)(cid:85)(cid:1) organisation, MADE-BY in May 2010. MADE-BY is a non-profit multi-stakeholder initiative set up to improve sustainability within the fashion industry. We are working with it to set realistic and achievable internal targets to improve in line with its internationally accredited benchmarks. Our first scorecard, detailing our current performance against these benchmarks, will be issued on MADE-BY’s website during 2011 the social and environmental standards (cid:116)(cid:1) (cid:48)(cid:86)(cid:83)(cid:1)(cid:81)(cid:66)(cid:83)(cid:85)(cid:79)(cid:70)(cid:83)(cid:84)(cid:73)(cid:74)(cid:81)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:46)(cid:34)(cid:37)(cid:38)(cid:14)(cid:35)(cid:58)(cid:1)(cid:73)(cid:66)(cid:84)(cid:1)(cid:70)(cid:79)(cid:66)(cid:67)(cid:77)(cid:70)(cid:69)(cid:1)(cid:86)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:66)(cid:68)(cid:68)(cid:70)(cid:84)(cid:84)(cid:1) its expertise on sustainable fibres. We have set long term internal targets for the quantity of sustainable fibres used within our collections, and will be showing our progress yearly on our MADE-BY scorecards Environmental Impacts (cid:116)(cid:1) (cid:34)(cid:84)(cid:1) (cid:66)(cid:1) (cid:40)(cid:83)(cid:70)(cid:70)(cid:79)(cid:1) (cid:22)(cid:17)(cid:17)(cid:1) (cid:46)(cid:70)(cid:78)(cid:67)(cid:70)(cid:83)(cid:13)(cid:1) (cid:88)(cid:70)(cid:1) (cid:66)(cid:83)(cid:70)(cid:1) (cid:68)(cid:80)(cid:78)(cid:78)(cid:74)(cid:85)(cid:85)(cid:70)(cid:69)(cid:1) (cid:85)(cid:80)(cid:1) (cid:83)(cid:70)(cid:69)(cid:86)(cid:68)(cid:74)(cid:79)(cid:72)(cid:1) our carbon footprint and were rewarded in June 2010 with a Platinum Award. This reflects the extent of our carbon reductions and acknowledges the successful implementation of our carbon saving initiatives (cid:116)(cid:1) (cid:56)(cid:70)(cid:1) (cid:66)(cid:83)(cid:70)(cid:1) (cid:88)(cid:80)(cid:83)(cid:76)(cid:74)(cid:79)(cid:72)(cid:1) (cid:80)(cid:79)(cid:1) (cid:67)(cid:80)(cid:85)(cid:73)(cid:1) (cid:66)(cid:1) (cid:67)(cid:66)(cid:84)(cid:70)(cid:77)(cid:74)(cid:79)(cid:70)(cid:1) (cid:78)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1) (cid:71)(cid:80)(cid:83)(cid:1) (cid:80)(cid:86)(cid:83)(cid:1) carbon footprint as well as on projects that will help reduce it such as installing energy efficient LED lights within our showrooms and SMART meters within our stores to monitor energy consumption (cid:116)(cid:1) (cid:34)(cid:77)(cid:77)(cid:1)(cid:80)(cid:71)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:85)(cid:83)(cid:66)(cid:87)(cid:70)(cid:77)(cid:1)(cid:74)(cid:84)(cid:1)(cid:36)(cid:66)(cid:83)(cid:67)(cid:80)(cid:79)(cid:47)(cid:70)(cid:86)(cid:85)(cid:83)(cid:66)(cid:77)(cid:165)(cid:15)(cid:1)(cid:263)(cid:74)(cid:84)(cid:1)(cid:78)(cid:70)(cid:66)(cid:79)(cid:84)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1) the unavoidable emissions generated by the air, road and rail journeys, required to visit our stores and suppliers, have been reduced to net zero through purchasing carbon credits from Voluntary Carbon Standard (“VCS”) validated projects (cid:116)(cid:1) (cid:56)(cid:70)(cid:1)(cid:68)(cid:80)(cid:79)(cid:85)(cid:74)(cid:79)(cid:86)(cid:70)(cid:1)(cid:85)(cid:80)(cid:1)(cid:81)(cid:66)(cid:83)(cid:85)(cid:74)(cid:68)(cid:74)(cid:81)(cid:66)(cid:85)(cid:70)(cid:1)(cid:74)(cid:79)(cid:1)(cid:263)(cid:70)(cid:1)(cid:36)(cid:66)(cid:83)(cid:67)(cid:80)(cid:79)(cid:1)(cid:37)(cid:74)(cid:84)(cid:68)(cid:77)(cid:80)(cid:84)(cid:86)(cid:83)(cid:70)(cid:1)(cid:49)(cid:83)(cid:80)(cid:75)(cid:70)(cid:68)(cid:85)(cid:1) to measure and disclose our greenhouse gas emissions and climate change strategies (cid:116)(cid:1) (cid:56)(cid:70)(cid:1) (cid:81)(cid:66)(cid:83)(cid:85)(cid:74)(cid:68)(cid:74)(cid:81)(cid:66)(cid:85)(cid:70)(cid:1) (cid:74)(cid:79)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1) (cid:56)(cid:66)(cid:84)(cid:85)(cid:70)(cid:81)(cid:66)(cid:76)(cid:1) (cid:36)(cid:80)(cid:78)(cid:81)(cid:77)(cid:74)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1) (cid:52)(cid:68)(cid:73)(cid:70)(cid:78)(cid:70)(cid:1) (cid:66)(cid:84)(cid:1) (cid:81)(cid:66)(cid:83)(cid:85)(cid:1) of the Producer Responsibility Obligation (Packaging Waste) Regulations 1997, and continue to reduce unnecessary packaging (cid:116)(cid:1) (cid:48)(cid:86)(cid:83)(cid:1) (cid:70)(cid:78)(cid:81)(cid:77)(cid:80)(cid:90)(cid:70)(cid:70)(cid:84)(cid:1) (cid:66)(cid:83)(cid:70)(cid:1) (cid:80)(cid:86)(cid:83)(cid:1) (cid:72)(cid:83)(cid:70)(cid:66)(cid:85)(cid:70)(cid:84)(cid:85)(cid:1) (cid:66)(cid:84)(cid:84)(cid:70)(cid:85)(cid:13)(cid:1) (cid:66)(cid:79)(cid:69)(cid:1) (cid:88)(cid:70)(cid:1) (cid:73)(cid:66)(cid:87)(cid:70)(cid:1) (cid:40)(cid:83)(cid:70)(cid:70)(cid:79)(cid:1) Team members in every department and store encouraging colleagues to be more environmentally aware (cid:116)(cid:1) (cid:56)(cid:70)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:85)(cid:66)(cid:79)(cid:85)(cid:77)(cid:90)(cid:1)(cid:77)(cid:80)(cid:80)(cid:76)(cid:74)(cid:79)(cid:72)(cid:1)(cid:66)(cid:85)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:88)(cid:66)(cid:84)(cid:85)(cid:70)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:68)(cid:83)(cid:70)(cid:66)(cid:85)(cid:70)(cid:84)(cid:13)(cid:1) and working towards our overall aim to ensure no waste goes to landfill. We participate in recycling schemes in all properties (cid:116)(cid:1) (cid:56)(cid:70)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:74)(cid:79)(cid:84)(cid:85)(cid:66)(cid:77)(cid:77)(cid:70)(cid:69)(cid:1)(cid:85)(cid:88)(cid:80)(cid:1)(cid:67)(cid:86)(cid:68)(cid:76)(cid:71)(cid:66)(cid:84)(cid:85)(cid:1)(cid:67)(cid:70)(cid:70)(cid:1)(cid:68)(cid:80)(cid:77)(cid:80)(cid:79)(cid:74)(cid:70)(cid:84)(cid:1)(cid:80)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:83)(cid:80)(cid:80)(cid:71)(cid:1)(cid:80)(cid:71)(cid:1) our London head office, to help give the bees a haven in which to recuperate their local population Community Our Charity Partner for 2009/2010 was Everyman, a prostate and testicular cancer charity. We used our underwear boxes as a vehicle to further raise awareness of their charity and funds for research into prostate and testicular cancer. We have also worked with them business wise to support a number of their initiatives. We have also made other one-off in-kind donations throughout the year. Donations paid during the year can be found on page 33. 20 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: GOVERNANCE PEOPLE overseas expansion our workforce is becoming more diverse and we respect cultural differences and actively seek to learn about them in each territory we operate. Health, Safety and Welfare Our duty and commitment to the well being of our team is supported by activity such as healthcare, occupational health, health seminars and funding for flu jabs. During the period, we introduced a Cycle to Work Scheme, with a Childcare Voucher Scheme introduced in previous years. During 2011, we will introduce an Employee Assistance Programme which will further support our genuine concern for the well-being of our team. The prevention and identification of risks and accidents is supported by an external Health and Safety service provider and ongoing training of management teams. A dedicated Health & Safety Officer will be recruited to strengthen our knowledge and commitment in this area of our business. Disabled Employees Applications for employment by disabled persons are always fully and fairly considered, bearing in mind the aptitudes of the applicant concerned. In the event of team members becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical with that of other employees. Employee Engagement The Group places considerable value on the involvement of its team members and continues to keep them informed on matters affecting them and on the significant factors affecting the performance of the Group. This is achieved through formal and informal meetings and employee representatives are consulted regularly on a wide range of matters affecting employees current and future interests. Team members are regularly informed of the Group’s performance and the factors affecting its performance during the year. The talent, commitment and passion of the Ted Baker team are key factors in the success of our business and brand. The value we place on our team is shown in the way we motivate them, encourage learning and development, nurture their growth and potential, and recognise and reward their contributions. Culture The spirit in which we conduct our business and interact with our team always takes into consideration ‘Would Ted do it that way?’ We regularly host internal events, including sessions with the chief executive, telling the story behind the brand and also Family Days where we open our doors to friends and family. During the period we invited investors and analysts to a series of presentations led by the Ted Baker management team to demonstrate the culture of our business and the strength of the team behind the brand. Reward and Recognition Remuneration is reviewed annually and a benchmarking review is undertaken to ensure we remain competitive and fair across all areas of the business. Our rewards include bonus schemes linked to sales targets and individual and corporate performance. We encourage our team members to join our Save As You Earn (“SAYE”) schemes. This year we saw the launch of our Wisdom Awards; recognition for the longer serving members of the team and a chance for them to celebrate and share their stories with the rest of the team. is reviewed bi-annually with each Learning and Development Performance team member to discuss personal and career development. Within this process, goals and objectives are set and linked to personal growth and business development. We allow our team members to broaden their abilities and knowledge by exposing them to new experiences. We invest in training which ranges from specialist and technical skills training, to in-house developed courses focusing on management skills, leadership skills, brand awareness and self awareness. Firm career paths exist across the Group and inter-departmental and international moves play a large part in maintaining and growing talent. Diversity The Group believes in respecting individuals and their rights in the workplace. With this in mind, specific policies are in place covering harassment and bullying, whistle blowing, equal opportunities and data protection. Our team represents a wide and diverse workforce from all backgrounds, sexual orientation, nationality, ethnic and religious groups. We support sponsorship of visa applications, where appropriate, to retain specific talent within the business. With continued 21 Ted Baker Report and Accounts 2010 / 2011 Ted ’s Tactile Textiles All Ted Baker prints are designed in house, and each one is intended to capture a sense of both the character and individuality of the man himself. The abstract nature of this floral print from Ted’s Spring/Summer 11 menswear collection offers both texture and depth and combines with the highest quality fabrics, finishes and surfaces to ensure Ted’s unique personality is woven into its very heart. DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES BOARD OF DIRECTORS Robert Breare Non-Executive Chairman (58) Robert has extensive experience of consumer facing businesses and was formerly a founder and Chief Executive Officer of Arcadian International Plc, which included Malmaison Hotels. Robert is non-executive chairman of Individual Restaurant Company plc and holds other non-executive positions. He is chairman of the nomination committee and a member of the audit and remuneration committees. Robert is an independent director. David Alan Bernstein Non-Executive Director (67) David is chairman of The Football Association and non- executive chairman of Wembley National Stadium Limited, Blacks Leisure plc, Sports and Leisure Group Ltd and The Orchid Group Ltd. Previously he was joint managing director of Pentland Group Plc and chairman of Manchester City plc. He is chairman of the remuneration committee and a member of the audit and nomination committees. David is an independent director and the senior non-executive director. Raymond Stuart Kelvin, CBE Chief Executive (55) (‘Closest Man To Ted’) Ray, the founder of Ted Baker, has worked in the fashion industry for over 37 years. In 1973 he founded PC Clothing Limited, a supplier of womenswear to high street retailers. In 1987 Ray developed the Ted Baker brand and has been chief executive of Ted Baker since its launch in 1988. Lindsay Dennis Page, MA, ACA Finance Director (52) Lindsay joined Ted Baker as finance director in February 1997. He joined Binder Hamlyn in 1981, became a founder member of the corporate finance department in 1986 and a partner in 1990. Binder Hamlyn subsequently merged with Arthur Andersen in 1994. Ronald Stewart Non-Executive Director (63) Ron spent all his 39 year banking career at The Royal Bank of Scotland PLC, retiring in 2003 as Deputy Managing Director of its Corporate Banking Department in London. He is a Trustee of several Christian charities and a Governor of Reeds School in Surrey. He is chairman of the audit committee and a member of the nomination and remuneration committees. Ron is an independent director. Anne Sheinfield Non-Executive Director (45) Anne was appointed as a non-executive director on 15 June 2010. Anne is a commercial lawyer with 20 years’ post qualification experience in the theatre, TV and music areas of entertainment and has a wealth of intellectual property and commercial legal experience. Anne is an independent director. 25 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES DIRECTORS’ REMUNERATION REPORT This report has been prepared in accordance with section 420 of the Companies Act 2006 and in compliance with the provisions of the Combined Code, as disclosed in the Company’s corporate governance statements, and the requirements of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 regarding the contents of the report. Remuneration Committee The Remuneration Committee (the “Committee”) is chaired by David Bernstein and its other members are Robert Breare and Ronald Stewart, all of whom are independent non-executive Directors and served throughout the course of the year. The Committee met once during the year with full attendance. The Committee consulted Ernst & Young LLP (which also provided tax, legal and accounting services to the Group in the year) on executive remuneration issues. The Committee is responsible for setting the remuneration packages of the executive directors of the Board and other senior executives who fall within the scope of the Committee. It approves all service contracts or other contracts between the Company and its executive directors and senior executives and considers and, if thought fit, approves any outside interests and other directorships of the executive directors. The Committee also reviews and approves the design of the Company’s share based incentive schemes and determines the level of awards to be made and approves the performance targets. The terms of reference for the Committee are available on request from the Company Secretary. Remuneration Policy The aim of the Group’s remuneration policy is to attract, motivate and retain high quality management and to incentivise them according to the levels of value generated for shareholders. The total size of the remuneration package is judged by comparison with the value of packages of similar companies, having regard to: (cid:116)(cid:1) (cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:84)(cid:74)(cid:91)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:13)(cid:1)(cid:74)(cid:85)(cid:84)(cid:1)(cid:85)(cid:86)(cid:83)(cid:79)(cid:80)(cid:87)(cid:70)(cid:83)(cid:13)(cid:1)(cid:81)(cid:83)(cid:80)(cid:277)(cid:85)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:79)(cid:86)(cid:78)(cid:67)(cid:70)(cid:83)(cid:1)(cid:80)(cid:71)(cid:1) people employed; (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:69)(cid:74)(cid:87)(cid:70)(cid:83)(cid:84)(cid:74)(cid:85)(cid:90)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:77)(cid:70)(cid:89)(cid:74)(cid:85)(cid:90)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:28) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:70)(cid:80)(cid:72)(cid:83)(cid:66)(cid:81)(cid:73)(cid:74)(cid:68)(cid:66)(cid:77)(cid:1)(cid:84)(cid:81)(cid:83)(cid:70)(cid:66)(cid:69)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:67)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:70)(cid:89)(cid:81)(cid:66)(cid:79)(cid:84)(cid:74)(cid:80)(cid:79)(cid:1)(cid:81)(cid:83)(cid:80)(cid:277)(cid:77)(cid:70)(cid:15) Non-executive directors are remunerated with fees in line with market rates. They do not receive any pension or other benefits, other than reasonable expenses, and they do not participate in any bonus or share schemes. Key Components of Executive Remuneration Remuneration packages are structured to provide a balance between fixed basic salary and variable remuneration based on individual and Group performance. Basic Salary Basic salary is reviewed annually by the Committee having regard to competitive market practice and each director’s contribution to the business, thus allowing for individual performance. When reviewing the salaries of the Executive Directors, the Committee also has regard to pay and employment conditions elsewhere in the Group. Annual Bonus The annual grant of bonuses is conditional upon achievement of targets by reference to agreed financial performance measures and external expectations, namely profit before tax and growth in earnings per share. These are designed to provide a direct link between the rewards for executives and returns to shareholders. Bonuses are capped at 100 per cent of basic salary. This scheme is applicable to Mr R S Kelvin and Mr L D Page. Amounts received in the year may be found on page 29. Pensions and Other Benefits The Company operates a money purchase scheme with a Company contribution of 12.5 per cent of basic salary for executive directors apart from Mr R S Kelvin. Taxable benefits include such items as company cars, fuel and medical expense insurance. Life assurance is provided as a non-taxable benefit. Long Term Incentive Schemes The Committee strongly believes that executives should participate in equity-based incentives which support the Company’s overall business strategy and objectives. In addition, share ownership by executives strengthens the link between their personal interests and those of the shareholders. This was historically approached through annual grants of conditional share awards under the Performance Share Plan and grants of share options every three to five years under the 1997 Executive Share Option Scheme and/or the Performance Share Plan. These plans impose an aggregate individual limit on the market value of shares which may be subject to options or awards of ten times that individual’s annual remuneration. The Committee’s policy was usually to grant share options based on between one and four times an individual’s annual remuneration, and to grant conditional awards based on one times an individual’s annual remuneration. Following the Committee’s extensive review of the existing conditional share awards and share options in 2009, the 26 Ted Baker Report and Accounts 2010 / 2011 Committee introduced the Value Creation Plan. The Value Creation Plan focuses executives on shareholder returns as the rewards earned are directly linked to share price performance and total shareholder return exceeding the return on an appropriate index. Since the introduction of the Value Creation Plan, no awards or options have been granted under the Performance Share Plan or the 1997 Executive Share Option Scheme. The following schemes are in operation for the benefit of executive directors: The Ted Baker 2009 Value Creation Plan Under this plan, an award of units is made which has no value at grant but, subject to satisfaction of earnings per share, share price and total shareholder return performance targets, converts into nil cost options to acquire ordinary shares in the Company at the end of the three year performance period. Conversion of units is based on each unit having a value calculated by reference to a pool of value, being 12.5 per cent of the market value of all issued ordinary shares in the Company above the share price growth target (described in the next paragraph) multiplied by the number of ordinary shares in issue at that date, and then divided by the total number of units awarded. The aggregate value of the units held by an executive is then divided by the market price per share on conversion to determine the number of shares subject to that executive’s nil cost options. A nil cost option over 50 per cent of the shares will be granted to the executive at the end of the performance period and a further nil cost option over the balance of the shares after a further year. The terms and conditions of the awards of units granted on 13 August 2009 are as follows: (cid:116)(cid:1) (cid:79)(cid:80)(cid:1)(cid:67)(cid:70)(cid:79)(cid:70)(cid:277)(cid:85)(cid:1)(cid:74)(cid:84)(cid:1)(cid:81)(cid:83)(cid:80)(cid:87)(cid:74)(cid:69)(cid:70)(cid:69)(cid:1)(cid:86)(cid:79)(cid:77)(cid:70)(cid:84)(cid:84)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:70)(cid:66)(cid:83)(cid:79)(cid:74)(cid:79)(cid:72)(cid:84)(cid:1)(cid:81)(cid:70)(cid:83)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)(cid:1) over the performance period is greater than 5 per cent per annum compound above the consensus forecasts for the (cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:1)(cid:70)(cid:79)(cid:69)(cid:74)(cid:79)(cid:72)(cid:1)(cid:43)(cid:66)(cid:79)(cid:86)(cid:66)(cid:83)(cid:90)(cid:1)(cid:19)(cid:17)(cid:18)(cid:17)(cid:28) (cid:116)(cid:1) (cid:79)(cid:80)(cid:1) (cid:67)(cid:70)(cid:79)(cid:70)(cid:277)(cid:85)(cid:1) (cid:74)(cid:84)(cid:1) (cid:81)(cid:83)(cid:80)(cid:87)(cid:74)(cid:69)(cid:70)(cid:69)(cid:1) (cid:86)(cid:79)(cid:77)(cid:70)(cid:84)(cid:84)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1) (cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:1) (cid:81)(cid:83)(cid:74)(cid:68)(cid:70)(cid:1) (cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)(cid:1) (cid:74)(cid:84)(cid:1) greater than 10 per cent per annum compound over the (cid:81)(cid:70)(cid:83)(cid:71)(cid:80)(cid:83)(cid:78)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:81)(cid:70)(cid:83)(cid:74)(cid:80)(cid:69)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69) (cid:116)(cid:1) (cid:79)(cid:80)(cid:1) (cid:67)(cid:70)(cid:79)(cid:70)(cid:277)(cid:85)(cid:1) (cid:74)(cid:84)(cid:1) (cid:81)(cid:83)(cid:80)(cid:87)(cid:74)(cid:69)(cid:70)(cid:69)(cid:1) (cid:86)(cid:79)(cid:77)(cid:70)(cid:84)(cid:84)(cid:1) (cid:85)(cid:80)(cid:85)(cid:66)(cid:77)(cid:1) (cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:73)(cid:80)(cid:77)(cid:69)(cid:70)(cid:83)(cid:1) (cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:1) exceeds the return on the FTSE General Retail Sector Index over the performance period. The 2009 awards under the plan have been supplemented, in accordance with the plan rules, with a parallel linked issue of B ordinary shares in the Company’s subsidiary, No Ordinary Designer Label Limited, to recipients of the 2009 awards. The award holders purchased the B ordinary shares at fair market value and they will only be able to realise any value in those shares by reference to the value of No Ordinary Designer Label Limited above a predetermined hurdle value at the end of the three year performance period applicable to the 2009 awards described above. At the end of the performance period, an (cid:66)(cid:88)(cid:66)(cid:83)(cid:69)(cid:1)(cid:73)(cid:80)(cid:77)(cid:69)(cid:70)(cid:83)(cid:1)(cid:68)(cid:66)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:83)(cid:70)(cid:71)(cid:80)(cid:83)(cid:70)(cid:1)(cid:83)(cid:70)(cid:68)(cid:70)(cid:74)(cid:87)(cid:70)(cid:1)(cid:73)(cid:74)(cid:84)(cid:1)(cid:67)(cid:70)(cid:79)(cid:70)(cid:277)(cid:85)(cid:1)(cid:86)(cid:79)(cid:69)(cid:70)(cid:83)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:77)(cid:66)(cid:79)(cid:1) either by exercising the nil cost option under the 2009 award (cid:80)(cid:83)(cid:1)(cid:84)(cid:70)(cid:77)(cid:77)(cid:74)(cid:79)(cid:72)(cid:1)(cid:35)(cid:1)(cid:80)(cid:83)(cid:69)(cid:74)(cid:79)(cid:66)(cid:83)(cid:90)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:84)(cid:13)(cid:1)(cid:67)(cid:86)(cid:85)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:84)(cid:84)(cid:1)(cid:67)(cid:70)(cid:79)(cid:70)(cid:277)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:66)(cid:88)(cid:66)(cid:83)(cid:69)(cid:1) holder cannot exceed the gross value realisable under the 2009 (cid:66)(cid:88)(cid:66)(cid:83)(cid:69)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:73)(cid:70)(cid:1)(cid:68)(cid:66)(cid:79)(cid:79)(cid:80)(cid:85)(cid:1)(cid:83)(cid:70)(cid:68)(cid:70)(cid:74)(cid:87)(cid:70)(cid:1)(cid:66)(cid:79)(cid:90)(cid:1)(cid:67)(cid:70)(cid:79)(cid:70)(cid:277)(cid:85)(cid:1)(cid:70)(cid:66)(cid:83)(cid:77)(cid:74)(cid:70)(cid:83)(cid:1)(cid:85)(cid:73)(cid:66)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:85)(cid:74)(cid:78)(cid:70)(cid:1) described above in relation to the nil cost option. The Ted Baker 1997 Executive Share Option Scheme Under this scheme, options may be granted to subscribe for new shares and to acquire shares from the Ted Baker Group (cid:38)(cid:78)(cid:81)(cid:77)(cid:80)(cid:90)(cid:70)(cid:70)(cid:1) (cid:35)(cid:70)(cid:79)(cid:70)(cid:277)(cid:85)(cid:1) (cid:53)(cid:83)(cid:86)(cid:84)(cid:85)(cid:15)(cid:1) (cid:263)(cid:70)(cid:1) (cid:70)(cid:89)(cid:70)(cid:83)(cid:68)(cid:74)(cid:84)(cid:70)(cid:1) (cid:80)(cid:71)(cid:1) (cid:68)(cid:86)(cid:83)(cid:83)(cid:70)(cid:79)(cid:85)(cid:77)(cid:90)(cid:1) (cid:84)(cid:86)(cid:67)(cid:84)(cid:74)(cid:84)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1) options is subject to earnings per share growth over three (cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:81)(cid:70)(cid:83)(cid:74)(cid:80)(cid:69)(cid:84)(cid:13)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:277)(cid:83)(cid:84)(cid:85)(cid:1)(cid:67)(cid:70)(cid:74)(cid:79)(cid:72)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:80)(cid:79)(cid:70)(cid:1)(cid:74)(cid:79)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:66)(cid:79)(cid:85)(cid:1) is made. If compound earnings per share growth is at least 7.5 per cent per annum, 25 per cent of the options will be exercisable, rising on a straight line basis to 100 per cent if compound growth of 12.5 per cent per annum is achieved. Mr R S Kelvin and Mr L D Page hold options under this scheme. The Ted Baker Performance Share Plan Under this plan, both conditional share awards and share options may be granted. Awards made on 4 April 2008 were also subject to compound earnings per share growth performance conditions, with 25 per cent vesting only on 7.5 per cent per annum growth and the balance vesting on a straight line basis thereafter up to 100 per cent if growth of 12.5 per cent per annum was achieved. Mr R S Kelvin and Mr L D Page held awards under this plan. The exercise of subsisting share options was subject to the same performance conditions as the 1997 Executive Share Option Scheme. The Ted Baker Sharesave Scheme Under this scheme, options are made available to all employees to encourage share ownership. The exercise of options is not subject to performance conditions. Mr L D Page holds options under this scheme. Contracts of Service Each executive director has a service contract with a notice period of 12 months. The Board sets non-executive directors’ fees. Service contracts and letters of appointment are available for inspection at the Company’s registered office. 27 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES DIRECTORS’ REMUNERATION REPORT continued Robert Breare David A Bernstein Raymond S Kelvin Lindsay D Page Ronald Stewart Anne Sheinfield Date of service contract 1 November 2001 24 January 2003 17 July 1997 17 July 1997 25 February 2009 15 June 2010 Un-expired term Notice period Provision for compensation 6 months 6 months 12 months 12 months 6 months 6 months 6 months 6 months 12 months 12 months 6 months 6 months None None None None None None Total shareholder value The following graph charts the total cumulative shareholder return of the Company from January 2006 to January 2011. Total Shareholder Return - 5 Years Ted Baker PLC FTSE All Share General Retailers 180 160 140 120 100 80 60 40 20 0 ) £ ( e u l a V Jan ‘06 Jul ‘06 Jan ‘07 Jul ‘07 Jan ‘08 Jul ‘08 Jan ‘09 Jul ‘09 Jan ‘10 Jul ‘10 Jan ‘11 Audited Information The auditors are required to report on the individual aspects of remuneration, which may be found in the following section of this report. Directors’ remuneration, interests and transactions Emoluments Money purchase pension contributions 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 1,145 35 1,180 £’000 1,037 31 1,068 28 Ted Baker Report and Accounts 2010 / 2011 Directors’ emoluments Executive R S Kelvin L D Page Non-executive R Breare D A Bernstein D B Hewitt R Stewart A Sheinfield * Fees/basic salary £’000 Benefits £’000 Performance related bonus £’000 296 279 43 33 - 33 22 706 6 2 - - - - - 8 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 527 487 43 33 - 33 22 £’000 493 432 40 30 14 28 - 225 206 - - - - - 431 1,145 1,037 * Anne Sheinfield was appointed as a non-executive director on 15 June 2010 Performance related bonuses are determined by the Committee based on achievement of targets by reference to agreed financial performance measures and external expectations, namely profit before tax and growth in earnings per share. Bonuses are capped at 100% of basic salary. Directors’ Long Term Incentive Schemes Awards under the Ted Baker 2009 Value Creation Plan On 13 August 2009, the Committee made the award of units set out below under the Ted Baker 2009 Value Creation Plan (the “VCP”) subject to a three year performance period ending 12 August 2012. Awards under the VCP are subject to growth in earnings per share, share price and total shareholder return over a three year period, details of which may be found on page 27. R S Kelvin L D Page Average share price at award date No. of units awarded Share price at first vesting date No. of shares vested 376.1p 376.1p 17,900 (17.9% of total issued units 15,600 (15.6% of total issued units*) - - - - *In parallel to the award of these units, Mr L D Page also acquired 4,444 B ordinary shares in the capital of No Ordinary Designer Label Limited on 29 January 2010 under the terms of the VCP. At the end of the performance period, Mr L D Page can receive his benefit under the VCP either by exercising the nil cost option which may be granted under the units award or by selling his B ordinary shares. 29 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES DIRECTORS’ REMUNERATION REPORT continued Conditional Share Awards On 4 April 2008, the Trustees of the Ted Baker 1998 Employee Benefit Trust made the conditional share awards set out below under the Ted Baker Performance Share Plan (the “Plan”) for the three years ending 29 January 2011. Awards under the Plan were subject to the growth of the Company’s earnings per share over a three year period, details of which may be found on page 27. Diluted earnings per share rose by a compound rate of 4.9 per cent during the three years resulting in none of the shares vesting. R S Kelvin L D Page Share price at award date No. of shares awarded Share price at first vesting date No. of shares vested 414.0p 414.0p 66,425 57,971 - - - - Share Options Options granted to directors under the 1997 Executive Share Option Scheme were as follows: R S Kelvin LD Page 30 January 2010 No. of shares Options (exercised) or granted No. of shares 8,453 8,499 - - 29 January 2011 No. of shares 8,453 8,499 Option price p 354.9 353.0 Earliest date of exercise Expiry Date 28 October 2011 27 October 2018 22 October 2011 21 October 2018 Share options granted to directors under the Ted Baker Performance Share Plan were as follows: R S Kelvin L D Page 30 January 2010 No. of shares 137,681 113,527 Options (exercised) or granted No. of shares - - 29 January 2011 No. of shares 137,681 113,527 Option price p 414.0 414.0 Earliest date of exercise Expiry Date 30 January 2011 29 January 2018 30 January 2011 29 January 2018 The exercise of options was subject to the growth in the Company’s earnings per share over a three year period, details of which may be found on page 27. Diluted earnings per share rose by a compound rate of 4.9 per cent during the three years resulting in none of the options vesting. Share options granted to directors under the Ted Baker Sharesave Scheme were as follows: 30 January 2010 No. of shares 5,165 Options (exercised) or granted No. of shares - 29 January 2011 No. of shares 5,165 Option price p 303.0 Earliest date of exercise Expiry Date 1 July 2014 1 January 2015 L D Page Directors’ pension 52 weeks ended 29 January 2011 £’000 35 52 weeks ended 30 January 2010 £’000 31 L D Page David Bernstein Chairman of the Remuneration Committee 30 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES OTHER DISCLOSURES The directors present their annual report on the affairs of the Group, together with the accounts and auditors’ report, for the 52 weeks ended 29 January 2011. The comparative period is for the 52 weeks ended 30 January 2010. Principal Activities Ted Baker is a leading designer brand and the principal activities of the Group comprise the design, wholesale and retail of menswear, womenswear and related accessories. The subsidiary undertakings principally affecting the profits and net assets of the Group in the period are listed in Note 12 to the accounts. The Group also has branches operating in Eire and Hong Kong and a representative office in Italy. Business Review and Future Prospects A commentary on the Group’s progress during the period and its future prospects are set out in the Chairman’s Statement and Business Review on pages 5 to 11. The contents of this Directors’ Report together with: (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:8)(cid:84)(cid:1)(cid:52)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:79)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:22)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:23)(cid:28) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:35)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:51)(cid:70)(cid:87)(cid:74)(cid:70)(cid:88)(cid:1)(cid:80)(cid:79)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:24)(cid:1)(cid:85)(cid:80)(cid:1)(cid:18)(cid:18)(cid:28) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:49)(cid:83)(cid:74)(cid:79)(cid:68)(cid:74)(cid:81)(cid:66)(cid:77)(cid:1)(cid:51)(cid:74)(cid:84)(cid:76)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:54)(cid:79)(cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:85)(cid:74)(cid:70)(cid:84)(cid:1)(cid:80)(cid:79)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:84)(cid:1)(cid:18)(cid:19)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:18)(cid:20)(cid:28) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:52)(cid:86)(cid:84)(cid:85)(cid:66)(cid:74)(cid:79)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:90)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:38)(cid:79)(cid:87)(cid:74)(cid:83)(cid:80)(cid:79)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:83)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)(cid:80)(cid:79)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:19)(cid:17)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:49)(cid:70)(cid:80)(cid:81)(cid:77)(cid:70)(cid:1)(cid:83)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)(cid:80)(cid:79)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:19)(cid:18) constitute the Business Review and are incorporated into this report by reference. Results and Dividends The audited accounts for the 52 weeks ended 29 January 2011 are set out on pages 41 to 76. The Group profit for the 52 weeks, after taxation, was £17,280,000 (2010: £13,527,000). The directors recommend a final dividend of 14.3p per ordinary share (2010: 0.5p) payable on 17 June 2011 to ordinary shareholders on the register on 13 May 2011 which, together with the interim dividend of 6.3p per share (2010: 5.25p per share) paid on 26 November 2010, makes a total of 20.6p per share for the period (2010: 17.15p per share). Directors The directors during the financial year were those listed on page 25. Details of the directors’ beneficial interests in the shares of the Company are shown on page 32. Details of their options are given in the Directors’ Remuneration Report on pages 26 to 30. Brief details of the career of each director are set out on page 25. Mr R S Kelvin and Mr D A Bernstein will retire by rotation at the next annual general meeting and, being eligible, will offer themselves for re-election. Mr R Breare faces annual re-election due to his length of service as a non-executive Director of the Company. In line with the terms of her appointment, Ms A Sheinfield will also retire by rotation at the next annual general meeting and, being eligible, will offer herself for re-election. Substantial Shareholdings On 24 March 2011, the Company had been notified, in accordance with the Disclosure Rules and Transparency Rules (DTR5), of substantial interests in the ordinary share capital of the Company. For details see the table below. 31 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES OTHER DISCLOSURES continued Name of holder R S Kelvin Fidelity Investments Schroder Investment Management Scottish Widows Legal & General Investment Management Number 16,537,276 4,404,994 3,463,777 3,174,600 2,239,899 % Held 39.7 10.6 8.3 7.6 5.4 During the period between 24 March 2011 and 6 May 2011, being the latest date prior to the posting of the annual report and accounts, there have been no disclosures made to the Company pursuant to DTR 5. Share Capital and Control As at 29 January 2011, the Company’s authorised share capital was 80,000,000 ordinary shares of 5 pence each (in nominal value). Details of the Company’s share capital are shown in Note 19 to the consolidated financial statements on page 64. On 29 January 2011 there were 43,198,033 ordinary shares in issue of which the Company holds 1,574,249 ordinary shares in treasury. The Company may not exercise any rights (such as voting rights) in respect of the treasury shares and the treasury shares carry no right to receive dividends or other distributions of assets. The rules about the appointment and replacement of directors are contained in the Company’s Articles of Association. Specific rules regarding the re-election of directors are referred to in the Corporate Governance Statements report on pages 17 to 19. Changes to the Articles of Association must be approved by the shareholders in accordance with the legislation in force from time to time. The powers of the directors are determined by legislation and the Articles of Association of the Company in force from time to time. Powers relating to the issuing and buying back of shares are included in the Company’s Articles of Association and shareholder approval of such authorities may be sought, if considered appropriate by directors, at the Annual General Meeting. There are a number of agreements that take effect, alter or terminate upon a change of control of the Company following a takeover bid, such as commercial contracts, bank loan agreements and employee share schemes. None of these is deemed to be significant in terms of its potential impact on the business of the Company. The Company does not have agreements with any director or employee that would provide compensation for loss of office or employment resulting from a takeover, save that the Company’s share schemes contain provisions which may cause options and awards granted to employees to vest on a takeover. Directors’ Interests The directors who held office at 29 January 2011 had interests in the shares of Ted Baker PLC as shown in the table below. R S Kelvin L D Page R Stewart % of share capital 29 January 2011 Beneficial 30 January 2010 Beneficial 39.7 0.7 - 16,537,276 16,537,276 293,851 300 318,851 - During the period between 29 January 2011 and 6 May 2011, being the latest date prior to the posting of the annual report and accounts, there have been no subsequent changes in the interests of directors. Going Concern The directors have reviewed the Group’s budgets and long term projections. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. 32 Ted Baker Report and Accounts 2010 / 2011 Creditor Payment Policy The Company’s policy, in relation to all of its suppliers, is to settle the terms of payment when agreeing the terms of the transaction and to abide by those terms provided that it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. The Company does not follow any code or statement on payment practice. The number of days’ purchases outstanding for payment by the Group at the end of the year was 52 days (2010: 34 days). At the year end the Company had no trade creditors. Donations The value of charitable donations made during the period was £27,368 (2010: £2,450). Social Responsibility Details of the Group’s social, ethical and environmental responsibility initiatives are set out in the Sustainability and the Environment statement on page 20. People Details of the Group’s policies with respect to people and employees are set out in the People statement on page 21. Health and Safety The Group remains committed to providing a safe place to work and shop for all employees and customers. Annual risk assessments are carried out at all locations and a committee, comprised of representatives within the business and an external adviser, reviews and resolves any health and safety issues. Risk Management The Company’s policies on currency and interest rate risk are outlined in Note 22 of the Financial Statements on pages 68 to 76. Directors’ Statement Regarding Disclosure of Information to Auditors The directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are aware, there is no relevant audit information of which the Company’s auditors are unaware. Further, each director has taken all the steps that he ought to have taken as a director to ensure the Board is aware of any relevant audit information and to establish that the Company’s auditors are aware of any such information. Auditors The directors will place a resolution before the annual general meeting to re-appoint KPMG Audit Plc as auditors for the ensuing year. The report was approved by the Board of Directors on 24 March 2011 and signed on its behalf by: C F Anderson, Secretary Registered office - The Ugly Brown Building, 6a St. Pancras Way, London NW1 0TB 33 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES STATEMENT OF DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the Annual Report and Group and Parent company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they have elected to prepare both the group and the parent company financial statements in accordance with IFRSs as adopted by the EU and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to: (cid:116)(cid:1) (cid:84)(cid:70)(cid:77)(cid:70)(cid:68)(cid:85)(cid:1)(cid:84)(cid:86)(cid:74)(cid:85)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:81)(cid:80)(cid:77)(cid:74)(cid:68)(cid:74)(cid:70)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:79)(cid:1)(cid:66)(cid:81)(cid:81)(cid:77)(cid:90)(cid:1)(cid:85)(cid:73)(cid:70)(cid:78)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:74)(cid:84)(cid:85)(cid:70)(cid:79)(cid:85)(cid:77)(cid:90)(cid:28) (cid:116)(cid:1) (cid:78)(cid:66)(cid:76)(cid:70)(cid:1)(cid:75)(cid:86)(cid:69)(cid:72)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:70)(cid:84)(cid:85)(cid:74)(cid:78)(cid:66)(cid:85)(cid:70)(cid:84)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:83)(cid:70)(cid:66)(cid:84)(cid:80)(cid:79)(cid:66)(cid:67)(cid:77)(cid:70)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:81)(cid:83)(cid:86)(cid:69)(cid:70)(cid:79)(cid:85)(cid:28) (cid:116)(cid:1) (cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:1)(cid:88)(cid:73)(cid:70)(cid:85)(cid:73)(cid:70)(cid:83)(cid:1)(cid:85)(cid:73)(cid:70)(cid:90)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:42)(cid:39)(cid:51)(cid:52)(cid:84)(cid:1)(cid:66)(cid:84)(cid:1)(cid:66)(cid:69)(cid:80)(cid:81)(cid:85)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:38)(cid:54)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69) (cid:116)(cid:1) (cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:80)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:80)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:80)(cid:79)(cid:68)(cid:70)(cid:83)(cid:79)(cid:1)(cid:67)(cid:66)(cid:84)(cid:74)(cid:84)(cid:1)(cid:86)(cid:79)(cid:77)(cid:70)(cid:84)(cid:84)(cid:1)(cid:74)(cid:85)(cid:1)(cid:74)(cid:84)(cid:1)(cid:74)(cid:79)(cid:66)(cid:81)(cid:81)(cid:83)(cid:80)(cid:81)(cid:83)(cid:74)(cid:66)(cid:85)(cid:70)(cid:1)(cid:85)(cid:80)(cid:1)(cid:81)(cid:83)(cid:70)(cid:84)(cid:86)(cid:78)(cid:70)(cid:1)(cid:85)(cid:73)(cid:66)(cid:85)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:86)(cid:81)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:66)(cid:83)(cid:70)(cid:79)(cid:85)(cid:1) company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement of the directors in respect of the Annual Report We, the directors of the Company, confirm that to the best of our knowledge: (a) the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit for the Group and the undertakings included in the consolidation taken as a whole; and (b) pursuant to Chapter 4 of the Disclosure and Transparency Rules, the Group’s annual report contains a fair review of the development and performance of the business and the position of the Group, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. On behalf of the Board R S Kelvin Chief Executive 24 March 2011 L D Page Finance Director 24 March 2011 34 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF TED BAKER PLC We have audited the financial statements of Ted Baker PLC for the 52 weeks ended 29 January 2011 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the Group and Parent Company Statement of Changes in Equity, the Group and Parent Company Balance Sheets, the Group and Parent Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s 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 and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 34, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/ private.cfm. Opinion on financial statements In our opinion: (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:72)(cid:74)(cid:87)(cid:70)(cid:1)(cid:66)(cid:1)(cid:85)(cid:83)(cid:86)(cid:70)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:71)(cid:66)(cid:74)(cid:83)(cid:1)(cid:87)(cid:74)(cid:70)(cid:88)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:86)(cid:81)(cid:8)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:66)(cid:83)(cid:70)(cid:79)(cid:85)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:8)(cid:84)(cid:1)(cid:66)(cid:268)(cid:66)(cid:74)(cid:83)(cid:84)(cid:1)(cid:66)(cid:84)(cid:1)(cid:66)(cid:85)(cid:1)(cid:19)(cid:26)(cid:1)(cid:43)(cid:66)(cid:79)(cid:86)(cid:66)(cid:83)(cid:90)(cid:1) 2011 and of the group’s profit for the period then ended; (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:86)(cid:81)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:81)(cid:83)(cid:80)(cid:81)(cid:70)(cid:83)(cid:77)(cid:90)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:42)(cid:39)(cid:51)(cid:52)(cid:84)(cid:1)(cid:66)(cid:84)(cid:1)(cid:66)(cid:69)(cid:80)(cid:81)(cid:85)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:38)(cid:54)(cid:28)(cid:1) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:66)(cid:83)(cid:70)(cid:79)(cid:85)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:81)(cid:83)(cid:80)(cid:81)(cid:70)(cid:83)(cid:77)(cid:90)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:42)(cid:39)(cid:51)(cid:52)(cid:84)(cid:1)(cid:66)(cid:84)(cid:1)(cid:66)(cid:69)(cid:80)(cid:81)(cid:85)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:38)(cid:54)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:66)(cid:84)(cid:1) applied in accordance with the provisions of the Companies Act 2006; and (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:83)(cid:70)(cid:82)(cid:86)(cid:74)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)(cid:1)(cid:34)(cid:68)(cid:85)(cid:1)(cid:19)(cid:17)(cid:17)(cid:23)(cid:1)(cid:66)(cid:79)(cid:69)(cid:13)(cid:1)(cid:66)(cid:84)(cid:1)(cid:83)(cid:70)(cid:72)(cid:66)(cid:83)(cid:69)(cid:84)(cid:1) the group financial statements, Article 4 of the IAS Regulation. Opinion on other matter prescribed by the Companies Act 2006 In our opinion: (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:66)(cid:83)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:37)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:8)(cid:1)(cid:51)(cid:70)(cid:78)(cid:86)(cid:79)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:51)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:67)(cid:70)(cid:1)(cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:70)(cid:69)(cid:1)(cid:73)(cid:66)(cid:84)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:81)(cid:83)(cid:80)(cid:81)(cid:70)(cid:83)(cid:77)(cid:90)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:68)(cid:68)(cid:80)(cid:83)(cid:69)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:36)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:74)(cid:70)(cid:84)(cid:1) Act 2006; and (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:74)(cid:79)(cid:71)(cid:80)(cid:83)(cid:78)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:72)(cid:74)(cid:87)(cid:70)(cid:79)(cid:1)(cid:74)(cid:79)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:37)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:8)(cid:1)(cid:51)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:90)(cid:70)(cid:66)(cid:83)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:88)(cid:73)(cid:74)(cid:68)(cid:73)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:74)(cid:84)(cid:1)(cid:68)(cid:80)(cid:79)(cid:84)(cid:74)(cid:84)(cid:85)(cid:70)(cid:79)(cid:85)(cid:1) with the financial statements. 35 Ted Baker Report and Accounts 2010 / 2011 DIRECTORS' REPORT: OTHER STATUTORY DISCLOSURES INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF TED BAKER PLC continued Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: (cid:116)(cid:1) (cid:66)(cid:69)(cid:70)(cid:82)(cid:86)(cid:66)(cid:85)(cid:70)(cid:1) (cid:66)(cid:68)(cid:68)(cid:80)(cid:86)(cid:79)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1) (cid:83)(cid:70)(cid:68)(cid:80)(cid:83)(cid:69)(cid:84)(cid:1) (cid:73)(cid:66)(cid:87)(cid:70)(cid:1) (cid:79)(cid:80)(cid:85)(cid:1) (cid:67)(cid:70)(cid:70)(cid:79)(cid:1) (cid:76)(cid:70)(cid:81)(cid:85)(cid:1) (cid:67)(cid:90)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1) (cid:81)(cid:66)(cid:83)(cid:70)(cid:79)(cid:85)(cid:1) (cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:13)(cid:1) (cid:80)(cid:83)(cid:1) (cid:83)(cid:70)(cid:85)(cid:86)(cid:83)(cid:79)(cid:84)(cid:1) (cid:66)(cid:69)(cid:70)(cid:82)(cid:86)(cid:66)(cid:85)(cid:70)(cid:1) (cid:71)(cid:80)(cid:83)(cid:1) (cid:80)(cid:86)(cid:83)(cid:1) (cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:1) (cid:73)(cid:66)(cid:87)(cid:70)(cid:1) (cid:79)(cid:80)(cid:85)(cid:1) (cid:67)(cid:70)(cid:70)(cid:79)(cid:1) received from branches not visited by us; or (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:66)(cid:83)(cid:70)(cid:79)(cid:85)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:1)(cid:277)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:66)(cid:83)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:37)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:8)(cid:1)(cid:51)(cid:70)(cid:78)(cid:86)(cid:79)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:51)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:67)(cid:70)(cid:1)(cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:70)(cid:69)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:79)(cid:80)(cid:85)(cid:1)(cid:74)(cid:79)(cid:1)(cid:66)(cid:72)(cid:83)(cid:70)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1) with the accounting records and returns; or (cid:116)(cid:1) (cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:69)(cid:74)(cid:84)(cid:68)(cid:77)(cid:80)(cid:84)(cid:86)(cid:83)(cid:70)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:8)(cid:1)(cid:83)(cid:70)(cid:78)(cid:86)(cid:79)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:84)(cid:81)(cid:70)(cid:68)(cid:74)(cid:277)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:77)(cid:66)(cid:88)(cid:1)(cid:66)(cid:83)(cid:70)(cid:1)(cid:79)(cid:80)(cid:85)(cid:1)(cid:78)(cid:66)(cid:69)(cid:70)(cid:28)(cid:1)(cid:80)(cid:83) (cid:116)(cid:1) (cid:88)(cid:70)(cid:1)(cid:73)(cid:66)(cid:87)(cid:70)(cid:1)(cid:79)(cid:80)(cid:85)(cid:1)(cid:83)(cid:70)(cid:68)(cid:70)(cid:74)(cid:87)(cid:70)(cid:69)(cid:1)(cid:66)(cid:77)(cid:77)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:74)(cid:79)(cid:71)(cid:80)(cid:83)(cid:78)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:70)(cid:89)(cid:81)(cid:77)(cid:66)(cid:79)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:88)(cid:70)(cid:1)(cid:83)(cid:70)(cid:82)(cid:86)(cid:74)(cid:83)(cid:70)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:80)(cid:86)(cid:83)(cid:1)(cid:66)(cid:86)(cid:69)(cid:74)(cid:85)(cid:28)(cid:1)(cid:80)(cid:83) (cid:116)(cid:1) (cid:66)(cid:1)(cid:36)(cid:80)(cid:83)(cid:81)(cid:80)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:40)(cid:80)(cid:87)(cid:70)(cid:83)(cid:79)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:52)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:73)(cid:66)(cid:84)(cid:1)(cid:79)(cid:80)(cid:85)(cid:1)(cid:67)(cid:70)(cid:70)(cid:79)(cid:1)(cid:81)(cid:83)(cid:70)(cid:81)(cid:66)(cid:83)(cid:70)(cid:69)(cid:1)(cid:67)(cid:90)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:15)(cid:1) Under the Listing Rules we are required to review: (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:8)(cid:1)(cid:84)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:13)(cid:1)(cid:84)(cid:70)(cid:85)(cid:1)(cid:80)(cid:86)(cid:85)(cid:1)(cid:80)(cid:79)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:20)(cid:19)(cid:13)(cid:1)(cid:74)(cid:79)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:85)(cid:80)(cid:1)(cid:72)(cid:80)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:80)(cid:79)(cid:68)(cid:70)(cid:83)(cid:79)(cid:28) (cid:116)(cid:1) (cid:85)(cid:73)(cid:70)(cid:1)(cid:81)(cid:66)(cid:83)(cid:85)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:36)(cid:80)(cid:83)(cid:81)(cid:80)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:40)(cid:80)(cid:87)(cid:70)(cid:83)(cid:79)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:52)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:80)(cid:79)(cid:1)(cid:81)(cid:66)(cid:72)(cid:70)(cid:1)(cid:18)(cid:24)(cid:1)(cid:83)(cid:70)(cid:77)(cid:66)(cid:85)(cid:74)(cid:79)(cid:72)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:79)(cid:90)(cid:8)(cid:84)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:77)(cid:74)(cid:66)(cid:79)(cid:68)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:79)(cid:74)(cid:79)(cid:70)(cid:1)(cid:81)(cid:83)(cid:80)(cid:87)(cid:74)(cid:84)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1) the June 2008 Combined Code specified for our review; and (cid:116)(cid:1) (cid:68)(cid:70)(cid:83)(cid:85)(cid:66)(cid:74)(cid:79)(cid:1)(cid:70)(cid:77)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:83)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:84)(cid:73)(cid:66)(cid:83)(cid:70)(cid:73)(cid:80)(cid:77)(cid:69)(cid:70)(cid:83)(cid:84)(cid:1)(cid:67)(cid:90)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:35)(cid:80)(cid:66)(cid:83)(cid:69)(cid:1)(cid:80)(cid:79)(cid:1)(cid:69)(cid:74)(cid:83)(cid:70)(cid:68)(cid:85)(cid:80)(cid:83)(cid:84)(cid:8)(cid:1)(cid:83)(cid:70)(cid:78)(cid:86)(cid:79)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:15)(cid:1)(cid:1) Mike Barradell (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL 24 March 2011 36 Ted Baker Report and Accounts 2010 / 2011 37 Ted Baker Report and Accounts 2010 / 2011 Weaving Ted ’s Magic A veritable explosion of breathtaking lights, this ‘shattered crystal’ graphic is a key print that has weaved its magic across Ted’s womenswear accessories for Spring/Summer 11. Using digital fragmentation to bring to life his love of exotic colour and fabrics, this chameleon-like print sparkles both day and night and has ensured Ted continues to remain popular with the ladies, worldwide. FINANCIAL STATEMENTS GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS Group Income Statement For the 52 weeks ended 29 January 2011 Revenue Cost of sales Gross profit Distribution costs Administrative expenses - Other administrative expenses - Impairment losses Licence income Other operating income Operating profit Finance income Finance expenses Share of profit of jointly controlled entity, net of tax Profit before tax Income tax expense Profit for the period Attributable to: - Equity shareholders of the parent company - Non-controlling interest Profit for the period Earnings per share Basic Diluted Note 2 4 4 12 3,6 6 9 52 weeks ended 29 January 2011 £’000 187,700 (71,923) 115,777 52 weeks ended 30 January 2010 £’000 163,586 (63,659) 99,927 (73,690) (64,573) (24,259) - 6,227 77 24,132 42 (120) 174 24,228 (6,948) 17,280 17,280 - 17,280 41.5p 41.4p (20,395) (750) 5,493 80 19,782 10 (374) 86 19,504 (5,977) 13,527 13,576 (49) 13,527 32.6p 32.6p 41 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS continued Group Statement of Comprehensive Income For the 52 weeks ended 29 January 2011 Profit for the period Other comprehensive income Net effective portion of changes in fair value of cash flow hedges Net change in fair value of cash flow hedges transferred to profit or loss Exchange rate movement Other comprehensive income for the period 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 17,280 143 (279) 112 (24) £’000 13,527 (1,334) (391) (1,058) (2,783) Total comprehensive income for the period 17,256 10,744 Total comprehensive income attributable to: - Equity shareholders of the parent company - Non-controlling interest Total comprehensive income for the period 17,256 - 17,256 10,793 (49) 10,744 42 Ted Baker Report and Accounts 2010 / 2011 Group Statement of Changes in Equity For the 52 weeks ended 29 January 2011 Share capital Share premium £’000 2,160 £’000 9,137 Cash flow hedging reserve £’000 (12) Translation reserve £’000 124 Retained earnings £’000 54,906 Total equity attributable to equity shareholders of the parent Non-controlling interest Total equity £’000 66,315 £’000 (85) Balance at 30 January 2010 Comprehensive income for the period Profit for the period Deferred tax associated with movement in hedging reserve Effective portion of changes in fair value of cash flow hedges Net change in fair value of cash flow hedges transferred to profit or loss Exchange rate movement Total comprehensive income for the period Transactions with owners recorded directly in equity Share options / awards charge Movement on current / deferred tax on share options / awards Purchase of non-controlling interest Disposal of own / treasury shares Dividends paid Total transactions with owners - - - - - - - - - - - - - - - - - - - - - - - - - 55 88 (279) - (136) - - - - - - - - - - 112 112 - - - - - - 17,280 17,280 - - - - 17,280 426 298 (715) 19 (7,575) (7,547) 55 88 (279) 112 17,256 426 298 (715) 19 (7,575) (7,547) - - - - - - - - 85 - - 85 £’000 66,230 17,280 55 88 (279) 112 17,256 426 298 (630) 19 (7,575) (7,462) Balance at 29 January 2011 2,160 9,137 (148) 236 64,639 76,024 - 76,024 For the 52 weeks ended 30 January 2010 Balance at 31 January 2009 Comprehensive income for the period Profit for the period Deferred tax associated with movement in hedging reserve Effective portion of changes in fair value of cash flow hedges Net change in fair value of cash flow hedges transferred to profit or loss Exchange rate movement Total comprehensive income for the period Transactions with owners recorded directly in equity Share options / awards charge Movement on current / deferred tax on share options / awards Disposal of own / treasury shares Dividends paid Total transactions with owners Share capital Share premium £’000 2,160 £’000 9,137 Cash flow hedging reserve £’000 1,713 Translation reserve £’000 1,182 - - - - - - - - - - - - - - - - - - - - - - - (375) (959) (391) - (1,725) - - - - (1,058) (1,058) - - - - - - - - - - Retained earnings £’000 48,010 13,576 - - - - 13,576 192 13 43 (6,928) (6,680) Total equity attributable to equity shareholders of the parent £’000 62,202 13,576 (375) (959) (391) (1,058) 10,793 192 13 43 (6,928) (6,680) Non-controlling interest Total equity £’000 (36) £’000 62,166 (49) 13,527 - - - - (375) (959) (391) (1,058) (49) 10,744 - - - - - 192 13 43 (6,928) (6,680) Balance at 30 January 2010 2,160 9,137 (12) 124 54,906 66,315 (85) 66,230 43 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS continued Company Statement of Changes in Equity For the 52 weeks ended 29 January 2011 Balance at 30 January 2010 Profit for the period Transactions with owners recorded directly in equity Share options / awards charge Share options / awards granted to subsidiary employees Disposal of own shares Dividends paid Total transactions with owners Share capital £’000 2,160 Share premium £’000 9,137 Other reserves Retained earnings Total Equity £’000 14,605 £’000 15,381 £’000 41,283 - - - - - - - - - - - - - - 357 - - 357 8,060 8,060 69 - 19 (7,575) (7,487) 69 357 19 (7,575) (7,130) Balance at 29 January 2011 2,160 9,137 14,962 15,954 42,213 For the 52 weeks ended 30 January 2010 Balance at 31 January 2009 Profit for the period Transactions with owners recorded directly in equity Share options / awards credit Share options / awards granted to subsidiary employees Disposal of own shares Dividends paid Total transactions with owners Share capital £’000 2,160 Share premium £’000 9,137 Other reserves Retained earnings Total Equity £’000 14,445 £’000 453 £’000 26,195 - - - - - - - - - - - - - - 160 - - 160 21,781 21,781 32 - 43 (6,928) (6,853) 32 160 43 (6,928) (6,693) Balance at 30 January 2010 2,160 9,137 14,605 15,381 41,283 44 Ted Baker Report and Accounts 2010 / 2011 Group and Company Balance Sheet At 29 January 2011 Non-current assets Intangible assets Property, plant and equipment Investments in subsidiary Investment in equity accounted investee Deferred tax assets Prepayments Current assets Inventories Trade and other receivables Amount due from equity accounted investee Derivative financial assets Cash and cash equivalents Current liabilities Trade and other payables Income tax payable Derivative financial liabilities Non-current liabilities Deferred tax liabilities Net assets Equity Share capital Share premium Other reserves Translation reserve Retained earnings Total equity attributable to equity shareholders of the parent company Non-controlling interest Total equity Note Group 29 January 2011 £’000 Company 29 January 2011 £’000 Group 30 January 2010 £’000 Company 30 January 2010 £’000 10 11 12 12 13 14 15 12 16 17 18 16 13 19 19 19 19 19 997 28,368 - 345 2,470 777 32,957 42,492 27,384 286 102 13,536 83,800 (34,970) (3,761) (455) (39,186) (1,547) (1,547) 76,024 2,160 9,137 (148) 236 64,639 76,024 - 76,024 - - 17,051 - - - 17,051 - 24,712 - - 464 25,176 (14) - - (14) - - 42,213 2,160 9,137 14,962 - 15,954 42,213 - 42,213 634 25,508 - 171 1,598 842 28,753 33,450 19,698 261 280 13,698 67,387 (24,779) (3,511) (304) (28,594) (1,316) (1,316) 66,230 2,160 9,137 (12) 124 54,906 66,315 (85) 66,230 - - 16,694 - - - 16,694 - 24,112 - - 489 24,601 (12) - - (12) - - 41,283 2,160 9,137 14,605 - 15,381 41,283 - 41,283 These financial statements were approved by the Board of Directors on 24 March 2011 and were signed on its behalf by: L D Page Director 45 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS continued Group and Company Cash Flow Statement For the 52 weeks ended 29 January 2011 Cash generated from operations Profit for the period Adjusted for: Income tax expense Depreciation Impairment losses Loss on disposal of property, plant & equipment Share options / awards charge Net finance losses / (gains) Net change in derivative financial assets and liabilities Share of profit in joint venture Decrease in non-current prepayments (Increase) / decrease in inventory (Increase) / decrease in trade and other receivables Increase /(decrease) in trade and other payables Interest paid Income taxes paid Net cash generated from operating activities Cash flow from investing activities Purchases of property, plant & equipment Purchase of non-controlling entity Proceeds from sale of property, plant & equipment Interest received Net cash from investing activities Cash flow from financing activities Own shares acquired Proceeds from option holders for exercise of options Dividends paid Net cash from financing activities Net (decrease) / increase in cash and cash equivalents Cash and cash equivalents at 30 January 2010 / 31 January 2009 Exchange rate movement Cash and cash equivalents at 29 January 2011 / 30 January 2010 Group 52 weeks ended 29 January 2011 £’000 17,280 6,948 6,470 - 225 426 30 138 (174) 61 (9,026) (7,511) 10,140 (83) (6,859) 18,065 (10,036) (630) 32 38 (10,596) - 19 (7,575) (7,556) (87) 13,698 (75) 13,536 Company 52 weeks ended 29 January 2011 £’000 8,060 - - - - 69 (5) - - - - (600) 2 - - 7,526 - - - 5 5 - 19 (7,575) (7,556) (25) 489 - 464 Group 52 weeks ended 30 January 2010 £’000 13,527 5,977 6,295 750 110 192 138 1,118 (86) 64 3,026 1,649 (4,908) (157) (6,602) 21,093 (4,538) - - 8 (4,530) - 43 (6,928) (6,885) 9,678 4,660 (640) 13,698 Company 52 weeks ended 30 January 2010 £’000 21,781 - - - - 32 (3) - - - - (14,960) 10 - - 6,860 - - - 3 3 - 43 (6,928) (6,885) (22) 511 - 489 46 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 1) Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated and parent financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. a) Basis of preparation Both the consolidated and parent financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’). On publishing the parent company financial statements here together with the consolidated financial statements, the Company is taking advantage of the exemption in Section 408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements. The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out on pages 5 to 13. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 10 to 11. In addition Note 22 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Group’s forecasts and projections, taking into account reasonably possible changes in trading performance, show that the Group has sufficient financial resources. As a consequence the directors have a reasonable expectation that the Company and the Group are well placed to manage their business risks and to continue in operational existence for the foreseeable future, despite the current uncertain global economic outlook. Accordingly, the directors continue to adopt the going concern basis in preparing the consolidated financial statements. The consolidated and parent financial statements have been prepared under the historical cost convention, except for financial assets and financial liabilities (including derivative instruments), which are held at fair value. The preparation of financial statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The Group’s significant judgement areas relate to inventory provisions and impairment of assets. 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: (cid:116)(cid:1) (cid:42)(cid:39)(cid:51)(cid:52)(cid:1)(cid:20)(cid:1)(cid:9)(cid:83)(cid:70)(cid:87)(cid:74)(cid:84)(cid:70)(cid:69)(cid:1)(cid:19)(cid:17)(cid:17)(cid:25)(cid:10)(cid:13)(cid:1)(cid:35)(cid:86)(cid:84)(cid:74)(cid:79)(cid:70)(cid:84)(cid:84)(cid:1)(cid:36)(cid:80)(cid:78)(cid:67)(cid:74)(cid:79)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:28) (cid:116)(cid:1) (cid:34)(cid:78)(cid:70)(cid:79)(cid:69)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:42)(cid:34)(cid:52)(cid:1)(cid:19)(cid:24)(cid:13)(cid:1)(cid:36)(cid:80)(cid:79)(cid:84)(cid:80)(cid:77)(cid:74)(cid:69)(cid:66)(cid:85)(cid:70)(cid:69)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:52)(cid:70)(cid:81)(cid:66)(cid:83)(cid:66)(cid:85)(cid:70)(cid:1)(cid:39)(cid:74)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:52)(cid:85)(cid:66)(cid:85)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:28) (cid:116)(cid:1) (cid:34)(cid:78)(cid:70)(cid:79)(cid:69)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:42)(cid:34)(cid:52)(cid:1)(cid:20)(cid:26)(cid:13)(cid:1)(cid:39)(cid:74)(cid:79)(cid:66)(cid:79)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:42)(cid:79)(cid:84)(cid:85)(cid:83)(cid:86)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:27)(cid:1)(cid:51)(cid:70)(cid:68)(cid:80)(cid:72)(cid:79)(cid:74)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:46)(cid:70)(cid:66)(cid:84)(cid:86)(cid:83)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:27)(cid:1)(cid:38)(cid:77)(cid:74)(cid:72)(cid:74)(cid:67)(cid:77)(cid:70)(cid:1)(cid:41)(cid:70)(cid:69)(cid:72)(cid:70)(cid:69)(cid:1)(cid:42)(cid:85)(cid:70)(cid:78)(cid:84)(cid:28) (cid:116)(cid:1) (cid:34)(cid:78)(cid:70)(cid:79)(cid:69)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:85)(cid:80)(cid:1)(cid:42)(cid:34)(cid:52)(cid:1)(cid:19)(cid:13)(cid:1)(cid:52)(cid:73)(cid:66)(cid:83)(cid:70)(cid:14)(cid:67)(cid:66)(cid:84)(cid:70)(cid:69)(cid:1)(cid:49)(cid:66)(cid:90)(cid:78)(cid:70)(cid:79)(cid:85)(cid:27)(cid:1)(cid:40)(cid:83)(cid:80)(cid:86)(cid:81)(cid:1)(cid:36)(cid:66)(cid:84)(cid:73)(cid:14)(cid:84)(cid:70)(cid:85)(cid:85)(cid:77)(cid:70)(cid:69)(cid:1)(cid:52)(cid:73)(cid:66)(cid:83)(cid:70)(cid:14)(cid:67)(cid:66)(cid:84)(cid:70)(cid:69)(cid:1)(cid:49)(cid:66)(cid:90)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:53)(cid:83)(cid:66)(cid:79)(cid:84)(cid:66)(cid:68)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:28) 47 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued (cid:116)(cid:1) (cid:42)(cid:78)(cid:81)(cid:83)(cid:80)(cid:87)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:42)(cid:39)(cid:51)(cid:52)(cid:8)(cid:84)(cid:1)(cid:19)(cid:17)(cid:17)(cid:26)(cid:28) (cid:116)(cid:1) (cid:42)(cid:39)(cid:51)(cid:42)(cid:36)(cid:1)(cid:18)(cid:24)(cid:13)(cid:1)(cid:37)(cid:74)(cid:84)(cid:85)(cid:83)(cid:74)(cid:67)(cid:86)(cid:85)(cid:74)(cid:80)(cid:79)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:47)(cid:80)(cid:79)(cid:14)(cid:68)(cid:66)(cid:84)(cid:73)(cid:1)(cid:34)(cid:84)(cid:84)(cid:70)(cid:85)(cid:84)(cid:1)(cid:85)(cid:80)(cid:1)(cid:48)(cid:88)(cid:79)(cid:70)(cid:83)(cid:84)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69) (cid:116)(cid:1) (cid:42)(cid:39)(cid:51)(cid:42)(cid:36)(cid:1)(cid:18)(cid:25)(cid:13)(cid:1)(cid:53)(cid:83)(cid:66)(cid:79)(cid:84)(cid:71)(cid:70)(cid:83)(cid:84)(cid:1)(cid:80)(cid:71)(cid:1)(cid:34)(cid:84)(cid:84)(cid:70)(cid:85)(cid:84)(cid:1)(cid:71)(cid:83)(cid:80)(cid:78)(cid:1)(cid:36)(cid:86)(cid:84)(cid:85)(cid:80)(cid:78)(cid:70)(cid:83)(cid:84)(cid:15) The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have significant impact on the financial statements. b) Basis of consolidation The consolidated accounts include the accounts of the Company and its subsidiary undertakings made up to 29 January 2011. Unless otherwise stated, the acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated financial statements from the date of acquisition or up to the date of disposal. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring the venturers’ unanimous consent for strategic financial and operating decisions. Jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The consolidated financial statements include the Group’s share of the total recognised income and expense and equity movements of equity accounted investees, from the date that significant influence or joint control commences until the date that significant influence or control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to nil and recognition of further losses is discounted except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an investee. c) Foreign currency Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to functional currency at foreign exchange rates ruling at the dates the values were determined. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to sterling at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to sterling at average foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation since the transition date to IFRS are recognised directly in a separate component of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss. 48 Ted Baker Report and Accounts 2010 / 2011 d) Revenue recognition Revenue represents amounts receivable for goods provided in the normal course of business, net of trade discounts, VAT and other sales related taxes. Retail revenue is recognised when a Group entity sells a product to the customer. Wholesale revenue is recognised when goods are delivered. Licence income is recognised on an accruals basis in accordance with the risks and rewards of the relevant agreements. The Group sells retail products with the right of return and experience is used to estimate and provide for the value of such returns at the time of sale when considered significant. Credit notes or exchanges are available to customers returning unwanted products with proof of purchase within 28 days of the date of purchase. Sale of gift vouchers are treated as future liabilities, and revenue is recognised when the gift vouchers are redeemed against a later transaction. e) Leases Rentals under operating leases are charged as incurred, unless there are pre-determined rental increases in the lease, in which case they are recognised on a straight-line basis over the lease term. Leasehold incentives received are recognised as an integral part of total lease expense, over the term of the lease. Certain rental expense is determined on the basis of revenue achieved in specific retail locations and is accrued for on that basis. The Group’s intangible assets, as shown in Note 10, relates to leased premises which have a guaranteed residual value. The guaranteed value arises because the next tenant, based on current market conditions, will pay this amount to the Group. Due to the likelihood that the money will be recoverable, the asset is not amortised. f) Pension costs Contributions payable to defined contribution schemes in respect of pension costs and other post retirement benefits are charged to the consolidated income statement in the period to which they relate. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet. g) Share based payments The Group operates an equity settled share based compensation plan. Share options and conditional share awards Share options and conditional share awards are measured at fair value at the date of grant using the Black-Scholes pricing model, taking into account the terms and conditions of the options/awards vesting. The grant date fair value is expensed on a straight line basis over the vesting period (i.e. the period in which the employees become unconditionally entitled to share options/ awards) based on an estimate of shares that will eventually vest. Shares of Ted Baker PLC held by the Company for the purpose of filling obligations in respect of employee share plans are deducted from equity in the balance sheet. Any surplus or deficit arising on the sale of the Ted Baker PLC shares held by the Company is included as an adjustment to reserves. Value Creation Plan The Group also operates a Value Creation Plan (VCP) which awards entitlements to certain employees and directors of the Group. These entitlements are convertible into options over ordinary shares subject to the Group’s share price reaching certain targets. The fair value of the amount payable to the employee is recognised as an expense with a corresponding increase in equity. The fair value is initially recognised at the date of the award of the entitlements and spread over the period during which the entitlements are convertible into ordinary shares. The fair value of the entitlements is based on a Monte Carlo valuation model, taking into account the terms and conditions upon which the instruments were granted. Transactions of the Company-sponsored Employee Benefit Trust (EBT) are treated as being those of the Company and are therefore reflected in the parent company and group financial statements. In particular, the EBT’s purchases and sales of shares in the Company are debited and credited directly to equity. 49 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued Where the Company grants options over its own shares to the employees of its subsidiaries, it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its consolidated financial statements with the corresponding credit being recognised directly in equity. h) Derivatives The Group holds derivative financial instruments to hedge its foreign currency exposure. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Cash flow hedges Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in other comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss. i) Taxation Corporation tax payable is recognised on taxable profits using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax is not recognised for temporary differences relating to investments in subsidiaries to the extent they will not reverse in the foreseeable future. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Income tax comprises current and deferred tax. j) Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group and Company financial statements in the period in which it is declared. k) Intangible assets Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement on a straight line basis over the estimated useful lives of intangible assets unless such lives are indefinite. 50 Ted Baker Report and Accounts 2010 / 2011 l) Property, plant and equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value, of each asset over its expected useful life, on the following bases: Leasehold improvements: Fixtures, fittings and office equipment: Motor vehicles: Assets under construction: Straight line over the period of the lease. 20% to 25% per annum on a straight-line basis apart from computer equipment, which is 33% per annum on a straight-line basis. 25% per annum on a straight-line basis. Are deemed to have not started their useful lives and as such are not depreciated until the assets are in use and transferred to one of the categories above. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in the income statement. m) Investments Investments in subsidiaries by the Company are shown at cost less accumulated impairment losses which are recognised in the income statement. n) Impairment of property, plant and equipment and indefinite life intangible assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Recoverable amounts for cash-generating units are based on value in use, which is calculated from cash flow projections using data from the Group’s latest internal forecasts, the results of which are reviewed by the Board. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes in margins. Management uses a pre-tax discount rate derived from the Group’s weighted average cost of capital. Internal forecasts reflect the current market assessment and risks specific to the cash-generating units. Changes in selling prices and direct costs are based on past experience and expectations of future changes in the market. Impairment losses are recognised in the income statement. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of the recoverable amount, but so that the increased carrying value does not exceed the carrying value that would have been determined if no impairment loss had been recognised for the asset in prior years. A reversal of an impairment loss is recognised in income immediately. o) Inventories Inventories and work in progress are stated at the lower of cost and net realisable value. Cost includes materials, direct labour and inward transportation costs. Net realisable value is based on estimated selling price, less further costs expected to be incurred to completion and disposal. Provision is made for obsolete, slow moving or defective items where appropriate. p) Cash and cash equivalents Cash and cash equivalents comprises cash balances and money market deposits. Bank overdrafts that are repayable on demand 51 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. q) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. r) Finance income and expenses Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statement. Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity’s right to receive payments is established which in the case of quoted securities is usually the ex-dividend date. s) Segment reporting A segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s Board to make decisions about resources to be allocated to a segment and assess its performance, and for which discrete financial information is available (see note 2). t) Financial guarantee contracts Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee. u) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly incremental costs (net of income taxes), is deducted from retained earnings in equity attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders. v) Accounting estimates and judgements The directors have made significant accounting estimates and judgements in applying the Group’s accounting policies in the following areas: Impairment – the directors have used forecast models and an appropriate pre-tax weighted average cost of capital in their property, plant and equipment impairment calculations. Growth assumptions are based on directors’ knowledge and historical experience. Inventory valuation – the directors have used their knowledge and experience of the fashion industry in determining the level and rates of provisioning required to calculate the appropriate inventory carrying values. 2. Segment information The Group has three reportable segments; retail, wholesale and licence income. 52 Ted Baker Report and Accounts 2010 / 2011 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 pages 48 to 52. 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. a) Segment revenue and segment result 52 weeks ended 29 January 2011 Revenue Cost of sales Gross profit Operating costs Operating contribution Licence income Segment result Reconciliation of segment result to profit before tax Segment result Other operating costs Other operating income Operating profit Net finance expense Share of profit of jointly controlled entity, net of tax Profit before tax Capital expenditure Unallocated capital expenditure Total capital expenditure Depreciation Unallocated depreciation Total depreciation Segment assets Other assets Total assets Segment liabilities Other liabilities Total liabilities Net assets Retail £’000 152,724 (52,615) 100,109 (72,649) 27,460 - 27,460 Wholesale Licence income £’000 34,976 (19,308) 15,668 - 15,668 - 15,668 £’000 - - - - - 6,227 6,227 27,460 15,668 6,227 - - 6,336 4,980 - - 360 132 86,784 22,946 (28,824) (6,601) - - - - - - Total £’000 187,700 (71,923) 115,777 (72,649) 43,128 6,227 49,355 49,355 (25,300) 77 24,132 (78) 174 24,228 6,696 2,812 9,508 5,112 1,358 6,470 109,730 7,027 116,757 (35,425) (5,308) (40,733) 76,024 Wholesale sales are shown after the elimination of inter-company sales of £14,596,000 (2010: £7,113,000). 53 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued 52 weeks ended 30 January 2010 Revenue Cost of sales Gross profit Operating costs Operating contribution Licence income Segment result Reconciliation of segment result to profit before tax Segment result Impairment losses Other operating costs Other operating income Operating profit Net finance expense Share of profit of jointly controlled entity, net of tax Profit before tax Capital expenditure Unallocated capital expenditure Total capital expenditure Depreciation Unallocated depreciation Total depreciation Segment assets Other assets Total assets Segment liabilities Other liabilities Total liabilities Net assets Total £’000 163,586 (63,659) 99,927 (63,641) 36,286 5,493 41,779 41,779 (750) (21,327) 80 19,782 (364) 86 19,504 3,978 566 4,544 5,060 1,235 6,295 91,665 4,475 96,140 (25,083) (4,827) (29,910) 66,230 Retail £’000 136,455 (47,884) 88,571 (63,641) 24,930 - 24,930 24,930 (750) - - 3,844 - 4,958 - Wholesale Licence income £’000 27,131 (15,775) 11,356 - 11,356 - 11,356 £’000 - - - - - 5,493 5,493 11,356 5,493 - - - 134 - 102 - - - - - - - - - - 74,896 16,769 (20,923) (4,160) 54 Ted Baker Report and Accounts 2010 / 2011 b) Geographical information 52 weeks ended 29 January 2011 Revenue Non-current assets* 52 weeks ended 30 January 2010 Revenue Non-current assets* *Non-current assets exclude deferred tax assets. c) Revenue by collection Menswear Womenswear 3. Profit before tax Profit before tax is stated after charging: Depreciation Impairment losses UK & Europe £’000 167,422 23,431 153,527 22,885 US £’000 17,678 6,922 10,059 4,270 Other £’000 2,600 134 - - Total £’000 187,700 30,487 163,586 27,155 52 weeks ended 29 January 2011 £’000 98,229 89,471 187,700 52 weeks ended 30 January 2010 £’000 88,376 75,210 163,586 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 6,470 - 15,865 9 76 20 20 225 £’000 6,295 750 15,510 9 76 20 3 110 Operating lease rentals for leasehold properties Fees payable to the Company’s auditor for the audit of the Company’s annual accounts Fees payable to the Company’s auditor and associates for the audit of the Company’s subsidiaries, pursuant to legislation Fees payable to the Company’s auditor for other services supplied, persuant to legislation Other services provided by the Company’s auditor Loss on sale of property, plant & equipment 55 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued 4. Finance income and expenses Finance income - Interest receivable - Foreign exchange gains Finance expenses - Interest payable - Foreign exchange losses 5. Staff numbers and costs The average number of employees (including executive directors) was: Sales Design Administration Their aggregate remuneration comprised: Wages and salaries Share based charge Social security costs Pension costs 52 weeks ended 29 January 2011 £’000 52 weeks ended 30 January 2010 £’000 35 7 42 (65) (55) (120) 10 - 10 (148) (226) (374) 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 No. 1,472 56 172 1,700 £’000 32,007 426 2,880 515 35,828 No. 1,372 32 173 1,577 £’000 28,145 192 2,516 432 31,285 The figures stated above are Group staff costs and as such include the costs for Mr R S Kelvin, who is the only salaried employee of the parent company for both years. Further details of his remuneration may be found in the Directors’ Remuneration Report on page 29. 6. Income tax expense a) The tax charge comprises Current tax Deferred tax Prior year under provision 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 7,461 (633) 120 6,948 £’000 6,336 (521) 162 5,977 56 Ted Baker Report and Accounts 2010 / 2011 b) Deferred tax movement by type Property, plant & equipment Share based payments Overseas losses Inventory Other (gains) / losses For further details please refer to note 13. 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 (412) (159) (41) (12) (9) (633) £’000 (396) (6) (111) (43) 35 (521) c) Factors affecting the tax charge for the period The tax assessed for the period is higher than the tax calculated at domestic rates applicable to profits in the respective countries. The differences are explained below. Profit before tax Profit multiplied by the standard rate in the UK – 28%, (2010: standard rate in the UK of 28%) Expenses not deductible for tax purposes Overseas losses not recognised Movement in current and deferred tax on share awards and options Prior year under provision Effect of rate change on corporation tax Difference due to overseas tax rates Total income tax expense d) Deferred and current tax recognised directly in equity Deferred tax credit on share awards and options Deferred tax associated with movement in hedging reserve in hedging reserve 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 24,228 6,784 191 133 (46) 120 (66) (168) 6,948 £’000 19,504 5,461 427 42 49 162 - (164) 5,977 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 (298) (55) (353) £’000 (13) 375 362 The Chancellor announced in the Budget on 23 March 2011 that the decrease in the UK corporation tax rate for large companies will be increased such that there will be a 2% reduction in the headline rate from 28% to 26% with effect from 1 April 2011. The proposed 1% per annum reductions in the headline rate remains such that it is proposed that the headline rate will decrease to 23% by 1 April 2014. 57 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued As the deferred tax assets and liabilities should be recognised based on the corporation tax rates substantively enacted at the balance sheet date, the 27% rate remains appropriate for the current year. Accordingly, in the period, £66,000 has been credited to the income statement. Had the further tax rate changes been substantively enacted before the balance sheet date, it would have had the effect of reducing the net deferred tax liability in relation to UK operations by £171,000. 7. Profit attributable to Ted Baker PLC The profit after tax of Ted Baker PLC, the parent company was £8,060,000 (2010: £21,781,000). The directors have approved the income statement for the parent company. 8. Dividends per share Final dividend paid for prior year of 0.5p per ordinary share (2010: 11.4p) Second interim dividend paid for prior year of 11.4p per ordinary share (2010: £Nil) Interim dividend paid of 6.3p per ordinary share (2010: 5.25p) 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 208 4,745 2,622 7,575 £’000 4,743 - 2,185 6,928 A final dividend in respect of 2011 of 14.3p per share, amounting to a dividend payable of £5,952,201, is to be proposed at the Annual General Meeting on 14 June 2011. 9. Earnings per share Number of shares: Weighted number of average ordinary shares outstanding Effect of dilutive options and awards Weighted number of average ordinary shares outstanding – diluted Earnings: Profit for the period basic and diluted Basic earnings per share Diluted earnings per share 52 weeks ended 29 January 2011 No. 41,622,472 163,956 41,786,428 £’000 17,280 41.5 41.4 52 weeks ended 30 January 2010 No. 41,613,798 10,183 41,623,981 £’000 13,576 32.6 32.6 The weighted number of average ordinary shares excludes own shares held by the Ted Baker Group Employee Benefit Trust, the Ted Baker 1998 Employee Benefit Trust and treasury shares. Diluted earnings per share have been calculated using the weighted average number of ordinary shares outstanding. In addition, account has been taken of any share options and awards made under the long term incentive schemes which will have a dilutive effect when exercised or vested. The actual dilutive effect will only be determined on exercise or vesting and in particular, the dilutive impact of the Ted Baker 2009 Value Creation Plan will be determined by the number of nil cost options ultimately granted to participants at the end of the three year performance period. 58 Ted Baker Report and Accounts 2010 / 2011 There were no share related events after the balance sheet date that may affect earnings per share. 10. Intangible assets Cost and net book value At 30 January 2010 Additions Exchange rate movement At 29 January 2011 Cost and net book value At 31 January 2009 Exchange rate movement At 30 January 2010 £’000 634 366 (3) 997 £’000 673 (39) 634 The intangible assets, both brought forward and added during the period, relate to the right to lease stores that have a guaranteed residual value. The guaranteed value arises because the next tenants based on current market conditions are required to pay these amounts to the Group. Due to the nature of this the assets are considered recoverable and therefore not amortised. The current market rate rents, for both stores, continue to be above the rent under the lease terms and hence no decline in values are foreseen. 11. Property, plant and equipment Cost At 30 January 2010 Additions Disposals Exchange rate movement At 29 January 2011 Depreciation At 30 January 2010 Charge for the year Impairment losses Disposals Exchange rate movement At 29 January 2011 Net book value At 30 January 2010 At 29 January 2011 Leasehold Improvements Fixtures, fittings & office equipment £’000 £’000 Motor vehicles £’000 Assets under construction £’000 33,485 4,380 (279) 71 37,657 15,926 2,785 - (105) 9 18,615 17,559 19,042 29,974 4,603 (249) 30 34,358 22,562 3,679 - (178) 15 26,078 7,412 8,280 170 - (45) 1 126 139 6 - (35) 1 111 31 15 506 525 - - 1,031 - - - - - - 506 1,031 Total £’000 64,135 9,508 (573) 102 73,172 38,627 6,470 - (318) 25 44,804 25,508 28,368 59 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued Additions included within the assets under construction category are stated net of transfers to other property, plant and equipment categories. Transfers from the assets under construction category in the period amounted to £506,000 (2010: £203,000) whilst additions into this category were £1,031,000 (2010: £506,000). Impairment losses recognised in the year were £nil (2010: £750,000). The impairment losses in the prior year were as a result of a review of the carrying value of the portfolio of store assets. Cost At 31 January 2009 Additions Disposals Exchange rate movement At 30 January 2010 Depreciation At 31 January 2009 Charge for the year Impairment losses Disposals Exchange rate movement At 30 January 2010 Net book value At 31 January 2009 At 30 January 2010 Leasehold Improvements Fixtures, fittings & office equipment £’000 £’000 Motor vehicles £’000 Assets under construction £’000 32,188 2,043 (14) (732) 33,485 13,019 2,508 680 (8) (273) 15,926 19,169 17,559 29,021 2,186 (815) (418) 29,974 19,734 3,768 70 (711) (299) 22,562 9,287 7,412 165 12 - (7) 170 123 19 - - (3) 139 42 31 203 303 - - 506 - - - - - - 203 506 Total £’000 61,577 4,544 (829) (1,157) 64,135 32,876 6,295 750 (719) (575) 38,627 28,701 25,508 Impairment of property, plant and equipment The Group has determined that for the purposes of impairment testing, each store and outlet is a cash-generating unit. Cash- generating units are tested for impairment if there are indications of impairment at the balance sheet date. Recoverable amounts for cash-generating units are based on value in use, which is calculated from cash flow projections using data from the Group’s latest internal forecasts, the results of which are reviewed by the Board. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes in margins. Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the cash-generating units. Changes in selling prices and direct costs are based on past experience and expectations of future changes in the market. The pre-tax discount rate used to calculate value in use is derived from the Group’s weighted average cost of capital. The impairment losses relate to stores whose recoverable amounts (value in use) did not exceed the asset carrying values. In all cases, impairment losses arose due to stores performing below projected trading levels. 60 Ted Baker Report and Accounts 2010 / 2011 12. Investments (Company) a) Subsidiary undertakings The Company and Group have shares in the following subsidiary undertakings. All of the subsidiaries have been included in the consolidated accounts (*held directly by Ted Baker PLC). Subsidiary undertaking No Ordinary Designer Label Ltd (formerly Ted Baker Limited)* Ted Baker Investments (Jersey) Ltd* Ted Baker Limited Ted Baker (New York) Inc Ted Baker (France) SARL Ted Baker Japan KK Country of incorporation & operation UK Jersey US US France Japan Principal activity Design, wholesale & retail of designer clothing & accessories Investment holding company Retail of designer clothing & accessories Retail of designer clothing & accessories Retail of designer clothing & accessories Retail of designer clothing & accessories b) Subsidiary undertakings - cost and net book value At 30 January 2010 Increase in cost of investment for share options / awards granted to subsidiary employees At 29 January 2011 At 31 January 2009 Increase in cost of investment for share options / awards granted to subsidiary employees At 30 January 2010 Holding Ordinary Shares 100% 100% 100% 100% 100% 100% Company £’000 16,694 357 17,051 Company £’000 16,534 160 16,694 c) Interest in Joint Venture The Group has a 50% interest in a joint venture with Flair Industries Pty Ltd which is represented by three stores in Australia (2010: two stores). Investment in Joint Venture 52 weeks ended 29 January 2011 £’000 345 52 weeks ended 30 January 2010 £’000 171 The above carrying value represents the initial cost of the investment undertaken, as well as any subsequent change in net assets of the venture, as at 29 January 2011. 61 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued Amounts due from equity accounted investee 52 weeks ended 29 January 2011 £’000 286 52 weeks ended 30 January 2010 £’000 261 There are no contingent liabilities relating to the Group’s interest in the joint venture, and no contingent liabilities of the venture itself. The joint venture’s assets, liabilities and profit at 29 January 2011 are as follows: Non-current assets Current assets Non-current liabilities Current liabilities Net assets Share capital Retained earnings Current year profit, net of tax Exchange rate movement Total equity 13. Deferred tax assets and liabilities Assets Share based payments Derivative financial instruments Liabilities Property, plant & equipment Other * Net deferred tax liability Deferred tax asset on foreign operations arising from: Foreign trading losses Inventory Property, plant & equipment Other – vacation accrual 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 1,509 425 - (1,077) 857 23 395 348 91 857 52 weeks ended 29 January 2011 £’000 474 55 (403) (1,673) (1,547) 1,904 349 178 39 2,470 £’000 889 277 - (728) 438 23 185 172 58 438 52 weeks ended 30 January 2010 £’000 17 - (396) (937) (1,316) 1,162 302 134 - 1,598 Recognition of deferred tax assets is based on the generation of future taxable profits that will allow utilisation of losses. 62 Ted Baker Report and Accounts 2010 / 2011 Deferred tax assets are only recognised on the foreign trading losses when these businesses pass their development phase, and when management considers it probable that future taxable profits will be available against which they can be utilised. The amount of unused cumulative tax losses for which no deferred tax asset has been recognised in the balance sheet is £689,000 (2010: £587,000). * Other includes a deferred tax liability for UK tax payable on US operations for which no double tax relief will be available. 14. Inventories Raw materials and packaging Work in progress Finished goods and goods for resale Cost of inventories recognised as an expense Inventories written down and recognised as an expense in the period 15. Trade and other receivables Trade receivables Amounts owed by Group undertakings Prepayments and accrued income 16. Derivative financial instruments Forward foreign exchange contracts 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 2,174 805 39,513 42,492 62,881 1,683 Group 30 January 2010 £’000 14,436 - 5,262 19,698 Assets 30 January 2010 £’000 280 £’000 2,072 750 30,628 33,450 67,524 1,182 Company 30 January 2010 £’000 - 24,108 4 24,112 Liabilities 29 January 2010 £’000 (304) Group 29 January 2011 £’000 18,182 - 9,202 27,384 Assets 29 January 2011 £’000 102 Company 29 January 2011 £’000 - 24,710 2 24,712 Liabilities 29 January 2011 £’000 (455) Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates that arise in the normal course of the Group’s business. The ineffective portion recognised in the income statement that arises from cash flow hedges amounts to a loss of £nil (2010: £nil). Gains and losses in equity of forward exchange contracts at 29 January 2011 will be released to the income statement at various dates within 12 months of the balance sheet date, as the hedged forecast transactions occur. 63 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued 17. Reconciliation of cash and cash equivalents per balance sheet to cash flow statement Cash and cash equivalents per cash flow statement / balance sheet 18. Trade and other payables Trade payables Accruals and deferred income Other taxes and social security 19. Capital and reserves Group 52 weeks ended 29 January 2011 Company 52 weeks ended 29 January 2011 Group 52 weeks ended 30 January 2010 Company 52 weeks ended 30 January 2010 £’000 13,536 £’000 464 £’000 13,698 £’000 489 Group 29 January 2011 £’000 18,888 13,385 2,697 34,970 Company 29 January 2011 £’000 - 14 - 14 Group 30 January 2010 £’000 10,392 11,471 2,916 24,779 Company 30 January 2010 £’000 - 12 - 12 Authorised – 80,000,000 ordinary shares of 5p each Allotted, called up and fully paid – 43,198,033 ordinary shares of 5p each (2010: 43,198,033) 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 4,000 2,160 £’000 4,000 2,160 At 29 January 2011, the Ted Baker Group Employee Benefit Trust (“Employee Trust”) and the Ted Baker 1998 Employee Benefit Trust (“1998 Trust”) did not hold any ordinary shares in Ted Baker PLC (2010: Employee Trust - £Nil, 1998 Trust - £Nil). The Company held 1,574,249 shares in treasury at 29 January 2011 (2010: 1,579,557). Other Reserves and retained earnings Other Reserves and retained earnings include the following reserve accounts: Cash Flow Hedging reserve The effective portion of financial instruments that is designated as hedging instruments and is documented as part of an effective hedge of future cash flows is recognised directly in equity and recycled to the income statement when the underlying cash flows occur, or are no longer expected to occur. At 29 January 2011, the value of financial instruments that are designated as hedging instruments recorded in equity was -£148,000 (2010: -£12,000). Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the Group’s financial statements of foreign operations. Other reserves - Company This reserve relates to the premium on equity consideration used in the acquisition of a subsidiary, No Ordinary Designer Label Limited, by Ted Baker PLC in 1997, which is classified within Other Reserves under the Companies Act. This reserve also includes the cost of share options and awards granted to subsidiary employees of the parent company. This reduction in other reserves is reflected in retained earnings in the Group Statement of Changes in Equity. 64 Ted Baker Report and Accounts 2010 / 2011 Retained Earnings In 2010 the Group acquired an additional 34% in Ted Baker (New York) Inc for £0.6m in cash increasing its ownership to 100%. The carrying amount of net assets in the Group’s financial statements on the date of acquisition was £0.1m. The Group eliminated its non controlling interest of £0.1m and recognised a decrease in retained earnings of £0.7m. 20. Share based payments Share options and conditional share awards Equity settled awards are granted to employees in the form of share options or share awards. Share options are granted at an option price equal to the Company’s share price at the grant date, or at a discount of up to 20% in the case of SAYE share options. No consideration is payable where share awards vest. The vesting period is generally between three and five years. Movements in the number of share options and awards outstanding and their related weighted average exercise prices are as follows: At beginning of period Granted during the period Exercised during the period Lapsed during the period Outstanding at the end of period Exercisable at end of period Weighted average exercise price 2011 240.7p 432.0p 361.0p 235.9p 344.7p - Number of options/awards 2011 1,921,415 42,093 (5,308) (1,803,953) 154,247 Weighted average exercise price 2010 Number of options/awards 2010 241.7p 303.0p 314.0p 378.9p 240.7p 1,865,698 138,886 (13,823) (69,346) 1,921,415 - - - The charge for the year to the income statement amounted to £38,868 (2010: £22,930). The weighted average share price at the date of exercise of share options exercised during the year was 531.0p (2010: 342.5p). Share options and awards outstanding at the end of the period were as follows: Expiry date Excercise price Fair value at grant date Number o f options / awards at 29 January 2011 Number o f options / awards at 30 January 2010 17 November 2004 17 November 2005 18 April 2006 31 July 2006 23 March 2007 27 November 2007 4 April 2008 4 April 2008 21 October 2008 21 October 2008 27 October 2008 15 May 2009 15 May 2009 14 May 2010 14 May 2010 31 January 2011 31 January 2012 * * * 31 January 2014 * 29 January 2018 20 October 2018 20 October 2018 26 October 2018 1 January 2013 1 January 2015 31 January 2015 31 January 2017 361.0p 334.0p - - - 429.0p - 414.0p 362.0p 353.0p 354.9p 303.0p 303.0p 432.0p 432.0p 141.5p 160.0p 443.5p 458.8p 551.5p 144.6p 367.4p 65.2p 53.9p 57.3p 40.7p 82.5p 84.6p 124.6p 129.4p - 2,602 - - - 18,810 - - - - - 23,445 78,584 22,537 8,269 5,308 5,675 212,198 157,548 139,515 25,943 378,316 740,877 27,624 84,990 8,453 29,641 108,400 - - * Share awards outstanding at the end of the period do not have an expiry date, but vest by reference to performance over the following three financial years. The fair value of employee share options and awards were calculated using the Black-Scholes model. 154,247 1,924,488 65 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued The range of inputs into the Black-Scholes model were as follows: Weighted average share price Weighted average exercise price Risk free interest rate Expected life of options Share price volatility Dividend yield 52 weeks ended 29 January 2011 441.4p 241.6p 52 weeks ended 30 January 2010 439.1p 240.7p 1.49% - 5.29% 2.17% - 5.29% 3-5 years 19.1% - 32.1% 2.24% - 4.62% 3-5 years 19.1% - 32.1% 2.24% - 4.62% The share price volatility was determined by calculating the historic volatility of the Group’s share price over a time period matching the expected life of the option. Value Creation Plan The award of units is made under the Ted Baker 2009 Value Creation Plan (“2009 VCP”), which was approved by shareholders at the General Meeting held on 16 June 2009. 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. Further details of the plan are outlined in the notice of meeting dated 13 May 2009. The terms and conditions of the award of units granted under the 2009 VCP are as follows: Grant date Type of award Number of units Vesting conditions Vesting period 13 August 2009 Award of units 100,000 Growth in earnings per share, share price and total shareholder return over a three year performance period 50% after three years and the balance one year later VCP awards outstanding at the end of the period were as follows: At 30 January 2010 VCP entitlements awarded during the year Lapsed during the year Outstanding at 29 January 2011 At 29 January 2011 At 30 January 2010 No. of entitlements No. of entitlements 100,000 - - 100,000 - 100,000 - 100,000 66 Ted Baker Report and Accounts 2010 / 2011 The VCP awards are valued using a Monte Carlo model. The inputs into the model are as follows: Share price on award date Average share price at award date Number of simulations Expected life of options Dividend yield Risk free interest rate Ted Baker volatility FTSE index volatility Correlation between Ted Baker and FTSE index Share price hurdle per annum Payout over share price hurdle Vesting percentage for meeting performance conditions Shares in issue 13 August 2009 £3.98 £3.76 10,000 3 years 4.18% 2.21% 25.0% 33.0% 12.0% 10.0% 12.5% 100.0% 41,618,476 The charge for the year to the income statement amounted to £387,264 (2010: £178,737). Included in the charge for the year is an amount in respect of R S Kelvin who is employed by the Company, amounting to £69,320 (2010: £31,994). 21. Financial commitments a) Capital commitments The Group has capital commitments of £2,682,000 at 29 January 2011 (2010: £1,118,000) which were not provided in the financial statements. b) Operating leases Total of future lease payments under non-cancellable operating leases are as follows: Within one year Between one and five years Later than five years 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 18,267 58,980 36,626 113,873 £’000 15,388 62,820 35,706 113,914 The Group leases a number of stores, warehouses and head office facilities under operating leases. The leases are of varied length with the longest lease running until 2029. Leases of land and buildings are typically subject to rent reviews at specified intervals and provide for the lessee to pay all insurance, maintenance and repair costs. Certain rental expense is determined on the basis of revenue achieved in specific retail locations and is accrued for on that basis. The total amount paid under these agreements was £12,934,000 (2010: £12,704,000). 67 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued c) Pension arrangements The Group operates a number of defined contribution schemes for senior management and a stakeholder pension scheme for employees, for which the pension cost charge for the period amounted to £515,000 (2010: £432,000). Contributions totalling £18,778 (2010: £18,045) are included in other receivables at the year end. 22. Financial instruments and risk management a) Carrying amount and fair values of financial assets and liabilities Financial assets and liabilities - Group The fair values of financial assets and liabilities of the Group, together with the carrying amounts shown in the balance sheet, are as follows: Financial assets Trade receivables Accrued income Amount due from equity accounted investee Derivative financial assets Cash and cash equivalents Total financial assets Financial liabilities Trade and other payables Derivative financial liabilities Total financial liabilities Net financial (liabilities) / assets Carrying Amount 29 January 2011 £’000 18,182 1,099 286 102 13,536 33,205 (34,970) (455) (35,425) (2,220) Fair value 29 January 2011 £’000 18,182 1,099 286 102 13,536 33,205 (34,970) (455) (35,425) (2,220) Carrying Amount 30 January 2010 £’000 14,436 1,163 261 280 13,698 29,838 (24,779) (304) (25,083) 4,755 Fair value 30 January 2010 £’000 14,436 1,163 261 280 13,698 29,838 (24,779) (304) (25,083) 4,755 68 Ted Baker Report and Accounts 2010 / 2011 Financial assets and liabilities - Company The fair values of financial assets and liabilities of the Company, together with the carrying amounts shown in the balance sheet, are as follows: Financial assets Amounts owed by group undertakings Cash and cash equivalents Total financial assets Financial liabilities Trade and other payables Total financial liabilities Net financial assets Carrying Amount 29 January 2011 £’000 24,710 464 25,174 (14) (14) Fair value 29 January 2011 £’000 24,710 464 25,174 (14) (14) Carrying Amount 30 January 2010 £’000 24,108 489 24,597 (12) (12) Fair value 30 January 2010 £’000 24,108 489 24,597 (12) (12) 25,160 25,160 24,585 24,585 The methods and assumptions used to estimate fair values of financial assets and liabilities are as follows: 1. Cash and cash equivalents have been stated at their book values due to their short maturities or immediate or short-term access. 2. The fair values of trade receivables, amount due from equity accounted investee and amounts owed by Group undertakings have been stated at their book value due to their short maturities. 3. The fair value of derivatives is determined by reference to third party valuations (usually from a bank) or by reference to readily observable market prices. 4. The fair values of trade and other payables have been stated at their book values due to their short maturities. 5. Valuation of all financial derivative assets and liabilities carried at fair value by the Group is based on hierarchy Level 2. Fair value hierarchy levels are defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). b) Derivative financial instruments Currency derivatives Contractual/ notional amounts 29 January 2011 £’000 26,598 26,598 Assets 29 January 2011 £’000 102 102 Liabilities 29 January 2011 Contractual/ notional amounts 30 January 2010 £’000 (455) (455) £’000 21,187 21,187 Assets 30 January 2010 £’000 280 280 Liabilities 30 January 2010 £’000 (304) (304) 69 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued c) Cash flow hedging reserve movements The following table indicates the cash flow hedging reserve balance at 29 January 2011 and the periods in which the cash flows are expected to occur. The periods in which the cash flows are expected to impact the profit and loss are materially the same. Within six months Between six months and one year Between one and two years Unrecognised losses Currency derivatives 29 January 2011 Currency derivatives 30 January 2010 £’000 (148) - - (148) £’000 (12) - - (12) The following table identifies the movements in the cash flow hedging reserve during the year, including where gains and losses have been recognised in the income statement. Opening balance Gains / (losses) recognised in hedging reserve Amounts recovered from hedging reserve and recognised in income statement Deferred tax associated with movement in the hedging reserve Closing balance Currency derivatives 29 January 2011 Currency derivatives 30 January 2010 £’000 (12) 88 (279) 55 (148) £’000 1,713 (959) (391) (375) (12) d) Financial risk identification and management The Group’s multinational operations and debt financing requirements expose it to a variety of financial risks. In the course of its business the Group is exposed to: (cid:116)(cid:1) (cid:78)(cid:66)(cid:83)(cid:76)(cid:70)(cid:85)(cid:1)(cid:83)(cid:74)(cid:84)(cid:76)(cid:28) (cid:116)(cid:1) (cid:68)(cid:83)(cid:70)(cid:69)(cid:74)(cid:85)(cid:1)(cid:83)(cid:74)(cid:84)(cid:76)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69) (cid:116)(cid:1) (cid:77)(cid:74)(cid:82)(cid:86)(cid:74)(cid:69)(cid:74)(cid:85)(cid:90)(cid:1)(cid:83)(cid:74)(cid:84)(cid:76) The Group’s financial risk management process seeks to enable the early identification, evaluation and effective management of key risks facing the business. Risk management policies and systems have been established and are reviewed regularly to reflect changes in the market conditions and the Group’s activities. The Group, through its standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. i) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. At the balance sheet date, the only significant market risk to the Group arises from foreign currency risk. 70 Ted Baker Report and Accounts 2010 / 2011 The Group operates internationally and is therefore exposed to foreign currency risk primarily on purchases denominated in US dollars and Euros. The Board reviews and agrees policies for managing exchange rate risks on a regular basis. Where appropriate, the Group uses financial instruments to mitigate these risks. All transactions in derivatives, principally forward exchange contracts, are taken solely to manage these risks. No transactions of a speculative nature are entered into. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency. The Group’s policy is to hedge substantially all the risks of such currency fluctuations by using forward contracts taking into account forecast foreign currency cash inflows and outflows. The Group’s risk management policy is to hedge the vast majority of anticipated cash flows (mainly purchases of inventory) in each major foreign currency for the subsequent 12 months. The vast majority of projected purchases in each major currency qualifies as ‘highly probable’ forecast transactions for hedge accounting purposes. Foreign currency risk The Group operates internationally and is therefore exposed to foreign currency transaction risk, primarily on purchases denominated in US dollars and Euros. Where appropriate, the Group uses financial instruments to mitigate these risks. The Group also publishes its financial statements in sterling and is therefore exposed to foreign currency translation risks due to movements in foreign exchange rates on the translation of the results and underlying net assets of its foreign operations into sterling. Transaction risk Currency transaction exposure occurs where a business makes sales and purchases in a currency other than its functional currency. It also arises where monetary assets and liabilities of a business are not denominated in its functional currency, and where dividends or surplus funds are remitted from overseas. The Group’s policy is to match transaction exposures wherever possible, and to hedge actual exposures and firm commitments as soon as they occur by using forward foreign exchange contracts. An element of this risk is mitigated by natural hedges as the Group operates internationally and income is generated in the local currencies. Economic (forecast) risk The Group also uses forward foreign currency contracts to hedge its exposure to movements in exchange rates on its highly probable forecast foreign currency purchases on a rolling 12 month basis. The Group does not formally define the proportion of highly probable forecast purchases to hedge, but agrees an appropriate percentage on an individual basis with each business by reference to the Group’s risk management policies and prevailing market conditions. The Group documents currency derivatives used to hedge its forecast transactions as cash flow hedges. To the extent that cash flow hedges are effective, gains and losses are deferred in equity until the forecast transaction occurs, at which point the gains and losses are recycled either to the income statement or to the non-financial asset acquired. The majority of the Group’s currency derivatives have original maturities of less than one year. The Group’s most significant currency transaction exposure is the purchases of inventories which are denominated in a number of currencies, predominantly Euros and US dollars. The analysis of the Group’s foreign currency exposure to financial assets and liabilities by currency of denomination is as follows: 71 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued Financial assets Trade receivables Cash and cash equivalents* Financial liabilities Trade and other payables US Dollar 29 January 2011 £’000 84 (7,291) (7,207) (3,597) (3,597) Euro 29 January 2011 £’000 1,425 4,780 6,205 (2,857) (2,857) (10,804) 3,348 Other 29 January 2011 £’000 125 1,031 1,156 (255) (255) 901 * The US Dollar overdraft forms part of a multi-currency overdraft facility and as such is netted off against other cash balances and is not recognised as an overdraft in its own right. Financial assets Trade receivables Cash and cash equivalents* Financial liabilities Trade and other payables US Dollar 30 January 2010 £’000 33 (5,055) (5,022) (1,101) (1,101) Euro 30 January 2010 £’000 342 845 1,187 (1,416) (1,416) (6,123) (229) Other 30 January 2010 £’000 125 21 146 (135) (135) 11 The following significant exchange rates applied during the year: US dollar Euro Average rate 29 January 2011 1.543 1.170 Mid-spot rate 29 January 2011 1.589 1.161 Average rate 30 January 2010 1.580 1.127 Mid-spot rate 30 January 2010 1.610 1.155 Sensitivity Analysis The Group has used a sensitivity analysis technique that measures the estimated change to the income statement and equity of a 10% strengthening or weakening in sterling against all other currencies, using the rates applicable at 29 January 2011. The analysis assumes that all other variables, in particular, interest rates, remain constant. 72 Ted Baker Report and Accounts 2010 / 2011 The following sensitivity analysis illustrates the impact that a 10% strengthening of the Group’s reporting currency against local functional currencies would have had on profit before tax and non-controlling interest and equity. The analysis covers currency translation exposures at the year end on the Group’s financial assets and liabilities that are not denominated in the functional currencies of those businesses. A 10% (2010: 10%) strengthening or weakening of the sterling against the following currencies at 29 January 2011 would have increased / (decreased) equity and profit by the amounts shown in the following table: Test of 10% (2010: 10%) strengthening in sterling against other currencies £’000 £’000 £’000 £’000 Impact on profit 29 January 2011 Impact on equity 29 January 2011 Impact on profit 30 January 2010 Impact on equity 30 January 2010 US Dollar Euro Test of 10% (2010: 10%) weakening in sterling against other currencies US Dollar Euro (982) 304 (678) 1,200 (372) 828 (982) 304 (678) 1,200 (372) 828 (557) (21) (578) 680 25 705 (557) (21) (578) 680 25 705 Interest rate risk The Group’s exposure to interest rate risk is limited to floating rate financial assets and liabilities. The interest rate profile of the financial assets and liabilities of the Group are as follows: Financial assets subject to interest rate risk Sterling US Dollar Euro Other Group 29 January 2011 £’000 11,785 (4,586) 5,252 1,030 13,481 Company 29 January 2011 Group 30 January 2010 Company 30 January 2010 £’000 464 - - - 464 £’000 16,296 (4,092) 1,412 22 13,638 £’000 489 - - - 489 There were no fixed rate financial assets or liabilities at 29 January 2011 and 30 January 2010. ii) Credit risk Credit risk is the risk that counterparties to financial instruments do not perform according to the terms of the contract or instrument. The Group is exposed to counterparty credit risk when dealing with its credit customers, and from certain financing activities. The immediate credit exposure of financial instruments is represented by those financial instruments that have a net positive fair value by counterparty at 29 January 2011. The Group considers its maximum exposure to credit risk to be: 73 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued Cash and cash equivalents Trade receivables Accrued income Amount due from equity accounted investee Derivative financial assets 52 weeks ended 29 January 2011 52 weeks ended 30 January 2010 £’000 13,481 18,182 1,099 286 102 33,150 £’000 13,638 14,436 1,163 261 280 29,778 All cash balances and derivative financial assets are held with reputable banks or financial institutions. As at 29 January 2011, there were no significant financial guarantees or third-party obligations that increase the credit risk of the financial assets set out above. Although the Group has seen no direct evidence of changes to the credit risk of its counterparties that hold cash balances and derivative financial assets, the current focus on financial liquidity in all international markets has introduced increased financial volatility. The Group uses market knowledge, changes in credit ratings and other techniques to identify significant changes to the financial profile of its counterparties. Trade receivables Credit risk arises on credit exposure to wholesale customers including outstanding receivables and committed transactions. However, this risk is substantially mitigated by insurance being taken out up to the amount of the credit limit. All new wholesale customers are checked against appropriate trade references and details such as frequency/delinquency. The limits applied to each customer are set in conjunction with our credit insurer’s advice. Monitoring of credit limits is undertaken on a daily basis. No credit limits were exceeded in the reporting period and management will continue with its current approach to credit control to prevent any future losses from non-performance arising. The Group is not able to protect its royalty income with credit insurance, although it does not consider this a significant credit risk, as a prudent approach to income recognition is taken in the accounts. Forecasts are obtained from all its licence partners throughout the year to allow extensive visibility of future income. iii) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Group’s liquidity reserve (comprises undrawn borrowing facility and cash and cash equivalents) on the basis of expected cash flow. This is generally carried out at entity level in the operating companies of the Group in accordance with practice and limits set by the Group. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these; and monitoring balance sheet liquidity ratios against internal and external regulatory requirements. Based on current cash flow projections, the Group expects to have sufficient headroom against its borrowing facilities (see section below for further details on the borrowing facilities). 74 Ted Baker Report and Accounts 2010 / 2011 The table below analyses the Group’s financial liabilities and derivative financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date, at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. At 29 January 2011 Non-derivative financial liabilities Trade and other payables Derivative financial liabilities Derivative financial instruments At 30 January 2010 Non-derivative financial liabilities Trade and other payables Derivative financial liabilities Derivative financial instruments Less than 1 year £’000 Between 1-2 years £’000 Between 2-5 years £’000 Over 5 years £’000 Contracted amount £’000 Carrying amount £’000 34,970 455 24,779 304 - - - - - - - - - - - - 34,970 34,970 455 455 24,779 24,779 304 304 Borrowing facilities Borrowing facilities of £20,000,000 (2010: £15,000,000) are available to the Group in 2011 in respect of which all conditions precedent have been met. The borrowing facilities available to the Group consist of facilities with The Royal Bank of Scotland PLC of £10.0m and a facility of £10.0m with Barclays Bank PLC, all facilities are subject to an annual renewal. The borrowing facilities held with The Royal Bank of Scotland PLC are made up by a £3.0m multi-currency facility and a £7.0m revolving credit facility. The facility held with Barclays Bank PLC is an uncommitted, unsecured multi-option facility of £10.0m. All facilities expire on 5 February 2012. The Group will seek to renew its facilities prior to these renewal dates. Based on current forecasts the Group does not envisage any difficulties with the renewal of these facilities. The Group is obliged to perform monthly financial covenant tests as part of its facility agreement with The Royal Bank of Scotland PLC, based upon the following: (cid:116)(cid:1) (cid:78)(cid:74)(cid:79)(cid:74)(cid:78)(cid:86)(cid:78)(cid:1)(cid:79)(cid:70)(cid:85)(cid:1)(cid:85)(cid:66)(cid:79)(cid:72)(cid:74)(cid:67)(cid:77)(cid:70)(cid:1)(cid:66)(cid:84)(cid:84)(cid:70)(cid:85)(cid:84)(cid:28) (cid:116)(cid:1) (cid:66)(cid:1)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:1)(cid:80)(cid:71)(cid:1)(cid:81)(cid:83)(cid:80)(cid:277)(cid:85)(cid:1)(cid:67)(cid:70)(cid:71)(cid:80)(cid:83)(cid:70)(cid:1)(cid:74)(cid:79)(cid:85)(cid:70)(cid:83)(cid:70)(cid:84)(cid:85)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:66)(cid:89)(cid:1)(cid:85)(cid:80)(cid:1)(cid:67)(cid:80)(cid:83)(cid:83)(cid:80)(cid:88)(cid:74)(cid:79)(cid:72)(cid:1)(cid:68)(cid:80)(cid:84)(cid:85)(cid:84)(cid:28)(cid:1)(cid:66)(cid:79)(cid:69) (cid:116)(cid:1) (cid:66)(cid:1)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:1)(cid:80)(cid:71)(cid:1)(cid:79)(cid:70)(cid:85)(cid:1)(cid:68)(cid:66)(cid:84)(cid:73)(cid:1)(cid:280)(cid:80)(cid:88)(cid:1)(cid:85)(cid:80)(cid:1)(cid:69)(cid:70)(cid:67)(cid:85)(cid:1)(cid:84)(cid:70)(cid:83)(cid:87)(cid:74)(cid:68)(cid:70)(cid:1)(cid:77)(cid:74)(cid:66)(cid:67)(cid:74)(cid:77)(cid:74)(cid:85)(cid:90)(cid:15) The Group, as part of its regular forecasting process, has a forward looking view of these financial covenant tests and based on current projections there are no indications that any of these covenants will be breached during the term of the agreement. No covenants were breached during the year to 29 January 2011. At 29 January 2011, the borrowing facilities were unutilised (2010: unutilised). 75 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS continued e) Capital management The Board’s policy is to maintain a strong capital base, defined as total shareholders’ equity, totalling £76,024,000 at 29 January 2011 (2010: £66,230,000), so as to maintain investor, creditor and market confidence and to sustain future development of the business. From time to time the Company purchases its own shares on the market; the timing of these purchases depends on market prices. Primarily the shares are intended to be used for issuing shares under the Group and Company’s share option and award programmes. Buy and sell decisions are made on a specific transaction basis by the Board; the Group and Company do not have a defined share buy-back plan. It is the Board’s intention to achieve a dividend cover ratio of 2 times every year. There were no changes in the Group and Company’s approach to capital management during the year. Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements. 23. Related Parties The Company has a related party relationship with its directors and executive officers. Directors of the Company and their immediate relatives control 40.4 per cent of the voting shares of the Company. At the 29 January 2011, the main trading company owed the parent company £24,710,000 (2010: £24,108,000). The main trading company was owed £23,313,000 (2010: £11,869,000) from the other subsidiaries within the Group. Transactions between subsidiaries were priced on an arms length basis. The Group has a 50% interest in a joint venture, with Flair Industries Pty Ltd. As at 29 January 2011, the joint venture owed £286,000 to the main trading company (2010: £261,000). In the period the value of sales made to the joint venture by the Group was £565,000 (2010: £364,000). The Group considers Remuneration Report. the executive directors as key management. Further details are provided in the 76 Ted Baker Report and Accounts 2010 / 2011 FINANCIAL STATEMENTS FIVE YEAR SUMMARY Results Revenue Operating profit Profit before tax Profit before tax and impairment Profit for the period Assets employed Property, plant and equipment Non-current assets Net current assets / (liabilities) Non-current liabilities 52 weeks ended 27 January 2007 £’000 125,648 20,049 20,050 20,050 14,416 19,209 1,007 31,108 (43) 52 weeks ended 26 January 2008 £’000 142,231 22,142 22,057 22,057 15,242 23,061 1,738 31,756 (843) 53 weeks ended 31 January 2009 £’000 152,661 17,161 17,766 19,552 12,568 28,701 2,623 31,417 (575) 52 weeks ended 30 January 2010 £’000 163,586 19,782 19,504 20,254 13,527 25,508 3,245 38,793 (1,316) 52 weeks ended 29 January 2011 £’000 187,700 24,132 24,228 24,228 17,280 28,368 4,589 44,614 (1,547) Net assets 51,281 55,712 62,166 66,230 76,024 Financed by Shareholders' funds Non-controlling interest Key statistics Basic earnings per share Diluted earnings per share Dividends per share Dividend cover Return on capital employed 51,338 (57) 51,281 33.9p 33.6p 14.6p 2.3 times 53.8% 55,723 (11) 55,712 36.1p 35.9p 16.4p 2.2 times 51.4% 62,202 (36) 62,166 29.6p 29.6p 16.65p 1.8 times 32.6% 66,315 (85) 66,230 32.6p 32.6p 17.15p 1.9 times 37.4% 76,024 - 76,024 41.5p 41.4p 20.6p 2.0 times 39.3% 77 Ted Baker Report and Accounts 2010 / 2011 Part of the Fabric of Ted Creating bespoke homes for his clothing and accessories is a key part of the fabric of Ted’s world and each of his stores is tailored to suit the location in which it sits. Ted’s second store in Hong Kong, for example, is based in the bustling New Town Plaza of Shatin and uses the area’s rich history as a famous picnic spot as its design inspiration – including this mural of a Victorian picnic scene which adorns the fitting room walls. Texture, ambience and eccentricity combine to ensure that no two Ted stores are alike. 

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