FASH
IONO
MICS
Natty numbers that look
as fine as Ted’s clothes
ANNUAL REPORT AND ACCOUNTS 2012/13
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
i
WELCOME
TO THE FOLD
iT’S WHAT’S
iNSiDE THAT
COUNTS
In Fashionomics, Ted shows how he has made it his business to
fashion a global success story out of precision planning, distinctive
designs, quality fabrics… and a steady pair of hands.
Be it the dimensions of an exquisite new suit or the details of
an important business contract, every element of Ted Baker
(much like an artful piece of origami) has been carefully structured
and considered to ensure everything is right on the money.
While Ted always starts with a clean sheet of paper,
he never cuts corners.
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Ted Baker: Brand Overview
No Ordinary Designer Label
A Year to Remember
Directors’ Report: Overview
Chairman’s Statement
Business Review
Geographic Performance
Financial Review
Principal Risks and Uncertainties
Directors’ Report: Governance
Corporate Governance Statements
Sustainability and the Environment
People
Board of Directors
Directors’ Report: Other Statutory Disclosures
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
Ted’s advisors
Registered Office:
Secretary:
Financial Advisors and Stockbrokers:
Solicitors:
Auditors:
Bankers:
Registrars:
The Ugly Brown Building, 6a St. Pancras Way, London NW1 OTB
Charles Anderson ACMA
Espirito Santo Investment Bank, 10 Paternoster Square, London EC4M 7AL
Jones Day, 21 Tudor Street, London EC4Y ODJ
KPMG Audit Plc, 15 Canada Square, Canary Wharf, London E14 5GL
Barclays Bank PLC, 1 Churchill Place, London E14 5HP
The Royal Bank of Scotland PLC, 62–63 Threadneedle Street, London EC2R 8LA
Capita Registrars, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Ted Baker PLC – Registered in England No: 03393836
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£254.5
+18.0%
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£31.5
+16.5%
56.4p
+15.3%
0
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1
Group revenue (£m)
Profit before tax and exceptional costs (£m)
Adjusted basic earnings per share (p)
02
Established in 1988 as a shirting specialist of some repute,
Ted Baker London is a global lifestyle brand offering menswear,
womenswear, accessories and everything in between.
The brand’s unconventional approach to fashion, irreverent sense
of humour and, above all, unswerving attention to detail appeals to
style-conscious men and women who trust Ted to deliver something
out of the ordinary.
NO ORDiNARY
DESiGNER LABEL
A quintessentially British brand, Ted is famed for his quirky yet
commercial fashion offering, high quality design detailing and
distinctive use of pattern and colour.
In order to protect the ethos and persona for which we have gained
an enviable reputation, we always ask ourselves the question…
‘Would Ted do it that way?’
THREE CHANNELS
Ted carefully manages distribution
through three main channels:
RETAIL
£208.0m
WHOLESALE
£46.5m
LICENSING
£7.5m
Details on the performance of each
can be found in our Business Review,
starting on page 12.
U
NIT E D STATE
16
STORES
S
A
N
D
C
A
N
ADA
33 Concessions
4 Outlet Stores
+
WORLDWIDE TED
Ted is focused on a multi-channel distribution strategy and
is looking forward to the further expansion of the brand
in new and existing international markets.
ITED K
N
U
I N GDO
M
35STORES
A
N
D
E
U
R
O
PE
183 Concessions
10 Outlet Stores
+
E E A
L
D
D
I
M
T
S
8
STORES
ASIA
19
STORES
+
4 Concessions
96 STORES/OUTLETS
+ 220 CONCESSiONS
iN A TOTAL OF 22
COUNTRiES (AS AT
26 JANUARY 2013)
OUR GROUP REVENUE
iNCREASED FROM
£215.6M TO £254.5M
(THAT’S AN
18.0% iNCREASE)
A
N
U S T RALIA A
4
STORES
LAND
W ZEA
D
N
E
TED BAkER: BRAND OVERVi EW
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
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1 2
A YEAR TO REMEMBER
20
13
JAN - MARCH
TED’S FINE CHINA
Ted’s first store in Shanghai, L’Avenue,
opens for business
BE THE EXCEPTION, NEVER THE RULE
Ted opens his SS13 Finishing School:
a sartorial establishment dedicated
to putting the “man” into manners
and the “cor” in decorum
THAT’S A WRAP
Celebrating British film, Ted’s
Kuwait Al Hamra store premieres
SQUINTESSENTIAL
Ted’s recollection of classic vintage
eyewear blinks into life
BEST CELLARS
Ted’s got fashion down to a vine art as
he uncorks his first store in Adelaide
APRIL - JUNE
JULY SEPT
OCT DEC
TRÈS EXCLUSIVE
TAKE FIVE
Ted opens a posh Knightsbridge address
Manhattan makes room for
on London’s Brompton Road
Ted’s Grand House on Fifth Avenue
A TRUE DIAMOND
Celebrating HM the Queen’s Diamond Jubilee
NEVER MEDAL WITH
A WINNING FORMULA
JAKARTA
Ted opens the doors to his
Plaza Senayan store in Jakarta
BLOOMING MARVELLOUS
Ted celebrates the Olympics in London town
OTTOMAN TO GENTLEMAN
The “appointment only” Ottoman Lounge puts
the man into manicure
Bloomingdales and Ted continue to flourish
SLING WHEN YOU’RE WINNING
KING KONG
A third store for Ted in Hong Kong
at Harbour City
Ted opens in Singapore’s ION mall
SURVIVAL OF THE FITTEST
Ted’s AW12 collection takes a bow
MALAY OF THE LAND
IN COD WE TRUST
Ted’s Kuala Lumpur store is unveiled
Ted celebrates Vogue Fashion Night Out
GOLDEN WONDER
Supporting charity Childline,
with fish and chips
TIGHT LINES!
Ted’s BT ArtBox 2012 glitters in gold
Ted’s new collection of traditional styles
and fabrics casts off in style
BED TAKER
“In Bed with Ted” bedding range
launches in John Lewis
FULL OF EASTERN PROMISE
Ted makes his debut in
mainland China (Beijing)
SPARE PARTS FOR DAPPER GENTS
Ted Baker’s Workshop
opens in Selfridges
ANOTHER CLOSE SHAVE
Ted’s Grooming Room opens in
London’s Fitzrovia
WHO’S THE RAREST OF THEM ALL?
Ted’s Tux collection is unveiled
in Harrods’ window
TREES ON WATER
Ted’s first Canadian store opens in Toronto
ILLUSTRATED
Top British talents create 13 limited edition
illustrations of British pastimes for
A Baker’s Dozen – a unique gift with purchase
STYLE HIGH CLUB
A new store in Heathrow’s T3 takes off
OUTLET IT BE
Ted opens a premium outlet store close to
New York City in Woodbury Common
S U R V I V A L
O F T H E
For Autumn/Winter 2012, Ted created a ‘how
to’ survival guide to offer sophisticated ladies
and dapper gents a choice selection of tactics,
techniques and tricks to ensure they never blend
in with their surroundings.
After all, while having outdoor survival skills may
be useful, Ted’s always said that making a stylish
and fashionable statement is absolutely essential.
Bringing his innovative and distinctive British
designs to Tokyo’s prestigious shopping area of
Omotesando, Ted Baker’s debut store in Japan
celebrates digital communication and looks
back at the analogue era of 1950s Britain.
A home from home for Ted’s collections,
the store’s beautiful interior is embellished
with oak and limestone parquet flooring,
mirrored surfaces and retro teak furniture.
Customer opportunities to engage with Ted
in store include being transported on a trip
around 1950s London (via digital film footage)
inside a black cab.
An English Rose in the heart of Beijing,
Ted’s first store in mainland China is a unique
interpretation of an idyllic country garden with
features influenced by William Morris, a leading
member of the Arts and Crafts movement.
Combining elements of old and new, the
storefront offers a beautiful contrast against
the city’s modern steely backdrop and features
intricate rose garden patterns and quirky British
objects such as gnomes, foxes and badgers. The
store’s chandeliers comprise 540 handmade
coloured glass leaves and help to define its
modern day English country garden design.
For Spring Summer 13, Ted opened his
Finishing School: a sartorial establishment
dedicated to putting the ‘man’ into manners
and the ‘cor’ in decorum.
Underlining the importance of old-fashioned
manners and exceptional style, Ted’s SS13
collection’s bright colours, bold prints,
simple fabrics and smart silhouettes teach a
fashionable lesson in life: to be the exception,
never the rule.
10
10
CHAiRMAN’S
STATEMENT
The Group has delivered a strong result across all areas of our business.
This performance resulted in an 18.0% increase in Group revenue to
£254.5m (2012: £215.6m) and a 16.5% increase to £31.5m (2012:
£27.1m) in profit before tax and exceptional costs.
The retail division performed strongly in a competitive trading
environment and delivered an increase in revenue of 19.4% to
£208.0m (2012: £174.2m), on an increase in average square footage
of 14.0%. Gross margins increased to 66.2% (2012: 65.2%).
Wholesale sales for the Group increased by 12.2% to £46.5m (2012:
£41.4m). This reflected continued growth in our US wholesale
business and a good performance from our UK wholesale business,
which also includes the results of our UK export business.
Licence income from our territorial and product licences increased by
11.5% to £7.5m (2012: £6.7m).
This has been a significant year for the Group as we have further
established the brand in existing markets and invested in newer
markets for the longer term.
RESULTS
Group revenue for the 52 weeks ended 26 January 2013 rose by
18.0% to £254.5m (2012: £215.6m). The composite gross margin
increased to 62.4% (2012: 61.3%), reflecting less promotional
activity compared to the same period last year.
PEOPLE
I would like to take this opportunity to thank all of my colleagues
around the world. This performance and the continued development
of the brand in new and existing markets are testament to the passion,
enthusiasm and commitment of the Ted Baker team.
Profit before tax and exceptional costs increased by 16.5% to £31.5m
(2012: £27.1m) and profit before tax increased by 19.2% to £28.9m
(2012: £24.3m).
Exceptional costs incurred during the year of £2.6m (2012: £2.8m)
included £1.6m of rental costs incurred in the first half of the year
in our stores on Fifth Avenue, New York and in Tokyo, Japan for
the periods before they commenced trading. The balance of £1.0m
includes an impairment charge of £0.8m in respect of some retail
assets, notably a retail development in the UK that has failed to
deliver on its potential. The remaining £0.2m primarily relates to set
up costs incurred for our expansion into China.
Adjusted basic earnings per share, which exclude exceptional costs
increased by 15.3% to 56.4p (2012: 48.9p) and basic earnings per
share increased by 22.0% to 51.5p (2012: 42.2p).
The Group’s net borrowing position at the end of the year was
£10.0m (2012: net cash of £1.8m). As anticipated, the reduction
in cash was due to the significant investment in capital expenditure
during the year and increased inventory to support both the growth
and expansion of the Group in the coming year.
DIVIDENDS
The Board is recommending a final dividend of 18.7p per share
(2012: 16.25p), making a total for the year of 26.6p per share
(2012: 23.4p per share), an increase of 13.7% on the prior year.
Subject to approval by shareholders at the 2013 AGM, the final
dividend will be paid on 21 June 2013 to shareholders on the register
on 10 May 2013.
It was announced on 9 January 2013 that Robert Breare, who had
been Non-Executive Chairman since 2002, was stepping down
from the Board. I would like to thank Robert for his extraordinary
contribution to Ted Baker over the last 11 years. His retail and business
experience has greatly benefited the Group during this period of
growth and we wish him all the best with his future endeavours.
Following Robert stepping down, I have taken over his duties as
Non-Executive Chairman and I will also chair the Board’s Nomination
Committee. I am incredibly proud to have been associated with Ted
Baker since joining the Board in 2003 and I look forward to continuing
to work with the Ted Baker team to deliver the exciting opportunities
ahead. Ron Stewart, an independent non-executive director since
2009, has become Senior Independent Non-Executive Director and
Anne Sheinfield, an independent non-executive director since 2010,
has become Chairman of the Remuneration Committee.
It is with great sadness that I have to report that David Hewitt, a
colleague and fellow director, passed away at the end of last year.
David was a non-executive director of the Company from its flotation
in July 1997 until retirement in July 2009. He was passionate about
the product and worked closely with the team across the business,
providing valuable advice that greatly benefited the Company over
his twelve year tenure. He will be sadly missed by his colleagues.
CURRENT TRADING AND OUTLOOK
The Ted Baker brand continues to perform strongly and we are pleased
by the initial positive reaction to our Spring/Summer collections. We
continue to build brand awareness in our newer markets, where we
are investing for the longer term, and further retail openings are
planned across all of our markets.
LICENCE INCOME
Our product and territorial licences continue to perform well and are
in line with expectations.
Our licence partners plan to open stores in Beirut, Adelaide,
Abu Dhabi and Kuwait during the coming year.
GROUP
We have continued to deliver a good performance in an uncertain
trading environment and, through maintaining our focus on the long
term development of the brand, we believe that we are well placed
to deal with the challenges and opportunities ahead. We continue to
ensure that our costs and commitments are controlled and in line
with trends anticipated for the coming year.
We will continue to develop our retail, wholesale and licensing
distribution strategy across new and existing markets.
We intend to make our next interim management statement,
covering trading since the start of the financial year, in mid
June 2013.
RETAIL
The new financial year has started well at this early stage, particularly
in the UK, where we will be opening two stores within Gatwick
Airport: an accessory only store in the Gatwick North terminal in
June and a store in the Gatwick South terminal towards the end of
the year. We will be launching a new e-commerce platform in the
second half of the year to support our anticipated growth, including
the opportunity for local language sites as we expand internationally.
This will also include more localised and personalised content, based
upon browsing and shopping behaviours, including currency and
delivery options specific to each country.
In Europe, we will be opening our first outlet store in Belgium in July.
We are also looking to open further concessions in Germany, Spain,
France and the Netherlands.
In the US, we plan to open a further eight concessions during the
year. We also plan to open our first outlet store in Toronto, Canada
later in the year.
In Asia, we have very recently opened a second store in Shanghai,
China and a further concession through a leading department store
in Tokyo, Japan. We will be opening another store in Shanghai in the
middle of the year, as well as our first outlet store in Shanghai in April.
WHOLESALE
Trading in our wholesale business has started well and in line with
our expectations. We anticipate further growth in our US wholesale
business and export business in the coming year, with sales from our UK
wholesale business slightly above last year. Overall, this should result
in single digit growth in our wholesale business in the coming year.
David Bernstein
Non-Executive Chairman
21 March 2013
DiRECTORS' REPORT: OVERViEW
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
11
12
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 by Ted Baker; 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 independent stores in Europe, North America,
the Middle East, Asia and Australasia.
Our strategy is to become a leading global designer brand, based on
three main elements:
1.
CONSIDERED EXPANSION OF THE
TED BAKER COLLECTIONS.
We review our collections continually to
ensure we react to trends and meet our
customers’ expectations. In addition, we
look for opportunities to extend the breadth
of collections and enhance our offer.
2.
CONTROLLED DISTRIBUTION
THROUGH THREE MAIN
CHANNELS: retail; wholesale; and
licensing. We consider each new
opportunity to ensure it is right for the
brand and will deliver margin led growth.
3.
CAREFULLY MANAGED
DEVELOPMENT OF OVERSEAS
MARKETS. We continue to manage
growth in existing territories while
considering new territories for expansion.
Underlying our strategy is an emphasis on design, product quality
and attention to detail, 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, North
America and Asia, an e-commerce business based in the UK,
primarily serving the UK and Europe, with a separate site dedicated
to the Americas and an e-commerce business with some of our
concession partners.
The retail division delivered a strong performance with sales up 19.4%
to £208.0m (2012: £174.2m). Average retail square footage rose
by 14.0% over the year to 274,531 sq ft (2012: 240,815 sq ft).
Total retail square footage at 26 January 2013 was 294,329 sq ft
(2012: 253,635 sq ft), an increase of 16.0% on the prior year. Retail
sales per square foot rose 2.6% from £685 to £703.
Sales through our e-commerce business increased by 63.7% to
£14.9m (2012: £9.1m). In April, we launched a mobile optimised
transactional site and the response from our customers has been
very positive. Our e-commerce business continues to benefit from
the enhancements to our UK based transactional site.
The retail gross margin increased to 66.2% (2012: 65.2%), reflecting
a lower level of promotional activity in our markets compared to the
same period last year.
Retail operating costs increased in line with our expectations to
£100.1m (2012: £81.2m) and as a percentage of retail sales rose to
48.1% (2012: 46.6%), primarily driven by our expansion into new
international markets. This resulted in a slight decrease in retail
operating contribution to 18.1% (2012: 18.5%).
Wholesale
We currently operate a wholesale business in the UK serving
countries across Europe and a wholesale business in the US.
Group wholesale sales increased by 12.2% to £46.5m (2012: £41.4m)
and the gross margin was in line with last year at 45.2% (2012: 45.1%).
The increase in sales predominantly reflects a good performance
from our UK wholesale business and continuing growth in both our
wholesale export business and our US wholesale business.
Licensing
We operate both territorial and product 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 and sleepwear,
fragrance, watches, footwear, eyewear, neckwear, skinwear and
childrenswear.
Licence income was up 11.5% to £7.5m (2012: £6.7m). We have seen
particularly good performances from our footwear collection with
our licensed partner, Pentland Group, and from our childrenswear
collection and lingerie and sleepwear collections with Debenhams.
Our licensed stores in the Middle East and Asia performed well
during the period.
Collections
Ted Baker Womenswear delivered a strong performance with sales
up 27.7% to £137.1m (2012: £107.4m). Womenswear benefited from
a greater proportion of the space added during the period and as a
result represented 53.9% of total sales (2012: 49.8%).
Ted Baker Menswear performed well with sales increasing by 8.4%
to £117.4m (2012: £108.3m). Menswear represented 46.1% of total
sales in the period (2012: 50.2%).
UNDERLYiNG OUR
STRATEGY iS AN
EMPHASiS ON DESiGN,
PRODUCT QUALiTY
AND ATTENTiON
TO DETAiL.
THiS iS DELiVERED
BY THE PASSiON,
COMMiTMENT
AND DEDiCATiON
OF OUR TEAMS,
LiCENCE PARTNERS
AND WHOLESALE
CUSTOMERS.
DiRECTORS’ REPORT: OVERViEW
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
13
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GEOGRAPHiC
PERFORMANCE
UNITED KINGDOM AND EUROPE
US AND CANADA
MIDDLE EAST, ASIA AND AUSTRALASIA
Sales in our UK and Europe retail division were up 11.1% to £165.1m
(2012: £148.6m). This good performance was delivered in a
competitive trading environment.
Average retail square footage rose by 5.7% over the period to
204,331 sq ft (2012: 193,389 sq ft). At 26 January 2013 total retail
square footage was 210,768 sq ft (2012: 201,223 sq ft), representing
an increase of 4.7%. Retail sales per square foot increased by 2.1%
from £723 to £738.
During the year, we opened stores on the Brompton Road, London
and in Heathrow Terminal Three, both of which performed well.
We also opened concessions with leading department stores in
Germany, the Netherlands, Ireland and Spain and are pleased with
their performances.
At 26 January 2013, we operated 35 stores (2012: 33), 183
concessions (2012: 169) and 10 outlet stores (2012: 10).
Our e-commerce business performed exceptionally well during the
period with sales increasing by 62.5% to £14.3m (2012: £8.8m)
Sales from our UK wholesale division increased by 10.1% to £39.1m
(2012: £35.5m), reflecting a good performance from our UK wholesale
business and continued growth in our wholesale export business.
Sales from our US and Canadian retail division increased by 68.3%
to £36.7m (2012: £21.8m).
In support of our strategy to build our multi-channel business and
raise brand awareness, during the year we opened a flagship store
on Fifth Avenue, New York, a further 22 concessions throughout a
leading department store and an outlet store in Woodbury Common,
New York. We continue to make good progress and are confident
that our prominent store on Fifth Avenue is helping to raise brand
awareness of Ted Baker in the US and internationally. We also opened
our first store in Toronto, Canada in November and its performance
has been good.
Average square footage rose by 38.9% to 59,384 sq ft (2012: 42,761
sq ft) and retail sales per square foot increased 20.9% from £502
to £607. This reflects both higher sales densities in the concessions
opened during the year and an improvement in consumer confidence
in this market. As at 26 January 2013, we had 16 stores (2012: 14),
33 concessions (2012: 11) and 4 outlet stores (2012: 3).
Sales from our US wholesale business increased by 25.3% to £7.5m
(2012: £6.0m) reflecting the continued growth of our business.
THiS HAS BEEN A
SiGNiFiCANT YEAR
FOR THE GROUP AS
WE HAVE FURTHER
ESTABLiSHED THE
BRAND iN EXiSTiNG
MARkETS AND
iNVESTED iN NEWER
MARkETS FOR THE
LONGER TERM.
We continue to develop the Ted Baker brand across the Middle East,
Asia and Australasia. In Asia, with the help of our licence partners,
we are in the early stages of investing in new markets for the longer
term development of the brand. As at 26 January 2013, we, together
with our licence partners, operated a total of 35 stores (2012: 26)
across these territories.
Our licensed stores across the Middle East performed particularly
well during the period and as a result our partners are seeking further
opportunities to expand in the region. One of our licence partners
opened another store in Kuwait during the year. As at 26 January 2013,
our licence partners operated 8 stores across the Middle East
(2012: 7).
Our expansion into new international markets continued with an
opening in Tokyo, Japan in February 2012 and four concessions
through leading department stores in South Korea in March and
November 2012. We also opened our first store in Beijing, China
in September. These openings reflect our strategy to invest
for the longer term development of the brand and we have been
encouraged by the initial reaction to the brand and our collections
in these new markets.
In June, our licence partner opened stores in the Plaza Senayan Mall
in Jakarta, Indonesia, the Suria Mall in Kuala Lumpur, Malaysia and
the ION Mall in Singapore. In July, we opened a third store in Hong
Kong under our own management and the brand continues to be well
received in the region. During the period two existing stores were
closed and, as a result, as at 26 January 2013, we, together with our
licence partners, operated a total of 23 stores across the Middle East
and Asia (2012: 15).
The joint venture with our Australasian licence partner, Flair Industries
Pty Ltd, continues to perform in line with our expectations. As at
26 January 2013, we operated 4 stores in Australasia (2012: 4).
DiRECTORS' REPORT: OVERViEW
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
15
16
16
FiNANCiAL
REViEW
REVENUE AND GROSS MARGIN
Group revenue increased by 18.0% to £254.5m (2012: £215.6m),
driven by a 19.4% increase in retail sales to £208.0m (2012: £174.2m)
and a 12.2% increase in wholesale sales to £46.5m (2012: £41.4m).
PROFIT BEFORE TAX
Profit before tax and exceptional costs increased by 16.5% to £31.5m
(2012: £27.1m) and profit before tax increased by 19.2% to £28.9m
(2012: £24.3m).
The composite gross margin for the Group was 62.4% (2012: 61.3%).
This increase reflects a lower level of promotional activity in our
markets compared to the same period last year.
OPERATING EXPENSES PRE-EXCEPTIONAL COSTS
Distribution costs increased in line with our expectations to £101.4m
(2012: £82.4m) and as a percentage of sales increased to 39.8%
(2012: 38.2%), which was primarily driven by our expansion into
new international markets and included pre-opening costs of £0.4m
(excluding exceptional costs discussed below) in respect of stores
before they commenced trading.
Administration expenses increased by 11.3% to £33.0m (2012: £29.6m).
Excluding the employee performance related bonus of £nil
(2012: £3.1m), administration expenses rose by 24.5%, reflecting
growth in the US team to support the growth in our retail and wholesale
businesses, growth in other central functions and the continued
development of our distribution and
information technology
infrastructures to support our expansion into international markets.
EXCEPTIONAL COSTS
The exceptional costs, which include both distribution costs and
incurred during the year of £2.6m
administration expenses,
(2012: £2.8m) included £1.6m of rental costs incurred in the first half
of the year in our stores on Fifth Avenue, New York and in Tokyo,
Japan for the periods before they commenced trading. The balance
of £1.0m includes an impairment charge of £0.8m in respect of some
retail assets, notably a retail development in the UK that has failed
to deliver on its potential. The remaining £0.2m primarily relates to
set up costs incurred for our expansion into China.
The prior year figure was in respect of rent for stores that did
not commence trading until 2012, set up costs in relation to our
expansion into China and a provision for bad and doubtful debts in
respect of our exposure in Greece.
FINANCE INCOME AND EXPENSES
interest payable during the year was £612,000
Net
(2012: £201,000). This increase reflects higher Group borrowing
compared to the prior year due to significant capital expenditure and
increased working capital to support the Group around the world.
The foreign exchange loss during the year of £178,000 (2012: gain
of £38,000) was due to the retranslation of monetary assets and
liabilities denominated in foreign currencies.
TAXATION
The Group tax charge for the year was £7.3m (2012: £6.7m), an
effective tax rate of 25.3% (2012: 27.6%). This reduction from the
prior year reflects the fall in the UK corporation tax rate from 1 April
2012. This effective tax rate is higher than the UK rate of 24.32%
largely due to the non-recognition of losses in overseas territories
where the businesses are still in their development phase. The
Autumn Statement on 5 December 2012 confirmed that the main
corporation tax rate from 1 April 2013 will fall to 23% with a further
reduction to 21% from 1 April 2014. In the Budget Statement on
20 March 2013, a further cut in corporation tax rate to 20% was
announced which will take effect from 1 April 2015. We would expect
to see a future reduction in our effective tax rate in line with these
changes although the rate will be impacted where future overseas
profits arise in jurisdictions with higher tax rates than the UK.
CASH FLOW
The net decrease in cash and cash equivalents was the same as for
last year at £11.9m (2012: £11.9m). An increase in net cash generated
from operating activities of £6.2m was offset by an increase in
financing and investing activities.
Total working capital as per the Group balance sheet, which comprises
inventories, trade and other receivables and trade and other payables,
increased by £13.8m to £61.0m (2012: £47.2m), principally as
a result of an increase in year-end inventory levels reflecting the
underlying growth of our business and the earlier phasing of deliveries
into the business to ensure smooth transition to the Spring/Summer
season across all our markets.
Capital expenditure of £19.8m as per the Group cash flow
(2012: £15.0m) 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 £1.6m
(2012: £3.7m) of expenditure which relates to stores that are due
to open in 2013.
SHAREHOLDER RETURN
Basic earnings per share increased by 22.0% to 51.5p (2012: 42.2p).
Adjusted earnings per share, which exclude exceptional costs of
£2.6m (2012: £2.8m), increased by 15.3% to 56.4p (2012: 48.9p).
The proposed final dividend of 18.7p per share will make a total for
the year of 26.6p per share (2012: 23.4p per share), an increase of
13.7% on the previous year.
Free cash flow per share, which is calculated using the net cash
generated from operating activities, was 41.0p (2012: 26.7p) and
reflected an increase in cash generated from operating activities.
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 is hedged in accordance with
the Group’s risk management policy, typically 12 months in advance.
The balance of purchases is hedged naturally as the business operates
internationally and income is generated in the local currencies.
At the balance sheet date, the Group had hedged its projected
commitments in respect of the year ending January 2014.
BORROWING FACILITIES
The Group has a three year committed borrowing facility of £40.0m
(2012: £40.0m), which is due to expire on 1 March 2015. The facility
is a multi-currency revolving credit facility with The Royal Bank of
Scotland and Barclays. The facility is used as necessary to fund capital
expenditure to support the Group’s growth strategy.
The facilities contain appropriate financial covenants and are tested
on a quarterly basis. The Group monitors actual and prospective
compliance with these on a regular basis.
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.
DiRECTORS' REPORT: OVERViEW
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
17
18
PRiNCiPAL
RiSkS AND
UNCERTAiNTiES
The Board recognises there are a number of risks and uncertainties
that face the Group. The Board, with the help of 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:
Issue
Potential impact
Mitigation
Strategic risks
External events
Brand and reputational risk
External events may occur which may affect the global,
economic and financial environment in which we operate.
These events can affect our suppliers, customers and
partners, risking an increase in our cost base and adversely
affecting our revenue
All factors affecting these stakeholders are monitored
closely on an ongoing basis ensuring that we are prepared
for and can react to changes in the external environment,
allowing us to reduce our exposure as early as possible.
The spread of our business and supply chain also helps to
mitigate these risks
The strength of our brand and its reputation are important
to the business. There is a risk that our brand may be
undermined or damaged by our actions or those of our
partners
We carefully consider each new opportunity and each
wholesale customer and partner with whom we do business.
These are monitored on an ongoing basis to ensure they
remain appropriate to the brand
Fashion and design
As with all fashion brands there is a risk that our offer will
not satisfy the needs of our customers, resulting in lower
sales and reduced market share
Operational risks
Supply chain
If garments do not reach us on time and to specification,
there is a risk of a loss of revenue and customer confidence
The Group maintains a high level of market awareness and
an understanding of consumer trends and fashion to ensure
that we remain able to respond to changes in consumer
preference
Our supply chain is diversified across a number of suppliers
in different regions, reducing reliance 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
Infrastructure
Social responsibility
IT security
People
Regulatory and legal framework
Financial risks
Currency, interest, credit
and counterparty credit risks,
including financial covenants
under the credit facilities
We may face increases in our operating costs due to growth
in raw material, labour, property and other costs, placing
pressure on our pricing strategy, margins and profitability
Operating costs are monitored regularly to ensure that any
cost pressures are quickly identified and appropriate action
is taken
There is a risk of operational problems, including disruption
to the infrastructure that supports our business, which may
lead to a loss of revenue, data and inventory
The business continuity plan is constantly reviewed and
updated by the Risk Committee. In addition, business
disruption is covered by our insurance policies
We are committed to operating in a responsible
and sustainable manner as regards our supply chain,
environment and community. If we fail to operate in a
manner that supports our philosophy, this could damage the
trust and confidence of our stakeholders
Four members of the Executive Committee have
been tasked with overseeing specific areas of our social
responsibility agenda. The Group has an employee whose
sole responsibility is to monitor this agenda and ensure our
practices fall in line with it
Advances in technology have resulted in more data being
transmitted electronically, posing an increased security
risk. There is also the possibility of unintentional loss of
controlled data by authorised users
The Group’s performance is linked to the performance
of our people and, in particular, to the leadership of
key individuals. The loss of a key individual whether at
management level or within a specialist skill set could have a
detrimental effect on our operations and, in some cases, the
creative vision for the brand
Commitment of additional specialist resources and the
continual upgrading of security equipment and software
mitigate these risks
Retention of key talent is important and we take active
steps to provide stability and security to the key team. We
carry out an annual benchmarking review to ensure that
we provide competitive remuneration and total reward
packages. We also utilise long-term incentive schemes to
retain key talent. Employee engagement through our culture
and environment strengthen the commitment of team
members and has a positive impact on our attrition rate
The Group operates within many markets globally and must
comply with various regulatory requirements. Failure to
do so could lead to financial penalties and/or reputational
damage
The Group closely monitors changes in the legal 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
In the course of its operations, the Group is exposed to
these financial risks which if they were to arise may have
material financial impacts on the Group
The Group’s policies for dealing with these risks are
discussed in detail in note 22 on pages 68 to 74
DiRECTORS’ REPORT: OVERViEW
TED BAKER ANNUAL REPORT 2012/13
19
22
CORPORATE
GOVERNANCE
STATEMENTS
Statement of Compliance with the Code
The Board notes that, during the financial year ended 26 January
2013, it entered the FTSE 350 index of companies and acknowledges
that additional requirements are placed on the constituents of this
index under the provisions of the Code. Whilst the Company has
endeavoured to comply with these additional requirements, there
are a number of areas in which full compliance has not as yet been
achieved, and the Board is of the view that the Company’s compliance
against the Code during the year under review should be fairly
assessed against the provisions applying to smaller companies. The
Board will seek to achieve compliance with the enhanced provisions
for larger Companies during its next financial year and the areas
in which the Company is not currently compliant are outlined and
explained below.
Statement About Applying the Main Principles of the Code
The Company has applied the Main Principles set out in the Code.
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 32 to 37.
The Board
The Board currently comprises a non-executive Chairman, the
Chief Executive, one other executive director and two independent
non-executive directors. Biographies of these directors appear
on page 29. The Board is of the view that its current membership
provides an appropriate balance of skills, experience, independence
and knowledge, which enables it to discharge its responsibilities
effectively.
of Senior Independent Director, was appointed as his successor.
Following this change, Ronald Stewart was appointed as Senior
Independent Director and Anne Sheinfield as Chairman of the
Remuneration Committee. Mr Stewart and Mrs Sheinfield 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.
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.
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.
The Company maintains an appropriate level of director and
officer liability insurance cover in place and, through the Articles
of Association and directors’ terms of appointment, has agreed to
indemnify the directors against certain liabilities to third parties and
costs and expenses incurred as a result of holding office as a director.
Save for such indemnity provisions in the Company’s Articles of
Association and in the Directors’ terms of appointment, there are
no qualifying third party indemnity provisions in force.
Board and Committee attendance
On 9 January 2013, Robert Breare stepped down as Non-Executive
Chairman of the Company, having served in that role for more than
11 years, and David Bernstein, who previously held the position
The table below details the number of Board and committee meetings
held during the year ended 26 January 2013 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
Board
meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
12
10
7
10
9
11
12
3
3
3
3
-
-
-
3
3
2
3
-
-
-
-
-
-
-
-
-
-
Audit Committee
During the year, Ronald Stewart was chairman of the Audit
committee (the “Committee”). The other committee members
were Robert Breare (until resignation on 9 January 2013) and
David Bernstein.
Provision C.3.1. of the Code sets out differing requirements
for smaller companies and larger companies in relation to the
membership of the Company’s Audit Committee. As noted above,
the Company entered the FTSE 350 index of companies only part
way through the financial year under review; the Board is therefore
of the view that its compliance with the Code for the year ended
26 January 2013 should be assessed against the provisions applying
to smaller companies.
Following the resignation of Robert Breare in January 2013, and in
light of the enhanced requirements of the Code applying to larger
companies, the Board is in the process of reviewing the membership
of the Committee, but is satisfied that all members have recent and
relevant financial experience.
During the year ended 26 January 2012, the Committee undertook
a formal evaluation of its own performance, which has been revisited
informally during the current year. Given the company’s entry into
the FTSE 350, the Board is reviewing the evaluation process around
performance for the year ending January 2014.
The Committee meets at least twice a year to review and recommend
the interim and annual financial statements, before submission
for approval by the Board, and consider any matters raised by
the auditors. The Committee considers all significant financial
reporting
in the financial statements,
including accounting policies and compliance, areas of management
judgements and estimates and the effectiveness of financial reporting
and controls.
judgements contained
The Committee oversees the Company’s relationship with the
external auditors, makes recommendations to the Board
in
relation to their appointment, reappointment and removal and
approves their remuneration and terms of engagement. The Board
and Committee also review the independence of the external
auditors and consider the engagement of the external auditors to
supply non-audit services.
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 and non-audit
fees are disclosed in note 3 to the financial statements.
The Committee recognises that the independence of the auditors
is an essential part of the audit framework and the assurance that
it provides. The Committee monitors any non-audit work that is
undertaken by the external auditors to ensure that their objectivity
and independence is not compromised.
The Committee has formally reviewed the independence of the
auditors during the year as part of the 2012 review. KPMG Audit
Plc have provided a letter to the Committee confirming that the
remain independent within the meaning of the regulations on this
matter and in accordance with their professional standards.
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.
During 2012 the Committee, supported by the senior management
team, conducted a rigorous tender process in respect of the
external audit contract (in line with Provision C.3.7. of the Code).
The incumbent auditors, KPMG Audit Plc, plus four other firms
(PricewaterhouseCoopers LLP, Ernst & Young LLP, Deloitte LLP
and BDO LLP) were invited to submit proposals to the Committee
and, of those five, two were short-listed and invited to present
to the Committee in further detail. Having carefully considered
the proposals and presentations put forward by all applicants, the
Committee determined that the reappointment of KPMG would
be in the best interests of the Company. The Audit Committee
is satisfied that KPMG are independent of the Company and
that the external audit has been conducted in an objective and
effective manner.
The Financial Reporting Council recently issued a revised UK
Corporate Governance Code and revised guidance for audit
committees. The Board and the Audit Committee have scheduled
time in 2013 to discuss how the Company can best comply with
these new requirements.
Nomination Committee
During the year the Nomination Committee (the “Committee”)
was chaired by Robert Breare and its other members were David
Bernstein and Ronald Stewart. The composition of the Committee
during the year complied with Provision B.2.1. of the Code, however,
following the resignation of Robert Breare, the Board is in the
process of reviewing the Committee’s membership. It is noted that
the appointment of David Bernstein as Chairman, following the
resignation of Robert Breare, was determined to be an issue most
appropriately considered and decided upon by the Board as a whole,
as Mr Stewart was the only independent member of the Nomination
Committee in respect of such matter.
The Committee is responsible for nominating candidates for
appointment to the Board. The Board has been satisfied that the
size and composition of the Board has been appropriate throughout
the year and it has been unnecessary for the Committee to meet
during the year.
All non-executive directors are advised of the time commitment
considered necessary to enable them to fulfil their responsibilities
prior to appointment.
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. However, as reported last
year, the Board previously determined that the directors would retire
and stand for re-election on an annual basis, in line with Provision
B.7.1. of the Code.
DiRECTORS' REPORT: GOVERNANCE
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
23
CORPORATE GOVERNANCE STATEMENTS CONTiNUED
24
Diversity
We strongly support the principle of boardroom diversity, of which
gender is one element. Anne Sheinfield has been on the Board
since June 2010 and the Board is very pleased to benefit from her
valuable contribution.
Boardroom diversity, including gender, is an important consideration
when assessing a candidate’s ability to contribute to, and complement
the abilities of, a balanced Board.
Our Board appointments will always be made on merit against
objective criteria, and this will continue to be the priority rather than
aiming to achieve an externally prescribed diversity target.
As noted in the People report on page 28, the continued expansion
of the Company means that Ted Baker’s workforce is becoming
increasingly more diverse. The Company will continue to support
the development and progression of all employees, with the aim
of maintaining and achieving diversity throughout all levels of
the organisation.
Communication with Shareholders
The Group attaches considerable importance to 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.
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 at www.tedbakerplc.com. They may
also attend the Company’s Annual General Meeting at which they
have the opportunity to ask questions.
informed of the views of
Non-executive directors are kept
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 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, which 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 its 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
information which 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.
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:
•
•
•
the authority, resources and co-ordination of those involved in
the identification, assessment and management of significant
risks faced by the Group;
the response to the significant risks which have been identified by
management and others;
the maintenance of a controlled environment directed towards
the proper management of risk; and
•
the annual reporting procedures.
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 Bribery Act 2010
The Board continues to proactively review the Group’s procedures to
ensure they are sufficiently robust to prevent corruption.
DiRECTORS' REPORT: GOVERNANCE
25
26
SUSTAiNABiLiTY
AND THE
ENViRONMENT
At Ted Baker 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. We approach
our social, environmental and ethical matters (“SEE”) with the
same focus and attention to detail that permeates the rest of the
business. To ensure that we continue to meet our responsibilities
in these important areas we formulated a three pronged plan,
named Ted3, in 2012.
How we work
Lindsay 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. 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). Our full time Green Guardian
manages these areas and the Group’s cross-functional team which
is responsible for addressing SEE concerns of the Group (the “Ted’s
Conscience Team”).
Our Key Focus
been reduced to net zero through purchasing carbon credits from
Voluntary Carbon Standard (“VCS”) validated projects.
• We are constantly reviewing the waste our business generates in
an effort to achieve our overall aim of sending no waste to landfill.
We participate in the Wastepack Compliance Scheme as part
of the Producer Responsibility Obligations (Packaging Waste)
Regulations 1997 and continue to reduce unnecessary packaging.
• We work with the National Industrial Symbiosis Programme
(“NISP”) to recycle as much waste as we can through their
network of charities, such as Scrapstores.
• Through relationships with charities Oxfam, Newlife and World
Jewish Relief we have been able to ensure that our end of life
garments are utilised in the best way, raising over £300,000 and
diverting 18 tonnes of waste from landfill.
We believe in three very important strands of work:
Ethical and Sustainable Sourcing
Protect: The Group
is committed to protecting the
environment within our properties and throughout our entire
supply chain by reducing the use of resources and increasing
efficiencies wherever possible.
Product: The Group is committed to purchasing the best
possible products for use and sale within and throughout Ted
and associated businesses.
Practise: This section of our strategy focuses on putting
in place a framework to achieve our goals and targets by
educating and inspiring our teams.
Environmental Impacts
As part of our commitment to “Protect”, the Group has engaged in
a number of environmental projects during the course of the year:
• We continue to participate in the Carbon Disclosure Project to
measure and disclose our greenhouse gas emissions and climate
change strategies. We received a score of 66% and disclosed many
of our Scope 3 emissions for the first time.
• All of our business travel within Scopes 1 and 3 is CarbonNeutral®.
This means that the unavoidable emissions generated by air, road
and rail journeys required to visit our stores and suppliers have
As part of our commitment to “Product”, we place great importance
on ethical and sustainable sourcing within the Group. We believe 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.
• All Ted Baker suppliers are governed by our Company Code
of Conduct, which is based on the Social Accountability
International Code, an internationally recognised benchmark for
ethical excellence, and can be found at http://externalresources.
tedbaker.com/legaldocs/codes_of_conduct.pdf.
• Through our partnership with MADE-BY, a non-profit multi-
stakeholder initiative set up to improve sustainability within the
fashion industry, we have been able to set long-term internal
targets for the amount of sustainable fibres we use in our
collections. Our Social Scorecard for 2011 was released during
the period and can be found at http://www.made-by.org/partner-
brand/34/ted-baker/scorecard. This shows the improvement we
have made in sourcing from more sustainable factories and we
worked to further improve this in our 2012 scorecard. Our third
Scorecard will be released during the period.
• During the period we continued two
long-term social
improvement programmes with key suppliers as part of our
partnership with MADE-BY and started a third. These projects
involve working closely with these suppliers to improve their social
and working practices.
• We participate in the Metrics group, which is responsible for
identifying the key hotspots within the industry to measure, as
well as working on a tool to measure our baseline carbon, water
and waste footprints and what improvement actions are possible
to take in this area.
• We are also part of the Sustainable Clothing Action Plan, a
Department for Environment, Food, and Rural Affairs sponsored
action plan, organised to improve the sustainability of clothing
across its lifecycle by bringing together industry, government and
third parties to develop sector-wide targets, along with the tools
and guidance necessary to reach them.
• Animal welfare is an important issue to many consumers
and we have always sourced from the highest quality suppliers. Our
Group Animal Welfare Policy was made public this year and can
be found at www.tedbaker.com/about_us/our_policies/content.
aspx#ethical_statement. We have decided not to retail fragrance
or skinwear in our Chinese stores to ensure we are able to hold
true to our principles of not testing on animals.
Community
In order to “Practise” our goals and achieve our targets we
place great importance on the Teducation of our employees to
support the community in a number of ways. Throughout the year
we have supported various charities and taken part in valuable and
exciting projects.
• Our employees are our greatest asset and we have Ted’s
Conscience Team members in every department and store
worldwide encouraging colleagues to be more environmentally
aware. During 2012/13 we trialled participation
in Ted’s
Conscience with a number of our concessions and aim to roll this
out during 2013/14.
• Our Green Guardian gives twice yearly store team training
sessions to ensure our sustainability issues are communicated
across the business.
• We released our first Ted’s Conscience Newsletter which has been
sent to all areas of the business to advise team members on our
policies, plans, targets and partners.
• Movember: We supported the Movember Initiative, asking
as many of our teams as possible to grow a moustache to raise
awareness and funds for prostate and testicular cancer.
• Oxfam: We continued to encourage our teams to use our inhouse
“Oxfam Collects” Collection Point. This enables team members
to donate any unwanted items to Oxfam during the course of
their usual working week.
• We also donated various garments to other charities and groups
during 2012 such as Dress for Success, an agency that assists
women getting back into work, Centrepoint, which supports
Homeless young people, and Kids Co, a London based charity
that supports under privileged children.
• We keep two buckfast bee colonies on the roof of our London
head office from which we had a hugely successful honey harvest
during 2012.
WE ARE COMMiTTED
TO PROTECTiNG THE
ENViRONMENT AND
PURCHASiNG THE BEST
POSSiBLE PRODUCTS
FOR USE AND SALE
THROUGHOUT THE
BUSiNESS. WE PLACE
GREAT iMPORTANCE
ON THE TEDUCATiON
OF OUR EMPLOYEES
TO SUPPORT THE
COMMUNiTY AND
PRACTiSE OUR GOALS.
DiRECTORS' REPORT: GOVERNANCE
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
27
28
PEOPLE
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.
BOARD OF
DiRECTORS
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 people to join our Save As You Earn (“SAYE”) schemes. This
year we celebrated our third year of 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.
Learning and Development
Performance is reviewed bi-annually with each team member to
discuss personal and career development. Within this process, goals
and objectives are set and linked to personal growth and business
development as well as Ted’s environmental and social commitments.
We allow our people 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 retaining 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, whistleblowing and equal opportunities. Our
team represents a wide and diverse workforce from all backgrounds,
sexual orientations, nationalities and ethnic and religious groups.
We support sponsorship of visa applications, where appropriate, to
retain specific talent within the business. With continued 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 private healthcare, occupational health, health
seminars and funding for flu jabs. During the period, we conducted
a Wellness health assessment day and we offer health and fitness
classes to our team members at our head office. We also run a
Childcare Voucher Scheme. We launched an Employee Assistance
Programme during the year that further supports our genuine
concern for the well-being of our team.
DiRECTORS' REPORT: GOVERNANCE
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 and Safety
focused team member has been appointed and will 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 members of the team becoming
disabled every effort is made to ensure that their employment
with the Group continues and that where appropriate reasonable
adjustments are made and relevant 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.
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 Teducation sessions with
the Chief Executive, telling the story behind the brand, and also
family days where we open our doors to family and friends.
David Alan Bernstein – Non-Executive Chairman (69)
Ronald Stewart – Non-Executive Director (65)
David is Chairman of The Football Association and Non-Executive
Director of Wembley National Stadium Limited. Previously he was
joint Managing Director of Pentland Group PLC, Chairman of
Manchester City PLC, Blacks Leisure PLC and French Connection
PLC. He is Chairman of the Nomination Committee and a
member of the Audit and Remuneration Committees. David is an
independent director.
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 and
the Senior Non-Executive Director.
Raymond Stuart Kelvin, CBE – Chief Executive (57)
(“Closest Man To Ted”)
Ray, the founder of Ted Baker, has worked in the fashion industry for
over 39 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. In the New Year Honours’ List of 2011 Ray was
appointed Commander of the Order of the British Empire (CBE) for
services to the fashion industry.
Employer Brand
Lindsay Dennis Page, MA, ACA – Finance Director (54)
Lindsay joined Ted Baker as Finance Director in February 1997. He
joined Binder Hamlyn in 1981 and 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.
The culture sets the tone for how our “employer brand” speaks to
our teams. Aligned to the business brand, our Ted tone of voice
is translated through every employee touch point throughout
the employee lifecycle. Our Coach Station department leads the
way in communicating a unique approach to all people and team
orientated activity.
Employee Engagement
The Group places considerable value on the involvement of its
employees 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. Employees
are regularly informed of the Group’s performance and the factors
affecting its performance during the year.
Anne Sheinfield – Non-Executive Director (47)
Anne was appointed as a non-executive director on 15 June 2010.
Anne is a commercial lawyer with more than two decades of
post qualification experience in the theatre, TV and music areas
of entertainment and has a wealth of intellectual property and
commercial legal experience. She is Chairman of the Remuneration
Committee. Anne is an independent director.
Robert Breare – (60) (Resigned 9 January 2013)
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 Chief
Executive Officer of Snoozebox Ltd, a luxury portable events hotel
operating both in the UK and internationally. Prior to his resignation
Robert served as the Non-Executive Chairman and was Chairman
of the Nomination Committee and a member of the Remuneration
and Audit Committees.
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
29
32
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 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 (until
resignation on 9 January 2013) and Ronald Stewart. David Bernstein
and Ronald Stewart are independent non-executive directors as
noted in the corporate governance statements. In line with Provision
D.2.1. of the Code, Robert Breare, as Non-Executive Chairman,
may be a member of but not chair the Committee, as he was
considered to be independent on appointment. The Committee
met three times during the year with full attendance, apart from
one meeting where David Bernstein was unable to attend. Following
the resignation of Robert Breare in January 2013, Anne Sheinfield,
an independent non-executive director became Chairman of
the Remuneration Committee and David Bernstein will remain a
member of the Committee.
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.
During the period the Committee considered and approved the
terms, including the option exercise price, of the 2012 Sharesave
Scheme and the conversion of units under the Ted Baker 2009 Value
Creation Plan into nil cost options. The Committee considered the
salary increases for the executive directors and senior executives
having regard to salary levels across the overall Group and the
findings of the remuneration report produced by Ernst & Young LLP
in the prior year. When reviewing salary benchmarking in respect of
Lindsay Page, the Committee recognises that he has a broader role
and is considered deputy to the Chief Executive. The Committee
also considered Board and Executive Committee training and
development plans.
The Remuneration Committee has completed a review of the existing
incentive schemes and, with the Ted Baker 2009 Value Creation
Plan vesting in August 2012, intends to adopt a new arrangement.
The Committee will seek the relevant shareholder approval once
details of an appropriate long term incentive plan have been finalised.
During the period, the Committee was assisted in its work by the
following external advisors:
Remuneration Policy
Advisor
Appointed by
PricewaterhouseCoopers LLP
Company
Jones Day
Company
Service
provided to the
Committee
Other services
provided to the
Company
Advice
on share
schemes
Advice
on share
schemes
Tax, legal
and accounting
services to
the Group
General legal
advice
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
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:
•
•
•
•
the size of the company, its turnover, profits and number
of people employed;
the diversity and complexity of the business;
the geographical spread of the business; and
the growth and expansion profile.
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
Linkage to strategy
Operation
Maximum potential
Performance metrics
and period
Changes to policy
since last approved
Basic Salary
N/A
Salary increases will generally
be no higher than the
increase in RPI
N/A
No change
Reviewed annually with
regard to competitive market
practice and each director’s
contribution to the business.
Increases reflect inflation and
in line with wider employee
increases
Annual Bonus
Provides a direct link between
the rewards for executives
and returns to shareholders
Annual grant condition
on achievement of agreed
financial targets
100% of salary
Growth in profit before tax*
No change
Long Term Incentive Schemes Delivery of sustainable value
to shareholders
Value Creation Plan
delivering value through
growth in B ordinary shares
or in nil cost options over
ordinary shares
Share of pool representing
12.5% of the growth in the
Company’s market value and
share price target
Pension and Other Benefits
N/A
Pension contributions,
company car, fuel and
medical expense insurance
Pension contribution to a
money purchase scheme of
12.5% of salary for executive
directors other than
Raymond S Kelvin
No change
Performance conditions
measured over three financial
years with 50% vesting at
the end of the third year and
50% at the end of the fourth
year. Performance conditions
are share price per growth,
earnings per share and total
shareholder return.
N/A
No change
* The target was set by reference to Group budgets and consensus market expectations for the financial year and in the event was not met, despite the outcome
for the year reflecting strong performance of profit before tax of £28,922,000. Accordingly, no annual bonus has been paid to the Executive Directors or
other employees.
Remuneration Package
Remuneration packages are structured to provide a balance between
fixed basic salary and variable remuneration based on individual and
Group performance.
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 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 provisions of long term incentive schemes cannot be altered to
the benefit or advantage of participants without prior shareholder
approval in a general meeting.
DiRECTORS' REPORT: OTHER STATUTORY DiSCLOSURES
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
33
34
DiRECTORS’ REMUNERATiON REPORT CONTiNUED
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. The performance conditions were
chosen to support the delivery of sustainable value to shareholders.
Conversion of units is based on each unit having a value calculated
by reference to a pool of value, being 12.5% 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% 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:
• no benefit is provided unless the earnings per share growth over
the performance period is greater than 5% per annum compound
above the consensus forecasts for the financial year ended
January 2010;
• no benefit is provided unless the share price growth is greater
than 10% per annum compound over the performance period; and
• no benefit is provided unless total shareholder return exceeds
the return on the FTSE General Retail Sector Index over the
performance period.
Robert Breare*
David A Bernstein
Raymond S Kelvin
Lindsay D Page
Ronald Stewart
Anne Sheinfield
*Resigned 9 January 2013.
300
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 with the aim of
delivering the benefits under the 2009 awards in a more tax efficient
manner. 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 award holder can
therefore receive his benefit under the plan either by exercising the
nil cost option under the 2009 award or selling B ordinary shares,
but the gross benefit to the award holder cannot exceed the gross
value realisable under the 2009 award and he cannot receive any
benefit earlier than the time described above in relation to the nil
cost option.
200
250
The Ted Baker 1997 Executive Share Option Scheme
150
Under this scheme, options may be granted to subscribe for new
shares and to acquire shares from the Ted Baker Group Employee
Benefit Trust. There are currently no options under this scheme.
The Ted Baker Performance Share Plan
100
Under this plan, both conditional share awards and share options
may be granted. There are currently no awards or options under
this scheme.
50
The Ted Baker Sharesave Scheme
Jan ’08
Jul ’08
Jan ’09
Jul ’09
Under this scheme, options are made available to all employees
to encourage share ownership. The exercise of options is not
subject to performance conditions. Lindsay D Page holds options
under this scheme.
Contracts of Service
Each executive director has a service contract with a notice period of
12 months. Service contracts and letters of appointment are available
for inspection at the registered office. The Board sets non-executive
directors’ fees.
Date of service
contract
1 November 2001
24 January 2003
17 July 1997
17 July 1997
25 February 2009
15 June 2010
Unexpired 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 2008 to January 2013.
FTSE All Share General Retailers
Ted Baker PLC
FTSE All Share General Retailers
Ted Baker PLC
300
250
200
150
Jan ’10
100
50
Jul ’10
Jan ’11
Jul ’11
Jan ’12
Jul ’12
Jan ’13
Jan ’08
Jul ’08
Jan ’09
Jul ’09
Jan ’10
Jul ’10
Jan ’11
Jul ’11
Jan ’12
Jul ’12
Jan ’13
DiRECTORS' REPORT: OTHER STATUTORY DiSCLOSURES
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
35
36
DiRECTORS’ REMUNERATiON REPORT CONTiNUED
Audited Information
Directors’ Long Term Incentive Schemes
The auditors are required to report on the individual aspects of remuneration, which may be found in the following section of this report.
Awards and nil cost options under the Ted Baker 2009 Value Creation Plan
Directors’ Remuneration, Interests and Transactions
Emoluments
Money purchase pension contributions
Directors’ Emoluments
Executive
Raymond S Kelvin
Lindsay D Page
Non-executive
R Breare*
D A Bernstein
R Stewart
A Sheinfield
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
898
41
939
£’000
1,269
40
1,309
Fees/basic
salary
£’000
Performance
related bonus
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
£’000
£’000
Benefits
£’000
354
338
75
40
40
40
887
8
3
-
-
-
-
11
-
-
-
-
-
-
-
362
341
75
40
40
40
569
530
50
40
40
40
898
1,269
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.
On 13 August 2009, the Committee made the award of 100,000 units under the Ted Baker 2009 Value Creation Plan (the “VCP”) to the
Executive Directors and other employees, subject to a three year performance period ending 12 August 2012. Awards under the VCP were 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 34.
Raymond S Kelvin
Lindsay D Page
Average share price at award date
No. of units awarded
376.1p
376.1p
17,900 (17.9% of total issued units)
15,600 (15.6% of total issued units*)
Based on the achievement of performance conditions, the units awarded on 13 August 2009 converted into options to acquire 2,177,115 ordinary
shares in the Company. In accordance with the rules of the VCP, 50% of these options were exercisable immediately, and the remaining 50%
are exercisable on 8 October 2013.
Performance Conditions
Earnings per share
Share Price
Target
31.0p
10.0% per annum
Total Shareholder Return
Exceeds FTSE General Retail Sector Index
Nil cost options granted to Directors under the VCP were as follows:
Achieved
% Vesting
49.9p
33.0%
Yes
100%
100%
100%
Raymond S Kelvin
Lindsay D Page
28 January
2012
No. of shares
Nil cost options
granted
No. of shares
Nil cost options
exercised
No. of shares
-
-
404,763
353,206
-
(176,603)
26 January
2013
No. of shares
404,763
176,603
Option
price
Expiry Date
930.0p
7 October 2019
930.0p
7 October 2019
Nil cost options granted in respect of Raymond S Kelvin and Lindsay D Page represent 34.8% of the total number of nil cost options granted.
The balance included other senior executives across the Group.
Share Options
* Mr Breare was willing to serve his contractual notice period but the Board determined that it would be preferable to bring in the new Chairman effective
Share options granted to directors under the Ted Baker Sharesave Scheme were as follows:
immediately and chose to make a payment in lieu of notice.
Directors’ Pensions
Lindsay D Page
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
£’000
41
40
Lindsay D Page
5,165
-
5,165
28 January
2012
No. of shares
Options (exercised)
or granted
No. of shares
26 January
2013
No. of shares
Option
price
303.0p
Earliest
date of
exercise
Expiry
date
1 July 2014
1 July 2015
Anne Sheinfield
Chairman of the Remuneration Committee
DiRECTORS' REPORT: OTHER STATUTORY DiSCLOSURES
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
37
38
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 26 January 2013. The comparative period is for
the 52 weeks ended 28 January 2012.
Principal Activities
Results and Dividends
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, Portugal 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 10 to 15.
The contents of this Directors’ Report together with:
•
•
•
•
the Chairman’s Statement on pages 10 to 11;
the Business Review on pages 12 to 13;
the Principal Risks and Uncertainties on page 18;
the Sustainability and the Environment report on pages 26 to
27; and
•
the People report on page 28
constitute the Business Review and are incorporated into this report
by reference.
The audited accounts for the 52 weeks ended 26 January 2013 are
set out on pages 44 to 74. The Group profit for the 52 weeks, after
taxation, was £21,597,000 (2012: £17,557,000). The directors
recommend a final dividend of 18.7p per ordinary share (2012:
16.25p) payable on 14 June 2013 to ordinary shareholders on the
register on 10 May 2013 which, together with the interim dividend
of 7.9p per share (2012: 7.15p per share) paid on 23 November 2012,
makes a total of 26.6p per share for the period (2012: 23.4p per
share).
Directors
The directors during the financial year were those listed on page
29. Details of the directors’ beneficial interests in the shares of the
Company are shown on page 39. Details of their options are given in
the Directors’ Remuneration Report on pages 34 to 37. Brief details
of the career of each director are set out on page 29.
Substantial Shareholdings
On 21 March 2013, 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.
Name of Holder
Raymond S Kelvin
Schroder Investment Management
BlackRock
Standard Life Investments
Number
16,537,899
3,116,198
2,319,363
2,144,479
% Held
38.83
7.32
5.45
5.04
Share Capital and Control
As at 26 January 2013, the Company’s authorised share capital
was 80,000,000 ordinary shares of 5p each (in nominal value).
Details of the Company’s share capital are shown in note 19 to
the consolidated financial statements on page 65. On 26 January
2013 there were 43,198,033 ordinary shares in issue of which the
Company holds 608,991 ordinary shares in treasury. The rights
and obligations attaching to the Company’s shares, in addition to
those conferred on their holders by law, are set out in the Articles
of Association. The holders of ordinary shares are entitled to receive
all shareholder documents, attend and speak at general meetings of
the Company, exercise all voting rights and to receive dividends and
participate in other distributions of assets. 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 Company is not aware of any
agreements between shareholders restricting the voting rights or the
right to transfer shares in the Company.
The rules about the appointment and replacement of directors are
contained in the Company’s Articles of Association.
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.
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
There are a number of agreements that take effect, alter or terminate
upon a change of control of the Company following a takeover bid,
The directors who held office at 26 January 2013 had interests in the
shares of Ted Baker PLC as shown in the table below.
Raymond S Kelvin
Lindsay D Page
R Stewart
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.
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 44 days (2012: 40
days). At the year end the Company had no trade creditors.
Donations
% of share capital
26 January 2013
Beneficial
28 January 2012
Beneficial
38.83
16,537,899
16,537,276
-
-
43,851
300
43,851
300
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 74.
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
KPMG Audit Plc have expressed their willingness to continue in
office as auditors and a resolution will be proposed to reappoint them
at the Annual General Meeting.
The value of charitable donations made during the period was
£30,266 (2012: £33,293).
The report was approved by the Board of Directors on 21 March 2013
and signed on its behalf by:
Charles F Anderson,
Secretary
Registered office – The Ugly Brown Building, 6a St. Pancras Way,
London NW1 0TB
Social Responsibility
Details of the Group’s social, ethical and environmental responsibility
initiatives are set out in the Sustainability and the Environment
report on pages 26 and 27.
People
Details of the Group’s policies with respect to people and employees
are set out in the People report on page 28.
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 advisor, reviews
and resolves any health and safety issues.
DiRECTORS' REPORT: OTHER STATUTORY DiSCLOSURES
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
39
40
STATEMENT OF
DiRECTORS’
RESPONSiBi LiTiES
Statement of Directors’ responsibilities in respect of the Annual
Report and the financial statements.
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:
•
select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and prudent;
•
state whether they have been prepared in accordance with IFRSs
as adopted by the EU; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the parent
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.
Under applicable law and regulations, the directors are also responsible
for preparing a Directors’ Report, Directors’ Remuneration Report
and Corporate Governance Statement that complies with that law
and those regulations.
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:
Raymond S Kelvin
Chief Executive
21 March 2013
Lindsay D Page
Finance Director
21 March 2013
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 26 January 2013 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 40, 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/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of
the Group’s and of the parent company’s affairs as at 26 January
2013 and of the Group’s profit for the period then ended;
•
•
•
the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the EU;
the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act
2006; and
the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards
the group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
•
•
the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and
the information given in the Directors’ Report for the financial
year for which the financial statements are prepared is consistent
with the financial statements.
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:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
•
the parent company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we
require for our audit; or
Under the Listing Rules we are required to review:
•
the directors’ statement, set out on page 40, in relation to going
concern;
• certain elements of the report to shareholders by the Board on
directors’ remuneration.
Mike Barradell
Senior Statutory Auditor
for and on behalf of KPMG Audit Plc, Statutory Auditors:
Chartered Accountants
15 Canada Square, London E14 5GL
21 March 2013
Di RECTORS’ REPORT: OTHER STATUTORY Di SCLOSURES
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
41
44
FiNANCiAL
STATEMENTS
Group Income Statement
For the 52 weeks ended 26 January 2013
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Exceptional costs
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
Earnings per share
Basic
Diluted
Group Statement of Comprehensive Income
For the 52 weeks ended 26 January 2013
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
Group Statement of Changes in Equity
For the 52 weeks ended 26 January 2013
Balance at 28 January 2012
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
Balance at 26 January 2013
Group Statement of Changes in Equity
For the 52 weeks ended 28 January 2012
Balance at 29 January 2011
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
Balance at 28 January 2012
Note
2
4
4
12
3,6
6
9
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
£’000
254,466
(95,740)
158,726
(101,357)
(32,984)
(2,614)
7,509
234
29,514
34
(824)
198
28,922
(7,325)
21,597
215,625
(83,419)
132,206
(82,358)
(29,640)
(2,814)
6,733
142
24,269
45
(208)
149
24,255
(6,698)
17,557
51.5
49.9
42.2p
40.6p
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
£’000
21,597
17,557
(320)
723
152
555
(190)
26
(92)
(256)
Share
capital
£’000
2,160
Share
premium
£’000
9,137
Cash flow
hedging
reserve
£’000
(312)
Total equity
attributable
to equity
shareholders
of the parent
Translation
reserve
Retained
earnings
£’000
£’000
144
74,056
£’000
85,185
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(131)
(189)
723
-
403
-
-
-
-
-
-
-
-
-
152
152
-
-
-
-
-
21,597
21,597
-
-
-
-
(131)
(189)
723
152
21,597
22,152
240
1,225
222
240
1,225
222
(10,131)
(10,131)
(8,444)
(8,444)
2,160
9,137
91
296
87,209
98,893
Non-
controlling
interest
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
Total equity
attributable
to equity
shareholders
of the parent
Non-
controlling
interest
Translation
reserve
Retained
earnings
£’000
£’000
£’000
£’000
Share
capital
£’000
2,160
Share
premium
£’000
9,137
Cash flow
hedging
reserve
£’000
(148)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50
(240)
26
-
(164)
-
-
-
-
-
236
64,639
76,024
-
-
-
-
(92)
(92)
-
-
-
-
-
17,557
17,557
-
-
-
-
50
(240)
26
(92)
17,557
17,301
446
275
69
446
275
69
(8,930)
(8,930)
(8,140)
(8,140)
2,160
9,137
(312)
144
74,056
85,185
Total equity
£’000
85,185
21,597
(131)
(189)
723
152
22,152
240
1,225
222
(10,131)
(8,444)
98,893
Total equity
£’000
76,024
17,557
50
(240)
26
(92)
17,301
446
275
69
(8,930)
(8,140)
85,185
-
-
-
-
-
-
-
-
-
-
-
-
-
Total comprehensive income for the period
22,152
17,301
FiNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
45
46
FiNANCiAL STATEMENTS CONTiNUED
Company Statement of Changes in Equity
For the 52 weeks ended 26 January 2013
Balance at 28 January 2012
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
Balance at 26 January 2013
Company Statement of Changes in Equity
For the 52 weeks ended 28 January 2012
Balance at 29 January 2011
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
Balance at 28 January 2012
Share
capital
£’000
2,160
Share
premium
£’000
9,137
-
-
-
-
-
-
-
-
-
-
-
-
2,160
9,137
Share
capital
£’000
2,160
Share
premium
£’000
9,137
-
-
-
-
-
-
-
-
-
-
-
-
2,160
9,137
Other
reserves
£’000
15,339
-
-
203
-
-
203
15,542
Other
reserves
£’000
14,962
-
-
377
-
-
377
15,339
Retained
earnings
£’000
21,285
14,183
37
-
222
(10,131)
(9,872)
25,596
Retained
earnings
£’000
15,954
14,123
69
-
69
(8,930)
(8,792)
21,285
Total
equity
£’000
47,921
14,183
37
203
222
(10,131)
(9,669)
52,435
Total
equity
£’000
42,213
14,123
69
377
69
(8,930)
(8,415)
47,921
Group and Company Balance Sheet
At 26 January 2013
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
Bank overdraft
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
26 January
2013
£’000
Company
26 January
2013
£’000
Group
28 January
2012
£’000
Company
28 January
2012
£’000
10
11
12
12
13
14
15
12
16
17
18
17
16
13
19
19
19
19
19
983
45,412
-
693
4,523
674
52,285
67,673
34,124
225
544
9,823
112,389
(40,793)
(19,862)
(4,360)
(269)
(65,284)
(497)
(497)
98,893
2,160
9,137
91
296
87,209
98,893
-
98,893
-
-
17,631
-
-
-
17,631
-
34,376
-
-
440
34,816
(12)
-
-
-
(12)
-
-
52,435
2,160
9,137
15,542
-
25,596
52,435
-
52,435
968
35,680
-
494
3,418
695
41,255
51,872
30,587
407
411
8,560
91,837
(35,281)
(6,790)
(3,353)
(1,063)
(46,487)
(1,420)
(1,420)
85,185
2,160
9,137
(312)
144
74,056
85,185
-
85,185
-
-
17,428
-
-
-
17,428
-
30,053
-
-
444
30,497
(4)
-
-
-
(4)
-
-
47,921
2,160
9,137
15,339
-
21,285
47,921
-
47,921
These financial statements were approved by the Board of Directors on 21 March 2013 and were signed on its behalf by:
Lindsay D Page
Director
FiNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
47
48
FiNANCiAL STATEMENTS CONTiNUED
Group and Company Cash Flow Statement
For the 52 weeks ended 26 January 2013
Cash generated from operations
Profit for the period
Adjusted for:
Income tax expense
Depreciation
Net impairment/(credit)
Loss on disposal of property, plant and 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 in inventory
Increase 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 and equipment
Proceeds from sale of property, plant and equipment
Interest received
Net cash generated from investing activities
Cash flow from financing activities
Proceeds from option holders for exercise of options
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 28 January 2012/29 January 2011
Exchange rate movement
Net cash and cash equivalents at 26 January 2013/28 January 2012
Cash and cash equivalents at 26 January 2013/28 January 2012
Bank overdraft at 26 January 2013/28 January 2012
Net cash and cash equivalents at 26 January 2013/28 January 2012
Group
52 weeks ended
26 January
2013
Company
52 weeks ended
26 January
2013
Group
52 weeks ended
28 January
2012
Company
52 weeks ended
28 January
2012
£’000
£’000
£’000
£’000
21,597
14,183
17,557
14,123
NOTES TO THE
FiNANCiAL
STATEMENTS
7,325
9,040
765
102
240
789
(1,461)
(198)
29
(15,762)
(2,570)
5,586
(633)
(7,122)
17,727
(19,774)
9
8
(19,757)
222
(10,131)
(9,909)
(11,939)
1,770
130
(10,039)
9,823
(19,862)
(10,039)
-
-
-
-
37
(5)
-
-
-
-
(4,324)
8
-
-
9,899
-
-
6
6
222
(10,131)
(9,909)
(4)
444
-
440
440
-
440
6,698
7,656
(352)
30
446
201
85
(149)
62
(9,302)
(3,720)
242
(192)
(7,738)
11,524
(14,993)
451
8
(14,534)
69
(8,930)
(8,861)
(11,871)
13,536
105
1,770
8,560
(6,790)
1,770
-
-
-
-
69
(4)
-
-
-
-
(5,341)
(10)
-
-
8,837
-
-
4
4
69
(8,930)
(8,861)
(20)
464
-
444
444
-
444
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 10 to 18. The financial position of the Group, its cash
flows, liquidity position and borrowing facilities are described in the
Chairman’s Statement 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
There were no revisions to Adopted IFRSs that became applicable
in the period which had a significant impact on the Group’s
financial statements.
The Group does not consider that any other standards, amendments
or interpretations issued by the IASB, but not yet applicable, will
have a significant impact on the financial statements in future years.
b) Basis of consolidation
The consolidated accounts include the accounts of the Company
and its subsidiary undertakings made up to 26 January 2013. 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.
included
The financial statements of subsidiaries are
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
FiNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
49
50
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
decisions. Jointly controlled entities are accounted for using the
equity method (equity accounted investees) and are initially
recognised at cost.
Sale of gift vouchers are treated as future liabilities and revenue
is recognised when the gift vouchers are redeemed against a
later transaction.
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 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.
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 and title has passed. Licence income receivable
from licensees is accrued as earned on the basis of the terms of
the relevant licence agreement, which is typically on the basis of a
minimum payment and a variable amount based on turnover.
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.
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 asset, 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.
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.
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:
Straight line over the period of the lease.
• Fixtures, fittings and office equipment:
20% to 25% per annum on a straight-line basis apart
from computer equipment, which is 33% per annum on a
straight-line basis.
• Motor vehicles:
25% per annum on a straight-line basis.
• Assets under construction:
Assets in the course of construction are stated at cost less any
provision for impairment and transferred to completed assets
when substantially all of the activities necessary for the asset to
be ready for use have occurred.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
51
52
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
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 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 use 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 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
interest
calculated using the effective
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 rate method,
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 its 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.
Deferred taxes assets – the recognition of deferred tax assets is
dependent on assessments of probable future taxable income in the
relevant countries concerned in the time period available for utilisation
of the respective losses. Judgement is involved in determining the
profitability expectations when assessing the recovery of the asset.
The directors have used their knowledge and expectations of future
performance for each jurisdiction in forming this assessment.
w) Non-GAAP performance measures
The directors believe that the profit before exceptional items and
adjusted earnings per share measures provide additional useful
information for shareholders on the underlying performance of
the business. These measures are consistent with how underlying
business performance is measured internally.
The exceptional profit before tax measure is not a recognised profit
measure under IFRS and may not be directly comparable with
adjusted profit measures used by other companies.
Exceptional items in the current year include:
•
significant pre opening costs (including rental) for new store
openings;
• an impairment charge in respect to some retail assets, notably
a retail development in the UK that has failed to deliver on
its potential; and
• costs incurred in relation to expansion into new markets.
2. Segment information
The Group has three reportable segments: retail, wholesale and
licensing.
For each of the three segments, the Group’s chief operating decision
maker (the Board) reviews internal management reports on a four
weekly basis.
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.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
53
54
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
a) Segment revenue and segment result
52 weeks ended 26 January 2013
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
Exceptional 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
207,953
(70,268)
137,685
(100,121)
37,564
-
37,564
Wholesale
£’000
46,513
(25,472)
21,041
-
21,041
-
21,041
Licensing
£’000
-
-
-
-
-
7,509
7,509
37,564
21,041
7,509
17,358
6,814
194
199
126,688
26,842
(49,568)
(11,087)
-
-
-
-
Total
£’000
254,466
(95,740)
158,726
(100,121)
58,605
7,509
66,114
66,114
(34,220)
(2,614)
234
29,514
(790)
198
28,922
17,552
2,305
19,857
7,013
2,027
9,040
153,530
11,144
164,674
(60,655)
(5,126)
(65,781)
98,893
52 weeks ended 28 January 2012
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
Exceptional 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
174,185
(60,667)
113,518
(81,207)
32,311
-
32,311
Wholesale
£’000
41,440
(22,752)
18,688
-
18,688
-
18,688
Licensing
£’000
-
-
-
-
-
6,733
6,733
32,311
18,688
6,733
12,178
5,460
159
157
100,512
23,691
(33,986)
(8,085)
-
-
-
-
Total
£’000
215,625
(83,419)
132,206
(81,207)
50,999
6,733
57,732
57,732
(30,791)
(2,814)
142
24,269
(163)
149
24,255
12,337
2,752
15,089
5,617
2,039
7,656
124,203
8,889
133,092
(42,071)
(5,836)
(47,907)
85,185
Wholesale sales are shown after the elimination of inter-company sales of £28,714,000 (2012: £20,348,000).
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
55
56
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
b) Geographical information
4. Finance income and expenses
UK & Europe
US & Canada
£’000
£’000
204,146
27,877
184,094
25,474
44,134
16,498
27,787
9,210
Asia
£’000
6,186
3,387
3,744
3,153
Total
£’000
254,466
47,762
215,625
37,837
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:
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
£’000
117,355
137,111
254,466
108,252
107,373
215,625
Sales
Design
Administration
52 weeks ended 26 January 2013
Revenue
Non-current assets*
52 weeks ended 28 January 2012
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
Exceptional costs
Net impairment reversal of property, plant and equipment
Operating lease rentals for leasehold properties
Audit of these financial statements
Loss on sale of property, plant & equipment
Audit of financial statements of subsidiaries of the Company
Interim financial statements review
Audit related assurance services
Taxation compliance services
Other tax advisory services
All other services (forensic services)
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
9,040
2,614
-
22,430
9
102
101
20
18
9
31
165
£’000
7,656
2,814
(352)
18,915
9
30
76
20
20
-
-
-
Their aggregate remuneration comprised:
Wages and salaries
Share based charge
Social security costs
Pension costs
The figures stated above are Group staff costs and as such include the costs for Raymond 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 pages 32 to 37.
6. Income tax expense
a) The tax charge comprises :
Current tax
Deferred tax
Prior year under provision
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
8,550
(1,510)
285
7,325
£’000
7,155
(692)
235
6,698
The exceptional costs incurred during the year of £2.6m (2012: £2.8m) are in respect of £1.6m rent paid in advance for stores that did not
commence trading until the first half of the period. The balance of £1.0m includes an impairment charge of £0.8m in respect of some retail
assets, notably a retail development in the UK that has failed to deliver on its potential. The remaining £0.2m relates primarily to set up costs
incurred for our expansion into China.
The exceptional costs incurred during the 52 weeks to 28 January 2012 were in respect of rent paid in advance for stores that did not commence
trading until the first half of 2012, set up costs in relation to our expansion into China and provision for bad and doubtful debts in respect of our
exposure in Greece.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
57
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
£’000
34
-
34
(646)
(178)
(824)
7
38
45
(208)
-
(208)
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
No.
1,867
38
280
2,185
£’000
40,456
240
4,062
623
45,381
No.
1,706
37
236
1,979
£’000
34,782
446
3,252
549
39,029
58
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
b) Deferred tax movement by type
7. Profit attributable to Ted Baker PLC
Property, plant and equipment
Share based payments
Overseas losses
Inventory
Other
For further details please refer to note 13.
c) Factors affecting the tax charge for the period
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
466
80
(1,957)
(51)
(48)
(1,510)
£’000
(380)
(151)
(192)
(35)
66
(692)
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
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
28,922
£’000
24,255
Profit multiplied by the standard rate in the UK – 24.32% (2012: standard rate in the UK – 26.32%)
7,034
6,384
Expenses not deductible for tax purposes
Overseas losses not recognised offset by previously unrecognised losses
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
655
123
(62)
285
(169)
(541)
7,325
55
408
(61)
235
(131)
(192)
6,698
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
(1,225)
131
(1,094)
£’000
(275)
(50)
(325)
There was a reduction in the UK corporation tax rate from 26% to 24% with effect from 1 April 2012. There are further proposed reductions such
that the headline rate will decrease to 20% by 1 April 2015.
As the deferred tax assets and liabilities should be recognised based on the corporation tax rate substantively enacted at the balance sheet date,
the assets and liabilities have been recognised at a rate of 23%. In the Budget on 20 March 2013, the Chancellor announced a further cut in
corporation tax rate to 20% from 1 April 2015. Had this tax rate change been substantively enacted before the balance sheet date, it would have
had the effect of reducing the net deferred tax liability on UK operations by a further £65,000.
The profit after tax for the 52 weeks ended 26 January 2013 of Ted Baker PLC, the parent company, was £14,183,000 (2012: £14,123,000).
The directors have approved the income statement for the parent company.
8. Dividends per share
Final dividend paid for prior year of 16.25p per ordinary share (2012: 14.3p)
Interim dividend paid of 7.9p per ordinary share (2012: 7.15p)
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
6,767
3,364
10,131
£’000
5,953
2,977
8,930
A final dividend in respect of 2013 of 18.7p per share, amounting to a dividend payable of £7,964,151, is to be proposed at the Annual General
Meeting on 20 June 2013.
9. Earnings per share
Number of shares:
Weighted number of ordinary shares outstanding
Effect of dilutive options
Weighted number of ordinary shares outstanding – diluted
Earnings:
Profit for the period basic and diluted
Profit for the period adjusted*
Basic earnings per share
Adjusted earnings per share*
Diluted earnings per share
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
No.
No.
41,939,012
41,637,410
1,343,134
1,571,313
43,282,146
43,208,723
£’000
21,597
23,635
51.5p
56.4p
49.9p
£’000
17,557
20,371
42.2p
48.9p
40.6p
* Adjusted profit for the period and adjusted earnings per share are shown before the exceptional costs of £2,038,000 (2012: £2,814,000).
Own shares, if held by the Ted Baker Group Employee Benefit Trust, the Ted Baker 1998 Employee Benefit Trust and treasury shares are
eliminated from the weighted average number of ordinary shares. The options exercised during the year, and conditional share awards distributed,
if they vest, are covered by shares held either in treasury or by these trusts.
Diluted earnings per share have been calculated using additional ordinary shares of 5p each available under the Ted Baker Sharesave Scheme, the
1997 Executive Share Option Scheme, the Ted Baker Performance Share Plan and the Ted Baker 2009 VCP.
There were no share related events after the balance sheet date that may affect earnings per share.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
59
60
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
10. Intangible assets
Cost and net book value
At 28 January 2012
Exchange rate movement
At 26 January 2013
Cost and net book value
At 29 January 2011
Exchange rate movement
At 28 January 2012
£’000
968
15
983
£’000
997
(29)
968
The intangible assets brought forward 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 included within the intangible assets, 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 28 January 2012
Additions
Disposals
Exchange rate movement
At 26 January 2013
Depreciation
At 28 January 2012
Charge for the year
Impairment
Disposals
Exchange rate movement
At 26 January 2013
Net book value
At 28 January 2012
At 26 January 2013
Leasehold
improvements
Fixtures, fittings &
office equipment
£’000
£’000
Motor
vehicles
£’000
Assets under
construction
£’000
44,279
13,302
(120)
(22)
57,439
21,282
4,098
513
(84)
(28)
37,358
8,431
(395)
(10)
45,384
28,410
4,941
252
(327)
(7)
25,781
33,269
22,997
31,658
8,948
12,115
126
-
(25)
-
101
116
1
-
(18)
-
99
10
2
3,725
(1,876)
-
(212)
1,637
-
-
-
-
-
-
3,725
1,637
Total
£’000
85,488
19,857
(540)
(244)
104,561
49,808
9,040
765
(429)
(35)
59,149
35,680
45,412
Cost
At 29 January 2011
Additions
Disposals
Exchange rate movement
At 28 January 2012
Depreciation
At 29 January 2011
Charge for the year
Impairment
Disposals
Exchange rate movement
At 28 January 2012
Net book value
At 29 January 2011
At 28 January 2012
Leasehold
improvements
Fixtures, fittings &
office equipment
£’000
£’000
Motor
vehicles
£’000
Assets under
construction
£’000
37,657
7,396
(841)
67
44,279
18,615
3,628
(305)
(706)
50
21,282
19,042
22,997
34,358
4,992
(1,989)
(3)
37,358
26,078
4,023
(47)
(1,671)
27
28,410
8,280
8,948
126
-
-
-
126
111
5
-
-
-
116
15
10
1,031
2,701
-
(7)
3,725
-
-
-
-
-
-
1,031
3,725
Total
£’000
73,172
15,089
(2,830)
57
85,488
44,804
7,656
(352)
(2,377)
77
49,808
28,368
35,680
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 £3,725,000 (2012: £1,031,000) whilst additions into this
category were £1,637,000 (2012: £3,725,000).
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.
The impairment charge for the 52 weeks ended 26 January 2013
includes a charge in respect to some retail assets, notably a retail
development in the UK that has failed to deliver on its potential.
The net impairment credit of £352,000 in the 52 weeks ended 28
January 2012 relates to the reversal of an impairment charge of
£743,000 incurred during the 52 weeks ended 30 January 2010 in
relation to the carrying value of retail assets in Eire and offset by an
impairment charge relating to retail assets in the year of £391,000.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
61
62
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
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.
Amounts due from equity accounted investee
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
225
£’000
407
Subsidiary undertaking
Country of incorporation
and operation
Holding
ordinary shares
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 26 January 2013 are as follows:
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
Ted Baker Hong Kong Limited
Ted Baker Spain, S. L.
Ted Baker Korea Yuhan Hoesa
Ted Baker Netherlands B. V.
UK
Jersey
US
US
France
Japan
Principal activity
Design, wholesale & retail of
designer clothing and accessories
Investment holding company
Retail and wholesale of
designer clothing and accessories
Retail of designer clothing and accessories
Retail of designer clothing and accessories
Retail of designer clothing and accessories
Hong Kong
Retail of designer clothing and accessories
Spain
Korea
Retail of designer clothing and accessories
Retail of designer clothing and accessories
The Netherlands
Retail of designer clothing and accessories
Ted Baker (Beijing) Commercial Company
The People’s Republic of China
Retail of designer clothing and accessories
Canada
Germany
Retail of designer clothing and accessories
Retail of designer clothing and accessories
Ted Baker Canada Inc
Ted Baker Germany GmbH
*Held directly by Ted Baker PLC.
b) Subsidiary undertakings - cost and net book value
At 28 January 2012
Increase in cost of investment for share options/awards granted to subsidiary employees
At 26 January 2013
At 29 January 2011
Increase in cost of investment for share options/awards granted to subsidiary employees
At 28 January 2012
c) Interest in joint venture
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Company
£’000
17,428
203
17,631
Company
£’000
17,051
377
17,428
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
Deferred tax asset on UK operations arising from:
Assets
Share based payments
Derivative financial instruments
Liabilities
Property, plant and equipment
Derivative financial instruments
Other*
Net deferred tax liability
The Group has a 50% interest in a joint venture with Flair Industries Pty Ltd which is represented by three stores in Australia and one store in
New Zealand (2012: three stores in Australia and one store in New Zealand).
Deferred tax asset on foreign operations arising from:
Investment in joint venture
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
693
£’000
494
Foreign trading losses
Inventory
Property, plant and equipment
Other – vacation accrual
Net deferred tax asset
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 26 January 2013.
*Other includes a deferred tax liability for UK tax payable on US operations for which no double tax relief will be available.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
63
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
1,720
1,450
-
(1,686)
1,484
23
1,085
396
(20)
1,484
£’000
1,935
1,201
-
(1,993)
1,143
23
762
298
60
1,143
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
£’000
1,727
-
(155)
(27)
(2,042)
(497)
4.443
438
(524)
166
4,523
900
104
(144)
-
(2,280)
(1,420)
2,675
389
305
49
3,418
Group
52 weeks ended
26 January
2013
Company
52 weeks ended
26 January
2013
Group
52 weeks ended
28 January
2012
Company
52 weeks ended
28 January
2012
£’000
9,823
(19,862)
(10,039)
Group
26 January
2013
£’000
22,097
13,111
5,585
40,793
£’000
440
-
440
Company
26 January
2013
£’000
-
12
-
12
£’000
8,560
(6,790)
1,770
Group
28 January
2012
£’000
15,910
15,260
4,111
35,281
£’000
444
-
444
Company
28 January
2012
£’000
-
4
-
4
64
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
Recognition of deferred tax assets is based on the generation of future taxable profits that will allow utilisation of losses.
17. Reconciliation of cash and cash equivalents per balance sheet to cash flow statement
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 tax effect of the unused cumulative tax losses for which no deferred tax asset has been recognised in the balance sheet is £2,200,000
(2012: £1,155,000).
Cash and cash equivalents per balance sheet
Borrowings per balance sheet
Net cash and cash equivalents per cash flow statement
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
26 January
2013
52 weeks ended
28 January
2012
18. Trade and other payables
Trade payables
Accruals and deferred income
Other taxes and social security
19. Capital and reserves
£’000
4,027
935
62,711
67,673
79,939
1,744
Group
28 January
2012
£’000
19,744
-
10,843
30,587
£’000
2,547
760
48,565
51,872
72,715
1,949
Company
28 January
2012
£’000
-
30,053
-
30,053
Group
26 January
2013
Company
26 January
2013
£’000
19,529
-
14,595
34,124
£’000
-
34,376
-
34,376
Assets
26 January
2013
£’000
544
Liabilities
26 January
2013
£’000
(269)
Assets
28 January
2012
£’000
411
Liabilities
28 January
2012
£’000
(1,063)
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 (2012: £nil).
Gains and losses in equity of forward exchange contracts at 26 January 2013 will be released to the income statement at various dates within 12
months of the balance sheet date, as the hedged forecast transactions occur.
Authorised – 80,000,000 ordinary shares of 5p each
Allotted, called up and fully paid – 43,198,033 ordinary shares of 5p each (2012: 43,198,033)
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
£’000
4,000
2,160
£’000
4,000
2,160
At 26 January 2013, 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 (2012: Employee Trust – £nil, 1998 Trust – £nil).
The Company held 608,991 shares in treasury at 26 January 2013 (2012: 1,557,111).
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 26 January 2013, the value of
financial instruments that are designated as hedging instruments
recorded in equity was £91,000 (2012: (£312,000)).
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 Ltd,
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.
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.
NOTES TO THE FiNANCiAL STATEMENTS
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
65
66
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
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.
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 Directors’ Remuneration Report on pages 32 to 37.
Movements in the number of share options and awards outstanding and their related weighted average exercise prices are as follows:
The terms and conditions of the award of units granted under the 2009 VCP 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
Weighted average
exercise price
2013
Number of
options/awards
2013
Weighted average
exercise price
2012
Number of
options/awards
2012
382.4p
722.0p
303.0p
512.4p
550.8p
164,837
53,969
(72,429)
(14,536)
131,841
344.7p
552.0p
414.6p
441.9p
382.4p
154,247
42,966
(17,138)
(15,238)
164,837
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
The VCP awards are valued using a Monte Carlo model. The inputs into the model are as follows:
Exercisable at end of period
-
-
-
-
The charge for the year to the income statement amounted to £74,199 (2012: £58,926). The weighted average share price at the date of exercise
of share options exercised during the year was 909.5p (2012: 665.0p).
Share options and awards outstanding at the end of the period were as follows:
Grant date
27 November 2007
15 May 2009
15 May 2009
14 May 2010
14 May 2010
16 May 2011
16 May 2011
17 May 2012
17 May 2012
Expiry date
Exercise price
Number of options
/ awards
at 26 January
2013
Number of options
/ awards
at 28 January
2012
Fair value at
grant date
31 January 2014
1 January 2013
1 January 2015
31 January 2015
31 January 2017
1 January 2015
1 January 2017
1 January 2016
1 January 2018
429.0p
303.0p
303.0p
432.0p
432.0p
552.0p
552.0p
722.0p
722.0p
144.6p
82.5p
84.6p
124.6p
129.4p
168.8p
189.0p
193.0p
226.3p
3,916
-
22,826
15,523
6,257
25,327
7,318
45,442
5,232
131,841
3,916
74,963
23,445
17,875
6,832
29,930
7,876
-
-
164,837
The fair value of employee share options and awards were calculated using the Black-Scholes model.
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
26 January
2013
52 weeks ended
28 January
2012
688.4p
550.8p
478.0p
382.4p
0.59% – 4.60%
1.49% – 4.70%
3 – 5 years
3 – 5 years
22.8% – 32.1%
22.7% – 32.1%
2.24% – 4.69%
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.
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 £165,541 (2012: £387,264). Included in the charge for the year is an amount in
respect of Raymond S Kelvin, who is employed by the Company, amounting to £37,326 (2012: £69,320).
VCP awards outstanding at the end of the period were as follows:
At 28 January 2012/29 January 2011
VCP entitlements awarded during the year
VCP awards converted during the year
Lapsed during the year
Outstanding at 26 January 2013/28 January 2012
At 26 January
2013
At 28 January
2012
No. of entitlements
No. of entitlements
100,000
-
(96,280)
(3,720)
-
100,000
-
-
-
100,000
Earnings per share growth exceeded the hurdle rate and total shareholder return exceeded the return on the FTSE General Retail Sector Index
over the performance period. Growth in the share price was 33.0% per annum compound over the performance period, which was above the
hurdle rate of 10% per annum compound. This resulted in the units awarded on 13 August 2009 converting into nil - cost options to acquire
2,177,115 ordinary shares in the Company. In accordance with the rules of the VCP, 50% of these options were exercisable immediately, and the
remaining 50% are exercisable on 8 October 2013. Further details regarding performance are outlined in the Directors’ Remuneration Report
on pages 32 to 37.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
67
68
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
21. Financial commitments
a) Capital commitments
The Group has capital commitments of £4,101,000 at 26 January 2013 (2012: £6,408,000) 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
26 January
2013
52 weeks ended
28 January
2012
£’000
23,062
69,603
54,988
147,653
£’000
17,599
64,831
50,086
132,516
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 2031.
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 £16,717,562 (2012: £14,793,000).
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 £623,000 (2012: £549,000). Contributions totalling £24,741 (2012: £24,474) 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
Bank overdraft
Total financial liabilities
Net financial liabilities
Carrying amount
26 January
2013
£’000
19,529
1,206
225
544
9,823
31,327
(40,793)
(269)
(19,862)
(60,924)
(29,597)
Fair value
26 January
2013
£’000
19,529
1,206
225
544
9,823
31,327
(40,793)
(269)
(19,862)
(60,924)
(29,597)
Carrying amount
28 January
2012
£’000
19,744
1,092
407
411
8,560
30,214
(35,281)
(1,063)
(6,790)
(43,134)
(12,920)
Fair value
28 January
2012
£’000
19,744
1,092
407
411
8,560
30,214
(35,281)
(1,063)
(6,790)
(43,134)
(12,920)
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
26 January
2013
£’000
34,376
440
34,816
(12)
(12)
Fair value
26 January
2013
£’000
34,376
440
34,816
(12)
(12)
Carrying amount
28 January
2012
£’000
30,053
444
30,497
(4)
(4)
Fair value
28 January
2012
£’000
30,053
444
30,497
(4)
(4)
34,804
34,804
30,493
30,493
The methods and assumptions used to estimate fair values of financial assets and liabilities are as follows:
• Cash and cash equivalents have been stated at their book values
due to their short maturities or immediate or short-term access.
• The fair values of trade receivables, amounts due from equity
accounted investee and amounts owed by Group undertakings
have been stated at their book value due to their short maturities.
• 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.
• The fair values of trade and other payables have been stated at
their book values due to their short maturities.
b) Derivative financial instruments
• 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).
Currency derivatives
Contractual/
notional amounts
26 January
2013
£’000
16,547
16,547
Assets
26 January
2013
£’000
544
544
Liabilities
26 January
2013
£’000
(269)
(269)
Contractual/
notional amounts
28 January
2012
£’000
26,434
26,434
Assets
28 January
2012
£’000
411
411
Liabilities
28 January
2012
£’000
(1,063)
(1,063)
c) Cash flow hedging reserve movements
The following table indicates the cash flow hedging reserve balance at 26 January 2013 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
26 January
2013
Currency derivatives
28 January
2012
£’000
91
—
—
91
£’000
(312)
—
—
(312)
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
69
70
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
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.
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.
Opening balance
Losses recognised in hedging reserve
Amounts recovered from hedging reserve and recognised in income statement
Deferred tax associated with movement in the hedging reserve
Unrecognised gains/(losses)
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:
• market risk;
• credit risk; and
•
liquidity risk.
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.
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.
Currency derivatives
26 January
2013
Currency derivatives
28 January
2012
£’000
(312)
(189)
723
(131)
91
£’000
(148)
(240)
26
50
(312)
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 twelve 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 analysis of the Group’s foreign currency exposure to financial assets and liabilities by currency of denomination is as follows:
Financial assets
Trade receivables
Cash and cash equivalents*
Financial liabilities
Trade and other payables
Financial assets
Trade receivables
Cash and cash equivalents*
Financial liabilities
Trade and other payables
US Dollar
26 January
2013
£’000
1,893
2,608
4,501
(10,867)
(10,867)
Euro
26 January
2013
£’000
Other
26 January
2013
£’000
2,105
2,172
4,277
(3,132)
(3,132)
72
(107)
(35)
(1,512)
(1,512)
(6,366)
1,145
(1,547)
US Dollar
28 January
2012
£’000
Euro
28 January
2012
£’000
Other
28 January
2012
£’000
1,602
(5,152)
(3,550)
(4,362)
(4,362)
1,276
795
2,071
(3,210)
(3,210)
44
2,362
2,406
(256)
(256)
(7,912)
(1,139)
2,150
* 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.
The following significant exchange rates applied during the year:
US Dollar
Euro
Sensitivity analysis
Average rate
26 January
2013
Mid-spot rate
26 January
2013
Average rate
28 January
2012
Mid-spot rate
28 January
2012
1.589
1.233
1.579
1.177
1.602
1.154
1.569
1.195
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 26 January 2013. The analysis assumes
that all other variables, in particular, interest rates, remain constant.
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% (2012: 10%) strengthening or weakening of the Sterling
against the following currencies at 26 January 2013 would have
increased/(decreased) equity and profit by the amounts shown in
the table overleaf.
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
71
72
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
Test of 10% (2012: 10%) strengthening in Sterling against other currencies
US Dollar
Euro
Test of 10% (2012: 10%) weakening in Sterling against other currencies
US Dollar
Euro
Interest rate risk
Impact on profit
26 January
2013
Impact on equity
26 January
2013
Impact on profit
28 January
2012
Impact on equity
28 January
2012
£’000
(579)
209
(370)
707
(256)
451
£’000
(579)
209
(370)
707
(256)
451
£’000
(719)
(104)
(823)
879
127
1,006
£’000
(719)
(104)
(823)
879
127
1,006
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 and liabilities subject to interest rate risk
Sterling
US Dollar
Euro
Other
Group
26 January
2013
£’000
(19,313)
3,397
3,523
2,270
(10,123)
Company
26 January
2013
£’000
440
-
-
-
440
Group
28 January
2012
£’000
(2,718)
(2,220)
1,419
5,232
1,713
Company
28 January
2012
£’000
444
-
-
-
444
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 and 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 (which 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).
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.
There were no fixed rate financial assets or liabilities at 26 January 2013 and 28 January 2012.
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 26 January 2013. The Group considers its maximum exposure to credit risk to be:
52 weeks ended
26 January
2013
52 weeks ended
28 January
2012
At 26 January 2013
Non-derivative financial liabilities
Trade and other payables
Derivative financial liabilities
Derivative financial instruments
Bank Overdraft
Cash and cash equivalents
Trade receivables
Accrued income
Amount due from equity accounted investee
Derivative financial assets
£’000
£’000
At 28 January 2012
9,739
19,529
1,206
225
544
31,243
1,713
19,744
1,092
407
411
23,367
Non-derivative financial liabilities
Trade and other payables
Derivative financial liabilities
Derivative financial instruments
Bank overdraft
All cash balances and derivative financial assets are held with reputable banks or financial institutions.
As at 26 January 2013, there were no significant financial guarantees or third-party obligations that increase the credit risk of the financial assets
set out above.
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
40,793
269
19,862
35,281
1,063
6,790
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,793
40,793
269
19,862
269
19,862
35,281
35,281
1,063
6,790
1,063
6,790
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
73
74
NOTES TO THE FiNANCiAL STATEMENTS CONTiNUED
Borrowing facilities
The Group has a three year committed borrowing facility of
£40.0m (2012: £40.0m), which is due to expire on 1 March 2015.
The facility is a multi-currency revolving credit facility with The
Royal Bank of Scotland and Barclays. The facility will be used to the
extent necessary to fund capital expenditure to support the Group’s
growth strategy.
The Group had utilised £14.0m (2012: £nil) of the £40.0m credit
facility as at 26 January 2013.
The facilities contain financial covenants which are believed to be
appropriate in the current economic climate and tested on a quarterly
basis. The Group monitors actual and prospective compliance with
these on a regular basis.
The financial covenant tests are based upon the following:
• a ratio of total net debt to EBITDA;
• a fixed charge cover ratio; and
• minimum net tangible assets.
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 26 January 2013.
e) Capital management
The Board’s policy is to maintain a strong capital base, defined as
total shareholders’ equity, totalling £98,893,000 at 26 January 2013
(2012: £85,185,000), 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 two
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
38.8 per cent of the voting shares of the Company.
At 26 January 2013, No Ordinary Designer Label Limited (“NODL”),
the main trading company, owed Ted Baker PLC £34,376,000
(2012: £30,053,000). NODL was owed £57,111,000 (2012:
£38,987,000) 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 26 January 2013, the joint venture owed £225,000
to the main trading company (2012: £407,000). In the period the
value of sales made to the joint venture by the Group was £808,000
(2012: £726,000).
The Group considers the Board of executive directors as
key management.
FiVE YEAR
SUMMARY
Results
Revenue
Operating profit
Profit before tax
Profit before tax and impairment
Profit before tax and exceptional costs
Profit for the period
Assets employed
Property, plant and equipment
Non-current assets
Net current assets/(liabilities)
Non-current liabilities
Net assets
Financed by:
Shareholders’ funds
Non-controlling interest
Key statistics
Basic earnings per share
Adjusted earnings per share
Diluted earnings per share
Dividends per share
Dividend cover
Dividend cover before exceptional costs
Pre-tax return on capital employed before exceptional costs
Post-tax return on capital employed before exceptional costs
53 weeks
ended 31
January
2009
£’000
152,661
17,161
17,766
19,552
17,766
12,568
28,701
2,623
31,417
(575)
62,166
62,202
(36)
62,166
29.6p
29.6p
29.6p
16.65p
1.8 times
1.8 times
34.1%
24.1%
52 weeks
ended 30
January
2010
£’000
163,586
19,782
19,504
20,254
19,504
13,527
25,508
3,245
38,793
(1,316)
66,230
66,315
(85)
66,230
32.6p
32.6p
32.6p
17.15p
1.9 times
1.9 times
38.7%
26.8%
52 weeks
ended 29
January
2011
£’000
187,700
24,132
24,228
24,228
24,228
17,280
28,368
4,589
44,614
(1,547)
76,024
76,024
-
76,024
41.5p
41.5p
41.4p
20.6p
2.0 times
2.0 times
38.9%
27.7%
52 weeks
ended 28
January
2012
£’000
215,625
24,269
24,255
23,903
27,069
17,557
35,680
5,575
45,350
(1,420)
85,185
85,185
-
85,185
42.2p
48.9p
40.6p
23.4p
1.8 times
2.1 times
32.6%
23.6%
52 weeks
ended 26
January
2013
£’000
254,466
29,514
28,922
29,687
31,536
21,597
45,412
6,873
47,105
(497)
98,893
98,893
-
98,983
51.5p
56.4p
49.9p
26.6p
1.9 times
2.1 times
29.7%
22.2%
NOTES TO THE F iNANCiAL STATEMENTS
TED BAKER ANNUAL REPORT AND ACCOUNTS 2012/13
75
GONE FiSHiNG
78
“Debonair with a touch of flair, Ted Baker’s 2013 Annual Report has taught me a thing or
two about sartorial style, elegant earnings and fashionable finances.”
The Chartered Institute of Looking The Business
There are some who believe in tipping points.
Others think nudges are the way to health, wealth and happiness.
Ted Baker believes in Fashionomics,
where precision planning, distinctive designs, quality fabrics
and a steady pair of hands combine to fashion
‘no ordinary designer label’.
Author of the acclaimed Hosiery Now? Get Socks Appeal with Ted and the seminal
Knockout Knitwear, Ted Baker is a celebrated (albeit shy and retiring) icon whose mission
is to bring the world the highest quality clothing, faultless attention to detail and
quirky sense of humour. Ted lives in a London townhouse, enjoys fishing, reminisces
about his days in Vegas with Elvis and is a stickler for brewing the perfect cup of tea.
TED BAKER PRESS
Annual Report and Accounts 2012 / 13
www.tedbaker.com
NOTES TO THE F iNANCiAL STATEMENTS