STEADY
AS HE GROWS
Annual Report
& Accounts 2015/16
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.
o CONTENTS o
CHAIRMAN’S STATEMENT
Chairman’s Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
STRATEGIC REPORT
Business Model and Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9
Business Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Principal Risks and Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DIRECTORS’ REPORT: GOVERNANCE
Corporate Governance Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Audit Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
29
Nomination Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
DIRECTORS’ REPORT: OTHER STATUTORY DISCLOSURES
38
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors’ Remuneration Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
Other Statutory and Regulatory Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
59
Statement of Directors’ Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF TED BAKER PLC . . . . . . . . . . . . . . 61
FINANCIAL STATEMENTS
Group and Company Primary Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Five Year Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Registered Office:
Company Secretary:
Financial Advisers and Sponsor:
Auditors:
Bankers:
Registrars:
The Ugly Brown Building, 6a St. Pancras Way, London NW1 0TB
Charles Anderson ACMA
Liberum Capital Limited, 25 Ropemaker St, London EC2Y 9LY
KPMG LLP, 15 Canada Square, Canary Wharf 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 Asset Services, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Ted Baker Plc - Registered in England number: 03393836
1
o WORLDWIDE TED o
North America
32 STORES*
55 CONCESSIONS – 10 OUTLETS
THREE CHANNELS
Ted carefully manages distribution through
three main channels:
Retail
£348.4M
(13.5% INCREASE)
Wholesale
£107.7M
(33.6% INCREASE)
Licensing
£14.4M
(23.3% INCREASE)
2
UK and Europe
41 STORES*
224 CONCESSIONS – 13 OUTLETS
Middle East
26 STORES*
Asia
27 STORES*
8 CONCESSIONS – 3 OUTLETS
Australasia
9 STORES*
… AND WHOLESALE AND LICENSING RELATIONSHIPS
IN OVER 35 COUNTRIES ACROSS THE GLOBE.
*Store numbers include licence partner stores and outlets.
3
Ted Baker Plc Annual Report and Accounts 2015/16 o CHAIRMAN’S STATEMENT o
I am pleased to report another successful year in
Ted Baker’s development as a global lifestyle brand.
For the 52 weeks ended 30 January 2016 (the “period”)
we delivered a strong performance across all channels
and established territories, which resulted in a 17.7%
(17.0% in constant currency) increase in Group revenue
to £456.2m (2015: £387.6m) and an 18.6% increase
in profit before tax and exceptional items to £58.7m
(2015: £49.5m).
4
o CHAIRMAN’S STATEMENT o
During the period, we successfully launched further phases
of the Microsoft Dynamics AX business system, as planned.
We will continue to roll out this system globally across the
Group over the next year to enhance efficiency, streamline our
operations and support the continued evolution of the business.
FINANCIAL RESULTS
Group revenue for the period increased by 17.7% (17.0% in
constant currency) to £456.2m (2015: £387.6m). The composite
gross margin decreased to 59.9% (2015: 60.7%), as a result of a
change in the mix of retail and wholesale sales.
Profit before tax and exceptional items increased by 18.6%
to £58.7m (2015: £49.5m) and profit before tax increased by
20.3% to £58.7m (2015: £48.8m). Adjusted basic earnings per
share, which exclude exceptional items, increased by 20.9% to
100.6p (2015: 83.2p) and basic earnings per share increased by
22.7% to 100.6p (2015: 82.0p).
There were no exceptional costs in the period, compared to
£5.3m in the previous period which related to a legal dispute
with a former insurer. There was no exceptional income for
the period, compared to £4.7m in the previous period which
comprised £3.7m in relation to the early termination of a
licence agreement and £1.0m relating to settlement of an
intellectual property dispute.
The Group’s net borrowing position at the end of the
period was £84.6m (2015: £18.8m). This reflects the addition
of a secured term loan of £60.0m (2015: £nil) to the Group’s
existing multi-currency revolving credit facility to finance the
purchase of The Ugly Brown Building and other net debt of
£24.6m (2015: £18.8m). The increase in other net debt reflects
the ongoing significant investment in capital expenditure
during the period and increased working capital in line with
the Group’s growth.
DIVIDENDS
The Board is recommending a final dividend of 34.6p per
share (2015: 29.0p), making a total for the year of 47.8p per
share (2015: 40.3p per share), an increase of 18.6% on the
prior period. Subject to approval by shareholders at the Annual
General Meeting to be held on 14 June 2016, the final dividend
will be paid on 17 June 2016 to shareholders on the register on
20 May 2016.
The retail division performed well, with sales up 13.5%
(13.2% in constant currency) to £348.4m (2015: £306.9m) on
an increase in average square footage of 7.5%. We saw a good
performance across our established territories and we continue
to invest and build brand awareness in our newer markets for
the long-term development of the brand. We continued our
geographic expansion with openings across the UK and Europe,
North America and Asia. Our e-commerce business delivered
another strong performance, with sales up 45.8% (44.7% in
constant currency) to £53.5m (2015: £36.7m) as we benefit
from continued investment in our platform. E-commerce sales
now represent 15.4% of our retail sales (2015: 12.0%).
The wholesale division delivered a strong performance,
with sales up 33.6% (31.2% in constant currency) to £107.7m
(2015: £80.7m). This reflects a good performance from our
UK wholesale business, which includes the supply of goods to
our licensed stores and our export business, as well as a strong
performance from our North American wholesale business.
Our territorial and product licences delivered good
performances, as licence income increased by 23.3% to £14.4m
(2015: £11.7m). During the period, our licence partners opened
stores and concessions in Azerbaijan, Dubai, Kuwait, Mexico,
Qatar, Saudi Arabia, Singapore, Taiwan and Thailand and
our joint venture in Australasia opened two outlet stores. We
launched new product licences in bedding, rugs and tiles, which
were well received.
In January 2016, we completed the purchase of the
freehold of Block B, Canal Reach, St Pancras Way, London,
also known as The Ugly Brown Building and currently occupied
by the Group as its head office, for £58.25m using a new term
loan facility. The Ugly Brown Building has become an iconic
building in a rapidly developing Central London location
and is a very important ingredient of Ted Baker’s history and
unique personality. We are delighted to have secured our future
in this excellent location. We are confident that this will help
us preserve our culture and continue to attract and retain great
talent. This acquisition also enables the Group to consider
expansion as its operations continue to grow and provides
certainty over operating costs whilst removing exposure to
rising rent reviews.
In December 2015, we entered into an agreement for lease
of a new state-of-the-art distribution facility in the UK. Once
fully operational, it will serve as our European Distribution
Centre, handling all operations for our retail, wholesale
and e-commerce businesses across the UK and Europe and
supporting our long-term growth strategy.
5
Ted Baker Plc Annual Report and Accounts 2015/16 o STRATEGIC REPORT o
PEOPLE
WHOLESALE
We anticipate further growth across our wholesale
businesses, which should result in low double-digit sales growth
in the coming year.
LICENCE INCOME
Our product and territorial licences continue to perform
well, with further openings planned in Azerbaijan, Dubai,
Egypt, Malaysia, Mexico, Saudi Arabia and Taiwan, along with
our first store in Chile.
GROUP
The strength of the Ted Baker brand and collections
support our confidence in the continued development of the
brand and further growth of the business; however, we remain
mindful of the economic and political uncertainties in some of
our markets.
We will continue to ensure that costs and commitments are
controlled. To deliver our expansion plans, capital expenditure
in the new financial year is anticipated to be above the previous
year at £45m as a result of the investment in the new distribution
facility, further store openings and refurbishments, and the
ongoing investment in new systems across the business.
We intend to make our next interim management
statement, covering trading since the start of the 2016/17
financial year, in mid-June 2016.
David Bernstein CBE
Non-Executive Chairman
17 March 2016
I would like to take this opportunity to thank all of my
colleagues across the world for their continued hard work and
commitment. The Group’s strong performance is dependent on
our talented teams, whose creativity and passion are key to our
success as we continue to grow the business and further develop
Ted Baker as a global lifestyle brand.
CURRENT TRADING AND OUTLOOK
We are pleased by the initial reaction to our Spring/
Summer collections, which has been positive. Trading is in line
with our expectations, with the exception of Asia, where, as has
been widely reported, the trading environment continues to be
challenging. Whilst Asia currently represents a small part of
our business at 3.4% of revenue, we remain positive about the
long-term opportunities to develop the brand in this territory.
Further store openings are planned across new and
established markets and we continue to develop and invest in
our e-commerce business. In our newer markets, we continue
to build brand awareness for the long-term development of
the brand.
RETAIL
In the UK and Europe, we plan to open a new store in Paris,
and further concessions in France, Germany and Spain during
the year. We will continue to invest in our e-commerce sites to
enhance the customer experience and enhance the local content
provided to our European customers, including launching our
first language specific website in Germany.
In North America, we remain focused on developing our
presence and have opened a store in Seattle and plan to open
a further five new stores, including two in New York and one
in Calgary, Miami and Ottawa. We are also relocating our
Dallas store.
In Asia, we remain focused on building brand awareness
in this market where we are in the relatively early stages of
investment. In line with our development strategy in this
territory, we have opened another store in Beijing and we are
opening further concessions in China and Japan.
6
Dickiboe Quirkidum
o STRATEGIC REPORT o
BUSINESS MODEL AND STRATEGY
Our strategy is to further our position as a leading global
Ted Baker is a global lifestyle brand that operates through
three main distribution channels: retail, which includes
includes
e-commerce; wholesale; and
territorial and product licences.
licensing, which
The brand has grown steadily from its origins as a single
shirt specialist store in Glasgow to the global lifestyle brand it is
today. We distribute through our own and licensed retail stores,
leading department stores and selected independent stores in
the UK and Europe, North America, the Middle East, Asia
and Australasia.
We offer a wide range of collections including: Menswear;
Womenswear; Global; Phormal; Endurance; Accessories;
Audio; Bedding; Childrenswear; Crockery; Eyewear;
Footwear; Fragrance and Skinwear; Gifting and Stationery;
Jewellery; Lingerie and Sleepwear; Luggage; Neckwear; Rugs;
Suiting; Technical Accessories; Tiles; and Watches.
lifestyle brand, based on three main elements:
• considered expansion of the Ted Baker collections. We
review our collections continually to ensure we anticipate
and react to trends and meet our customers’ expectations.
In addition, we look for opportunities to extend the
breadth of collections and enhance our offer;
• controlled distribution through three main channels:
retail; wholesale; and licensing. We consider each new
opportunity to ensure it is right for the brand and will
deliver margin led growth; and
• carefully managed development of 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 skill of our teams, licence partners and
wholesale customers (our “trustees”).
KEY PERFORMANCE INDICATORS
We review the ongoing performance of the business using key performance indicators for our global business and each of our
distribution channels.
The KPIs have been detailed below and considered further throughout the Strategic Report.
KEY PERFORMANCE INDICATOR
Group
Revenue
Gross margin
Profit before tax (excluding exceptional items) as a % of revenue
Operating contribution %*
Retail
Revenue
Gross margin
Average square footage**
Closing square footage**
Sales per square foot***
Wholesale
Revenue
Gross margin
Licence income Revenue
Group
Operating cash flow per share****
Working capital*****
52 WEEKS
ENDED
30 JANUARY 2016
53 WEEKS
ENDED
31 JANUARY 2015
£456.2m
£387.6m
59.9%
12.9%
13.0%
£348.4m
64.8%
357,096
377,830
£826
£107.7m
43.8%
£14.4m
93.3p
£113.5m
60.7%
12.8%
13.0%
£306.9m
65.5%
332,089
344,898
£814
£80.7m
42.4%
£11.7m
68.7p
£90.9m
CONSTANT
CURRENCY
VARIANCE
17.0%
13.2%
1.3%
31.2%
-
VARIANCE
17.7%
-80bps
10bps
-
13.5%
-70bps
7.5%
9.5%
1.5%
33.6%
+140bps
23.3%
35.8%
24.9%
* Operating contribution is defined as operating profit before exceptional items as a percentage of revenue.
** Excludes licensed partner stores.
*** Excludes online sales.
**** Operating cash flow per share is defined as net cash generated from operating activities divided by the weighted number of ordinary shares (diluted).
***** Working capital comprises inventories, trade and other receivables and trade and other payables.
8
o STRATEGIC REPORT o
GLOBAL GROUP PERFORMANCE
RETAIL
Ted Baker operates stores and concessions across the UK,
Europe, North America and Asia and an e-commerce business
based in the UK, primarily serving the UK and Europe, with
separate US and Canadian sites dedicated to North America,
and a separate site serving Australia. We also have e-commerce
businesses with some of our concession partners.
The retail division performed well, with sales up 13.5%
(13.2% in constant currency) to £348.4m (2015: £306.9m).
Average retail square footage rose by 7.5% over the period to
357,096 sq ft (2015: 332,089 sq ft). Total retail square footage
at 30 January 2016 was 377,830 sq ft (2015: 344,898 sq ft), an
increase of 9.5% on the prior year. Retail sales per square foot
rose 1.5% (1.3% in constant currency) from £814 to £826.
Our e-commerce business delivered another strong
performance with sales increasing by 45.8% (44.7% in constant
currency) to £53.5m (2015: £36.7m) driven by growth across
our e-commerce business. We continue to invest in each of
our UK, USA, Canadian and Rest Of World sites, aiming to
provide a more relevant customer experience through improved
design, performance and personalised content.
The retail gross margin reduced slightly to 64.8% (2015:
65.5%), largely reflecting an increase in our outlet sales as a
proportion of total sales. Retail operating costs increased 13.9%
in line with our expectations, to £163.5m (2015: £143.5m)
and as a percentage of retail sales, increased slightly to 46.9%
(2015: 46.8%).
WHOLESALE
Our wholesale business in the UK serves countries
across the world, particularly in the UK and Europe, as well
as supplying products to stores operated by our territorial
licence partners. In addition, we operate a wholesale business in
North America serving the USA and Canada.
Group wholesale sales increased by 33.6% (31.2% in
constant currency) to £107.7m (2015: £80.7m), reflecting
a good performance from both our UK wholesale business,
with sales increasing by 20.2% to £78.0m (2015: £64.9m), and
a strong performance from our North American wholesale
business, with sales increasing by 94.1% (81.7% in constant
currency) to £29.7m (2015: £15.3m) as the brand continues to
gain traction.
The wholesale gross margin increased to 43.8% (2015:
42.4%), which was principally the result of a greater proportion of
wholesale sales to our trustee partners which carry a higher margin.
LICENCE INCOME
We operate both territorial and product licences. Our
territorial licences cover specific countries in Asia, Australasia,
Europe, the Middle East and North America, where our
partners operate licensed retail stores and, in some territories,
wholesale operations.
Our product licences cover Audio, Bedding, Childrenswear,
Crockery, Eyewear, Footwear, Fragrance and Skinwear, Gifting
and Stationery, Jewellery, Lingerie and Sleepwear, Luggage,
Neckwear, Rugs, Suiting, Technical Accessories, Tiles,
and Watches.
Both territorial and product licences delivered good
performances, with licence income up 23.3% to £14.4m (2015:
£11.7m). There were notable performances from our product
licensees in childrenswear, footwear, eyewear, homeware,
skinwear and suiting.
In October, we opened our first concessions in Mexico with
our new licence partner Multimoda and we are encouraged
by performance to date. Our licensed stores in Saudi Arabia,
operated by our territorial partner, RSH Limited, also
performed particularly well during the period.
COLLECTIONS
Ted Baker Womenswear delivered a good performance
with sales up 15.9% to £254.1m (2015: £219.3m). Womenswear
represented 55.7% of total sales (2015: 56.6%).
Ted Baker Menswear performed well with sales up 20.1%
to £202.1m (2015: £168.3m). Menswear represented 44.3%
of total sales in the period (2015: 43.4%).
9
Ted Baker Plc Annual Report and Accounts 2015/16 Hirsutinum Charmosa
o STRATEGIC REPORT o
GEOGRAPHIC PERFORMANCE
UNITED KINGDOM AND EUROPE
Retail revenue*
Average square footage*
Closing square footage*
Sales per square foot**
Wholesale revenue
Own stores
Concessions
Outlets
Partner stores
Total
* Excludes licensed partner stores.
** Excludes online sales.
52 WEEKS
ENDED
30 JANUARY 2016
53 WEEKS
ENDED
31 JANUARY 2015
VARIANCE
£252.5m
236,685
244,007
£869
£78.0m
38
224
13
3
278
£231.8m
228,584
233,387
£869
£64.9m
37
214
12
3
266
8.9%
3.5%
4.6%
0.0%
20.2%
1
10
1
-
12
CONSTANT
CURRENCY
VARIANCE
10.7%
1.9%
20.0%
Sales in our UK and Europe retail division were up 8.9%
to £252.5m (2015: £231.8m) (10.7% in constant currency),
reflecting a good performance in our established UK market
and a very good performance in continental Europe where we
continue to expand.
In the UK, we opened new stores during the year in
London Spitalfields and Stansted Airport along with three new
concessions with our UK concession partners. We closed our
accessories store in Gatwick Airport and our store in Richmond
along with one other concession. Our European expansion
continued as we opened our first store in the Netherlands, in
Amsterdam, and our first outlet in Spain, in Barcelona. We also
opened further concessions with premium department stores in
France, Germany, Ireland, the Netherlands and Spain. We are
pleased with their performances and remain confident about
growth opportunities for the brand in these markets.
Our e-commerce business performed very well during
the period with sales increasing by 40.5% to £46.8m (2015:
£33.3m), primarily reflecting continuing growth in the UK.
Sales from our UK wholesale division increased by 20.2%
to £78.0m (2015: £64.9m) reflecting strong sales of product
to our licence partners and continued growth in our wholesale
export business.
NORTH AMERICA
Retail revenue*
Average square footage*
Closing square footage*
Sales per square foot**
Wholesale revenue
Own stores
Concessions
Outlets
Partner Stores
Total
* Excludes licensed partner stores.
** Excludes online sales.
CONSTANT
CURRENCY
VARIANCE
20.6%
2.3%
81.7%
52 WEEKS
ENDED
30 JANUARY 2016
53 WEEKS
ENDED
31 JANUARY 2015
VARIANCE
£63.3m
82,360
89,240
£726
£15.3m
20
48
6
1
75
27.3%
14.7%
19.3%
8.0%
94.1%
5
7
4
6
22
£80.6m
94,496
106,471
£784
£29.7m
25
55
10
7
97
11
Ted Baker Plc Annual Report and Accounts 2015/16 o STRATEGIC REPORT o
We continue to be very pleased with our progress across
the retail and wholesale channels in North America, both of
which performed very well. We are confident that the Ted
Baker brand is becoming more established and continuing to
gain recognition in this territory.
Sales from our retail division
in North America
increased by 27.3% to £80.6m (2015: £63.3m) (20.6% in
constant currency). During the period, we continued our
expansion with new stores in Hawaii, Malibu, Toronto and
Vancouver, and outlets in Florida (two outlets), Los Angeles,
San Francisco and seven further concessions through a leading
department store. We also opened six concessions in Mexico
with our licence partner.
Our US and Canadian e-commerce businesses delivered
strong performances with sales increasing 91.4% to £6.6m
(77.8% in constant currency).
Sales from our North American wholesale business
increased by 94.1% to £29.7m (2015: £15.3m) (81.7% in
constant currency) reflecting further growth of our business as
the brand continues to gain traction.
MIDDLE EAST, ASIA AND AUSTRALASIA
Retail revenue*
Average square footage*
Closing square footage*
Sales per square foot
Own stores
Concessions
Outlets
Partner Stores
Total
* Excludes licensed partner stores.
52 WEEKS
ENDED
30 JANUARY 2016
53 WEEKS
ENDED
31 JANUARY 2015
VARIANCE
£15.4m
25,915
27,352
£593
8
8
3
54
73
£11.8m
21,145
22,271
£559
7
7
2
41
57
30.5%
22.6%
22.8%
6.1%
1
1
1
13
16
CONSTANT
CURRENCY
VARIANCE
24.1%
1.3%
We continue to develop the Ted Baker brand across
Asia, Australasia and the Middle East through our retail and
territorial licence channels.
In Asia, we remain encouraged by reactions to the brand and
are positive about the long-term opportunities in this territory;
however, as has been widely reported, the trading environment
continues to be challenging. Retail sales in Asia increased
30.5% to £15.4m (2015: £11.8m) (24.1% in constant currency).
In Hong Kong, we opened our first street side store. In China,
we opened a further concession. In South Korea, we opened an
outlet store and one concession and closed one concession.
During the period, our Middle East licence partners
performed particularly well and opened three further stores in
Saudi Arabia and one store in each of Dubai, Azerbaijan, Qatar
and a concession in each of Dubai and Kuwait. Our South
East Asia licence partners opened two stores in Singapore, one
store in Taiwan, one store in Thailand, two new concessions in
Taiwan and closed one concession in Taiwan. As at 30 January
2016, our licence partners operated 45 stores and concessions
across the Middle East and South East Asia (2015: 34).
The joint venture with our Australasian licence partner,
Flair Industries Pty Ltd continued to perform well. During the
period, we opened new outlet stores in Sydney and Melbourne.
As at 30 January 2016, we operated 9 stores in Australasia
(2015: 7 stores).
12
o STRATEGIC REPORT o
FINANCIAL REVIEW
TAXATION
REVENUE AND GROSS MARGIN
Group revenue increased by 17.7% (17.0% in constant
currency) to £456.2m (2015: £387.6m), driven by a 13.5%
(13.2% in constant currency) increase in retail sales to £348.4m
(2015: £306.9m) and a 33.6% (31.2% in constant currency)
increase in wholesale sales to £107.7m (2015: £80.7m).
The composite gross margin for the Group decreased to
59.9% (2015: 60.7%) mainly as a result of a change in sales mix
between wholesale and retail sales.
OPERATING EXPENSES PRE-EXCEPTIONAL ITEMS
Distribution costs increased by 17.4% in line with our
expectations to £169.8m (2015: £144.6m) and as a percentage
of sales slightly decreased to 37.2% (2015: 37.3%).
Administration expenses increased by 12.5% to £57.4m
(2015: £51.0m). Excluding the employee performance related
bonus of £2.7m (2015: £4.9m), administration expenses rose by
18.7% due to our growth in central functions, both in the UK and
overseas, and the continued deployment of our distribution and
information technology infrastructures to support our growth.
PROFIT BEFORE TAX
Profit before tax and exceptional items increased by 18.6%
to £58.7m (2015: £49.5m) and profit before tax increased by
20.3% to £58.7m (2015: £48.8m).
EXCEPTIONAL ITEMS
There were no exceptional costs or income during
the period.
The prior year’s exceptional income of £4.7m comprised
£3.7m in relation to the early termination of a licence partner
agreement and £1.0m in relation to the settlement of an
intellectual property dispute. The prior year’s exceptional costs
of £5.3m related to a legal dispute with a previous insurer.
FINANCE INCOME AND EXPENSES
Net finance costs during the period were £1.4m (2015:
£1.2m). This increase reflects higher Group borrowing
compared to the prior year as a result of an increase in the
ongoing significant investment in capital expenditure and
increased working capital to support our long-term expansion.
The net foreign exchange loss during the year was £nil
(2015: £0.3m).
The Group tax charge for the year was £14.4m (2015:
£12.9m), an effective tax rate of 24.6% (2015: 26.5%). This
effective tax rate is higher than the UK tax rate for the period
of 20.16% largely due to higher overseas tax rates and the non-
recognition of losses in overseas territories where the businesses
are still in their development phase. On 1 April 2015, the UK
corporation tax rate fell from 21% to 20% and further reductions
to 19% from 1 April 2017 and to 18% from 1 April 2020 have
been substantively enacted. The Budget on 16 March 2016
announced that there will be a further cut in the corporation tax
rate to 17% from 1 April 2020.
Our closing UK deferred tax assets and liabilities have been
measured at 19% based on the corporation tax rate at which
they are anticipated to unwind and overseas deferred tax assets
and liabilities have been measured at the applicable overseas
tax rates.
Our future effective tax rate is expected to be higher
than the UK tax rate as a result of overseas profits arising in
jurisdictions with higher tax rates than the UK.
CASH FLOW
The net decrease in cash and cash equivalents of £5.9m
(2015: £10.1m decrease) primarily reflected an increase in
working capital and further capital expenditure to support our
long-term development.
Total Group working capital, which comprises inventories,
trade and other receivables and trade and other payables,
increased by £22.6m to £113.5m (2015: £90.9m). This was
mainly driven by an increase in inventories of £14.2m to
£125.3m (2015: £111.1m) reflecting the growth of our business
and stock on hand for our wholesale customers and licence
partners. Working capital is further driven by an increase
in trade and other receivables of £12.4m to £49.3m (2015:
£36.9m) as a result of stronger wholesale sales.
Group capital expenditure amounted to £89.5m (2015:
£25.7m) reflecting the purchase of The Ugly Brown Building
for £58.0m, which was financed by the new term loan. Further
capital expenditure relates to the opening and refurbishment of
stores, concessions and outlets and investment in business wide
systems to support our future growth.
The Group’s net borrowing position at the end of the period
was £84.6m (2015: £18.8m). The Group added a secured term
loan of £60.0m (2015: £nil) to the Group’s existing multi-
currency revolving credit facility to finance the purchase of
The Ugly Brown Building.
13
Ted Baker Plc Annual Report and Accounts 2015/16 o STRATEGIC REPORT o
SHAREHOLDER RETURN
Basic earnings per share increased by 22.7% to 100.6p
(2015: 82.0p). Adjusted earnings per share, which exclude net
exceptional items, increased by 20.9% to 100.6p (2015: 83.2p).
The proposed final dividend of 34.6p per share will make a
total for the period of 47.8p per share (2015: 40.3p per share),
an increase of 18.6% on the previous year.
Operating cash flow per share, which is calculated using
the net cash generated from operating activities, was 93.3p
(2015: 68.7p) 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 are hedged in
accordance with the Group’s risk management policy, typically
twelve 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
28 January 2017.
BORROWING FACILITIES
In July 2015, the Group increased its borrowing facility
to £85.0m (2015: £65.0m). The facility is a multi-currency
revolving credit facility with The Royal Bank of Scotland
and Barclays which is due to expire on 29 March 2018. The
increase is a function of the growth in our business and is
necessary to fund capital expenditure to support the Group’s
long-term strategy.
In December 2015, the Group agreed a £60.0m secured
term loan, in addition to the existing multi-currency revolving
credit facility with The Royal Bank of Scotland and Barclays.
The term loan is repayable over five years and the proceeds were
used to finance the purchase of The Ugly Brown Building.
The facility and term loan contain appropriate financial
covenants and are tested on a quarterly basis. The Group
monitors actual and prospective compliance with these
on a regular basis.
14
Sharpus Accessora
o STRATEGIC REPORT o
The Board has reviewed the effectiveness of the system
of risk management and internal control during the period.
In particular, it has reviewed and updated the process for
identifying and evaluating the significant risks affecting the
business and the policies and procedures by which these risks
are managed. Management is responsible for the identification
and evaluation of significant risks applicable to their areas of
the business together with the design and operation of suitable
internal controls. These risks are assessed on a continual
basis and may be associated with a variety of internal or
external sources including control breakdowns, disruption in
information systems, competition, natural catastrophe and
regulatory requirements, and also by reference to the Group’s
five year strategic and financial plan.
The Group has an independent internal audit function
whose findings are regularly reviewed by the Board and the
Executive Committee. The Audit Committee monitors and
reviews the effectiveness of the internal audit activities.
The Chief Operating Officer provides the Board with monthly
financial information which includes key performance indicators.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board is ultimately responsible for the Group’s system
of risk management and internal control and risk management
systems and for reviewing their effectiveness. 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 period and up to the date of approval of
these financial statements, and that this process is regularly
reviewed by the Board. However, such systems are 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.
In order to help manage these risks and uncertainties,
the Board has delegated responsibility for monitoring the
effectiveness of the Group’s systems of internal control and risk
management methodology to the Audit Committee.
In addition, the Group has established a Risk Committee
that includes the Finance Director and various members of
the Executive Committee and heads of department. The Risk
Committee reviews the risk management and control process
in each key business area on an ongoing basis 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.
•
•
•
Having considered the key risks inherent in the business
and the system of control necessary to manage such risks, the
Finance Director of the Subsidiaries (the “Finance Director”)
presents the Risk Committee’s findings to the Board on a
regular basis. In addition, the Chief Executive reports to the
Board on significant changes in the business and the external
environment which affect significant risks.
16
o STRATEGIC REPORT o
The Board has carried out a robust assessment of the principal risks facing the Group, including those that would threaten
its business model, future performance, solvency or liquidity. Although not exhaustive, the following list highlights some of the
principal risks identified by the Group (which are not shown in order of importance):
ISSUE
POTENTIAL IMPACT
MITIGATION
STRATEGIC
RISKS
Brand and
reputational risk
Development of
overseas markets
Fashion and design
External events
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 such
customer and partner with whom we do business. Such
partners are monitored on an ongoing basis to ensure they
remain appropriate to the brand.
Incorrect management of social media interactions
could have an adverse effect on our reputation.
Our dedicated team closely monitors social media channels
and addresses any issues in accordance with our protocol.
Failure in growing the international business through
franchise operations, licensees and e-commerce. Risk
that the Group fails to prioritise the right territories or
investment or to support these markets with systems
and supply chain capability.
We perform extensive due diligence on all potential partners
and territories and to assess our appropriate route to market.
We operate in a range of international markets, which
helps to mitigate over reliance and exposure to any
one territory.
As with all fashion brands there is a risk that our offer
will not satisfy the needs of our customers or we fail to
correctly identify trends in an increasingly competitive
market, both resulting in lower sales and reduced
market share.
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.
We maintain 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. We use customer data to develop targeted
marketing and promotional activity. We continue to
focus on product design, quality and attention to detail.
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 geographic spread of our business and
supply chain also helps to mitigate these risks.
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.
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.
Infrastructure
Social responsibility
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.
A sub-committee of the Executive Committee has
been tasked with overseeing specific areas of our
social responsibility agenda. Ted’s Conscience Team is
responsible for monitoring this agenda and ensuring our
practices fall in line with it.
IT and cyber security The business is reliant on data being transmitted
Implementation of
ERP and other IT
infrastructure
electronically, and is subject to threats from hacking or
viruses of other unauthorised data breaches. There is
also the possibility of unintentional loss of controlled
data by authorised users.
We are in the process of implementing Microsoft
Dynamics AX across the business. With any project
of this scale, there is a risk of a poorly managed
implementation or take up of new systems, which
could lead to business disruptions. This, and the
implementation of other new business systems, has
potential to impact interdependent systems.
Ted has committed additional specialist resources
and the continual upgrading of security equipment
and software mitigates these risks. Tightly controlled
security controls and data recovery and business
continuity plans have been implemented.
The Group’s IT Steering Committee meets on a two
weekly basis to review the implementation and all other
major IT projects. This Committee comprises members
of the Executive Committee and the Board and is advised
by external professional advisers. The Steering Committee
has established a Design Authority charged with
overseeing the scheduling of the implementation of any
new system.
Robust change management and project governance with
professional project managers recruited to oversee the
project team which includes key business stakeholders.
17
Ted Baker Plc Annual Report and Accounts 2015/16 o STRATEGIC REPORT o
OPERATIONAL
RISKS
CONTINUED
People
Our 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.
Regulatory and legal
framework
We operate within many markets globally and must
comply with various regulatory requirements. Failure
to do so could lead to financial penalties and/or
reputational damage.
Infringement of the
Group’s intellectual
property
Unauthorised use of the Group’s designs, trademarks and
other intellectual property rights could damage the Ted
Baker brand and the Group’s reputation.
FINANCIAL
RISKS
Currency, interest,
credit and counterparty
credit risks, including
financial covenants
under the Group’s
credit facilities
In the course of its operations, we are exposed to these
financial risks which, if they were to arise, may have
material financial impacts on the Group.
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.
Succession plans are in place and have been reviewed
during the period.
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.
The Group, with its external advisers, rigorously manages
and defends its intellectual property.
The Group deals with counterfeit goods in accordance
with its robust enforcement strategy.
The Group’s policies for dealing with these risks are
discussed in detail in note 22 on pages 55 to 101.
VIABILITY STATEMENT
In accordance with Provision 2.2 of the UK Corporate
Governance Code dated September 2014 (the “Code”) the
Directors have assessed the viability of the Group over a three
year period, taking into account the Group’s current position and
the potential impact of the principal risks documented above.
The Group operates a five year plan, which is updated and
reviewed annually by the Board. Within the five year plan,
detailed scenario planning and stress testing has been carried
out over a three year period. The Directors consider the three
year period to 30 January 2019 to be the appropriate period to
assess the viability and prospects of the Group with a high level
of certainty, and also aligns with the typical borrowing period
of the Group.
The Directors’ assessment has been further enhanced by
analysing the current and future risks, controls and assurances
available, resulting in a clear picture of the risk profile across the
whole business. The principal risks that could affect the future
viability of the Group over the next three years are identified on
pages 16 to 18 in the Principal Risks and Uncertainties.
In making this assessment the Directors have considered the
resilience of the Group to the occurrence of these risks in severe
but plausible scenarios, taking into account the effectiveness of
any mitigating actions. In addition, the Board has considered
the impact on the Group’s cash flows, headroom, covenants and
other key financial ratios having stress tested the potential impact
of these scenarios, both individually and in combination.
Sensitivity analysis was also used to stress test the Group’s
strategic plan and to confirm that sufficient headroom would
remain available under the Group’s credit facilities. The Board
considers that under each scenario tested the mitigating actions
would be effective and sufficient to ensure the continued
viability of the Group. For the reasons stated above, based on
the robust assessment undertaken, the Directors confirm they
have a reasonable expectation that the Group will be able to
continue in operation, and meet its liabilities as they fall due,
over the period of assessment.
The Strategic Report was approved by the Board of Directors
on 17 March 2016 and signed on its behalf by:
Charles Anderson
Company Secretary
Registered office:
The Ugly Brown Building,
6a St Pancras Way, London NW1 0TB
Company number: 03393836
18
o DIRECTORS’ REPORT: GOVERNANCE o
CORPORATE GOVERNANCE STATEMENT
BOARD INDEPENDENCE
STATEMENT OF COMPLIANCE WITH THE CODE
During the period the Company was subject to the UK
Corporate Governance Code dated September 2014 (the
“Code”). The Code was issued by the Financial Reporting
Council and is available for review on the Financial Reporting
Council’s website, https://www.frc.org.uk/. The Board
confirms that the Company has complied with the provisions
set out in the Code throughout the year, except in respect of
Code Provision C.3.1 (Audit Committee to have at least three
independent Non-Executive Directors). An explanation of the
reason for this departure from the Code is set out on page 22.
An explanation of how the Main Principles have been
applied is set out on pages 56 to 58 and, in connection with
Directors’ remuneration, in the Directors’ Remuneration
Report on pages 39 to 55.
BOARD COMPOSITION
The Board currently comprises the Non-Executive
Chairman, the Chief Executive, the Chief Operating Officer &
Group Finance Director and three independent Non-Executive
Directors. Biographies of these Directors appear on page 38.
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. This is reinforced by the findings of the external
Board evaluation (see page 20).
The Board considers Non-Executive Directors Ronald
Stewart, Anne Sheinfield and Andrew Jennings to be
independent for the purposes of the Code.
BOARD OPERATION
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. These
include decisions on the Group’s strategy, financial budgets,
major capital expenditure and transactions, appointment of
territorial and product licence partners, store openings, dividend
policy, Group bonus and risk profile. 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 Group’s Executive Committee, which is
comprised of the Board of Directors of No Ordinary Designer
Label Limited (the Group’s operating subsidiary) together
with relevant heads of department as required. The Executive
Committee meets regularly throughout the year.
TED BAKER PLC
BOARD OF DIRECTORS
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
AUDIT
COMMITTEE
RISK
COMMITTEE
IT STEERING
COMMITTEE
EXECUTIVE
COMMITTEE
SOCIAL RESPONSIBILITY
COMMITTEE
19
Ted Baker Plc Annual Report and Accounts 2015/16 o DIRECTORS’ REPORT: GOVERNANCE o
To enable the Board to function effectively and for the
Directors to discharge their responsibilities, full and timely
access is provided to all relevant information. A comprehensive
Board pack is prepared and circulated in advance of each Board
meeting. Board members regularly input into the level and
quality of information provided, and request specific Board
papers on additional agenda items. 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 (which were in force throughout
the period and are in force as at the date of these financial
statements), there are no qualifying third-party indemnity
provisions in force.
The Code requires that the Board provides a fair, balanced
and understandable assessment of the Company’s position and
prospects in its external reporting. The Directors were responsible
for the preparation and approval of the Annual Report and
Accounts and consider them, taken as a whole, to be fair,
balanced and understandable and believe that this provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
BOARD AND COMMITTEE ATTENDANCE
BOARD EVALUATION
During the period, an externally facilitated evaluation of
the Board and Committees’ effectiveness was undertaken by
Sean O’Hare of Boardroom Dialogue Limited, an independent
external adviser with no other connection to the Company.
The Board evaluation considered the balance of skills,
experience, independence and knowledge of the Company on
the Board, its diversity, including gender, how the Board works
together as a unit, and other factors relevant to its effectiveness.
The Board Evaluation consisted of:
•
interviews with each of the members of the Board, the
Company Secretary and selected members of the
Executive Committee;
• observation of a Board meeting; and
• a review of the Board and Committee agendas, minutes
and papers for the previous twelve months.
The Board evaluation concluded that the Board was
working well, considering the right topics on a timely basis
and with an appropriate level of challenge. The Non-Executive
Directors were conscientious and prepared thoroughly for
Board and Committee meetings and the management team
received value from the Non-Executive Directors’ contributions.
Areas of focus for the Non-Executive Directors continue to be
enhancing Board engagement with the Executive Committee
and building on existing long-term succession planning
throughout the Group.
The table below details the number of Board and Committee meetings held during the period and the attendance record
of each Director.
NUMBER OF MEETINGS HELD
Raymond Kelvin
Lindsay Page
David Bernstein
Anne Sheinfield
Ronald Stewart
Andrew Jennings
BOARD
MEETINGS
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
2
N/A
N/A
2
2
2
2
-
N/A
N/A
-
-
-
N/A
10
10
10
10
10
10
9
3
N/A
N/A
3
N/A
3
2
20
o DIRECTORS’ REPORT: GOVERNANCE o
21
Ted Baker Plc Annual Report and Accounts 2015/16COMMUNICATION WITH SHAREHOLDERSThe 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.Led by the Chief Executive, the Chief Operating Officer and the Finance Director, the Group seeks 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 via its investor relations programme. 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. Shareholders may also attend the Company’s Annual General Meeting at which they have the opportunity to ask questions. Non-Executive Directors are kept informed of the views of shareholders by the Executive Directors and are provided with independent feedback from investor meetings.CONFLICTS OF INTERESTSThe Company’s Articles of Association 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. o DIRECTORS’ REPORT: GOVERNANCE o
22
AUDIT COMMITTEE REPORT Dear Shareholder,The role of the Audit Committee is to monitor the integrity of the Group’s financial statements and reporting responsibilities and to maintain its internal control and compliance procedures. During the period, the Audit Committee focused on the Group’s internal and external audit processes and risk management (particularly cyber risk). This Audit Committee Report has been prepared in accordance with the Code and includes:• a description of the significant issues that the Audit Committee considered in relation to the financial statements, and how these issues were addressed;• an explanation of how the Audit Committee has assessed the effectiveness of the external audit process and the approach taken to the reappointment of the external auditors, and information on the length of tenure of the current audit firm and when a tender was last conducted; and • an explanation of how the Group’s auditors' objectivity and independence are safeguarded when providing non-audit services.Meetings with senior management, internal audit and the external auditors, together with the regular circulation and review of Board papers and financial information, have enabled the Audit Committee to discharge its duties and responsibilities effectively.AUDIT COMMITTEE MEMBERSHIPDuring the period, Ronald Stewart was Chairman of the Audit Committee. The other members were David Bernstein and Andrew Jennings.Provision C.3.1 of the Code provides that the Audit Committee should comprise of at least three independent Non-Executive Directors, and that the Chairman should not be a member of the Audit Committee. The Board recognises that the Company has not been compliant with Provision C.3.1 of the Code during the period but considers David Bernstein, notwithstanding his appointment as Chairman, to be a valuable member of the Audit Committee because of his recent and extensive relevant financial experience.The terms of reference for the Audit Committee are available on the Company’s website www.tedbakerplc.com. o DIRECTORS’ REPORT: GOVERNANCE o
KEY MATTERS
A summary of the key matters considered by the Audit Committee during the year are set out below:
AGENDA ITEMS
FULL YEAR REPORT/INTERIM REPORT
Full year report/Interim report
KPMG Audit Committee paper summarising the results from the year end external audit
KPMG Audit Committee paper summarising the results from the interim review
KPMG Management Letter on control observations
Effectiveness of external auditor
Independence of KPMG
INTERNAL AUDIT
Findings of internal audit reviews
Key tax risks and approach
Risk management
POLICIES
Impairment policy review
Terms of reference of the Audit Committee
Whistle blowing
Non-audit services provided by KPMG
Employment of former KPMG staff
Non-audit spend
OTHER MATTERS
Materiality
Resourcing
Succession planning
Cyber Risk Review
Post investment appraisal (stores)
Supply Chain Review
Stock Analysis
Foreign Currency Risk
Social Media Policy Review
FRC review of external audit items
MARCH
2015
JULY
2015
OCTOBER
2015
✓
✓
-
✓
✓
✓
-
✓
-
✓
-
-
✓
-
✓
✓
✓
-
✓
-
-
-
-
✓
-
-
-
-
-
-
-
✓
-
✓
✓
✓
✓
✓
✓
✓
-
✓
✓
✓
✓
-
✓
✓
-
-
✓
-
✓
-
-
✓
-
✓
✓
-
-
-
-
-
-
✓
✓
-
✓
-
✓
✓
✓
-
✓
The main areas of judgement and estimation are set out in the accounting policies on pages 72 to 77.
23
Ted Baker Plc Annual Report and Accounts 2015/16 Precio Exquisitidesa
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25
Ted Baker Plc Annual Report and Accounts 2015/16SIGNIFICANT ISSUESThe Audit Committee received and reviewed reports from management and the external auditors setting out the significant issues in relation to the financial statements for the period which related to the carrying value of inventory and the carrying value of retail fixed assets (being leasehold improvements).These issues were discussed and challenged with management during the period. They were also discussed with the auditors at the time the Audit Committee reviewed and agreed the auditors’ group audit plan, when the auditors reviewed the half year interim financial statements in October 2015, and also at the conclusion of the audit of the financial statements for the period.1) Carrying value of inventoryInventory is carried in the financial statements at the lower of cost and net realisable value. The fashion industry can be extremely volatile with consumer demand changing significantly based on current trends. As a result there is a risk that the cost of inventory exceeds its net realisable value.Management confirmed to the Audit Committee that there have been no significant changes to the approach used to estimate inventory provisions from the prior year. The auditors explained to the Audit Committee the work they had conducted during the year. On the basis of their audit work, the auditors reported no inconsistencies or misstatements that were material in the context of the financial statements as a whole; and in the view of the Audit Committee this supports the appropriateness the Company’s methodology.2) Carrying value of retail fixed assets (being leasehold improvements)The Group has invested a significant amount of capital outside the UK in its retail store portfolio. Given the relative immaturity of the brand outside the UK, the payback period is typically longer and it is not uncommon for new stores to make losses in their starting phase. The Audit Committee challenged management on the evidence on which they based their assessment as to when an indicator exists for an impairment review over the carrying value of leasehold improvements. This included an assessment of performance of retail stores to the original business case, comparing relative performance of stores within each region and confirming that management’s assessment was in line with the Audit Committee’s understanding of the maturity of the brand in each location. The auditors explained to the Audit Committee the work they had conducted during the year. On the basis of the audit work, the auditors reported no inconsistencies or misstatements that were material in the context of the financial statements as a whole; and in the view of the Audit Committee this supports the appropriateness the Company’s methodology.3) Misstatements Management confirmed to the Audit Committee that they were not aware of any material misstatements or immaterial misstatements made intentionally to achieve a particular presentation. The auditors reported to the Audit Committee the misstatements that had been found in the course of their work and no material amounts remain unadjusted. The Audit Committee confirms that it is satisfied that the auditors has fulfilled its responsibilities with diligence and professional scepticism. After reviewing and challenging the presentations and reports from management and consulting where necessary with the auditors, the Audit Committee is satisfied that the financial statements appropriately address the critical judgements and key estimates (both in respect to the amounts reported and the disclosures). The Audit Committee is also satisfied that the significant assumptions used for determining the value of assets and liabilities have been appropriately scrutinised, challenged and are sufficiently robust.4) Future IFRS developmentsThe Audit Committee has discussed future accounting developments likely to affect the presentation of the Group’s financial statements. TAX GOVERNANCE FRAMEWORKThe Audit Committee is responsible for monitoring all significant tax matters including the Group’s tax policy. The Finance Director is responsible for implementing the Group’s tax policy with the assistance of the senior finance and Group tax team. This is reviewed on an ongoing basis as part of the regular financial planning cycle. In addition, the Group’s tax status is reported regularly to the Board and Audit Committee. o DIRECTORS’ REPORT: GOVERNANCE o
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EXTERNAL AUDITThe Audit Committee oversees the Company’s relationship with the external auditors and makes recommendations to the Board in relation to their appointment, reappointment and removal and approves their remuneration and terms of engagement. The Board and Audit 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 Audit 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 Audit 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 for the period.The Audit Committee recognises that the independence of the auditors is an essential part of the audit framework and the assurance that it provides. The Audit Committee monitors any non-audit work that is undertaken by the external auditors to ensure that their objectivity and independence is not compromised. In the prior period the ratio of non-audit fees to audit fee exceeded 1:1. This was considered by the Audit Committee and was not considered to represent a threat to the auditors' independence as the majority of the non-audit fees related to a one-off project to provide forensic services. The Audit Committee regularly reviews the level of non-audit fees and, as noted above, pre-approval for any such services is required from the Audit Committee Chairman above set monetary thresholds. In approving any non-audit services the Audit Committee considers any threats, perceived or actual, to the auditors' independence taking regard of the guidance contained in the relevant ethical standards.The Audit Committee has formally reviewed the independence of the auditors during the review year. KPMG LLP has provided a letter to the Audit Committee confirming that it remains independent within the meaning of the regulations on this matter and in accordance with professional and ethical standards.To assess the effectiveness of the external auditors, the Audit Committee reviewed:• the external auditors’ fulfilment of the agreed audit plan and variations from it; • reports highlighting the major issues that arose during the course of the audit; and• feedback from the businesses evaluating the performance of each assigned audit team.The FRC’s Audit Quality Review team reviewed the KPMG LLP audit files for the prior period and shared with the Audit Committee the two observations in connection with audit process. The Audit Committee has discussed the review team’s feedback with KPMG and is satisfied that the auditors have addressed the two observations noted in relation to the audit process for the current year audit.The Audit Committee held meetings with the external auditors before each Audit Committee meeting to review key issues within their scope of interest and responsibility. To fulfil its responsibility for oversight of the external audit process, the Audit Committee reviewed: • the terms, areas of responsibility, associated duties and scope of the audit as set out in the external auditors’ engagement letter for the forthcoming year;• the external auditors’ overall work plan for the forthcoming year;• the external auditors’ fee proposal;• the major issues that arose during the course of the audit and their resolution;• key accounting and audit judgements;• the level of errors identified during the audit; and• recommendations made by the external auditors in their management letters and the adequacy of management’s response. Soxus Stylis
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Consideration is also given by the Audit Committee to the need to include the risk of the withdrawal of the external auditors from the market in its risk evaluation and planning.The Audit Committee considers the reappointment of the external auditors each year and assesses their independence on an ongoing basis. KPMG have been the Company’s external auditors since 2001, with a competitive audit tender process last carried out in 2012. The Audit Committee notes the final Order from the Competition & Markets Authority and the new EU Regulation on audit rotation and will ensure compliance with these requirements in considering when next to tender the external audit. The requirements of the Code and the Order and EU Regulation notwithstanding, the Audit Committee will continue to monitor the effectiveness of the external auditors on an annual basis and will tender in accordance with the new EU regulations.KPMG have expressed their willingness to continue in office as auditors. The Audit Committee has recommended to the Board that KPMG LLP be appointed as the Company’s external auditors for the 2016/17 financial period.WHISTLE BLOWINGThe Audit Committee is responsible for the review of the Company’s procedures for responding to the allegations of whistle blowers and the arrangements by which staff may, in confidence, raise concerns about possible financial reporting irregularities.Ronald StewartChairman of the Audit Committee o DIRECTORS’ REPORT: GOVERNANCE o
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Ted Baker Plc Annual Report and Accounts 2015/16NOMINATION COMMITTEE REPORTDear Shareholder,The role of the Nomination Committee is to establish a framework for the process of appointment of new Directors to the Board. The Nomination Committee is also responsible for overseeing succession planning requirements, including the identification and assessment of potential Board candidates and making recommendations to the Board for its approval.NOMINATION COMMITTEE MEMBERSHIPDuring the year the Nomination Committee was chaired by David Bernstein and its other members were Ronald Stewart, Anne Sheinfield and Andrew Jennings. The composition of the Nomination Committee during the year complied with Provision B.2.1 of the Code. The Nomination Committee is responsible for nominating candidates for appointment to the Board. All Non-Executive Directors are advised of the time commitment considered necessary to enable them to fulfill their responsibilities prior to appointment. The terms of reference for the Nomination Committee are available on the Company’s website www.tedbakerplc.com.APPOINTMENTS TO THE BOARDNo appointments to the Board were made in the period.The Company’s Articles of Association require one third of the Directors for the time being to retire each year, and for each Director to retire from office at least once every three years. However, in line with Provision B.7.1 of the Code, the Board has determined that all Directors must retire and stand for re-election by shareholders on an annual basis.In the year ahead, the Nomination Committee will meet to hold general discussions on succession planning and to facilitate long-term planning in respect of executive and non-executive skills required around the Board table, including the timing and the process for recruitment and the transition plan for existing Board members.DIVERSITYWe 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 34 to 35, the continued expansion of the Company means that Ted Baker’s workforce is becoming increasingly 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.David Bernstein CBEChairman of the Nomination Committee o DIRECTORS’ REPORT: GOVERNANCE o
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SUSTAINABILITY At Ted Baker we believe in being open and honest in the way we do business, this includes doing the right thing by all of our stakeholders throughout our supply chain and operating in a fair and sustainable manner. We approach our social, environmental and ethical commitments ('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 designed a three pronged plan, named Ted3, in 2012. Our Global Sustainability Strategy has been developed and continues to be advanced and improved ensuring that every department is included.HOW WE WORKThe Chief Operating Officer 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 Ted’s Conscience Team co-ordinates 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 SUSTAINABILITY FOCUSWe believe in three very important areas of sustainability:1. 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;2. Product: The Group is committed to purchasing the best possible products for use and sale within and throughout Ted and associated businesses at the same time as ensuring that the people and environment within the supply chain are treated well; and3. Practice: The Group is committed to practicing what it preaches by implementing a robust strategy to achieve our goals and targets by educating and inspiring our teams. o DIRECTORS’ REPORT: GOVERNANCE o
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Ted Baker Plc Annual Report and Accounts 2015/16ENVIRONMENTAL IMPACTSAs 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. Our disclosure score increased from 89% in the previous year to 93%; 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, trustees and suppliers, have been offset in full through the purchase of carbon credits from verified carbon reduction 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 local schools and charities to recycle as much waste from head office as we can;• We have been working with charity Newlife to ensure that all faulty garments returned to store do not end up in landfill. Since March 2014 all faulty returned garments are sent to Newlife for re-sale as secondhand garments;• Through relationships with charities Oxfam and Newlife we have been able to ensure that our end of life garments are utilised in the best way, raising over £325,000 and diverting over 24 tonnes of waste from landfill;• We are part of the Sustainable Clothing Action Plan ('SCAP'), a Department for Environment, Food and Rural Affairs ('DEFRA') sponsored action plan, organised to improve the sustainability of clothing throughout its lifecycle by bringing together industry, government and third parties. SCAP members collaborate to develop sector-wide targets along with the tools and guidance necessary to achieve them. As an SCAP 2020 signatory, we are challenged to reduce carbon, water and the amount of waste generated or consumed by our products by 15% by 2020; • We have introduced internal sustainable fibre targets to our 2017 collections to ensure that we are meeting our SCAP commitment; and• As part of SCAP, we participate in the Metrics Group. The Group identifies the key industry metrics that businesses should measure and is working on a tool to measure baseline carbon, water and waste footprints. It also identifies improvement actions that business could take in this area.ETHICAL AND SUSTAINABLE SOURCINGAs part of our commitment to “Product”, we place great importance on ethical and environmental sourcing within the Group. We believe that our products should be produced in factories that are committed to providing a fair and safe environment for their workers. Our trusted partners within the supply chain are one of our most valuable assets.• All Ted Baker suppliers are governed by our Ethical Code of Conduct. We revise our Code of Conduct regularly to ensure that it reflects legislative changes and make sure that our suppliers continue to make improvements. The Code is based on international conventions such as; The Ethical Trade Initiative Base Code, The United Nations Universal Declaration of Human Rights and The Fundamental Conventions of the International Labour Organisation, and can be found at http://www.tedbakerplc.com/~/media/Files/T/Ted-Baker/documents/ted-ethical-code-of-conduct-2016.pdf• Through our partnership with MADE-BY, a non-profit multi-stakeholder initiative set up to improve sustainability within the fashion industry, our Social Scorecard for 2014 was released during the year and can be found at http://www.made-by.org/modetracker/scorecards/ted-baker/ The scorecard shows an increase in the percentage of product sourced from MADE-BY A or B benchmarked factories. • Our MADE-BY Scorecard for 2014 is the last in this format as MADE-BY have developed a new progress tracking tool, MODE Tracker. It is aimed at supporting fashion brands to become more sustainable, focusing on eight areas of fashion business, including People, Product and Own Operations. Our first Scorecard will be released in April 2016. o DIRECTORS’ REPORT: GOVERNANCE o
COMMUNITY
In order to “Practice” 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. To make the most
of their innovation we have Ted’s Conscience Team to
encourage colleagues to be more environmentally and
socially aware in both their jobs and their personal lives.
• Ted’s Conscience issues a monthly “DO SOMETHING”
email initiating sustainable and environmental activities
and competitions to inspire everyone in our head office.
• We continue to encourage our employees to donate unwanted
items through our ‘Oxfam Collects’ Collection Point.
• In December 2014 we started to collect donations for
leftover restaurant food, we chose to donate the proceeds
to Magic Breakfast, a charity that provides underprivileged
school children in London with much needed breakfast
before school. We have so far raised enough money to
provide 10,340 Magic Breakfasts.
• We donated product and raised money for other charities
during the year including The Tope Project, a charity that
organises Christmas dinners for care leavers in London.
• We keep two Buckfast bee colonies on the roof of our
London head office from which we had a hugely successful
honey harvest for the sixth year running.
GREENHOUSE GAS EMISSIONS
The Group has, for a number of years, participated in the
Carbon Disclosure Project and is now required, in accordance
with The Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 (the 'Regulations'), to report its
greenhouse gas emissions ('GHG').
The Group has adopted a greenhouse gas reporting policy
and a management system based on the ISO 14064-1:2006
methodology, which has been used to calculate the Group’s
Scope 1 and 2 emissions in the period for activities within the
financial control of the Group.
In measuring the Group’s greenhouse gas emissions, all
the Group’s stores, warehouses and head offices around the
world were taken into account. The space occupied by the
Group within concession stores is excluded from Scope 1 and
2 calculations because the Group has neither financial nor
operational control over a concession area. Such emissions are
included in the Group’s Scope 3 figures which are published in
our annual Carbon Disclosure Project Report.
The Group’s GHG emissions during the period are disclosed in the table below.
Scope 1 – Direct CO2 emissions (tonnes CO2e)
Scope 2 – Indirect CO2 emissions (tonnes CO2e)
Total tonnes CO2e emissions
tCO2e per sq ft
tCO2e per £'000 sales
2016
138
4,062
4,200
0.012
0.009
2015
220
4,538
4,758
0.014
0.012
GHG emissions for the year ended 30 January 2016 have been calculated using the appropriate 2015 UK Government Conversions
Factors for Company Reporting.
32
THE BRIBERY ACT 2010The Board continues to proactively review the Group’s procedures to ensure they are sufficiently robust to prevent corruption.MODERN SLAVERY ACT 2015Ted condemns the practice of Modern Slavery. Pursuant to the Company’s Code of Conduct, suppliers are required to ensure that all reasonable efforts are employed to eliminate Modern Slavery and deceptive practices in the recruitment of workers in their operations, in their subcontractors and within their supply chains including raw material producers. The Group will issue a slavery and human trafficking statement in the next period in accordance with the Modern Slavery Act 2015. F lora Activicus
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PEOPLEThe incredible talent, enduring commitment and passion of the Ted Baker team are key factors in the success of the Group. We encourage team members with learning and development opportunities, nurture their growth and potential, and recognise and reward their contributions. This is illustrated by the energy and inspired performance of our team who drive innovation and the Group’s growth.REWARD AND RECOGNITIONRemuneration is reviewed annually and a benchmarking analysis is undertaken against market intelligence to ensure we remain competitive and commensurate across all areas of the business. For employees in each territory where the Group operates, we offer reward and recognition schemes in line with local legislative and market requirements. Our reward packages include bonus schemes linked to sales targets and individual and corporate performance. We encourage all UK employees to join our Save As You Earn share scheme which provides Ted with confidence in the commitment of its team. Ted also provides a Long Term Incentive Plan ('LTIP') for key senior employees throughout the business spanning a three year award period. The LTIP is currently in its third tranche of issue and it is anticipated that this will continue on a rolling yearly award basis to enhance total annual reward and support retention. During the period we celebrated the fifth year of Wisdom Awards, our scheme that recognises long serving members of the team and provides a chance for them to celebrate and share their Ted stories.LEARNING AND DEVELOPMENTIndividual performance is reviewed bi-annually with each team member to discuss personal and career development and to set, and assess performance against, goals and objectives linked to personal growth and business development, as well as Ted’s environmental and social commitments. We invest in training which ranges from outsourced specialist and technical skills training to in-house developed "Hand Made by Ted" bespoke courses offered by the Ted Academy focusing on management and leadership skills, brand awareness and self-awareness. Distinct career paths exist across the Group and inter-departmental and international transfers play a large part in retaining and growing talent as well as ensuring the Ted story translates across the Globe. Our manpower and succession plans are monitored and evaluated regularly to highlight skills and learning gaps, anticipate vacancies and harness talent. During the period we launched Ted’s Extraordinary Diploma which is an apprenticeship programme for "Learning at the School of Ted". Due to its success a second programme is planned for 2016/17.DIVERSITYThe Group believes in respecting individuals and their rights in the workplace, and that diversity supports the dynamic of our teams to deliver success. With this in mind, specific policies are in place setting out our stance and commitment to managing harassment and bullying, whistle blowing and equality and diversity. Our team represents a wide and diverse workforce from all backgrounds, sexual orientation, nationality, ethnic and religious groups. We support sponsorship of visa applications, where appropriate, to retain specific talent within the business. With continued overseas expansion our workforce is becoming more diverse and we respect cultural difference and actively seek to learn about each territory we operate within. o DIRECTORS’ REPORT: GOVERNANCE o
Our commitment to diversity across the Group continues and consideration to diversity and gender is given with a view to
appointing the best placed individual for each new role. The charts below demonstrate the gender split across the Board of Directors,
the Group's leadership and senior management teams and global employees as at 30 January 2016.
Ted Baker Plc Board of Directors
Executive Committee and other senior managers
Global employees
2016
2015
MALE FEMALE TOTAL
MALE
FEMALE TOTAL
5
34
1
54
6
88
1,108
2,168
3,276
5
27
995
1
39
6
66
1,842
2,837
UK
North America
Europe
Asia
MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
TOTAL
Ted Baker Plc Board of Directors
Executive Committee and other senior managers
Global employees
5
21
695
1
31
-
9
1,226
244
-
14
456
-
1
-
4
111
358
-
3
58
-
5
6
88
128
3,276
35
Ted Baker Plc Annual Report and Accounts 2015/16HEALTH, SAFETY AND WELFAREOur 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 Wellness health assessment days and we offer health and fitness classes to our team members at our Tedquarters. We run a Childcare Voucher Scheme in the UK and an Employee Assistance Programme in the UK and USA further supports our genuine concern for the well-being of our team.The prevention and identification of risks and accidents is supported by an external Health and Safety service provider and ongoing training of management teams. The Group employs a dedicated Health and Safety team to strengthen our knowledge and commitment in this area of the business. EMPLOYEES WITH DISABILITIESApplications for employment by persons with disabilities are always fully and fairly considered, focusing on the aptitudes and abilities of the applicant concerned. In the event of members of the Ted team becoming disabled during their employment, every effort is made to ensure that their employment with the Group continues and that where appropriate reasonable adjustments are made and relevant training and education of the wider team is arranged. It is the policy of the Group that the training, career development and promotion of persons with disabilities should, as far as possible, be identical with that of other team members.CULTUREOur brand values are important in everything we do and are instilled in team members at their initial induction and onboarding and at Teducation sessions with the Founder and Chief Executive telling the story behind the brand. Employees are encouraged to always ask: "Would Ted do it that way?" We continue employees' cultural journeys through a host of varied events.EMPLOYEE ENGAGEMENTThe Group places considerable value on the involvement of its team members and continues to keep them informed on matters affecting them and the Group, communicating in a way that aligns with the brand tone of voice and actively encourages feedback. This is achieved through formal and informal meetings, BroadcasTED communications, Talk to Ted sessions, team member surveys and e-postcard messages from Ted. Team representatives are consulted regularly on a wide range of matters affecting team members’ current and future interests. Team members are regularly informed of the Group’s performance and any factor affecting its performance during the year, in addition to business development initiatives to maintain interest and encourage participation. Entici Seductivus
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BOARD OF DIRECTORSDAVID ALAN BERNSTEIN, CBE NON-EXECUTIVE CHAIRMAN (72)David is Chairman of the British Red Cross. Previously he was joint Managing Director of Pentland Group Plc, Chairman of Blacks Leisure Plc, Manchester City Plc and the Football Association. He is Chairman of the Nomination Committee and a member of the Audit and Remuneration Committees. In the New Year Honours’ List of 2014 David was appointed Commander of the Order of the British Empire (CBE) for services to football.RAYMOND STUART KELVIN, CBE CHIEF EXECUTIVE (60) (‘CLOSEST MAN TO TED’)Ray, the founder of Ted Baker, has worked in the fashion industry for over 40 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.LINDSAY DENNIS PAGE, MA, ACA CHIEF OPERATING OFFICER (57)Lindsay joined Ted Baker as Finance Director in February 1997. He joined Binder Hamlyn in 1981, became a founder member of the corporate finance department in 1986 and a partner in 1990. Binder Hamlyn subsequently merged with Arthur Andersen in 1994. Lindsay was appointed as the Group’s Chief Operating Officer in addition to his role as Group Finance Director on 8 July 2014.RONALD STEWART, FCIB NON-EXECUTIVE DIRECTOR (68)Ron was appointed as a Non-Executive Director on 25 February 2009. 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 Independent Director.ANNE SHEINFIELD NON-EXECUTIVE DIRECTOR (50)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 and a member of the Nomination Committee. Anne is an Independent Director. ANDREW JENNINGS NON-EXECUTIVE DIRECTOR (67)Andrew was appointed as a Non-Executive Director on 1 February 2014. He has worked in the international retail industry for over 40 years at some of the world’s most respected high-end department stores. Previously he was Chief Executive Officer of the Karstadt Group in Germany and prior to this has held a number of senior executive positions at leading UK and international retailers including Saks Fifth Avenue in the USA; Holt Renfrew in Canada; Harrods and House of Fraser in the UK; and Brown Thomas in Ireland. He is a member of the Audit, Nomination and Remuneration Committees. Andrew is an Independent Director. o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
39
Ted Baker Plc Annual Report and Accounts 2015/16DIRECTORS’ REMUNERATION REPORTPART A: ANNUAL STATEMENT Dear Shareholder,The Directors’ Remuneration Report has been prepared on behalf of the Board by the Remuneration Committee in accordance with the requirements of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended, and meets the relevant requirements of the Listing Rules of the Finance Conduct Authority and the UK Corporate Governance Code. The Remuneration Report is split into two parts:• The Directors’ Remuneration Policy which sets out the Company’s policy on Directors’ remuneration which was approved at the Annual General Meeting ('AGM') held on 10 June 2014, and the key factors that were taken into account in setting the policy. The Directors’ Remuneration Policy is subject to a binding shareholder vote at least every third year following its approval; and• The Annual Report on Remuneration sets out payments and awards made to Executive Directors and Non-Executive Directors and details the synergy between Company performance and remuneration for the period. 2015/16 – A YEAR IN REVIEWThe Group delivered a strong performance in 2015/16. Continued investment has been made in the long-term future of the brand, including the recruitment of new specialist talent into key areas to drive the global development and growth of the business, and to support the investment in core infrastructure. Our unique and talented teams continue to drive momentum and as the Group continues to expand in new and existing markets, their commitment to take on diverse and complex challenges with passion and professionalism has further strengthened the foundations of the Ted Baker brand. I am pleased to announce that 50% of the maximum potential annual bonus has been achieved and will be paid to Executive Directors and eligible employees across the Group. A third award of options was made under the shareholder-approved Ted Baker Plc Long Term Incentive Plan 2013 (the “2013 LTIP”) in April 2015. This award of options carries the same performance conditions as the previous two awards and will vest in April 2018. Following a review of fees payable to NEDs carried out during the year, increases were approved by the Board with effect from 1 August 2015 to bring NED fees in line with market rates. Further details are provided in the annual report on remuneration in part C.Last year’s Directors’ Remuneration Report (excluding the remuneration policy) was approved by 97.29% of shareholders, and the Directors’ Remuneration Policy was approved by 97.21% of shareholders at the AGM held on 10 June 2014. This high level of shareholder approval confirms our reasonable approach to remuneration.2016/17 – THE YEAR AHEADIn arriving at the proposed base salaries payable for 2016/17, the Remuneration Committee have kept the basic salaries of the Executive Directors at the same rates as were in force at 30 January 2016. This is consistent with the approach to salary increases for head office employees across the Group where the flat salary rate has been applied (except in cases of exceptional performance, changes in roles or responsibilities or promotion) in exchange for a marginal reduction in weekly working hours. Further details are provided in the annual report on remuneration in part C.The next independent benchmarking report to review the remuneration packages of Executive Directors and senior management will be commissioned in 2016/17. Any changes required to the Group’s remuneration policy to maintain total remuneration packages at the targeted median level will be put to shareholders for consultation and proposed in the Directors’ Remuneration Report for the year ended 28 January 2017 which will be subject to a binding vote by shareholders.IN CONCLUSIONThe annual report on remuneration provides further details and the Directors’ Remuneration Policy sets out how we are continuously building for the future.I would like to thank you for your support in approving the current remuneration policy and hope that we can rely on your vote in favour of the Directors’ Remuneration Report at this year’s Annual General Meeting.Anne SheinfieldChairman of the Remuneration Committee o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
REMUNERATION POLICY TABLE – EXECUTIVE DIRECTORS
ELEMENT
MAXIMUM POTENTIAL
OPERATION AND LINK
TO STRATEGY
PERFORMANCE TARGETS
AND TIME PERIOD
BASE SALARY
No maximum salary but annual
increases will be broadly consistent
with increase in base salary of wider
employee population and generally no
higher than the increase in RPI unless
there is a change in role or responsibility.
Salary reviewed annually and reflects
the role and sustained value of the
individual in terms of skills, experience
and contribution. Increases will be
applied to reflect inflation and are in
line with wider employee increases.
N/A
ANNUAL BONUS
Up to 100% of base salary.
Drives and rewards annual
performance.
Profit targets are reviewed annually at
the start of the financial year.
Payment is determined by the
Remuneration Committee following
the end of the financial year.
LTIPs
Up to 150% of base salary per annum.
The Remuneration Committee has
the right to award up to 200% of basic
salary in exceptional circumstances.
Annual award of shares which vest
dependent on the achievement of
profit targets with a share price
underpin.
40
Achievement of profit before tax,
annual bonus and exceptional /
non-recurring items against targets*
for the financial year.
The Remuneration Committee reserves the
right to make adjustments if the outcome
does not reflect underlying performance.
Threshold vesting is 0%.
Annual bonus policy does not contain
any clawback or malus provisions.
25% vesting if compound annual
growth of profit before tax per share of
10% over the three year performance
period beginning with the financial
year in which the awards are made,
rising to 100% vesting at 15% growth.**
PART B: DIRECTORS’ REMUNERATION POLICYREMUNERATION POLICY The policy described in this section was approved by shareholders on 10 June 2014 at the Company’s Annual General Meeting and applies for the three years commencing on that date. No changes have been made to the policy since it came into effect on that date. The original approved version of the policy can be found in the Group’s annual accounts for the year ended 25 January 2014 at www.tedbakerplc.com.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.We use target performance to estimate the total potential reward and benchmark it according to the criteria outlined above. External benchmarking analysis is commissioned every two years to make sure that we remain competitive within the broader retail comparator groups. The latest benchmarking report was carried out during the year ended January 2015 and the results presented to the Remuneration Committee in February 2015. The next report will be commissioned during the year ending January 2017.Remuneration packages for Executive Directors are structured to provide a balance between fixed basic salary and variable remuneration based on individual and Group performance.Non-Executive Directors are remunerated with fees in line with market rates. They do not receive any pension or other benefits, other than the reimbursement of reasonable expenses, and they do not participate in any bonus or share schemes.SHORT AND LONG-TERM REMUNERATIONGroup policy is to use fixed annual elements of remuneration such as salary, pension and benefits to recognise the status of our Executives and to ensure current and future market competitiveness. The use of short-term annual bonus incentives and Long Term Incentive Plans ('LTIPs') provides a direct link between remuneration and key performance indicators. It also creates a synergy between the Executive Directors’ personal return and the return to investors.Both the short and long-term incentives are used to motivate and reward them for sustaining and growing the success of the Ted Baker Group. o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
LTIPs
CONTINUED
Drives the overall business strategy
and objectives, and aligns the interests
of shareholders and the executive team
over the longer term.
Share awards will only vest if the share
price has risen by 10% over the three
year period commencing on the date
that the awards are made.
No dividends are payable on unvested
or unexercised LTIP options.
No claw-back or malus provisions are
included in the LTIP rules.
In the event of a change in control of
the Group prior to the end of the
period set for achievement of performance
targets the performance period will be
shortened to the date of change of
control and awards will vest on change of
control based on the extent to which any
performance conditions are satisfied by
reference to that shortened performance
period. If the change of control occurs
after the end of the performance period,
awards will vest on change of control
to the extent that the performance
conditions have been satisfied.
Performance conditions for
future awards may vary but the
Remuneration Committee will
consult with shareholders on any
major changes proposed.
THE TED BAKER
SHARESAVE SCHEME
RETIREMENT BENEFITS
OTHER BENEFITS
All Executive Directors excluding
Mr R S Kelvin have the option to
save up to the statutory limit towards
options over shares in Ted Baker Plc
over any three or five year period.
All Executive Directors excluding
Mr R S Kelvin are entitled to pension
contributions to a money purchase
scheme of up to 12.5% of base salary.
Entitlements include car allowance
and medical expense insurance.
To align the interests of Executive
Directors with the long-term interests
of the shareholders.
None.
Positioned to ensure broad
competitiveness with market practice.
N/A
Maximum car allowance entitlements
are based on the estimated costs of
running a private car.
N/A
NOTES TO THE EXECUTIVE DIRECTORS’ POLICY TABLE
*Annual bonus
Profit targets are set by the Remuneration Committee at the start of the financial
year by reference to internal budgets and taking account of consensus market
expectations for profit before tax and exceptional / non-recurring items. Market
expectations for profit are considered a key measure of business performance for
our shareholders; in considering these, the highest and lowest expectations from
the range are excluded to help reduce the risk of distortion. The funds available for
payment of the annual bonus are determined by the achievement of profit before
tax, annual bonus and exceptional / non-recurring items in a financial year in
excess of the target. The maximum bonus payable to staff is capped as a percentage
of base salary which varies according to individual contracts. The maximum annual
bonus payable to an Executive Director is capped at 100% of base salary.
**LTIPs
In arriving at the performance criteria for the 2013 LTIP, the comparator group
used for benchmarking purposes consisted of listed companies with similar
enterprise value to Ted Baker. The group included retail and other service sector
businesses and was approved by the Remuneration Committee.
41
This scheme was introduced in July 2013 for Executive Directors and other
senior executives across the Group. The criteria used to measure performance
are growth targets based on adjusted profit before tax per share over the
performance period and share price growth over the award period. The profit
per share growth targets were set following consideration of consensus market
analyst expectations and the share price growth target was agreed in consultation
between the Remuneration Committee and shareholders.
The Remuneration Committee felt that these criteria were appropriate for
the Group in view of its recent investment in expansion and should encourage
management to focus on longer-term profitable growth. The share price growth
target has been favoured over a TSR-based measure because the unique profile
of the Group’s business means that a readily comparable TSR benchmark was
not available. A commitment has, however, been made to apply the existing
dividend policy consistently.
Ted Baker Plc Annual Report and Accounts 2015/16 o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
APPROACH TO SETTING FEES
BASIS OF FEES
OTHER ITEMS
Fees are reviewed at appropriate intervals taking
into account the time commitment expected and
practice in peer companies of a similar size, sector
and complexity.*
Each NED is paid a basic fee for undertaking
Non-Executive Director and Board duties. A higher
fee is typically paid to the Chairman of the Board.
Non-Executive Director fees are not subject to
claw-back or withholding arrangements.
The NEDs do not participate in the Company’s
annual bonus scheme, long-term incentive plans,
health care arrangements or employee share schemes
and do not receive any retirement benefits.
The Group provides each NED with relevant liability
insurance for the duration of their appointment.
All NEDs stand for reappointment on an annual
basis at every AGM.
*Increase in fees payable to NEDs
Following a review of fees payable to NEDs carried out during the year, increases were approved by the Board with effect from 1 August 2015 to bring NED fees
in line with market rates.
42
REMUNERATION POLICY TABLE – NON-EXECUTIVE DIRECTORSThe Board aims to recruit high-calibre Non-Executive Directors ('NEDs') with broad commercial, international or other relevant experience. The remuneration policy for NEDs is set by the Board having taken account of the fees paid by other companies of a similar size and complexity.When recruiting NEDs, the remuneration arrangements offered will generally be in line with those set out in the Non-Executive Directors’ Remuneration Policy Table below.DIFFERENCES IN REMUNERATION POLICY FOR ALL EMPLOYEES A consistent remuneration approach is applied at all levels throughout the Group, except as outlined below, to make sure that business strategy and performance are aligned and that the total reward is sufficient to attract and retain high-performing and talented individuals. All employees of Ted Baker are entitled to a base salary, annual or periodic bonus and benefits dependent upon their role within the Group. The maximum opportunity available for a base salary increase is consistent across all employees. The maximum opportunity for bonus and benefits is based on seniority, responsibility and function of the role. Conditional long-term share awards are only available to Executive Directors and other members of senior management across the Group. Share option grants under the Save As You Earn scheme are available to all UK employees.STATEMENT OF CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE COMPANY The Group Head of Human Resources presents to the Remuneration Committee at its meeting in February each year on proposed salary increases for the general employee population and on any changes to remuneration policy within the Company. The Remuneration Committee limits any increases in base salary for Executive Directors so that they are broadly in line with the inflationary increase to be applied across the general employee population unless there has been a change in role, or if the salary and total reward falls below the targeted median range.Proposed remuneration arrangements are discussed with employee communication groups and senior management. The Remuneration Committee does not specifically invite employees to comment on the Executive Directors’ remuneration policy but any comments made by employees are taken into account.As well as benchmarking the remuneration packages of an Executive Director peer group, the benchmarking exercise performed during the year ended January 2013, which informed the current policy, included a separate analysis of salaries paid to other senior executives. The Remuneration Committee’s conclusion following that report was that the Group should commit to target total remuneration levels for senior management across the Group within the median range in order to retain and reward key individuals. A further benchmarking report was conducted during the 53 weeks ended 31 January 2015. Again, the report considered the remuneration packages of both Executive Directors and senior management and the findings confirmed the current strategy of targeting a median level total remuneration package. The next benchmarking report will be performed in the 52 weeks ending January 2017. Natty Detailia
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
SERVICE CONTRACTS AND POLICY OF PAYMENTS FOR LOSS OF OFFICE
STANDARD PROVISION
POLICY
DETAILS
Notice periods in Executive Director
Service Contracts
12 months’ notice from the Company.
12 months’ notice from the Executive
Director.
Compensation for loss of office
in service contracts
Treatment of annual bonus
on termination
Treatment of unvested and deferred
share awards on termination under
plan rules
Outside appointments
Non-Executive Directors
No more than 12 months’ salary,
pension and benefits (excluding
bonus).
No payment unless employed on the
date of payment of bonus except for
“good leavers”. The Remuneration
Committee retains discretion to
determine whether an Executive
Director is a “good leaver” taking
account of circumstances including
in particular death, disability and
redundancy.
All awards lapse except for “good
leavers” (e.g. on death, disability,
ill health, injury, retirement,
redundancy). The Remuneration
Committee retains discretion to
treat an Executive Director as a
“good leaver” in other circumstances.
Executive Directors may accept
one Board appointment in another
listed company.
NEDs have letters of appointment
with the Company which provide:
3 - 6 months’ notice from the
Company
3 - 6 months’ notice from the NED.
Executive Directors may be required
to work during their notice period,
be placed on gardening leave for all
or part of the notice period or be
provided with pay in lieu of notice if
not required to work the full period
of notice.
Payable monthly and adjusted if the
Executive Director obtains alternative
employment.
“Good leavers” are entitled to a bonus
pro-rated to the period of service
during the year provided the financial
targets have been achieved and all
necessary conditions have been met.
The Remuneration Committee has
discretion to reduce the entitlement
of a “good leaver” in line with
performance and the circumstances
of the termination.
For “good leavers”, the extent of
vesting is at the discretion of the
Remuneration Committee taking
account of performance to date
of leaving and pro-rated for period
of employment in the vesting period
for the award.
The Remuneration Committee’s
discretion to treat an Executive
Director as a “good leaver” will
take into account the particular
circumstances of the Executive
Director’s departure.
The Remuneration Committee
Chairman’s approval must be sought
before accepting appointment.
Fees may be retained by the
Executive Director.
NEDs may be required to work
during the notice period, be placed
on gardening leave for all or part of
the notice period or may be provided
with pay in lieu of notice if not
required to work the full period
of notice.
OTHER PROVISIONS
IN SERVICE CONTRACTS
Executive Directors’ service
contracts include non-compete
and non-poaching provisions.
N/A
N/A
N/A
N/A
N/A
44
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
CONTRACTS OF SERVICE & LETTERS OF APPOINTMENT
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 NEDs’ fees.
DATE OF SERVICE
CONTRACT/LETTER
OF APPOINTMENT
UNEXPIRED
TERM
NOTICE PERIOD
PROVISION FOR
COMPENSATION
DAVID A BERNSTEIN
24 January 2003
RAYMOND S KELVIN
LINDSAY D PAGE
RONALD STEWART
ANNE SHEINFIELD
ANDREW JENNINGS
17 July 1997
17 July 1997
25 February 2009
15 June 2010
1 February 2014
6 months
12 months
12 months
3 months
3 months
3 months
6 months
12 months
12 months
3 months
3 months
3 months
None
None
None
None
None
None
RECRUITMENT REMUNERATION
The Group’s strong brand identity, cultural and family ethos
attract a high calibre of candidate. If needed, external recruitment
agencies are engaged to recruit for specialist roles.
The Remuneration Committee’s approach to recruitment
remuneration is to pay at the comparable internal rate and no more
than is necessary to attract candidates with the appropriate level
of skill and experience to the role. The Remuneration Committee
retains the principle of a median level total remuneration package
when benchmarking for new and senior roles.
In order to attract key talent to Ted Baker the Remuneration
in exceptional circumstances, consider
Committee will,
compensating a candidate for losses incurred by leaving a
previous employer to join the Group. This will not be considered
as regular practice and nor will the Remuneration Committee
commit to matching any expected value of awards.
A relocation package within HMRC guidelines will be
offered to Executive Directors who are required to relocate to
take up their appointment within the Group.
The remuneration package for any new Executive Directors
would be made up of the same or broadly similar components to
those used to reward existing Executive Directors of the Group
as described in the Remuneration Policy Table for Executive
Directors above. The remuneration package would comprise
an appropriate mixture of fixed and variable remuneration as
was required to attract a candidate of appropriate skill and level
of qualification.
45
Ted Baker Plc Annual Report and Accounts 2015/16 o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
TOTAL REMUNERATION OPPORTUNITY
NOTES:
The total remuneration for each of the Executive Directors
that could result from the remuneration policy in 2016/17
under three different performance scenarios is shown below:
RAYMOND S KELVIN
LTIP variable
Annual variable
Fixed
453
100%
2000
1800
1600
1400
1200
1000
800
600
400
200
0
972
26%
27%
47%
1,904
53%
23%
24%
FIXED
THRESHOLD
MAXIMUM
(Note: Figures are stated in £’000s)
LINDSAY D PAGE
2000
1800
1600
1400
1200
1000
800
600
400
200
0
LTIP variable
Annual variable
Fixed
984
24%
26%
496
1,854
50%
23%
100%
50%
27%
FIXED
THRESHOLD
MAXIMUM
(Note: Figures are stated in £’000s)
46
Fixed pay is base salary plus pension & benefits for 2016/17.
Threshold performance is the level of performance required
to deliver 60% of the maximum bonus and 25% of the full LTIP
award and the scenario assumes that the share price growth
target of 10% is met at the vesting date. The LTIP variable
amount relates to awards granted in July 2013 which will not
vest until July 2016. LTIP awards granted in April 2015 will not
vest until April 2018.
Maximum performance would result in the maximum
bonus payment of 100% of salary and 100% vesting of the LTIP
award. Again, this assumes that the share price growth target is
also met.
For the purpose of the scenarios illustrated above the share
price used in calculating the value of the LTIP variable is the
average of the Company’s share price over the last quarter of the
year ended 30 January 2016.
Mr R S Kelvin has the right to receive £15,000 by way of
car allowance during the 52 weeks ending 28 January 2017. At
the date of signing the Company’s accounts, he has chosen, as
he did during the 52 weeks ended 30 January 2016, to claim
only £5,400. This position is reflected in the illustration above;
however, Mr R S Kelvin has the right to claim the full value of
the allowance at a future date, prior to the year end, if he chooses.
STATEMENT OF CONSIDERATION
OF SHAREHOLDER VIEWS
The Remuneration Committee consults with key
shareholders and seeks feedback on any major changes to
executive remuneration, including the level of awards to be
made and the performance targets in respect of the Company’s
long-term incentive schemes.
In May 2013 the Remuneration Committee consulted
with key shareholders on the design of the Ted Baker Plc
Long Term Incentive Plan 2013. The consultation included
consideration of the move from a single performance period
spanning three years to rolling annual awards, performance
metrics and conditions, and the level of awards. A number
of meetings were held with key shareholders to discuss
their comments and feedback before the scheme was
finalised and approved at the Annual General Meeting on
20 June 2013. In 2016/17 the design of the 2013 LTIP will be
reviewed and shareholders will be consulted in respect of any
significant changes.
Courtalis Exotica
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
PART C: ANNUAL REPORT ON REMUNERATION
The table below sets out in a single figure the total amount of remuneration, including each element, received by each of the
Executive and Non-Executive Directors for the years ended 30 January 2016 and 31 January 2015.
DIRECTORS’ SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED)
YEAR ENDED
30 JANUARY 2016
SALARY
BENEFITS*
PERFORMANCE
RELATED
BONUS
LONG TERM
INCENTIVE
PLANS
PENSION
TOTAL 2016
£’000
£’000
£’000
£’000
£’000
£’000
EXECUTIVE
R S Kelvin
L D Page
NON-
EXECUTIVE
D A Bernstein
R Stewart
A Sheinfield
A Jennings
434
417
65
45
45
45
1,051
8
18
-
-
-
-
26
223
213
-
-
-
-
436
-
-
-
-
-
-
-
-
53
-
-
-
-
53
665
701
65
45
45
45
1,566
YEAR ENDED
31 JANUARY 2015
SALARY
BENEFITS*
PERFORMANCE
RELATED
BONUS
LONG TERM
INCENTIVE
PLANS
PENSION
TOTAL 2015
£’000
£’000
£’000
£’000
£’000
£’000
EXECUTIVE
R S Kelvin
L D Page
NON-
EXECUTIVE
D A Bernstein
R Stewart
A Sheinfield
A Jennings
374
360
60
40
40
40
914
8
26
-
-
-
-
34
375
370
-
-
-
-
745
-
-
-
-
-
-
-
-
44
-
-
-
-
44
* Benefits comprise private medical insurance, car benefits and the discount on SAYE options granted during the year.
ANNUAL RATES OF SALARY IN FORCE DURING THE YEAR
R S Kelvin
1 February 2015 - 31 March 2015
1 April 2015 - 30 January 2016
L D Page
1 February 2015 - 31 March 2015
1 April 2015 - 30 January 2016
48
757
800
60
40
40
40
1,737
£’000
375
445
370
425
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
ANNUAL BONUS (AUDITED)
For the financial year ended 30 January 2016 50% of the maximum potential bonus pool was achieved.
ACTUAL PERFORMANCE AGAINST PERFORMANCE TARGETS (AUDITED)
PERFORMANCE – RELATED BONUS
KPI
TARGET
ACTUAL
% MAX
ACHIEVED
R S KELVIN
L D PAGE
PROFIT
TARGET
£’M
64.9
£’M
61.4
MAX £’000
ACTUAL £’000
MAX £’000
ACTUAL £’000
50%
445
223
425
213
The profit target is arrived at after adjusting profit before tax for exceptional / non-recurring items and annual bonus as explained
earlier in the Directors’ Remuneration Policy.
LONG TERM INCENTIVE SCHEMES (AUDITED)
AWARDS UNDER THE TED BAKER PLC LONG TERM INCENTIVE PLAN 2013 (AUDITED)
Awards of options have been made by the Remuneration Committee over Ordinary Shares in Ted Baker Plc under the 2013
LTIP to the Executive Committee and other members of senior management, subject to three year performance periods. Details
of the awards which are due to vest under the 2013 LTIP are as follows:
2013 LTIP
Award 1
Award 2
Award 3
DATE OF AWARD
NO. OF OPTIONS
PERFORMANCE PERIOD
3 July 2013
1 May 2014
30 April 2015
220,226
254,141
3 year period ending 2 July 2016
3 year period ending 30 April 2017
192,860
3 year period ending 29 April 2018
Awards granted to Executive Directors under the 2013 LTIP during the year were as follows:
TYPE OF
INTEREST
NO. OF
SHARES
BASIS OF
AWARD
FACE VALUE
£’000
% VESTING AT
THRESHOLD
PERFORMANCE
PERIOD
R S Kelvin
L D Page
LTIP 2013 share
awards Award 3
LTIP 2013 share
awards Award 3
23,380
150% of salary
22,329
150% of salary
558
556
25%
25%
3 year period ending
29 April 2018
3 year period ending
29 April 2018
LTIP awards granted in respect of Mr Raymond S Kelvin and Mr Lindsay D Page represent 24% of the total number of LTIP
awards granted during the year (2015: 23%). The balance included other senior executives across the Group. Face value has been
calculated by multiplying the maximum number of share awards that may vest by the share price used for purposes of the grant.
The award made under the 2013 LTIP is subject to performance conditions of compound annual growth in profit before tax
and exceptional items per share over the three year performance period and share price growth over the three year award period as
detailed below.
PERFORMANCE CONDITIONS
THRESHOLD
TARGET
STRETCH
SUPER-STRETCH
Adjusted profit before tax per share
Share price
10%
10%
12%
10%
13.5%
10%
15%
10%
49
Ted Baker Plc Annual Report and Accounts 2015/16 o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
The closing share price on the day immediately prior to the grant and the share price used for determining the number of awards
made on 30 April 2015 was £28.55 (awards made 1 May 2014: £18.49). The share price used for the basis of the share price growth
target was £23.85 (awards made 1 May 2014: £21.03), being the average closing price for the six month period ending immediately
before the date the awards were made.
No awards were granted to either Mr L D Page or Mr R S Kelvin under the Company Sharesave scheme during the 52 weeks
ended 30 January 2016. Mr L D Page was granted 1,875 options under the Company Sharesave scheme during the 53 weeks ended
31 January 2015. These options carry no performance criteria and were granted with an exercise price of £16.00, which represented
a discount of 20% to the prevailing market rate. The vesting period for these awards ends on 1 July 2019.
DIRECTORS’ SHAREHOLDING (AUDITED)
Raymond S Kelvin
Lindsay D Page
NO. OF SHARES
OWNED (INCLUDING
CONNECTED PERSONS)
NO. SHARE AWARDS
GRANTED UNDER
LTIP 2013
NO. SHARE AWARDS
GRANTED UNDER TED
BAKER SHARESAVE
SCHEME*
15,540,280
81,229
85,907
80,501
-
1,875
* The earliest date on which options acquired by Mr L D Page under the Ted Baker Sharesave Scheme will vest is 1 July 2019 at a price of £16.00 each.
OPTIONS EXERCISED BY DIRECTORS DURING THE YEAR (AUDITED)
No options were exercised during the year by either of the Executive Directors.
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
No payments were made in the year for loss of office.
PAYMENTS TO PAST DIRECTORS (AUDITED)
No payments were made in the year to past Directors.
50
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
PERFORMANCE GRAPH AND TABLE
The following graph charts the total cumulative shareholder return of the Company from January 2009 to January 2016.
Ted Baker Plc
F TSE All Share Personal Goods
F TSE All Share
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
January
‘09
January
‘10
January
‘11
January
‘12
January
‘13
January
‘14
January
‘15
January
‘16
The graph above shows the Company’s performance against the FTSE All Share Personal Goods index, the sector against
which it is tracked by market analysts, and also against the FTSE All Share index to illustrate the Company’s performance in
the general market.
51
Ted Baker Plc Annual Report and Accounts 2015/16 o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
CEO REMUNERATION
Total Remuneration
% of maximum performance-related bonus paid
% of maximum LTIP vesting
2010
£’000
493
Note 1
75%
0%
2011
£’000
527
Note 1
76%
0%
2012
£’000
569
Note 1
67%
0%
2013
£’000
4,126
Note 2
0%
100%
2014
£’000
701
90%
0%
2015
£’000
757
100%
0%
2016
£’000
665
50%
0%
PERCENTAGE CHANGE IN CEO’S REMUNERATION
The table below shows how the percentage change in the CEO’s total remuneration excluding share-based payments in 2015
and 2016 compares with the percentage change in the average remuneration for all employees within the Group. The Remuneration
Committee has selected the Group’s entire staff population (excluding the CEO) as this represents the most appropriate comparator.
CEO R S KELVIN
REMUNERATION (£’000)
GLOBAL EMPLOYEES’
REMUNERATION (£’000)
NUMBER OF EMPLOYEES
AVERAGE REMUNERATION
(£’000)
SALARY AND BENEFITS
PENSIONS
ANNUAL BONUS
2016
442
2015 % Change
2016
2015 % Change
382
15.7%
-
-
-
2016
223
2015 % Change
375
(40.5%)
58,115
50,723
14.6%
1,422
1,030
38.1%
2,477
3,933
(37.0%)
2,954
19.67
2,803
18.10
5.4%
8.7%
2,954
0.48
2,803
0.37
5.4%
29.7%
2,954
0.80
2,803
5.4%
1.40
(42.9%)
52
Note 1: The performance criteria in respect of LTIP schemes due to vest in these years were not met and therefore no value was crystalised under these schemes.Note 2: The amount included in total remuneration in respect of variable LTIP awards in 2013 comprises the number of nil-cost option awards vesting under the Ted Baker 2009 Value Creation Plan in August 2012 at the share price on the date the awards first became exercisable. Under this scheme awards converted into a number of options which was dependent upon the satisfaction of various performance targets. These options were exercisable over two tranches, the first in October 2012 and the second in October 2013. Suave Aromatica
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
RELATIVE IMPORTANCE OF SPEND
The following table sets out the percentage change in dividends and employee remuneration for the year ended 30 January 2016,
compared to the year ended 31 January 2015.
Dividends*
Employee Remuneration (£’000s)
2016
21,018
76,885
2015
17,679
68,701
PERCENTAGE
CHANGE
18.9%
11.9%
* The value of dividends disclosed is the total interim dividend paid during the year and the final dividend proposed for the respective year.
REMUNERATION COMMITTEE AND ADVISERS
REMUNERATION COMMITTEE
The Remuneration 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 and other contracts
between the Company and its Executive Directors and senior
executives and, if thought fit, approves any outside interests and
other directorships of the executive Directors. The Committee
also reviews and approves the design of the Company’s
long-term incentive schemes and determines the level of awards
to be made and approves the performance targets.
The Committee is chaired by Anne Sheinfield and its other
members are David Bernstein, Ronald Stewart and Andrew
Jennings (appointed with effect from 30 September 2014).
David Bernstein, Ronald Steward and Andrew Jennings are
independent NEDs as noted in the corporate governance
statements. In line with Provision D.2.1 of the Code, David
Bernstein, as Non-Executive Chairman, may be a member,
but not chair the Committee, as he was considered to be
independent on appointment.
The terms of reference for the Committee are available on
the Company's website at www.tedbakerplc.com.
STATEMENT OF IMPLEMENTATION OF
REMUNERATION POLICY IN THE FOLLOWING
FINANCIAL YEAR
The Remuneration Policy was approved at the Annual
General Meeting on 10 June 2014 and took effect for the three
years commencing on that date.
The base salaries proposed for the 52 weeks ended 28
January 2017 by the Group are £445,000 for the Company
Chief Executive Officer, £425,000 for the Chief Operating
Officer and Group Finance Director, £70,000 for the Chairman
and £50,000 for the other NEDs.
The decision to retain the basic salary rates of Executive
Directors at the same level as in 2015/16 is consistent with the
approach to salary and performance objectives for head office
employees across the Group. Under measures approved by the
Executive Committee for the forthcoming year, basic salary
rates will remain at the same rates as in the prior year, except
in cases of exceptional performance, change in responsibilities
or promotions, in exchange for a marginal reduction in weekly
working hours.
The target profit before tax, annual bonus and exceptional
items on which the 2016/17 annual bonus is based is derived
after considering consensus market analyst expectations and
maximum bonus pool thresholds in line with existing annual
bonus policy. The target for the 52 weeks ending 28 January
2017 is not disclosed for reasons of commercial sensitivity, but
will be disclosed in the annual accounts for that year.
A further award of options under the Ted Baker Plc Long
Term Incentive Scheme 2013 will be made in the 52 weeks
ending 28 January 2017. Awards to Executive Directors under
this scheme will likely be based on up to 150% of basic salary.
However, the Board has approval from shareholders to grant
awards of up to 200% of basic salary under this scheme in
exceptional circumstances. The performance criteria for the
next round of 2013 LTIP awards will be the same as those
applied to the first three awards made under the 2013 LTIP.
54
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
ADVISERS
During the period, the Remuneration Committee was assisted in its work by PricewaterhouseCoopers LLP ('PwC'), who was
appointed by the Company in consultation with the Remuneration Committee. PwC is retained by the Remuneration Committee
as its independent executive remuneration adviser. The Remuneration Committee assesses advice provided by PwC from time to
time to consider whether it is independent. Comfort is obtained from PwC’s adherence to the Remuneration Consultants Group
Code of Conduct.
ADVISER
APPOINTED BY
PricewaterhouseCoopers LLP
Company
SERVICE PROVIDED TO
THE REMUNERATION
COMMITTEE
Review of Directors’
Remuneration Report
FEES BASED ON
HOURLY RATES
OTHER SERVICES
PROVIDED TO
THE COMPANY
£2,700 Tax, legal, project management
and accounting services to
the Group
STATEMENT OF VOTING AT GENERAL MEETING
At the last Annual General Meeting, votes on the remuneration report (excluding the Directors’ Remuneration Policy) were
cast as follows.
Approval of the 2015
Directors’ Remuneration Report
FOR
%
NUMBER
97.29%
37,438,293
AGAINST
%
NUMBER
2.39%
918,916
WITHHELD
%
NUMBER
REASONS FOR
VOTES AGAINST,
IF APPLICABLE
ACTION TAKEN
BY COMMITTEE
0.32%
123,364
The number of
votes against the
Remuneration
Report was not
considered to be
significant
N/A
The Directors’ Remuneration Policy is subject to a binding vote by shareholders every three years and was last approved at the
Annual General Meeting held on 10 June 2014.
FOR
%
NUMBER
AGAINST
%
NUMBER
WITHHELD
%
NUMBER
REASONS FOR
VOTES AGAINST,
IF APPLICABLE
Approval of Directors’ Remuneration
Policy included within the 2014
Directors’ Remuneration Report
97.21%
38,322,794
2.79%
1,099,638
0.00%
-
The number of
votes against the
LTIP was not
considered to be
significant
ACTION
TAKEN BY
REMUNERATION
COMMITTEE
N/A
The Directors’ Remuneration Report was approved on behalf of the Board on 17 March 2016 and signed on its behalf by:
Anne Sheinfield
Chairman of the Remuneration Committee
55
Ted Baker Plc Annual Report and Accounts 2015/16 o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
OTHER STATUTORY AND
REGULATORY 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 30 January 2016. The comparative
period is for the 53 weeks ended 31 January 2015.
The information on the following pages, together with
the sections of the Annual Report incorporated by reference,
constitutes the Strategic Report:
• Chairman’s Statement on page 4
• Business Model and Strategy on page 8
• Business Review on page 9
• Financial Review on page 13
• Principal Risks and Uncertainties on page 16
• Sustainability on page 30
• People on page 34.
SUBSIDIARY UNDERTAKINGS
The subsidiary undertakings of the Group in the period are
listed in note 12 to the accounts. The Group also has branches
operating in Eire and Portugal.
RESULTS AND DIVIDENDS
The audited accounts for the 52 weeks ended 30 January
2016 are set out on pages 66 to 102. The Group profit for the 52
weeks, after taxation, was £44.2m (2015: £35.9m). The Directors
recommend a final dividend of 34.6p per ordinary share (2015:
29.0p) payable on 17 June 2016 to ordinary shareholders on
the register on 20 May 2016 which, together with the interim
dividend of 13.2p per share (2015: 11.3p per share) paid on 20
November 2015, makes a total of 47.8p per share for the period
(2015: 40.3p per share). The Group maintains a dividend policy
of broadly achieving a 2.1x dividend cover.
The information on the following pages, together with
the sections of the Annual Report incorporated by reference,
constitutes the Directors’ Report:
• Governance on page 19
• Board of Directors on page 38
• Other Statutory and Regulatory Disclosures on page 56.
DIRECTORS
The Directors during the period were those listed on page
38. Details of the Directors’ beneficial interests in the shares of
the Company are shown on page 57. Details of their options are
given in the Directors’ Remuneration Report on page 39. Brief
details of the career of each Director are set out on page 57.
The Directors’ Report also includes additional disclosures
required by the UKLA’s Disclosure and Transparency Rules
and Listing Rules.
For the purposes of DTR 4.1.5R(2) and DTR 4.1.8, this
Directors’ Report and the Strategic Report compromise the
Management Report.
SUBSTANTIAL SHAREHOLDINGS
As at 30 January 2016, 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
R S Kelvin
Capital Research & Management
BlackRock
Standard Life Investments
NUMBER
15,540,280
3,685,155
3,114,468
2,753,803
% HELD
35.34
8.38
7.08
6.26
Pursuant to LR9.8.6(1), the Company confirms that it was notified on 19 April 2016 that Aviva Plc holds 1,331,934 ordinary
shares (3.03%) in the share capital of the Company. The Company was not notified of any other notifiable transactions between the
end of the period and 19 April 2016.
SHARE CAPITAL AND CONTROL
As at 30 January 2016, the Company’s authorised share
capital was 80,000,000 ordinary shares of 5 pence each (in
nominal value). Details of the Company’s share capital are
shown in note 19 to the consolidated financial statements on
page 92. As at 30 January 2016 there were 43,971,454 ordinary
shares in issue. 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
56
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
treasury shares and the treasury shares carry no right to receive
dividends or other distributions of assets. Other than as set out
in the Articles of Association, the Company is not aware of any
agreements between shareholders restricting the voting rights
or the right to transfer shares in the Company.
The Directors were granted authority at the 2015 annual
general meeting (the “2015 AGM”) to allot shares in the
capital of the Company up to an aggregate nominal amount of
£731,372 (being approximately one-third of the issued share
capital prior to the 2015 AGM). This authority is due to lapse
at the annual general meeting in 2016 (the “2016 AGM”). At
the 2016 AGM, shareholders will be asked to grant a similar
allotment authority. The Directors were also empowered at the
2015 AGM to make non pre-emptive issues for cash up to an
aggregate nominal amount of £109,815 (being approximately
5% of the issued share capital prior to the 2015 AGM). This
power is also due to lapse at the 2016 AGM and shareholders
will be asked to grant a similar power. The Company did not
seek an authority at the 2015 AGM to buy back its own shares
and there was no authority in place as at the end of the period.
The Articles of Association provide that the Company’s
shareholders may appoint any person to act as a Director or,
on special notice, remove any Director from office by passing
an ordinary resolution at a general meeting. The Articles also
empower the Board to appoint any person as a Director.
The Articles set out when a Director must leave office.
These include where a Director resigns, becomes bankrupt
or is prohibited from acting as a Director for other reasons, is
absent from the business for the long term or where a Director
is required to resign by all the other Directors.
The Articles provide that any Director who was appointed by
DIRECTORS’ INTERESTS
the Board during the year shall retire at the next Annual General
Meeting following his or her appointment, but that Director
may then stand for election by the Company’s shareholders.
Additionally, at each Annual General Meeting one-third of the
Directors must retire from office and each Director must retire
at least once every three years. Retiring Directors may stand for
re-election by the Company’s shareholders. Notwithstanding
the provisions of the Articles, the Company’s current practice,
in accordance with the recommendations of the Code, is to
require each Director to stand for election or re-election by the
Company’s shareholders on an annual basis.
Changes to the Articles of Association must be approved
by the shareholders in accordance with the legislation in force
from time to time. The powers of the Directors are determined
by legislation and the Articles of Association of the Company
in force from time to time. Powers relating to the issuing and
buying back of shares are included in the Company’s Articles of
Association and shareholder approval of such authorities may
be sought, if considered appropriate by Directors, at the Annual
General Meeting.
There are a number of agreements that take effect, alter
or terminate upon a change of control of the Company
following a takeover bid, such as commercial contracts, bank
loan agreements and employee share schemes. None of these is
deemed to be significant in terms of its potential impact on the
business of the Company.
The Company does not have agreements with any Director
or employee that would provide compensation for loss of
office or employment resulting from a takeover, save that the
Company’s share schemes contain provisions which may cause
options and awards granted to employees to vest on a takeover.
The Directors who held office at 30 January 2016 and their connected persons had interests in the shares of the Company as
shown in the table below.
R S Kelvin
L D Page
D Bernstein
R Stewart
% OF SHARE
CAPITAL
30 JANUARY 2016
BENEFICIAL
31 JANUARY 2015
BENEFICIAL
35.3
0.2
-
-
15,540,280
15,540,280
81,229
6,000
313
81,039
6,000
313
Pursuant to LR9.8.6R(1) there has been no change in the beneficial interests of the Directors between the end of the period and
19 April 2016.
57
Ted Baker Plc Annual Report and Accounts 2015/16 o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
CONTROLLING SHAREHOLDER
PEOPLE
Pursuant to LR 9.8.4R(14)(a), the Directors confirm
that the Company entered into a written and legally binding
relationship agreement with R S Kelvin on 14 November
2014 which is intended to ensure that R S Kelvin complies
with the independence provisions set out in LR 6.1.4D R (the
“Relationship Agreement”).
Pursuant to LR 9.8.4R(14)(c)(i), the Directors confirm that
the Company has complied with the independence provisions
set out in the Relationship Agreement during the period. In
addition, pursuant to LR 9.8.4R(14)(c)(ii), the Directors
confirm that, so far as the Company is aware, R S Kelvin and his
associates have complied with the independence provisions set
out in the Relationship Agreement during the period.
This paragraph sets out all information required by
LR9.8.4R that is applicable to the Company during the period.
Details of the Group’s policies with respect to people and
employees are set out in the People statement on page 34 and 35.
HEALTH AND SAFETY
The Group remains committed to providing a safe place to
work and shop for all employees and customers. Annual risk
assessments are carried out at all locations and a committee,
comprised of representatives within the business and an external
adviser, reviews and resolves any health and safety issues.
RISK MANAGEMENT
The Company’s policies on financial risk management are
outlined in note 22 of the financial statements on pages 95
to 101. Such information is incorporated into this Directors’
Report by reference.
GOING CONCERN
POST BALANCE SHEET EVENTS
There have been no important events affecting the Group
since the end of the period.
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.
The report was approved by the Board of Directors on
17 March 2016 and signed on its behalf by:
Charles Anderson
Company Secretary
Registered office:
The Ugly Brown Building,
6a St Pancras Way, London NW1 0TB
Company number: 03393836
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
12 months from the approval of these accounts. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
CREDITOR PAYMENT POLICY
The Group’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 Group
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 39 days (2015: 42 days). At the
year end the Company had no trade creditors.
DONATIONS
The value of charitable donations made during the period
was £30,580 (2015: £18,504). There were no political donations
made during the period (2015: £nil).
SOCIAL RESPONSIBILITY
Details of the Group’s social, ethical and environmental
responsibility initiatives are set out in the Sustainability and the
Environment statement on pages 30 to 32.
58
o DIRECTORS’ REPORT: OTHER STATU TORY DISCLOSURES o
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, 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
FINANCIAL REPORT
We, the Directors of the Company, whose names and
functions are set out on page 38, confirm that to the best of
our knowledge:
•
the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the company and the undertakings included in the
consolidation taken as a whole; and
the Strategic Report/Directors’ Report includes a fair
review of the development and performance of the business
and the position of the issuer and the undertakings
included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties
that they face.
We consider the Annual Report and accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
R S Kelvin
Chief Executive
17 March 2016
L D Page
Chief Operating Officer
17 March 2016
STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL
STATEMENTS
The Directors are responsible for preparing the Annual
Report and the 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 are required to prepare the group financial
statements in accordance with IFRSs as adopted by the EU and
applicable law and have elected to prepare the parent company
financial statements on the same basis.
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
transactions and disclose with
the parent company’s
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.
59
Ted Baker Plc Annual Report and Accounts 2015/16
Pearlea Opalescent
o INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF TED BAKER PLC ONLY o
OPINIONS AND CONCLUSIONS ARISING FROM
OUR AUDIT
1. OUR OPINION ON THE FINANCIAL
STATEMENTS IS UNMODIFIED
We have audited the financial statements of Ted Baker Plc
for the 52 week period ended 30 January 2016 set out on pages
66 to 102. 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 30
January 2016 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared
in accordance with International Financial Reporting
Standards as adopted by the European Union (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.
•
•
•
2. OUR ASSESSMENT OF RISKS OF MATERIAL
MISSTATEMENT
In arriving at our audit opinion above on the financial
statements the risks of material misstatement that had the
greatest effect on our audit were as follows:
VALUATION OF INVENTORY
Refer
to page 25 (Audit Committee statement),
page 72 (accounting policy note) and page 90 (financial
statement disclosures).
The risk: Inventory is carried in the financial statements
at the lower of cost and net realisable value. The net carrying
value of inventory at 30 January 2016 was £125.3m. Sales in
the fashion industry can be extremely volatile with consumer
demand changing significantly based on current trends. As a
result there is a risk that the carrying value of inventory exceeds
its net realisable value.
Our response: Our audit procedures were designed to
challenge the adequacy of the Group’s provisions against
inventory by seasonal collection and included:
• Corroborating on a sample basis that items on the stock
ageing listing by season were classified in the appropriate
ageing bracket;
• We examined the group’s historical trading patterns of
inventory sold at full price and inventory sold below full
61
price through alternative clearance routes, together with
the related margins achieved for each channel in order to
gain comfort that stock has not been sold below cost; and
• Assessing the appropriateness of the provision percentages
applied by challenging the assumptions made by the
Directors on the extent to which older season inventory
can be sold through various channels.
We have also considered the adequacy of the Group’s
disclosures in respect of the levels of provisions against inventory.
VALUATION OF RETAIL STORE ASSETS
(LEASEHOLD IMPROVEMENTS)
Refer
to page 25 (Audit Committee statement),
page 72 (accounting policy note) and page 87 to 88 (financial
statement disclosures).
The risk: The Group invests a significant amount of capital
(included in non-current assets on the balance sheet) both
within and outside the UK in its retail store portfolio through
leasehold improvements. The net carrying value of leasehold
improvements at 30 January 2016 was £42.3m. There is a risk that
the carrying value of retail store leasehold improvements may be
overstated if the profitability expectations for the related stores
are adversely impacted by trading and other conditions that were
not anticipated in the initial business case. The level of judgement
involved in assessing impairment indicators on retail stores is one
of the key judgemental areas that our audit is concentrated on.
Our response: Our audit procedures were designed to
challenge whether there were any indicators of impairment
and the need for any provisions against the asset carrying value
and included:
• Comparing the performance of stores against expected
profitability measures and understanding any material
variances. This assessment is undertaken for all stores
regardless of the period of time the store has been open.
This analysis is used to identify those stores performing
below expectations and accordingly with leasehold
improvements at a greater risk of impairment;
• Where there is a material adverse variance, we considered
whether this was an indicator of impairment given our
understanding of the maturity of the brand in the relevant
region, the period for which the store has been open and
comparison of performance to the original business case
for that particular store;
• Where there are indicators of impairment, reviewing
the cash flow forecasts for that store to ensure that the
recoverable amount exceeds the carrying amount of the
leasehold improvements.
Ted Baker Plc Annual Report and Accounts 2015/16 o INDEPENDENT AUDITORS' REPORT TO THE MEMBERS
OF TED BAKER PLC ONLY o
This includes:
• testing the accuracy of the calculations;
• assessing the key assumptions including growth rates in
turnover and margin expectations by reference to historic
rates achieved, the accuracy of previous forecasts and
our understanding of the maturity of the brand in the
particular region;
• considering the appropriateness of the discount rates
applied by benchmarking against other comparable groups
and assessing the key assumptions applied within the
Company’s adjusted WACC against available external
market data; and
• applying sensitivity analysis on the key assumptions used
in the cash flow forecasts to assess the possible range of
outcomes and the overall risk of any material impairment.
We have also considered the adequacy of the Group’s
disclosures in respect of impairment of retail fixed assets.
3. OUR APPLICATION OF MATERIALITY AND AN
OVERVIEW OF THE SCOPE OF OUR AUDIT
The materiality for the group financial statements as a whole
was set at £2.8m determined with reference to a benchmark of
group profit before tax of which it represents 4.8%.
We report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £140,000
sheet
impacting
reclassifications in addition to other identified misstatements
that warranted reporting on qualitative grounds.
statement and balance
income
the
Of the group’s 23 reporting components, the group audit
team subjected four UK components to an audit for group
reporting purposes and the three US components to specified
risk focused audit procedures performed by component auditors
in the US.
The components within the scope of our work accounted for the following percentages of the group’s results:
Audits for group reporting purposes
Specified risk focused audit procedures
Total
NUMBER OF
COMPONENTS
GROUP
REVENUE
GROUP PROFIT
BEFORE TAX
4
3
7
67%
24%
91%
82%
9%
91%
TOTAL
ASSETS
67%
23%
90%
For the remaining components, we performed analysis at an
aggregated group level to re-examine our assessment that there
were no significant risks of material misstatement within these.
The Group audit team instructed component auditors in the
US as to the significant areas to be covered, including where relevant
the risks detailed above and the information to be reported back.
The UK components audits were covered by the Group team. The
Group audit team approved the components materialities which
ranged from £2.1m - £2.7m, having regard to the mix of size and
risk profile of the Group across the components.
Telephone conference meetings were held with component
auditors in the US. The Group team discussed the audit strategy
and the findings reported to the Group audit team were discussed
in more detail, and any further work required by the Group audit
team was then performed by the component auditors.
•
4. OUR OPINION ON OTHER MATTERS
PRESCRIBED BY THE COMPANIES ACT 2006
IS UNMODIFIED
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 Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements.
•
5. WE HAVE NOTHING TO REPORT ON THE
DISCLOSURES OF PRINCIPAL RISKS
Based on the knowledge we acquired during our audit, we
have nothing material to add or draw attention to in relation to:
the Directors’ viability statement on page 18, Concerning
•
the principal risks, their management, and based on that,
the Directors’ assessment and expectations of the group’s
continuing in operation over the next three years to 2019; or
the disclosures in note 1 of the financial statements
concerning the use of the going concern basis of accounting.
•
62
o INDEPENDENT AUDITORS' REPORT TO THE MEMBERS
OF TED BAKER PLC ONLY o
SCOPE AND RESPONSIBILITIES
As explained more fully in the Directors’ Responsibilities
Statement set out on page 59, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. A description of
the scope of an audit of financial statements is provided on
the Financial Reporting Council’s website at www.frc.org.uk/
auditscopeukprivate. This report is made solely to the Company’s
members as a body and is subject to important explanations
and disclaimers regarding our responsibilities, published on our
website at www.kpmg.com/uk/auditscopeukco2014a, which are
incorporated into this report as if set out in full and should be
read to provide an understanding of the purpose of this report,
the work we have undertaken and the basis of our opinions.
Robert Brent (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditors
Chartered Accountants
15 Canada Square,
London,
E14 5GL
17 March 2016
6. WE HAVE NOTHING TO REPORT IN RESPECT
OF THE MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
Under ISAs (UK and Ireland) we are required to report to
you if, based on the knowledge we acquired during our audit,
we have identified other information in the annual report that
contains a material inconsistency with either that knowledge or
the financial statements, a material misstatement of fact, or that
is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our audit and the Directors’
statement that they consider that the annual report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s position and
performance, business model and strategy; or
the Audit Committee Statement does not appropriately
address matters communicated by us to the Audit Committee.
•
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.
•
•
Under the Listing Rules we are required to review:
the Directors’ statements, set out on pages 59, in relation
to going concern and longer-term viability; and
the part of the Corporate Governance Statement on
page 19 relating to the Company’s compliance with the
eleven provisions of the 2014 UK Corporate Governance
Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
63
Ted Baker Plc Annual Report and Accounts 2015/16 Dapare Dandifica
o GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS o
GROUP INCOME STATEMENT
FOR THE 52 WEEKS ENDED 30 JANUARY 2016
NOTE
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
Revenue
Cost of sales
GROSS PROFIT
Distribution costs
Administrative expenses
Administrative expenses before exceptional costs
Exceptional costs
Licence income
Other operating (expense) /income
Other operating expense before exceptional income
Exceptional income
OPERATING PROFIT
Finance income
Finance expenses
Share of profit of jointly controlled entity, net of tax
PROFIT BEFORE TAX
PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS
Exceptional costs
Exceptional income
Income tax expense
PROFIT FOR THE PERIOD
EARNINGS PER SHARE
Basic
Diluted
2
3
3
4
4
12
3
6
9
£’000
456,169
(183,147)
273,022
(169,762)
(57,435)
(57,435)
-
14,384
(840)
(840)
-
59,369
531
(1,931)
695
58,664
58,664
-
-
(14,429)
44,235
100.6p
99.3p
£’000
387,564
(152,359)
235,205
(144,584)
(56,373)
(51,034)
(5,339)
11,665
3,846
(812)
4,658
49,759
108
(1,621)
525
48,771
49,452
(5,339)
4,658
(12,921)
35,850
82.0p
81.0p
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE 52 WEEKS ENDED 30 JANUARY 2016
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
PROFIT FOR THE PERIOD
OTHER COMPREHENSIVE INCOME
ITEMS THAT MAY BE RECLASSIFIED TO THE INCOME STATEMENT
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 differences on translation of foreign operations net of tax
OTHER COMPREHENSIVE INCOME FOR THE PERIOD
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
66
£‘000
44,235
951
(669)
2,599
2,881
47,116
£‘000
35,850
1,328
1,890
2,692
5,910
41,760
o GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS o
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED
30 JANUARY 2016
SHARE
CAPITAL
SHARE
PREMIUM
TRANSLATION
RESERVE
RETAINED
EARNINGS
CASH
FLOW
HEDGING
RESERVE
TOTAL EQUITY
ATTRIBUTABLE
TO EQUITY
SHAREHOLDERS
OF THE PARENT
BALANCE AT 31 JANUARY 2015
2,196
9,331
1,368
(288)
127,967
140,574
£’000
£’000
£’000
£’000
£’000
£’000
-
-
-
996
(669)
(45)
282
-
-
-
-
-
-
44,235
44,235
3,242
(643)
-
-
-
-
-
-
-
-
3,242
(643)
996
(669)
(45)
2,599
44,235
47,116
-
-
-
-
-
-
2,019
1,144
(18,543)
(15,380)
156,822
289
2,019
1,144
(18,543)
(15,091)
172,599
1,650
2,311
COMPREHENSIVE INCOME FOR
THE PERIOD
Profit for the period
Exchange differences on translation
of foreign operations
Current tax on foreign currency translation
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
Deferred tax associated with movement
in hedging reserve
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD
TRANSACTIONS WITH OWNERS
RECORDED DIRECTLY IN EQUITY
Increase in issued share capital
Share-based payments charges
Movement on current and deferred tax on
share-based payments
Dividends paid
TOTAL TRANSACTIONS WITH
OWNERS
-
-
-
-
-
-
-
3
-
-
-
3
BALANCE AT 30 JANUARY 2016
2,199
-
-
-
-
-
-
-
286
-
-
-
286
9,617
67
Ted Baker Plc Annual Report and Accounts 2015/16
o GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS o
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE 53 WEEKS ENDED 31
JANUARY 2015
SHARE
CAPITAL
SHARE
PREMIUM
TRANSLATION
RESERVE
RETAINED
EARNINGS
CASH
FLOW
HEDGING
RESERVE
TOTAL EQUITY
ATTRIBUTABLE
TO EQUITY
SHAREHOLDERS
OF THE PARENT
£’000
2,194
£’000
9,139
£’000
(1,850)
£’000
(2,980)
£’000
105,561
£’000
112,064
BALANCE AT 25 JANUARY 2014
COMPREHENSIVE INCOME FOR
THE PERIOD
Profit for the period
Exchange differences on translation
of foreign operations
Current tax on foreign currency translation
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
Deferred tax associated with movement
in hedging reserve
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD
TRANSACTIONS WITH OWNERS
RECORDED DIRECTLY IN EQUITY
Increase in issued share capital
Share-based payments charges
Movement on current and deferred tax on
share-based payments
Dividends paid
TOTAL TRANSACTIONS WITH
OWNERS
-
-
-
-
-
-
-
2
-
-
-
2
-
-
-
2,132
1,890
(804)
3,218
-
-
-
-
-
-
35,850
35,850
3,475
(783)
-
-
-
-
-
-
-
-
3,475
(783)
2,132
1,890
(804)
2,692
35,850
41,760
-
-
-
-
-
-
1,390
672
(15,506)
(13,444)
127,967
194
1,390
672
(15,506)
(13,250)
140,574
BALANCE AT 31 JANUARY 2015
2,196
1,368
(288)
-
-
-
-
-
-
-
192
-
-
-
192
9,331
68
o GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS o
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 30 JANUARY 2016
SHARE
CAPITAL
SHARE
PREMIUM
OTHER
RESERVES
RETAINED
EARNINGS
TOTAL
EQUITY
BALANCE AT 31 JANUARY 2015
Profit for the period
TRANSACTIONS WITH OWNERS RECORDED DIRECTLY
IN EQUITY
Increase in issued share capital
Share-based payments charges
Share-based payments charges for awards granted to subsidiary employees
Dividends paid
TOTAL TRANSACTIONS WITH OWNERS
£’000
2,196
-
3
-
-
-
3
BALANCE AT 30 JANUARY 2016
2,199
£’000
9,331
-
286
-
-
-
286
9,617
£’000
17,287
-
-
-
1,773
£’000
32,978
24,016
-
246
-
£’000
61,792
24,016
289
246
1,773
-
(18,543)
(18,543)
1,773
19,060
5,719
38,697
7,781
69,573
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE 53 WEEKS ENDED 31 JANUARY 2015
SHARE
CAPITAL
SHARE
PREMIUM
OTHER
RESERVES
RETAINED
EARNINGS
TOTAL
EQUITY
BALANCE AT 25 JANUARY 2014
Profit for the period
TRANSACTIONS WITH OWNERS RECORDED DIRECTLY
IN EQUITY
Increase in issued share capital
Share-based payments charges
Share-based payments charges for awards granted to subsidiary employees
Dividends paid
TOTAL TRANSACTIONS WITH OWNERS
£’000
2,194
-
2
-
-
-
2
BALANCE AT 31 JANUARY 2015
2,196
£’000
9,139
-
192
-
-
-
192
9,331
£’000
16,073
-
-
-
1,214
£’000
30,295
18,013
-
176
-
£’000
57,701
18,013
194
176
1,214
-
(15,506)
(15,506)
1,214
17,287
2,683
32,978
4,091
61,792
69
Ted Baker Plc Annual Report and Accounts 2015/16 o GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS o
GROUP AND COMPANY BALANCE SHEET
AT 30 JANUARY 2016
NOTE
GROUP
30 JANUARY
2016
GROUP
31 JANUARY
2015
COMPANY
30 JANUARY
2016
COMPANY
31 JANUARY
2015
Intangible assets
Property, plant and equipment
Investments in subsidiary
Investment in equity accounted investee
Deferred tax assets
Prepayments
NON-CURRENT ASSETS
Inventories
Trade and other receivables
Amount due from equity accounted investee
Derivative financial assets
Cash and cash equivalents
CURRENT ASSETS
Trade and other payables
Bank overdraft
Term loan
Income tax payable
Derivative financial liabilities
CURRENT LIABILITIES
Deferred tax liability
Term loan
NON-CURRENT LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Other reserves
Translation reserve
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO EQUITY
SHAREHOLDERS OF THE PARENT COMPANY
TOTAL EQUITY
10
11
12
12
13
14
15
12
16
17
18
17
22
16
13
22
19
19
19
19
19
£’000
17,247
123,397
-
1,641
6,313
414
149,012
125,323
49,303
563
2,850
13,295
191,334
(61,088)
(37,869)
(1,500)
(8,382)
(352)
(109,191)
(56)
(58,500)
(58,556)
172,599
2,199
9,617
1,650
2,311
£’000
12,855
51,804
£’000
£’000
-
-
-
-
-
21,482
19,709
1,290
5,659
461
72,069
111,114
36,873
679
3,547
7,380
159,593
(57,046)
(26,204)
-
(7,202)
(636)
(91,088)
-
-
-
-
-
-
21,482
-
-
-
-
19,709
-
47,486
41,510
-
-
615
48,101
(10)
-
-
-
-
-
-
583
42,093
(10)
-
-
-
-
(10)
(10)
-
-
-
-
-
-
140,574
69,573
61,792
2,196
9,331
1,368
(288)
2,199
9,617
19,060
-
2,196
9,331
17,287
-
156,822
127,967
38,697
32,978
172,599
172,599
140,574
140,574
69,573
69,573
61,792
61,792
These financial statements were approved by the Board of Directors on 17 March 2016 and were signed on its behalf by:
L D Page
Director
70
o GROUP AND COMPANY PRIMARY FINANCIAL STATEMENTS o
GROUP AND COMPANY CASH FLOW STATEMENT
FOR THE 52 WEEKS ENDED 30 JANUARY 2016
CASH GENERATED FROM OPERATIONS
Profit for the period
Adjusted for:
Income tax expense
Depreciation and amortisation
Impairment
Loss on disposal of property, plant and equipment
Share-based payments
Net finance expense
Net change in derivative financial assets and liabilities carried at fair value through
profit or loss
Share of profit in joint venture
Decrease in non-current prepayments
Increase in inventory
Increase in trade and other receivables
Increase in trade and other payables
Interest paid
Income taxes paid
GROUP
52 WEEKS
ENDED
30 JANUARY
2016
GROUP
53 WEEKS
ENDED
31 JANUARY
2015
COMPANY
52 WEEKS
ENDED
30 JANUARY
2016
COMPANY
53 WEEKS
ENDED
31 JANUARY
2015
£’000
£’000
£’000
£’000
44,235
35,850
24,016
18,013
14,429
14,929
188
58
2,019
1,400
840
(695)
52
(12,142)
(10,805)
1,566
(1,376)
12,921
12,536
-
462
1,390
1,513
(1,507)
(525)
71
(29,131)
(1,815)
11,653
(1,594)
(13,127)
(11,419)
-
-
-
-
-
-
-
-
247
176
-
-
-
-
-
-
-
-
-
-
(5,977)
(2,401)
-
-
-
-
-
-
NET CASH GENERATED FROM OPERATING ACTIVITIES
41,571
30,405
18,286
15,788
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment and intangibles
(89,535)
(25,476)
Proceeds from sale of property, plant and equipment
Investment in subsidiaries
Dividends received from joint venture
Interest received
-
-
344
-
5
-
259
1
NET CASH FROM INVESTING ACTIVITIES
(89,191)
(25,211)
CASH FLOW FINANCING ACTIVITIES
Proceeds from term loan
Dividends paid
Proceeds from issue of shares
NET CASH FROM FINANCING ACTIVITIES
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Net cash and cash equivalents at the beginning of the period
Exchange rate movement
60,000
-
289
41,746
(5,874)
(18,824)
124
194
(15,312)
(10,118)
(8,761)
55
NET CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
(24,574)
(18,824)
Cash and cash equivalents at the end of the period
Bank overdraft at the end of the period
NET CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
13,295
(37,869)
(24,574)
7,380
(26,204)
(18,824)
71
-
-
-
-
-
-
-
-
-
(333)
-
-
(333)
-
289
194
(18,254)
(15,312)
32
583
-
615
615
-
615
143
440
-
583
583
583
(18,543)
(15,506)
(18,543)
(15,506)
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES TO THE FINANCIAL STATEMENTS o
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 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 4 to 15. The financial position
of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Chairman’s Statement on pages 4
to 7. 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.
As highlighted in note 22 to the financial statements, the
Group meets its day-to-day working capital requirements
through a committed overdraft facility expiring on 29 March
2018 which 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’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 twelve months
from the date of signing these financial statements, 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 certain
financial assets and financial liabilities (including derivative
instruments), which are held at fair value.
The preparation of financial statements in conformity with
Adopted IFRSs requires management to make judgements,
estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The Group’s significant judgement areas relate to inventory
provisions and impairment of assets.
REVISED AND AMENDED STANDARDS AND
INTERPRETATIONS
The Group has considered the impact of the new standard,
not yet effective, in relation to IFRS 15 ‘Revenue from Contracts
with Customers’. The Group does not consider this to be
significant to the Group’s financial statements in the future.
IFRS 16, Leases, is not yet EU endorsed and has an effective
date of 1 January 2019. Management will conduct a review of
the impact this will have on the Group.
There were no other new standards, interpretations or
amendments to standards issued and effective for the year
which materially impacted the Group’s financial statements.
B) BASIS OF CONSOLIDATION
The consolidated accounts include the accounts of the
Company and its subsidiary undertakings made up to 30
January 2016. 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. The
Group controls an entity when it is exposed to, or has rights to,
72
o NOTES TO THE FINANCIAL STATEMENTS o
variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. In assessing control, the Group takes into consideration
potential voting rights that are currently exercisable. The
acquisition date is the date on which control is transferred to the
acquirer. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control
commences until the date that control ceases. Losses applicable
to the non-controlling interests in a subsidiary are allocated to
the non-controlling interests even if doing so causes the non-
controlling interests to have a deficit balance.
The financial statements of subsidiaries are included
in the consolidated financial statements from the date that
control commences until the date that control ceases. Jointly
controlled entities are those entities over whose activities the
Group has joint control, established by contractual agreement
and requiring the venturers’ unanimous consent for strategic,
financial and operating decisions. Jointly controlled entities
are accounted for using the equity method (equity accounted
investees) and are initially recognised at cost.
The consolidated financial statements include the Group’s
share of the total recognised income and expense and equity
movements of equity accounted investees, from the date that
significant influence or joint control commences until the date
that significant influence or control ceases. When the Group’s
share of losses exceeds its interest in an equity accounted
investee, the Group’s carrying amount is reduced to nil and
recognition of further losses is discounted except to the extent
that the Group has incurred legal or constructive obligations or
made payments on behalf of an investee.
C) FOREIGN CURRENCY
Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated to functional currency at the
foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the income
statement. Non-monetary assets and liabilities denominated in
foreign currencies that are stated at fair value are translated to
functional currency at foreign exchange rates ruling at the dates
the values were determined.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation,
are translated to Sterling at foreign exchange rates ruling at
the balance sheet date. The revenues and expenses of foreign
operations are translated to Sterling at average foreign exchange
rates ruling at the dates of the transactions. Foreign exchange
differences arising on retranslation since the transition date 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.
Exchange differences arising from a monetary item
receivable from or payable to a foreign operation, the settlement
of which is neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation
and are recognised directly in equity in the translation reserve.
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 title has passed in accordance
with the terms of individual terms of trade. Licence income
receivable from licencees is accrued as earned on the basis of the
terms of the relevant licence agreement, which is typically on
the basis of a minimum payments spread over the licence period
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. Cash refunds are available to customers
returning unwanted products with proof of purchase within 14
days of the date of purchase.
Sales of gift vouchers are treated as future liabilities, and
revenue is recognised when the gift vouchers are redeemed
against a later transaction.
E) LEASES
Rentals under operating leases are charged as incurred,
unless there are pre-determined rental increases in the lease, in
which case they are recognised on a straight-line basis over the
lease term. Leasehold incentives received are recognised as an
integral part of total lease expense, over the term of the lease.
Certain rental expenses are determined on the basis of revenue
achieved in specific retail locations and are accrued for on that
basis. The Group engages in lease and concession arrangements
that include fixed and variable elements, depending on the terms
of the underlying agreement. The Group has disclosed in note 3
the amounts charged in the year, and in note 21 sets out the firm
commitments for future periods.
73
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES TO THE FINANCIAL STATEMENTS o
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.
H) DERIVATIVES
The Group holds derivative financial instruments to hedge
its foreign currency exposure. Derivatives are recognised initially
at fair value. Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are accounted for
as described below.
F) PENSION COSTS
CASH FLOW HEDGES
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 granted under the Sharesave scheme and the
Ted Baker Plc Long-Term Incentive Plan are measured at fair
value at the date of grant using the Black-Scholes and Monte
Carlo pricing models respectively. The pricing models take
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.
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.
74
Changes in the fair value of foreign currency derivatives
which are designated as effective hedges of future cash flows
are recognised in equity in the cash flow hedging reserve, and
remain there until the forecast transaction occurs. When the
hedged item is a non-financial asset, the amount recognised
in equity 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 the income
statement in the same period that the hedged item affects the
income statement.
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.
Changes in the fair value of foreign currency derivatives
which are ineffective or do not meet the criteria for hedge
accounting are recognised in the income statement.
The Group does not hold any fair value hedging instruments.
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.
o NOTES TO THE FINANCIAL STATEMENTS o
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
• 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.
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.
at cost less accumulated amortisation and impairment losses.
M) INVESTMENTS
Amortisation is charged to the income statement on a
straight-line basis over the estimated useful lives of intangible
assets. Key Money is not amortised but systematically tested for
impairment at each balance sheet date as the Directors are of the
opinion the residual value of the asset is in excess of the carrying
value. Other intangible assets are amortised from the date they
are available for use. The estimated useful lives are as follows:
• Key money: No amortisation charged.
• Computer Software: 4 years.
• Computer Software under development: Assets under
development 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.
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 on the following bases:
• Freehold land: Not depreciated.
• Freehold buildings: Straight line over 50 years.
• Leasehold improvements: Straight line over the shorter of
the period of the unexpired term of the lease or the useful
economic life of the improvement.
• 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 over the expected useful economic life of the asset.
• Motor vehicles: 25% per annum on a straight-line basis
over the expected useful economic life of the asset.
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 INTANGIBLE ASSETS
Assets that are subject to depreciation or 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 adjusted 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
75
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES TO THE FINANCIAL STATEMENTS o
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 calculated using the effective interest rate method,
interest receivable on funds invested, dividend income, foreign
exchange gains and losses, and gains and losses on hedging
instruments that are recognised in the income statement.
Interest income is recognised in the income statement as it
accrues, using the effective interest method. Dividend income
is recognised in the income statement on the date the entity’s
right to receive payments is established which in the case of
quoted securities is usually the ex-dividend date.
S) SEGMENT REPORTING
A segment is a component of the Group that engages
in business activities from which it may earn revenues and
incur expenses, including revenues and expenses that relate to
transactions with any of the Group’s other components. All
operating segments’ operating results are reviewed regularly
by the Group’s Board to make decisions about resources to
be allocated to a segment and assess its performance, and for
which discrete financial information is available (see note 2).
T) FINANCIAL GUARANTEE CONTRACTS
Where the Company enters into financial guarantee
contracts to guarantee the indebtedness of other companies
within its group, the Company considers these to be insurance
arrangements, and accounts for them as such. In this respect, the
Company treats the guarantee contract as a contingent liability
until such time as it becomes probable that the Company will
be required to make a payment under the guarantee.
U) SHARE CAPITAL
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Where any group company purchases the Company’s
equity share capital (treasury shares), the consideration paid,
including any directly incremental costs (net of income taxes),
is deducted from retained earnings in equity attributable to
the Company’s equity holders until the shares are cancelled
or reissued. Where such shares are subsequently reissued,
any consideration received, net of any directly attributable
incremental transaction costs and the related income tax
effects, is included in equity attributable to the Company’s
equity holders.
V ) ACCOUNTING ESTIMATES AND JUDGEMENTS
The Directors have made significant accounting estimates
and judgements in applying the Group’s accounting policies in
the following areas:
Impairment: Leasehold improvements for stores are identified
for further impairment testing primarily on the basis of current
and projected performance, with growth assumptions based
on Directors’ knowledge and experience. Given the relative
immaturity of the brand outside the UK, the payback period is
typically longer and it is not uncommon for new stores to make
losses in their start-up phase. Judgement is therefore applied
by the Directors in assessing the trigger point for impairment,
recognising that losses in the start-up phase are not always
indicative of the future performance of a particular store. The
Directors have used forecast models and an appropriate pre-tax
adjusted weighted average cost of capital in its property, plant
and equipment impairment calculations.
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. Inventory is carried in the financial
statements at the lower of cost and net realisable value. Sales in
the fashion industry can be extremely volatile with consumer
demand changing significantly based on current trends.
76
o NOTES TO THE FINANCIAL STATEMENTS o
As a result there is a risk that the cost of inventory exceeds
its net realisable value. Management calculates the inventory
provision on the basis of the ageing profile of what is in stock.
Adjustments are made where appropriate based on Directors’
knowledge and experience to calculate the appropriate inventory
carrying values.
W ) NON-GAAP PERFORMANCE MEASURES
Exceptional items are those items which, in the opinion of
the Directors, should be excluded in order to provide a consistent
and comparable view of the underlying performance of the
Group’s ongoing business. Generally this will include those items
that are largely one-off and material in nature. Exceptional items
are identified and presented on a consistent basis each year and a
reconciliation of profit before tax and exceptional items to profit
before tax is included in the financial statements.
Exceptional items and their related tax impacts are added
back/deducted from profit attributable to the owners of the
2. SEGMENT INFORMATION
Company to arrive at adjusted earnings per share.
There were no exceptional items in the current year.
Exceptional items in the prior year included:
• costs in relation to a legal dispute with a previous insurer;
income for an early termination of a licence partner
•
agreement; and
• receipt for a settlement of an intellectual property dispute.
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.
The Group has three reportable segments, retail, wholesale and licence income.
For each of the three segments, the Group’s chief operating decision maker (the “Board”) reviews internal management reports
on a four weekly basis.
The accounting policies of the reportable segments are the same as described in note 1 on pages 72 to 77. 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 before exceptional items 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.
77
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES TO THE FINANCIAL STATEMENTS o
2. SEGMENT INFORMATION CONTINUED
A) SEGMENT REVENUE AND SEGMENT RESULT
52 WEEKS ENDED 30 JANUARY 2016
RETAIL WHOLESALE
LICENSING
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
Exceptional income
Other operating expense
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 and amortisation
Unallocated depreciation and amortisation
TOTAL DEPRECIATION AND AMORTISATION
Segment assets
Deferred tax assets
Derivative financial assets
Intangible assets – head office
Property, plant and equipment – head office
Other assets
TOTAL ASSETS
Segment liabilities
Income tax payable
Term loan
Other liabilities
TOTAL LIABILITIES
NET ASSETS
£’000
348,433
(122,557)
225,876
(163,484)
62,392
-
62,392
£’000
107,736
(60,590)
47,146
-
47,146
-
47,146
£’000
-
-
-
-
-
14,384
14,384
62,392
47,146
14,384
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,386
1,153
-
-
11,966
-
-
-
-
258
-
-
186,826
60,468
-
-
-
-
-
-
-
-
-
-
-
-
(75,232)
(23,726)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Wholesale sales are shown after the elimination of inter-company sales of £65,535,811 (2015: £54,541,000).
TOTAL
£’000
456,169
(183,147)
273,022
(163,484)
109,538
14,384
123,922
123,922
(63,713)
-
-
(840)
59,369
(1,400)
695
58,664
20,539
68,994
89,533
12,224
2,705
14,929
247,294
6,313
2,850
14,199
67,072
2,618
340,346
(98,958)
(8,382)
(60,000)
(407)
(167,747)
172,599
78
o NOTES TO THE FINANCIAL STATEMENTS o
2 A) SEGMENT REVENUE AND SEGMENT RESULT CONTINUED
53 WEEKS ENDED 31 JANUARY 2015
RETAIL WHOLESALE
LICENSING
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
Exceptional income
Other operating expense
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 and amortisation
Unallocated depreciation and amortisation
TOTAL DEPRECIATION AND AMORTISATION
Segment assets
Deferred tax assets
Derivative financial assets
Intangible assets – head office
Property, plant and equipment – head office
Other assets
TOTAL ASSETS
Segment liabilities
Income tax payable
Other liabilities
TOTAL LIABILITIES
NET ASSETS
£’000
306,914
(105,940)
200,974
(143,484)
57,490
-
57,490
£’000
80,650
(46,419)
34,231
-
34,231
-
34,231
£’000
-
-
-
-
-
11,665
11,665
57,490
34,231
11,665
-
-
-
-
-
-
-
-
16,550
-
-
10,392
-
-
-
-
-
-
-
-
-
-
42
-
-
116
-
-
162,617
43,418
-
-
-
-
-
-
-
-
-
-
-
-
(65,926)
(17,324)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
79
TOTAL
£’000
387,564
(152,359)
235,205
(143,484)
91,721
11,665
103,386
103,386
(52,134)
(5,339)
4,658
(812)
49,759
(1,513)
525
48,771
16,592
9,112
25,704
10,508
2,028
12,536
206,035
5,659
3,547
9,279
4,712
2,430
231,662
(83,250)
(7,202)
(636)
(91,088)
140,574
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES TO THE FINANCIAL STATEMENTS o
2. SEGMENT INFORMATION CONTINUED
B) GEOGRAPHICAL INFORMATION
52 WEEKS ENDED 30 JANUARY 2016
Revenue
Non-current assets*
53 WEEKS ENDED 31 JANUARY 2015
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/(crediting):
Depreciation and amortisation
Impairment of property, plant and equipment
Exceptional costs
Exceptional income
LEASEHOLD PROPERTIES AND CONCESSION RENTALS*
Fixed lease payments
Variable rental and commission payments
Loss on sale of property, plant and equipment
AUDITOR REMUNERATION
Audit of these financial statements
Audit of financial statements of subsidiaries of the Company
Interim financial statements review
Audit-related assurance services
Taxation compliance and other advisory services
All other services (forensic services)
UK
USA
£’000
291,804
103,642
261,157
38,061
£’000
99,931
25,578
72,950
17,230
REST OF
WORLD
£’000
64,434
13,479
TOTAL
£’000
456,169
142,699
53,457
11,119
387,564
66,410
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
202,083
254,086
456,169
£’000
168,310
219,254
387,564
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
14,929
188
-
-
41,171
29,724
58
11
205
17
20
114
-
£’000
12,536
-
5,339
(4,658)
37,080
29,072
462
10
179
17
21
114
569
* Disclosed above are the costs charged in the year relating to leasehold properties and concession arrangements. These are either fixed in nature or variable based on
revenue levels for a particular store or concession, where relevant, excluding e-commerce sales with concession partners.
There were no amounts recognised as exceptional costs or income during the 52 weeks ended 30 January 2016.
Exceptional costs in the 53 weeks ended 31 January 2015 of £5.3m relate to a legal dispute with a previous insurer.
Exceptional income in the 53 weeks ended 31 January 2015 of £4.7m comprises £3.7m relating to the early termination
of a licence partner agreement and £1.0m in relation to the settlement of an intellectual property dispute.
80
o NOTES TO THE FINANCIAL STATEMENTS o
4. FINANCE INCOME AND EXPENSES
FINANCE INCOME
– Interest receivable
– Foreign exchange gains
FINANCE EXPENSES
– Interest payable
– Foreign exchange losses
5. STAFF NUMBERS AND COSTS
The average number of employees (including Executive Directors) was:
Sales
Design
Administration
Their aggregate remuneration comprised:
Wages and salaries
Share-based charge
Social security costs
Pension costs
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
£’000
-
531
531
(1,430)
(501)
(1,931)
7
101
108
(1,184)
(437)
(1,621)
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
No.
2,281
78
596
2,955
£’000
67,178
2,019
6,266
1,422
76,885
No.
2,206
49
549
2,804
£’000
60,055
1,390
6,226
1,030
68,701
The figures stated above are Group staff costs and as such include the costs for Mr R S Kelvin, who is the only salaried employee of the
parent company for both years. Further details of his remuneration may be found in the Directors’ Remuneration Report on page 39 to 55.
81
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES TO THE FINANCIAL STATEMENTS o
5. STAFF NUMBERS AND COSTS CONTINUED
DIRECTORS’ REMUNERATION
Executive Directors’ remuneration
Non-Executive Directors’ remuneration
Amounts received by Executive Directors under long-term incentive schemes
Company contributions to Executive Directors’ money purchase pension plans
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
1,313
200
-
53
£’000
1,513
180
4,734
44
The aggregate of remuneration and amounts receivable under long-term incentive schemes of the highest paid Director was
£665,000 (2015: £5,412,000). In the year ended 31 January 2015 amounts received under long-term incentive schemes related to
the exercise of options due to Mr R S Kelvin under the Ted Baker 2009 VCP, a long-term incentive scheme which vested in full in
August 2012 and became exercisable in two tranches in October 2012 and October 2013.
No amounts in relation to pension contributions to a money purchase scheme were made on behalf of Mr R S Kelvin during the
52 weeks ended 30 January 2016 or the 53 weeks ended 31 January 2015. Amounts in relation to pension contributions to a money
purchase scheme were made on behalf of Mr L D Page during the period totalling £53,125 (2015: £44,250).
Retirement benefits are accruing to the following number of Directors under money purchase schemes
1
1
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
6. INCOME TAX EXPENSE
A) THE TAX CHARGE COMPRISES
Current tax
United Kingdom Corporation Tax
Overseas tax
Deferred tax
United Kingdom Corporation Tax
Overseas tax
PRIOR YEAR (OVER)/UNDER PROVISION
Current tax
Deferred tax
Property, plant and equipment
Share-based payments
Overseas losses
Inventory
Other
For further details please refer to note 13.
82
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
11,609
5,060
46
(854)
(2,854)
1,422
14,429
£’000
11,394
2,957
(64)
(715)
869
(1,520)
12,921
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
(107)
336
412
(65)
232
808
£’000
(94)
32
20
514
307
779
B) DEFERRED TAX MOVEMENT BY TYPE o NOTES TO THE FINANCIAL STATEMENTS o
Profit before tax
Profit multiplied by the standard rate in the UK – 20.16% (2015: standard rate in the UK of 21.32%)
Income not taxable/expenses not deductible for tax purposes
Overseas losses not recognised
Movement in current and deferred tax on share awards and options
Prior year over provision
Effect of rate change on corporation tax
Difference due to overseas tax rates
TOTAL INCOME TAX EXPENSE
Current tax credit on share awards and options
Deferred tax (credit) / charge on share awards and options
Deferred tax charge associated with movement in hedging reserve
Current tax charge associated with foreign exchange movements in reserves
Final dividend paid for prior year of 29.0p per ordinary share (2015: 24.2p)
Interim dividend paid of 13.2p per ordinary share (2015: 11.3p)
83
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
58,664
11,827
759
678
30
(1,432)
41
2,526
14,429
£’000
48,771
10,398
902
912
210
(651)
-
1,150
12,921
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
(190)
(954)
45
643
(456)
£’000
(1,201)
529
804
783
915
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
12,739
5,804
18,543
£’000
10,566
4,940
15,506
Ted Baker Plc Annual Report and Accounts 2015/16C) FACTORS AFFECTING THE TAX CHARGE FOR THE PERIODThe 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.7. PROFIT ATTRIBUTABLE TO TED BAKER PLCThe profit after tax for the 52 weeks ended 30 January 2016 of Ted Baker Plc, the parent company was £24,016,000 (2015: £18,013,000). The Directors have approved the income statement for the parent company.8. DIVIDENDS PER SHAREA final dividend in respect of 2016 of 34.6p per share, amounting to a dividend payable of £15,214,123, is to be proposed at the Annual General Meeting on 14 June 2016.There was a reduction in the UK corporation tax rate from 21% to 20% with effect from 1 April 2015. Further reductions to 19% from 1 April 2017 and 18% from 1 April 2020 have been substantively enacted. The Budget on 16 March 2016 announced that there will be a further cut in the corporation tax rate to 17% from 1 April 2020. As the deferred tax assets and liabilities should be recognised based on the corporation tax rate at which they are anticipated to unwind, the assets and liabilities on UK operations have been recognised at a rate of 19%. Those assets and liabilities arising on foreign operations have been recognised at the applicable overseas tax rates.D) DEFERRED AND CURRENT TAX RECOGNISED DIRECTLY IN EQUITY o NOTES TO THE FINANCIAL STATEMENTS o
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
Adjusted diluted earnings per share
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
No.
No.
43,950,203
43,703,369
612,138
44,562,341
542,027
44,245,396
£’000
44,235
44,235
100.6p
100.6p
99.3p
99.3p
£’000
35,850
36,372
82.0p
83.2p
81.0p
82.2p
* Adjusted profit for the period and adjusted earnings per share are shown before the net exceptional costs (net of tax) of £nil (2015: £522,000).
COST
At 31 January 2015
Additions/transfers
Exchange rate movement
AT 30 JANUARY 2016
AMORTISATION
At 31 January 2015
Charge for the year
Exchange rate movement
AT 30 JANUARY 2016
NET BOOK VALUE
AT 31 JANUARY 2015
AT 30 JANUARY 2016
COMPUTER
SOFTWARE
UNDER
DEVELOPMENT
TOTAL
£’000
£’000
9,278
1,371
-
10,649
-
-
-
-
9,278
10,649
13,812
6,005
72
19,889
957
1,652
33
2,642
12,855
17,247
KEY MONEY
COMPUTER
SOFTWARE
£’000
3,669
4,634
58
8,361
957
1,652
33
2,642
2,712
5,719
£’000
865
-
14
879
-
-
-
-
865
879
84
Diluted earnings per share and adjusted diluted earnings per share have been calculated using additional ordinary shares of 5p each available under the Ted Baker Sharesave Scheme and the Ted Baker Plc Long Term Incentive Plan 2013.There were no share related events after the balance sheet date that may affect earnings per share.10. INTANGIBLE ASSETS9. EARNINGS PER SHARE o NOTES TO THE FINANCIAL STATEMENTS o
COST
At 25 January 2014
Additions
Exchange rate movement
AT 31 JANUARY 2015
AMORTISATION
At 25 January 2014
Charge for the year
Exchange rate movement
AT 31 JANUARY 2015
NET BOOK VALUE
AT 25 JANUARY 2014
AT 31 JANUARY 2015
KEY MONEY
COMPUTER
SOFTWARE
COMPUTER
SOFTWARE
UNDER
DEVELOPMENT
TOTAL
£’000
£’000
£’000
£’000
949
-
(84)
865
-
-
-
-
949
865
2,670
999
-
3,669
137
811
9
957
2,533
2,712
2,598
6,680
-
9,278
-
-
-
-
6,217
7,679
(84)
13,812
137
811
9
957
2,598
9,278
6,080
12,855
85
Ted Baker Plc Annual Report and Accounts 2015/16The key money brought forward relates 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 no amortisation is charged each year as the residual value of the asset is considered to be in excess of the carrying value. 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 is foreseen. Additions included within the computer software under development category relate to the Microsoft Dynamics AX systems and are stated net of transfers to computer software. Transfers from the computer software under development category in the period amounted to £3,620,000 (2015: £nil) whilst additions into this category were £4,991,000 (2015: £6,680,000).10. INTANGIBLE ASSETS CONTINUED o NOTES TO THE FINANCIAL STATEMENTS o
11. PROPERTY, PLANT AND EQUIPMENT
FREEHOLD
LAND AND
BUILDINGS
LEASEHOLD
IMPROVEMENTS
FIXTURES,
FITTINGS
AND OFFICE
EQUIPMENT
MOTOR
VEHICLES
ASSETS UNDER
CONSTRUCTION
TOTAL
£’000
£’000
£’000
£’000
£’000
£’000
COST
At 31 January 2015
Additions / transfers
Disposals
Exchange rate movement
-
57,973
-
-
AT 30 JANUARY 2016
57,973
DEPRECIATION
At 31 January 2015
Charge for the year
Disposals
Impairment
Exchange rate movement
AT 30 JANUARY 2016
NET BOOK VALUE
AT 31 JANUARY 2015
AT 30 JANUARY 2016
-
32
-
-
-
32
-
57,941
73,447
12,470
(280)
1,747
87,384
37,238
7,218
(250)
187
727
45,120
36,209
42,264
58,160
10,704
(105)
1,054
69,813
43,362
6,025
(77)
1
623
49,934
14,798
19,879
110
-
-
-
110
103
2
-
-
-
105
7
5
790
2,381
-
137
3,308
-
-
-
-
-
-
132,507
83,528
(385)
2,938
218,588
80,703
13,277
(327)
188
1,350
95,191
790
3,308
51,804
123,397
86
o NOTES TO THE FINANCIAL STATEMENTS o
LEASEHOLD
IMPROVEMENTS
FIXTURES,
FITTINGS
AND OFFICE
EQUIPMENT
MOTOR
VEHICLES
ASSETS UNDER
CONSTRUCTION
TOTAL
£’000
£’000
£’000
£’000
£’000
COST
At 25 January 2014
Additions / transfers
Disposals
Exchange rate movement
AT 31 JANUARY 2015
DEPRECIATION
At 25 January 2014
Charge for the year
Disposals
Exchange rate movement
AT 31 JANUARY 2015
NET BOOK VALUE
AT 25 JANUARY 2014
AT 31 JANUARY 2015
60,905
12,010
(711)
1,243
73,447
30,791
6,375
(465)
537
37,238
30,114
36,209
110
-
-
-
110
101
2
-
-
103
9
7
2,839
(2,080)
-
31
790
-
-
-
-
-
2,839
790
113,667
18,025
(929)
1,744
132,507
68,584
11,725
(517)
911
80,703
45,083
51,804
49,813
8,095
(218)
470
58,160
37,692
5,348
(52)
374
43,362
12,121
14,798
87
Ted Baker Plc Annual Report and Accounts 2015/16Additions 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 £30,642,000 (2015: £20,995,000) whilst additions into this category were £33,023,000 (2015: £18,915,000).IMPAIRMENT OF LEASEHOLD IMPROVEMENTSThe Group has determined that, for the purposes of impairment testing, each store and outlet is 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 adjusted 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 30 January 2016 includes a charge in respect to one retail asset in the UK that has failed to deliver on its potential.There was no impairment charge for the 53 weeks ended 31 January 2015. 11. PROPERTY, PLANT AND EQUIPMENT CONTINUED o NOTES TO THE FINANCIAL STATEMENTS o
SUBSIDIARY UNDERTAKING
No Ordinary Designer Label Ltd
(formerly Ted Baker Limited)*
Ted Baker Investments ( Jersey) Ltd*
Ted Baker Limited
Ted Baker (New York) Inc
Ted Baker (France) SARL
Ted Baker Japan KK
Ted Baker Hong Kong Limited
Ted Baker Spain S. L.
Ted Baker Korea Yuhan Hoesa
Ted Baker Netherlands B. V.
COUNTRY OF
INCORPORATION
AND OPERATION
PRINCIPAL ACTIVITY
HOLDING
ORDINARY
SHARES
UK
Jersey
US
US
France
Japan
Design, wholesale and 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
Ted Baker Canada Inc
Ted Baker Germany GmbH
Ted Baker Belgium N.V.
Big Lobster Limited
Little Lobster Limited
* Held directly by Ted Baker Plc.
Canada
Germany
Belgium
UK
UK
Retail of designer clothing and accessories
Retail of designer clothing and accessories
Retail of designer clothing and accessories
Property
Dormant
At 31 January 2015
Increase in cost of investment for share options / awards granted to subsidiary employees
AT 30 JANUARY 2016
At 25 January 2014
Increase in cost of investment for share options / awards granted to subsidiary employees
Increase in cost of investment in UK subsidiary
AT 31 JANUARY 2015
88
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
COMPANY
£’000
19,709
1,773
21,482
COMPANY
£’000
18,162
1,214
333
19,709
12. INVESTMENTS (COMPANY)A) SUBSIDIARY UNDERTAKINGSThe Company and Group have shares in the following subsidiary undertakings. All of the subsidiaries have been included in the consolidated accounts.B) SUBSIDIARY UNDERTAKINGS – COST AND NET BOOK VALUE o NOTES TO THE FINANCIAL STATEMENTS o
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
1,290
695
(344)
1,641
£’000
1,024
525
(259)
1,290
30 JANUARY 2016
31 JANUARY 2015
£’000
563
£’000
679
30 JANUARY 2016
31 JANUARY 2015
£’000
2,714
2,278
-
(2,538)
2,454
25
1,094
1,390
(55)
2,454
£’000
2,591
1,854
-
(2,413)
2,032
27
1,021
1,050
(66)
2,032
Opening Investment in Joint Venture
Share of profit of Joint Venture
Dividend received
CLOSING INVESTMENT IN JOINT VENTURE
AMOUNTS DUE FROM EQUITY ACCOUNTED INVESTEE
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
89
Ted Baker Plc Annual Report and Accounts 2015/16C) INTEREST IN JOINT VENTUREThe Group has a 50% interest in the ordinary share capital of No Ordinary Retail Company Pty, a company incorporated in Australia through its wholly owned subsidiary, No Ordinary Designer Label Limited. The joint venture is represented by eight stores in Australia and one store in New Zealand (2015: six stores in Australia and one store in New Zealand). 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 30 January 2016.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 as at 30 January 2016 were as follows: o NOTES TO THE FINANCIAL STATEMENTS o
AS AT 30 JANUARY 2016
ASSET/
(LIABILITY )
BROUGHT
FORWARD
(CHARGE)
/ CREDIT
TO INCOME
STATEMENT
(CHARGE)/
CREDIT TO
EQUITY
FOREIGN
EXCHANGE ON
RETRANSLATION
ASSET /
(LIABILITY )
CARRIED
FORWARD
£’000
£’000
£’000
£’000
£’000
DEFERRED TAX ASSET/(LIABILITY )
ON UK OPERATIONS ARISING FROM:
ASSETS
Share-based payments
Other
LIABILITIES
Property, plant and equipment
Derivative financial instruments
NET DEFERRED TAX ASSET ON UK
OPERATIONS
DEFERRED TAX ASSET ON FOREIGN
OPERATIONS ARISING FROM:
Foreign trading losses
Inventory
Property, plant and equipment
Other
DEFERRED TAX LIABILITY ON FOREIGN
OPERATIONS ARISING FROM:
Property, plant and equipment
NET DEFERRED TAX ASSET ON FOREIGN
OPERATIONS
TOTAL
1,082
221
198
(341)
1,160
1,877
1,266
481
875
-
4,499
5,659
336
(121)
(2,246)
-
(2,031)
357
(42)
549
605
(52)
1,417
(614)
954
-
-
(45)
909
-
-
-
-
-
-
909
-
-
-
-
-
129
77
67
34
(4)
303
303
2,372
100
(2,048)
(386)
38
2,363
1,301
1,097
1,514
(56)
6,219
6,257
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
90
30 JANUARY 2016
31 JANUARY 2015
£’000
7,176
984
117,163
125,323
180,304
4,168
£’000
6,780
1,406
102,928
111,114
150,286
5,979
13. DEFERRED TAX ASSETS AND LIABILITIESRecognition of deferred tax assets is based on the generation of future taxable profits that will allow utilisation of losses. 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 £3,318,000 (2015: £2,576,000). These losses expire between one and ten years. o NOTES TO THE FINANCIAL STATEMENTS o
Trade receivables
Amounts owed by Group undertakings
Prepayments and accrued income
Other taxes and social security
GROUP
30 JANUARY 2016
COMPANY
30 JANUARY 2016
GROUP
31 JANUARY 2015
COMPANY
31 JANUARY 2015
£’000
30,136
-
17,975
1,192
49,303
£’000
-
47,486
-
-
47,486
£’000
25,823
-
11,050
-
36,873
£’000
-
41,510
-
-
41,510
ASSETS
30 JANUARY 2016
LIABILITIES
30 JANUARY 2016
ASSETS
31 JANUARY 2015
LIABILITIES
31 JANUARY 2015
£’000
£’000
£’000
£’000
DERIVATIVES THAT ARE DESIGNED AND
EFFECTIVE AS HEDGING INSTRUMENTS
AND CARRIED AT FAIR VALUE:
Forward foreign exchange contracts
2,300
(33)
2,103
(263)
DERIVATIVES THAT ARE CARRIED AT FAIR VALUE
THROUGH PROFIT OR LOSS:
Foreign currency options
550
2,850
(319)
(352)
1,444
3,547
(373)
(636)
Cash and cash equivalents per balance sheet
Bank overdraft per balance sheet
NET CASH AND CASH EQUIVALENTS PER CASH
FLOW STATEMENT
GROUP
30 JANUARY 2016
COMPANY
30 JANUARY 2016
GROUP
31 JANUARY 2015
COMPANY
31 JANUARY 2015
£’000
13,295
(37,869)
(24,574)
£’000
615
-
615
£’000
7,380
(26,204)
(18,824)
£’000
583
-
583
91
Ted Baker Plc Annual Report and Accounts 2015/1615. TRADE AND OTHER RECEIVABLES16. DERIVATIVE FINANCIAL INSTRUMENTSDerivative 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 Group did not have any ineffective cash flow hedges in the period (2015: £nil).The charge to the income statement in respect of changes in the fair value of foreign currency derivatives that do not meet the criteria for hedge accounting was £840,000 (2015: credit of £1,507,000).Gains and losses in equity relating to forward exchange contracts at 30 January 2016 for derivatives in effective hedging relationships will remain there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in equity 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 the income statement in the same period that the hedged item affects the income statement.17. RECONCILIATION OF CASH AND CASH EQUIVALENTS PER BALANCE SHEET TO CASH FLOW STATEMENT o NOTES TO THE FINANCIAL STATEMENTS o
Trade payables
Accruals and deferred income
Other taxes and social security
GROUP
30 JANUARY 2016
COMPANY
30 JANUARY 2016
GROUP
31 JANUARY 2015
COMPANY
31 JANUARY 2015
£’000
31,657
21,923
7,508
61,088
£’000
-
10
-
10
£’000
32,241
20,316
4,489
57,046
£’000
-
10
-
10
Authorised – 80,000,000 ordinary shares of 5p each
Allotted, called up and fully paid – 43,971,454 ordinary shares of 5p each (2015: 43,926,288)
30 JANUARY 2016
31 JANUARY 2015
£’000
4,000
2,199
£’000
4,000
2,196
92
19. CAPITAL AND RESERVESAt 30 January 2016, 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 (2015: Employee Trust - £nil, 1998 Trust - £nil).OTHER RESERVES AND RETAINED EARNINGSOther Reserves and retained earnings include the following reserve accounts:CASH FLOW HEDGING RESERVEThe effective portion of financial instruments that are 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. TRANSLATION RESERVEThe translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.OTHER RESERVES – COMPANYThis reserve relates to the premium on equity consideration used in the acquisition of a subsidiary, No Ordinary Designer Label Limited, by Ted Baker Plc in 1997, which is classified within Other Reserves under the Companies Act. This reserve also includes the cost of share options and awards granted to employees of the Group. This reduction in other reserves is reflected in retained earnings in the Group Statement of Changes in Equity.18. TRADE AND OTHER PAYABLES o NOTES TO THE FINANCIAL STATEMENTS o
20. SHARE-BASED PAYMENTS
LONG-TERM INCENTIVE PLAN
Share awards are made in the form of nil-cost options over Ordinary shares in Ted Baker Plc under the Long-Term Incentive
Plan 2013 (“LTIP 2013”), which was approved by the shareholders at the general meeting held on 20 June 2013. The options will
be exercisable three years after the date of grant subject to the satisfaction of profit before tax per share and share price performance
targets, each measured over a three year period. The profit before tax per share target is calibrated so that the percentage of awards
that vests is linked to the level of profit growth achieved.
Share options and awards granted under the LTIP 2013 and outstanding at the end of the period were as follows:
GRANT DATE
EXPIRY DATE
NUMBER OF
OPTIONS
GRANTED
FAIR VALUE AT
GRANT DATE
3 July 2013
1 May 2014
30 April 2015
2 July 2023
30 April 2024
29 April 2025
220,226
254,141
192,860
667,227
1,140.0p
695.0p
1,785.0p
NUMBER
OF AWARDS
OUTSTANDING
AT 30 JANUARY
2016
NUMBER
OF AWARDS
OUTSTANDING
AT 31 JANUARY
2015
214,324
242,691
186,393
643,408
214,963
247,111
-
462,074
The terms and conditions of the awards granted during the year ended 30 January 2016 were the same as those for the awards made
under the LTIP 2013 in previous periods and are as follows:
GRANT DATE
30 April 2015
TYPE OF AWARD
NUMBER OF OPTIONS VESTING CONDITIONS
VESTING PERIOD
LTIP 2013
192,860
Adjusted profit before
tax per share growth of
10-15% per annum and
10% share price growth
over the vesting period
Up to 100% after
three years
Share price at grant
Share price at grant (based on six month average) for share price performance condition
Risk free interest rate
Expected life of options
Share price volatility
Dividend yield
2,855.0p
2,385.0p
0.84%
3 years
29.0%
1.41%
93
Ted Baker Plc Annual Report and Accounts 2015/16The charge for the year to the income statement in respect of options issued under the LTIP 2013 amounted to £1,777,000 (2015: £1,244,000). In respect of R S Kelvin, who is employed by the Company, there is a charge of £246,147 in the year (2015: £176,215).The Monte-Carlo valuation methodology has been used as the basis of measuring the fair value of all awards made under the LTIP 2013. The inputs into the Monte-Carlo model for awards made during the period were as follows: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. o NOTES TO THE FINANCIAL STATEMENTS o
Within one year
Between one and five years
Later than five years
AS AT
30 JANUARY 2016
AS AT
31 JANUARY 2015
£’000
45,536
130,173
82,227
257,936
£’000
37,513
85,611
58,870
181,994
94
21. FINANCIAL COMMITMENTSA) CAPITAL COMMITMENTSThe Group has capital commitments of £13,819,909 at 30 January 2016 (2015: £14,923,000) which were not provided in the financial statements.B) OPERATING LEASESTotal of future lease payments under non-cancellable operating leases are as follows:The above table includes the minimum future commitments assuming no lease terminations. Under certain arrangements, if a lease is terminated, the quantum of any future minimum lease payments is subject to the terms of the contract which may result in final payments lower than those disclosed above.Our operating leases for retail stores often contain rental expenses based on revenue (‘revenue leases’). Under the terms of certain revenue leases there are minimum payments due, together with variable amounts in excess of those minimums which are based on the store’s future revenue levels. For certain other revenue leases there are no minimum payment conditions within the terms of the lease such that rental charges are contingent wholly on future store revenue levels. The table above includes only committed minimum payments and excludes the variable or contingent elements of future rental payments. As a result, the amounts charged to the Income Statement may be materially higher than the financial commitment at the prior period end.Financial commitments for operating lease amounts due as at 31 January 2015 have been revised to include minimum payments due under operating leases relating to concession spaces which had previously been included in a separate disclosure.C) PENSION ARRANGEMENTSThe 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 £1,422,000 (2015: £1,030,000). Contributions totalling £400,995 are included in other payables at the year end (2015: £16,808 receivable). o NOTES TO THE FINANCIAL STATEMENTS o
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
Term loan
TOTAL FINANCIAL LIABILITIES
NET FINANCIAL LIABILITIES
CARRYING
AMOUNT
30 JANUARY 2016
FAIR
VALUE
30 JANUARY 2016
CARRYING
AMOUNT
31 JANUARY 2015
FAIR
VALUE
31 JANUARY 2015
£’000
£’000
£’000
£’000
30,136
1,179
563
2,850
13,295
48,023
(53,580)
(352)
(37,869)
(60,000)
(151,801)
(103,778)
30,136
1,179
563
2,850
13,295
48,023
(53,580)
(352)
(37,869)
(60,000)
(151,801)
(103,778)
25,823
1,290
679
3,547
7,380
38,719
(52,557)
(636)
(26,204)
-
(79,397)
(40,678)
25,823
1,290
679
3,547
7,380
38,719
(52,557)
(636)
(26,204)
-
(79,397)
(40,678)
There are no significant trade debtor balances overdue and no significant amounts impaired at the end of the period.
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
30 JANUARY 2016
FAIR
VALUE
30 JANUARY 2016
CARRYING
AMOUNT
31 JANUARY 2015
FAIR
VALUE
31 JANUARY 2015
£’000
£’000
£’000
£’000
47,486
615
48,101
(10)
(10)
48,091
41,510
583
42,093
(10)
(10)
42,083
41,510
583
42,093
(10)
(10)
42,083
47,486
615
48,101
(10)
(10)
48,091
95
Ted Baker Plc Annual Report and Accounts 2015/1622. FINANCIAL INSTRUMENTS AND RISK MANAGEMENTA) CARRYING AMOUNT AND FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES FINANCIAL ASSETS AND LIABILITIES – GROUPThe 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 AND LIABILITIES – COMPANYThe fair values of financial assets and liabilities of the Company, together with the carrying amounts shown in the balance sheet, are as follows: o NOTES TO THE FINANCIAL STATEMENTS o
CONTRACTUAL/
NOTIONAL
AMOUNTS
30 JANUARY 2016
ASSETS
30 JANUARY
2016
LIABILITIES
30 JANUARY
2016
CONTRACTUAL/
NOTIONAL
AMOUNTS
31 JANUARY 2015
ASSETS
31 JANUARY
2015
LIABILITIES
31 JANUARY
2015
Currency derivatives
£’000
34,285
34,285
£’000
2,850
2,850
£’000
(352)
(352)
£’000
52,190
52,190
£’000
3,547
3,547
£’000
(636)
(636)
Within six months
Between six months and one year
Between one and two years
UNRECOGNISED GAINS
Opening balance
Gains recognised in hedging reserve
Amounts recycled from hedging reserve and recognised in income statement
Deferred tax associated with movement in the hedging reserve
UNRECOGNISED GAINS
96
CURRENCY DERIVATIVES
30 JANUARY 2016
CURRENCY DERIVATIVES
31 JANUARY 2015
£’000
5
587
1,058
1,650
£’000
200
534
634
1,368
CURRENCY DERIVATIVES
30 JANUARY 2016
CURRENCY DERIVATIVES
31 JANUARY 2015
£’000
1,368
996
(669)
(45)
1,650
£’000
(1,850)
2,132
1,890
(804)
1,368
B) DERIVATIVE FINANCIAL INSTRUMENTS C) CASH FLOW HEDGING RESERVE MOVEMENTSThe following table indicates the cash flow hedging reserve balance at 30 January 2016 and the periods in which the cash flows are expected to occur. The periods in which the cash flows are expected to impact the income statement are materially the same.The methods and assumptions used to estimate fair values of financial assets and liabilities are as follows:1. Cash and cash equivalents have been stated at their book values due to their short maturities or immediate or short-term access.2. The fair values of trade receivables, amount due from equity accounted investee and amounts owed by Group undertakings have been stated at their book value due to their short maturities.3. The fair value of derivatives is determined by reference to third party valuations (usually from a bank) or by reference to readily observable market prices.4. The fair values of trade and other payables have been stated at their book values due to their short maturities.5. The fair value of the term loan considers the present value of expected payment discounted using a risk-adjusted discount rate.Valuation of all financial 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).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.22. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED o NOTES TO THE FINANCIAL STATEMENTS o
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 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.
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
twelve 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 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 by reference to the Group’s
risk management policies and prevailing market conditions.
The Group documents currency derivatives used to hedge its
forecast transactions as cash flow hedges. To the extent that
cash flow hedges are effective, gains and losses are deferred in
equity until the forecast transaction occurs, at which point the
gains and losses are recycled either to the income statement or
to the non-financial asset acquired.
The majority of the Group’s currency derivatives have
original maturities of less than one year. The Group’s most
significant currency transaction exposure is the purchases of
inventories which are denominated in a number of currencies,
predominantly Euros and US Dollars.
97
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES TO THE FINANCIAL STATEMENTS o
The analysis of the Group’s foreign currency exposure of its subsidiaries to financial assets and liabilities that are not denominated
in their functional currency 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
30 JANUARY 2016
EURO
30 JANUARY 2016
OTHER
30 JANUARY 2016
£’000
6,530
(1,870)
4,660
(14,929)
(14,929)
(10,269)
£’000
5,749
1,237
6,986
(4,122)
(4,122)
2,864
£’000
729
889
1,618
(2,900)
(2,900)
(1,282)
US DOLLAR
31 JANUARY 2015
EURO
31 JANUARY 2015
OTHER
31 JANUARY 2015
£’000
2,616
184
2,800
(5,974)
(5,974)
(3,174)
£’000
6,564
158
6,722
(2,851)
(2,851)
3,871
£’000
471
706
1,177
(2,050)
(2,050)
(873)
US Dollar
Euro
AVERAGE RATE
30 JANUARY 2016
CLOSING RATE
30 JANUARY 2016
AVERAGE RATE
31 JANUARY 2015
CLOSING RATE
31 JANUARY 2015
1.522
1.379
1.424
1.316
1.639
1.246
1.518
1.338
98
The following significant exchange rates applied during the year:22. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED o NOTES TO THE FINANCIAL STATEMENTS o
TEST OF 10% (2015: 10%) STRENGTHENING IN
STERLING AGAINST OTHER CURRENCIES
US Dollar
Euro
TEST OF 10% (2015: 10%) WEAKENING IN STERLING
AGAINST OTHER CURRENCIES
US Dollar
Euro
IMPACT ON
PROFIT
30 JANUARY 2016
IMPACT ON
EQUITY
30 JANUARY 2016
IMPACT ON
PROFIT
31 JANUARY 2015
IMPACT ON
EQUITY
31 JANUARY 2015
£’000
(933)
260
(673)
1,141
(318)
823
£’000
(933)
260
(673)
1,141
(318)
823
£’000
(289)
352
63
353
(430)
(77)
£’000
(289)
352
63
353
(430)
(77)
FINANCIAL ASSETS AND LIABILITIES SUBJECT
TO INTEREST RATE RISK
GROUP
30 JANUARY 2016
GROUP
31 JANUARY 2015
COMPANY
30 JANUARY 2016
COMPANY
31 JANUARY 2015
Sterling
US Dollar
Euro
Other
£’000
(92,545)
(57)
2,607
5,324
£’000
(24,619)
1,865
627
3,215
(84,671)
(18,912)
£’000
615
-
-
-
615
£’000
583
-
-
-
583
There were no fixed rate financial assets or liabilities at 30 January 2016 and 31 January 2015.
99
Ted Baker Plc Annual Report and Accounts 2015/16SENSITIVITY ANALYSISThe 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 30 January 2016. 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% (2015: 10%) strengthening or weakening of the Sterling against the following currencies at 30 January 2016 would have increased/(decreased) equity and profit by the amounts shown in the following table:INTEREST RATE RISKThe 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: o NOTES TO THE FINANCIAL STATEMENTS o
Cash and cash equivalents
Trade receivables
Accrued income
Amount due from equity accounted investee
Derivative financial assets
GROUP
30 JANUARY 2016
GROUP
31 JANUARY 2015
£’000
13,295
30,136
1,179
563
2,850
48,023
£’000
7,380
25,823
1,290
679
3,547
38,719
100
All cash balances and derivative financial assets are held with reputable banks or financial institutions. As at 30 January 2016, there were no significant financial guarantees or third-party obligations that increase the credit risk of the financial assets set out above.Although the Group has seen no direct evidence of changes to the credit risk of its counterparties that hold cash balances and derivative financial assets, the current focus on financial liquidity in all international markets has introduced increased financial volatility. The Group uses market knowledge, changes in credit ratings and other techniques to identify significant changes to the financial profile of its counterparties. TRADE RECEIVABLESCredit risk arises on credit exposure to wholesale customers including outstanding receivables and committed transactions. However, this risk is substantially mitigated by insurance being taken out up to the amount of the credit limit. All new wholesale customers are checked against appropriate trade references and details such as frequency/delinquency. The limits applied to each customer are set in conjunction with our credit insurer’s advice. Monitoring of credit limits is undertaken on a daily basis.No credit limits were exceeded in the reporting period and management will continue with its current approach to credit control to prevent any future losses from non-performance arising. The Group is not able to protect its royalty income with credit insurance, although it does not consider this a significant credit risk. Forecasts are obtained from all its licence partners throughout the year to allow extensive visibility of future income.iii) LIQUIDITY RISKPrudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group treasury maintains flexibility in funding by maintaining availability under committed credit lines.Management monitors rolling forecasts of the Group’s liquidity reserve (comprises undrawn borrowing facility and cash and cash equivalents) on the basis of expected cash flow. This is generally carried out at entity level in the operating companies of the Group in accordance with practice and limits set by the Group. In addition, the Group’s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these; and monitoring balance sheet liquidity ratios against internal and external regulatory requirements. Based on current cash flow projections, the Group expects to have sufficient headroom against its borrowing facilities (see section overleaf for further details on the borrowing facilities).ii) CREDIT RISKCredit 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 30 January 2016. The Group considers its maximum exposure to credit risk to be:22. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED o NOTES TO THE FINANCIAL STATEMENTS o
AT 30 JANUARY 2016
NON-DERIVATIVE FINANCIAL LIABILITIES
Trade and other payables
Bank overdraft
Term loan
DERIVATIVE FINANCIAL LIABILITIES
CARRYING
AMOUNT
CONTRACTED
AMOUNT LESS
THAN 1 YEAR
CONTRACTED
AMOUNT
1–2 YEARS
CONTRACTED
AMOUNT
2–5 YEARS
£’000
£’000
£’000
£’000
53,580
37,869
60,000
53,580
37,869
1,500
-
-
-
-
6,000
52,500
Derivative financial instruments
352
352
AT 31 JANUARY 2015
NON-DERIVATIVE FINANCIAL LIABILITIES
Trade and other payables
Bank overdraft
Term loan
DERIVATIVE FINANCIAL LIABILITIES
52,557
26,204
-
52,557
26,204
-
Derivative financial instruments
636
636
-
-
-
-
-
-
-
-
-
-
101
Ted Baker Plc Annual Report and Accounts 2015/16The 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 twelve months equal their carrying balances as the impact of discounting is not significant.BORROWING FACILITIESIn July 2015, the Group agreed an increase in its committed borrowing facility to £85.0m (2015: £65.0m). The facility is a multi-currency revolving credit facility with The Royal Bank of Scotland and Barclays expiring on 29 March 2018. Interest is payable based on LIBOR plus a margin. The facility will be used to the extent necessary to fund capital expenditure to support the Group’s growth strategy. The Group had utilised £36.0m (2015: £26.0m) of the £85.0m credit facility as at 30 January 2016.In January 2016, the Group borrowed £60.0m under a Sterling-denominated term credit facility with The Royal Bank of Scotland and Barclays. The facility was used to support the purchase of The Ugly Brown Building. The term loan is for a period of five years with an interest rate based on LIBOR plus a margin and quarterly loan repayments commencing January 2017. 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 30 January 2016.E) CAPITAL MANAGEMENTThe Board’s policy is to maintain a strong capital base, defined as total shareholders’ equity, totalling £172,599,000 at 30 January 2016 (2015: £140,574,000), 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. o NOTES TO THE FINANCIAL STATEMENTS o
Salaries and short-term benefits
Contributions to money-purchase pension schemes
Share-based payment charges
Directors of the Company and their immediate relatives
control 35.5% of the voting shares of the Company.
At 30 January 2016, No Ordinary Designer Label Limited
(NODL), the main trading company, owed Ted Baker
Plc £47,486,000 (2015: £41,510,000). NODL was owed
£55,931,309 (2015: £50,025,000) from the other subsidiaries
within the Group.
Transactions between subsidiaries were priced on an arm’s
length basis.
The Group has a 50% interest in the ordinary share capital
of No Ordinary Retail Company Pty, a company incorporated
in Australia, through its wholly owned subsidiary, No Ordinary
Designer Label Limited. As at 30 January 2016, the joint
52 WEEKS ENDED
30 JANUARY 2016
53 WEEKS ENDED
31 JANUARY 2015
£’000
1,513
53
480
2,046
£’000
1,693
44
342
2,079
venture owed £563,179 to the main trading company (2015:
£679,000). In the period the value of sales made to the joint
venture by the Group was £2,426,921 (2015: £2,507,000).
During the year the Group provided design services to
THAT Bournemouth Company Limited (THAT BCL)
for which licence income fees were charged of £170,000. No
amounts were outstanding as at 30 January 2016. R S Kelvin
and L D Page are both directors of, and shareholders in,
THAT BCL and as such, THAT BCL is a related party of the
Company for the purposes of Chapter 11 of the Listing Rules.
102
23. RELATED PARTIESThe Group considers its Executive and Non-Executive Directors as key management and their compensation therefore comprises a related-party transaction.Total compensation in respect of key management for the year was as follows: o NOTES TO THE FINANCIAL STATEMENTS o
RESULTS
Revenue
Operating profit
Profit before tax
Profit before tax and impairment
Profit before tax and exceptional items
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
52 WEEKS
ENDED
28 JANUARY
2012
52 WEEKS
ENDED
26 JANUARY
2013
52 WEEKS
ENDED
25 JANUARY
2014
53 WEEKS
ENDED
31 JANUARY
2015
52 WEEKS
ENDED
30 JANUARY
2016
£’000
£’000
£’000
£’000
£’000
215,625
254,466
321,921
387,564
456,169
24,269
24,255
23,903
27,069
17,557
35,680
5,575
45,350
(1,420)
85,185
29,514
28,922
29,687
31,536
21,597
45,412
6,873
47,105
(497)
98,893
39,588
38,923
39,648
39,969
28,852
45,083
12,118
54,863
-
49,759
48,771
48,771
49,452
35,850
51,804
20,265
68,505
-
112,064
140,574
59,369
58,664
58,853
58,664
44,235
123,397
25,615
82,143
(58,556)
172,599
85,185
98,893
112,064
140,574
172,599
-
-
-
-
98,893
112,064
140,574
172,599
-
85,185
42.2p
48.9p
40.6p
23.4p
51.5p
56.4p
49.9p
26.6p
67.2p
69.0p
66.3p
33.7p
82.0p
83.2p
81.0p
40.3p
100.6p
100.6p
99.3p
47.8p
2.1 times
2.1 times
30.5%
23.0%
1.8 times
1.9 times
2.0 times
2.0 times
Dividend cover before exceptional costs
2.1 times
2.1 times
2.0 times
2.1 times
Pre-tax return on capital employed before exceptional costs
Post tax return on capital employed before exceptional costs
32.6%
23.6%
29.7%
22.2%
33.9%
25.1%
32.0%
23.5%
103
Ted Baker Plc Annual Report and Accounts 2015/16 o NOTES o
104
Never one to rest on his laurels, Ted’s already getting his hands dirty with next year’s bumper crop. You reap what you sew, after all.