2 March 2017                                                                                                                                     

Jimmy Choo PLC

Preliminary results for the year ended 31 December 2016

Accelerating Retail Growth and Margin Expansion

Jimmy Choo PLC, the British luxury brand specialising in shoes and accessories, today announces its preliminary results for the year ended 31 December 2016.

Highlights

·      Revenue up 14.5% with improving retail momentum in the second half

·      Adjusted EBITDA grew by 15.7% to £59.0m, driven by strong sales growth, margin improvement and lower growth in overheads

·      Improved Adjusted EBITDA margin, up 20 bps to 16.2%

·      Operating profit up 42.6% to £42.5m

·      EBITDA cash conversion⁷ increased from 96.5% to 104.2%

·      Continued strong growth in Asia, solid growth in Europe and Japan and improving trends in USA retail offset by the planned reduction in USA wholesale

·      Rich heritage celebrated in a successful 20th anniversary year - growing global appeal of the brand marked by continued industry award wins

·      Key new styles launched in seasonal fashion and core ranges and success with luxury trainers

·      Men's remains our fastest growing category, now accounting for 9% of revenue

·      Continued roll out of the successful New Store Concept - Directly Operated Stores ("DOS") count increased by 10, with one closure, to 150 in the year

·      16 further DOS renovated - over 45% of the store portfolio now in the New Store Concept

·      Operating leverage coming through as we continue to invest in re-platforming and Omnichannel

*Reduction due to non-recurring loss on loan arising from foreign exchange translation

Pierre Denis, CEO of Jimmy Choo PLC, said:

"2016 was a landmark year for Jimmy Choo.  Not only did we successfully celebrate 20 years of heritage but record revenues and profitability are testament to the growing appeal and strength of our brand.  We will continue to deliver on our long term strategy of growth through the creative and innovative development of our collections and the sustained expansion of our distribution network, particularly in areas such as Asia where we remain underpenetrated.  I would like to thank all my colleagues for their hard work this year in delivering this excellent performance."

The Company will next update the market on trading at the time of its AGM on 1 June 2017.

Enquiries

Notes to Editors

Jimmy Choo encompasses a complete luxury accessories brand.  Women's shoes remain the core of the product offer, alongside handbags, small leather goods, scarves, sunglasses, eyewear, belts, fragrance and men's shoes. CEO Pierre Denis and Creative Director Sandra Choi together share a vision to create one of the world's most treasured luxury brands.  Jimmy Choo has a global store network encompassing more than 150 stores and is present in the most prestigious department and specialty stores worldwide.  Jimmy Choo PLC is publicly listed on the London Stock Exchange with the ticker CHOO.

¹ Constant currency revenue growth is calculated by applying the exchange rates for the year ended 31 December 2016 to the year ended 31 December 2015 on a month by month basis and calculating the growth percentage by reference to the total year.

² Like-for-like sales growth ("LFL") is calculated by taking retail sales in all locations where trading occurred for a full financial year prior to the start of the period being measured and calculating sales growth for those locations at constant currency.

³ Adjusted EBITDA is defined as Operating profit for the year adjusted for exceptional costs, loss on disposal of property, plant and equipment and intangible assets, depreciation and amortisation charges and realised and unrealised foreign exchange gains and losses on the revaluation of monetary items.

⁴ Adjusted EBIT is defined as Operating profit for the year adjusted for exceptional costs, share of the result of associates and joint ventures and realised and unrealised foreign exchange gains and losses on the revaluation of monetary items.

⁵ Adjusted Consolidated Net Income is defined as Profit for the year adjusted for exceptional costs, foreign exchange gains and losses on the revaluation of external bank facilities, changes in the fair value of forward foreign exchange contracts used to manage exposure to foreign currency gains and losses arising on external bank facilities and refinancing interest break costs. Tax charged in Adjusted Consolidated Net Income is as per the Income Statement, excluding deferred tax.

⁶ Adjusted EPS is calculated as Adjusted Consolidated Net Income divided by the basic weighted average number of shares in issue during the year.

⁷ Cash conversion is defined as Adjusted Operating Cash Flow (cash generated from operating activities adjusted for exceptional costs) divided by Adjusted EBITDA.

Certain statements made in this announcement are forward-looking statements.  Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements.  Jimmy Choo PLC undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document.  All persons, wherever located, should consult any additional disclosures that Jimmy Choo PLC may make in any regulatory announcements or documents which it publishes.  All persons, wherever located, should take note of these disclosures.  This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Jimmy Choo PLC shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction.

Operational Review

Our passion for shoes and our dedication to product quality have again ensured that we continue to create innovative products to delight our clients around the world.

We celebrated the heritage of the brand with the marking of our 20^th anniversary in 2016.  As part of the celebrations, we hosted a party in New York during Fashion Week, where an exclusive music video was premiered, starring a powerful line up of our Autumn Winter 16 Women's campaign models who represent the dynamism of the Jimmy Choo brand.

The growing global appeal of the brand is also enriched by continued award wins.  At the start of June, Sandra Choi collected the Accessories Designer award at the Glamour Women of the Year Awards.  Later in the month we won three awards at the Draper's Footwear Awards including Designer of the Year, Women's Brand of the Year and Store Design of the Year.  Also of note during 2016, was our 'Best Luxury Window' award for our Christmas window display in Tokyo and New York, featuring a glittering banquet of our customisable shoes, encrusted with Swarovski crystals.

We have continued to enjoy global recognition for our high profile product placements.  Our Japanese business saw a particular benefit from brand and product exposure on the TV drama "Seisei Suruhodo, Aishiteiru", based on characters working in the luxury industry. 

Product Collections

The main driver of revenue growth in 2016 was Shoes, which continue to be at the heart of the brand, representing 75% of revenue.  Growth was driven by the launch of key new styles in the seasonal fashion and core ranges.  The breadth of our product range allows us to capture trends such as the renewed popularity of the luxury trainer, leading to particular success with our Miami trainer.

The Memento collection launched as part of the 20^th anniversary celebrations for the brand paid tribute to the entrance-making moments that have come to define Jimmy Choo style.  The 20 shoes and bags that were reimagined for the collection honoured the legacy of high glamour looks played out over the years on the red carpet.  Clients could also purchase, and personalise, a limited edition accessories trunk with exceptional detailing, designed to house the Memento collection.

As part of Cruise 17, we launched a capsule collection of customisable jewelled shoes and bags.  An irresistible suite of jewelled decorations encrusted with Swarovski crystals; floral and vintage star-inspired button charms; pearl, diamanté and pompom brooches which allow clients to embellish the shoes and bags with their own design.

In Choo 24:7, we introduced a number of new and innovative products, with shapes and styles which had a significant impact from the second quarter of the year.  These include the new Romy shoe, with its softer toe point and new heel construction, and the Ren, a modern fashion twist on the classic Jimmy Choo caged sandal.

Jimmy Choo also enjoys brand flexibility and versatility beyond Women's shoes.  Accessories benefitted from the continued development of our iconic Lockett bags.  We made continued progress in Men's (including shoes and accessories), which remains our fastest growing category and now accounts for 9% of revenue. 

2016 saw further strong growth in our licensing business.  During 2016, we launched 'Man Intense' and 'Illicit Flower' fragrances.  In Sunglasses & Eyewear, we extended our Safilo licence until 2023 and have scheduled the launch of Men's products for 2018.

Distribution

Continued investment in our retail estate was one of the key drivers of retail revenue growth.  The number of new DOS in the year was 10, with one closure in the USA, giving a total DOS portfolio of 150 as at 31 December 2016. 

Our new concept continues to outperform and we refitted a total of 16 stores in the year, with over 45% of our portfolio in the New Store Concept at the year end.  Our store development programme remains unchanged.  We expect to open around 10 new DOS and to renovate a further 10-15 DOS each year.

As part of the overall retail performance, our Online business continued to develop well during the period and accounts for 6% of revenue.

Digital-Led Client Interaction

As a digital leader, we continue to increase our digital investment to enable us to reach both new and existing clients in the most relevant way. Our social media following continues to grow alongside our brand recognition and we have seen growth across all channels.  This engagement, in particular with the 'millenial' generation, complements our continued success in growing and strengthening our editorial impact in traditional media.

Investment in Systems and Processes

An important part of our retail strategy is our transformation programme, which continued during 2016.  We are starting to test some Omnichannel services which were introduced during the second half of the year.  These are being progressively rolled out across the business during 2017.  This is a key project to leverage the system platform investments already made and it will greatly improve the shopping experience by enhancing product availability, improving inventory management and increasing engagement with our clients.

Revenue Analysis

Our overall revenue increased by 14.5% on a reported basis (1.6% on a constant currency basis). Once again, Retail continues to be the growth engine of the business, growing ahead of Wholesale, in line with our previously stated strategic aim of retail led growth. Retail sales in 2016 represented 67.0% of revenue.  Other, which primarily relates to licensed income from Fragrance and Eyewear, also performed strongly, growing to 3.5% of total revenue. Revenue was significantly affected by currency volatility during the year, particularly post the UK Referendum vote in June 2016, with all currencies stronger in relation to Sterling, causing both significant reported sales value gains in the second half of the year and some sizeable shifts in client shopping patterns, largely in favour of UK trading.

Retail

In 2016, retail revenue grew by 17.4% to £243.9m (3.9% at constant currency) as a result of the addition of 10 new DOS and one closure and the full year impact of the new stores opened in 2015.  LFL sales were -0.8% below last year as difficult market conditions during the first half caused LFL decline, however a stronger final quarter resulted in LFL in the second half improving to 1.9%, with overall second half retail revenue growth of 5.4% at constant currency.  LFL also reflected the impact of the renovation programme and downward adjustments to maintain our global price positioning.

Sales continued to be positively impacted by the roll out of the New Store Concept as stores which have been refitted with the new concept continue to outperform those in the existing format. During 2016, a further 16 stores were refitted, bringing the total stores trading in the New Store Concept at the year end to over 45% of the DOS estate.  As part of the overall retail performance, our Online business continued to develop well during the period and now accounts for 6% of revenue.  We are starting to test some Omnichannel services which were introduced during the second half of the year.  These are being progressively rolled out across the business during 2017. 

Wholesale

Our wholesale business grew by 7.4% on a reported basis during the year (-3.9% on a constant currency basis). As expected, wholesale revenue was impacted by reduced purchasing by USA department stores in the face of a slowdown of luxury footfall.  However, we continued to see organic growth within existing key wholesale accounts outside of the USA and the continued expansion of our wholesale network in EMEA and across Asia ex-Japan.

Licensing/Other

We had another successful year in Licensing, with Fragrance seeing the full year impact of the launch in August 2015 of 'Illicit', our third Women's fragrance, as well as launches during the year of 'Man Intense' and 'Illicit Flower' fragrances.  Sunglasses & Eyewear also performed well.

Our strategy in Asia continues to be successful, with the region once again leading growth.  Asia ex-Japan grew by 33.4% on a reported basis (19.2% on a constant currency basis), driven by increasingly strong domestic performance in China where we opened three new stores during the period.  The franchise doors in Singapore and Malaysia acquired and converted to DOS in 2015 also performed well during 2016, as did the new flagship store in Harbour City, Hong Kong.  In Japan, we opened three new stores and benefitted from strong domestic demand.  We also experienced continued notable growth in our Men's business in Japan.

We saw growth across EMEA where business improved throughout the second half, with a benefit in the UK from weaker Sterling which aided good growth in sales to international clients.  In Continental Europe, the impact of geopolitical events reduced tourist spend and slowed sales, but with an improved trend building throughout the second half. 

In Americas, revenue declined by -1.7%, with the continuing repositioning of our business in the USA.  This work coincided with softer demand for luxury and lower purchasing by the department stores.  However, we continued to invest in and develop our USA store portfolio in order to enhance the quality of the client experience.  This included the opening of a new store on Greene Street in Soho and the relocation of our flagship Madison Avenue store in New York, as well as the opening of new stores in both Chicago and San Francisco.   We have worked closely with our wholesale partners to realign our USA wholesale distribution network.  We also closed one DOS.  We continue to strengthen our platform for sales development in the USA.

Profit Analysis

Gross Margin

In 2016, our gross margin continued to benefit from the growth of our retail business, driving an improvement in channel mix and lower markdowns.  This was also the first full year of the operation of the new supply chain set-up which enabled us to improve distribution and reduce logistics costs.  Weaker Sterling and the translation of currency earnings also lifted margins.  At the same time, we continued to reinvest in the growth of our Men's business and the fashion component of our collections.  As a result, gross margin at 64.0% improved by 130 bps from 62.7% in 2015.

Costs

Total costs charged in arriving at Adjusted EBITDA increased by 17.4% in 2016, compared to 14.5% growth in total revenue and 17.4% growth in retail revenue in the same period.

Selling and distribution expenses continued to reflect the impact of the store development programme, including the opening of 10 new DOS and the renovation of 16 DOS in the same period.  As a result, these costs increased by £20.3m or 21.8% in 2016 of which £8.9m related to development programme costs with the remaining £11.4m relating to foreign exchange.

We continued to invest in brand communication during the year, with an investment of £18.3m or 5.0% of revenue, up by 18.1% against 2015. This is in line with our stated goal of brand communication investment of 5.0% of revenue.  Our media presence continued to grow and we undertook a number of high profile events and activities during the year to mark the 20^th anniversary of the brand.  We were again ranked as number one in global editorial ranking for luxury women's shoes.

Overheads for 2016 were £42.3m, which was 6.8% ahead of last year, falling to 11.6% of revenue from 12.5%. This was in line with our target of cost increases below revenue growth and was achieved through continued tight cost control and further benefits from process efficiency improvements following the completion of the SAP implementation programme with the go-live of SAP in Japan in June 2016.

Exceptional costs of £3.0m (2015: £2.4m) were incurred during the year and were largely related to costs associated with the completion of the SAP implementation programme and legal costs.

Profits and Earnings

Profit growth was driven by continuing expansion of the retail network, improvement of gross margin in the supply chain and operating leverage on the overheads of the business.  As a result, Adjusted EBITDA grew by 15.7% to £59.0m compared to £51.0m in the prior year.  Adjusted EBITDA margin improved by 20 bps to 16.2%.

Depreciation and amortisation reflected the continued investment in new stores, the roll out of the New Store Concept and the completion of the SAP implementation programme and rose from £17.8m in 2015 to £20.3m in 2016, an increase of 14.0%. Depreciation and amortisation remained at 5.6% of revenue, leading to an increase in Adjusted EBIT of 16.6% to £38.7m (2015: £33.2m), with an Adjusted EBIT margin up 20bps to 10.6%.

Operating profit increased by 42.6% to £42.5m (2015: £29.8m) which included a gain on realised and unrealised monetary items of £6.8m, driven by weaker Sterling (2015: £1.0m loss).

Our finance expense increased by £9.9m to £15.3m, driven largely by a £9.2m foreign exchange loss on the close-out of the old debt facilities.  The losses on financial instruments of £9.5m were largely driven by weaker Sterling and more than offset the foreign exchange gains on monetary items.  Amortisation of refinancing costs amounted to £0.3m in the year (2015: £nil).

The total tax charge for 2016 was £2.3m (2015: £2.7m). The effective tax rate (ETR) of 12.9% increased slightly from 12.7% in 2015 having materially benefitted from a deferred tax credit of £2.8m in each year, largely arising from changes in the UK corporate tax rate.  As an international company with a wide geographic spread of markets, the ETR will continue to be sensitive to the geographic mix of profits.  Tax risk could fluctuate further as we respond to legislative changes from the OECD's Base Erosion Profit Shifting project ("BEPS") and review the impact of potential geopolitical structural tax changes, for example tax reform in the USA, which could impact the tax landscape.

Adjusted Consolidated Net Income for the year was £24.3m (2015: £19.0m) and generated Adjusted EPS of 6.4 pence (2015: 5.0 pence).  In overall reported terms, Profit for the year was £15.4m (2015: £19.4m) with EPS of 4.1 pence (2015: 5.1 pence), both impacted by a non-recurring loss on the previous loan facility arising from foreign exchange translation.

Cashflow

Cash conversion improved again in 2016 from 96.5% to 104.2%, with strong EBITDA growth of £8.0m and a continuing and increasingly successful focus on working capital efficiency which reduced working capital by £0.6m, notwithstanding the expansion of the retail network.

Free operating cash flow of £6.6m in 2016 increased by £5.1m from £1.5m in 2015.  This was driven by an improvement in cash generated from operating activities, £4.8m ahead of 2015, with investing activities (capital expenditure and acquisitions) £0.3m lower than last year. Capital expenditure was 8% of revenues as a result of the investment in the retail network and preparation for Omnichannel. 

Net Debt

On 17 March 2016, the Group completed the refinancing of its debt with a new, unsecured facility of £200m with a five year tenor through to 16 March 2021, made up of a £125m term loan and a £75m Revolving Credit Facility (RCF) (denominated in US Dollars and Euro) with an accordion option to increase the facility by a further £50m.  The previous principal secured debt facilities were repaid in full. The new facility results in a reduction in borrowing costs, an improvement in headroom and certainty over our financing for the next five years. 

Net debt as at 31 December 2016 decreased by £6.6m (5.4%) at constant rates, but increased by £17.6m at reported rates. The bank reported leverage measure (Net debt:EBITDA) was well within covenant requirements, with significant headroom available.

Balance Sheet

During the year, total assets increased by £51.6m to £819.5m as at 31 December 2016. Non-current assets increased by £19.6m to £675.4m as a result of continued investment in new stores, the refit of stores in the New Store Concept and further investment in the replatforming of the Group's information systems, including the development of Omnichannel and the implementation of SAP in Japan, with all major markets now on the SAP platform. Current assets increased by £32.0m to £144.1m against last year, with inventory and trade receivables both higher and both driven largely by foreign exchange.

Total liabilities increased by £42.3m to £343.3m as at 31 December 2016. Non-current liabilities increased by £23.0m to £208.8m as a result of non-current borrowings £23.9m higher than last year.  This arose from a change to the maturity profile of the loan which lowered current borrowings together with the foreign exchange impact from weaker Sterling on currency borrowings overall.  Current liabilities increased by £19.3m to £134.5m as at 31 December 2016, with the increase in trade and other payables driven by improved terms with key suppliers and the impact of foreign exchange on currency balances.  As at 31 December 2016, we carried tax provisions of £1.8m (2015: £2.8m) relating to the likely settlement of international trading issues.

Impact of Foreign Exchange Volatility

Following the UK Referendum in June, Sterling weakened significantly, impacting both the financial results and client purchasing behaviour.  The UK accounts for 7.7% of our global sales area, with 11.6% of revenue and 28.5% of operating costs denominated in Sterling.  Hence we saw a significant translational benefit arising on revenue and assets in overseas subsidiaries leading to strong published revenue results and improved asset values.  This was offset by increases in non-Sterling costs and liabilities including our debt facilities which are denominated in US Dollars and Euro. The combined impact of net foreign exchange gains on monetary items and the loss on financial instruments was a loss of £2.7m.

Exchange rate fluctuations have been highlighted as one of the material risks and will remain an area of monitoring and active management.

Outlook

We see improving retail trends across all regions and are well positioned to take advantage of a stronger marketplace.  This, combined with our sustained investment plan, gives us confidence that we will deliver on the current strong growth expectations for 2017. Despite some continuing specific challenging market conditions, and increased geopolitical uncertainty, we are cautiously optimistic that continuing operating efficiency and dynamism, innovation and flexibility of our teams will enable us to drive margin expansion and continue the reduction in leverage and financing costs.  After 20 years of investment in the brand, we are well positioned for the future with a solid base built for long term growth.

Appendix 1 - Financial Information

Consolidated income statement

For the year ended 31 December 2016

Consolidated statement of other comprehensive income

For the year ended 31 December 2016

Consolidated statement of financial position

As at 31 December 2016

Consolidated statement of changes in equity

For the year ended 31 December 2016

Consolidated statement of cash flows

For the year ended 31 December 2016

Notes to the consolidated financial statements

1.    Basis of preparation

The financial information contained in this preliminary announcement has been prepared on the historical cost basis except for the revaluation of certain financial instruments which are carried at fair value.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015 but is derived from those accounts.  Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course.  The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Full financial statements for the year ended 31 December 2016, will be posted to shareholders and made available on the Company's website at least 20 working days prior to the Company's Annual General Meeting on 1 June 2017 and delivered to the registrar after this meeting.

Changes in Accounting Policy

Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS.  The Group has consistently applied the accounting policies set out in this note to all periods presented in these consolidated financial statements.

With effect from 1 January 2016, the Group has adopted the following standards, amendments and improvements endorsed by the IASB during 2015 and 2016:

There was no material impact on the reported financial performance or position of the Group.

Going Concern

The Group's consolidated financial statements are prepared on a going concern basis as the directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future.   The Group has considerable financial resources following the refinancing of the Group on 17 March 2016, together with a strong on-going trading performance.

The directors have reviewed the Group's forecasts and projections.  These include the assumptions around the Group's products and markets, expenditure commitments, expected cash flows and borrowing facilities.

Taking into account reasonable possible changes in trading performance, and after making enquiries, the directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future.  Accordingly the directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements.

2.    Operating segments

The Chief Operating Decision Maker considers the Group's segments to be its three channels to market, being Retail (including online), Wholesale and Other.

Retail revenue is generated through the sale of luxury goods to end clients through Jimmy Choo directly operated stores in Europe, USA, Canada, Hong Kong, China, Singapore, Malaysia and Japan and through the Group's website.

Wholesale revenue is generated through the sale of luxury goods to distribution partners, multi-brand department stores and speciality stores worldwide.

Other revenue is predominantly generated through receipt of royalties from the Group's global licensees of Jimmy Choo branded fragrance, sunglasses and eyewear products.

There are no material inter-segment transactions.

The following is an analysis of the Group's revenue and results by reportable segment for the year ended 31 December 2016.

The following is an analysis of the Group's revenue and results by reportable segment for the year ended 31 December 2015.

3.    Exceptional costs

The Group incurred the following costs during the years presented that are considered to be exceptional:

Replatforming costs represent one-off costs associated with SAP implementation, supply chain restructure and scaling up the information systems capability and office infrastructure to support the growth strategy, as well as associated streamlining of the organisation.

Legal exceptional costs of £2.1m relate to three complaints brought in the USA courts against Jimmy Choo.  These include a complaint by Tamara Mellon, O.B.E. and class actions involving credit card receipts and payments to employees.  In all three cases, Jimmy Choo denies responsibility.  A liability has been recognised for all costs incurred and judged payable by the Group.

IPO costs represent costs directly associated with the listing of the Group on the London Stock Exchange in October 2014.

4.    Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.  There were no new shares issued for the year.  The difference between basic and diluted earnings per share is not material.

In order to provide a measure of underlying performance, the Group has chosen to present an additional illustrative measure of Adjusted earnings per share.  Adjusted earnings per share has been calculated using Adjusted Consolidated Net Income (see note 11) and dividing by the weighted average number of ordinary shares in issue during the year.

5.    Staff numbers and costs

The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:

The aggregate payroll costs incurred were as follows:

Full details of directors' remuneration and interests are set out in the Directors Remuneration Report in the Annual Report and Financial Statements.

Share-based payment expenses have been recognised in administrative expenses in the current and prior year.

6.    Financial Income and expense

The foreign exchange loss on external borrowings in 2016 relates to the close-out on the old debt facilities.

7.    Taxation

The tax charge is reconciled with the standard rates of UK corporation tax as follows:

8.    Acquisition of subsidiaries

On 1 April 2015, J. Choo Limited acquired part of the trade of American Style Pte. Ltd. and Valiram Avant Garde Sdn. Bhd.. Prior to the acquisition, American Style Pte. Ltd. and Valiram Avant Garde Sdn. Bhd. operated Jimmy Choo franchise stores in Singapore and Malaysia under a distribution agreement with J. Choo Limited. Jimmy Choo (Singapore) Pte. Ltd. subsequently acquired the operating leases, the tangible fixed assets and stock of the franchised stores from American Style Pte. Ltd. and Jimmy Choo (Malaysia) Sdn. Bhd. subsequently acquired the operating lease, the tangible fixed assets and stock of the franchised store from Valiram Avant Garde Sdn. Bhd.  The acquired trade and assets of American Style Pte. Ltd. and Valiram Avant Garde Sdn. Bhd. were accounted for as a single business combination in which the shop fittings, inventory and leases were recognised with a nil fair value.  Goodwill represents the fair value of the trade acquired including the operations and a presence in these locations.  The total consideration paid was £3.4m. The revenue and loss of the acquired trades from the date of acquisition to 31 December 2015 was £1.4m and £(0.0)m respectively.

9.    Capital and reserves

Share capital

Share capital is comprised of:

Share premium

Share premium of £99.5m arose on the debt for equity swap transaction between JAB Luxury GmbH and Choo Luxury Group Limited on 3 October 2014.  The carrying value of the Shareholder Credit Facility (including accrued interest) at the date of the debt for equity swap was £489.2m.

Own shares reserve

The cost of the Company's ordinary shares held by the Jimmy Choo PLC Employee Benefit Trust ("EBT") is treated as a deduction in arriving at total shareholder's equity.  The movement in the own shares reserve was as follows:

Shares held by the Jimmy Choo PLC Employee Benefit Trust will be used to satisfy options awarded under the Group's long-term incentive plan.

10.  Principal Risks

The Board carries out a formal process to identify, evaluate and manage significant risks faced by the Group.  In the view of the Board, the principal risks and uncertainties affecting the Group are those set out on pages 42 to 44 of the 2015 Annual Report and Financial Statements (www.jimmychooplc.com/investors/results-and-investors-presentations).

These risks have remained unchanged and the Group continues to actively monitor and manage these risks.  Recent events include a slowing of global economic growth and the EU Referendum and the attendant devaluation of Sterling have not altered the Group's views of the principal risks facing the business.

11.  Reconciliation to non-GAAP performance measures

The tax impact on adjusting items in Adjusted Consolidated Net Income would be a charge of £2.6m (2015: £0.5m).

Appendix 2 - Supplementary Financial Information

Table 1 - Costs charged in arriving at EBITDA

Table 2 - Free operating cash flow

(1)   Adjusted operating cash flow is defined as Adjusted EBITDA plus/minus non-cash charges in respect of share-based payments, realised and unrealised foreign exchange gains and losses on the revaluation of monetary items and working capital.  Working capital is defined as the sum of changes in trade and other receivables, inventories, trade and other payables and provisions.

(2)   Cash conversion is defined as Adjusted operating cash flow (as defined above) divided by Adjusted EBITDA.

(3)   Acquisition of property, plant and equipment and other intangible assets.