Ted Baker Plc

("Ted Baker", the "Group")

 

 

'Continued strong performance across all channels'

 

 

Highlights	28 weeks ended 9 August 2014	28 weeks ended 10 August 2013	Change
Group Revenue	£182.2m	£155.2m	17.4%
Profit Before Tax and Exceptional Items	£14.4m	£11.6m	24.2%
Profit Before Tax	£15.6m	£11.6m	33.8%
Adjusted Basic EPS*	24.2p	20.2p	19.8%
Basic EPS	26.1p	20.2p	29.2%
Interim Dividend	11.3p	9.5p	18.9%

*Adjusted EPS is shown before exceptional items (net of tax)

 

·    Retail sales including e-commerce up 14.8% to £140.0m on a 9.9% increase in average square footage

·    UK and European retail sales up 15.1% to £105.4m

·    US and Canada retail sales up 13.8% to £28.9m

·    Asia retail sales up 16.0% to £5.8m

·    E-commerce sales up 48.9% to £14.0m

·    Planned expansion continued with:

·    Two new stores in the UK, and a new store and outlet in France

·    A new store and outlet in the US

·    Further concessions with leading department stores across the US, Europe and Asia

·    Licensee store openings in Dubai, Egypt, Saudi Arabia and Australia

·    Wholesale sales up 26.8% to £42.1m

·    Licence income up 37.1% to £5.5m

 

 

 

 

 

Commenting, Ray Kelvin CBE, Founder and Chief Executive, said:

 

"Ted Baker has continued to deliver a strong performance across its global markets and distribution channels during the first half of the year. We have successfully opened new space in our international markets, with further planned for the second half of the year in line with our strategy to focus on expansion opportunities that are appropriate for our brand.

 

The strength of our brand is testament to the passion and dedication of our team and has enabled us to attract customers both in the UK and overseas who recognise our unwavering focus on quality, design and attention to detail. Whilst our results for the full year will be dependent on the more weighted second half, we continue to look forward with confidence as we further develop Ted Baker as a leading global lifestyle brand."

 

 

 

Enquiries:
Ted Baker Plc	Tel: 020 7796 4133 on 2 October 2014 only
Ray Kelvin CBE, Founder and Chief Executive	Tel: 020 7255 4800 thereafter
Lindsay Page, Chief Operating Officer and Group Finance Director
Hudson Sandler	Tel: 020 7796 4133
Alex Brennan Michael Sandler Julia Cooke

 

www.tedbaker.com

 

www.tedbakerPlc.com

 

Media images available for download at:

http://www.tedbakerPlc.com/ted/en/mediacentre/imagelibrary

 

 

 

 

 

 

 

Notes to Editors

 

Ted Baker Plc - "No Ordinary Designer Label"

Ted Baker is a leading global lifestyle brand distributing across five continents through its three main distribution channels: retail (including e-commerce), wholesale and licensing.

 

Ted Baker has 381 stores and concessions worldwide, comprising of 183 in the UK, 77 in Europe, 67 in the US and Canada, 47 in the Middle East and Asia and 7 in Australasia.

 

Ted Baker offers a wide range of collections including: Menswear; Womenswear; Global; Phormal; Endurance; Born by Ted Baker; Accessories; Lingerie and Sleepwear; Childrenswear; Fragrance and Skinwear; Footwear; Neckwear; Eyewear; Watches; Jewellery; and Audio, all of which are underpinned by an unwavering emphasis on design, product quality and attention to detail.

 

 

Development of the brand

 

Our strategy is to develop as a leading global lifestyle brand, based on three main elements:

·     considered expansion of our collections. We review our collections continually to ensure we react to trends and meet our customers' expectations. In addition, we look for opportunities to extend the breadth of collections and enhance our offer;

·     controlled distribution through three main channels: retail (including e-commerce); 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 existing and new international markets. We continue to manage growth in existing territories while considering new territories for expansion.

 

Underlying our strategy is an emphasis on design, product quality and attention to detail, which is delivered by the passion, commitment and dedication of our teams, licence partners and wholesale customers.

 

 

 

 

Chairman's Statement

I am pleased to announce a strong performance in the first half of the year, during which the Ted Baker brand has continued to develop across territories and distribution channels. This has resulted in a 17.4% increase in Group revenue to £182.2m and a 33.8% improvement in profit before tax to £15.6m. Profit before tax and exceptional items increased 24.2% to £14.4m.

 

The retail division performed well, with sales up 14.8% (18.0% in constant currency) on a 9.9% increase in average retail square footage. Performance was strong across all established territories and we continue to invest in our newer markets for the long term development of the brand. During the first half of the year, we have continued our expansion with openings across all territories. We successfully migrated our US e-commerce site onto our new platform in July, following the launch of the UK site last year, and we are pleased with performance at this early stage.

 

Wholesale sales increased 26.8% to £42.1m (29.1% in constant currency), which reflects a very good performance from our UK wholesale business, which includes the supply of goods to our licensed stores and our export business, and a strong performance from our US wholesale business.

 

Licence income increased by 37.1% to £5.5m as both our product and territorial licences continued to perform well. During the period our licence partners opened stores in Dubai, Egypt and Saudi Arabia and our joint venture partner in Australasia opened two new stores.

 

We continue to invest in our infrastructure and people and are working closely with Microsoft on the implementation of Microsoft Dynamics AX business systems globally across the Group to support our long term growth strategy. We are pleased with our progress to date and remain on course to commence the roll out early next year.We are confident of the opportunities that these systems will create to improve the efficiency of our business.

 

Financial Results

Group revenue increased by 17.4% to £182.2m (2013: £155.2m) for the 28 weeks ended 9 August 2014 (the "period"). The composite gross margin fell to 58.5% (2013: 59.7%), partly a result of a change in sales mix between wholesale and retail sales and partly due to a slight decrease in the retail and wholesale margins.

 

Operating expenses increased in line with expectations by 15.6% in the period to £97.2m (2013: £84.1m), which is reflective of our investment in people and infrastructure to support our long term growth. Distribution costs, which largely comprise the cost of retail stores, outlets and concessions increased by 13.2% to £70.2m (2013: £62.0m) and as a percentage of retail sales decreased to 50.2% (2013: 50.9%).

 

Administrative expenses including the performance related bonus provision increased by 21.5% to £26.6m (2013: £21.9m) due to  the growth of our central operations and the continued investment in our information technology infrastructure to support our international expansion. Excluding the employee performance related bonus provision of £1.4m (2013: £0.9m), administrative expenses increased by 20.0% to £25.2m (2013: 21.0m).

 

Exceptional costs in the period of £2.6m (2013: £nil) relate to a legal dispute with a previous insurer, details of which have been previously disclosed. We are required by accounting standards to recognise a provision for our legal and professional costs incurred in respect of the case so far, the judgment of which is due in the second half of the current financial year.

 

Exceptional income in the period of £3.7m (2013: £nil) relates to the early termination of a licence partner agreement. As previously communicated, in February 2014, we came to a mutual agreement with one of our licence partners to terminate our licence agreement earlier than anticipated due to a variation in that licence partner's long-term strategy. We received a payment of £3.7m for compensation of royalties that would be due to us had the agreement continued to its original completion date.

 

Profit before tax and exceptional items increased by 24.2% to £14.4m (2013: £11.6m) and profit before tax increased by 33.8% to £15.6m (2013: £11.6m). Adjusted basic earnings per share excluding exceptional items increased by 19.8% to 24.2p (2013: 20.2p) whilst basic earnings per share increased by 29.2% to 26.1p (2013: 20.2p).

 

Net interest payable during the period was £0.6m (2013: £0.5m). This increase reflects higher Group borrowing compared to the prior period due to increased capital expenditure and working capital. The net foreign exchange loss during the period of £0.1m (2013: loss of £0.6m) was due to the retranslation of monetary assets and liabilities denominated in foreign currencies.

 

The effective tax rate of 26.6% (2013 full year effective rate: 25.9%) is higher than the UK corporation tax rate. Whilst benefiting from the reduction in the UK corporation tax rate, this has been more than offset by higher overseas tax rates and the non-recognition of losses in some overseas territories during their development phase.

 

The net decrease in cash and cash equivalents of £23.8m (2013: £19.3m) primarily reflected an increase in working capital and further capital expenditure to support our long term development.

 

Total working capital, which comprises inventories, trade and other receivables and trade and other payables, increased by £12.4m to £87.7m (2013: £75.3m). This was mainly driven by an increase in inventories of £16.1m to £91.9m (2013: £75.8m) reflecting the growth of our business, stock on hand for our wholesale customers and licence partners and some earlier phasing of stock deliveries between the first and second half of the year.

 

Capital expenditure of £13.8m (2013: £8.1m) reflected the opening and refurbishment of stores and concessions in both new and existing markets. It also reflected our continued investment in Microsoft Dynamics AX systems across the business to support our growth, and we are on course to commence roll out early next year. We expect full year capital expenditure to be in line with previous guidance of £25m, subject to the timing of planned openings in the early stages of next year.

 

Borrowing Facilities

During the period, the Group was in discussions with the Royal Bank of Scotland and Barclays to arrange the renewal of its multi-currency revolving credit facility, due to expire on 1 March 2015. A new agreement was signed on 29 September 2014, increasing the Group's committed borrowing facility from £50m to £65m for the 3.5 years to March 2018. The new borrowing is on similar terms and contains similar covenants to the previous facility.

 

Dividends

The Board has declared an interim dividend of 11.3p (2013: 9.5p), representing an increase of 18.9%, which will be payable on 21 November 2014 to shareholders on the register at the close of business on 17 October 2014.

 

People

I would like to take this opportunity to thank all of my colleagues across the world for their continued hard work. This strong performance is testament to our talented teams, whose commitment and passion is key to our success as we continue to grow the business and develop Ted Baker as a global lifestyle brand.

 

Global Group Performance

 

Retail

We operate stores and concessions across the UK, Europe, the US, Canada and Asia and an e-commerce business based in the UK, primarily serving the UK and Europe, with a separate US site dedicated to the Americas. We also have e-commerce business with some of our concession partners. 

 

Retail sales, including e-commerce, were up 14.8% to £140.0m (2013: £122.0m) (18.0% in constant currency) with average retail square footage increasing by 9.9% to 326,403 sq.ft (2013: 297,011 sq.ft). Retail sales per square foot increased 1.8% to £386 (2013: £379) (5.3% in constant currency), benefiting from a good performance in new space opened in the second half of last year.

 

Our e-commerce business delivered another period of strong growth with a 48.9% increase in sales to £14.0m (2013: £9.4m), driven by growth across all areas of our e-commerce business. Our UK site has benefited from the launch of our new platform last year, providing a more relevant customer experience through improved design, performance and personalised content. This was followed by the successful migration of our US site in July, and we are pleased with performance at this early stage.

 

The retail gross margin reduced slightly to 64.0% (2013: 64.7%), largely reflecting an increase in our outlet sales as a proportion of total sales.

 

Retail operating costs increased in line with our expectations to £70.1m (2013: £61.5m), and as a percentage of retail sales reduced to 50.0% (2013: 50.4%).

Wholesale

We operate a wholesale business in the UK, which serves countries across the world, particularly in Europe and includes the supply of goods to our licensed stores. We also operate a wholesale business in the US.

 

Group wholesale sales were 26.8% above the same period last year at £42.1m (2013: £33.2m) (29.1% in constant currency) with a gross margin of 40.5% (2013: 41.5%), reflecting a very good performance from our UK business and a strong performance from our US business. Our US business benefited from additional new business in the second half of last year and accordingly, we do not expect this level of growth in the second half of the year.

 

The fall in wholesale margin was largely due to a proportionate increase in sales to our licensed stores, which carry a lower margin.

 

Licence Income

We operate both territorial and product licences. Our territorial licences cover the Middle East, Asia and Australasia, where our partners operate licensed retail stores and in some territories, wholesale operations. Our product licences cover lingerie and sleepwear, fragrance and skinwear, watches, footwear, eyewear, men's suits, neckwear, jewellery, childrenswear, homeware, luggage and audio.

 

Licence income was up 37.1% to £5.5m (2013: £4.0m) with both territorial and product licences performing well. Notably there were good performances from our product licensees in footwear, eyewear, neckwear, skinwear and lingerie. In June we launched with a licence partner, Ted Baker Audio, which has been very positively received. Our licensed stores in the Middle East, operated by our territorial partner, RSH Limited, also performed particularly well during the period with further openings planned as a result.

 

 

Collections

Ted Baker Womenswear performed very well with sales up 19.2% to £106.9m (2013: £89.7m), benefiting from a greater share of space added during the period. Ted Baker Menswear also delivered a very good performance with sales increasing 15.0% to £75.3m (2013: £65.5m). We are very pleased with the positive reactions to the collections both in the UK and internationally.

 

Womenswear represented 58.7% of total sales (2013: 57.8%) during the period and Menswear represented 41.3% of total sales (2013: 42.2%), which is broadly representative of the division in retail selling space.

 

Geographic Performance

 

United Kingdom & Europe

 

Sales in the period in the UK and Europe increased 16.7% to £139.7m (2013: £119.7m) (17.4% in constant currency).

                                                                       

Sales in the retail division were up 15.1% to £105.4m (2013: £91.6m) (15.6% in constant currency), reflecting a good performance in our established UK market and a very good performance in Europe where we continue to expand. During the period we opened two new stores in the UK, in Glasgow and Heathrow Terminal 2, a new store in Marseille, France, an outlet in Paris, France and further concessions with leading department stores in France, Spain and the Netherlands.

 

Average square footage rose by 7.6% over the period to 225,662 sq.ft (2013: 209,653 sq.ft), driven largely by growth in Europe. As at 9 August 2014, total retail square footage was 229,092 sq.ft (2013: 211,594 sq.ft), representing an increase of 8.3%. Retail sales per square foot increased by 4.1% from £394 to £410 (5.1% constant currency) reflecting the strength of our collections both in the UK and Europe.         

 

As at 9 August 2014, we operated 39 stores (2013: 34), including 2 licence stores (2013: nil), 209 concessions (2013: 193) and 12 outlet stores (2013: 11).

 

Sales from our UK wholesale business increased by 21.6% to £34.3m (2013: £28.2m) reflecting a good performance from our UK wholesale business and continued growth in our wholesale export business.

 

US & Canada

 

We are very pleased with our progress across retail and wholesale in the US and Canada with sales increasing 19.3% to £36.4m (2013: £30.5m) (31.3% in constant currency). Both our retail and wholesale channels performed very well and we are confident that the Ted Baker brand is continuing to gain traction and recognition in this territory.

 

Sales from our retail division increased by 13.8% to £28.9m (2013: £25.4m) (25.2% in constant currency). During the period we continued our expansion in the US with a new store in Philadelphia, an outlet in Desert Hills, California and two further concessions through a leading department store. We also successfully migrated our US e-commerce site onto our new platform in July this year, and we are very pleased with the improved design and performance.

 

Average square footage rose 13.5% over the period to 79,138 sq.ft (2012: 69,703 sq.ft). At 9 August 2014, total retail square footage was up 10.2% on last year at 81,433 sq.ft (2013: 73,877 sq.ft). Retail sales per square foot in constant currency increased 7.8% reflecting positive reactions to our collections, however, adjusted for currency movements fell 2.2% to £350 (2013: £358).

 

As at 9 August 2014, we operated 44 concessions across the US and Canada (2013: 37), 17 stores (2013: 16) and 6 outlet stores (2013: 5).

 

Sales from our US wholesale business increased by 47.1% to £7.5m (2013: £5.1m) (62.1% in constant currency), reflecting the growth of this business and increased brand recognition in this territory. This growth reflected momentum from new business gained in the second half of last year, which will annualise in the second half of this year. As a result, we do not expect this level of growth to be achieved in the second half of the year.

 

Middle East, Asia & Australasia

 

We continue to develop the Ted Baker brand across the Middle East, Asia and Australasia through our retail and licensing channels. We work closely with our territorial partners to ensure the visual merchandising of the licensed stores and training of the teams is reflective of the Ted Baker culture.

 

Retail sales in Asia increased 16.0% to £5.8m (2013: £5.0m) (26.0% in constant currency), with average square footage up 22.4% to 21,603 sq.ft (2013: 17,655 sq.ft). We are still in the early stages of development in this territory and continue to invest in infrastructure and people to build brand awareness and support our future growth.

 

During the period we closed two concessions in Japan and South Korea and opened one new concession in Japan. As at 9 August 2014, we operated 22 stores (2013: 22), 15 of which are through a licence partner (2013: 15), 1 outlet (2013:1) and 7 concessions (2013: 5) across Asia.

 

Our licensed stores across the Middle East continued to perform very well. During the period we opened a new store in Dubai and in Egypt and our first two stores in Saudi Arabia with our licence partner in this territory, RSH Limited. As a result, as at 9 August 2014, we operated a total of 17 stores across the Middle East (2013: 12).

 

During the period, we opened two new stores in Brisbane and Melbourne, Australia through a joint venture with our Australasian licence partner, Flair Industries Pty Ltd. As at 9 August 2014, we operated 7 stores in Australasia (2013: 5 stores).

 

 

Current Trading and Outlook

 

Retail

The second half has started well for the Group, with a good performance from our Autumn/Winter collections despite unusually warm weather in September. We have continued our international expansion in the US with a new store in Las Vegas and two concessions with a leading department store. We have also opened further concessions across Europe in France and Spain.

 

We will continue to develop our presence in the US and Canada during the second half of the year with plans to open two new stores in Miami and Toronto and further concessions in the US.

 

In the UK and Europe, we plan to open a store in Heathrow Terminal 4 and further concessions in Spain, Portugal and the Netherlands.

 

Wholesale

The strong performance in our wholesale business has been positively impacted by additional new business in the US during the second half of last year. As a result, we anticipate full year growth of around 18% for our wholesale business.

 

Licence Income

Our product and territorial licences continue to perform well with further store openings planned in Turkey, Abu Dhabi and Saudi Arabia. In September, we opened our first store in Panama with a new licence partner and performance at this early stage has been encouraging.

 

Outlook

The Group continues to perform well and we are pleased with the reactions to our Autumn/Winter collections.

 

We remain focused on the long term development of the Ted Baker brand and continue to invest in infrastructure and people to support the future growth of our business in new and existing markets.

 

Whilst we have made a strong start to the financial year, our results for the full year will, as always, be dependent on the more weighted second half trading period.

 

We intend to make our next interim management statement, covering the period since the start of the second half of the financial year, in mid-November.

 

 

David Bernstein CBE

Non-Executive Chairman

 

02 October 2014

 

 

 

Condensed Group Income Statement

For the 28 weeks ended 9 August 2014

 

		Note	Unaudited 28 weeks ended 9 August 2014		Unaudited 28 weeks ended 10 August 2013		Audited 52 weeks ended 25 January 2014
			£'000		£'000		£'000
	Revenue	2	182,172		155,208		321,921
	Cost of sales	2	(75,540)		(62,541)		(123,451)
	Gross profit	2	106,632		92,667		198,470
	Distribution costs		(70,234)		(62,046)		(123,211)
	Administrative expenses		(26,610)		(21,905)		(43,381)
	Exceptional income	3	3,669		-		-
	Exceptional costs	3	(2,556)		-		(1,046)
	Licence income		5,496		4,010		8,888
	Other operating (expense)/income		(362)		(115)		(132)
	Operating profit	2	16,035		12,611		39,588
	Finance income	4	69		27		316
	Finance expenses	4	(749)		(1,124)		(1,312)
	Share of profit of jointly controlled entity, net of tax		197		108		331
	Profit before tax	2	15,552		11,622		38,923
Profit before tax and exceptional items			14,439		11,622		39,969
Exceptional income		3	3,669		-		-
Exceptional costs		3	(2,556)		-		(1,046)
	Income tax expense	7	(4,137)		(3,008)		(10,071)
	Profit for the period		11,415		8,614		28,852
	Earnings per share	5
	Basic		26.1p		20.2p		67.2p
	Diluted		25.8p		19.6p		66.3p

 

 

Condensed Group Statement of Comprehensive Income

For the 28 weeks ended 9 August 2014

 

	Unaudited 28 weeks ended 9 August 2014	Unaudited 28 weeks ended 10 August 2013	Audited 52 weeks ended 25 January 2014
	£'000	£'000	£'000
Profit for the period	11,415	8,614	28,852
Other comprehensive (loss) / income Items that may be reclassified subsequently to the income statement:
Net effective portion of changes in fair value of cash flow hedges	(1,228)	(101)	(2,486)
Net change in fair value of cash flow hedges transferred to profit or loss	1,797	(169)	545
Exchange rate movement	(708)	(763)	(3,276)
Other comprehensive loss for the period, net of tax	(139)	(1,033)	(5,217)
Total comprehensive income for the period	11,276	7,581	23,635

 

 

Condensed Group Statement of Changes in Equity - Unaudited         

For the 28 weeks ended 9 August 2014

 

	Share capital	Share premium account	Cash flow hedging reserve	Translation reserve	Retained earnings	Total equity attributable to equity shareholders of the parent
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 25 January 2014	2,194	9,139	(1,850)	(2,980)	105,561	112,064
Comprehensive income for the period
Profit for the period	-	-	-	-	11,415	11,415
Deferred tax associated with movement in hedging reserve	-	-	(142)	-	-	(142)
Effective portion of changes in fair value of cash flow hedges	-	-	(1,086)	-	-	(1,086)
Net change in fair value of cash flow hedges transferred to profit or loss	-	-	1,797	-	-	1,797
Exchange rate movement	-	-	-	(708)	-	(708)
Total comprehensive income for the period	-	-	569	(708)	11,415	11,276
Transactions with owners recorded directly in equity
Increase in issued share capital	1	144	-	-	-	145
Share options / awards charge	-	-	-	-	580	580
Movement on current / deferred tax on share options / awards	-	-	-	-	(233)	(233)
Dividends paid	-	-	-	-	(10,566)	(10,566)
Total transactions with owners	1	144	-	-	(10,219)	(10,074)
Balance at 9 August 2014	2,195	9,283	(1,281)	(3,688)	106,757	113,266

 

 

 

 

 

 

 

Condensed Group Statement of Changes in Equity - Unaudited         

For the 28 weeks ended 10 August 2013

	Share capital	Share premium account	Cash flow hedging reserve	Translation reserve	Retained earnings	Total equity attributable to equity shareholders of the parent
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 26 January 2013	2,160	9,137	91	296	87,209	98,893
Comprehensive income for the period
Profit for the period	-	-	-	-	8,614	8,614
Deferred tax associated with movement in hedging reserve	-	-	74	-	-	74
Current tax associated with movements in foreign exchange	-	-	-	318	-	318
Effective portion of changes in fair value of cash flow hedges	-	-	(129)	-	-	(129)
Net change in fair value of cash flow hedges transferred to profit or loss	-	-	(215)	-	-	(215)
Exchange rate movement	-	-	-	(1,081)	-	(1,081)
Total comprehensive income for the period	-	-	(270)	(763)	8,614	7,581
Transactions with owners recorded directly in equity
Share options / awards charge	-	-	-	-	140	140
Movement on current / deferred tax on share options / awards	-	-	-	-	-	-
Disposal of own / treasury shares	-	-	-	-	71	71
Dividends paid	-	-	-	-	(7,965)	(7,965)
Total transactions with owners	-	-	-	-	(7,754)	(7,754)
Balance at 10 August 2013	2,160	9,137	(179)	(467)	88,069	98,720

 

 

 

 

 

 

 

Condensed Group Statement of Changes in Equity - Audited

For the 52 weeks ended 25 January 2014

	Share capital	Share premium account	Cash flow hedging reserve	Translation reserve	Retained earnings	Total equity attributable to equity shareholders of the parent
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 26 January 2013	2,160	9,137	91	296	87,209	98,893
Comprehensive income for the period
Profit for the period	-	-	-	-	28,852	28,852
Deferred tax associated with movement in hedging reserve	-	-	490	-	-	490
Current tax on foreign currency translation	-	-	-	1,115	-	1,115
Effective portion of changes in fair value of cash flow hedges	-	-	(2,976)	-	-	(2,976)
Net change in fair value of cash flow hedges transferred to profit or loss	-	-	545	-	-	545
Exchange rate movement	-	-	-	(4,391)	-	(4,391)
Total comprehensive income for the period	-	-	(1,941)	(3,276)	28,852	23,365
Transactions with owners recorded directly in equity
Increase in issued share capital	34	2	-	-	(34)	2
Share options / awards charge	-	-	-	-	606	606
Movement on current / deferred tax on share options / awards	-	-	-	-	967	967
Disposal of own / treasury shares	-	-	-	-	71	71
Dividends paid	-	-	-	-	(12,110)	(12,110)
Total transactions with owners	34	2	-	-	(10,500)	(10,464)
Balance at 25 January 2014	2,194	9,139	(1,850)	(2,980)	105,561	112,064

Condensed Group Balance Sheet

At 9 August 2014

 

	Note	Unaudited 9 August 2014			Unaudited 10 August 2013				Audited 25 January 2014
		£'000			£'000				£'000
Non-current assets
Intangible assets		10,563				3,322				6,080
Property, plant and equipment		46,978				45,737				45,083
Investments in equity accounted investee		1,221				801				1,024
Deferred tax assets		4,055				6,094				4,450
Prepayments		536				620				564
		63,353				56,574				57,201
Current assets
Inventories		91,914				75,821				80,432
Trade and other receivables		36,929				33,372				34,793
Amount due from equity accounted investee		505				477				164
Derivative financial assets		230				920				499
Cash and cash equivalents	9	10,887				10,069				28,521
		140,465				120,659				144,409
Current liabilities
Trade and other payables		(41,095)				(33,867)				(45,289)
Bank overdraft	9	(44,213)				(40,024)				(37,282)
Income tax payable		(2,822)				(1,177)				(3,857)
Derivative financial liabilities		(2,422)				(1,193)				(3,118)
		(90,552)				(76,261)				(89,546)
Non-current liabilities
Deferred tax liabilities		-				(2,252)				-
		-				(2,252)				-
Net assets		113,266				98,720				112,064
Equity
Share capital		2,195				2,160				2,194
Share premium account		9,283				9,137				9,139
Other reserves		(1,281)				(179)				(1,850)
Translation reserve		(3,688)				(467)				(2,980)
Retained earnings		106,757				88,069				105,561
Total equity		113,266				98,720				112,064

 

Condensed Group Cash Flow Statement

For the 28 weeks ended 9 August 2014

 

	Note	Unaudited 28 weeks ended 9 August 2014		Unaudited 28 weeks ended 10 August 2013		Audited 52 weeks ended 25 January 2014
		£'000		£'000		£'000
Cash generated from operations
Profit for the period		11,415		8,614		28,852
Adjusted for:
Income tax expense		4,137		3,008		10,071
Depreciation		6,413		5,615		10,889
Loss on disposal of property, plant & equipment		385		108		308
Net impairment credit		-		-		725
Share options / awards charge		580		140		606
Net finance losses		680		1,097		996
Net change in derivative financial assets and liabilities		284		204		463
Share of profit in joint venture		(197)		(108)		(331)
Decrease in non-current prepayments		39		64		91
Increase in inventories		(10,920)		(7,937)		(12,215)
Increase in trade and other receivables		(2,952)		(993)		(3,787)
(Decrease) / increase in trade and other payables		(3,672)		(6,893)		4,780
Interest paid		(735)		(499)		(1,169)
Income taxes paid		(5,181)		(5,751)		(8,470)
Net cash generated from operating activities		276		(3,331)		31,809
Cash flow from investing activities
Purchases of property, plant & equipment & intangibles		(13,805)		(8,105)		(18,082)
Proceeds from sale of property, plant & equipment		176		1		73
Interest received		-		1		(43)
Net cash from investing activities		(13,629)		(8,103)		(18,052)
Cash flow from financing activities
Proceeds from option holders for exercise of options		-		71		71
Dividends paid		(10,566)		(7,965)		(12,110)
Proceeds from issue of shares		145		-		2
Net cash from financing activities		(10,421)		(7,984)		(12,037)
Net decrease in cash and cash equivalents		(23,774)		(19,328)		(1,720)
Cash and cash equivalents at the beginning of the period		(8,761)		(10,039)		(10,039)
Exchange rate movement		(791)		(588)		(442)
Net cash and cash equivalents at the end of the period		(33,326)		(29,955)		(8,761)
Cash and cash equivalents at the end of the period		10,887		10,069		28,521
Bank overdraft at the end of the period		(44,213)		(40,024)		(37,282)
Net cash and cash equivalents at the end of the period		(33,326)		(29,955)		(8,761)

Notes to the Condensed Interim Financial Statements

For the 28 weeks ended 9 August 2014

 

1.   Basis of preparation

 

a. Reporting entity

Ted Baker Plc is a company domiciled in the United Kingdom. The condensed interim financial statements ("interim financial statements") of Ted Baker Plc as at, and for the 28 weeks ended, 9 August 2014 comprise the Company and its subsidiaries (together referred to as the "Group").

 

The Group financial statements as at, and for the 52 weeks ended, 25 January 2014 are available upon request from the Company's registered office at Ted Baker Plc, The Ugly Brown Building, 6a St. Pancras Way, London NW1 0TB or at www.tedbakerPlc.com.  

 

b. Statement of compliance

These interim financial statements have been prepared in accordance with "IAS 34 Interim Financial Reporting" as adopted by the EU and the requirements of the Disclosures and Transparency Rules. They do not include all of the information required for full annual financial statements and should be read in conjunction with the Group financial statements as at, and for the 52 weeks ended, 25 January 2014. These interim financial statements were approved by the Board of Directors on 2 October 2014.

 

The comparative figures for the 52 weeks ended 25 January 2014 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified; (ii) did not include a reference to any matters to which the auditors 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. These sections address whether proper accounting records have been kept, whether the Company's accounts are in agreement with these records and whether the auditors have obtained all the information and explanations necessary for the purposes of the audit.

 

The financial information in this document is unaudited, but has been reviewed by the auditors in accordance with the Auditing Practices Board guidance on Review of Interim Financial Information.

 

c. Going concern

The Group financial statements for the 52 weeks ended 25 January 2014, approved by the Board on 21 March 2014, included information on the business environment in which the Group operates, including the factors that are likely to impact the future prospects of the Group, together with the principal risks and uncertainties that the Group faces. In addition, the notes to the consolidated financial statements set out the Group's objectives, policies and processes for managing its financial and capital risk and its exposures to credit, market and liquidity risk. Many of the risks and uncertainties reported are such that their potential to impact the Group's operations are inherent and remain valid as regards to their potential impact during the second half of 2014. The impact of the economic environment in which the Group's businesses operate is considered in the Chairman's Statement.

 

The Directors have prepared trading and cash flow forecasts for a period of one year from the date of approval of these interim financial statements. The Directors have a reasonable expectation that the Group has adequate cash headroom and expects to meet all banking covenant requirements. Accordingly, they continue to adopt a going concern basis in preparing the financial statements of the Group.

 

d. Significant accounting policies

The accounting policies adopted in these interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the 52 weeks ended 25 January 2014. Adoption of amendments to published standards and interpretations effective for the Group for the half year ended 9 August 2014 have had no significant impact on the financial position and performance of the Group.

 

 

 

 

 

 

2.   Segment information

 

Segment revenue and segment result

 

Unaudited - 28 weeks ended 9 August 2014	Retail	Wholesale	Licence income	Total
	£'000	£'000	£'000	£'000
Revenue	140,040	42,132	-	182,172
Cost of sales	(50,475)	(25,065)	-	(75,540)
Gross profit	89,565	17,067	-	106,632
Operating costs	(70,065)	-	-	(70,065)
Operating contribution	19,500	17,067	-	36,567
Licence income	-	-	5,496	5,496
Segment result	19,500	17,067	5,496	42,063
Reconciliation of segment result to profit before tax
Segment result	19,500	17,067	5,496	42,063
Other operating costs				(26,956)
Exceptional income				3,669
Exceptional costs				(2,556)
Other operating expense				(185)
Operating profit				16,035
Net finance expense				(680)
Share of profit of jointly controlled entity, net of tax				197
Profit before tax				15,552
Capital expenditure	8,306	41	-	8,347
Unallocated capital expenditure				5,363
Total capital expenditure				13,710
Depreciation	5,305	98	-	5,403
Unallocated depreciation				1,010
Total depreciation				6,413
Segment assets	150,662	43,309	-	193,971
Other assets				9,847
Total assets				203,818
Segment liabilities	(65,578)	(19,730)	-	(85,308)
Other liabilities				(5,244)
Total liabilities				(90,552)
Net assets				113,266

 

 

 

 

    

 

 

 

Unaudited - 28 weeks ended 10 August 2013	Retail	Wholesale	Licence income	Total
	£'000	£'000	£'000	£'000
Revenue	121,974	33,234	-	155,208
Cost of sales	(43,107)	(19,434)	-	(62,541)
Gross profit	78,867	13,800	-	92,667
Operating costs	(61,506)	-	-	(61,506)
Operating contribution	17,361	13,800	-	31,161
Licence income	-	-	4,010	4,010
Segment result	17,361	13,800	4,010	35,171
Reconciliation of segment result to profit before tax
Segment result	17,361	13,800	4,010	35,171
Other operating costs				(22,445)
Other operating expense				(115)
Operating profit				12,611
Net finance expense				(1,097)
Share of profit of jointly controlled entity, net of tax				108
Profit before tax				11,622
Capital expenditure	6,286	136	-	6,422
Unallocated capital expenditure				1,675
Total capital expenditure				8,097
Depreciation	4,338	71	-	4,409
Unallocated depreciation				1,206
Total depreciation				5,615
Segment assets	130,898	33,566	-	164,464
Other assets				12,769
Total assets				177,233
Segment liabilities	(58,069)	(15,822)	-	(73,891)
Other liabilities				(4,622)
Total liabilities				(78,513)
Net assets				98,720

 

 

Audited - 52 weeks ended 25 January 2014	Retail	Wholesale	Licence income	Total
	£'000	£'000	£'000	£'000
Revenue	259,143	62,778		321,921
Cost of sales	(87,909)	(35,542)	-	(123,451)
Gross profit	171,234	27,236	-	198,470
Operating costs	(122,176)	-	-	(122,176)
Operating contribution	49,058	27,236	-	76,294
Licence income	-	-	8,888	8,888
Segment result	49,058	27,236	8,888	85,182
Reconciliation of segment result to profit before tax
Segment result	49,058	27,236	8,888	85,182
Other operating costs				(44,416)
Exceptional costs				(1,046)
Other operating expense				(132)
Operating profit				39,588
Net finance expense				(996)
Share of profit of jointly controlled entity, net of tax				331
Profit before tax				38,923
Capital expenditure	13,009	281	-	13,290
Unallocated capital expenditure				4,578
Total capital expenditure				17,868
Depreciation	8,433	183	-	8,616
Unallocated depreciation				2,273
Total Depreciation				10,889
Segment assets	153,844	37,803	-	191,647
Other assets				9,963
Total assets				201,610
Segment liabilities	(66,469)	(16,102)	-	(82,571)
Other liabilities				(6,975)
Total liabilities				(89,546)
Net assets				112,064

 

 

3.   Exceptional Income and Expenses

 

The directors believe that the profit before exceptional items and the adjusted earnings per share measures provide additional useful information for shareholders on the underlying performance of the business. These measures are consistent with how underlying business performance is measured internally.

 

The exceptional profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies.

 

Exceptional income for the period of £3.7m (10 August 2013: £nil, 25 January 2014: £nil) is in relation to the early termination of a licence partner agreement. In February 2014 we came to a mutual agreement with one of our licence partners to terminate our licence agreement earlier than anticipated due to a variation in that licence partner's long-term strategy following a change in senior management.  The Company has recognised minimum royalty income in line with the terms of the original agreement in the 28 week period ended 9 August 2014 up to the point where work with the licence partner was complete. In addition we received a payment of £3.7 million for compensation of royalties that would be due to us had the agreement continued to its original completion date. Given the quantum of the amounts involved and the unusual nature of the early termination of the agreement the compensation payment has been included as exceptional income in the period.

 

Exceptional costs for the period of £2.6m (10 August 2013: £nil, 25 January 2014: £1.0m) relate to a legal dispute with a previous insurer. The Group is pursuing a claim against a previous insurer for loss of profit arising from the theft of inventory from its warehouse from 2004 to 2008. Whilst the directors remain confident, no contingent asset has been recognised at the balance sheet date in respect of any compensation for loss of profit or recovery of costs that may be awarded to the Company.  This is on the basis that accounting standards require the directors to be virtually certain of the outcome, and final judgment and any award of costs is pending from the Courts.  Accordingly an amount of £2.6 million has been charged as exceptional costs during the period which relates to the Company's legal and professional costs incurred in respect of the case.

 

Exceptional costs incurred for the 52 weeks ended 25 January 2014 include £0.7m of impairment charges in respect of the retail assets of a store in the Meatpacking District, New York, and a store in Paris. The balance of £0.3m related to an onerous lease for one of our Liverpool based stores, where we had ceased trading following the expansion of our Liverpool One store in Merseyside.

 

4.   Finance income and expenses

 

		Unaudited		Unaudited		Audited
		28 weeks  ended 9  August 2014		28 weeks  ended 10  August 2013		52 weeks ended 25 January 2014
		£'000		£'000		£'000
Finance income
- Interest receivable		15		2		146
- Foreign exchange gains		54		25		170
		69		27		316
Finance expenses
- Interest payable		(595)		(511)		(1,279)
- Foreign exchange losses		(154)		(613)		(33)
		(749)		(1,124)		(1,312)

 

5.   Earnings per share

 

		Unaudited		Unaudited		Audited
		28 weeks  ended 9  August 2014		28 weeks  ended 10  August 2013		52 weeks  ended 25  January 2014
Number of shares:		No.		No.		No.
Weighted number of ordinary shares outstanding		43,669,783		42,632,866		42,960,023
Effect of dilutive options		632,677		1,334,699		537,103
Weighted number of ordinary shares outstanding - diluted		44,302,460		43,967,565		43,497,126
Earnings:		£'000		£'000		£'000
Profit for the period, basic and diluted		11,415		8,614		28,852
Profit for the period adjusted *		10,573		8,614		29,627
Basic earnings per share		26.1p		20.2p		67.2p
Adjusted earnings per share *		24.2p		20.2p		69.0p
Diluted earnings per share		25.8p		19.6p		66.3p

 

* Adjusted profit for the period and adjusted earnings per share are shown before exceptional items (net of tax) of £842,000 (28 weeks ended 10 August 2013: £nil, 52 weeks ended 25 January 2014: £775,000).

 

6.   Dividends per share

 

		Unaudited		Unaudited		Audited
		28 weeks ended 9 August 2014		28 weeks ended 10 August 2013		52 weeks ended 25 January 2014
		£'000		£'000		£'000
Final dividend paid for the prior year of 24.2p per ordinary share (2013: 18.7p)		10,566		7,965		7,965
Interim dividend paid 2014: Nil (2013: Nil)		-		-		4,145
		10,566		7,965		12,110

 

The Board has declared an interim dividend of 11.3p per share (2013: 9.5p) payable on 21 November 2014 to shareholders on the register at 17 October 2014.

 

 

7.   Income tax expense

The Group's full year forecast effective tax rate in respect of continuing operations for the 28 weeks ended 9 August 2014 is 26.6% (28 weeks ended 10 August 2013: 25.9%, 52 weeks ended 25 January 2014: 25.9%).

This effective tax rate is higher than the UK tax rate 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 2014 the UK corporation tax rate fell from 23% to 21%.  A further reduction to 20% (from 1 April 2015) has been substantively enacted and therefore our closing UK deferred tax assets and liabilities have been measured at this rate.

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.

8.   Share based payments

 

Sharesave Scheme

 

Share options are granted at an option price equal to 80 per cent. of the Company share price at the grant date.  The share options vest and are exercisable either three or five years after the date of grant, and they expire six months after the end of the vesting period.  The options will also expire if the employee leaves the Group prior to the exercise or vesting date.

 

The charge to the income statement for the 28 weeks ended 9 August 2014 in respect of Sharesave scheme options amounted to £63,815 (2013: £43,669).

 

The terms and conditions of the SAYE grants made during the 28 weeks ended 9 August 2014 are as follows:

 

 

Grant date	Type of award	Number of shares	Vesting conditions	Vesting period
20 May 2014	SAYE Share Options	42,849	None	100% after 3 years
20 May 2014	SAYE Share Options	8,229	None	100% after 5 years

 

The basis of measuring fair value is consistent with that disclosed in the consolidated financial statements for the 52 weeks ended 25 January 2014. The range of inputs into the Black-Scholes model was as follows:

 

Share price	2,000.0p
Exercise price	1,600.0p
Risk free interest rate	1.48-2.01%
Expected life of options	3-5 years
Share price volatility	30.0-31.0%
Dividend yield	1.72%

 

Long Term Incentive Plan

 

Share awards are made in the form of nil-cost options under the Ted Baker Plc Long Term Incentive Plan 2013 ("LTIP 2013"), which was approved by the shareholders at the general meeting held on 20 June 2013.  A second award of options was granted under the LTIP 2013 on 1 May 2014. 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 vestsis linked to the level of profit growth achieved.

 

The terms and conditions of the LTIP 2013 awards made during the 28 weeks ended 9 August 2014 are as follows:

 

 

Grant date	Type of award	Number of shares	Vesting conditions	Vesting period
1 May 2014	LTIP 2013	254,141	Profit before tax per share growth of 10-15% per annum and 10% share price growth over the vesting period	Up to 100% after 3 years

 

The charge to the income statement for the 28 weeks ended 9 August 2014 for LTIP 2013 awards amounted to £515,920 (2013: £96,561). Included in the charge for the period is an amount in respect of R S Kelvin, who is employed by the Company, amounting to £66,230 (2013: £14,077).

 

The Monte-Carlo valuation methodology has been used as the basis of measuring fair value of the LTIP 2013. The range of inputs into the Monte-Carlo model was as follows:

 

Share price at grant	1,849.0p
Share price at grant (based on 6 month average) for share price performance condition	2,103.0p
Risk free interest rate	1.18%
Expected life of options	3 years
Share price volatility	29.0%
Dividend yield	1.82%

 

 

Value Creation Plan

 

No further awards were made under the Ted Baker 2009 Value Creation Plan ("2009 VCP") in the 28 weeks ended 9 August 2014 or the 28 weeks ended 10 August 2013 and no amounts charged to the income statement in either period. As at 9 August 2014 there remained 202,382 2009 VCP options unexercised.

 

 

9.   Reconciliation of cash and cash equivalents per balance sheet to the cash flow statement

			Unaudited		Unaudited
			28 weeks  ended 9  August 2014		28 weeks  ended 10  August 2013
			£'000		£'000
Cash and cash equivalents per balance sheet			10,887		10,069
Bank overdraft per balance sheet			(44,213)		(40,024)
Cash and cash equivalents per cash flow statement			(33,326)		(29,955)

 

During the period the Group was in discussions with The Royal Bank of Scotland and Barclays to arrange the renewal of its multi-currency revolving credit facility, due to expire 1 March 2015. A new agreement was signed on 29 September 2014 whereby the Group increased its committed borrowing facility from £50m to £65m for 3.5 years to March 2018. The existing borrowing facility was repaid on 29 September 2014 and the Group commenced borrowing under the new facility on the same day. The new facility is on similar terms to the previous facility and contains similar covenants appropriate to the Group which will be tested on a quarterly basis.

 

10.  Intangible assets

 

Intangible asset additions during the period include £4.0m (25 January 2014: £2.7m) in relation to the Microsoft Dynamics AX systems which will be implemented across the group and £0.9m (25 January 2014: £2.6m) relating to IT systems for the new e-commerce platform for both the UK and US site.  

 

11.  Treasury shares

 

The Company acquired nil Treasury shares (2013: nil) and disposed of 29,113 treasury shares in satisfaction of the Company's share option schemes for the proceeds of £nil (2013: 229,097 for proceeds of £71,340) in the 28 weeks ended 9 August 2014.

 

12.  Related Parties

 

The Company has a related party relationship with its directors and executive officers.

 

Directors of the company and their immediate relatives control 35.8% (2013:36%) of the voting shares of the Company.

 

At 9 August 2014, the main trading company owed the parent company £25,370,000 (10 August 2013: £23,183,000). The main trading company was owed £28,009,000 (10 August 2013: £62,634,000) from other subsidiaries within the Group.

 

Transactions between subsidiaries and between the parent and subsidiaries were priced on an arm's length basis.

 

The Group has a 50% interest in a joint venture company in Australia which is also the parent company of a subsidiary joint venture in New Zealand. As at 9 August 2014, the joint venture owed £505,000 to the main trading company (10 August 2013: £477,000). The value of sales made to the joint venture by the Group in the period was £1,319,000 (10 August 2013: £811,000).

 

 

13.  Principal risks and uncertainties

 

 

Strategic Risks	Operational Risks
·      Significant external events affecting our supply chain, customers, partners affecting our revenue and/or cost base	·      Failure in our supply chain affecting our ability to deliver our offer to customers and/or partners
·      Reputational risk to our brand as a result of our actions or those of our partners	·      Cost inflation affecting our operating costs
·      Risk that our offer will not satisfy the needs of our customers	·      Operational problems affecting the internal infrastructure of our business
	·      Failure to operate in a sustainable and responsible manner
Financial Risks	·      IT security breach and loss of controlled data
·      Failure of counterparties	·      Loss of key individuals
·      Currency, interest and credit risks ·      Financial covenants under credit facilities	·      Non-compliance with applicable legislations and regulations
	·      Poorly managed implementation or take up of new systems, leading to business disruptions

 

 

Responsibility statement of the directors in respect of the interim financial statements

 

The directors confirm that to the best of their knowledge:

 

·   the condensed financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU;

 

·   the interim management report includes a fair review of the information required by:

 

(a)  DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first 28 weeks of the financial year and their impact on the condensed financial statements, and a description of the principal risks and uncertainties for the remaining 25 weeks of the financial year; and

 

(b)  DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 28 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

The directors of Ted Baker Plc are listed on page 25 of the financial statements as at, and for, the 52 weeks to 25 January 2014. A list of current directors is maintained on the Ted Baker Plc website, at: www.tedbakerPlc.com

 

By order of the Board

 

R S Kelvin                                            L D Page

Chief Executive                                      Finance Director

02 October 2014                                    02 October 2014

 

 

Cautionary statement regarding forward-looking statements

 

This announcement contains certain forward-looking statements. These forward-looking statements include matters that are not historical facts or are statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies, and the industries in which the Group operates. Forward-looking statements are based on the information available to the Directors at the time of preparation of this announcement, and will not be updated during the year. The Directors can give no assurance that these expectations will prove to have been 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.

 

 

INDEPENDENT REVIEW REPORT TO TED BAKER Plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim results announcement for the 28 weeks ended 9 August 2014 which comprises the Condensed Group Income Statement, the Condensed Group Statement of Comprehensive Income, the Condensed Group Statement of changes in equity, the Condensed Group Balance Sheet, the Condensed Group Cash flow statement and the related explanatory notes. We have read the other information contained in the interim results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The interim results announcement is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results announcement in accordance with the DTR of the UK FCA.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this interim results announcement has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim results announcement based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim results announcement for the 28 weeks ended 9 August 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Robert Brent

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London

E14 5GL

02 October 2014