TED.L Regulatory News (TED)

Ted Baker Plc

("Ted Baker", the "Group")

Interim Results Announcement for the 28 weeks ended 13 August 2016

'Good performance across all channels despite challenging trading conditions'

· Group revenue up 14.4% (10.7% in constant currency) to £259.5m

· Retail sales including e-commerce up 13.6% (9.6% in constant currency)

· UK and Europe retail sales up 8.5% (6.7% in constant currency) to £131.2m

· North America retail sales up 28.7% (18.8% in constant currency) to £51.1m

· Asia retail sales up 15.8% (6.5% in constant currency) to £8.8m

· E-commerce sales up 29.7% (28.0% in constant currency) to £29.7m

· Planned expansion continued with:

· Two new stores in the US, one new store in each of Canada and China, and one new outlet in Canada

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

· Licensee store openings in Azerbaijan, Egypt, Mexico, South Africa, Taiwan and Vietnam

· Wholesale sales up 16.7% (13.7% in constant currency) to £68.4m

· Licence income up 23.2% to £7.9m

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

'Ted Baker continues to perform well across all distribution channels despite challenging trading conditions across our markets. Our continued growth and development reflects the strength of the Ted Baker brand, our business model and the skill, innovation and passion of our global teams.

We remain firmly focused on the long-term development of the Ted Baker brand and are continuing to invest in our infrastructure and people to support the future growth of our business in both new and existing markets.'

This announcement contains inside information.

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 470 stores, concessions and outlets worldwide comprising: 186 in the UK; 97 in continental Europe; 106 in North America; 72 in the Middle East, Asia and Africa; and 9 in Australasia.

We offer a wide range of collections including: Menswear; Womenswear; Phormal; Endurance; Accessories; Audio; Bedding; Childrenswear; Crockery; Eyewear; Footwear; Fragrance and Skinwear; Gifting and Stationery; Jewellery; Lingerie and Sleepwear; Luggage; Neckwear; Rugs; Suiting; Technical Accessories; Tiles; and Watches.

Development of the Brand

Our strategy is to further 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 report a good performance for the first half of the year across all channels despite challenging external trading conditions, reflecting the strength of the Ted Baker brand and our business model. This resulted in a 14.4% (10.7% in constant currency) increase in Group revenue for the 28 weeks ended 13 August 2016 (the "period") to £259.5m (2015: £226.8m) and a 20.5% increase in profit before tax to £21.5m (2015: £17.8m).

The retail channel performed well, with retail sales including e-commerce up 13.6% to £191.1m (9.6% in constant currency) on a 9.7% increase in average retail square footage. Our e-commerce business is an integral and increasingly important component within our retail proposition and has performed very well, delivering sales growth of 29.7%. Geographic expansion continued with store openings across all territories. We continue to invest to develop brand awareness in newer markets.

Wholesale sales increased by 16.7% (13.7% in constant currency) to £68.4m with a good performance from our UK business and a strong performance from our North American business.

Licence income increased by 23.2% to £7.9m as both our product and territorial licences continued to perform well. During the period, our existing licence partners opened further stores in Azerbaijan, Egypt, Mexico and Taiwan. We also opened new licence partner stores in South Africa and Vietnam and are encouraged by their performance at this early stage.

In September 2016, we successfully launched the Microsoft Dynamics AX system across our North American business. We will continue the roll-out to our other territories over the current year and early next year, which will allow us to enhance efficiency, to streamline our operations and to support the evolution of the business.

In October 2016, we took our first delivery of inventory into our new distribution facility in the UK. Over the coming months, we will transition operations from our three current distribution centres into this facility. This will become our European distribution centre handling all operations for our retail (including e-commerce) and wholesale business across the UK and Europe, supporting our long term growth strategy.

Financial Results

Group revenue increased by 14.4% (10.7% in constant currency) to £259.5m (2015: £226.8m) for the 28 weeks ended 13 August 2016. The composite gross margin increased to 58.9% (2015: 57.6%), mainly due to an increase in the retail gross margin.

Distribution costs, which comprise the cost of retail operations and distribution centres increased by 22.7% (17.7% in constant currency) to £103.7m (2015: £84.6m). As a percentage of sales they increased to 40.0% (2015: 37.3%) due to the dual running costs arising from our new European distribution centre.

Administrative expenses, including the performance-related bonus provision and dual system running costs, increased by 5.4% (4.1% in constant currency). Excluding the employee performance related bonus provision of £0.0m (2015: £1.4m), administrative expenses increased by 9.9% (8.7% in constant currency) to £35.5m (2015: £32.3m) and as a percentage of sales decreased to 13.7% (2015: 14.2%).

Dual running costs incurred in respect of our new distribution centre and the systems roll-out were £2.0m in the first half of the year. We would expect to incur similar costs in the second half of the year.

The net foreign exchange gain during the period of £1.2m (2015: loss of £0.7m) was due to the translation of monetary assets and liabilities denominated in foreign currencies following the devaluation of sterling that followed the UK's EU referendum result.

Net interest payable during the period was £1.5m (2015: £0.6m). The increase was largely due to the interest payable on the term loan that financed the acquisition of the freehold of the Ugly Brown Building in January 2016.

Profit before tax increased by 20.5% to £21.5m (2015: £17.8m). This profit growth was in part aided by foreign exchange gains of £1.2m (2015: loss of £0.7m). Basic earnings per share increased by 24.5% to 37.1p (2015: 29.8p).

The effective tax rate of 24.0% (2016 full year effective rate: 24.6%) is higher than the UK corporation tax rate for the period of 20%, largely due to higher overseas tax rates and the non-recognition of losses in overseas territories where the brand is still in its development phase. On 1 April 2015, the UK corporation tax rate fell from 21% to 20% and further reductions to 19% from 1 April 2017 and to 17% from 1 April 2020 have been substantively enacted.

The net decrease in cash and cash equivalents of £32.9m (2015: £34.7m) 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 £18.2m to £132.5m (2015: £114.3m). This was mainly driven by an increase in inventories of £20.6m to £135.6m (2015: £115.0m) 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.

The increase in trade and other receivables of £12.5m to £56.4m (2015: £43.9m) was driven by the growth in our wholesale business and the impact of foreign exchange rates on the translation of overseas subsidiaries. Trade and other payables increased by £14.9m to £59.5m (2015: £44.6m) as a consequence of the timing of stock intake and other payments as well as the foreign exchange impact explained above.

Capital expenditure of £21.5m (2015: £17.7m) comprises the costs of opening and refurbishing stores, concessions and outlets. It also reflects the initial phases of the fit-out of our new European distribution centre as well as the on-going investment in business-wide systems to support our continued growth. We expect full year capital expenditure to be in line with previous guidance of £45m, subject to the timing of planned openings in the early stages of next year.

Borrowing Facilities

During the period, the Group agreed an extension of its multi-currency revolving credit facility with the Royal Bank of Scotland and Barclays. A new agreement was signed on 31 May 2016 which increased the Group's committed borrowing facility from £85m to £110m expiring in March 2018.

This increased facility provides the resources to fund the planned capital expenditure to support the Group's long-term growth strategy. The new borrowing facility is on the same terms and contains the same covenants as the previous facility.

Dividends

The Board has declared an interim dividend of 14.8p (2015: 13.2p), representing an increase of 12.1%, which will be payable on 18 November 2016 to shareholders on the register at the close of business on 21 October 2016.

People

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

Global Group Performance

*Operating contribution is defined as operating profit before exceptional items as a percentage of revenue.

**Excludes license partner stores

*** Excludes e-commerce sales

Retail

Our retail channel comprises stores, concessions and e-commerce, which is now an integral part of our retail experience. We operate stores and concessions across the UK, Europe, North America and Asia as well as localised e-commerce sites in the UK, continental Europe, US, Canada and Australia. We also have e-commerce businesses with some of our concession partners.

Retail sales were up 13.6% (9.6% in constant currency) to £191.1m (2015: £168.2m), despite a challenging trading environment across all of our markets. This growth was driven by continued investment in new stores and a strong e-commerce performance, where sales grew 29.7% to £29.7m (2015: £22.9m) and represented 15.5% (2015: 13.6%) of total retail sales. We have continued to develop our retail proposition with continued investment in each of our e-commerce sites, aiming to provide a more relevant customer experience through improved design, performance and personalised content. We also launched our first language specific site in Germany and have been very pleased with its performance. Average retail square footage increased by 9.7% to 381,441 sq ft (2015: 347,793 sq ft) and retail sales per square foot increased 1.2% (decrease of 2.7% in constant currency) to £423 (2015: £418).

The retail gross margin increased to 65.6% (2015: 64.0%) driven primarily by an improved full price sell through.

Retail operating costs increased by 20.6% (15.6% in constant currency) to £100.8m (2015: £83.6m), and as a percentage of retail sales increased to 52.8% (2015: 49.7%). As anticipated, an element of the increase in retail operating costs is due to dual running costs as a result of the new European distribution centre, but also included some store pre-opening costs in our North American market.

Wholesale

Our wholesale business in the UK serves countries across the world, particularly in the UK and Europe, as well as supplying products to stores operated by our territorial licence partners. In addition, we operate a wholesale business in North America serving the US and Canada.

Wholesale sales increased by 16.7% (13.7% in constant currency) to £68.4m (2015: £58.6m) reflecting a good performance from our UK business and a strong result from our North American business.

The wholesale gross margin increased to 40.1% (2015: 39.2%). This was largely due to a proportionate increase in sales to our trustees, which carry a higher margin.

Licence Income

We operate both territorial and product licences. Our territorial licences cover selected countries in Europe, North America, the Middle East, Asia, Australasia and Africa, where our partners operate licensed retail stores and, in some territories, wholesale operations. Our product licences cover Audio, Bedding, Childrenswear, Crockery, Eyewear, Footwear, Fragrance and Skinwear, Gifting and Stationery, Jewellery, Lingerie and Sleepwear, Luggage, Neckwear, Rugs, Suiting, Technical Accessories, Tiles and Watches.

Licence income was up 23.2% to £7.9m (2015: £6.4m) with both product and territorial licences performing well. There were notable performances from our product licensees in Childrenswear, Eyewear, Footwear and Suiting. In July 2016, we opened our first store in Vietnam with our new licence partner Maison, and in August 2016, we opened our first store in South Africa with our new licence partner Stuttafords. We are encouraged by their performance to date. An additional store opening is planned in South Africa for later in the year.

Collections

Ted Baker Womenswear performed well with sales up 13.8% to £148.9m (2015: £130.9m). Ted Baker Menswear delivered a good performance with sales increasing 15.3% to £110.6m (2015: £95.9m). We are pleased with the positive reactions to the collections both in the UK and internationally.

Womenswear represented 57.4% of total sales (2015: 57.7%) during the period and Menswear represented 42.6% of total sales (2015: 42.3%), which is broadly representative of the division in retail selling space.

Geographic Performance

United Kingdom & Europe

*Excludes licence partner stores

** Excludes e-commerce sales

Retail sales in the period in the UK and Europe increased 8.5% (6.7% in constant currency) to £131.2m (2015: £120.9m) despite tough trading conditions and recent events in northern Europe. 

E-commerce sales increased by 26.5% to £25.3m (2015: £20.0m) further demonstrating how e-commerce sales are an integral part of the retail proposition in the UK and European markets. We launched our first language specific site in Germany and are very pleased with its performance.

As a percentage of UK and Europe retail sales, e-commerce sales represent 19.3% (2015: 16.5%).

During the period, we opened further concessions with premium department stores in the UK, France, Germany and Spain. We are pleased with their performance and remain positive about growth opportunities for our brand in these markets.

Sales from our UK wholesale business increased 6.2% to £46.6m (2015: £43.9m). This reflected a good performance from sales to trustees, including our wholesale export business and the supply of product to our retail licence partners.

North America

*Excludes licence partner stores

** Excludes e-commerce sales

We continue to be pleased with our progress across the retail and wholesale channels in North America, despite well documented challenges facing the North American retail market, which has seen increased levels of promotional activity and a fall in tourism. This has resulted in a challenging environment for not only our stores but also for our key trading partners. However, we remain confident that the Ted Baker brand is becoming more established and continuing to gain recognition in this territory.

Sales from our retail division increased by 28.7% (18.8% in constant currency) to £51.1m (2015: £39.7m) driven by our continued expansion. In the period, we opened two new stores in each of New York and Seattle, and a new store in Ottawa and an outlet in Vancouver. We also opened a further five concessions in Mexico with our licence partner.

Our e-commerce business delivered a strong performance with sales increasing by 51.7% (43.7% constant currency) to £4.4m (2015: £2.9m). As a percentage of North America retail sales, e-commerce sales represent 8.6% (2015: 7.1%).

Sales from our North American wholesale business increased by 49.3% (36.6% in constant currency), to £21.8m (2015: £14.6m) reflecting the increased brand recognition in this territory. 

Middle East, Asia, Africa & Australasia

We continue to develop the Ted Baker brand across the Middle East, Asia, Africa and Australasia through our retail and licensing channels.

In Asia, we remain positive about the long term opportunities in this territory. However, as has been widely reported, the trading environment continues to be challenging. Retail sales in Asia increased 15.8% (6.5% in constant currency) to £8.8m (2015: £7.6m). During the period, we opened a store in Beijing and concessions in China and Japan. We closed a store in Hong Kong in July 2016 which will be relocated in the second half of the financial year.

Our licensed stores across the Middle East, Asia and Africa continued to perform well. Our existing licence partners opened new stores in Azerbaijan, Egypt, and Taiwan and we opened stores with new licence partners in South Africa and Vietnam during the period. As at 13 August 2016, we operated a total of 51 partner stores (2015: 41).

The joint venture with our Australian licence partner, Flair Industries Pty Ltd, continues to perform well. As at 13 August 2016, we operated 9 stores in Australasia (2015: 7 stores).

Current Trading and Outlook

Retail

We are pleased with the reaction to our Autumn/Winter collections, however, on-going external factors impacting trading across our established markets have meant that conditions remain challenging.

In the UK and Europe, we have continued our expansion with concession openings in the UK and Germany. We plan to open an outlet in Spain, and further concessions in the UK, France, Germany and Spain later this year.

In North America, we have continued our expansion with the relocation of our New York Soho store and the opening of a new store in Calgary. We remain focused on developing our presence further in this market with plans to open a new store in Atlanta and an additional store in Miami.

In Asia, we have opened two further concessions in Japan and a concession in China. Later in the year we will relocate one of our Hong Kong stores and open further concessions in China. We have closed a store in Japan in anticipation of its relocation next financial year.

Wholesale

The good performance in our wholesale business in the first half of the year is expected to continue for the remainder of the year. As a result, we would expect low double-digit sales growth (in constant currency) for the full year.

Licence Income

Our product and territorial licences continue to perform well, with further store openings in Dubai and Mexico and we also plan to open further stores in Bahrain, Indonesia, Saudi Arabia and South Africa. We have signed a new territorial licence agreement with a partner in India and plan to open stores in the next financial year.

Outlook

The Group continues to perform well despite challenging trading conditions and we remain focused on the long-term development of Ted Baker as a global lifestyle brand. We continue to invest in infrastructure and people to support the future growth of our business in new and existing markets.

Whilst the Group has had a good start to the financial year, our results for the full year will, as always, be dependent on the second half trading period. Underpinned by the strength of the Ted Baker brand, our business model and balanced distribution channels, we remain confident of delivering continued growth and development.

Despite the challenging conditions, the Board is confident of making further progress for the full year and we intend to make our next trading update, covering the period since the start of the second half of the financial year, in mid-November.

David Bernstein CBE

Non-Executive Chairman

11 October 2016

Condensed Group Income Statement

For the 28 weeks ended 13 August 2016

Condensed Group Statement of Comprehensive Income

For the 28 weeks ended 13 August 2016

Condensed Group Statement of Changes in Equity - Unaudited

For the 28 weeks ended 13 August 2016

Condensed Group Statement of Changes in Equity - Unaudited

For the 28 weeks ended 15 August 2015

Condensed Group Statement of Changes in Equity - Audited

For the 52 weeks ended 30 January 2016

Condensed Group Balance Sheet

At 13 August 2016

Condensed Group Cash Flow Statement

For the 28 weeks ended 13 August 2016

Notes to the Condensed Interim Financial Statements

For the 28 weeks ended 13 August 2016

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, 13 August 2016 comprise the Company and its subsidiaries (together referred to as the "Group").

The Group financial statements as at, and for the 52 weeks ended 30 January 2016 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 30 January 2016. These interim financial statements were approved by the Board of Directors on 11 October 2016.

The comparative figures for the 52 weeks ended 30 January 2016 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 30 January 2016, approved by the Board on 17 March 2016, 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 the financial year ending 28 January 2017. 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 30 January 2016. Adoption of amendments to published standards and interpretations effective for the Group for the 28 weeks ended 13 August 2016 have had no significant impact on the financial position and performance of the Group.

2. Segment information

Segment revenue and segment result

3. Finance income and expenses

4. Earnings per share

5. Dividends per share