Our e-commerce business performed very well during the period
with sales increasing by 51.0% to GBP21.6m (2013: GBP14.3m), with
the UK site benefiting from the launch of a new platform in
November 2013.
Sales from our UK wholesale division increased by 32.5% to
GBP51.8m (2013: GBP39.1m) reflecting a good performance from our UK
wholesale business and continued growth in our wholesale export
business.
US and Canada
Sales from our US and Canadian retail division increased by
38.1% to GBP50.7m (2013: GBP36.7m), which includes sales from our
US e-commerce business which is in its early stage of
development.
Following a year of significant expansion, we have continued to
develop the brand in this market through the opening of nine
concessions in the US with a leading department store and an outlet
store in Toronto, Canada. We are pleased with our performance as
the brand gains increasing traction and recognition and are
positive about the impact of our store on Fifth Avenue, New York in
raising brand awareness and supporting the development of Ted Baker
both in the US and indeed globally.
Average square footage rose by 21.8% to 72,326 sq ft (2013:
59,384 sq ft) and retail sales per square foot increased 13.2% from
GBP607 to GBP687. This reflects both higher sales densities in the
concessions opened during the year and an improvement in brand
awareness in this market. As at 25 January 2014, we had 16 stores
(2013: 16), 42 concessions (2013: 33) and 5 outlet stores (2013:
4).
Sales from our US wholesale business increased by 46.7% to
GBP11.0m (2013: GBP7.5m) reflecting the continued growth of our
business.
Middle East, Asia and Australasia
We are developing the Ted Baker brand across the Middle East,
Asia, and Australasia. As at 25 January 2014, we, together with our
licence partners, operated a total of 40 (2013: 31) stores, 7
concessions (2013: 4) and 1 outlet (2013: nil) across these
territories.
In Asia, we are investing in newer markets to support the long
term growth of the business. Sales from our retail division
increased 59.7% to GBP9.9m (2013: GBP6.2m).
Average retail square footage rose by 74.6% to 18,880 sq ft
(2013:10,816 sq ft), whilst retail sales per square foot decreased
8.2% from GBP572 to GBP525 reflecting the opening of new space.
In China we opened two further stores in Shanghai and three
concessions through leading department stores. We also opened an
outlet store in Shanghai. In Japan we opened our first concession
in Tokyo through a leading department store and closed one
concession in South Korea. As at 25 January 2014, we operated 7
stores (2013: 5 stores), 7 concessions (2013: 4) and 1 outlet
(2013: nil) across Asia. We are encouraged by reactions to the
brand and whilst we remain in the relatively early stages of
development, we are positive about the long term opportunities in
this territory.
We operate with licence partners across Asia and the Middle
East. During the period, our Asia licence partners opened
concessions in Indonesia and Singapore, and three stores were
closed. Our licensed stores across the Middle East performed very
well with openings in Lebanon, Kuwait, Abu Dhabi and Dubai during
the period and one closure in Dubai. As at 25 January 2014, our
licence partners operated 28 stores and concessions across the
Middle East and Asia (2013: 22).
The joint venture with our Australasian licence partner
continues to perform well and in March 2013 we opened a new store
with our partner in Adelaide, Australia. As at 25 January 2014, we
operated 5 stores in Australasia (2013: 4 stores).
Financial Review
Revenue and Gross Margin
Group revenue increased by 26.5% to GBP321.9m (2013: GBP254.5m),
driven by a 24.6% increase in retail sales to GBP259.1m (2013:
GBP208.0m) and a 35.0% increase in wholesale sales to GBP62.8m
(2013: GBP46.5m).
The composite gross margin for the Group decreased to 61.7%
(2013: 62.4%), reflecting an increase in the proportion of total
sales attributable to our wholesale business. While retail margins
were in line, wholesale margins were lower due to a greater
proportion of wholesale sales to our territorial licence partners,
which carry a lower margin, and to a slight reduction in the
underlying wholesale margin due to the product mix in the first
half of the year.
Operating Expenses Pre-Exceptional Costs
Distribution costs increased in line with our expectations to
GBP123.2m (2013: GBP101.4m) and as a percentage of sales decreased
to 38.3% (2013: 39.8%).
Administration expenses increased by 31.5% to GBP43.4m (2013:
GBP33.0m). Excluding the employee performance related bonus of
GBP3.9m (2013: GBPnil), administration expenses rose by 19.7% due
to our growth in central functions, both in the UK and overseas and
the continued deployment of our distribution and information
technology infrastructures to support our growth.
Exceptional costs
The exceptional costs incurred during the year of GBP1.0m (2013:
GBP2.6m) includes GBP0.7m of impairment charges in respect of a
retail store in the Meatpacking district, New York and a retail
store in Paris, both locations of which have failed to deliver on
their potential. The balance of GBP0.3m relates to an onerous lease
for our retail store in Liverpool, where we are no longer trading
following the expansion of our Liverpool One Store in
Merseyside.
The prior year figure included GBP1.6m of rental costs for our
stores on Fifth Avenue, New York and in Tokyo, Japan for the
periods before they commenced trading. The balance of GBP1.0m
included an impairment charge of GBP0.8m in respect of some retail
assets, notably a retail development in the UK that failed to
deliver on its potential and the remaining GBP0.2m was primarily
set up costs incurred for our expansion into China.
Profit Before Tax
Profit before tax and exceptional costs increased by 26.7% to
GBP40.0m (2013: GBP31.5m) and profit before tax increased by 34.6%
to GBP38.9m (2013: GBP28.9m).
Finance Income and Expenses
Net interest payable during the year was GBP1,133,000 (2013:
GBP612,000). This increase reflects higher Group borrowing compared
to the prior year as a result of the on-going significant
investment in capital expenditure and increased working capital to
support the Group's expansion.
The net foreign exchange gain during the year of GBP137,000
(2013: loss of GBP178,000) was due to the retranslation of monetary
assets and liabilities denominated in foreign currencies.
Taxation
The Group tax charge for the year was GBP10.1m (2013: GBP7.3m),
an effective tax rate of 25.9% (2012: 25.3%).This effective tax
rate is higher than the UK tax rate for the period of 23.16%
largely due to higher overseas tax rates and the non-recognition of
losses in overseas territories where the businesses are still in
their development phase. On 1 April 2013, the UK corporation tax
rate fell from 24% to 23% and will fall to 21% from 1 April 2014. A
further reduction to 20% (from 1 April 2015) has been substantively
enacted and therefore our closing deferred tax assets and
liabilities have been re-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.
Cash Flow
The net increase in cash and cash equivalents was GBP1.7m (2013:
GBP11.9m decrease). An increase in net cash generated from
operating activities of GBP14.1m (2013: GBP6.2m) was offset by an
increase in financing and investing activities.
Total Group working capital, which comprises inventories, trade
and other receivables and trade and other payables, increased by
GBP8.9m to GBP69.9m (2013: GBP61.0m), principally as a result of an
increase in year-end inventory levels reflecting the underlying
growth of our business and the earlier phasing of deliveries into
the business to ensure smooth transition to the Spring/Summer
season across all our markets following strong trading.
Group capital expenditure amounted to GBP18.1m (2013: GBP19.8m)
and reflected the opening and refurbishment of stores, concessions
and outlets, investment in business wide systems to support our
future growth and a new e-commerce platform for the UK site.
Post balance sheet events
In February 2014, we mutually terminated an agreement with a
licence partner earlier than anticipated. Under the terms of our
licence agreement we received a payment of GBP2.7m for compensation
of royalties that would be due to us had the agreement continued to
its original completion date. In line with accounting standards
this will be accounted for in the 2014/15 financial statements as
exceptional income.
Shareholder Return
Basic earnings per share increased by 30.5% to 67.2p (2013:
51.5p). Adjusted earnings per share, which exclude exceptional
costs of GBP1.0m (2013: GBP2.6m), increased by 22.3% to 69.0p
(2013: 56.4p)
The proposed final dividend of 24.2p per share will make a total
for the year of 33.7p per share (2013: 26.6p per share), an
increase of 26.7% on the previous year.
Free cash flow per share, which is calculated using the net cash
generated from operating activities, was 73.1p (2013: 41.0p) and
reflected an increase in cash generated from operating
activities.
Currency Management
The most significant exposure to foreign exchange fluctuation
relates to purchases made in foreign currencies, principally the US
Dollar and the Euro.
A proportion of the Group's purchases are hedged in accordance
with the Group's risk management policy, typically 12 months in
advance. The balance of purchases is hedged naturally as the
business operates internationally and income is generated in the
local currencies.
At the balance sheet date, the Group had hedged its projected
commitments in respect of the year ending January 2015.
Borrowing Facilities
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