TIDMTED
RNS Number : 0700S
Ted Baker PLC
11 November 2021
Ted Baker plc
("Ted Baker", the "Group")
Interim Results Announcement for the 28 weeks ended 14 August
2021 and Q3 trading update for 12 weeks ending 6 November 2021
Ted returns to growth; significantly improves profitability and
upgrades core Transformation Plan target on the back of strong
liquidity
Rachel Osborne, Chief Executive Officer, commented:
"I'm pleased with the continued progress we're making, as we
return to revenue growth, and make big strides back towards
profitability. The brand remains healthy, delivering a stronger
full price mix alongside encouraging early reactions to the new
collection.. The pandemic continues to impact the global retail
environment, yet despite this we are delivering against our
Transformation Plan. I remain confident that our turnaround of this
great global lifestyle brand is on course and that Ted will emerge
as a stronger business."
28 weeks 28 weeks Change Change vs. H1 2019
ended ended
14 August 8 August
2021 2020
Group Revenue GBP199.3m GBP169.5m 17.6% (36.4)%
Reported Loss Before Tax GBP(25.3)m GBP(86.4)m 70.7% (10.1)%
Basic EPS (10.1)p (64.1)p 84.2% 78.1%
Interim Dividend nil nil nil (100)%
Net Cash/(Debt) GBP12.7m GBP60.7m (74.3)% (113.0)%
Summary
-- Sales growth showing sequential quarterly improvements in comparatives to FY20
-- Improving margins and profitability as Group re-establishes
premium positioning. Full price sales mix up over 500bps during H1
and Q3.
-- Robust liquidity and continuing positive net cash position of GBP12.7m at 14 August 2021.
-- The Group upgrades its target to achieve a net cash position
forward by one year, with this target to be achieved by the end of
the current financial year. All other targets have been
reiterated.
-- The Group is currently experiencing limited negative impact
from the global supply chain disruptions or rising inflation. The
Group has a basket of mitigation strategies to minimise the impact
of further supply chain disruptions as well as cost inflation.
-- Transformation Plan delivery on track, with the Group in line
with or ahead of plan for six of the current financial year's
operational KPIs.
-- The Group is not providing guidance for the current financial
year; the Board is comfortable with market consensus.
Financial Summary for the First Half FY2022
-- Brand sales up 23% to GBP433m.
-- Group revenue up 17.6% (up 21.4% in constant currency**) to
GBP199.3m, driven by a return to retail growth and the partial
relaxation of COVID restrictions globally.
-- Gross margin* improved by 250 basis points to 55.7%,
predominantly reflecting a stronger stance on Full Price sales.
-- Reported Losses Before Tax reduced by GBP61.1m or 70.7% at GBP(25.3)m.
-- Retail sales including eCommerce up 10.4% (up 14.1% in constant currency**) to GBP136.9m.
-- eCommerce sales down on last year by 14.2% (down 12.2%in
constant currency**) to GBP63.6m, as the sales performance was
impacted by the move away from last year's heavy promotional stance
in order to re-establish premium positioning.
-- Growth over pre-COVID 2019 in Ecommerce now at 22%.
-- Wholesale sales up 40.6% (up 45.2% in constant currency**) to
GBP55.5m reflecting returning confidence in Ted product from our
Trustees.
-- Net cash of GBP12.7m at 14 August 2021, ahead of expectations
through continuing discipline in managing working capital.
* Gross margin before non-underlying items, and restated for
FY2021 to reclassify carriage costs into operating expenditure on a
consistent basis with FY2022 .
**Constant currency compares the performance in local currency
at the same exchange rate for both periods, thereby removing the FX
impact in the movement between periods.
Operational and strategic highlights
We are now midway through the three-year strategic
transformation programme we launched in June 2020. Even though some
of the legacy issues facing the business have been amplified by
COVID, our progress in executing this plan has been very
encouraging. We have already largely completed delivery in a number
of areas:
- Refreshing and strengthening of the Group's leadership.
- Recapitalisation of the business.
- Full operational and efficiency review.
- Significant cost action taken.
- Enhanced and strengthened operational and financial controls.
- Completed foundational work on product refresh and brand reenergisation.
We continue to focus on the three core pillars of the
Transformation Plan which are:
- Refreshing and re-energising the product and brand.
- Prioritise digital and capital-light growth.
- Efficiency through Transformation
Our focus and execution against these pillars have supported
continued progress and improving momentum within the first
half.
1. Re-energised product driving sales growth in line with expectations
- Sales momentum with growth rates in Q2 of 50% above last year.
- Sales mix of trend product (one of the product segments of the
product pyramid) improved in Womenswear as customers adopt the new
collections.
- Improving quarter-on-quarter LFL sales trend through the first
half of the year, but with travel and commuting still well below
previous levels, Ted is experiencing variable speeds of recovery
across the channels and markets.
2. Premium brand position demonstrating resilience
- Ted Baker recognised as amongst the most popular luxury brands in the UK in a YouGov survey.
- Full price sales mix up materially, with over 500bps improvement over last year.
- Gross Margin up 250bps on last year
- Basket of core brand metrics all showed sequential improvement since the start of the year.
3. ESG credentials stronger
- Good progress towards target of 75% sustainable cotton in current financial year.
- The Group has set and submitted Carbon and Climate targets,
representing a 46% carbon reduction, to the Science Based Targets
Initiative.
4. Growth and development in Digital and capital-light model
- Digital progress with the new eCommerce platform on track for
the reschedule delivery date in early 2022.
- 9 new store openings in UK, Europe, North America, South
Africa and Asia on capital-light model.
5. Efficiency through Transformation
- Continuing cost savings in property, along with the GBP3.3m
annual saving from the move to the new head office building.
- Net cash still positive at GBP12.7m at 14 August 2021. The
Group guidance is upgraded to a net cash position by the end of the
financial year to January 2022, one year earlier than previous
guidance.
Current Trading and Outlook
The Group is reporting Q3 revenues, for the 12 weeks to 6
November 2021. Q3 trading has been impacted by ongoing COVID
restrictions and subdued footfall into physical retail. However,
the Group has seen further sequential improvement in trends during
the period, with further progress in trading margin as the Group
continues to re-establish its premium position and full price sales
mix increased further.
-- Q3 FY22 Group revenue up 18% (up 20% in constant currency),
driven by recovery in Retail store channel, Wholesale and
Licencing.
o Retail stores up 34% (down 38% compared to Q3 FY20). There
remains sharp divergence in performance across our store groupings,
with Town and City stores returning most strongly towards FY20
levels. Our stores with exposure to Travel retail and International
Travel remain significantly down as footfall remains weak.
o eCommerce was down 10% (up 4% vs. Q3 FY20). This reflected the
highly promotional comparatives from prior year and stronger full
price stance by the Group.
o Wholesale and Licence was up 24% (down 33% vs. Q3 FY20)
reflecting ongoing recovery of store-based trustees and good
progress from a number of product licences, including Next
(Childrenwear and Lingerie), Baird (formal suiting) and both
Eyewear partners.
-- Trading margin for the combined Retail channel (stores and
online) has increased by over 500bps, reflecting the Group reducing
promotional levels.
-- The Group remains on track or ahead of its six operational
KPIs set for the financial year to January 2022, with the
previously announced resetting of launch of the new eCommerce
platform to early calendar 2022.
The Group is not providing guidance for the current financial
year, but the Board is comfortable with market consensus.
Enquiries:
Ted Baker plc Tel: +44 (0) 20 7255 4800
Rachel Osborne, Chief Executive Officer
David Wolffe, Chief Financial Officer
Tulchan Communications Tel: +44 (0) 20 7353 4200
Jonathan Sibun/Jessica Reid
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 global lifestyle brand distributing across five
continents through its three main distribution channels: retail
(including eCommerce); wholesale; and licensing.
Ted Baker has 377 stores and concessions worldwide, comprising
97 in the UK, 81 in Europe, 95 in North America, 95 in the Middle
East, Africa and Asia, and 9 in Australasia.
We offer a wide range of collections including Menswear;
Womenswear; Accessories; Bedding; Childrenswear; Eyewear; Footwear;
Fragrance and Skinwear; Gifting and Stationery; Jewellery;
Lingerie, Underwear and Sleepwear; Luggage; Neckwear; Rugs;
Suiting; Technical Accessories; Towels; Wallcoverings; and
Watches.
Chief Executive Officer's Statement
Ted Baker is now midway through the Transformation Plan that was
launched at our preliminary results in June 2020. I am pleased to
say that we are on course towards creating a sustainably more
profitable, higher free cash flow and higher ROCE business. This
positive momentum in Ted's transformation has been despite the
material headwinds that have been created by COVID-19. Due to the
actions we have taken over the last 18 months around cost control,
inventory management and capital discipline, the Group is very well
placed to take full advantage of the developing recovery in
demand.
Transformation Plan progress
Our Transformation Plan is built on three core priorities -
refresh and re-energise our brand and product; prioritise digital
and asset-light growth; efficiency through transformation. The
Group has made solid progress on all three strategic
priorities.
Refresh and re-energise our product and brand
Over the last 18 months, we have recruited new design talent
across the business - in men's and women's apparel, footwear and
accessories. I have been very pleased how the new team has come
together and with its output. The team is designing against the
product pyramid and customers have responded well. This has been
most evident across our Womenswear business. For Menswear, newer
entry priced products within our core collection have performed
well.
During the first half of the year, we have seen strong
performance across womenswear accessories and footwear. Men's
footwear has outperformed as customers have bought into the new
design team products. Within clothing, occasionwear product has
seen a strong pick-up across men's and women's collections. In
particular, formalwear and suiting have shown marked pickup.
The Group has a much better understanding of our customers
following the new customer insight programme focused on brand
research, customer value and customer personas connected to end use
and mindset. Some recent highlights of how we have been using these
new insights are the current Street Party campaign targeting our
fashion persona or our focus on in-store merchandising and relevant
product to address our NPS detractors - style and store
experience.
Ted Baker has continued to make excellent progress under our
'Fashioning a Better Future' ESG initiative. We've made great
strides in improving supply chain transparency so we can ensure
fair, ethical, sustainable practices are in place. We have mapped
100% of our subcontracting units and nominated mills, having
already mapped our tier one suppliers. We have become a brand
member of Sedex, to better monitor and improve working conditions
in our global supply chain. Our factory list publication this year
now includes our licensee partners and we have now embedded a
factory map on our website.
We've continued to focus on creating beautiful, sustainable
product - in July we launched a recycled polyester puffer bag
range, and our menswear Icon T-shirts launched in August are made
from 100% organic cotton. We are on track to achieve 75% of our
cotton from more sustainable sources by the end of financial year
2022 and working towards our 2024 target to source 100% more
sustainable cotton. We have progressed in our leather targets, and
now the number of Leather Working Group tanneries is at 65%, with
an aim to source 100% leather from LWG tanneries by 2025.
We have launched our ambitious Carbon Targets to be 100% net
zero across all our scope 1 and 2 operations (as per the GHG
protocol standards, scope 1 emissions are direct emissions from
sources owned or controlled by the company and scope 2 emissions
are indirect emissions from the generation of purchased energy) by
2030. We have submitted for accreditation to the SBTI (Science
Based Targets Initiative) an absolute carbon reduction target of
46% across all scope 3 operations by 2030. We have created an
internal carbon steering group to deliver the roadmap which
underpins our carbon goals, in addition to working collaboratively
with other brands in the BRC Climate Action and Textiles 2030
working groups.
Our eCommerce packaging and retail bags have been relaunched and
are now FSC certified and 100% recyclable. Our goal is to move
towards 100% sustainable customer packaging by 2025, with all
paper-based materials being made from recycled materials.
Better promoting our sustainability efforts to our customers has
been at the forefront of our minds. From November 2021 we will
introduce sustainability swing tickets on our products in stores to
let customers know which products are made with responsibly sourced
cotton, responsible wool and recycled polyester. We have added a QR
code to our packaging and swing tickets to provide our customers
with greater visibility of what the product composition is.
Prioritise digital and capital-light growth
With significant disruption to our physical store estate due to
COVID restrictions, the Group has increasingly been a digital
brand. Our eCommerce sales performance has been strong on a
two-year view, albeit impacted by base effect from fiscal 2020 when
the industry was highly promotional, and the Group took an
aggressive trading stance to turn stock into cash. As we continue
to re-establish the Group's premium positioning, this has adversely
affected sales but seen a strong uplift in trading margin across
our eCommerce business.
By the end of the period, our customer metrics are looking
healthier following a year of promotional trading and formal
product under pressure. Our Average Order Value (AOV) is up 11% on
last year, showing stronger demand for higher price points.
Compared to pre-pandemic FY20 new customers are up 50% and our
traffic is up 21%.
During the period, we have seen faster growth from our online
concession partners, with growth of 31% versus last year and 30% on
a two-year view. We note that the online platforms have stepped up
their performance marketing. Among the online concessions, we have
seen a very strong performance with The Label, already a strong
partner, with a marked acceleration due to the introduction of
Platform Plus. As we have seen elsewhere, our trading margin has
improved during the period for our online concession business.
The Group has made good progress on the work for the new
eCommerce platform, but some technical aspects have taken longer
than expected to fully resolve. Given the proximity to the upcoming
peak trading period and need to fully test its business readiness
and stability ahead of implementation, the go live date has been
moved to early 2022. This date change will have no material impact
on the expected outcome of our eCommerce business and the Group has
a very high degree of confidence on delivery.
We have an ambitious digital roadmap to strengthen the
direct-to-consumer and third-party businesses. From micro services
to quickly integrate with marketplaces to developing front end user
experiences to ensure our mobile conversion increases and we can
bring more product immersion into the shopping experience.
Our Licensing division continues to build momentum. Our eyewear
licence partners, among the biggest in the Group, continue to show
robust performance, up 58% compared to H1 FY21 and up 10% compared
to H1 FY20. Several of our newer licence partners are showing good
momentum, including Next and Baird. We have also converted our
wholesale arrangement with Moss Bros into a new licence agreement,
which will improve our working capital position. Within our
territory licence and joint venture (JV) business, our partners
have opened five new stores during the period. AFG has seen a very
encouraging start to its new wholesale business.
Over the last 18 months, under the Transformation Plan, the
Group has introduced much greater capital discipline. Our strategy
within the physical retail channel has been to limit capex on new
stores and prioritise variable rental deals to minimise balance
sheet liability. During the first half, we have opened two
short-term lease stores at Exeter and Bromley, with turnover only
rents and a total investment of c.GBP100k. These stores are
expected to deliver cash payback within 12 months. The Group has
opened another two more short-term lease stores during Q3 with a
similar financial profile.
Efficiency Through Transformation
The Group has consistently demonstrated cost discipline over the
last 18 months and we have fully delivered on our upgraded cost
saving targets. This cost control has been embedded across the
business and can be seen in our financial performance during the
first half of the current financial year. An annualised payroll
savings run rate of GBP31m versus FY20 has been delivered.
On rents, we have focused on both structural and tactical
savings. On structural saving, the Group has secured another
GBP5.5m of fixed rent cost savings during the period and remains on
track to deliver or exceed its FY22 target of 15% base rent
reductions. The Group also announced its new global head office,
the Gorgeous Brown Building, which will deliver a GBP3.3m per annum
fixed rent saving plus further savings on service charges, rates
and utilities.
The Group is aware of rising inflation pressures across the
economy, especially for wages and supply chain costs. We are
monitoring the situation carefully and will ensure cost disciplines
are maintained. Supply chain pressures have been manageable, albeit
the Group has used a higher level of air freight to offset the
industry wide supply chain disruptions around shipping.
COVID causing a multi-speed recovery
Despite COVID, the Group has made encouraging progress, with
trading over the first half in line with expectations. However, the
speed of recovery is different across store locations, product
categories and regions. Full price sales mix has significantly
improved across all our retail channels as we continue to
re-establish our premium lifestyle brand positioning. This has
contributed to an 880bps improvement in our Retail gross
margin.
Within our store portfolio there have been clear changes in
footfall patterns and there is uncertainty over the timing and
degree of the return to previous patterns. Our immediate response
has been to focus on shifting to variable rent structure and open
short-term lease stores in new locations. We have closed six stores
where we are no longer confident they can deliver a financial
return.
Travel retail and metro city-centre locations are still seeing
materially negative performance against pre-COVID fiscal 2020 sales
performances. Such store locations accounted for around 50% of our
total sales base in the financial year to January 2020. Travel
retail locations have been negatively affected by significantly
reduced airline capacity and government restrictions on travel. We
note with cautious optimism a general easing of the restrictions
and remain confident in the long-term recovery in our travel retail
business. Metro city centre locations have been impacted by both
lack of international tourism and the shift to working from home
for large parts of the economy.
Encouragingly, stores in regional locations, outlets, shopping
malls and concessions are seeing firmer recovery, with growth rates
for the last four weeks of the half-year period being the
strongest.
Geographically, sales trends are seeing a mixed performance.
North America has been our strongest market during the period, as
consumer confidence improved ahead of other regions. Performance in
our concessions has been reassuringly steady, reflecting the
stronger attraction for consumers at present. We have also seen
good recovery in our own operated stores within shopping mall
locations.
Fundamentals remain strong with clear green shoots of
recovery
Our Transformation Plan has laid the foundations of our future
success. Our balance sheet is robust following our recapitalisation
in June 2020 and ongoing tight grip on cash flow. We have
sufficient confidence to upgrade our net cash target once again and
now expect to be net cash positive at the end of the current
financial year. In addition, we have reiterated our guidance of
generating at least GBP30m of free cash flow in the financial year
ending January 2023, further strengthening our cash position.
The Ted Baker brand remains strong and healthy. We have seen
improvement in the basket of core brand metrics. Consideration,
brand affinity, quality perception and net promoter score all show
sequential improvement from the start of the year.
We have seen clear evidence of green shoots of recovery during
the first half. Our Autumn/Winter 2021 collections have been
positively received by customers. The frequent introduction of new
product designs and 'newness' has been working well, with a
positive response to the new product pyramid structure. Where
consumer confidence has recovered, we have seen significantly
improved sales performance, including across North American
concessions and North American and UK shopping malls during the
first half of the year.
Exciting growth opportunities
As the Group looks ahead into the second half of the current
financial year and beyond, we see a wide range of growth
opportunities, further establishing Ted Baker as a true global
lifestyle brand. With so many growth opportunities ahead, we have
focused our efforts into three core areas:
-- Priority growth markets. Benchmarking to international brand
peers, Ted Baker has material expansion potential in almost every
market. Following extensive research and analysis, strategic
rationale and well-defined route to market, the Group has
identified North America, Germany, China and the Middle East as
priority markets. Each market provides material profit growth
opportunity with limited capital investment.
-- Digital growth. Before the COVID-19 boost to eCommerce across all markets, the Group had a well-established eCommerce business. As part of the Transformation Plan, we identified the need to re-platform our eCommerce operations to increase flexibility, upgrade our customer digital experience, optimise for mobile, enhance our omnichannel capabilities and support new digital operating models. Our new platform will be up and running in early 2022. Alongside our refreshed product offer, the new eCommerce platform will drive increased conversion rates.
-- Licence partner ramp up. Over the last 18 months, we have
executed our strategy of upgrading our licence partners.
Consequently, several of our partners in important categories and
territories are in ramp-up phase. Childrenswear, Lingerie,
Formalwear are three key categories that should see strong growth
in the balance of the year and into the new year. We are confident
in the growth that will be delivered by the expanded licence
agreement with AFG in the Middle East as well as the potential of
our new partner in Indonesia.
It is against this backdrop of multiple growth initiatives, a
recovering consumer economy, fading impact of COVID-19 and a
rebased cost structure that we confidently look ahead. We are on
track or ahead on all our operational Transformation Targets for
FY22, with the previously announced resetting of the launch of the
new eCommerce platform to early calendar 2022, and remain confident
that we will deliver on our Transformation Plan. We have the right
people and team in place to deliver. It has been a hugely
challenging first half for everyone at Ted and I want to thank
every single one of my team for coming to work every day with the
right attitude to execute our turnaround.
Rachel Osborne
Chief Executive Officer
Business and Financial Review
Business Review
The continuation of the COVID-19 pandemic had a significant
impact on the Group's performance, resulting in stores remaining
closed for a significant proportion of the period and footfall
depressed across many of our key markets. However, the business was
better positioned to respond to these challenges, as a result of
the changes put in place over the past year.
Global Group Summary
28 weeks 28 weeks Variance Constant
ended ended currency
14 August 8 August variance(1)
2021 2020
Group Revenue GBP199.3m GBP169.5m 17.6% 21.4%
-------------------------------- ----------- ----------- ---------- -------------
Gross margin (excluding
non-underlying items)* 55.7% 53.2% 250 bps
-------------------------------------------- ----------- ----------- ---------- -------------
(Loss)/Profit before
tax (excluding non-underlying
items) GBP(27.1)m GBP(38.4)m (29.5%)
-------------------------------------------- ----------- ----------- ---------- -------------
(Loss)/Profit before
tax (excluding non-underlying
items) as a % of
revenue (13.6)% (22.6)% 910 bps
-------------------------------------------- ----------- ----------- ---------- -------------
(Loss) before tax GBP(25.3)m GBP(86.4)m (70.7%)
-------------------------------------------- ----------- ----------- ---------- -------------
(Loss) before tax
as a % of revenue (12.7%) (51.0%) 3,830 bps
-------------------------------------------- ----------- ----------- ---------- -------------
Retail Retail revenue GBP136.9m GBP124.0m 10.4% 14.1%
-------------------------------- ----------- ----------- ---------- -------------
Store revenue GBP73.3m GBP49.8m 47.2% 53.3%
-------------------------------------------- ----------- ----------- ---------- -------------
Ecommerce revenue GBP63.6m GBP74.2m (14.2%) (12.2%)
-------------------------------------------- ----------- ----------- ---------- -------------
Gross margin (excluding
non-underlying items) 63.4% 58.6% 480 bps
-------------------------------------------- ----------- ----------- ---------- -------------
Average square footage** 421,435 442,790 (4.8%)
-------------------------------------------- ----------- ----------- ---------- -------------
Closing square footage** 411,602 438,483 (6.1%)
-------------------------------------------- ----------- ----------- ---------- -------------
Sales per square
foot including eCommerce GBP325 GBP280 16.0% 19.9%
-------------------------------------------- ----------- ----------- ---------- -------------
Sales per square
foot excluding eCommerce GBP174 GBP113 54.6% 61.1%
-------------------------------------------- ----------- ----------- ---------- -------------
Wholesale Revenue GBP55.5m GBP39.5m 40.6% 45.2%
-------------------------------- ----------- ----------- ---------- -------------
Gross margin 31.1% 29.0% 210 bps
-------------------------------------------- ----------- ----------- ---------- -------------
Licensing Revenue GBP6.9m GBP6.0m 15.1% 15.1%
-------------------------------- ----------- ----------- ---------- -------------
*Prior year comparison adjusted for reclassification of carriage
costs from gross margin to operating expenses and is on a
consistent basis to FY22
**Excludes licence partner stores. Sales per square foot based
on average square footage.
(1) Constant currency compares the performance in local currency
at the same exchange rate for both periods, thereby removing the FX
impact in the movement between periods.
Channel Performance
Retail
Our retail channel comprises stores, concessions and eCommerce,
providing an omnichannel experience. We operate stores and
concessions across the UK, Europe, North America and South Africa,
and localised eCommerce sites in the UK, continental Europe, North
America and Australia. We also have eCommerce businesses with many
of our concession partners. Our stores are important to the success
of our digital businesses through supporting brand awareness and
showcasing our products.
The COVID-19 pandemic continued to affect the performance of the
Retail channel, particularly stores, the majority of which were
closed for part of the period to comply with local lockdowns or
required to limit the number of customers shopping at one time.
Footfall remained significantly below normal levels but showed some
signs of recovery towards the end of the period as the effect of
vaccine programmes reduced prevalence of the virus in many of our
territories and consumers began to return to shops. This recovery
has been slower in major city centres and airport locations, more
reliant on office workers and tourists, than in shopping centres,
out-of-town locations and smaller towns and cities.
Our business with House of Fraser in the UK transitioned to a
wholesale model at the end of the period, resulting in the closure
of 28 concessions. In line with our longer-term optimisation of our
store portfolio to align with emerging changes in customer shopping
habits, we closed a further ten locations and opened nine stores
during the period, contributing to a reduction in the average
retail square footage of 4.8% to 421,435 sq ft (2020: 442,790 sq
ft). Five of these new locations were opened by our franchise
partners, deepening our reach in key territories such as Greater
China, and the Middle East.
While demand through online channels remained high by historical
standards, we faced a tough comparison to 2020, in which ecommerce
sales increased by 41.8% versus 2019. This increase, for Ted Baker
as for the market in general, was driven by high levels of
promotion and markdown to clear stock that could not be sold
through stores closed to comply with lockdown restrictions. In
contrast, we entered the period with stock levels better aligned to
expected sales, as well as a substantially stronger balance sheet,
and therefore with less need to drive sales at lower margins to
maintain liquidity. While ecommerce sales decreased by 14.2% year
on year, this represents an increase of 21.6% over two years,
broadly in line with historical growth rates.
During the period the Group continued to furlough store
colleagues in response to government-imposed lockdowns, and
benefitted from government support, such as business rates holidays
and job support schemes, as well as rent savings and waivers
through negotiations with landlords and reductions in
turnover-related rent, which mitigated some of the impact of the
loss of store sales. The cost of driving business through our
online channels remained slightly above historical levels as
competition drove up the cost of online marketing. As a result of
all the cost movements combined, retail operating costs excluding
non-underlying items decreased by 0.9% to GBP82.4m (2020:
GBP83.2m).
Wholesale
Our wholesale business in the UK serves countries across the
world, primarily 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.
Our wholesale business in the UK and Europe during the period
was affected by disruption to supply chains as a result of COVID-19
and Brexit, which necessitated some additional use of air freight
to supply customers. Demand in North America held up well despite
adverse weather conditions and localised lockdowns, but with a
slightly higher mix of off-price product (product that has been
through full price and outlet offerings and is then sold at a
discount), reflecting consumers' continuing price sensitivity.
Sales increased by 40.6% (45.2% in constant currency(1) ) to
GBP55.5m (2020: GBP39.5m). Gross margin improved to 31.1% (2020:
29.0%) in the period, despite additional support offered to trustee
partners and a higher mix of off-price sales.
Licence income in revenue
We operate both territorial and product licences. Our licence
partners are carefully selected as experts in their field and share
our passion for unwavering attention to detail and firm commitment
to quality.
Territorial licences cover specific countries or regions in
Asia, Australasia, Europe, the Middle East, Africa and Central
America, where our partners operate licensed retail stores and, in
some territories, wholesale operations.
Product licences cover Bedding; Childrenswear; Eyewear;
Fragrance and Skincare; Jewellery; Lingerie and Sleepwear; Men's
Underwear and Loungewear; Luggage; Neckwear; Rugs; Suiting; Ted's
Grooming Rooms; Towels; Technical Accessories; Wallpaper; and
Watches.
Licence income increased by 15.1% to GBP6.9m (2020: GBP6.0m). We
benefitted from strong growth in the Eyewear segment in North
America and the UK, as well as the maturing of our partnership with
Next Plc for Childrenswear and Lingerie. Sales in the Formalwear
segment remained weak as a result of the increased prevalence of
working from home, and fewer events such as weddings taking
place.
Collection performance
Ted Baker womenswear sales increased by 13.9% to GBP124.5m
(2020: GBP109.0.m) and represented 64.7% (2020: 66.9%) of total
sales. Ted Baker menswear sales increased by 25.4% to GBP67.9m
(2020: GBP54.2m) and represented 35.3% of total sales (2020:
33.1%).
Geographic Performance
United Kingdom and Europe
28 weeks 28 weeks Variance Constant
ended ended currency
14 August 8 August variance(1)
2021 2020
Revenue (including licensing) GBP132.9m GBP125.9m 5.5% 11.2%
----------- ---------- --------- -------------
Total retail revenue GBP89.1m GBP88.7m 0.4% 1.0%
----------- ---------- --------- -------------
Store revenue GBP39.1m GBP32.5m 20.2% 21.4%
----------- ---------- --------- -------------
ECommerce revenue* GBP50.1m GBP56.2m (11.0%) (10.7%)
----------- ---------- --------- -------------
Average square footage** 276,437 284,533 (2.8%)
----------- ---------- --------- -------------
Closing square footage** 269,283 291,557 (7.6%)
----------- ---------- --------- -------------
Sales per square foot
including eCommerce sales GBP322 GBP312 3.4% 4.0%
----------- ---------- --------- -------------
Sales per square foot
excluding eCommerce sales GBP141 GBP114 23.8% 24.9%
----------- ---------- --------- -------------
Wholesale revenue GBP36.9m GBP31.2m 18.1% 46.2%
----------- ---------- --------- -------------
Own stores 46 44 4.5%
----------- ---------- --------- -------------
Concessions 101 130 (22.3%)
----------- ---------- --------- -------------
Outlets 20 21 (4.8%)
----------- ---------- --------- -------------
Partner stores/concessions 11 10 10.0%
----------- ---------- --------- -------------
Total 178 204 (13.2%)
----------- ---------- --------- -------------
*Includes all revenue from ecommerce channels to customers
outside North America, including non-European territories.
**Excludes licence partner stores. Sales per square foot based
on average square footage.
Concession numbers reflect new classification method,
identifying multiple mats within one partner store as a single
location.
(1) Constant currency compares the performance in local currency
at the same exchange rate for both periods, thereby removing the FX
impact in the movement between periods.
All of our major territories were affected by lockdowns during
the period, with, for example, UK locations remaining closed from
Christmas until the middle of May and stores in Germany closed from
the end of December, reopening progressively between April and
July. Footfall remained low even when stores were open,
particularly in city centres and areas traditionally popular with
tourists. Towards the end of the period there was some signs of
improvement, but footfall remained well below pre-pandemic
levels.
In the final weeks of the period, our 28 concession locations
within House of Fraser stores in the UK were transferred to a
wholesale model. Sales from these locations will be reported
through the wholesale channel during the second half. We closed two
unprofitable outlets in France and a concession in the UK, and
opened a new outlet location in Cannock, in the UK. We also opened
two new stores on flexible short-term leases, and expect to roll
out this low capital investment approach further in the second half
of the year and beyond.
Ecommerce demand remained above historical levels (up 21.6% on
2019), but sales dropped below the elevated levels seen during the
first lockdown as the Group adjusted its promotional stance in line
with its stock and liquidity levels.
Retail sales in the UK and Europe increased by 0.4% (1.0% in
constant currency) to GBP89.1m (2020: GBP88.7m), with eCommerce
sales representing 56.2% (2020: 63.4%) of the total. Despite the
impact of Brexit and the continuing pandemic, demand from trustees
and licence partners recovered significantly from last year's
level, increasing our wholesale sales by 18.1% (46.2% in constant
currency).
North America
28 weeks 28 weeks Variance Constant
ended ended currency
14 August 8 August variance(1)
2021 2020
Revenue GBP64.6m GBP48.6m 32.9% 45.3%
----------- ---------- --------- -------------
Total retail revenue GBP46.0m GBP34.4m 33.8% 46.1%
----------- ---------- --------- -------------
Store revenue GBP32.4m GBP16.4m 97.3% 114.3%
----------- ---------- --------- -------------
ECommerce revenue GBP13.5m GBP17.9m (24.5%) (16.9%)
----------- ---------- --------- -------------
Average square footage* 137,894 138,152 (0.2%)
----------- ---------- --------- -------------
Closing square footage* 135,215 139,822 (3.3%)
----------- ---------- --------- -------------
Sales per square foot
including eCommerce sales GBP333 GBP249 34.1% 46.4%
----------- ---------- --------- -------------
Sales per square foot
excluding eCommerce sales GBP235 GBP119 97.7% 114.7%
----------- ---------- --------- -------------
Wholesale revenue GBP18.7m GBP14.3m 30.6% 43.3%
----------- ---------- --------- -------------
Own stores 32 35 (8.6%)
----------- ---------- --------- -------------
Concessions 35 35 0.0%
----------- ---------- --------- -------------
Outlets 12 12 0.0%
----------- ---------- --------- -------------
Partner stores/concessions 16 16 0.0%
----------- ---------- --------- -------------
Total 95 98 (3.1%)
----------- ---------- --------- -------------
*Excludes licence partner stores.
Concession numbers reflect new classification method,
identifying multiple mats within one partner store as a single
location.
(1) Constant currency compares the performance in local currency
at the same exchange rate for both periods, thereby removing the FX
impact in the movement between periods.
Our North American business continued to face challenges, with
the Delta COVID variant and travel restrictions affecting footfall,
particularly in key tourist markets such as New York, Los Angeles,
San Francisco and Las Vegas, and our stores in Canada closed under
lockdown for a significant proportion of the year. However,
consumer confidence began to return in the spring as vaccination
rates increased, with the return to offices and social activities
driving demand for more formal and occasionwear. Our outlet
locations benefitted from being primarily outdoor spaces, with
consumers more comfortable in shopping these locations.
We continued to restructure the US business, closing a regional
office and consolidating the functions in our New York City hub,
and, following negotiations with our landlords, closed three stores
that were no longer viable.
Retail sales increased by 33.8% (46.1% in constant currency(1) )
to GBP46.0m (2020: GBP34.4m), with store sales increasing by 97.3%
(114.3% in constant currency(1) ). ECommerce sales fell by 24.5% to
GBP13.5m (16.9% in constant currency(1) ) as demand returned to
physical channels; this still represents a net increase of 51% over
pre-pandemic levels. Ecommerce sales represented 29.4% of total
retail sales (2020: 52.1%).
The wholesale business delivered a strong performance, with
sales increasing by 30.6% to GBP18.7m (2020: GBP14.3m) as demand
from our trustees returned.
Rest of the World
28 weeks 28 weeks Variance Constant
ended ended currency
14 August 8 August variance(1)
2021 2020
Revenue GBP1.8m GBP0.9m 103.9% 99.2%
----------- ---------- --------- -------------
Total retail revenue GBP1.8m GBP0.9m 103.9% 99.2%
----------- ---------- --------- -------------
Store revenue GBP1.8m GBP0.9m 103.9% 99.2%
----------- ---------- --------- -------------
ECommerce revenue - - N/A N/A
----------- ---------- --------- -------------
Average square footage* 7,104 20,105 (64.7%)
----------- ---------- --------- -------------
Closing square footage* 7,104 7,104 0.0%
----------- ---------- --------- -------------
Sales per square foot
including eCommerce sales GBP255 GBP44 476.9% 463.7%
----------- ---------- --------- -------------
Sales per square foot
excluding eCommerce sales GBP255 GBP44 476.9% 463.7%
----------- ---------- --------- -------------
Own stores 5 4 25.0%
----------- ---------- --------- -------------
Concessions 0 0 0.0%
----------- ---------- --------- -------------
Outlets 0 0 0.0%
----------- ---------- --------- -------------
Partner stores/concessions 77 79 (2.5%)
----------- ---------- --------- -------------
Joint venture locations 22 20 10.0%
----------- ---------- --------- -------------
Total 104 103 1.0%
----------- ---------- --------- -------------
*Excludes licence partner stores. Sales per square foot based on
average square footage.
Concession numbers reflect new classification method,
identifying multiple mats within one partner store as a single
location.
(1) Constant currency compares the performance in local currency
at the same exchange rate for both periods, thereby removing the FX
impact in the movement between periods.
The Company's trading outside our core European and North
American businesses reflects a mixed distribution strategy,
including wholly owned stores in South Africa and a single location
in Japan, as well as joint ventures in China and Australia, and
franchise agreements in territories such as India, South Korea and
the Middle East.
Stock sales to franchisees are reported through our wholesale
channel. During the period, our franchisee partners opened one
store in Kuwait, and closed three in Asia. We opened a new owned
store in Durban, South Africa, and now operate five in the country
(2020: four stores).
Our joint venture in China (including Hong Kong S.A.R. and Macau
S.A.R.) continued to grow rapidly, with sales growing more than 50%
year on year. Rapid growth began to moderate towards the end of the
period as the country was affected by a further wave of COVID-19
infections and lockdowns. Our venture opened two new stores during
the period, and now operates 22 stores and concessions across the
region (2020: 20 locations).
The joint venture with our Australian licence partner, Flair
Industries Pty Ltd, operates nine stores in Australasia (2020: nine
stores).
Financial Review
Trading performance continues to be impacted by the COVID-19
pandemic, but the Group is now benefiting from the transformation
initiatives that commenced during 2020, as well as governmental
efforts to control the spread of the virus and support businesses
through these challenging conditions. While stores in some key
markets remained closed for a significant proportion of the period,
in general the trading restrictions faced by the Group were less
challenging, and this led both to a shift in back to physical
channels, and improved demand overall. As a result, Group revenue
increased by 17.6% (21.4% increase in constant currency) to
GBP199.3m (2020: GBP169.5m) for the 28 weeks ended 14 August
2021.
Gross margin before non-underlying items improved to 55.7%
(2020: 53.2%, adjusted for change in basis(2) and consistent with
FY22) reflecting the less turbulent trading conditions, a change in
our promotional stance, as well as the Group's substantially
stronger and more liquid balance sheet. During the first half of
2020, the impact of falling demand, restrictions on store trading
and retailers' need for cash was that the market became highly
promotional, and we acted decisively to clear stock and drive
additional cash. In 2021, we adopted a less promotional stance to
improve margin and brand perception, and begin normalising customer
expectations. This was partly offset by additional duties and
unrecoverable sales tax resulting from Brexit.
Excluding non-underlying costs, distribution costs, which
comprise the cost of retail operations and distribution centres,
decreased by 3.4% to GBP89.3m (2020: GBP92.4m, adjusted for change
in basis(2) ), reflecting the implementation of cost savings
initiatives in the business during the second half of last year,
including headcount reductions in store, and discussions with our
landlords to abate fixed rent during the closure periods and reduce
rent thereafter to reflect lower levels of footfall. We also
benefitted from governmental support in several territories,
including furlough payments, rent and wage subsidies and a
reduction in UK business rates.
Administration expenses increased by 27.1% to GBP46.9m (2020:
GBP36.9). This year, in contrast to 2020, while store staff were
put back on furlough during the lockdown period, staff in head
office and non-store channels continued to work. We also continued
to invest in brand marketing to support the future growth of the
business.
Loss/profit before tax and non-underlying items and Loss/profit
before tax
The loss before tax was GBP25.3m (2020: loss of GBP86.4m). The
loss before tax and non-underlying items was GBP27.1m (2020: loss
of GBP38.4m).
Non-underlying items
Non-underlying items before tax in the period amounted to income
of GBP1.7m (2020: cost of GBP48.1m) and
comprised the following items expenses / (income):
Unaudited Unaudited
28 weeks ended 28 weeks ended
14 August 8 August
2021 2020
---------------------------------------- ---------------- ----------------
GBP'000 GBP'000
Loss before tax (25,323) (86,444)
Included in cost of sales:
Inventory changes in estimates - (6,065)
Onerous contract provision 753 (4,408)
Other - 12
---------------- ----------------
Included in gross profit 753 (10,461)
Included in distribution costs
:
Impairment of intangible assets,
property, plant and equipment and
right-of-use assets (2,953) (45,829)
Included in administrative costs:
Acquisition costs and unwind of
fair value accounting adjustments - (1,182)
Reorganisation cost, restructuring
costs and other legal and professional
costs (1,940) (10,117)
Included in Other operating (loss)
/ income
Gain on sale and leaseback of head
office - 17,566
Head office exit receivable 7,966
Included in operating profit 3,826 (50,023)
Included in share of post-tax profits
from joint venture:
Unwind of fair value adjustments - (6)
Foreign exchange on the translation
of monetary assets and liabilities
denominated in foreign currencies (2,096) 1,942
---------------- ----------------
Non-underlying items 1,730 (48,087)
Loss before tax and non-underlying
items (27,053 ) (38,357)
================ ================
Finance income and expenses
Net finance expenses were GBP4.3m (2020: GBP4.0m). The IFRS 16
interest expense for the period was GBP2.5m (2020: GBP4.1m).
Excluding the impact of non-underlying items, net finance expenses
were GBP2.2m (2020: GBP5.9m).
Taxation
The Group tax credit for the period was GBP6.7m (2020: credit of
GBP14.4m). An income tax credit is recognised on losses before
non-underlying items at the full year forecast effective tax rate
of 28.5% for the 28 weeks ended 14 August 2021 (28 weeks ended 8
August 2020: 17.4%). This is higher than the UK tax rate due to the
revaluation of previously recognised UK deferred tax assets now at
the higher UK rate of 25% which was substantively enacted at the
balance sheet date.
Our future effective tax rate is expected to be in line with the
UK tax rate which increases to 25% from 1 April 2023 and aligns
more with overseas tax rates from that point.
Cash Flow
Net cash flow for the period was an outflow of GBP38.3m (2020:
inflow of GBP7.7m). This reflects the normal operating cycle of the
business, as we bring stock in for sale during the second half of
the year, which includes higher selling periods such as Black
Friday and Christmas, as well as an improving trading outlook as
the impact of the COVID-19 pandemic starts to abate. The prior year
comparison was affected by the sale of the Group's head office in
London, the Ugly Brown Building, for net proceeds of GBP72.2m and
the issuance of GBP105.0m (gross) of new equity.
Net working capital, which comprises inventories, trade and
other receivables and trade and other payables, increased by
GBP32.8m to GBP78.5m (2020: GBP45.7m), as we continued to rebuild
inventory for the second half, and as sales to trustees
recovered.
Group capital expenditure during the period was GBP5.7m (2020:
GBP3.4m). The Group has continued to invest in upgrading its
digital capabilities, both to support online sales and improve
operational efficiency. In contrast to last year, when investment
in physical locations has been limited only to essential works, we
have recommenced a store refit programme to improve customer
experience and align it with our revised brand positioning.
Borrowing facilities
The Group's net cash balance at 14 August 2021 was GBP12.7m (8
August 2020: net cash GBP60.8m). On 25 May 2021 the Group announced
the signing of an extension to its revolving credit facility with
its existing lending syndicate. The new agreement extends the
revolving credit facility maturity from September 2022 to November
2023 and amends the covenants. Under the new agreement, the
existing Facility A of GBP107.8m maturing in September 2022 and
Facility B of GBP25m maturing in January 2022, will be replaced by
a new RCF of GBP90m reducing to GBP80m in January 2022 until
maturity in November 2023. The existing lending syndicate continues
to show ongoing support to the Group.
The amended revolving credit facility includes among other
changes amendments to the quarterly covenant tests on adjusted
EBITDA, leverage ratio and fixed charge cover, providing further
financial flexibility for the Group.
Treasury risk 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, which allows for foreign
currency to be hedged for up to 24 months in advance. The balance
of purchases is hedged naturally as the business operates
internationally and income is generated in the local currencies.
The Group is also exposed to movements in foreign exchange rates on
intercompany balances denominated in a foreign currency. These are
not hedged. In April 2020, the Group exited its foreign exchange
contracts to crystallise a cash gain of GBP6.9m, and as a result,
the Group's foreign exchange risk was unhedged for most of FY21. At
14 August 2021, the Group held foreign exchange contracts for the
right to purchase USD.
The Group is exposed to movements in UK, European and US
interest rates as the revolving credit facility accrues interest
based on the relevant SONIA (for sterling borrowing), EURIBOR (for
Euro borrowing) or SOFR (for US Dollar borrowing) rate plus a
margin. The Group does not hold any interest rate hedge
contracts.
Brexit
The 'transitional period' for Brexit ended on 1 January 2020,
introducing a number of complexities into the Group's operations in
Europe. To date, the main operational impacts have been the flow of
goods into the UK through the ports, and from the UK to stores and
customers in Europe.
We have set up a customs warehouse in the UK, which became
operational in April 2021 and has partially mitigated the impact of
higher duties, but there remain a number of other areas
outstanding, including rules of origin and reclamation of input
VAT. We expect that a full year net impact of Brexit on profits
will be c.GBP5m, and anticipate, only to a limited extent,
mitigating the extra cost of duties through the reflowing of
inventory for our EU stores.
Earnings per share and dividends
The basic loss per share was 10.1p (2020: loss per share 64.1p).
Underlying loss per share, which excludes non-underlying items,
changed to a loss of 10.5p (2020: loss per share 28.1p).
Given current trading conditions and the high level of
uncertainty about the future, the Board has determined that no
final dividend is to be paid (2020: nil). In the long term we
remain committed to paying dividends and returning surplus cash to
our shareholders.
David Wolffe
Chief Financial Officer
Notes:
1. Constant currency comparatives are obtained by applying the
exchange rates that were applicable for the period ended 8 August
2020 to the financial results in overseas subsidiaries for the 28
weeks ended 14 August 2021 to remove the impact of exchange rate
fluctuations.
2. The prior year gross margin and distribution costs have been restated to adjusted for the reclassification of carriage costs into operating expenses
Condensed Group Income Statement - Unaudited
For the 28 weeks ended 14 August 2021
Unaudited 28 weeks Unaudited 28 weeks
ended ended
14 August 8 August
2021 2020
Notes Underlying Non-underlying Reported Underlying Non-underlying Reported
items(1) (Restated)(2) items(1) (Restated)(2)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2 199,348 - 199,348 169,470 - 169,470
Cost of sales (88,354) 753 (87,601) (79,395) (10,461) (89,856)
Gross profit 110,994 753 111,747 90,075 (10,461) 79,614
Distribution
costs (89,263) (2,953) (92,216) (92,366) (45,829) (138,195)
Administrative
costs (46,939) (1,940) (48,879) (36,888) (11,299) (48,187)
Other operating
income 590 7,966 8,556 7,307 17,566 24,873
Operating loss (24,618) 3,826 (20,792) (31,872) (50,023) (81,895)
Share of
post-tax
losses
from joint
ventures 14 (266) - (266) (566) (6) (572)
Finance income 4 353 - 353 82 1,942 2,024
Finance expense 4 (2,522) (2,096) (4,618) (6,001) - (6,001)
Loss before tax 3 (27,053) 1,730 (25,323) (38,357) (48,087) (86,444)
Taxation 7 7,717 (1,001) 6,716 6,736 7,619 14,355
----------- --------------- --------- -------------- ---------------
Loss after tax
attributable
to owners of
the company 3 (19,336) 729 (18,607) (31,621) (40,468) (72,089)
----------- --------------- --------- -------------- ---------------
Loss per
share 5
Basic (10.1p) (64.1p)
Diluted (10.1p) (64.1p)
Dividends per
share
Interim - -
Final - -
(1) More details on non-underlying items are included in note
3.
(2) More details of the restatement are shown in note 1e)
The accompanying notes are an integral part of the financial
statements.
Condensed Group Statement of Comprehensive Income -
Unaudited
For the 28 weeks ended 14 August 2021
Unaudited 28 weeks Unaudited 28 weeks
ended ended
14 August 8 August
2021 2020
GBP'000 GBP'000
Loss for the period (18,607) (72,089)
--------- -------------------
Other comprehensive income Items that may be reclassified subsequently to the
income statement:
Net effective portion of changes in fair value of cash flow hedges (339) 743
Exchange differences on translation of foreign operations net of tax 1,268 (141)
--------- -------------------
Other comprehensive income for the period, net of tax 929 602
Total comprehensive expense for the period (17,678) (71,487)
--------- -------------------
Condensed Group Statement of Changes in Equity - Unaudited
For the 28 weeks ended 14 August 2021
Total equity
attributable
to equity
Translation Retained shareholders
Share capital Share premium Other reserves reserve earnings of the parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30
January 2021 9,230 101,304 (1,165) 5,582 37,085 152,036
Comprehensive
income for the
period
Loss for the
period - - - - (18,607) (18,607)
Exchange
differences on
translation of
foreign
operations - - - 1,268 - 1,268
Effective
portion of
changes in
fair value of
cash flow
hedges - - (231) - - (231)
Deferred tax
associated
with movement
in hedging
reserve - - (108) - - (108)
--------------- --------------- --------------- --------------- --------------- ---------------
Total
comprehensive
loss for the
period - - (339) 1,268 (18,607) (17,678)
--------------- --------------- --------------- --------------- --------------- ---------------
Transactions
recognised
directly in
equity
Net change in
fair value of
cash flow
hedges
transferred to
cost of
inventory - - 827 - - 827
Share-based
payment
charges - - - - 371 371
Movement on
current and
deferred tax
on share-based
payments 80 80
Total - - 827 - 451 1,278
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at 14
August 2021 9,230 101,304 (677) 6,850 18,929 135,636
=============== =============== =============== =============== =============== ===============
Condensed Group Statement of Changes in Equity - Unaudited
For the 28 weeks ended 8 August 2020
Total equity
attributable
to equity
Others Translation Retained shareholders
Share capital Share premium reserves reserve earnings of the parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 25
January 2020 2,228 10,555 (743) 6,328 122,305 140,673
Comprehensive
income for the
period
Loss for the
period - - - - (72,089) (72,089)
Exchange
differences on
translation of
foreign
operations - - - (141) - (141)
Effective
portion of
changes in
fair value of
cash flow
hedges - - 765 - - 765
Deferred tax
associated
with movement
in hedging
reserve - - (22) - - (22)
--------------- --------------- --------------- --------------- --------------- ---------------
Total
comprehensive
income for the
period - - 743 (141) (72,089) (71,487)
--------------- --------------- --------------- --------------- --------------- ---------------
Transactions
recognised
directly in
equity
Net change in
fair value of
cash flow
hedges
transferred to
cost of
inventory - - - 283 - 283
Increase in
issued share
capital(1) 7,002 90,749 - - - 97,751
Share-based
payment
charges - - - - 415 415
Total 7,002 90,749 - 283 415 98,449
--------------- --------------- --------------- --------------- --------------- ---------------
Balance at 8
August 2020 9,230 101,304 - 6,470 50,631 167,635
=============== =============== =============== =============== =============== ===============
(1) In the 28 week period ended 8 August 2020, there was a
misallocation of proceeds received from the equity raise between
share capital and share premium. Comparative amounts have been
restated, with a reduction in amounts previously reported as share
capital of GBP2,228,000 with a corresponding increase to share
premium. There was no impact on net assets reported. This error did
not feature in the 30 January 2021 financial statements since it
was corrected before the approval of those financial
statements.
Condensed Group Balance Sheet
At 14 August 2021
Unaudited 14 August 2021 Audited
30 January 2021
(Restated)(1)
Note GBP'000 GBP'000
Intangible assets 9 33,594 34,758
Property, plant and equipment 10 32,405 39,401
Right-of-use assets 11 73,806 81,759
Investment in equity accounted investee 3,710 3,691
Deferred tax assets 33,612 27,635
Prepayments 144 541
-------------------------- ----------
Non-current assets 177,271 187,785
-------------------------- ----------
Inventories 101,081 87,848
Trade and other receivables 63,111 44,666
Amount due from equity accounted investee 4,284 4,305
Income tax receivable 7,315 7,983
Cash and cash equivalents 8 28,228 66,671
Current assets 204,019 211,473
-------------------------- ----------
Total assets 381,290 399,258
-------------------------- ----------
Trade and other payables (85,662) (86,829)
Bank overdraft (5,490) -
Income tax payable (2,626) (2,607)
Lease liabilities (42,431) (45,063)
Provisions (943) (1,973)
Derivative financial liabilities 13 (742) (1,191)
Current liabilities (137,894) (137,663)
-------------------------- ----------
Deferred tax liabilities - -
External borrowings (10,000) -
Provisions (2,825) (2,942)
Lease liabilities (94,935) (106,617)
-------------------------- ----------
Non-current liabilities (107,760) (109,559)
-------------------------- ----------
Total liabilities (245,654) (247,222)
-------------------------- ----------
Net assets 135,636 152,036
-------------------------- ----------
Equity
Share capital 9,230 9,230
Share premium 101,304 101,304
Other reserves (677) (1,165)
Translation reserve 6,850 5,582
Retained earnings 18,929 37,085
-------------------------- ----------
Total equity attributable to equity
shareholders of the parent company 135,636 152,036
-------------------------- ----------
Total equity 135,636 152,036
-------------------------- ----------
(1) More details of the restatement are shown in note 1e)
Condensed Group Cash Flow Statement - Unaudited
For the 28 weeks ended 14 August 2021
Unaudited Unaudited
28 weeks ended 28 weeks ended
14 August 8 August
2021 2020
(Restated)(1)
GBP'000 GBP'000
Cash generated from operations
(Loss) for the period (18,607) (72,089)
Adjusted for:
Income tax (credit)/expense (6,716) (14,355)
Non-cash adjustments/profit on disposal of property, plant and equipment and
intangibles - (19,188)
Depreciation and amortisation 22,805 30,811
Amortisation of reacquired right - 1,182
Impairments 2,953 45,777
Loss on disposal of property, plant and equipment - 80
Share-based payments charge/(credit) 371 417
IFRS16 practical expedient (369) -
Net finance expense 4,265 5,919
Net change in derivative financial assets and liabilities carried at fair
value 68 (151)
Share of profit in joint venture 266 566
Other non cash items (684) -
Increase/(decrease) in provisions (1,147) -
Decrease/(increase) in non-current prepayments 316 23
(Increase)/decrease in inventory (13,649) 43,095
(Increase)/decrease in trade and other receivables (18,925) 14,016
(Decrease)/increase in trade and other payables (852) (10,542)
Income taxes received/ (paid) 1,415 2,097
Net cash generated from operating activities (28,490) 27,658
---------------- ----------------
Cash flow from investing activities
Purchases of property, plant and equipment and intangibles (5,712) (3,199)
Proceeds from sale of property, plant and equipment - 77,782
Investment in equity accounted investee - -
Interest received 252 81
Payments to joint venture 19 (642)
---------------- ----------------
Net cash from investing activities (5,441) 74,022
---------------- ----------------
Cash flow from financing activities
Repayment of term loan/overdraft - (180,000)
Repayment of capital element of leases (16,927) (7,839)
Repayment of interest element of leases (2,955) (1,942)
Interest paid - (1,921)
Bank overdraft 5,490 -
Drawdown on facility 10,000 -
Proceeds from issue of shares - 105,003
Cost of issue of shares - (7,251)
---------------- ----------------
Net cash from financing activities (4,392) (93,950)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents (38,323) 7,730
Cash and cash equivalents at the beginning of the period 66,671 52,912
Exchange rate movement (120) 110
---------------- ----------------
Net cash and cash equivalents at the end of the period 28,228 60,752
---------------- ----------------
Cash and cash equivalents at the end of the period 28,228 60,752
Cash and cash equivalents included in assets held for sale - -
---------------- ----------------
Net cash and cash equivalents at the end of the period 28,228 60,752
---------------- ----------------
(1) More details of the restatement are shown in note 1e)
Notes to the Unaudited Condensed Interim Financial
Statements
For the 28 weeks ended 14 August 2021
1. Basis of preparation
a. Reporting entity
Ted Baker plc (the "Company") 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, 14 August 2021 comprise the Company and its
subsidiaries (together referred to as the "Group").
The Group financial statements as at, and for the 53 weeks ended
30 January 2021 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 and at www.tedbakerplc.com .
b. Statement of compliance
These condensed interim financial statements have been prepared
in accordance with UK adopted "IAS 34 Interim Financial Reporting"
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 53 weeks ended 30
January 2021, which were prepared in accordance with IFRS in
conformity with the requirements of the Companies Act 2006 and IFRS
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union and which have been delivered to the Registrar
of Companies. These interim financial statements were approved by
the Board of Directors on 11 November 2021. The information in this
document has not been subject to audit.
The comparative figures for the 53 weeks ended 30 January 2021
are not the Company's statutory accounts for that financial year.
Those accounts have been reported on by the Company's auditor and
delivered to the Registrar of Companies. The report of the auditor
was (i) qualified solely in respect of the 2020 year end
comparative figures; (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report; and (iii) did include a statement
under Section 498(2) or (3) of the Companies Act 2006 relating to
comparative financial information. These sections address whether
proper accounting records have been kept, whether the Company's
accounts are in agreement with these records and whether the
auditor had obtained all the information and explanations necessary
for the purposes of the audit. In reference to the comparative
financial statements the auditor stated that they had not obtained
all the information and explanations that they considered necessary
for the purpose of their audit.
In the year to 29 January 2022 the annual financial statements
will be prepared in accordance with IFRS as adopted by the UK
Endorsement Board. This change in the basis of preparation is
required by UK company law for financial reporting as a result of
the UK's exit from the EU on 31 January 2020 and the cessation of
the transition period on 31 December 2020. This has no impact on
recognition, measurement or disclosure.
The financial information in this document is unaudited but has
been reviewed by the auditor in accordance with the Auditing
Practices Board guidance on Review of Interim Financial
Information.
c. Going concern
The Directors have prepared a going concern assessment covering
the 15 month period from the date of issuance of these financial
statements to January 2023, which demonstrates that the Group is
capable of continuing to operate within its existing facilities and
can meet its financial covenant tests during the period. The
Directors have therefore concluded that it is appropriate to adopt
the going concern basis of accounting in preparing these financial
statements.
On 24 May 2021, the Group successfully refinanced existing debt
facilities, reducing the size of the facility to reflect future
forecasts for the business. The existing facilities totalling
GBP132.7m have been replaced with a GBP90m Revolving Credit
Facility, reducing to GBP80m in January 2022, before maturing in
November 2023. Financial covenants within the facility have been
set at levels that reflect past store closures and future levels of
disruption modelled within the Severe but Plausible scenario. The
Directors have concluded that this facility continues to provide
adequate liquidity and financial covenant headroom under all
downside scenarios described below.
In making the going concern assessment, the Group has modelled a
number of scenarios for the period to June 2022. The Base Case
scenario assumes there are no further lockdowns with a slow return
to global economic recovery. This includes growth assumptions that
factor a continued challenge to physical store, wholesale and
licence channels. The Group has forecast strong growth in the
online retail channel driven by a continued customer shift towards
online spend compared to pre-COVID preferences, supported by
continued investment in our online platforms and related marketing
spend. This scenario illustrates significant liquidity and covenant
headroom, with total forecast Group sales remaining below pre-COVID
levels for the 15 month going concern period.
In light of the considerable uncertainty surrounding the ongoing
impact of COVID-19, a Severe but Plausible downside scenario has
also been modelled. This scenario assumes all sales channels are
further disrupted throughout the 15 month going concern period.
Store, wholesale and licence income reductions of 5-20% and online
reductions of 15-30% have been applied against the Base Case
scenario. Within the going concern period, this translates to Q4
FY22, H1 FY23, and H2 FY23 total turnover that is -28%, -19% and
-13% against the same period in FY20, the last full trading year
prior to Covid-19. The Severe but Plausible scenario also assumes a
72-100bps deterioration of margins due to continued global
disruption to supply chains. Under the Severe but Plausible
scenario, the Group has adequate liquidity and covenant headroom
throughout the going concern period.
In addition, the Directors have performed a Reverse Stress Test,
applying further downside trade reductions to the Severe but
Plausible scenario to demonstrate the value of lost sales until
financial covenants are breached. Liquidity under the facility is
adequate, even under this scenario. Trade reductions have been
gradually applied to physical store, online and wholesale sales
channels during the 15 month going concern period. Further physical
store reductions of 10-32%, and online and wholesale reductions of
5-10% have been applied against the Severe but Plausible scenario.
Within the going concern period, this translates to Q4 FY22, H1
FY23, and H2 FY23 total turnover that is -32%, -27% and -29%
against the same period in FY20. Further, the Reverse Stress Test
includes a number of cost savings measures that management would
seek to implement to mitigate the financial effects of such an
adverse trade scenario unfolding, which includes reducing store and
central fixed costs as well as reductions in capital expenditure.
In the Reverse Stress Test, the quarterly financial covenant
reported in August 2022 would be the only one impacted during the
going concern assessment period, allowing the Directors time to
take appropriate actions if there are early signs of a prolonged
reduction in trade.
During Q3, the recovery of the Group's trade performance has
been slowed by factors including the pandemic's effect on the
return of travel and city centre footfall. However, Q3 compared to
FY20 shows a continuation of the upward trajectory towards FY20
levels seen in Q2. The Directors remain confident that the
scenarios illustrated above reasonably consider the level of risk
in the current trading environment.
As a result of the above analysis, the Directors have concluded
that the Group has sufficient financial resources to continue in
operation and meet its obligations as they fall due for the 15
months from the date of approval of these financial statements and
that no material uncertainty exists in relation to the conclusion
of the going concern assessment.
d. Significant accounting policies
The interim financial statements for the 28 weeks ended 14
August 2021 have been prepared on a basis consistent with the
accounting policies published in the Group's financial statements
for the 53 weeks ended 30 January 2021, with the exception of a
change in the calculation of the stock obsolescence provision,
changes in the presentation of carriage costs and the correction of
the presentation of lease liabilities as detailed in note 1e)
below.
e . Changes in accounting estimates, errors or misstatements
Changes in accounting estimates
In the FY20 accounting period, our inventory accounting basis of
estimating inventory cost included certain logistics and freight
costs in getting stock from the distribution centre to its final
location. At the end of FY21, the Directors decided that this basis
of estimating was not suitable due to an increasingly multi-channel
business in which purchases may reach the consumer through a
variety of different routes. As a result of these changes, the
estimation of costs relating to this had become less reliable. The
amount capitalised in respect of these costs at 26 January 2020 was
GBP6.1m which was expensed in the year ended 30 January 2021.
Carrying amount of inventories
The carrying value of inventory is recorded at the lower of cost
and net realisable value. The Group manages inventory on an
expected two year life cycle within its own retail channels. At the
end of two years, remaining stock is managed out of the business
through a variety of channels and partners in order to recover as
much of the original cost as possible. The final part of this
process involves offering stock to certain operators at much
reduced prices - the final 'liquidation' of the stock holding. In
the previous year the provision was calculated based on reviewing
the physical stock on hand by season at the period end and forward
forecasting the expected terminal stock value after two years,
reflecting the expected sales levels in all channels. At that point
in time, the provision was calculated, based on the net realisable
value of the estimated inventory on hand at that point. As there
becomes more certainty about the future, with the impact of
disruption from future lockdowns diminishing, management believes
that future forecast sales are less relevant than provisioning by
season based on recent trading patterns. As such the current model
is no longer deemed to be appropriate and during the period ended
14 August 2021, management has changed the basis of determining the
inventory obsolescence. The new provisioning policy is based on
reviewing the percentage of an original stock season that has
entered the liquidation stage and the cost recovered at that time.
The percentage of each season's total stock purchases that is still
on hand at the end of the period is determined and the amount of
this stock that is expected to enter the liquidation stage is
calculated. The liquidation cost recovery percentage is then
applied to this to obtain the provisioning percentage by season and
this is used to update the actual provision by season. The two key
sensitivities to the calculation of the provision are the
percentage of the original stock season entering into the
liquidation stage and the percentage of cost that is recovered. A
10% increase/reduction in the amount of stock entering into the
liquidation stage or a 10% reduction/increase in the liquidation
cost recovery rate would lead to an additional charge of GBP395,338
or a reduction in the charge of GBP886,382 respectively.
At 14 August 2021, the inventory provision was GBP13.0m,
representing 11.0% of the gross carrying value of inventory. The
impact of the change in the basis of the calculation of the
estimate for inventory provisioning was GBP5.5m.
Change In Presentation of Carriage Costs
In year ended 2021, carriage out costs were included within cost
of sales. In the period to 14 August 2021, the Group has come to
the opinion that only costs of delivering stock to the warehouse
should be considered in cost of sales, and carriage costs out of
the warehouse should be treated as distribution costs. The prior
year numbers have been restated with a reduction in cost of sales
and a corresponding increase in distribution costs of GBP4.9m.
There is no impact on operating loss, but gross profit has
increased due to the GBP4.9m reclassification.
Errors or misstatements
Prior Year Adjustment - Balance Sheet and Cash flow statement
Reclassification relating to Lease Liabilities
In the comparative period, there was a material impact to timing
and amount of rental payments during the COVID crisis, as payments
to landlords were delayed. The lease liability balance disclosed in
our Condensed Group Balance Sheet was understated with the
corresponding delayed payments due to landlords being disclosed
within Trade and other payables. The January 2021 Balance Sheet has
been restated to reclassify these balances, reducing Trade and
other payables and increasing Current Lease Liabilities (January
2021: GBP9.2m). This is a reclassification within the Balance sheet
with no change to Net Assets. This had a corresponding impact on
the Condensed Group Cash Flow Statement with lease payments being
overstated (Capital of GBP8.6m and Interest of GBP2.2m), whilst
decrease in trade and other payables was understated (Aug 2020:
GBP10.8m). Although this changes net cash generated from operating
activities and net cash generated from financing activities, there
is no impact on the net decrease in cash and cash equivalents.
There is no restatement impact on the Income Statement or Retained
Earnings.
Significant accounting judgements or estimates
Taxation
Deferred tax assets are recognised to the extent it is probable
that future taxable profits (including the future release of
deferred tax liabilities) will be available, against which the
deductible temporary differences can be utilised, based on
management's assumptions relating to the amounts and timing of
future taxable profits. Estimates of future profitability on an
entity basis are required to ascertain whether it is probable that
sufficient taxable profits will arise to support the recognition of
deferred tax assets relating to the corresponding entity.
Onerous contract provision
In the period to 30 January 2021, GBP4.0m was provided in
relation to onerous contracts in relation to cancelled purchase
orders due to the COVID-19 pandemic. The unutilised balance
remaining at 14 August 2021 was GBP0.9m (30 January 2021:
GBP2.0m).
2. Segment information
Segment revenue and segment result
Unaudited - 28 weeks ended 14 August 2021 Retail Wholesale Licensing Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 136,905 55,536 6,907 199,348
Cost of sales (50,086) (38,268) - (88,354)
--------- ---------- ---------- ----------
Gross profit before non-underlying items 86,819 17,268 6,907 110,994
Operating costs (82,388) - - (82,388)
--------- ---------- ---------- ----------
Operating contribution 4,431 17,268 6,907 28,606
Reconciliation of segment
result to profit before tax
Segment result before non-underlying items 4,431 17,268 6,907 28,606
Other operating costs - - - (53,814)
Other operating (expense)/income - - - 590
----------
Operating profit before non-underlying items (24,618)
Finance income - - - 353
Finance expense - - - (2,522)
Share of losses from joint ventures - - - (266)
----------
Loss before tax and non-underlying items (27,053)
==========
Non-underlying items before tax - - - 1,730
==========
Loss before tax (25,323)
==========
Capital expenditure 3,432 - - 3,432
Additions to right of use assets - - - 3,629
Unallocated capital expenditure - - - 2,280
Total capital expenditure and additions to right of use assets 9,341
==========
Depreciation and amortisation 4,534 90 - 4,624
Unallocated depreciation and amortisation - - - 8,803
Depreciation of right of use assets - - - 9,378
----------
Total depreciation and amortisation 22,805
==========
Segment assets 141,002 76,352 - 217,354
Property, plant and equipment - central - - - 2,279
Intangible assets - central - - - 33,326
Right-of-use assets - central - - - 73,806
Deferred tax assets - - - 33,612
Income tax receivable - - - 7,315
Other assets(1) - - - 13,598
Total assets 381,290
==========
Segment liabilities (71,322) (26,384) - (97,706)
Lease liability - central - - - (122,040)
Other liabilities(2) - - - (25,908)
----------
Total liabilities (245,654)
==========
Net assets 135,636
==========
(1) Other assets include prepayments, derivatives and central
allocations of inventory, cash and cash equivalents and other
receivables.
(2) Other liabilities include derivatives and central
allocations of trade and other payables and borrowings.
2. Segment information (continued)
Unaudited - 28 weeks ended 8 August 2020 (Restated)(3) Retail Wholesale Licensing Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 123,975 39,511 5,984 169,470
Cost of sales (51,335) (28,060) - (79,395)
---------- ---------- ---------- ----------
Gross profit before non-underlying items 72,640 11,451 5,984 90,075
Operating costs (83,161) - - (83,161)
---------- ---------- ---------- ----------
Operating contribution (10,521) 11,451 5,984 6,914
Reconciliation of segment
result to profit before tax
Segment result before non-underlying items (10,521) 11,451 5,984 6,914
Other operating costs - - - (46,093)
Other operating (expense)/income - - - 7,307
----------
Operating profit before non-underlying items (31,872)
Finance income - - - 82
Finance expense - - - (6,001)
Share of losses from joint ventures - - - (566)
----------
Loss before tax and non-underlying items (38,357)
==========
Non-underlying items before tax (48,087)
==========
Loss before tax (86,444)
==========
Capital expenditure 1,141 - - 1,141
Additions to right of use assets - - - 8,413
Unallocated capital expenditure - - - 2,286
Total capital expenditure and additions to right of use assets 11,840
==========
Depreciation and amortisation (1,325) (122) - (1,447)
Unallocated depreciation and amortisation - - - (14,717)
Depreciation of right of use assets - - - (15,829)
----------
Total depreciation and amortisation (31,993)
==========
Segment assets 270,662 72,103 - 342,765
Property, plant and equipment - central - - - 3,180
Intangible assets - central - - - 33,041
Right-of-use assets - central - - - -
Deferred tax assets - - - 22,998
Income tax receivable - - - 9,393
Other assets(1) - - - 17,423
Total assets 428,800
==========
Segment liabilities (230,737) (23,226) - (253,963)
Lease liability - central - - - -
Current tax liability - - - -
Other liabilities(2) - - - (7,202)
----------
Total liabilities (261,165)
==========
Net assets 167,635
==========
(1) Other assets include prepayments, derivatives and central
allocations of inventory, cash and cash equivalents and other
receivables.
(2) Other liabilities include derivatives and central
allocations of trade and other payables and borrowings.
(3) More details of the restatement are shown in note 1e)
3. Reconciliation of loss before tax to profit before tax and non-underlying items
Note Unaudited Unaudited
28 weeks ended 28 weeks ended
14 August 8 August
2021 2020
------------------------------------------ ----- ---------------- ----------------
GBP'000 GBP'000
Loss before tax (25,323) (86,444)
Included in cost of sales:
Inventory changes in estimates 1 - (6,065)
Onerous contract provision 2 753 (4,408)
Other - 12
---------------- ----------------
Included in gross profit 753 (10,461)
Included in distribution costs
:
Impairment of intangible assets,
property, plant and equipment and
right-of-use assets 3 (2,953) (45,829)
Included in administrative costs:
Acquisition costs and unwind of
fair value accounting adjustments 4 - (1,182)
Reorganisation cost, restructuring
costs and other legal and professional
costs 5 (1,940) (10,117)
Included in Other operating (loss)/income
Gain on sale and leaseback of head
office 6 - 17,566
Head office exit receivable 7 7,966
---------------- ----------------
Included in operating loss 3,826 (50,023)
Included in share of post-tax losses
from joint ventures:
Unwind of fair value adjustments - (6)
Foreign exchange on the translation
of monetary assets and liabilities
denominated in foreign currencies 8 (2,096) 1,942
---------------- ----------------
Non-underlying items 1,730 (48,087)
Loss before tax and non-underlying
items (27,053 ) (38,357)
================ ================
Notes
1. Further details surrounding the changes in accounting
estimates for inventory can be found in Note 1e)
2. Details of the onerous contract provision can be found in note 1e).
3. The Group impaired a number of assets in retail stores
resulting in a charge of GBP3.0m (2020: GBP45.8m), including
leasehold improvements, fixtures and fittings, intangible assets
and right-of-use assets.
4. Charges in the prior period relate to amortisation of
reacquired rights, fair value and accounting adjustments in
relation to the acquisition of the footwear business in FY19.
5. Costs relate to the refinancing and restructuring of the
business previously announced and include redundancy costs, legal
and professional fees. Prior period costs relate to further costs
incurred in relation to the investigation into the allegations of
misconduct of the former Chief Executive Officer and the Group's
policies, procedures and handling of HR-related complaints and
other legal matters.
6. Relates to the sale of the corporate head office building within FY21.
7. The Group is due GBP8.0m from the landlord when it exits its
current head office building. This amount crystallised in the half
year when the Group did not exercise its option on an alternative
building owned by the landlord. Receipt of funds is expected in
FY23.
8. Foreign exchange gain on re-translation of intercompany
balances denominated in foreign currencies.
4. Finance income and expenses
Unaudited Unaudited
28 weeks 28 weeks
ended ended
14 August 8 August
2021 2020
GBP'000 GBP'000
Finance income
- Interest receivable 353 81
- Foreign exchange gains - 1,943
----------- ----------
353 2,024
----------- ----------
Finance expenses
- Interest payable - (1,921)
- Interest on lease liabilities (2,522) (4,080)
- Foreign exchange losses (2,096) -
----------- ----------
(4,618) (6,001)
----------- ----------
5. Earnings per share
Unaudited Unaudited
28 weeks 28 weeks
ended ended
14 August 8 August
2021 2020
Number of shares: No. No.
Weighted number of ordinary shares outstanding 184,608,786 112,416,515
Effect of dilutive options 8,783,295 28,518
------------ ------------
Weighted number of ordinary shares outstanding - diluted 193,392,081 112,445,033
------------ ------------
Earnings:
Loss for the period - basic and diluted (18,607) (72,089)
Underlying loss for the period (19,336) (31,621)
Basic loss per share (10.1p) (64.1p)
Underlying loss per share (10.5p) (28.1p)
Diluted loss per share (10.1p) (64.1p)
Underlying diluted loss per share (10.5)p (28.1p)
Diluted loss per share and adjusted diluted loss per share have
been calculated using additional ordinary shares of 5p each
available under the Ted Baker Sharesave Scheme, the Ted Baker plc
Long-Term Incentive Plan 2013, the Ted Baker Incentive Plan 2020,
and the Ted Baker Long Term Incentive Plan 2020.
6. Dividends per share
Unaudited Unaudited
28 weeks ended 14 August 2021 28 weeks ended 8 August 2020
GBP'000 GBP'000
Final dividend paid for the prior year of nil
pence per ordinary share (2020: GBPnil) - -
Interim dividend paid 2021: GBPnil (2020: - -
GBPnil)
------------------------------ -----------------------------
- -
------------------------------ -----------------------------
The Board has declared an interim dividend of Nil pence per
share (2020: Nil pence).
7. Income tax expense
An income tax credit is recognised on losses before
non-underlying items at the full year forecast effective tax rate
of 28.5% for the 28 weeks ended 14 August 2021 (28 weeks ended 8
August 2020: 17.4%). This is higher than the UK tax rate due to the
remeasurement of previously recognised UK deferred tax assets now
at the higher UK rate of 25% which was substantively enacted at the
balance sheet date.
The income tax charge on non-underlying items at half year is
calculated and disclosed separately. This has a significant impact
on the total effective tax rate at the half year given the
significant number of non-underlying items.
Our future effective tax rate is expected to be in line with the
UK tax rate which increases to 25% from 1 April 2023 and aligns
more with overseas tax rates from that point.
8. Reconciliation of net cash
Unaudited Unaudited
14 August 2021 8 August 2020
GBP'000 GBP'000
Cash and cash equivalents per balance sheet 28,228 60,752
Bank overdraft per balance sheet (5,490) -
External borrowings (10,000) -
--------------- --------------
Net cash 12,738 60,752
--------------- --------------
9. Intangible assets
Intangible asset additions during the period were GBP4.8m (30
January 2021: GBP3.7m) in relation to investment in business-wide
systems to support the long-term development of the business. The
IFRS Interpretations Committee ("IC") has published a first agenda
decision in March 2019 which provides guidance to companies when
capitalising expenses to intangible assets relating to cloud based
systems. The IC has published a second agenda decision in April
2021 providing further guidance on accounting for configuration or
customisation costs in a cloud computing arrangement. Management
has not adopted this policy in the interim period and is in the
process of reviewing its intangible additions costs relating to the
modification and improvement of the current ERP system to ascertain
whether such costs should continue to be capitalised or not. Any
adjustment to the current capitalisation of costs would be
retrospective. A change in accounting policy may lead to a
restatement as a result of that change if the amounts to be
reclassified and expensed are material. Management has not
concluded on this exercise as at the interim period
Impairment in the period was GBPnil (30 January 2021:
GBP0.7m).
10. Property, plant and equipment
Property, plant and equipment asset additions during the period
were GBP1.5m (30 January 2021: GBP3.3m) primarily in relation to
store refurbishments and openings.
Impairment in the period was GBP0.8m (30 January 2021:
GBP12.1m).
11. Right-of-use assets
Right-of-use assets are recognised in relation to the Group's
leases, representing the economic benefits of the Group's right to
use the underlying leased assets. The Group's lease portfolio is
principally made up of property leases of stores, distribution
centres and head offices.
The Group has applied the practical expedient for the
application of rent concessions provided as a response to the
COVID-19 pandemic, as allowed by the amendment to IFRS 16. The
Group has applied the practical expedient to all its leases within
Europe that meet the criteria set out in the amendment. The Group
has not applied the practical expedient to concessions in the rest
of world. GBP0.4m (8 August 2020: GBPnil) has been recognised in
the income statement in the period to reflect these lease
concessions to which the practical expedient has been applied.
Right-of-use
asset
---------------------- ------------
GBP'000
Cost
At 30 January 2021 181,544
Additions 3,061
Disposals (2,647)
Increase/decrease* 511
At 14 August 2021 182,469
------------
Amortisation
At 30 January 2021 (99,785)
Charge for the period (9,378)
Disposals 2,647
Impairments (2,147)
Increase/decrease* -
At 14 August 2021 (108,663)
------------
Net book value
------------
At 30 January 2021 81,759
============
At 14 August 2021 73,806
============
* Increase or decrease in values arising from modifications of
leases agreed in current period but with effective dates in
preceding periods.
12. Inventory provisioning
Where necessary, provision is made to reduce cost to no more
than net realisable value having regard to the nature and condition
of inventory, as well as its anticipated utilisation and
saleability.
See Note 1e) for details of the change in accounting estimate
relating to inventory provisioning.
13. Financial instruments
The definitions and valuation techniques employed for financial
instruments at 30 January 2021 are disclosed in Note 25 on pages
142 to 145 of the Annual Report and Accounts for the 53 weeks ended
30 January 2021.
Level 2 assets and liabilities are shown as:
Unaudited Audited
14 August 30 January
2021 2021
GBP'000 GBP'000
----------- ------------
Assets at fair value:
Currency derivatives - -
Liabilities at fair value:
Currency derivatives 742 1,191
14. Related parties
The Group considers its Executive and Non-Executive Directors as
key management and therefore has a related party relationship with
them.
Directors of the Company and their immediate relatives control
0.2% (8 August 2020: 0.2%) of the voting shares of the Company.
The Group has a 50% interest in the ordinary share capital of No
Ordinary Retail Company Pty, a company incorporated in Australia.
As at 14 August 2021, the joint venture owed GBP599,751 to No
Ordinary Designer Ltd (30 January 2021: GBP372,000). The value of
sales made to the joint venture by the Group in the period was
GBP796,587 (8 August 2020: GBP486,584).
The Group also has a 50% interest in the shares of Ted Baker
Hong Kong Limited. As at 14 August 2021, the joint venture owed
GBP3,684,091 to No Ordinary Designer Ltd (2021: GBP790,000). In the
period the value of sales made to the joint venture by the Group
was GBP1,568,306 (2020: GBP1,433,654).
15. Alternative Performance Measures
In the reporting of financial information, the Group uses
certain measures that are not separately disclosable under IFRS or
the Companies Act. The Directors believe that these additional
measures are useful to the users of the financial statements in
helping them understand the underlying business performance. These
are not recognised measures under IFRS and may not be directly
comparable with similarly titled measures used by other companies,
including other retailers. Alternative performance measures (APM)
should be considered in addition to rather than as a replacement
for IFRS measurements.
Underlying loss
This is a non GAAP measure, used internally to better represent
the actual ongoing performance of the company. It aims to exclude
items that are either one-off in nature, non recurring or by the
value of the item distorts the reported performance. It is
calculated as loss before tax or loss after tax less non underlying
items (see below). The tax charge associated with underlying items
is separately disclosed.
Non-underlying items
This is a non GAAP measure. Non-underlying items are those items
which, in the opinion of the Directors, should be excluded in order
to provide a consistent and comparable view of the underlying
performance of the Group's ongoing business and are considered by
the Directors to be significant. The Directors also exclude foreign
exchange gains and losses on the translation of intercompany
monetary assets and liabilities denominated in foreign currencies.
See note 3 for details of the non-underlying items and a
reconciliation to loss before tax.
16. Principal risks and uncertainties
The principal risks and uncertainties affecting the Group were
identified as part of the Group Strategic Report, set out on pages
50 to 53 of the Ted Baker Annual Report and Accounts for the 53
weeks ended 30 January 2021, a copy of which is available on the
Group's investor relations website at www.tedbakerplc.com.
The Group has established a structured approach to identify,
assess and manage these risks and this is regularly monitored and
updated by the Risk Committee. The following list highlights some
of the principal risks, which are unchanged from the prior year end
and remain relevant for the second half of the financial year:
Market risks
-- COVID-19 - The longevity of the pandemic could lead to
further lockdown store closures, team members on furlough and the
need to discount. This could lead to more redundancies and store
closures in the longer term.
-- Economic downturn - Due to a slowdown in the economy, there
is a decrease in demand for Ted Baker's products. For example,
people have less disposable income to spend on non-essential items.
This could lead to the need to discount and reduce margin or hold
excess stock, ultimately affecting the bottom line and business
profitability/viability, as well as damaging the Ted Baker
brand.
-- Competition - A lack of insight around customers and
competitors could result in Ted Baker being overtaken by the
competition, particularly if our market position is not clear. This
could reduce our market share and supply chain buying power if we
are not seen as competitive with other brands or we fail to offer a
competitive and suitably diverse product mix.
-- Changing customer preferences - We fail to understand and
respond to changes in customer preferences. For example, lack of
stock diversity or preferred shopping channel, or lack of
influencer recommendation, results in Ted Baker losing its
competitive edge. This could lead to a loss of sales, reduced
margins, missed opportunities for growth or a poor balance of sales
channels.
-- Execution of transformation strategy - Failing to deliver our
corporate transformation strategy could result in Ted Baker not
realising the long-term goals of the business. This could be a
result of: 1) The wrong transformation strategy being rolled out to
the business (or failing to pivot that strategy if the operating
environment changes). 2) A lack of bandwidth - starting on too many
activities without sufficient resource, an inability to focus on
future value due to short-term firefighting, an inability to retain
and recruit the right talent, confusion around responsibility for
individual workstreams, misaligned prioritisation or competing
priorities. For example, failing to align our finance strategy with
the wider business strategy, or inability to deliver strategy due
to budget constraints.
-- Real estate agility - Unable to respond to market changes
around real estate - meaning we cannot negotiate new contracts that
support a profitable store opening and/or exit old contracts that
are no longer commercially viable. Inability to structure leases in
a flexible way could limit our ability to operate on the high
street or tie us to long and potentiality expensive leases.
-- Margin deliverability/foreign exchange - Factors such as
foreign exchange movements, an inability to pass on increased costs
to customers and produce goods for less could mean the Company
fails to meet our goal to improve margin.
Reputational risks
-- Brand reputation/identity crisis - A revitalised product mix
with a new composition of product categories, combined with a
change in focus on target audience could send mixed messages to
consumers, resulting in a loss of core loyal customers and failure
to engage new customers and influencers.
-- Corporate reputation - Exposure of stakeholders to negative
media stories could lead to reputational damage affecting the
ability to attract and retain investors, customers and team
members.
Supply and Value Chain risks
-- Global Shipping & Supply Chains - The disruption to
supply chains due to the pandemic could create reduced shipping and
freight availability, and reduced schedule reliability, which may
result in adversely impacted product availability in stores and
warehouses, as well as potential cost inflation in product inputs
and labour.
-- Supplier risk - A failure to evaluate suppliers, set up
suitable commercial contracts, or establish supplier management
protocols (including ongoing monitoring), could leave Ted Baker
exposed to supplier failure, an inability to source goods or
significant margin pressure.
-- Critical path/agility - Without creating a more agile
approach to the critical path and enhancing speed to market we will
not be able to take advantage of opportunities in the market as
they arise and would lose out to competitors who can respond
faster.
-- Control environment - Insufficient or inadequate checks,
controls and processes could result in limited financial oversight,
leading to errors, misstatement or fraud. A weak control
environment could lead to poor business decisions or decisions made
by team members who do not have adequate insight or authority such
as changing supplier or customer payment terms, oversight over
stock quantities and stock buy. A weak control environment could
also lead to an impaired ability to forecast revenues and profits
and inaccurate accounting.
-- Merchandising/ stock obsolescence - Inventory risk due to
stock obsolescence could lead to a write-off that damages
profitability and asset value. This could be a result of inaccurate
forecasting, lack of relevance to customers, high price points or
poor inventory controls, and poor management of revenue data to
drive decision-making.
-- IT resilience and continuity - A lack of resiliency or
business continuity plans could result in a failure to withstand
any shocks and an inability to adapt during a crisis. For example,
failure to take more sales online while shops are forced to close,
inability to adapt effectively and communicate action required
during a crisis.
People risks
-- Talent management - Failing to attract and retain the best
talent could mean we cannot achieve our strategic goals through a
lack of the innovation, objectivity and diversity we need to
support customer and market needs. We may not meet our business
objectives if we fail to retain and train existing team members so
their skill sets evolve to meet the needs of the business. Failing
to attract new team members with the right capabilities and
ensuring market competitiveness (through competitive salary,
benefits and flexible working) could also undermine our ability to
complete our transformation strategy.
-- Diversity and inclusion - Without a sufficient focus on
inclusion across all levels of the business there is a risk that
team members will become demotivated which could damage performance
and reputation.
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 UK adopted IAS 34, Interim Financial Reporting ;
and
-- 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 24 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.
For the purposes of this responsibility statement, the Directors
of Ted Baker plc are those persons whose names and positions are
listed on pages 58 and 59 of the Annual Report and Accounts as at,
and for, the 53 weeks ended 30 January 2021, and Fumbi Chima and
Meg Lustman who were appointed as independent Non-Executive
Directors on 4 August 2021. A list of current Directors is
maintained on the Ted Baker plc website, at: www.tedbakerplc.com
.
By order of the Board
J Barton R Osborne
Executive Chairman Chief Executive Officer
11 November 2021 11 November 2021
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 half-yearly financial report for the
28 weeks ended 14 August 2021 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 half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report 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 Financial Reporting Council for use
in the United Kingdom. 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 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 half-yearly financial report for the 28 weeks ended 14
August 2021 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
55 Baker Street
London
W1W 7EU
Date: 11 November 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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