Ted Baker Plc - Final Results

"Continued progress in Ted Baker's expansion as a global lifestyle brand"

 

Highlights:

 

2018

2017

Change

 

 

 

 

Group Revenue

£591.7m

£531.0m

11.4%

Profit Before Tax and Exceptional Items

£73.5m

£65.8m

11.7%

Profit Before Tax

£68.8m

£61.3m

12.3%

Adjusted EPS

127.7p

114.0p

12.0%

Basic EPS

119.0p

105.7p

12.6%

Total Dividend

60.1p

53.6p

12.1%

 

·    Group revenue up 11.4% (9.6% in constant currency) to £591.7m

·    Retail sales up 10.4% (8.5% in constant currency) to £442.5m

o  UK and Europe retail sales up 7.7% (6.4% in constant currency) to £301.1m

o  US and Canada retail sales up 16.2% (12.4% in constant currency) to £120.1m

o  E-commerce sales up 39.8 % (38.7% in constant currency) to £101.1m

·    Wholesale sales up 14.6% (13.3% in constant currency) to £149.2m

·    Licence income up 17.6% to £21.4m

·    Proposed final dividend of 43.5p bringing total dividend to 60.1p, an increase of 12.1%

 

Ray Kelvin CBE, Founder and Chief Executive, said:

 

"I am pleased to report a year of continued progress in Ted Baker's expansion as a global lifestyle brand.  The Group's good performance demonstrates the strength of the brand as well as the quality and appeal of our collections.

 

Ted Baker's continued success is driven by the passion and talent of our global teams. I would like to take this opportunity to thank our colleagues across the world for their hard work and Tedication during the year.

 

Our new collections have been received positively and although we anticipate external trading conditions will remain challenging across many of our global markets, the strength of our brand and business model mean that we remain well positioned to continue the Group's momentum and long-term development. We have a clear strategy for growth across both established and new markets which is underpinned by our controlled, multi-channel distribution as well as the design, quality and attention to detail that are at the heart of everything we do."

 

Chairman's Statement

 

I am pleased to report that Group revenue increased by 11.4% (9.6% in constant currency)1 to £591.7m (2017: £531.0m) and profit before tax and exceptional items2 increased by 11.7% to £73.5m (2017: £65.8m) for the 52 weeks ended 27 January 2018 (the "period"). Profit before tax increased by 12.3% to £68.8m (2017: £61.3m). This good performance reflects the strength of the Ted Baker brand and business model and was achieved despite a backdrop of on-going challenging external factors across our global markets.

 

The retail channel performed well, with retail sales including e-commerce up 10.4% (8.5% in constant currency)1 to £442.5m (2017: £400.7m) on an increase in average square footage of 5.9%. Our e-commerce business is an integral and increasingly important component within our retail proposition and has performed very well, delivering strong sales growth of 39.8% (38.7% in constant currency)1 to £101.1m (2017: £72.3m). We continued our controlled geographic expansion with openings across the UK and Europe, North America and the Rest of the World and we continue to invest and build brand awareness in our newer markets for the long-term development of the brand.

 

The wholesale channel delivered a strong performance, with sales up 14.6% (13.3% in constant currency)1 to £149.2m (2017: £130.3m). This reflects a good performance from our UK wholesale business, which includes the supply of goods to our licensed stores and our export business, as well as a strong performance from our North American wholesale business.

 

Licence income delivered strong growth of 17.6% to £21.4m (2017: £18.2m). During the period, our licence partners opened further stores and concessions in Australia, Dubai, Indonesia, Kuwait, Lebanon, Mexico, Qatar, Saudi Arabia and Turkey.

 

In May 2017, we launched the next phase of the Microsoft Dynamics AX system across our UK and European businesses to fully support our retail, e-commerce and wholesale channels. We anticipate completing the final phases of this project towards the end of this year, and this will allow us to continue to enhance efficiency, streamline our operations and support the development of the business. 

 

We have now successfully completed the transition from our three legacy distribution centres to our single European distribution centre in the UK. The new distribution centre now handles all logistic operations for our retail, e-commerce and wholesale businesses across the UK and Europe, supporting our long-term growth strategy. In September 2017, we successfully assigned the leases for our three UK legacy distribution centres to third parties.

 

The Group continues to consider its expansion and development plans for The Ugly Brown Building and has decided not to exercise the option to purchase 50% of neighbouring Block A, as future capacity requirements will be accommodated within our enhanced plans for the current site.

 

Financial Results

Group revenue for the period increased by 11.4% (9.6% in constant currency)1 to £591.7m (2017: £531.0m). The Group gross margin remained constant at 61.0% (2017: 61.0%). This was a result of an increased retail margin driven by an improved full price sell-through and change in mix of full price and outlet sales, offset by a decrease in the wholesale margin, reflecting a prior-year foreign exchange benefit that was not expected to re-occur and a greater proportion of wholesale sales to our territorial licence partners which carry a lower margin.

 

Profit before tax and exceptional items2 increased by 11.7% to £73.5m (2017: £65.8m) and profit before tax increased by 12.3% to £68.8m (2017: £61.3m). Adjusted basic earnings per share, which excludes exceptional items, increased by 12.0% to 127.7p (2017: 114.0p) and basic earnings per share increased by 12.6% to 119.0p (2017: 105.7p).

 

Exceptional items in the period amounted to £4.7m (2017: £4.5m) and comprised the impairment of retail assets, relating to three stores in the US and one store in Europe of £4.5m, and restructuring costs of £1.3m, partially offset by income of £1.1m related to the release of provisions against the Group's legacy warehouses following assignment of the leases. Exceptional items in the 52 weeks ended 28 January 2017 of £4.5m included a provision for lease commitments relating to the Group's legacy warehouses of £2.9m along with £0.7m of other closure costs and £0.9m in respect of closure costs for a concept store in London.

 

The Group's net borrowing position at the end of the period was £111.8m (2017: £95.2m) being the secured term loan of £52.5m (2017: £58.5m) used to purchase The Ugly Brown Building and other net debt of £59.3m (2017: £36.7m). The increase in other net debt primarily reflects the ongoing capital expenditure during the period and increased working capital.

 

Dividends

Reflecting the Group's continued good performance and the Board's confidence in the outlook, the Board is recommending a final dividend of 43.5p per share (2017: 38.8p), making a total for the period of 60.1p per share (2017: 53.6p per share), an increase of 12.1% on the prior period. Subject to approval by shareholders at the Annual General Meeting to be held on 12 June 2018, the final dividend will be paid on 22 June 2018 to shareholders on the register on 18 May 2018.

 

People

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

 

Current Trading and Outlook

 

Retail

In the UK and Europe, we have opened a new store in London Luton Airport and plan to open new stores in Barcelona Airport and London Bridge station, an outlet in Lyon and our first outlet in Neumunster, Germany, along with further concessions in the UK, France, Germany and Spain. We will continue to invest in our e-commerce sites to enhance the customer experience.

 

In North America, we will continue to develop our presence with plans to open stores in Austin and Orlando, along with further licence partner concessions in Mexico.

 

In the Rest of the World, we remain focused on building brand awareness, as we are still in the relatively early stages of investment. In line with our development strategy in this territory, we plan to open a further concession in Japan.

 

Wholesale

We anticipate further growth across our wholesale businesses, which should result in high single-digit sales growth (in constant currency)1 in the coming period.

 

Licence Income

Our product and territorial licences continue to perform well. We have opened a store in India, with further store openings planned in Egypt, India, Indonesia, Kazakhstan, Saudi Arabia, Singapore and Thailand. 

 

Group

The recent unseasonal weather across Europe and the East Coast of America has had an impact on the early part of trading for Spring/Summer and we anticipate that external trading conditions will remain challenging across many of our global markets.  However, the new season collections have been well received and the strength of our brand and business model mean that we remain well positioned to continue the Group's momentum and long-term development.  We have a clear strategy for the continued expansion of Ted Baker as a global lifestyle brand across both established and newer markets. This is underpinned by our controlled distribution across channels as well as the design, quality and attention to detail that are central to everything we do.

 

To deliver our expansion plans, capital expenditure in the new financial period is planned to be at £30.0m (2018: £36.6m). This relates to further store openings and refurbishments, and the ongoing investment in new IT systems across the business.

 

We intend to make our trading statement covering trading from the start of the financial period in mid-June 2018.

 

David Bernstein CBE

Non-Executive Chairman

22 March 2018