2014
A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S
NIC OL E K IDM A N S TA R RING IN T HE P R E - FA L L 2 014 A DV E R T ISING
CON T EN T S
OV ERV IE W
S T R AT EGIC REPOR T
15HIGHLIGH TS
18 CH AIRM AN’S STATEMENT
21 OUR M A RKE T
22 BUSINESS MODEL
26 ST R ATEGIC F R A ME WORK
28 CHIEF E X ECU TIV E’S RE VIE W
32 FINANCIA L RE VIE W
35 SUSTAINA BLE BUSINESS
36 OUR PEOPLE
38 RISK M ANAGEMENT
GOV ERN A NCE
4 4 T HE BOA RD OF DIREC TORS
4 8 CORPOR ATE GOV ERNANCE REP ORT
5 4 AUDIT AND RISK COMMIT TEE REPORT
5 8 REMUNER ATION AND NOMINATIONS COMMIT TEE REPORT
74 DIREC TORS’ REP ORT
F IN A NCI A L S TAT EMEN T S
79 INDEPENDENT AUDITOR’S REPORT
81 CONSOLIDATED INCOME STATEMENT
82 CONSOLIDATED STATEMENT OF OT HER COMPREHENSIV E INCOME
8 3 CONSOLIDATED STATEMENT OF FINANCIA L POSITION
8 4 CONSOLIDATED STATEMENT OF CH ANGES IN EQUIT Y
85 CONSOLIDATED STATEMENT OF CASH F LOWS
8 6 NOTES TO T HE CONSOLIDATED FINANCIA L STATEMENTS
118 COMPANY STATEMENT OF FINANCIA L POSITION
119 NOTES TO T HE COMPANY FINANCIA L STATEMENTS
123 CORPOR ATE INFORM ATION
A 21ST CENTURY LUXURY
ACCESSORIES BRAND WITH
SHOES AT ITS HEART, OFFERING
AN EMPOWERED SENSE OF
LUXURY AND A PLAYFULLY
DARING SPIRIT
JIMMY CHOO
ICONIC, POWERFUL BRAND
A LUXURY BR AND, WITH UNIQUE DNA ,
OFFERING AN EMPOWERED SENSE
OF GL AMOUR AND PL AYFULLY
DARING SPIRIT
SEE PAGE 24
LUXURY SHOES
AT TRACTIVE
MARKET SEGMENT
ONE OF THE FASTEST
GROWING SEGMENTS OF THE WIDER
LUXURY MARKE T, WHERE SPECIALISTS
ARE OUTPERFORMING
SEE PAGE 2 1
BUSINESS MODEL
WELL INVESTED,
SCALED FOR GROW TH
JIMMY CHOO HAS THE MERCHANDISING,
DESIGN, SUPPLY CHAIN, COMMUNICATION AND
RE TAIL SKILLS AND HAS SIGNIFICANTLY INVESTED
ACROSS THE PL ATFORM TO OUTPERFORM
BY SUPERIOR E XECUTION
SEE PAGE 2 2
K I T H A R RING T ON S TA R RING IN T HE AU T UMN W IN T E R 2 014 A DV E R T ISING
FINANCIAL
PERFORMANCE
A PROVEN TRACK RECORD
CONSISTENTLY DELIVERING STRONG
TOP-LINE GROW TH. SUCCESSFUL BUSINESS
MODEL NOW SCALED AND EMBARKING ON
THE NE X T PHASE OF GROW TH AND
MARGIN E XPANSION
SEE PAGE 3 2
THE FUTURE
REVENUE GROW TH
AHEAD OF THE MARKET AND
MARGIN EXPANSION
GROW TH IS BEING PURSUED WITHOUT
ANY COMPROMISE TO BR AND E XCLUSIVIT Y
SEE PAGE 2 8
LIVE THE LIFE YOU DARE
STRATEGIC
REPORT
HIGHLIGHTS
• MADE TO ORDER OFFER LIFTS LUXURY EXPERIENCE
RE V ENUE ( Y E A R T O 31 DECE MBE R)
£299.7M
• ROLL OUT OF THE NEW STORE CONCEPT
• STRONG RESULTS OF CHOO.08° SINCE LAUNCH
£ 2 9 9 .7 M
2 014
2 013
£ 2 81. 5 M
2 012
£ 24 3.0M
• MEN’S CONTINUES TO BE OUR FASTEST
GROWING CATEGORY
• MARIE CLAIRE’S PRIX D’EXCELLENCE
DE LA MODE AWARD
A D JUS T ED EBI T DA 3 ( Y E A R T O 31 DECE MBE R)
• RATED AS “GIFTED” BY L2
£50.2 M
• SUCCESSFUL IPO IN VOLATILE MARKETS
2 014
£50.2M
2 013
£46.9M
2 012
£ 4 6 .1 M
• REVENUE +12.2% AT CONSTANT CURRENCY1
TO £299.7M
• STRONG RETAIL GROW TH SUPPORTED BY LIKE FOR
LIKE GROW TH 2 OF 5.7% AND A NET NINE NEW DOS
• ADJUSTED EBITDA3 MARGIN INCREASED TO 16.8%
A D JUS T ED EPS 6 ( Y E A R T O 31 DECE MBE R)
6.1P
• ADJUSTED EBIT 4 OF £35.4M AND ADJUSTED EBT 5
OF £28.3M
2 014
6 .1 P
2 013
5.6P
2 012
4.0P
1
Constant currency revenue growth is calculated by applying the exchange rates for the year
ended 31 December 2014 to the year ended 31 December 2013 on a month by month basis
and calculating the growth percentage by reference to the total year.
2
Like for like sales growth (“LFL”) is calculated by taking retail sales in all locations where
trading occurred for a full financial year prior to the start of the period being measured and
calculating sales growth for those locations at constant currency.
3
Adjusted EBITDA is defined as operating profit for the year adjusted for exceptional costs, loss
on disposal of property, plant and equipment and intangible assets, depreciation and
amortisation charges and realised and unrealised foreign exchange gains and losses on the
revaluation of monetary items.
4
Adjusted EBIT is defined as operating profit for the year adjusted for exceptional costs, share of
the result of associates and joint ventures and realised and unrealised foreign exchange gains
and losses on the revaluation of monetary items.
• 92.2% EBITDA CASH CONVERSION
• CLOSING NET DEBT OF £125.6M
5
Adjusted EBT is defined as loss before tax for the year adjusted for exceptional costs, interest
on the shareholder credit facility, foreign exchange gains and losses on the revaluation of
external bank facilities, changes in the fair value of forward foreign exchange contracts used
to manage exposure to foreign currency gains and losses arising on the Euro denominated
portion of its external bank facilities and the accelerated amortisation of capitalised debt costs.
6
Adjusted EPS is calculated as Adjusted consolidated net income7 divided by 377,786,469 shares.
7
Adjusted consolidated net income is defined as loss for the period adjusted for exceptional
costs, deferred tax, interest on the shareholder credit facility, foreign exchange gains and
losses on the revaluation of external bank facilities, changes in the fair value of forward
foreign exchange contracts used to manage exposure to foreign currency gains and losses
arising on the Euro denominated portion of its external bank facilities and the accelerated
amortisation of capitalised debt costs.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
S T R AT EGIC R EP OR T
15
AT A GLANCE
OT HER
RE TA IL
£ 6.4 M 2 0 13
£ 17 7.4 M 2 0 13
£192.9 M
£7.2 M
RE V ENUE BY SEGMEN T
TOTA L RE V ENUE
( YE A R TO 31 DECEMBER)
£299.7 M
£ 2 8 1. 5 M 2 0 13
W HOL ESA L E
£99.6 M
£ 9 7.7 M 2 0 13
RE V ENUE BY DES T IN AT ION
SHOES REM A IN AT T HE HE A R T
OF T HE BUSINESS
T HR E E Q UA R T E R S OF R E V E NUE
EMEA
USA
Japan
Asia (excluding Japan)
2014
2013
132.4
99.8
32.7
34.8
126.4
99.2
30.0
25.9
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
S T R AT EGIC R EP OR T
16
GROWING GLOBAL
DISTRIBUTION PLATFORM
44
36
215
A MERICAS
2 26
23
293
JA PA N
13
19
EME A
ASI A
M A P L EGEND
29
29
DOS 1
F R A NCHISE
MULT IBR A ND
1
Directly Operated Stores
NE W DOS GROW T H
E X IS T ING DOS RENOVAT ION
In line with recent years, Jimmy Choo plans to open 10 to 15 new
stores per year. This store opening programme is weighted towards
China, where we have historically been underpenetrated relative to
many of our larger luxury peers. This store opening rate allows us to
capture the growth potential of the white space while ensuring the
quality of execution maintains the luxury positioning and brand image
of Jimmy Choo.
In addition to the new store roll-out programme, Jimmy Choo plans
to refurbish 10 to 15 existing stores each year in the new store
concept. This renovation programme is weighted towards our earliest
markets of the US and Europe. While we have only recently opened
the small number of renovated stores, the initial results are very
positive and indicate that renovated stores in the new store concept
outperform existing stores by a noticeable margin.
NE W S TORE CONCEP T
F L AGSHIP PROGR A MME
Jimmy Choo’s retail portfolio has had a similar store design approach
and materials since 1996. Jimmy Choo debuted a new store concept
in 2014, developed with David Collins Studio and inspired by haute
couture salons and fantasy shoe closets. This refreshes the look and
feel of our stores, emphasises our luxury positioning and presents
the fashion driven products in more space, while retaining the higher
product densities in the key Choo 24:7 collection. The new concept
integrates the dual gender product portfolio, helping with penetration
of the men’s collection globally.
In addition to our boutiques and concessions we are planning 10
flagship stores which are designed to be a more full expression of the
Jimmy Choo brand in key locations. The New Bond Street and Beverly
Hills flagship stores have already reopened. Future flagship stores are
envisaged for New York, Milan, London, Paris, Hong Kong, Tokyo,
Shanghai and Beijing, with the programme complete by the end of
2017. The creation of these flagships will not entail increasing our
number of DOS in any city, as it will be achieved by conversion and
expansion of space in five existing stores and relocation to expanded
space in five other locations.
E VOL U T ION OF T HE RE TA IL PL AT F ORM
NE W S T OR E C ONCEP T ROL L OU T
NET NEW DOS
PLANNED OPENINGS PER YEAR
DOS IN NEW STORE CONCEPT
PLANNED REFURBISHMENTS PER YEAR
9
15
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
S T R AT EGIC R EP OR T
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10–15
10–15
CHAIRMAN’S STATEMENT
WE ARE PROUD TO WELCOME
OUR NEW SHAREHOLDERS WITH A YEAR
OF PROFITABLE GROWTH
PE TER HARF
CH AIRM A N OF T HE BOA RD
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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2014 has been a major year in the development of Jimmy Choo. We
have continued to grow the business, with revenue increasing 12.2%
at constant currency through the creation of new exciting collections,
opening new stores and driving like for like sales growth through our
robust business. In addition to growing the business, we launched
Jimmy Choo PLC on the London Stock Exchange in October 2014.
We welcome our new shareholders to our first annual report as a
public company and look forward to partnering with you in the
years to come.
In order to position Jimmy Choo for the next stage of development,
significant investment has been undertaken to restructure and
strengthen the business, including talent management and in
systems and logistics. Jimmy Choo has been able to finance this
investment through inherently strong cash flow and improvements
in underlying margin. Whilst these investments have resulted in an
increase in operating costs and reduced reported operating margin
in recent years, we believe that they have provided the business
with the requisite scale and operating leverage to generate significant
profit growth into the future.
HIS TORY & S T RENGT HS
Jimmy Choo is a 21st century accessories brand with shoes at its
heart, with a focus on glamour, style authority, craftsmanship,
luxury positioning and a distinctive iconic brand.
This investment phase is nearing completion and we look forward
to the new systems backbone not only supporting long term growth
in what is a complex category, but also enabling us to move to an
omnichannel model in the near term. In addition, the regional offices
in New York, Tokyo, Hong Kong, Beijing, Paris and Milan provide the
distribution network with the support and drive to grow the global
footprint profitably.
Jimmy Choo’s journey started in 1996 from an entrepreneurial start-up
partnership, where a combination of the shoes of Mr. Jimmy Choo,
OBE and the drive and inspiration of Tamara Mellon, OBE, created
a luxury footwear phenomenon. They opened the first store in 1996,
in Motcomb Street in London SW1, and sold 3,000 pairs of the
first ready-to-wear shoe collection, with Mr. Jimmy Choo’s niece,
Sandra Choi, serving as the company’s Creative Director, a role
she still holds today.
IPO
JAB Luxury have invested in the Jimmy Choo business for the long
term. While JAB Luxury intend to remain majority shareholders of the
business for the foreseeable future, we believe that bringing outside
investors in and exposing the company to public scrutiny ensures the
best governance to drive long term growth and helps to promote the
brand and incentivise the team.
In 1998, Jimmy Choo opened its first boutique in New York City,
followed by Los Angeles. Jimmy Choo became an innovator in
Hollywood, being the first accessory brand to offer award nominees
and presenters customised shoes for their red carpet appearances.
The brand’s presence on the red carpet helped to create a global
following and to make it a favoured brand among celebrities,
supermodels and royalty.
Throughout its history, Jimmy Choo has been identified by the media
as a key element of the fashion zeitgeist, with prominence in films
and television such as “Sex and the City” in 1999, “The Devil Wears
Prada” in 2006 and the Korean show “My Love from the Star”
in 2013.
There followed a sustained period of strong retail expansion
supported by private equity ownership. In 2011, when JAB Luxury
GmbH (“JAB Luxury”) acquired Jimmy Choo, we had a vision of a
long term continued growth strategy built upon the amazing brand
and people in the business, underpinned by significant new
investment in systems and processes.
OP E NING T HE L ONDON S T OCK E XCH A NGE 2 2 OC T OBE R 2 014
Continuing the journey of the company, we therefore launched
Jimmy Choo PLC on the London Stock Exchange on 22 October 2014
(“Admission”). It was a time of turmoil in the markets, with the FTSE
100 falling by 9% over the marketing period. However, we were
looking for long term partners in the future of Jimmy Choo, and the
investors we met recognised that the fundamentals of the business
behind the Jimmy Choo brand are strong. As a result, we priced the
IPO within the original price range, despite the fluctuations of the
wider market. We are very pleased with the calibre of the investors
who have joined us in owning Jimmy Choo PLC.
JAB Luxury recognised Jimmy Choo as a world class brand,
operating in an attractive market, with a strong design,
merchandising, production and distribution platform, supported
by a 360 degree communication programme.
Luxury shoes are an incredibly complex category, with a range of
functions (pumps, boots, sandals, wedges, sneakers) each at various
heel heights, each in a number of colours and materials and each in
a range of sizes. This complexity means that in order to grow beyond
a certain point, systems and processes need to be sophisticated and
scalable, which requires significant investment behind the scenes.
Taking Jimmy Choo out of private equity hands in 2011 provided the
environment for that core investment to commence.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
S T R AT EGIC R EP OR T
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CHAIRMAN’S STATEMENT
CONTINUED
OV ERV IE W OF RESULT S
GOV ERN A NCE
We are very pleased with the strong performance of the business in
2014. Revenue increased by 12.2% on a constant currency basis and
6.4% on a reported basis. Our well invested business demonstrated
its operational gearing potential, with adjusted EBITDA growing by
7.2% to £50.2m and adjusted EBT growing by 19.8% to £28.3m.
We believe that good corporate governance is the key to good
businesses continuing to grow profitably for the long term.
The Board is mindful of the need to protect and promote the interests
of the Company’s new minority investors. We believe the Board and
its Committees, with the addition of the independent Non-Executive
Directors (Gianluca Brozzetti, David Poulter and Bob Singer) provide
the appropriate corporate governance balance in light of the interests
of both the majority shareholder and new minority shareholders.
The Audit and Risk Committee consists solely of independent
directors and the Board has also established a Conflicts Committee
to help manage the relationship between the Company and our
majority shareholder.
BOA RD COMPOSI T ION
In order to support our CEO Pierre Denis, our CFO Jonathan Sinclair
and the senior management team in running the day to day
operations of the company, we have brought together an international
Board of Directors with extensive experience of running public
companies in a global environment. Between us, we have experience
of luxury goods, retail and consumer goods from small cap to global
large cap companies. We believe that by using that wealth of
experience to help monitor and guide the path of the management
of the company, we will ensure that the growth Jimmy Choo has
produced to date will continue for the foreseeable future. On
5 March 2015, Judith Sprieser informed me that she had decided
to step down from the Board for personal reasons unrelated to the
Company. We are grateful to Judith for the input and support she
has provided to the Company since the IPO in October. We are sad
to see her leave the Board, but understand her reasons for making
this decision and we fully support her. Please see page 46 for an
introduction to the high calibre individuals who have joined Pierre,
Jonathan and me on the Board.
OU T L OOK
We continue to pursue our overall growth strategy of focussing on
the design of high quality collections which resonate with our clients
and growth in the retail business through like for like growth and
opening additional stores with a focus on Asia ex-Japan and Japan.
We are rolling out 10 to 15 new DOS, with a focus on China, and
renovating 10 to 15 of our existing portfolio of DOS in the new store
concept. Japan and Asia ex-Japan continue to grow well, while
EMEA remains impacted by a reduction in Russian travellers. We
continue to see outperformance by stores in the new store concept.
We remain focused on executing our growth strategy and pursuing
growth without compromising our brand or its luxury position,
despite the more challenging macroeconomic environment.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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20
OUR MARKET
L U X URY SHOE M A RK E T GROW T H
INCRE ASING PA R T ICIPAT ION OF MEN IN L U X URY
Luxury shoes are a fast-growing segment of the luxury market with
an estimated sales compound growth rate from 2008 to 2013 of
10%, compared to the luxury market excluding shoes which had
a compound growth rate of 5% over the same period.
It has widely been noted in the media that men are becoming more
hedonistic and opinionated on fashion matters and that, over recent
years, there has been an increasing trend for male clients to purchase
luxury fashion goods for themselves. We believe that the male
segments of the luxury goods market, in particular luxury shoes,
are under-represented by leading luxury brands. Luxury fashion
companies are beginning to address this opportunity, with some
market participants launching men only stores as well as expanding
their product offering for men, including shoes.
We believe that the strong historical growth experienced in the luxury
shoe market is a result of a number of factors.
OP T IM A L G AT E WAY
Shoes are available at a psychologically accessible price. This makes
them an optimal gateway into the luxury market, compared to many
other luxury goods.
MEN ’S L U X URY SHOES
K I T H A R RING T ON IN JIMM Y CHOO ME N ’S
AU T UMN W IN T E R 2 014 A DV E R T ISING
ACCESSORISAT ION
Over recent years, consumers have been buying ready-to-wear
apparel from high street retailers and then upgrading their wardrobe
with luxury shoes, bags and other accessories.
ACCESSORISAT ION
JIMM Y CHOO SHOE S, B AG,
HIGH S T R E E T OU T F I T
L U X URY SHOE SPECI A L IS T BR A NDS
Luxury shoes have outperformed the general luxury market in
recent years. Luxury shoe specialist brands have outperformed the
luxury shoe market. We believe that luxury shoe specialist brands
experienced compound revenue growth from 2008 to 2012 of 13%
compared to 9% for the luxury shoe market as a whole. During this
same period, Jimmy Choo delivered reported compound revenue
growth of 22%.
F OCUS OF RE TA IL ERS ON L U X URY SHOES
Luxury brands and multibrand retailers have both increased their
focus on shoes in recent years and, as a consequence, many
department stores have considerably expanded their shoe floors.
The luxury shoe business is very complex, with a variety of sizes,
heel heights, materials and colours. Successfully mastering this
complexity requires a constant and dedicated focus. We believe
luxury shoe specialist brands, like Jimmy Choo, are strongly
positioned to offer this.
MULT IBR A ND F OCUS ON SHOES
H A R RODS SHOE HE AV E N
We believe that the increase in market share by luxury shoe specialist
brands from 41% in 2008 to 44% in 2012, is a result of, amongst
other things, the fragmented nature of the market. As a result of
this fragmentation, there remains significant scope for luxury shoe
specialist brands like Jimmy Choo to continue outperforming the
luxury shoe market as a whole.
L U X URY SHOE M A RK E T RESIL IENCE
We believe that the luxury shoe market is one of the more resilient
segments of the luxury goods market. During the global financial
crisis of 2008 and 2009, luxury shoes sales decreased 4%,
compared to a total market decrease of 8%. Over this same
period, Jimmy Choo revenue increased by 2%.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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BUSINESS MODEL
DEDICAT ED A ND E X PERIENCED
M A N AGEMEN T T E A M
MULT ICH A NNEL
DIS T RIBU T ION MODEL
L E A DING DESIGN
T E A M T H AT DRI V ES
PRODUC T AU T HORI T Y
L U X URY
PRODUC T OF F ERING
3 6 0 º COMMUNICAT ION
S T R AT EGY F UEL S
T HE BR A ND
MERCH A NDISING
E XCEL L ENCE
BESPOK E SUPPLY CH A IN
F OR PRODUC T E XCEL L ENCE
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
S T R AT EGIC R EP OR T
22
Jimmy Choo has the merchandising, design, supply chain,
communication and retail skills and assets to outperform in this
attractive and complex category by superior execution. Jimmy Choo
has a strong position in the luxury shoe market, being one of a very
small number of luxury shoe specialist brands with the requisite
scale to compete globally.
CON T INUAT I V E
•
DEDICAT ED A ND E X PERIENCED M A N AGEMEN T
•
The Group is run by a passionate and experienced senior
management team with a degree of focus on execution which we
believe can only be achieved by a pure play luxury goods company.
•
•
•
•
SE ASON A L
CHOO 24:7
THE “PERFECT WARDROBE” OF SHOES,
AVAIL ABLE CONTINUALLY
REFRESHED SEASONALLY WITH FASHION
COLOURS, MATERIALS, ST YLES AND HEELS
LOW MARKDOWN
QUICKER REPLENISHMENT
STABLE BUSINESS
BET TER MARGINS
FASHION
•
•
INSTINCTIVELY SEDUCTIVE
COSMOPOLITAN
•
•
ROCK /EDGY
LONDON FEEL
•
•
COOL
REL A XED FEEL
CHOO.0 8 °
W EEK END
The Group has appointed a highly experienced and dedicated
management team, comprising established Jimmy Choo incumbents
together with new management who have a long and successful
history of working in the luxury goods sector. The management team
is led by Pierre Denis, CEO, who joined Jimmy Choo in 2012 with
more than 25 years of experience in the luxury industry and a deep
knowledge of Asian markets.
BALANCE OF STABILITY AND BRAND DEVELOPMENT
Designing successful collections and managing the complexity
of multiple collection drops each year relies upon the seamless
interaction, integration and cooperation between Jimmy Choo’s
merchandising, design, supply chain, brand communication and
distribution teams. The success of this collaboration is shown in
Jimmy Choo’s track record of offering a considerable depth and
breadth in its collections, in terms of functions, heel heights,
materials, sizes and colours. We have been able to leverage our
expertise to replicate this model across our accessory offering.
L E A DING DESIGN T E A M T H AT DRI V ES PRODUC T AU T HORI T Y
Jimmy Choo’s design team of twelve is led by Sandra Choi,
who has been Creative Director for the Group since its inception.
Jimmy Choo’s design team has a proven track record of developing
Sandra’s conceptual visions into beautiful products multiple times
each year through a structured process encompassing line plans,
designs, prototypes, edits and pre-launch samples.
BESPOK E SUPPLY CH A IN F OR PRODUC T E XCEL L ENCE
Jimmy Choo operates a lean and flexible supply chain outsourcing
production and logistics to gain flexibility and speed in bringing
products to market. Those elements which protect the brand are
owned and managed by Jimmy Choo, including quality, vendor liaison
and product development which are managed through Studio Luxury
S.r.l., which was acquired by Jimmy Choo on 5 August 2014.
Jimmy Choo produces over one million units per annum in its supply
chain. Materials research and sourcing, product development,
engineering, production planning and control, quality assurance,
as well as customer service and after sales are all controlled by
Jimmy Choo.
SA NDR A CHOI
SOL E C R E AT I V E DIR EC T OR
In order to produce luxury shoes with a high quality finish,
Jimmy Choo partners with suppliers with the specific skill sets
to match each particular shoe style. Accordingly, Jimmy Choo’s
products are produced by specialists in the Florence and Veneto
regions of Italy, with the exception of espadrilles, which are made
in Spain. In addition to providing specialist skills, this multi-supplier
strategy provides scalability, flexibility and speed to market, as well
as diversifying risk. This model enables the Group to drive gross
margin improvement through early deliveries of new collections
and inventory control resulting in lower markdowns.
Jimmy Choo’s design team is at the forefront of the industry in terms
of its ability to interpret fashion trends. This provides clients with a
very broad product range that addresses all categories and functions
of the luxury shoe offering, including evening, day, catwalk and
boots, and the full spectrum of client tastes.
MERCH A NDISING E XCEL L ENCE
Jimmy Choo’s merchandising model is designed to nourish the
brand through innovation and drive footfall through timely delivery
of fashion-forward products, underpinned by a continuative core
of iconic products which are continuously reviewed and refreshed.
The product calendar is managed to create a structured flow of new
products into our DOS and multibrand networks which drives editorial
focus, footfall and conversion into sales. The calendar is based
around multiple collection drops per year, with the continuative
core Choo 24:7 collection complementing the seasonal offerings.
Jimmy Choo’s online infrastructure was re-launched in November
2013, with a new flexible and powerful platform to enable the roll
out of online sites in new countries while retaining a core backbone
to deliver excellent customer service. The Jimmy Choo online
store represents Jimmy Choo’s largest single DOS within the
retail segment.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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OUR BUSINESS MODEL
CONTINUED
ICONIC POWERFUL BRAND,
WITH UNIQUE DNA
CONF IDEN T
EF F OR T L ESSLY GL A MOUROUS
COSMOPOL I TA N
F UL LY SE L F -AC T UA L ISE D A ND
R E L ISHING T HE SUC CE S S
GL A MOUROUS, L UMINOUS,
CH A RISM AT IC
A NE W L U X UR Y F OR T HE
NE W W OR L D, MULT I- C ULT UR A L
A ND R E -A PP ROP RI AT E D
INS T INC T I V ELY SEDUC T I V E
DA RING
PL AY F UL
T HE RIGH T SIDE OF SE X Y,
W I T H A N INS T INC T I V E
F E R A L N AT UR E
P ROVOC AT I V E RISK TA K E R W HO
UNDE R S TA NDS T HE RUL E S BU T IS
UN A F R A ID T O CH A L L E NGE
JOY F UL , E X T ROV E R T E D A ND DA RING
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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More importantly, our online presence provides a powerful route to
engage with new potential clients and for clients to begin a purchase
process which may be completed in one of Jimmy Choo’s boutiques.
As Jimmy Choo invests in supply chain infrastructure to move
towards an integrated omnichannel model, the online platform
will increase the integration within the retail channel.
Jimmy Choo’s brand communication spend has significantly
increased over the last three years. This has positioned the Group
alongside our larger luxury brand peers and is a level of spend as
a proportion of revenue which is within appropriate parameters for
a leading luxury shoe brand.
We expect to benefit from our systems and logistics investment,
which includes: continued development of the online platform, new
point of sales infrastructure, a new centralised warehouse, SAP
implementation and product lifecycle management, many of which
are already in place and virtually all of which have become operational
with the opening of our Swiss warehouse in March 2015. These new
investments will significantly enhance service and product availability,
streamline inventory management and improve our operating margin.
Jimmy Choo has successful and effective distribution networks
with significant opportunity for expansion. In addition, Jimmy Choo
benefits from having a balanced multichannel distribution network
with our retail DOS network at the core.
DIS T RIBU T ION
Jimmy Choo has a particularly strong presence in EMEA, USA and
Japan, with a growing footprint in the rest of Asia. The Group has
experienced strong growth in recent years across all of these
markets. 2014 has been a particularly transformational year for our
DOS network, as we launched our new store concept, continued the
store roll-out programme and began a comprehensive renovation
programme of our existing portfolio. By the end of 2014, we had
125 DOS, of which 15 were in the new store concept. See page 17
for the progress we have made in our retail network.
3 6 0° COMMUNICAT ION S T R AT EGY F UEL S T HE BR A ND
Jimmy Choo’s status as a globally recognised luxury brand is a result
of our entrepreneurial and dynamic approach to brand communication.
The Group applies an all encompassing brand communication strategy
which includes celebrity placement, editorial and digital influencer
engagement, product advertising, launch events and store layout
and display.
As part of our DOS strategy, the Group has invested significantly in
our online platform, which has experienced strong revenue growth in
recent years. This investment, together with the broader investments
in the supply chain, is expected to result in the Group being able to
provide an omnichannel client offering in the medium term.
We adopt this approach to all our new product launches and our
success has resulted in Jimmy Choo currently being the top ranked
brand globally in editorial for luxury women’s shoes. We have gained
10.7 million social media followers as of 31 December 2014; and,
attained recognition globally through high-profile product placements,
most notably in “Sex and the City” in 1999 and more recently in the
Korean series “My Love from the Star” which has elevated the brand
significantly throughout Asia.
The Group continues to benefit from our strong multibrand distribution
offering, which provides attractive economics and acts as a lead
indicator of collection success and a benchmark against competitors.
The Group’s franchise channel acts as an important entry model into
new markets. These serve as a potential springboard to expanding the
DOS network once the new region has become established. This has
already been demonstrated by successful joint venture (“JV”) and
franchise buyouts in Japan, Hong Kong and China between 2011
and 2013.
M Y L OV E F ROM T HE S TA R
A N T HR ACI T E GL I T T E R
A BE L P UMP F E AT UR E D
IN T HE SHO W
JIMM YCHOO.COM
ONL INE P L AT F OR M
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STRATEGIC FRAMEWORK
Our goal is to pursue growth without compromising Jimmy Choo’s
brand. This is achieved by successful product collections driving
positive like for like sales, opening new DOS, and expansion in
Asia and selected new markets.
• Like for like growth: through continued strong performance of our
collections and investment in our DOS network, with selected
openings, relocations and new store concept renovations in
Jimmy Choo’s existing developed markets of Europe, USA
and Japan.
• Retail led growth driven by:
–– door growth opportunity: expansion of DOS in Greater China,
where Jimmy Choo is currently under-represented compared
to our peers, and potential franchise buyouts and JVs in
incumbent fast growing markets, including the Middle East,
South Korea, Singapore and Malaysia. It is expected that half
to two-thirds of Jimmy Choo’s DOS development will be in
China each year.
–– Online: the Group will continue our investment in online which
has proved to be one of the key elements of growth in the
current environment. Recent investments into the supply chain
and systems upgrades are expected to position the Group to
participate in the growth of the global online trade, and provide
an omnichannel distribution offering in the medium term.
• Wholesale entry: explore potential franchise opportunities in new
markets where Jimmy Choo currently has a limited presence,
particularly in Latin America and Eastern Europe, alongside
continued development of our existing business.
Shoes are at the heart of Jimmy Choo and will remain the core
offering. Shoes represent three quarters of revenue, which we
do not expect to change substantially. Jimmy Choo is a specialist
luxury shoe company focused on growing our relationship with our
customers and clients. Growth will always be pursued within the
context of protecting the Jimmy Choo brand identity and luxury
positioning. We believe that Jimmy Choo’s unique brand DNA and
experienced design team will enable us to continue to deliver
collections that resonate strongly with our clients.
We aim to deliver earnings growth and returns through focusing on
growth ahead of the market and margin expansion, together with
good cash flow conversion.
RE V ENUE GROW T H
Revenue growth is supported by the store opening programme,
through which the Group plans to open 10 to 15 stores per year,
as well as the rollout of the recently introduced new store concept
across the estate. In addition to our DOS expansion plans, we intend
to pursue growth through our multibrand, franchise and JV channels.
All of these are important for Jimmy Choo’s business model as they
provide access to new markets.
M A RGIN E X PA NSION
The revenue growth initiatives described above, together with
increased control over distribution, are designed to drive margin
improvement in the business. The opex impact of the investment
in systems and logistics is now complete and the business is scaled
for growth. Direct costs will grow broadly in line with retail revenue
and indirect costs will grow slower than overall revenue. The new
systems and logistics investment will help the management team
to improve inventory efficiency, thereby reducing markdowns and
increasing cash flow.
Our aim is to grow towards a regional mix more in line with the wider
luxury market through growth in Asia and selected new markets,
while maintaining our presence in EMEA and USA. Jimmy Choo’s
revenue growth strategy is focused around the following key pillars:
• Market outperformance: we believe that Jimmy Choo’s client
insight, design approach and systems that it has developed as
a specialist will enable us to outperform the wider luxury market.
Jimmy Choo has the right specialist resource, knowhow, skills
and people to excel in this attractive and complex category.
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OB JEC T I V ES
PERF ORM A NCE
IN T EN T IONS
L IK E F OR L IK E SA L ES GROW T H
L IK E F OR L IK E AT CONS TA N T CURRENCY
• Collection-led growth
• New store concept
• Merchandising excellence
Mid single digit like for
like growth
5.7 %
5 .7 %
2 014
RE V ENUE GROW T H
Constant currency revenue
growth ahead of the market
A D JUS T ED EBI T DA M A RGIN
Operational gearing to provide
modest Adjusted EBITDA
margin growth
RE TA IL L ED GROW T H
Retail revenue as percentage
of total revenue to increase
over time
2 013
7.1 %
2 012
6 .1 %
RE V ENUE GROW T H AT CONS TA N T CURRENCY
12.2 %
2 014
12 . 2 %
2 013
15 . 6 %
2 012
17.1 %
A D JUS T ED EBI T DA AS % OF RE V ENUE
16.8 %
2 014
16 . 8 %
2 013
16 . 6 %
2 012
19 . 0 %
RE TA IL AS % OF RE V ENUE
64.4%
2 014
6 4 . 4%
2 013
63.0%
2 012
62.6%
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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• Like for like growth
• 10 to 15 new DOS per annum
• Distribution growth in Asia, the
Middle East and Latin America
• Impact of investment in systems
and processes complete
• Direct costs growth in line with
retail revenue
• Brand communication broadly
maintained as % of revenue
• Indirect costs growth slower
than revenue
• Opening 10 to 15 DOS per year
• Forming JVs with franchise
partners
• Renovations of existing DOS
CHIEF EXECUTIVE’S REVIEW
OUR UNIQUE BRAND AND PLATFORM
INVESTED FOR GROWTH ARE HELPING
JIMMY CHOO TO OUTPERFORM THE
MARKET FOR THE LONG TERM
PIERRE DENIS
JIMM Y CHOO CEO
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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This has been a year of great progress for the Group from a financial,
strategic and operational perspective.
M A DE TO ORDER
In order to enhance the luxury positioning of the brand and create a
more bespoke offering for our clients, we launched Made To Order
shoes in 2014. Clients can have a pair of shoes made, choosing from
a range of designs and heel heights, fabric colour or skin and
personalise them with their initials on the sole.
In what has been a challenging year for the industry, Jimmy Choo
has performed strongly in 2014, with double digit revenue growth at
constant currency driven by a mix of like for like growth from strong
product authority and retail excellence, new store openings with
a focus on China and continued growth in partnership with our
wholesale customers. Revenue grew by 12.2% on a constant
currency basis (6.4% on a reported currency basis) to £299.7m in
2014, driven by strong performance in both ladies’ and men’s shoes.
Adjusted EBITDA margin grew to 16.8% despite significant currency
headwinds, demonstrating the operating leverage of the business.
Made to Order was originally offered in selected stores from early
in the year. Subsequently, the enhanced online platform has allowed
us to roll the Made to Order service out across the retail website,
providing a much wider footprint.
PRODUC T S
JIMM YCHOO.COM
ONL INE M A DE T O OR DE R P OR TA L
Our focus on shoes and dedication to product quality has ensured we
continued to produce innovative products which resonate strongly
with our clients around the world.
As a luxury accessories brand, design and quality is everything. The
brand positioning is nurtured and the DNA is expressed through the
products we design and produce. 2014 was a strong year for us from
a design perspective. The resonance of our collections with our
clients is apparent in achieving revenue growth ahead of the market.
We also received external validation of this at Paris Fashion Week in
2014, where Sandra Choi and Jimmy Choo won Marie Claire’s Prix
d’Excellence de la Mode Award for best shoe collection.
Shoes continue to be at the heart of the brand, representing three
quarters of the business. In accessories, evening bags and small
leather goods (“SLG”) continued to perform well.
V ICES
In addition to our usual seasonal collections, Creative Director
Sandra Choi produced an exciting limited edition capsule collection
with contemporary artist Mat Collishaw. The collection united
Sandra Choi’s personal fascination with jewels with an exploration
of themes of envy, seduction and the irrepressible yearning for
objects of beauty.
CHOO 24:7
The iconic Choo 24:7 collection which forms the Jimmy Choo
woman’s perfect wardrobe of shoes underpins our business, forming
roughly half of our shoe sales. The balance between our continuative
and seasonal collections is one of the key elements of our
merchandising strategy. We introduced new colours and fabrics in
our iconic shoe styles in line with the seasonal collections. This
maintains the cohesion of our seasonal look and feel and introduces
newness into the continuative collection.
MEN
Men’s continued to be our strongest growth category, representing
5% of revenue. We launched the first ever shoe fashion show in
2014, building upon the remarkable growth of the men’s luxury shoe
market and showcasing our fashion forward credentials in the space.
The event was a great success, with Kit Harrington, Tinie Tempah
and Jack Guinness amongst the guests.
CHOO.0 8 °
In 2014, we launched a new collection called CHOO.08°, creating
a cohesive collection based around boots and sneakers with a cool
London feel. While many of the product elements of CHOO.08°
were already in our Fashion and Weekend collections, bringing them
together into a single collection allows us to present the biker cool
and daring side of the brand DNA in a cohesive way, with tailored
advertising and events. The response to CHOO.08° has been very
positive, especially with our Asian and European clients.
In addition, we launched Jimmy Choo Man, our first male fragrance,
with our partners InterParfums SA. The fragrance has performed
well above our expectations, further demonstrating the appeal of
the brand image in the rapidly expanding men’s luxury space.
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CHIEF EXECUTIVE’S REVIEW
CONTINUED
COLLECTION INSPIRATION IN 2014
T HROUGHOU T T HE Y E A R ,
W E L AUNCH SE ASON A L COL L EC T IONS
IN L INE W I T H T HE IN T ERN AT ION A L
FASHION CA L ENDA R .
KEY HIGHLIGHTS IN 2014 WERE:
SPRING SUMMER 2 0 14
N AT UR E UNL E A SHE D,
W I T H T HE MODE R N JUNGL E
A S T HE INSPIR AT ION F OR
T HE C OL L EC T ION.
PRE-FA L L 2 0 14
SP E A K ING T O T HE E DGY
SPIRI T OF T HE BR A ND W I T H
S T Y L E S T H AT R E V E RBE R AT E
W I T H ROCK CHIC INCL UDING
BOO T S A ND BROGUE S W I T H
BUCK L E DE TA IL S A ND
DIS T R E S SE D F INISHE S.
AU T UMN W IN T ER 2 0 14
A N E X P R E S SION OF L US T,
DE SIR E , PA S SION A ND
ROM A NCE , E X P E RIME N T ING
W I T H NE W P ROP OR T IONS
W HIL S T R E M A INING
F OC USE D ON A R E F INE D
C U T, SH A P E A ND F OR M.
CRUISE 2 0 15
E NE R GY. MOV E ME N T.
S T R E NG T H. P O W E R .
A R E DE F INE D A E S T HE T IC
E ME R GE S F OR JIMM Y CHOO
C RUISE 2 015 , W I T H T ODAY ’S
AC T I V E A ND MODE R N
W OM A N P L AY ING T HE
ROL E A S MUSE .
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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In order to capitalise upon this opportunity, we have focused our
Chinese growth strategy by buying out our franchise partner in 2012,
opening Jimmy Choo offices in Hong Kong and Shanghai in order
to manage the operations in the region effectively and introducing
focused brand communication messages tailored for the
Chinese market.
DIS T RIBU T ION
We launched a new store concept, developed with David Collins
Studio and inspired by haute couture salons and fantasy shoe closets.
This refreshes the look and feel of our stores, emphasises the luxury
positioning of the brand and presents the fashion driven products in
more space, while retaining the higher product densities in the key
Choo 24:7 collection. Client response has been very positive.
As with “Sex in the City” in the nineties and the “Devil Wears Prada”
in the following decade, Jimmy Choo’s style and product authority
continues to catch the fashion zeitgeist. Our products were featured
in a 2013 storyline of “My Love From the Star”, a popular television
series in Korea. Korean media has an incredible influence on the
Asian region as a whole and China in particular, and this alongside
the focused brand communication in the region has transformed our
Chinese brand awareness. The shoe featured in the story line has
been a global best seller and continues to outstrip our expectations.
NE W S TORE CONCEP T
NE W BOND S T R E E T
The focused strategy in the region has been successful, with very
strong growth rates in our stores on the ground in China and
travelling Chinese becoming our second largest travelling client
group, behind Russians.
ASI A N GROW T H R AT ES
2 014 AT R EP OR T E D C UR R E NC Y
We continued to drive our retail channel expansion, with a net nine
new DOS opened in the period. The focus of our retail expansion
remains in Asia, where we are under-represented relative to our
luxury peers.
GL OB A L
JA PA N
A SI A E X- JA PA N
RENOVAT IONS A ND
REL OCAT IONS
2 014
6.4%
8.8%
34.5%
There is a much larger growth opportunity for Jimmy Choo in China
and the wider Asian region, where we remain underpenetrated
relative to much of the wider luxury market. This includes Japan,
which remains one of our fastest growing regions. We plan to
continue to open the majority of our new stores each year in China.
We have changed franchise partners in Korea, and intend to begin
the process of forming a JV there in the coming year. This, alongside
further JVs in Singapore and Malaysia, will allow us to focus and drive
our growth in the region as we have done in Japan and China.
NE W DOS
2 014
In addition, we began to renovate our existing store portfolio in the
new store concept. We began with our Beverly Hills flagship, which
reopened in early 2014 and completed 14 stores in the new concept
by the end of the year. While it is still early days, we are greatly
encouraged by the results to date, with the newly renovated stores
consistently outperforming the rest of the portfolio.
IN V ES T MEN T IN SYS T EMS A ND PROCESSES
During the year we consolidated jimmychoo.com on our new
platform, increasing our flexibility and ability to leverage our online
sales platform as we move towards an omnichannel model.
The improvements made to the online platform and our digital
communication resulted in L2Digital rating Jimmy Choo as “Gifted”
in 2014, which underlines the preparations we are making for the
future development of omnichannel. We also continued to implement
SAP in our regional operations and began the roll out of elements of
Product Lifecycle Management (“PLM”), to bring together everything
from initial sketches and materials research through to prototyping,
orders, production and reorders into a single system.
The reopening of our New Bond Street global flagship was a highlight
of the year. Now covering three floors, the New Bond Street
Townhouse gives us the space to present the fullest expression
of the Jimmy Choo brand.
We intend to continue the renovation programme, with 10 to 15
renovations per annum in addition to the new store openings, all
of which will be in the new store concept.
2015 will continue this transformation programme, with the near
final stage of the SAP roll-out and moving into the central global
distribution centre in Switzerland. This will represent a key stage
in the development of our omnichannel capability. We plan to be
initiating trials of the first stages of omnichannel delivery in 2016.
ASI A N GROW T H OPPOR T UNI T Y
Our growth potential in Asia was one of the opportunities which
initially attracted me to Jimmy Choo. The luxury market in China has
been driven by a relatively small number of global brands with broad
product offerings. Women’s luxury shoes was not a large player in
this initial wave of luxury consumption, focusing more on gifting
items purchased by largely male clients. What we have seen in the
last few years is a shift towards non-logo brands purchased by
affluent women for their own consumption.
I would like to take the opportunity to thank all of our stakeholders for
their contribution to this year’s strong results. I would especially like
to thank our employees across the business for their hard work in this
transformational year.
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FINANCIAL REVIEW
REVENUE GROWTH AHEAD OF THE
MARKET AND NET PROFIT GROWTH AHEAD
OF REVENUE DEMONSTRATE THE STRONG
FUNDAMENTALS OF THE BUSINESS
JONATHAN SINCL AIR
CF O & E V P BUSINESS OPER ATIONS OF JIMM Y CHOO
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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32
£M
2014
Revenue
Gross margin (%)
Selling and distribution expenses
Brand communication expenses
Overheads
Adjusted EBITDA
Adjusted EBITDA as % of net revenues
Adjusted EBIT
Adjusted EBT
Adjusted consolidated net income
Adjusted EPS (pence)
299.7
61.8%
(83.0)
(14.1)
(37.9)
50.2
16.8%
35.4
28.3
22.9
6.1
reduced activity by travelling clients, as the marked currency shifts
impacted behaviour and travel restrictions on Russians reduced
foot fall offset by growth in travelling Chinese clients. Americas
performed in line with expectations, up 0.6% despite currency
headwind for most of the year and a number of temporary store
closures as we began to roll out the new store concept.
2013
281.5
62.3%
(73.4)
(16.9)
(38.2)
46.9
16.6%
35.0
23.6
21.0
5.6
Other revenues were positively impacted this year by the launch of
Jimmy Choo Man, our first men’s fragrance, which was very well
received following its launch in August 2014 and has outstripped
expectations consistently since launch.
At a product level we continued to see volume growth in both shoes
and accessories, with shoes representing approximately three
quarters of revenue for the year. Men’s remains the fastest growing
category and represents around 5% of revenue.
GROSS M A RGIN
Unless otherwise stated, all figures and growth rates in the following
commentary exclude the impact of adjusting items. For a reconciliation
of adjusted performance measures to statutory figures, please see
note 28 to the financial statements.
Gross margin continued to improve on an underlying basis from
increased buying volumes and the favourable shift in channel mix in
the year. However this was impacted by strong currency headwinds
for most of the year, especially in relation to adverse movements in
the US dollar, Euro and Japanese exchange rates against sterling. As
a result reported gross margin reduced from 62.3% in 2013 to 61.8%
in 2014.
RE V ENUE
£M
2014
%
2013
%
Retail
Wholesale
Other
192.9
99.6
7.2
64.4%
33.2%
2.4%
177.4
97.7
6.4
63.0%
34.7%
2.3%
Total
299.7 100.0%
COS T S
Overall, total costs charged in arriving at Adjusted EBITDA increased
by 5.1% in 2014, compared to a 6.4% growth in total revenue in the
same period.
281.5 100.0%
Selling and distribution expenses increased by £9.6m (13.1%) in
2014, reflecting the impact of the addition of new stores and the
variable costs incurred in connection with the operation of the
Group’s website. Retail costs were also negatively impacted by
£0.8m of increased costs during the refurbishments of the New Bond
Street and Beverly Hills flagship locations. We also incurred £0.4m of
costs in relation to stores due to open in subsequent years. Excluding
these two elements costs rose by 11.4% in 2014 compared to the
previous year.
Revenue increased by 6.4%, or 12.2% on a constant currency basis,
with continued growth across all segments. Retail grew ahead of
wholesale, in line with our previously stated strategic aim of retail
led growth and for 2014 represented just over 64.4% of revenue.
In 2014 retail revenue grew by 8.8% to £192.9m as a result of like
for like growth of 5.7% and the addition of a net nine new DOS, half
of which were opened in China. In constant currency terms, retail
revenue grew by 15.4% in 2014. Like for like sales were also
positively impacted by the roll out of the new store concept, with
10 existing stores refurbished or relocated in the year and a total
of 14 stores trading in the new concept at the year end. The early
indications from the refurbishments undertaken in the year are that
the new store concept helps to drive noticeably improved like for
like sales.
Brand communication benefitted from the achievement of significant
economies of scale having insourced our media production. We also
grew our media presence and were ranked consistently as number 1
in global editorial ranking for luxury shoes. In addition we were
ranked as “Gifted” for our digital presence by the digital agency L2
with our social presence being rated “Genius”. We launched Kit
Harrington as our key male personality which coincided with our first
catwalk show in London in June 2014. All of this was achieved with
spend just under 4.7% of revenue and £2.8m (16.6%) lower
expenditure than the previous year.
Our wholesale business also performed well, although growth was
held back by adverse movements in the US dollar exchange rate
against sterling during the year, as a significant proportion of our
wholesale accounts are denominated in US dollars. In constant
currency terms, wholesale revenue grew by 6.3% during 2014,
compared to 1.9% at reported rates. On an underlying basis we
saw organic growth within existing key wholesale accounts as
well as the opening of a further 8 franchise stores.
Overheads for 2014 were £37.9m, down 0.8% or £0.3m compared to
the prior year, reflecting tight cost control now that the replatforming
of the business is largely complete and savings due to movements in
foreign exchange rates. As a percentage of revenue, overheads fell
from 13.6% in 2013 to 12.6% in 2014.
Asia remains our strongest growth region. Asia ex-Japan grew by
34.5%, with strong acceptance of our collections and increasing
brand penetration driving like for like sales growth supported by
our continued build out of new stores. Despite the extent of the
devaluation of the Yen, our Japanese business grew by 8.8%, with
a strong response to the launch of CHOO.08º. Growth in these was
further stimulated by the interest generated in Jimmy Choo from the
Korean soap “My Love from the Star”. EMEA grew by 4.7%, despite
Exceptional costs of £13.0m (2013: £6.0m) were incurred during
the year, of which £7.8m (2013: £nil) were IPO related costs. The
remaining exceptional costs included replatforming costs of £3.6m
(2013: £3.4m) and acquisition and integration costs of £1.6m
(2013: £2.6m). Refer to note 5 of the financial statements for
additional detail.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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33
FINANCIAL REVIEW
CONTINUED
PROF I T S A ND E A RNINGS
NE T DEB T
In 2014 Adjusted EBITDA grew by £3.4m or 7.2% compared to the
prior year, with Adjusted EBITDA margin increasing from 16.6% to
16.8%. This represents a strong result for the Group in a year which
saw significant foreign exchange headwind and is clear evidence that
one of the Group’s strategic financial goals, the widening of EBITDA
margins, is already being delivered.
£M
Current borrowings
Non-current borrowings
Shareholder loan
Other debt
Gross debt
Depreciation and amortisation increased from £11.8m in 2013 to
£14.9m in 2014, an increase of £3.1m or 26.3% as a result of the
investment in new stores, refurbishment of flagship stores and
improvements to the Group’s information systems. Depreciation rose
from 54.0% to 54.8% of capital expenditure in 2014 compared to the
previous year.
Net debt
1
2
(7.4)
7.7
460.5
0.1
460.9
20.3
(8.3)
–
(582.4)
(12.6)
(124.5)
–
(0.5)
(137.6)
12.0
(125.6)
BA L A NCE SHEE T
During the year, total assets increased by £26.1m to £759.0m at
31 December 2014. Non-current assets increased by £15.2m to
£647.7m due to an increase of £11.8m in tangible fixed assets as
a result of investment in new stores and the replatforming of the
Group’s information systems. Additional deferred tax assets of
£3.1m were recognised in the year in respect of share based
payments and the sale of inventory between Group entities. Current
assets increased by £10.9m to £111.3m primarily due to an increase
in inventory and trade receivables, offset by a lower cash balance.
CASH F L OW
50.2
46.3
92.2%
(13.0)
(5.5)
(5.3)
(27.2)
0.6
(4.1)
0.6
2.0
–
1.6
4.2
31 DECEMBER
2014
Excluding the impact of the conversion of the shareholder credit
facility, net debt increased from £121.9m to £125.6m, principally due
to the timing of drawdowns on the revolving credit facility to fund IPO
related costs. As at 31 December 2014 we had drawn down £5.5m
on the revolving credit facility (2013: £nil). During 2014 we prepaid
£13.3m in respect of our term loans, made net drawings of £5.5m
on the capital expenditure facility and repaid other debt of £1.7m.
Adjusted consolidated net income for the year was £22.9m
compared to £21.0m in the preceding period, generating Adjusted
EPS of 6.1 pence per share in 2014 (2013: 5.6 pence).
Adjusted EBITDA
Adjusted operating cash flow1
Cash conversion 2
Exceptional costs
Tax paid
Net financing payments
Capital expenditure
Acquisitions
Free operating cash flow
NON-CASH
MOVEMENTS
Net debt reduced from £582.4m at 31 December 2013 to £125.6m at
31 December 2014 following the conversion of the shareholder credit
facility from JAB Luxury to equity in October 2014 prior to IPO.
Adjusted EBT for the year was £28.3m (2013: £23.6m). In addition to
the growth in Adjusted EBIT described above we realised a net gain
on realised and unrealised foreign exchange of £1.8m (2013: net loss
of £4.0m) and financing charges of £8.8m (2013: £7.5m). The
increased financing charges in the year represented the fair value
of the open currency swaps at the year end, excluding which
financing charges fell by £4.5m or 38.4% in 2014 compared
to the previous year.
2014
CASH
MOVEMENTS
(5.8)
(134.2)
(460.5)
(2.2)
(602.7)
Cash and cash equivalents
In 2014 Adjusted EBIT grew more modestly than Adjusted EBITDA,
as expected, increasing by 0.9% compared to the prior year as a
result of the additional depreciation and amortisation charges
described above.
£M
1 JANUARY
2014
2013
46.9
45.7
97.4%
(6.0)
–
(8.4)
(21.7)
(0.8)
8.8
Total liabilities reduced by £443.7m to £314.8m at 31 December
2014. Non-current liabilities decreased by £458.9m to £199.5m as
a result of the conversion of the £460.5m shareholder credit facility
(carrying value as at 31 December 2013) to equity prior to IPO in
October 2014. In addition we made prepayments of £13.3m against
our non-current term loans during the year. This was partially
offset by the acquisition of own shares from JAB Luxury by the
Jimmy Choo PLC Employee Benefit Trust during the year. The
consideration for the shares, £16.7m, will fall due for payment
when awards to employees vest in accordance with the terms
of the share awards. Current liabilities increased by £15.1m to
£115.3m at 31 December 2014, mainly due to an increase in
trade and other payables.
Adjusted operating cash flow is defined as Adjusted EBITDA plus/minus non-cash charges
in respect of share-based payments, realised and unrealised foreign exchange gains and
losses on the revaluation of monetary items and working capital. Working capital is defined
as the sum of changes in trade and other receivables, inventories, trade and other payables
and provisions.
Cash conversion is defined as Adjusted operating cash flow (as defined above) divided by
Adjusted EBITDA.
Cash conversion decreased from 97.4% of Adjusted EBITDA in 2013
to 92.2% of Adjusted EBITDA in 2014, largely as a result of the
investment in working capital during the year as we have built
inventory to support the expansion of the store portfolio.
Free operating cash flow decreased from an inflow of £8.8m in 2013
to an outflow of £4.1m largely due to the impact of exceptional
payments associated with the IPO.
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SUSTAINABLE BUSINESS
Jimmy Choo’s Board, Senior Management and employees recognise
the importance of reducing our impact on the environment and
increasing our positive social impact both in the regions in which we
operate and in a wider global context. Sustainability has always been
part of our thinking and we have implemented a wide variety of
sustainability initiatives at a local level. We are always thinking about
how we can create a more sustainable business and to this end we
have started to create a global sustainability strategy and policy.
We look forward to exploring how we can make further changes and
leverage our existing sustainability initiatives across the business.
Jimmy Choo has chosen to use an intensity ratio measure based
upon emissions per £m of revenue in order to put the GHG intensity
in context for the size of the business.
2014
Scope 1
Fuel combustion
CH A RI TA BL E AC T I V I T Y
Jimmy Choo has a rich history of innovation, not only in design but
in its collaborations with artists and charities. Jimmy Choo adopts
a policy of working with local charities in markets where this is
established practice and undertakes frequent charity events in which
a portion of the sales are donated to a local charity. These events,
particularly in the USA, allow Jimmy Choo to connect with the
community and deliver on our values of contributing to the
communities which it serves. Total donations in 2014 to charities
amounted to £0.2m.
T HE JIMM Y CHOO F OUNDAT ION
In 2011 we launched The Jimmy Choo Foundation (the
“Foundation”), a non-profit charitable trust that empowers women
through education to enhance livelihoods. The Foundation was
established following the ideals of the Jimmy Choo brand which has
through history striven to offer women the confidence and optimism
to dream and achieve. The Foundation focuses on building
confidence and independence through education and economic
opportunity. To date, the Foundation has raised funds from the sale
of Jimmy Choo’s Icons collection and The Jimmy Choo XV Book.
The Trustees of the Foundation are Pierre Denis, Sandra Choi,
Jonathan Sinclair and Hannah Merritt.
(tCO 2 e)
(tCO 2 e/£M)
58
0.20
Scope 2
Purchased electricity
3,069
10.26
Statutory Total (Scope 1 and 2 Emissions)
3,127
10.46
In addition to the statutorily required Scope 1&2
disclosure, Jimmy Choo has voluntarily analysed
the Scope 3 emissions where it has the ability to
influence them.
Scope 3
Upstream Scope 3 emissions
1,954
6.53
Total Emissions
5,081
16.99
Note:
tCO 2 e is an abbreviation of ‘tonnes of carbon dioxide equivalent’ and is the internationally
recognised measure of greenhouse gas emissions.
Jimmy Choo applies an operational control approach to defining its organisational boundaries.
Data is reported for sites where it is considered that Jimmy Choo has the ability to influence
energy management. Data is not reported for sites where Jimmy Choo has a physical presence,
but does not influence the energy management for those sites, such as a concession within a
department store.
We use the Greenhouse Gas Protocol (revised edition, 2004) and ISO 14064-1 (2006) to estimate
emissions and apply conversion factors from Defra, UK Government conversion factors for
Company Reporting (2014). All material sources of emissions are reported.
ENG AGEMEN T A ND REPOR T ING
In order to challenge and enhance its sustainable operation goals, we
will consider which industry sustainability working groups would be
appropriate for us to join. We presently meet all mandatory reporting
requirements and will enhance this disclosure in 2015 with a
discussion of how we have changed over the year.
EN V IRONMEN T
Jimmy Choo has a commitment to meeting high environmental
standards in its operations and throughout its supply chain.
Jimmy Choo ensures that all of the sourcing of materials is done
in a way to limit the impact on biodiversity and animal welfare. We
comply with the Washington Convention on International Trade in
Endangered Species of Wild Fauna and Flora (“CITES”), which aims
to regulate the trade of specimens of endangered animals and plants
by monitoring their exportation, re-exportation, importation, transit,
transhipment or possession.
SOCI A L
Jimmy Choo is committed to improving working conditions for
workers both under its direct operations and across its value chain.
The majority of Jimmy Choo’s products are made in Europe, and
in particular Italy, where factories and tanneries are subject to
mandatory legislative requirements. Jimmy Choo already expects
its suppliers and sub-suppliers to include clauses combatting child
labour in their contracts.
CA RBON F OOT PRIN T
In 2014, Jimmy Choo had its carbon footprint independently
measured for the first time by Deloitte. This enabled Jimmy Choo
to identify areas of risk and prioritise areas on which to focus carbon
reduction efforts. Over the next 12 months, Jimmy Choo will be
building on the activities which today centre on 93 energy reduction
initiatives already in place across its operations. In due course, we
will establish a global energy management programme.
In the unlikely event that Jimmy Choo identifies working conditions
which do not meet its minimum standards, the Group will work
closely with suppliers to improve their performance. Over the next
12 months, Jimmy Choo expects to formalise its policy on human
rights and working conditions and will continue to increase the
amount of supplier engagement activities.
GREENHOUSE G AS EMISSION S TAT EMEN T
The GHG Protocol categorises Greenhouse Gas (“GHG”) emissions
into three broad scopes:
• Scope 1: All direct GHG emissions
• Scope 2: Indirect emissions from consumption of purchased
electricity, heat or steam.
• Scope 3: Other indirect emissions
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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OUR PEOPLE
JIMMY CHOO IS A DYNAMIC
COMMUNITY OF HIGHLY SKILLED PEOPLE
THAT HAVE BEEN BROUGHT TOGETHER
AROUND A UNIQUE BRAND THAT WE
FEEL PASSIONATELY ABOUT
F ROM BOA RD MEMBERS, TO PEOPL E WORK ING IN DESIGN, F IN A NCE , MERCH A NDISING, COMMUNICAT ION,
L EG A L , A F T ERSA L ES, HR , S TORE PL A NNING, REGION A L M A N AGERS TO SA L ES ASSOCI AT ES IN S TORE , W E
A RE A L L WORK ING TOWA RDS A SH A RED V ISION, W HICH F ORMS T HE CORE OF OUR PEOPL E S T R AT EGY
HERI TAGE
OUR PA S T
CULT URE
OUR PA S SION
T E A M WORK
OUR P EOP L E
We respect our entrepreneurial heritage
and never forget that our brand began in a
humble shop – offering extraordinary service,
design and quality.
We thrive on talent and passion. We are
a great place for smart people with an
urgent passion to build the brand and
serve the customer.
No one person or team can do it alone.
The brand is bigger than any individual.
We challenge, align and show a united front.
CRE AT I V I T Y
OUR L IF EBL OOD
CUS TOMER F OCUS
OUR JUDGE
IN T EGRI T Y
OUR VA L UE S
We lead through our creativity whether in
designing beautiful product or improving
service to our stakeholders.
There is one version of the truth –
the customer is our judge and jury.
We are always proud of what we do and
how we treat each other. We have high
ethical standards – and give back to the
communities we serve.
The Group is committed to a policy of treating all of its employees
and job applicants equally. No employee or potential employee will
receive less favourable treatment or consideration on the grounds of
race, colour, nationality, ethnic origin, religion or belief, sex, gender
reassignment, sexual orientation, age, marital status, civil partnership
status, or disability or will be disadvantaged by any conditions of
employment or requirements of the Company that cannot be justified
as necessary on operational grounds.
CRE AT ING A DI V ERSE COMMUNI T Y
We believe that businesses thrive from the sharing of knowledge and
experiences. In order to make the most of the cross fertilisation of
ideas, we employ people from a diverse range of professional and
cultural backgrounds not only because it is the right thing to do, but
also because it enhances our work environment and strengthens our
ability to nurture and grow the business.
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We have a comprehensive diversity policy which ensures that
everyone who works at one of our workplaces, whether they are
directly employed by Jimmy Choo or not, is protected from direct
and indirect discrimination, harassment or victimisation, whether
deliberate or accidental. In addition, we commit to ensuring that the
work environment is suitable for our employees to carry out their
duties, with adjustments to equipment, location and working
practices where necessary.
Jimmy Choo is a dynamic environment and it is important to
ensure that the views of our employees are taken into account as
we change and grow. We therefore consult at local, regional and
global levels at an early stage where any changes may impact our
employees. This process is supported by a clear open door policy
with our HR team and a transparent approach, where appropriate,
in the business. All employees are encouraged to come forward
with ideas and concerns. This consultation has positive results for
the long term growth of the business, such as the introduction
of new management training specifically designed to help our
employees develop into the senior managers of tomorrow.
We have put policies in place to ensure that the recruitment process
is free from bias and that equal work receives equal pay.
P ROMO T ION A ND T R A INING
• There should be no discrimination on account of race, colour,
nationality, ethnic origin, religion or belief, sex, gender
reassignment, sexual orientation, age, marital status, civil
partnership status, or disability.
• The Group will appoint, train, develop and promote on the basis
of merit and capability.
• All employees have personal responsibility for the practical
application of the Group’s equal opportunity policy, which extends
to the treatment of employees and clients.
• Special responsibility for the practical application of the company’s
equal opportunity policy falls upon all managers and supervisors
involved in the recruitment, selection, promotion and training
of employees.
• The Group’s grievance procedure is available to any employee
who believes that he/she may have been unfairly treated.
• Disciplinary action is taken against any employee who is found to
have committed an act of unlawful discrimination. Discriminatory
conduct will be treated as gross misconduct and may lead to
summary dismissal.
In order to help our employees to grow within the business, training
is offered throughout Jimmy Choo. Training and development
does not stop because someone is pregnant or has childcare
responsibilities. We never assume that such employees are not
interested in promotion.
We offer training appropriate to each employee’s current
responsibilities as well as those they need to progress within the
business to achieve their potential. Training is organised by the
company and with external providers at Jimmy Choo’s expense.
Overall, we employed 1,035 people as at 31 December 2014. Of
those, 77% (797) were female and 23% (238) were male. Of our ten
member Executive Management Team, 50% (5) are female and 50%
(5) are male.
Last year, 87% of those attending our newly introduced transition
to management and people management training were female. The
introduction of this training was in response to extensive consultation
at many levels in the company, identifying skills gaps and underlying
latent demand. This demonstrates how our business is working to
ensure everyone has the opportunity to be leaders of the business.
IN VOLV ING OUR PEOPL E IN T HE BUSINESS
We want all of our employees to be part of Jimmy Choo’s success.
This means not only excelling in their particular role, but also taking
an interest in and influencing outcomes across the business. We
do this through active two way communication, training, individual
recognition and variable rewards linked to corporate results.
VA RI A BL E AWA R DS
All employees are incentivised with an element of variable
compensation linked to metrics relevant to their role and function.
At retail, this is largely linked to sales commission, whereas in the
corporate side of the business, the variable component of pay
is linked to a mix of metrics relating to the company’s overall
performance and their particular role and function. This blended
approach promotes the ethos that everyone at Jimmy Choo is
responsible not only for their own role but working together to
promote the whole business within the strategic framework.
C OMMUNIC AT ION
Our internal communication strategy is designed to ensure that the
strategic framework and value creation architecture of the board is
well understood by all employees. We keep employees up to date
on the medium term plans for how we aim to achieve those goals,
as well as on the day to day progress of the business.
The Executive Directors present the strategic plan for the year
annually to all corporate employees and managers within the retail
business. This is supported by regular communication in relation
to organisational changes in the business and sales data relevant
to each employee’s region and responsibilities. This regular update
serves to introduce new colleagues as well as provide information
on how we are performing against the strategic framework towards
which we are all working.
VA L UE S AWA R DS
We invite managers to nominate members of their teams
annually to be recognised in front of their peers as people who
have achieved something exceptional and acted as a role model
for our Company “Values”.
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RISK MANAGEMENT
The Board is responsible for identifying the nature and extent of the
risks the Group has to manage in order to successfully pursue its
growth strategy and generate shareholder value over the long term.
The Board uses a risk framework which is designed to support the
process for identifying, evaluating and managing both financial and
non-financial risks.
RISK
The Group has identified the following key risks. This is not an
exhaustive list but rather a list of the most material risks facing the
Group. The impact of these risks, individually or collectively, could
potentially affect the ability of the Group to operate profitably and
generate positive cash flows in the medium to long term. As a result
these risks are actively monitored and managed, as detailed below.
DESCRIPTION
MITIGATING ACTION
Jimmy Choo’s long term growth is dependent on
making strategic moves into new territories,
channels, and products. The wrong strategy or poor
implementation could put future growth at risk.
The Board has approved well-structured growth plans
and ensured they are adequately resourced.
S T R AT EGIC RISKS
GROW T H S T R AT EGY
The Board regularly challenges the strategic plans
to ensure downside risks are mitigated.
The Board closely monitors the progress against the
strategic plan, redirecting strategy or implementation
effort when required.
COMPE T I T I V E
EN V IRONMEN T
CH A NGES IN
CONSUMER
PREF ERENCES
A ND T RENDS
Jimmy Choo competes with other luxury goods
companies for end clients, talent, retail sites,
wholesale customer accounts and supplier capacity.
Failure to compete well in any of these areas risks
future growth.
Senior Management monitors competitor movements
and ensures Jimmy Choo hires and retains top staff to
stay ahead of the competition in each area – including:
Future success depends on Jimmy Choo’s ability to
shape, predict and respond to fashion trends and
consumer preferences on both products and channels.
Failure to do so risks surplus inventories, missed sales
opportunities and a reducing salience of the brand
with clients.
Design and Merchandising teams have a structured
approach to monitoring trends internally and externally
and use the feedback to develop each collection to
stay ahead of future design and consumer trends.
• Design and Merchandising staying ahead of future
design and consumer trends;
• Supply Chain negotiating and building strong
relationships with current and future suppliers;
• Retail acquiring top sites in new areas; and
• Wholesale nurturing strong relationships with
key customers.
Retail teams monitor consumer channel preferences.
Marketing and Brand Image teams ensure the brand
book and marketing are aligned and relevant to the
market place.
OPER AT ION A L RISKS
K E Y PERSONNEL
Jimmy Choo needs to attract and retain the best
people in each area.
HR policies and management culture are reviewed
regularly to ensure they continue to be effective in
keeping Jimmy Choo as an attractive place to work.
Bonuses and incentive plans are reviewed regularly
to ensure they remain competitive with the industry.
T HIRD PA R T Y
PRODUC T ION
If suppliers do not produce product on time, to the
right quality levels, or fail to meet local laws and
regulations, this would constrain the availability of
stock in stores and for delivery to our wholesale
customers. If Jimmy Choo requires production beyond
current capacity this risks constraining growth.
Jimmy Choo has dedicated supply chain and quality
assurance offices, close to where the suppliers are
located. This helps to build strong relationships with
suppliers and manages those suppliers tightly to
production deadlines and contracts.
To ensure supplier availability, Jimmy Choo plans
volume and capacity clearly in advance.
Jimmy Choo maintains knowledge of supplier
capability on an on-going basis to determine
where constraints could arise in future.
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RISK
DESCRIPTION
MITIGATING ACTION
I T SYS T EMS
Critical data losses or delays in operations if
Jimmy Choo’s IT systems are not robust against power
outages; computer, network and telecommunications
failures; computer viruses; security breaches and user
errors could interrupt the business operations.
Senior management reviews the IT strategy and
operations plan regularly to ensure IT systems
continue to be appropriate for the size and complexity
of Jimmy Choo’s business.
Logistics, IT and transactional accounting activities
are outsourced to the JAB Luxury’s shared services
company, LLX Global Business Services SA (“GBS”).
Reductions in GBS performance risk impacting
Jimmy Choo’s operations and reductions in GBS
efficiency would lead to increased costs for
Jimmy Choo.
Legal contracts and service catalogues have been
signed between Jimmy Choo and GBS. Both parties
are committed to improving the KPIs over time.
Interruption or reduced performance during
implementation of the operational transformation
programme would impact current operations. If the
scope of transformation reduced, future development
plans of the business would be put at risk.
Senior management have put in place a strong
programme management team and structure in
Jimmy Choo, linking project delivery teams (from GBS)
to key staff in the Jimmy Choo business.
OU T SOURCING
SERV ICES TO
GL OBA L BUSINESS
SERV ICES (“GBS”)
PROGR A MME RISK
In addition, Jimmy Choo maintains a disaster
recovery plan.
Performance is monitored on a daily basis and
reported to senior managers monthly.
A clear remediation process is in place if required.
A clear programme structure, planning processes,
reporting framework and communication plan have
been put in place and are regularly monitored.
Senior management are prepared to enact decisions
and actions quickly as required to ensure the
programme is implemented successfully.
COMPL I A NCE RISKS
COMPL I A NCE
W I T H L AWS A ND
REGUL AT IONS
Changes in laws and regulations could result in
Jimmy Choo being non-compliant or incurring costs
to be compliant (e.g. system changes). If third parties
(e.g. suppliers) are not compliant, there would be a
risk to brand image or of financial penalties.
Employees in each area monitor regulatory
requirements in their area (e.g. Design, Merchandising
and Supply Chain on consumer product safety; Retail
on health and safety in stores; Supply Chain and
Logistics on import and export requirements).
The Jimmy Choo legal team liaise with these teams,
provide an overall review and act swiftly should
instances of non-compliance arise.
CUS TOMER
CONF IDEN T I A L I T Y
Failure to comply with restrictions on the use of
customer data could harm Jimmy Choo’s brand
reputation and credibility and level of customer trust.
The new CRM system which has been implemented
with the roll-out of SAP has been designed to handle
customer information securely.
The Chief Information Security Officer within GBS
undertakes regular PCI audits.
F IN A NCI A L RISKS
E XCH A NGE R AT E
F L UC T UAT IONS
Products are purchased in euro and sold in local
currencies. In addition, our DOS costs are incurred
in local currencies. Adverse movements in foreign
exchange rates would impact revenue growth reported
in sterling, as well as gross and net margins.
The Board has approved a hedging strategy to
minimise impact of exchange rate fluctuations.
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RISK MANAGEMENT
CONTINUED
RISK
DESCRIPTION
MITIGATING ACTION
ECONOMIC
DOW N T URN A ND
IN T ERN AT ION A L
M A RK E T RISK
Economic downturns in countries where Jimmy Choo
sells products may reduce sales and increase inventory.
Economic environment and international market risks
are regularly reviewed by senior management, with
appropriate action taken as required (e.g. reallocation
of product or resources between regions and active
management of inventory).
Changes in international trade laws, transportation
costs, or local government instability could all impact
financial results.
REPU TAT ION A L RISK
IM AGE A ND
REPU TAT ION
OF BR A ND
If Jimmy Choo’s products, stores, marketing, customer
service and corporate profile fail to retain the
distinctive Jimmy Choo character, quality and values,
brand equity could be reduced and sales impacted.
Brand quality is placed at the core of everything the
business does.
This ensures close management by all areas of
business concerned to retain reputation (e.g. design of
products, quality of marketing, store environment and
client service).
Jimmy Choo’s contracts with licensees are drafted to
ensure retention of control of the brand and are
rigorously enforced.
CON T ROL OF
W HOL ESA L E
DIS T RIBU T ION
CH A NNEL
Third party multibrand and franchisee stores could
present the brand in a manner not in keeping with
Jimmy Choo’s brand positioning and DNA, damaging
the brand.
Senior management review distribution partners in
advance of accepting them as a Jimmy Choo partner.
Jimmy Choo’s contracts with distribution partners are
drafted to ensure control of elements of the brand
presentation and are rigorously enforced.
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GOVERNANCE
WE BELIEVE THAT BRINGING
OUTSIDE INVESTORS IN AND EXPOSING
THE COMPANY TO PUBLIC SCRUTINY
ENSURES THE BEST GOVERNANCE TO
DRIVE LONG TERM GROWTH
PE TER HARF
CH AIRM A N OF JIMM Y CHOO PL C
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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BOARD OF DIRECTORS
01 BOB SINGER 0 2 FA BIO F USCO 0 3 BA R T BECH T
0 4 PIERRE DENIS 0 5 PE T ER H A RF 0 6 JON AT H A N SINCL A IR
0 7 OL I V IER GOUDE T 0 8 DAV ID POULT ER
0 9 GI A NL UCA BROZ ZE T T I
01
02
03
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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04
05
06
07
08
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09
BOARD OF DIRECTORS
CONTINUED
PE T ER H A RF
NON-E X ECU T I V E CH A IRM A N
JON AT H A N SINCL A IR
CHIEF F IN A NCI A L OF F ICER A ND
E X ECU T I V E V ICE PRESIDEN T (BUSINESS OPER AT IONS
Mr. Harf was named the Non-Executive Chairman of the Company
in September 2014. Mr. Harf joined Joh. A. Benckiser SE in 1981,
serving the company in a variety of capacities, including Chairman
and Chief Executive Officer since 1988. Mr. Harf is a JAB Holding
Partner. Mr. Harf is currently a Board member of Peet’s Coffee &
Tea, Inc., a premier specialty coffee and tea company; a Board
member of D.E Master Blenders 1753 B.V. (“DEMB 1753”), the
world’s leading pure play coffee and tea company; the Chairman of
JAB Luxury; a Director, and former Chairman, of Coty Inc., a global
leader in beauty; and the Deputy Chairman of Reckitt Benckiser
Group PLC, a leading global fast moving consumer goods company
operating in the health, hygiene and home care categories – a
position he has held since 1999. Mr. Harf has previously been the
Chairman of Anheuser-Busch InBev, the world’s largest brewer, from
2002 to April 2012, and served on the Board of Burger King Holdings,
Inc, the world’s second largest fast food hamburger restaurant, from
2010 through 2011. He is also a co-founder and Executive Chairman
of Delete Blood Cancer DKMS, Tübingen, Germany, the largest
institution of its kind.
Mr. Sinclair was named Chief Financial Officer and Executive Vice
President (Business Operations) in June 2014, and currently leads the
Finance, Legal and Merchandise Planning departments. Mr. Sinclair
originally joined Jimmy Choo in 2008 as Chief Operating Officer,
overseeing the company’s Finance, Legal, Merchandise Planning,
IT and Store Development functions. Mr. Sinclair left Jimmy Choo in
2013 to become Chief Operating Officer at Vertu, the luxury mobile
phone designer, before returning to Jimmy Choo in June 2014.
Mr. Sinclair is also a Non-Executive Director of LLX Global Business
Services SA, a subsidiary of JAB Luxury that provides various
services to Jimmy Choo, as well as being a Non-Executive Director at
Nottingham Scientific Limited. Mr. Sinclair began his career in finance
working for Boots Group PLC, now an international pharmacy-led
health and beauty group under the ownership of Alliance Boots,
where he spent over 19 years, most recently holding the position of
Finance Director of Boots Retail. He subsequently joined Pentland
Brands plc, the name behind some of the world’s best sports,
outdoor and fashion brands, where he spent five years in a similar
capacity. Mr. Sinclair is a graduate of Loughborough University and
is based in the London head office of Jimmy Choo.
PIERRE DENIS
CHIEF E X ECU T I V E OF F ICER
BA R T BECH T
NON-E X ECU T I V E DIREC TOR
Mr. Denis was named CEO of Jimmy Choo in July 2012. Mr. Denis
brings extensive experience in the global luxury fashion industry
and joined Jimmy Choo from John Galliano, where he also held
the position of CEO. Mr. Denis began his career in perfume and
cosmetics and joined LVMH, the diversified luxury goods group, in
1992. In 1999, he was appointed Managing Director, Asia Pacific for
Parfums Christian Dior; in addition, he took over managing the Dior
Couture Asian business in 2004. In 2006, Mr. Denis moved back to
his native Paris to serve as Managing Director for Christian Dior
Couture in Europe, the Middle East and India. After joining John
Galliano in 2008, Mr. Denis successfully managed the business
side of operations, developing the John Galliano and contemporary
Galliano lines, and expanding the licensing business. Mr. Denis is
a graduate of ESSEC Paris and is based in the London head office
of Jimmy Choo.
Mr. Becht was named a Non-Executive Director of the Company in
September 2014. He is currently the Chairman and interim CEO of
Coty, Inc., a global leader in beauty; Chairman of DEMB 1753, the
world’s leading pure play coffee and tea company; as well as a Board
member of Peet’s Coffee & Tea, Inc, a premier specialty coffee and
tea company. Mr. Becht is a JAB Holding Partner. Mr. Becht was
formerly a Director of ICON Aircraft and Prudential Plc. He was also
formerly the CEO of Reckitt Benckiser Group PLC, a leading global
fast moving consumer goods company operating in the health,
hygiene and home care categories. Mr. Becht was appointed CEO
of privately-held Benckiser Household Products in 1995 and took
the company public in 1997. Mr. Becht merged Benckiser N.V.
with Reckitt & Colman plc in 1999 and became the CEO of the
combined entity.
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GI A NL UCA BROZ ZE T T I
INDEPENDEN T NON-E X ECU T I V E DIREC TOR
DAV ID POULT ER
SENIOR INDEPENDEN T NON-E X ECU T I V E DIREC TOR
Mr. Brozzetti was named an Independent Non-Executive Director
of the Company, with effect from Admission, in September 2014.
Mr. Brozzetti started his management career in Rome, in 1980, at
Procter & Gamble, one of the world’s largest consumer products
companies, where he eventually became Group Marketing Director.
In 1985, he became an associate at McKinsey & Co., a global
management consulting firm, in Milan. Following that position,
he gained over 28 years of executive experience in top luxury and
fashion brands. He became the Sales & Marketing Director at Gucci
Group, the high fashion, Italian luxury goods house, in Florence in
1986; Executive Director Bulgari Jewels/Watches in Rome in 1987;
and then managed the start-up of the Bulgari Fragrance Division in
Neuchatel in 1992. Additionally he became the President and Director
General at Louis Vuitton Malletier, the French fashion house, in Paris
in 1999; the CEO and a shareholder of Asprey & Garrard, the luxury
jeweller, in London in 2001; the CEO of Nautor Swan Yachts, the
designer and builder of luxury sailing yachts, in Finland in 2007; and
the CEO at Roberto Cavalli, the luxury clothing business, in Florence/
Milan in 2009, a position he held until February 2014. He was also a
Non-Executive Director at William Grant & Sons, the premium spirits
company, from 2001 to 2012. Most recently, Mr. Brozzetti was
appointed CEO of Buccellati in September 2014.
Mr. Poulter was named Senior Independent Non-Executive Director
(“SID”) of the Company, with effect from Admission, in September
2014. He is currently a Member of the finance committee and
investment and pension committee of Save the Children UK
and over the last 18 months has supported the directors on the
integration of Merlin, another global charity. Mr. Poulter was
formerly at Reckitt Benckiser Group PLC, a leading global fast
moving consumer goods company operating in the health, hygiene
and home care categories, from 1999 to December 2012. His roles
included the Head of Internal Audit and ten years as Senior Vice
President, Finance for Developing Markets and Europe. Mr. Poulter
has also been a Trustee Board Member for large pension schemes,
including for Reckitt Benckiser Group PLC from 2009 to January
2013. He is a Chartered Accountant.
BOB SINGER
INDEPENDEN T NON-E X ECU T I V E DIREC TOR
Mr. Singer was named an Independent Non-Executive Director of
the Company, with effect from Admission, in September 2014. He is
currently a member of the Board of Directors and a member and the
Chairman until the end of April 2015 of the Audit Committee of Mead
Johnson Nutrition, a global leader in infant nutrition; as well as a
member of the Board of Directors and the Chairman of the Audit
Committee of Coty, Inc., a global leader in beauty, positions he has
held since 2009. He is also a member of the Board of Directors and
the Chairman of the Audit Committee of Tiffany and Co., a specialty
retailer of jewellery and other accessories, a position he has held
since 2012; and, from 2001, an Advisory Council Member of Johns
Hopkins University School of Advanced International Studies –
Bologna Campus. From 1995 to 2004, Mr. Singer was the CFO and
Executive Vice President of Gucci Group N.V., the high fashion, Italian
luxury goods house; and, from 2004 to 2005, he was the President,
COO and member of the Board of Directors of Abercrombie and
Fitch, a branded specialty retailer targeting the youth market. He also
was the CEO of Barilla Holdings S.p.A., one of the top Italian food
groups, from 2006 to 2009.
FA BIO F USCO
NON-E X ECU T I V E DIREC TOR
Mr. Fusco was named a Non-Executive Director of the Company in
September 2014. Mr. Fusco is a JAB Holding Partner, a position he
has held since July 2014, and has 20 years of experience in the
luxury industry, 10 of which were in executive positions. He has been
the JAB Luxury CFO since April 2010, overseeing the set-up and
development of JAB’s investment in luxury. He was also the CFO of
Bally, the luxury accessories brand, from 2005 to 2010, leading the
brand turn-around and the transfer of ownership from TPG to JAB.
He was also the CFO of IT Holding, a leader in the production and
global distribution of clothing and total look accessories, from 2003
to 2005, overseeing the dismissal of non-strategic assets and the
restructuring of the financial debt. Before that he held various
positions within IT Holding SpA and Diners Club Europe SpA,
a credit card issuer member of Diners Club International Network.
OL I V IER GOUDE T
NON-E X ECU T I V E DIREC TOR
Mr. Goudet was named a Non-Executive Director of the Company
in September 2014. Mr. Goudet is a JAB Holding Partner. He is
currently the Chairman of Peet’s Coffee & Tea, Inc., a premier
specialty coffee and tea company; a Board member of DEMB 1753,
the world’s leading pure play coffee and tea company; a Board
member of Coty, Inc., a global leader in beauty; a Board Director
of the French governmental agency “Agence Française des
Investissements Internationaux”; an independent advisor to the
Board of Directors of Mars, Inc., one of the world’s leading food
manufacturers; and an Independent Director of Anheuser-Busch
InBev, the world’s largest brewer, where he is also the Chairman
of the Audit Committee. Additionally, Mr. Goudet was formerly the
Executive Vice President and CFO of Mars, Inc., a position he held
from 2004 to April 2012.
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CORPORATE GOVERNANCE REPORT
CH A IRM A N ’S IN T RODUC T ION TO GOV ERN A NCE
UK CORPOR AT E GOV ERN A NCE CODE – COMPL I A NCE S TAT EMEN T
DE A R SH A REHOL DER
The Company adopted the UK Corporate Governance Code on
22 October 2014 on admission of its shares to the UKLA’s Official
List and listing on the Main Market of the London Stock Exchange.
Since that date, the Company has applied all except four of the main
principles of the Code as listed below:
I am pleased to present our first Corporate Governance Report,
which describes how the main principles of the UK Corporate
Governance Code (the “Code”) have been applied during the year,
information about the composition of the Board and its Committees
and an overview of Jimmy Choo’s system of internal controls.
Jimmy Choo listed its ordinary shares on the main market of the
London Stock Exchange on 22 October 2014. The Listing Rules
of the Financial Conduct Authority, including the Code, have only
therefore applied to the Company since that date. In the months
leading up to the listing, the Board implemented a number of
measures to comply with the Code which have proven robust and
useful in our post-IPO Board and Committee meetings, including
the budgeting process for 2015.
A.3.1 The Chairman was not independent on appointment.
B.1.2 At least half of the Board, excluding the Chairman, does not
comprise Non-Executive Directors determined by the Board
to be independent.
B.2.1 There is a joint Remuneration and Nominations Committee.
The majority of the members of this committee are not
determined by the Board to be independent.
B.6
The Board has not carried out an annual evaluation of its own
performance given the Board and its Committees have been
operating for less than a year. A formal evaluation process
will be carried out within 2015.
Since listing JAB Luxury continues to be the majority shareholder
of the Jimmy Choo and the Company represents a significant
investment to JAB Luxury. The Board and JAB Luxury are mindful
of the need to consider the interests of the Company’s new minority
shareholders. The Board believes that the Board and its Committees,
with the addition of the new independent Non-Executive Directors
will provide the appropriate corporate governance balance in light of
the interests of both the majority shareholder and the new minority
shareholders. The Audit and Risk Committee consists solely of
independent Non-Executive Directors and the Board has also
established a Conflicts Committee to help manage the relationship
between the Company and its majority shareholder. Further details
of these measures are contained within this report.
Under the Relationship Agreement between JAB Luxury and the
Company, JAB Luxury is able to appoint up to one half of the Board
while it continues to own 50% or more of the Company’s Shares.
Further details of the Relationship Agreement can be found on
page 51.
The Board believes that there are sufficient safeguards in place
in the structures and processes implemented to consider and
protect the interests of independent shareholders. The Company
does have a number of areas in which it does not fully follow the
recommendations of the UK Corporate Governance Code. These
are that at least half of the Board of Directors of a UK-listed
company, excluding the Chairman, does not comprise Independent
Non-Executive Directors and the Board has established a joint
Remuneration and Nomination Committee, rather than separate
Remuneration and Nomination Committees, which is not made up
solely of independent Non-Executive Directors. The Board believes
that these departures from the Code are reasonable in the
circumstances of Jimmy Choo’s ownership.
Since the Company only recently listed, it is not practicable to
expect full compliance with the rest of the provisions of the Code.
Accordingly, this report includes a description of how the Company
has applied the principles of the Code since 22 October 2014 and
how it intends to apply those principles throughout 2015
PE T ER H A RF
CH A IR M A N
18 March 2015
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JIMM Y CHOO L E A DERSHIP A ND GOV ERN A NCE S T RUC T URE
RISK M A N AGE ME N T A ND IN T E R N A L C ON T ROL S
T HE BOA RD S T RUC T URE
• Ensuring maintenance of effective systems of internal control
and risk management
• Reviewing these systems of control and risk management
The structure and business of the Board is designed to ensure that
the Board focuses its time and energy on providing entrepreneurial
leadership to the Group, setting strategy and monitoring
performance, and ensuring that the necessary financial and human
resources are in place to enable the Company to meet its objectives.
In addition, the Board ensures that the appropriate financial and
business systems and controls are in place to safeguard both the
majority and the minority shareholders’ interests and to maintain
effective corporate governance.
BOA R D ME MBE R SHIP
• Changes to the structure, size and composition of the Board
• Ensuring adequate succession planning
• Appointment or removal of the Chairman, CEO, SID and
Company Secretary
CORP OR AT E GOV E RN A NCE
•
•
•
•
The Board operates in accordance with the Company’s Articles of
Association and its own written terms of reference (Schedule of
Matters Reserved for Board Decision). The Board has established
a number of Committees as indicated in the chart below. Each
Committee has its own terms of reference which will be reviewed
at least annually. A summary of the matters reserved for decision
by the Board is set out below:
Review of Group’s overall governance framework
Determining the independence of directors
Considering the views of shareholders
Authorising any conflicts of interest
R E MUNE R AT ION
• Determining the policy for remuneration of the Chairman,
the Executive Directors, Company Secretary and other
senior executives
• Determining the remuneration of the Non-Executive Directors
• Introduction of new share incentive plans or major changes to
existing plans
L E A DE R SHIP, S T R AT EGY, BUDGE T S A ND M A N AGE ME N T
• Providing leadership and setting values and standards
• Approving, developing and monitoring the strategy and objectives
of the Group
• Overseeing operations
O T HE R
•
•
•
•
S T RUC T UR E A ND C A PI TA L
• Changes to the Group’s capital or corporate structure
• Changes to the Group’s management and control structure
Approval and monitoring of the share dealing code
Approval and monitoring of Corporate and Social Responsibility
Approving policies for political and charitable donations
Approval of the overall levels of insurance for the Group
F IN A NCI A L R EP OR T ING
•
•
•
•
Approval of financial statements
Approval of dividend policy
Approval of material changes in accounting policies
Approval of major capital expenditure
T HE JIMM Y CHOO BOA RD
L E A DERSHIP
SE T T ING VA L UES A ND S TA NDA RDS
RISK M A N AGEMEN T
S T R AT EGY A ND OV ERSIGH T
F IN A NCI A L REPOR T ING
S T R AT EGIC IN V ES T MEN T
AUDI T A ND RISK COMMI T T EE 1
REMUNER AT ION A ND
NOMIN AT IONS COMMI T T EE 1
CONF L IC T S COMMI T T EE
CHAIRMAN
BOB SINGER
MEMBERS
DAVID POULTER
KEY RESPONSIBILITIES
MONITORING THE INTEGRIT Y OF
FINANCIAL STATEMENTS, ENSURING
THAT AN EFFECTIVE SYSTEM OF
INTERNAL CONTROLS IS MAINTAINED
AND MONITORING ACCOUNTING
POLICIES.
MORE INFORMATION: AUDIT AND RISK
COMMIT TEE REPORT – PAGES 54 TO 57
MEMBERS
EXECUTIVE DIRECTORS AND
OTHER SENIOR MANAGEMENT
CHAIRMAN
BART BECHT
MEMBERS
PETER HARF
GIANLUCA BROZZET TI
KEY RESPONSIBILITIES
DETERMINATION
OF SPECIFIC REMUNERATION PACK AGES
FOR ALL EXECUTIVE DIRECTORS AND
CERTAIN SENIOR EXECUTIVES OF THE
GROUP.
MORE INFORMATION: REMUNERATION
AND NOMINATIONS COMMIT TEE REPORT
– PAGES 58 TO 73
CHAIRMAN
BOB SINGER
MEMBERS
PIERRE DENIS
JONATHAN SINCL AIR
GIANLUCCA BROZZET TI
DAVID POULTER
SENIOR M A N AGEMEN T
KEY RESPONSIBILITIES
CONSIDERS MAT TERS WHICH ARISE IN THE ORDINARY COURSE OF BUSINESS OF THE GROUP’S OPERATIONS. SENIOR MANAGEMENT HAVE SPECIFIC DELEGATED POWERS TO DEAL WITH
MAT TERS ARISING IN THE ORDINARY COURSE OF BUSINESS THAT REQUIRE CONSIDERATION PRIOR TO THE NEXT SCHEDULED BOARD MEETING. THESE POWERS OPERATE WITHIN
PRESCRIBED LIMITS SET BY THE CORPORATE GOVERNANCE RULES APPROVED BY THE BOARD.
HE A DS OF DEPA R T MEN T
1
KEY RESPONSIBILITIES
TO CONSIDER ANY CONTRACT,
ARRANGEMENT OR TRANSACTION
BET WEEN A MEMBER OF THE GROUP
AND THE CONTROLLING SHAREHOLDER
OR ITS ASSOCIATES.
Terms of reference of the Audit and Risk Committee and the Remuneration and Nominations Committee are available on the Company’s website.
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CONTINUED
BOA RD A ND SENIOR M A N AGEMEN T
ROL E OF T HE CEO
Prior to Admission, the day to day running of the Company was
overseen by Pierre Denis and Jonathan Sinclair, with an executive
committee formed of ten senior managers. As part of the Admission
process the Board of Directors was formed consisting of the
Non-Executive Chairman, two Executive Directors and seven
Non-Executive Directors and a Schedule of Matters for Board
Decision was adopted. The executive committee’s power to exercise
managerial decisions was transferred to the Board on its formation.
At the Board meeting in March 2015 the Board approved revised
delegated authorities and concluded that, with the exception of the
Executive Directors, the pre-IPO executive committee members
were no longer persons dispensing managerial responsibility
(“PDMRs”) for the purpose of the Disclosure and Transparency Rules
by virtue of the fact that all power to make managerial decisions
affecting the future development and business prospects of the
Company rested with the Board.
• Conduct the affairs of the Group in accordance with the highest
standards of integrity, probity and corporate governance
throughout the Company;
• Manage the Group on a day-to-day basis within the authority
delegated by the Board;
• Develop and propose strategy, annual plans and commercial
objectives;
• Lead the executive team to pursue the Group’s commercial
objectives and execute Group strategy;
• Identify and execute strategic opportunities whilst optimising
the Group’s resources;
• Communicate to the Group’s employees the expectations of
the Board in relation to the Group’s culture, values and behaviour;
• Manage the Group’s risk profile;
• Keep the Chairman informed of important matters and maintain
a dialogue on important and strategic issues facing the Group;
• Make recommendations on remuneration policies, Board
nominations and succession planning;
• Ensure that the executive team complies with the terms on
which matters are delegated by the Board;
• Support the Chairman in order to ensure that appropriate
governance standards are applied throughout the Group; and
• Lead communications with shareholders and other stakeholders
• Provide, together with the Chairman, coherent leadership of
the Group.
K E Y BOA RD ROL ES A ND RESPONSIBIL I T IES
There is a clear division of responsibilities between the Chairman and
CEO which has been agreed by the Board. The roles of the Chairman
and CEO are held by different people and the purpose of each role
is clear and distinct and set out in respective job descriptions. The
Chairman is responsible for the leadership and overall effectiveness
of the Board and setting the Board’s agenda; the CEO reports to
the Chairman and the Board and is responsible for all executive
management matters of the Group. A summary of the key areas
of responsibility of the Chairman and CEO are set out below:
SE NIOR INDEP E NDE N T DIR EC T OR
David Poulter is the Senior Independent Director. The SID’s role is to
act as a sounding board for the Chairman and serve as an
intermediary for the other directors when necessary. The SID will
meet other Non-Executive Directors without the Chairman and
Executive Directors present at least once a year to discuss
governance issues. The SID will also provide feedback to the Board
on the independent Non-Executive Directors’ collective views on the
perceived quality of the relationship between the Chairman and the
CEO; the degree of openness between the CEO and the Board; the
visibility of checks and balances within the Executive Directors’ team;
and whether all questions asked by the Non-Executive Directors of
the Board have been adequately addressed.
ROL E OF T HE CH A IR M A N
• Conduct the affairs of the Group in accordance with the
highest standards of integrity, probity and corporate governance
throughout the Company;
• Run the Board effectively, ensuring adequate frequency
of meetings;
• Set the Board agenda and ensure that adequate time is available
for discussion of the important issues facing the Group;
• Ensure the frequency and depth of evaluation of the Board
and its Committees is in compliance with best practice;
• Ensure there is appropriate delegation of authority from the
Board to the executive management;
• Ensure that the Board receives accurate, timely and clear
information in advance of meetings;
• Promote a culture of openness and debate by facilitating
the effective contribution of Non-Executive Directors;
• Ensure approval with Board approved procedures;
• Hold meetings with the Non-Executive Directors without
the Executive Directors present;
• Ensure training and development needs of all directors are
met, and that all new directors receive a full induction;
• Ensure effective communication with shareholders
and stakeholders; and
• Ensure shareholders’ views are communicated to the Board.
The SID is also available to shareholders to discuss concerns where
contact through the normal channels of the Chairman, CEO or CFO
has failed to resolve or for which such contact is inappropriate.
BOA R D INDEP E NDE NCE
The Board currently consists of seven Non-Executive Directors
(including the Chairman) three of whom are considered to be
independent.
Non Independent
Independent
Peter Harf
Gianluca Brozzetti
Bart Becht
David Poulter
Fabio Fusco
Bob Singer
Oliver Goudet
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As explained in the Chairman’s introduction, under the Relationship
Agreement JAB Luxury is able to appoint: (i) up to one half of the
Directors on the Board while it continues to hold 50% or more of the
shares; (ii) up to one quarter of the Directors on the Board while it
continues to hold at least 25% but less than 50% of the shares; and
(iii) up to one eighth of the Directors on the Board while it continues
to hold at least 10% but less than 25% of the shares. The first
such appointees are Bart Becht, Fabio Fusco, Olivier Goudet and
Peter Harf.
The Relationship Agreement will continue for so long as (i) the shares
are listed on the premium listing segment of the Official List and
traded on the London Stock Exchange’s main market for listed
securities and (ii) JAB Luxury, together with its associates, is entitled
to exercise or control the exercise of 10% or more of the votes able
to be cast on all, or substantially all, matters at general meetings of
the Company.
The Directors believe that the terms of the Relationship Agreement
enable the Group to carry on its business independently of JAB
Luxury and ensure that all transactions and relationships between the
Company and/or the members of the Group and JAB Luxury and/or
its associates are, and will be, on arm’s length terms and on a normal
commercial basis.
The Board has determined that each of Gianluca Brozzetti, David
Poulter and Bob Singer will be regarded as independent NonExecutive Directors. In reaching this determination, the Board took
into consideration the following relationships: Mr. Brozzetti has
advised JAB Luxury in respect of its investment in Zagliani; from
1999 to 2012 Mr. Poulter held senior finance positions in Reckitt
Benckiser Group PLC (in which JAB Luxury’s controlling shareholder
is a significant investor) including a period as a trustee of its pension
scheme and Mr. Singer has been a director of Coty Inc. (in which
JAB Luxury’s controlling shareholder is the majority shareholder)
since 2009. Each of these directors has been appointed as an
independent Non-Executive Director of Bally and Belstaff, which
are companies owned by JAB Luxury. The other directors have
concluded that the judgement, experience and challenging approach
taken by each of Gianluca Brozzetti, David Poulter and Bob Singer
should ensure that they each make a significant contribution to the
work of the Board and its Committees. Therefore, the Board has
determined that each of them is of independent character and
judgement and should be regarded as independent Directors for
the purposes of the Code.
Under the Relationship Agreement, JAB Luxury is able to appoint
to the Board such number of Non-Executive Directors as discussed
above. JAB Luxury is entitled to receive, subject to compliance by
the Company with its legal and regulatory obligations, such financial
or other information in relation to the Group or any member of the
Group as is necessary or reasonably required by it: (i) in its capacity
as a shareholder of the Company, for the purposes of its accounting
or financial control requirements or in order to comply with its legal,
regulatory or tax obligations; or (ii) in order for it and other members
of its group to provide certain advisory services to the Group,
including but not limited to management accounts, long and short
term planning documents and sales and margin reports.
C ONF L IC T S C OMMI T T E E
The Board has constituted a Conflicts Committee that considers
on behalf of the Board any contract, arrangement or transaction
between any member of the Group and JAB Luxury or any of JAB
Luxury’s associates, and any actual or potential conflict of interest
between any member of the Group and JAB Luxury or any of JAB
Luxury’s associates which involves, or would involve, significant
expenditure by the Group. The Conflicts Committee will meet on an
ad hoc basis as required. The Conflicts Committee is chaired by Bob
Singer, and its other members are Pierre Denis, Jonathan Sinclair,
Gianluca Brozzetti and David Poulter.
The names of the Directors and brief biographies can be found on
pages 46 and 47.
C OMMI T ME N T
The Board expects Non-Executive Directors to commit sufficient
time to allow them to meet their obligations to the Company. The
Non-Executive Directors’ letters of appointment currently anticipate
that each Non-Executive Director will need to commit ten days per
year to the Company but clarifies that more time may be required.
Non-Executive Directors will need to attend scheduled and
emergency Board and Committee meetings, at least one site visit
per year and the AGM. In addition, the Non-Executive Directors
are expected to commit appropriate preparation time ahead of
each meeting.
C ONF L IC T S OF IN T E R E S T
The Company’s Articles of Association set out the policy for dealing
with directors’ conflicts of interest and are in line with the Companies
Act 2006. The Articles permit the Board to authorise conflicts and
potential conflicts, as long as the potentially conflicted Director is
not counted in the quorum and does not vote on the resolution
to authorise.
R E L AT IONSHIP AGR E E ME N T
On 3 October 2014, the Company and JAB Luxury entered into the
Relationship Agreement which regulates aspects of the ongoing
relationship between the Company and JAB Luxury. The principal
purpose of the Relationship Agreement is to ensure that the
Company and its subsidiaries are capable of carrying on their
business independently of JAB Luxury and its associates, that
transactions and relationships with JAB Luxury or its associates
(including any transactions and relationships with any member of the
Group) are at arm’s length and on normal commercial terms, and that
the goodwill, reputation and commercial interests of the Company
are maintained.
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CONTINUED
The Company has adopted a formal procedure through which
Directors may obtain independent professional advice at the
Company’s expense.
In March 2015, the Board agreed a procedure for dealing with
conflicts of interest in relation to matters which are scheduled for
Board consideration following which each Director completed
a ‘Directors List’ which sets out details of situations where each
Director’s interests may conflict with those of the Company
(‘situational conflicts’). These lists were subsequently considered
and situational conflicts authorised. In addition, Directors are
reminded at the beginning of each Board meeting to notify the Board
of any further conflicts of interest in accordance with sections 175,
177 and 182 of the Companies Act 2006.
P E R F OR M A NCE E VA L UAT ION
Given that the majority of the Directors were only appointed in the
months immediately preceding the listing in October 2014, the
Board believes that a meaningful evaluation of the Board can only
take place after it has been working together for a reasonable time.
An evaluation policy will be developed and implemented before
the end of 2015 and annually thereafter, with such an evaluation
process being externally facilitated at least every three years.
BOA R D P ROCE S S
Since Admission the Board has met once in December 2014
to approve the annual budget for 2015 and once in March 2015,
following the year end. All Directors were present at each meeting.
The Board intends to meet formally at least four times a year, with ad
hoc meetings called as and when circumstances require it to at short
notice. There will be an annual calendar of agenda items to ensure
that all matters are given due consideration and are reviewed at the
appropriate point in the regulatory and financial cycle.
SH A R E DE A L ING C ODE
At Admission, the Company adopted Share Dealing Codes which
cover dealings by PDMRs and relevant employees. The codes
comply with the provisions set out in the Model Code contained
in Annex 1 to Listing Rule 9 of the UK Listing Authority’s Listing
Rules. It restricts dealings in shares and other relevant securities
by PDMRs and employees during designated prohibited periods
and at any time when they are in possession of unpublished,
price-sensitive information. As noted previously, the Board has
concluded that the senior managers are not PDMRs however they
are classed as ‘relevant employees’ and have therefore committed
to full compliance of the Company’s Share Dealing Codes.
At least once a year, the Board will undertake a full strategic review
of the business operations as part of the budget review.
All Directors are expected to attend all meetings of the Board and
any Committees of which they are members, and to devote sufficient
time to the Company’s affairs to fulfil their duties as Directors. Where
Directors are unable to attend a meeting, they are encouraged to
submit any comments on papers to be considered at the meeting
to the Chairman in advance to ensure that their views are recorded
and taken into account during the meeting.
REL AT IONS W I T H SH A REHOL DERS
DI A L OGUE W I T H SH A R E HOL DE R S
As part of the IPO “roadshow” in 2014, the CEO and CFO met with
a large number of investors.
As part of its ongoing investor relations programme, the Group
aims to maintain an active dialogue with its stakeholders including
institutional investors to discuss issues relating to the performance
of the Group including strategy and new developments. The
Non-Executive Directors are available to discuss any matter
stakeholders might wish to raise, and the Chairman and
independent Non-Executive Directors will attend meetings
with investors and analysts as required.
The Chairman and Non-Executive Directors will meet without the
Executive Directors present on a number of occasions throughout
the year.
T R A INING A ND DE V E L OP ME N T
In preparation for listing, all Directors received an induction briefing
from the Company’s legal advisor, Freshfields Bruckhaus Deringer,
on their duties and responsibilities as directors of a publicly quoted
company. During 2015, the Company Secretary will prepare a full,
formal and tailored induction programme for any new directors
joining the Board. The Chairman, with the support of the Company
Secretary, will ensure that the development and ongoing training
needs of individual directors and the Board as a whole are reviewed
and agreed at least annually.
Investor relations activity and a review of the share register are
standing items on the Board’s agenda.
A NNUA L GE NE R A L ME E T ING
The Company’s first Annual General Meeting since Admission will
take place on 27 May 2015 at the Radisson Blu Edwardian Hotel,
140 Bath Road, Hayes, Middlesex UB3 5AW. The Chairman will
be present to answer questions put to him by shareholders. The
Annual Report and Financial Statements and Notice of the Annual
General Meeting will be sent to shareholders at least 20 working
days prior to the date of the meeting.
INF OR M AT ION A ND SUPP OR T
An agenda and accompanying pack of detailed papers is circulated
to the Board well in advance of each Board meeting. These include
reports from Executive Directors and other members of senior
management. All Directors have direct access to senior management
should they require additional information on any of the items to be
discussed. The Board and the Audit and Risk Committee also receive
further regular and specific reports to allow the monitoring of the
adequacy of the Company’s systems of internal controls.
To encourage shareholders to participate in the Annual General
Meeting process, the Company proposes to offer electronic proxy
voting through the CREST service and all resolutions will be
proposed and voted on at the meeting on an individual basis by
shareholders or their proxies. Voting results will be announced
through the Regulatory News Service and made available on the
Company’s website.
The information supplied to the Board and its Committees will be
kept under review and formally assessed on an annual basis as part
of the Board evaluation exercise to ensure it is fit and proper for
purpose and that it enables sound decision making.
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• in respect of any performance related element of remuneration,
formulating suitable performance related criteria and monitor
their operation;
• ensuring that contractual terms on termination, and any payments
made, are fair to the individual and the Company, that failure
is not rewarded and that the duty to mitigate loss is fully
recognised; and
• leading the process for appointments to the Board and ensuring
that the Board, its Committees, and the boards of the Company’s
subsidiaries, are appropriately balanced in terms of skills,
experience, independence and knowledge of the Company.
REMUNER AT ION A ND NOMIN AT IONS COMMI T T EE
MEMBERSHIP A ND MEE T INGS
The Remuneration and Nominations Committee is chaired by Bart
Becht and its other members are Peter Harf and Gianluca Brozzetti.
The Committee will meet at least three times a year and at such
other times during the year as is necessary to discharge its duties.
Only members of the Committee have the right to attend meetings.
However, other individuals, such as the CEO and external advisers,
may be invited to attend for all or part of any meeting.
The Remuneration and Nominations Committee met once in 2014
and once in 2015 to date. All members of the Committee were
present for each meeting.
In carrying out its duties, the Remuneration and Nominations
Committee takes into account any legal requirements, the UK
Corporate Governance Code and UK Listing Rules. Determining
the fees of the Non-Executive Directors is a matter reserved for
the Chairman of the Board and the Executive Directors.
The Remuneration and Nominations Committee’s responsibilities are
set out in its Terms of Reference which are available on the
Company’s website. Its role includes:
The key responsibilities of the Committee are shown below.
• setting the remuneration policy for all Executive Directors of the
Company and the Chairman of the Board, the Company Secretary
and other senior employees of the Company as the Board
may determine;
• within the terms of the remuneration policy determining the total
individual remuneration package of the Executive Directors,
Company Secretary and other designated senior executives
including base salary, bonuses and performance related
payments, discretionary payments, pension contributions,
benefits in kind and share options;
DI V E R SI T Y
The Board recognises the benefits of diversity, including gender
diversity, on the Board, although it believes that all appointments
should be made on merit, whilst ensuring that there is an appropriate
balance of skills and experience within the Board. As at 31 December
2014, the board consisted of 10% (1) female and 90% (9) male
board members.
T HE REMUNER AT ION A ND NOMIN AT IONS COMMI T T EE K E Y RESPONSIBIL I T IES
REMUNER AT ION POL ICY
• DETERMINE THE FRAMEWORK FOR THE
REMUNERATION POLICY FOR THE CHAIRMAN,
EXECUTIVE DIRECTORS, COMPANY
SECRETARY AND OTHER SENIOR EXECUTIVES
• WHEN SET TING THE POLICY HAVE REGARD
FOR PAY AND EMPLOYMENT CONDITIONS
ACROSS THE GROUP
• FORMUL ATE SUITABLE PERFORMANCE
CRITERIA FOR THE PERFORMANCE REL ATED
ELEMENTS OF REMUNERATION
• ENSURE THAT CONTRACTUAL TERMS
ON TERMINATION, AND ANY PAYMENTS
MADE, ARE FAIR TO THE INDIVIDUAL
AND THE COMPANY
A PPOIN T MEN T S
BOA RD COMPOSI T ION A ND
SUCCESSION PL A NNING
• PREPARE ROLE DESCRIPTION FOR BOARD
APPOINTMENTS FOLLOWING AN
EVALUATION OF THE BAL ANCE OF SKILLS,
KNOWLEDGE AND EXPERIENCE ON THE
BOARD
• REGUL ARLY REVIEW STRUCTURE, SIZE AND
COMPOSITION OF THE BOARD
• KEEP UNDER REVIEW THE LEADERSHIP NEEDS
OF THE ORGANISATION
• GIVE FULL CONSIDERATION TO SUCCESSION
PL ANNING FOR DIRECTORS AND OTHER
SENIOR EXECUTIVES
• IDENTIF Y AND NOMINATE TO THE BOARD
CANDIDATES TO FILL BOARD VACANCIES
• MAKE RECOMMENDATIONS TO THE BOARD
REGARDING THE RE-APPOINTMENT OF
NON-EXECUTIVE DIRECTORS AT THE END OF
THEIR TERM OF OFFICE
• MAKE RECOMMENDATIONS TO THE BOARD
REGARDING THE ANNUAL RE-ELECTION OF
DIRECTORS BY SHAREHOLDERS
• ENSURE THAT FAILURE IS NOT REWARDED
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EF F EC T I V ENESS
• REVIEW THE RESULTS OF THE BOARD
PERFORMANCE EVALUATION PROCESS THAT
REL ATE TO THE COMPOSITION OF THE BOARD
• REVIEW ANNUALLY THE TIME REQUIRED
FROM NON-EXECUTIVE DIRECTORS
CORPORATE GOVERNANCE REPORT
CONTINUED
AUDI T A ND RISK COMMI T T EE REPOR T
MEMBERSHIP A ND MEE T INGS
DE A R SH A REHOL DER ,
The Audit and Risk Committee currently comprises two independent
Non-Executive Directors: Bob Singer (Chairman) and David Poulter.
On behalf of the Board, I am pleased to present the Company’s first
Audit and Risk Committee report. Following the announcement that
Judith Sprieser was stepping down from the Board for personal
reasons, I have been asked to fulfil the role of Chairman of the Audit
and Risk Committee, having been a member of the committee since
the IPO and having been closely involved in all aspects of the
Committee’s work to date. The Audit and Risk Committee is responsible for establishing,
monitoring and regularly reviewing the Company’s internal controls
and risk management framework, as well as overseeing the work of
the external auditor. The Audit and Risk Committee has met three
times so far since the IPO, focused primarily on setting the internal
audit plan for 2015, establishing key policies and procedures in
support of the control environment and the audit and approval
of the 2014 Annual Report and Financial Statements.
I would like to thank Judith for the support she has given to the
Committee since IPO and look forward to reporting back to you next
year with the progress of the Committee.
Further details on the activities of the Committee during the year and
how it discharged its responsibilities are provided in the report below.
All members of the Committee have recent and relevant financial
experience. Bob Singer is currently Chairman of the Audit Committee
of Mead Johnson Nutrition, Coty Inc., and Tiffany and Co., having
previously been CFO of Gucci Group. David Poulter has held previous
roles as Head of Internal Audit and Senior Vice President, Finance at
Reckitt Benckiser Group PLC and is a Chartered Accountant and
member of the finance committee of Save the Children UK.
The Audit and Risk Committee will meet as often as it deems
necessary but in any case at least four times a year, with meetings
scheduled at appropriate intervals in the financial reporting cycle.
Additional meetings are held as required. The Audit and Risk
Committee met once between Admission in October and the
year end. A further two meetings have been held since year end.
All members of the Committee were present at all meetings.
Only members of the Committee have the right to attend meetings.
However, standing invitations are extended to the CFO and Internal
Audit Manager. Other non-members may be invited to attend
all or part of any meeting as and when appropriate. Fabio Fusco
(Non‑Executive Director) acts as secretary to the Committee. The
external auditor attends all meetings and also meets in private with
the Committee on each occasion. In addition the Chairman of the
Audit Committee will have regular contact with the external and
internal auditors throughout the year.
BOB SINGER
AUDI T A ND RISK C OMMI T T E E CH A IR M A N
ROL E OF T HE AUDI T A ND RISK COMMI T T EE
The Board has delegated to the Committee responsibility for
overseeing the internal financial controls and financial reporting of the
Company and its subsidiaries, reviewing the Group’s internal control
and risk management systems and for maintaining a proper
relationship with the external auditor. The Committee’s specific
responsibilities are set out in its terms of reference which were
adopted in October 2014. These are available on the Company’s
website, and are summarised below.
T HE AUDI T A ND RISK COMMI T T EE K E Y RESPONSIBIL I T IES
E X T ERN A L AUDI T
IN T ERN A L AUDI T
• RECOMMEND THE APPOINTMENT,
RE-APPOINTMENT OR REMOVAL OF
THE EXTERNAL AUDITOR
• APPROVE APPOINTMENT OR
REMOVAL OF THE OF INTERNAL
AUDIT MANAGER
• ENSURE THE AUDIT CONTRACT IS
PUT OUT TO TENDER AT LEAST
EVERY TEN YEARS
• MONITOR AND REVIEW
EFFECTIVENESS OF INTERNAL AUDIT
• OVERSEE THE REL ATIONSHIP,
APPROVE TERMS OF ENGAGEMENT
AND REVIEW INDEPENDENCE AND
OBJECTIVIT Y OF THE EXTERNAL
AUDITOR
• REVIEW AND APPROVE THE ANNUAL
AUDIT PL AN AND REVIEW THE
FINDINGS OF THE AUDIT WITH THE
EXTERNAL AUDITOR
• MEET REGUL ARLY WITH THE
EXTERNAL AUDITOR WITHOUT
MANAGEMENT PRESENT
• DEVELOP POLICY ON THE SUPPLY OF
NON-AUDIT SERVICES
• REVIEW AND ASSESS THE INTERNAL
AUDIT PL AN
F IN A NCI A L A ND
N A RR AT I V E REPOR T ING
• MONITOR THE FINANCIAL
REPORTING PROCESS AND THE
INTEGRIT Y OF THE FINANCIAL
STATEMENTS
• REVIEW AND REPORT TO THE BOARD
ON SIGNIFICANT FINANCIAL ISSUES
AND JUDGEMENTS
• ENSURE ACCESS OF INTERNAL
AUDIT TO THE BOARD AND
COMMIT TEE CHAIRMEN
• REVIEW AND CHALLENGE
ACCOUNTING POLICIES, METHODS
USED TO ACCOUNT FOR SIGNIFICANT
OR UNUSUAL TRANSACTIONS,
ENSURE CL ARIT Y AND
COMPLETENESS OF DISCLOSURE
• REVIEW MANAGEMENT’S
RESPONSIVENESS TO INTERNAL
AUDIT FINDINGS
• ASSESS THE EFFECTIVENESS OF THE
GROUP’S FINANCIAL REPORTING
PROCEDURES
• MEET WITH INTERNAL AUDIT
WITHOUT MANAGEMENT PRESENT
AT LEAST ONCE A YEAR
• WHERE REQUESTED BY THE BOARD,
ADVISE WHETHER THE ANNUAL
REPORT IS FAIR, BAL ANCED AND
UNDERSTANDABLE
• CONSIDER AND APPROVE THE REMIT
OF THE INTERNAL AUDIT FUNCTION
IN T ERN A L
CON T ROL S A ND
RISK M A N AGEMEN T
SYS T EMS
• KEEP UNDER REVIEW THE ADEQUACY
AND EFFECTIVENESS OF THE
GROUP’S INTERNAL FINANCIAL
CONTROLS AND INTERNAL CONTROL
AND RISK MANAGEMENT SYSTEMS
• KEEP UNDER REVIEW THE POLICIES
AND OVERALL PROCESS FOR
IDENTIF YING AND ASSESSING
BUSINESS RISKS AND MANAGING
THEIR IMPACT
• CONSIDER AND REVIEW AREAS OF
SPECIFIC RISK
• REVIEW AND APPROVE THE
STATEMENTS IN THE ANNUAL
REPORT CONCERNING INTERNAL
CONTROLS AND RISK MANAGEMENT
SYSTEMS
• OVERSEE AND ADVISE THE BOARD
ON THE CURRENT RISK EXPOSURES
OF THE COMPANY AND FUTURE RISK
STRATEGY
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W HIS T L EBL OW ING,
F R AUD A ND BRIBERY
• REVIEW THE ADEQUACY AND
SECURIT Y OF WHISTLEBLOWING
ARRANGEMENTS
• REVIEW POLICIES AND PROCEDURES
FOR DETECTING FRAUD AND ITS
SYSTEMS AND CONTROLS FOR
PREVENTING BRIBERY AND MONEY
L AUNDERING, ITS CODE OF
CORPORATE CONDUCT AND
BUSINESS ETHICS
IN T ERN A L AUDI T
NON-AUDI T SE R V ICE S
Internal audit services are provided by JAB Luxury under an Advisory
Services Agreement dated 13 August 2014. The role of these internal
audit services is to determine whether the Group’s network of risk
management, control and governance processes are adequate and
functioning appropriately.
The engagement of the external audit firm to provide non-audit
services to the Group can impact on the independence assessment.
The Group has therefore established a policy governing the provision
of any such non-audit services. The policy specifies services which
cannot be carried out by the external auditor (generally activities
that would involve the external auditor taking on management
responsibility) and sets the framework within which non-audit
services may be provided. All requests to utilise the external auditors
for non-audit services must be reviewed by the CFO and above a
certain limit must be subject to competitive tender and be approved
by the Audit and Risk Committee.
At its meeting in December 2014 the Committee also approved the
annual internal audit plan for 2015 which identified areas of focus
for the year. Outcomes of the work of internal audit will be reported
to the Audit and Risk Committee and the Group’s management
with responsibility for any improvement or remedial action allocated
appropriately. The internal audit function will carry out follow up
reviews to ensure that any control weaknesses are addressed.
During 2014, KPMG LLP were engaged to provide non-audit services
to the Group. These included acting as Reporting Accountant to the
Group in connection with the IPO and the provision of tax advisory
services. KPMG LLP were appointed as Reporting Accountants
following a competitive tender process. In approving the use of
KPMG LLP to provide these services, the Board took the view that
KPMG LLP’s knowledge of the Company and its operations meant
that it was best placed to provide the services, and was comfortable
that KPMG LLP’s independence would not be compromised. The
fees paid to KPMG LLP in respect of non-audit services during the
year totalled £1.7m which is in excess of the total audit fee of £0.2m.
The majority of the non-audit fees incurred during the year, £1.3m,
were in connection with the IPO and are therefore inherently one-off
in nature. In addition, the Group incurred £0.2m of tax advisory fees
in connection with the redesign of the Group’s supply chain which
is also considered to be one-off in nature.
The Audit and Risk Committee will receive regular reports from
the internal audit function during 2015 which will include progress
updates against the approved internal audit plan. The Committee
will use these reports as the basis for its assessment of the
effectiveness of the internal audit function during 2015, as well
as monitoring the relationship between the internal audit function
and the Group’s management.
E X T E R N A L AUDI T OR
The Committee is responsible for overseeing the Group’s relationship
with its external auditor, KPMG LLP. This includes the ongoing
assessment of the auditor’s independence and the effectiveness
of the external audit process, the results of which inform the
Committee’s recommendation to the Board as to the auditor’s
appointment (subject to shareholder approval) or otherwise.
The Committee assesses the independence of the external auditor
and the effectiveness of the external audit process before making
recommendations to the Board in respect of their appointment
or re-appointment.
A PP OIN T ME N T A ND T E NUR E
KPMG LLP was first appointed as the external auditor of the Group in
2011. The current audit partner, Wayne Cox, has been in place since
the appointment of KPMG LLP.
In assessing independence and objectivity, the Committee considers
the level and nature of services provided by the external auditor
as well as the confirmation from the external auditor that it has
remained independent within the meaning of the APB Ethical
Standards for Auditors. The Committee’s assessment of the external
auditor’s independence took into account the non-audit services
provided during the year. The Committee concluded that the
nature and extent of the non-audit fees did not compromise
the independence of the auditor, given the one-off nature of
the majority of services provided.
The audit partner is required to rotate every five years. As Wayne Cox
is retiring from KPMG LLP this year, a new audit partner will be
selected for the 2015 audit. In accordance with the Code, the
Committee intends to put the external audit out to tender at least
every ten years. There are no contractual obligations that act to
restrict the Audit and Risk Committee’s choice of external auditor.
Having reviewed the auditor’s independence and performance
the Audit and Risk Committee recommends that KPMG LLP be
re-appointed as the Company’s auditor at the next annual
general meeting.
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CORPORATE GOVERNANCE REPORT
CONTINUED
SIGNIF IC A N T IS SUE S
Significant issues and accounting judgements are identified by the finance team and through the external audit process and are reviewed by
the Audit and Risk Committee. The significant issues considered by the Committee in respect of the year ended 31 December 2014 are set
out below:
Risk area
Significant issues and judgements
How the issues were addressed
Revenue
recognition
Revenue is a key performance indicator of the
Group. Whilst the Group’s revenue recognition
policies are not complex, the Group’s revenue is
comprised of a high volume of transactions. The
maintenance of an effective control environment,
particularly within our retail channel which accounts
for 64.4% of total revenue, is therefore fundamental
to ensuring appropriate revenue recognition.
Controls relevant to the retail channel are formally
documented within the retail excellence manual
that was implemented within each store throughout
the year. The accounting policies for revenue
are set out in note 1 to the financial statements
and are unchanged from previous periods.
The Audit and Risk Committee considered reports
prepared by Internal Audit during the year, particularly
where there has been a change in the control
environment following the transition to SAP and noted
no significant issues with respect to the operation
of the controls around revenue recognition.
The Audit and Risk Committee also considered a report
from the external auditor, which commented, inter alia,
on revenue recognition.
Identification
and disclosure of
exceptional items
The Group is undergoing a significant
transformation programme in connection with
which the Group has incurred a significant degree
of costs that are considered to be exceptional
in nature as they are unrepresentative of the
underlying operating performance of the Group.
Further details of these costs are provided
in note 5 to the financial statements.
The Audit and Risk Committee has discussed the nature
of these costs with management and the external auditor.
The Audit and Risk Committee are of the view that these
costs warrant separate disclosure on the face of the
consolidated income statement by virtue of the fact they
are not representative of the underlying performance of
the Group. The Audit and Risk Committee consider that
separate disclosure of exceptional costs will aid investors
in evaluating the performance of the business in the year.
Residual value
of key money
Judgement is required in estimating the residual value
of key money paid to outgoing tenants to secure a
leasehold property. In certain locations, the residual
value of key money is considered to be equal to cost;
either due to legal protection offered to tenants in
that jurisdiction or because it is common practice to
at least recover the amounts paid at the end of the
lease due to the existence of an active market for
operating leases in premium luxury retail locations.
The Audit and Risk Committee has reviewed and
challenged the key assumptions used in assessing
the residual value of key money. The Audit and Risk
Committee requested management to provide an in
depth analysis of the valuation assumptions applied by
location in order to consider the application of the agreed
approach. Following review, the Audit and Risk Committee
concluded that the judgements applied were appropriate
in preparing the financial statements for the year.
When considering the financial statements, the Committee also considered the issues included in the Group’s critical accounting policies,
which are set out in note 2 to the financial statements. Having discussed these matters with management and the external auditor the
Committee has satisfied itself that such risks are being appropriately managed, the judgements made are reasonable and they are being
accounted for in accordance with the relevant accounting standards and principles.
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The Board retains ultimate responsibility for setting the Group’s
risk appetite, identification of key risks and ensuring that there is
an effective risk management framework to maintain levels of
risk within the risk appetite. The Board has however delegated
responsibility for oversight of the Group’s risk appetite, risk
monitoring and reviewing areas of specific risk to the Audit and Risk
Committee as well as ensuring sufficient mitigating actions are taken.
The Committee will provide oversight and advice to the Board on
current risk exposures and future risk strategy. Further details of the
Group’s risk management approach, structure and principal risks are
set out in the Strategic Report on pages 15 to 40.
FA IR , B A L A NCE D A ND UNDE R S TA NDA BL E
At the request of the Board, the Audit and Risk Committee has
conducted a review of the Annual Report and Financial Statements
to assess whether it presents a fair, balanced and understandable
view of the Company’s position and prospects. The Committee’s
review took account of the process by which the Annual Report
and Financial Statements is prepared which includes detailed project
planning, analysis of changes to applicable reporting requirements
and standards, and a robust programme of review and verification
at various levels of the business and by external advisers to ensure
accurate reporting.
F IN A NCI A L A ND BUSINESS REPOR T ING
The Committee is satisfied that the Annual Report and Financial
Statements is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Company’s
position and performance, and has advised the Board accordingly.
The Board is committed to ensuring that all external financial
reporting presents a fair, balanced and understandable assessment
of the Group’s position and prospects. Under the Schedule of
Reserved Matters, the Board has responsibility for the approval
of all externally published information including, but not limited
to, annual and half-yearly financial statements, regulatory news
announcements and publications required by regulators or to
satisfy statutory requirements.
S YS T E MS OF IN T E R N A L C ON T ROL A ND RISK M A N AGE ME N T
The Group has in place a comprehensive financial review cycle,
which includes a detailed annual budgeting and forecasting process.
The budget is prepared annually for approval by the Board and is
regularly reviewed and updated during the year at key points of the
business calendar. Performance is monitored against the budget
through weekly and monthly reporting cycles. During the financial
year under review regular reports on performance, including income
statements, balance sheets, cash flow statements and key ratios,
were provided to the Board. In respect of external financial reporting,
the Group finance team is responsible for preparing the Group
financial statements and there are well established controls over
the financial reporting process.
RE V IE W OF EF F EC T I V ENESS OF IN T ERN A L F IN A NCI A L CON T ROL S
As part of preparing for operating in a listed environment, a review of
the existing controls in place was performed and additional controls
were implemented to ensure compliance with the UK Corporate
Governance Code. The directors confirm that these processes have
been in place since the date of Admission and up to the date of
approval of the Annual Report and Financial Statements.
As such the directors confirm that they have reviewed the
effectiveness of the system of internal controls for the period under
review and to the date of approval of the Annual Report and Financial
Statements. The Board receives regular reports from the Audit and
Risk Committee on its activities, including the Audit and Risk
Committee’s review of reports prepared by internal audit on the
operation and efficacy of internal controls systems.
The Group has defined and formally documented the core elements
of the system of internal control at a store, channel and Group level.
Policies and procedures and clearly defined levels of delegated
authority have been communicated across the Group. Management
has identified the key operational and financial processes which exist
within the business and implemented internal controls over these
processes in addition to the higher level review and authorisation
based controls. The control environment is communicated to staff
through three key documents:
However, such a system is designed to manage rather than eliminate
the risk of failure to achieve business objectives and can provide only
reasonable and not absolute assurance against material misstatement
or loss.
• the Group’s internal governance rules, which set out policies for
delegation of authority within the business, including contract
approval and signing limits for all types of expenditure;
• the retail excellence manual detailing controls at store level; and
• the internal control system documentation which describes
controls over key processes such as financial reporting,
receivables and payables management.
T RE ASURY OPER AT IONS
The Company adopted a treasury policy prior to Admission which
sets the Group’s approach to the management of risks from treasury
operations. This policy will be reviewed annually by the Board.
W HIS T L EBL OW ING
The Company has implemented a whistleblowing policy following
Admission. The Audit and Risk Committee is responsible for
monitoring the Group’s whistleblowing arrangements and the policy
will be reviewed periodically by the Board. The Group is confident
that these arrangements will be effective, facilitate the proportionate
and independent investigation of reported matters, and allow
appropriate follow up action to be taken.
The Group has continued to develop its governance arrangements
since Admission which has included the enhancement of various
policies and procedures to support the systems of internal control
and risk management. The Audit and Risk Committee has been
central to this process, in particular in the drafting and review of a
number of updated or new policies, which have subsequently been
approved by the Board, covering:
•
•
•
•
anti-bribery and corruption policy;
whistleblowing policy;
risk framework and risk register; and
disaster recovery arrangements.
These policies will be subject to periodic review.
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REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
• The annual bonus is based predominantly on financial
performance conditions designed to reward the delivery of the
Group’s strategy of pursuing growth without compromising the
brand. For 2015, the annual bonus will be subject to three key
performance metrics:
DE A R SH A REHOL DER
On behalf of the Board, I am pleased to present our first
remuneration report for the financial year ended 31 December
2014. This has been prepared in accordance with the provisions of
the Companies Act 2006 and Schedule 8 of the Large and Medium
sized Company and Groups (Accounts and Reports) (Amendment)
Regulations 2013.
(1)A revenue growth metric – to support the long-term growth
strategy of the business and the sustainability of the brand;
(2 A profit growth metric – to ensure that any growth delivers
appropriate returns to shareholders; and
(3)A cash conversion metric – to ensure that the business is
delivering sufficient cash returns to cover its operating costs.
In line with the regulations, this Directors’ Remuneration Report has
been split into three parts:
• This Annual Statement;
• The Remuneration Policy Report – which sets out the Directors’
Remuneration Policy of Jimmy Choo PLC. This will be subject to
a binding vote at our 2015 Annual General Meeting (“AGM”); and
• The Annual Remuneration Report – which sets out details
on how the Directors’ were remunerated in the period to
31 December 2014, and how the policy will be implemented
in 2015. This will be subject to an advisory vote at our
2015 AGM.
• A long-term incentive, which is the primary tool to be used to
drive the long-term business strategy and align the interests of the
management team with those of the Company’s shareholders.
To ensure that the long-term incentive plan achieves its primary
objectives and to ensure that it acts as a strong motivation and
retention tool, we have considered it appropriate for awards under the
plan to be subject to an extended vesting period (whereby no value
is received unless the participant remains in employment for a period
of at least five years from the date of grant) only. We believe that
management continuity, in particular in an industry where the
management team is synonymous with the products developed
and the brand vision, is key to delivering long-term returns
for shareholders.
REMUNER AT ION PHIL OSOPH Y
As set out in the Company’s prospectus, the remuneration package
for our Executive Directors has been designed based on the
following key principles:
• Fixed remuneration should be set at a suitable level to attract
and retain executives with the required calibre to run a company
with the size and growth profile of the Company. Base salaries
are generally targeted around market median of a suitable
peer group.
• Variable remuneration, in particular long-term incentives, should
form a significant part of the remuneration package to encourage
a high-performance culture and to ensure that the interests of
executives are strongly aligned with those of the Company’s
shareholders.
• In line with the above, the total target cash remuneration
opportunity for Executive Directors (fixed remuneration and
target annual bonus) is set at around the market median of a
suitable peer group. The total remuneration opportunity for
Executive Directors (fixed remuneration, annual bonus and
long-term incentives) is targeted at around the upper quartile
of a suitable peer group.
We appreciate that operating a long-term incentive plan that is not
subject to forward looking performance conditions is not common
practice compared to other FTSE listed companies, however, we
strongly believe that granting awards subject to an extended vesting
period rather than granting awards which are subject to performance
over a shorter period (i.e. three years from the date of grant), is more
likely to drive behaviours that are in the interests of long-term value
creation for shareholders.
To emphasise the link between the management team and
shareholders, the Committee also encourages the Executive
Directors to build up significant shareholdings in the Company.
Executive Directors are therefore expected to build up a significant
shareholding in the Company over the seven years following
Admission. The shareholding guideline for Pierre Denis is 500%
of base salary and for Jonathan Sinclair is 200% of base salary.
In recognition of our remuneration philosophy, the variable
remuneration arrangements for our Executive Directors are made
up of an appropriate balance of both short and long-term incentives
to ensure that our Executive Directors are focused on delivering
both annual as well as long-term returns for shareholders.
Following the grants that were made to the Executive Directors
shortly after Admission of the Company, there is currently no
intention for them to participate in the long-term incentive plan
in 2015.
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2 0 14 PERF ORM A NCE A ND REMUNER AT ION OU TCOMES
2014 represented a strong year of performance for Jimmy Choo PLC,
its first year as a publicly listed company. Particular highlights for
2014 include:
• revenue of £299.7m, which were up 6.4% on 2013;
• 7.2% growth in Adjusted EBITDA to £50.2m;
• opening a net nine new stores and extension of our new store
concept to 15 stores;
• continuing rollout of SAP and shared services around
Jimmy Choo;
• consolidation of Choo 24:7 and successful launch of CHOO.08°;
and
• important development of our online and men’s businesses.
In light of the level of performance achieved in 2014 against
objectives that were set prior to the IPO, the Remuneration and
Nominations Committee approved bonus payments of c.43% of
salary to the CEO and c.30% of salary to the CFO, pro-rated for time
based on his period of employment during the year. Further details
on performance against the targets are set out on page 69.
As noted above, the long-term incentive plan for the Executive
Directors are not subject to forward looking performance conditions.
As required under the regulations, the single figure table therefore
includes the face value of shares awarded shorty following
Admission. The Executive Directors have not received any value from
these awards at this stage, as they are subject to extended continued
employment requirements. Should an Executive Director leave the
Company prior to vesting, unless otherwise determined by the
Committee, these awards would be forfeit.
I hope that you find the Remuneration Report helpful, clear and
informative and I hope you will support the resolutions to approve the
Directors remuneration policy and the Remuneration Report at the
2015 AGM.
BA R T BECH T
CH A IR M A N OF T HE R E MUNE R AT ION A ND NOMIN AT IONS C OMMI T T E E
18 March 2015
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REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
REMUNER AT ION POL ICY REPOR T
The following sets out the Remuneration Policy (the “Policy”) for Directors of the Company. This Policy will be put forward for shareholder
approval at the 2015 AGM in accordance with section 439A of the Companies Act 2006. Subject to shareholder approval, this Policy will
apply to payments made on or after the date of the 2015 AGM (27 May 2015) and will be effective for three years.
E X ECU T I V E DIREC TORS
The remuneration of the Executive Directors is set by the Remuneration and Nominations Committee (the Committee) under delegated
powers from the Board.
P OL IC Y TA BL E
Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Base salary
To recognise the
responsibilities, experience
and ability of our talent
in a competitive global
environment, keeping
our people focused
on, and passionate
about, the brand.
The Committee sets base
salaries within the same
framework as those for all
other employees taking
into account a range of
factors, including:
Salaries for Executive
Directors are targeted
at around the median
for competitors.
N/A
• the individual’s skills,
performance and
experience;
• their overall contribution
to the business during
the year;
• the cost to the Company;
• salary increases
awarded across the
Group as a whole;
• the external economic
climate; and
• external benchmark data
at other global
companies of similar
size and/or global reach
within relevant sectors
and/or companies with
a high growth profile.
Base salaries are normally
reviewed, although not
necessarily increased,
annually. Base salaries
may be reviewed more
frequently at the discretion
of the Committee.
The Committee considers
the impact of any base
salary increase on the total
remuneration package.
Pension
To offer market competitive
retirement benefits,
to recruit and retain
appropriate talent to
lead the business.
Executive directors may
receive contributions into
a defined contribution
arrangement, as a
cash allowance or as a
combination thereof.
Base salary is the only
element of remuneration
that is pensionable.
Whilst there is no
maximum salary, any
increases will normally be
in line with the range of
increase for all employees
across the Group.
The Committee retains
the flexibility to award
increases above this level
in certain circumstances,
for example:
• to reflect the individual’s
development and
performance in the role;
• to reflect a significant
increase in the
individual’s role or
responsibility; and
• where a new recruit or
promoted employee’s
salary has been set
lower than the market
level for such a role and
larger increases are
justified in the
Committee’s opinion as
the individual becomes
established in the role.
Maximum Company
contribution: up to 25%
of salary per annum.
The company pension
contribution for the
executive directors
for 2015 is:
• CEO – €50,000 to the
Caisse des Français de
L’Etranger (or as a
cash allowance)
• CFO – up to 10%
of salary.
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N/A
Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Other benefits
and allowances
To promote the wellbeing of employees,
allowing them to focus
on the business.
Benefit levels are normally
reviewed on an annual
basis and the cost to the
Company of providing
benefits can vary due to
a number of factors.
The aggregate maximum
value of all other benefits
and allowances is not
normally anticipated to
exceed £200,000 per
individual per annum.
N/A
Benefits for Executive
Directors may include,
but are not limited to:
The Committee retains
the discretion to approve a
higher cost in exceptional
circumstances (e.g.
recruitment or relocation)
or in circumstances
where factors outside the
Company’s control have
changed materially (e.g.
increases in private medical
insurance premiums).
• private medical
insurance (including for
their spouse and for
dependant children);
• life assurance;
• long-term disability
insurance;
• car or car allowance;
• an allowance for school
fees for dependant
children;
• clothing allowance;
• employee discount;
• other benefits provided
to all employees across
the Group; and
• the Company paying any
tax or social security
contributions due on any
of the benefits.
Other benefits may be
provided, where the
Committee considers
this appropriate.
Reasonably incurred
expenses will also
be reimbursed.
The Committee may agree
that the Company will pay
additional allowances linked
to relocation or international
assignment where required.
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REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Annual Bonus
To reward Executive
Directors for achieving
annual financial targets or
other short-term objectives
linked to the strategic plan
agreed by the Board.
Awards are based on an
appropriate balance of
financial and non-financial
performance metrics.
The maximum opportunity
under the annual bonus
plan is 200% of salary in
respect of a financial year.
Performance targets are set
annually by the Committee.
The maximum bonus
opportunities for 2015 are:
Performance is measured
against a range of key
performance metrics,
determined on an annual
basis to ensure they remain
appropriate and are aligned
with the Group’s strategy.
At the end of the year, the
Committee determines
the extent to which the
performance targets have
been achieved. In doing so,
the Committee exercises
its judgement to ensure
that the outcomes are
fair in the context of the
underlying performance
of the Group as a whole.
Bonus pay-outs are in cash.
• CEO – 120% of salary.
• CFO – 50% of salary.
Bonus awards are subject
to clawback (details set
out later in this report).
The weighting between the
measures is determined on
an annual basis, however
at least 75% will be based
on measures relating to
financial performance.
Performance is measured
over 12 months.
For performance below
threshold, the bonus
payout is nil. For threshold
performance, the bonus
payout is 25% of maximum.
For target performance,
the bonus payout is up
to 75% of maximum.
For 2015, 100% of the
annual bonus opportunity
will be based on financial
performance metrics.
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Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Long-Term
Incentive Plan
To incentivise and reward
participants for the delivery
of long-term performance,
and align the interests
of Executive Directors
with our shareholders.
Under the long-term
incentive plan, awards
of shares may be
granted, which normally
vest subject to the
continued employment
of the participant for a
five-year period from
the date of grant.
The Committee calibrates
long-term incentive share
awards for participants as
a fixed number of shares.
Vesting of awards is subject
to continued employment.
Long-term incentive awards
are normally granted in
the form of conditional
shares or options with a
total exercise price of £1
(or such higher amount
as determined by the
Committee at grant). They
may however be awarded
in other forms if it is
considered appropriate.
Unvested awards are
subject to malus (details
set out later in this report).
Dividend equivalents may
accrue over the five-year
vesting period. These
will normally be paid in
shares on a cumulative
reinvestment basis.
The Committee will
determine annual award
levels for each of the
Executive Directors
taking into account its
philosophy that the total
compensation opportunity
for Executive Directors
should be positioned at
around the upper quartile
of an appropriate peer
group (as determined
by the Committee).
The maximum award to
any individual in respect
of any one financial year
will be over no more than
2,500,000 shares. Details
of the awards in respect
of each financial year will
be disclosed in the Annual
Report on Remuneration.
The Committee may
adjust and amend
awards in accordance
with the plan rules.
NO T E S T O T HE P OL IC Y TA BL E
DISC R E T ION T O HONOUR A L L P RIOR C OMMI T ME N T S
The Committee reserves the right to make any remuneration payments and payments for loss of office where the terms were agreed before
this Policy came into effect or prior to an individual being appointed a director of the Company and the payment was not in consideration for
the individual becoming a director of the Company.
For these purposes ‘payments’ include the Committee satisfying awards of variable remuneration and, in relation to an award over shares
(including awards granted prior to and shortly after Admission of the Company (including the JC PLC Share Award and the One-Off Share
Award as detailed below)), in line with the terms of the payment that were agreed at the time the award was granted.
JC P L C SH A R E AWA R D
Prior to Admission, a co-investment plan was operated which required executives to invest in shares of Choo Luxury Holdings Limited. In
return for the participant’s investment in these shares, they were granted matching phantom (i.e. cash settled) options which participated in
the growth in the value of the company from the date of the investment to the end of the vesting period.
On Admission of the Company, participants exercised a portion of their phantom options. The remaining phantom options were surrendered
by participants. Following Admission of the Company, participants were granted awards in the form of an option with a nominal total exercise
price of £1 or conditional share awards. The number of shares awarded was linked to the Black-Scholes value of the phantom options
surrendered. These awards will normally become exercisable (or will vest) in equal tranches in July 2016, July 2017 and July 2018 subject to
the participant’s continued employment with the Group. Details of the outstanding awards made to the CEO under the plan are set out in the
Annual Remuneration Report.
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REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
ONE - OF F SH A R E AWA R D
P E R F OR M A NCE ME A SUR E S A ND A PP ROACH T O TA R GE T SE T T ING
Following Admission of the Company, selected senior management
and the Executive Directors of the Company were granted a one-off
award in the form of an option with a nominal total exercise price
of £1 or conditional shares, which normally vest 50% on the fifth
and 50% on the sixth anniversary of the date of grant subject
to the participant’s continued employment with the Group.
The CFO’s award vests in equal tranches on the fourth, fifth
and sixth anniversary of the date of grant, subject to his continued
employment with the Group. Details of the outstanding awards
made to Executive Directors under the plan are set out in the
Annual Remuneration Report.
The performance measures for the annual bonus are set by the
Remuneration and Nominations Committee on an annual basis
to reflect the Group’s financial objectives for any given year.
The performance targets applied to the annual bonus are
reviewed annually, based on a number of internal reference
points (including the budget for the financial year and prior year
performance) and external reference points (including consensus
forecasts, forecasts for the wider luxury industry as well as
the wider economic environment).
The Committee believes that the pay-outs under the bonus plan
should only be received for out-performance. Given the level of
stretch in the performance targets for the annual bonus at all levels,
the Committee considers it appropriate to set pay-outs for “target”
performance at up to 75% of the maximum. Maximum awards will
only be earned where the performance of the Group has significantly
exceeded expectations.
R E MUNE R AT ION A ND NOMIN AT IONS C OMMI T T E E DISC R E T ION IN
R E L AT ION T O F U T UR E OP E R AT ION OF T HE R E MUNE R AT ION P OL IC Y
In the event of a variation of share capital, demerger, dividend in
specie, special dividend or similar event, the Committee may adjust
or amend awards in accordance with the rules of the relevant plan.
If the Company has been or will be affected by a demerger, dividend
in specie, special dividend or other transaction which will affect the
current or future value of the Company’s shares, awards may vest to
the extent the Committee determines, which may include awards
being time pro-rated if the Committee considers it appropriate.
The following sets out the performance measures that will be used
for the annual bonus for 2015:
ME ASURES • revenue growth;
• net income growth; and
• reduction in net working capital as a percentage of revenue.
The Committee retains the discretion to amend performance targets
in exceptional business or regulatory circumstances or to vary such
targets if acting fairly and reasonably if it considers it appropriate to
do so. If discretion is exercised in this way the Committee may
consult with major shareholders as appropriate.
WHY
The measures were chosen to support the Company’s key financial
objectives for 2015 of:
The Committee may make minor amendments to the Policy (for
example for regulatory, exchange control, tax or administrative
purposes or to take account of a change in legislation) without
obtaining shareholder approval for that amendment.
• growth;
• margin expansion; and
• strong cash flow generation.
M A L US
L ONG-T E R M INCE N T I V E AWA R DS A ND SH A R E HOL DE R A L IGNME N T
Under the malus provision, the Committee can reduce awards that
have not yet vested. Malus may apply where stated in the Policy
table above.
The Committee believes that the long-term incentive plan should
primarily be used as a tool to align the interests of the management
team with those of the Company’s shareholders.
The circumstances in which malus would apply are set out below:
In order to achieve this primary objective and to ensure that the
long-term incentive plan acts as a strong motivation and retention
tool, encouraging individuals to remain in long-term employment with
the Company, the Committee considers it appropriate to grant
long-term incentive awards that are subject to an extended vesting
period (i.e. five years from the date of grant) rather than granting
awards which are subject to performance over a shorter period (i.e.
three years from the date of grant), which the Committee considers
may drive shorter-term behaviours.
• where there has been a material misstatement of the Company’s
Annual Report and Financial Statements for the financial year
during which the award was granted and/or for any subsequent
financial year ending before either the last date when the award
becomes exercisable or the final vesting date;
• where there has been serious reputational damage to the Company
as a result of the participant’s actions or the actions of a member of
the team for which the participant is directly responsible;
• where the participant has deliberately misled the Company, the
Company’s shareholders or the market regarding the Company’s
financial performance; or
• gross misconduct.
To emphasise the link between the management team and
shareholders, the Committee also encourages the Executive
Directors to build up significant shareholdings in the Company.
Executive Directors are therefore expected to build up a significant
shareholding in the Company over the seven years following
Admission. The shareholding guideline for the CEO is 500%
of base salary and for the CFO is 200% of base salary.
CL AW B ACK
The Committee can reclaim bonus payments made from 2016
onwards, for a period of up to two years post the payment date
in the following circumstances:
• where there has been a material misstatement of the Company’s
Annual Report and Financial Statements for the financial year to
which the bonus payment relates; or
• gross misconduct.
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SCE N A RIO CH A R T S
The regulations require the inclusion of a scenario chart which sets out what each of the Executive Directors could receive for varying levels
of performance in respect of the first year in which the Policy is to be effective.
As set out in the Company’s Prospectus, the Committee does not currently intend to grant a long-term incentive award in respect of 2015
and as such no determination has yet been made on the number of shares that would be granted to each of the Executive Directors under
the long-term incentive plan. The following chart therefore only includes the value of base salary, pension, other benefits and allowances
and the annual bonus.
CEO SCEN A RIO CH A R T
T HR E SHOL D
CF O SCEN A RIO CH A R T
10 0 %
TA R GE T
60%
M A X IMUM
53%
F I X E D PAY
£0.89M
T HR E SHOL D
£ 1. 47 M
TA R GE T
82%
£ 1. 6 7 M
M A X IMUM
77%
40%
47 %
F I X E D PAY
A NNUA L R E WA R D
£0.59M
10 0 %
18 %
23%
£ 0 .7 2 M
£ 0 .7 6 M
A NNUA L R E WA R D
The above charts are based on the following assumptions:
• Below threshold is based on fixed pay only, which includes 2015 base salary, pension (assuming both of the Executive Directors
participate in the pension) and other benefits and allowances. For simplicity the normal maximum other benefit and allowances cap
of £200,000 has been used. It is noted that the actual level of benefits will vary by year.
• Target includes fixed pay (as noted above) and target bonus opportunity (75% of the maximum).
• Maximum includes fixed pay (as noted above) and the maximum bonus opportunity.
• The Committee does not currently intend to grant a long-term incentive award in respect of 2015. The value of long-term incentives
has therefore been excluded from the above.
• Awards granted shortly after Admission have also been excluded as these were one-off in nature.
REMUNER AT ION POL ICY F OR NON-E X ECU T I V E DIREC TORS
Purpose
Approach to fees
Chairman and Non-Executive Director – fees
To attract and retain high-calibre
Non-Executive Directors.
Fees are set at a market appropriate rate with reference to fees paid to other Non-Executive
Directors at companies of a similar size to the Company and to reflect the time commitment
and the personal contribution expected from Non-Executive Directors. Fees are normally
reviewed annually.
The remuneration of the Chairman is set by the Board based on a recommendation from
the Remuneration and Nominations Committee. The Chairman is paid a single fee for
all responsibilities.
The remuneration of the Non-Executive Directors is set by the Board based on a
recommendation from the Chairman. Non-Executive Directors are paid a basic fee for their
role. Additional fees may be paid for additional board duties such as chairmanship of a
committee and the Senior Independent Director role.
Fees are paid in cash. Non-Executive Directors and the Chairman are expected to invest
50% of their net of tax fees in the Company’s shares. Any investment at Admission is
recognised as a prepayment of such investment of fees.
Fees paid are subject to a maximum cap which is stated in the Company’s Articles of
Association. Any changes in this would be subject to shareholder approval.
Chairman and Non-Executive Directors –
other benefits
To enable the Chairman and
Non-Executive Directors to
undertake their roles.
Reasonably incurred expenses will be reimbursed. Additional fees or benefits may be
provided, where appropriate, at the discretion of the Board.
The Chairman and Non-Executive Directors are not eligible to participate in any incentive
arrangements operated by the Company.
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REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
R E MUNE R AT ION P OL IC Y F OR NE W HIR E S
NON-E X EC U T I V E DIR EC T OR S
The Committee aims to attract, motivate and retain an Executive
Director with the required expertise to develop and deliver the
business strategy, while at the same time ensuring that the
remuneration arrangements offered are in the best interests
of both the Company and its shareholders.
If a new Chairman or Non-Executive Director is appointed,
remuneration arrangements will normally be in line with
those detailed in the remuneration policy for Non-Executive
Directors above.
SE R V ICE C ON T R AC T A ND E X I T PAY ME N T P OL IC Y
E X EC U T I V E DIR EC T OR S
In determining the appropriate remuneration arrangements for a new
recruit, the Committee will take into account all relevant factors,
including but not limited to, the individual’s skills and expertise, local
market practice, appropriate market data, and the individual’s existing
remuneration package.
Executive Director service agreements, including for early
termination, are carefully reviewed by the Committee. The
Committee does not believe that there should be any element
of reward for failure.
The Committee’s approach to termination payments is to consider
each case on an individual basis taking into account any preestablished contractual agreements (including the provisions of any
incentive plans), the performance and conduct of the individual and
the commercial justification for any payments.
In cases of hiring a new recruit to the Board (including an internal
promote), the Committee will ensure that the remuneration
arrangements are in line with the approved remuneration policy and
all its elements as set out in the table above. The ongoing annual
remuneration arrangements for new Executive Directors will
therefore comprise:
The key terms and conditions of the current Executive Directors,
as stipulated in their service agreements are set out below:
• base salary;
• suitable pension and other benefits and allowances (which may
include a relocation allowance where the Committee considers
it appropriate);
• an annual bonus opportunity; and
• a long-term incentive award.
NOTICE PERIOD
• Each Executive Director’s service agreement is terminable by
the Executive Director on six months’ written notice.
• The Company may terminate Pierre Denis’ service agreement
on twelve months’ written notice.
• The Company may terminate Jonathan Sinclair’s service
agreement on six months’ written notice.
• For new appointments the Committee’s policy is that Executive
Director service agreements will provide up to twelve months’
notice by the Company and up to twelve months’ notice by the
Executive Director.
The maximum ongoing level of annual variable remuneration which
may be awarded to a new executive shall therefore be limited to the
levels set out in the Policy table (i.e. 200% of salary for the annual
bonus and 2,500,000 shares under the long-term incentive plan) for
Executive Directors, excluding buy-out awards.
The Committee retains the flexibility to undertake the following
actions, as appropriate, in the best interests of the Company and
therefore shareholders:
TERMINATION PAY MENTS
• The Company is entitled to terminate each Executive Director’s
employment immediately and make a payment in lieu of notice
comprising the executive’s base salary in respect of the notice
period (or the remaining part of it) and a sum equal to the value of
other benefits during the notice period (or the remaining part of it).
• Alternatively, the Company may continue to provide Jonathan
Sinclair with his contractual benefits for the duration of what
would have been his notice period (or the remaining part of it).
• The Company may elect at its discretion to make the payment in
lieu as a lump sum or to pay half the payment in lieu as a lump
sum and to pay the second half subsequently in equal instalments.
• A duty to mitigate may apply to the payment in instalments.
• For external appointments, the Committee may offer additional
cash and/or share awards (‘buy-out’ awards) to take account of
remuneration relinquished when leaving a former employer. As far
as possible and appropriate, such payments would reflect the
nature, time horizons and performance requirements attaching to
the relinquished remuneration. Where appropriate, the Committee
retains the discretion to utilise Listing Rule 9.4.2 for the purpose
of making such an award.
• For an internal appointment, the Committee would honour any
contractual commitments made prior to their promotion to the
Executive Director level, even in instances where they would
not otherwise be consistent with the prevailing Policy at the time
of appointment.
• If necessary, the Committee may offer additional cash and/or
share based elements to secure an appointment, for which the
Committee has not set a maximum. The Committee would
determine the performance conditions and time horizons that
would apply to such awards at the time. The Committee would
provide full disclosure of the rationale for such an award in the
Directors’ Remuneration Report in the year following such
an award.
ANNUA L BONUS
• Where an Executive Director leaves office during the performance
period (or after the end of the performance year but before
payment is made) any bonus will be at the discretion of the
Committee. Any payment will typically be on a pro-rata basis up
to the termination date, taking into account the extent to which
any performance targets have been met.
• Under his service contract, other than in certain “bad-leaver”
circumstances, where the Company gives notice to Pierre Denis,
he is entitled to a pro-rata annual bonus taking into account time in
employment during the financial year and the extent to which any
performance targets have been met.
• Upon voluntary resignation or termination for cause no bonus
payment would be made.
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The appointments of each Non-Executive Director are for a fixed
term of six years, subject to annual re-election in general meeting.
The appointments of all the Non-Executive Directors may be
terminated at any time upon written notice, in accordance with the
Articles of Association or upon their resignations. In addition, the
appointment of the Non-Executive Directors appointed pursuant to
the relationship agreement entered into between the Company and
JAB Luxury may be terminated in accordance with that agreement.
LONG-TERM INCENTIV ES
• The treatment of long-term incentive awards is governed by the
relevant incentive plan.
JC PLC SH A RE AWA RD
• If a participant ceases employment with the Group by reason
of disability, death or dismissal without cause (including mutual
agreement) the Committee will determine the number of unvested
awards that will vest taking into account the proportion of time
elapsed since the original investment was made under the
co-investment plan and a pre-agreed pro-rating approach for
each tranche of the award.
• In other circumstances, unless the Committee determines
otherwise, unvested awards will lapse on cessation
of employment.
• Awards to the extent that they have vested on cessation of
employment (or for any reason) or that are allowed to vest as
referred to above will be exercisable for a period of up to twelve
months from the date of cessation (or if earlier until the end of
the option exercise period).
R E MUNE R AT ION P OL IC Y IN T HE R E S T OF T HE C OMPA N Y
The remuneration arrangements for Executive Directors outlined
above are consistent with those for the other employees in the
Group, although quantum and award opportunities vary by Executive
level. Only the senior most executives in the Group participate in the
long-term incentive plan.
During its deliberations on executive remuneration, the Committee
considers the reward framework for all employees worldwide,
ensuring that the principles applied are consistent with the Executive
remuneration policy. Merit increases awarded to executives are
determined within the broader context of employee remuneration.
ONE-OF F SH A RE AWA RD AND F U T URE AWA RDS UNDER T HE LONG-TERM
INCENTIV E PL AN
Due to the size and geographical spread of the Group’s operations,
it does not invite employees to comment on the Directors’
Remuneration Policy.
• Unless the Committee in its sole discretion determines otherwise
(in which case it will determine the terms on which awards vest
and may be exercised), if a participant ceases to be employed
by the Group for any reason, any awards will lapse on cessation
of employment.
C ONSIDE R AT ION OF SH A R E HOL DE R V IE W S
Although the Company only recently became a public listed company,
the Committee recognises the importance of understanding the
views of their new shareholders. The Committee is therefore open to
listening to the views of our new shareholders through the year and
at the annual general meeting.
OT HER
• Legal fees and outplacement costs may be paid if the Committee
considers this commercially appropriate.
CH ANGE OF CONT ROL
The Committee Chairman speaks with the Company’s largest
shareholder on the subject of remuneration as and when appropriate.
The Company’s largest shareholder is very supportive of the
Company’s philosophy and policy on remuneration. The Committee
will continue to keep its remuneration policy under review to ensure
that it remains aligned with the Company’s strategic objectives and
provides strong alignment with shareholder interests.
• In the event of a change of control, Executive Directors may
receive a bonus in respect of the year in which the change of
control occurs, which, unless the Committee determines
otherwise, will be pro-rated by reference to the time elapsed in
the bonus year and performance achieved.
• Long-term incentive awards will normally vest, taking into account
the time elapsed between grant and vest, unless the Committee
determines otherwise. Awards may alternatively be exchanged for
an equivalent award in the acquirer, where appropriate.
CH A IR M A N A ND NON-E X EC U T I V E DIR EC T OR S
The Non-Executive Directors and Chairman of the Board have letters
of appointment which set out their duties and responsibilities. They
do not have service contracts.
The Chairman’s letter of appointment states that his appointment is
expected to last for at least six years, subject to annual re-election
in general meeting. His appointment is terminable at any time upon
written notice, in accordance with the Articles of Association, his
resignation or in accordance with the relationship agreement entered
into between the Company and JAB Luxury.
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REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
The Committee considers the exact performance targets to
be commercially sensitive and as such these have not been
disclosed ahead of the financial year. However, in next year’s
Annual Report and Financial Statements, the Committee will
provide shareholders with appropriate context on performance
against the performance targets and the rationale for any
bonus pay-outs, within commercial constraints.
A NNUA L REMUNER AT ION REPOR T
E X ECU T I V E DIREC TORS
S TAT E ME N T OF IMP L E ME N TAT ION OF R E MUNE R AT ION P OL IC Y F OR 2 015
B A SE S A L A R Y
No changes have been made to base salaries since Admission of the
Company. The table below shows base salaries for 2015.
Pierre Denis
£650,000
Jonathan Sinclair
£350,000
L ONG-T E R M INCE N T I V E P L A N
There is currently no intention for Executive Directors to participate
in the long-term incentive plan in 2015, given the awards received
shortly after Admission.
P E NSION
NON-E X EC U T I V E DIR EC T OR S
In respect of Pierre Denis, the Company will contribute up to €50,000
to the Caisse des Français de l’Etranger. In respect of Jonathan
Sinclair, the Company will contribute 10% of base salary to the
Company’s Group Personal Pension Scheme if he contributes at
least 5% of base salary.
The following table sets out the Non-Executive Director fee structure
for 2015:
Chairman
BE NE F I T S
The Committee sets benefits in line with the policy set out on pages
60 to 63. For 2015, both of the Executive Directors will receive private
medical insurance for himself, his spouse and dependent children and
life assurance. As agreed as part of his relocation arrangements on
joining the Group, Pierre Denis will also be reimbursed for annual
school fees in respect of his children (up to a maximum of £18,000
per child) and receive a company car.
£50,000
Board Committee Chairman
£15,000
Senior Independent Director
£5,000
SINGL E T O TA L F IGUR E OF R E MUNE R AT ION F OR E X EC U T I V E DIR EC T OR S
F OR T HE Y E A R E NDE D 31 DECE MBE R 2 014 ( AUDI T E D)
The maximum bonus opportunity for the Executive Directors in
respect of 2015 will be as follows:
The following table sets out the total remuneration for Executive
Directors for the year ended 31 December 2014. Given that
Jimmy Choo PLC only listed as a public company on 22 October 2014,
the figures shown represent the remuneration received over the
period 22 October 2014 to 31 December 2014 and therefore do not
include a prior year comparison figure.
120% of base salary
Jonathan Sinclair
Basic fee for Non-Executive Directors
Fees will be paid in cash. Non-Executive Directors and the Chairman
are expected to invest 50% of their net of tax fees in the Company’s
shares, taking into account any investment prepaid at Admission.
A NNUA L BONUS
Pierre Denis
£150,000
50% of base salary
For 2015, the annual bonus opportunity will be based solely on
the following financial performance metrics: revenue growth
(measured on a constant exchange rate basis), net income
growth and a reduction in net working capital as a percentage
of revenue.
The Executive Directors did not provide any qualifying services
between 1 September 2014 (the date of appointment as Directors
of Jimmy Choo PLC) and 22 October 2014.
Annual bonus awards will be paid in cash.
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Pierre Denis
Jonathan Sinclair
1
Base
salary
£’000
Pension
£’000
Other
benefits and
allowances
£’000
Annual
Bonus
£’000
Total pre
long-term
incentives
£’000
128
8
15
55
206
5,147
5,353
68
–
2
20
90
1,500
1,590
Long-term
incentives1
£’000
Total
£’000
The amounts shown in this column reflect the value on grant of the awards made shortly after Admission of the Company to Pierre Denis and Jonathan Sinclair. Although the regulations require the
disclosure of the full grant value of the awards in this table, these awards are subject to continued employment requirements. Further details of the vesting schedule for these awards are set out on
pages 63 and 64.
E L E ME N T S OF T HE SINGL E F IGUR E OF R E MUNE R AT ION
BASE SA L A RY
The values shown in the table represent the amount received since Admission of the Company. Annualised base salaries for the Executive
Directors following Admission were:
Pierre Denis
£650,000
Jonathan Sinclair
£350,000
PENSION
For Pierre Denis, this represents the Company’s contribution to the Caisse des Français de l’Etranger.
Jonathan Sinclair did not participate in the pension arrangements in 2014.
OT HER BENEFITS AND A L LOWANCES
The values shown in the table represents the taxable value of benefits received during the financial year since Admission of the Company.
For Pierre Denis this includes: company car, school fees (which is only drawn in respect of one of his three dependant children), private
healthcare and product allowances.
For Jonathan Sinclair this includes: private healthcare and product allowances.
ANNUA L BONUS
The value shown in the table reflects the annual bonus earned in respect of performance in the year ended 31 December 2014, pro-rated
over the period since Admission of the Company. The bonus was paid in cash.
The Executive Directors’ annual bonus awards in relation to performance during 2014 were measured against a basket of metrics and
objectives. For Pierre Denis and Jonathan Sinclair, they were weighted 70% on Group financial objectives and 30% on strategic objectives.
The table below shows the overall outcome against each of the financial measures. The Board considered the financial performance of the
Group to be strong in the year, and in particular, the Group made strong progress against the revenue target set at the beginning of the year.
Although absolute Adjusted EBITDA performance was resilient during the year, the stretching targets set at the beginning of the year were
not met and nor were the net working capital targets.
Weighting (as a total of
annual bonus opportunity)
Performance measure
Adjusted EBITDA
Performance achieved as
a percentage of maximum
Pierre
Denis
Jonathan
Sinclair
25%
25%
0%
Threshold
Target
Maximum
Payout
% maximum
Revenue at constant exchange rates
25%
25%
85.2%
Net working capital (as a percentage of revenue)
20%
20%
0%
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REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
Actual targets have not been disclosed as they were set at a time prior to the Company becoming a listed Company and as such the Board
considers the underlying targets to be commercially sensitive and any disclosure of such targets could be seriously prejudicial to the
Group’s business.
A portion of Pierre Denis bonus was subject to performance against strategic objectives set at the beginning of the year. Pierre demonstrated
strong performance against these objectives during the year, his key achievements in the year include development of the distribution
network, leadership of the IPO and the transformation programme.
A portion of Jonathan Sinclair’s bonus was also subject to performance against strategic objectives set at the beginning of the year. Jonathan
demonstrated strong performance against these objectives during the year, his key achievements in the year include a number of aspects of
the successful IPO and the transformation programme.
As a result of the above performance, the Committee considered it appropriate to pay Pierre Denis a bonus of c.43% of salary and Jonathan
Sinclair a bonus of c.30% of salary, pro-rated for time based on his period of employment during the year
LONG-TERM INCENTIV ES
As required under the regulations, the values shown in the table represents the face value of shares (based on a share price of £1.40)
awarded following Admission which are subject to the Executive Directors continued employment with the Company only. Although the
regulations require the disclosure of the full grant value of the awards in the single figure table, these awards are subject to continued
employment requirements as set out below. The individuals have not yet received any value from these awards at this stage.
For Pierre Denis, this includes the face value of shares granted to him under the JC PLC Share Award, which as set out in the Remuneration
Policy were granted to replace awards under a phantom share option plan that was operated by the Group prior to Admission. The value of
the shares granted were linked to the Black-Scholes value of the phantom options that were surrendered by Mr. Denis before Admission of
Company. These awards will only become exercisable in equal tranches in July 2016, July 2017 and July 2018 subject to Mr. Denis’ continued
employment with the Company.
It also includes the face value of the shares granted to him under the one-off award which was made shortly after Admission, which will vest
50% on the fifth anniversary of the date of grant and 50% on the sixth anniversary of the date of grant subject to Mr. Denis’ continued
employment with the Company.
For Jonathan Sinclair, this includes the face value of shares granted to him under the one-off award which was made shortly after Admission,
which will vest in equal tranches on the fourth, fifth and sixth anniversary of the date of grant subject to Mr Sinclair’s continued employment
with the Company.
SCHE ME IN T E R E S T S GR A N T E D DURING T HE F IN A NCI A L Y E A R ( AUDI T E D)
The table below sets out the details on the awards made to Executive Directors during the financial year, namely the JC PLC Share Award
and the One-Off Share Award.
Award
Individual
Type of award
JC PLC
Share Award
Pierre
Denis
Nominal
cost
option 2
Pierre
Denis
One-Off
Share Award
Jonathan
Sinclair
Nominal
cost
option 2
Face value of
award at grant1
Vesting period for awards
£1,847,167
Awards become exercisable
in equal tranches in July
2016, July 2017 and
July 2018
£3,300,000
Awards become exercisable
in equal tranches in October
2019 and October 2020
£1,500,001
Awards become exercisable
in equal tranches in October
2018, October 2019 and
October 2020
Performance
measures
Threshold and maximum vesting
Subject to
continued
employment
only
100% of the awards become
exercisable on the dates set
out in the column “vesting
period for awards”
1 Based on the share price used for the grant of awards of £1.40. These shares were granted on 30 October 2014.
2 Total exercise price of option on exercise – £1.
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E X EC U T I V E DIR EC T OR SH A R E HOL DINGS ( AUDI T E D)
The Committee recognises the importance of aligning Executive Directors’ and shareholder interests through the executives building up
significant shareholdings in the Company. Executive Directors are therefore expected to build up a significant shareholding in the Company
over the seven years following Admission. The shareholding guideline for Pierre Denis is 500% of base salary and for Jonathan Sinclair is
200% of base salary.
The table below shows the shareholding of each Executive Director against their respective shareholding guideline as at 31 December 2014:
Total number of
shares owned as at
22 October 2014
Individual
Pierre Denis 3
Jonathan Sinclair
Shares acquired/
sold by the Director
during the period
Total number of
shares owned at
31 December 20141
Total value of
shares owned at
31 December (as a
percentage of salary) 2
Shares acquired
by the Director
during the period
31 December 2014
and 18 March 2015
2,771,429
–
2,771,429
746%
–
35,714
–
35,714
18%
–
1 Includes shares held by the Director and by their connected persons.
2 Based on a closing share price on 31 December 2014 of 175p.
3 As disclosed in the Prospectus, following Pierre Denis’s exercise of awards under the previous phantom share option plan, he agreed to make an investment in Jimmy Choo PLC shares. Pursuant to
this agreement, Pierre Denis purchased 771,429 shares immediately following Admission of the Company. In order to fund his investment, Pierre Denis has entered into a loan agreement with HSBC,
pursuant to which he agreed to grant a pledge over 2,771,429 shares to HSBC. Pierre Denis has agreed that he will hold these shares in line with and in the same proportions as the vesting schedule
for the JC PLC Share Awards.
As shown in the table above Pierre Denis has met his shareholding guideline. Jonathan Sinclair is on-target to meet his shareholding requirement.
The below shows in relation to each Executive Director the total number of share options with and without performance conditions held at
31 December 2014.
Options
without
performance
measures
Vested but
unexercised
Exercised
during the
year
Pierre Denis 3
– 3,676,548
–
–
Jonathan Sinclair
– 1,071,429
–
–
Options with
performance
measures
Individual
PAY ME N T S T O PA S T DIR EC T OR S ( AUDI T E D)
There were no payments to past directors during the financial year.
PAY ME N T S F OR L OS S OF OF F ICE ( AUDI T E D)
There were no payments for loss of office during the financial year.
T SR P E R F OR M A NCE CH A R T
The graph below shows the TSR of the Company and the UK FTSE 250 Index since Admission of the Company to 31 December 2014.
The FTSE 250 index was selected on the basis that the Company is a member of the FTSE 250 in the UK.
£ VA LUE OF £10 0 IN V ESTED AT ADMISSION
14 0
12 0
10 0
80
OC T OBE R 2 014
— JIMM Y CHOO
NOV E MBE R 2 014
— F T SE 2 5 0
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DECE MBE R 2 014
REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
HIS T ORIC A L CEO PAY
Given that the Company has only been publicly listed since 22 October 2014, the following sets out information regarding the CEO’s historical
pay since Admission.
CEO
2010
2011
2012
2013
Single figure of remuneration
n/a
n/a
n/a
n/a
2014
5,3531
Annual bonus payout (as a % of maximum opportunity)
n/a
n/a
n/a
n/a
36%
Long-term incentive payout (as a % of maximum opportunity)
n/a
n/a
n/a
n/a
100%1
1
The regulations require the value of long-term incentives granted to the Executive Directors to be included at the date of grant as they are subject to continued employment with the Company only.
Further details of the vesting schedule for these awards are set out on pages 63 and 64.
P E R CE N TAGE CH A NGE IN CEO R E MUNE R AT ION
This section is not applicable as the Company only listed in October 2014 and as such there is no prior year comparator which can be shown.
R E L AT I V E IMP OR TA NCE OF SP E ND ON PAY
The following table illustrates total remuneration for all employees in the Group compared to distributions to shareholders and any other
significant distributions and payments or other uses of profit or cashflow deemed by the directors to assist in understanding the relative
importance of spend on pay since Admission of the Company to 31 December 2014. As the Company only listed in October 2014,
there is no comparative information for the prior year. The following is based on the period following Admission of the Company to
31 December 2014.
2014
£m
Shareholder distributions (dividends and share buybacks)
–
Total employee expenditure
10.8
E X T E R N A L A PP OIN T ME N T S
Subject to the Board’s approval, Executive Directors are able to accept a limited number of external appointments outside the Company and
can retain any fees paid for these services. Details of such external appointments held between Admission and 31 December 2014 are set
out below:
Individual
Roles and organisation
Pierre Denis
–
Jonathan Sinclair
LLX Global Business Services SA1
Nottingham Scientific Limited
1
Fees
–
£3,000 per annum pro rata
A subsidiary of JAB Luxury that provides various services to Jimmy Choo.
SINGL E T O TA L F IGUR E OF R E MUNE R AT ION F OR NON-E X EC U T I V E DIR EC T OR S F OR T HE Y E A R E NDE D 31 DECE MBE R 2 014 ( AUDI T E D)
The following table sets out the total remuneration for Non-Executive Directors and the Chairman for the year ended 31 December 2014.
Given that Jimmy Choo PLC only listed as a public company on 22 October 2014, the figures shown represent the remuneration received
over the period 22 October 2014 to 31 December 2014 and therefore do not include a prior year comparison figure.
Basic fee
£
Board
Committee
Chairmanship
fee
£
Senior
Independent
Director fee
£
Total
£
Peter Harf
30
–
–
30
Bart Becht
10
3
–
13
Gianluca Brozzetti
10
–
–
10
Fabio Fusco
10
–
–
10
Olivier Goudet
10
–
–
10
David Poulter
10
–
1
11
Bob Singer
10
–
–
10
Judith Sprieser
10
3
–
13
Fees are paid in cash. Non-Executive Directors and the Chairman are expected to invest 50% of their net of tax fees in the Company’s shares.
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NON-E X EC U T I V E DIR EC T OR SH A R E HOL DINGS ( AUDI T E D)
The following table shows the shareholding of each of the Non-Executive Directors and their connected persons as at 31 December 2014.
Total number of
shares owned as at
22 October 2014
Total number of
shares owned at
31 December 2014
Shares acquired
by the Director
during the period
31 December 2014
and 18 March 2015
Peter Harf
928,571
928,571
–
Bart Becht
928,571
928,571
–
Gianluca Brozzetti
Fabio Fusco
–
–
–
107,143
107,143
–
Olivier Goudet
928,571
928,571
–
David Poulter
142,857
142,857
–
Bob Singer
285,714
285,714
–
35,714
35,714
–
Judith Sprieser
T HE R E MUNE R AT ION A ND NOMIN AT IONS C OMMI T T E E
As of 31 December 2014, the Committee comprised of three Non-Executive Directors:
• Bart Becht (Chairman)
• Peter Harf
• Gianluca Brozzetti
The Committee determines and recommends to the Board the Group’s policy on executive remuneration, determines the level of
remuneration for Executive Directors and the Chairman and other senior executives and prepares the annual remuneration report for approval
by shareholders at the annual general meeting. The Committee also assists the Board in reviewing the structure, size and composition of the
Board. It is also responsible for reviewing succession plans for the Directors, including the Chairman, the CEO and other senior executives.
The Committee did not hold any scheduled meetings in the period following Admission of the Company to 31 December 2014. The Committee
did however hold one scheduled meeting between the 31 December 2014 and the publication of this report.
During the year, the Committee received independent advice on executive remuneration matters from Deloitte LLP (“Deloitte”). Deloitte
is a member of the Remuneration Consultants Group and as such, voluntarily operates under the code of conduct in relation to executive
remuneration consulting in the UK. The Committee has reviewed the advice provided by Deloitte during the year and is comfortable that it
has been objective and independent. Total fees received by Deloitte in relation to the remuneration advice provided to the Committee during
2014 amounted to £34,350 (excluding VAT) based on the required time commitment.
SH A REHOL DER VOT ING
The Company has yet to hold a shareholder vote on the Remuneration Report.
On behalf of the Board,
BA R T BECH T
CH A IR M A N OF T HE R E MUNE R AT ION A ND NOMIN AT IONS C OMMI T T E E
18 March 2015
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DIRECTORS’ REPORT
The directors present their annual report on the affairs of the Group,
together with the financial statements and auditor’s report, for
the year ended 31 December 2014. The Corporate Governance
Statement set out on pages 48 to 57 forms part of this report.
REL AT IONSHIP AGREEMEN T W I T H CON T ROL L ING SH A REHOL DER
Prior to the IPO, the Company and JAB Luxury entered into a
relationship agreement to regulate the ongoing relationship between
them (‘the Relationship Agreement’). The principal purpose of the
Relationship Agreement is to ensure that the Group is capable of
carrying on its business for the benefit of the shareholders of the
Company as a whole, and that transactions and relationships with
JAB Luxury and any of their respective associates are at arm’s length
and on normal commercial terms. Further details of the Relationship
Agreement with regard to the conduct of the major shareholder are
set out in the Corporate Governance report on page 51 and, with
regard to the right to appoint directors, are set out on page 51.
Details of significant events since the balance sheet date are
contained in note 29 to the financial statements. An indication of
likely future developments in the business of the Group are included
in the Strategic Report. The Directors’ Report should be read in
conjunction with the Strategic Report, which contains details of
the principal activities of the Group during the year.
Information about the use of financial instruments by the Group and
its subsidiaries is given in note 23 to the financial statements.
DIREC TORS
The directors of the Company as at 31 December 2014 and their
interests in the shares of the Company are shown on pages 71
and 73.
DI V IDENDS
The directors do not recommend the payment of a dividend
(2013: £nil).
On 5 March 2015, Judith Sprieser informed the Company that she
intended to step down from the board of the Company with
immediate effect for personal reasons unrelated to the Company.
The Board has commenced a process to identify a new independent
Non-Executive Director to replace Judith Sprieser as soon
as practicable.
CA PI TA L S T RUC T URE
Details of the authorised and issued share capital, together with
details of the movements in the Company’s issued share capital
during the year are shown in note 21 to the financial statements.
The Company has one class of ordinary shares which carry no right
to fixed income. Each share carries the right to one vote at general
meetings of the company. The percentage of the issued nominal
value of the ordinary shares is equal to the total issued nominal
value of all share capital.
As detailed in the Articles of Association, at every Annual General
Meeting, all directors at the date of any subsequent notice of Annual
General Meeting shall retire from office. Consequently, the directors
currently holding office will all be required and all intend to seek
re-election at the forthcoming Annual General Meeting to be held
in May 2015.
There are no specific restrictions on the size of a holding nor on the
transfer of shares, which are both governed by the general provisions
of the Articles of Association and prevailing legislation. The directors
are not aware of any agreements between holders of the Company’s
shares that may result in restrictions on the transfer of securities or
on voting rights.
DIREC TORS’ INDEMNI T IES
The Company has made qualifying third party indemnity provisions
for the benefit of its directors which were made during the year and
which remain in force at the date of this report.
Details of employee share schemes are set out in note 22 to the
financial statements. Shares held by the Jimmy Choo PLC Employee
Benefit Trust abstain from voting.
POL I T ICA L CON T RIBU T IONS
The Group has not made any political donations during the year
(2013: £nil).
With regard to the appointment and replacement of directors, the
company is governed by its Articles of Association, the UK Corporate
Governance Code, the Companies Acts and related legislation. The
Articles themselves may be amended by special resolution of the
shareholders. The powers of directors are described in the Main
Board Terms of Reference, copies of which are available on request,
and the Corporate Governance Statement on page 48.
ACQ UISI T ION OF T HE COMPA N Y ’S OW N SH A RES
Further to the shareholders’ resolutions of 16 October 2014, the
Company purchased 11,951,119 ordinary shares with a nominal value
of £1, and representing 4.3% of the Company’s called up ordinary
share capital, for a consideration of £16,731,567. The shares were
purchased from JAB Luxury prior to the IPO of the Group in order
to satisfy future awards to be made under the terms of the Group’s
share based payment schemes, as described in note 22 to the
financial statements.
SUBS TA N T I A L SH A REHOL DINGS
On 31 December 2014, the Company had been notified, in
accordance with chapter 5 of the Disclosure and Transparency Rules,
of the following voting rights as a shareholder of the Company.
Percentage of
voting rights
and issued
share capital
Number of
ordinary shares
JAB Luxury GmbH
67.68%
263,767,190
GIC Private Limited
4.62%
18,000,000
Name
ETHNA AKTIV E Luxembourg registered
investment fund (“FCP”) and ETHNAGLOBAL DYNAMISCH Luxembourg
registered investment fund (“FCP”)
At 31 December 2014 the directors did not have the authority
to purchase any further shares.
SUS TA IN A BL E BUSINESS
A summary of how the Group recognises its responsibility to
colleagues, customers, environment (including greenhouse gas
emissions) and community is contained within the Corporate and
Social Responsibility Report on pages 35 to 37 which forms part
of this report.
GOING CONCERN
3.03%
The Board is of the opinion that there is a reasonable expectation that
the Company and the Group has adequate resources to continue in
operational existence for the foreseeable future. In arriving at this
conclusion the Board has taken account of current and anticipated
trading performance, current and anticipated levels of borrowings
11,800,000
During the period between 31 December 2014 and 18 March 2015
the company did not receive any notifications under chapter 5 of the
Disclosure and Transparency Rules.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
GOV E RN A NCE
74
and the availability of borrowing facilities and exposures to and
management of the financial risks detailed on pages 38 to 40.
Consequently, the going concern basis has been used in the
preparation of the Company and Group financial statements.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent company and of
their profit or loss for that period. In preparing each of the Group and
parent company financial statements, the directors are required to:
A NNUA L GENER A L MEE T ING
The Annual General Meeting will be held at the Radisson Blu
Edwardian Hotel, 140 Bath Road, Hayes, Middlesex UB3 5AW, on
Wednesday 27 May 2015 at 1pm. The Notice of Annual General
Meeting is contained in a separate letter from the Chairman
accompanying this report.
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been
prepared in accordance with IFRSs as adopted by the EU;
• for the parent company financial statements, state whether
applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the parent
company financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the parent
company will continue in business.
DISCL OSURE OF INF ORM AT ION TO T HE AUDI TOR
Each of the persons who is a director at the date of approval of this
Annual Report confirms that:
• so far as the director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
• the director has taken all the steps that he ought to have taken
as a director in order to make himself aware of any relevant audit
information and to establish that the Company’s auditor is aware
of that information.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
This confirmation is given and should be interpreted in accordance
with the provisions of s418 of the Companies Act 2006.
KPMG LLP have expressed their willingness to continue in office as
auditor and a resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
INF ORM AT ION REG A RDING F OR WA RD-L OOK ING S TAT EMEN T S
This Annual Report and Financial Statements includes forwardlooking statements. These forward-looking statements involve
known and unknown risks and uncertainties, many of which are
beyond the Company’s control and all of which are based on the
directors’ current beliefs and expectations about future events.
Forward-looking statements are sometimes identified by the use
of forward-looking terminology such as “believe”, “expects”, “may”,
“will”, “could”, “should”, “shall”, “risk”, “intends”, “estimates”,
“aims”, “plans”, “predicts”, “continues”, “assumes”, “positioned”
or “anticipates” or the negative thereof, other variations thereon
or comparable terminology.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and loss of the company
and the undertakings included in the consolidation taken as a
whole; and
• the Strategic Report includes a fair review of the development and
performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
These forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
Annual Report and Financial Statements and includes statements
regarding the intentions, beliefs or current expectations of the
directors or the Company concerning, among other things, the results
of operations, financial condition, prospects, growth, strategies
(including continued store roll out plans), and dividend policy of the
Company and the industry in which it operates. In particular, the
statements regarding the Company’s strategy and other future
events or prospects are forward-looking statements.
We consider the Annual Report and Financial Statements, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
S TAT EMEN T OF DIREC TORS ’ RESPONSIBIL I T IES IN RESPEC T OF T HE
A NNUA L REPOR T A ND T HE F IN A NCI A L S TAT EMEN T S
The directors are responsible for preparing the Annual Report and the
Group and parent company financial statements in accordance with
applicable law and regulations.
By order of the Board,
Company law requires the directors to prepare Group and parent
company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with IFRSs as adopted by the EU and applicable law and
have elected to prepare the parent company financial statements in
accordance with UK Accounting Standards.
H A NN A H MERRI T T
COMPA N Y SECR E TA R Y
18 March 2015
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FINANCIAL
STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF JIMMY CHOO PLC ONLY
P R E SE N TAT ION OF E XCEP T ION A L I T E MS (E XCEP T ION A L I T E MS – £ 13 . 0 M)
OPINIONS A ND CONCL USIONS A RISING F ROM OUR AUDI T
1. OUR OPINION ON T HE F IN A NCI A L S TAT E ME N T S IS UNMODIF IE D
Refer to page 54 (Audit and Risk Committee Report), note 1.17
(accounting policy) and note 5 (financial disclosures).
We have audited the financial statements of Jimmy Choo PLC for
the year ended 31 December 2014 set out on pages 81 to 122.
In our opinion:
T HE RISK
Operating profit before exceptional items is a key performance
measure for the Group. Exceptional items are defined by the
Group in an accounting policy set out in the financial statements.
The identification of items as exceptional, and their quantification,
requires the application of significant judgement.
• the financial statements give a true and fair view of the state
of the Group’s and of the parent Company’s affairs as at
31 December 2014 and of the loss of the Group for the year
then ended;
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with UK Accounting Standards; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006; and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
OUR RESPONSE
Our audit procedures in this area included:
• we obtained a listing of the items identified as exceptional by the
Group, discussed with the Group the rationale for classifying them
as exceptional and critically assessed whether the items meet the
definition of exceptional items as set out in the Group’s
accounting policies;
• we selected a sample of the underlying items which are
aggregated and classified as exceptional and agreed these items
back to supporting documentation; and
• we considered whether any other items we became aware of
in the course of our audit work might be considered to be
exceptional under the definition set out in the Group’s
accounting policies.
2 . OUR A S SE S SME N T OF RISKS OF M AT E RI A L MIS S TAT E ME N T
In arriving at our audit opinion above on the financial statements the
risks of material misstatement that had the greatest effect on our
audit were as follows:
R E V E NUE R EC OGNI T ION (R E V E NUE £ 2 9 9 .7M)
Refer to page 54 (Audit and Risk Committee Report), note 1.15
(accounting policy) and note 3 (financial disclosures).
We also assessed the adequacy of the Group’s disclosures in respect
of exceptional items.
T HE RISK
Revenue is a key performance measure for the Group and a key
driver for gross margin which is a further key indicator of Group
performance. There are different revenue streams within the Group
including for example, retail (including concessions), wholesale and
online that have differing revenue recognition criteria and accounting
processes handling a high volume of transactions. Due to its
materiality in the context of the financial statements as a whole
revenue is considered to be one of the areas which had the greatest
effect on our overall audit strategy and allocation of resources in
planning and completing our audit.
3 . OUR A PP L IC AT ION OF M AT E RI A L I T Y A ND A N OV E R V IE W OF T HE SC OP E
OF OUR AUDI T
The materiality for the Group financial statements as a whole was set
at £2.0m, determined with reference to a benchmark of Group loss
before tax normalised for interest and exceptional costs (£35.7m of
which it represents 5.6%).
We report to the Audit and Risk Committee any corrected or
uncorrected identified misstatements exceeding £0.1m, in addition
to other identified misstatements that warranted reporting on
qualitative grounds.
OUR RESPONSE
Our audit procedures in this area included:
Of the group’s seventeen reporting components, we subjected six to
audits for group reporting purposes and two to specified risk-focused
audit procedures. The latter were not individually financially significant
enough to require an audit for group reporting purposes, but did
present specific individual risks, principally around revenue recognition,
that needed to be addressed. These Group procedures covered 91%
of total Group revenue; 97% of Group profit before taxation; and 96%
of total Group assets.
• we tested the design and operating effectiveness of key controls
around the recognition of revenue, including those related to the
reconciliation of cash receipts to sales records;
• we used a statistical sampling tool to select manual journals
posted to revenue to critically assess whether these journals were
appropriate and supported by documentation where relevant;
• we selected samples of sale transactions from either side of the
financial year end and, to assess the appropriateness of the timing
of revenue recognition compared those sales to supporting
documentation; and
• we challenged the adequacy of the group’s provision for returns
in the light of the historical pattern of credits given for returns.
The remaining 9% of total Group revenue, 3% of Group profit
before taxation and 4% of total Group assets is represented by nine
reporting components, none of which individually represented more
than 10% of any of total Group revenue, Group profit before tax, or
total Group assets. For these remaining components, we performed
analysis at an aggregated group level to re-examine our assessment
that there were no significant risks of material misstatement
within these.
We also assessed the adequacy of the Group’s disclosures in respect
of revenue recognition.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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79
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF JIMMY CHOO PLC ONLY
CONTINUED
The Group audit team instructed component auditors as to the
significant areas to be covered, including the relevant risks detailed
above and the information to be reported back. The Group audit team
approved the component materiality of £1.5m, having regard to the
mix of size and risk profile of the Group across the components. The
Group audit team visited three component locations in UK and USA
to perform the audit work. The work on all of the remaining in scope
components was performed by component auditors.
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we
require for our audit.
Telephone conference meetings were held with these component
auditors. At these meetings, the findings reported to the Group audit
team were discussed in more detail, and any further work required by
the Group audit team was then performed by the component auditor.
4 . OUR OPINION ON O T HE R M AT T E R S P R E SC RIBE D BY T HE C OMPA NIE S
AC T 2 0 0 6 IS UNMODIF IE D
Under the Listing Rules we are required to review:
In our opinion:
• the directors’ statement, set out on page 74, in relation to going
concern; and
• the part of the Corporate Governance Statement on page 48
relating to the Company’s compliance with the ten provisions of
the 2012 UK Corporate Governance Code specified for our review.
• the part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act
2006; and
• the information given in the Strategic Report and Directors’ Report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
We have nothing to report in respect of the above responsibilities.
SCOPE OF REPOR T A ND RESPONSIBIL I T IES
5 . W E H AV E NO T HING T O R EP OR T IN R E SP EC T OF T HE M AT T E R S ON
W HICH W E A R E R EQ UIR E D T O R EP OR T BY E XCEP T ION
As explained more fully in the directors’ responsibilities statement
set out on page 75, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a
true and fair view. A description of the scope of an audit of financial
statements is provided on the Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate. This report is made solely
to the Company’s members as a body and is subject to important
explanations and disclaimers regarding our responsibilities, published
on our website at www.kpmg.com/uk/auditscopeukco2014a, which
are incorporated into this report as if set out in full and should be read
to provide an understanding of the purpose of this report, the work
we have undertaken and the basis of our opinions.
Under ISAs (UK and Ireland) we are required to report to you if,
based on the knowledge we acquired during our audit, we have
identified other information in the annual report that contains a
material inconsistency with either that knowledge or the financial
statements, a material misstatement of fact, or that is otherwise
misleading. In particular, we are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our audit and the Directors’
statement that they consider that the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group’s performance, business model and strategy; or
• the Report of the Audit and Risk Committee does not
appropriately address matters communicated by us to the
Audit and Risk Committee.
WAY NE COX
SE NIOR S TAT U T OR Y AUDI T OR
for and on behalf of KPMG LLP
Statutory Auditor
Chartered Accountants
St Nicholas House
Park Row
Nottingham NG1 6FQ
18 March 2015
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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80
CONSOLIDATED INCOME STATEMENT
F OR T HE Y E A R ENDED 31 DECEMBER
Note
3
Revenue
2014
£000
2013
£000
299,670
281,544
Cost of sales
(114,357)
(106,188)
Gross profit
185,313
175,356
Selling and distribution expenses
(93,750)
(81,911)
Administrative expenses
(54,436)
(62,287)
37,127
31,158
Exceptional costs
Operating profit before exceptional costs
5
(13,047)
(6,009)
Operating profit
4
24,080
25,149
Financial income
9
1,480
68
Financial expenses
9
(30,963)
(50,909)
(Loss)/gain on financial instruments
9
(2,908)
4,374
Loss after financing expense
(8,311)
Share of profit/(loss) of associates
14
Loss before tax
Taxation
10
Loss for the year
Note
6
Earnings per share – basic and diluted
12
(21,318)
(85)
(8,299)
(21,403)
(2,543)
3,735
(10,842)
(17,668)
£
(0.12)
£
(176,680)
Non-GAAP measures
Adjusted EBITDA
28
50,230
46,877
Adjusted EBIT
28
35,353
35,039
Adjusted EBT
28
28,291
23,612
Adjusted consolidated net income
28
22,888
21,004
6
6.1
5.6
Adjusted earnings per share (pence)
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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81
CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME
2014
£000
Loss for the year
(10,842)
2013
£000
(17,668)
Other comprehensive income
Items that are or may be recycled subsequently to profit or loss:
Gain on non-controlling interest
Foreign currency translation differences
Income tax credit on items that are or may be recycled subsequently to profit or loss
Other comprehensive (loss)/income for the year, net of tax
–
128
(425)
407
–
184
(425)
Total comprehensive loss for the year
(11,267)
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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82
719
(16,949)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2 014
Note
2014
£000
2013
£000
Intangible assets and goodwill
11
585,244
584,958
Property, plant and equipment
12
50,908
39,094
Investments in equity-accounted investees
14
191
179
Deferred tax asset
15
Non-current assets
11,370
8,320
647,713
632,551
16
58,068
42,864
Trade and other receivables
17
41,087
35,520
Other financial assets
23
–
1,450
Total non-current assets
Current assets
Inventories
Current tax assets
59
146
12,045
20,334
Total current assets
111,259
100,314
Total assets
758,972
732,865
Cash and cash equivalents
Current liabilities
Borrowings
18
(12,604)
(7,588)
Trade and other payables
19
(94,494)
(86,640)
(5,287)
(5,503)
23
(2,903)
(419)
(115,288)
(100,150)
Current tax liabilities
Other financial liabilities
Total current liabilities
Non-current liabilities
Borrowings
18
(124,982)
(595,140)
Trade and other payables
19
(5,165)
(3,552)
Other non-current liabilities
20
(15,374)
–
Deferred tax liabilities
15
(54,010)
(53,824)
Share based payments liability
22
–
(5,872)
Total non-current liabilities
(199,531)
(658,388)
Total liabilities
(314,819)
(758,538)
Net assets/(liabilities)
444,153
(25,673)
Equity attributable to equity holders of the parent
Share capital
21
389,738
–
Share premium
21
99,480
–
Own shares reserve
21
(16,732)
–
Translation reserve
21
(2,864)
(2,439)
Retained deficit
21
Total equity
(25,469)
(23,234)
444,153
(25,673)
The accompanying notes are an integral part of this consolidated statement of financial position.
These consolidated financial statements of Jimmy Choo PLC, registered number 09198021, have been approved and authorised for issue
by the Board of Directors on 18 March 2015 and were signed on behalf by:
JON AT H A N SINCL A IR
DIR EC T OR
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83
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital
£000
Note
Share
premium
£000
Own shares
reserve
£000
Translation
reserve
£000
Total
equity
£000
Balance at 1 January 2013
–
–
–
(5,878)
(8,724)
Loss for the year
–
–
–
–
(17,668)
(17,668)
Other comprehensive income
–
–
–
407
312
719
Total comprehensive income/(loss) for the year
(2,846)
Retained
earnings
£000
–
–
–
–
–
–
Loss for the year
–
–
–
Other comprehensive loss
–
–
–
Total comprehensive loss for the year
–
–
–
(425)
389,738
99,480
–
–
–
489,218
Acquisition of own shares
–
–
(16,732)
–
–
(16,732)
21
Balance at 31 December 2013
Issue of shares in consideration for shareholder
credit facility
407
(17,356)
(16,949)
(23,234)
(25,673)
–
(10,842)
(10,842)
(425)
–
(425)
(2,439)
(10,842)
(11,267)
Capital contribution from controlling shareholder
–
–
–
–
1,358
1,358
Effect of cancellation of cash-settled share based
payments
–
–
–
–
6,690
6,690
Charge for the year under equity-settled share based
payments
–
–
–
–
526
526
–
–
33
33
–
8,607
481,093
(25,469)
444,153
Deferred tax on share based payments
Total transactions with owners
Balance at 31 December 2014
21
–
–
389,738
99,480
(16,732)
389,738
99,480
(16,732)
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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84
(2,864)
CONSOLIDATED STATEMENT OF CASH FLOWS
F OR T HE Y E A R ENDED 31 DECEMBER 2 014
2014
£000
2013
£000
24,080
25,149
14,225
11,001
Amortisation of intangible assets
793
752
Gain on disposal of property, plant and equipment and intangibles
(129)
–
Cash flows from operating activities
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Effects of foreign exchange
1,339
3,158
Share based payment expense
1,344
1,999
(5,880)
(8,031)
(16,418)
(4,020)
Increase in trade and other receivables
Increase in inventories
Increase in trade and other payables
13,917
9,647
Cash generated from operating activities
33,271
39,655
Income taxes paid
(5,542)
(33)
Interest paid
(6,251)
(9,321)
23
67
Interest received
Settlement of derivatives
Net cash inflow from operating activities
1,007
939
22,508
31,307
–
65
Cash flows from investing activities
Dividends received from associates
Proceeds from sale of property, plant and equipment and intangibles
530
–
Acquisition of subsidiary, net of cash acquired
570
(786)
(27,228)
(17,530)
(489)
(4,266)
(26,617)
(22,517)
Acquisition of property, plant and equipment
Acquisition of other intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
15,062
1,760
Repayment of borrowings
(19,256)
(13,740)
–
305
Capital contribution from joint venture partner
Net cash outflow from financing activities
(4,194)
(11,675)
Net decrease in cash and cash equivalents
(8,303)
(2,885)
Cash and cash equivalents at start of year
20,334
23,360
14
(141)
12,045
20,334
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of year
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES
1. 2 GOING CONCE RN
Jimmy Choo PLC (the “Company”) and its subsidiaries (together
referred to as the “Group”) is a global luxury shoes and accessories
brand owner, wholesaler and retailer incorporated and domiciled in
the United Kingdom.
The Group’s consolidated financial statements are prepared on a going
concern basis as the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. The Group has considerable financial
resources, together with a strong ongoing trading performance.
Details of the Group’s liquidity position and borrowing facilities are
described in note 18. Financial risk management objectives, details of
financial instruments and hedging activities, and exposures to credit
risk and liquidity risk are described in note 23.
The consolidated financial statements of the Group have been
prepared and approved by the directors in accordance with
International Financial Reporting Standards as adopted by the
EU (“Adopted IFRS”).
The accounting policies set out below have, unless otherwise stated,
been applied consistently to all years presented in these Group
financial statements.
The directors have reviewed the Group’s forecasts and projections.
These include the assumptions around the Group’s products and
markets, expenditure commitments, expected cash flows and
borrowing facilities.
Judgements made by the directors in the application of these
accounting policies, that have a significant effect on the financial
statements and estimates with a significant risk of material
adjustment in the next year are discussed in note 2.
Taking into account reasonably possible changes in trading
performance, and after making enquiries, the directors have a
reasonable expectation that the Group and the Company have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly the directors consider it appropriate
to continue to adopt the going concern basis in preparing the
financial statements.
1.1 ME A SUR E ME N T C ON V E N T ION
The financial statements have been prepared on the historical cost
basis, except for financial instruments that are measured at revalued
amounts or fair values at the end of each reporting year, as explained
in the accounting policies below. Historical cost is generally based on
the fair value of the consideration given in exchange for goods and
services. The principal accounting policies adopted are set out below.
1. 3 B A SIS OF C ONSOL IDAT ION
On 16 October 2014 the Company obtained control of the entire
share capital of Choo Luxury Group Limited by way of a share for
share exchange with one share in the Company being exchanged for
each share in Choo Luxury Group Limited. There were no changes in
rights or proportion of control exercised as a result of this transaction.
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability, the
Group takes into account the characteristics of the asset or liability
if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value
for measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for share
based payment transactions that are within the scope of IFRS 2,
leasing transactions that are within the scope of IAS 17, and
measurements that have some similarities to fair value but are
not fair value, such as net realisable value in IAS 2 or value
in use in IAS 36.
Although the share for share exchange resulted in a change in legal
ownership, in substance these financial statements reflect the
continuation of the pre-existing Group, headed by Choo Luxury
Group Limited.
As a result the comparatives presented in these financial statements
are the consolidated results of Choo Luxury Group Limited. The
prior year statement of financial position reflects the share capital
structure of Choo Luxury Group Limited. The current year statement
of financial position presents the legal change in the ownership of
the Group, as well as the issue of shares in satisfaction of the
shareholder credit facility. The consolidated statement of changes
in equity explains the impact of these transactions in more detail.
In addition, for financial reporting purposes, fair value measurements
are categorised into Level 1, 2 or 3 based on the degree to which
the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
SUBSIDI A RIE S
Subsidiaries are entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights that are currently exercisable. The acquisition date is
the date on which control is transferred to the acquirer. The financial
statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that
control ceases. Intra-group transactions, balances and unrealised
profits on transactions between Group companies are eliminated
in preparing the Group’s consolidated financial statements.
• Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
• Level 2 inputs are inputs, other than quoted prices included within
Level 1, that are observable for the asset or liability, either directly
or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
Employee benefit trusts that are controlled by the Group are
consolidated on the same basis as subsidiaries as set out above.
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1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES
C ON T INUE D
1. 4 A S SOCI AT E S A ND JOIN T V E N T UR E S
1. 6 F IN A NCI A L INS T RUME N T S
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating policies.
Significant influence is presumed to exist when the Group holds
between 20% and 50% of the voting power of another entity. Joint
ventures are those entities over whose activities the Group has
joint control.
Financial instruments issued by the Group are treated as equity only
to the extent that they meet the following two conditions:
Classification of financial instruments issued by the Group
(a)they include no contractual obligations upon the Group to deliver
cash or other financial assets or to exchange financial assets or
financial liabilities with another party under conditions that are
potentially unfavourable to the Group; and
(b)where the instrument will or may be settled in the Group’s own
equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Group’s own equity
instruments or is a derivative that will be settled by the Group’s
exchanging a fixed amount of cash or other financial assets for
a fixed number of its own equity instruments.
Associates and joint ventures are accounted for using the equity
method (equity accounted investees) and are initially recognised
at cost. The Group’s investment includes goodwill identified on
acquisition, net of any accumulated impairment losses. The
consolidated financial statements include the Group’s share of the
total comprehensive income and equity movements of equity
accounted investees, from the date that significant influence or joint
control commences until the date that significant influence or joint
control ceases. When the Group’s share of losses exceeds its
interest in an equity accounted investee, the Group’s carrying amount
is reduced to nil and recognition of further losses is discontinued
except to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of an investee.
To the extent that this definition is not met, the proceeds of issue are
classified as a financial liability. Where the instrument so classified
takes the legal form of the company’s own shares, the amounts
presented in these financial statements for called up share capital
exclude amounts in relation to those shares.
F IN A NCI A L A S SE T S
1. 5 F OR EIGN C UR R E NC Y
F UNC T ION A L A ND P R E SE N TAT ION A L C UR R E NCIE S
Financial assets are initially recognised at fair value on the
consolidated balance sheet when the entity becomes a party to
the contractual provisions of the instrument. A financial asset is
derecognised when the contractual rights to the cash flow expire
or substantially all risks and rewards of the asset are transferred.
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency).
The consolidated financial statements are presented in pounds
sterling which is the Company’s functional and the Group’s
presentational currency.
i. T R ADE RECEIVA BLES
Trade and other receivables are included in current assets, except
for maturities greater than 12 months after the balance sheet date.
Receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method,
less any provision for impairment.
T R A NS AC T IONS IN F OR EIGN C UR R E NCIE S
Transactions in foreign currencies are translated to the respective
functional currencies of Group entities at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
retranslated to the functional currency at the foreign exchange rate
ruling at that date. Foreign exchange differences arising on translation
are recognised in the income statement. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in
foreign currencies that are stated at fair value are retranslated to the
functional currency at foreign exchange rates ruling at the dates
the fair value was determined.
A provision for impairment of trade receivables is established when
there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of receivables. The
amount of the provision is determined as the difference between the
asset’s carrying amount and the present value of estimated future
cash flows, and is recognised in the consolidated income statement
in administrative expenses.
ii. CASH AND CASH EQUIVA LENTS
Cash and cash equivalents include cash in hand and deposits held
at call with banks with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and
cash equivalents includes bank overdrafts in addition to the
definition above.
T R A NSL AT ION OF T HE R E SULT S OF OV E R SE A S BUSINE S SE S
The assets and liabilities of foreign operations, including goodwill and
fair value adjustments arising on consolidation, are translated to the
Group’s presentational currency at foreign exchange rates ruling at
the balance sheet date. The revenues and expenses of foreign
operations are translated at an average rate for the year where this
rate approximates to the foreign exchange rates ruling at the dates
of the transactions. Exchange differences arising from this translation
of foreign operations are reported as an item of other comprehensive
income and accumulated in the translation reserve.
F IN A NCI A L L I A BIL I T IE S
Financial liabilities and equity instruments are classified according
to the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its liabilities.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. Exchange differences arising are
recognised in other comprehensive income.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Depreciation is charged to the income statement on a straight-line
basis over the estimated useful lives of each part of an item of
property, plant and equipment. The estimated useful lives are
as follows:
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES
C ON T INUE D
The Group’s financial liabilities comprise trade and other payables,
borrowings and other non-current liabilities. All financial liabilities are
recognised initially at their fair value and subsequently measured
at amortised cost using the effective interest method except for
derivatives, which are classified as held for trading, except where
they qualify for hedge accounting, and are held at fair value. The
fair value of the Group’s liabilities held at amortised cost are
approximately equal to their carrying amount. A financial liability
is derecognised when the obligation specified in the contract
is discharged, cancelled or expires.
Leasehold improvements
between 4 and 10 years
Fixtures and fittings, plant and machinery
between 3 and 10 years
Depreciation methods, useful lives and residual values are reviewed
at each balance sheet date or if events or changes in circumstances
indicate the carrying value may not be recoverable.
i. BANK BORROW INGS
All loans and borrowings are initially recognised at the fair value of
the consideration received net of issue costs associated with the
borrowing. Borrowings are subsequently stated at amortised cost;
any difference between the proceeds (net of transaction costs) and
the redemption value is recognised in the consolidated income
statement over the period of the borrowings using the effective
interest method.
1. 8 BUSINE S S C OMBIN AT IONS
Acquisitions of subsidiaries and businesses are accounted for using
the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the sum
of the acquisition date fair values of assets transferred by the Group,
liabilities incurred by the Group to the former owners of the acquiree
and the equity interest issued by the Group in exchange for control of
the acquiree. Acquisition related costs are recognised in profit or loss
as incurred.
Financial expenses comprise interest expense on borrowings and
the cost of foreign currency forward contracts.
At the acquisition date, the identifiable assets acquired and the
liabilities assumed are recognised at their fair value.
ii. T R ADE PAYA BLES
Trade and other payables are included in current liabilities, except
for maturities greater than 12 months after the balance sheet date.
Payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net of the acquisition date
amounts of the identifiable assets acquired and the liabilities
assumed. If, after reassessment, the net of the acquisition date
amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree and the fair value of the
acquirer’s previously held interest in the acquiree (if any), the excess
is recognised immediately in profit or loss as a bargain purchase gain.
iii. PU T OP TION LIA BILITIES OV ER NON-CONT ROL LING INTEREST
Put options over shares in subsidiaries or joint ventures held by
non-controlling interests are recognised initially at fair value through
equity when granted. They are subsequently remeasured at fair value
at each reporting period with the change in fair value recorded in
the consolidated income statement as other finance expenses
and income.
iv. DERIVATIV E FINANCIA L INST RUMENTS AND HEDGE ACCOUNTING
When the consideration transferred by the Group in a business
combination includes asset or liability resulting from a contingent
consideration arrangement, the contingent consideration is measured
at its acquisition date fair value and included as part of the
consideration transferred in a business combination. Changes in fair
value of the contingent consideration that qualify as measurement
period adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are
adjustments that arise from additional information obtained during
the ‘measurement period’ (which cannot exceed one year from
the acquisition date) about facts and circumstances that existed
at the acquisition date.
The Group uses derivative financial instruments to hedge its
exposure to fluctuations in foreign exchange rates arising on certain
trading transactions. The principal derivative instruments used are
forward foreign exchange contracts taken out to hedge highly
probable cash flows in relation to future sales and product purchases.
Derivative financial instruments are recognised at fair value. The gain
or loss on remeasurement to fair value is recognised in the
consolidated income statement.
1.7 P ROP E R T Y, P L A N T A ND EQ UIP ME N T
Property, plant and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses.
The subsequent accounting for changes in the fair value of the
contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is
classified. Contingent consideration that is classified as equity is
not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or a liability is remeasured at subsequent
reporting dates in accordance with IAS 39 or IAS 37 Provisions,
Contingent Liabilities and Contingent Assets, as appropriate, with
the corresponding gain or loss being recognised in profit or loss.
Where parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items of
property, plant and equipment.
Leases in which the Group assumes substantially all the risks and
rewards of ownership of the leased asset are classified as finance
leases. Operating lease payments are accounted for as described
at 1.16 Operating leases below.
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• the Group is able to protect the brand and associated products
from counterfeiters or other infringements through securing
protection of its intellectual property and enforcing this through
litigation where necessary; and
• the Group dedicates sufficient resources to support the brand and
plans to continue to do so for the foreseeable future. This includes
investment across all forms of media to convey the fundamental
tenets of the brand.
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES
C ON T INUE D
When a business combination is achieved in stages, the Group’s
previously held interests in the acquired entity is remeasured to its
acquisition date fair value and the resulting gain or loss, if any, is
recognised in profit or loss. Amounts arising from interests in the
acquiree prior to the acquisition date that have previously been
recognised in other comprehensive income are reclassified to profit
or loss, where such treatment would be appropriate if that interest
were disposed of.
The brand value is not amortised but subject to an impairment
test which is performed annually or more frequently if events or
changes in circumstances indicate that the carrying value may
not be recoverable.
If the initial accounting for a business combination is incomplete by
the end of the reporting period in which the combination occurs, the
Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted
during the measurement period (see above), or additional assets or
liabilities are recognised, to reflect new information obtained about
facts and circumstances that existed as of the acquisition date that, if
known, would have affected the amounts recognised as of that date.
For further details see 1.12 Impairment excluding inventories and
deferred tax assets.
K E Y MONE Y
Key money paid to the outgoing tenant to enter a leasehold property
is stated within intangible assets at cost, net of amortisation and any
provision for impairment. Amortisation is charged on key money at
rates calculated to write-off the cost, less estimated residual value
(which in some locations and geographies equates to cost) on a
straight-line basis over the lease term.
1. 9 AC Q UISI T IONS A ND DISP OS A L S OF NON- C ON T ROL L ING IN T E R E S T S
Acquisitions and disposals of non-controlling interests that do not
result in a change of control are accounted for as transactions with
owners in their capacity as owners and therefore no goodwill is
recognised as a result of such transactions. The adjustments to
non-controlling interests are based on a proportionate amount of the
net assets of the subsidiary. Any difference between the price paid
or received and the amount by which non-controlling interests are
adjusted is recognised directly in equity and attributed to the
owners of the parent.
O T HE R IN TA NGIBL E A S SE T S
The cost of securing and renewing design patents, trademarks and
other intangible assets is capitalised at purchase price and amortised
by equal annual instalments over the period in which benefits are
expected to accrue. The useful economic life of these assets is
determined on a case-by-case basis, in accordance with the terms
of the underlying agreement and the nature of the asset.
1.10 IN TA NGIBL E A S SE T S A ND GOODW IL L
GOODW IL L
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is allocated to cash-generating units and is not amortised
but tested annually for impairment or more frequently if events or
changes in circumstances indicate that the carrying value may not
be recoverable.
A MOR T IS AT ION
Amortisation is charged to the statement of profit and loss on a
straight-line basis over the estimated useful lives of intangible assets
unless such lives are indefinite. Intangible assets with an indefinite
useful life including the Jimmy Choo brand and goodwill are
systematically tested for impairment at each balance sheet date.
Other intangible assets are amortised from the date they are available
for use. The estimated useful lives are as follows:
For the purpose of impairment testing, goodwill is allocated to
each of the Group’s cash-generating units expected to benefit from
synergies of the combination. If the recoverable amount of the
cash-generating unit is less that the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of
goodwill and then to the other assets of the unit on a pro rata basis.
Impairment losses relating to goodwill are not reversed in
subsequent years.
Trademarks
5-10 years
Software
3-7 years
1.11 IN V E N T ORIE S
For further details see 1.12 Impairment excluding inventories and
deferred tax assets.
Inventories are stated at the lower of cost and net realisable value.
Cost is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories and other costs
in bringing them to their existing location and condition.
BR A ND
Brands acquired in a business combination are recognised at
fair value at the acquisition date and are carried at cost less
accumulated impairment.
Where necessary, provision is made to reduce the cost to no more
than net realisable value having regard to the nature and condition
of inventory, as well as anticipated utilisation and saleability.
The Jimmy Choo brand is the only intangible asset that is considered
to have an indefinite useful life on the basis that:
1.12 IMPA IR ME N T E XCL UDING IN V E N T ORIE S A ND DE F E R R E D TA X A S SE T S
F IN A NCI A L A S SE T S (INCL UDING R ECEI VA BL E S)
A financial asset not carried at fair value through profit or loss is
assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if
objective evidence indicates that a loss event has occurred after the
initial recognition of the asset, and that the loss event has a negative
effect on the estimated future cash flows of that asset that can be
estimated reliably.
• the brand is central to the business strategy, differentiating the
products in the market through building a reputation for excellence
and it is not considered realistic to abandon the brand given its
importance to the business;
• the brand does not face technological obsolescence and the
luxury market is not a sector with a definite life;
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
SHOR T-T E R M BE NE F I T S
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES
C ON T INUE D
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be paid
under short-term cash bonus or profit-sharing plans if the Group has
a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation
can be estimated reliably.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Interest on
the impaired asset continues to be recognised through the unwinding
of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is
reversed through profit or loss.
1.14 P ROV ISIONS
A provision is recognised in the consolidated balance sheet when the
Group has a present legal or constructive obligation as a result of a
past event, that can be reliably measured and it is probable that an
outflow of economic benefits will be required to settle the obligation.
Provisions are discounted if the effect of the time value of money is
material using a pre-tax market rate adjusted for risks specific to
the liability.
NON- F IN A NCI A L A S SE T S
The carrying amounts of the Group’s non-financial assets, other than
inventories and deferred tax assets are reviewed at each reporting
date to determine whether there is any indication of impairment.
If any such indication exists, then the asset’s recoverable amount is
estimated. For goodwill, and intangible assets that have indefinite
useful lives or that are not yet available for use, the recoverable
amount is estimated each year at the same time.
1.15 R E V E NUE R EC OGNI T ION
Revenue, which is stated excluding Value Added Tax and other sales
related taxes, is the amount receivable for goods supplied (less
returns, trade discounts and allowances) and royalties receivable.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and
the risks specific to the asset. For the purpose of impairment testing,
assets that cannot be tested individually are grouped together into
the smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or groups of assets (the “cash-generating unit”). The
goodwill acquired in a business combination, for the purpose of
impairment testing, is allocated to cash-generating units, (“CGU”).
CGUs to which goodwill has been allocated are aggregated so that
the level at which impairment is tested reflects the lowest level at
which goodwill is monitored for internal reporting purposes which
does not exceed the level of individual operating segments. Goodwill
acquired in a business combination is allocated to groups of CGUs
that are expected to benefit from the synergies of the combination.
Wholesale sales are recognised when the significant risks and
rewards of ownership have transferred to the customer, with
provisions made for expected returns and allowances. Retail sales,
returns and allowances are reflected at the dates of transactions with
customers. Provisions for returns on retail and wholesale sales are
calculated based on historical return levels.
Royalty revenue from licensing agreements is recognised on an
accruals basis in accordance with the substance of the relevant
agreement (provided that it is probable that the economic benefits
will flow to the Group and the amount of revenue can be
measured reliably).
1.16 OP E R AT ING L E A SE S
Rentals payable under operating leases are charged to the income
statement on a straight-line basis over the term of the relevant lease
except where another more systematic basis is more representative
of the time pattern in which economic benefits from the lease asset
are consumed. Contingent rentals arising under operating leases are
recognised as an expense in the year in which they are incurred.
An impairment loss is recognised if the carrying amount of an asset
or its CGU exceeds its estimated recoverable amount. Impairment
losses are recognised in the consolidated income statement.
Impairment losses recognised in respect of CGUs are allocated first
to reduce the carrying amount of any goodwill allocated to the units,
and then to reduce the carrying amounts of the other assets in the
units on a pro rata basis.
In the event that lease incentives are received to enter into an
operating lease such incentives are recognised as a liability. Lease
incentives are recognised as a reduction of rental expense on
a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the lease are consumed.
An impairment loss in respect of goodwill is not reversed. In respect
of other assets, impairment losses recognised in prior years are
assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the
recoverable amount, only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment
loss had been recognised.
Premiums paid to landlords to secure operating leases are recognised
as assets and depreciated to residual value over the lease term.
1.17 E XCEP T ION A L C OS T S
Exceptional items are non-recurring items which are outside the
normal scope of the Group’s ordinary activities such as costs arising
from a fundamental restructuring of the Group’s operations or are
considered to be one-off in nature. Such items are disclosed
separately within the consolidated income statement.
1.13 E MP L OY E E BE NE F I T S
DE F INE D C ON T RIBU T ION P L A NS
A defined contribution plan is a post-employment benefit plan under
which the Group pays fixed contributions into a separate entity and
has no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution pension plans
are recognised as an expense in the consolidated income statement
in the periods during which services are rendered by employees.
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EQ UI T Y- SE T T L E D SH A R E B A SE D PAY ME N T SCHE ME S
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES
C ON T INUE D
1.18 F IN A NCI A L INC OME A ND E X P E NSE S
Share based payment transactions in which the Group receives
goods or services by incurring a liability to transfer its own equity
instruments are accounted for as equity-settled share based
payments. The payments are assessed at their fair value on the grant
date. The cost of the share based incentives is recognised as an
expense over the vesting period of the awards, with a corresponding
increase in equity. The estimate of the number of options expected
to vest is revised at each balance sheet date.
Financial expenses comprise interest payable and changes in the
fair value of financial liabilities that are recognised in the income
statement. Financial income comprises interest receivable on funds
invested and changes in the fair value of financial assets recognised
in the income statement.
Interest income and interest payable is recognised in profit or loss
as it accrues, using the effective interest method.
When options and awards are exercised, they are settled through
awards of shares held in the Employee Benefit Trust. The proceeds
received from the exercises, net of any directly attributable
transaction costs, are credited to equity.
1.19 TA X AT ION
Tax on the profit or loss for the year comprises current and deferred
tax. Tax is recognised in the consolidated income statement and
consolidated statement of other comprehensive income except to
the extent that it relates to items recognised directly in equity, in
which case it is recognised in equity.
1. 21 O W N SH A R E S R E SE R V E
Where the Company or its subsidiaries (including the Jimmy Choo
PLC Employee Benefit Trust) purchase the Company’s own
equity shares, the cost of those shares, including any attributable
transaction costs, is presented within the own shares reserve
as a deduction in shareholders’ equity in the consolidated
financial statements.
Current tax is the expected tax payable or receivable on the taxable
income or loss for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable
in respect of previous years.
1. 2 2 A DOP T ION OF NE W A ND R E V ISE D S TA NDA R DS
A DOP T ION OF NE W S TA NDA R DS
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition of
goodwill; the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a business
combination, and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
With effect from 1 January 2014, the Group has adopted the
following standards and amendments endorsed by the IASB
in December 2012:
A deferred tax asset is recognised only to the extent that it is
probable that future profits will be available against which the
temporary difference can be utilised.
IFRS 10
Consolidated Financial Statements
IFRS 11
Joint Arrangements
IFRS 12
Disclosure of Interests in Other Entities
IAS 27
Separate Financial Statements
IAS 28
Investments in Associates and Joint Ventures
The following new standards, amendments to standards or
interpretations must be applied for the first time by the Group for
the year ending 31 December 2014 but are not currently relevant:
Current and deferred tax assets and liabilities are only offset when
there is a legally enforceable right to offset current tax assets against
current tax liabilities and when deferred income tax assets and
liabilities relate to income taxes levied by the same taxation authority
on either the same taxable entities or different taxable entities where
there is an intention to settle the balances on a net basis.
1. 2 0 SH A R E B A SE D PAY ME N T T R A NS AC T IONS
C A SH- SE T T L E D SH A R E B A SE D PAY ME N T SCHE ME S
Share based payment transactions in which the Group receives
goods or services by incurring a liability to transfer cash or other
assets that is based on the price of the Group’s equity instruments
are accounted for as cash-settled share based payments. The fair
value of the amount payable to employees is recognised as an
expense, with a corresponding increase in liabilities, over the period
in which the employees become unconditionally entitled to payment.
The liability is remeasured at each balance sheet date and at
settlement date. Any changes in the fair value of the liability
are recognised as personnel expense in the consolidated
income statement.
IAS 32 (Amendments)
Financial Instruments: Presentation
IAS 36 (Amendments)
Impairment of Assets
IAS 39 (Amendments)
Financial Instruments: Recognition
and Measurement
IFRIC 21
Levies
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
IMPA IR ME N T OF GOODW IL L A ND O T HE R INDE F INI T E L IF E IN TA NGIBL E
A S SE T S
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES
C ON T INUE D
F U T UR E A DOP T ION OF NE W S TA NDA R DS
At the date of authorisation of these financial statements, the
following standards and interpretations which have not been applied
in these financial statements were in issue but not yet effective (and
in some cases had not yet been adopted by the EU):
On an annual basis, the Group is required to perform an impairment
review to assess whether the carrying value of goodwill and other
indefinite life intangible assets is less than its recoverable amount.
Recoverable amount is based on a calculation of expected future
cash flows, which include estimates of future performance. Details
of assumptions used in the impairment tests are detailed in note 11.
IAS 19 (Amendments)
Defined Benefit Plans: Employee
Contributions
K E Y MONE Y VA L UAT ION
IFRS 14
Regulatory Deferral Accounts
IFRS 11 (Amendments)
Accounting for Acquisitions of Interests
in Joint Operations
IAS 16 and 36
Classification of Acceptable Methods
of Depreciation and Amortisation
IAS 27 (Amendments)
Equity Method in Separate Financial
Statements
IFRS 15
Revenue from Contracts with Customers
IFRS 9
Financial Instruments
Judgement is required in estimating the residual value of key money
paid to outgoing tenants to secure a leasehold property. In certain
locations, the residual value of key money is considered to be equal
to cost; either due to legal protection offered to tenants in that
jurisdiction or because it is common practice to at least recover the
amounts paid at the end of the lease due to the existence of an active
market for operating leases of prime luxury real estate.
VA L UAT ION OF O T HE R IN TA NGIBL E A S SE T S
The assessment of fair value in a business combination requires the
recognition and measurement of the identifiable assets, liabilities and
contingent liabilities in the acquired business. The key judgements
required are the identification of intangible assets meeting the
recognition criteria of IAS 38 and their attributable fair values. The
key assumptions in relation to the brand valuation are the directors’
best estimate of its life and the royalty and discount rate used in
its valuation.
The Group chose not to adopt any of the above standards and
interpretations early. No significant net impact from the adoption
of these new standards is expected.
SH A R E B A SE D PAY ME N T S
The vesting of awards granted under the Group’s share based
payments scheme is dependent upon continued employment
within the Group over the vesting period. Judgement is required
in determining the number of shares that will ultimately vest.
Beyond the information above, it is not practicable to provide a
reasonable estimate of the effect of these standards until a detailed
review has been completed.
2 . CRI T ICA L ACCOUN T ING ES T IM AT ES A ND JUDGEMEN T S
TA X AT ION
The preparation of the consolidated financial statements requires the
directors to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The Group recognises deferred tax assets and liabilities based upon
future taxable income and the expected recoverability of the balance.
The estimate will include assumptions regarding future income
streams of the Group and the future movement in corporation tax
rates in the respective jurisdictions. The estimation of liabilities in
respect of current taxation depends on estimates and judgements in
respect of whether or not, and the extent to which items of income
and expenditure will be taxable.
Estimates and underlying assumptions are reviewed on an ongoing
basis based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Revisions to accounting estimates are
recognised in the year in which the estimate is revised and in any
future year impacted. The key judgements and estimates employed
in the financial statements are considered below.
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3 . OPER AT ING SEGMEN T S
The Chief Operating Decision Maker (“CODM”) is the Board of Directors. Internal management reports are reviewed by the CODM. Key
measures used to evaluate segment performance are revenue and segment contribution to EBITDA. Management believes that these
measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions as central
costs are not allocated across the segments.
The CODM considers the Group’s segments to be its three channels to market, being retail (including online), wholesale and other.
Retail revenue is generated through the sale of luxury goods to end consumers via Jimmy Choo directly operated stores in Europe, USA,
Hong Kong, China and Japan and via the Group’s website.
Wholesale revenue is generated through the sale of luxury goods to distribution partners, multi-brand department stores and speciality
stores worldwide.
Other revenue is predominantly generated through receipt of royalties from the Group’s global licensees of Jimmy Choo branded fragrance,
sunglasses and eyewear products.
There are no material inter-segment transactions.
An analysis of net assets by segment is not reviewed by the CODM and accordingly is not presented below.
The following is an analysis of the Group’s revenue and results by reportable segment for the year ended 31 December 2014.
Revenue
Segment result
Retail
2014
£000
Wholesale
2014
£000
Other
2014
£000
Total
2014
£000
192,896
45,049
99,583
7,191
299,670
45,260
1,254
91,563
Administrative expenses
(54,436)
Exceptional costs
(13,047)
Finance income
1,480
Finance expense
(30,963)
Loss on financial instruments
(2,908)
Share of profit of associates
12
Loss before tax
(8,299)
The following is an analysis of the Group’s revenue and results by reportable segment for the year ended 31 December 2013.
Revenue
Segment result
Retail
2013
£000
Wholesale
2013
£000
Other
2013
£000
Total
2013
£000
177,362
97,707
6,475
281,544
49,394
43,195
856
Administrative expenses
93,445
(62,287)
Exceptional costs
(6,009)
Finance income
68
Finance expense
(50,909)
Gain on financial instruments
4,374
Share of loss of associates
(85)
Loss before tax
(21,403)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
3 . OPER AT ING SEGMEN T S C ON T INUE D
SEGMEN T ASSE T S
The following table provides an analysis of the Group’s total assets by reportable segment:
Retail
Wholesale
Other
2014
£000
2013
£000
119,261
94,623
21,122
18,747
24,430
20,650
Total segment assets
164,813
134,020
Goodwill and brand
570,494
568,416
12,045
20,334
Cash and cash equivalents
Investments in joint venture
191
179
Other financial instruments
–
1,450
Taxation
Total assets
11,429
8,466
758,972
732,865
EN T I T Y-W IDE DISCL OSURES
The following table provides an analysis of the Group’s revenue by geographical destination, irrespective of the origin of the goods:
2014
£000
2013
£000
UK
38,174
37,164
EMEA excluding UK
94,176
89,256
Americas
99,845
99,209
Asia excluding Japan
34,805
25,883
Japan
32,670
30,032
Total
299,670
281,544
2014
£000
2013
£000
585,013
576,813
EMEA excluding UK
21,788
24,328
USA
19,700
14,195
The total of non-current assets other than deferred tax assets located in the UK and foreign countries is as follows:
UK
Asia excluding Japan
8,779
7,815
Japan
1,063
1,080
Total
636,343
624,231
The Group did not have a single customer that accounted for more than 10% of the Group’s consolidated revenue in either of the years presented.
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4 . OPER AT ING PROF I T
Operating profit is stated after (charging)/crediting:
2014
£000
Depreciation of fixed assets
2013
£000
(14,225)
(11,001)
Gain on disposal of operating lease
402
–
Loss on disposal of fixed assets
(273)
–
Amortisation of other intangible fixed assets
(793)
(752)
Operating lease rentals for land and buildings
(23,705)
(20,197)
Net gain/(loss) on foreign currency translation
1,786
(3,966)
5 . E XCEP T ION A L COS T S
The Group incurred the following costs during the years presented that are considered to be exceptional:
2014
£000
2013
£000
Acquisition and integration costs
1,644
2,584
Replatforming costs
3,559
3,425
IPO costs
Total
7,844
–
13,047
6,009
Acquisition and integration costs relate to initiatives put in place following the acquisition of Passion Holdings Limited on 1 July 2011 and the
subsequent costs incurred integrating the operations of the business into the wider JAB Luxury GmbH group. These costs include legal and
other professional fees associated with the refinancing and integration of the Group and the restructuring of the senior management team,
including severance, recruitment costs and retention bonuses. These initiatives came to an end on the IPO of the Group in October 2014.
Replatforming costs represent costs associated with strengthening product development (in the Florence facility), reinforcing the team in
key functions, undertaking regional buyouts in Asia and scaling up the information systems capability and office infrastructure to support
the growth strategy.
IPO costs represent costs directly associated with the listing of the Group on the London Stock Exchange in October 2014. IPO costs
includes an exceptional charge of £1.6m in respect of the accelerated vesting of the Group’s cash settled share based payment scheme
at IPO (note 22).
6 . E A RNINGS PER SH A RE
Basic earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary
shares in issue during the year. There are no dilutive shares.
The weighted average number of shares for the year was:
Shares issued
No of shares
Own shares
No of shares
Shares outstanding
No of shares
1 January 2014
100
–
100
3 October 2014
389,737,488
(11,951,119)
377,786,369
31 December 2014
389,737,588
(11,951,119)
377,786,469
Weighted average number of shares
93,152,879
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
6 . E A RNINGS PER SH A RE C ON T INUE D
In order to provide a measure of underlying performance, the Group has chosen to present an additional illustrative measure of Adjusted
earnings per share. Adjusted earnings per share has been calculated using adjusted consolidated net income (see note 28) and dividing by
the number of ordinary shares outstanding as at 31 December 2014 for both years to eliminate the impact of shares issued during the year.
Basic weighted average shares
Outstanding shares as at 31 December 2014
2014
No of shares
2013
No of shares
93,152,879
100
377,786,469
377,786,469
2014
£000
2013
£000
Loss for the year
(10,842)
(17,668)
Adjusted consolidated net income for the year
22,888
21,004
Earnings per share is calculated as follows:
2014
Basic and diluted earnings per ordinary share (£)
Adjusted earnings per ordinary share (pence)
2013
(0.12)
(176,680)
6.1
5.6
2014
£000
2013
£000
213
69
57
24
7. AUDI TOR ’S REMUNER AT ION
Fees payable for the audit of the Company’s financial statements
Amounts receivable by the Company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company
Other audit related services
160
–
Taxation compliance services
121
95
Taxation advisory services
540
377
Other non-audit services
874
–
1,965
565
Total auditor remuneration
Included within the other non-audit services for the year ended 31 December 2014 are corporate finance transaction services fees of £0.9m
(2013: £nil) that were incurred as part of the IPO process. Tax advisory services includes £0.2m (2013: £nil) of IPO related services. Included
within other audit related services are fees of £0.2m (2013: £nil) in relation to the six month period audit undertaken as part of the IPO
process. These are disclosed within exceptional costs (see note 5).
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8 . S TA F F NUMBERS A ND COS T S
The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:
2014
2013
Administration
320
266
Selling and distribution
659
564
Total staff numbers
979
830
2014
£000
2013
£000
Wages and salaries
40,914
37,804
Social security costs
5,042
5,094
Share based payments
3,541
1,999
Contributions to defined contribution plans
1,354
282
50,851
45,179
The aggregate payroll costs incurred were as follows:
Total staff costs
Full details of directors’ remuneration and interests are set out in the Directors Remuneration Report.
Included within share based payments expenses for the year ended 31 December 2014 is an expense of £1.6m (2013: £nil) that relates to
the accelerated vesting of the Group’s cash settled share based payment scheme and is disclosed within exceptional costs (see note 5).
9. F IN A NCI A L INCOME A ND E X PENSE
Bank interest income
2014
£000
2013
£000
24
68
Foreign exchange gain on external borrowings
1,456
–
Total financial income
1,480
68
Interest expense on bank loans and overdrafts
(5,955)
(7,386)
Interest expense on shareholder credit facility
(23,646)
(29,496)
(1,362)
(12,962)
–
(1,065)
Finance charges
Foreign exchange loss on external borrowings
Total finance expense
(30,963)
Net result on financial instruments
(2,908)
Net financing expense
(32,391)
(50,909)
4,374
(46,467)
Interest incurred on the shareholder credit facility ceased on 3 October 2014 when the Group entered into a debt for equity swap agreement,
which discharged the shareholder credit facility in exchange for the issue of ordinary shares in Choo Luxury Group Limited (see note 21).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
10. TA X AT ION
TA X AT ION RECOGNISED IN T HE CONSOL IDAT ED INCOME S TAT EMEN T:
2014
£000
Corporation tax charge for the year
2013
£000
(4,455)
(3,803)
(911)
320
Double taxation relief
130
1,000
Foreign tax for current year
(167)
(125)
(5,403)
(2,608)
2,860
6,343
2,860
6,343
(2,543)
3,735
Adjustments for prior year
Current taxation
Origination and reversal of temporary differences
Deferred tax credit
Total tax (charge)/credit for the year
The tax (charge)/credit is reconciled with the standard rates of UK corporation tax as follows:
2014
£000
Loss before tax
(8,299)
UK corporation tax at standard rate of 21.25% (2013: 23.25%)
2013
£000
(21,403)
1,763
4,976
(2,196)
(8,681)
(327)
393
–
7,011
Adjustments in respect of prior year
(911)
320
Group relief claimed and paid for
242
318
Factors affecting the charge for the year:
Expenses not deductible for tax purposes
Utilisation of losses brought forward
Impact of change in tax rate
Difference of overseas rate
(1,114)
(602)
Total tax (charge)/credit for the year
(2,543)
3,735
FAC TORS A F F EC T ING T HE F U T URE , CURREN T A ND TOTA L TA X CH A RGES:
Reductions in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) were substantively enacted on 2 July 2014. This will
reduce the Company’s future current tax charge accordingly.
The deferred tax asset at 31 December 2014 has been calculated based on the rates substantively enacted at the balance sheet date in each
jurisdiction which was 20% in the UK.
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11. IN TA NGIBL E ASSE T S
Goodwill
£000
Brand
£000
Key money
£000
Trademarks
and designs
and patents
£000
Total
£000
304,332
263,816
12,367
1,693
582,208
Cost
Balance at 1 January 2013
Additions through business combinations (note 13)
Additions
Disposals
Exchange differences
Balance at 31 December 2013
Additions through business combinations (note 13)
Additions
Disposals
Exchange differences
Balance at 31 December 2014
323
–
–
–
323
–
–
3,789
648
4,437
–
–
(109)
(11)
(120)
(55)
–
251
(12)
184
304,600
263,816
16,298
2,318
587,032
1,787
–
–
–
1,787
–
–
–
413
413
–
–
(638)
–
(638)
291
–
(975)
(3)
(687)
306,678
263,816
14,685
2,728
587,907
–
–
1,047
281
1,328
Amortisation
Balance at 1 January 2013
Amortisation for the year
–
–
548
204
752
Disposals
–
–
–
(10)
(10)
Exchange differences
–
–
16
(12)
4
Balance at 31 December 2013
–
–
1,611
463
2,074
Amortisation for the year
–
–
558
235
793
Disposals
–
–
(73)
–
(73)
Exchange differences
–
–
(128)
(3)
(131)
Balance at 31 December 2014
–
–
1,968
695
2,663
At 31 December 2014
306,678
263,816
12,717
2,033
585,244
At 31 December 2013
304,600
263,816
14,687
1,855
584,958
Net book value
Amortisation of key money is recognised in selling and distribution expenses in the income statement. All other amortisation is recognised in
administrative expenses.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
11 IN TA NGIBL E ASSE T S C ON T INUE D
A L L OCAT ION OF INDEF INI T E L IF E IN TA NGIBL E ASSE T S
The carrying value of goodwill is allocated as follows:
2014
£000
2013
£000
Retail
187,856
187,565
Wholesale
114,172
114,172
Other
4,650
2,863
306,678
304,600
Goodwill and indefinite life intangible assets are not amortised, but are tested for impairment annually or where there is an indication that
goodwill might be impaired. The recoverable amount of all cash generating units has been determined on a value-in-use basis.
Goodwill of £294.2m arising on the acquisition of Passion Holdings Limited on 1 July 2011 is allocated to the groups of cash generating units
acquired that represent the lowest level within the Group at which goodwill is monitored for internal management purposes. This is
consistent with the determination of operating segments. For the purpose of impairment testing, the value-in-use of each operating segment
is calculated as described below.
Goodwill arising on the acquisitions of J. Choo Hong Kong JV Limited, the business line of Jimmy Choo in Shanghai Kutu Trading Co., Ltd.
and J. Choo Russia JV Limited described in note 13 is allocated to the retail segment for impairment testing.
Goodwill arising on the acquisition of Studio Luxury S.r.l. on 5 August 2014 described in note 13 is allocated to the other segment for
impairment testing.
The Jimmy Choo brand, which was valued at £263.8m on the acquisition of Passion Holdings Limited on 1 July 2011 is considered to have an
indefinite useful life and accordingly is tested for impairment on an annual basis, or where an indicator of impairment is identified. The brand
is fundamental to the operations of the Group as a whole and is therefore not allocated to cash-generating units but tested for impairment at
the Group level.
IMPA IRMEN T T ES T ING
The value-in-use is represented by the discounted value of future cash flows that are expected from continuous use of the assets associated
with the cash generating units and by the terminal value attributable to them. In assessing the value-in-use, the cash flow projections were
taken from the Group’s five year business plan, approved by the Board of Directors. The cash flow projections are subject to key assumptions
in respect of discount rates, future net revenue, margin and EBITDA growth. The directors have reviewed and approved the assumptions
inherent in the model as part of the annual budget process using historical experience and considering economic and business risks facing
the Group.
The terminal value was determined using a perpetuity long-term growth rate in line with macro-economic estimates of 3%.
In assessing the Group’s value-in-use a discount rate of 9.9% (2013: 11.3%) has been applied to the groups of cash generating units.
A sensitivity analysis has been performed on the value-in-use calculations by assuming a reasonable change in the discount rate, revenue
growth rates, EBITDA margins and terminal growth rates. The sensitivity analysis indicated significant headroom between the recoverable
amount under these scenarios and the carrying value of goodwill and intangibles.
No impairment has been recognised in respect of the carrying value of the goodwill or the brand in any of the years presented as, for each
cash generating unit and the Group as a whole, the recoverable amount exceeds its carrying value.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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12 . PROPER T Y, PL A N T A ND EQ UIPMEN T
Leasehold land
and buildings
£000
Fixtures and
Fittings, plant
and machinery
£000
Total
£000
Cost
Balance at 1 January 2013
22,185
19,522
41,707
Additions
7,780
11,601
19,381
Disposals
(1,313)
(1,255)
(2,568)
Transfers
1,211
(1,211)
–
Exchange differences
Balance at 31 December 2013
Additions through business combinations (note 13)
(827)
(459)
(1,286)
29,036
28,198
57,234
24
87
111
Additions
7,423
18,486
25,909
Disposals
(992)
(1,768)
(2,760)
Transfers
2,517
(2,517)
–
138
131
269
38,146
42,617
80,763
4,914
5,236
10,150
Exchange differences
Balance at 31 December 2014
Depreciation and impairment
Balance at 1 January 2013
Depreciation charge for the year
5,323
5,678
11,001
Disposals
(1,313)
(1,255)
(2,568)
Transfers
472
(472)
–
Exchange differences
(226)
(217)
(443)
Balance at 31 December 2013
9,170
8,970
18,140
Depreciation charge for the year
6,271
7,954
14,225
Disposals
(880)
(1,607)
(2,487)
Transfers
475
(475)
–
Exchange differences
(215)
192
(23)
14,821
15,034
29,855
At 31 December 2014
23,325
27,583
50,908
At 31 December 2013
19,866
19,228
39,094
Balance at 31 December 2014
Net book value
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
13 . ACQ UISI T IONS OF SUBSIDI A RIES
AC Q UISI T IONS IN T HE Y E A R E NDE D 31 DECE MBE R 2 014
On 10 February 2014, J. Choo Limited, a wholly owned subsidiary undertaking of the Group, subscribed for 100% of the share capital
of J. Choo Canada Inc for consideration of CAD 1,000 (£545).
On 15 October 2014, Jimmy Choo PLC subscribed for 100% of the share capital of Jimmy Choo (Holdings) Limited for consideration
of £389,737,588 satisfied by way of share-for-share exchange (note 21).
On 5 August 2014, Itachoo S.r.l., a wholly owned subsidiary undertaking of the Group, purchased 100% of Studio Luxury S.r.l. for
consideration of EUR 1,935,000 (£1,531,460) from Luxury Italia Holding S.r.l, a wholly owned subsidiary of JAB Luxury GmbH.
The consideration is payable in four tranches between 1 January 2015 and 31 December 2018.
The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group on the
Studio Luxury S.r.l. acquisition.
Book
value
£000
Fair value
adjustments
£000
Fair
value
£000
111
–
111
19
–
19
Cash and cash equivalents
570
–
570
Total assets
700
–
700
Non-current assets
Property, plant and equipment
Current assets
Trade and other receivables
Trade and other payables
(956)
–
(956)
Net liabilities
(256)
–
(256)
Goodwill
1,787
Total consideration
1,531
Satisfied by:
Deferred consideration
1,531
Net cash inflow arising on acquisition:
Cash acquired
570
The book value of the acquired assets was equal to fair value.
Goodwill has arisen on the acquisition because of the growth potential of the business, the future income generating potential of the assets
acquired, the workforce and the value of other immaterial intangible assets acquired. None of the goodwill recognised is expected to be
deductible for income tax purposes.
ACQ UISI T IONS IN T HE Y E A R ENDED 31 DECEMBER 2 0 13
On 29 May 2013 J. Choo Limited, a wholly owned subsidiary undertaking of the Group, entered into a joint venture agreement with Rubinse
Trading LLC to form J. Choo Russia JV Limited. The Directors have concluded that the Group has control over the joint venture because it has
the ability to appoint the majority of Directors to the Board of the company and accordingly has consolidated the results of J. Choo Russia JV
Limited and its immediate subsidiary undertaking, J. Choo RUS LLC, in the Group’s consolidated financial statements from 13 March 2013,
the date of the incorporation of J. Choo Russia JV Limited.
The joint venture agreement includes a put and call option which requires the Group to purchase the share capital of the joint venture partner
on expiry of the joint venture agreement in 2018 which has been accounted for under the anticipated acquisition method, resulting in the
recognition of goodwill of £0.3m.
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14 . IN V ES T MEN T S IN SUBSIDI A RIES A ND ASSOCI AT ES
The principal undertakings in which the Group’s interest at the year end is more than 20% are as follows:
Ordinary shares held
%
Company
Country of incorporation
Nature of Business
2014
Jimmy Choo (Holdings) Limited
Great Britain
Holding Co.
100
–
Choo Luxury Group Limited
Great Britain
Holding Co.
100
100
Choo Luxury Holdings Limited
Great Britain
Holding Co.
100
100
Choo Luxury Finance Limited
Great Britain
Holding Co.
100
100
Passion Holdings Limited
Great Britain
In liquidation
100
100
Bag and Choos Limited
Great Britain
In liquidation
100
100
Choo Management Limited
Great Britain
In liquidation
100
100
J. Choo Group Holding Limited
Great Britain
In liquidation
100
100
The J. Choo Group Ltd
Great Britain
In liquidation
100
100
Choo Group Holdings Ltd
Great Britain
In liquidation
100
100
Choo Group Finance Ltd
Great Britain
In liquidation
100
100
Yearnoxe Limited
Great Britain
In liquidation
100
100
Choo Holdings UK Limited
Great Britain
In liquidation
100
100
J. Choo Limited
Great Britain
Retail and wholesale
100
100
J. Choo (OS) Limited
Great Britain
Retail
100
100
Franchoo SAS
France
Retail
100
100
Itachoo S.r.l.
Italy
Retail
100
100
J Choo Florida Inc
USA
Property
100
100
J Choo Germany GmbH
Germany
Retail
100
100
J. Choo (Jersey) Limited
Jersey
Brand Co.
100
100
J Choo USA Inc
USA
Retail
100
100
Jimmy Choo Spain SL
Spain
Retail
100
100
J Choo (Switzerland) AG
Switzerland
Retail
100
100
J. Choo (Belgium) BVBA
Belgium
Retail
100
100
J. Choo (Asia) Limited
Hong Kong
Regional office
100
100
J. Choo Japan JV Ltd.
Great Britain
Dormant
100
100
Jimmy Choo (Shanghai) Trading Co. Ltd
China
Retail
100
100
Jimmy Choo Tokyo K.K.
Japan
Retail and wholesale
100
100
J. Choo Netherlands B.V.
The Netherlands
Retail
100
100
J. Choo Czech s.r.o.
Czech Republic
Retail
100
100
J. Choo Hong Kong JV Limited
Great Britain
Dormant
100
100
Jimmy Choo Hong Kong Limited
Hong Kong
Retail and wholesale
100
100
J. Choo Supply SA
Switzerland
Procurement
100
100
J. Choo (Austria) GmbH
Austria
Retail
100
100
J. Choo Canada Inc
Canada
Retail
100
–
Studio Luxury S.r.l.
Italy
Production control
100
–
J. Choo Russia JV Limited
Great Britain
Holding Co.
50
50
J. Choo RUS LLC
Russian Federation
Retail
50
50
JC Industry S.r.l.
Italy
Production
33
33
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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2013
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
14 . IN V ES T MEN T S IN SUBSIDI A RIES A ND ASSOCI AT ES C ON T INUE D
As at 31 December 2014, all subsidiary undertakings are wholly owned, except where indicated differently above, and operate in the country
in which they are incorporated. All subsidiaries have financial years ending 31 December.
The Group’s share of the results of its immaterial associates, all of which are unlisted, and their aggregated assets and liabilities, are as follows:
2014
£000
2013
£000
Total assets
2,061
2,521
Total liabilities
(1,481)
(1,978)
Net assets
580
543
Group’s share of net assets
191
179
Revenue
142
5,566
Profit
37
(259)
Group’s share of associate profit/(loss)
12
(85)
15 . DEF ERRED TA X ASSE T S A ND L I A BIL I T IES
RECOGNISED DEF ERRED TA X ASSE T S A ND L I A BIL I T IES
Deferred tax assets and liabilities are attributable to the following:
A S SE T S
Inventories
Tax value of loss carry-forwards
Other assets
Deferred tax assets
2014
£000
2013
£000
7,725
5,118
–
68
3,645
3,134
11,370
8,320
2014
£000
2013
£000
L I A BIL I T IE S
Property, plant and equipment
(1,247)
(1,061)
Intangible assets
(52,763)
(52,763)
Deferred tax liabilities
(54,010)
(53,824)
Less deferred tax assets
11,370
8,320
(42,640)
(45,504)
Net deferred tax liabilities
Movement in deferred tax during the year:
Recognised in
profit and loss (credit)/
charge
£000
1 January
2014
£000
Property, plant and equipment
Recognised
in other
comprehensive
income
(credit)/charge
£000
Recognised
directly in
equity
£000
31 December
2014
£000
(1,061)
(186)
–
–
(1,247)
(52,763)
–
–
–
(52,763)
Inventories
5,118
2,607
–
–
7,725
Other financial assets (including foreign exchange
adjustment)
3,134
507
(29)
33
3,645
68
(68)
–
–
–
Intangible assets
Tax value of losses carried forward
(45,504)
2,860
(29)
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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33
(42,640)
15 . DEF ERRED TA X ASSE T S A ND L I A BIL I T IES C ON T INUE D
Recognised in
profit and loss
(credit)/charge
£000
1 January
2013
£000
Property, plant and equipment
Recognised
in other
comprehensive
income
(credit)/charge
£000
Recognised
directly
in equity
£000
31 December
2013
£000
(558)
(503)
–
–
(1,061)
(60,678)
7,915
–
–
(52,763)
Inventories
6,097
(979)
–
–
5,118
Other financial assets (including foreign exchange
adjustment)
2,627
507
–
–
3,134
Intangible assets
Tax value of losses carried forward
1,367
(51,145)
(597)
(702)
–
6,343
(702)
–
68
(45,504)
16 . IN V EN TORIES
Finished goods
Raw materials
2014
£000
2013
£000
57,820
42,354
248
510
58,068
42,864
The cost of inventories recognised as an expense and included in cost of sales for the year was £108.3m (2013: £99.3m). There is no material
difference between the balance sheet value of stocks and their replacement cost.
17. T R A DE A ND OT HER RECEI VA BL ES
Trade receivables
Allowance for doubtful debts
2014
£000
2013
£000
26,700
20,962
(302)
(291)
26,398
20,671
Amounts owed by related parties (note 26)
2,120
2,517
Other receivables
8,254
6,891
311
2,663
3,168
2,071
Restricted cash
Prepayments and accrued income
Other tax receivable
Total current receivables
836
707
41,087
35,520
Invoices to customers are generally due for payment within 30 days of the end of the month of issue. The Group’s experience is that the
majority of customers will pay within that timeframe. Trade receivables disclosed above include amounts which are past due at the reporting
date (see below for aged analysis). In determining the recoverability of a trade receivable the Group considers any change in the credit
quality of the trade receivable from the date credit was initially granted up to the reporting date. The Group has recognised an allowance
for doubtful receivables at each reporting date by considering the recoverability of each receivable. The average age of receivables is
32 days (2013: 27 days).
AGEING OF PAS T DUE BU T NOT IMPA IRED RECEI VA BL ES
2014
£000
2013
£000
1,759
1,450
60–120 days
355
222
121+ days
648
699
2,762
2,371
31–60 days
Total
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
17. T R A DE A ND OT HER RECEI VA BL ES C ON T INUE D
MOV EMEN T IN A L L OWA NCE F OR DOUB T F UL DEB T S
Balance at beginning of the year
Movement in allowance for doubtful debts
Balance at the end of the year
2014
£000
2013
£000
(290)
(199)
(12)
(92)
(302)
(291)
The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount
owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly.
18 . IN T ERES T-BE A RING L OA NS A ND BORROW INGS
The contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost are described below.
For more information about the Group’s exposure to interest rate and foreign currency risk, see note 23.
2014
£000
2013
£000
113,217
123,177
Non-current liabilities
Secured bank loan
Secured bank facility
Shareholder credit facility
Loan from related party
Total non-current liabilities
11,221
11,007
–
460,494
544
462
124,982
595,140
–
3,199
Current liabilities
Current portion of secured bank loan
Current portion of secured bank facility
12,604
2,610
Unsecured bank facility
–
1,779
Total current liabilities
12,604
7,588
SECURED BA NK L OA N A ND FACIL I T IES
The principal amounts, interest margins and expiry dates for the main bank facilities as at 31 December 2014 are:
Principal
£000
Principal
$/€000
Interest margin
Expiry date
53,204
€68,106
EURIBOR + 3.0%
27 June 2018
Facility B2
60,013
$93,602
LIBOR + 3.0%
27 June 2018
Capex/acquisition facility (EUR)
13,283
€17,003
EURIBOR + 2.5%
27 June 2017
Capex/acquisition facility (USD)
5,074
$7,913
LIBOR + 2.5%
27 June 2017
Facility B1
The Group’s current bank facility came into effect on 1 July 2011. It consists of two term loans, a working capital facility and a revolving
credit facility, held by one of the Company’s subsidiary undertakings, Choo Luxury Finance Limited.
During the year the Group made repayments of £11.9m against Facility B1 (year ended 31 December 2013: £13.7m).
During the year the Group made repayments of £1.5m against Facility B2 (year ended 31 December 2013: £nil).
During the year the Group made repayments of £4.2m against the Capex/acquisition facility (year ended 31 December 2013: £nil).
The Capex/acquisition is repayable in equal instalments between 31 December 2015 and 27 June 2017.
In addition to the above, the Group has access to a 6 year revolving cash flow facility which expires on 27 June 2017 of up to €91.6m
(£71.6m), of which £59.9m was available to be drawn at 31 December 2014.
The Group’s external bank facilities are secured by way of a pledge of certain assets of the Group.
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18 . IN T ERES T-BE A RING L OA NS A ND BORROW INGS C ON T INUE D
SH A R E HOL DE R C R E DI T FACIL I T Y
The shareholder credit facility permitted drawings up to a maximum of £510.0m and incurs a fixed interest rate of 7.35% on 50% of the
amounts drawn under the facility and a variable interest rate of LIBOR +5.15% on the other 50% of amounts drawn down under the facility.
The unsecured facility was converted to equity on 3 October 2014 (see note 21).
A N A LYSIS OF BORROW INGS BY CURRENCY
Pounds
sterling
£000
Euro
£000
US dollars
£000
Other
£000
Total
£000
31 December 2014
Bank loans
–
53,204
60,013
–
113,217
Bank facilities
–
18,751
5,074
–
23,825
Loans from joint venture partner
–
544
–
–
544
–
72,499
65,087
–
137,586
Pounds
sterling
£000
Euro
£000
US dollars
£000
Other
£000
Total
£000
–
68,637
57,739
–
126,376
–
8,694
4,923
1,779
15,396
460,494
–
–
–
460,494
31 December 2013
Bank loans
Bank facilities
Shareholder credit facility
Loans from joint venture partner
–
462
–
–
462
460,494
77,793
62,662
1,779
602,728
2014
£000
2013
£000
Trade payables
54,654
41,548
Accruals and deferred income
23,539
26,069
2,199
2,350
19. T R A DE A ND OT HER PAYA BL ES
Current
Accrued interest on bank facilities
Accrued interest on shareholder credit facility
–
5,077
Amounts owed to related parties (note 26)
6,638
5,756
Amounts owed to associate (note 26)
1,657
2,688
312
–
Deferred consideration owed to related parties (note 13)
Other creditors
Total current trade and other payables
5,495
3,152
94,494
86,640
500
500
Non-current
Put option over non-controlling interest
Deferred consideration owed to related parties (note 13)
1,199
–
Other creditors
3,466
3,052
5,165
3,552
Total non-current trade and other payables
The Directors consider that the carrying amount of trade payables is approximate to their fair value. Trade creditor days as at 31 December 2014
were on average 137 days (31 December 2013: 152 days).
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
2 0. OT HER NON-CURREN T L I A BIL I T IES
Employee Benefit Trust liability
2014
£000
2013
£000
15,374
–
The liability has been discounted applying a pre-tax discount rate that has been adjusted for risks specific to the liability.
The Jimmy Choo PLC Employee Benefit Trust acquired the Company’s own shares during the year from JAB Luxury GmbH, the Group’s
majority shareholder. The consideration for the shares has been left outstanding and will fall due for payment when shares are awarded to
employees in accordance with the terms of the Group’s long term incentive plan (see note 22). Shares will be returned to JAB Luxury GmbH
in the event that an employee leaves the scheme.
2 1. CA PI TA L A ND RESERV ES
Share capital
2014
£000
2013
£000
389,738
–
Share premium
99,480
–
Own shares reserve
(16,732)
–
(2,864)
(2,439)
Translation reserve
Retained earnings
(25,469)
(23,234)
Total equity
444,153
(25,673)
SH A RE CA PI TA L
Share capital is comprised of:
2014
£000
2013
£000
–
–
389,738
–
Allotted and called up
100 ordinary shares of £1 each
389,737,588 ordinary shares of £1 each
The comparative share capital represents that of Choo Luxury Group Limited.
The table below summarises the movements in share capital during the year ended 31 December 2014:
No of shares
Balance at 31 December 2013
100
Issue of ordinary shares – Jimmy Choo PLC
1
Issue of preference shares – Jimmy Choo PLC
50,000
Redemption of preference shares – Jimmy Choo PLC
(50,000)
Issue of ordinary shares – Jimmy Choo PLC
389,737,487
Balance prior to capital transaction
389,737,588
Jimmy Choo PLC was incorporated on 1 September 2014 and issued one ordinary share of £1 at par and £50,000 preference shares
of £1 each at par. The preference shares were subsequently redeemed as part of the share for share exchanges described below.
On 1 September 2014 Jimmy Choo (Holdings) Limited was incorporated and issued one ordinary share of £1 at par.
On 3 October 2014 JAB Luxury GmbH and Choo Luxury Group Limited entered into a debt for equity swap agreement pursuant to which
JAB Luxury GmbH agreed to discharge Choo Luxury Group Limited from the Shareholder Credit Facility in exchange for the issue of
389,737,488 new ordinary £1 shares in Choo Luxury Group Limited.
On 15 October 2014 Jimmy Choo (Holdings) Limited issued 389,737,587 ordinary £1 shares in exchange for all classes of shares
of Choo Luxury Group Limited.
On 16 October 2014 Jimmy Choo PLC issued 389,737,587 ordinary £1 shares in exchange for all classes of shares of Jimmy Choo
(Holdings) Limited.
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2 1. CA PI TA L A ND RESERV ES C ON T INUE D
SH A RE PREMIUM
Share premium of £99.5m arose on the debt for equity swap transaction between JAB Luxury GmbH and Choo Luxury Group Limited on
3 October 2014. The carrying value of the Shareholder Credit Facility (including accrued interest) at the date of the debt for equity swap
was £489.2m.
OW N SH A RES RESERV E
The cost of the Company’s ordinary shares held by the Jimmy Choo PLC Employee Benefit Trust is treated as a deduction in arriving at total
shareholder’s equity. The movement in the own shares reserve was as follows:
Number of
ordinary shares
1 January 2014
Average price
paid per share
£000
–
–
–
Shares purchased by the EBT during the year
11,951,119
£1.40
16,732
At 31 December 2014
11,951,119
£1.40
16,732
Shares held by the Jimmy Choo PLC Employee Benefit Trust will be used to satisfy options awarded under the Group’s long term incentive
plan (see note 22).
2 2 . SH A RE BASED PAY MEN T S
During the year the Group operated two equity-settled share based compensation schemes and one cash-settled share based payment
scheme for its Directors and employees. Details of each of these schemes are set out in this note.
CASH-SE T T L ED SH A RE OP T ION SCHEME
PH A N T OM OP T ION SCHE ME
The Group operated a long term incentive plan open to invited employees of the Group (“the Participants”), which was accounted for as
a cash-settled share based payment scheme. The Participants in the scheme were required to purchase equity in Choo Luxury Holdings
Limited, a wholly owned subsidiary of the Group (“the Subsidiary”) in order to receive matching phantom options over the shares of
the Subsidiary.
A put and call agreement existed between the Participants and the Subsidiary which enabled the Participant to put their equity shares back
to the Subsidiary at fair value. The Subsidiary could call the shares in the event of a change in control or if the Participant left employment
with the Group. The put and call agreement was accounted for as a cash settled share based payment scheme as the Participants were
required to remain employed by the Group in order to participate in any increase in the fair value of the underlying equity shares.
The IPO of the Group in October 2014 triggered the vesting conditions of the all the options. Of these, 5,387,877 options were exercised at
a fair value of £1.40, calculated with reference to the IPO price. The remaining 3,571,713 were cancelled and replaced by the equity-settled
JC PLC Scheme detailed below.
At IPO the Participants also exchanged their shares in Choo Luxury Holdings Limited for shares in Jimmy Choo PLC via a series of share-forshare exchanges. The put and call agreement over the Participants’ shares in Choo Luxury Holdings Limited lapsed at IPO. The liability of
£3.5m that had previously been recognised in respect of the put and call agreement was therefore reclassified to equity.
The total liability recognised in respect of the cash settled share based payment scheme at 31 December 2014 was £nil (2013: £5.9m).
Details of the movements during the year are as follows:
2014
Number of
share options
Outstanding at the beginning of the year
2013
Weighted
average
exercise price
Number of
share options
Weighted
average
exercise
price
8,959,590
1.00 4,679,620
1.00
–
1.00 6,000,000
1.00
1.00 (1,720,030)
1.00
Granted during the year
Cancelled during the year
(3,571,713)
Exercised during the year
(5,387,877)
–
–
–
Expired during the year
–
–
–
–
Outstanding at the end of the year
–
– 8,959,590
–
Exercisable at the end of the year
–
–
–
–
There were no phantom options outstanding at 31 December 2014. At 31 December 2013, the phantom options had a weighted average
exercise price of £1.00 and a maximum weighted average remaining contractual life of 7.5 years.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
2 2 . SH A RE BASED PAY MEN T S C ON T INUE D
EQ UI T Y-SE T T L ED SH A RE OP T ION SCHEMES
JC P L C SH A R E AWA R D
Following the partial vesting of the Phantom Option Scheme at IPO in October 2014, 3,571,713 options were cancelled and a new equitysettled share based payment scheme implemented (the “JC PLC Share Award”). The number of shares awarded under the JC PLC Share
Award was calculated by reference to the value attributed to the proportion of previously held phantom options. For each phantom option
forfeited, Participants received 0.55 share awards, with a nominal exercise price of £1 in total for each exercise.
The options are due to vest in three stages: one third are exercisable on 1 July 2016; one third are exercisable 1 July 2017; and the remaining
third are exercisable on 1 July 2018. The vesting of these options is dependent upon continued employment over the vesting period.
Any vested but unexercised options will automatically lapse on 21 October 2024.
Movements in the number of share awards outstanding are as follows:
Outstanding at the beginning of the year
2014
2013
–
–
Granted during the year
2,801,120
–
Outstanding at 31 December
2,801,120
–
–
–
Exercisable at 31 December
The weighted average exercise price of the options is £nil.
ONE - OF F AWA R D
On 30 October 2014, share awards of 10,192,858 ordinary shares in Jimmy Choo PLC were granted as a one-off award at IPO to members
of the Group’s senior management team, with a nominal exercise price of £1 in total for each exercise.
The options were awarded in three tranches each with different vesting conditions:
1. M A IN AWA R D
50% of the options granted are exercisable on the fifth anniversary of the grant date and 50% are exercisable on the sixth anniversary
of the grant date. The total number of shares granted under this award was 8,271,429.
2 . A LT E R N AT E GR A N T 1
33% of the options granted are exercisable on the fourth anniversary of the grant date; 33% are exercisable on the fifth anniversary of
the grant date and 33% are exercisable on the sixth anniversary of the grant date. The total number of shares granted under this award
was 1,071,429.
3 . A LT E R N AT E GR A N T 2
850,000 options were granted with vesting conditions that are the same as the JC PLC Share Awards described above.
The vesting of these options is dependent upon continued employment over the vesting period. Any vested but unexercised options will
automatically lapse on 21 October 2024. The fair value of the award was determined as £1.40 based on the market value of ordinary shares
at the grant date.
Movements in the number of share awards outstanding are as follows:
2014
2013
–
–
Granted during the year
10,192,858
–
Outstanding at 31 December
10,192,858
–
–
–
Outstanding at the beginning of the year
Exercisable at 31 December
The weighted average exercise price of the options is £nil.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
F IN A NCI A L S TAT E ME N T S
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2 3 . F IN A NCI A L INS T RUMEN T S A ND REL AT ED DISCL OSURES
F IN A NCI A L RISK M A N AGEMEN T
The Directors have overall responsibility for the oversight of the Group’s risk management framework. A formal process for reviewing and
managing risk in the business has been developed. A register of strategic and operational risk is maintained and reviewed by the Directors,
who also monitor the status of agreed actions to mitigate key risks.
CREDI T RISK
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations,
and arises principally from the Group’s receivables from wholesale customers and the Group’s foreign exchange forward contracts.
The Group has no significant concentrations of credit risk. The trade receivables balance is spread across a large number of different
customers. The Group has policies in place to ensure that wholesale sales are made to customers with an appropriate credit history. The
Group only sells to wholesale customers who are creditworthy and mitigates risk in certain markets by trading on terms with accelerated
payments, bank guarantees and letters of credit, as well as adopting credit insurance when appropriate. The Group monitors the
creditworthiness of counterparties using publicly available information. As a result the Group’s exposure to bad debts is not significant and
default rates have historically been very low. Sales to retail customers are made in cash or via major credit cards. An ageing of overdue
receivables is included in note 17.
The Group is also exposed to credit risk arising from other financial assets, which comprise cash and short-term deposits and certain
derivative instruments. The Group’s exposure to credit risk arises from the default of the counterparty with a maximum exposure equal to
the carrying value of these instruments if a counterparty to a financial instrument fails to meet its contractual obligation. The Group’s policy
is that surplus funds are placed on deposit with counterparties, who are either party to the Group’s banking syndicate, or who are credit
worthy counterparties.
L IQ UIDI T Y RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures that it has
sufficient cash or loan facilities to meet all its commitments when they fall due by ensuring that there is sufficient cash or working capital
facilities to meet the Group’s cash requirements.
The risk is measured by review of forecast liquidity each month to determine whether there are sufficient credit facilities to meet forecast
requirements and by monitoring covenants on a regular basis to ensure there are no expected significant breaches, which would lead to an
“Event of Default”. Cash flow forecasts are submitted monthly to the Directors. These continue to demonstrate the strong cash generating
ability of the business and its ability to operate within existing agreed banking facilities. There have been no breaches of covenants during
the reported years. For further details of the Group’s borrowings see note 18.
All short-term trade and other payables, accruals, bank overdrafts and borrowings mature within one year or less. The carrying value of all
financial liabilities due in less than one year is equal to their contractual undiscounted cash flows.
The maturity profile of the contractual undiscounted cash flows of the Group’s non-current financial liabilities, excluding derivatives used for
hedging, is as follows:
2014
£000
In more than one year, but not more than two years
2013
£000
(12,299)
(470,914)
In more than two years, but not more than three years
(5,862)
(8,021)
In more than three years, but not more than four years
(116,408)
(6,268)
In more than four years, but not more than five years
(6,115)
(125,225)
In more than five years
(6,195)
–
Total non-current financial liabilities
(146,879)
(610,428)
M A RK E T RISK
Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates, will affect the Group’s income.
The Group’s exposure to market risk predominantly relates to interest and currency risk.
IN T ERES T R AT E RISK
The Group is exposed to the risk of interest rate fluctuations mainly with regard to the interest expense on the debt carried by Choo Luxury
Finance Limited. The Group’s bank borrowings incur variable interest rate charges linked to EURIBOR/LIBOR plus a margin. The Group’s
policy aims to manage the interest cost of the Group within the constraints of its financial covenants and business plan.
The Group has historically held interest rate swaps in connection with the financing put in place at the time of the acquisition of the Group
by JAB Luxury GmbH. The original swap agreements expired in 2014.
Sensitivity analysis of the effect of a change in interest rates of ±1% is included below.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
2 3 . F IN A NCI A L INS T RUMEN T S A ND REL AT ED DISCL OSURES C ON T INUE D
F OREIGN CURRENCY RISK
The Group operates internationally and is, therefore, exposed to the foreign exchange risk which can negatively impact revenue, costs,
margins and profit.
The Group transacts with its suppliers of finished goods, based in continental Europe, in euro. In addition to this, the Group is exposed to
transaction risk on the translation and conversion of surplus US dollar, Hong Kong dollar, Japanese yen and Chinese yuan balances, generated
by its directly owned stores globally into euro and pounds sterling. The Group’s policy allows these exposures to be hedged for up to
12 months forward in order to create sufficient certainty to price different collections and assure the business cash flows.
Hedging is performed through the use of foreign currency bank accounts and forward foreign exchange contracts and nil cost options. These
contracts are put in place as part of the Group’s treasury management strategy. It enables merchandisers to be given targeted exchange
rates for products, which are set aligned with the hedge rates for future collections, typically 9–12 months before cash flows crystallise. In
addition, the Group uses forward foreign exchange contracts in order to hedge its exposure to foreign currency gains and losses arising on
the Euro denominated portion of its external bank facilities.
The following table shows the extent to which the Group has monetary assets and liabilities at the balance sheet date in currencies other
than the local currency of operation. Monetary assets and liabilities refer to cash, deposits, borrowings and other amounts to be received
or paid in cash. Amounts exclude intercompany balances which eliminate on consolidation.
31 December 2014
Euro
US dollar
31 December 2013
Monetary
assets
£000
Monetary
liabilities
£000
Monetary
assets
£000
Monetary
liabilities
£000
14,459
(68,062)
15,931
(64,760)
9,635
(115,424)
12,589
(115,742)
Japanese yen
578
–
649
–
Hong Kong dollar
554
(113)
2,276
(77)
84
(802)
662
(2,187)
Chinese yuan
Other currencies
1,309
(800)
653
(2,942)
26,619
(185,201)
32,760
(185,708)
PENSION L I A BIL I T Y RISK
The Group has no association with any defined benefit pension scheme and therefore carries no deferred, current or future liabilities in
respect of such a scheme.
CA PI TA L RISK
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to optimise returns to its
shareholders. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor, and market confidence and to sustain
future growth. The Directors regularly monitor the Group’s level of capital to ensure that this can be achieved.
Cash is used to fund the Group’s continued investment and growth of the global brand. It is also used to make routine outflows of capital
expenditure, tax and dividends. The Group has access to a revolving cash flow facility of €91.6m (£71.6m) of which €14.9m (£11.7m) was
utilised at 31 December 2014 (2013: €25.1m available (£20.1m) and €nil utilised (£nil)).
The Group is in compliance with the financial and other covenants within its committed bank credit facilities, and has been in compliance
throughout the reported years.
FA IR VA L UE DISCL OSURES
The carrying amount of financial assets and liabilities approximate their fair values. The majority of the financial assets are current. The
majority of the current interest-bearing liabilities are at variable interest rate. The fair values of the non-current fixed rate interest-bearing
liabilities are not materially different from their carrying amounts.
The fair value of non-current fixed rate interest-bearing liabilities is calculated based on the present value of future principal and interest
cash flows, discounted at the market rate of interest at the reporting date.
The fair value of derivative instruments (currency forwards and options) is determined based on current and available market data. Pricing
models commonly used in the market are used, taking into account relevant parameters such as forward rates, spot rates, discount rates,
yield curves and volatility.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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2 3 . F IN A NCI A L INS T RUMEN T S A ND REL AT ED DISCL OSURES C ON T INUE D
FA IR VA L UE HIER A RCH Y
Financial instruments carried at fair value are categorised into the below levels, reflecting the significance of the inputs used in estimating
the fair values:
Level 1: Quoted prices (unadjusted) in active markets for identical instruments;
Level 2: Valuation techniques based on observable inputs, other than quoted prices included within level 1, that are observable either directly
or indirectly from market data;
Level 3: Valuation techniques using significant unobservable inputs, this category includes all instruments where the valuation technique
includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation.
The Group recognises derivative financial instruments at fair value. No other financial instruments are carried at fair value. The derivative
financial instruments have been measured using a level 2 valuation method.
The fair value of financial assets and liabilities are as follows:
2014
£000
2013
£000
Cash and cash equivalents
12,045
20,334
Trade and other receivables
41,087
35,520
–
1,450
Other financial assets
Total financial assets
53,132
57,304
Trade and other payables
(99,659)
(90,192)
Borrowings
(137,586)
(602,728)
(15,374)
–
Other non-current liabilities (note 20)
Other financial liabilities
Total financial liabilities
(2,903)
(419)
(255,522)
(693,339)
F IN A NCI A L INS T RUMEN T S SENSI T I V I T Y A N A LYSIS
In managing interest rate and currency risks the Group aims to reduce the impact of short term fluctuations on its earnings. At the end
of each reporting year, the effect of hypothetical changes in interest and currency rates are as follows:
IN T ERES T R AT E SENSI T I V I T Y A N A LYSIS
The table below shows the Group’s sensitivity to interest rates on floating rate borrowings (i.e. cash and cash equivalents and bank
borrowings which attract interest at floating rates) if interest rates were to change by ±1%. The impact on the results in the consolidated
income statement and consolidated statement of other comprehensive income and equity would be:
2014
Increase/
(decrease)
in equity
£000
2013
Increase/
(decrease)
in equity
£000
+1% movement in interest rates
(1,370)
(3,720)
-1% movement in interest rates
1,370
3,720
2014
Increase/
(decrease)
in equity
£000
2013
Increase/
(decrease)
in equity
£000
10% appreciation of pounds sterling
14,378
13,904
10% depreciation of pounds sterling
(17,667)
(16,994)
F OREIGN E XCH A NGE R AT E SENSI T I V I T Y A N A LYSIS
The table below shows the Group’s sensitivity to pounds sterling strengthening/weakening by 10%:
This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the
reporting year. The analysis assumes that all other variables, in particular interest rates, remain constant.
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113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
2 3 . F IN A NCI A L INS T RUMEN T S A ND REL AT ED DISCL OSURES C ON T INUE D
OT HER F IN A NCI A L ASSE T S A ND L I A BIL I T IES
Other financial assets and liabilities are the result of derivative contracts entered into by the Group to hedge against interest and exchange
rate risk.
2014
£000
2013
£000
–
1,450
Other financial assets
Forward foreign exchange contracts
Other financial liabilities
Forward foreign exchange contracts
Interest rate swap contracts
Total financial liabilities
(2,903)
–
–
(419)
(2,903)
(419)
Net derivative financial instruments
Notional principal amounts of the outstanding forward foreign exchange contracts
Notional principal amounts of the outstanding interest rate swap contracts
117,285
41,773
–
151,140
24 . OPER AT ING L E ASES
Non-cancellable operating lease rentals are payable as follows:
Land and Buildings
2014
£000
2013
£000
Less than one year
26,560
22,141
Between one and five years
79,297
67,345
More than five years
Total operating leases
37,300
35,760
143,157
125,246
In addition the Group had annual commitments under concession agreements totalling £1.2m (2013: £0.7m) per annum at 31 December 2014.
The Group leases a number of stores under operating leases of varying lengths.
2 5 . COMMI T MEN T S
J. Choo Limited, a subsidiary undertaking, holds a put option to purchase the remaining 50% share capital of J. Choo Russia JV Limited at the
end of the joint venture agreement in 2018. The fair value of the future consideration payable is estimated to be £0.5m at 31 December 2014
(2013: £0.5m).
In 2012 the Company entered into a joint and several money only guarantee of up to £15.0m for a UK lease for the benefit of Belstaff
International Limited, a fellow subsidiary of JAB Luxury GmbH. The Company is counter-indemnified in respect of this guarantee by
JAB Luxury GmbH.
There was no unprovided capital or other financial commitments at 31 December 2014 (2013: £nil).
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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2 6 . REL AT ED PA R T IES
T R A NSAC T IONS W I T H K E Y M A N AGEMEN T PERSONNEL
The compensation of key management personnel (including the directors) is as follows:
2014
£000
2013
£000
5,709
4,554
–
1,731
3,410
2,021
Key management personnel emoluments
Emoluments (of which directors £1.9m (2013: £1.4m))
Termination payments
Share based payments (of which directors £1.5m (2013: £0.9m))
Other emoluments
1,371
250
Total emoluments
10,490
8,637
Company contributions to money purchase pension schemes
Total
221
81
10,711
8,718
Share based payments includes an expense of £1.6m (2013: £nil) recognised within exceptional items (see note 22). The costs associated
with other emoluments are also recognised within exceptional items.
OT HER REL AT ED PA R T Y T R A NSAC T IONS
Balances between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note. The Group has related party relationships with its shareholder, JAB Luxury GmbH, other subsidiary undertakings of JAB Luxury
GmbH, and its associates and joint ventures and the other shareholder of J. Choo Russia JV Limited. The Group entered into the following
transactions during the year:
2014
Income
£000
2013
Expense
£000
Income
£000
Expense
£000
Parent company
JAB Luxury GmbH
–
(73)
–
(31,085)
–
(1,282)
–
(34)
Other related parties
LLX Global Business Services UK Ltd
Bally Group (U.K.) Limited
–
–
–
(640)
Bally (Shanghai) Commercial Co., Ltd.
–
(123)
–
–
Bally Americas Inc.
–
(112)
–
(78)
Bally GC Retail Co. Limited
–
(66)
–
–
Belstaff International Limited
–
–
–
(315)
Zagliani UK Limited
–
–
–
(23)
Studio Luxury S.r.l.
–
–
–
(3,712)
Bally Schuhfabriken AG
–
–
–
(173)
LLX Global Business Services Americas Inc.
–
(764)
–
–
LLX Global Business Services Hong Kong Limited
–
(274)
–
–
LLX Global Business Services Shanghai Co., Ltd.
–
(106)
–
–
JC Industry S.r.l. (associated company)
–
(4,261)
–
(4,802)
Rubinse LLC
–
–
183
(323)
Oxana Bondarenko
–
(249)
–
Total
–
(7,310)
183
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
F IN A NCI A L S TAT E ME N T S
115
–
(41,185)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
2 6 . REL AT ED PA R T IES C ON T INUE D
The following amounts were outstanding at the balance sheet date:
2014
Receivable
£000
2013
Payable
£000
Receivable
£000
Payable
£000
Parent company
JAB Luxury GmbH
9
(18,305)
–
(467,161)
736
(3,330)
505
(34)
1,322
(296)
1,464
(640)
–
–
–
(64)
Other related parties
LLX Global Business Services UK Ltd
Bally Group (U.K.) Limited
Bally (Shanghai) Commercial Co., Ltd.
Bally Americas Inc.
15
(175)
–
(89)
Bally GC Retail Co. Limited
–
(2)
–
–
Belstaff International Limited
7
(571)
19
(315)
Zagliani UK Limited
–
(4)
–
(23)
Studio Luxury S.r.l.
–
–
–
(300)
Bally Schuhfabriken AG
–
(11)
–
(2,701)
–
(1,511)
–
–
31
(469)
440
–
Luxury Italia Holding S.r.l.
LLX Global Business Services Americas Inc.
LLX Global Business Services Hong Kong Limited
–
(19)
–
–
LLX Global Business Services (Shanghai) Co., Ltd.
–
(96)
–
–
JC Industry S.r.l. (associated company)
–
(1,657)
–
(1,727)
Rubinse LLC
–
–
89
(961)
Oxana Bondarenko
–
(1,136)
–
–
2,120
(27,582)
2,517
Total
(474,015)
Until 3 October 2014, JAB Luxury GmbH provided a credit facility to the Group (see note 18). The total amount drawn at 31 December 2014
was £nil (2013: £460.5m). Interest of £nil (2013: £5.1m) had accrued on the outstanding facility at the balance sheet date. The total interest
expense for the year was £23.6m (2013: £29.5m).
The Group also incurred expenses on behalf of or payable to JAB Luxury GmbH of £0.1m (2013: £1.6m) during the year to 31 December 2014
which remain unpaid at the balance sheet date. No management fee was incurred in the year (2013: £1.5m).
Included in the payable to Bally Group (UK) Limited is £0.3m (2013: £0.6m) in relation to surrender of tax losses.
2 7. ULT IM AT E PA REN T COMPA N Y
The majority shareholder is JAB Luxury GmbH and the ultimate controlling party is Agnaten SE, a company incorporated in Austria.
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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2 8 . RECONCIL I AT ION TO NON-G A A P PERF ORM A NCE ME ASURES
A D JUS T ED EBI T DA
Operating profit
2014
£000
2013
£000
24,080
25,149
Adjusted for:
Exceptional costs (note 5)
13,047
6,009
Depreciation
14,225
11,001
Amortisation
793
752
Gain on disposal property, plant and equipment and intangibles
Realised and unrealised foreign exchange (gain)/loss
Adjusted EBITDA
(129)
–
(1,786)
3,966
50,230
46,877
2014
£000
2013
£000
24,080
25,149
13,047
6,009
12
(85)
A D JUS T ED EBI T
Operating profit
Adjusted for:
Exceptional costs (note 5)
Share of associates and jointly controlled entities
Realised and unrealised foreign exchange (gain)/loss
Adjusted EBIT
(1,786)
3,966
35,353
35,039
2014
£000
2013
£000
A D JUS T ED PROF I T BEF ORE TA X
Loss before tax
(8,299)
(21,403)
Exceptional costs (note 5)
13,047
6,009
Interest on shareholder credit facility
23,646
29,496
Foreign exchange (gain)/loss on external loan
(1,456)
1,065
Loss on financial instruments on external loan
1,353
–
–
8,445
28,291
23,612
2014
£000
2013
£000
Adjusted for:
Accelerated amortisation of capitalised debt costs
Adjusted EBT
A D JUS T ED CONSOL IDAT ED NE T INCOME
Loss for the year
(10,842)
(17,668)
13,047
6,009
Adjusted for:
Exceptional costs (note 5)
Deferred tax
(2,860)
(6,343)
Interest on shareholder credit facility
23,646
29,496
Foreign exchange (gain)/loss on external loan
(1,456)
1,065
Loss on financial instruments on external loan
1,353
–
Accelerated amortisation of capitalised debt costs
Adjusted consolidated net income
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
F IN A NCI A L S TAT E ME N T S
117
–
8,445
22,888
21,004
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2 014
Note
2014
£000
Investments in equity-accounted investees
4
489,449
Deferred tax asset
5
Non-current assets
Total non-current assets
131
489,580
Current assets
Trade and other receivables
6
Total assets
5
489,585
Current liabilities
Trade and other payables
7
(1,317)
Non-current liabilities
Other non-current liabilities
8
(15,374)
Total liabilities
(16,691)
Net assets
472,894
Capital and reserves
Called up share capital
9
Share premium
9
99,480
Own share reserve
9
(16,732)
Capital contribution
9
1,358
Retained deficit
9
(950)
10
472,894
Shareholder equity
389,738
The accompanying notes are an integral part of this company only statement of financial position.
These company only financial statements of Jimmy Choo PLC, registered number 09198021, have been approved and authorised for issue
by the Board of Directors on 18 March 2015 and were signed on behalf by:
JON AT H A N SINCL A IR
DIR EC T OR
JIMM Y CHOO P L C A NNUA L R EP OR T & F IN A NCI A L S TAT E ME N T S 2 014
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118
NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS
(F ORMING PA R T OF T HE F IN A NCIA L S TAT EMEN TS)
1. ACCOUN T ING POL ICIES
The principal accounting policies are summarised below. They have all been applied consistently throughout the current year.
The Company was incorporated on 1 September 2014 and, therefore, no comparative information is presented. On 29 September 2014,
the Company was registered as a public limited company. On 22 October 2014, its shares were listed on the London Stock Exchange.
BASIS OF PREPA R AT ION
These financial statements are prepared on the going concern basis under the historical cost convention and in accordance with applicable
United Kingdom law and UK Generally Accepted Accounting Practice. The principal accounting policies are set out below and have been
applied consistently throughout the period.
The Company has control over the assets and liabilities of the Jimmy Choo PLC Employee Benefit Trust and accordingly the assets and
liabilities of the Jimmy Choo PLC Employee Benefit Trust are recognised in the Company financial statements. No profit or loss account is
presented for the Company as permitted by Section 408 of the Companies Act 2006. The Company’s loss for the period was £1.5m, mainly
related to exceptional costs incurred in respect of the IPO.
GOING CONCERN
At the balance sheet date, the Company had net assets. The Directors have reviewed the financial projection of the Company for a period of
12 months from the date of this report, which shows that the Company will be able to generate sufficient cash flows in order the meet its
liabilities as they fall due. Accordingly, the Directors are satisfied that the gong concern basis remains appropriate for the preparation of the
financial statements.
REL AT ED PA R T IES
The Company has taken advantage of the exemption contained in Financial Reporting Standard 8 Related party disclosure and has not
reported transactions with related parties.
SH A RE BASED PAY MEN T S
Where the Company grants options over its own shares to the employees of its subsidiaries, it recognises, in its individual financial
statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share based payment charge recognised
in its subsidiary’s financial statements. The corresponding credit is recognised directly in equity.
IN V ES T MEN T S
Shares in subsidiary undertakings are stated at cost less any provision for impairment where in the opinion of the Directors there has been
a diminution in the value of the investment.
CASH F L OW
Under FRS 1 (revised 1996) the Company is exempt from the requirement to prepare a cash flow statement as a consolidated cash flow has
been included in the Jimmy Choo PLC consolidated financial statements.
2 . F EES PAYA BL E TO T HE AUDI TORS
Auditor’s remuneration is detailed in note 7 to the consolidated financial statements.
3 . S TA F F NUMBERS A ND COS T S
The Company has no employees other than the Directors. Full details of the Directors’ remuneration and interests are set out in the Directors’
Remuneration Report.
4 . IN V ES T MEN T S IN EQ UI T Y-ACCOUN T ED IN V ES T EES
2014
£000
On incorporation
–
Additions
489,449
At 31 December 2014
489,449
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NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS
CONTINUED
(F ORMING PA R T OF T HE F IN A NCIA L S TAT EMEN TS)
4 . IN V ES T MEN T S IN EQ UI T Y-ACCOUN T ED IN V ES T EES C ON T INUE D
The principal undertakings in which the Company’s interest at the period end is more than 20% are as follows:
Ordinary shares held
%
Company
Country of incorporation
Nature of Business
2014
Jimmy Choo (Holdings) Limited
Great Britain
Holding Co.
100
–
Choo Luxury Group Limited
Great Britain
Holding Co.
100
100
Choo Luxury Holdings Limited
Great Britain
Holding Co.
100
100
Choo Luxury Finance Limited
Great Britain
Holding Co.
100
100
Passion Holdings Limited
Great Britain
In liquidation
100
100
Bag and Choos Limited
Great Britain
In liquidation
100
100
Choo Management Limited
Great Britain
In liquidation
100
100
J. Choo Group Holding Limited
Great Britain
In liquidation
100
100
The J. Choo Group Ltd
Great Britain
In liquidation
100
100
Choo Group Holdings Ltd
Great Britain
In liquidation
100
100
Choo Group Finance Ltd
Great Britain
In liquidation
100
100
Yearnoxe Limited
Great Britain
In liquidation
100
100
Choo Holdings UK Limited
Great Britain
In liquidation
100
100
J. Choo Limited
Great Britain
Retail and wholesale
100
100
J. Choo (OS) Limited
Great Britain
Retail
100
100
Franchoo SAS
France
Retail
100
100
Itachoo S.r.l.
Italy
Retail
100
100
J Choo Florida Inc
USA
Property
100
100
J Choo Germany GmbH
Germany
Retail
100
100
J. Choo (Jersey) Limited
Jersey
Brand Co.
100
100
J Choo USA Inc
USA
Retail
100
100
Jimmy Choo Spain SL
Spain
Retail
100
100
J Choo (Switzerland) AG
Switzerland
Retail
100
100
J. Choo (Belgium) BVBA
Belgium
Retail
100
100
J. Choo (Asia) Limited
Hong Kong
Regional office
100
100
J. Choo Japan JV Ltd.
Great Britain
Dormant
100
100
Jimmy Choo (Shanghai) Trading Co. Ltd
China
Retail
100
100
Jimmy Choo Tokyo K.K.
Japan
Retail and wholesale
100
100
J. Choo Netherlands B.V.
The Netherlands
Retail
100
100
J. Choo Czech s.r.o.
Czech Republic
Retail
100
100
J. Choo Hong Kong JV Limited
Great Britain
Dormant
100
100
Jimmy Choo Hong Kong Limited
Hong Kong
Retail and wholesale
100
100
J. Choo Supply SA
Switzerland
Procurement
100
100
J. Choo (Austria) GmbH
Austria
Retail
100
100
J. Choo Canada Inc
Canada
Retail
100
–
Studio Luxury S.r.l.
Italy
Production control
100
–
J. Choo Russia JV Limited
Great Britain
Holding Co.
50
50
J. Choo RUS LLC
Russian Federation
Retail
50
50
JC Industry S.r.l.
Italy
Production
33
33
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2013
4 . IN V ES T MEN T S IN EQ UI T Y-ACCOUN T ED IN V ES T EES C ON T INUE D
As at 31 December 2014, all subsidiary undertakings are wholly owned, except where indicated differently above, and operate in the country
in which they are incorporated. All subsidiaries have financial years ending 31 December.
The Company indirectly owns all subsidiaries through Jimmy Choo (Holdings) Limited.
5 . DEF ERRED TA X
2014
£000
Deferred tax assets
131
6 . T R A DE A ND OT HER RECEI VA BL ES
2014
£000
Amounts owed by group undertakings
4
VAT receivable
1
Total trade and other receivables
5
7. T R A DE A ND OT HER PAYA BL ES
2014
£000
Current
Trade payables
505
Amounts due to group undertakings
465
Accruals
347
Total current trade and other payables
1,317
8 . OT HER NON-CURREN T L I A BIL I T IES
2014
£000
Jimmy Choo PLC Employee Benefit Trust liability
15,374
The Jimmy Choo PLC Employee Benefit Trust acquired the Company’s own shares during the year from JAB Luxury GmbH, the Group’s
majority shareholder. The consideration for the shares has been left outstanding to JAB Luxury GmbH. The payable will fall due for payment
when shares are awarded to employees in accordance with the terms of the Group’s equity settled share based payment schemes (see note
22 in the consolidated financial statements). Shares will be returned to JAB Luxury GmbH on the event of an employee leaving the scheme.
9. CA PI TA L A ND RESERV ES
SH A RE CA PI TA L
2014
£000
Allotted, called up, issued and not paid:
389,737,588 ordinary share of £1
389,738
SH A RE PREMIUM
Share premium of £99.5m arose on the debt for equity swap transaction between JAB Luxury GmbH and Choo Luxury Group Limited
on 3 October 2014. The carrying value of the shareholder credit facility (including accrued interest) at the date of the debt for equity swap
was £489.2m.
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NOTES TO THE COMPANY ONLY FINANCIAL STATEMENTS
CONTINUED
(F ORMING PA R T OF T HE F IN A NCIA L S TAT EMEN TS)
9. CA PI TA L A ND RESERV ES C ON T INUE D
OW N SH A RE RESERV E
The cost of the Company’s ordinary shares held by the Jimmy Choo PLC Employee Benefit Trust is treated as a deduction in arriving at total
shareholder’s equity. The movement in the own shares reserve was as follows:
Number of
ordinary shares
On incorporation
Average price
paid per share
£000
–
–
–
Shares purchased by the EBT during the year
11,951,119
£1.40
16,732
At 31 December 2014
11,951,119
£1.40
16,732
Shares held by the Jimmy Choo PLC Employee Benefit Trust will be used to satisfy options awarded under the Group’s share option schemes
(see note 22 in consolidated financial statements).
CA PI TA L CON T RIBU T ION
2014
£000
Capital contribution from controlling shareholder
1,358
The Company has recorded a capital contribution in the year reflecting the accounting for the fair value of the Employee Benefit Trust liability
(see note 8).
RE TA INED DEF ICI T
2014
£000
On incorporation
–
Loss for the year
(1,490)
Equity settled share based payments charge
526
Deferred tax on share based payments taken directly to reserves
14
At 31 December 2014
(950)
10. RECONCIL I AT ION OF MOV EMEN T IN SH A REHOL DERS ’ F UNDS
2014
£000
On incorporation
–
Loss for the period
(1,490)
Issue of shares
489,218
Own shares reserve
(16,732)
Equity settled share based payments
526
Deferred tax on share based payments taken directly to reserves
14
Capital contribution from controlling shareholder
1,358
Closing shareholders’ equity
472,894
11. ULT IM AT E PA REN T COMPA N Y A ND CON T ROL L ING PA R T Y
The Company’s immediate parent undertaking party is JAB Luxury GmbH. The ultimate undertaking and controlling party is Agnaten SE,
a company incorporated in Austria.
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CORPORATE INFORMATION
REGIS T ERED OF F ICE:
Jimmy Choo PLC
10 Howick Place
London
SW1P 1GW
+44 (0) 20 7368 5000
www.jimmychooplc.com
REGIS T ERED NUMBER
09198021
COMPA N Y SECRE TA RY
Hannah Merritt
AUDI TOR
K P MG L L P
St Nicholas House
31 Park Row
Nottingham
NG1 6FQ
REGIS T R A RS
EQ UINI T I LT D
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
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JIMM Y CHOO P L C
10 HO W ICK P L ACE
L ONDON S W 1P 1G W