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OV ERV IE W
S T R AT EGIC REPOR T
15 HIGHLIGH 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
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
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
1 Constant currency revenue growth is calculated by applying the exchange rates for the year 5 Adjusted EBT is defined as loss before tax for the year adjusted for exceptional costs, interest
ended 31 December 2014 to the year ended 31 December 2013 on a month by month basis on the shareholder credit facility, foreign exchange gains and losses on the revaluation of
and calculating the growth percentage by reference to the total year. 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
2 Like for like sales growth (“LFL”) is calculated by taking retail sales in all locations where portion of its external bank facilities and the accelerated amortisation of capitalised debt costs.
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. 6 Adjusted EPS is calculated as Adjusted consolidated net income7 divided by 377,786,469 shares.
3 Adjusted EBITDA is defined as operating profit for the year adjusted for exceptional costs, loss 7 Adjusted consolidated net income is defined as loss for the period adjusted for exceptional
on disposal of property, plant and equipment and intangible assets, depreciation and costs, deferred tax, interest on the shareholder credit facility, foreign exchange gains and
amortisation charges and realised and unrealised foreign exchange gains and losses on the losses on the revaluation of external bank facilities, changes in the fair value of forward
revaluation of monetary items. 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
4 Adjusted EBIT is defined as operating profit for the year adjusted for exceptional costs, share of amortisation of capitalised debt costs.
the result of associates and joint ventures and realised and unrealised foreign exchange gains
and losses on the revaluation of monetary items.
15
AT A GLANCE
OT HER RE TA IL
£7.2 M £192.9 M
£ 17 7.4 M 2 0 13
£ 6.4 M 2 0 13
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
2014 2013
16
GROWING GLOBAL
DISTRIBUTION PLATFORM
36 44
2 26
23
215
293 JA PA N
A MERICAS EME A 13
19
ASI A
29
M A P L EGEND
DOS 1
29
F R A NCHISE
MULT IBR A ND
9 10–15
DOS IN NEW STORE CONCEPT PLANNED REFURBISHMENTS PER YEAR
15 10–15
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
17
CHAIRMAN’S STATEMENT
18
2014 has been a major year in the development of Jimmy Choo. We In order to position Jimmy Choo for the next stage of development,
have continued to grow the business, with revenue increasing 12.2% significant investment has been undertaken to restructure and
at constant currency through the creation of new exciting collections, strengthen the business, including talent management and in
opening new stores and driving like for like sales growth through our systems and logistics. Jimmy Choo has been able to finance this
robust business. In addition to growing the business, we launched investment through inherently strong cash flow and improvements
Jimmy Choo PLC on the London Stock Exchange in October 2014. in underlying margin. Whilst these investments have resulted in an
We welcome our new shareholders to our first annual report as a increase in operating costs and reduced reported operating margin
public company and look forward to partnering with you in the in recent years, we believe that they have provided the business
years to come. 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 This investment phase is nearing completion and we look forward
heart, with a focus on glamour, style authority, craftsmanship, to the new systems backbone not only supporting long term growth
luxury positioning and a distinctive iconic brand. 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
Jimmy Choo’s journey started in 1996 from an entrepreneurial start-up in New York, Tokyo, Hong Kong, Beijing, Paris and Milan provide the
partnership, where a combination of the shoes of Mr. Jimmy Choo, distribution network with the support and drive to grow the global
OBE and the drive and inspiration of Tamara Mellon, OBE, created footprint profitably.
a luxury footwear phenomenon. They opened the first store in 1996,
in Motcomb Street in London SW1, and sold 3,000 pairs of the IPO
first ready-to-wear shoe collection, with Mr. Jimmy Choo’s niece, JAB Luxury have invested in the Jimmy Choo business for the long
Sandra Choi, serving as the company’s Creative Director, a role term. While JAB Luxury intend to remain majority shareholders of the
she still holds today. business for the foreseeable future, we believe that bringing outside
investors in and exposing the company to public scrutiny ensures the
In 1998, Jimmy Choo opened its first boutique in New York City, best governance to drive long term growth and helps to promote the
followed by Los Angeles. Jimmy Choo became an innovator in brand and incentivise the team.
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.
19
CHAIRMAN’S STATEMENT
CONTINUED
20
OUR MARKET
ACCESSORISAT ION
JIMM Y CHOO SHOE S, B AG,
HIGH S T R E E T OU T F I T
21
BUSINESS MODEL
DEDICAT ED A ND E X PERIENCED
M A N AGEMEN T T E A M
L U X URY
PRODUC T OF F ERING
BESPOK E SUPPLY CH A IN
F OR PRODUC T E XCEL L ENCE
22
Jimmy Choo has the merchandising, design, supply chain,
communication and retail skills and assets to outperform in this CON T INUAT I V E SE ASON A L
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 CHOO 24:7 FASHION
scale to compete globally. • THE “PERFECT WARDROBE” OF SHOES, • INSTINCTIVELY SEDUCTIVE
AVAIL ABLE CONTINUALLY • COSMOPOLITAN
• REFRESHED SEASONALLY WITH FASHION
DEDICAT ED A ND E X PERIENCED M A N AGEMEN T COLOURS, MATERIALS, ST YLES AND HEELS
The Group is run by a passionate and experienced senior • LOW MARKDOWN CHOO.0 8 °
• QUICKER REPLENISHMENT • ROCK /EDGY
management team with a degree of focus on execution which we • STABLE BUSINESS • LONDON FEEL
believe can only be achieved by a pure play luxury goods company. • BET TER MARGINS
W EEK END
• COOL
The Group has appointed a highly experienced and dedicated • REL A XED FEEL
management team, comprising established Jimmy Choo incumbents
together with new management who have a long and successful BALANCE OF STABILITY AND BRAND DEVELOPMENT
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. Designing successful collections and managing the complexity
of multiple collection drops each year relies upon the seamless
L E A DING DESIGN T E A M T H AT DRI V ES PRODUC T AU T HORI T Y interaction, integration and cooperation between Jimmy Choo’s
Jimmy Choo’s design team of twelve is led by Sandra Choi, merchandising, design, supply chain, brand communication and
who has been Creative Director for the Group since its inception. distribution teams. The success of this collaboration is shown in
Jimmy Choo’s design team has a proven track record of developing Jimmy Choo’s track record of offering a considerable depth and
Sandra’s conceptual visions into beautiful products multiple times breadth in its collections, in terms of functions, heel heights,
each year through a structured process encompassing line plans, materials, sizes and colours. We have been able to leverage our
designs, prototypes, edits and pre-launch samples. expertise to replicate this model across our accessory offering.
23
OUR BUSINESS MODEL
CONTINUED
24
More importantly, our online presence provides a powerful route to Jimmy Choo’s brand communication spend has significantly
engage with new potential clients and for clients to begin a purchase increased over the last three years. This has positioned the Group
process which may be completed in one of Jimmy Choo’s boutiques. alongside our larger luxury brand peers and is a level of spend as
As Jimmy Choo invests in supply chain infrastructure to move a proportion of revenue which is within appropriate parameters for
towards an integrated omnichannel model, the online platform a leading luxury shoe brand.
will increase the integration within the retail channel.
DIS T RIBU T ION
We expect to benefit from our systems and logistics investment, Jimmy Choo has successful and effective distribution networks
which includes: continued development of the online platform, new with significant opportunity for expansion. In addition, Jimmy Choo
point of sales infrastructure, a new centralised warehouse, SAP benefits from having a balanced multichannel distribution network
implementation and product lifecycle management, many of which with our retail DOS network at the core.
are already in place and virtually all of which have become operational
with the opening of our Swiss warehouse in March 2015. These new Jimmy Choo has a particularly strong presence in EMEA, USA and
investments will significantly enhance service and product availability, Japan, with a growing footprint in the rest of Asia. The Group has
streamline inventory management and improve our operating margin. experienced strong growth in recent years across all of these
markets. 2014 has been a particularly transformational year for our
3 6 0° COMMUNICAT ION S T R AT EGY F UEL S T HE BR A ND DOS network, as we launched our new store concept, continued the
Jimmy Choo’s status as a globally recognised luxury brand is a result store roll-out programme and began a comprehensive renovation
of our entrepreneurial and dynamic approach to brand communication. programme of our existing portfolio. By the end of 2014, we had
The Group applies an all encompassing brand communication strategy 125 DOS, of which 15 were in the new store concept. See page 17
which includes celebrity placement, editorial and digital influencer for the progress we have made in our retail network.
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
We adopt this approach to all our new product launches and our recent years. This investment, together with the broader investments
success has resulted in Jimmy Choo currently being the top ranked in the supply chain, is expected to result in the Group being able to
brand globally in editorial for luxury women’s shoes. We have gained provide an omnichannel client offering in the medium term.
10.7 million social media followers as of 31 December 2014; and,
attained recognition globally through high-profile product placements, The Group continues to benefit from our strong multibrand distribution
most notably in “Sex and the City” in 1999 and more recently in the offering, which provides attractive economics and acts as a lead
Korean series “My Love from the Star” which has elevated the brand indicator of collection success and a benchmark against competitors.
significantly throughout Asia. 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
M Y L OV E F ROM T HE S TA R franchise buyouts in Japan, Hong Kong and China between 2011
A N T HR ACI T E GL I T T E R
A BE L P UMP F E AT UR E D and 2013.
IN T HE SHO W
JIMM YCHOO.COM
ONL INE P L AT F OR M
25
STRATEGIC FRAMEWORK
Our goal is to pursue growth without compromising Jimmy Choo’s • Like for like growth: through continued strong performance of our
brand. This is achieved by successful product collections driving collections and investment in our DOS network, with selected
positive like for like sales, opening new DOS, and expansion in openings, relocations and new store concept renovations in
Asia and selected new markets. Jimmy Choo’s existing developed markets of Europe, USA
and Japan.
Shoes are at the heart of Jimmy Choo and will remain the core • Retail led growth driven by:
offering. Shoes represent three quarters of revenue, which we –– door growth opportunity: expansion of DOS in Greater China,
do not expect to change substantially. Jimmy Choo is a specialist where Jimmy Choo is currently under-represented compared
luxury shoe company focused on growing our relationship with our to our peers, and potential franchise buyouts and JVs in
customers and clients. Growth will always be pursued within the incumbent fast growing markets, including the Middle East,
context of protecting the Jimmy Choo brand identity and luxury South Korea, Singapore and Malaysia. It is expected that half
positioning. We believe that Jimmy Choo’s unique brand DNA and to two-thirds of Jimmy Choo’s DOS development will be in
experienced design team will enable us to continue to deliver China each year.
collections that resonate strongly with our clients. –– Online: the Group will continue our investment in online which
has proved to be one of the key elements of growth in the
We aim to deliver earnings growth and returns through focusing on current environment. Recent investments into the supply chain
growth ahead of the market and margin expansion, together with and systems upgrades are expected to position the Group to
good cash flow conversion. participate in the growth of the global online trade, and provide
an omnichannel distribution offering in the medium term.
RE V ENUE GROW T H • Wholesale entry: explore potential franchise opportunities in new
Revenue growth is supported by the store opening programme, markets where Jimmy Choo currently has a limited presence,
through which the Group plans to open 10 to 15 stores per year, particularly in Latin America and Eastern Europe, alongside
as well as the rollout of the recently introduced new store concept continued development of our existing business.
across the estate. In addition to our DOS expansion plans, we intend
to pursue growth through our multibrand, franchise and JV channels. M A RGIN E X PA NSION
All of these are important for Jimmy Choo’s business model as they The revenue growth initiatives described above, together with
provide access to new markets. increased control over distribution, are designed to drive margin
improvement in the business. The opex impact of the investment
Our aim is to grow towards a regional mix more in line with the wider in systems and logistics is now complete and the business is scaled
luxury market through growth in Asia and selected new markets, for growth. Direct costs will grow broadly in line with retail revenue
while maintaining our presence in EMEA and USA. Jimmy Choo’s and indirect costs will grow slower than overall revenue. The new
revenue growth strategy is focused around the following key pillars: systems and logistics investment will help the management team
to improve inventory efficiency, thereby reducing markdowns and
• Market outperformance: we believe that Jimmy Choo’s client increasing cash flow.
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.
26
OB JEC T I V ES PERF ORM A NCE IN T EN T IONS
2 014 5 .7 %
2 013 7.1 %
2 012 6 .1 %
RE V ENUE GROW T H RE V ENUE GROW T H AT CONS TA N T CURRENCY • Like for like growth
Constant currency revenue
growth ahead of the market 12.2 % • 10 to 15 new DOS per annum
• Distribution growth in Asia, the
Middle East and Latin America
2 014 12 . 2 %
2 013 15 . 6 %
2 012 17.1 %
27
CHIEF EXECUTIVE’S REVIEW
28
This has been a year of great progress for the Group from a financial, M A DE TO ORDER
strategic and operational perspective. In order to enhance the luxury positioning of the brand and create a
more bespoke offering for our clients, we launched Made To Order
In what has been a challenging year for the industry, Jimmy Choo shoes in 2014. Clients can have a pair of shoes made, choosing from
has performed strongly in 2014, with double digit revenue growth at a range of designs and heel heights, fabric colour or skin and
constant currency driven by a mix of like for like growth from strong personalise them with their initials on the sole.
product authority and retail excellence, new store openings with
a focus on China and continued growth in partnership with our Made to Order was originally offered in selected stores from early
wholesale customers. Revenue grew by 12.2% on a constant in the year. Subsequently, the enhanced online platform has allowed
currency basis (6.4% on a reported currency basis) to £299.7m in us to roll the Made to Order service out across the retail website,
2014, driven by strong performance in both ladies’ and men’s shoes. providing a much wider footprint.
Adjusted EBITDA margin grew to 16.8% despite significant currency
headwinds, demonstrating the operating leverage of the business.
29
CHIEF EXECUTIVE’S REVIEW
CONTINUED
AU T UMN W IN T ER 2 0 14 CRUISE 2 0 15
A N E X P R E S SION OF L US T, E NE R GY. MOV E ME N T.
DE SIR E , PA S SION A ND S T R E NG T H. P O W E R .
ROM A NCE , E X P E RIME N T ING A R E DE F INE D A E S T HE T IC
W I T H NE W P ROP OR T IONS E ME R GE S F OR JIMM Y CHOO
W HIL S T R E M A INING C RUISE 2 015 , W I T H T ODAY ’S
F OC USE D ON A R E F INE D AC T I V E A ND MODE R N
C U T, SH A P E A ND F OR M. W OM A N P L AY ING T HE
ROL E A S MUSE .
30
DIS T RIBU T ION In order to capitalise upon this opportunity, we have focused our
We launched a new store concept, developed with David Collins Chinese growth strategy by buying out our franchise partner in 2012,
Studio and inspired by haute couture salons and fantasy shoe closets. opening Jimmy Choo offices in Hong Kong and Shanghai in order
This refreshes the look and feel of our stores, emphasises the luxury to manage the operations in the region effectively and introducing
positioning of the brand and presents the fashion driven products in focused brand communication messages tailored for the
more space, while retaining the higher product densities in the key Chinese market.
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
NE W S TORE CONCEP T continues to catch the fashion zeitgeist. Our products were featured
NE W BOND S T R E E T 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.
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
We continued to drive our retail channel expansion, with a net nine 2 014 AT R EP OR T E D C UR R E NC Y
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 6.4%
JA PA N 8.8%
A SI A E X- JA PA N 34.5%
RENOVAT IONS A ND
REL OCAT IONS
2 014
ASI A N GROW T H OPPOR T UNI T Y 2015 will continue this transformation programme, with the near
Our growth potential in Asia was one of the opportunities which final stage of the SAP roll-out and moving into the central global
initially attracted me to Jimmy Choo. The luxury market in China has distribution centre in Switzerland. This will represent a key stage
been driven by a relatively small number of global brands with broad in the development of our omnichannel capability. We plan to be
product offerings. Women’s luxury shoes was not a large player in initiating trials of the first stages of omnichannel delivery in 2016.
this initial wave of luxury consumption, focusing more on gifting
items purchased by largely male clients. What we have seen in the I would like to take the opportunity to thank all of our stakeholders for
last few years is a shift towards non-logo brands purchased by their contribution to this year’s strong results. I would especially like
affluent women for their own consumption. to thank our employees across the business for their hard work in this
transformational year.
31
FINANCIAL REVIEW
32
£M 2014 2013
reduced activity by travelling clients, as the marked currency shifts
impacted behaviour and travel restrictions on Russians reduced
Revenue 299.7 281.5 foot fall offset by growth in travelling Chinese clients. Americas
Gross margin (%) 61.8% 62.3% performed in line with expectations, up 0.6% despite currency
headwind for most of the year and a number of temporary store
Selling and distribution expenses (83.0) (73.4)
closures as we began to roll out the new store concept.
Brand communication expenses (14.1) (16.9)
Overheads (37.9) (38.2) Other revenues were positively impacted this year by the launch of
Adjusted EBITDA 50.2 46.9 Jimmy Choo Man, our first men’s fragrance, which was very well
received following its launch in August 2014 and has outstripped
Adjusted EBITDA as % of net revenues 16.8% 16.6% expectations consistently since launch.
Adjusted EBIT 35.4 35.0
Adjusted EBT 28.3 23.6 At a product level we continued to see volume growth in both shoes
Adjusted consolidated net income 22.9 21.0 and accessories, with shoes representing approximately three
quarters of revenue for the year. Men’s remains the fastest growing
Adjusted EPS (pence) 6.1 5.6 category and represents around 5% of revenue.
Unless otherwise stated, all figures and growth rates in the following GROSS M A RGIN
commentary exclude the impact of adjusting items. For a reconciliation Gross margin continued to improve on an underlying basis from
of adjusted performance measures to statutory figures, please see increased buying volumes and the favourable shift in channel mix in
note 28 to the financial statements. the year. However this was impacted by strong currency headwinds
for most of the year, especially in relation to adverse movements in
RE V ENUE 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%
£M 2014 % 2013 % in 2014.
Retail 192.9 64.4% 177.4 63.0% COS T S
Wholesale 99.6 33.2% 97.7 34.7% Overall, total costs charged in arriving at Adjusted EBITDA increased
Other 7.2 2.4% 6.4 2.3% by 5.1% in 2014, compared to a 6.4% growth in total revenue in the
same period.
Total 299.7 100.0% 281.5 100.0%
Selling and distribution expenses increased by £9.6m (13.1%) in
Revenue increased by 6.4%, or 12.2% on a constant currency basis, 2014, reflecting the impact of the addition of new stores and the
with continued growth across all segments. Retail grew ahead of variable costs incurred in connection with the operation of the
wholesale, in line with our previously stated strategic aim of retail Group’s website. Retail costs were also negatively impacted by
led growth and for 2014 represented just over 64.4% of revenue. £0.8m of increased costs during the refurbishments of the New Bond
Street and Beverly Hills flagship locations. We also incurred £0.4m of
In 2014 retail revenue grew by 8.8% to £192.9m as a result of like costs in relation to stores due to open in subsequent years. Excluding
for like growth of 5.7% and the addition of a net nine new DOS, half these two elements costs rose by 11.4% in 2014 compared to the
of which were opened in China. In constant currency terms, retail previous year.
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 Brand communication benefitted from the achievement of significant
10 existing stores refurbished or relocated in the year and a total economies of scale having insourced our media production. We also
of 14 stores trading in the new concept at the year end. The early grew our media presence and were ranked consistently as number 1
indications from the refurbishments undertaken in the year are that in global editorial ranking for luxury shoes. In addition we were
the new store concept helps to drive noticeably improved like for ranked as “Gifted” for our digital presence by the digital agency L2
like sales. with our social presence being rated “Genius”. We launched Kit
Harrington as our key male personality which coincided with our first
Our wholesale business also performed well, although growth was catwalk show in London in June 2014. All of this was achieved with
held back by adverse movements in the US dollar exchange rate spend just under 4.7% of revenue and £2.8m (16.6%) lower
against sterling during the year, as a significant proportion of our expenditure than the previous year.
wholesale accounts are denominated in US dollars. In constant
currency terms, wholesale revenue grew by 6.3% during 2014, Overheads for 2014 were £37.9m, down 0.8% or £0.3m compared to
compared to 1.9% at reported rates. On an underlying basis we the prior year, reflecting tight cost control now that the replatforming
saw organic growth within existing key wholesale accounts as of the business is largely complete and savings due to movements in
well as the opening of a further 8 franchise stores. 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 Exceptional costs of £13.0m (2013: £6.0m) were incurred during
brand penetration driving like for like sales growth supported by the year, of which £7.8m (2013: £nil) were IPO related costs. The
our continued build out of new stores. Despite the extent of the remaining exceptional costs included replatforming costs of £3.6m
devaluation of the Yen, our Japanese business grew by 8.8%, with (2013: £3.4m) and acquisition and integration costs of £1.6m
a strong response to the launch of CHOO.08º. Growth in these was (2013: £2.6m). Refer to note 5 of the financial statements for
further stimulated by the interest generated in Jimmy Choo from the additional detail.
Korean soap “My Love from the Star”. EMEA grew by 4.7%, despite
33
FINANCIAL REVIEW
CONTINUED
34
SUSTAINABLE BUSINESS
Jimmy Choo’s Board, Senior Management and employees recognise Jimmy Choo has chosen to use an intensity ratio measure based
the importance of reducing our impact on the environment and upon emissions per £m of revenue in order to put the GHG intensity
increasing our positive social impact both in the regions in which we in context for the size of the business.
operate and in a wider global context. Sustainability has always been 2014
part of our thinking and we have implemented a wide variety of
sustainability initiatives at a local level. We are always thinking about (tCO 2 e) (tCO 2 e/£M)
how we can create a more sustainable business and to this end we Scope 1
have started to create a global sustainability strategy and policy.
We look forward to exploring how we can make further changes and Fuel combustion 58 0.20
leverage our existing sustainability initiatives across the business. Scope 2
Purchased electricity 3,069 10.26
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 Statutory Total (Scope 1 and 2 Emissions) 3,127 10.46
in its collaborations with artists and charities. Jimmy Choo adopts
a policy of working with local charities in markets where this is In addition to the statutorily required Scope 1&2
established practice and undertakes frequent charity events in which disclosure, Jimmy Choo has voluntarily analysed
a portion of the sales are donated to a local charity. These events, the Scope 3 emissions where it has the ability to
particularly in the USA, allow Jimmy Choo to connect with the influence them.
community and deliver on our values of contributing to the Scope 3
communities which it serves. Total donations in 2014 to charities
amounted to £0.2m. Upstream Scope 3 emissions 1,954 6.53
Total Emissions 5,081 16.99
T HE JIMM Y CHOO F OUNDAT ION
In 2011 we launched The Jimmy Choo Foundation (the Note:
tCO 2 e is an abbreviation of ‘tonnes of carbon dioxide equivalent’ and is the internationally
“Foundation”), a non-profit charitable trust that empowers women recognised measure of greenhouse gas emissions.
through education to enhance livelihoods. The Foundation was Jimmy Choo applies an operational control approach to defining its organisational boundaries.
established following the ideals of the Jimmy Choo brand which has 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,
through history striven to offer women the confidence and optimism but does not influence the energy management for those sites, such as a concession within a
department store.
to dream and achieve. The Foundation focuses on building
confidence and independence through education and economic 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
opportunity. To date, the Foundation has raised funds from the sale Company Reporting (2014). All material sources of emissions are reported.
of Jimmy Choo’s Icons collection and The Jimmy Choo XV Book.
The Trustees of the Foundation are Pierre Denis, Sandra Choi, ENG AGEMEN T A ND REPOR T ING
Jonathan Sinclair and Hannah Merritt. In order to challenge and enhance its sustainable operation goals, we
will consider which industry sustainability working groups would be
EN V IRONMEN T appropriate for us to join. We presently meet all mandatory reporting
Jimmy Choo has a commitment to meeting high environmental requirements and will enhance this disclosure in 2015 with a
standards in its operations and throughout its supply chain. discussion of how we have changed over the year.
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 SOCI A L
comply with the Washington Convention on International Trade in Jimmy Choo is committed to improving working conditions for
Endangered Species of Wild Fauna and Flora (“CITES”), which aims workers both under its direct operations and across its value chain.
to regulate the trade of specimens of endangered animals and plants The majority of Jimmy Choo’s products are made in Europe, and
by monitoring their exportation, re-exportation, importation, transit, in particular Italy, where factories and tanneries are subject to
transhipment or possession. mandatory legislative requirements. Jimmy Choo already expects
its suppliers and sub-suppliers to include clauses combatting child
CA RBON F OOT PRIN T labour in their contracts.
In 2014, Jimmy Choo had its carbon footprint independently
measured for the first time by Deloitte. This enabled Jimmy Choo In the unlikely event that Jimmy Choo identifies working conditions
to identify areas of risk and prioritise areas on which to focus carbon which do not meet its minimum standards, the Group will work
reduction efforts. Over the next 12 months, Jimmy Choo will be closely with suppliers to improve their performance. Over the next
building on the activities which today centre on 93 energy reduction 12 months, Jimmy Choo expects to formalise its policy on human
initiatives already in place across its operations. In due course, we rights and working conditions and will continue to increase the
will establish a global energy management programme. 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:
35
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
We respect our entrepreneurial heritage We thrive on talent and passion. We are No one person or team can do it alone.
and never forget that our brand began in a a great place for smart people with an The brand is bigger than any individual.
humble shop – offering extraordinary service, urgent passion to build the brand and We challenge, align and show a united front.
design and quality. serve the customer.
We lead through our creativity whether in There is one version of the truth – We are always proud of what we do and
designing beautiful product or improving the customer is our judge and jury. how we treat each other. We have high
service to our stakeholders. ethical standards – and give back to the
communities we serve.
CRE AT ING A DI V ERSE COMMUNI T Y The Group is committed to a policy of treating all of its employees
We believe that businesses thrive from the sharing of knowledge and and job applicants equally. No employee or potential employee will
experiences. In order to make the most of the cross fertilisation of receive less favourable treatment or consideration on the grounds of
ideas, we employ people from a diverse range of professional and race, colour, nationality, ethnic origin, religion or belief, sex, gender
cultural backgrounds not only because it is the right thing to do, but reassignment, sexual orientation, age, marital status, civil partnership
also because it enhances our work environment and strengthens our status, or disability or will be disadvantaged by any conditions of
ability to nurture and grow the business. employment or requirements of the Company that cannot be justified
as necessary on operational grounds.
36
We have a comprehensive diversity policy which ensures that Jimmy Choo is a dynamic environment and it is important to
everyone who works at one of our workplaces, whether they are ensure that the views of our employees are taken into account as
directly employed by Jimmy Choo or not, is protected from direct we change and grow. We therefore consult at local, regional and
and indirect discrimination, harassment or victimisation, whether global levels at an early stage where any changes may impact our
deliberate or accidental. In addition, we commit to ensuring that the employees. This process is supported by a clear open door policy
work environment is suitable for our employees to carry out their with our HR team and a transparent approach, where appropriate,
duties, with adjustments to equipment, location and working in the business. All employees are encouraged to come forward
practices where necessary. with ideas and concerns. This consultation has positive results for
the long term growth of the business, such as the introduction
We have put policies in place to ensure that the recruitment process of new management training specifically designed to help our
is free from bias and that equal work receives equal pay. employees develop into the senior managers of tomorrow.
37
RISK MANAGEMENT
The Board is responsible for identifying the nature and extent of the The Group has identified the following key risks. This is not an
risks the Group has to manage in order to successfully pursue its exhaustive list but rather a list of the most material risks facing the
growth strategy and generate shareholder value over the long term. Group. The impact of these risks, individually or collectively, could
The Board uses a risk framework which is designed to support the potentially affect the ability of the Group to operate profitably and
process for identifying, evaluating and managing both financial and generate positive cash flows in the medium to long term. As a result
non-financial risks. these risks are actively monitored and managed, as detailed below.
RISK DESCRIPTION MITIGATING ACTION
S T R AT EGIC RISKS
GROW T H S T R AT EGY Jimmy Choo’s long term growth is dependent on The Board has approved well-structured growth plans
making strategic moves into new territories, and ensured they are adequately resourced.
channels, and products. The wrong strategy or poor
implementation could put future growth at risk. The Board regularly challenges the strategic plans
to ensure downside risks are mitigated.
38
RISK DESCRIPTION MITIGATING ACTION
I T SYS T EMS Critical data losses or delays in operations if Senior management reviews the IT strategy and
Jimmy Choo’s IT systems are not robust against power operations plan regularly to ensure IT systems
outages; computer, network and telecommunications continue to be appropriate for the size and complexity
failures; computer viruses; security breaches and user of Jimmy Choo’s business.
errors could interrupt the business operations.
In addition, Jimmy Choo maintains a disaster
recovery plan.
OU T SOURCING Logistics, IT and transactional accounting activities Legal contracts and service catalogues have been
SERV ICES TO are outsourced to the JAB Luxury’s shared services signed between Jimmy Choo and GBS. Both parties
GL OBA L BUSINESS
SERV ICES (“GBS”) company, LLX Global Business Services SA (“GBS”). are committed to improving the KPIs over time.
Reductions in GBS performance risk impacting
Jimmy Choo’s operations and reductions in GBS Performance is monitored on a daily basis and
efficiency would lead to increased costs for reported to senior managers monthly.
Jimmy Choo.
A clear remediation process is in place if required.
PROGR A MME RISK Interruption or reduced performance during Senior management have put in place a strong
implementation of the operational transformation programme management team and structure in
programme would impact current operations. If the Jimmy Choo, linking project delivery teams (from GBS)
scope of transformation reduced, future development to key staff in the Jimmy Choo business.
plans of the business would be put at risk.
A clear programme structure, planning processes,
reporting framework and communication plan have
been put in place and are regularly monitored.
39
RISK MANAGEMENT
CONTINUED
ECONOMIC Economic downturns in countries where Jimmy Choo Economic environment and international market risks
DOW N T URN A ND sells products may reduce sales and increase inventory. are regularly reviewed by senior management, with
IN T ERN AT ION A L
M A RK E T RISK appropriate action taken as required (e.g. reallocation
Changes in international trade laws, transportation of product or resources between regions and active
costs, or local government instability could all impact management of inventory).
financial results.
REPU TAT ION A L RISK
IM AGE A ND If Jimmy Choo’s products, stores, marketing, customer Brand quality is placed at the core of everything the
REPU TAT ION service and corporate profile fail to retain the business does.
OF BR A ND
distinctive Jimmy Choo character, quality and values,
brand equity could be reduced and sales impacted. 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).
40
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
43
BOARD OF DIRECTORS
01 02 03 04
44
05 06 07 08 09
45
BOARD OF DIRECTORS
CONTINUED
PE T ER H A RF JON AT H A N SINCL A IR
NON-E X ECU T I V E CH A IRM A N CHIEF F IN A NCI A L OF F ICER A ND
Mr. Harf was named the Non-Executive Chairman of the Company E X ECU T I V E V ICE PRESIDEN T (BUSINESS OPER AT IONS
in September 2014. Mr. Harf joined Joh. A. Benckiser SE in 1981, Mr. Sinclair was named Chief Financial Officer and Executive Vice
serving the company in a variety of capacities, including Chairman President (Business Operations) in June 2014, and currently leads the
and Chief Executive Officer since 1988. Mr. Harf is a JAB Holding Finance, Legal and Merchandise Planning departments. Mr. Sinclair
Partner. Mr. Harf is currently a Board member of Peet’s Coffee & originally joined Jimmy Choo in 2008 as Chief Operating Officer,
Tea, Inc., a premier specialty coffee and tea company; a Board overseeing the company’s Finance, Legal, Merchandise Planning,
member of D.E Master Blenders 1753 B.V. (“DEMB 1753”), the IT and Store Development functions. Mr. Sinclair left Jimmy Choo in
world’s leading pure play coffee and tea company; the Chairman of 2013 to become Chief Operating Officer at Vertu, the luxury mobile
JAB Luxury; a Director, and former Chairman, of Coty Inc., a global phone designer, before returning to Jimmy Choo in June 2014.
leader in beauty; and the Deputy Chairman of Reckitt Benckiser Mr. Sinclair is also a Non-Executive Director of LLX Global Business
Group PLC, a leading global fast moving consumer goods company Services SA, a subsidiary of JAB Luxury that provides various
operating in the health, hygiene and home care categories – a services to Jimmy Choo, as well as being a Non-Executive Director at
position he has held since 1999. Mr. Harf has previously been the Nottingham Scientific Limited. Mr. Sinclair began his career in finance
Chairman of Anheuser-Busch InBev, the world’s largest brewer, from working for Boots Group PLC, now an international pharmacy-led
2002 to April 2012, and served on the Board of Burger King Holdings, health and beauty group under the ownership of Alliance Boots,
Inc, the world’s second largest fast food hamburger restaurant, from where he spent over 19 years, most recently holding the position of
2010 through 2011. He is also a co-founder and Executive Chairman Finance Director of Boots Retail. He subsequently joined Pentland
of Delete Blood Cancer DKMS, Tübingen, Germany, the largest Brands plc, the name behind some of the world’s best sports,
institution of its kind. outdoor and fashion brands, where he spent five years in a similar
capacity. Mr. Sinclair is a graduate of Loughborough University and
PIERRE DENIS is based in the London head office of Jimmy Choo.
CHIEF E X ECU T I V E OF F ICER
Mr. Denis was named CEO of Jimmy Choo in July 2012. Mr. Denis BA R T BECH T
brings extensive experience in the global luxury fashion industry NON-E X ECU T I V E DIREC TOR
and joined Jimmy Choo from John Galliano, where he also held Mr. Becht was named a Non-Executive Director of the Company in
the position of CEO. Mr. Denis began his career in perfume and September 2014. He is currently the Chairman and interim CEO of
cosmetics and joined LVMH, the diversified luxury goods group, in Coty, Inc., a global leader in beauty; Chairman of DEMB 1753, the
1992. In 1999, he was appointed Managing Director, Asia Pacific for world’s leading pure play coffee and tea company; as well as a Board
Parfums Christian Dior; in addition, he took over managing the Dior member of Peet’s Coffee & Tea, Inc, a premier specialty coffee and
Couture Asian business in 2004. In 2006, Mr. Denis moved back to tea company. Mr. Becht is a JAB Holding Partner. Mr. Becht was
his native Paris to serve as Managing Director for Christian Dior formerly a Director of ICON Aircraft and Prudential Plc. He was also
Couture in Europe, the Middle East and India. After joining John formerly the CEO of Reckitt Benckiser Group PLC, a leading global
Galliano in 2008, Mr. Denis successfully managed the business fast moving consumer goods company operating in the health,
side of operations, developing the John Galliano and contemporary hygiene and home care categories. Mr. Becht was appointed CEO
Galliano lines, and expanding the licensing business. Mr. Denis is of privately-held Benckiser Household Products in 1995 and took
a graduate of ESSEC Paris and is based in the London head office the company public in 1997. Mr. Becht merged Benckiser N.V.
of Jimmy Choo. with Reckitt & Colman plc in 1999 and became the CEO of the
combined entity.
46
GI A NL UCA BROZ ZE T T I DAV ID POULT ER
INDEPENDEN T NON-E X ECU T I V E DIREC TOR SENIOR INDEPENDEN T NON-E X ECU T I V E DIREC TOR
Mr. Brozzetti was named an Independent Non-Executive Director Mr. Poulter was named Senior Independent Non-Executive Director
of the Company, with effect from Admission, in September 2014. (“SID”) of the Company, with effect from Admission, in September
Mr. Brozzetti started his management career in Rome, in 1980, at 2014. He is currently a Member of the finance committee and
Procter & Gamble, one of the world’s largest consumer products investment and pension committee of Save the Children UK
companies, where he eventually became Group Marketing Director. and over the last 18 months has supported the directors on the
In 1985, he became an associate at McKinsey & Co., a global integration of Merlin, another global charity. Mr. Poulter was
management consulting firm, in Milan. Following that position, formerly at Reckitt Benckiser Group PLC, a leading global fast
he gained over 28 years of executive experience in top luxury and moving consumer goods company operating in the health, hygiene
fashion brands. He became the Sales & Marketing Director at Gucci and home care categories, from 1999 to December 2012. His roles
Group, the high fashion, Italian luxury goods house, in Florence in included the Head of Internal Audit and ten years as Senior Vice
1986; Executive Director Bulgari Jewels/Watches in Rome in 1987; President, Finance for Developing Markets and Europe. Mr. Poulter
and then managed the start-up of the Bulgari Fragrance Division in has also been a Trustee Board Member for large pension schemes,
Neuchatel in 1992. Additionally he became the President and Director including for Reckitt Benckiser Group PLC from 2009 to January
General at Louis Vuitton Malletier, the French fashion house, in Paris 2013. He is a Chartered Accountant.
in 1999; the CEO and a shareholder of Asprey & Garrard, the luxury
jeweller, in London in 2001; the CEO of Nautor Swan Yachts, the BOB SINGER
designer and builder of luxury sailing yachts, in Finland in 2007; and INDEPENDEN T NON-E X ECU T I V E DIREC TOR
the CEO at Roberto Cavalli, the luxury clothing business, in Florence/ Mr. Singer was named an Independent Non-Executive Director of
Milan in 2009, a position he held until February 2014. He was also a the Company, with effect from Admission, in September 2014. He is
Non-Executive Director at William Grant & Sons, the premium spirits currently a member of the Board of Directors and a member and the
company, from 2001 to 2012. Most recently, Mr. Brozzetti was Chairman until the end of April 2015 of the Audit Committee of Mead
appointed CEO of Buccellati in September 2014. Johnson Nutrition, a global leader in infant nutrition; as well as a
member of the Board of Directors and the Chairman of the Audit
FA BIO F USCO Committee of Coty, Inc., a global leader in beauty, positions he has
NON-E X ECU T I V E DIREC TOR held since 2009. He is also a member of the Board of Directors and
Mr. Fusco was named a Non-Executive Director of the Company in the Chairman of the Audit Committee of Tiffany and Co., a specialty
September 2014. Mr. Fusco is a JAB Holding Partner, a position he retailer of jewellery and other accessories, a position he has held
has held since July 2014, and has 20 years of experience in the since 2012; and, from 2001, an Advisory Council Member of Johns
luxury industry, 10 of which were in executive positions. He has been Hopkins University School of Advanced International Studies –
the JAB Luxury CFO since April 2010, overseeing the set-up and Bologna Campus. From 1995 to 2004, Mr. Singer was the CFO and
development of JAB’s investment in luxury. He was also the CFO of Executive Vice President of Gucci Group N.V., the high fashion, Italian
Bally, the luxury accessories brand, from 2005 to 2010, leading the luxury goods house; and, from 2004 to 2005, he was the President,
brand turn-around and the transfer of ownership from TPG to JAB. COO and member of the Board of Directors of Abercrombie and
He was also the CFO of IT Holding, a leader in the production and Fitch, a branded specialty retailer targeting the youth market. He also
global distribution of clothing and total look accessories, from 2003 was the CEO of Barilla Holdings S.p.A., one of the top Italian food
to 2005, overseeing the dismissal of non-strategic assets and the groups, from 2006 to 2009.
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.
47
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
PE T ER H A RF
CH A IR M A N
18 March 2015
48
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
• Ensuring maintenance of effective systems of internal control
T HE BOA RD S T RUC T URE and risk management
The structure and business of the Board is designed to ensure that • Reviewing these systems of control and risk management
the Board focuses its time and energy on providing entrepreneurial
leadership to the Group, setting strategy and monitoring BOA R D ME MBE R SHIP
performance, and ensuring that the necessary financial and human • Changes to the structure, size and composition of the Board
resources are in place to enable the Company to meet its objectives. • Ensuring adequate succession planning
In addition, the Board ensures that the appropriate financial and • Appointment or removal of the Chairman, CEO, SID and
business systems and controls are in place to safeguard both the Company Secretary
majority and the minority shareholders’ interests and to maintain
effective corporate governance. CORP OR AT E GOV E RN A NCE
• Review of Group’s overall governance framework
The Board operates in accordance with the Company’s Articles of • Determining the independence of directors
Association and its own written terms of reference (Schedule of • Considering the views of shareholders
Matters Reserved for Board Decision). The Board has established • Authorising any conflicts of interest
a number of Committees as indicated in the chart below. Each
Committee has its own terms of reference which will be reviewed R E MUNE R AT ION
at least annually. A summary of the matters reserved for decision • Determining the policy for remuneration of the Chairman,
by the Board is set out below: the Executive Directors, Company Secretary and other
senior executives
L E A DE R SHIP, S T R AT EGY, BUDGE T S A ND M A N AGE ME N T • Determining the remuneration of the Non-Executive Directors
• Providing leadership and setting values and standards • Introduction of new share incentive plans or major changes to
• Approving, developing and monitoring the strategy and objectives existing plans
of the Group
• Overseeing operations O T HE R
• Approval and monitoring of the share dealing code
S T RUC T UR E A ND C A PI TA L • Approval and monitoring of Corporate and Social Responsibility
• Changes to the Group’s capital or corporate structure • Approving policies for political and charitable donations
• Changes to the Group’s management and control structure • 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
SENIOR M A N AGEMEN T
MEMBERS KEY RESPONSIBILITIES
EXECUTIVE DIRECTORS AND 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
OTHER SENIOR MANAGEMENT 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 Terms of reference of the Audit and Risk Committee and the Remuneration and Nominations Committee are available on the Company’s website.
49
CORPORATE GOVERNANCE REPORT
CONTINUED
50
As explained in the Chairman’s introduction, under the Relationship The Relationship Agreement will continue for so long as (i) the shares
Agreement JAB Luxury is able to appoint: (i) up to one half of the are listed on the premium listing segment of the Official List and
Directors on the Board while it continues to hold 50% or more of the traded on the London Stock Exchange’s main market for listed
shares; (ii) up to one quarter of the Directors on the Board while it securities and (ii) JAB Luxury, together with its associates, is entitled
continues to hold at least 25% but less than 50% of the shares; and to exercise or control the exercise of 10% or more of the votes able
(iii) up to one eighth of the Directors on the Board while it continues to be cast on all, or substantially all, matters at general meetings of
to hold at least 10% but less than 25% of the shares. The first the Company.
such appointees are Bart Becht, Fabio Fusco, Olivier Goudet and
Peter Harf. The Directors believe that the terms of the Relationship Agreement
enable the Group to carry on its business independently of JAB
The Board has determined that each of Gianluca Brozzetti, David Luxury and ensure that all transactions and relationships between the
Poulter and Bob Singer will be regarded as independent Non- Company and/or the members of the Group and JAB Luxury and/or
Executive Directors. In reaching this determination, the Board took its associates are, and will be, on arm’s length terms and on a normal
into consideration the following relationships: Mr. Brozzetti has commercial basis.
advised JAB Luxury in respect of its investment in Zagliani; from
1999 to 2012 Mr. Poulter held senior finance positions in Reckitt Under the Relationship Agreement, JAB Luxury is able to appoint
Benckiser Group PLC (in which JAB Luxury’s controlling shareholder to the Board such number of Non-Executive Directors as discussed
is a significant investor) including a period as a trustee of its pension above. JAB Luxury is entitled to receive, subject to compliance by
scheme and Mr. Singer has been a director of Coty Inc. (in which the Company with its legal and regulatory obligations, such financial
JAB Luxury’s controlling shareholder is the majority shareholder) or other information in relation to the Group or any member of the
since 2009. Each of these directors has been appointed as an Group as is necessary or reasonably required by it: (i) in its capacity
independent Non-Executive Director of Bally and Belstaff, which as a shareholder of the Company, for the purposes of its accounting
are companies owned by JAB Luxury. The other directors have or financial control requirements or in order to comply with its legal,
concluded that the judgement, experience and challenging approach regulatory or tax obligations; or (ii) in order for it and other members
taken by each of Gianluca Brozzetti, David Poulter and Bob Singer of its group to provide certain advisory services to the Group,
should ensure that they each make a significant contribution to the including but not limited to management accounts, long and short
work of the Board and its Committees. Therefore, the Board has term planning documents and sales and margin reports.
determined that each of them is of independent character and
judgement and should be regarded as independent Directors for C ONF L IC T S C OMMI T T E E
the purposes of the Code. The Board has constituted a Conflicts Committee that considers
on behalf of the Board any contract, arrangement or transaction
The names of the Directors and brief biographies can be found on between any member of the Group and JAB Luxury or any of JAB
pages 46 and 47. Luxury’s associates, and any actual or potential conflict of interest
between any member of the Group and JAB Luxury or any of JAB
C OMMI T ME N T Luxury’s associates which involves, or would involve, significant
The Board expects Non-Executive Directors to commit sufficient expenditure by the Group. The Conflicts Committee will meet on an
time to allow them to meet their obligations to the Company. The ad hoc basis as required. The Conflicts Committee is chaired by Bob
Non-Executive Directors’ letters of appointment currently anticipate Singer, and its other members are Pierre Denis, Jonathan Sinclair,
that each Non-Executive Director will need to commit ten days per Gianluca Brozzetti and David Poulter.
year to the Company but clarifies that more time may be required.
Non-Executive Directors will need to attend scheduled and C ONF L IC T S OF IN T E R E S T
emergency Board and Committee meetings, at least one site visit The Company’s Articles of Association set out the policy for dealing
per year and the AGM. In addition, the Non-Executive Directors with directors’ conflicts of interest and are in line with the Companies
are expected to commit appropriate preparation time ahead of Act 2006. The Articles permit the Board to authorise conflicts and
each meeting. potential conflicts, as long as the potentially conflicted Director is
not counted in the quorum and does not vote on the resolution
R E L AT IONSHIP AGR E E ME N T to authorise.
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.
51
CORPORATE GOVERNANCE REPORT
CONTINUED
In March 2015, the Board agreed a procedure for dealing with The Company has adopted a formal procedure through which
conflicts of interest in relation to matters which are scheduled for Directors may obtain independent professional advice at the
Board consideration following which each Director completed Company’s expense.
a ‘Directors List’ which sets out details of situations where each
Director’s interests may conflict with those of the Company P E R F OR M A NCE E VA L UAT ION
(‘situational conflicts’). These lists were subsequently considered Given that the majority of the Directors were only appointed in the
and situational conflicts authorised. In addition, Directors are months immediately preceding the listing in October 2014, the
reminded at the beginning of each Board meeting to notify the Board Board believes that a meaningful evaluation of the Board can only
of any further conflicts of interest in accordance with sections 175, take place after it has been working together for a reasonable time.
177 and 182 of the Companies Act 2006. An evaluation policy will be developed and implemented before
the end of 2015 and annually thereafter, with such an evaluation
BOA R D P ROCE S S
process being externally facilitated at least every three years.
Since Admission the Board has met once in December 2014
to approve the annual budget for 2015 and once in March 2015, SH A R E DE A L ING C ODE
following the year end. All Directors were present at each meeting. At Admission, the Company adopted Share Dealing Codes which
The Board intends to meet formally at least four times a year, with ad cover dealings by PDMRs and relevant employees. The codes
hoc meetings called as and when circumstances require it to at short comply with the provisions set out in the Model Code contained
notice. There will be an annual calendar of agenda items to ensure in Annex 1 to Listing Rule 9 of the UK Listing Authority’s Listing
that all matters are given due consideration and are reviewed at the Rules. It restricts dealings in shares and other relevant securities
appropriate point in the regulatory and financial cycle. by PDMRs and employees during designated prohibited periods
and at any time when they are in possession of unpublished,
At least once a year, the Board will undertake a full strategic review
price-sensitive information. As noted previously, the Board has
of the business operations as part of the budget review.
concluded that the senior managers are not PDMRs however they
All Directors are expected to attend all meetings of the Board and are classed as ‘relevant employees’ and have therefore committed
any Committees of which they are members, and to devote sufficient to full compliance of the Company’s Share Dealing Codes.
time to the Company’s affairs to fulfil their duties as Directors. Where REL AT IONS W I T H SH A REHOL DERS
Directors are unable to attend a meeting, they are encouraged to DI A L OGUE W I T H SH A R E HOL DE R S
submit any comments on papers to be considered at the meeting As part of the IPO “roadshow” in 2014, the CEO and CFO met with
to the Chairman in advance to ensure that their views are recorded
a large number of investors.
and taken into account during the meeting.
As part of its ongoing investor relations programme, the Group
The Chairman and Non-Executive Directors will meet without the
aims to maintain an active dialogue with its stakeholders including
Executive Directors present on a number of occasions throughout
the year. institutional investors to discuss issues relating to the performance
of the Group including strategy and new developments. The
T R A INING A ND DE V E L OP ME N T Non-Executive Directors are available to discuss any matter
In preparation for listing, all Directors received an induction briefing stakeholders might wish to raise, and the Chairman and
from the Company’s legal advisor, Freshfields Bruckhaus Deringer, independent Non-Executive Directors will attend meetings
on their duties and responsibilities as directors of a publicly quoted with investors and analysts as required.
company. During 2015, the Company Secretary will prepare a full,
formal and tailored induction programme for any new directors Investor relations activity and a review of the share register are
joining the Board. The Chairman, with the support of the Company standing items on the Board’s agenda.
Secretary, will ensure that the development and ongoing training
needs of individual directors and the Board as a whole are reviewed A NNUA L GE NE R A L ME E T ING
and agreed at least annually. The Company’s first Annual General Meeting since Admission will
take place on 27 May 2015 at the Radisson Blu Edwardian Hotel,
INF OR M AT ION A ND SUPP OR T 140 Bath Road, Hayes, Middlesex UB3 5AW. The Chairman will
An agenda and accompanying pack of detailed papers is circulated be present to answer questions put to him by shareholders. The
to the Board well in advance of each Board meeting. These include Annual Report and Financial Statements and Notice of the Annual
reports from Executive Directors and other members of senior General Meeting will be sent to shareholders at least 20 working
management. All Directors have direct access to senior management days prior to the date of the meeting.
should they require additional information on any of the items to be
discussed. The Board and the Audit and Risk Committee also receive To encourage shareholders to participate in the Annual General
further regular and specific reports to allow the monitoring of the Meeting process, the Company proposes to offer electronic proxy
adequacy of the Company’s systems of internal controls. voting through the CREST service and all resolutions will be
proposed and voted on at the meeting on an individual basis by
The information supplied to the Board and its Committees will be shareholders or their proxies. Voting results will be announced
kept under review and formally assessed on an annual basis as part through the Regulatory News Service and made available on the
of the Board evaluation exercise to ensure it is fit and proper for
Company’s website.
purpose and that it enables sound decision making.
52
REMUNER AT ION A ND NOMIN AT IONS COMMI T T EE • in respect of any performance related element of remuneration,
formulating suitable performance related criteria and monitor
MEMBERSHIP A ND MEE T INGS their operation;
The Remuneration and Nominations Committee is chaired by Bart • ensuring that contractual terms on termination, and any payments
Becht and its other members are Peter Harf and Gianluca Brozzetti. made, are fair to the individual and the Company, that failure
is not rewarded and that the duty to mitigate loss is fully
The Committee will meet at least three times a year and at such recognised; and
other times during the year as is necessary to discharge its duties. • leading the process for appointments to the Board and ensuring
Only members of the Committee have the right to attend meetings. that the Board, its Committees, and the boards of the Company’s
However, other individuals, such as the CEO and external advisers, subsidiaries, are appropriately balanced in terms of skills,
may be invited to attend for all or part of any meeting. experience, independence and knowledge of the Company.
The Remuneration and Nominations Committee met once in 2014 In carrying out its duties, the Remuneration and Nominations
and once in 2015 to date. All members of the Committee were Committee takes into account any legal requirements, the UK
present for each meeting. Corporate Governance Code and UK Listing Rules. Determining
the fees of the Non-Executive Directors is a matter reserved for
The Remuneration and Nominations Committee’s responsibilities are the Chairman of the Board and the Executive Directors.
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 DI V E R SI T Y
Company and the Chairman of the Board, the Company Secretary The Board recognises the benefits of diversity, including gender
and other senior employees of the Company as the Board diversity, on the Board, although it believes that all appointments
may determine; should be made on merit, whilst ensuring that there is an appropriate
• within the terms of the remuneration policy determining the total balance of skills and experience within the Board. As at 31 December
individual remuneration package of the Executive Directors, 2014, the board consisted of 10% (1) female and 90% (9) male
Company Secretary and other designated senior executives board members.
including base salary, bonuses and performance related
payments, discretionary payments, pension contributions,
benefits in kind and share options;
REMUNER AT ION POL ICY A PPOIN T MEN T S BOA RD COMPOSI T ION A ND EF F EC T I V ENESS
SUCCESSION PL A NNING
• DETERMINE THE FRAMEWORK FOR THE • PREPARE ROLE DESCRIPTION FOR BOARD • REGUL ARLY REVIEW STRUCTURE, SIZE AND • REVIEW THE RESULTS OF THE BOARD
REMUNERATION POLICY FOR THE CHAIRMAN, APPOINTMENTS FOLLOWING AN COMPOSITION OF THE BOARD PERFORMANCE EVALUATION PROCESS THAT
EXECUTIVE DIRECTORS, COMPANY EVALUATION OF THE BAL ANCE OF SKILLS, REL ATE TO THE COMPOSITION OF THE BOARD
• KEEP UNDER REVIEW THE LEADERSHIP NEEDS
SECRETARY AND OTHER SENIOR EXECUTIVES KNOWLEDGE AND EXPERIENCE ON THE
OF THE ORGANISATION • REVIEW ANNUALLY THE TIME REQUIRED
BOARD
• WHEN SET TING THE POLICY HAVE REGARD FROM NON-EXECUTIVE DIRECTORS
• GIVE FULL CONSIDERATION TO SUCCESSION
FOR PAY AND EMPLOYMENT CONDITIONS • IDENTIF Y AND NOMINATE TO THE BOARD
PL ANNING FOR DIRECTORS AND OTHER
ACROSS THE GROUP CANDIDATES TO FILL BOARD VACANCIES
SENIOR EXECUTIVES
• FORMUL ATE SUITABLE PERFORMANCE • MAKE RECOMMENDATIONS TO THE BOARD
CRITERIA FOR THE PERFORMANCE REL ATED REGARDING THE RE-APPOINTMENT OF
ELEMENTS OF REMUNERATION NON-EXECUTIVE DIRECTORS AT THE END OF
THEIR TERM OF OFFICE
• ENSURE THAT CONTRACTUAL TERMS
ON TERMINATION, AND ANY PAYMENTS • MAKE RECOMMENDATIONS TO THE BOARD
MADE, ARE FAIR TO THE INDIVIDUAL REGARDING THE ANNUAL RE-ELECTION OF
AND THE COMPANY DIRECTORS BY SHAREHOLDERS
• ENSURE THAT FAILURE IS NOT REWARDED
53
CORPORATE GOVERNANCE REPORT
CONTINUED
54
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 The engagement of the external audit firm to provide non-audit
Services Agreement dated 13 August 2014. The role of these internal services to the Group can impact on the independence assessment.
audit services is to determine whether the Group’s network of risk The Group has therefore established a policy governing the provision
management, control and governance processes are adequate and of any such non-audit services. The policy specifies services which
functioning appropriately. cannot be carried out by the external auditor (generally activities
that would involve the external auditor taking on management
At its meeting in December 2014 the Committee also approved the responsibility) and sets the framework within which non-audit
annual internal audit plan for 2015 which identified areas of focus services may be provided. All requests to utilise the external auditors
for the year. Outcomes of the work of internal audit will be reported for non-audit services must be reviewed by the CFO and above a
to the Audit and Risk Committee and the Group’s management certain limit must be subject to competitive tender and be approved
with responsibility for any improvement or remedial action allocated by the Audit and Risk Committee.
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
The Audit and Risk Committee will receive regular reports from Group in connection with the IPO and the provision of tax advisory
the internal audit function during 2015 which will include progress services. KPMG LLP were appointed as Reporting Accountants
updates against the approved internal audit plan. The Committee following a competitive tender process. In approving the use of
will use these reports as the basis for its assessment of the KPMG LLP to provide these services, the Board took the view that
effectiveness of the internal audit function during 2015, as well KPMG LLP’s knowledge of the Company and its operations meant
as monitoring the relationship between the internal audit function that it was best placed to provide the services, and was comfortable
and the Group’s management. that KPMG LLP’s independence would not be compromised. The
fees paid to KPMG LLP in respect of non-audit services during the
E X T E R N A L AUDI T OR year totalled £1.7m which is in excess of the total audit fee of £0.2m.
The Committee is responsible for overseeing the Group’s relationship The majority of the non-audit fees incurred during the year, £1.3m,
with its external auditor, KPMG LLP. This includes the ongoing were in connection with the IPO and are therefore inherently one-off
assessment of the auditor’s independence and the effectiveness in nature. In addition, the Group incurred £0.2m of tax advisory fees
of the external audit process, the results of which inform the in connection with the redesign of the Group’s supply chain which
Committee’s recommendation to the Board as to the auditor’s is also considered to be one-off in nature.
appointment (subject to shareholder approval) or otherwise.
The Committee assesses the independence of the external auditor
A PP OIN T ME N T A ND T E NUR E and the effectiveness of the external audit process before making
KPMG LLP was first appointed as the external auditor of the Group in recommendations to the Board in respect of their appointment
2011. The current audit partner, Wayne Cox, has been in place since or re-appointment.
the appointment of KPMG LLP.
In assessing independence and objectivity, the Committee considers
The audit partner is required to rotate every five years. As Wayne Cox the level and nature of services provided by the external auditor
is retiring from KPMG LLP this year, a new audit partner will be as well as the confirmation from the external auditor that it has
selected for the 2015 audit. In accordance with the Code, the remained independent within the meaning of the APB Ethical
Committee intends to put the external audit out to tender at least Standards for Auditors. The Committee’s assessment of the external
every ten years. There are no contractual obligations that act to auditor’s independence took into account the non-audit services
restrict the Audit and Risk Committee’s choice of external auditor. 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.
55
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 Revenue is a key performance indicator of the Controls relevant to the retail channel are formally
recognition Group. Whilst the Group’s revenue recognition documented within the retail excellence manual
policies are not complex, the Group’s revenue is that was implemented within each store throughout
comprised of a high volume of transactions. The the year. The accounting policies for revenue
maintenance of an effective control environment, are set out in note 1 to the financial statements
particularly within our retail channel which accounts and are unchanged from previous periods.
for 64.4% of total revenue, is therefore fundamental
to ensuring appropriate revenue recognition. 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.
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.
56
FA IR , B A L A NCE D A ND UNDE R S TA NDA BL E The Board retains ultimate responsibility for setting the Group’s
At the request of the Board, the Audit and Risk Committee has risk appetite, identification of key risks and ensuring that there is
conducted a review of the Annual Report and Financial Statements an effective risk management framework to maintain levels of
to assess whether it presents a fair, balanced and understandable risk within the risk appetite. The Board has however delegated
view of the Company’s position and prospects. The Committee’s responsibility for oversight of the Group’s risk appetite, risk
review took account of the process by which the Annual Report monitoring and reviewing areas of specific risk to the Audit and Risk
and Financial Statements is prepared which includes detailed project Committee as well as ensuring sufficient mitigating actions are taken.
planning, analysis of changes to applicable reporting requirements The Committee will provide oversight and advice to the Board on
and standards, and a robust programme of review and verification current risk exposures and future risk strategy. Further details of the
at various levels of the business and by external advisers to ensure Group’s risk management approach, structure and principal risks are
accurate reporting. set out in the Strategic Report on pages 15 to 40.
The Committee is satisfied that the Annual Report and Financial F IN A NCI A L A ND BUSINESS REPOR T ING
Statements is fair, balanced and understandable, and provides the The Board is committed to ensuring that all external financial
information necessary for shareholders to assess the Company’s reporting presents a fair, balanced and understandable assessment
position and performance, and has advised the Board accordingly. of the Group’s position and prospects. Under the Schedule of
Reserved Matters, the Board has responsibility for the approval
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 of all externally published information including, but not limited
The Group has in place a comprehensive financial review cycle, to, annual and half-yearly financial statements, regulatory news
which includes a detailed annual budgeting and forecasting process. announcements and publications required by regulators or to
The budget is prepared annually for approval by the Board and is satisfy statutory requirements.
regularly reviewed and updated during the year at key points of the
business calendar. Performance is monitored against the budget 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
through weekly and monthly reporting cycles. During the financial As part of preparing for operating in a listed environment, a review of
year under review regular reports on performance, including income the existing controls in place was performed and additional controls
statements, balance sheets, cash flow statements and key ratios, were implemented to ensure compliance with the UK Corporate
were provided to the Board. In respect of external financial reporting, Governance Code. The directors confirm that these processes have
the Group finance team is responsible for preparing the Group been in place since the date of Admission and up to the date of
financial statements and there are well established controls over approval of the Annual Report and Financial Statements.
the financial reporting process.
As such the directors confirm that they have reviewed the
The Group has defined and formally documented the core elements effectiveness of the system of internal controls for the period under
of the system of internal control at a store, channel and Group level. review and to the date of approval of the Annual Report and Financial
Policies and procedures and clearly defined levels of delegated Statements. The Board receives regular reports from the Audit and
authority have been communicated across the Group. Management Risk Committee on its activities, including the Audit and Risk
has identified the key operational and financial processes which exist Committee’s review of reports prepared by internal audit on the
within the business and implemented internal controls over these operation and efficacy of internal controls systems.
processes in addition to the higher level review and authorisation
based controls. The control environment is communicated to staff However, such a system is designed to manage rather than eliminate
through three key documents: the risk of failure to achieve business objectives and can provide only
reasonable and not absolute assurance against material misstatement
• the Group’s internal governance rules, which set out policies for or loss.
delegation of authority within the business, including contract
approval and signing limits for all types of expenditure; T RE ASURY OPER AT IONS
• the retail excellence manual detailing controls at store level; and The Company adopted a treasury policy prior to Admission which
• the internal control system documentation which describes sets the Group’s approach to the management of risks from treasury
controls over key processes such as financial reporting, operations. This policy will be reviewed annually by the Board.
receivables and payables management.
W HIS T L EBL OW ING
The Group has continued to develop its governance arrangements The Company has implemented a whistleblowing policy following
since Admission which has included the enhancement of various Admission. The Audit and Risk Committee is responsible for
policies and procedures to support the systems of internal control monitoring the Group’s whistleblowing arrangements and the policy
and risk management. The Audit and Risk Committee has been will be reviewed periodically by the Board. The Group is confident
central to this process, in particular in the drafting and review of a that these arrangements will be effective, facilitate the proportionate
number of updated or new policies, which have subsequently been and independent investigation of reported matters, and allow
approved by the Board, covering: appropriate follow up action to be taken.
57
REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
In recognition of our remuneration philosophy, the variable Following the grants that were made to the Executive Directors
remuneration arrangements for our Executive Directors are made shortly after Admission of the Company, there is currently no
up of an appropriate balance of both short and long-term incentives intention for them to participate in the long-term incentive plan
to ensure that our Executive Directors are focused on delivering in 2015.
both annual as well as long-term returns for shareholders.
58
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:
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
59
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.
P OL IC Y TA BL E
Element Purpose and link to strategy Operation Maximum opportunity Performance measures
Base salary To recognise the The Committee sets base Salaries for Executive N/A
responsibilities, experience salaries within the same Directors are targeted
and ability of our talent framework as those for all at around the median
in a competitive global other employees taking for competitors.
environment, keeping into account a range of
our people focused factors, including: Whilst there is no
on, and passionate maximum salary, any
about, the brand. • the individual’s skills, increases will normally be
performance and in line with the range of
experience; increase for all employees
• their overall contribution across the Group.
to the business during
the year; The Committee retains
• the cost to the Company; the flexibility to award
• salary increases increases above this level
awarded across the in certain circumstances,
Group as a whole; for example:
• the external economic
climate; and • to reflect the individual’s
• external benchmark data development and
at other global performance in the role;
companies of similar • to reflect a significant
size and/or global reach increase in the
within relevant sectors individual’s role or
and/or companies with responsibility; and
a high growth profile. • where a new recruit or
promoted employee’s
Base salaries are normally salary has been set
reviewed, although not lower than the market
necessarily increased, level for such a role and
annually. Base salaries larger increases are
may be reviewed more justified in the
frequently at the discretion Committee’s opinion as
of the Committee. the individual becomes
established in the role.
The Committee considers
the impact of any base
salary increase on the total
remuneration package.
Pension To offer market competitive Executive directors may Maximum Company N/A
retirement benefits, receive contributions into contribution: up to 25%
to recruit and retain a defined contribution of salary per annum.
appropriate talent to arrangement, as a The company pension
lead the business. cash allowance or as a contribution for the
combination thereof. executive directors
for 2015 is:
Base salary is the only
element of remuneration • CEO – €50,000 to the
that is pensionable. Caisse des Français de
L’Etranger (or as a
cash allowance)
• CFO – up to 10%
of salary.
60
Element Purpose and link to strategy Operation Maximum opportunity Performance measures
Other benefits To promote the well- Benefit levels are normally The aggregate maximum N/A
and allowances being of employees, reviewed on an annual value of all other benefits
allowing them to focus basis and the cost to the and allowances is not
on the business. Company of providing normally anticipated to
benefits can vary due to exceed £200,000 per
a number of factors. individual per annum.
Reasonably incurred
expenses will also
be reimbursed.
61
REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
Element Purpose and link to strategy Operation Maximum opportunity Performance measures
Annual Bonus To reward Executive Awards are based on an The maximum opportunity Performance is measured
Directors for achieving appropriate balance of under the annual bonus against a range of key
annual financial targets or financial and non-financial plan is 200% of salary in performance metrics,
other short-term objectives performance metrics. respect of a financial year. determined on an annual
linked to the strategic plan basis to ensure they remain
agreed by the Board. Performance targets are set The maximum bonus appropriate and are aligned
annually by the Committee. opportunities for 2015 are: with the Group’s strategy.
At the end of the year, the • CEO – 120% of salary. The weighting between the
Committee determines • CFO – 50% of salary. measures is determined on
the extent to which the an annual basis, however
performance targets have at least 75% will be based
been achieved. In doing so, on measures relating to
the Committee exercises financial performance.
its judgement to ensure
that the outcomes are Performance is measured
fair in the context of the over 12 months.
underlying performance
of the Group as a whole. For performance below
Bonus pay-outs are in cash. threshold, the bonus
payout is nil. For threshold
Bonus awards are subject performance, the bonus
to clawback (details set payout is 25% of maximum.
out later in this report). For target performance,
the bonus payout is up
to 75% of maximum.
62
Element Purpose and link to strategy Operation Maximum opportunity Performance measures
Long-Term To incentivise and reward Under the long-term The Committee calibrates Vesting of awards is subject
Incentive Plan participants for the delivery incentive plan, awards long-term incentive share to continued employment.
of long-term performance, of shares may be awards for participants as
and align the interests granted, which normally a fixed number of shares.
of Executive Directors vest subject to the
with our shareholders. continued employment The Committee will
of the participant for a determine annual award
five-year period from levels for each of the
the date of grant. Executive Directors
taking into account its
Long-term incentive awards philosophy that the total
are normally granted in compensation opportunity
the form of conditional for Executive Directors
shares or options with a should be positioned at
total exercise price of £1 around the upper quartile
(or such higher amount of an appropriate peer
as determined by the group (as determined
Committee at grant). They by the Committee).
may however be awarded
in other forms if it is The maximum award to
considered appropriate. any individual in respect
of any one financial year
Unvested awards are will be over no more than
subject to malus (details 2,500,000 shares. Details
set out later in this report). of the awards in respect
of each financial year will
Dividend equivalents may be disclosed in the Annual
accrue over the five-year Report on Remuneration.
vesting period. These
will normally be paid in
shares on a cumulative
reinvestment basis.
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.
63
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 The performance measures for the annual bonus are set by the
and the Executive Directors of the Company were granted a one-off Remuneration and Nominations Committee on an annual basis
award in the form of an option with a nominal total exercise price to reflect the Group’s financial objectives for any given year.
of £1 or conditional shares, which normally vest 50% on the fifth
and 50% on the sixth anniversary of the date of grant subject The performance targets applied to the annual bonus are
to the participant’s continued employment with the Group. reviewed annually, based on a number of internal reference
The CFO’s award vests in equal tranches on the fourth, fifth points (including the budget for the financial year and prior year
and sixth anniversary of the date of grant, subject to his continued performance) and external reference points (including consensus
employment with the Group. Details of the outstanding awards forecasts, forecasts for the wider luxury industry as well as
made to Executive Directors under the plan are set out in the the wider economic environment).
Annual Remuneration Report.
The Committee believes that the pay-outs under the bonus plan
R E MUNE R AT ION A ND NOMIN AT IONS C OMMI T T E E DISC R E T ION IN should only be received for out-performance. Given the level of
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
stretch in the performance targets for the annual bonus at all levels,
In the event of a variation of share capital, demerger, dividend in the Committee considers it appropriate to set pay-outs for “target”
specie, special dividend or similar event, the Committee may adjust performance at up to 75% of the maximum. Maximum awards will
or amend awards in accordance with the rules of the relevant plan. only be earned where the performance of the Group has significantly
exceeded expectations.
If the Company has been or will be affected by a demerger, dividend
in specie, special dividend or other transaction which will affect the The following sets out the performance measures that will be used
current or future value of the Company’s shares, awards may vest to for the annual bonus for 2015:
the extent the Committee determines, which may include awards
being time pro-rated if the Committee considers it appropriate. ME ASURES
• revenue growth;
The Committee retains the discretion to amend performance targets • net income growth; and
in exceptional business or regulatory circumstances or to vary such • reduction in net working capital as a percentage of revenue.
targets if acting fairly and reasonably if it considers it appropriate to
do so. If discretion is exercised in this way the Committee may WHY
consult with major shareholders as appropriate. 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 • growth;
purposes or to take account of a change in legislation) without • margin expansion; and
obtaining shareholder approval for that amendment. • 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 The Committee believes that the long-term incentive plan should
have not yet vested. Malus may apply where stated in the Policy primarily be used as a tool to align the interests of the management
table above. 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
• where there has been a material misstatement of the Company’s tool, encouraging individuals to remain in long-term employment with
Annual Report and Financial Statements for the financial year the Company, the Committee considers it appropriate to grant
during which the award was granted and/or for any subsequent long-term incentive awards that are subject to an extended vesting
financial year ending before either the last date when the award period (i.e. five years from the date of grant) rather than granting
becomes exercisable or the final vesting date; awards which are subject to performance over a shorter period (i.e.
• where there has been serious reputational damage to the Company three years from the date of grant), which the Committee considers
as a result of the participant’s actions or the actions of a member of may drive shorter-term behaviours.
the team for which the participant is directly responsible;
• where the participant has deliberately misled the Company, the To emphasise the link between the management team and
Company’s shareholders or the market regarding the Company’s shareholders, the Committee also encourages the Executive
financial performance; or Directors to build up significant shareholdings in the Company.
• gross misconduct. Executive Directors are therefore expected to build up a significant
shareholding in the Company over the seven years following
CL AW B ACK Admission. The shareholding guideline for the CEO is 500%
The Committee can reclaim bonus payments made from 2016 of base salary and for the CFO is 200% of base salary.
onwards, for a period of up to two years post the payment date
in the following circumstances:
64
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.
• 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 Fees are set at a market appropriate rate with reference to fees paid to other Non-Executive
To attract and retain high-calibre Directors at companies of a similar size to the Company and to reflect the time commitment
Non-Executive Directors. 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.
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 – Reasonably incurred expenses will be reimbursed. Additional fees or benefits may be
other benefits provided, where appropriate, at the discretion of the Board.
To enable the Chairman and
Non-Executive Directors to The Chairman and Non-Executive Directors are not eligible to participate in any incentive
undertake their roles. arrangements operated by the Company.
65
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 If a new Chairman or Non-Executive Director is appointed,
Director with the required expertise to develop and deliver the remuneration arrangements will normally be in line with
business strategy, while at the same time ensuring that the those detailed in the remuneration policy for Non-Executive
remuneration arrangements offered are in the best interests Directors above.
of both the Company and its shareholders.
SE R V ICE C ON T R AC T A ND E X I T PAY ME N T P OL IC Y
In determining the appropriate remuneration arrangements for a new E X EC U T I V E DIR EC T OR S
recruit, the Committee will take into account all relevant factors, Executive Director service agreements, including for early
including but not limited to, the individual’s skills and expertise, local termination, are carefully reviewed by the Committee. The
market practice, appropriate market data, and the individual’s existing Committee does not believe that there should be any element
remuneration package. of reward for failure.
In cases of hiring a new recruit to the Board (including an internal The Committee’s approach to termination payments is to consider
promote), the Committee will ensure that the remuneration each case on an individual basis taking into account any pre-
arrangements are in line with the approved remuneration policy and established contractual agreements (including the provisions of any
all its elements as set out in the table above. The ongoing annual incentive plans), the performance and conduct of the individual and
remuneration arrangements for new Executive Directors will the commercial justification for any payments.
therefore comprise:
The key terms and conditions of the current Executive Directors,
• base salary; as stipulated in their service agreements are set out below:
• suitable pension and other benefits and allowances (which may
NOTICE PERIOD
include a relocation allowance where the Committee considers
it appropriate); • Each Executive Director’s service agreement is terminable by
• an annual bonus opportunity; and the Executive Director on six months’ written notice.
• a long-term incentive award. • The Company may terminate Pierre Denis’ service agreement
on twelve months’ written notice.
The maximum ongoing level of annual variable remuneration which • The Company may terminate Jonathan Sinclair’s service
may be awarded to a new executive shall therefore be limited to the agreement on six months’ written notice.
levels set out in the Policy table (i.e. 200% of salary for the annual • For new appointments the Committee’s policy is that Executive
bonus and 2,500,000 shares under the long-term incentive plan) for Director service agreements will provide up to twelve months’
Executive Directors, excluding buy-out awards. notice by the Company and up to twelve months’ notice by the
Executive Director.
The Committee retains the flexibility to undertake the following TERMINATION PAY MENTS
actions, as appropriate, in the best interests of the Company and • The Company is entitled to terminate each Executive Director’s
therefore shareholders: employment immediately and make a payment in lieu of notice
comprising the executive’s base salary in respect of the notice
• For external appointments, the Committee may offer additional period (or the remaining part of it) and a sum equal to the value of
cash and/or share awards (‘buy-out’ awards) to take account of other benefits during the notice period (or the remaining part of it).
remuneration relinquished when leaving a former employer. As far • Alternatively, the Company may continue to provide Jonathan
as possible and appropriate, such payments would reflect the Sinclair with his contractual benefits for the duration of what
nature, time horizons and performance requirements attaching to would have been his notice period (or the remaining part of it).
the relinquished remuneration. Where appropriate, the Committee • The Company may elect at its discretion to make the payment in
retains the discretion to utilise Listing Rule 9.4.2 for the purpose lieu as a lump sum or to pay half the payment in lieu as a lump
of making such an award. sum and to pay the second half subsequently in equal instalments.
• For an internal appointment, the Committee would honour any • A duty to mitigate may apply to the payment in instalments.
contractual commitments made prior to their promotion to the
Executive Director level, even in instances where they would ANNUA L BONUS
not otherwise be consistent with the prevailing Policy at the time • Where an Executive Director leaves office during the performance
of appointment. period (or after the end of the performance year but before
• If necessary, the Committee may offer additional cash and/or payment is made) any bonus will be at the discretion of the
share based elements to secure an appointment, for which the Committee. Any payment will typically be on a pro-rata basis up
Committee has not set a maximum. The Committee would to the termination date, taking into account the extent to which
determine the performance conditions and time horizons that any performance targets have been met.
would apply to such awards at the time. The Committee would • Under his service contract, other than in certain “bad-leaver”
provide full disclosure of the rationale for such an award in the circumstances, where the Company gives notice to Pierre Denis,
Directors’ Remuneration Report in the year following such he is entitled to a pro-rata annual bonus taking into account time in
an award. 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.
66
LONG-TERM INCENTIV ES The appointments of each Non-Executive Director are for a fixed
• The treatment of long-term incentive awards is governed by the term of six years, subject to annual re-election in general meeting.
relevant incentive plan. The appointments of all the Non-Executive Directors may be
terminated at any time upon written notice, in accordance with the
JC PLC SH A RE AWA RD Articles of Association or upon their resignations. In addition, the
• If a participant ceases employment with the Group by reason appointment of the Non-Executive Directors appointed pursuant to
of disability, death or dismissal without cause (including mutual the relationship agreement entered into between the Company and
agreement) the Committee will determine the number of unvested JAB Luxury may be terminated in accordance with that agreement.
awards that will vest taking into account the proportion of time
elapsed since the original investment was made under the R E MUNE R AT ION P OL IC Y IN T HE R E S T OF T HE C OMPA N Y
co-investment plan and a pre-agreed pro-rating approach for The remuneration arrangements for Executive Directors outlined
each tranche of the award. above are consistent with those for the other employees in the
• In other circumstances, unless the Committee determines Group, although quantum and award opportunities vary by Executive
otherwise, unvested awards will lapse on cessation level. Only the senior most executives in the Group participate in the
of employment. long-term incentive plan.
• Awards to the extent that they have vested on cessation of
employment (or for any reason) or that are allowed to vest as During its deliberations on executive remuneration, the Committee
referred to above will be exercisable for a period of up to twelve considers the reward framework for all employees worldwide,
months from the date of cessation (or if earlier until the end of ensuring that the principles applied are consistent with the Executive
the option exercise period). 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,
• Unless the Committee in its sole discretion determines otherwise it does not invite employees to comment on the Directors’
(in which case it will determine the terms on which awards vest Remuneration Policy.
and may be exercised), if a participant ceases to be employed
by the Group for any reason, any awards will lapse on cessation C ONSIDE R AT ION OF SH A R E HOL DE R V IE W S
of employment. Although the Company only recently became a public listed company,
the Committee recognises the importance of understanding the
OT HER
views of their new shareholders. The Committee is therefore open to
• Legal fees and outplacement costs may be paid if the Committee listening to the views of our new shareholders through the year and
considers this commercially appropriate. at the annual general meeting.
CH ANGE OF CONT ROL
The Committee Chairman speaks with the Company’s largest
• In the event of a change of control, Executive Directors may
shareholder on the subject of remuneration as and when appropriate.
receive a bonus in respect of the year in which the change of
The Company’s largest shareholder is very supportive of the
control occurs, which, unless the Committee determines
Company’s philosophy and policy on remuneration. The Committee
otherwise, will be pro-rated by reference to the time elapsed in
will continue to keep its remuneration policy under review to ensure
the bonus year and performance achieved.
that it remains aligned with the Company’s strategic objectives and
• Long-term incentive awards will normally vest, taking into account
provides strong alignment with shareholder interests.
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.
67
REMUNERATION AND NOMINATIONS COMMITTEE
CHAIRMAN’S STATEMENT
CONTINUED
A NNUA L REMUNER AT ION REPOR T The Committee considers the exact performance targets to
be commercially sensitive and as such these have not been
E X ECU T I V E DIREC TORS disclosed ahead of the financial year. However, in next year’s
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 Annual Report and Financial Statements, the Committee will
B A SE S A L A R Y
provide shareholders with appropriate context on performance
No changes have been made to base salaries since Admission of the against the performance targets and the rationale for any
Company. The table below shows base salaries for 2015. bonus pay-outs, within commercial constraints.
L ONG-T E R M INCE N T I V E P L A N
Pierre Denis £650,000 There is currently no intention for Executive Directors to participate
Jonathan Sinclair £350,000 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 The following table sets out the Non-Executive Director fee structure
to the Caisse des Français de l’Etranger. In respect of Jonathan for 2015:
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. Chairman £150,000
BE NE F I T S Basic fee for Non-Executive Directors £50,000
The Committee sets benefits in line with the policy set out on pages
Board Committee Chairman £15,000
60 to 63. For 2015, both of the Executive Directors will receive private
medical insurance for himself, his spouse and dependent children and Senior Independent Director £5,000
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 Fees will be paid in cash. Non-Executive Directors and the Chairman
per child) and receive a company car. 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
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
The maximum bonus opportunity for the Executive Directors in F OR T HE Y E A R E NDE D 31 DECE MBE R 2 014 ( AUDI T E D)
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,
Pierre Denis 120% of base salary the figures shown represent the remuneration received over the
Jonathan Sinclair 50% of base salary period 22 October 2014 to 31 December 2014 and therefore do not
include a prior year comparison figure.
For 2015, the annual bonus opportunity will be based solely on The Executive Directors did not provide any qualifying services
the following financial performance metrics: revenue growth between 1 September 2014 (the date of appointment as Directors
(measured on a constant exchange rate basis), net income of Jimmy Choo PLC) and 22 October 2014.
growth and a reduction in net working capital as a percentage
of revenue.
68
Other Total pre
Base benefits and Annual long-term Long-term
salary Pension allowances Bonus incentives incentives1 Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
PENSION
For Pierre Denis, this represents the Company’s contribution to the Caisse des Français de l’Etranger.
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 Performance achieved as
annual bonus opportunity) a percentage of maximum
Pierre Jonathan Payout
Performance measure Denis Sinclair Threshold Target Maximum % maximum
69
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.
70
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:
Shares acquired
Total value of by the Director
Total number of Shares acquired/ Total number of shares owned at during the period
shares owned as at sold by the Director shares owned at 31 December (as a 31 December 2014
Individual 22 October 2014 during the period 31 December 20141 percentage of salary) 2 and 18 March 2015
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
Options with without Exercised
performance performance Vested but during the
Individual measures measures unexercised 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 NOV E MBE R 2 014 DECE MBE R 2 014
— JIMM Y CHOO — F T SE 2 5 0
71
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 2014
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 Fees
Pierre Denis –
Jonathan Sinclair LLX Global Business Services SA1 –
Nottingham Scientific Limited £3,000 per annum pro rata
1 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.
Board
Committee Senior
Chairmanship Independent
Basic fee fee 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.
72
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.
Shares acquired
by the Director
Total number of Total number of during the period
shares owned as at shares owned at 31 December 2014
22 October 2014 31 December 2014 and 18 March 2015
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.
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
73
DIRECTORS’ REPORT
The directors present their annual report on the affairs of the Group, REL AT IONSHIP AGREEMEN T W I T H CON T ROL L ING SH A REHOL DER
together with the financial statements and auditor’s report, for Prior to the IPO, the Company and JAB Luxury entered into a
the year ended 31 December 2014. The Corporate Governance relationship agreement to regulate the ongoing relationship between
Statement set out on pages 48 to 57 forms part of this report. them (‘the Relationship Agreement’). The principal purpose of the
Relationship Agreement is to ensure that the Group is capable of
Details of significant events since the balance sheet date are carrying on its business for the benefit of the shareholders of the
contained in note 29 to the financial statements. An indication of Company as a whole, and that transactions and relationships with
likely future developments in the business of the Group are included JAB Luxury and any of their respective associates are at arm’s length
in the Strategic Report. The Directors’ Report should be read in and on normal commercial terms. Further details of the Relationship
conjunction with the Strategic Report, which contains details of Agreement with regard to the conduct of the major shareholder are
the principal activities of the Group during the year. 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.
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
DI V IDENDS interests in the shares of the Company are shown on pages 71
The directors do not recommend the payment of a dividend and 73.
(2013: £nil).
On 5 March 2015, Judith Sprieser informed the Company that she
CA PI TA L S T RUC T URE intended to step down from the board of the Company with
Details of the authorised and issued share capital, together with immediate effect for personal reasons unrelated to the Company.
details of the movements in the Company’s issued share capital The Board has commenced a process to identify a new independent
during the year are shown in note 21 to the financial statements. Non-Executive Director to replace Judith Sprieser as soon
The Company has one class of ordinary shares which carry no right as practicable.
to fixed income. Each share carries the right to one vote at general
meetings of the company. The percentage of the issued nominal As detailed in the Articles of Association, at every Annual General
value of the ordinary shares is equal to the total issued nominal Meeting, all directors at the date of any subsequent notice of Annual
value of all share capital. General Meeting shall retire from office. Consequently, the directors
currently holding office will all be required and all intend to seek
There are no specific restrictions on the size of a holding nor on the re-election at the forthcoming Annual General Meeting to be held
transfer of shares, which are both governed by the general provisions in May 2015.
of the Articles of Association and prevailing legislation. The directors
are not aware of any agreements between holders of the Company’s DIREC TORS’ INDEMNI T IES
shares that may result in restrictions on the transfer of securities or The Company has made qualifying third party indemnity provisions
on voting rights. 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 POL I T ICA L CON T RIBU T IONS
Benefit Trust abstain from voting. 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 ACQ UISI T ION OF T HE COMPA N Y ’S OW N SH A RES
Governance Code, the Companies Acts and related legislation. The Further to the shareholders’ resolutions of 16 October 2014, the
Articles themselves may be amended by special resolution of the Company purchased 11,951,119 ordinary shares with a nominal value
shareholders. The powers of directors are described in the Main of £1, and representing 4.3% of the Company’s called up ordinary
Board Terms of Reference, copies of which are available on request, share capital, for a consideration of £16,731,567. The shares were
and the Corporate Governance Statement on page 48. 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
SUBS TA N T I A L SH A REHOL DINGS share based payment schemes, as described in note 22 to the
On 31 December 2014, the Company had been notified, in financial statements.
accordance with chapter 5 of the Disclosure and Transparency Rules,
of the following voting rights as a shareholder of the Company. At 31 December 2014 the directors did not have the authority
to purchase any further shares.
Percentage of
voting rights
and issued Number of SUS TA IN A BL E BUSINESS
Name share capital ordinary shares
A summary of how the Group recognises its responsibility to
JAB Luxury GmbH 67.68% 263,767,190 colleagues, customers, environment (including greenhouse gas
emissions) and community is contained within the Corporate and
GIC Private Limited 4.62% 18,000,000 Social Responsibility Report on pages 35 to 37 which forms part
ETHNA AKTIV E Luxembourg registered of this report.
investment fund (“FCP”) and ETHNA-
GOING CONCERN
GLOBAL DYNAMISCH Luxembourg
registered investment fund (“FCP”) 3.03% 11,800,000 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
During the period between 31 December 2014 and 18 March 2015 conclusion the Board has taken account of current and anticipated
the company did not receive any notifications under chapter 5 of the trading performance, current and anticipated levels of borrowings
Disclosure and Transparency Rules.
74
and the availability of borrowing facilities and exposures to and Under company law the directors must not approve the financial
management of the financial risks detailed on pages 38 to 40. statements unless they are satisfied that they give a true and fair
Consequently, the going concern basis has been used in the view of the state of affairs of the Group and parent company and of
preparation of the Company and Group financial statements. 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 • select suitable accounting policies and then apply them
Edwardian Hotel, 140 Bath Road, Hayes, Middlesex UB3 5AW, on consistently;
Wednesday 27 May 2015 at 1pm. The Notice of Annual General • make judgements and estimates that are reasonable and prudent;
Meeting is contained in a separate letter from the Chairman • for the Group financial statements, state whether they have been
accompanying this report. prepared in accordance with IFRSs as adopted by the EU;
• for the parent company financial statements, state whether
DISCL OSURE OF INF ORM AT ION TO T HE AUDI TOR applicable UK Accounting Standards have been followed, subject
Each of the persons who is a director at the date of approval of this to any material departures disclosed and explained in the parent
Annual Report confirms that: company financial statements; and
• prepare the financial statements on the going concern basis
• so far as the director is aware, there is no relevant audit unless it is inappropriate to presume that the Group and the parent
information of which the Company’s auditor is unaware; and company will continue in business.
• 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 The directors are responsible for keeping adequate accounting
information and to establish that the Company’s auditor is aware records that are sufficient to show and explain the parent company’s
of that information. transactions and disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to ensure
This confirmation is given and should be interpreted in accordance that its financial statements comply with the Companies Act 2006.
with the provisions of s418 of 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
KPMG LLP have expressed their willingness to continue in office as and to prevent and detect fraud and other irregularities.
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,
INF ORM AT ION REG A RDING F OR WA RD-L OOK ING S TAT EMEN T S
Directors’ Remuneration Report and Corporate Governance
This Annual Report and Financial Statements includes forward- Statement that complies with that law and those regulations.
looking statements. These forward-looking statements involve
known and unknown risks and uncertainties, many of which are The directors are responsible for the maintenance and integrity
beyond the Company’s control and all of which are based on the of the corporate and financial information included on the Company’s
directors’ current beliefs and expectations about future events. website. Legislation in the UK governing the preparation and
Forward-looking statements are sometimes identified by the use dissemination of financial statements may differ from legislation
of forward-looking terminology such as “believe”, “expects”, “may”, in other jurisdictions.
“will”, “could”, “should”, “shall”, “risk”, “intends”, “estimates”,
“aims”, “plans”, “predicts”, “continues”, “assumes”, “positioned” We confirm that to the best of our knowledge:
or “anticipates” or the negative thereof, other variations thereon
or comparable terminology. • the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
These forward-looking statements include all matters that are not of the assets, liabilities, financial position and loss of the company
historical facts. They appear in a number of places throughout this and the undertakings included in the consolidation taken as a
Annual Report and Financial Statements and includes statements whole; and
regarding the intentions, beliefs or current expectations of the • the Strategic Report includes a fair review of the development and
directors or the Company concerning, among other things, the results performance of the business and the position of the issuer and
of operations, financial condition, prospects, growth, strategies the undertakings included in the consolidation taken as a whole,
(including continued store roll out plans), and dividend policy of the together with a description of the principal risks and uncertainties
Company and the industry in which it operates. In particular, the that they face.
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
S TAT EMEN T OF DIREC TORS ’ RESPONSIBIL I T IES IN RESPEC T OF T HE as a whole, is fair, balanced and understandable and provides the
A NNUA L REPOR T A ND T HE F IN A NCI A L S TAT EMEN T S information necessary for shareholders to assess the Group’s
The directors are responsible for preparing the Annual Report and the position and performance, business model and strategy.
Group and parent company financial statements in accordance with
applicable law and regulations. By order of the Board,
75
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
76
FINANCIAL
STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF JIMMY CHOO PLC ONLY
OPINIONS A ND CONCL USIONS A RISING F ROM OUR AUDI T 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)
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
We have audited the financial statements of Jimmy Choo PLC for (accounting policy) and note 5 (financial disclosures).
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
• the financial statements give a true and fair view of the state measure for the Group. Exceptional items are defined by the
of the Group’s and of the parent Company’s affairs as at Group in an accounting policy set out in the financial statements.
31 December 2014 and of the loss of the Group for the year The identification of items as exceptional, and their quantification,
then ended; requires the application of significant judgement.
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as OUR RESPONSE
adopted by the European Union; Our audit procedures in this area included:
• the parent company financial statements have been properly
prepared in accordance with UK Accounting Standards; and • we obtained a listing of the items identified as exceptional by the
• the financial statements have been prepared in accordance with Group, discussed with the Group the rationale for classifying them
the requirements of the Companies Act 2006; and, as regards as exceptional and critically assessed whether the items meet the
the Group financial statements, Article 4 of the IAS Regulation. definition of exceptional items as 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 • we selected a sample of the underlying items which are
In arriving at our audit opinion above on the financial statements the aggregated and classified as exceptional and agreed these items
risks of material misstatement that had the greatest effect on our back to supporting documentation; and
audit were as follows: • we considered whether any other items we became aware of
in the course of our audit work might be considered to be
R E V E NUE R EC OGNI T ION (R E V E NUE £ 2 9 9 .7M) exceptional under the definition set out in the Group’s
Refer to page 54 (Audit and Risk Committee Report), note 1.15 accounting policies.
(accounting policy) and note 3 (financial disclosures).
We also assessed the adequacy of the Group’s disclosures in respect
T HE RISK of exceptional items.
Revenue is a key performance measure for the Group and a key
driver for gross margin which is a further key indicator of Group 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
performance. There are different revenue streams within the Group OF OUR AUDI T
including for example, retail (including concessions), wholesale and The materiality for the Group financial statements as a whole was set
online that have differing revenue recognition criteria and accounting at £2.0m, determined with reference to a benchmark of Group loss
processes handling a high volume of transactions. Due to its before tax normalised for interest and exceptional costs (£35.7m of
materiality in the context of the financial statements as a whole which it represents 5.6%).
revenue is considered to be one of the areas which had the greatest
effect on our overall audit strategy and allocation of resources in We report to the Audit and Risk Committee any corrected or
planning and completing our audit. uncorrected identified misstatements exceeding £0.1m, in addition
to other identified misstatements that warranted reporting on
OUR RESPONSE qualitative grounds.
Our audit procedures in this area included:
Of the group’s seventeen reporting components, we subjected six to
• we tested the design and operating effectiveness of key controls audits for group reporting purposes and two to specified risk-focused
around the recognition of revenue, including those related to the audit procedures. The latter were not individually financially significant
reconciliation of cash receipts to sales records; enough to require an audit for group reporting purposes, but did
• we used a statistical sampling tool to select manual journals present specific individual risks, principally around revenue recognition,
posted to revenue to critically assess whether these journals were that needed to be addressed. These Group procedures covered 91%
appropriate and supported by documentation where relevant; of total Group revenue; 97% of Group profit before taxation; and 96%
• we selected samples of sale transactions from either side of the of total Group assets.
financial year end and, to assess the appropriateness of the timing
of revenue recognition compared those sales to supporting The remaining 9% of total Group revenue, 3% of Group profit
documentation; and before taxation and 4% of total Group assets is represented by nine
• we challenged the adequacy of the group’s provision for returns reporting components, none of which individually represented more
in the light of the historical pattern of credits given for returns. than 10% of any of total Group revenue, Group profit before tax, or
total Group assets. For these remaining components, we performed
We also assessed the adequacy of the Group’s disclosures in respect analysis at an aggregated group level to re-examine our assessment
of revenue recognition. that there were no significant risks of material misstatement
within these.
79
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF JIMMY CHOO PLC ONLY
CONTINUED
The Group audit team instructed component auditors as to the Under the Companies Act 2006 we are required to report to you if,
significant areas to be covered, including the relevant risks detailed in our opinion:
above and the information to be reported back. The Group audit team
approved the component materiality of £1.5m, having regard to the • adequate accounting records have not been kept by the parent
mix of size and risk profile of the Group across the components. The company, or returns adequate for our audit have not been received
Group audit team visited three component locations in UK and USA from branches not visited by us; or
to perform the audit work. The work on all of the remaining in scope • the parent company financial statements and the part of the
components was performed by component auditors. Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
Telephone conference meetings were held with these component • certain disclosures of directors’ remuneration specified by law are
auditors. At these meetings, the findings reported to the Group audit not made; or
team were discussed in more detail, and any further work required by • we have not received all the information and explanations we
the Group audit team was then performed by the component auditor. require for our audit.
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 Under the Listing Rules we are required to review:
AC T 2 0 0 6 IS UNMODIF IE D
In our opinion: • the directors’ statement, set out on page 74, in relation to going
concern; and
• the part of the Directors’ Remuneration Report to be audited has • the part of the Corporate Governance Statement on page 48
been properly prepared in accordance with the Companies Act relating to the Company’s compliance with the ten provisions of
2006; and the 2012 UK Corporate Governance Code specified for our review.
• the information given in the Strategic Report and Directors’ Report
for the financial year for which the financial statements are We have nothing to report in respect of the above responsibilities.
prepared is consistent with the financial statements.
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
Under ISAs (UK and Ireland) we are required to report to you if, set out on page 75, the directors are responsible for the preparation
based on the knowledge we acquired during our audit, we have of the financial statements and for being satisfied that they give a
identified other information in the annual report that contains a true and fair view. A description of the scope of an audit of financial
material inconsistency with either that knowledge or the financial statements is provided on the Financial Reporting Council’s website
statements, a material misstatement of fact, or that is otherwise at www.frc.org.uk/auditscopeukprivate. This report is made solely
misleading. In particular, we are required to report to you if: to the Company’s members as a body and is subject to important
explanations and disclaimers regarding our responsibilities, published
• we have identified material inconsistencies between the on our website at www.kpmg.com/uk/auditscopeukco2014a, which
knowledge we acquired during our audit and the Directors’ are incorporated into this report as if set out in full and should be read
statement that they consider that the annual report and financial to provide an understanding of the purpose of this report, the work
statements taken as a whole is fair, balanced and understandable we have undertaken and the basis of our opinions.
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
80
CONSOLIDATED INCOME STATEMENT
F OR T HE Y E A R ENDED 31 DECEMBER
2014 2013
Note £000 £000
Note £ £
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
Adjusted earnings per share (pence) 6 6.1 5.6
81
CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME
2014 2013
£000 £000
82
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2 014
2014 2013
Note £000 £000
Non-current assets
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 11,370 8,320
Total non-current assets 647,713 632,551
Current assets
Inventories 16 58,068 42,864
Trade and other receivables 17 41,087 35,520
Other financial assets 23 – 1,450
Current tax assets 59 146
Cash and cash equivalents 12,045 20,334
Total current assets 111,259 100,314
Total assets 758,972 732,865
Current liabilities
Borrowings 18 (12,604) (7,588)
Trade and other payables 19 (94,494) (86,640)
Current tax liabilities (5,287) (5,503)
Other financial liabilities 23 (2,903) (419)
Total current liabilities (115,288) (100,150)
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 (25,469) (23,234)
Total equity 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 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
83
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
84
CONSOLIDATED STATEMENT OF CASH FLOWS
F OR T HE Y E A R ENDED 31 DECEMBER 2 014
2014 2013
£000 £000
85
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 The Group’s consolidated financial statements are prepared on a going
referred to as the “Group”) is a global luxury shoes and accessories concern basis as the directors have a reasonable expectation that the
brand owner, wholesaler and retailer incorporated and domiciled in Group has adequate resources to continue in operational existence
the United Kingdom. for the foreseeable future. The Group has considerable financial
resources, together with a strong ongoing trading performance.
The consolidated financial statements of the Group have been Details of the Group’s liquidity position and borrowing facilities are
prepared and approved by the directors in accordance with described in note 18. Financial risk management objectives, details of
International Financial Reporting Standards as adopted by the financial instruments and hedging activities, and exposures to credit
EU (“Adopted IFRS”). risk and liquidity risk are described in note 23.
The accounting policies set out below have, unless otherwise stated, The directors have reviewed the Group’s forecasts and projections.
been applied consistently to all years presented in these Group These include the assumptions around the Group’s products and
financial statements. 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 Taking into account reasonably possible changes in trading
statements and estimates with a significant risk of material performance, and after making enquiries, the directors have a
adjustment in the next year are discussed in note 2. reasonable expectation that the Group and the Company have
adequate resources to continue in operational existence for the
1.1 ME A SUR E ME N T C ON V E N T ION foreseeable future. Accordingly the directors consider it appropriate
The financial statements have been prepared on the historical cost to continue to adopt the going concern basis in preparing the
basis, except for financial instruments that are measured at revalued financial statements.
amounts or fair values at the end of each reporting year, as explained
in the accounting policies below. Historical cost is generally based on 1. 3 B A SIS OF C ONSOL IDAT ION
the fair value of the consideration given in exchange for goods and On 16 October 2014 the Company obtained control of the entire
services. The principal accounting policies adopted are set out below. share capital of Choo Luxury Group Limited by way of a share for
share exchange with one share in the Company being exchanged for
Fair value is the price that would be received to sell an asset or paid each share in Choo Luxury Group Limited. There were no changes in
to transfer a liability in an orderly transaction between market rights or proportion of control exercised as a result of this transaction.
participants at the measurement date, regardless of whether that
price is directly observable or estimated using another valuation Although the share for share exchange resulted in a change in legal
technique. In estimating the fair value of an asset or a liability, the ownership, in substance these financial statements reflect the
Group takes into account the characteristics of the asset or liability continuation of the pre-existing Group, headed by Choo Luxury
if market participants would take those characteristics into account Group Limited.
when pricing the asset or liability at the measurement date. Fair value
for measurement and/or disclosure purposes in these consolidated As a result the comparatives presented in these financial statements
financial statements is determined on such a basis, except for share are the consolidated results of Choo Luxury Group Limited. The
based payment transactions that are within the scope of IFRS 2, prior year statement of financial position reflects the share capital
leasing transactions that are within the scope of IAS 17, and structure of Choo Luxury Group Limited. The current year statement
measurements that have some similarities to fair value but are of financial position presents the legal change in the ownership of
not fair value, such as net realisable value in IAS 2 or value the Group, as well as the issue of shares in satisfaction of the
in use in IAS 36. 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 SUBSIDI A RIE S
the inputs to the fair value measurements are observable and the Subsidiaries are entities over which the Group has control. The Group
significance of the inputs to the fair value measurement in its controls an entity when the Group is exposed to, or has rights to,
entirety, which are described as follows: variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
• Level 1 inputs are quoted prices (unadjusted) in active markets for In assessing control, the Group takes into consideration potential
identical assets or liabilities that the entity can access at the voting rights that are currently exercisable. The acquisition date is
measurement date; the date on which control is transferred to the acquirer. The financial
• Level 2 inputs are inputs, other than quoted prices included within statements of subsidiaries are included in the consolidated financial
Level 1, that are observable for the asset or liability, either directly statements from the date that control commences until the date that
or indirectly; and control ceases. Intra-group transactions, balances and unrealised
• Level 3 inputs are unobservable inputs for the asset or liability. profits on transactions between Group companies are eliminated
in preparing the Group’s consolidated financial statements.
86
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES 1. 6 F IN A NCI A L INS T RUME N T S
C ON T INUE D Classification of financial instruments issued by the Group
1. 4 A S SOCI AT E S A ND JOIN T V E N T UR E S
Associates are those entities in which the Group has significant Financial instruments issued by the Group are treated as equity only
influence, but not control, over the financial and operating policies. to the extent that they meet the following two conditions:
Significant influence is presumed to exist when the Group holds
between 20% and 50% of the voting power of another entity. Joint (a) they include no contractual obligations upon the Group to deliver
ventures are those entities over whose activities the Group has cash or other financial assets or to exchange financial assets or
joint control. financial liabilities with another party under conditions that are
potentially unfavourable to the Group; and
Associates and joint ventures are accounted for using the equity (b) where the instrument will or may be settled in the Group’s own
method (equity accounted investees) and are initially recognised equity instruments, it is either a non-derivative that includes no
at cost. The Group’s investment includes goodwill identified on obligation to deliver a variable number of the Group’s own equity
acquisition, net of any accumulated impairment losses. The instruments or is a derivative that will be settled by the Group’s
consolidated financial statements include the Group’s share of the exchanging a fixed amount of cash or other financial assets for
total comprehensive income and equity movements of equity a fixed number of its own equity instruments.
accounted investees, from the date that significant influence or joint
control commences until the date that significant influence or joint To the extent that this definition is not met, the proceeds of issue are
control ceases. When the Group’s share of losses exceeds its classified as a financial liability. Where the instrument so classified
interest in an equity accounted investee, the Group’s carrying amount takes the legal form of the company’s own shares, the amounts
is reduced to nil and recognition of further losses is discontinued presented in these financial statements for called up share capital
except to the extent that the Group has incurred legal or constructive exclude amounts in relation to those shares.
obligations or made payments on behalf of an investee.
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
Items included in the financial statements of each of the Group’s
the contractual provisions of the instrument. A financial asset is
entities are measured using the currency of the primary economic
derecognised when the contractual rights to the cash flow expire
environment in which the entity operates (the functional currency).
or substantially all risks and rewards of the asset are transferred.
The consolidated financial statements are presented in pounds
sterling which is the Company’s functional and the Group’s i. T R ADE RECEIVA BLES
presentational currency. Trade and other receivables are included in current assets, except
T R A NS AC T IONS IN F OR EIGN C UR R E NCIE S
for maturities greater than 12 months after the balance sheet date.
Receivables are recognised initially at fair value and subsequently
Transactions in foreign currencies are translated to the respective
measured at amortised cost using the effective interest method,
functional currencies of Group entities at the foreign exchange rate
less any provision for impairment.
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
A provision for impairment of trade receivables is established when
retranslated to the functional currency at the foreign exchange rate
there is objective evidence that the Group will not be able to collect
ruling at that date. Foreign exchange differences arising on translation
all amounts due according to the original terms of receivables. The
are recognised in the income statement. Non-monetary assets and
amount of the provision is determined as the difference between the
liabilities that are measured in terms of historical cost in a foreign
asset’s carrying amount and the present value of estimated future
currency are translated using the exchange rate at the date of the
cash flows, and is recognised in the consolidated income statement
transaction. Non-monetary assets and liabilities denominated in
in administrative expenses.
foreign currencies that are stated at fair value are retranslated to the
functional currency at foreign exchange rates ruling at the dates ii. CASH AND CASH EQUIVA LENTS
the fair value was determined. Cash and cash equivalents include cash in hand and deposits held
T R A NSL AT ION OF T HE R E SULT S OF OV E R SE A S BUSINE S SE S
at call with banks with an original maturity of three months or less.
For the purpose of the consolidated cash flow statement, cash and
The assets and liabilities of foreign operations, including goodwill and
cash equivalents includes bank overdrafts in addition to the
fair value adjustments arising on consolidation, are translated to the
definition above.
Group’s presentational currency at foreign exchange rates ruling at
the balance sheet date. The revenues and expenses of foreign F IN A NCI A L L I A BIL I T IE S
operations are translated at an average rate for the year where this Financial liabilities and equity instruments are classified according
rate approximates to the foreign exchange rates ruling at the dates to the substance of the contractual arrangements entered into.
of the transactions. Exchange differences arising from this translation An equity instrument is any contract that evidences a residual
of foreign operations are reported as an item of other comprehensive interest in the assets of the Group after deducting all of its liabilities.
income and accumulated in the translation reserve.
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES Depreciation is charged to the income statement on a straight-line
C ON T INUE D basis over the estimated useful lives of each part of an item of
The Group’s financial liabilities comprise trade and other payables, property, plant and equipment. The estimated useful lives are
borrowings and other non-current liabilities. All financial liabilities are as follows:
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 Leasehold improvements between 4 and 10 years
they qualify for hedge accounting, and are held at fair value. The
fair value of the Group’s liabilities held at amortised cost are Fixtures and fittings, plant and machinery between 3 and 10 years
approximately equal to their carrying amount. A financial liability
is derecognised when the obligation specified in the contract Depreciation methods, useful lives and residual values are reviewed
is discharged, cancelled or expires. 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 1. 8 BUSINE S S C OMBIN AT IONS
the consideration received net of issue costs associated with the Acquisitions of subsidiaries and businesses are accounted for using
borrowing. Borrowings are subsequently stated at amortised cost; the acquisition method. The consideration transferred in a business
any difference between the proceeds (net of transaction costs) and combination is measured at fair value, which is calculated as the sum
the redemption value is recognised in the consolidated income of the acquisition date fair values of assets transferred by the Group,
statement over the period of the borrowings using the effective liabilities incurred by the Group to the former owners of the acquiree
interest method. and the equity interest issued by the Group in exchange for control of
the acquiree. Acquisition related costs are recognised in profit or loss
Financial expenses comprise interest expense on borrowings and as incurred.
the cost of foreign currency forward contracts.
At the acquisition date, the identifiable assets acquired and the
ii. T R ADE PAYA BLES
liabilities assumed are recognised at their fair value.
Trade and other payables are included in current liabilities, except
for maturities greater than 12 months after the balance sheet date. Goodwill is measured as the excess of the sum of the consideration
Payables are recognised initially at fair value and subsequently transferred, the amount of any non-controlling interests in the
measured at amortised cost using the effective interest method. acquiree, and the fair value of the acquirer’s previously held equity
iii. PU T OP TION LIA BILITIES OV ER NON-CONT ROL LING INTEREST
interest in the acquiree (if any) over the net of the acquisition date
amounts of the identifiable assets acquired and the liabilities
Put options over shares in subsidiaries or joint ventures held by
assumed. If, after reassessment, the net of the acquisition date
non-controlling interests are recognised initially at fair value through
amounts of the identifiable assets acquired and liabilities assumed
equity when granted. They are subsequently remeasured at fair value
exceeds the sum of the consideration transferred, the amount of any
at each reporting period with the change in fair value recorded in
non-controlling interests in the acquiree and the fair value of the
the consolidated income statement as other finance expenses
acquirer’s previously held interest in the acquiree (if any), the excess
and income.
is recognised immediately in profit or loss as a bargain purchase gain.
iv. DERIVATIV E FINANCIA L INST RUMENTS AND HEDGE ACCOUNTING
The Group uses derivative financial instruments to hedge its When the consideration transferred by the Group in a business
exposure to fluctuations in foreign exchange rates arising on certain combination includes asset or liability resulting from a contingent
trading transactions. The principal derivative instruments used are consideration arrangement, the contingent consideration is measured
forward foreign exchange contracts taken out to hedge highly at its acquisition date fair value and included as part of the
probable cash flows in relation to future sales and product purchases. consideration transferred in a business combination. Changes in fair
value of the contingent consideration that qualify as measurement
Derivative financial instruments are recognised at fair value. The gain period adjustments are adjusted retrospectively, with corresponding
or loss on remeasurement to fair value is recognised in the adjustments against goodwill. Measurement period adjustments are
consolidated income statement. adjustments that arise from additional information obtained during
the ‘measurement period’ (which cannot exceed one year from
1.7 P ROP E R T Y, P L A N T A ND EQ UIP ME N T the acquisition date) about facts and circumstances that existed
Property, plant and equipment are stated at cost less accumulated at the acquisition date.
depreciation and accumulated impairment losses.
The subsequent accounting for changes in the fair value of the
Where parts of an item of property, plant and equipment have contingent consideration that do not qualify as measurement period
different useful lives, they are accounted for as separate items of adjustments depends on how the contingent consideration is
property, plant and equipment. classified. Contingent consideration that is classified as equity is
not remeasured at subsequent reporting dates and its subsequent
Leases in which the Group assumes substantially all the risks and settlement is accounted for within equity. Contingent consideration
rewards of ownership of the leased asset are classified as finance that is classified as an asset or a liability is remeasured at subsequent
leases. Operating lease payments are accounted for as described reporting dates in accordance with IAS 39 or IAS 37 Provisions,
at 1.16 Operating leases below. Contingent Liabilities and Contingent Assets, as appropriate, with
the corresponding gain or loss being recognised in profit or loss.
88
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES • the Group is able to protect the brand and associated products
C ON T INUE D from counterfeiters or other infringements through securing
When a business combination is achieved in stages, the Group’s protection of its intellectual property and enforcing this through
previously held interests in the acquired entity is remeasured to its litigation where necessary; and
acquisition date fair value and the resulting gain or loss, if any, is • the Group dedicates sufficient resources to support the brand and
recognised in profit or loss. Amounts arising from interests in the plans to continue to do so for the foreseeable future. This includes
acquiree prior to the acquisition date that have previously been investment across all forms of media to convey the fundamental
recognised in other comprehensive income are reclassified to profit tenets of the brand.
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
If the initial accounting for a business combination is incomplete by changes in circumstances indicate that the carrying value may
the end of the reporting period in which the combination occurs, the not be recoverable.
Group reports provisional amounts for the items for which the
accounting is incomplete. Those provisional amounts are adjusted For further details see 1.12 Impairment excluding inventories and
during the measurement period (see above), or additional assets or deferred tax assets.
liabilities are recognised, to reflect new information obtained about
facts and circumstances that existed as of the acquisition date that, if K E Y MONE Y
known, would have affected the amounts recognised as of that date. Key money paid to the outgoing tenant to enter a leasehold property
is stated within intangible assets at cost, net of amortisation and any
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 provision for impairment. Amortisation is charged on key money at
Acquisitions and disposals of non-controlling interests that do not rates calculated to write-off the cost, less estimated residual value
result in a change of control are accounted for as transactions with (which in some locations and geographies equates to cost) on a
owners in their capacity as owners and therefore no goodwill is straight-line basis over the lease term.
recognised as a result of such transactions. The adjustments to
non-controlling interests are based on a proportionate amount of the O T HE R IN TA NGIBL E A S SE T S
net assets of the subsidiary. Any difference between the price paid The cost of securing and renewing design patents, trademarks and
or received and the amount by which non-controlling interests are other intangible assets is capitalised at purchase price and amortised
adjusted is recognised directly in equity and attributed to the by equal annual instalments over the period in which benefits are
owners of the parent. expected to accrue. The useful economic life of these assets is
determined on a case-by-case basis, in accordance with the terms
1.10 IN TA NGIBL E A S SE T S A ND GOODW IL L of the underlying agreement and the nature of the asset.
GOODW IL L
Goodwill is stated at cost less any accumulated impairment losses. A MOR T IS AT ION
Goodwill is allocated to cash-generating units and is not amortised Amortisation is charged to the statement of profit and loss on a
but tested annually for impairment or more frequently if events or straight-line basis over the estimated useful lives of intangible assets
changes in circumstances indicate that the carrying value may not unless such lives are indefinite. Intangible assets with an indefinite
be recoverable. useful life including the Jimmy Choo brand and goodwill are
systematically tested for impairment at each balance sheet date.
For the purpose of impairment testing, goodwill is allocated to Other intangible assets are amortised from the date they are available
each of the Group’s cash-generating units expected to benefit from for use. The estimated useful lives are as follows:
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 Trademarks 5-10 years
goodwill and then to the other assets of the unit on a pro rata basis.
Impairment losses relating to goodwill are not reversed in Software 3-7 years
subsequent years.
1.11 IN V E N T ORIE S
For further details see 1.12 Impairment excluding inventories and Inventories are stated at the lower of cost and net realisable value.
deferred tax assets. Cost is based on the weighted average principle and includes
expenditure incurred in acquiring the inventories and other costs
BR A ND in bringing them to their existing location and condition.
Brands acquired in a business combination are recognised at
fair value at the acquisition date and are carried at cost less Where necessary, provision is made to reduce the cost to no more
accumulated impairment. 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)
• the brand is central to the business strategy, differentiating the A financial asset not carried at fair value through profit or loss is
products in the market through building a reputation for excellence assessed at each reporting date to determine whether there is
and it is not considered realistic to abandon the brand given its objective evidence that it is impaired. A financial asset is impaired if
importance to the business; objective evidence indicates that a loss event has occurred after the
• the brand does not face technological obsolescence and the initial recognition of the asset, and that the loss event has a negative
luxury market is not a sector with a definite life; effect on the estimated future cash flows of that asset that can be
estimated reliably.
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES SHOR T-T E R M BE NE F I T S
C ON T INUE D Short-term employee benefit obligations are measured on an
An impairment loss in respect of a financial asset measured at undiscounted basis and are expensed as the related service is
amortised cost is calculated as the difference between its carrying provided. A liability is recognised for the amount expected to be paid
amount and the present value of the estimated future cash flows under short-term cash bonus or profit-sharing plans if the Group has
discounted at the asset’s original effective interest rate. Interest on a present legal or constructive obligation to pay this amount as a
the impaired asset continues to be recognised through the unwinding result of past service provided by the employee and the obligation
of the discount. When a subsequent event causes the amount of can be estimated reliably.
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
NON- F IN A NCI A L A S SE T S Group has a present legal or constructive obligation as a result of a
The carrying amounts of the Group’s non-financial assets, other than past event, that can be reliably measured and it is probable that an
inventories and deferred tax assets are reviewed at each reporting outflow of economic benefits will be required to settle the obligation.
date to determine whether there is any indication of impairment. Provisions are discounted if the effect of the time value of money is
If any such indication exists, then the asset’s recoverable amount is material using a pre-tax market rate adjusted for risks specific to
estimated. For goodwill, and intangible assets that have indefinite the liability.
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
The recoverable amount of an asset or cash-generating unit is related taxes, is the amount receivable for goods supplied (less
the greater of its value in use and its fair value less costs to sell. returns, trade discounts and allowances) and royalties receivable.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that Wholesale sales are recognised when the significant risks and
reflects current market assessments of the time value of money and rewards of ownership have transferred to the customer, with
the risks specific to the asset. For the purpose of impairment testing, provisions made for expected returns and allowances. Retail sales,
assets that cannot be tested individually are grouped together into returns and allowances are reflected at the dates of transactions with
the smallest group of assets that generates cash inflows from customers. Provisions for returns on retail and wholesale sales are
continuing use that are largely independent of the cash inflows of calculated based on historical return levels.
other assets or groups of assets (the “cash-generating unit”). The
goodwill acquired in a business combination, for the purpose of Royalty revenue from licensing agreements is recognised on an
impairment testing, is allocated to cash-generating units, (“CGU”). accruals basis in accordance with the substance of the relevant
CGUs to which goodwill has been allocated are aggregated so that agreement (provided that it is probable that the economic benefits
the level at which impairment is tested reflects the lowest level at will flow to the Group and the amount of revenue can be
which goodwill is monitored for internal reporting purposes which measured reliably).
does not exceed the level of individual operating segments. Goodwill
acquired in a business combination is allocated to groups of CGUs 1.16 OP E R AT ING L E A SE S
that are expected to benefit from the synergies of the combination. Rentals payable under operating leases are charged to the income
statement on a straight-line basis over the term of the relevant lease
An impairment loss is recognised if the carrying amount of an asset except where another more systematic basis is more representative
or its CGU exceeds its estimated recoverable amount. Impairment of the time pattern in which economic benefits from the lease asset
losses are recognised in the consolidated income statement. are consumed. Contingent rentals arising under operating leases are
Impairment losses recognised in respect of CGUs are allocated first recognised as an expense in the year in which they are incurred.
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 In the event that lease incentives are received to enter into an
units on a pro rata basis. operating lease such incentives are recognised as a liability. Lease
incentives are recognised as a reduction of rental expense on
An impairment loss in respect of goodwill is not reversed. In respect a straight-line basis over the lease term, except where another
of other assets, impairment losses recognised in prior years are systematic basis is more representative of the time pattern in
assessed at each reporting date for any indications that the loss which economic benefits from the lease are consumed.
has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the Premiums paid to landlords to secure operating leases are recognised
recoverable amount, only to the extent that the asset’s carrying as assets and depreciated to residual value over the lease term.
amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment 1.17 E XCEP T ION A L C OS T S
loss had been recognised. Exceptional items are non-recurring items which are outside the
normal scope of the Group’s ordinary activities such as costs arising
1.13 E MP L OY E E BE NE F I T S from a fundamental restructuring of the Group’s operations or are
DE F INE D C ON T RIBU T ION P L A NS considered to be one-off in nature. Such items are disclosed
A defined contribution plan is a post-employment benefit plan under separately within the consolidated income statement.
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.
90
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES 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
C ON T INUE D Share based payment transactions in which the Group receives
1.18 F IN A NCI A L INC OME A ND E X P E NSE S
goods or services by incurring a liability to transfer its own equity
Financial expenses comprise interest payable and changes in the instruments are accounted for as equity-settled share based
fair value of financial liabilities that are recognised in the income payments. The payments are assessed at their fair value on the grant
statement. Financial income comprises interest receivable on funds date. The cost of the share based incentives is recognised as an
invested and changes in the fair value of financial assets recognised expense over the vesting period of the awards, with a corresponding
in the income statement. increase in equity. The estimate of the number of options expected
to vest is revised at each balance sheet date.
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
1.19 TA X AT ION
awards of shares held in the Employee Benefit Trust. The proceeds
received from the exercises, net of any directly attributable
Tax on the profit or loss for the year comprises current and deferred
transaction costs, are credited to equity.
tax. Tax is recognised in the consolidated income statement and
consolidated statement of other comprehensive income except to 1. 21 O W N SH A R E S R E SE R V E
the extent that it relates to items recognised directly in equity, in Where the Company or its subsidiaries (including the Jimmy Choo
which case it is recognised in equity. PLC Employee Benefit Trust) purchase the Company’s own
equity shares, the cost of those shares, including any attributable
Current tax is the expected tax payable or receivable on the taxable transaction costs, is presented within the own shares reserve
income or loss for the year, using tax rates enacted or substantively as a deduction in shareholders’ equity in the consolidated
enacted at the balance sheet date, and any adjustment to tax payable financial statements.
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
Deferred tax is provided on temporary differences between the A DOP T ION OF NE W S TA NDA R DS
carrying amounts of assets and liabilities for financial reporting With effect from 1 January 2014, the Group has adopted the
purposes and the amounts used for taxation purposes. The following following standards and amendments endorsed by the IASB
temporary differences are not provided for: the initial recognition of in December 2012:
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 IFRS 10 Consolidated Financial Statements
to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected IFRS 11 Joint Arrangements
manner of realisation or settlement of the carrying amount of assets IFRS 12 Disclosure of Interests in Other Entities
and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date. IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
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. The following new standards, amendments to standards or
interpretations must be applied for the first time by the Group for
Current and deferred tax assets and liabilities are only offset when the year ending 31 December 2014 but are not currently relevant:
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 IAS 32 (Amendments) Financial Instruments: Presentation
on either the same taxable entities or different taxable entities where IAS 36 (Amendments) Impairment of Assets
there is an intention to settle the balances on a net basis.
IAS 39 (Amendments) Financial Instruments: Recognition
1. 2 0 SH A R E B A SE D PAY ME N T T R A NS AC T IONS and Measurement
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 IFRIC 21 Levies
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.
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
1. BASIS OF PREPA R AT ION A ND SIGNIF ICA N T ACCOUN T ING POL ICIES 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
C ON T INUE D A S SE T S
F U T UR E A DOP T ION OF NE W S TA NDA R DS On an annual basis, the Group is required to perform an impairment
At the date of authorisation of these financial statements, the review to assess whether the carrying value of goodwill and other
following standards and interpretations which have not been applied indefinite life intangible assets is less than its recoverable amount.
in these financial statements were in issue but not yet effective (and Recoverable amount is based on a calculation of expected future
in some cases had not yet been adopted by the EU): cash flows, which include estimates of future performance. Details
of assumptions used in the impairment tests are detailed in note 11.
92
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.
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.
Retail Wholesale Other Total
2014 2014 2014 2014
£000 £000 £000 £000
The following is an analysis of the Group’s revenue and results by reportable segment for the year ended 31 December 2013.
Retail Wholesale Other Total
2013 2013 2013 2013
£000 £000 £000 £000
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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
The total of non-current assets other than deferred tax assets located in the UK and foreign countries is as follows:
2014 2013
£000 £000
UK 585,013 576,813
EMEA excluding UK 21,788 24,328
USA 19,700 14,195
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.
94
4 . OPER AT ING PROF I T
Operating profit is stated after (charging)/crediting:
2014 2013
£000 £000
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.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
2014 2013
£000 £000
Basic and diluted earnings per ordinary share (£) (0.12) (176,680)
Adjusted earnings per ordinary share (pence) 6.1 5.6
Fees payable for the audit of the Company’s financial statements 213 69
Amounts receivable by the Company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company 57 24
Other audit related services 160 –
Taxation compliance services 121 95
Taxation advisory services 540 377
Other non-audit services 874 –
Total auditor remuneration 1,965 565
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).
96
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
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).
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).
97
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 2013
£000 £000
The tax (charge)/credit is reconciled with the standard rates of UK corporation tax as follows:
2014 2013
£000 £000
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.
98
11. IN TA NGIBL E ASSE T S
Trademarks
and designs
Goodwill Brand Key money and patents Total
£000 £000 £000 £000 £000
Cost
Balance at 1 January 2013 304,332 263,816 12,367 1,693 582,208
Additions through business combinations (note 13) 323 – – – 323
Additions – – 3,789 648 4,437
Disposals – – (109) (11) (120)
Exchange differences (55) – 251 (12) 184
Balance at 31 December 2013 304,600 263,816 16,298 2,318 587,032
Additions through business combinations (note 13) 1,787 – – – 1,787
Additions – – – 413 413
Disposals – – (638) – (638)
Exchange differences 291 – (975) (3) (687)
Balance at 31 December 2014 306,678 263,816 14,685 2,728 587,907
Amortisation
Balance at 1 January 2013 – – 1,047 281 1,328
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
Amortisation of key money is recognised in selling and distribution expenses in the income statement. All other amortisation is recognised in
administrative expenses.
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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.
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.
100
12 . PROPER T Y, PL A N T A ND EQ UIPMEN T
Fixtures and
Leasehold land Fittings, plant
and buildings and machinery Total
£000 £000 £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 (827) (459) (1,286)
Balance at 31 December 2013 29,036 28,198 57,234
Additions through business combinations (note 13) 24 87 111
Additions 7,423 18,486 25,909
Disposals (992) (1,768) (2,760)
Transfers 2,517 (2,517) –
Exchange differences 138 131 269
Balance at 31 December 2014 38,146 42,617 80,763
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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 Fair value Fair
value adjustments value
£000 £000 £000
Non-current assets
Property, plant and equipment 111 – 111
Current assets
Trade and other receivables 19 – 19
Cash and cash equivalents 570 – 570
Total assets 700 – 700
Trade and other payables (956) – (956)
Net liabilities (256) – (256)
Goodwill 1,787
Total consideration 1,531
Satisfied by:
Deferred consideration 1,531
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.
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.
102
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 2013
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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 2013
£000 £000
A S SE T S
2014 2013
£000 £000
L I A BIL I T IE S
2014 2013
£000 £000
104
15 . DEF ERRED TA X ASSE T S A ND L I A BIL I T IES C ON T INUE D
Recognised
in other
Recognised in comprehensive Recognised
1 January profit and loss income directly 31 December
2013 (credit)/charge (credit)/charge in equity 2013
£000 £000 £000 £000 £000
16 . IN V EN TORIES
2014 2013
£000 £000
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.
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).
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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.
Non-current liabilities
Secured bank loan 113,217 123,177
Secured bank facility 11,221 11,007
Shareholder credit facility – 460,494
Loan from related party 544 462
Total non-current liabilities 124,982 595,140
Current liabilities
Current portion of secured bank loan – 3,199
Current portion of secured bank facility 12,604 2,610
Unsecured bank facility – 1,779
Total current liabilities 12,604 7,588
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.
106
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).
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 Euro US dollars Other Total
£000 £000 £000 £000 £000
31 December 2013
Bank loans – 68,637 57,739 – 126,376
Bank facilities – 8,694 4,923 1,779 15,396
Shareholder credit facility 460,494 – – – 460,494
Loans from joint venture partner – 462 – – 462
460,494 77,793 62,662 1,779 602,728
Current
Trade payables 54,654 41,548
Accruals and deferred income 23,539 26,069
Accrued interest on bank facilities 2,199 2,350
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
Deferred consideration owed to related parties (note 13) 312 –
Other creditors 5,495 3,152
Total current trade and other payables 94,494 86,640
Non-current
Put option over non-controlling interest 500 500
Deferred consideration owed to related parties (note 13) 1,199 –
Other creditors 3,466 3,052
Total non-current trade and other payables 5,165 3,552
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).
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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
2014 2013
£000 £000
SH A RE CA PI TA L
Share capital is comprised of: 2014 2013
£000 £000
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
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.
108
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 Average price
ordinary shares paid per share £000
1 January 2014 – – –
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).
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-for-
share 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).
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.
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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.
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.
110
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 2013
£000 £000
In more than one year, but not more than two years (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.
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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 31 December 2013
Monetary Monetary Monetary Monetary
assets liabilities assets liabilities
£000 £000 £000 £000
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.
112
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 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.
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.
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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).
114
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 2013
£000 £000
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.
Parent company
JAB Luxury GmbH – (73) – (31,085)
Other related parties
LLX Global Business Services UK Ltd – (1,282) – (34)
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 (41,185)
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Parent company
JAB Luxury GmbH 9 (18,305) – (467,161)
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.
116
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
2014 2013
£000 £000
A D JUS T ED EBI T
2014 2013
£000 £000
117
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2 014
2014
Note £000
Non-current assets
Investments in equity-accounted investees 4 489,449
Deferred tax asset 5 131
Total non-current assets 489,580
Current assets
Trade and other receivables 6 5
Total assets 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 9 389,738
Share premium 9 99,480
Own share reserve 9 (16,732)
Capital contribution 9 1,358
Retained deficit 9 (950)
Shareholder equity 10 472,894
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
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)
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.
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.
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.
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.
On incorporation –
Additions 489,449
At 31 December 2014 489,449
119
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)
120
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
6 . T R A DE A ND OT HER RECEI VA BL ES
2014
£000
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
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
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.
121
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 Average price
ordinary shares paid per share £000
On incorporation – – –
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).
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).
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)
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
122
CORPORATE INFORMATION
www.jimmychooplc.com
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
123
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
124
JIMM Y CHOO P L C
10 HO W ICK P L ACE
L ONDON S W 1P 1G W