ELECTRONIC TRANSMISSION DISCLAIMER
STRICTLY NOT TO BE FORWARDED TO ANY OTHER PERSONS
IMPORTANT: You must read the following disclaimer before continuing. This electronic transmission applies to the attached document and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached combined prospectus and circular (the Prospectus) relating to Ted Baker Plc (the Company) received by means of electronic communication. In accessing or making any other use of the attached document, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access.
You acknowledge that this electronic transmission and the delivery of the attached document is confidential and intended for you only and you agree you will not (directly or indirectly) forward, reproduce, copy, download or publish, in whole or in part in any manner whatsoever, this electronic transmission or the attached document to any other person. The Prospectus has been prepared solely in connection with the proposed placing and open offer, firm placing and offer for subscription of ordinary shares (the New Shares) of the Company (the Capital Raising) and the proposed admission of the New Shares to the premium listing segment of the Official List of the UK Financial Conduct Authority (the FCA) and to trading on the London Stock Exchange plc’s main market for listed securities (Admission). If you are not the intended recipient of this document, you are hereby notified that any dissemination, distribution or copying of this document is strictly prohibited.
THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENT MAY ONLY BE DISTRIBUTED, OUTSIDE THE UNITED STATES, IN “OFFSHORE TRANSACTIONS” IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT) OR, WITHIN THE UNITED STATES, TO CERTAIN PERSONS REASONABLY BELIEVED TO BE QUALIFIED INSTITUTIONAL BUYERS (QIBs) AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (RULE 144A) OR TO OTHER PERSONS, IN OFFERINGS EXEMPT FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, AND, IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE ATTACHED DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. NOTHING IN THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENT CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.
THE NEW SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OR UNDER ANY SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED, TAKEN UP, EXERCISED, RESOLD, RENOUNCED, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY, EXCEPT (1) WITHIN THE UNITED STATES TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QIB IN ACCORDANCE WITH RULE 144A, OR TO OTHER PERSONS PURSUANT TO AN APPLICABLE EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (2) OUTSIDE THE UNITED STATES, IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT, IN EACH CASE IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THERE WILL BE NO PUBLIC OFFER OF THE NEW SHARES IN THE UNITED STATES. SUBJECT TO CERTAIN LIMITED EXCEPTIONS, THE APPLICATION FORMS HAVE NOT BEEN, AND WILL NOT BE, SENT TO ANY QUALIFYING SHAREHOLDER WITH A REGISTERED ADDRESS IN OR THAT IS LOCATED IN THE UNITED STATES.
The distribution of this document or the application form and the transfer of New Shares into jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws or regulations of such jurisdictions. In particular,
subject to certain exceptions, this document, the enclosures and any other such documents should not be distributed, forwarded to or transmitted in, and the application form, the New Shares may not be transferred or sold to, or renounced or delivered in or into the United States, the Commonwealth of Australia, its territories and possessions, Canada, Japan, the Republic of South Africa and Switzerland or any other jurisdictions where the extension and availability of the Capital Raising would breach any applicable law. No offer of New Shares is being made by virtue of this document of the application form into the United States, the Commonwealth of Australia, its territories and possessions, Canada, Japan, the Republic of South Africa and Switzerland or any other jurisdictions where the extensions and availability of the Capital Raising would breach and applicable law.
This electronic transmission and the attached document and the Capital Raising when made are only addressed to and directed at persons in member states of the European Economic Area, other than the United Kingdom, who are “qualified investors” within the meaning of Article 2(e) of the Prospectus Regulation (Qualified Investors). This electronic transmission and the attached document must not be acted on or relied on in any member state of the European Economic Area other than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment activity to which this document relates is available only, in any member state of the European Economic Area other than the United Kingdom, to Qualified Investors, and will be engaged in only with such persons.
The making or acceptance of the proposed offer of New Shares to persons who have registered addresses outside the United Kingdom, or who are resident in, or citizens of, countries other than the United Kingdom may be affected by the laws of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to participate in the Capital Raising.
It is also the responsibility of any person (including, without limitation, custodians, nominees and trustees) outside the UK wishing to take up rights under or otherwise participate in the Capital Raising to satisfy himself, herself or itself as to the full observance of the laws of any relevant territory in connection therewith, including the obtaining of any governmental or other consents which may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territories.
Confirmation of Your Representation: This electronic transmission and the attached document is delivered to you on the basis that you are deemed to have represented to the Company and Goldman Sachs International and Liberum Capital Limited (together, the Underwriters) that (i) you are (a), if located within the United States, a QIB, in according with Rule 144A under the Securities Act, acquiring such securities for its own account or for the account of another QIB, or are a person who the Company has otherwise specifically permitted to access the attached document or (b), if located outside the United States, acquiring such securities in “offshore transactions”, in accordance with Rule 904 of Regulation S under the Securities Act; (ii) if you are in the United Kingdom, you are a relevant person and/or a relevant person who is acting on behalf of relevant persons in the United Kingdom and/or Qualified Investors to the extent you are acting on behalf of persons or entities in the EEA other than the United Kingdom; (iii) if you are in any member state of the European Economic Area other than the United Kingdom, you are a Qualified Investor and/or a Qualified Investor acting on behalf of Qualified Investors to the extent you are acting on behalf of persons or entities in the EEA other than the United Kingdom; (iv) you are an institutional investor that is eligible to receive this document and amendments or supplements and you consent to delivery by electronic transmission and (v) you are not located in the Commonwealth of Australia, its territories and possessions, Canada, Japan, the Republic of South Africa and Switzerland.
You are reminded that you have received this electronic transmission and the attached document on the basis that you are a person into whose possession this document may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver this document, electronically or otherwise, to any other person. This document has been made available to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither the Company, the Underwriters nor any of their respective affiliates, directors, officers, employees or agents accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version. Please ensure that your copy is complete. If you received this document by e-mail, you should not reply by e-mail to this document. Any reply e-mail communications, including those you generate by using the “reply” function on your e-mail software, will be ignored or rejected.
By accessing the attached document, you consent to receiving it in electronic form. Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters by the FSMA or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Underwriters, nor any of their respective affiliates, directors, officers, employees or advisers accepts any responsibility or liability whatsoever for the contents of the attached document, including its accuracy, completeness or verification and makes no representation or warranty, express or implied, as to the contents of this document or for any statement made or purported to be made by it, or on its behalf, in connection with the Company or the New Shares. The Underwriters and each of their respective affiliates, each accordingly disclaims to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of such document or any such statement. No representation or warranty express or implied, is made by any of the Underwriters or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information set out in the attached document.
Restriction: Nothing in this electronic transmission constitutes, and may not be used in connection with, an offer of securities for sale to persons other than the specified categories of institutional buyers described above and to whom it is directed and access has been limited so that it shall not constitute a general solicitation. If you have gained access to this transmission contrary to the foregoing restrictions, you will be unable to purchase any of the securities described therein.
You are responsible for protecting against viruses and other destructive items. Your receipt of this document via electronic transmission is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature.
THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document and any accompanying documents or the action you should take, you are recommended to seek your own financial advice immediately from an appropriately authorised stockbroker, bank manager, solicitor, accountant or other independent financial adviser who, if you are taking advice in the United Kingdom, is duly authorised under the Financial Services and Markets Act 2000 (FSMA), or, if not, from another appropriately authorised independent financial adviser. This document comprises (i) a circular prepared in accordance with the Listing Rules of the Financial Conduct Authority (FCA) made under section 73A of the FSMA and (ii) a prospectus relating to Ted Baker Plc (the Company, and together with its subsidiaries and subsidiary undertakings, the Group) prepared in accordance with the Prospectus Regulation Rules of the FCA made under section 73A of FSMA. This document has been approved by the FCA (as competent authority under Regulation (EU) 2017/1129) in accordance with section 85 of the FSMA. The Prospectus has been drawn up as part of a simplified prospectus in accordance with Article 14 of Regulation (EU) 2017/1129. The FCA only approves this document as meeting the standards of completeness, comprehensibility and consistency imposed by Regulation (EU) 2017/1129, and such approval should not be considered as an endorsement of the issuer that is, or the quality of the shares that are, the subject of this document. Investors should make their own assessment as to the suitability of investing in the New Shares. This document has been filed with the FCA in accordance with the Prospectus Regulation Rules and will be made available to the public in accordance with Prospectus Regulation Rule 3.2 by the same being made available, free of charge, at www.tedbakerplc.com/investor-relations. If you sell or have sold or otherwise transferred all of your Existing Shares before 8.00 a.m. on 1 June 2020 (being the date from which the Company’s shares were marked ex-entitlement to the Open Offer by the London Stock Exchange), please send this document, together with any Application Form, if received, at once to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer is/was effected for delivery to the purchaser or transferee. However, such documents should not be forwarded or transmitted in or into any jurisdiction in which such act would constitute a violation of the relevant laws of such jurisdiction, including, but not limited to, the United States and any other Excluded Territory. If you sell or have sold or otherwise transferred only part of your holding of Existing Shares, please retain these documents and consult the stockbroker, bank or other agent through whom the sale or transfer was effected. The distribution of this document and any accompanying documents in or into certain jurisdictions other than the United Kingdom may be restricted by law. Therefore, persons into whose possession this document and any accompanying documents come should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This document and any accompanying documents have been prepared to comply with requirements of English law, the Listing Rules, the Prospectus Regulation Rules and the Rules of the London Stock Exchange and information disclosed may not be the same as that which would have been disclosed if this document and any accompanying documents had been prepared in accordance with the laws of jurisdictions outside England. In particular, this document and any accompanying documents should not be distributed, forwarded or transmitted in or into the United States or any other Excluded Territory.
Ted Baker Plc (incorporated in England and Wales under the Companies Act 1985 with registered number 03393836)
Disposal of Big Lobster Limited and Placing and Open Offer of 25,478,035 New Shares, Firm Placing of 101,188,632 New Shares and Offer for Subscription of up to 13,333,333 New Shares, all at 75 pence per New Share and Admission and Notice of General Meeting
Joint Bookrunner, Joint Underwriter and Joint Joint Bookrunner, Joint Underwriter and Joint Global Co-ordinator Global Co-ordinator Goldman Sachs International Liberum
Sponsor Liberum A “Notice of General Meeting” of the Company, to be held at 11.00 a.m. on 18 June 2020 at the Company’s registered office at The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB, is set out at the end of this document. Whether or not you intend to be present at the General Meeting, you are asked to complete and return the enclosed Form of Proxy in accordance with the instructions printed on it as soon as possible and, in any event, so as to be received by the Registrar, Link Asset Services (Link), at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, by not later than 11.00 a.m. on 16 June 2020 (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting). Alternatively, you may appoint a proxy online by registering for a Share Portal account via the website of Link Asset Services, at www.signalshares.com. To register for the Share Portal you will need your Investor Code (IVC), which can be found on your share certificate or on any other recent shareholder communication. If you hold your Existing Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to the Registrar (CREST participant ID RA10), so that it is received by no later than 11.00 a.m. on 16 June 2020. The return of a Form of Proxy (or the electronic appointment of a proxy) will not preclude a shareholder from attending and voting at the meeting. The Existing Shares are listed on the premium listing segment of the Official List of the FCA (the Official List) and traded on the main market for listed securities of London Stock Exchange plc (the London Stock Exchange). Application will be made to the FCA, acting in its capacity as UK Listing Authority, and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange, respectively (together, Admission). It is expected that Admission will become effective and that dealings in the New Shares will commence on the London Stock Exchange as soon as practicable after 8.00 a.m. on 19 June 2020. You should read the whole of this document and any documents incorporated by reference prior to making an investment decision. Your attention is drawn to the letter of recommendation which is set out in “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc” of this document. Your attention is also drawn to the section headed “Risk Factors” at the beginning of this document which sets out certain risks and other factors that should be considered by Shareholders when deciding on what action to take in relation to the Disposal and Capital Raising, and by others when deciding whether or not to purchase the New Shares. You should not rely solely on the information contained in the Summary. The latest time and date for acceptance and payment in full for the Open Offer Shares under the Open Offer is 11.00 a.m. on 17 June 2020. The procedures for acceptance and payment are set out in “Part IV—Terms and Conditions of the Placing and Open Offer” and, where relevant, in the Application Form. Qualifying Non- CREST shareholders will be sent an Application Form. Qualifying CREST Shareholders (who will not receive an Application Form) will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlements and Excess Open Offer Entitlements, which is expected to be enabled for settlement on 19 June 2020. Applications under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim arising out of a sale or transfer of Shares prior to the date on which the Shares were marked ‘ex’ the entitlement by the London Stock Exchange. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with this document and the Open Offer. The Application Form is personal to Qualifying Shareholders and cannot be transferred, sold, or assigned except to satisfy bona fide market claims. Holdings of Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Open Offer. The latest time and date for acceptance and payment in full for the Offer for Subscription Shares under the Offer for Subscription is 11.00 a.m. on 17 June 2020. The procedures for application and payment are set out in “Part V—Terms and Conditions of the Offer for Subscription” and, where relevant, in the Offer for Subscription Application Form. No statement in this document or incorporated by reference into this document is intended as a profit forecast or profit estimate for any period and no statement in this document or incorporated by reference into this document should be interpreted to mean that the earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for the Company. Investors should only rely on the information contained in this document or in any documents incorporated into this document by reference. No person has been authorised to give any information or make any representations other than those contained in this document and any document incorporated by reference and, if given or made, such information or representation must not be relied upon as having been so authorised by the Company, the Directors, Goldman Sachs International (Goldman Sachs) or Liberum Capital Limited (Liberum, together with
1 Goldman Sachs, the Underwriters). The Company will comply with its obligation to publish supplementary prospectuses containing further updated information required by law or by any regulatory authority but assumes no further obligation to publish additional information. Neither the delivery of this document nor any subscription or sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this document or that the information in this document is correct as at any time subsequent to its date. The directors and the proposed director, whose names appear on page 42, and the Company accept responsibility for the information contained in this document. To the best of the knowledge of the directors, the proposed director and the Company, the information contained in this document is in accordance with the facts and this document makes no omission likely to affect its import. Certain information in relation to the Company has been incorporated by reference into this document. You should refer to the part of this document headed “Part XIII—Documentation Incorporated by Reference”. Liberum is acting for the Company as sponsor and for no one else in connection with the Disposal and will not regard any other person as a client in relation to the Disposal and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, or for providing advice in connection with the Disposal, or any other matter, transaction or arrangement referred to in this document. Goldman Sachs and Liberum and their respective affiliates, acting as investors for their own account, may, in accordance with applicable legal and regulatory provisions and subject to the Sponsor and Underwriting Agreement, engage in transactions in relation to the New Shares or related instruments for their own account in connection with the Capital Raising or otherwise. Accordingly, references in this document to the New Shares being issued, offered, subscribed, acquired or placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, the Underwriters and any of their respective affiliates acting as investors for their own account. Except as required by applicable law or regulation, the Underwriters do not propose to make any public disclosure in relation to such transactions. In addition, the Underwriters may enter into financing arrangements (including swaps or contracts for difference) with investors in connection with which the Underwriters or their respective affiliates may from time to time acquire, hold or dispose of the New Shares. Each of the Underwriters is authorised and regulated by the FCA in the United Kingdom. The Underwriters are acting for the Company and for no one else in connection with the Capital Raising and will not regard any other person as a client in relation to the Capital Raising and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, or for providing advice in connection with the Capital Raising, or any other matter, transaction or arrangement referred to in this document. There will be no public offer in any of the Excluded Territories. Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters by the FSMA or the regulatory regime established thereunder, or under the regulatory regime of any other jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Underwriters, nor any of their respective affiliates, directors, officers, employees or advisers, accept any responsibility whatsoever for, or make any representation or warranty, express or implied, as to, the contents of this document, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, by the Company, the Directors or any other person, in connection with the Company, the New Shares, the Capital Raising or Disposal, and nothing contained in this document is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Each of the Underwriters and their respective affiliates, directors, officers, employees or advisers accordingly disclaim any and all liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this document or any such statement. The Underwriters and their respective affiliates have from time to time engaged in, and may in the future engage in, various commercial banking, investment banking and financial advisory transactions and services in the ordinary course of their business with the Company. They have received and will receive customary fees and commissions for these transactions and services.
Notice to Overseas Persons This document does not constitute an offer of the New Shares to any person with a registered address, or who resides or is located, in any jurisdiction in which such an offer or solicitation is unlawful or, except as otherwise provided for herein, in the United States or any Excluded Territory. The New Shares have not been and will not be registered or qualified for distribution to the public under the relevant laws of any state, province or territory of the United States or any Excluded Territory.
2 The New Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act), or under any securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, exercised, resold, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The New Shares are being offered outside the United States in reliance on Regulation S (Regulation S) under the Securities Act. The Underwriters may arrange for the Firm Placed Shares, any Open Offer Shares not taken up in the Open Offer and the Offer for Subscription Shares to be offered and sold inside the United States only to persons reasonably believed to be “qualified institutional buyers” (QIBs) within the meaning of Rule 144A under the Securities Act (Rule 144A) in reliance on an exemption from the registration requirements of the Securities Act. Any such persons are notified that such offers may be made in reliance on the exemption from the registration provisions of the Securities Act provided by Rule 144A. In addition, until 40 days after the commencement of the Capital Raising, an offer, sale or transfer of the New Shares within the United States by a dealer (whether or not participating in the Capital Raising) may violate the registration requirements of the Securities Act. The New Shares may not be offered, sold, taken up, exercised, resold, transferred or delivered, directly or indirectly, within any other Excluded Territory except pursuant to an applicable exemption from registration and in compliance with any applicable securities laws. All Shareholders and any person (including, without limitation, a nominee or trustee) who has a contractual or legal obligation to forward this document or any Application Form or other document, if and when received, to a jurisdiction outside the United Kingdom should read the information set out in paragraph 8 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” of this document.
Notice to all investors Any reproduction or distribution of this document, in whole or in part, and any disclosure of its contents or use of any information contained in this document for any purpose other than deciding whether to vote in favour of the resolutions to be put to Shareholders and considering an investment in the New Shares is prohibited. By accepting delivery of this document, each offeree of the New Shares agrees to the foregoing. The distribution of this document, the Application Form and/or the Offer for Subscription Application Form and/or the transfer of the New Shares, Open Offer Entitlements or Excess Open Offer Entitlements into jurisdictions other than the United Kingdom may be restricted by law. This document does not constitute an offer of Open Offer Entitlements, Excess Open Offer Entitlements or the New Shares in any jurisdiction in which such offer or solicitation is unlawful. Persons into whose possession these documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted in or into the United States or any Excluded Territory. The New Shares, Open Offer Entitlements, Excess Open Offer Entitlements, Application Form and Offer for Subscription Application Form are not transferable, except in accordance with, and the distribution of this document is subject to, the restrictions set out in paragraph 8 of “Part IV- Terms and Conditions of the Placing and Open Offer and Firm Placing” and paragraph 6 of “Part V- Terms and Conditions of the Offer for Subscription” of this document. No action has been taken by the Company or by the Underwriters that would permit an offer of the New Shares or rights thereto or possession or distribution of this document or any other offering or publicity material or the Application Form or Offer for Subscription Application Form in any jurisdiction where action for that purpose is required, other than in the United Kingdom. Neither this document, the New Shares, the Form of Proxy, the Application Form, the Offer for Subscription Application Form, nor any other document connected with the Capital Raising have not been approved or disapproved by the US Securities and Exchange Commission (the SEC), any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon, or endorsed the merits of, the offering of the New Shares or the accuracy or adequacy of this document or any other document connected with the Capital Raising. Any representation to the contrary is a criminal offence in the United States. In making an investment decision, each offeree must rely on their own examination, analysis and enquiry of the Company and the terms of the Capital Raising, including the merits and risks involved. Each offeree acknowledges that: (i) it has not relied on the Underwriters or any person affiliated with the Underwriters in
3 connection with any investigation of the accuracy of any information contained in or incorporated by reference in this document or their investment decision; and (ii) they have relied only on the information contained in or incorporated by reference in this document. Unless explicitly incorporated by reference herein, the contents of the websites of the Group do not form part of this document. Capitalised terms have the meanings ascribed to them, and certain technical terms are explained, in “Part XIV—Definitions and Glossary” of this document.
INFORMATION FOR DISTRIBUTORS Solely for the purposes of the product governance requirements contained within: (i) EU Directive 2014/65/EU on markets in financial instruments, as amended (MiFID II); (ii) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (iii) local implementing measures (together, the MiFID II Product Governance Requirements), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the New Shares to be issued in the Capital Raising have been subject to a product approval process, which has determined that the Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the Target Market Assessment). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Shares may decline and investors could lose all or substantially all of their investment; the New Shares to be issued in the Capital Raising offer no guaranteed income and no capital protection; and an investment in the New Shares to be issued in the Capital Raising is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Capital Raising. For the avoidance of doubt, the Target Market Assessment does not constitute: (i) an assessment of suitability or appropriateness for the purposes of MiFID II; or (ii) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the New Shares. Each distributor is responsible for undertaking its own Target Market Assessment in respect of the New Shares and determining appropriate distribution channels.
WHERE TO FIND HELP “Part II—Some Questions and Answers about the Placing and Open Offer and Firm Placing” of this document answers some of the questions most often asked by shareholders about placings and open offers and firm placings. If you have further questions, please call Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. This document is dated 1 June 2020.
4 CONTENTS
Page SUMMARY ...... 6 RISK FACTORS ...... 13 IMPORTANT INFORMATION ...... 31 CAPITAL RAISING STATISTICS ...... 38 EXPECTED TIMETABLE OF PRINCIPAL EVENTS ...... 39 DIRECTORS, COMPANY SECRETARY AND ADVISERS ...... 41 PART I—LETTER FROM THE ACTING NON-EXECUTIVE CHAIR OF TED BAKER PLC . . . . 43 PART II—SOME QUESTIONS AND ANSWERS ABOUT THE PLACING AND OPEN OFFER AND FIRM PLACING ...... 65 PART III—PRINCIPAL TERMS AND CONDITIONS OF THE DISPOSAL ...... 71 PART IV—TERMS AND CONDITIONS OF THE PLACING AND OPEN OFFER AND FIRM PLACING ...... 74 PART V—TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION ...... 96 PART VI—BUSINESS OVERVIEW OF THE GROUP ...... 107 PART VII—OPERATING AND FINANCIAL REVIEW ...... 119 PART VIII—FINANCIAL INFORMATION OF THE GROUP ...... 143 PART IX—UNAUDITED PRO FORMA FINANCIAL INFORMATION ...... 144 PART X—VALUATION REPORT ...... 150 PART XI—TAXATION ...... 161 PART XII—ADDITIONAL INFORMATION ...... 167 PART XIII—DOCUMENTATION INCORPORATED BY REFERENCE ...... 209 PART XIV—DEFINITIONS AND GLOSSARY ...... 210 NOTICE OF GENERAL MEETING ...... 216 OFFER FOR SUBSCRIPTION APPLICATION FORM ...... F-1
5 SUMMARY A. INTRODUCTION AND WARNINGS A.1.1 Name and international securities identifier number (ISIN) of the securities Ordinary shares ISIN code GB0001048619 A.1.2 Identity and contact details of the issuer, including its Legal Entity Identifier (LEI) The Company’s legal name is Ted Baker Plc (the Company). The commercial name is “Ted Baker”. The Company’s registered address is The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB, and its telephone number is +44 (0) 20 7255 4800. The Company’s legal entity identifier is 549300HN14450OU4IL77. A.1.3 Identity and contact details of the competent authority approving the prospectus This document has been approved by the FCA, as competent authority, with its head office at 12 Endeavour Square, London E20 1JN, and telephone number: +44 20 7066 1000, in accordance with Regulation (EU) 2017/1129. A.1.4 Date of approval of the prospectus This document was approved on 1 June 2020. A.1.5 Warning This summary should be read as an introduction to this document. Any decision to invest in the New Shares should be based on a consideration of this document as a whole by the investor. Any investor could lose all or part of their invested capital and, where any investor’s liability is not limited to the amount of the investment, it could lose more than the invested capital. Where a claim relating to the information contained in this document is brought before a court, the plaintiff investor might, under national law, have to bear the costs of translating this document before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary, including any translation thereof, but only where the summary is misleading, inaccurate or inconsistent when read together with the other parts of this document or where it does not provide, when read together with the other parts of this document, key information in order to aid investors when considering whether to invest in the New Shares. B. KEY INFORMATION ON THE ISSUER B.1 Who is the issuer of the securities? B.1.1 Domicile, legal form, jurisdiction of incorporation, country of operation and legal entity identifier The Company was incorporated and registered in England and Wales under the Companies Act 1985 as a public limited company and under the name Ted Baker Plc on 23 June 1997 with registered number 03393836. The Company’s legal entity identifier is 549300HN14450OU4IL77. B.1.2 Principal activities Ted Baker is a global lifestyle brand offering a range of products including menswear, womenswear, childrenswear, footwear and accessories. A quintessentially British brand, Ted Baker is known for its quirky fashion offering, high quality design detailing and distinctive use of pattern and colour. Ted Baker’s approach is focused on unwavering attention to detail and firm commitment to quality. The brand operates through three main distribution channels: retail (including stores, concessions and e-Commerce), wholesale, and licensing (which includes territorial and product licences). As at 25 January 2020, the Group and its retail licencees had 563 stores and concessions worldwide, comprising of 198 in the United Kingdom, 123 in the rest of Europe, 140 in North America, 93 in the Middle East, Africa and Asia and 9 in Australasia. B.1.3 Major shareholders Insofar as is known to the Company, the name of each person who, directly or indirectly, has an interest in 3.0 per cent. or more of the Company’s issued share capital, and the amount of such person’s interest, as at 19 May 2020 (being the latest practicable date prior to the publication of this document) are as follows: Shares Name No. % Ray Kelvin ...... 15,540,280 34.85 Toscafund Asset Management LLP ...... 6,412,776 14.38 Threadneedle Asset Management Limited ...... 4,802,509 10.77 Schroders Investment Management ...... 2,423,379 5.44 Affiliated Managers Group ...... 1,659,330 3.72 Hargreaves Lansdown plc ...... 1,629,918 3.66
6 Insofar as is known to the Company, immediately following the Capital Raising, the interests of those persons set out above with an interest in 3.0 per cent. or more of the Company’s issued share capital, and the amount of such persons’ interests, including as a percentage of the enlarged share capital (assuming full take up by such persons of their Open Offer Entitlements), will be as follows: Shares % % (assuming dilution (excluding the from full take up impact of the Offer under the Offer for Name No. for Subscription) Subscription)(1) Ray Kelvin ...... 29,087,107 17.0 15.8 Toscafund Asset Management LLP ...... 48,743,866 28.5 26.4 Threadneedle Asset Management Limited ...... 21,188,799 12.4 11.5 Schroders Investment Management ...... 24,308,167 14.2 13.2 Affiliated Managers Group ...... 2,607,518 1.5 1.4 Hargreaves Lansdown plc ...... 2,561,299 1.5 1.4 Notes: (1) Assumes such Shareholders will not subscribe for Shares in the Offer for Subscription but the maximum number of Shares available in the Offer for Subscription will be subscribed for by other Shareholders. B.1.4 Key managing directors Rachel Osborne is the Chief Executive Officer of the Company and David Wolffe is the Chief Financial Officer. B.1.5 Identity of the statutory auditors KPMG LLP, with its address at 15 Canada Square, Canary Wharf, London E14 5GL, is the statutory auditor to the Company. The financial information for the Group as of and for the 12 month periods ended 27 January 2018, 26 January 2019 and 25 January 2020 incorporated by reference in this document was audited by KPMG LLP. B.2 What is the key financial information regarding the issuer? The statutory auditor’s report on the annual financial statements for the year ended 25 January 2020, incorporated by reference in this document, contains a statement that the Group’s net debt position and the future impact of the coronavirus pandemic constitute a material uncertainty that may cast significant doubt on the Group’s and the parent company’s ability to continue as a going concern. This may be exacerbated by ongoing uncertainties around the longer term impact of Brexit. The statutory auditor’s opinion is not, however, modified in respect of this matter. The tables below set out the Group’s summary financial information for the periods indicated. The following table sets forth the Group’s main operating results, extracted without material adjustment from the Ted Baker Annual Report for the each of the Financial Years 2018, 2019 and 2020 (except as described in notes 1, 2 and 3 below). Financial Year 2018 2019 2020 Reported Restated(3) Reported (£ millions) Group Income Statement: Revenue ...... 591.7 639.6 630.5 Cost of sales ...... (230.9) (277.5) (323.4) Gross profit ...... 360.8 362.0 307.1 Distribution costs(1) ...... (236.5) (249.8) (268.5) Administration expenses(1) ...... (75.6) (79.8) (100.9) Licence income(2) ...... 21.4 — — Other operating income ...... 0.6 1.8 0.1 Operating profit/(loss) ...... 70.7 34.3 (62.2) Finance income ...... 0.8 0.3 0.1 Finance costs ...... (3.3) (4.5) (15.6) Share of profit of jointly controlled entity, net of tax ...... 0.6 0.5 (2.2) Profit/(loss) before tax ...... 68.8 30.7 (79.9) Income tax expense ...... (16.0) (6.2) 9.4 Profit/(loss) for the period ...... 52.7 24.5 (70.4)
Notes: (1) For Financial Year 2018, exceptional items relating to impairment of retail assets of £4.5 million have been reclassified from administration expenses to distribution costs. (2) Historically licence income was reported below gross profit through Financial Year 2019. From Financial Year 2020, the Group reports this income above gross profit, as illustrated above. In Financial Year 2018, 2019 and 2020 the Group reported £21.4 million, £22.1 million and £19.0 million respectively in licence income. (3) In December 2019, the Group identified that the value of inventory held on its balance sheet at that time had been overstated following an internal review. As a result of these findings, the Group engaged Deloitte LLP to undertake an independent and thorough review of this issue. In January 2020, the Group announced that the independent review had found that the Group’s inventories, as reported at the end of Financial Year 2019, were overstated by £58 million. Following the conclusion of Deloitte’s review and the completion of the year-end process and audit, this figure was subsequently refined and finalised showing a net inventory adjustment of £52.6 million, with the Group amending the opening value of its inventory position from £225.8 million to £205.6 million, a £20.2 million restatement. The restatement of inventory was due to stock that did not physically exist (representing £6.5 million), and adjustments to correct calculations (representing £13.7 million). In addition, through this exercise the Group has reviewed its approach to estimating the carrying value of stock and adopted a better estimate methodology which resulted in a £32.4 million reduction in stock value being accounted for as a change in estimate booked as a non-underlying expense in the income statement for the period ended 25 January 2020. The change in estimate was due to inventories considered obsolete (representing £9.4 million) and changes for a revised stock costing methodology (representing £23.0 million) Because it is not possible to allocate all or a portion of the amount of the revaluation into any specific prior financial year, the Group has not, in accordance with relevant accounting standards, restated its financial information for the Financial Year 2018. The financial information captioned “Restated” has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020.
7 The following table sets out the condensed consolidated statement of financial position as at the dates indicated, which have been extracted without material adjustment from the Ted Baker Annual Report for the each of the Financial Years 2018, 2019 and 2020 (except as described in note 1 below): 27 January 26 January 25 January 2018 2019 2020 Reported Restated(3) Reported (£ millions) Non-current assets ...... 179.8 186.6 342.1 Current assets ...... 269.4 299.5 258.9 Total assets ...... 449.2 486.1 600.9 Current liabilities ...... (176.8) (209.7) (316.8) Non-current liabilities ...... (48.3) (47.9) (135.5) Total liabilities ...... (225.1) (257.6) (452.3) Net assets ...... 224.1 228.5 148.6 Equity attributable to owners of the group ...... 224.1 228.5 148.6 Total shareholders’ equity ...... 224.1 228.5 148.6
Notes: (1) The financial information captioned “Restated” reflects the restatement referred to above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. The following table sets out the condensed consolidated statement of cash flows for the periods indicated, which have been extracted without material adjustment from the Ted Baker Annual Report for the each of the Financial Years 2019 and 2020 (except as described in note 1 below): Financial Year 2018 2019 2020 Reported Restated(1) Reported (£ millions) Net cash inflow from operating activities ...... 43.9 67.0 98.4 Net cash used in investing activities ...... (35.8) (48.3) (31.8) Net cash outflow from financing activities ...... (12.0) (21.1) (25.7) Net decrease in cash and cash equivalents ...... (3.9) (2.3) 41.0 Net cash and cash equivalents at the beginning of the year ...... 21.4 16.7 14.7 Exchange rates movement ...... (0.8) 0.3 (2.7) Net cash and cash equivalents at the end of the period ...... 16.7 14.7 52.9
Notes: (1) The financial information captioned “Restated” reflects the restatement referred to above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. Pro Forma Financial Statements The below Unaudited Pro Forma Statement of Net Assets has been prepared to illustrate the effect on the Group’s consolidated net assets of the Placing and Open Offer and Firm Placing and the Disposal as if the Placing and Open Offer and Firm Placing and the Disposal had occurred on 25 January 2020.
8 Adjustments Pro forma Adjustment for consolidated net Consolidated net Placing and assets of the Group assets of the Open Offer (excluding Big Group at and Firm Adjustment for Lobster) as at 25 January 2020 Placing the Disposal 25 January 2020 Unaudited Unaudited Unaudited Note 1 Note 2 Note 3 Note 4 £m £m £m £m Non-current assets Intangible assets ...... 42.3 42.3 Property, plant and equipment ...... 127.4 (58.0) 69.4 Right-of-use asset ...... 149.0 7.8 156.8 Investment in equity accounted investee ...... 5.1 5.1 Deferred tax assets ...... 17.6 17.6 Prepayments ...... 0.6 0.6 342.1 — (50.2) 291.8 Current assets Inventories ...... 131.7 131.7 Trade and other receivables ...... 67.3 67.3 Amount due from equity accounted investee . . . . 4.5 4.5 Income tax receivable ...... 2.3 2.3 Derivative financial assets ...... 0.2 0.2 Cash and cash equivalents ...... 52.9 90.0 142.9 258.9 90.0 — 348.9 Current liabilities Trade and other payables ...... (99.3) 0.6 (98.7) Borrowings ...... (180.0) 72.0 (108.0) Lease liabilities ...... (36.4) (2.5) (38.9) Derivative financial liabilities ...... (1.1) (1.1) (316.8) — 70.1 (246.7) Net current (liabilities)/assets ...... (57.9) 90.0 70.1 102.2 Total assets less current liabilities ...... 284.2 90.0 19.9 394.0 Non-current liabilities Deferred tax liability ...... (3.6) (3.6) Lease liabilities ...... (132.0) (5.3) (137.3) (135.6) — (5.3) (140.9) Net assets ...... 148.6 90.0 14.6 253.1
Notes 1. The historical consolidated financial information as of 25 January 2020, has been extracted without adjustment from the Group’s audited consolidated financial statements incorporated by reference from the Ted Baker Annual Report for Financial Year 2020 as described in “Part XIII—Documents Incorporated by Reference” of this document. 2. This adjustment reflects the new proceeds of the Placing and Open Offer and Firm Placing receivable by the Company of £90.0 million, being gross proceeds of approximately £95.0 million less estimated fees relating to the Placing and Open Offer and Firm Placing of approximately £5.0 million, as detailed in the section headed “Capital Raising Statistics” of this document. The proceeds from the Offer for Subscription have not been taken into account. 3. This adjustment: (a) eliminates the assets and liabilities of Big Lobster as at 25 January 2020, as extracted without material adjustment from the consolidation schedule supporting the Group’s audited consolidated financial statements for Financial Year 2020; (b) reflects the net proceeds of the Disposal receivable by the Company of £72 million, being gross proceeds of approximately £78.8 million less estimated fees relating to the Disposal of approximately £3.1 million and corporation tax liability of approximately £3.6 million, as detailed in “Part III—Principal Terms and Conditions of the Disposal” of this document; and (c) capitalises the right of use asset of £7.8 million as per IFRS 16 in relation to the Block B Lease and recognises the associated lease liability of £7.8 million, as detailed in the paragraph headed ‘The Ugly Brown Building Sale and Leaseback’ of “Part VII—Operating and Financial Review” of this document. 4. No adjustment has been made to reflect the trading results of the Group since 25 January 2020 or any other change in its financial position in this period. 5. No adjustment has been made to reflect the £11.5 million increase in Facility B agreed with the Lenders, on the grounds that (i) this will only be made available from 6 September 2020, and (ii) Facility B did not exist at 25 January 2020. The Unaudited Pro Forma Income Statement has been prepared to illustrate the effect on the Group’s consolidated income statement of the Placing and Open Offer and Firm Placing and the Disposal as if the Placing and Open Offer and Firm Placing and the Disposal had occurred on 27 January 2019.
9 Adjustments Pro forma Consolidated consolidated income income statement statement of of the Group the Group for Adjustment for (excluding Big the 52 week Placing and Lobster) for period ended Open Offer the 52 week 25 January and Firm Adjustment for period ended 2020 Placing the Disposal 25 January 2020 Unaudited Unaudited Unaudited Note 1 Note 2 Note 3 Note 4 £m £m £m £m Revenue ...... 630.5 630.5 Cost of sales ...... (323.4) (323.4) Gross profit ...... 307.1 — — 307.1 Distribution costs ...... (268.5) (268.5) Administrative expenses ...... (100.9) (5.0) (2.2) (108.1) Other operating income ...... 0.1 15.8 15.9 Operating loss ...... (62.2) (5.0) 13.5 (53.7) Finance income ...... 0.1 0.1 Finance expense ...... (15.6) 1.4 (14.2) Share of profit of jointly controlled entity, net of tax . . (2.2) (2.2) Loss before tax ...... (79.9) (5.0) 14.9 (70.0) Taxation ...... 9.4 (3.4) 6.0 Loss for the period ...... (70.4) (5.0) 11.4 (64.0)
Notes 1. The historical consolidated financial information for the year ended 25 January 2020, has been extracted without adjustment from the Group’s audited consolidated financial statements incorporated by reference from the Ted Baker Annual Report for Financial Year 2020 as described in “Part XIII—Documents Incorporated by Reference” of this document. 2. This reflects an adjustment of £5.0 million in relation to the estimated fees relating to the Placing and Open Offer and Firm Placing, as detailed in the section headed “Capital Raising Statistics” of this document. For the illustrative purposes of this Unaudited Pro Forma Income Statement it has been assumed that all of the £5.0 million of fees relating to the Placing and Open Offer and Firm Placing would be expensed in the Group’s income statement. This adjustment will not have a continuing impact on the Group. 3. This adjustment: (a) reflects an adjustment of £15.8 million in relation to the profit, after related transaction costs, that will arise on disposal of Big Lobster on receipt of the gross cash consideration of £78.8 million. This adjustment will not have a continuing impact on the Group; (b) eliminates the administration costs of £0.5 million residing in Big Lobster (these costs primarily relate to depreciation and amortisation on The Ugly Brown Building freehold); (c) accounts for the depreciation charge of £2.7 million on the right of use asset relating to the Block B Lease; (d) accounts for the interest charge of £0.7 million on the lease liability relating to the Block B Lease right of use asset; (e) eliminates the finance costs residing in Big Lobster as well as changes in interest payable as a consequence of pay down of the Revolving Credit Facility from the Big Lobster disposal proceeds (aggregate impact of approximately £2.1 million elimination); (f) reflects a net adjustment of £3.45 million to corporation tax, which comprises: (i) an expected corporation tax charge of £3.6 million arising on the profit on disposal of Big Lobster (this adjustment will not have a continuing impact on the Group), less (ii) a £0.15 million decrease to taxation as a result of previous adjustments to administrative expenses and finance expense detailed in notes 3(b), 3(d) and 3(e) to the Unaudited Pro Forma Income Statement. These taxation adjustments are calculated at the prevailing rate of UK corporation tax of 19 per cent. 4. The pro forma income statement adjustments are expected to have a continuing effect on the Group, other than: (a) The profit on disposal of Big Lobster (note 3(a)); (b) The tax charge on the profit on the disposal of Big Lobster (note 3(f)(i)); and (c) Transaction fees associated with the Placing and Open Offer and Firm Placing (note 2). 5. No adjustment has been made to reflect the trading results of the Group since 25 January 2020 or any other change in its financial position in this period. B.3 What are the key risks that are specific to the issuer? If any of the Disposal, the Firm Placing or the Placing and Open Offer are not successfully completed, this will constitute an event of default under the Facility Agreement, which would likely result in Shareholders losing all of the value of their investment in the Company. The coronavirus pandemic has affected the Group’s business, results of operations and financial condition and prospects. The Group’s continued success depends in part on its ability to anticipate and respond promptly to changing consumer demands and fashion trends in the design, styling, production, merchandising and pricing of its products. The Group’s products must appeal to a client base whose preferences cannot be predicted with certainty and are subject to rapid change.
10 The Group may be affected by downturns in economic conditions or uncertainties regarding future economic prospects that impact the countries where it sells a significant portion of its products. The Group is particularly affected by trends in the retail industry which has recently faced a challenging trading environment. The Group’s ability to attract customers to its stores and concessions depends heavily on the success of department stores, shopping centres, retail parks and town centres (“retail destinations”) in which its stores and concessions are located, and any decrease in footfall at those retail destinations could adversely impact revenue. The Group’s financial performance is influenced by the image, perception and recognition of the Ted Baker brand, which, in turn, depends on many factors such as product design, the distinctive character and the quality of its products, the image of its stores, its communication activities including advertising, public relations, marketing and its general corporate and market profile, including any cash flow challenges. ‘Ted’s Formula for Growth’ strategy is dependent upon a number of factors, many of which could strain its resources or delay or prevent its successful expansion in new or existing markets. If the Group fails to realise its strategic objectives in full or in part and in a timely manner, or if the underlying assumptions on which such objectives are based prove to be incorrect, its ability to increase its revenue and profitability could suffer, which could have a material adverse effect on its business, results of operations and financial condition. The Group has substantial borrowings: as at 25 January 2020, the Group’s consolidated net debt was £127.1 million. Following a successful Placing and Open Offer, Firm Placing and Disposal, the Group would continue to be subject to the covenants in its Facility Agreement which limit the flexibility of the Group in running its business and may have other operational impacts on the Group. C. KEY INFORMATION ON THE SECURITIES C.1 What are the main features of the securities? C.1.1 Type, class and ISIN Pursuant to the Placing and Open Offer, the Company will issue 25,478,035 new ordinary shares of five pence each in the capital of the Company (the Open Offer Shares). Pursuant to the Firm Placing, the Company will issue 101,188,632 new ordinary shares of five pence each in the capital of the Company (the Firm Placed Shares). Pursuant to the Offer for Subscription, the Company may issue a maximum of 13,333,333 new ordinary shares of five pence each in the capital of the Company but may also issue fewer shares or no shares at all (the Offer for Subscription Shares and, together with the Open Offer Shares and the Firm Placed Shares, the New Shares). The issue of the Firm Placed Shares and the Open Offer Shares has been underwritten by the Underwriters. The issue of the Offer for Subscription Shares has not been underwritten. Each New Share is expected to be issued at a premium of 70.0 pence to its nominal value of five pence. When admitted to trading, the New Shares will be registered with ISIN number GB0001048619 and SEDOL number 0104861 and trade under the symbol “TED”. C.1.2 Currency, denomination, par value, number of securities issued and duration The currency of the issue is United Kingdom Pounds Sterling. Immediately prior to the publication of this document, the share capital of the Company was £2,229,328, comprised of 44,586,562 Existing Shares, all of which were fully paid or credited as fully paid. The issued and fully paid ordinary share capital of the Company immediately following completion of the Capital Raising is expected to be £8,562,661.45, comprising 171,253,229 Shares (excluding the impact of the Offer for Subscription) or £9,229,328.10, comprising 184,586,562 Shares (assuming full take up under the Offer for Subscription). C.1.3 Rights attached to the Shares The New Shares will, when issued and fully paid, rank equally in all respects with the Existing Shares, including the right to receive all dividends and other distributions made, paid or declared after the date of issue of the New Shares. C.1.4 Rank of securities in the issuer’s capital structure in the event of insolvency The Shares do not carry any rights to participate in a distribution (including on a winding-up) other than those that exist under the Companies Act 2006. The New Shares and the Existing Shares will rank pari passu in all respects. C.1.5 Restrictions on the free transferability of the securities There are no restrictions on the free transferability of the Shares. C.1.6 Dividend policy While ‘Ted’s Formula for Growth’ strategy is being implemented, the Directors have suspended dividend payments to Shareholders. Given the uncertainty surrounding the coronavirus pandemic, the Directors determined that this suspension will continue. The Directors recognise that dividends are an important part of the Company’s returns to Shareholders and will look to resume the payment of dividends as soon as it is appropriate to do so. C.2 Where will the securities be traded? Application will be made to the FCA for the New Shares to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for such Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities. C.3 What are the key risks that are specific to the securities? The Principal Shareholder will retain significant interests in, and will continue to exert substantial influence over, the Group following the Capital Raising and his interests may differ from or conflict with those of other Shareholders. The market price of the Shares could be subject to significant fluctuations due to a change in sentiment in the market regarding the Shares (or securities similar to them), including, in particular, in response to various facts and events, including any variations in the Group’s operating results and/or business developments of the Group and/or its competitors. The market price for the Shares may decline below the Offer Price and Shareholders may not be able to sell Shares at a favourable price after the Capital Raising. Shareholders who take up their pro rata Open Offer Entitlements in full will suffer 59.1 per cent. dilution to their interests in the Company as a result of the Firm Placing (assuming no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). Up to 13,333,333 New Shares will be issued at
11 a price of 75 pence per New Share pursuant to the Offer for Subscription. Shareholders who do not, or are not permitted to, acquire the New Shares will be diluted by 74.0 per cent. (excluding the impact of the Offer for Subscription) or 75.8 per cent. (assuming full take up under the Offer for Subscription) following the Capital Raising. D. KEY INFORMATION ON THE ADMISSION TO TRADING ON A REGULATED MARKET D.1 Under which conditions and timetable can I invest in this security? It is expected that Admission will become effective and that dealings in the New Shares will commence as soon as practicable after 8.00 a.m. on 19 June 2020 (whereupon an announcement will be made by the Company to a Regulatory Information Service). The Company is proposing to raise up to approximately £90.0 million (net of estimated commissions, fees and expenses) by the issue of up to 126,666,667 New Shares at the Offer Price through a fully underwritten Placing and Open Offer and Firm Placing. Up to a further approximately £10.0 million in gross proceeds (approximately £9.6 million net of commissions) may also be raised by way of an Offer for Subscription which is not underwritten, (together with the Placing and Open Offer and Firm Placing, the Capital Raising). The Offer Price of 75 pence per New Share represents an effective 51.1 per cent. discount to the Closing Price of 153.3 pence on 29 May 2020, being the Business Day prior to the announcement of the Capital Raising. The Open Offer is an opportunity for Qualifying Shareholders to apply for in aggregate 25,478,035 Open Offer Shares at the Offer Price by subscribing both for their Open Offer Entitlement and for any Excess Open Offer Entitlement, subject to availability. Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, the Application Form), each Qualifying Shareholder who is not a Restricted Person is being given an opportunity to apply for Open Offer Shares at the Offer Price (payable in full and free of all expenses) on the following pro rata basis: 4 Open Offer Shares at 75 pence each for every 7 Existing Share held and registered in their name at the Record Date in proportion to any other number of Ordinary Shares then held, rounded down to the nearest whole number of New Shares. Qualifying Shareholders may also apply, under the Excess Application Facility, for Excess Shares not taken up under the Open Offer Entitlements of other Qualifying Shareholders. In all circumstances, allocation of Excess Shares shall be subject to the discretion of the Board (in consultation with the Underwriters). To the extent unallocated Excess Shares remain following the application by Qualifying Shareholders under the Excess Application Facility, such Excess Shares will be made available under the Placing. The Underwriters, as agents for the Company, have made arrangements to conditionally place the Open Offer Shares with institutional investors at the Offer Price. The Open Offer Shares will be subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. Subject to the waiver or satisfaction of the conditions and the Sponsor and Underwriting Agreement not being terminated in accordance with its terms, any Open Offer Shares not subscribed for under the Open Offer will be issued to Placees procured by the Underwriters. The Offer for Subscription is only being made in the United Kingdom but may be extended by the Company on a private placement basis to other jurisdictions. The Company may terminate the Offer for Subscription in its absolute discretion at any time prior to Admission. If the Company exercises such right of termination, the Offer for Subscription will lapse and any monies will be returned without interest. Applications under the Offer for Subscription must be for a minimum of 500 New Shares and thereafter in multiples of 50 New Shares. The Capital Raising is conditional upon Shareholder approval of the Resolutions at the General Meeting (including approval of the Disposal), the Sponsor and Underwriting Agreement having become or been declared unconditional in all respects and the Sponsor and Underwriting Agreement not having been terminated by the Underwriters in accordance with its terms prior to Admission and Admission occurring not later than 8.00 a.m. on 19 June 2020 (or such later time or date as the Company and the Underwriters may agree, being not later than 30 June 2020). As a consequence of the current interest of each of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited in the Company, each of their proposed participation in the Placing and Open Offer and Firm Placing is a related party transaction for the purposes of Chapter 11 of the Listing Rules and such transactions require the prior approval of independent Shareholders by ordinary resolution. The resolutions to approve the related party transactions are therefore to be proposed at the General Meeting as ordinary resolutions and will pass, subject to the other resolutions being passed, if more than 50 per cent. of the votes cast (either in person or by proxy) are in favour. None of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited are entitled to vote, and each has either undertaken to take all reasonable steps to ensure that it and its associates will abstain from voting or will appoint the Chair who will abstain from voting, on the resolution to approve its own related party transaction at the General Meeting. D.2 Why is this document being produced? The purpose of this document is to explain the background to, and reasons for, the Disposal and the Capital Raising and to set out the terms and conditions of the Disposal and the Capital Raising. The Directors believe the Disposal and the Capital Raising to be in the best interests of Shareholders as a whole and this document will explain why the Board unanimously recommends that Shareholders should vote in favour of the Resolutions, as each Director has committed to do so in respect of his or her own legal and beneficial holdings of Shares. The net proceeds of the Capital Raising are expected to be approximately £90.0 million (net of estimated commissions, fees and expenses) (excluding any proceeds from the Offer for Subscription) and approximately £99.6 million (net of estimated commissions, fees and expenses) if there is a full take-up under the Offer for Subscription. The total costs, charges and expenses payable by the Company in connection with the Capital Raising are estimated to be approximately £5.4 million (inclusive of VAT). No expenses will be charged by the Company to the purchasers of the New Shares. The Company intends to use the net proceeds of the Disposal to reduce its indebtedness to the Lenders, and the net proceeds of the Placing and Open Offer and the Firm Placing for general corporate purposes in support of ‘Ted’s Formula for Growth’ strategy, resulting in a £72 million reduction of its indebtedness to the Lenders under Facility A (offset in part by £25 million made available under Facility B for a net reduction of £47 million in available lending facilities); £6 million for an upgraded e-Commerce platform; an initial £31 million for trading and working capital requirements (with an additional £25 million available under Facility B for specified working capital purposes); £24 million for refinancing and restructuring the business, including professional fees; and £29 million for other capital expenditure projects.
12 RISK FACTORS The Disposal and Capital Raising and any investment in the New Shares are subject to a number of risks. Accordingly, Shareholders and prospective investors should carefully consider the factors and risks associated with any investment in the New Shares, the Group’s business and the industry in which it operates, together with all other information contained in this document and all of the information incorporated by reference into this document, including, in particular, the risk factors described below, and their personal circumstances prior to making any investment decision. Some of the following factors relate principally to the Group’s businesses. Other factors relate principally to the Disposal, Capital Raising and an investment in the New Shares. The Group’s businesses, operating results, financial condition and prospects could be materially and adversely affected by any of the risks described below. In such case, the market price of the New Shares may decline and investors may lose all or part of their investment. Prospective investors should note that the risks relating to the Group, its industry and the New Shares summarised in the section of this document headed “Summary” are the risks that the Directors believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the New Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this document headed “Summary” but also, among other things, the risks and uncertainties described below. The following is not an exhaustive list or explanation of all risks which investors may face when making an investment in the New Shares and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that it currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group’s business, prospects, operating results and financial position and, if any such risk should occur, the price of the New Shares may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the New Shares is suitable for them in the light of the information in this document and their personal circumstances.
RISKS RELATING TO THE BUSINESS OF THE GROUP If any of the Disposal, the Firm Placing or the Placing and Open Offer are not successfully completed, this will constitute an event of default under the Facility Agreement, which would likely result in Shareholders losing all of the value of their investment in the Company. The Company is of the opinion that the Group does not have sufficient working capital for its present requirements, that is, for the 12 months from the publication of this document. As at 25 January 2020, the Group had £180.0 million outstanding under its Facility Agreement. On 20 March 2020, the Group’s Lenders agreed to make available a new facility B of £13.5 million until December 2020 in order to provide short-term liquidity support to the business (Facility B). In addition, the Group has agreed certain amendments to the Facility Agreement with the Lenders, including but not limited to: (i) an increase of Facility B by £11.5 million to a total of £25 million and extension of its maturity date until January 2022 and (ii) a covenant holiday until 24 April 2021, with the existing financial covenants being removed and replaced by adjusted EBITDA and minimum liquidity covenants, such amendments being conditional on the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing being passed at the General Meeting. While the Resolution relating to the Disposal is not conditional upon Shareholders voting in favour of the Resolutions relating to the Capital Raising, if the Disposal, the Placing and Open Offer or Firm Placing (but not the Offer for Subscription) are not approved, or otherwise do not proceed to completion by no later than 2 July 2020 in respect of the Disposal and 22 June 2020 in respect of the Placing and Open Offer and Firm Placing, either such disapproval or failure to proceed to completion will constitute events of default under the Facility Agreement (which includes Facility B) (the Timetable Events of Default). Any such Timetable Event of Default would entitle the requisite majority of the Lenders (who hold in aggregate more than 66.67 per cent. of the amounts outstanding under the Facility Agreement) (the Majority Lenders) to declare all amounts outstanding under the Facility Agreement (including the Facility B), which is expected to total approximately £179 million as at 22 June 2020, immediately due and payable and to take enforcement action against the Group, including without limitation to take control of the Group and/or its assets by enforcing their security over the assets of the Group or taking other steps (for example instituting insolvency proceedings). At the time of such Timetable Event of Default, the Group will not have sufficient funds available to repay the expected amounts due, and, in the absence of being able to successfully agree or implement any of the alternatives discussed below, enforcement action by the Lenders (by way of insolvency proceedings or otherwise) would likely result in Shareholders losing all of the value of their investment in the Company.
13 The Resolutions to approve the Capital Raising are contingent on the approval of the Resolution relating to the Disposal. If the Resolution relating to the Disposal is not approved, the Capital Raising will not proceed, and one of the Timetable Events of Default will be triggered on 22 June 2020. If the Resolution to approve the Disposal is approved but the Resolutions to approve the Capital Raising are not, the Directors intend to proceed with the Disposal, but the Timetable Event of Default in respect of the failure of the Placing and Open Offer and Firm Placing to proceed to completion will still be triggered on 22 June 2020. While the latter scenario would result in a lower working capital shortfall (approximately £90 - £98 million assuming receipt of the proceeds of the Disposal (depending on the Group’s cash position at the time), compared to approximately £162 - £170 million in the absence of such proceeds), in either circumstance, the Group would not have sufficient funds to repay in full the amounts due under the Facility Agreement and the Majority Lenders would be entitled to take enforcement action as described above, which would likely result in Shareholders losing all the value of their investment in the Company. If any of the Disposal, Placing and Open Offer or Firm Placing do not proceed, in order to avoid the possibility of immediate action by the Majority Lenders, the Directors expect that the Company would seek to obtain waivers or standstills of the Timetable Events of Default, although the Lenders have given no indication that such waivers or standstills would be forthcoming. The Directors expect that the Company would also ask the Lenders to further amend the Facility Agreement to allow additional funding to be made available to the Group (either by the lenders or by alternative finance providers) and/or seek alternative financing. The Directors are not confident that additional financing would be achievable nor that the lenders would be willing to continue to support the business in these circumstances and therefore the most likely outcome would be that the Shareholders lose all of the value of their investments in the Company. The Directors do not believe that any of these alternatives to the Disposal, Placing and Open Offer and Firm Placing would provide sufficient working capital. In addition, as these alternatives would require the participation, agreement or approval of external parties, they may not be successful. Even if the Lenders were willing to agree to any such amendments, waivers and/or additional funding and/or the Group was able to secure alternative financing, the Directors expect that the Group’s operational and commercial flexibility would be limited by the terms of such amendments or alternative financing and the Group may find it increasingly challenging and costly to refinance its Facility Agreement or any such alternative financing as they fall due, and the Group’s suppliers would be expected to continue to demand more onerous, and ultimately unsustainable, terms. In addition, even if the Group was able to avoid an Event of Default under the Facility Agreement or arrange alternative additional financing, doing so may require the Group to delay or reduce planned investments in the business, which could also have a material adverse effect on the Group’s future growth prospects. The Directors propose to rectify this anticipated shortfall in working capital by completing the Disposal, the Placing and Open Offer and Firm Placing and applying the net proceeds of the Disposal to reduce its indebtedness to the Lenders. The balance of the aggregate net proceeds for general corporate purposes in support of ‘Ted’s Formula for Growth’ strategy. On completion of the Disposal and the Placing and Open Offer and Firm Placing, the Company is of the opinion that the Group will have sufficient working capital for its present requirements, that is for the 12 months from the publication of this document. If any of the Resolutions are not approved, there can be no assurance that any alternatives would be capable of implementation in the time available and/or would ultimately be successful and the Shareholders would likely lose all of their investment in the Company. Accordingly, the Directors believe that the successful completion of the Disposal and the Capital Raising are in the best interests of the Shareholders as a whole. As such, it is very important that Shareholders vote in favour of each of the Resolutions at the General Meeting so that, assuming that the other conditions to the Disposal and the Capital Raising are satisfied, the Disposal and the Capital Raising can proceed to completion.
The coronavirus pandemic has affected the Group’s business, results of operations, financial condition and prospects. Economic conditions globally have been severely and negatively impacted by the coronavirus pandemic and the Group expects this to negatively affect its retail sales and supply chain. Public policy and government response has differed across each market and the Group has adopted measures designed to best serve employees, customers and wider stakeholders across its trading markets. During the course of the coronavirus pandemic, all of the Group’s retail stores, outlets and concessions have been closed at times and as of 2 May 2020 approximately 390 retail stores, outlets and concessions remain closed in line with relevant government guidance and a gradual reopening of stores, outlets and concessions is taking place in several European markets
14 including Germany, France and the Netherlands. These closed retail stores, outlets and concessions contributed 68 per cent. of retail revenue in Financial Year 2020. A significant number of the Group’s wholesale partners have cancelled or delayed orders, impacting wholesale revenue, and the Group’s licence partners have also been affected by the pandemic, thereby impacting licence income. While some of these sales may migrate to the Group’s e-Commerce operations, with e-Commerce channel sales in the first fourteen weeks of the financial year up approximately 50.3 per cent. on last year (49 per cent. on a constant currency basis), this was at much lower margins due to heavily discounted sales for part of the period of up to 60 per cent and it is unlikely that such sales through the Group’s e-Commerce distribution channel will fully replace revenue lost due to store and concession closures. In addition, this increase was in part due to a two week mid-season sale which was deeper and wider than normal to drive sales. While in some jurisdictions the Group has been able to take advantage of government relief measures that have, for example, allowed it to suspend business rates payments during the pandemic, the Group’s physical stores will still incur costs. In addition, the Group may experience increased levels of stock obsolescence to the extent economic conditions and/or restrictions on retail operations do not recover in time for the autumn/winter season or to the extent the Group’s existing inventories are unsold as a result of store closures. Quarantine restrictions may adversely impact the ability of the Group’s key personnel to collaborate effectively. The Group responded to the challenges presented by the coronavirus pandemic, including taking a series of steps to reduce costs and protect cashflow and ensure the wellbeing of its teams. The Group has also furloughed approximately 85 per cent. of its employees globally in line with a variety of government schemes across its trading market. The Group has suspended all discretionary capital expenditure, temporarily reduced executive remuneration by 15 per cent., rephased product orders and is negotiating rent deferrals and rent reductions with landlords. The Group will also benefit from a 12 month business rates holiday in the United Kingdom (which is expected to save the Group £5.8 million in Financial Year 2021). However, these measures will not be sufficient to offset the full impact of reduced sales due to the coronavirus pandemic, which will have a material adverse effect on the Group’s business, results of operations and financial condition. The coronavirus pandemic has created very significant challenges for companies given its widespread adverse global economic, social and operational impact, the effects of which are continuing to unfold. The majority of the Group’s manufacturing plants have been closed at times during the last five months due to the coronavirus pandemic, although the significant majority of its factories are now operational. The Group does not currently envisage supply disruptions and inventory levels are sufficient. However, if this pandemic continues beyond what is currently anticipated and results in a prolonged period of commercial, manufacturing, travel and other similar restrictions, the Group could experience significant supply disruptions for its 2020 autumn/winter season. The Group may need to develop alternate sourcing and there is no assurance that the Group will be able to do so quickly and alternate suppliers may cost significantly more. In addition, if the manufacturing process is delayed, the Group may have to incur additional expense to ship its products so they arrive in a timely manner for the collections’ scheduled launch. The above factors have had and can be expected to have in the future a material adverse effect on the Group’s business, results of operations, financial condition and prospects.
The Group’s business is subject to changes in customer preferences and fashion trends. The Group’s continued success depends in part on its ability to anticipate and respond promptly to changing consumer demands and fashion trends in the design, styling, production, merchandising and pricing of its products. The Group’s products must appeal to a client base whose preferences cannot be predicted with certainty and are subject to rapid change. The Group’s ability to anticipate and respond to changing customer preferences and tastes depends, in part, on its ability to invest effectively in areas such as buying and merchandising and supply chain management. The Group is also exposed to product segments which are declining in popularity, such as formal menswear and occasion womenswear. If these product segments do not regain popularity or the Group is unable to successfully promote alternative product segments, such as casual wear, this trend may have an adverse impact on the Group’s sales. Furthermore, there can be no assurance that products the Group has ordered will match actual demand. Many of the Group’s products are manufactured in markets outside of the United Kingdom, principally in China, Turkey and Vietnam. Accordingly, in some instances the Group must enter into contracts for the purchase and manufacture of merchandise well in advance of the applicable selling season. The long lead times between ordering and delivery make it more important to predict accurately, and more difficult to fulfil, the demand for items.
15 If the Group misjudges the market for its products, it may be faced with significant excess inventories for some products and missed opportunities with others. If the Group is unable to predict or respond to sales demand or to changing styles or trends successfully, its sales will be lower. With a reduced market share the Group may be forced to rely on additional markdowns or promotional sales to dispose of excess or slow-moving inventory. The Group may experience inventory shortfalls on unexpectedly popular merchandise which would also result in reduced market share. In addition, there can be no assurance that the Group will be able to distribute and market new products efficiently or that any product category that it may expand or introduce will achieve sales levels sufficient to generate profits. Any of these outcomes could have a material adverse effect on the Group’s business, results of operations and financial condition.
A downturn in the economy, the retail industry or consumer confidence in the Group’s chosen markets may affect sales of its products. The Group may be affected by downturns in economic conditions or uncertainties regarding future economic prospects that impact the countries where it sells a significant portion of its products. The Group is particularly affected by trends in the retail industry which has recently faced a challenging trading environment. Many factors affect the level of consumer spending in the retail industry, including the state of the economy as a whole, stock market performance, interest rates, currency exchange rates, recession, inflation, deflation, political uncertainty, the availability of consumer credit, taxation, unemployment and other matters that influence consumer confidence. These trends also affect the Group’s wholesale, concession and licensing partners, which in turn has an adverse impact on the Group’s revenue from these distribution channels. The Group may also be affected by a downturn in the economy due to the coronavirus pandemic and quarantine measures designed to mitigate its spread. See “—The coronavirus pandemic could affect the Group’s business, results of operations and financial condition” above. Sales of the Group’s products have in the past and may in the future decline during recessionary periods when the average level of disposable income tends to be lower or when consumer confidence is low. Many of the items that the Group sells represent discretionary purchases. Depressed consumer spending in the United Kingdom, Europe, United States, or globally may also result in fewer discretionary purchases by consumers which would lead to a decline in sales. These events can also affect the Group’s suppliers and partners, increasing its cost base and adversely affecting revenue. A significant decline in the global economy or in consumers’ confidence could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group’s ability to attract customers to its stores and concessions depends heavily on the success of the shopping centres and town centres in which its stores and concessions are located and the success of its concession and wholesale partners. The Group’s ability to attract customers to its stores and concessions depends heavily on the success of department stores, shopping centres, retail parks and town centres (“retail destinations”) in which its stores and concessions are located, and any decrease in footfall at those retail destinations could adversely impact revenue. In order to generate customer traffic, the Group locates many of its stores and concessions in prominent retail destinations. Its revenue at these stores and concessions is dependent, to a significant degree, on the volume of consumer traffic in those retail destinations and the surrounding areas. The Group’s stores and concessions located in or near retail destinations benefit from the ability of other tenants in those retail destinations to generate consumer traffic in the vicinity of its stores and concessions and the continuing popularity of those areas as retail destinations. The Group cannot control the availability or cost of appropriate locations or the success of individual shopping centres. The Group may also need to compete with other retailers for the most prominent locations within these retail destinations, some of which may have greater financial resources than the Group. All these factors may impact the level of customer footfall in its stores and result in underperforming or loss-making stores and could have a material adverse effect on the Group’s revenue and results of operations. The Group will also be affected by the closure of its stores as well as shopping centres and town centres due to the coronavirus pandemic and quarantine measures designed to mitigate its spread. See “—The coronavirus pandemic could affect the Group’s business, results of operations and financial condition” above. The economic downturn in the United Kingdom and other factors have led to increased store closures recently on the UK high streets affecting the Group’s concession and wholesale partners. For example, one of the
16 Group’s former concession partners, House of Fraser, entered into administration in August 2018. While in this case, the concessions were transferred to Sports Direct (part of Frasers Group plc) and continued trading, there is no assurance similar transfers will occur in the future. A reduction in footfall, as a result of these or other factors, such as the diversion of sales from the Group’s stores and concessions due to a larger proportion of sales through online channels, or its inability to obtain or maintain prominent store locations within retail destinations, could have a material adverse effect on the Group’s business, results of operations, financial condition and prospects.
The Group’s business is dependent on the image and reputation of its brand. The Group’s financial performance is influenced by the image, perception and recognition of the Ted Baker brand, which, in turn, depends on many factors such as product design, the distinctive character and the quality of its products, the image of its stores, its communication activities including advertising, public relations, marketing and its general corporate and market profile, including any cash flow challenges. The Group is a trusted brand with high levels of customer loyalty. However, the Group’s “brand equity” could decline if it is unable to maintain the strength, image and recognition of the Group brand. Further, unmanaged exposure through adverse press commentary and user-generated content platforms, such as Twitter, may increase the impact of reputational matters. The Group relies on its ability to control its licencee and wholesale distribution channels to ensure that its products are sold in environments and in a manner consistent with its brand image. In Financial Year 2020, income from these channels accounted for 30.2 per cent. of the Group’s total revenue. Actions by concessions and wholesale partners that vary from the Group’s policies, such as presenting the Group’s products in a manner inconsistent with its preferred positioning or offering its products at unacceptable discounts, could damage its brand image. In addition, the Group licences its brands to third parties for certain products including childrenswear, eyewear, watches, fragrances and skincare and, therefore, the Group relies on its licensing partners to preserve the value of its brand. In Financial Year 2020, licence income accounted for 3.0 per cent. of the Group’s total revenue. If the Group’s licencees or the manufacturers of these products do not maintain the standards of quality and exclusivity as the Group would expect, or if such licencees or manufacturers otherwise misuse the Ted Baker brand, there is a risk that the Group’s reputation and the integrity of its brands may be damaged. Any failure to maintain favourable brand recognition could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group operates in a competitive environment. The Group operates in the retail industry which is a competitive environment. The Group’s competitors include general retailers that compete with a number of product groups, specialist retailers that compete only in certain product categories, local independent retailers and e-Commerce retailers. Market players compete with respect to merchandise selection and quality, store location and design, online sales and convenience, inventory, price, customer service, credit availability, loyalty offering and advertising. The Group faces a variety of competitive challenges including: decreased consumer spending; anticipating and quickly responding to changing consumer demands; maintaining favourable brand recognition and effectively marketing products to consumers in several diverse market segments; developing website design, mobile application, online presence and multi-channel offering; developing innovative, high-quality products in styles that appeal to consumers of varying age groups and tastes; sourcing merchandise efficiently; and anticipating changing consumer behaviour as a result of economic conditions and as a result of changes in consumer spending patterns. Additionally, channel shifts away from physical stores and concessions to e-Commerce could lead to higher operational costs within the e-Commerce channel and lower profitability, or even impairment, of store assets, all of which could impact the Group’s ability to compete effectively. Furthermore, if the Group fails to price products competitively customers may elect to purchase the products of other retailers which would lower the Group’s sales. The Group may also face market pressure to hold promotions and sales due to aggressive discounting strategies of its competitors, as a result of the coronavirus pandemic or otherwise. Excessive promotions and sales by the Group may lower the Group’s profit margin and may have an adverse impact on the brand’s reputation. Whilst the Group actively seeks to be competitive on price, range and service, as well as developing formats to compete in different markets, and engages in market scanning and competitor analysis to refine its customer proposition, if it fails to deliver an effective, coherent and consistent strategy to respond to competitors, customer preferences and broader market changes or fails to
17 adapt to technological developments to improve the customer experience as effectively as its competitors, the Group may lose market share and fail to improve and/or experience declining profitability. Further, some of its competitors may have greater financial resources, greater purchasing economies of scale and/or lower cost bases, any of which may give them a competitive advantage over the Group. The Group’s competitors also may merge or form strategic partnerships, which could cause significant additional competition. This, or any of the risks discussed above, could have a material adverse effect on the Group’s business, results of operations and financial condition.
‘Ted’s Formula for Growth’ strategy is dependent upon a number of factors, many of which could strain its resources or delay or prevent its successful expansion in new or existing markets. The Group’s ability to increase its revenue and pursue growth and development objectives depends on its success in carrying out its ‘Ted’s Formula for Growth’ strategy, which includes stabilising cash flow, enhancing operational performance and driving future sales and margin and growth. The Group’s initial focus is to stabilise cash flow by securing cost savings through the reduction of employee headcount and tighter budget controls, amongst other initiatives. The Group’s ability to achieve these cost savings depends on various factors including the ability of management and employees to effectively implement these initiatives. As a result, the Group may be unable to achieve cost savings at the anticipated level or at all. Furthermore, if incorrectly executed, cost saving initiatives may have an adverse impact on the Group’s business, results of operations and financial condition. The Group also plans to continue to develop its e-Commerce strategy in order to remain competitive and is investing in a new e-Commerce platform to improve the percentage of website visits leading to a sale (the Conversion Rate). If the Group is not successful in implementing its e-Commerce strategy, if there is a delay in the launch of its new e-Commerce platform or if its new e-Commerce platform does not achieve the Conversion Rate anticipated, the Group may experience lower than expected revenue. Expanding its retail distribution channel could lead to an increase in the Group’s fixed costs related to the opening of new stores and concessions and it may encounter initial losses when new stores and concessions commence operations. The Group’s ability to successfully open and operate new stores and concessions, including when it has bought out a franchisee or joint venture, depends on many factors, including, among others, its ability to: • identify new markets where its products and brand image will be accepted; • negotiate acceptable lease terms to secure suitable store locations; • negotiate acceptable acquisition terms to acquire franchises and joint ventures; • hire, train and retain personnel and field management; • assimilate new personnel and field management into its corporate culture; • source sufficient inventory levels; and • successfully integrate new stores and concessions into its existing operations and information technology (IT) systems. In addition, expanding into new markets, either through retail or wholesale channels, where the success of the Group’s brand is not as established as in existing markets depends on the ability to understand customer preferences, as well as to identify and/or anticipate the trends in the relevant market. Many of these countries have different operational characteristics, including, but not limited to, employment and labour, transportation, logistics, real estate (including lease terms) and local reporting or legal requirements. Accordingly, in new markets, sales of the Group’s products may not be successful, or the margins on those sales may not be in line with those in more established markets. If the Group fails to realise its strategic objectives in full or in part and in a timely manner, or if the underlying assumptions on which such objectives are based prove to be incorrect, its ability to increase its revenue and profitability could suffer, which could have a material adverse effect on its business, results of operations and financial condition.
18 The Group has significant borrowings and liabilities, the amount and terms of which may limit its financial and operational flexibility. The Group has substantial borrowings: as at 25 January 2020, the Group’s consolidated net debt was £127.1 million. On 23 March 2020, the Group announced that its lending bank syndicate had agreed to provide an additional revolving credit facility of up to £13.5 million until 18 December 2020 taking the Group’s total available facilities to £193.5 million. On 20 May 2020, the Group entered into an amendment and restatement agreement with the lenders in respect of the Facility Agreement (the Amendment and Restatement Agreement), in terms of which the Facility Agreement will be amended and restated to, among other things, increase Facility B by £11.5 million to a total of £25 million and extend Facility B’s maturity date until January 2022 (provided that any amounts drawn under Facility B must be repaid on the date on which the amendment and restatement agreement becomes effective and Facility B will be available to be drawn down from 6 September 2020 until 1 month prior to Facility B’s maturity date, except that it will not be available during the period from 27 December 2020 to 30 January 2021, inclusive). The Group has also agreed a covenant holiday until 24 April 2021, with the existing financial covenants being removed and replaced by adjusted EBITDA and minimum liquidity covenants. The amendments to the Facility Agreement pursuant to the Amendment and Restatement Agreement are conditional on the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing being passed at the General Meeting. Following the amendments to the Facility Agreement becoming effective, the total available bank credit facilities will increase to £205 million, as described above. The net proceeds of the sale of Big Lobster Limited will be used to repay loans outstanding under Facility A (with a corresponding portion of the Facility A commitments being cancelled following such prepayment). Following the application of the net proceeds of the Disposal, Facility A will be reduced to a maximum of £108 million and, together with the increased Facility B (as described above), the total available facilities will be a maximum of £133 million. Following a successful Placing and Open Offer, Firm Placing and Disposal, the Group would continue to be subject to the covenants in its Facility Agreement which limit the flexibility of the Group in running its business and may have other operational impacts on the Group, including but not limited to: • requiring the Group to use excess cash flow to repay its existing indebtedness pursuant to the Cash Sweep, thereby restricting the Group’s ability to pay dividends or other distributions to shareholders and limiting the Group’s ability to make acquisitions as well as capital expenditures or other investments in the Group’s business; • limiting, among other things, its ability to borrow additional funds or raise capital in the future and increasing the costs of such additional financings; • limiting the Group’s flexibility in planning for, or reacting to, changes in its business and the markets in which it operates; • increasing the Group’s vulnerability to downturns in its business or economic and industry conditions; • customers developing a negative perception of the Group’s solvency, which could adversely impact brand perception more generally; and • placing the Group at a disadvantage compared to its competitors that may be less leveraged or restricted by financial covenants. Any of the above factors could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group has conducted several external and internal reviews related to its inventory position, and further adjustments could adversely impact the Group’s financial condition. Following an internal review, in December 2019 the Group identified that the value of inventory held on its balance sheet had been overstated. As a result of these findings, the Group engaged Deloitte LLP to undertake an independent and thorough review of this issue. In January 2020, the Group announced that the independent review had found that the Group’s inventories, as reported at the end of Financial Year 2019, were overstated by £58 million. Following the conclusion of Deloitte’s review and the completion of the year-end process and audit, this figure was subsequently refined and finalised showing a net inventory adjustment of £52.6 million, with the Group amending the opening value of its inventory position from £225.8 million to £205.6 million, a £20.2 million restatement. The restatement of inventory was due to stock that did not physically exist (representing £6.5 million), and adjustments to correct calculations (representing £13.7 million). In addition, through this exercise the Group has reviewed its approach to estimating the carrying value of stock and adopted
19 a better estimate methodology which resulted in a £32.4 million reduction in stock value being accounted for as a change in estimate booked as a non-underlying expense in the income statement for the period ended 25 January 2020. The change in estimate was due to inventories considered obsolete (representing £9.4 million) and changes for a revised stock costing methodology (representing £23.0 million). The Group also initiated an internal review into potential misconduct relating to the overstatement, which is still ongoing. The Group also engaged Deloitte LLP to conduct an independent review of the changes needed to the Company’s systems and controls. This review has concluded and the Group is now in the process of updating its accounting processes and systems to implement Deloitte’s recommendations and expects to complete this process in the second half of the year. Deloitte’s recommendations include: • greater segregation of duties in key areas such as journals entries, for which a monthly detective journal review is being implemented; • an assessment of general IT controls across the business (including revenue, procure to pay, inventory and record to report) to ensure they are designed and implemented effectively and increase reliance on system- generated reports; • controls over manual spreadsheets to increase the reliability and quality of information and reduce the risk of error and deficiency; • implementing simplified, standardised and centralised processes to enable increased automation across the business, derive cost efficiencies and ensure a periodic review is performed to confirm changes are captured in a timely manner and controls are operating effectively; and • a training programme across finance to increase the understanding of accounting processes, the financial risks to the business and what the key controls are with the aim of reducing key person risk and improving the overall maturity of the finance environment. Implementing new processes and systems can be costly, difficult and disruptive and requires significant time, resources and management attention and could have an adverse effect on the Group’s financial condition. The Group will continue to provide information to and respond to enquiries from regulatory and other agencies, including the FCA. Although the Group has not received notification of any formal investigations, the inventory overstatements could result in a regulatory or other investigation which could result in regulatory, civil or criminal actions, including against the Group, and all consequent outcomes including censure, fines and compensation, which could have a material adverse effect on the Group’s business, results of operations, financial condition and reputation. There can be no assurance about the timing or outcome of any such action.
The Group may be unable to control its wholesale and licence distribution channels satisfactorily. The Group relies on its ability to control its wholesale and licence distribution channels, including franchise stores, to ensure that its products are sold in environments and in a manner consistent with its brand image. During Financial Year 2020, the Group generated 27.2 per cent. of its revenue from products sold through its wholesale distribution channel and 3.0 per cent. from products sold through its licence distribution channel. The Group requires its territorial licencee partners to sell its products in agreed locations and to follow its policies on promoting its products and merchandising displays and sales personnel in order to maintain consistency with the brand image and policies of the Group’s stores. Actions by significant licencee customers that vary from the Group’s policies, such as presenting the Group’s products in a manner inconsistent with its preferred positioning or offering its products at unacceptable discounts, could damage its brand image. Should the Group need to replace any of its wholesale or licencee partners, it may face risks and costs associated with a transfer of operations or the potential of extra operations costs from a new partner. If the Group is unable to control its wholesale or licence distribution channels, its brand image may suffer, which could have a material adverse effect on its business, results of operations and financial condition.
Negative media speculation, other negative public statements, matters underlying such speculation or resulting private actions could adversely affect the Group’s reputation, which in turn could adversely affect the Group’s business The media and others have speculated negatively from time to time about the Group and certain of its previous senior management team, which could adversely affect its reputation, potentially affecting the Group’s ability to attract the best talent, disrupting the Group’s ability to do business with counterparties, distracting the Group’s senior executive officers from their other management responsibilities, and adversely affecting the trading price
20 of the Company’s Shares. Matters underlying such speculation could also lead to private actions which could adversely affect the Group. For example, the press and social media have speculated as to the conduct of the Group’s former CEO before he left the Company last year. Mr. Kelvin took a voluntary leave of absence from his role as CEO of the Group in December 2018 after allegations of misconduct were made against him. An internal Independent Committee commissioned the law firm Herbert Smith Freehills LLP to help it to investigate those allegations and the Group’s policies, procedures and handling of HR-related complaints. Mr. Kelvin denied all allegations of misconduct and subsequently, in March 2019, agreed to resign with immediate effect from his position as CEO and as a director of the Company. The investigation continued after Mr Kelvin’s resignation, and the primary focus of the remainder of that investigation turned to the Company’s policies, procedures and handling of complaints. The investigation led to substantive changes being made to the Company’s policies, procedures and handling of complaints, and the Company underlined its commitment to ensuring that all employees feel respected and valued, although there can be no assurance that such policies and procedures will achieve their objectives. The press and social media have speculated from time to time and may continue to speculate from time to time on matters relating to the Group and such speculation could have been and may in the future be heightened when themes such as #MeToo are trending. In addition, if allegations along such themes are made in the future, the impact on the Group could be exacerbated by historical allegations and media speculation along such themes. Media speculation more generally can also be heightened as a result of unmanaged exposure through user-generated content platforms, such as Twitter, and can be driven yet further by themes that are trending at the particular time. Future negative speculation in the media could adversely affect the Group’s reputation, which in turn could affect the ability of the Group to attract the best talent or otherwise affect the Group’s business and/or result in a reduction in the value of the Shares.
The Group depends on key personnel and certain members of its management. The Group’s results and success are dependent on its capacity to attract and retain effective personnel. The Group’s performance depends significantly on the efforts and abilities of its key senior management, including Sharon Baylay (Acting Non-Executive Chair), Rachel Osborne (Chief Executive Officer), David Wolffe (Chief Financial Officer), Michael Bastian (Acting Chief Creative Director), Peter Collyer (Chief People Officer) and Jennifer Roebuck (Chief Customer Officer). The Group’s senior management have substantial experience and expertise in the retail industry and have made significant contributions to the Group’s survival and continuing growth and success. The loss of key personnel or managers, including as a result of the coronavirus pandemic, without the prompt addition of appropriate replacements could therefore adversely affect the Group’s operations and prospects. For example, in 2018 the Group lost key creative personnel which resulted in underperforming product ranges. The Group may be unable to find appropriate replacements in a timely manner or the replacements, once appointed, may not perform as effectively as expected, in particular with regards to implementing ‘Ted’s Formula for Growth’ strategy. In addition, there can be no assurance that the Group will continue to be able to retain or attract a sufficient number of skilled personnel, including within the design and merchandising teams, on attractive terms or at all. As part of ‘Ted’s Formula for Growth’ strategy, it is planning to reduce employee headcount which may adversely impact the Group’s ability to retain or recruit employees. The coronavirus pandemic is also expected to have adverse effects on the availability of skilled personnel. Any resulting inability to recruit, train or retain such personnel could hinder the Group’s ability to design and market new products and to operate its business generally, which could have a material adverse effect on its business, results of operations and financial condition.
The Group is subject to risks associated with leasing retail space. The Group’s stores are principally leased from third parties and, therefore, the Group is subject to risks associated with periodically negotiating or re-negotiating lease terms. In Financial Year 2020, the Group incurred £50.9 million in costs charged relating to leasehold properties. As the Group’s stores and concessions are situated in prestigious shopping streets and areas, when the Group renews expiring leases, it may have to compete over desirable property sites with other businesses in the retail sector, some of which are considerably larger than the Group and have greater economic and financial assets. Any inability to renew existing leases may result in, among other things, significant alterations to rental terms (including substantial increases in rent), the closure of stores and concessions in desirable locations or failure to secure suitable alternative locations. In addition, the Group’s ability to open new stores and concessions depends upon, among other things, the availability of sites that meet its criteria and its ability to negotiate lease terms that meet its financial targets.
21 Any of these events affecting the Group’s stores could have a material adverse effect on its business, results of operations or financial condition.
Operations at the Group’s warehouse or distribution facilities could be subject to disruption. The Group currently operates from three warehouse and distribution facilities in the United Kingdom, the United States and Hong Kong. These facilities are subject to operational risks, including, among other things, mechanical and IT system failure, work stoppages, increases in transportation costs, natural disasters, pandemics and fire. Such disruption could have an adverse effect on the Group’s in-store inventory and will divert financial and management resources from beneficial uses. In addition, any disruption to the business of the Group’s main distributors could have a similar material adverse effect on its operations. For example, systems and warehousing transitions in Asia and the United States resulted in a write-down in the value of inventory of £5 million in February 2019. A disaster or disruption in the infrastructure that supports the Group’s business or a natural disaster or pandemic that affects its staff, could have a material adverse effect on its ability to continue to operate the business without interruption. The Group’s disaster recovery procedures may not be sufficient to mitigate the harm that may result from such a disaster or disruption. Any interruption of activity in the warehouse or distribution facilities due to these or other events could result in the disruption to the operation of its activities, clients’ cancellation of orders or refusal to accept deliveries or a reduction in sales, any of which could have a material adverse effect on the Group’s business, results of operations and financial condition.
Any adverse events influencing either the sustainability of the supply chain or the Group’s relationship with any major supplier or service provider could adversely affect its business. In Financial Year 2020, the Group’s top 10 suppliers provided 34 per cent. of the Group’s products. The Group’s relationships with suppliers are typically governed by short-term purchase orders which set out service and quality standards and which are subject to standard terms and conditions. In the event that one or more of the Group’s major suppliers ceases to provide it with products, becomes insolvent or experiences operational difficulties (for example due to the economic climate, natural disasters, pandemics, accidents, equipment breakdowns or work stoppages) and the Group is unable to secure alternative sources in a timely manner or on commercially favourable terms, it may experience delays in delivery, inventory shortages or other adverse effects to its business. As a result of the Group’s current financial difficulty certain of the Group’s suppliers may demand more onerous terms, and while the completion of the Disposal and the Capital Raising is expected to stabilise the Group’s financial position, if the Group’s suppliers are unable or unwilling to continue providing it with merchandise under current terms or if the Group is unable to obtain goods from its suppliers at prices that will allow its products to be competitively priced due to cost inflation or otherwise, it may place pressure on margins and profitability or require the Group to divert financial and management resources from more beneficial uses. In addition, supply chain sustainability is becoming increasingly important to customers and may impact their purchasing decisions. If the Group fails to operate its supply chain in a sufficiently sustainable manner, this could have an adverse impact on customers’ willingness to purchase the Group’s products. Despite the Group’s efforts to select its suppliers and manage its supplier relationships with scrutiny, a supplier may fail to meet the Group’s requirements, including in relation to sustainability, product quality and other corresponding standards, which could have a material adverse impact on the Group’s reputation and brand value. There may also be additional unplanned costs required to transfer operations between providers or additional operational costs from a new provider. Any of these risks, in isolation or in combination, could restrict the availability of merchandise or significantly increase the cost of the Group’s merchandise or require it to divert financial and management resources from more beneficial uses and could have a material adverse effect on its business, results of operations, financial condition or reputation.
The Group is exposed to certain risks related to raw materials and other costs incurred in making and distributing its products, which may result in higher costs or reduced sales. The Group’s products are manufactured from certain key raw materials, including cotton, which are subject to availability constraints and price volatility caused by factors such as the high demand for fabrics, fuel prices, weather, supply conditions, government regulations, crop yields, foreign exchange rate fluctuations, war, terrorism, labour unrest, global health concerns, the economic climate and other unpredictable factors. The
22 price and availability of certain raw materials have fluctuated in the past and may fluctuate in the future. An increase in the price of certain raw materials, such as cotton, may significantly impact costs and thereby reduce margins. Further, the business model relies on an efficient and flexible supply chain able to manufacture and deliver the products responding to a current fashion trend. If the raw material required for production is not immediately available in stock at the Group’s suppliers, this may cause delays and longer lead times between ordering and taking delivery of the products. This in turn may lead to lower sales than could have been realised with products potentially arriving in store once the fashion trend has passed or the season has changed. Consequently, the Group may also experience lower margins if required to mark down prices to clear inventory of slow selling products. Any such trends may adversely affect margins and could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group is subject to risks associated with third-party production. The Group outsources the production of its directly managed products to external manufacturers with appropriate expertise and capacity. The Group has established an inspection and quality control process for all outsourced production, and requires all third-party manufacturers to comply with intellectual property protections and confidentiality restrictions in addition to all applicable labour and health and safety laws and regulations. However, the inability of third-party manufacturers to ship orders in a timely and appropriate manner or to comply with their obligations or other laws and regulations could have a negative impact on the Group’s operations and business. Similarly, if the Group expands beyond the production capacity of its current suppliers, it may not be able to find new suppliers with an appropriate level of expertise and capacity in a timely manner. If any of these risks were to develop, it could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group’s business may be impacted by weak sales during peak selling seasons. The Group’s business is subject to seasonal peaks. Historically, the most important trading period in terms of sales, operating results and cash flow has been the Black Friday, Christmas and New Year sales trading periods, with 29 per cent. of the Group’s sales occurring between the beginning of November and the end of January. The Group incurs significant additional expenses in advance of the Black Friday and Christmas season in anticipation of higher sales during that period, including the cost of additional inventory, advertising and hiring additional employees. If sales during peak seasons, particularly the Black Friday, Christmas and New Year sales trading periods, are significantly lower than expected for any reason, the Group may be unable to adjust its expenses in a timely fashion and may be left with a substantial amount of unsold inventory, especially in seasonal merchandise that is difficult to liquidate. In that event, the Group may be forced to rely on markdowns or promotional sales to dispose of excess inventory, which could have a material adverse effect on the Group’s business, results of operations or financial condition. At the same time, if the Group fails to purchase a sufficient quantity of merchandise, it may not have an adequate supply of products to meet consumer demand, which could materially adversely affect its gross transaction value and, in turn, its results of operations. The Group’s results are also affected by periods of abnormal, severe or unseasonal weather conditions. Extended periods of unseasonal weather could also render a portion of its inventory incompatible with such unseasonal conditions. Adverse weather conditions early in the season could have a double impact on profitability, leading to a slowdown in sales at full margin followed by more extensive markdowns at the end of the season. For example, unseasonable weather conditions in North America in the early part of Financial Year 2020 impacted the Group’s results. Prolonged unseasonal weather conditions or temporary severe weather during one of the Group’s peak trading seasons, such as the Christmas season, could materially adversely affect its gross transaction value and, in turn, its results of operations.
The Group is subject to risks associated with international markets. As a company that markets, sells and manufactures its products in many countries, the Group faces a variety of risks generally associated with doing business in foreign markets and importing merchandise from these regions including, among others, political instability resulting in the disruption of trade, quotas and other trade regulations, export licence requirements, delays associated with customs procedures, including increased security requirements applicable to foreign goods, imposition of taxes, other charges and restrictions on imports, currency and exchange rate risks, risks related to labour practices increasing minimum wages and inflationary pressures, environmental matters or other issues in the foreign countries or factories in which the
23 Group’s merchandise is manufactured, risk of loss at sea or other delays in the delivery of products caused by transportation problems, and increased costs of transportation. The Group expects that sales to fast growing economies, such as China and India, will be an increasing portion of its total sales, as developing nations and regions around the world increase their demand for its products. The Group’s operations in countries with less developed legal systems present several risks, including legal uncertainty, civil disturbances, economic and governmental instability, different business and operating practices and the imposition of exchange controls. The uncertainty of the legal environment in these regions, in particular with respect to the enforcement of intellectual property rights, could limit the Group’s ability to enforce its rights and grow its business. The risks associated with the countries in which the Group operates, and sells and markets its products, could have a material adverse effect on the Group’s business, results of operations and financial condition.
The United Kingdom’s withdrawal from the European Union and the end of the transition period may lead to increased costs, potential staff shortages and increased regulatory burden. On 31 January 2020, the United Kingdom left the European Union and there is now a transition period in place until the end of 2020 while the United Kingdom and European Union negotiate a free trade agreement. Following the transition period, barrier-free trade access between the United Kingdom and other member states of the European Union could be diminished or eliminated and the United Kingdom may no longer be covered by trade agreements entered into by the European Union which apply to all member states. As a result, the United Kingdom will either have to seek to negotiate new trade agreements or join existing trade agreements (such as the World Trade Organization tariffs). There is a risk that the United Kingdom will not have trade agreements with countries that supply a large proportion of goods to the Group. This could result in the transfer of goods between the European Union and the United Kingdom, or between certain non-EU countries and the United Kingdom, becoming subject to import/export duties and/or non-tariff trade barriers (including health and safety, product labelling and other standards, many of which are currently standardised across the European Union). Such duties or trade barriers could lead to delays to the Group’s logistics distribution operations and result in the cost of doing business being materially affected if not passed on, in whole or in part, to consumers and retailers in the form of price increases (which may influence customer spending decisions and priorities and adversely impact their relative competitive position). There is also a risk arising from the increased complexity in regulatory framework surrounding the manufacture and sale of products should the United Kingdom deviate from existing regulations derived from EU legislation. Another potential outcome of the United Kingdom’s withdrawal from the European Union is that limitations may be placed on the principle of free movement of people which currently permits EU nationals to work in the United Kingdom. If the United Kingdom’s withdrawal from the European Union does lead to restrictions being placed on European Union nationals working in the United Kingdom, this reduces the potential talent pool the business is able to recruit from which could have a material adverse effect on the Group’s business, financial condition and results of operations. A failure to adequately prepare for the United Kingdom’s withdrawal from the European Union and the end of the transition period may lead to increased costs, potential staff shortages and increased regulatory burden and could have a material adverse effect on the Group’s business, results of operations or financial condition.
The Group is exposed to interest rate fluctuations. As of 25 January 2020, all of the Group’s debt (£180.0 million) bore interest at variable rates, based on the lender’s base rates for the currencies concerned. If market interest rates increase, variable-rate debt will create higher debt service requirements, which could adversely affect the Group’s cash flow. To manage this risk, the Group may enter into agreements to decrease its exposure to floating interest rates, consistent with its treasury policy. To the extent that any of the Group’s interest rate exposure remains unhedged, adverse movements in interest rates could have a material adverse effect on the Group’s business, results of operations or financial condition.
The Group’s business may be affected by the default of counterparties in respect of monies owed to the Group The Group often has significant amounts owed to it by wholesale, licence and concession partners, with trade receivables of £47.2 million as at 25 January 2020. The Group seeks to mitigate its trade receivable
24 counterparty risk by insurance, and at 25 January 2020, 55 per cent. of the Group’s accounts receivable balance was covered by credit insurance and standby letters of credit. If the Group is unable to recover and insurance does not cover a significant portion of these receivables in a timely manner or otherwise satisfy its contractual obligations, the Group may experience net sales and revenue losses and decreased profitability. There can be no assurance that the Group’s policies of limiting counterparty exposures by setting credit limits for each counterparty and maintaining credit insurance will eliminate such exposure effectively. In addition, if a wholesale, licence or concession partner has any financial difficulties, it may become difficult for the Group to obtain or renew credit insurance policies on that partner. Furthermore, the discontinuation of commercial relationships with third-party suppliers or the bankruptcy of a third-party supplier could have a material adverse effect on the Group’s its business, results of operations or financial condition.
The Group is exposed to foreign currency exchange rate fluctuations. Due to the international nature of its business, the Group is exposed to changes in foreign currency rates. The Group’s functional currency used in its financial statements is Pounds Sterling. However, it conducts and will continue to conduct transactions in currencies other than Pounds Sterling, including euro and US dollars. In addition, the Group pays its suppliers in euro and US dollars and therefore it incurs its cost of goods sold largely in euro and US dollars. The Group sets the sales prices for its products at periodic fixed intervals. If there is a significant weakening of the exchange rate between the local currency in which the revenue is generated prior to the sale and subsequent to its fixing of prices, then its expected margins may be reduced. The Group is also exposed to foreign exchange rate movements when translating the results of its non-UK subsidiaries into Pounds Sterling. Transactions are typically measured in the currency in which they occur and the accounts of subsidiaries are then translated into Pounds Sterling for presentation of the Group’s consolidated operating results. In Financial Year 2020, 43 per cent. of the Group’s total revenue was generated in currencies other than Pounds Sterling. As a result, the Group will be subject to fluctuations in its profits as a result of foreign exchange movements. Although the Group seeks to manage its foreign currency risks in order to minimise any negative effects caused by exchange rate fluctuations, including by engaging in foreign exchange hedging transactions, such activities may not fully protect the Company from exchange rate loses, and its business, results of operations and financial condition could be adversely affected by fluctuations in exchange rates.
Any problems with the Group’s IT systems, or any material disruption in the Group’s IT systems, could have a material adverse effect on its business, financial condition and results of operations. The Group relies to a significant degree on its IT systems to track inventory, manage its supply chain, record and process transactions, summarise results and manage its business. In January 2019, the Group concluded the final phase of the implementation of a new IT system, which includes a number of IT projects and enhancements to its distribution network. The failure of the Group’s IT systems to operate effectively, or any problems with transitioning or integrating its new systems, could adversely affect its business. In particular, the implementation of any new IT systems could take longer than expected, disrupt the Group’s current systems and/or result in cost overruns. In addition, the Group’s IT systems may be subject to damage and/or interruption from: power outages; computer, network and telecommunications failures; computer viruses; security breaches; and usage errors by its employees. If the Group’s IT systems are damaged or cease to function properly, it may have to make a significant investment to fix or replace them, and it may suffer loss of critical data and interruptions or delays in its operations. Any significant disruption in the Group’s IT systems could have a material adverse effect on its business, results of operations and financial condition.
Direct privacy breaches or any failure to protect clients’ confidential information could harm the Group’s reputation and expose it to litigation. The Group is subject to a number of laws relating to privacy and data protection, including, in particular, the General Data Protection Regulation (Regulation (EU) 2016/679) (GDPR) the United Kingdom’s Data Protection Act 2018 and the EU Privacy and Electronic Communications Regulations. Such laws govern the Group’s ability to collect, use and transfer personal data, including relating to its customers and business partners, as well as any such data relating to its employees and others. The Group routinely transmits and receives personal, confidential and proprietary information (such as debit and/or credit card details of its customers) by electronic means and therefore relies on the secure processing, storage and transmission of such information in line with regulatory requirements (including Payment Card Industry—Data Security Standards). Therefore, the Group is exposed to the risk that such data could be wrongfully appropriated, lost or disclosed, damaged or processed in breach of privacy or data protection laws which could lead to the imposition of fines
25 or regulatory action, together with associated negative publicity. For example, breaches of the GDPR can result in fines of up to 4 per cent. of annual global turnover. Any perceived or actual failure by the Group, including its third-party service providers, to protect confidential data or any material non-compliance with privacy or data protection or other consumer protection laws or regulations may harm its reputation and credibility, adversely affect revenue, reduce its ability to attract and retain customers, result in litigation or other actions being brought against the Group and the imposition of significant fines and, as a result, could have a material adverse effect on its business, results of operations or financial condition.
The Group may be unable to protect its trademarks and other intellectual property rights. The Group’s trademarks and other property rights are important to its success and competitive position. Therefore, its business is dependent on its ability to protect and promote its trademarks and other intellectual property rights. Third parties have in the past and may in the future look to counterfeit the Group’s brand, otherwise infringe the Group’s intellectual property rights or try to challenge the validity of the Group’s intellectual property. The Group may not always be able to secure protection for, or stop infringements of, its intellectual property, and may need to resort to litigation to enforce its intellectual property rights. Any litigation or dispute involving the scope or enforceability of the Group’s intellectual property rights or any allegation that it infringed upon the intellectual property rights of others could be costly and time-consuming, lead to a diversion of resources and result, if determined adversely to the Group, in harm to its business, results of operations and financial condition.
Compliance with existing laws and regulations or changes in any such laws and regulations could affect the Group’s business, financial condition and results of operations. The Group operates in a range of international markets and is subject to a variety of laws and regulations and it routinely incurs costs in complying with these laws and regulations. New laws or regulations or changes in existing laws and regulations, particularly those governing the sale of products or in other regulatory areas such as consumer credit, privacy, information security, labour and employment, competition, health and safety or environmental protection, may conceivably require extensive system and operating changes that may be difficult to implement and could increase the Group’s cost of doing business. The Group is also subject to those regulations provided under the Modern Slavery Act 2015 (the Modern Slavery Act) and has taken steps to mitigate against any risk of breaching the Modern Slavery Act, including adopting a policy relating to its suppliers’ conduct in these matters, conducting due diligence to ensure its key suppliers comply with the Group’s code of practice, and building internal knowledge of the Modern Slavery Act. However, there can be no assurances that suppliers or their labour practices are fully compliant with the Group’s policies and procedures as well as UK or EU law. In addition, changes in laws and regulations, more stringent enforcement or alternative interpretation of existing laws and regulations in jurisdictions in which the Group currently operates can change the legal and regulatory environment, making compliance with all applicable laws and regulations more challenging. Changes in laws and regulations in the future could have an adverse economic impact on the Group by tightening restrictions, reducing its freedom to do business, increasing its costs of doing business, or reducing its profitability. Failure to comply with applicable laws or regulations can lead to civil, administrative or criminal penalties, including but not limited to fines or the revocation of permits and licences that may be necessary for the Group’s business activities. The Group could also be required to pay damages or civil judgments in respect of third- party claims. Any of these developments, alone or in combination, could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group relies on its licencees, suppliers, agents and distributors to comply with employment, environmental and other laws and regulations. The Group believes that its licencees, suppliers, agents and distributors are in material compliance with the Group’s business terms, as well as employment, environmental, anti-bribery and other relevant laws and regulations generally. However, it can give no assurance that these individuals or entities are or will remain in compliance with such terms, laws or regulations. A violation, or allegations of a violation, of such laws or regulations, or failure to achieve particular standards, by any of the Group’s licencees, suppliers, agents or distributors, could lead to financial penalties, adverse publicity or a decline in public demand for the Group’s products, or require the Group to incur expenditure or make changes to its supply chain and other business
26 arrangements to ensure compliance. Any such events could have a material adverse effect on the Group’s business, results of operations and financial condition.
RISKS RELATING TO THE DISPOSAL Conditionality of the SPA. Completion under the SPA is conditional upon the approval by Shareholders of the Disposal Resolution. There can be no assurance that this condition will be satisfied and, accordingly, that completion of the Disposal will take place. If the Disposal does not complete, absent alternative measures, the Group may default under its Facility Agreement and will also experience a liquidity shortfall, which would likely result in Shareholders losing all of the value of their investment in the Company. See “—If any of the Disposal, the Firm Placing or the Placing and Open are not successfully completed, this will constitute an event of default under the Facility Agreement, which would likely result in Shareholders losing all of the value of their investment in the Company” above and “—The Disposal may not proceed” below.
The Disposal may not proceed. If the Disposal does not proceed, the following risks and uncertainties may affect the Group’s business and results of operations:
Inability to realise value if the Disposal does not complete The Directors believes that the Disposal is in the best interests of the Shareholders as a whole and that the Disposal currently provides the best opportunity to realise an attractive and certain value for Big Lobster and/or the Property. If the Disposal does not complete, the subsequent value of Big Lobster and/or the Property to the Company may be lower than can be realised by way of the Disposal. This could result in the financial position of the Group being materially worse than the position it would be in if the Disposal completed.
Potential inability to dispose of Big Lobster and/or the Property in the future in favourable or equivalent market circumstances If the Disposal is not completed, there would be no assurance that the Company would be able to dispose of Big Lobster and/or the Property at a later date, in more favourable or equivalent market circumstances. The Directors have determined that the Disposal offers attractive value for Shareholders in the short-term, as well as improving the prospects of the Group in the medium to long-term.
The separation of Big Lobster from the rest of the Group may be more complex than expected and could cause the Group to incur unexpected costs. The process of separating Big Lobster and the Property from the rest of the Group may be more complex than expected. The Group could incur unexpected additional costs and/or adverse impacts on the functions of its business as a result of the separation process which could adversely affect its financial condition and the results of its operations. The Company’s management may be required to allocate time and resources to the separation. This may limit the management and financial recourses available to the Group, and could have a material adverse effect on the Group’s business, results of operations and financial condition. In particular:
Potential disruption if Big Lobster terminates the Block B Lease On 19 March 2020, No Ordinary Designer Label Limited (the Seller) entered into a short-term lease of the Property with Big Lobster for a period post-Completion, as described in paragraph 16.1.4 of “Part XII—Additional Information” of this document. If the Property is damaged during the course of this lease as a result of either: • a risk against which Big Lobster is required to insure, in circumstances where Big Lobster does not reasonably foresee itself as being able to reinstate the premises before the expiry of the Block B Lease; or • a risk against which Big Lobster is not required to insure (and Big Lobster does not elect to reinstate the premises), then Big Lobster may terminate the Block B Lease. Should the Block B Lease be terminated early, there is a risk that any necessary move to new offices may disrupt Ted Baker’s staff and operations for a short period of time and may cause additional cost to the Group.
27 Changes to market conditions or business needs Risks inherent from entering into Block A Option Over the next three years, market conditions may change meaning the agreed terms in regard to the Block A Lease are not as favourable to the Group as they are now. For instance, any adverse change to the stamp duty land tax regime in the United Kingdom could result in increased tax payable by the Group on entry into the Block A Lease.
The Group may not wish to occupy Block A The business needs of the Group could change over time, and the Group may not wish to enter into the Block A Lease at the relevant time. Whilst £7,966,075 would be payable to the Seller in that event, the Group would still need to seek alternate offices, and thus: • could have to negotiate a lease in respect of offices elsewhere, with no guarantee of there being sufficient time for the Group to negotiate such a lease on terms favourable to the Group; and • there may be insufficient time to complete, or complete at a reasonable price, any necessary fit-out of any alternate offices. Each option could involve disruption to the Group’s employees/operations, or increased costs to the Group.
RISKS RELATING TO THE CAPITAL RAISING AND INVESTMENT IN SHARES The Principal Shareholder will retain significant interests in, and will continue to exert substantial influence over, the Group following the Capital Raising and his interests may differ from or conflict with those of other Shareholders. Prior to the Capital Raising, the Principal Shareholder beneficially owned 34.85 per cent. of the issued share capital of the Company. Immediately following Admission, the Principal Shareholder may own up to 17.0 per cent. (excluding the impact of the Offer for Subscription) and 15.8 per cent. (assuming full take up under the Offer for Subscription) of the issued share capital of the Company (in each case assuming that he does not take up any open offer entitlements). As a result, the Principal Shareholder will continue to possess sufficient voting power to have a significant influence over all matters requiring shareholder approval, including the election of directors and the approval of significant corporate transactions, and to delay, defer or prevent a change of control. However, because Principal Shareholder’s shareholding is expected to fall below 30 per cent., the undertakings by the Principal Shareholder in his relationship agreement with the Company, including his undertaking to not prevent the Company from carrying on business independently, will fall away. The interests of the Principal Shareholder may not always be aligned with those of other holders of Shares.
The market price of the Shares could be subject to volatility. Prospective investors should be aware that the value of an investment in the New Shares may go down as well as up. The market price of the Shares could be subject to significant fluctuations due to a change in sentiment in the market regarding the Shares (or securities similar to them), including, in particular, in response to various facts and events, including any regulatory changes affecting the Group’s operations, variations in the Group’s operating results and/or business developments of the Group and/or its competitors. Stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for securities and which may be unrelated to the Company’s operating performance or prospects. Furthermore, the Group’s operating results and prospects from time to time may be below the expectations of market analysts and investors. Any of these events could result in a decline in the market price of the Shares.
An active trading market for the New Shares may not develop. Application has been made to admit the New Shares to trading on the London Stock Exchange’s main market for listed securities. It is expected that Admission of the New Shares will become effective on 19 June 2020 and that dealings in the New Shares will commence as soon as practicable after 8.00 a.m. on that date. There can be no assurance, however, that an active trading market in the New Shares will develop following Admission.
28 Admission may not occur when expected. Admission is subject to the approval (and subject to satisfaction of any conditions on which such approval is expressed) of the FCA and Admission will become effective as soon as a dealing notice has been issued by the FCA and the London Stock Exchange has acknowledged that the New Shares will be admitted to trading. There can be no guarantee that any conditions to which Admission is subject will be met or that the FCA will issue a dealing notice when anticipated.
The market price for the Shares may decline below the Offer Price and Shareholders may not be able to sell Shares at a favourable price after the Capital Raising. The public trading market price of the Shares may decline below the Offer Price. Should that occur prior to the latest time and date for acceptance under the Open Offer, Qualifying Shareholders who take up any part of their Open Offer Entitlements or Excess Open Offer Entitlements will suffer an immediate loss as a result. Moreover, following the acceptance of their Open Offer Entitlements or Excess Open Offer Entitlements, Shareholders may not be able to sell their New Shares at a price equal to or greater than the acquisition price for those shares. If the public trading market price of the New Shares declines below the Offer Price, investors who have acquired any such New Shares will likely suffer a loss as a result.
Inability to exercise pre-emption rights on any issue of shares. As part of the Capital Raising, the share capital of the Company will be increased and the New Shares will be issued. In addition, further share capital increases and share issues may be proposed in the future. In respect of new issues of Shares for cash, Shareholders have certain statutory pre-emption rights unless those rights are disapplied by a special resolution of the Shareholders at meeting. Such an issue could dilute the interests of the then existing Shareholders. Securities laws of certain jurisdictions, including, without limitation, the Excluded Territories, may restrict the Company’s ability to allow participation by Shareholders in such jurisdictions in any future issue of shares carried out on a pre-emptive basis.
The Company’s ability to pay dividends on the Shares will depend on the availability of distributable reserves. The Company’s ability to pay dividends is limited by law, which limits a company to only paying cash dividends to the extent that it has distributable reserves and cash available for this purpose. As a holding company, the Company’s ability to pay dividends in the future is affected by a number of factors, principally its ability to receive sufficient dividends from subsidiaries. The payment of dividends to the Company by its subsidiaries is, in turn, subject to restrictions, including certain regulatory requirements and the existence of sufficient distributable reserves and cash in the Company’s subsidiaries. The ability of these subsidiaries to pay dividends and the Company’s ability to receive distributions from its investments in other entities are subject to applicable local laws and regulatory requirements and other restrictions, including, but not limited to, applicable tax laws and covenants in some of the Company’s debt facilities. These laws and restrictions could limit the payment of future dividends and distributions to the Company by its subsidiaries, which could restrict the Company’s ability to fund other operations or to pay a dividend to holders of the Existing Shares or the New Shares. The Company is also required to apply any excess cash flow to repay its existing indebtedness pursuant to the cash sweep under its Facility Agreement. This will further limit the Company’s ability to pay dividends.
Shareholders outside the United Kingdom may not be able to subscribe for the New Shares in the Open Offer or future issues of Shares. Securities laws of certain jurisdictions may restrict the Company’s ability to allow participation by Shareholders in the Open Offer. In particular, holders of Shares who are located in the United States may not be able to take up their entitlements under the Open Offer unless an exemption from the registration requirements of the Securities Act is available thereunder. The Capital Raising will not be registered under the Securities Act. Securities laws of certain other jurisdictions may restrict the Company’s ability to allow participation by Shareholders in such jurisdictions in any future issue of shares carried out by the Company. Qualifying Shareholders who have a registered address in or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to subscribe for or acquire the New Shares.
29 The implementation of the Firm Placing will result in the dilution of ownership of Existing Shares for Shareholders and the Placing and Open Offer and Offer for Subscription will further dilute Qualifying Shareholders who do not, or are not permitted to, acquire the New Shares in the Open Offer or the Offer for Subscription. Shareholders’ economic and proportionate voting rights in the Company will be reduced by the Firm Placing and the Offer for Subscription. In addition, if a Shareholder does not take up the offer of the New Shares under the Open Offer, either because the Shareholder is in the United States or another jurisdiction where their participation is restricted for legal, regulatory and other reasons or because the Shareholder does not respond to the Open Offer or the Offer for Subscription by 11.00 a.m. on 17 June 2020, the expected latest time and date for acceptance and payment in full for that Shareholder’s Open Offer Entitlement, the Shareholder’s proportionate ownership and voting interests as well as the percentage that their shares will represent of the total share capital of the Company will be further reduced. Even if a Shareholder takes up his or her Excess Open Offer Entitlements and/or participates in the Placing, Firm Placing or Offer for Subscription (in addition to taking up his or her Open Offer Entitlements), his or her interest in the Company may still be diluted depending on the size of his or her participation in the Open Offer, Placing, Firm Placing or Offer for Subscription.
Further issues or a significant sale of Shares may adversely impact the market price of the Shares. The issue of the New Shares pursuant to the Capital Raising as well as any sales of a substantial number of Shares in the market after the Capital Raising, or the perception that such events might occur, could depress the market price of the Shares. Although the Group does not have any plans to offer additional equity securities within 12 months of the date of this document (other than pursuant to the Share Schemes), it is possible that the Group may decide to offer additional equity securities (over and above those issued pursuant to the Share Schemes) in the future. An additional offering of equity securities could have an adverse effect on the market price of the Shares.
Investors in the New Shares may be subject to exchange rate risk. The New Shares are priced in Pounds Sterling, and any dividends on the Shares will be paid in Pounds Sterling. Accordingly, any investor outside the United Kingdom is subject to adverse movements to their local currency against the Pounds Sterling. Any depreciation of the Pounds Sterling in relation to such foreign currency will reduce the value of the investment in the New Shares or any dividends in foreign currency terms, and any appreciation of the Pounds Sterling will increase the foreign currency terms of any such investment or dividends. In addition, such investors could incur additional transaction costs if they convert Pounds Sterling into another currency.
It may not be possible to effect service of process upon the Company or the Directors or enforce court judgments against the Company or the Directors. The Company is incorporated in England and Wales and the rights of holders of Shares are governed by the Companies Act and by the Articles. These rights may differ from the rights of shareholders in non-UK corporations. In general terms, only a company may be the claimant in proceedings in respect of wrongful acts committed against it. In addition, it may be difficult for Overseas Shareholders to effect service of process outside the United Kingdom or to prevail in a claim against the Company under, or to enforce liabilities predicated upon, non-UK securities laws. An Overseas Shareholder may not be able to enforce a judgement against some or all of the Directors. The majority of its Directors are citizens or residents of England. As a result, it may not be possible for investors outside of the United Kingdom to effect service of process outside the United Kingdom against the Company or the Directors or to enforce against the Directors judgements of courts of the Overseas Shareholder’s country of residence based on civil liabilities under that country’s securities laws. An Overseas Shareholder may not be able to enforce any judgements in civil and commercial matters or any judgements under the securities laws of countries other than the United Kingdom against the Directors who are residents of the United Kingdom or countries other than those in which judgement is made. In addition, English or other courts may not impose civil liability on the Directors in any original action based solely on non-UK securities laws brought against the Company or its Directors in a court of competent jurisdiction in England or other jurisdictions.
30 IMPORTANT INFORMATION
MARKET AND INDUSTRY INFORMATION Unless the source is otherwise stated, the market, economic and industry data in this Prospectus constitute the Directors’ estimates, using underlying data from independent third parties and the Company’s own estimates in some circumstances, where appropriate. The Company obtained market data and certain industry forecasts used in this Prospectus from internal surveys, reports and studies, where appropriate, as well as market research and publicly available information. The Company confirms that all third-party data contained in this Prospectus has been accurately reproduced and, so far as the Company is aware and able to ascertain from information published by that third-party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Any industry forecasts are forward-looking statements. See “—Cautionary Note Regarding Forward-Looking Statements” below. Where third-party information has been used in this Prospectus, the source of such information has been identified.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This document contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “will”, “may”, “should”, “would”, “could”, “is confident”, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Ted Baker’s plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are: the impact of the coronavirus pandemic, increased competition, the loss of or damage to one or more key customer relationships, changes to customer purchasing patterns, delays or restrictions in the supply of products, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects. You are advised to read this document and the information incorporated by reference into this document in their entirety, and, in particular, the section of this document headed “Risk Factors”, for a further discussion of the factors that could affect the Group’s future performance and the industry in which it operates. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this document and/or the information incorporated by reference into this document may not occur. Neither the Company nor the Underwriters are under any obligation to update or revise publicly any forward- looking statement contained within this Prospectus, whether as a result of new information, future events or otherwise, other than in accordance with their legal or regulatory obligations (including under the Listing Rules, the Disclosure and Transparency Rules, the Prospectus Regulation Rules and the Market Abuse Regulation). The contents of this section “—Cautionary Note Regarding Forward Looking Statements” relating to forward- looking statements in no way seek to qualify or negate the statement relating to the Group’s working capital set out in paragraph 19 of “Part XII—Additional Information”.
PRESENTATION OF FINANCIAL INFORMATION Capitalisation and indebtedness information for the Group in this document is presented in Pounds Sterling and is derived from financial information contained in the Ted Baker Annual Report for the Financial Year 2020 prepared in accordance with IFRS and from the Group’s unaudited management accounts for 22 March 2020. Other financial information, unless otherwise stated, has been extracted from the Ted Baker Annual Reports for each of the Financial Years 2019 and 2020. Where information has been extracted from the Ted Baker Annual Reports for each of the Financial Years 2018, 2019 and 2020, the information is audited unless otherwise
31 stated. In December 2019, the Group identified that the value of inventory held on its balance sheet at that time had been overstated following an internal review. As a result of these findings, the Group engaged Deloitte LLP to undertake an independent and thorough review of this issue. In January 2020, the Group announced that the independent review had found that the Group’s inventories, as reported at the end of Financial Year 2019, were overstated by £58 million. Following the conclusion of Deloitte's review and the completion of the year-end process and audit, this figure was subsequently refined and finalised showing a net inventory adjustment of £52.6 million, with the Group amending the opening value of its inventory position from £225.8 million to £205.6 million, a £20.2 million restatement. The restatement of inventory was due to stock that did not physically exist (representing £6.5 million), and adjustments to correct calculations (representing £13.7 million). In addition, through this exercise the Group has reviewed its approach to estimating the carrying value of stock and adopted a better estimate methodology which resulted in a £32.4 million reduction in stock value being accounted for as a change in estimate booked as a non-underlying expense in the income statement for the period ended 25 January 2020. The change in estimate was due to inventories considered obsolete (representing £9.4 million) and changes for a revised stock costing methodology (representing £23.0 million). See “Part VII—Operating and Financial Review—Critical Accounting Policies” for more details. Financial information captioned “Restated” has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. Unless otherwise indicated, financial information for the Group in this document and the information incorporated by reference into this document are presented in Pounds Sterling and has been prepared in accordance with IFRS. The financial information presented in a number of tables in this document has been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this document reflect calculations based upon the underlying information prior to rounding, and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.
PRO FORMA FINANCIAL INFORMATION The unaudited pro forma statement information contained in “Part IX—Unaudited Pro Forma Financial Information” is based on the historical financial information of Ted Baker contained in “Part IX—Unaudited Pro Forma Financial Information”. The unaudited pro forma statement of net assets and the unaudited pro forma income statement (together, the unaudited pro forma financial information) have been prepared to illustrate the effect on the net assets and the consolidated income statement, respectively, of Ted Baker as if the Disposal and Placing Open Offer and Firm Placing had taken place on 25 January 2020 (in the case of the unaudited pro forma statement of net assets) and 27 January 2019 (in the case of the unaudited pro forma income statement). The unaudited pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and does not, therefore, represent the Group’s actual financial position or results. The unaudited pro forma financial information has been prepared on the basis set out in “Part IX—Unaudited Pro Forma Financial Information” and in accordance with Annex 20 of the Prospectus Delegated Regulation.
NON-IFRS INFORMATION This document contains certain financial measures that are not defined or recognised under IFRS, including underlying gross profit, underlying profit before tax, Adjusted EBITDA, net debt, underlying net working capital to sales ratio and constant currency. These measures are not measures of financial performance under IFRS and should not be considered as alternatives to other indicators of the Group’s operating performance, cash flows or any other measure of performance derived in accordance with IFRS. Information regarding these measures is sometimes used by investors to evaluate the efficiency of a company’s operations and its ability to employ its earnings toward repayment of debt, capital expenditures and working capital requirements. There are no generally accepted principles governing the calculation of these measures and the criteria upon which these measures are based can vary from company to company. These measures, by themselves, do not provide a sufficient basis to compare the Company’s performance with that of other companies and should not be considered in isolation or as a substitute for operating profit or any other measure as an indicator of operating performance, or as an alternative to cash generated from operating activities as a measure of liquidity.
32 Underlying gross profit Underlying gross profit provides a measure of direct product profitability. It is defined as gross profit before non-underlying items. The Group believes underlying gross profit is a useful measure as it provides a better understanding of the Group’s results of operations by providing additional information on what the Directors consider to be some of the drivers of the Group’s financial performance. The table below sets out the reconciliation of the Group’s underlying gross profit for the periods indicated:
Financial Year 2018 2019 2020 Reported Restated(1) Reported (£ millions) Gross Profit/(loss) ...... 360.8 362.0 307.1 Inventory changes in estimates ...... — — 32.4 Change in prior year carrying amount of inventory ...... — 20.2 — Change to inventory obsolescence provision ...... — — 13.5 North America duty drawback income ...... — — (2.2) Underlying gross profit ...... 360.8 382.2 350.7
Notes: (1) The restatement for Financial Year 2019 relates to the prior year stock misstatement as described in Note 1(y) to the Ted Baker Annual Report for Financial Year 2020 and the inclusion of licence income in revenue. Underlying profit before tax The Group believes underlying profit before tax is a useful measure as it provides a better understanding of the Group’s results of operations by providing additional information on what the Directors consider to be some of the drivers of the Group’s financial performance and achieves a consistent comparison of performance over time. The table below sets out the reconciliation of the Group’s underlying profit/(loss) before tax from reported profit/(loss) before tax for the periods indicated:
Financial Year 2018 2019 2020 Reported Restated(1) Reported (£ millions) Profit/(loss) before tax ...... 68.8 30.7 (79.9) Changes in estimates for inventory ...... — — 32.4 Change in prior year carrying amount of inventory ...... — 20.2 — Change to inventory obsolescence provision ...... — — 13.5 North America duty drawback income ...... — — (2.2) Loss on disposal of Asian business ...... — — 7.6 Impairment of property, plant and equipment and right-of-use assets ...... 4.5 8.7 16.2 Other closure costs ...... — — 0.6 Provision for specific trade and other receivables ...... — 0.6 — Acquisition costs and unwind of fair value accounting adjustments ...... — 1.7 4.7 Legacy warehouse costs ...... (1.1) — — North America reorganisation costs and other restructuring costs ...... 1.3 — 1.4 Legal and professional costs ...... — 1.1 6.5 Unwind of fair value adjustments ...... — — 1.0 Foreign exchange on the translation of monetary assets and liabilities denominated in foreign currencies ...... (0.7) 0.5 3.0 Underlying profit before tax ...... 72.8 63.5 4.8 Impact of IFRS 16 ...... — — 5.0 Underlying profit before tax and IFRS 16 ...... 72.8 63.5 9.8
Notes: (1) The restatement for Financial Year 2019 relates to the prior year stock misstatement as described in Note 1(y) to the Ted Baker Annual Report for Financial Year 2020 and the inclusion of licence income in revenue.
33 Adjusted EBITDA Adjusted EBITDA is defined as reported profit after tax before tax, interest, depreciation and amortization and impairment. The Group believes Adjusted EBITDA is a useful measure as it is widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance. The table below sets out the reconciliation of the Group’s Adjusted EBITDA from reported profit/(loss) after tax for the periods indicated:
Financial Year 2018 2019 2020 Reported Restated(1) Reported (£ millions) Profit after tax ...... 52.7 24.5 (70.4) Taxation ...... 16.0 6.2 (9.4) Net finance costs ...... 2.5 4.2 15.5 Depreciation and amortisation ...... 23.2 25.3 65.1 Impairment ...... 4.5 8.7 16.2 Adjusted EBITDA ...... 98.9 68.8 16.9
Notes: (1) The restatement for Financial Year 2019 relates to the prior year stock misstatement as described in Note 1(y) to the Ted Baker Annual Report for Financial Year 2020 and the inclusion of licence income in revenue. Net debt The Group presents net debt because the Directors believe that it contributes to a better understanding of the Group’s liquidity and financial position by providing additional information in respect of the Group’s ability to meet its financial obligations. Furthermore, the Directors believe that net debt is widely used by certain investors, securities analysts and other interested parties as a supplemental measure of liquidity and financial position. The table below sets out the reconciliation of the Group’s net debt from total liabilities for the periods indicated:
Financial Year 2018 2019 2020 Reported (£ millions) Cash and cash equivalents ...... 16.7 14.7 52.9 Loans and other borrowings—current ...... (81.5) (95.5) (180.0) Loans and other borrowings—non current ...... (47.0) (43.0) — Net debt(1) ...... (111.8) (123.8) (127.1)
Note: (1) This statement of net debt does not reflect the Group’s lease liabilities recognised under IFRS 16. The Group excludes lease liabilities arising under IFRS 16 from indebtedness, as this treatment aligns with the definition of net debt under its banking covenants. The IFRS 16 lease liabilities recognised as at 25 January 2020 were £168.3 million (split, current: £36.4 million; non- current: £131.9 million) and there has been no material change in this figure since that date
Underlying net working capital to sales ratio Underlying net working capital to sales ratio is defined as the sum of trade and other receivables and Inventories less trade and other payables, over revenue. The Group believes underlying net working capital to sales ratio is a useful measure as it illustrates how efficiently the Company is utilising its working capital.
34 The table below sets out the reconciliation of the Group’s underlying net working capital to sales ratio for the periods indicated:
Financial Year 2018 2019 2020 Reported Restated(1) Reported (£ millions) Trade and other receivables ...... 64.3 78.6 67.3 Inventories ...... 187.2 205.6 131.7 Trade and other Payables ...... (82.9) (108.6) (99.3) Net working capital ...... 168.6 175.6 99.6 Revenue ...... 591.7 639.6 630.5 Net working capital to revenue ...... 0.28 0.27 0.16
Notes: (1) The restatement for Financial Year 2019 relates to the prior year stock misstatement as described in Note 1(y) to the Ted Baker Annual Report for Financial Year 2020 and the inclusion of licence income in revenue. Constant currency Constant currency is an unaudited metric that retranslates the results for the prior year at the current year’s rates of exchange. Management believes that this allows a better understanding of underlying business performance. The following significant average exchange rates applied during Financial Year 2018 and Financial Year 2019 and Financial Year 2020:
Average Average Average Year end Year end Year end rate rate rate rate rate rate 2018 2019 2020 2018 2019 2020 Sterling/Euro ...... 1.13897 1.12954 1.1438 1.1384 1.15614 1.1853 Sterling/US Dollar ...... 1.29932 1.32815 1.27828 1.4156 1.31945 1.3065 The tables below sets out the constant currency variance of the Group’s segments for the periods indicated:
Financial Year (£ millions) Constant 2019 2020 variance Restated(1) Reported Variance currency Revenue ...... 639.6 630.5 (1.4)% (2.4)% Retail revenue ...... 461.0 439.9 (4.6)% (5.4)% Store revenue ...... 339.3 321.2 (5.3)% (6.3)% e-Commerce revenue ...... 121.7 118.7 (2.4)% (3.1)% Wholesale revenue ...... 156.5 171.5 9.6% 8.1% Licence revenue ...... 22.1 19.0 (14.1)% (14.1)%
Notes: (1) The restatement for Financial Year 2019 relates to the prior year stock misstatement as described in Note 1(y) to the Ted Baker Annual Report for Financial Year 2020 and the inclusion of licence income in revenue.
Financial Year Reported Constant (£ millions) currency 2018 2019 Reported Restated(1) Variance variance Revenue ...... 591.7 639.6 8.1% 8.8% Retail revenue ...... 442.5 461.0 4.2% 4.8% Store revenue ...... 341.4 339.3 (0.6)% 0.1% e-Commerce revenue ...... 101.1 121.7 20.4% 20.8% Wholesale revenue ...... 149.2 156.5 4.8% 5.7% Licence income ...... 21.4 22.1 3.1% 3.1%
Notes: (1) The restatement for Financial Year 2019 relates to the prior year stock misstatement as described in Note 1(y) to the Ted Baker Annual Report for Financial Year 2020 and the inclusion of licence income in revenue.
35 CURRENCIES In this document and the information incorporated by reference into this document, references to “£”, “Sterling”, “pence”, “Pounds Sterling” or “GBP” are to the lawful currency of the United Kingdom and references to “US dollars”, “US$”, “$US”, “US¢” or “cents” are to the lawful currency of the United States. The abbreviation “€” represents the euro, the European single currency.
NO PROFIT FORECAST No statement in this document is intended as a profit forecast and no statement in this document should be interpreted to mean that earnings per Share for the current or future financial years would necessarily match or exceed the historical published earnings per Share.
NOTICE TO INVESTORS IN THE UNITED STATES OF AMERICA Subject to certain exceptions, neither this document nor the Application Form nor the Offer for Subscription Application Form constitute, or will constitute, or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, the New Shares to any Shareholder with a registered address in, or who is resident of, the United States. The New Shares being offered outside the United States are being offered in reliance on Regulation S. Subject to certain exceptions, any person in the United States who obtains a copy of this document will be unable to purchase, or subscribe for the New Shares and is required to disregard this document. Notwithstanding the foregoing, the Company reserves the right to offer the New Shares to a limited number of Shareholders in the United States reasonably believed to be QIBs, within the meaning of Rule 144A, in offerings exempt from or in a transaction not subject to, the registration requirements under the Securities Act. If you are a QIB located in the United States, in order to acquire any of the New Shares you must sign and deliver an investor letter in the form provided by the Company. If you sign such an investor letter, you will be, amongst other things: representing that you and any account for which you are acquiring the New Shares are a QIB; and agreeing not to reoffer, sell, pledge or otherwise transfer the New Shares except: in an offshore transaction in accordance with Rule 904 of Regulation S (which, for the avoidance of doubt, includes a sale over the London Stock Exchange), and neither the seller nor any person acting on its behalf knows that the transaction has been pre-arranged with a buyer in the United States; to a QIB in a transaction in accordance with Rule 144A; with respect to the New Shares only, pursuant to Rule 144 under the Securities Act (if available); or in another transaction pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and, in each case, in compliance with any applicable securities laws of any state or other jurisdiction of the United States. No representation has been, or will be, made by the Company or the Underwriters as to the availability of Rule 144 under the Securities Act or any other exemption under the Securities Act or any applicable securities laws of any state or other jurisdiction of the United States for the reoffer, pledge or transfer of the New Shares. Any person in the United States who obtains a copy of this document, an Application Form and/or an Offer for Subscription Application Form and who is not a QIB is required to disregard them.
OVERSEAS TERRITORIES Shareholders who have registered addresses in or who are resident in, or who are citizens of, all countries other than the United Kingdom should refer to paragraph 8 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” and paragraph 5 of “Part V—Terms and Conditions of the Offer for Subscription” of this document.
AVAILABLE INFORMATION If, at any time, the Company is neither subject to Section 13 or Section 15(d) of the United States Securities Exchange Act of 1934, as amended (the Exchange Act), nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the Company will furnish, upon request, to any holder or beneficial holder of Shares, or any prospective purchaser designated by any such holder or beneficial owner, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. In such cases, the Company will also furnish to each such owner all notices of general Shareholders’ meetings and other reports and communications that the Group generally makes available to Shareholders.
36 ENFORCEMENT OF CIVIL LIABILITIES The ability of an Overseas Shareholder to bring an action against the Company may be limited under law. The Company is a public limited company incorporated in England and Wales. The rights of holders of Shares are governed by the Companies Act and by the Company’s Articles. These rights differ from the rights of shareholders in typical US corporations and some other non-UK corporations. An Overseas Shareholder may not be able to enforce a judgment against some or all of the Directors and executive officers. The majority of the Directors and executive officers are residents of the United Kingdom. Consequently, it may not be possible for an Overseas Shareholder to effect service of process upon the Directors and executive officers within that Shareholder’s country of residence or to enforce against the Directors and executive officers judgments of courts of that Shareholder’s country of residence based on civil liabilities under that country’s securities laws. There can be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the United Kingdom against the Directors or executive officers who are residents of the United Kingdom or countries other than those in which judgment is made. In addition, the English or other courts may not impose civil liability on the Directors or executive officers in any original action based solely on the foreign securities laws brought against the Company or the Directors in a court of competent jurisdiction in England or other countries.
37 CAPITAL RAISING STATISTICS
Offer Price for each New Share ...... 75 pence Discount of Offer Price to the Closing Price on 29 May 2020(1) ...... 51.1% Number of Shares in issue at 29 May 2020(1) ...... 44,586,562 Placing and Open Offer and Firm Placing Basis of Open Offer ...... 4 Open Offer Shares for every 7 Existing Shares Number of New Shares to be issued pursuant to the Placing and Open Offer . . 25,478,035 Number of New Shares to be issued pursuant to the Firm Placing ...... 101,188,632 Number of Shares in issue immediately following completion of the Placing and Open Offer and Firm Placing(2) ...... 171,253,229 New Shares as a percentage of the enlarged issued share capital of the Company immediately following completion of the Placing and Open Offer and Firm Placing(2) ...... 74.0% Firm Placed Shares as a percentage of the enlarged issued share capital of the Company immediately following completion of the Placing and Open Offer and Firm Placing(2) ...... 59.1% Estimated net proceeds receivable by the Company from the Placing and Open Offer and Firm Placing after expenses ...... £90.0 million Estimated expenses in connection with the Placing and Open Offer and Firm Placing ...... £5.0 million Offer for Subscription Maximum number of New Shares available for subscription pursuant to the Offer for Subscription(3) ...... up to 13,333,333 Number of Shares in issue immediately following completion of the Capital Raising if the Offer for Subscription is subscribed in full(4) ...... 184,586,562 New Shares as a percentage of the enlarged issued share capital of the Company immediately following completion of the Capital Raising if the Offer for Subscription is subscribed in full(4) ...... 75.8% Estimated maximum net proceeds receivable by the Company from the Offer for Subscription after expenses(5) ...... £9.6 million Estimated maximum expenses in connection with the Offer for Subscription(5) . . £0.4 million
Notes: (1) Being the last business day prior to the date of this document
(2) Assuming that no Shares are issued as a result of the exercise of any options between 19 May 2020, being the latest practicable date prior to the publication of this document, and Admission becoming effective, and assuming no Shares are issued pursuant to the Offer for Subscription. (3) The New Shares may be issued pursuant to the Offer for Subscription regardless of whether the Offer for Subscription is subscribed in full. (4) Assuming that no Shares are issued as a result of the exercise of any options between 19 May 2020, being the latest practicable date prior to the publication of this document, and Admission becoming effective, and assuming the Offer for Subscription is subscribed in full. (5) Assuming the Offer for Subscription is subscribed in full.
38 EXPECTED TIMETABLE OF PRINCIPAL EVENTS(1)(2)(3)
2020 SPA executed to implement the Disposal ...... 20 March Record Date for entitlements under the Open Offer ...... close of business on 28 May Announcement of the Capital Raising ...... 7.00 a.m. on 1 June Publication of the Prospectus, Application Form, Offer for Subscription Application Form and Proxy Forms ...... 1 June Ex-entitlement date for the Open Offer ...... 1 June Announcement of the results of the Firm Placing through a Regulatory Information Service ...... 1 June Offer for Subscription opens ...... 2 June Open Offer Entitlements and Excess Open Offer Entitlements enabled in CREST and credited to stock accounts of Qualifying CREST Shareholders in CREST ...... 2 June Recommended latest time for requesting withdrawal of Open Offer Entitlements and Excess Open Offer Entitlements from CREST(4) . . . . . 4.30 p.m. on 11 June Latest time and date for depositing Open Offer Entitlements and Excess Open Offer Entitlements into CREST(5) ...... 3.00 p.m. on 12 June Latest time and date for splitting of Application Forms (to satisfy bona fide market claims only) ...... 3.00 p.m. on 15 June Latest time and date for receipt of Forms of Proxy or electronic proxy appointments ...... 11.00 a.m. on 16 June Record date for voting at the General Meeting ...... 16 June Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate) ...... 11.00 a.m. on 17 June Latest time and date for receipt of completed Offer for Subscription Application Forms and payment in full under the Offer for Subscription ...... 11.00 a.m. on 17 June Announcement of the results of the Placing and Open Offer and Offer for Subscription through a Regulatory Information Service ...... 18 June General Meeting ...... 11.00 a.m. on 18 June Results of General Meeting announced through a Regulatory Information Service ...... 18 June Admission and commencement of dealings in New Shares ...... By 8.00 a.m. on 19 June CREST Members’ accounts credited in respect of New Shares in uncertificated form ...... From 8.00 a.m. on 19 June Expected date of completion of the Disposal ...... by 30 June Expected despatch of definitive share certificates for New Shares in certificated form ...... Within 14 days of Admission
Notes: (1) The times and dates set out in this “Expected Timetable of Principal Events” and mentioned in this document, the Application Form, the Offer for Subscription Application Form and in any other document issued in connection with the Capital Raising are subject to change by the Company (with the agreement of, in certain instances, the Underwriters), in which event details of the new times and dates will be notified to the FCA, the London Stock Exchange and, where appropriate, to Shareholders.
(2) References to times in this document are to London time.
39 (3) The ability to participate in the Placing and Open Offer and the Offer for Subscription are subject to certain restrictions relating to Shareholders with registered addresses outside the United Kingdom, details of which are set out in paragraph 8 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” and paragraph 5 of “Part V—Terms and Conditions of the Offer for Subscription” of this document.
(4) If your Open Offer Entitlements and Excess Open Offer Entitlements are in CREST and you wish to convert them to certificated form. (5) If your Open Offer Entitlements and Excess Open Offer Entitlements are represented by an Application Form and you wish to convert them to uncertificated form.
40 DIRECTORS, COMPANY SECRETARY AND ADVISERS Board of Directors A list of the members of the Company’s Board of Directors is set forth in the table below.
Name Position Sharon Baylay ...... Acting Non-Executive Chair Rachel Osborne ...... Chief Executive Officer David Wolffe ...... Chief Financial Officer Helena Feltham ...... Senior Independent Director Andrew Jennings ...... Non-Executive Director Jonathan Kempster ...... Non-Executive Director
* In addition, John Barton has been proposed a Director (the proposed Non-Executive Chair) with effect from 1 July 2020. Each of the Directors’ and the Proposed Director’s business address is the Company’s head office at The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB. Telephone: +44 (0) 20 7255 4800
Company Secretary Peter Hearsey-Zoubie Registered Office The Ugly Brown Building 6a St Pancras Way London NW1 0TB Joint Bookrunner, Joint Underwriter and Joint Global Goldman Sachs International Co-ordinator Plumtree Court 25 Shoe Lane London EC4A 4AU Sponsor, Joint Bookrunner, Joint Underwriter and Joint Global Liberum Capital Limited Co-ordinator Ropemaker Place 25 Ropemaker Street London EC2Y 9LY Reporting Accountants Grant Thornton UK LLP 30 Finsbury Square London EC2A 1AG Auditors to the Company KPMG LLP 15 Canada Square Canary Wharf London E14 5GL Legal advisers to the Company as to English and US law in Freshfields Bruckhaus Deringer LLP connection with the Capital Raising 65 Fleet Street London EC4Y 1HS Legal advisers to the Company in connection with the Disposal Addleshaw Goddard LLP Milton Gate 60 Chiswell Street London EC1Y 4AG Legal advisers to the Underwriters and Sponsor as to English Hogan Lovells International LLP and US law in connection with the Capital Raising Atlantic House 50 Holborn Viaduct Holborn London EC1A 2FG Valuer of the Disposal Jones Lang LaSalle Limited 30 Warwick Street London W1B 5NH
41 Registrar Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Receiving Agent Link Asset Services Corporate Actions The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
42 PART I—LETTER FROM THE ACTING NON-EXECUTIVE CHAIR OF TED BAKER PLC
Directors: Head Office: Sharon Baylay The Ugly Brown Rachel Osborne Building David Wolffe 6a St Pancras Way Helena Feltham London NW1 0TB Andrew Jennings Jon Kempster 1 June 2020 To holders of Ted Baker Plc ordinary shares Dear Shareholder
Proposed Disposal of Big Lobster Limited and Proposed Placing and Open Offer of 25,478,035 New Shares, Firm Placing of 101,188,632 New Shares and Offer for Subscription of up to 13,333,333 New Shares at 75 pence per New Share and Notice of General Meeting
1. Introduction Ted Baker’s board of directors (the Board) has today announced its intention to raise approximately £95.0 million in gross proceeds (approximately £90.0 million in net proceeds) by way of a fully underwritten Placing and Open Offer and Firm Placing. Up to a further approximately £10.0 million in gross proceeds (approximately £9.6 million net of commissions) may also be raised by way of an Offer for Subscription which is not underwritten (the Offer for Subscription, together with the Placing and Open Offer and Firm Placing, comprising the Capital Raising). In addition, on 20 March 2020, No Ordinary Designer Label Limited (the Seller), a wholly-owned subsidiary of the Company, entered into a share purchase agreement with a wholly-owned subsidiary of the British Airways Pension Fund, St Pancras Way Block C Unit Trust (the Purchaser) in relation to the sale by the Seller of the entire issued share capital of Big Lobster Limited (Big Lobster) to the Purchaser (the Disposal). Big Lobster is a wholly-owned subsidiary of the Company and its only material asset is The Ugly Brown Building at 6a St Pancras Way, London NW1 0TB (the Property), which is the Company’s head office. The expected gross aggregate cash consideration payable to the Seller for the Disposal is £78.75 million (subject to completion of a customary completion accounts adjustment mechanism) and will be paid in cash on Completion, which is expected to take place by 30 June 2020. The net proceeds of at least £72.0 million (post tax) will be used to reduce the Group’s indebtedness to the Lenders. In accordance with the Listing Rules, due to the size of the Disposal in relation to the size of the Company, the Disposal constitutes a Class 1 transaction (as defined in the Listing Rules) and requires the approval of the Shareholders. A notice convening the General Meeting, at which the Disposal Resolution will be proposed, together with explanatory notes, is set out at the end of this document. The purpose of this document is to explain the background to, and reasons for, the Disposal and the Capital Raising and to set out the terms and conditions of the Disposal and the Capital Raising. The Board believes the Disposal and the Capital Raising to be in the best interests of Shareholders as a whole and this document will explain why the Board unanimously recommends that Shareholders should vote in favour of the Resolutions, as each Director has committed to do so in respect of his or her own legal and beneficial holdings of Shares. The Placing and Open Offer and Firm Placing are fully underwritten by the Underwriters, subject to the terms of the Sponsor and Underwriting Agreement. The Offer for Subscription is not underwritten.
2. Background to the Disposal and the Capital Raising 2.1 Summary Ted Baker is a global lifestyle brand offering a range of products including menswear, womenswear, childrenswear, footwear and accessories. A quintessentially British brand, Ted Baker is known for its quirky fashion offering, high quality design detailing and distinctive use of pattern and colour. Ted Baker’s approach is focused on unwavering attention to detail and firm commitment to quality.
43 The brand operates through three main distribution channels: retail (including stores, concessions and e-Commerce), wholesale, and licensing (which includes territorial and product licences). As at 25 January 2020, the Group and its retail licencees had 563 stores and concessions worldwide, comprising of 198 in the UK, 123 in the rest of Europe, 140 in North America, 93 in the Middle East, Africa and Asia and 9 in Australasia.
2.2 Recent Trading Background In addition to the impact of the coronavirus pandemic as discussed below, in Financial Year 2020 the Group’s performance was impacted by very difficult trading conditions throughout the period, amplified by heightened levels of consumer uncertainty across many of its global markets. The external retail market has presented, and continues to present, unprecedented trading conditions, heighted competition, digital disruption, changing customer behaviour and demand and intense pressures on retail has led to a dramatic increase in promotional activity and an intense level of discounting. In 2019, these pressures were exacerbated in the United Kingdom by the significant impact on consumer sentiment and spending from Brexit and political uncertainty. Consequently, several of the Group’s distribution channels have witnessed declining sales, while a number of important product segments, including formalwear and women’s occasion wear, have experienced falling demand. The Group has also faced some difficult internal issues in the last year. As previously announced, the Group experienced some challenges with its 2019 Spring/Summer collections and trading over November and the Black Friday period was below expectations, with lower than anticipated margins and sell through. In addition, the store estate underperformed driven by sales pressure and high costs, with continued high cost store expansion. The Group’s performance was also negatively impacted by high working capital driven by a three year stock cycle that is no longer relevant in a fast moving fashion market. The Group also experienced high levels of operating expenditure across the business as a result of a failure to properly control costs and increase its share of e-Commerce. The Group’s free cash flow diminished as a result of lower Adjusted EBITDA, continued high levels of dividend and significant capital expenditure spend. In addition, several members of the Group’s senior management left the Group. As a result of the Group’s weaker financial performance, the Group was required to revise down guidance for Financial Year 2020 first in June 2019 and again in December 2019. The Directors expect trading conditions to be difficult for some time, especially in light of the significant challenges presented by the coronavirus pandemic. In light of the above, Group revenue decreased by 1.4 per cent. to £630.5 million in Financial Year 2020 (2019: £639.6 million, including licence income). Total retail sales including e-Commerce decreased by 4.6 per cent. to £439.9 million (2019: £461.0 million) for Financial Year 2020 and average retail square footage rose by 2.6 per cent. to 442,790 sq. ft (2019: 431,646 sq. ft). E-Commerce sales decreased by 2.4 per cent. and represented 27.0 per cent. of total retail sales (2019: 26.4 per cent., restated). Further non-underlying charges in the year related to £13.5 million in respect of a change in accounting policy for stock provision, £16.2 million in the impairment of stores, and a £7.6 million loss on disposal of the Asian businesses. As at 25 January 2020, the Facility Agreement of £180 million was fully drawn. In Financial Year 2020, the Group’s loss before tax was £79.9 million (2019: restated profit of £30.7 million). In Financial Year 2020, the Group’s underlying profit before tax was £4.8 million (£9.8 million before the impact of IFRS 16) (2019: underlying profit of £63.5 million). Underlying profit is adjusted for non-operating charges relating principally to inventory overstatement corrections, charges following the implementation of a revised stock provisioning policy and store impairments to reach a reported Group loss before tax of £79.9 million in Financial Year 2020 (2019: restated profit of £30.7 million). In December 2019, following an internal review, the Group identified that the value of inventory held on its balance sheet had been overstated. As a result of these findings, the Group engaged Deloitte LLP to undertake an independent and thorough review of this issue. In January 2020, the Group announced that the independent review had found that the Group’s inventories, as reported at the end of Financial Year 2019, were overstated by £58 million. Following the conclusion of Deloitte’s review and the completion of the year-end process and audit, this figure was subsequently refined and finalised showing a net inventory adjustment of £52.6 million, with the Group amending the opening value of its inventory position from £225.8 million to £205.6 million, a £20.2 million restatement. The restatement of inventory was due to stock that did not physically exist (representing £6.5 million), and adjustments to correct calculations (representing £13.7 million). In addition, through this exercise the Group has reviewed its approach to estimating the carrying value of stock and adopted a better estimate methodology which resulted in a £32.4 million reduction in stock value being accounted for as a change in estimate booked as a non-underlying expense in the income statement for the period ended 25 January 2020. The change in estimate was due to inventories considered obsolete (representing £9.4 million)
44 and changes for a revised stock costing methodology (representing £23.0 million). See “Part VII—Operating and Financial Review—Critical Accounting Policies” for more details. A comprehensive internal review, with external support, has led to the implementation of several measures to strengthen the Group’s accounting systems and processes including the reorganisation of the finance function with clearer responsibilities, greater focus, and more senior and experienced leaders, an increased and detailed detective review by senior management of journal entries, balance sheet reviews and revenue-impacting balances, as well as the documentation of correct stock accounting procedures. The Group also engaged Deloitte LLP to conduct an independent review of the changes needed to the Company’s systems and controls. This review has concluded and the Group is now in the process of updating its accounting processes and systems to implement Deloitte’s recommendations and expects to complete this process in the second half of the year. Deloitte’s recommendations include: • greater segregation of duties in key areas such as journals entries, for which a monthly detective journal review is being implemented; • an assessment of general IT controls across the business (including revenue, procure to pay, inventory and record to report) to ensure they are designed and implemented effectively and increase reliance on system- generated reports; • controls over manual spreadsheets to increase the reliability and quality of information and reduce the risk of error and deficiency; • implementing simplified, standardised and centralised processes to enable increased automation across the business, derive cost efficiencies and ensure a periodic review is performed to confirm changes are captured in a timely manner and controls are operating effectively; and • a training programme across finance to increase the understanding of accounting processes, the financial risks to the business and what the key controls are with the aim of reducing key person risk and improving the overall maturity of the finance environment. Following on from Deloitte’s review the Group intends to complete the implementation of a controls improvement programme, under the auspices of the Audit and Risk Committee, which includes improvements to spreadsheet controls, segregation of duties, system logs and approval matrices, followed by progressive simplification, standardisation and automation of reporting processes. The Group anticipates completing the programme in the second half of the Financial Year ending 30 January 2021.
‘Ted’s Formula for Growth’ strategy The Group has developed ‘Ted’s Formula for Growth’ strategy to improve efficiencies across the wider Group and address the key drivers of underperformance. ‘Ted’s Formula for Growth’ strategy is the culmination of six-months’ rigorous analysis, assessment work and the bringing together of insights from across the Executive team, industry trends and external experts. At its core, Ted’s Formula for growth is made up of three parts: reenergising product and brand, prioritisation of digital and capital light growth and significant cost reduction. Combined, these three elements will deliver a sustainably more profitable, higher free cash flow generating and higher return on capital employed business. This transformational strategy will see the business pivot towards a customer-centric, digital and territory approach and away from the previously adopted channels-based approach.
Building Block 1: Stabilise the Group’s Foundations The Group’s initial focus has been on putting stable foundations in place to alleviate the impact of poor trading performance and to manage cash flow requirements and increasing the Group’s flexibility to deliver its ‘Ted’s Formula for Growth’ strategy. This has involved a number of steps: • Refresh and strengthen the Group’s leadership. The Company has appointed a new Chair, CEO, CFO, Global Creative Director and a new CEO of North America, and created the roles of Chief Customer Officer and Chief People Officer. The Board now has three independent non-executive directors. • Recapitalisation of the business. A restructuring of debt, the sale and leaseback of the Group’s head office to reduce debt as well as the proposed Capital Raising will delever the balance sheet and increase financial flexibility over the medium term. • Management has undertaken a full operational and efficiency review. The Group has taken action to reduce head office costs, both in the United Kingdom and North America, which has allowed it to simplify
45 the organisation and reset the business for greater collaboration and cost savings. After Financial Year 2020, the Group announced that this reorganisation will achieve £5 million of cost savings for the current financial year, with £2.7 million exceptional cash costs to achieve these savings which will result in £7 million of annualised savings. • Rethink the Group’s vision and commercial strategy. The creation of an organisational structure that pivots the focus away from channel centricity, towards a customer-centric, digital and global approach with the potential to deliver faster and more profitable growth at greater return on capital employed. The Group’s brand vision has been reset so that the brand strength and relevance becomes a key enabler of its future success. • Respond effectively to the coronavirus pandemic. The Group has taken swift action to protect the business, its customers and its colleagues. The Group has responded dynamically to the challenges presented by the coronavirus pandemic, including taking a series of steps to reduce costs and protect cashflow and ensure the wellbeing of its teams. The focus is on stock on hand and minimum orders to fulfil sales demand with new products released where appropriate to support retail sales. As the Group reopens its stores in line with government guidance, it is taking strong precautions to ensure the safety of its customers and employees.
Building Block 2: Growth Drivers The Group will invest in product, creative content and new e-Commerce and digital platforms to operate a ‘digital first’ retail strategy and drive future profitable growth. This strategy is based on five primary growth drivers: • Attract more customers: deliver a deeper and broader relationship with new and existing customers, leading to higher share of wallet and lifetime value. • Be ‘no ordinary brand’: re-energise the brand and creative direction for all consumer touch points, strengthening the ‘no ordinary’, unconventional and aspirational position through innovation and consistency to increase awareness and purchase consideration. • Expand the Group’s product and its relevance: make clothing more relevant to all day / week occasions; drive accessories, footwear and large licence partner categories. • Be forward thinking: retaining relevance for business model, industry trends, internal R&D function and capability. • Profitably be where the customer is: reach customers in prioritised territories through the appropriate distribution and service models, in a profitable way.
Building Block 3: Operational Excellence Going forward, the Group will operate under the core philosophy of ‘Simpler, Smarter, Together’. By getting the basics right and operating more efficiently and collaboratively, the Group sees significant scope to improve profitability and cash generation. Initiatives in this building block are focused on creating a digital and data led operating model, creating a high performance business culture, and creating a commercial and agile business, enabled by a more effective organisation. The Group has established ‘Ted’s Formula for Growth’ office, with proven operational expertise to help support the delivery of these initiatives and to achieve the potential benefits. There are significant opportunities across the business to lower costs, improve efficiency and tighten controls, including: • Scope for significant improvement in gross margin through a series of structural bought-in margin improvements. • The Group plans to change how it buys goods (streamlining its critical path and reducing sampling), who it buys from (consolidation of its supplier base) and where it buys from (relocation of sourcing markets). Product margin can be further enhanced through the purchase of products throughout the season in response to customer preferences, reworked margin on outlet products and more sophisticated promotional activity.
46 • Continued focus on working capital efficiency. • Historically, the Group has operated with too much inventory, which has negatively impacted cash flow. Despite improvements in working capital efficiency over the last 12 months (with an improvement in underlying net working capital to sales ratio from 27.5 per cent. to 15.8 per cent.) the Group is highly confident it can achieve a further material improvement through shortening its product lifecycle from three years to two. • Reduce operating expenditure. • The Group’s recent cost review concluded the business is carrying high costs in several areas, including logistics and distribution, the head office and stores. As a result, it intends to renegotiate carrier arrangements, reduce requirements for air freight and implement productivity improvements in its Derby and Atlanta Distribution Centres which will further reduce the cost base within the business in addition to the annualised £7 million of cost savings relating to head office costs. • Improve retail store profitability. • The Group has conducted a thorough review of retail stores across all territories, with a critical focus on rental costs and payroll. It has identified significant cost saving potential on store payroll driven by new ways of working. In addition, the transformation team is in ongoing discussions with landlords across all territories and Directors remain confident in the Group’s ability to reduce rental costs. The Group has already taken the decision to close one store in Italy ahead of its lease expiry due to financial and strategic considerations. • Upgrade and enhance IT systems. • Going forward, capex and investment will be restricted to focus on critical systems enablers such as an upgraded e-Commerce platform and new payment service provider gateway to enable a much broader set of payment options for customers.
Financial Implications The Directors believe the successful implementation of this ‘Ted’s Formula for Growth’ strategy should result in a more profitable business, operating on a lower level of capital employed. Improved product margin, lower operating expenses and prioritisation of capital expenditure-light distribution should all contribute to driving greater return on capital employed and ultimately greater shareholder value. At the end of this initial three-year journey, Directors are targeting the following financial metrics: • Limit capital expenditure to £15 million annually; • Medium-term revenue growth of approximately 5 per cent.; • Adjusted EBITDA margin of 7.0 per cent. to 10 per cent. by the 2023 financial year; • Free cash flow generation, after capex, of at least £30 million by the 2023 financial year; and • Net debt to Adjusted EBITDA of 1.0x or less by the end of the 2023 financial year. These targets are not intended as a profit forecast and no statement in this document should be interpreted to mean that earnings per Share for the current or future financial years would necessarily match or exceed the historical published earnings per Share.
2.3 Impact of Coronavirus Pandemic The impact of the coronavirus pandemic is rapidly evolving which creates material uncertainty across many of the Group’s markets. Public policy and government responses have differed across each market and the Group has adopted measures designed to best serve employees, customers and wider stakeholders across its trading markets.
47 The Group has responded dynamically to the challenges presented by the coronavirus pandemic, including taking a series of self-help steps to reduce costs and protect cashflow and ensure the wellbeing of its teams. During the course of the coronavirus pandemic, all of the Group’s retail stores, outlets and concessions have been closed at times and as of the date of this Prospectus approximately 390 retail stores and concessions remain closed in line with relevant government guidance and a gradual reopening of stores, outlets and concessions is taking place in several European markets including Germany, France and the Netherlands. Footfall in China and Hong Kong following reopening was considerably lower than prior to closure and management expects that also to be the case in other jurisdictions. As the Group reopens its stores, it is taking strong precautions to ensure the safety of its customers and employees. Social distancing measures are being adhered to, with floor markings in local languages. The stores are thoroughly cleaned every day and hand sanitiser, anti-bacterial wipes, disinfectant and gloves are available in its stores. The stores are also initially limited to one shift a day. The Group is also adhering to local regulations in regards to the coronavirus pandemic where applicable, such as mandatory face masks and holding returns in a designated area for one week before resale. The Group has furloughed approximately 85 per cent. of its employees globally in line with a variety of government schemes across its trading markets. In addition, the Group has suspended all discretionary capital expenditure, temporarily reduced executive remuneration by 15 per cent., rephased product orders and is negotiating rent deferrals and rent reductions with landlords. The Group will also benefit from a 12 month business rates holiday in the United Kingdom (which is expected to save the Group £5.8 million in Financial Year 2021). This cash preservation programme is expected to deliver permanent cash flow savings of £138.4 million (of which £88.2 million relates to savings from the reduced purchasing of stock and recent stock liquidation, £20.4 million from improved payment terms, £5.8 million from a 12 month business rates holiday, £17.2 million from the furlough schemes, £6.5 million from putting all discretionary capex on hold and £0.3 million from Board and executive management pay cuts) and defer £10.9 million of cash payments (of which £3.4 million relates to employee tax and VAT deferrals for three months, £4.5 million from negotiated rent holidays and deferrals and £3.0 million on discretionary capex deferrals). The e-Commerce distribution channel continues to operate for customers as normal and is a channel the Group is intensively managing during this period of store closures, including holding a two week mid-season sale which was deeper and wider than normal to drive sales. The e-Commerce channel has proved much more resilient with sales in the first fourteen weeks of the financial year up approximately 50.3 per cent. on last year (49 per cent. on a constant currency basis), with an increase of 77.9 per cent. in the first six weeks of the lockdown in the United Kingdom (76.5 per cent. on a constant currency basis), albeit at much lower gross profits due to heavily discounted sales for part of the period of up to 60 per cent. The coronavirus pandemic has created unprecedented challenges for companies given its widespread and adverse global economic, social and operational impact, the effects of which are continuing to unfold. The Company’s confidence in the adequacy of its action plan to rectify the Group’s working capital shortfall (as described further in paragraph 24 of this “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”) is accordingly based on the following assumption relating to the impact of the coronavirus pandemic on its operations: • a 100 per cent. reduction in the Group’s physical store revenue (own, outlet and concessions) until early September 2020, followed by a partial recovery to a reduction of approximately 35 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and a 25 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • an approximately 75 per cent. reduction in the Group’s trustee, other wholesale and licence income until early September 2020, followed by a partial recovery to an approximately 50 per cent. reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 20 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • an approximately 20 per cent. reduction in the Group’s ecommerce revenue until early September 2020, followed by a partial recovery to an approximately 15 per cent. reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 20 per cent. increase in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • all store employees being furloughed while the Group’s physical stores are closed and store payroll costs reduced by approximately 95 per cent. until mid-June 2020, with government support for payroll costs
48 within the United Kingdom, and similar programmes in certain other markets in which the Group operates, for so long as the Group’s physical stores are required to be closed (to early September 2020 under the Company’s reasonable worst case scenario). Between mid-June 2020 and early September 2020 the Group anticipates a reduction in payroll costs of approximately 70 per cent. (compared to the corresponding period in the year ended 25 January 2020) as a group of store employees will return to work to prepare to reopen the Group’s stores. Following reopening in early September, the Company anticipates a reduction of store payroll costs (before redundancy costs) of approximately 25 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 15 per cent. reduction thereafter (compared to the year ended 25 January 2020); • an approximately 35 per cent. reduction in the Group’s central payroll until early September 2020 and a reduction (before redundancy costs) of approximately 30 per cent. thereafter for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 30 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • a bad debt driven increase in the Group’s overhead costs, excluding property costs, of approximately 20 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 20 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • an approximately 25 per cent. reduction in the Group’s property costs until early September 2020 followed by a reduction of approximately 20 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 5 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); and • a 100 per cent. reduction in the Group’s concession rent and service charges paid until early September 2020 followed by an approximately 25 per cent. reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 10 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020).
3. Leadership Changes As described above, in light of the recent and ongoing challenges Ted Baker has faced, the Group has spent the last nine months building the talent and capability of the Board and the senior management team to ensure it has the skills, diversity, experience and ambition to deliver and execute the strategy and transform the business. This has included the appointment of: • a new Chair (effective 1 July 2020), John Barton, chair of easyJet plc and formerly chair of Next plc; • a new CEO, Rachel Osborne, formerly CFO of Debenhams; • a new CFO, David Wolffe, formerly CFO of HMV Group; • a new Global Creative Director, Anthony Cuthbertson, formerly Global Design Director for Topshop; • a new Chief Customer Officer, Jennifer Roebuck, formerly Chief Marketing Officer at Feelunique; • a new Chief People Officer, Peter Collyer, formerly People Experience Director of Asos Plc; • a new CEO North America, Ari Hoffman, formerly CEO of Scotch & Soda; and • two new independent non-executive directors, Helena Feltham and Jon Kempster. The changes to the executive team have resulted in a smaller and focused team with clear accountability. With these new hires and with the capabilities of longer serving colleagues who understand the history and DNA of the Ted Baker brand, the Group has a diverse and creative team committed to delivering ‘Ted’s Formula for Growth’ strategy.
4. Facility Amendments The Group’s total debt balance at 22 March 2020 was £180.0 million. The Group’s net debt balance at 22 March 2020 was £137.8 million. This comprised of a fully-drawn three year £180 million GBP revolving credit facility, which was entered into in September 2019 (the Facility Agreement), and cash balances of £42.2
49 million. On 23 March 2020, the Group announced that its lending bank syndicate had agreed to provide an additional revolving credit facility of up to £13.5 million (Facility B) until 18 December 2020 taking the Group’s total available facilities to £193.5 million. On 20 May 2020, the Group entered into an amendment and restatement agreement with the lenders in respect of the Facility Agreement (the Amendment and Restatement Agreement), in terms of which the Facility Agreement will be amended and restated to, among other things, increase Facility B by £11.5 million to a total of £25 million (which will be available to be drawn down from 6 September 2020 until 1 month prior to Facility B’s maturity date, except that it will not be available during the period from 27 December 2020 and 30 January 2021, inclusive) and extend Facility B’s maturity date until January 2022. The amendments to the Facility Agreement pursuant to the Amendment and Restatement Agreement are conditional on the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing being passed at the General Meeting. Following the amendments to the Facility Agreement becoming effective, the total available bank credit facilities will increase to £205 million, as described above. The net proceeds of the sale of Big Lobster Limited will be used to repay loans outstanding under Facility A (with a corresponding portion of the Facility A commitments being cancelled following such prepayment). Following the application of the net proceeds of the Disposal, Facility A will be reduced to a maximum of £108 million and, together with the increased Facility B (as described above), the total available facilities will be a maximum of £133 million.
5. Information on Big Lobster Big Lobster is the owner of the freehold interest in the Property. Before it acquired this interest in January 2016, Big Lobster was a dormant company. The Property is used as the Group’s headquarters and is leased by Big Lobster to No Ordinary Designer Label Limited, a wholly-owned subsidiary of the Company. In December 2015, Big Lobster agreed to acquire the Property from Leysin Investments Limited for £55.3 million (the Acquisition). The costs incurred by the Group in connection with the Acquisition were £2.7 million. The Acquisition completed in January 2016, and the Group secured planning permission on 17 March 2020 for the redevelopment of the Property. The Acquisition was financed by the addition of a £60.0 million secured term loan (the Term Loan) to the Company’s then existing multi-currency revolving credit facility with The Royal Bank of Scotland and Barclays (the RCF). The Term Loan and RCF were refinanced in September 2019 and replaced with the Facility Agreement. The book value of the Property as recorded in the Group’s balance sheet as at 25 January 2020 was £58.0 million.
6. Information on the Purchaser British Airways Pension Trustee Limited is a company limited by guarantee established to hold the assets of the Airways Pension Scheme and the New Airways Pension Scheme, with British Airways Pension Trustee Limited acting in law as the Custodian Trustee of the assets of both schemes. The Trustee Directors of the Airways Pension Scheme and the New Airways Pension Scheme are the Directors of British Airways Pension Trustee Limited. As at 31 March 2019, British Airways Pension Trustee Limited held over £26 billion worth of investments, including £3.2 million worth of real estate assets, on behalf of the Airways Pension Scheme and the New Airways Pension Scheme. The purchasing entity, St Pancras Way Block C Unit Trust, is an indirectly owned subsidiary of British Airways Pension Trustee Limited.
7. Reasons for the Disposal As a result of the factors referred to in paragraphs 2.2 “—Recent Trading Background” and 2.3 “—Impact of Coronavirus pandemic” above, the Directors do not believe the Group to be in a financial position to undertake a redevelopment of the Property or to expose itself to the development risk associated with such a redevelopment. Accordingly, the Directors have decided to dispose of the Property through the sale of Big Lobster. The Directors believe that the Disposal is attractive for the following reasons: • the net proceeds of the Disposal will be used to reduce the level of the Group’s outstanding debt under the Facility Agreement to a more appropriate level in light of the current financial position of the Group, putting the business of the Group on a more financially-stable footing; • by disposing of the Property now, the Group will be crystallising a significant increase in the value of the Property;
50 • the Group is not considered by the Directors to be a natural holder of freehold assets; and • through the entry into the Block B Lease and the Block A Option, the Group will have secured appropriate and flexible arrangements for its head office function for the medium term. The Directors have engaged Jones Lang LaSalle (the Valuer) to provide an independent valuation of The Ugly Brown Building. The Valuer has valued the Property at £50.5 million as at 1 June 2020. The details of this valuation are set out in “Part V—Valuation Report”. Notwithstanding the material uncertainty contained therein, the net proceeds of the Disposal if completed will be in excess of the fair market value as estimated by Jones Lang LaSalle. The Directors believe that the Disposal is in the best interests of the Company and the Shareholders as a whole given the factors set out above, and that, if the Disposal does not occur, the Group will be at risk of being in breach of covenant in respect of the Facility Agreement, and at risk of facing liquidity issues.
8. Terms and Conditions of the Disposal Pursuant to the SPA, the Purchaser has agreed to acquire the entire issued share capital of Big Lobster from the Seller. Big Lobster is the owner of the Property. The key terms of the Disposal are as follows: • the Purchaser will acquire Big Lobster for approximately £78.75 million on a “debt-free, cash-free” basis; • Completion will occur on the date notified by the Seller to the Purchaser in writing (subject to such date being not less than 10 business days from the date of such notice), or such other date as the Seller and the Purchaser may agree, and is conditional on Shareholders voting in favour of the Disposal Resolution; and • the consideration of approximately £78.75 million (which amount will be subject to a net asset value true- up adjustment) shall be paid by the Purchaser to the Seller in cash on Completion. The net proceeds of at least £72.0 million (post tax) will be used to reduce the Group’s indebtedness to the Lenders. On 20 March 2020, the Seller also entered into the short-term Block B Lease of the Property with Big Lobster for a period post Completion. Additionally, on Completion, the Group will enter into the Block A Option. It is currently anticipated that, at the end of the term of the Block B Lease, the Seller will exercise the Block A Option. Completion is expected to take place on by 30 June 2020. Further details of the Disposal, including details of the terms of the SPA and the Block A Option (including the related Block A Lease), are set out in “Part III—Principal Terms and Conditions of the Disposal” of this document. Details of the terns of the Block B Lease are set out in paragraph 16.1.4 of “Part XII—Additional Information”.
9. Reasons for the Capital Raising In light of weak trading in Financial Year 2020, the inventory overstatement and the challenging retail environment, the Board conducted an operational and financial review of the business which highlighted the need for additional liquidity to fund the Group’s short-term working capital needs, strengthen the balance sheet and ensure the Group has a capital structure that will enable the Group to return to long-term growth. As part of the review, the Group developed ‘Ted’s Formula for Growth’ strategy to stabilise the business, respond to the impact of the coronavirus pandemic, improve operational performance and position the Group for long-term revenue growth. This ‘Ted’s Formula for Growth’ strategy includes the Capital Raising as a way to recapitalise the business through a combination of raising cash and repaying debt as well as to provide funds to support the transformational strategy and to mitigate the impact of the coronavirus pandemic. Accordingly, the Board has concluded that it is in the Group’s best interests to raise approximately £95.0 million in gross proceeds by way of a fully underwritten Placing and Open Offer and Firm Placing, and up to a further approximately £10.0 million in gross proceeds by way of an Offer for Subscription which is not underwritten. The Directors believe that this would enable the Group to materially reduce the level of debt within the Group, which will have the effect of restructuring the Group’s balance sheet and will also enable the Group to support the delivery of its ‘Ted’s Formula for Growth’ strategy.
10. Use of proceeds The Disposal is expected to raise, in aggregate, approximately £78.75 million in gross proceeds (at least £72.0 million in net proceeds, post tax).
51 The Placing and Open Offer and Firm Placing are expected to raise, in aggregate, approximately £95.0 million in gross proceeds (approximately £90.0 million in net proceeds). Up to a further approximately £10.0 million in gross proceeds (approximately £9.6 million net of commissions) may also be raised by way of an Offer for Subscription which is not underwritten. The Board currently intends to use the net proceeds of the Disposal to reduce its indebtedness to the Lenders, and the net proceeds of the Placing and Open Offer and the Firm Placing for general corporate purposes in support of ‘Ted’s Formula for Growth’ strategy, resulting in: • A £72 million reduction of its indebtedness to the Lenders under Facility A (offset in part by £25 million made available under Facility B for a net reduction of £47 million in available lending facilities); • £6 million for an upgraded e-Commerce platform; • an initial £31 million for trading and working capital requirements (with an additional £25 million available under Facility B for specified working capital purposes); • £24 million for refinancing and restructuring the business, including professional fees; and • £29 million for other capital expenditure projects. It is intended that any net proceeds of the Offer for Subscription will be applied to general corporate purposes.
11. Financial impact of the Disposal and the Capital Raising Had the Capital Raising taken place so that the net proceeds were accounted for as at 25 January 2020, the effect would have been an increase in cash and cash equivalents of £90 million. Had the Disposal taken place so that the net proceeds were accounted for as at 25 January 2020, the effect would have been an increase in cash and cash equivalents of £72 million. Your attention is also drawn to “Part IX—Unaudited Pro Forma Financial Information” of this document which contains an unaudited pro forma statement of net assets and an unaudited pro forma statement of income which illustrates the effect of the Disposal, the Placing and Open Offer and Firm Placing on the Group’s net assets and the consolidated income statement as at 25 January 2020 as if the Disposal, the Placing and Open Offer and Firm Placing had occurred at that date. This information has been prepared for illustrative purposes only.
12. Terms of the Capital Raising and of the New Shares The Company is proposing to raise gross proceeds of approximately £105.0 million (approximately £99.6 million net of estimated commissions, fees and expenses, assuming full take up under the Offer for Subscription) by way of a Placing and Open Offer of 25,478,035 New Shares, representing 14.9 per cent. of the enlarged issued share capital of the Company immediately following Admission (excluding the impact of the Offer for Subscription, 13.8 per cent. assuming full take up under the Offer for Subscription), a Firm Placing of 101,188,632 New Shares, representing 59.1 per cent. of the enlarged issued share capital of the Company immediately following Admission (excluding the impact of the Offer for Subscription, 54.8 per cent. assuming full take up under the Offer for Subscription), and an Offer for Subscription of up to 13,333,333 New Shares, representing up to 7.2 per cent. of the enlarged issued share capital of the Company immediately following Admission (assuming full take up under the Offer for Subscription), each at an Offer Price of 75 pence per New Share. The Directors have given careful consideration as to how to structure the proposed issue of ordinary shares and have concluded that a Placing and Open Offer and Firm Placing is the most suitable option available to the Company and its Shareholders at this time and the Offer for Subscription provides an opportunity for other potential investors, including employees and retail investors, to become shareholders in the Company. The Offer Price of 75 pence per New Share represents an effective 51.1 per cent. discount to the Closing Price of 153.3 pence on 29 May 2020, being the Business Day prior to the announcement of the Capital Raising. In setting the Offer Price, the Directors have considered the process by which the New Shares need to be offered to investors to ensure the success of the Capital Raising and raise a significant level of equity compared to the market capitalisation of the Company. The Directors believe that both the Offer Price and the discount are appropriate.
Placing and Open Offer The Underwriters, as agents for the Company, have made arrangements to conditionally place the Open Offer Shares with institutional investors at the Offer Price. The Open Offer Shares will be subject to clawback to
52 satisfy valid applications by Qualifying Shareholders under the Open Offer. Subject to the waiver or satisfaction of the conditions and the Sponsor and Underwriting Agreement not being terminated in accordance with its terms, any Open Offer Shares not subscribed for under the Open Offer will be issued to Placees procured by the Underwriters.
Open Offer Entitlements Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, the Application Form), each Qualifying Shareholder who is not a Restricted Person is being given an opportunity to apply for Open Offer Shares at the Offer Price (payable in full and free of all expenses) on the following pro rata basis: 4 Open Offer Shares at 75 pence per Open Offer Share for every 7 Existing Shares held and registered in their name at the Record Date and so on in proportion to any other number of Shares then held, rounded down to the nearest whole number of Open Offer Shares. Qualifying non-CREST Shareholders will have received an Application Form with this document which sets out their basic entitlement to Open Offer Shares as shown by the number of Open Offer Entitlements offered to them. Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlements on 2 June 2020. Qualifying Shareholders with holdings of Existing Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating their entitlements under the Open Offer. Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” of this document and, where relevant, in the Application Form.
Excess Application Facility Qualifying Shareholders who are not Restricted Persons may apply to subscribe for Excess Shares using the Excess Application Facility, should they wish. Qualifying Non-CREST Shareholders wishing to apply to subscribe for Excess Shares may do so by completing the relevant sections on the Application Form. Qualifying CREST Shareholders who wish to and are able to apply to subscribe for more than their Open Offer Entitlements will have Excess Open Offer Entitlements credited to their stock account in CREST, and should refer to paragraph 5.3 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” of this document for information on how to apply for Excess Shares pursuant to the Excess Application Facility. The Excess Application Facility will comprise Open Offer Shares that are not taken up by Qualifying Shareholders under the Open Offer pursuant to their Open Offer Entitlements, which have been clawed back from Placees and the aggregated fractional entitlements. Qualifying Shareholders’ applications for Excess Shares will, therefore, be satisfied only to the extent that applications by other Qualifying Shareholders are made for less than their pro rata Open Offer Entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the absolute discretion of the Directors in consultation with the Underwriters. Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non- CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. The New Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any of the New Shares which are not applied for under the Open Offer may be allocated to Placees or, failing which, to the Underwriters subject to the terms and conditions of the Sponsor and Underwriting Agreement, with the proceeds ultimately accruing for the benefit of the Company. The attention of Shareholders and any persons (including, without limitation, custodians, nominees and trustees) who have a contractual or other legal obligation to forward this document or an Application Form into a jurisdiction other than the United Kingdom is drawn to paragraph 8 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing”, which forms part of the terms and conditions of the Placing and
53 Open Offer and Firm Placing. In particular, Restricted Persons will not be sent this document or the Application Form. The Placing and Open Offer is conditional upon, among other things: (a) Shareholder approval of the Resolutions at the General Meeting; (b) the Sponsor and Underwriting Agreement having become or been declared unconditional in all respects and the Sponsor and Underwriting Agreement not having been terminated by the Underwriters in accordance with its terms prior to Admission; and (c) Admission occurring not later than 8.00 a.m. on 19 June 2020 (or such later time or date as the Company and the Underwriters may agree, being not later than 30 June 2020). Accordingly, if any such conditions are not satisfied or, if applicable, waived, the Placing and Open Offer will not proceed and any Open Offer Entitlements and Excess Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies will be returned to applicants (at the applicant’s risk) without interest as soon as possible. Shareholders who do not, or are not permitted to, acquire the New Shares will be diluted by 74.0 per cent. (excluding the impact of the Offer for Subscription) or 75.8 per cent. (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). The results of the Placing and Open Offer are expected to be announced on or around 18 June 2020.
Firm Placing The Company is proposing to issue 101,188,632 New Shares pursuant to the Firm Placing. The Firm Placed Shares are not to be offered first to Shareholders generally. The Board has undertaken discussions with key Shareholders in relation to the Firm Placing. The Firm Placed Shares represent 226.9 per cent. of the Shares in issue as at 19 May 2020 (being the latest practicable date prior to publication of this document) and are not subject to clawback under, nor do they form part of, the Open Offer. The Firm Placing is expected to raise approximately £75.9 million of gross proceeds. Shareholders who take up their pro rata Open Offer Entitlement in full will suffer 59.1 per cent. dilution to their interests in the Company as a result of the Firm Placing (assuming no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). The Firm Placing is subject to the same conditions and termination rights which apply to the Placing and Open Offer. If Admission does not take place on or before 8.00 a.m. on 19 June 2020 (or such later date as the Company and the Underwriters may agree, not being later than 8.00 a.m. on 30 June 2020), the Firm Placing will not proceed and subscription monies will be refunded to Firm Placees by cheque or CREST payment, as appropriate (at the Firm Placees’ risk).
Offer for Subscription Up to 13,333,333 New Shares are available under the Offer for Subscription at the Offer Price, representing gross proceeds of up to approximately £10.0 million (approximately £9.6 million net of commissions). The Offer for Subscription is only being made in the United Kingdom but, subject to applicable law, the Company may allot New Shares on a private placement basis to applicants in other jurisdictions. The Offer for Subscription is not underwritten. The terms and conditions of application under the Offer for Subscription are set out in “Part V—Terms and Conditions of the Offer for Subscription”, which forms part of the terms and conditions of the Offer for Subscription. The terms and conditions should be read carefully before an application is made. Investors should consult their respective stockbroker, bank manager, solicitor, accountant or other financial adviser if they are in any doubt about the contents of this document. The latest time and date for receipt of completed Offer for Subscription Application Forms and payment in full under the Offer for Subscription and settlement of relevant CREST instructions (as appropriate) is 11.00 a.m. on 17 June 2020, with Admission expected to take place on 19 June 2020.
54 In the event of excess applications under the Offer for Subscription, the basis of allocation will be determined at the discretion of the Board, in consultation with the Underwriters. The Offer for Subscription is separate to, and does not form part of, the Placing and Open Offer and Firm Placing.
Admission The New Shares issued pursuant to the Capital Raising will rank pari passu in all respects with the Existing Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of the Company after the date of issue of the New Shares. Applications will be made to the FCA and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities. It is expected that Admission will become effective and that dealings in the New Shares will commence as soon as practicable after 8.00 a.m. on 19 June 2020 (whereupon an announcement will be made by the Company to a Regulatory Information Service).
13. Intentions of the Directors and Senior Managers The only Director that holds Existing Shares currently is Andrew Jennings. Each of Rachel Osborne, David Wolffe, Helena Feltham and Jonathan Kempster have agreed to subscribe for the New Shares in the amount of £25,000 each, Sharon Baylay intends to subscribe for the New Shares in the amount of £50,000, and John Barton has agreed to subscribe for the New Shares in the Amount of £100,000. Andrew Jennings, who holds 5,005 Existing Shares, representing 0.01 per cent. of the Company’s existing issued share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document), has (i) committed to participate in full in the Open Offer in respect of the New Shares to which he is entitled; and (ii) given an irrevocable undertaking approving the Disposal and undertaking to vote his Existing Shares in favour of the Resolutions. In addition, Andrew Jennings has agreed to subscribe for the New Shares pursuant to a direct subscription agreement with the Company, for a total investment (including under the Open Offer) of £25,000. The only Senior Manager that holds Existing Shares currently is Phil Clark. Ari Hoffman has agreed to subscribe for the New Shares in the amount of £25,000. Tikki Godley, also known as Victoria Singleton, has agreed to further subscribe for the New Shares in the amount of £15,000 and Peter Collyer has agreed to subscribe for the New Shares in the amount of £10,000, Phil Clark, who holds 198 Existing Shares, representing 0.00 per cent. of the Company’s existing issued ordinary share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document), has (i) committed to participate in full in the Open Offer in respect of the New Shares to which he is entitled; and (ii) given an irrevocable undertaking approving the Disposal and undertaking to vote his Existing Shares in favour of the Resolutions. In addition, Phil Clark has agreed to subscribe for the New Shares pursuant to direct subscription agreements with the Company, for a total investment (including under the Open Offer) of £10,000.
14. Irrevocable undertakings and letters of intent The Principal Shareholder, who holds 15,540,280 Existing Shares, representing 34.85 per cent. of the Company’s existing issued share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document), has, on behalf of himself and any other registered holder of his Shares, given an irrevocable undertaking approving the Disposal and undertaking to vote his Existing Shares in favour of the Resolutions, aside from the resolution to approve his own related party transaction, described in paragraph 15 “Related party transactions” below. Toscafund Asset Management LLP, Threadneedle Asset Management Limited and Schroders Investment Management have each given a letter of intent confirming that they intend to vote, in aggregate, 12,870,076 Existing Shares, representing 28.87 per cent. of the Company’s existing issued share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document), in favour of the Disposal and the Capital Raising at the General Meeting, aside from, in the case of Toscafund Asset Management LLP and Threadneedle Asset Management Limited, the resolution to approve their own related party transaction, described in paragraph 15 "Related party transactions" below.
15. Related party transactions The Principal Shareholder, who holds 15,540,280 Existing Shares (representing 34.85 per cent. of the Company’s issued ordinary share capital as at 19 May 2020 (being the last practicable date prior to thepublication of this document)), has agreed to acquire up to 4,666,667 New Shares in the Firm Placing and the Placing (subject to clawback to satisfy valid applications under the Open Offer), resulting in the Principal
55 Shareholder being interested in not more than 15.8 per cent. of the enlarged issued share capital of the Company immediately following completion of the Capital Raising (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). Toscafund Asset Management LLP, which holds 6,412,776 Existing Shares (representing 14.38 per cent. of the Company’s issued ordinary share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document)), has agreed to acquire up to 38,666,667 New Shares in the Firm Placing and the Placing (subject to clawback to satisfy valid applications under the Open Offer), resulting in Toscafund Asset Management LLP being interested in not more than 26.4 per cent. of the enlarged issued share capital of the Company immediately following completion of the Capital Raising (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). Threadneedle Asset Management Limited, which holds 4,802,509 Existing Shares (representing 10.77 per cent. of the Company’s issued ordinary share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document)), has agreed to acquire up to 13,642,000 New Shares in the Firm Placing and the Placing (subject to clawback to satisfy valid applications under the Open Offer), resulting in Threadneedle Asset Management Limited being interested in not more than 11.5 per cent. of the enlarged issued share capital of the Company immediately following completion of the Capital Raising (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). As a consequence of the current interest of each of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited in the Company, each of their proposed participation in the Placing and Open Offer and Firm Placing is a related party transaction for the purposes of Chapter 11 of the Listing Rules and such transactions require the prior approval of independent Shareholders. None of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited are entitled to vote, and each has either undertaken to take all reasonable steps to ensure that it and its associates will abstain from voting or will appoint the Chair who will abstain from voting, on the resolution to approve its own related party transaction at the General Meeting. For a description of the related party resolutions, see paragraph 16 of this “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc” below.
16. Current trading and prospects in respect of Ted Baker In the first three months of this financial year, the Group faced the extraordinary challenge of the coronavirus pandemic across all of its trading markets, with customers, partners, suppliers and employees all impacted. A significant number of the Group’s wholesale partners have cancelled or delayed orders, impacting wholesale revenue, and the Group’s licence partners have also been affected by the pandemic, thereby impacting licence income. The Group responded dynamically to the challenges presented by the coronavirus pandemic, including taking a series of self-help steps to reduce costs and protect cashflow and ensure the wellbeing of its teams. During the course of the coronavirus pandemic, all of the Group’s retail stores, outlets and concessions have been closed at times and as of 2 May 2020 approximately 390 retail stores, outlets and concessions remain closed in line with relevant government guidance and a gradual reopening of stores, outlets and concessions is taking place in several European markets including Germany, France and the Netherlands. Footfall in China and Hong Kong following reopening was considerably lower than prior to closure and management expects that also to be the case in other jurisdictions. As the Group reopens its stores, it is taking strong precautions to ensure the safety of its customers and employees. Social distancing measures are being adhered to, with floor markings in local languages. The stores are thoroughly cleaned every day and hand sanitiser, anti-bacterial wipes, disinfectant and gloves are available in its stores. The stores are also initially limited to one shift a day. The Group is also adhering to local regulations with respect to the coronavirus pandemic where applicable, such as mandatory face masks and holding returns in a designated area for one week before resale. The Group has furloughed approximately 85 per cent. of its employees globally in line with a variety of government schemes across its trading markets. The Group has suspended all discretionary capital expenditure, temporarily reduced executive remuneration by 15 per cent., rephased product orders and is negotiating rent deferrals and rent reductions with landlords. The Group will also benefit from a 12 month business rates holiday in the United Kingdom (which is expected to save the Group £5.8 million in Financial Year 2021). This cash preservation programme is expected to deliver permanent cash flow savings of £138.4 million (of which £88.2 million relates to savings from the reduced purchasing of stock and recent stock liquidation, £20.4 million from improved payment terms, £5.8 million from a 12 month business rates holiday, £17.2 million from the furlough schemes, £6.5 million from putting all discretionary capex on hold and
56 £0.3 million from Board and executive management pay cuts) and defer £10.9 million of cash payments (of which £3.4 million relates to employee tax and VAT deferrals, £4.5 million from negotiated rent holidays and deferrals and £3.0 million on discretionary capex deferrals). The e-Commerce distribution channel continues to operate for customers as normal and is a channel the Group is intensively managing during this period of store closures. The e-Commerce channel has proved much more resilient with sales in the first fourteen weeks of the financial year up approximately 50.3 per cent. on last year (49 per cent. on a constant currency basis), with an increase of 77.9 per cent. in the first six weeks of the lockdown in the United Kingdom (76.5 per cent. on a constant currency basis), albeit at much lower margins due to heavily discounted sales for part of the period of up to 60 per cent. As the Group starts reopening stores, it expects to do so gradually and expects that there will be lower footfall and consumer demand for a time. Accordingly, in respect of the Group’s financial performance for the period from 25 January 2020 compared to the corresponding period in Financial Year 2020, the Group has suffered substantial reductions to revenue, operating profit, underlying profit and an increase in net loss. In the fourteen weeks ended 2 May 2020, the Group’s total revenue decreased 36.0 per cent. (36.6 per cent. on a constant currency basis), to £90.4 million (2019: restated £141.3 million). Over the same period, retail revenue decreased 34.8 per cent. (34.5 per cent. on a constant currency basis), to £58.8 million (2019: restated £89.9 million). This included store revenue of £25.2 million (2019: restated £66.8 million) and e-Commerce revenue of £33.5 million (2019: restated £22.3 million). Over the same period, wholesale revenue decreased 40.0 per cent. (40.7 per cent. on a constant currency basis), to £28.6 million (2019: restated £47.6 million) and licence income decreased 36.0 per cent. to £3.0 million (2019: restated £4.6 million). Prior to the coronavirus pandemic, in the four weeks ended 22 February 2020 the Group’s revenue was only slightly lower than the same period in 2019. As the impact of the coronavirus pandemic deepened, the Group’s revenue began decreasing, with the greatest effect felt in the six week period ended 2 May, during which the lockdown in the United Kingdom was in full effect. During this period, all of the Group’s segments were performing significantly below the same period in 2019, aside from e-Commerce, which saw a revenue increase of 77.9 per cent in the six week period ended 2 May, as compared to thesame period in 2019. In respect of the Group’s financial position as at the date of this document, preparation of a consolidated balance sheet requires numerous judgments and estimates about future store operating performance, the dates on which the Group’s physical stores will be permitted to reopen in the markets in which it operates and the cumulative macroeconomic impact on the Group’s customers’ discretionary income and the financial position of the Group’s trade creditors, and, as at 1 June 2020, it is not possible to reliably determine or quantify the impact of the coronavirus pandemic on the Group’s significant estimates (particularly with respect to impairment of property, plant and equipment, right of use assets and intangible assets, carrying amount of inventories, and carrying amount of trade receivables). The Group's accounting policies and a description of the methodology used in these estimates are described in Note 1(w) of the Ted Baker Annual Report for Financial Year 2020 under the captions “Impairment of property, plant and equipment, right of use assets and intangible assets” and “Carrying amount of inventories”. Management undertakes an impairment review for stores meeting certain criteria (primarily established stores with a cash contribution below 10 per cent. and determines value-in-use impairment using a discount rate equal to the Group’s weighted average cost of capital. Carrying value of inventory is impaired by reference to a provisioning policy based on a two-year product lifecycle. Nonetheless, assuming the impact of the coronavirus pandemic as set out in paragraph 19 of “Part XII—Additional Information”, which, inter alia, assumes that the Group’s retail stores and concessions remain closed for a period of six months to September 2020, the Group anticipates a significant impairment of the Group’s retail store assets, a significant impairment of trade receivables and a significant impairment in stock. In aggregate, the Group expects these impairments to have a material adverse impact on its balance sheet and to have a material, substantial adverse impact on its income statement. In the event of a shorter period during which the Group’s retail stores and concessions remain closed, the impact would be lessened, but still likely result in significant impairment charges. Since 25 January 2020 the Company has paid down £19.7 million under Facility A leaving total indebtedness at £160.3 million as at 28 May 2020. As described in paragraph 8 of “Part I—Letter from the Acting Non- Executive Chair of Ted Baker”, the Group expects to pay down approximately £72 million of its total indebtedness on completion of the Capital Raising and the Disposal. In light of the above, the Directors expect the Group’s profit margin to also deteriorate in the short-term with the Directors targeting a return to growth in the medium-term. Having reviewed its action plan against its current estimate of the impact of the coronavirus pandemic described in paragraph 2.3 of “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”, on completion of the Disposal and the Placing and Open
57 Offer and Firm Placing, the Company believes that the Group will have sufficient working capital for its present requirements, that is for the 12 months from the publication of this document. With the benefit of the strengthened capital structure following the Disposal and the Capital Raising, the Directors remain confident in the ability of the Group to continue to implement its ‘Ted’s Formula for Growth’ strategy and return to long-term growth.
17. Dividends While ‘Ted’s Formula for Growth’ strategy is being implemented, the Directors have suspended dividend payments to Shareholders. Given the uncertainty surrounding the coronavirus pandemic, the Directors determined that this suspension will continue. The Directors recognise that dividends are an important part of the Company’s returns to Shareholders and will look to resume the payment of dividends as soon as it is appropriate to do so.
18. General meeting and Resolutions You will find set out at the end of this document a notice convening a general meeting of the Company to be held at The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB on 18 June 2020 at 11.00 a.m. This general meeting is being held for the purpose of considering and, if thought fit, passing the Resolutions. In light of the coronavirus pandemic, the Directors take the well-being of the Company’s employees and shareholders very seriously. The UK Government has introduced measures to deal with the coronavirus pandemic which includes guidance on social distancing and restrictions on non-essential travel and public gatherings, which affect the manner in which the General Meeting can be conducted. The Directors regret that to ensure shareholders’ safety, shareholders are not permitted to attend the General Meeting in person. Any person attempting to attend the General Meeting in person will be refused admission. In order to comply with relevant legal requirements, the General Meeting will be convened with the minimum necessary quorum. This will be facilitated by the Company. We therefore strongly encourage shareholders to vote on all resolutions in advance of the General Meeting by completing their proxy forms or appointing a proxy electronically. Shareholders should appoint the Chair of the meeting (and not any named individual) to act as their proxy, otherwise their votes will be incapable of being cast. Arrangements have been made to provide an audio cast facility for the General Meeting to allow Shareholders to listen to the proceedings remotely given that they will be unable to attend in person. Please note that as the audio cast will be a listen-only facility, Shareholders will not be able to vote or ask questions on the day of the General Meeting. In order to access the audio cast facility, Shareholders are first required to pre-register online in advance of the General Meeting at https://www.incommglobalevents.com/registration/client/4038/ted-baker/. In order to register, Shareholders will need to provide their Investor Code, which can be found on their share certificate or any other recent shareholder communication. Shareholders should connect to the audio cast up to 15 minutes in advance of the meeting. In addition, all Shareholders will have the opportunity to ask written questions in advance of the General Meeting. Shareholders may submit questions, together with their name as it appears on the Company’s register of members, in relation to the General Meeting via email to [email protected] any time before 11.00 a.m. on 11 June 2020. Written answers to such questions will be published on the Company’s website after the General Meeting. The Directors will continue to keep Government guidance under review and may, if necessary, make further changes to the arrangements for the General Meeting, including how it is conducted. Further announcements and information will be provided as required and shareholders should continue to monitor the Company’s website at www.tedbakerplc.com and announcements for any updates in relation to the General Meeting arrangements that may need to be provided. A summary and explanation of the Resolutions proposed to be passed at the General Meeting are set out below, but please note that this does not contain the full text of the Resolutions and you should read this section in conjunction with the Resolutions in the “Notice of General Meeting” at the end of this document.
Disposal Resolution Due to the size of the Disposal in relation to the size of the Company, the Disposal constitutes a Class 1 transaction (as defined in the Listing Rules) and requires the approval of the Shareholders under the Listing Rules by ordinary resolution. The resolution to approve the Disposal in accordance with the terms of the SPA
58 (the Disposal Resolution) is therefore to be proposed at the General Meeting as an ordinary resolution and will pass if more than 50 per cent. of the votes cast (either in person or by proxy) are in favour.
Authorised Share Capital Resolution As on 19 May 2020, being the latest practicable date prior to the date of this document, the authorised share capital of the Company was £4,000,000 divided into 80,000,000 Shares and 44,586,562 Shares were in issue, as a result of which the Company is able to issue a maximum of 35,413,438 additional Shares. However, the maximum number of New Shares to be issued pursuant to the Capital Raising is 140,000,000 (assuming that no Shares are issued as a result of the exercise of any options between 19 May 2020, being the latest practicable date prior to the publication of this document, and Admission becoming effective). The resolution to amend the Articles (including the relevant provisions of the memorandum of association of the Company that is deemed to form part of the Articles) to remove the provisions specifying the authorised share capital of the Company is therefore required in order to enable the Company to issue sufficient New Shares to satisfy its obligations in connection with the Capital Raising. This resolution, referred to in this document as the Authorised Share Capital Resolution, is to be proposed at the General Meeting as a special resolution and will pass if more than 75 per cent. of the votes cast (either in person or by proxy) are in favour. The Company’s authorised share capital is set out in Article 4(A) of the Articles, which states as follows: “The authorised share capital of the Company immediately following the adoption of these Articles is £4,000,000 divided into 80,000,000 ordinary shares of 5p each” In addition, paragraph 6 of the Company’s memorandum of association (Memorandum), which was adopted before the Companies Act came into effect, states as follows: “The share capital of the Company is £5,000,000, divided into 4,000,000 Ordinary shares of £1 each and 5,000,000 ‘A’ cumulative convertible redeemable preference shares of 10p each and 5,000,000 ‘B’ cumulative convertible redeemable preference shares of 10p each*.
* The share capital of the Company as at 24 July 1997 pursuant to resolutions passed on 16 July 1997 was £4,000,000 divided into 80,000,000 Ordinary Shares of 5p each.” The Companies Act removed the concept of authorised share capital of a company. Further, section 28 of the Companies Act provides that provisions that immediately before 1 October 2009 were contained in a company’s memorandum of association but were not provisions of the kind included in the revised style of memorandum (including provisions in relation to the company’s authorised share capital) are to be treated as provisions of the company’s articles. As a result, paragraph 6 of the Company’s Memorandum is deemed to be a provision of the Company’s Articles (taking effect as setting out the maximum number of shares that may be allotted by the Company). The Authorised Share Capital Resolution is intended to delete these provisions in their entirety. This will have the effect of removing the restriction on the maximum number of shares that can be allotted by the Company, in line with market practice for listed companies. The Directors will still be limited as to the number of shares they can allot at any time because an allotment authority continues to be required under the Companies Act (save in certain circumstances).
Capital Raising Resolutions The resolutions to: (i) provide the Directors with the necessary authority and power to allot 140,000,000 New Shares to undertake the Capital Raising, which would apply until the conclusion of the Annual General Meeting of the Company to be held in 2020; and (ii) approve the issue of the New Shares on the terms set out in this document at a price of 75 pence per share, representing a discount of greater than 10 per cent. to the middle market price of the Existing Shares as at 29 May 2020, are to be proposed at the General Meeting as ordinary resolutions. These resolutions will pass if more than 50 per cent. of the votes cast (either in person or by proxy) are in favour and are required under section 551 of the Act (to authorise the Directors to allot the New Shares) and Listing Rule 9.5.10(3)(a) (to approve an issue process which is at a discount in excess of 10 per cent. to the middle market price of the Existing Shares as at 29 May 2020). These resolutions are referred to in this document as the New Share Issue Resolutions. The resolution to provide the Directors with the necessary authority and power to allot equity securities as if section 561 of the Companies Act did not apply to such allotment in order to undertake the Firm Placing and the Offer for Subscription, to apply until the conclusion of the Annual General Meeting of the Company to be held in 2020, is to be proposed at the General Meeting as a special resolution. This resolution will pass, subject
59 to the other Resolutions being passed, if more than 75 per cent. of the votes cast (either in person or by proxy) are in favour and is required under section 571 of the Act (to disapply statutory pre-emption rights). This resolution is referred to in this document as the Firm Placing and Offer for Subscription Resolution, and together with the New Share Issue Resolutions, the Capital Raising Resolutions.
Related Party Resolutions As a consequence of the current interest of each of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited in the Company, each of their proposed participation in the Placing and Open Offer and Firm Placing is a related party transaction for the purposes of Chapter 11 of the Listing Rules and such transactions require the prior approval of independent Shareholders by ordinary resolution (with the resolution related to the Principal Shareholder, the resolution related to Toscafund Asset Management LLP and the resolution related to Threadneedle Asset Management Limited together the Related Party Resolutions, and together with the Disposal Resolution, the Authorised Share Capital Resolution, and the Capital Raising Resolutions, the Resolutions). The Related Party Resolutions are therefore to be proposed at the General Meeting as ordinary resolutions and will pass, subject to the other Resolutions being passed, if more than 50 per cent. of the votes cast (either in person or by proxy) are in favour. None of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited are entitled to vote, and each has either undertaken to take all reasonable steps to ensure that it and its associates will abstain from voting or will appoint the Chair who will abstain from voting, on the resolution to approve its own related party transaction at the General Meeting.
19. Overseas Persons The attention of Qualifying Shareholders who have registered addresses outside of the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are holding Shares for the benefit of such persons (including, without limitation, custodians, nominees, trustees and agents), or who have a contractual or other legal obligation to forward this document and any other document in relation to the Placing and the Open Offer and Firm Placing to such persons, is drawn to the information which appears in “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing”. In particular, subject to certain exceptions, the Placing and Open Offer is not being made to Shareholders in the United States or into any Excluded Territory. Persons who have registered addresses in or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their professional advisers whether they require any governmental or other consents or need to observe any other formalities to enable them to acquire or subscribe for any New Shares. Any person with a registered address, or who is resident or located, in the United States or any other Excluded Territory who obtains a copy of this document, an Application Form or an Offer for Subscription Application Form is required to disregard them, except with the consent of the Company. This document and any accompanying documents are not being made available to Overseas Persons with registered addresses in any Excluded Territory (subject to limited exceptions) and may not be treated as an invitation to subscribe for any New Shares by any person resident or located in such jurisdictions or any other Excluded Territory. The New Shares have not been, and will not be, registered under the applicable securities laws of any Excluded Territory. Accordingly, subject to certain exceptions, the New Shares may not be offered, sold, delivered or transferred, directly or indirectly, in or into any Excluded Territory to or for the account or benefit of any national, resident or citizen of any Excluded Territory. Notwithstanding any other provision of this document, the Application Form or the Offer for Subscription Application Form, the terms of the Capital Raising relating to Overseas Persons may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company in its absolute discretion. This document has been prepared to comply with English law, the Prospectus Regulation Rules and the Listing Rules, and the information disclosed may not be the same as that which could have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.
60 NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.
20. Taxation Your attention is drawn to “Part XI—Taxation” of this document. If you are in any doubt as to your tax position, you should consult your own professional adviser without delay.
21. Share Schemes Outstanding options and awards granted under the Share Schemes may be adjusted in accordance with the rules of the relevant Share Scheme for any effect that the Placing and Open Offer and Firm Placing may have on those options and awards. Participants in the Share Schemes will be contacted separately with further information on their rights and how their options and awards will be affected by the Placing and Open Offer and Firm Placing.
22. Actions to be taken In respect of the General Meeting Existing Shareholders will find enclosed with this document a Form of Proxy for use at the General Meeting. You are requested to complete and sign the Form of Proxy in accordance with the instructions printed on it so as to be received by the Company’s registrar, Link, at the return address on the enclosed envelope, as soon as possible, and in any event no later than 11.00 a.m. on 16 June 2020 (or, in the case of an adjournment of the General Meeting, not less than 48 hours before the time fixed for holding of the adjourned meeting). Alternatively, you may appoint a proxy online by registering for a Share Portal account via the website of Link Asset Services, at www.signalshares.com. To register for the Share Portal you will need your Investor Code (IVC), which can be found on your share certificate or on any other recent shareholder communication. CREST Shareholders may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Link (CREST participant ID RA10). Electronic proxy appointments must also be received by no later 11.00 a.m. on 16 June 2020. The completion and return of the Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending the General Meeting and voting in person if you wish to do so.
In respect of the Open Offer If you are a Qualifying Non-CREST Shareholder and you wish to take up your Open Offer Entitlements in whole or in part and any Excess Open Offer Entitlements, you should complete and return the enclosed Application Form, together with your remittance for the full amount of the subscription monies for the Open Offer Shares being applied for in accordance with the instructions printed thereon and in “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing”, by post to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or by hand (during normal office hours only) to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to be received by Link Asset Services no later than 11.00 a.m. on 17 June 2020 being the latest time for acceptance and payment in full. If you do not wish to apply for any Open Offer Shares under the Open Offer you should not complete or return the Application Form. If you are a Qualifying CREST Shareholder and not also a Restricted Person, no Application Form is enclosed and you will receive a credit to your appropriate stock account in CREST in respect of the Open Offer Entitlements representing your entitlement under the Open Offer and in respect of the Excess Open Offer Entitlements for use in connection with the Excess Application Facility. The procedure for application and payment depends on whether, at the time at which application and payment is made, you have an Application Form in respect of your entitlement under the Open Offer or have Open Offer Entitlements and Excess Open Offer Entitlements credited to your stock account in CREST in respect of such entitlement. The latest time for applications under the Open Offer to be received is 11.00 a.m. on 17 June 2020. Full details of the terms and conditions of the Open Offer and the procedure for application and payment are contained in “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing”. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manager or other independent financial adviser authorised under FSMA if you are in the United Kingdom or, if you are not, from another appropriately authorised independent financial adviser.
61 In respect of the Offer for Subscription The terms and conditions of application under the Offer for Subscription are set out in “Part V—Terms and Conditions of the Offer for Subscription” and the Offer for Subscription Application Form, which is appended at the end of this document. These terms and conditions should be read carefully before an application is made. The latest time for applications under the Offer for Subscription is 11.00 a.m. on 17 June 2020. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manager or other independent financial adviser authorised under FSMA if you are in the United Kingdom or, if you are not, from another appropriately authorised independent financial adviser.
23. Further information Your attention is drawn to the further information set out in “Part II—Some Questions and Answers about the Placing and Open Offer and Firm Placing” to “Part XIV—Definitions and Glossary” (inclusive) of this document. Shareholders should read the whole of this document and not rely solely on the information set out in this letter. In addition, you should consider the risk factors on starting on page 13 of this document.
24. Importance of your vote The Company is of the opinion that the Group does not have sufficient working capital for its present requirements, that is, for the 12 months from the publication of this document. Shareholders are asked to vote in favour of the Resolutions at the General Meeting in order for the Disposal and the Capital Raising to proceed. If the any of the Resolutions are not passed and either the Disposal or the Capital Raising do not proceed, the Shareholders would likely lose all of their investment in the Company. The Directors believe that the successful completion of the Disposal and the Capital Raising are of critical importance to the Group’s future prospects and will strengthen the Group’s balance sheet, enable the amendment of the Facility Agreement, enhance the confidence of the Group’s suppliers and partners, and provide it with the financial flexibility to continue to invest in support of the next stage of the Group’s strategic development, for the benefit of Shareholders as a whole. As at 25 January 2020, the Group had £180.0 million outstanding under its Facility Agreement. On 20 March 2020, the Group’s Lenders agreed to make available a new facility B of £13.5 million until December 2020 in order to provide short-term liquidity support to the business (Facility B). In addition, the Group has agreed certain amendments to the Facility Agreement with the Lenders, including but not limited to: (i) an increase of Facility B by £11.5m to a total of £25 million and extension of its maturity date until January 2022; and (ii) a covenant holiday until 24 April 2021, with the existing financial covenants being removed and replaced by adjusted EBITDA and minimum liquidity covenants, such amendments being conditional on the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing being passed at the General Meeting. While the Resolution relating to the Disposal is not conditional upon Shareholders voting in favour of the Resolutions relating to the Capital Raising, if the Disposal, the Placing and Open Offer or Firm Placing (but not the Offer for Subscription) are not approved, or otherwise do not proceed to completion by no later than 2 July 2020 in respect of the Disposal and 22 June 2020 in respect of the Placing and Open Offer and Firm Placing, either such disapproval or failure to proceed to completion will constitute events of default under the Facility Agreement (which includes the Facility B) (the Timetable Events of Default). Any such Timetable Event of Default would entitle the requisite majority of the Lenders (who hold in aggregate 66.67 per cent. of the amounts outstanding under the Facility Agreement) (the Majority Lenders) to declare all amounts outstanding under the Facility Agreement (including the Facility B), which is expected to total approximately £179 million as at 22 June 2020, immediately due and payable and to take enforcement action against the Group, including without limitation to take control of the Group and/or its assets by enforcing their security over the assets of the Group or taking other steps (for example instituting insolvency proceedings). At the time of such Timetable Event of Default, the Group will not have sufficient funds available to repay the expected amounts due, and, in the absence of being able to agree or implement successfully any of the alternatives discussed below, enforcement action by the Lenders (by way of insolvency proceedings or otherwise) would likely result in Shareholders losing all of the value of their investment in the Company. The Resolutions to approve the Capital Raising are contingent on the approval of the Resolution relating to the Disposal. If the Resolution relating to the Disposal is not approved, the Capital Raising will not proceed, and one of the Timetable Events of Default will be triggered on 22 June 2020. If the Resolution relating to the Disposal is approved but the Resolutions to approve the Capital Raising are not, the Directors intend to proceed
62 with the Disposal, but the Timetable Event of Default in respect of the failure of the Placing and Open Offer and Firm Placing to proceed to completion will still be triggered on 22 June 2020. While the latter scenario would result in a lower working capital shortfall (approximately £90 - £98 million assuming receipt of the proceeds of the Disposal (depending on the Group’s cash position at the time), compared to approximately £162 - 170 million in the absence of such proceeds), in either circumstance, the Group would not have sufficient funds to repay in full the amounts due under the Facility Agreement and the Majority Lenders would be entitled to take enforcement action as described above, which would likely result in Shareholders losing all of their investment in the Company. If any of the Disposal, Placing and Open Offer or Firm Placing do not proceed, in order to avoid the possibility of immediate action by the Majority Lenders, the Directors expect that the Company would seek to obtain waivers or standstills of the Timetable Events of Default, although the Lenders have given no indication that such waivers or standstills would be forthcoming. The Directors expect that the Company would also ask the Lenders to further amend the Facility Agreement to allow additional funding to be made available to the Group (either by the lenders or by alternative finance providers) and/or seek alternative financing. The Directors are not confident that additional financing would be achievable nor that the lenders would be willing to continue to support the business in these circumstances and therefore the most likely outcome would be that the Shareholders lose all of the value of their investments in the Company. The Directors do not believe that any of these alternatives to the Disposal, Placing and Open Offer and Firm Placing would provide sufficient working capital. In addition, as these alternatives would require the participation, agreement or approval of external parties, they may not be successful. Even if the Lenders were willing to agree to any such amendments, waivers and/or additional funding and/or the Group was able to secure alternative financing, the Directors expect that the Group’s operational and commercial flexibility would be limited by the terms of such amendments or alternative financing and the Group may find it increasingly challenging and costly to refinance its Facility Agreement or any such alternative financing as they fall due, and the Group’s suppliers would be expected to continue to demand more onerous, and ultimately unsustainable, terms. In addition, even if the Group was able to avoid an Event of Default under the Facility Agreement or arrange alternative additional financing, doing so may require the Group to delay or reduce planned investments in the business, which could also have a material adverse effect on the Group’s future growth prospects. The Directors propose to rectify this anticipated shortfall in working capital by completing the Disposal, the Placing and Open Offer and Firm Placing and applying the net proceeds of both transactions as described in “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc—Use of proceeds”. Having reviewed its action plan against its current estimate of the impact of the coronavirus pandemic described in paragraph 2.3 of “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”, on completion of the Disposal and the Placing and Open Offer and Firm Placing, the Company is of the opinion that the Group will have sufficient working capital for its present requirements, that is for the 12 months from the publication of this document. If any of the Resolutions are not approved, there can be no assurance that any alternatives would be capable of implementation in the time available and/or would ultimately be successful and the Shareholders would likely lose all of their investment in the Company. Accordingly, the Directors believe that the successful completion of the Disposal and the Capital Raising are in the best interests of the Shareholders as a whole. As such, it is very important that Shareholders vote in favour of each of the Resolutions at the General Meeting so that, assuming that the other conditions to the Disposal and the Capital Raising are satisfied, the Disposal and the Capital Raising can proceed to completion.
25. Recommendation and voting intentions The Board believes the Disposal and the Capital Raising are of critical importance to the Group’s future prospects, will promote the success of the Company and are in the best interests of its Shareholders as a whole. The Board has received financial advice from Liberum on the Disposal in its capacity as sponsor, and in giving its financial advice to the Directors, Liberum has relied on the Board’s commercial assessment of the Disposal. The Board, having been so advised by Liberum in its capacity as Sponsor, consider that each related party transaction in connection with the Capital Raising to the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited is fair and reasonable as far as the Shareholders are concerned and is in the best interests of its Shareholders as a whole.
63 Accordingly, the Board unanimously recommends that Shareholders vote in favour of all the Resolutions to be proposed at the General Meeting, as the Directors each intend to do so in respect of their own holdings, amounting to 5,005 Existing Shares (representing approximately 0.01 per cent. of the Company’s existing issued share capital as at 19 May 2020 (being the Latest Practicable Date)).
Yours faithfully, for and on behalf of Ted Baker Plc
Sharon Baylay Acting Non-Executive Chair
64 PART II—SOME QUESTIONS AND ANSWERS ABOUT THE PLACING AND OPEN OFFER AND FIRM PLACING The questions and answers set out in this Part II are intended to be in general terms only and, as such, you should read “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” of this document for full details of what action you should take. If you are in any doubt as to what action you should take, you are recommended to seek immediately your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser, duly authorised under the FSMA if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser. This Part II deals with general questions relating to the Placing and Open Offer and Firm Placing and more specific questions relating to Shares held by persons resident in the United Kingdom who hold their Shares in certificated form only. If you are an Overseas Person, you should read paragraph 8 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” of this document and you should take professional advice as to whether you are eligible and/or you need to observe any formalities to enable you to take up your rights. If you hold your Shares in uncertificated form (that is, through CREST) you should read “Part IV—“Terms and Conditions of the Placing and Open Offer and Firm Placing” of this document for full details of what action you should take. If you are a CREST sponsored member, you should also consult your CREST sponsor. If you do not know whether your Shares are in certificated or uncertificated form, please call by shareholders about placings and open offers and firm placings. If you have further questions, please call Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
1. What is the Placing and Open Offer? A placing and open offer is a way for publicly listed companies to raise money. This combination involves providing existing shareholders with a right to subscribe for or acquire further shares at a fixed price in proportion to their existing shareholdings (an open offer) and providing for institutional investors to subscribe for or acquire new shares in the Company (a placing). The fixed price is normally at a discount to the closing mid-market price of the existing ordinary shares prior to the announcement of the open offer.
2. What is the Company’s Placing and Open Offer? The Underwriters, as agents for the Company, have made arrangements to conditionally place the Open Offer Shares with subscribers at the Offer Price, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. Subject to the Sponsor and Underwriting Agreement not being terminated in accordance with its terms and the waiver or satisfaction of the conditions thereunder, any Open Offer Shares not applied for under the Open Offer will be issued to Placees and/or the acquirers procured by the Underwriters, with the net proceeds of the Placing being retained by the Company. The Open Offer is an invitation by the Company to Qualifying Shareholders to apply to subscribe for an aggregate of 25,478,035 New Shares at a price of 75 pence per New Share. If you hold Shares at the Record Date or have a bona fide market claim, and are not a Shareholder located in the United States or any other Excluded Territory (for further information, see paragraph 8 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing”), you will be entitled to apply for New Shares under the Open Offer. The Open Offer is being made on the basis of 4 Open Offer Shares for every 7 Existing Shares held by Qualifying Shareholders at the Record Date. Applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements. In addition and subject to availability, the Excess Application Facility will enable Qualifying Shareholders to apply for any whole number of Excess Shares in excess of their Open Offer Entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such Excess Shares will be scaled down at the absolute discretion of the Board in consultation with the Underwriters. For technical reasons Qualifying CREST Shareholders who choose to take up their Open Offer Entitlements in full, or, in respect of pooled accounts, the Open Offer Entitlements of an underlying beneficial holder in full, the Excess Application Facility enables Qualifying CREST Shareholders to apply for Excess Shares up to a maximum amount equal to 10 times their total number of existing Ordinary Shares held in such Qualifying CREST Shareholder’s name as at the Record Date. If, however, a Qualifying CREST Shareholder wishes to
65 apply for more than 10 times the total number of existing Ordinary Shares held in such Qualifying Shareholder’s name as at the Record Date, the Qualifying CREST Shareholder should contact Link by telephone on the helpline number stated above who will arrange for additional Excess Shares to be credited to the relevant CREST account of the Qualifying CREST Shareholder concerned. Any such applications will be granted at the absolute discretion of the Company. If your entitlement to the New Shares is not a whole number, your fractional entitlement will be rounded down in calculating your entitlement to the New Shares and such fractional entitlements will not be allotted to Shareholders but will be aggregated and issued into the market for the benefit of the Company. The New Shares are being offered to Qualifying Shareholders in the Open Offer at a discount to the closing mid-market share price on the last Business Day before the details of the Placing and Open Offer were announced on 1 June 2020. Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non- CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess Open Offer Entitlements will be not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. The New Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Shares which are not applied for under the Open Offer will be issued to the Placees or, failing which, to the Underwriters subject to the terms and conditions of the Sponsor and Underwriting Agreement, with the proceeds ultimately accruing for the benefit of the Company. However, Shareholders should note that the Placing and Open Offer is conditional upon: (a) Shareholder approval of the Resolutions at the General Meeting; (b) the Sponsor and Underwriting Agreement having become or been declared unconditional in all respects and the Sponsor and Underwriting Agreement not having been terminated by the Underwriters in accordance with its terms prior to Admission; and (c) Admission occurring not later than 8.00 a.m. on 19 June 2020 (or such later time or date as the Company and the Underwriters may agree, being not later than 30 June 2020).
3. What is the Firm Placing? A firm placing is a way for companies to raise money by issuing shares on a non-pre-emptive basis to institutional investors. The Company is proposing to issue 101,188,632 New Shares pursuant to this Firm Placing. The Firm Placed Shares are not to be offered first to Shareholders generally. The Firm Placed Shares represent 59.1 per cent. of the enlarged issued share capital of the Company immediately following Admission (excluding the impact of the Offer for Subscription, 54.8 per cent. assuming full take up under the Offer for Subscription) and are not subject to clawback under, nor do they form part of, the Open Offer. The Firm Placing is expected to raise approximately £75.9 million of gross proceeds. The Firm Placing is subject to the same conditions and termination rights which apply to the Placing and Open Offer.
4. When will the Placing and Open Offer and Firm Placing take place? The Sponsor and Underwriting Agreement is subject to Admission of the New Shares becoming effective by not later than 8.00 a.m. on 19 June 2020 or such later time and/or date as the Company and the Underwriters may agree (not later than 30 June 2020). The Sponsor and Underwriting Agreement may be terminated by the Underwriters at any time prior to Admission in certain circumstances (including if any condition under the Sponsor and Underwriting Agreement has not been satisfied or waived), in which case the Placing and Open Offer and Firm Placing will not proceed.
5. What is an Application Form? It is a form sent to those Qualifying Shareholders who hold their Shares in certificated form. It sets out your Open Offer Entitlement to apply for the New Shares and Excess Open Offer Entitlement and is a form which you should complete if you want to participate in the Open Offer.
66 6. What if I have not received an Application Form? If you have not received an Application Form and you hold your Shares in certificated form, this probably means that you are not eligible to participate in the Open Offer. Some Qualifying Shareholders, however, will not receive an Application Form but may still be able to participate in the Open Offer, including: (a) Qualifying Shareholders who hold their Shares in uncertificated form (i.e. in CREST); and (b) Qualifying Shareholders who hold Shares in certificated form and who bought Shares before the Ex- Entitlements Date but were not registered as the holders of those Shares at the Record Date (see question 7 below).
7. If I bought Shares before 1 June 2020 (the Ex-Entitlements Date) will I be eligible to participate in the Open Offer? If you bought Shares before the Ex-Entitlements Date but you are not registered as the holder of those Shares at close of business on 28 May 2020 (the Record Date) you may still be eligible to participate in the Open Offer. If you are in any doubt, please consult your stockbroker, bank or other appropriate financial adviser, or whoever arranged your share purchase, to ensure you claim your entitlement. You will not be entitled to the New Shares in respect of any Shares acquired on or after the Ex-Entitlements Date.
8. I hold my Shares in uncertificated form in CREST. What do I need to do in relation to the Open Offer? CREST members should follow the instructions set out in “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing”. Persons who hold Shares through a CREST member should be informed by the CREST member through whom they hold their Shares of the number of the New Shares which they are entitled to take up under the Open Offer and should contact them if they do not receive this information.
9. I hold my Shares in certificated form. How do I know I am eligible to participate in the Open Offer? If you receive an Application Form and are not a Shareholder with a registered address in an Excluded Territory, and, subject to certain limited exceptions, are not physically located in the United States or any other Excluded Territory, then you should be eligible to participate in the Open Offer as long as you have not sold all of your Shares before the Ex-Entitlements Date. If you are in any doubt as to whether you are eligible to participate, you are recommended to seek your own independent legal advice.
10. I hold my Shares in certificated form. How do I know how many New Shares I am entitled to take up? If you hold your Shares in certificated form and, subject to certain limited exceptions, do not have a registered address in the United States or any other Excluded Territory, you will be sent an Application Form that shows: • In Box 6, how many Existing Shares you held at the Record Date; • In Box 7, how many New Shares are comprised in your Open Offer Entitlement; and • In Box 8, how much you need to pay in Pounds Sterling if you want to apply for all of your Open Offer Entitlement. If you would like to apply for any Excess Shares (i.e. the New Shares in excess of your Open Offer Entitlement which have not been applied for by other Qualifying Shareholders) pursuant to the Excess Application Facility, you should complete the Application Form in accordance with the instructions printed on it and the information provided in this document.
11. I hold my Existing Shares in certificated form and am eligible to receive an Application Form. What are my choices in relation to the Open Offer? (a) If you do not want to take up your Open Offer Entitlement If you do not want to take up your Open Offer Entitlement you do not need to do anything. In these circumstances, you will not receive any New Shares. You will also not receive any money when the New Shares you could have taken up are sold, as would happen under a rights issue provided the price at which they are sold exceeds the costs and expenses of effecting the sale. You cannot sell your Open Offer Entitlement or Excess Open Offer Entitlement to anyone else. If you do not return your Application Form applying for the
67 New Shares to which you are entitled by 11.00 a.m. on 17 June 2020, such New Shares will be made available for subscription under the Excess Application Facility. Failing that, we have made arrangements under which we have agreed to issue the New Shares comprising your Open Offer Entitlement and the balance of Excess Shares which are not taken up by Shareholders to the Placees. Shareholders who do not wish to take up their Open Offer Entitlements are, however, encouraged to vote at the General Meeting by completing and returning the Form of Proxy enclosed with this document. You may also submit your Form of Proxy electronically at www.signalshares.com using the Voting ID and Task ID printed on the Form of Proxy. If you do not take up your Open Offer Entitlement then following the issue of the New Shares pursuant to the Placing and Open Offer and Firm Placing, your interest in the Company will be diluted by approximately 74.0 per cent. from Admission (assuming no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). If you do take up your Open Offer Entitlement in full, then your interest in the Company will be diluted by approximately 59.1 per cent. as a result of the Firm Placing (assuming no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares).
(b) If you want to take up some but not all of the New Shares under your Open Offer Entitlement If you want to take up some but not all of the New Shares under your Open Offer Entitlement, you should write the number of New Shares you want to take up in Box 2 of your Application Form; for example, if you have an Open Offer Entitlement for 50 New Shares but you only want to apply for 25 New Shares, then you should write “25” in Box 2. To work out how much you need to pay for the New Shares, you need to multiply the number of New Shares you want (in this example, “25”) by 75 pence giving you an amount of £18.75 in this example. You should write this total sum in Box 5, rounding down to the nearest whole pence, and this should be the amount your cheque or banker’s draft is made out for. You should then return the completed Application Form, together with a cheque or banker’s draft for that amount, in the accompanying pre-paid envelope by post to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by no later than 11.00 a.m. on 17 June 2020, after which time Application Forms will not be valid. If you post your Application Form by first class post, it is recommended that you allow at least four Business Days for delivery. A definitive share certificate will then be sent to you for the New Shares that you take up. Your definitive share certificate for New Shares is expected to be despatched to you within 14 days of Admission.
(c) If you want to take up all of your Open Offer Entitlement If you want to take up all of the New Shares to which you are entitled, as shown in Box 7 on the Application Form, all you need to do is sign page 1 of the Application Form (ensuring that all joint holders sign (if applicable)) and send the Application Form, together with your cheque or banker’s draft for the amount (as indicated in Box 8 of your Application Form), payable to “Link Market Services Limited RE: Ted Baker Plc—Open Offer A/C” and crossed “A/C payee only”, in the accompanying pre-paid envelope by post to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by no later than 11.00 a.m. on 17 June 2020, after which time Application Forms will not be valid. If you post your Application Form by first class post, it is recommended that you allow at least four Business Days for delivery. A definitive share certificate will then be sent to you for the New Shares that you take up. Your definitive share certificate for New Shares is expected to be despatched to you within 14 days of Admission.
(d) If you want to take up Excess Shares pursuant to the Excess Application Facility If you want to apply for Excess Shares you may do so by completing Boxes 2, 3, 4 and 5 of the Application Form and then signing page 1 of the Application Form. However, the total number of New Shares to be issued under the Open Offer is fixed and will not be increased in response to any applications under the Excess Application Facility. Applications under the Excess Application Facility will therefore only be satisfied to the extent of any basic entitlements not taken up by other Qualifying Shareholders. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the absolute discretion of the Board in consultation with the Underwriters. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the
68 applicant’s risk) without interest as soon as practicable thereafter by way of cheque or CREST payment, as appropriate.
(e) Payment All payments should be in Pounds Sterling and made by cheque or banker’s draft made payable to “Link Market Services Limited RE: Ted Baker Plc—Open Offer A/C” and crossed “A/C payee only”. Cheques or banker’s drafts must be drawn on an account at a bank or building society or a branch of a bank or building society which must be in the United Kingdom or the Channel Islands and which is either a settlement member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker’s drafts to be cleared through the facilities provided by either of those companies. Cheques and banker’s drafts must bear the appropriate sorting code number in the top right-hand corner and must be for the full amount payable on application. Post-dated cheques will not be accepted. Cheques drawn on a non-UK bank will be rejected. Third party cheques may not be accepted with the exception of building society cheques or banker’s drafts where the building society or bank has confirmed the name of the account holder and the number of an account held in the applicant’s name at the building society or bank by stamping or endorsing the cheque or draft to such effect. The account name should be the same as that shown on the application. Cheques or banker’s drafts will be presented for payment upon receipt. Payments via CHAPS, BACS or electronic transfer will not be accepted. The Company reserves the right to instruct Link to seek special clearance of cheques and banker’s drafts to allow the Company to obtain value for remittances at the earliest opportunity. No interest will be paid on payments made before they are due. It is a term of the Open Offer that cheques shall be honoured on first presentation and the Company may elect to treat as invalid acceptances in respect of which cheques are not so honoured. All documents, cheques and banker’s drafts sent through the post will be sent at the risk of the sender.
12. I am a Qualifying Shareholder; do I have to apply for all the Open Offer Shares I am entitled to apply for? You can take up any number of the Open Offer Shares allocated to you under your Open Offer Entitlement, and you can also apply for Excess Shares pursuant to the Excess Application Facility. Your maximum Open Offer Entitlement is shown on your Application Form in Box 7. Any applications by a Qualifying Shareholder for a number of Open Offer Shares which is equal to or less than that person’s Open Offer Entitlement will be satisfied, subject to the Open Offer becoming unconditional. Excess applications will be satisfied only to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their pro rata entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the absolute discretion of the Board in consultation with the Underwriters. If you decide not to take up all of the Open Offer Shares comprised in your Open Offer Entitlement, then your proportion of the ownership and voting interest in the Company will be reduced to a greater extent than if you had decided to take up your full entitlement. Please refer to answers (a), (b), (c) and (d) of question 11 for further information.
13. What if the number of Open Offer Shares to which I am entitled is not a whole number? Am I entitled to fractions of Open Offer Shares? Your entitlement to Open Offer Shares will be calculated at the Record Date (other than in the case of those who bought shares after the Record Date but prior to 8.00 a.m. on 2 June 2020 who may be eligible to participate in the Placing and Open Offer). If your entitlement to Open Offer Shares is not a whole number, your fractional entitlement will be rounded down in calculating your entitlement to Open Offer Shares and such fractional entitlements will not be allotted to Shareholders but will be aggregated and issued into the market for the benefit of the Company.
14. Will I be taxed if I take up my entitlements? If you are resident in the United Kingdom for UK tax purposes, you will not have to pay UK tax when you take up your entitlement to apply for Open Offer Shares, although the amount of UK tax you pay when you sell your Shares may be affected. Further information for Qualifying Shareholders and Placees who are resident in the United Kingdom for UK tax purposes is contained in “Part XI Taxation—Taxation” and for Qualifying Shareholders and Placees who are resident in the United States for US tax purposes is contained in “Part XI Taxation—United States Federal Income Taxation”. If you are subject to tax in any jurisdiction other than the United Kingdom or the
69 United States or if you are in any doubt as to your tax position, you are strongly advised to consult an appropriately qualified independent professional adviser immediately.
15. What should I do if I live outside the United Kingdom? Your ability to apply to apply for Open Offer Shares may be affected by the laws of the country in which you live and you should take professional advice as to whether you require any governmental or other consents or need to observe any other formalities to enable you to take up your Open Offer Entitlement and/or Excess Open Offer Entitlement. Subject to limited exceptions, Shareholders with registered addresses or who are located in the United States or any other Excluded Territory are not eligible to participate in the Open Offer. Your attention is drawn to the information in paragraph 8 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” and paragraph 5 of “Part V—Terms and Conditions of the Offer for Subscription”.
16. What should I do if I need further assistance? If you have any other questions, please telephone Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. Your attention is drawn to the further terms and conditions in “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” and “Part V—Terms and Conditions of the Offer for Subscription”. The contents of this document or any subsequent communication from the Company, the Underwriters or any of their respective affiliates, officers, directors, employees or agents are not to be construed as legal, financial or tax advice. Each prospective investor should consult his or her own solicitor, independent financial adviser or tax adviser for legal, financial or tax advice.
70 PART III—PRINCIPAL TERMS AND CONDITIONS OF THE DISPOSAL 1. SPA 1.1 Parties and structure Under the terms of the SPA, the Purchaser (acting by its trustees, St Pancras Way Trustee 1 Limited and St Pancras Way Trustee 2 Limited) has agreed with the Seller to acquire the entire issued share capital of Big Lobster (comprising one ordinary share of £1 (the Sale Share)).
1.2 Consideration The consideration for the Disposal is estimated to be approximately £78.75 million (subject to any adjustment made pursuant to the true-up mechanism to reflect the net asset value of Big Lobster at Completion). The net proceeds of at least £72.0 million (post tax) will be used to reduce the Group’s indebtedness to the Lenders.
1.3 Condition to the Disposal Completion is conditional on the Shareholders voting in favour of the Disposal Resolution (the Condition), and shall occur on the date notified by the Seller to the Purchaser in writing (subject to such date being not less than 10 business days from the date of such notice), or such other date as the Seller and the Purchaser may agree. If the Condition is not satisfied (or waived by the Seller and the Purchaser) by 30 June 2020 (or such other date as the Seller and Purchaser may agree), then either the Seller or the Purchaser may terminate the SPA.
1.4 Warranties and indemnities The Seller has given warranties in favour of the Purchaser which are customary for a transaction of this nature. These include warranties in respect of: the completeness and accuracy of responses to certain enquiries raised by the Purchaser’s solicitors; capacity; certain corporate matters; Big Lobster’s activities and liabilities; property; environmental matters; litigation status; the absence of employees; accounts and other financial affairs; insolvency; the absence of related party / intra-group arrangements; contracts and operations; compliance with law and regulation, and insurance. Customary warranties and indemnities have also been given by the Seller in respect of tax. The Purchaser has given limited (customary) warranties to the Seller.
1.5 Limitations on liability The SPA provides that the Seller’s liability shall be capped at £1, save that: • an aggregate liability cap of £39.4 million shall apply in respect of any breaches by the Seller of the “conduct of business” provisions of the SPA in the period from (and including) the date of the SPA to (and including) Completion (the Interim Period); and • an aggregate liability cap of £78.75 million shall apply in respect of any breaches by the Seller of the “fundamental” warranties in the SPA (which warranties relate to capacity, ownership of the share in Big Lobster, and the absence of any encumbrance in respect of Big Lobster or the Property, and include a warranty that compliance with the provisions of the SPA will not result in any encumbrance being created or enforced). The Buyer has taken out a warranty and indemnity insurance policy, at its own cost and expense, which it shall rely on in respect of any claims not relating to breach of “conduct of business” provisions or breach of the “fundamental” warranties by the Seller (save that nothing shall prevent the Purchaser from making any claim against the Seller in respect of fraud). The SPA also contains a customary suite of other limitations on the Seller’s liability.
1.6 Miscellaneous terms Termination The Purchaser may terminate the SPA if: • the Seller breaches any of the “conduct of business” provisions of the SPA in the Interim Period; or
71 • owing to any act or omission of the Seller or Big Lobster in the Interim Period, a warranty given by the Seller on signing of the SPA would be breached if it were given at Completion, in each case only if the loss, liability or expense of Big Lobster is £7.9 million or greater, and the breach is uncured by the Purchaser for 10 Business Days following notification to the Seller by the Purchaser.
Cost cover In the event that the SPA is terminated as a result of (i) Shareholder approval not being obtained; (ii) a breach of the “conduct of business” provisions or completion warranties as described above; or (iii) the Seller failing to complete the Disposal, then the Seller shall pay the Purchaser’s costs on demand of £0.7 million.
1.7 Governing law The SPA is governed by the laws of England.
2. BLOCK A OPTION 2.1 Parties and structure On Completion, the Purchaser shall procure that St Pancras Way Trustee 1 Limited and St Pancras Way Trustee 2 Limited, as Trustees of St Pancras Way Block A Unit Trust (the A Trust), shall enter into the option agreement with the Seller.
2.2 The Option The option is to take a lease of parts of the Block A building and thereafter surrender the Block B Lease and Block C Lease. The option may be exercised by the Seller on or before 1 June 2021. It is anticipated that the Seller will take part basement, part ground floor and the whole of the first, second and third floors of the Block A building. When exercising its option the Seller may also to elect to take either the fourth floor, or the fourth and fifth floors, in addition.
2.3 Anticipated Timetable The Block A building is intended to be demolished and re-constructed in accordance with the scheme referenced within the Section 106 Agreement. If the Seller exercises its option, it is intended that: • the A Trust will commence demolition of the existing building on Block A by the later of: (i) 31 December 2020; or (ii) six months after the option is served (the Works Commencement Date); • the target date for practical completion of the works to construct the new building on Block A (the Works) is 24 months from demolition/site clearance of the existing building at Block A; • the A Trust will give the Seller six months’ prior notice of its anticipated date of practical completion (and the earliest date for practical completion is 1 June 2022); • completion of the lease will take place 20 working days after practical completion of the Works; • completion of the surrender of the Block B Lease and the Block C Lease will take place six months after completion of the lease to provide for a satisfactory fit out and transition period. This may be extended by the Seller for a period of up to six months; and • the Seller has the right to call for a renewal of the Block B Lease and Block C Lease in the event that practical completion is delayed. The Seller is entitled to determine the option agreement in the event that: • the A Trust has not commenced demolition by the Works Commencement Date; or • the certificate of practical completion has not been issued by the 15 July 2023. The A Trust is entitled to determine the option agreement in the event that the certificate of practical completion has not been issued by 15 October 2023.
72 2.4 Financials If the option is exercised, the Seller will be entitled to a rent-free period equivalent to a capital sum of £7,966,075. If the option is not exercised, the Seller will be entitled to call for a cash equivalent from the A Trust payable on expiry of the Block B leases, subject to the Seller having yielded up in accordance with the terms of those leases.
3. BLOCK A LEASE 3.1 Block A When exercising its option the Seller may elect to up to 77,462.79 square feet.
3.2 Term The term is 10 years from the date the Seller takes access of Block A. There are no break options. The lease benefits from security of tenure pursuant to the Landlord and Tenant Act 1954.
3.3 Financials The Seller benefits from a rent-free period of 21 months. This is in addition to the rent-free period equating to the sum of £7,966,075 described above. Following the initial 21-month rent-free period, an annual rent of up to £4.2 million (based on likely square footage required) would apply. The annual rent is subject to a rent review at the expiry of the fifth year of the term to CPI with a cap of 4 per cent. In addition to the annual rent, insurance, rent, service charge and VAT are reserved as rents.
3.4 Repair and Yield Up Block A will be handed over in accordance with an agreed specification and thereafter the lease will be on FRI terms. It is intended that the Seller will benefit from a full suite of construction warranties.
3.5 Disposal The Seller may assign the whole of the lease with landlord’s consent (which is not to be unreasonably withheld). The landlord may require the Seller to enter into an authorised guarantee agreement in relation to the assignee’s performance of the tenant covenants. The Seller may underlet the whole or part (on a floor by floor basis) with landlord’s consent (which is not to be unreasonably withheld). There is to be a maximum of four occupiers per floor. All underleases are to exclude security of tenure. The Seller may share occupation of Block A with group companies.
3.6 Miscellaneous Terms The Seller benefits from a right of pre-emption in relation to retail units on the ground floor of Block A. This pre-emption is personal to the Seller.
73 PART IV—TERMS AND CONDITIONS OF THE PLACING AND OPEN OFFER AND FIRM PLACING
1. INTRODUCTION As explained in “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”, the Company is proposing to raise approximately £95.0 million in gross proceeds (approximately £90.0 million in net proceeds) by way of a fully underwritten Placing and Open Offer and Firm Placing. Up to a further approximately £10.0 million in gross proceeds (approximately £9.6 million net of commissions) may also be raised by way of an Offer for Subscription which is not underwritten. The Capital Raising consists of a Placing and Open Offer of 25,478,035 Open Offer Shares, a Firm Placing of 101,188,632 Firm Placed Shares and an Offer for Subscription of up to 13,333,333 Offer for Subscription Shares. The Open Offer is an opportunity for Qualifying Shareholders to apply for in aggregate 25,478,035 Open Offer Shares pro rata to their current holdings at the Offer Price. The Offer Price of 75 pence per New Share represents a 51.1 per cent. discount to the Closing Price of 153.3 pence per Existing Share on 29 May 2020 (the last Business Day before the announcement of the Capital Raising). In setting the Offer Price, the Directors have considered the prices at which the New Shares need to be offered to investors to ensure the success of the Capital Raising and raise a significant level of equity compared to the market capitalisation of the Company. The Directors believe that both the Offer Price and the discount are appropriate. The Placing and Open Offer and Firm Placing are conditional upon: (a) Shareholder approval of the Resolutions at the General Meeting; (b) the Sponsor and Underwriting Agreement having become or been declared unconditional in all respects and the Sponsor and Underwriting Agreement not having been terminated by the Underwriters in accordance with its terms prior to Admission; and (c) Admission occurring not later than 8.00 a.m. on 19 June 2020 (or such later time or date as the Company and the Underwriters may agree, being not later than 30 June 2020). In the event that these conditions are not satisfied, the Placing and Open Offer and Firm Placing will not proceed. In such circumstances, application monies will be returned without payment of interest, as soon as practicable thereafter and any Open Offer Entitlements and Excess Open Offer Entitlements admitted to CREST will thereafter be disabled. The Placing and Open Offer and Firm Placing have been fully underwritten by the Underwriters on, and subject to, the terms and conditions of the Sponsor and Underwriting Agreement. The New Shares will rank pari passu in all respects with the Existing Shares, including the right to receive all dividends or other distributions declared, made or paid after the date of their issue. The New Shares will be in registered form and capable of being held in certificated form or uncertificated form in CREST. The New Shares issued as part of the Capital Raising will together represent approximately 75.8 per cent. of the enlarged issued share capital of the Company immediately following the Capital Raising.
2. TERMS AND CONDITIONS OF THE PLACING AND OPEN OFFER AND FIRM PLACING Placing and Open Offer The Underwriters, as agents for the Company, have made arrangements to conditionally place the Open Offer Shares with institutional investors at the Offer Price. The Open Offer Shares will be subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. Subject to the waiver or satisfaction of the conditions and the Sponsor and Underwriting Agreement not being terminated in accordance with its terms, any Open Offer Shares not applied for under the Open Offer by 11.00 a.m. on 17 June 2020 will be issued to Placees and/or the subscribers procured by the Underwriters, with the net proceeds of the Placing being retained by the Company.
74 Open Offer Entitlements Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, the Application Form), each Qualifying Shareholder is being given an opportunity to apply for Open Offer Shares at the Offer Price (payable in full and free of all expenses) on the following pro rata basis: 4 Open Offer Shares at 75 pence each for every 7 Existing Shares held and registered in their name at the Record Date and so on in proportion to any other number of Shares then held. Qualifying Shareholders may apply for any whole number of Open Offer Shares. Any fractional entitlements to Open Offer Shares will be rounded down in calculating entitlements to Open Offer Shares and such fractional entitlements will not be allotted to Shareholders but will be aggregated and issued into the market for the benefit of the Company. Valid applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements. Holdings of Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating the Open Offer Entitlements.
Excess Application Facility Qualifying Shareholders who are not Restricted Persons may apply to subscribe for Excess Shares using the Excess Application Facility, should they wish. Qualifying Non-CREST Shareholders wishing to apply to subscribe for Excess Shares may do so by completing the relevant sections on the Application Form. Qualifying CREST Shareholders who wish to and are able to apply to subscribe for more than their Open Offer Entitlements will have Excess Open Offer Entitlements credited to their stock account in CREST, and should refer to paragraph 4.5 of “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” of this document for information on how to apply for Excess Shares pursuant to the Excess Application Facility. The Excess Application Facility will comprise Open Offer Shares that are not taken up by Qualifying Shareholders under the Open Offer pursuant to their Open Offer Entitlements and the aggregated fractional entitlements. Qualifying Shareholders’ applications for Excess Shares will, therefore, be satisfied only to the extent that applications by other Qualifying Shareholders are made for less than their pro rata Open Offer Entitlements. If there is an over-subscription resulting from excess applications, allocations in respect of such excess applications will be scaled down at the Company’s absolute discretion in consultation with the Underwriters. Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non- CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements and Excess Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear’s Claims Processing Unit. New Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Shares which are not applied for under the Open Offer may be allocated to Placees or, failing which, to the Underwriters subject to the terms and conditions of the Sponsor and Underwriting Agreement, with the proceeds ultimately accruing for the benefit of the Company. The attention of Shareholders and any persons (including, without limitation, custodians, nominees and trustees) who have a contractual or other legal obligation to forward this document or an Application Form into a jurisdiction other than the United Kingdom is drawn to paragraph 8 of this “Part IV” relating to Overseas Persons, which forms part of the terms and conditions of the Placing and Open Offer and Firm Placing. In particular, Restricted Persons will not be sent this document or the Application Form. Shareholders who do not, or are not permitted to, acquire the New Shares will be diluted by 74.0 per cent. (excluding the impact of the Offer for Subscription) or 75.8 per cent. (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares) following the Capital Raising. The results of the Placing and Open Offer are expected to be announced on or around 18 June 2020.
75 Firm Placing The Company is proposing to issue 101,188,632 New Shares pursuant to the Firm Placing. The Firm Placed Shares are not to be offered first to Shareholders generally. The Firm Placed Shares represent 59.1 per cent. of the enlarged issued share capital of the Company immediately following Admission (excluding the impact of the Offer for Subscription, 54.8 per cent. assuming full take up under the Offer for Subscription) and are not subject to clawback under, nor do they form part of, the Open Offer. The Firm Placing is expected to raise approximately £75.9 million of gross proceeds. Shareholders who take up their pro rata Open Offer Entitlement in full will experience a 59.1 per cent. dilution to their interests in the Company as a result of the Firm Placing. The Firm Placing is subject to the same conditions and termination rights which apply to the Placing and Open Offer. If Admission does not take place on or before 8.00 a.m. on 19 June 2020 (or such later date as the Company and the Underwriters may agree, not being later than 8.00 a.m. on 30 June 2020), the Firm Placing will not proceed and subscription monies will be refunded to Firm Placees by cheque or CREST payment, as appropriate (at the Firm Placees’ risk).
Underwriting arrangements and Admission The Underwriters have agreed pursuant to the Sponsor and Underwriting Agreement to use reasonable endeavours to procure subscribers to acquire the Open Offer Shares at the Offer Price, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. The Underwriters have also agreed to procure subscribers for the Firm Placed Shares at the Offer Price. The Underwriters have agreed to acquire (in their respective proportions) any Open Offer Shares and Firm Placed Shares which are not taken up by subscribers under the Open Offer, Placing or Firm Placing at the Offer Price. The Placing and Open Offer and Firm Placing are therefore fully underwritten. The Offer for Subscription is not underwritten. The Sponsor and Underwriting Agreement is conditional upon, among other things: (a) the Company having complied with all its obligations and having satisfied all conditions to be satisfied, in each case under the Sponsor and Underwriting Agreement or under the terms or conditions of the Capital Raising which fall to be performed or satisfied on, or prior to, Admission; (b) the warranties, undertakings and covenants of the Company under the Sponsor and Underwriting Agreement being true, accurate and not misleading as at the date of the Sponsor and Underwriting Agreement and immediately prior to Admission (as though they had been given and made by reference to the facts and circumstances then subsisting) and no matter having arisen prior to the time of Admission which might reasonably be expected to give rise to a claim under the indemnity provisions of the Sponsor and Underwriting Agreement, save in each case to the extent as would not in the good faith opinion of the Underwriters (having consulted with the Company to the extent reasonably practicable) be material in the context of the Capital Raising, Admission or any of the transactions contemplated by the Sponsor and Underwriting Agreement; (c) no matter referred to in Section 87G of the FSMA arising between the publication of this document and Admission which requires the Company to publish a supplementary prospectus; (d) in the good faith opinion of the Underwriters, there having been no material adverse effect since the date of this document; and (e) Admission occurring not later than 8.00 a.m. on 19 June 2020 (or such later time and/or date (not later than 8.00 a.m. on 30 June 2020) as the Company and the Underwriters may agree). The Sponsor and Underwriting Agreement may be terminated by the Underwriters at any time prior to Admission in certain circumstances (including if any condition under the Sponsor and Underwriting Agreement has not been satisfied or waived, or if in the good faith opinion of the Underwriters there has been a material adverse effect since the date of this document), in which case the Capital Raising will not proceed. After Admission, the Sponsor and Underwriting Agreement will not be subject to any condition or right of termination (including in respect of statutory withdrawal rights). A summary of the principal terms of the Sponsor and Underwriting Agreement is set out in paragraph 15 of “Part XII—Additional Information”. Applications will be made to the FCA and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities. It is expected that Admission will become effective and that dealings in the New Shares
76 will commence as soon as practicable after 8.00 a.m. on 19 June 2020 (whereupon an announcement will be made by the Company to a Regulatory Information Service). The New Shares issued pursuant to the Placing and Open Offer and Firm Placing will rank pari passu in all respects with the Existing Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of the Company. No temporary documents of title will be issued in respect of the New Shares held in certificated form. Definitive certificates in respect of New Shares taken up are expected to be posted to the Qualifying Shareholders who have validly elected to hold their New Shares in certificated form within 14 days of Admission. The Existing Shares are already CREST-enabled. No further application for admission to CREST is required for the New Shares and all of the New Shares when issued and fully paid may be held and transferred by means of CREST. In respect of those Qualifying Shareholders who have validly elected to hold their New Shares in uncertificated form, the New Shares are expected to be credited to their CREST stock accounts, by 8.00 a.m. on 19 June 2020. Subject to the conditions above being satisfied and save as provided in this “Part IV”, it is expected that: (a) Link will instruct Euroclear to credit the appropriate stock accounts of Qualifying CREST Shareholders with such Shareholders’ Open Offer Entitlements and Excess Open Offer Entitlements, with effect from 8.00 a.m. on 2 June 2020; (b) New Shares in uncertificated form will be credited to the appropriate stock accounts of relevant Qualifying CREST Shareholders who validly take up their Open Offer Entitlements and Excess Open Offer Entitlements by 8.00 a.m. on 19 June 2020; and (c) share certificates for the New Shares will be despatched within 14 days of Admission to relevant Qualifying Non-CREST Shareholders who validly take up their Open Offer Entitlements and Excess Open Offer Entitlements. Such certificates will be despatched at the risk of such Shareholders. All Qualifying Shareholders taking up their Open Offer Entitlements and Excess Open Offer Entitlements will be deemed to have given the representations and warranties set out in paragraph 9.1 below (in the case of Qualifying Non-CREST Shareholders) and paragraph 9.2 below (in the case of Qualifying CREST Shareholders) unless, in each case, such requirement is waived in writing by the Company. All documents and cheques posted to or by Qualifying Shareholders and/or their transferees (or their agents, as appropriate) will be posted at their own risk. References to dates and times in this document should be read as subject to adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of any revised dates or times.
3. ACTION TO BE TAKEN IN CONNECTION WITH THE OPEN OFFER If you are in any doubt about the contents of this document and any accompanying documents or the action you should take, you are recommended to seek your own financial advice immediately from an appropriately authorised stockbroker, bank manager, solicitor, accountant or other independent financial adviser who, if you are taking advice in the United Kingdom, is duly authorised under FSMA, or, if not, from another appropriately authorised independent financial adviser. The action to be taken in respect of the Open Offer depends on whether, at the relevant time, a Qualifying Shareholder has received an Application Form in respect of his or her entitlement under the Open Offer or has had his or her Open Offer Entitlements and Excess Open Offer Entitlements credited to his or her CREST stock account. If you are a Qualifying Non-CREST Shareholder, please refer to paragraph 4 and paragraphs 6 to 12 (inclusive) of this “Part IV”. If you are a Qualifying CREST Shareholder, please refer to paragraphs 5 to 13 (inclusive) of this Part IV and to the CREST Manual for further information on the CREST procedures referred to above. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors, as only their CREST sponsors will be able to take the necessary actions specified below to apply under the Open Offer in respect of the Open Offer Entitlements and Excess Open Offer Entitlements of such members held in CREST. CREST members who wish to apply under the Open Offer in respect of their Open Offer Entitlements
77 and Excess Open Offer Entitlements in CREST should refer to the CREST Manual for further information on the CREST procedures referred to above.
4. ACTION TO BE TAKEN IN RELATION TO OPEN OFFER ENTITLEMENTS AND EXCESS OPEN OFFER ENTITLEMENTS REPRESENTED BY APPLICATION FORMS 4.1 General Save as provided in paragraph 8 of this “Part IV” below, Qualifying Non-CREST Shareholders will have received an Application Form with this document. The Application Form sets out: (a) in Box 6, the number of Existing Shares registered in such person’s name at the Record Date (on which a Qualifying Non-CREST Shareholder’s entitlement to the New Shares is based); (b) in Box 7, the maximum number of New Shares for which the holder(s) will be rounded down in calculating entitlements, and such fractional entitlements will not be allotted to Shareholders but will be aggregated and issued into the market for the benefit of the Company; (c) in Box 8, how much they would need to pay in Pounds Sterling if they wish to take up their Open Offer Entitlement in full; (d) the procedures to be followed if a Qualifying Non-CREST Shareholder wishes to convert all or part of his or her entitlement into uncertificated form; and (e) instructions regarding acceptance and payment, consolidation and splitting. Qualifying Non-CREST Shareholders may apply for less than their maximum Open Offer Entitlement should they wish to do so. Subject to applying to take up their Open Offer Entitlement in full, Qualifying Non-CREST Shareholders may also apply for Excess Shares (i.e. the New Shares in excess of their Open Offer Entitlements which have not been applied for by other Qualifying Shareholders) pursuant to the Excess Application Facility. Qualifying Non-CREST Shareholders may also hold such an Application Form by virtue of a bona fide market claim. The instructions and other terms set out in the Application Form constitute part of the terms and conditions of the Open Offer to Qualifying Non-CREST Shareholders. The latest time and date for acceptance of the Application Form and payment in full will be 11.00 a.m. on 17 June 2020. The New Shares are expected to be issued on 19 June 2020. After such date, the New Shares will be in registered form, freely transferable by written instrument of transfer in the usual common form, or if they have been issued in or converted into uncertificated form, in electronic form under the CREST system. Qualifying Shareholders who do not want to take up or apply for the Open Offer Shares under the Open Offer should take no action and should not complete or return the Application Form. Qualifying Shareholders are, however, encouraged to vote at the General Meeting by completing and returning the enclosed Form of Proxy (either in hard copy or electronically) or by completing and transmitting a CREST Proxy Instruction.
4.2 Bona fide market claims Applications to acquire Open Offer Shares may only be made on the Application Form and may only be made by the Qualifying Non-CREST Shareholder named in it or by a person entitled by virtue of a bona fide market claim in relation to a purchase of Shares through the market prior to 8.00 a.m. on 1 June 2020 (the date upon which the Shares were marked ‘ex’ the entitlement to participate in the Open Offer). Application Forms may not be assigned, transferred or split, except to satisfy bona fide market claims prior to 3.00 p.m. on 15 June 2020. The Application Form is not a negotiable document and cannot be separately traded. A Qualifying Non-CREST Shareholder who has sold or otherwise transferred all or part of his, or its holding of Shares prior to the date upon which the Shares were marked ‘ex’ the entitlement to participate in the Open Offer, being 8.00 a.m. on 1 June 2020, should consult his or her broker or other professional adviser as soon as possible, as the invitation to acquire the New Shares under the Open Offer may be a benefit which may be claimed by the transferee.
78 Qualifying Non-CREST Shareholders who have sold all of their registered holdings prior to 8.00 a.m. on 1 June 2020 should, if the market claim is to be settled outside CREST, complete Box 10 on the Application Form and immediately send it to the purchaser or transferee or to the stockbroker, banker or other agent through whom the sale or transfer was effected on their behalf. The Application Form should not, however, be forwarded to or transmitted in or into any Excluded Territory, including the United States. If the market claim is to be settled outside CREST, the beneficiary of the claim should follow the procedures set out in the accompanying Application Form. If the market claim is to be settled in CREST, the beneficiary of the claim should follow the procedures set out in paragraph 5 below. Qualifying Non-CREST Shareholders who have sold or otherwise transferred part only of their Existing Shares shown on Box 6 of their Application Form prior to 8.00 a.m. on 1 June 2020 should, if the market claim is to be settled outside CREST, complete Box 10 of the Application Form and immediately send the Application Form, together with a letter stating the number of Application Forms required (being one for the Qualifying Non-CREST Shareholder in question and one for each of the purchasers or transferees), the total number of Existing Shares to be included in each Application Form (the aggregate of which must equal the number shown in Box 6 of the original Application Form) and the total number of Open Offer Entitlements to be included in each Application Form (the aggregate of which must equal the number shown in Box 7 of the original Application Form), to the broker, bank or other agent through whom the sale or transfer was effected or return it by post or by hand to Link so as to be received by no later than 3.00 p.m. on 15 June 2020. The Receiving Agent will then create new Application Forms, mark the Application Forms “Declaration of sale or transfer duly made” and send them by post to the person submitting the original Application Form for appropriate distribution. The Application Form should not, however, be forwarded to or transmitted in or into any Excluded Territory, including the United States.
4.3 Application procedures Qualifying Non-CREST Shareholders who wish to apply to take up all or any of the New Shares in respect of their Open Offer Entitlement or any Excess Shares pursuant to the Excess Application Facility must complete, sign and return the Application Form in accordance with the instructions thereon. Completed Application Forms should be posted in the accompanying pre-paid envelope (in the United Kingdom only) or returned by post or by hand (during normal office hours only) to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to be received by Link by no later than 11.00 a.m. on 17 June 2020, after which time, subject to the limited exceptions set out below, Application Forms will not be valid. Applications delivered by hand will not be checked upon delivery and no receipt will be provided. Qualifying Non-CREST Shareholders should note that applications, once made, will, subject to the very limited withdrawal rights set out in this document, be irrevocable and receipt thereof will not be acknowledged. If an Application Form is being sent by first-class post in the United Kingdom, Qualifying Shareholders are recommended to allow at least four working days for delivery. Multiple applications will not be accepted. Completed Application Forms should be returned together with payment in accordance with paragraph 4.4 below.
4.4 Payment All payments must be made by cheque or banker’s draft in Pounds Sterling payable to “Link Market Services Limited RE: Ted Baker Plc—Open Offer A/C” and crossed “A/C payee only”. Cheques must be for the full amount payable on acceptance and sent by post to Link so as to be received as soon as possible and, in any event, not later than 11.00 a.m. on 17 June 2020. A pre-paid envelope for use within the United Kingdom only will be sent with the Application Form. Third party cheques may not be accepted except building society cheques or banker’s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque or banker’s draft to such effect. It is recommended that the account name should be the same as that shown on the application. Cheques or banker’s drafts must be drawn on an account at a bank or building society or a branch of a bank or building society which must be in the United Kingdom or the Channel Islands and which is either a settlement member of the Cheque and Credit Company Clearing Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker’s drafts to be cleared through the facilities provided by either of those companies. Cheques and banker’s drafts must bear the appropriate sorting code number in the top right-hand corner. Post-dated cheques will not be accepted. Payments via CHAPS, BACS or electronic transfer will not be accepted.
79 The Company reserves the right to have cheques and banker’s drafts presented for payment on receipt. No interest will be allowed on payments made before they are due. It is a term of the Open Offer that cheques must be honoured on first presentation and the Company may elect to treat as invalid any acceptances in respect of which cheques are not honoured. Return of the Application Form with a cheque will constitute a warranty that the cheque will be honoured on first presentation. If cheques or banker’s drafts are presented for payment before the conditions of the Placing and Open Offer are fulfilled, the application monies will be kept in a non-interest-bearing account retained for the Company until all conditions are met. If the Placing and Open Offer does not become unconditional, no New Shares will be issued and all monies will be returned (at the applicant’s sole risk), without payment of interest, to applicants as soon as practicable, following the lapse of the Placing and Open Offer. The interest earned on such monies, if any, will be retained for the benefit of the Company. If New Shares are allotted to a Qualifying Shareholder and a cheque for that allotment is subsequently not honoured, the Company may (in its absolute discretion as to manner, timing and terms) make arrangements for the sale of such shares on behalf of such Qualifying Shareholder and hold the proceeds of sale (net of the Company’s reasonable estimate of any loss that it has suffered as a result of the acceptance being treated as invalid and of the expenses of sale including, without limitation, any stamp duty or SDRT payable on the transfer of such shares, and of all amounts payable by such Qualifying Shareholder pursuant to the provisions of this “Part IV” in respect of the acquisition of such shares) on behalf of such Qualifying Shareholder. Neither the Company nor any other person shall be responsible for, or have any liability for, any loss, expenses or damage suffered by any Qualifying Shareholder as a result. All enquires in connection with the Application Forms should be addressed to Link Asset Services, Corporate Actions. The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. Alternatively, enquiries in connection with the Application Forms can be made to Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
4.5 Excess Application Facility Provided Qualifying Non-CREST Shareholders choose to take up their Open Offer Entitlement in full, the Excess Application Facility enables Qualifying Non-CREST Shareholders to apply for Open Offer Shares in excess of their Open Offer Entitlement. All enquiries in connection with the procedure for application for Excess Open Offer Entitlements should be made to Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am - 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. There is no limit on the amount of Open Offer Shares that can be applied for under the Excess Application Facility, save that the maximum amount of Open Offer Shares to be allotted under the Excess Application Facility will be limited by the maximum size of the Placing and Open Offer less the aggregate of the Open Offer Shares issued under the Open Offer pursuant to the Qualifying Shareholders’ Open Offer Entitlements. For the avoidance of doubt, the Firm Placed Shares will not form part of the amount of Shares available under the Excess Application Facility. Qualifying Non-CREST Shareholders who wish to apply for Open Offer Shares in excess of their Open Offer Entitlement must complete the Application Form in accordance with instructions set out on the Application Form. If you want to apply for Excess Shares you may do so by completing Boxes 2, 3, 4 and 5 of the Application Form and then signing page 1 of the Application Form. Applications for Excess Shares will be satisfied to the extent that other Qualifying Shareholders do not apply for their Open Offer Entitlements. If applications under the Excess Application Facility are received for more than the maximum number of Open Offer Shares available, then such applications will be scaled back at the absolute discretion of the Board in consultation with the Underwriters. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant’s risk) without interest as soon as practicable thereafter by way of cheque.
80 Qualifying Non-CREST Shareholders who make applications for Excess Shares under the Excess Application Facility which are not met in full and from whom payment in full has been made will receive a pounds sterling amount equal to the number of Open Offer Shares applied and paid for, but not allocated to, the relevant Qualifying Non-CREST Shareholder, multiplied by the Offer Price. Monies will be returned as soon as reasonably practicable thereafter, without payment of interests and at the applicant’s sole risk. Fractions of Excess Shares will not be issued under the Excess Application Facility and fractions of Excess Shares will be rounded down to the nearest whole number.
4.6 Placee participation Each Placee subscribing for the New Shares in relation to the Placing may apply for, or take up, its Open Offer Entitlement and apply under the Excess Application Facility.
4.7 Discretion as to validity of acceptances If payment is not received in full by 11.00 a.m. on 17 June 2020, the offer to apply for Open Offer Shares will be deemed to have been declined and will lapse. However, the Company may (acting in consultation with the Underwriters), but shall not be obliged to treat as valid (i) Application Forms and accompanying remittances that are received through the post not later than 2.00 p.m. on 17 June 2020 (the cover bearing a legible postmark not later than 11.00 a.m. on 17 June 2020); and (ii) acceptances in respect of which a remittance is received prior to 2.00 p.m. on 17 June 2020 from an authorised person (as defined in section 31(2) of FSMA) specifying the number of New Shares to be acquired and undertaking to lodge the relevant Application Form, duly completed, in due course. The Company (acting in consultation with the Underwriters) may also treat an Application Form as valid and binding on the person(s) by whom or on whose behalf it is lodged even if it is not completed in accordance with the relevant instructions or is not accompanied by a valid power of attorney where required. The Company, with the prior written consent of the Underwriters, reserves the right to treat as invalid any application or purported application for Open Offer Shares pursuant to the Open Offer that appears to the Company to have been executed in, despatched from, or that provides an address for delivery of definitive share certificates for New Shares in, an Excluded Territory, including the United States.
4.8 Effect of application All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant’s own risk. By completing and delivering an Application Form the applicant: (a) represents and warrants to each of the Company and the Underwriters that he or she has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his or her rights, and perform his or her obligations, under any contracts resulting therefrom and that he or she is not a person otherwise prevented by legal or regulatory restrictions from applying for New Shares or acting on behalf of any such person on a non-discretionary basis; (b) agrees with each of the Company and the Underwriters that all applications under the Open Offer and any contractual or non-contractual obligations resulting therefrom shall be governed by, and construed in accordance with, the laws of England; (c) confirms to each of the Company and the Underwriters that in making the application he or she is not relying on any information or representation other than that contained in this document or any documents incorporated by reference into this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document (including any documents incorporated by reference into this document) or any part thereof, or involved in the preparation thereof, shall have any liability for any information or representation not so contained and further agrees that, having had the opportunity to read this document, including any documents incorporated by reference, he or she will be deemed to have had notice of all information contained in this document (including information incorporated by reference); (d) confirms that in making the application he or she is not relying and has not relied on the Underwriters or any other person affiliated with the Underwriters in connection with any investigation of the accuracy of any information contained in this document or his or her investment decision; (e) represents and warrants to the Company and the Underwriters that if he or she has received some or all of his or her Open Offer Entitlements or Excess Open Offer Entitlements from a person other than the
81 Company, he or she is entitled to apply under the Open Offer in relation to such Open Offer Entitlements or Excess Open Offer Entitlements by virtue of a bona fide market claim; (f) represents and warrants to each of the Company and the Underwriters that he or she is the Qualifying Shareholder originally entitled to the Open Offer Entitlements and Excess Open Offer Entitlements or that he or she received such Open Offer Entitlements and Excess Open Offer Entitlements by virtue of a bona fide market claim; (g) represents and warrants to the Company and the Underwriters that: (i) he or she is not, nor is he or she applying on behalf of any person who is located, a citizen or resident, or a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for New Shares is prevented by law; and (ii) he or she is not applying with a view to re-offering, reselling, transferring or delivering any of the New Shares which are the subject of his or her application to, or for the benefit of, a person who is located, a citizen or resident, or which is a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for New Shares is prevented by law, nor acting on behalf of any such person on a non-discretionary basis nor a person(s) otherwise prevented by legal or regulatory restrictions from applying for New Shares under the Open Offer; (h) represents and warrants to each of the Company and the Underwriters that he or she is not, and nor is he or she applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986; and (i) requests that the New Shares to which he or she will become entitled be issued to him or her it on the terms set out in this document and the Application Form, subject to the Articles.
4.9 Money Laundering Regulations To ensure compliance with the Money Laundering Regulations, Link may require, at its absolute discretion, verification of the identity of the beneficial owner by whom or on whose behalf the Application Form is lodged with payment (which requirements are referred to below as the “verification of identity requirements”). If an application is made by a UK regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements are the responsibility of such broker or intermediary and not of Link. In such case, the lodging agent’s stamp should be inserted on the Application Form. The person lodging the Application Form with payment (the acceptor), including any person who appears to Link to be acting on behalf of some other person, shall thereby be deemed to agree to provide Link with such information and other evidence as Link may require to satisfy the verification of identity requirements. Submission of an Application Form shall constitute a warranty to the Company and the Underwriters that the Money Laundering Regulations will not be breached by the acceptance of remittance and an undertaking by the acceptor to provide promptly to Link such information as may be specified by Link as being required for the purpose of the Money Laundering Regulations and agree for Link to make a search using a credit reference agency for the purposes of confirming such identity; where deemed necessary a record of the search will be retained. If Link determines that the verification of identity requirements apply to any acceptor or application, the relevant New Shares (notwithstanding any other term of the Placing and Open Offer) will not be issued to the relevant acceptor unless and until the verification of identity requirements have been satisfied in respect of that acceptor or application. Link is entitled, and with the prior written consent of the Underwriters, to determine whether the verification of identity requirements apply to any acceptor or application and whether such requirements have been satisfied, and none of Link, the Company or the Underwriters will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion. If the verification of identity requirements applies, failure to provide the necessary evidence of identity within a reasonable time may result in delays and potential rejection of an application. If, within a reasonable period of time following a request for verification of identity, Link has not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, treat the relevant application as invalid, in which event the application monies will be returned (at the acceptor’s risk) without interest to the account of the bank or building society on which the relevant cheque or banker’s draft was drawn.
82 The verification of identity requirements will not usually apply if: (a) the acceptor is a regulated UK broker or intermediary acting as agent and is itself subject to the Money Laundering Regulations; (b) the acceptor is an organisation required to comply with the EU Money Laundering Directive 2015/849, as amended; (c) the acceptor is a company whose securities are listed on a regulated market subject to specified disclosure obligations; (d) the acceptor (not being an acceptor who delivers his/her application in person) makes payment through an account in the name of such acceptor with a credit institution which is subject to the Money Laundering Regulations or with a credit institution situated in a non-EEA State which imposes requirements equivalent to those laid down in that directive; or (e) the aggregate subscription price for the relevant New Shares is less than €15,000 (or its Pounds Sterling equivalent). Where the verification of identity requirements applies, please note the following as this will assist in satisfying the requirements. Satisfaction of these requirements may be facilitated in the following ways: (i) if payment is made by cheque or banker’s draft drawn on a branch of a bank or building society in the United Kingdom and bears a UK bank sort code number in the top right-hand corner, the following applies. Cheques, which are recommended to be drawn on the personal account of the individual investor where they have sole or joint title to the funds, should be made payable to “Link Market Services Limited RE: Ted Baker Plc—Open Offer A/C” and crossed “A/C payee only”. Third party cheques may not be accepted except for building society cheques or banker’s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/banker’s draft to such effect. The account name should be the same as that shown on the application; (ii) if the Application Form is lodged with payment by an agent which is an organisation of the kind referred to in sub-paragraph (b) above or which is subject to anti-money laundering regulations in a country which is a member of the Financial Action Task Force (the non-EU members of which are Argentina, Australia, Brazil, Canada, China, members of the Gulf Co-operation Council (being Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Hong Kong, Iceland, India, Israel, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Norway, the Russian Federation, Saudi Arabia, Singapore, South Africa, Switzerland, Turkey, the United Kingdom and the United States), the agent should provide written confirmation that it has that status with the Application Form(s) and written assurances that it has obtained and recorded evidence of the identity of the person for whom it acts and that it will on demand make such evidence available to Link and/or any relevant regulatory or investigatory authority; or (iii) if an Application Form is lodged by hand by the acceptor in person, he or she should ensure that he or she has with him or her evidence of identity bearing his or her photograph (for example, his or her passport) and evidence of his or her address. To confirm the acceptability of any written assurance referred to in paragraph (ii) above, or in any other case, the acceptor should contact Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
4.10 Issue of the New Shares in certificated form Definitive share certificates in respect of the New Shares to be held in certificated form are expected to be despatched within 14 days of Admission, at the risk of the person(s) entitled to them, to accepting Qualifying Non-CREST Shareholders or their agents or, in the case of joint holdings, to the first-named Shareholder, in each case at their registered address (unless lodging agent details have been completed on the Application Form).
83 5. ACTION TO BE TAKEN IN RELATION TO OPEN OFFER ENTITLEMENTS AND EXCESS OPEN OFFER ENTITLEMENTS CREDITED IN CREST 5.1 General Each Qualifying CREST Shareholder is expected to receive a credit to his or her CREST stock account of his or her Open Offer Entitlements equal to the maximum number of New Shares for which he or she is entitled to apply to acquire under the Open Offer as well as a credit in respect of his or her Excess Open Offer Entitlements. Any fractional entitlements to New Shares will be rounded down in calculating entitlements to the New Shares and such fractional entitlements will not be allotted to Shareholders but will be aggregated and issued into the market for the benefit of the Company. The CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Shares held at the Record Date by the Qualifying CREST Shareholder in respect of which the Open Offer Entitlements and Excess Open Offer Entitlements have been allocated. If for any reason it is impracticable to credit the stock accounts of Qualifying CREST Shareholders by 1 June 2020 or such later time as the Company shall decide, Application Forms shall, unless the Company and the Underwriters agree otherwise, be sent out in substitution for the Open Offer Entitlements and Excess Open Offer Entitlements which have not been so credited and the expected timetable as set out in this document may, with the consent of the Underwriters, be adjusted as appropriate. References to dates and times in this document should be read as subject to any such adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates but Qualifying CREST Shareholders may not receive any further written communication. Qualifying CREST Shareholders who wish to take up all or part of their entitlements in respect of the New Shares should refer to the CREST Manual for further information on the CREST procedures referred to below. If you are a CREST sponsored member, you should consult your CREST sponsor if you wish to take up your entitlement, as only your CREST sponsor will be able to take the necessary action to take up your entitlements in respect of the New Shares. If you have any queries on the procedure for acceptances and payment, you should contact Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. In accordance with the instructions in this “Part IV”, the CREST instruction must have been settled by 11.00 a.m. on 17 June 2020.
5.2 Bona fide market claims The Open Offer Entitlements and Excess Open Offer Entitlements will constitute separate securities for the purposes of CREST and will have separate ISINs. Although Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of Open Offer Entitlements and Excess Open Offer Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim transaction. Transactions identified by the CREST Claims Processing Unit as “cum” the Open Offer Entitlement and Excess Open Offer Entitlement will generate an appropriate market claim transaction and the relevant Open Offer Entitlement(s) and Excess Open Offer Entitlement(s) will thereafter be transferred accordingly.
5.3 Excess Application Facility Provided Qualifying CREST Shareholders choose to take up their Open Offer Entitlement in full, the Excess Application Facility enables Qualifying CREST Shareholders to apply for Open Offer Shares in excess of their Open Offer Entitlement. There is no limit on the amount of Open Offer Shares that can be applied for under the Excess Application Facility, save that the maximum amount of Open Offer Shares to be allotted under the Excess Application Facility will be limited by the maximum size of the Placing and Open Offer less the aggregate of the Open Offer Shares issued under the Open Offer pursuant to the Qualifying Shareholders’ Open Offer Entitlements. For the avoidance of doubt, the Firm Placed Shares will not form part of the amount of Shares available under the Excess Application Facility.
84 Applications for Excess Shares will be satisfied to the extent that other Qualifying Shareholders do not apply for their Open Offer Entitlements. If applications under the Excess Application Facility are received for more than the maximum number of Open Offer Shares available, then such applications will be scaled back at the absolute discretion of the Board in consultation with the Underwriters. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant’s risk) without interest as soon as practicable thereafter by way of cheque. Each Qualifying CREST Shareholder will initially be credited with Excess Open Offer Entitlements equal to 10 times its Open Offer Entitlement. If a Qualifying CREST Shareholder would like to apply for Excess Shares over and above the number of Excess Open Offer Entitlements which have been credited, such Qualifying CREST Shareholder should contact Link to request that further Excess Open Offer Entitlements be credited, subject at all times to the Maximum Excess Application Number. All enquiries in connection with the procedure for application for Excess Open Offer Entitlements should be made to Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. An Excess Open Offer Entitlement in CREST may not be sold or otherwise transferred. Save as provided in this “Part IV—Terms and Conditions of the Placing and Open Offer and Firm Placing” in relation to certain Overseas Persons, the CREST accounts of Qualifying CREST Shareholders will be credited with an Excess Open Offer Entitlement in order for any applications for Excess Shares to be settled through CREST. The credit of such Excess Open Offer Entitlement does not in any way give Qualifying CREST Shareholders a right to the New Shares attributable to the Excess Open Offer Entitlement as an Excess Open Offer Entitlement is subject to scaling back in accordance with the terms of this document. To apply for Excess Shares pursuant to the Open Offer, Qualifying CREST Shareholders should follow the instructions above and must not return a paper form and cheque. Excess Open Offer entitlements will not be subject to Euroclear’s market claims process. CREST Shareholders claiming Excess Open Offer Entitlements by virtue of a bona fide market claim are advised to contact the Receiving Agent to request a credit of the appropriate number of entitlements to their CREST account. Should a transaction be identified by the CREST Claims Processing Unit as “cum” the Open Offer Entitlement and the relevant Open Offer Entitlement(s) be transferred, the Excess Open Offer Entitlement(s) will not transfer with the Open Offer Entitlement(s) claim, but will need to be claimed separately by the purchaser who is advised to contact the Receiving Agent to request a credit of the appropriate number of Excess Open Offer Entitlements to their CREST account. Please note that a separate USE Instruction must be sent in respect of any application under the Excess Open Offer Entitlement. A Qualifying CREST Shareholder who has made a valid application for Excess Shares under the Excess Application Facility which is not met in full, and from whom payment in full for Excess Shares has been received, will receive a pounds sterling amount equal to the number of Excess Shares applied and paid for, but not allocated to, the relevant Qualifying CREST Shareholder, multiplied by the Offer Price. Monies will be returned as soon as reasonably practicable thereafter, without payment of interest and at the applicant’s sole risk. Fractions of Excess Shares will not be issued under the Excess Application Facility and fractions of Excess Shares will be rounded down to the nearest whole number.
5.4 USE Instructions for some or all of the Open Offer Entitlements Qualifying CREST Shareholders who are CREST members and who wish to apply for Open Offer Shares in respect of all or some of their Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) a USE Instruction to CREST which, on its settlement, will have the following effect: (a) the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with a number of Open Offer Entitlements corresponding to the number of the New Shares applied for; and
85 (b) the creation of a CREST payment, in accordance with the CREST payment arrangements, in favour of the payment bank of the Receiving Agent in respect of the amount specified in the USE Instruction which must be the full amount payable on application for the number of the New Shares referred to in (a) above.
5.5 Content of USE Instructions in respect of Open Offer Entitlements The USE Instruction must be properly authenticated in accordance with Euroclear’s specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details: (a) the number of Open Offer Shares for which application is being made (and hence the number of the Open Offer Entitlement(s) being delivered to the Receiving Agent); (b) the ISIN of the Open Offer Entitlements. This is GB00BM8R6L96; (c) the CREST participant ID of the CREST member; (d) the CREST member account ID of the CREST member from which the Open Offer Entitlements are to be debited; (e) the participant ID of the Receiving Agent in its capacity as a CREST receiving agent. This is 7RA33; (f) the member account ID of the Receiving Agent in its capacity as a CREST receiving agent. This is 20730TED; (g) the amount payable by means of a CREST payment on settlement of the USE Instruction. This must be the full amount payable on application for the number of the New Shares referred to in (a) above; (h) the intended settlement date. This must be on or before 11.00 a.m. on 17 June 2020; (i) the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST; (j) a contact name and telephone number (in the free format shared note field); and (k) a priority of at least 80. In order for an application under the Open Offer to be valid, the USE Instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 17 June 2020. CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE Instruction may settle on 17 June 2020 in order to be valid is 11.00 a.m. on that day. If Admission has not occurred by 8.00 a.m. on 19 June 2020, or such later time and date as the Company and the Underwriters may agree, being not later than 30 June 2020, the Underwriters may terminate the Sponsor and Underwriting Agreement. In such circumstances, the Capital Raising will not proceed, the Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest, as soon as practicable thereafter.
5.6 USE Instructions for the Excess Open Offer Entitlements Qualifying CREST Shareholders who are CREST members and who wish to apply for Excess Shares in respect of their Excess Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) a USE Instruction to CREST which, on its settlement, will have the following effect: (a) the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with a number of Excess Open Offer Entitlements corresponding to the number of Excess Shares applied for; and (b) the creation of a CREST payment, in accordance with the CREST payment arrangements, in favour of the payment bank of the Receiving Agent in respect of the amount specified in the USE Instruction which must be the full amount payable on application for the number of Excess Shares referred to in (a) above.
86 5.7 Content of USE Instructions in respect of Excess Open Offer Entitlements The USE Instruction must be properly authenticated in accordance with Euroclear’s specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details: (a) the number of Excess Shares for which application is being made (and hence the number of the Excess Open Offer Entitlement(s) being delivered to the Receiving Agent); (b) the ISIN of the Excess Open Offer Entitlements. This is GB00BM8R6M04; (c) the CREST participant ID of the CREST member; (d) the CREST member account ID of the CREST member from which the Excess Open Offer Entitlements are to be debited; (e) the participant ID of the Receiving Agent in its capacity as a CREST receiving agent. This is 7RA33; (f) the member account ID of the Receiving Agent in its capacity as a CREST receiving agent. This is 20730TED; (g) the amount payable by means of a CREST payment on settlement of the USE Instruction. This must be the full amount payable on application for the number of Excess Shares referred to in (a) above; (h) the intended settlement date. This must be on or before 11.00 a.m. on 17 June 2020; (i) the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST; (j) a contact name and telephone number (in the free format shared note field); and (k) a priority of at least 80. In order for an application under the Open Offer to be valid, the USE Instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 17 June 2020. CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE Instruction may settle on 17 June 2020 in order to be valid is 11.00 a.m. on that day. If Admission has not occurred by 8.00 a.m. on 19 June 2020, or such later time and date as the Company and the Underwriters may agree, being not later than 30 June 2020, the Underwriters may terminate the Sponsor and Underwriting Agreement. In such circumstances, the Capital Raising will not proceed, the Excess Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest, as soon as practicable thereafter.
5.8 CREST procedures and timings Qualifying CREST Shareholders who are CREST members and CREST sponsors (on behalf of CREST sponsored members) should note that Euroclear does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in relation to the input of a USE Instruction and its settlement in connection with the Open Offer. It is the responsibility of the Qualifying CREST Shareholder concerned to take (or, if the Qualifying CREST Shareholder is a CREST sponsored member, to procure that his or her CREST sponsor takes) the action necessary to ensure that a valid acceptance is received as stated above by 11.00 a.m. on 17 June 2020. Qualifying CREST Shareholders and (where applicable) CREST sponsors are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
5.9 Validity of application A USE Instruction complying with the requirements as to authentication and contents set out above which settles by not later by 11.00 a.m. on 17 June 2020 will constitute a valid application under the Open Offer.
87 5.10 Incorrect or incomplete applications If a USE Instruction includes a CREST payment for an incorrect sum, the Company (acting in consultation with the Underwriters), through the Receiving Agent, reserves the right: (a) to reject the application in full and refund the payment to the CREST member in question (without interest); (b) in the case that an insufficient sum is paid, to treat the application as a valid application for such lesser whole number of Open Offer Shares as would be able to be applied for with that payment at the Offer Price, refunding any unutilised sum to the CREST member in question (without interest); or (c) in the case that an excess sum is paid, to treat the application as a valid application for all the New Shares referred to in the USE Instruction, refunding any unutilised sum to the CREST member in question (without interest).
5.11 Placee participation Each Placee subscribing for New Shares in relation to the Placing may apply for, or take up, its Open Offer Entitlement and apply under the Excess Application Facility.
5.12 Effect of application A CREST member who makes or is treated as making a valid application in accordance with the above procedures thereby: (a) represents and warrants to each of the Company and the Underwriters that he or she has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his or her rights, and perform his or her obligations, under any contracts resulting therefrom and that he or she is not a person otherwise prevented by legal or regulatory restrictions from applying for Open Offer Shares or acting on behalf of any such person on a non- discretionary basis; (b) agrees with each of the Company and the Underwriters to pay the amount payable on application in accordance with the above procedures by means of a CREST payment in accordance with the CREST payment arrangements (it being acknowledged that the payment to the Receiving Agent’s payment bank in accordance with the CREST payment arrangements shall, to the extent of the payment, discharge in full the obligation of the CREST member to pay the amount payable on application); (c) agrees with each of the Company and the Underwriters that all applications under the Open Offer and any contractual or non-contractual obligations resulting therefrom, shall be governed by, and construed in accordance with, the laws of England; (d) confirms that in making the application he or she is not relying and has not relied on the Underwriters or any other person affiliated with the Underwriters in connection with any investigation of the accuracy of any information contained in this document or his or her investment decision; (e) confirms to each of the Company and the Underwriters that in making the application he or she is not relying on any information or representation other than that contained in this document, or any documents incorporated by reference into this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document (including any documents incorporated by reference into this document) or any part thereof, or involved in the preparation thereof, shall have any liability for any information or representation not so contained and further agrees that, having had the opportunity to read this document, including any documentation incorporated by reference, he or she will be deemed to have had notice of all the information contained in this document (including information incorporated by reference); (f) represents and warrants to the Company and the Underwriters that if he or she has received some or all of his or her Open Offer Entitlements and Excess Open Offer Entitlements from a person other than the Company, he or she is entitled to apply under the Open Offer in relation to such Open Offer Entitlements and Excess Open Offer Entitlements by virtue of a bona fide market claim; (g) represents and warrants to each of the Company and the Underwriters that he or she is the Qualifying Shareholder originally entitled to the Open Offer Entitlements and Excess Open Offer Entitlements or that he or she has received such Open Offer Entitlements and Excess Open Offer Entitlements by virtue of a bona fide market claim;
88 (h) represents and warrants to the Company and the Underwriters that: (i) he or she is not, nor is he or she applying on behalf of any person who is located, a citizen or resident, or a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for the New Shares is prevented by law; and (ii) he or she is not applying with a view to re-offering, reselling, transferring or delivering any of the New Shares which are the subject of his or her application to, or for the benefit of, a person who is located, a citizen or resident or which is a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for the New Shares is prevented by law, nor acting on behalf of any such person on a non-discretionary basis nor a person(s) otherwise prevented by legal or regulatory restrictions from applying for the New Shares under the Open Offer; (i) requests that the New Shares to which he or she will become entitled be issued to him or her on the terms set out in this document, subject to the Articles; and (j) represents and warrants to each of the Company and the Underwriters that he or she is not, and nor is he or she applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986.
5.13 Discretion as to rejection and validity of acceptances The Company (acting in consultation with the Underwriters) may: (a) reject any acceptance constituted by a USE Instruction, which is otherwise valid, in the event of a breach of any of the representations, warranties and undertakings set out or referred to in this paragraph 5.13 of this “Part IV”. Where an acceptance is made as described in this paragraph 5 of “Part IV” which is otherwise valid, and the USE Instruction concerned fails to settle by 11.00 a.m. on 17 June 2020 (or by such later time and date as the Company and the Underwriters may determine), the Company shall be entitled to assume, for the purposes of their right to reject an acceptance as described in this paragraph 5.13(a), of “Part IV” that there has been a breach of the representations, warranties and undertakings set out or referred to in paragraph 5.11 of this “Part IV” above unless the Company is aware of any reason outside the control of the Qualifying CREST Shareholder or CREST sponsor (as appropriate) concerned for the failure of the USE Instruction to settle; (b) treat as valid (and binding on the Qualifying CREST Shareholder concerned) an acceptance which does not comply in all respects with the requirements as to validity set out or referred to in this paragraph 5; (c) accept an alternative properly authenticated dematerialised instruction from a Qualifying CREST Shareholder or (where applicable) a CREST sponsor as constituting a valid acceptance in substitution for, or in addition to, a USE Instruction and subject to such further terms and conditions as the Company may determine; (d) treat a properly authenticated dematerialised instruction (in this sub-paragraph, the “first instruction”) as not constituting a valid acceptance if, at the time at which Link receives a properly authenticated dematerialised instruction giving details of the first instruction, either the Company or Link has received actual notice from Euroclear of any of the matters specified in CREST Regulations 35(5)(a) in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and (e) accept an alternative instruction or notification from a Qualifying CREST Shareholder or (where applicable) a CREST sponsor, or extend the time for acceptance and/or settlement of a USE Instruction or any alternative instruction or notification if, for reasons or due to circumstances outside the control of any Qualifying CREST Shareholder or (where applicable) CREST sponsor, a Qualifying CREST Shareholder is unable validly to take up all or part of his or her Open Offer Entitlement or Excess Open Offer Entitlement by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of facilities and/or systems operated by Link in connection with CREST.
5.14 Money Laundering Regulations If you hold your Existing Shares in CREST and apply to take up all or part of your entitlement as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a bank, a broker or another UK financial institution), then, irrespective of the value of the application, Link is required to take reasonable measures to establish the identity of the person or persons on whose behalf you are making the application.
89 Such Qualifying CREST Shareholders must therefore contact Link before sending any USE Instruction or other instruction so that appropriate measures may be taken. Submission of a USE Instruction which constitutes, or which may on its settlement constitute, a valid acceptance as described above constitutes a warranty and undertaking by the applicant to the Company and the Underwriters to provide promptly to Link any information Link may specify as being required for the purposes of the Money Laundering Regulations of FSMA. Pending the provision of evidence satisfactory to Link as to identity, Link, having consulted with the Company and the Underwriters may take, or omit to take, such action as it may determine to prevent or delay settlement of the USE Instruction. If satisfactory evidence of identity has not been provided within a reasonable time, Link will not permit the USE Instruction concerned to proceed to settlement (without prejudice to the right of the Company to take proceedings to recover any loss suffered by it as a result of failure by the applicant to provide satisfactory evidence).
5.15 Deposit of Open Offer Entitlements into, and withdrawal from, CREST A Qualifying Non-CREST Shareholder’s entitlement under the Open Offer as shown by the number of Open Offer Entitlements set out in his or her Application Form, including the entitlement to apply under the Excess Application Facility, may be deposited into CREST (either into the account of the Qualifying Shareholder named in the Application Form or into the name of a person entitled by virtue of a bona fide market claim). Similarly, Open Offer Entitlements and Excess Open Offer Entitlements held in CREST may be withdrawn from CREST so that the entitlement under the Open Offer is reflected in an Application Form. Normal CREST procedures (including timings) apply in relation to any such deposit or withdrawal (these are set out in the Application Form in the case of a deposit into CREST). A Qualifying Non-CREST Shareholder who wishes to make such a deposit should sign and complete Box 13 of their Application Form, entitled “CREST Deposit Form” and then deposit their Application Form with the CCSS. In addition, the normal CREST stock deposit procedures will need to be carried out, except that (i) it will not be necessary to complete and lodge a separate CREST transfer form (as prescribed under the Stock Transfer Act 1963) with the CCSS and (ii) only the Open Offer Entitlement and Excess Open Offer Entitlement may be deposited into CREST. If you have received your Application Form by virtue of a bona fide market claim, the declaration below in Box 10 must be made or (in the case of an Application Form which has been split) marked “Declaration of sale or transfer duly made”. If you wish to take up your Open Offer Entitlement, the CREST Deposit Form in Box 13 of your Application Form must be completed and deposited with the CCSS in accordance with the instructions above. A holder of more than one Application Form who wishes to deposit Open Offer Entitlements shown on those Application Forms into CREST must complete Box 13 of each Application Form. In particular, having regard to normal processing times in CREST and on the part of Link, the recommended latest time for depositing an Application Form with the CCSS, where the person entitled wishes to hold the Open Offer Entitlement set out in such Application Form as an Open Offer Entitlement in CREST and the entitlement to apply under the Excess Application Facility in CREST, is by 11.00 a.m. on 17 June 2020. CREST holders inputting the withdrawal of their Open Offer Entitlement and any Excess Open Offer Entitlement from their CREST account must ensure that they withdraw their Open Offer Entitlement. Delivery of an Application Form with the CREST deposit form duly completed, whether in respect of a deposit into the account of the Qualifying Shareholder named in the Application Form or into the name of another person, shall constitute a representation and warranty to the Company, the Underwriters and Link by the relevant CREST member(s) that it is/they are not in breach of the provisions of the notes under the paragraph headed Application Letter on page 2 of the Application Form, and a declaration to the Company and the Receiving Agent from the relevant CREST member(s) that it/they is/are not located in, or citizen(s) or resident(s) of, any Excluded Territory or any jurisdiction in which the application for the New Shares is prevented by law, and, where such deposit is made by a beneficiary or a market claim, a representation and warranty that the relevant CREST member(s) is/are entitled to apply under the Open Offer by virtue of a bona fide market claim.
5.16 Right to allot and issue the New Shares in certificated form Despite any other provision of this document, the Company reserves the right to allot and to issue any New Shares in certificated form. In normal circumstances, this right is only likely to be exercised in the event of an interruption, failure or breakdown of CREST (or of any part of CREST) or of a part of the facilities and/or systems operated by Link in connection with CREST.
90 6. TAXATION Information on taxation with regard to the Capital Raising for Qualifying Shareholders and Placees who are resident in the United Kingdom for UK tax purposes is set out in “Part XI—Taxation—UK Taxation” and for Qualifying Shareholders and Placees who are resident in the United States for US tax purposes is set out in “Part XI Taxation—United States Federal Income Taxation”. The information contained in “Part XI—Taxation” is intended only as a general guide to the current tax position in the United Kingdom and the United States, and Qualifying Shareholders and Placees resident in the United Kingdom or United States for UK or US tax purposes should consult their own tax advisers regarding the tax treatment of the Capital Raising in light of their own circumstances. Shareholders who are in any doubt as to their tax position, or who are subject to tax in any other jurisdiction, should consult an appropriately qualified independent professional adviser immediately. Note, for example, that dividends received by a Qualifying Shareholder in respect of the New Shares may be subject to tax in that Qualifying Shareholder’s own jurisdiction of tax residence, which may reduce the after-tax income received by that Qualifying Shareholder from his or her New Shares.
7. WITHDRAWAL RIGHTS Qualifying Shareholders wishing to exercise the withdrawal rights under section 87Q(4) of FSMA after the issue by the Company of a prospectus supplementing this document (if any) must do so by lodging a written notice of withdrawal, which shall not include a notice sent by facsimile or any other form of electronic communication, that must include the full name and address of the person wishing to exercise such statutory withdrawal rights and, if such person is a Qualifying CREST Shareholder, the participant ID and the member account ID of such Qualifying CREST Shareholder, to Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU (or by hand at Link Asset Services at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU), so as to be received no later than two Business Days after the date on which the supplementary prospectus is published. Notice of withdrawal given by any other means or which is deposited with or received by Link Asset Services after expiry of such period will not constitute a valid withdrawal. Furthermore, it is the Company’s view that Qualifying Shareholders who have validly taken up their entitlements in accordance with the procedure laid down for acceptance and payment in this “Part IV” shall not be entitled to withdraw any such acceptance. In such circumstances, any such accepting Qualifying Shareholder wishing to withdraw is advised to seek independent legal advice. Shareholders should note that, in any event, withdrawal rights will not apply once Admission of the New Shares has occurred.
8. OVERSEAS PERSONS This document has been approved by the FCA, being the competent authority in the United Kingdom. It is the responsibility of any person (including, without limitation, custodians, nominees and trustees) outside the United Kingdom wishing to participate in the Capital Raising to satisfy himself, herself or itself as to the full observance of the laws of any relevant territory in connection therewith, including the obtaining of any governmental or other consents which may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territories. The comments set out in this paragraph 8 are intended as a general guide only and any Overseas Person who is in doubt as to his or her position should consult his or her professional adviser without delay.
8.1 General The distribution of this document and the Application Form and the making of the Capital Raising to persons resident in, or who are citizens of, or who have a registered address in countries other than the United Kingdom may be affected by the law of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to participate in the Capital Raising. This paragraph sets out the restrictions applicable to Shareholders who have registered addresses outside the UK, who are physically located outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are persons (including, without limitation, custodians, nominees and trustees) who have a contractual or legal obligation to forward this document to a jurisdiction outside the United Kingdom, or who hold Shares for the account or benefit of any such person. Subject to limited exceptions, Application Forms have not been, and will not be, sent to, and Open Offer Entitlements, Excess Open Offer Entitlements and the New Shares will not be credited to CREST accounts of, Restricted Persons, or to their agent or intermediary.
91 No person receiving a copy of this document and/or an Application Form and/or any other document issued by the Company in connection with the Placing and Open Offer and Firm Placing and/or receiving a credit of Open Offer Entitlements or Excess Open Offer Entitlements to a stock account in CREST in any territory other than the United Kingdom may treat the same as constituting an invitation or offer to him or her, nor should he or she in any event use the Application Form or deal with Open Offer Entitlements or Excess Open Offer Entitlements in CREST unless, in the relevant jurisdiction, such an invitation or offer could lawfully be made to him and the Application Form or Open Offer Entitlements or Excess Open Offer Entitlements in CREST could lawfully be used or dealt with without contravention of any unfulfilled registration or other legal or regulatory requirements. In such circumstances, where an invitation or offer would contravene any registration or other legal or regulatory requirements, this document and/or an Application Form must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of this document and/or an Application Form and/or any other document issued by the Company in connection with the Capital Raising or whose stock account in CREST is credited with Open Offer Entitlements or Excess Open Offer Entitlements should not, in connection with the Placing and Open Offer, distribute or send the same in or into, or transfer Open Offer Entitlements or Excess Open Offer Entitlements to any person in or into, any Excluded Territory, including the United States. If an Application Form or credit of Open Offer Entitlements or Excess Open Offer Entitlements in CREST is received by any person in any Excluded Territory, including the United States, or by their agent or nominee in any such territory, he or she must not seek to take up the entitlements referred to in the Application Form or in this document or transfer the Open Offer Entitlements or Excess Open Offer Entitlements in CREST unless the Company and the Underwriters determine that such actions would not violate applicable legal or regulatory requirements. Any person who does forward this document or an Application Form into any Excluded Territory (whether under contractual or legal obligation or otherwise) should draw the recipient’s attention to the contents of this section. The Company and the Underwriters may (in their absolute discretion) treat as invalid and the Company will not be bound to allot or issue any New Shares in respect of any acceptance or purported acceptance of the application for the New Shares or offer of the Open Offer Entitlements or Excess Open Offer Entitlements which appears to the Company or its respective agents to have been executed, effected or despatched in a manner which may involve a breach of the laws or regulations of any jurisdiction or if it believes or they believe that the same may violate applicable legal or regulatory requirements or if, in the case of an Application Form, it provides an address for delivery of the definitive share certificates for the New Shares, or, in the case of a credit of the New Shares in CREST, the Shareholder’s registered address is in a Excluded Territory, including the United States, or any other jurisdiction outside the United Kingdom in which it would be unlawful to deliver such share certificates or make such a credit, or if the Company believes or its agents believe that the same may violate applicable legal or regulatory requirements. Despite any other provisions of this document or the Application Form, the Company and the Underwriters reserve the right to permit any Overseas Person to take up his or her entitlements if the Company and the Underwriters in their absolute discretion are satisfied that the transaction in question is exempt from or not subject to the legislation or regulations giving rise to the restriction in question. If the Company and the Underwriters are so satisfied, the Company will arrange for the relevant Overseas Person to be sent an Application Form if he or she is reasonably believed to be a Qualifying Non-CREST Shareholder or, if he or she is reasonably believed to be a Qualifying CREST Shareholder, arrange for the Open Offer Entitlements and Excess Open Offer Entitlements to be credited to the relevant CREST stock account. Those Overseas Persons who wish, and are permitted, to take up their entitlement should note that payments must be made as described in paragraphs 4 and 5 of this “Part IV”. The provisions of paragraph 8 of this “Part IV” will apply generally to Restricted Persons and other Overseas Persons who do not or are unable to take up the New Shares provisionally allotted to them.
8.2 Offering restrictions relating to the United States The New Shares have not been and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, resold, transferred or delivered, directly or indirectly, into or within the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the New Shares in the United States.
92 Subject to limited exceptions, no offering is being made in the United States and neither this document nor the Application Form constitute or will constitute an offer, or an invitation to apply for, or an offer or invitation to acquire, any New Shares in the United States. Application Forms have not been, and will not be, sent to, and the New Shares, Open Offer Entitlements and Excess Open Offer Entitlements have not been, and will not be, credited to the CREST account of, any Qualifying Shareholder with a registered address in the United States. Subject to certain limited exceptions, envelopes containing Application Forms should not be postmarked in the United States or otherwise despatched from the United States, and all persons acquiring New Shares and wishing to hold such shares in registered form must provide an address for registration of the New Shares issued upon exercise thereof outside the United States. Save with the prior consent of the Company, any person who acquires the New Shares will be deemed to have declared, warranted and agreed, by accepting delivery of this document or the Application Form and delivery of the New Shares, that it is not, and that at the time of acquiring the New Shares it will not be, in the United States or acting on behalf of, or for the account or benefit of a person on a non-discretionary basis in the United States. Neither the New Shares, the Form of Proxy, the Application Form, this document nor any other document connected with the Capital Raising have been or will be approved or disapproved by the SEC or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, nor have any of the foregoing authorities or any securities commission passed upon or endorsed the merits of the offering of the New Shares or the accuracy or adequacy of this document or any other document connected with this the Capital Raising. Any representation to the contrary is a criminal offence in the United States. The Company reserves the right to treat as invalid any Application Form: (i) that appears to it or its agents to have been executed in or despatched from the United States or that provides an address in the United States for delivery of definitive share certificates; (ii) that does not include the relevant warranty set out in the Application Form to the effect that the person executing the Application Form does not have a registered address (and is not otherwise located) in the United States and is not acquiring the New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Shares in the United States; or (iii) where the Company believes acceptance of such Application Form may violate applicable legal or regulatory requirements, and the Company shall not be bound to allot (on a non-provisional basis) or issue any New Shares in respect of any such Application Form. In addition, the Company and the Receiving Agent reserve the right to reject any USE Instruction sent by or on behalf of any CREST member with a registered address in the United States in respect of the New Shares. Notwithstanding the foregoing, the Company reserves the right to offer and deliver the Open Offer Entitlements and Excess Open Offer Entitlements to, and the New Shares may be offered to and acquired by, a limited number of Shareholders and investors in the United States reasonably believed to be QIBs, within the meaning of Rule 144A, in offerings exempt from or in a transaction not subject to, the registration requirements under the Securities Act. The New Shares being offered outside the United States are being offered in reliance on Regulation S. If you are a QIB located in the United States, in order to acquire any New Shares you must sign and deliver an investor letter in the form provided by the Company. If you sign such an investor letter, you will be, amongst other things: representing that you and any account for which you are acquiring the New Shares are a QIB; and agreeing not to reoffer, sell, pledge or otherwise transfer the New Shares except: in an offshore transaction in accordance with Rule 904 of Regulation S (which, for the avoidance of doubt, includes a sale over the London Stock Exchange), and neither the seller nor any person acting on its behalf knows that the transaction has been pre-arranged with a buyer in the United States; to a QIB in a transaction in accordance with Rule 144A; with respect to the New Shares only, pursuant to Rule 144 under the Securities Act (if available); or in another transaction pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and, in each case, in compliance with any applicable securities laws of any state or other jurisdiction of the United States. Any person in the United States who obtains a copy of this document and/or an Application Form and who is not a QIB is required to disregard them. In addition, until 40 days after commencement of the Capital Raising, an offer, sale or transfer of the New Shares within the United States by a dealer (whether or not participating in the Capital Raising) may violate the registration requirement of the Securities Act.
8.3 Other Excluded Territories Having considered the circumstances, the Company is of the view that it is necessary or expedient to restrict the ability of persons in the other Excluded Territories (i.e. other than the United States) to participate in the Capital Raising due to the time and costs involved in the registration of this document and/or compliance with
93 the relevant local legal or regulatory requirements in those jurisdictions. Therefore, subject to certain exceptions, no Allotment Letters will be sent to, and no Open Offer Entitlements or Excess Open Offer Entitlements will be credited to a stock account in CREST of, persons with registered addresses in the other Excluded Territories. No offer of or invitation to acquire the New Shares is being made by virtue of this document or the Application Form into the other Excluded Territories.
8.4 Other overseas territories Application Forms will be posted to Qualifying Non-CREST Shareholders with registered addresses in other overseas territories and Open Offer Entitlements and Excess Open Offer Entitlements will be credited to the CREST stock accounts of Qualifying CREST Shareholders with registered addresses in other overseas territories. Overseas Persons in jurisdictions other than the Excluded Territories may, subject to the laws of their relevant jurisdiction, accept their entitlements under the Placing and Open Offer and Firm Placing in accordance with the instructions set out in this document and, in the case of Qualifying Non- CREST Shareholders only, the Application Form. Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their appropriate professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Open Offer Entitlements or Excess Open Offer Entitlements. If you are in any doubt as to your eligibility to accept the offer of the New Shares, you should contact your appropriate professional adviser immediately.
9. REPRESENTATIONS AND WARRANTIES RELATING TO OVERSEAS TERRITORIES 9.1 Qualifying Non-CREST Shareholders Any person accepting an Application Form or requesting subscription to the New Shares as set out therein represents and warrants to each of the Company and the Underwriters that, except where proof has been provided to the satisfaction of the Company and the Underwriters that such person’s use of the Application Form will not result in the contravention of any applicable legal requirements in any jurisdiction: (i) such person is not accepting an Application Form from within the United States or any other Excluded Territory; (ii) such person is not in any territory in which it is unlawful to make or accept an offer to subscribe for the New Shares or to use the Application Form in any manner in which such person has used or will use it; (iii) such person is not acting on a non-discretionary basis for a person (iii) located within the United States or any other Excluded Territory or any territory referred to in (ii) above at the time the instruction to accept was given unless (a) the instruction to request registration was received from a person outside the United States, (b) the person giving such instruction has confirmed that it has the authority to give such instruction, and (c) either (A) has investment discretion over such account or (B) is an investment manager or investment company, and that, in the case of each of (i) and (ii), is acquiring the New Shares in an offshore transaction within the meaning of Regulation S; and (iv) such person is not acquiring the New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Shares into the United States or any other Excluded Territory or any territory referred to in (ii) above. The Company and the Underwriters may treat as invalid any acceptance or purported acceptance of the allotment of the New Shares comprised in an Application Form if it: (a) appears to the Company to have been executed in or despatched from the United States or any other Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or if the Company believes the same may violate any applicable legal or regulatory requirement; (b) provides an address in any Excluded Territory, including the United States, for delivery of definitive share certificates for the New Shares (or any jurisdiction outside the United Kingdom in which it would be unlawful to deliver such certificates); or (c) purports to exclude the representation and warranty required by this section.
9.2 Qualifying CREST Shareholders A Qualifying CREST Shareholder who makes a valid acceptance in accordance with the procedure set out in paragraph 5 of this “Part IV” represents and warrants to each of the Company and the Underwriters that, except where proof has been provided to the satisfaction of the Company and the Underwriters that such person’s submission of a USE Instruction will not result in the contravention of any applicable legal requirements in any jurisdiction: (i) he or she is not within any of the Excluded Territories, including the United States; (ii) he or she is not in any territory in which it is unlawful to make or accept an offer to acquire or subscribe for the New Shares; (iii) he or she is not acting on a non-discretionary basis for a person located within the United States or
94 any other Excluded Territory or any territory referred to in (ii) above at the time the instruction to accept was given; and (iv) he or she is not acquiring the New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Shares into the United States or any other Excluded Territory or any territory referred to in (ii) above. The Company and the Underwriters may treat as invalid any USE Instruction which: (i) appears to the Company and the Underwriters to have been despatched from the United States or any other Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or which they or their agents believe may violate any applicable legal or regulatory requirement; or (ii) purports to exclude the representation and warranty required by this section.
10. WAIVER The provisions of paragraphs 8 and 9 of this “Part IV” and of any other terms of the Placing and Open Offer and Firm Placing relating to Restricted Persons may be waived, varied or modified as regards specific Shareholder(s) or on a general basis by the Company in its absolute discretion. Subject to this, the provisions of paragraphs 8 and 9 of this “Part IV” supersede any terms of the Placing and Open Offer and Firm Placing inconsistent therewith. References in paragraphs 8 and 9 of this Part IV and in this paragraph 10 of “Part IV” to Shareholders shall include references to the person or persons executing an Application Form and, in the event of more than one person executing an Application Form, the provisions of paragraphs 8 and 9 of this “Part IV” and this paragraph 10 of “Part IV” shall apply jointly to each of them.
11. TIMES AND DATES The Company shall in its discretion be entitled to amend the dates that Application Forms are despatched or dealings in the New Shares commence and amend or extend the latest date for acceptance under the Capital Raising and all related dates set out in this document and in such circumstances shall announce such amendments via a Regulatory Information Service and, if appropriate, notify Shareholders.
12. GOVERNING LAW The terms and conditions of the Capital Raising as set out in this document and the Application Form and any non-contractual obligations arising out of or in relation to the Placing and Open Offer and Firm Placing shall be governed by, and construed in accordance with, English law.
13. JURISDICTION The courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non- contractual, which may arise out of or in connection with the Capital Raising, this document and the Application Form. By accepting entitlements under the Placing and Open Offer and Firm Placing in accordance with the instructions set out in this document and, in the case of Qualifying Non-CREST Shareholders only, the Application Form, Qualifying Shareholders irrevocably submit to the exclusive jurisdiction of the Courts of England and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.
95 PART V—TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION
1. INTRODUCTION As explained in “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”, the Company is proposing to raise approximately £95.0 million in gross proceeds (approximately £90.0 million in net proceeds) by way of a fully underwritten Placing and Open Offer and Firm Placing. Up to a further approximately £10.0 million in gross proceeds (approximately £9.6 million net of commissions) may also be raised by way of an Offer for Subscription which is not underwritten. The Capital Raising consists of a Placing and Open Offer of 25,478,035 Open Offer Shares, a Firm Placing of 101,188,632 Firm Placed Shares and an Offer for Subscription of up to 13,333,333 Offer for Subscription Shares. The Offer for Subscription is only being made in the United Kingdom but, subject to applicable law, the Company may allot New Shares on a private placement basis to applicants in other jurisdictions. If you are outside the United Kingdom, see paragraph 6 of this “Part V—Terms and Conditions of the Offer for Subscription”. The Offer Price of 75 pence per New Share represents a 51.1 per cent. discount to the Closing Price of 153.3 pence per Existing Share on 29 May 2020 (the last Business Day before the announcement of the Capital Raising). In setting the Offer Price, the Directors have considered the process at which the New Shares need to be offered to investors to ensure the success of the Capital Raising and raise a significant level of equity compared to the market capitalisation of the Company. The Directors believe that both the Offer Price and the discount are appropriate. The Offer for Subscription is conditional upon: (a) Shareholder approval of the Resolutions at the General Meeting; (b) the Sponsor and Underwriting Agreement having become or been declared unconditional in all respects and the Sponsor and Underwriting Agreement not having been terminated by the Underwriters in accordance with its terms prior to Admission; and (c) Admission occurring not later than 8.00 a.m. on 19 June 2020 (or such later time or date as the Company and the Underwriters may agree, being not later than 30 June 2020). In the event that these conditions are not satisfied, the Offer for Subscription will not proceed. In such circumstances, application monies will be returned without payment of interest, as soon as practicable thereafter. The Offer for Subscription is not underwritten. The New Shares will rank pari passu in all respects with the Existing Shares, including the right to receive all dividends or other distributions declared, made or paid after the date of their issue. The New Shares will be in registered form and capable of being held in certificated form or uncertificated form in CREST. The New Shares issued as part of the Capital Raising will together represent approximately 75.8 per cent. of the enlarged issued share capital of the Company immediately following the Capital Raising (assuming full take up under the Offer for Subscription).
2. TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION Subject to the terms and conditions set out below, Shareholders and other investors are being given an opportunity to apply for Offer for Subscription Shares on the terms and conditions as set out in this “Part V—Offer for Subscription” and in the Offer for Subscription Application Form, which is appended at the end of the document. The Offer for Subscription is to be made in respect of up to 13,333,333 Offer for Subscription Shares at the Offer Price (payable in full and free of all expenses). Applications under the Offer for Subscription must be for New Shares with a minimum subscription amount of 500 New Shares and thereafter in multiples of 50 New Shares, up to 13,333,350 Offer for Subscription Shares available in the Offer for Subscription. Multiple applications will not be accepted. If valid applications are received under the Offer for Subscription for more than the maximum number of Offer for Subscription Shares available, applications shall be allocated in such manner as the Board may determine in its absolute discretion (in consultation with the Underwriters).
96 Shareholders should be aware that the Offer for Subscription is not a rights issue. As such, Shareholders should note that Offer for Subscription Application Forms are not negotiable documents and cannot be traded. Offer for Subscription Shares which are not taken up under the Offer for Subscription will not be sold in the market for the benefit of those who do not apply under the Offer for Subscription and Shareholders who do not apply to subscribe for Offer for Subscription Shares will have neither rights under the Offer for Subscription nor receive any proceeds from it. The results of the Offer for Subscription are expected to be announced on or around 18 June 2020. If the Sponsor and Underwriting Agreement does not become unconditional and the Capital Raising is terminated, any applications for Offer for Subscription Shares will be rejected. In these circumstances, application monies received by the Receiving Agent in respect of Offer for Subscription Shares will be returned (at the applicant’s sole risk), without payment of interest, as soon as reasonably practicable thereafter. A summary of the principal terms of the Sponsor and Underwriting Agreement is set out in paragraph 15 of “Part XII—Additional Information”. Applications will be made to the FCA and to the London Stock Exchange for the New Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities. It is expected that Admission will become effective and that dealings in the New Shares will commence as soon as practicable after 8.00 a.m. on 19 June 2020 (whereupon an announcement will be made by the Company to a Regulatory Information Service). The New Shares issued pursuant to the Offer for Subscription will rank pari passu in all respects with the Existing Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of the Company. No temporary documents of title will be issued in respect of Offer for Subscription Shares held in uncertificated form. Definitive certificates in respect of Offer for Subscription Shares subscribed for are expected to be posted to those applicants who have validly elected to hold their Offer for Subscription Shares in certificated form within 14 days of Admission. The Existing Shares are already CREST-enabled. No further application for admission to CREST is required for the New Shares and all of the New Shares when issued and fully paid may be held and transferred by means of CREST. In respect of those applicants who validly elect to hold their Offer for Subscription Shares in uncertificated form, the Offer for Subscription Shares are expected to be credited to their stock accounts maintained in CREST as soon as practicable after 8.00 a.m. on 19 June 2020. All applicants who apply for Offer for Subscription Shares will be deemed to have given the representations and warranties set out in paragraph 3.7 below unless such requirement is waived in writing by the Company. All documents and cheques posted to or by applicants (or their agents, as appropriate) will be posted at their own risk. References to dates and times in this document should be read as subject to adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of any revised dates or times.
3. ACTION TO BE TAKEN 3.1 General Subject as provided in paragraph 6 of this “Part V” in relation to Overseas Persons, Shareholders and other investors may use the Offer for Subscription Application Form appended to the end of this document to apply for Offer for Subscription Shares. Applicants may apply for such number of Offer for Subscription Shares with a minimum subscription amount of 500 New Shares, and thereafter in multiples of 50 New Shares, as they wish, up to the 13,333,350 Offer for Subscription Shares by completing Box (A) under section 1 of the Offer for Subscription Application Form. The Offer for Subscription Application Form also sets out instructions regarding payment. The instructions and other terms set out in the Offer for Subscription Application Form appended to the end of this document form part of the terms of the Offer for Subscription.
97 3.2 Offer for Subscription Application Forms Applications to acquire Offer for Subscription Shares may only be made on the Offer for Subscription Application Form appended to the end of this document. The Offer for Subscription Application Form should not be forwarded to or transmitted in or into any of the Excluded Territories.
3.3 Excess Applications Shareholders and other investors may apply for any number of Offer for Subscription Shares up to the maximum available under the Offer for Subscription. However, the total number of Offer for Subscription Shares is fixed and will not be increased in response to excess applications under the Offer for Subscription. If valid applications are received under the Offer for Subscription for more than the maximum number of Offer for Subscription Shares available, applications shall be allocated in such manner as the Board may determine in its absolute discretion (in consultation with the Underwriters). No assurance can be given that applications will be met in full or in part or at all. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant’s risk) without interest as soon as practicable thereafter by way of cheque, electronic transfer or CREST payment, as appropriate.
3.4 Application procedures Shareholders and other investors who wish to acquire Offer for Subscription Shares under the Offer for Subscription must complete, sign and return the Offer for Subscription Application Form appended to the end of this document in accordance with the instructions thereon. Completed Offer for Subscription Application Forms should be returned by post or by hand (during normal office hours only) to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to be received by Link by no later than 11.00 a.m. on 17 June 2020, after which time, subject to the limited exceptions set out below, Offer for Subscription Application Forms will not be valid. Applications delivered by hand will not be checked upon delivery and no receipt will be provided. Within the United Kingdom, Applicants should note that applications, once made, will, subject to the very limited withdrawal rights set out in this document, be irrevocable and receipt thereof will not be acknowledged. If an Application Form is being sent by first-class post in the United Kingdom, applicants are recommended to allow at least four working days for delivery. Completed Offer for Subscription Application Forms should be returned together with payment in accordance with paragraph 3.5 below.
3.5 Payment All payments must be made in Pounds Sterling. Payments by cheque or banker’s draft should be made payable to “Link Market Services Limited RE: Ted Baker Plc—Offer for Subscription A/C” and crossed “A/C payee only”. Cheques must be for the full amount payable on acceptance and sent by post to Link Asset Services so as to be received as soon as possible and, in any event, not later than 11.00 a.m. on 17 June 2020. Third party cheques may not be accepted except building society cheques or banker’s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque or banker’s draft to such effect. It is recommended that the account name should be the same as that shown on the application. Cheques or banker’s drafts must be drawn on an account at a bank or building society or a branch of a bank or building society which must be in the United Kingdom or the Channel Islands and which is either a settlement member of the Cheque and Credit Company Clearing Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker’s drafts to be cleared through the facilities provided by either of those companies. Cheques and banker’s drafts must bear the appropriate sorting code number in the top right-hand corner. Post-dated cheques will not be accepted. The Company reserves the right to have cheques and banker’s drafts presented for payment on receipt. No interest will be allowed on payments made before they are due. It is a term of the Offer for Subscription that cheques must be honoured on first presentation and the Company may elect to treat as invalid any acceptances in respect of which cheques are not honoured. Return of the Offer for Subscription Application Form with a cheque will constitute a warranty that the cheque will be honoured on first presentation. If New Shares are allotted to an applicant and a cheque for that allotment is subsequently not honoured, the Company may (in its absolute discretion as to manner, timing and terms) make arrangements for the sale of such shares on behalf of such applicant and hold the proceeds of sale (net of the Company’s reasonable estimate of any loss that it has suffered as a result of the acceptance being treated as invalid and of the expenses of sale including, without limitation, any stamp duty or SDRT payable on the transfer of such shares, and of all amounts payable by such applicant pursuant to the provisions of this “Part V” in respect of the
98 acquisition of such shares) on behalf of such applicant. Neither the Company nor any other person shall be responsible for, or have any liability for, any loss, expenses or damage suffered by any applicant as a result. Payments made by electronic bank transfer must be made for value by no later than 11.00 a.m. on 17 June 2020. Only bank transfers via CHAPS are acceptable. Payments via BACS will not be accepted. Payment should be sent to the relevant bank account as detailed on the Offer for Subscription Application Form. Applicants must ensure that they remit sufficient funds to cover any charges incurred by their bank. The payment instruction must also include a unique reference comprising your name and a contact telephone number which should be entered in the reference field on the payment instruction (for example: MJ SMITH 01234 567 8910). Link cannot take responsibility for correctly identifying payments without a unique reference nor where a payment has been received but without an accompanying Offer for Subscription Application Form. Evidence of the source of funds will also be required. Typically, this will be a copy of the remitting bank account statement clearly identifying the applicant’s name, the value of the debit (equal to the application value) and the crediting account details or application reference. A photocopy of the transaction can be enclosed with the Offer for Subscription Application Form or a copy can also be emailed to Link at the email address detailed on the Offer for Subscription Application Form. Applicants choosing to settle via CREST, that is the delivery versus payment method (DvP), will need to match their instructions to Link’s Participant Account RA06 by no later than 11.00 a.m. on 17 June 2020, allowing for the delivery and acceptance of the New Shares to be made against payment of the Offer Price per New Share through the CREST system upon the relevant settlement date, following the CREST matching criteria set out in the Offer for Subscription Application Form. If cheques or banker’s drafts are presented for payment or payment for Offer for Subscription Shares is otherwise made before the conditions of the Offer for Subscription are fulfilled, the application monies will be kept in a non-interest-bearing account until all conditions are met. If the Offer for Subscription does not become unconditional, no New Shares will be issued and all monies will be returned (at the applicant’s sole risk), without payment of interest, to applicants as soon as practicable, following the lapse of the Offer for Subscription. All enquires in connection with the Offer for Subscription Application Forms should be addressed to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. Alternatively, enquiries in connection with the Offer for Subscription Application Forms can be made to Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
3.6 Discretion as to validity of acceptances If payment is not received in full by 11.00 a.m. on 17 June 2020, the offer to apply for Offer for Subscription Shares will be deemed to have been declined and will lapse. However, the Company may (acting in consultation with the Underwriters), but shall not be obliged to treat as valid (a) Offer for Subscription Application Forms and accompanying remittances that are received through the post not later than 2.00 p.m. on 17 June 2020 (the cover bearing a legible postmark not later than 11.00 a.m. on 17 June 2020); and (b) acceptances in respect of which a remittance is received prior to 2.00 p.m. on 17 June 2020 from an authorised person (as defined in section 31(2) of FSMA) specifying the number of the New Shares to be acquired and undertaking to lodge the relevant Offer for Subscription Application Form, duly completed, in due course. The Company (acting in consultation with the Underwriters) may also treat an Offer for Subscription Application Form as valid and binding on the person(s) by whom or on whose behalf it is lodged even if it is not completed in accordance with the relevant instructions or is not accompanied by a valid power of attorney where required. The Company, with the prior written consent of the Underwriters, reserves the right to treat as invalid any application or purported application for Offer for Subscription Shares pursuant to the Offer for Subscription that appears to the Company to have been executed in, despatched from, or that provides an address for delivery of definitive share certificates for the New Shares in, an Excluded Territory, including the United States.
99 3.7 Effect of application All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant’s own risk. By completing and delivering an Offer for Subscription Application Form the applicant: (a) represents and warrants to each of the Company and the Underwriters that he or she has the right, power and authority, and has taken all action necessary, to make the application under the Offer for Subscription and to execute, deliver and exercise his or her rights, and perform his or her obligations, under any contracts resulting therefrom and that he or she is not a person otherwise prevented by legal or regulatory restrictions from applying for the New Shares or acting on behalf of any such person on a non- discretionary basis; (b) represents and warrants to each of the Company and the Underwriters that that, if he or she signs the Offer for Subscription Application Form on behalf of somebody else or on behalf of a corporation, he or she has due authority to do so on behalf of that other person and that such other person will be bound accordingly and will be deemed also to have given the confirmations, warranties and undertakings contained in this Part V; (c) agrees with each of the Company and the Underwriters that all applications under the Offer for Subscription and any contractual or non-contractual obligations resulting therefrom shall be governed by, and construed in accordance with, the laws of England; (d) confirms to each of the Company and the Underwriters that in making the application he or she is not relying on any information or representation other than that contained in this document or any documents incorporated by reference into this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document (including any documents incorporated by reference into this document) or any part thereof, or involved in the preparation thereof, shall have any liability for any information or representation not so contained and further agrees that, having had the opportunity to read this document, including any documents incorporated by reference, he or she will be deemed to have had notice of all information contained in this document (including information incorporated by reference); (e) confirms that in making the application he or she is not relying and has not relied on the Underwriters or any other person affiliated with the Underwriters in connection with any investigation of the accuracy of any information contained in this document or his or her investment decision; (f) represents and warrants to the Company and the Underwriters that: (a) he or she is not, nor is he or she applying on behalf of any person who is located, a citizen or resident, or a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for the New Shares is prevented by law; and (b) he or she is not applying with a view to re-offering, reselling, transferring or delivering any of the New Shares which are the subject of his or her application to, or for the benefit of, a person who is located, a citizen or resident, or which is a corporation, partnership or other entity created or organised in or under any laws, in or of any Excluded Territory or any jurisdiction in which the application for the New Shares is prevented by law, nor acting on behalf of any such person on a non-discretionary basis nor a person(s) otherwise prevented by legal or regulatory restrictions from applying for the New Shares under the Offer for Subscription; (g) represents and warrants to each of the Company and the Underwriters that he or she is not, and nor is he or she applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986; and (h) requests that the New Shares to which he or she will become entitled be issued to him or her it on the terms set out in this document and the Offer for Subscription Application, subject to the Articles. Shareholders who do not want to apply for Offer for Subscription Shares under the Offer for Subscription should take no action and should not complete or return the Offer for Subscription Application Form.
3.8 Money Laundering Regulations To ensure compliance with the Money Laundering Regulations, Link may require, at its absolute discretion, verification of the identity of the beneficial owner by whom or on whose behalf the Offer for Subscription Application Form is lodged with payment (which requirements are referred to below as the “verification of identity requirements”).
100 The person lodging the Offer for Subscription Application Form with payment (the acceptor), including any person who appears to Link to be acting on behalf of some other person, shall thereby be deemed to agree to provide Link with such information and other evidence as Link may require to satisfy the verification of identity requirements. Submission of an Offer for Subscription Application Form shall constitute a warranty to the Company and the Underwriters that the Money Laundering Regulations will not be breached by the acceptance of remittance and an undertaking by the acceptor to provide promptly to Link such information as may be specified by Link as being required for the purpose of the Money Laundering Regulations and agree for Link to make a search using a credit reference agency for the purposes of confirming such identity; where deemed necessary a record of the search will be retained. If Link determines that the verification of identity requirements apply to any acceptor or application, the relevant the New Shares (notwithstanding any other term of the Offer for Subscription) will not be issued to the relevant acceptor unless and until the verification of identity requirements have been satisfied in respect of that acceptor or application. Link is entitled, and with the prior written consent of the Underwriters, to determine whether the verification of identity requirements apply to any acceptor or application and whether such requirements have been satisfied, and none of Link, the Company or the Underwriters will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion. If the verification of identity requirements apply, failure to provide the necessary evidence of identity within a reasonable time may result in delays and potential rejection of an application. If, within a reasonable period of time following a request for verification of identity, Link has not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, treat the relevant application as invalid, in which event the application monies will be returned (at the acceptor’s risk) without interest to the account of the bank or building society on which the relevant cheque or banker’s draft was drawn. The verification of identity requirements will not usually apply if: (a) the acceptor (not being an acceptor who delivers his/her application in person) makes payment through an account in the name of such acceptor with a credit institution which is subject to the Money Laundering Regulations or with a credit institution situated in a non-EEA State which imposes requirements equivalent to those laid down in that directive; or (b) the aggregate subscription price for the relevant the New Shares is less than €15,000 (or its Pounds Sterling equivalent). Where the verification of identity requirements apply, please note the following as this will assist in satisfying the requirements. Satisfaction of these requirements may be facilitated in the following ways: (i) if payment is made by cheque or banker’s draft drawn on a branch of a bank or building society in the United Kingdom and bears a UK bank sort code number in the top right-hand corner, the following applies. Cheques, which are recommended to be drawn on the personal account of the individual investor where they have sole or joint title to the funds, should be made payable to “Link Market Services Limited RE: Ted Baker Plc—Offer for Subscription A/C” and crossed “A/C payee only”. Third party cheques may not be accepted except for building society cheques or banker’s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/ banker’s draft to such effect. The account name should be the same as that shown on the application; (ii) if the person whose account is being debited is not the acceptor, the acceptor will be required to provide in respect of both the acceptor and the payor an original or a copy of that person’s passport or driving licence certified by a solicitor and an original or certified copy of the following no more than three months old: a gas, electricity, water or telephone (not mobile) bill, a recent bank statement or a council tax bill, in their name and showing their current address (which originals will be returned by post at the addressees’ risk) together with a signed declaration as to the relationship between the payor and the acceptor; (iii) if the Offer for Subscription Application Form is lodged with payment by an agent which is an organisation of the kind referred to in sub-paragraph (b) above or which is subject to anti-money laundering regulations in a country which is a member of the Financial Action Task Force (the non-EU members of which are Argentina, Australia, Brazil, Canada, China, members of the Gulf Co-operation Council (being Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Hong Kong, Iceland, India, Israel, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Norway, the Russian Federation, Saudi Arabia, Singapore, South Africa, Switzerland, Turkey, the United Kingdom and the United States), the agent should provide written confirmation that it has that status with the Offer for Subscription Application Form(s) and written assurances that it has obtained and recorded evidence of the
101 identity of the person for whom it acts and that it will on demand make such evidence available to Link and/or any relevant regulatory or investigatory authority; or (iv) if an Offer for Subscription Application Form is lodged by hand by the acceptor in person, he or she should ensure that he or she has with him evidence of identity bearing his or her photograph (for example, his or her passport) and evidence of his or her address. Link will make enquiries to credit reference agencies to meet its anti-money laundering obligations and the acceptor may be required to provide an original or certified copy of their passport, driving licence and recent bank statements to support such enquiries. Anti-money laundering checks do not mean the acceptor is suspected of anything illegal. To confirm the acceptability of any written assurance referred to in paragraph (ii) above, or in any other case, the acceptor should contact Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am–5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
3.9 Issue of the New Shares in certificated form Definitive share certificates in respect of the New Shares to be held in certificated form are expected to be despatched within 14 days of Admission, at the risk of the person(s) entitled to them, to applicants or, in the case of joint holdings, to the first-named applicant, in each case at their registered.
4. TAXATION Information on taxation with regard to the Offer for Subscription for Qualifying Shareholders and Placees who are resident in the United Kingdom for UK tax purposes is set out in “Part XI—Taxation—UK Taxation” and for Qualifying Shareholders and Placees who are resident in the United States for US tax purposes is set out in “Part XI Taxation—United States Federal Income Taxation”. The information contained in “Part XI—Taxation” is intended only as a general guide to the current tax position in the United Kingdom and the United States, and Qualifying Shareholders and Placees resident in the United Kingdom or United States for UK or US tax purposes should consult their own tax advisers regarding the tax treatment of the Offer for Subscription in light of their own circumstances. Applicants who are in any doubt as to their tax position, or who are subject to tax in any other jurisdiction, should consult an appropriately qualified independent professional adviser immediately. Note, for example, that dividends received by a Qualifying Shareholder in respect of the New Shares may be subject to tax in that Qualifying Shareholder’s own jurisdiction of tax residence, which may reduce the after-tax income received by that Qualifying Shareholder from his or her New Shares.
5. WITHDRAWAL RIGHTS Persons wishing to exercise the withdrawal rights under section 87Q(4) of FSMA after the issue by the Company of a prospectus supplementing this document (if any) must do so by lodging a written notice of withdrawal, which shall not include a notice sent by facsimile or any other form of electronic communication, that must include the full name and address of the person wishing to exercise such statutory withdrawal rights, to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU (or by hand at Link Asset Services, Corporate Actions, at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU), so as to be received no later than two Business Days after the date on which the supplementary prospectus is published. Notice of withdrawal given by any other means or which is deposited with or received by Link Asset Services after expiry of such period will not constitute a valid withdrawal. Furthermore, it is the Company’s view that persons who have paid for the Offer for Subscription Shares to which they are entitled in full, and the allotment of such Offer for Subscription Shares to whom has become unconditional, shall not be entitled to withdraw any such acceptance. In such circumstances, any such person wishing to withdraw is advised to seek independent legal advice. Applicants should note that, in any event, withdrawal rights will not apply once Admission of the New Shares has occurred.
6. OVERSEAS PERSONS This document has been approved by the FCA, being the competent authority in the United Kingdom. It is the responsibility of any person (including, without limitation, custodians, nominees and trustees) outside the United Kingdom wishing to participate in the Offer for Subscription to satisfy himself, herself or itself as to the full observance of the laws of any relevant territory in connection therewith, including the obtaining of any
102 governmental or other consents which may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territories. The comments set out in this paragraph 6 are intended as a general guide only and any Overseas Person who is in doubt as to his or her position should consult his or her professional adviser without delay.
6.1 General The distribution of this document and the Offer for Subscription Application Form and the making of the Offer for Subscription to persons resident in, or who are citizens of, or who have a registered address in countries other than the United Kingdom may be affected by the law of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to participate in the Offer for Subscription. This paragraph sets out the restrictions applicable to Shareholders and other investors who have registered addresses outside the United Kingdom, who are physically located outside the United Kingdom, or who are citizens or residents of countries other than the United Kingdom, or who are persons (including, without limitation, custodians, nominees and trustees) who have a contractual or legal obligation to forward this document to a jurisdiction outside the United Kingdom, or who hold Shares for the account or benefit of any such person. Subject to limited exceptions, Offer for Subscription Application Forms have not been, and will not be, sent to, and the New Shares will not be credited to CREST accounts of, Restricted Persons, or to their agent or intermediary. No person receiving a copy of this document and/or an Offer for Subscription Application Form and/or any other document issued by the Company in connection with the Offer for Subscription in any territory other than the United Kingdom may treat the same as constituting an invitation or offer to him or her, nor should he or she in any event use the Offer for Subscription Application Form unless, in the relevant jurisdiction, such an invitation or offer could lawfully be made to him or her and the Offer for Subscription Application Form could lawfully be used or dealt with without contravention of any unfulfilled registration or other legal or regulatory requirements. In such circumstances, where an invitation or offer would contravene any registration or other legal or regulatory requirements, this document and/or an Offer for Subscription Application Form must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of this document and/or an Offer for Subscription Application Form and/ or any other document issued by the Company in connection with the Offer for Subscription should not, in connection with the Offer for Subscription, distribute or send the same in or into any Excluded Territory, including the United States. If an Offer for Subscription Application Form is received by any person in any Excluded Territory, including the United States, or by their agent or nominee in any such territory, he or she must not seek to take up the Offer for Subscription Shares unless the Company and the Underwriters determine that such actions would not violate applicable legal or regulatory requirements. Any person who does forward this document or an Offer for Subscription Application Form into any Excluded Territory (whether under contractual or legal obligation or otherwise) should draw the recipient’s attention to the contents of this section. The Company and the Underwriters may (in their absolute discretion) treat as invalid and the Company will not be bound to allot or issue any New Shares in respect of any acceptance or purported acceptance of the application for the New Shares which appears to the Company or its respective agents to have been executed, effected or despatched in a manner which may involve a breach of the laws or regulations of any jurisdiction or if it believes or they believe that the same may violate applicable legal or regulatory requirements or if, in the case of an Offer for Subscription Application Form, it provides an address for delivery of the definitive share certificates for the New Shares, or, in the case of a credit of the New Shares in CREST, the applicant’s registered address is in a Excluded Territory, including the United States, or any other jurisdiction outside the United Kingdom in which it would be unlawful to deliver such share certificates or make such a credit, or if the Company believes or its agents believe that the same may violate applicable legal or regulatory requirements. Despite any other provisions of this document or the Offer for Subscription Application Form, the Company and the Underwriters reserve the right to permit any Overseas Person to take up his or her entitlements if the Company and the Underwriters in their absolute discretion are satisfied that the transaction in question is exempt from or not subject to the legislation or regulations giving rise to the restriction in question. If the Company and the Underwriters are so satisfied, the Company will arrange for the relevant Overseas Person to be sent an Offer for Subscription Application Form.
103 Those Overseas Persons who wish, and are permitted, to take up their entitlement should note that payments must be made as described in paragraph 2 of this “Part V”. The provisions of paragraph 6 of this “Part V” will apply generally to Restricted Persons and other Overseas Persons who do not or are unable to take up the New Shares provisionally allotted to them.
6.2 Offering restrictions relating to the United States The New Shares have not been and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, resold, transferred or delivered, directly or indirectly, into or within the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the New Shares in the United States. Prospective investors are hereby notified that sellers of the New Ordinary Shares may be relying on the exemption from registration provisions under section 5 of the Securities Act provided by Rule 144A thereunder. Accordingly, subject to limited exceptions, the Offer for Subscription is not being made in the United States and neither this document nor the Offer for Subscription Application Form constitute or will constitute an offer, or an invitation to apply for, or an offer or invitation to acquire, any New Shares in the United States. Offer for Subscription Application Forms have not been, and will not be, sent to, and the New Shares have not been, and will not be, credited to the CREST account of, any person with a registered address in the United States. Subject to certain limited exceptions, envelopes containing Offer for Subscription Application Forms should not be postmarked in the United States or otherwise despatched from the United States, and all persons acquiring the New Shares and wishing to hold such shares in registered form must provide an address for registration of the New Shares issued upon exercise thereof outside the United States. Save with the prior consent of the Company, any person who acquires the New Shares will be deemed to have declared, warranted and agreed, by accepting delivery of this document or the Offer for Subscription Application Form and delivery of the New Shares, that it is not, and that at the time of acquiring the New Shares it will not be, in the United States or acting on behalf of, or for the account or benefit of a person on a non-discretionary basis in the United States. Neither the New Shares, the Form of Proxy, the Offer for Subscription Application Form, this document nor any other document connected with the Offer for Subscription have been or will be approved or disapproved by the SEC or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, nor have any of the foregoing authorities or any securities commission passed upon or endorsed the merits of the offering of the New Shares, the Form of Proxy, the Offer for Subscription Application Form, or the accuracy or adequacy of this document or any other document connected with this Offer for Subscription. Any representation to the contrary is a criminal offence in the United States. The Company reserves the right to treat as invalid any Offer for Subscription Application Form: (i) that appears to it or its agents to have been executed in or despatched from the United States or that provides an address in the United States for delivery of definitive share certificates; (ii) that does not include the relevant warranty set out in the Offer for Subscription Application Form to the effect that the person executing the Offer for Subscription Application Form does not have a registered address (and is not otherwise located) in the United States and is not acquiring the New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Shares in the United States; or (iii) where the Company believes acceptance of such Offer for Subscription Application Form may violate applicable legal or regulatory requirements, and the Company shall not be bound to allot (on a non-provisional basis) or issue any New Shares in respect of any such Offer for Subscription Application Form. In addition, the Company and the Receiving Agent reserve the right to reject any USE Instruction sent by or on behalf of any CREST member with a registered address in the United States in respect of the New Shares. Any person in the United States who obtains a copy of this document and/or an Offer for Subscription Application Form and who is not a QIB is required to disregard them. In addition, until 40 days after commencement of the Capital Raising, an offer, sale or transfer of the New Shares within the United States by a dealer (whether or not participating in the Capital Raising) may violate the registration requirement of the Securities Act.
104 6.3 Other Excluded Territories Having considered the circumstances, the Company is of the view that it is necessary or expedient to restrict the ability of persons in the other Excluded Territories (i.e. other than the United States) to participate in the Offer for Subscription due to the time and costs involved in the registration of this document and/or compliance with the relevant local legal or regulatory requirements in those jurisdictions. Therefore, subject to certain exceptions, no Offer for Subscription Allotment Letters will be sent to persons with registered addresses in the other Excluded Territories. No offer of or invitation to acquire the New Shares is being made by virtue of this document or the Offer for Subscription Application Form into the other Excluded Territories.
6.4 Other overseas territories Overseas Persons in jurisdictions other than the Excluded Territories may, subject to the laws of their relevant jurisdiction, acquire Offer for Subscription Shares under the Offer for Subscription in accordance with the instructions set out in this document and the Offer for Subscription Application Form. Prospective applicants for the Offer for Subscription Shares who have registered addresses in or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their appropriate professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to apply for Offer for Subscription Shares under the Offer for Subscription. If you are in any doubt as to your eligibility to accept the offer of the New Shares, you should contact your appropriate professional adviser immediately.
7. REPRESENTATIONS AND WARRANTIES RELATING TO OVERSEAS TERRITORIES Any person accepting an Offer for Subscription Application Form or requesting subscription to the New Shares as set out therein represents and warrants to each of the Company and the Underwriters that, except where proof has been provided to the satisfaction of the Company and the Underwriters that such person’s use of the Offer for Subscription Application Form will not result in the contravention of any applicable legal requirements in any jurisdiction: (i) such person is not accepting an Offer for Subscription Application Form from within the United States or any other Excluded Territory; (ii) such person is not in any territory in which it is unlawful to make or accept an offer to subscribe for the New Shares or to use the Offer for Subscription Application Form in any manner in which such person has used or will use it; (iii) such person is not acting on a non-discretionary basis for a person located within the United States or any other Excluded Territory or any territory referred to in (ii) above at the time the instruction to accept was given unless (a) the instruction to request registration was received from a person outside the United States, (b) the person giving such instruction has confirmed that it has the authority to give such instruction, and (c) either (A) has investment discretion over such account or (B) is an investment manager or investment company, and that, in the case of each of (i) and (ii), is acquiring the New Shares in an offshore transaction within the meaning of Regulation S; and (iv) such person is not acquiring the New Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Shares into the United States or any other Excluded Territory or any territory referred to in (ii) above. The Company and the Underwriters may treat as invalid any acceptance or purported acceptance of the allotment of Offer for Subscription Shares if the Offer for Subscription Application Form: (a) appears to the Company to have been executed in or despatched from the United States or any other Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or if the Company believes the same may violate any applicable legal or regulatory requirement; (b) provides an address in any Excluded Territory, including the United States, for delivery of definitive share certificates for the New Shares (or any jurisdiction outside the United Kingdom in which it would be unlawful to deliver such certificates); or (c) purports to exclude the representation and warranty required by this section.
8. WAIVER The provisions of paragraphs 6 and 7 of this “Part V” and of any other terms of the Offer for Subscription relating to Restricted Persons may be waived, varied or modified as regards specific person(s) or on a general basis by the Company in its absolute discretion. Subject to this, the provisions of paragraphs 6 and 7 of this “Part V” supersede any terms of the Offer for Subscription inconsistent therewith. References in paragraphs 6 and 7 of this “Part V” and in this paragraph 8 of “Part V” to persons shall include references to the person or persons executing an Offer for Subscription Application Form and, in the event of more than one person executing an Offer for Subscription Application Form, the provisions of paragraphs 6 and 7 of this “Part V” and this paragraph 8 of “Part V” shall apply jointly to each of them.
105 9. TIMES AND DATES The Company shall in its discretion be entitled to amend the dates that Offer for Subscription Application Forms are despatched or dealings in the New Shares commence and amend or extend the latest date for acceptance under the Offer for Subscription and all related dates set out in this document and in such circumstances shall announce such amendments via a Regulatory Information Service and, if appropriate, notify Shareholders.
10. GOVERNING LAW The terms and conditions of the Offer for Subscription as set out in this document and the Offer for Subscription Application Form and any non-contractual obligations arising out of or in relation to the Offer for Subscription shall be governed by, and construed in accordance with, English law.
11. JURISDICTION The courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non- contractual, which may arise out of or in connection with the Offer for Subscription, this document and the Offer for Subscription Application Form. By applying for Offer for Subscription Shares under the Offer for Subscription in accordance with the instructions set out in this document and the Offer for Subscription Application Form, applicants irrevocably submit to the exclusive jurisdiction of the Courts of England and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.
106 PART VI—BUSINESS OVERVIEW OF THE GROUP
OVERVIEW Ted Baker is a global lifestyle brand offering a range of products including menswear, womenswear, childrenswear and accessories. A quintessentially British brand, Ted Baker is known for its quirky fashion offering, high quality design detailing and distinctive use of pattern and colour. Ted Baker’s approach is focused on unwavering attention to detail and firm commitment to quality. The brand operates through three main distribution channels: retail (including stores, concessions and e-Commerce), wholesale, and licensing (which includes territorial and product licences). As at 25 January 2020, the Group and its retail licencees had 563 stores and concessions worldwide, comprising of 198 in the UK, 123 in the rest of Europe, 140 in North America, 93 in the Middle East, Africa and Asia and 9 in Australasia.
Recent Trading Background In addition to the impact of the coronavirus pandemic as discussed below, in Financial Year 2020 the Group’s performance was impacted by very difficult trading conditions throughout the period, amplified by heightened levels of consumer uncertainty across many of its global markets. The external retail market has presented, and continues to present, unprecedented trading conditions, heighted competition, digital disruption, changing customer behaviour and demand and intense pressures on physical retailing has led to a dramatic increase in promotional activity and an intense level of discounting. In 2019 these pressures were exacerbated in the UK by the significant impact on consumer sentiment and spending from Brexit and political uncertainty. Consequently, several of the Group’s distribution channels have witnessed declining sales, while a number of important product segments, including formalwear and women’s occasion wear, have experienced falling demand. The Group has also faced some difficult internal issues in the last year. As previously announced, the Group experienced some challenges with its 2019 Spring/Summer collections and trading over November and the Black Friday period was below expectations, with lower than anticipated margins and sell through. In addition, the store estate underperformed driven by sales pressure and high costs, with continued high cost store expansion. The Group’s performance was also negatively impacted by high working capital driven by a three year stock cycle that is no longer relevant in a fast moving fashion market. The Group also experienced high levels of operating expenditure across the business as a result of a failure to properly control costs and increase its share of e-Commerce. The Group’s free cash flow diminished as a result of lower Adjusted EBITDA, continued high levels of dividend and significant capital expenditure spend. In addition, several members of the Group’s senior management left the Group. As a result of the Group’s weaker financial performance, the Group was required to revise down guidance for Financial Year 2020 first in June 2019 and again in December 2019. The Directors expect trading conditions to be difficult for some time, especially in light of the significant challenges presented by the coronavirus pandemic. In light of the above, Group revenue decreased by 1.4 per cent. to £630.5 million in Financial Year 2020 (2019: £639.6 million, including licence income). Total retail sales including e-Commerce decreased by 4.6 per cent. to £439.9 million (2019: £461.0 million) for Financial Year 2020 and average retail square footage rose by 2.6 per cent. to 442,790 sq. ft (2019: 431,646 sq. ft). E-Commerce sales decreased by 2.4 per cent. and represented 27.0 per cent. of total retail sales (2019: 26.4 per cent., restated). Further non-underlying charges in the year related to £13.5 million in respect of a change in accounting policy for stock provision, £16.2 million in the impairment of stores, and a £7.6 million loss on disposal of the Asian businesses. As at 25 January 2020, the Facility Agreement of £180 million was fully drawn. In Financial Year 2020, the Group’s loss before tax was £79.9 million (2019: restated profit of £30.7 million). In Financial Year 2020, the Group’s underlying profit before tax was £4.8 million (£9.8 million before the impact of IFRS 16) (2019: restated underlying profit of £63.5 million). Underlying profit is adjusted for non- operating charges relating principally to inventory overstatement corrections, charges following the implementation of a revised stock provisioning policy and store impairments to reach a reported Group loss before tax of £79.9 million in Financial Year 2020 (2019: restated profit of £30.7 million). In Financial Year 2020, the Group’s net cash flow increased £43.4 million, compared to an increase of £19.5 million in Financial Year 2019. In December 2019, following an internal review, the Group identified that the value of inventory held on its balance sheet had been overstated. As a result of these findings, the Group engaged Deloitte LLP to undertake an independent and thorough review of this issue. In January 2020, the Group announced that the independent
107 review had found that the Group’s inventories, as reported at the end of Financial Year 2019, were overstated by £58 million. Following the conclusion of Deloitte’s review and the completion of the year-end process and audit, this figure was subsequently refined and finalised showing a net inventory adjustment of £52.6 million, with the Group amended the opening value of its inventory position to £205.6 million from £225.8 million. The restatement of inventory was due to stock that did not physically exist (representing £6.5 million), and adjustments to correct calculations (representing £13.7 million). In addition, through this exercise the Group has reviewed its approach to estimating the carrying value of stock and adopted a better estimate methodology which resulted in a £32.4 million reduction in stock value being accounted for as a change in estimate booked as a non-underlying expense in the income statement for the period ended 25 January 2020. The change in estimate was due to inventories considered obsolete (representing £9.4 million) and changes for a revised stock costing methodology (representing £23.0 million). See “Part VII—Operating and Financial Review—Critical Accounting Policies” for more details. A comprehensive internal review, with external support, has led to the implementation of several measures to strengthen the Group’s accounting systems and processes including the reorganisation of the finance function with clearer responsibilities, greater focus, and more senior and experienced leaders, an increased and detailed detective review by senior management of journal entries, balance sheet reviews and revenue-impacting balances, as well as the documentation of correct stock accounting procedures. The Group also engaged Deloitte LLP to conduct an independent review of the changes needed to the Company’s systems and controls. This review has concluded and the Group is now in the process of updating its accounting processes and systems to implement Deloitte’s recommendations and expects to complete this process in the second half of the year. Deloitte’s recommendations include: • greater segregation of duties in key areas such as journals entries, for which a monthly detective journal review is being implemented; • an assessment of general IT controls across the business (including revenue, procure to pay, inventory and record to report) to ensure they are designed and implemented effectively and increase reliance on system- generated reports; • controls over manual spreadsheets to increase the reliability and quality of information and reduce the risk of error and deficiency; • implementing simplified, standardised and centralised processes to enable increased automation across the business, derive cost efficiencies and ensure a periodic review is performed to confirm changes are captured in a timely manner and controls are operating effectively; and • a training programme across finance to increase the understanding of accounting processes, the financial risks to the business and what the key controls are with the aim of reducing key person risk and improving the overall maturity of the finance environment. Following on from Deloitte’s review the Group intends to complete the implementation of a controls improvement programme, under the auspices of the Audit and Risk Committee, which includes improvements to spreadsheet controls, segregation of duties, system logs and approval matrices, followed by progressive simplification, standardisation and automation of reporting processes. The Group anticipates completing the programme in the second half of the Financial Year ending 30 January 2021.
‘Ted’s Formula for Growth’ strategy The Group has developed ‘Ted’s Formula for Growth’ strategy to improve efficiencies across the wider Group and address the key drivers of underperformance. ‘Ted’s Formula for Growth’ strategy is the culmination of six-months’ rigorous analysis, assessment work and the bringing together of insights from across the Executive team, industry trends and external experts. At its core, Ted’s Formula for growth is made up of three parts: reenergising product and brand, prioritisation of digital and capital light growth and significant cost reduction. Combined, these three elements will deliver a sustainably more profitable, higher free cash flow generating and higher return on capital employed business. This transformational strategy will see the business pivot towards a customer-centric, digital and territory approach and away from the previously adopted channels-based approach. The Group has spent the last nine months building the talent and capability of the Board and the senior management team to ensure it has the skills, diversity, experience and ambition to deliver and execute the strategy and transform the business. For a description of the three building blocks see paragraph 2.3 in “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”.
108 The Directors believe that these steps, together with the improved capital structure following the Disposal and the Capital Raising, should underpin a return to long-term growth.
HISTORY OF THE GROUP The Ted Baker brand was founded by Ray Kelvin in 1988 to provide design-led high-quality menswear at competitive prices to its target market. The first Ted Baker stores were opened in Glasgow in 1988, quickly followed by King Street, Manchester and Nottingham Exchange Arcade. In 1990, the first London store started trading in Covent Garden. In the following years, the Company continued to expand across the United Kingdom, launching its wholesale business in 1994 and Ted Baker Woman in 1995. Building on the success of wholesaling in the United Kingdom, the Group began wholesaling in the United States in 1996 through the help of an agent. In 1997, the first continental franchise was opened in Zurich and that same year the Company listed on the London Stock Exchange, trading as ‘No Ordinary Designer Label Limited’. In 1999, Ted Baker created the Endurance suit which went on to become one of the staples of the Company’s collections. Throughout the early 2000s, the Company continued to grow opening new stores across Europe and the United States and entering Australia and New Zealand in 2004. The Group also expanded its product lines, launching childrenswear, fragrances, eyewear and footwear collections, among others. In 2011, the Company entered the Asia market with new stores in Hong Kong, followed by stores in Tokyo, Beijing, Jakarta, Kuala Lumpur, South Korea and South Africa in 2012. In 2013, the Company celebrated its 25th anniversary by opening new stores and concessions in Canada, Turkey, Australia, the United Arab Emirates, Belgium, Lebanon and Kuwait. In 2014, the Company launched luggage, home fragrance and audio collections and in 2015, a collection of crockery with Portmeirion, followed by rugs with Brink & Campman. In 2017, the Group’s new collections included its golf, luxury loungewear and bridal collections. In January 2019, the Group acquired its footwear licence through the acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC from Pentland. In addition, in August 2019 the Group appointed a new licence partner in Japan, Sojitz Infinity (Infinity). In October 2019, the Group completed a new joint venture with Shanghai LongShang Trading Company Ltd to further develop the brand in China including Hong Kong S.A.R. and Macau S.A.R.
COMPETITIVE STRENGTHS The Group’s principal competitive strengths are: • Strong, authentic brand with long standing heritage: Ted Baker is an authentic lifestyle brand with a ‘No Ordinary’ theme. The brand benefits from an international presence and reach through diversified routes to market. Ted Baker has high levels of customer loyalty amongst its core target audience and a wide brand reach through its international presence and diversified routes to market. The Group has over 2.3 million followers across global social media platforms, with a 20 per cent. growth in Financial Year 2020. • Capex-light distribution channels strengthened by third party partnerships: The Group has its own distribution channels strengthened by capital expenditure-light wholesale and licensing partnerships. The Groups product licence partners have specialised expertise to grow the Ted Baker brand in large and growing product categories. Ted Baker is also partners with major retailers including Nordstrom, John Lewis, Bloomingdales, the Selfridges Group, De Bijenkorf and Breuninger. The Group recently created a joint venture in China which provides an opportunity to expand into a large and growing market with a strong local partner. • Well-invested business: The Group has invested £64.8 million in the business in the last five years with a focus on the United Kingdom, the EU, its North American IT systems, logistics and infrastructure. The Group has invested a further £80.1 million in the last five years on its retail stores with a focus on creating innovative store layouts to drive footfall. The Group has established a full omni-channel offering in the UK (including ship from store, click and collect, in-store ordering through iPads) with the capacity for an international roll out. On 1 January 2019, the Group acquired its No Ordinary footwear licence creating the opportunity to drive further growth in its footwear business. • Strong strategic growth opportunities: Ted Baker has a small share of the approximately £1.0 billion global market, offering material growth opportunities in the medium to long-term. The Directors believe there is a strong opportunity for geographical expansion in key territories across North America, Europe and China. In addition, the womenswear, menswear, footwear and accessories markets are expected to grow on average between 5 and 6 per cent. over the next three years. The Group will also further expand its product range development through penetration into higher frequency purchases based on the trend of
109 “casualisation”. Significant opportunities exist for the Group to leverage the Ted Baker brand online to gain market share in existing markets and expand into new ones. The Group also has the ability to establish further product licence agreements taking its successful global model to large adjacent markets (watches, lingerie, kidswear and men’s underwear). The Directors also anticipate customer expansion through the increased customer acquisition enabled by the new CRM system.
STRATEGY The Group has developed ‘Ted’s Formula for Growth’ strategy to improve efficiencies across the wider Group and address the key drivers of underperformance. ‘Ted’s Formula for Growth’ strategy is the culmination of six-months’ rigorous analysis, assessment work and the bringing together of insights from across the Executive team, industry trends and external experts. At its core, Ted’s Formula for growth is made up of three parts: reenergising product and brand, prioritisation of digital and capital light growth and significant cost reduction. Combined, these three elements will deliver a sustainably more profitable, higher free cash flow generating and higher return on capital employed business. This transformational strategy will see the business pivot towards a customer-centric, digital and territory approach and away from the previously adopted channels- based approach. For more details of ‘Ted’s Formula for Growth’ strategy, see paragraph 2.2 of “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”. As part of its ‘Ted’s Formula for Growth’ strategy, the Group has identified priorities for growth and operational excellence aimed at creating a commercial and agile business enabled by a more effective organisation: • Attract more customers: The Group is aiming to deliver a deeper and broader relationship with new and existing customers, leading to higher share of wallet and lifetime value. The Group has a large and growing customer database, with an opportunity to drive customer frequency and retention and expand its presence amongst a younger demographic. The volume of customers on the database has been steadily increasing for the past four years with a majority of the Group’s customers between 30 and 50 years of age. In addition, there is opportunity across social media channels to attract more followers as Ted Baker looks to produce more engaging content. In the past year, Ted Baker’s reach across social media channels has steadily increased, with Ted Baker’s total reach across all social media channels rising from 53.3 in April 2019 to 74.8 in April 2020. Furthermore, the Group is developing a ‘digital first’ retail strategy to enhance its e-Commerce platform to address performance gaps. The Group’s current e-Commerce platform lags behind the industry average, with an average customer conversion rate of 1.8 per cent. compared to an industry average of 3.1 per cent. The new platform will include improved payments methods, improved mobile experience to increase conversion rate and digital capabilities to service marketplaces, drop shipping and new instore experiences. The Group is investing approximately £6 million to update and enhance its e-Commerce platform and legacy systems across 2021 and 2022. • Be ‘No Ordinary’ brand: The Group is re-energising the brand and strengthening its ‘No ordinary’, unconventional and aspirational position through innovation and consistency. As part of this, the Group is seeking to redefine customers experience of Ted across all touchpoints and has created a new customer department to focus on this. New creative committees have also been created to collaborate across stores, product design and brand to strengthen the Ted Baker brand, generate awareness and improve creative output. Customer and ethnographic research panels have also been engaged to help shape a refreshed Ted archetype. Through a coordinated territory, product and channel strategy, the Group is working on the vision of Ted’s home and product range and plans to put the full licenced product assortment on the Group’s website to showcase the full Ted Baker product range, with phase one having launched in April 2020. The Group is also embracing sustainability and customer community through Ted’s Bazaar, the Group’s first community charity platform that supports local communities. • Expand product lines and their relevance: Ted Baker is looking to expand its product ranges, reset price architecture and expand its target customers. As part of this, the Group is re-evaluating its suppliers to develop a leaner and quicker supply base (moving from over 150 suppliers to 100) to get products to market more quickly and react to trends. Ted Baker’s ‘essential’ products are being expanded to have a ‘never out of stock’ range that would include core colours of tees, jumpers, trousers and bags at a competitive price point. In addition, the Group is reducing overall sale periods throughout the year and reducing discounting on ‘hero products’ (including women’s wool coats and occasion dresses and men’s polos and chinos as well as its icon bag range). Going forward, the Group expects to have approximately half of its product mix as core, bestselling products (consisting of the annual core-line flow and its
110 seasonal core collection) with the other half of its product mix more fashionable, trend items (consisting of monthly sales drops and speed-to-market products). The Group’s product licence portfolio has been rationalised and enhanced over the last 18 months, with footwear brought in-house and new partnerships launched for kidswear, watches and men’s underwear. The Group is also expecting to increase its share in homeware, sleep and loungewear while expanding in time to a broader range of services, potentially including hospitality and food and beverage. • Be forward thinking: Ted Baker intends to retain relevance with its business model, industry trends, internal R&D functions and capabilities by fostering a ‘what next’ and ‘after that’ mentality. This thinking will influence the customer experience and digital offerings, drive new revenue models, product innovations and will help to identify emerging consumer trends. Looking to the future, a customer insights program will be shared across the organization and services and efficiency will be improved, with the aim of Ted Baker becoming a data and digital driven organization. The Group is also investing in team capabilities and third party research platforms. • Profitably be where the customer is: The Group is undergoing a systematic review of its territories and channels to optimise its existing footprint and profitability grow its business by increasing store profitability and growing the e-Commerce channel. E-Commerce represents the baseline minimum level of distribution in all territories with controlled retail the preferred route to market. However, the Group does not expect to extend its owned retail footprint into any new territories over the short to medium term. Where owned retail is financially unattractive or not viable, the Group will work with local partners to operate Ted branded stores, with partners ideally taking on responsibility for retail and wholesale distribution channels. The Group is also looking to optimise growth in existing markets (including the United Kingdom, the United States, Canada and the EU), expand with strong partners in large markets (including China, Australia, India and the Middle East) and find new partners to enter into new markets (including Asia, South America and Russia).
BUSINESS DESCRIPTION The brand operates through three main distribution channels: retail (which includes concessions and e- Commerce); wholesale; and licensing (which includes territorial and product licences). As part of its strategy, the Group looks to further develop each of these routes to market, while ensuring the controlled distribution of its product.
Retail The Group’s retail channel comprises stores, outlets, concessions and e-Commerce, providing an omnichannel experience. The Group operates 257 stores and outlets (including licencee outlets) and 306 concessions across the United Kingdom, Europe, North America and the Rest of the World, and localised e-Commerce sites in the United Kingdom, continental Europe, the United States, Canada and Australia. It also has an e-Commerce business with some of its concession partners. The Group’s unique stores showcase the Ted Baker brand and are key to the growth and success of its e-Commerce business. The Group’s relatively low number of own stores and higher number of concession locations allow it to maintain a flexible store business model. In October 2019, the Group completed a new joint venture with Shanghai LongShang Trading Company to expand the Ted Baker brand in Mainland China, Hong Kong and Macau. Under the joint venture agreement, the Group’s eight full price stores, five concessions and one outlet store in China, primarily in Tier 2 and Tier 3 cities, have been transferred to the joint venture who will leverage these, as well as existing online capabilities, to grow the Ted Baker brand. The joint venture partners comprise LongGoal Holding Co. Ltd and Infra who bring a wealth of experience in digital marketing, e-Commerce operations and building successful joint ventures in China. The Directors believe the joint venture will drive the long-term expansion of Ted Baker in these markets, combining local knowledge and expertise with the proven buying, merchandising, training and brand-building expertise of the Group. Retail sales decreased by 4.6 per cent. to £439.9 million in Financial Year 2020 (2019: £461.0 million), representing 69.8 per cent. of the Group’s total revenue. During Financial Year 2020, average retail square footage increased 2.6 per cent. to 443,651 sq. ft (2019: 431,646 sq. ft). Retail sales per square foot (excluding e-Commerce) decreased by 7.7 per cent. to £725 (2019: £786) demonstrating the challenging external trading conditions together with changing customer behaviour with customers shopping both online and in store.
111 Stores and Concessions Stores and concessions are designed to showcase the brand’s unique style of retail theatre and to ensure customers enjoy a welcoming and pleasurable shopping experience. Each store boasts a differentiated design that is full of innovative and distinctive touches. The Group has a relatively small own store footprint allowing it to maintain a flexible business model. Outsanding store leases average four years across the portfolio. The Group also operates nine stores in airports providing important access to an international customer base and helping to drive global brand awareness. The Group also owns 34 outlets which provide a retail option for non-current season products and target a discount conscious consumer base. As part of ‘Ted’s Formula for Growth’ strategy, the Group has revised its outlet merchandising strategy to shorten the product lifecycle from two seasons in outlet stores to one season. The Group is also introducing products made specifically for sale in outlet stores at a lower price point. The Director’s expect this new strategy to improve sell-through and increase the Group’s profit margin. Concessions grant the Group capital-light access to markets that may not be able to sustain its own stores. The fixed costs are low as compared to own stores as rent costs are generally based on a percentage of sales. The Group’s key concession partners include John Lewis, Nordstrom, Bloomingdales, the Selfridges Group, De Bijenkorf and Breuninger. In Financial Year 2020, stores, concessions and outlets represented 50.9 per cent. of the Group’s total revenue (2019: 53.1 per cent.) The below table is a list of the Group’s stores, outlets, licencees, joint ventures and concessions as at 25 January 2020.
Own stores Outlets Airports Concessions Licensee/JV UK and Europe ...... 37 22 9 242 11 North America ...... 38 12 — 64 26 ROW ...... 4 — — — 98 Total ...... 79 34 9 306 135
E-Commerce E-Commerce is an increasingly important distribution channel for the Group and an area with significant opportunities for growth. E-Commerce enables the Group to offer customers access to an extended product range and provides a means to talk directly with its customers and engage them with the Ted Baker brand. The Group focuses on ensuring that it provides a user-friendly online brand and shopping experience across multiple devices. In 2019, the Group implemented a new CRM system that will now give it a complete single view of its channels enabling the Group to personalise content and experiences for each customer. The Directors believe the e-Commerce channel is a key area of growth with untapped market opportunities. The Group is investing in a new digital platform that will deliver a customer-focused minimum viable product that provides a fully-functional website, with friction-free functionality and a future-flexible structure. The new platform places customer experience at the centre and includes new payment methods and a more effective checkout and mobile experience. The Directors believe these initiatives will increase the Group’s Conversion Rate, with more site visitors completing purchases, and will ensure the Group is well-positioned for the accelerating channel shift towards e-Commerce. In Financial Year 2020, e-Commerce represented 18.9 per cent. of the Group’s total revenue (2019: 19.0 per cent.).
Wholesale The Group operates a wholesale business in the United Kingdom, North America as well as globally. The Group’s wholesale business in the United Kingdom serves countries across the world, primarily UK and Europe, and supplies products to stores operated by the Group’s territorial licence partners. The Group’s North American business serves the United States and Canada. Wholesale provides products in bulk quantities to wholesale partners and territory licencees. The Group has built up strong relationships with some of the best independent retailers, online retailers and department stores around the world. The Group works with over 900 wholesale partners, known as “Trustees” of the brand, including Nordstrom, Zalando and Shop Direct. Wholesale partners are seen as custodians of the Group’s
112 collections and uphold the Ted Baker brand integrity by ensuring that their retail environment and brand adjacencies are in keeping with the profile and positioning of the Ted Baker brand. The Group’s territory licencees operate Ted Baker stores in international territories, such as RSH which operates in the Middle East. Wholesale sales increased by 9.6 per cent. to £171.5 million in Financial Year 2020 (2019: £156.5 million), representing 27.2 per cent. of the Group’s total revenues. This reflects incremental footwear revenue, following the acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC. Wholesale revenue from Trustees and franchise partners represented £171.5 million in Financial Year 2020, £106.7 million of which was derived from the United Kingdom and Europe with £64.8 million from North America.
Licence Income The Group’s 15 licence partners are carefully selected as experts in their field and share the Group’s passion for unwavering attention to detail and firm commitment to quality. The Group’s licensing partners operate across both territorial and product licences. Territorial licences cover specific countries or regions in Asia, Australasia, Europe, the Middle East, Africa and Central America, where its partners operate licenced retail stores and, in some territories, wholesale operations. Product licences are categorised as either lifestyle or apparel licences and cover childrenswear; eyewear; fragrance and skinwear; North American suiting; bedding; gifting and stationery; jewellery; lingerie and sleepwear; luggage; neckwear; rugs; technical accessories; and watches. In 2019, the Group launched two new global licences including a new men’s underwear and loungewear global licence with Delta Galil and a new global watch licence with Timex Group. In February 2020, the Group launched a new licence with Next Plc to accelerate the expansion of the Group’s childrenswear collections. Under the agreement, which will run initially for a five-year period, Next Plc will create and sell Ted Baker childrenswear products spanning baby, boys’ and girls’ clothing, shoes and accessories in collaboration with the creative team at Ted Baker. These new partners reflect the Group’s commitment to working with the best product specialists that are able to support its status as a truly global lifestyle brand. Licence income decreased by 14.1 per cent to £19.0 million (2019: £22.1 million) in Financial Year 2020, representing 3.0 per cent. of the Group’s total revenue. of this, 84.0 per cent. of licensing income came from product licences and 16.0 per cent. from Territory licences.
Collections The Group offers a wide range of collections but is primarily focused on menswear, womenswear, accessories and footwear. Ted Baker introduces new seasonal collections two times a year in discrete collection drops as well as a limited number of new items in monthly drops. This refreshes stores’ merchandise, allows for seasonal products, drives footfall and ensures the brand stays on trend.
Menswear The menswear collection is a reflection of popular contemporary culture, with a sense of humour and style mixed in. It also includes the Group’s Phormalwear range, offering a number of distinctive suiting collections that combine heritage British tailoring with a modern outlook. In Financial Year 2020, Ted Baker Menswear revenue (including accessories and footwear) increased 2.5 per cent. to £241.1 million (2019: £235.2 million) and represented 39.4 per cent. of revenue (exclusive of licence income) (2019: 38.1 per cent). In Financial Year 2020, 71.6 per cent. of menswear retail revenue derived from casualwear, 13.6 per cent. from accessories, 9.9 per cent. from Phormalwear and 4.8 per cent. from footwear.
Womenswear The womenswear collection is a fresh and feminine mix of European elegance with London flair and is a celebration of beauty, individuality and exquisite attention to detail. In Financial Year 2020, Ted Baker Womenswear revenue (including accessories and footwear) decreased 3.1 per cent. to £370.4 million (2019: £382.2 million) and represented 60.6 per cent. of revenue (exclusive of licence income) (2019: 61.9 per cent.). In Financial Year 2020, 32.0 per cent. of womenswear retail revenue derived from casualwear, 25.9 per cent. from dresses, 23.8 per cent. from accessories, 14.0 per cent. from outerwear and 4.2 per cent. from footwear.
113 Accessories The Group considers accessories an essential part of its collections. Its selection for men includes socks, bags and cufflinks with scarves, bags, purses and belts for women. In Financial Year 2020, accessories retail revenue, when split out from menswear and womenswear, represented 19.9 per cent. of retail revenue.
Footwear On 1 January 2019, the Group brought its footwear licence in-house through the acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC from Pentland Group Plc and Pentland USA Inc, the Group’s former footwear licencee. The acquisition was completed for cash consideration of £20.3 million, subject to the finalisation of completion accounts. In Financial Year 2020, footwear retail revenue, when split out from menswear and womenswear, represented 4.5 per cent. of retail revenue.
Creative and Design Team The Creative and Design Team is led by the Chief Creative Director who sets the creative tone and direction for the Ted Baker brand and its products. Anthony Cuthbertson will join the Group later this year as Global Creative Director The design team on average comprised a total of 77 people in Financial Year 2020 and includes designers that work across the entire product design department, including menswear, womenswear, accessories and footwear. This team is responsibility for all Ted Baker sourced products and works in close collaboration with buying teams to ensure the Group produces the best products at the best price from the best factories.
Customer, Brand and Communications Team Ted Baker is a No Ordinary lifestyle brand and has come to be known for its unconventional approach to fashion, irreverent sense of humour and, above all, a distinctive use of pattern and colour. Ted Baker is committed to delivering an out of the ordinary experience across every product and experience it creates. The Ted Baker brand has strong heritage and is currently being re-energised with a consistent approach to product, visual marketing, social media and all customer touchpoints. The Customer, Brand and Communications Team is led by Jennifer Roebuck, who is an experienced digital and e-Commerce executive with a background in digital transformation and brand marketing, as Chief Customer Officer. This team coordinates the expression of the Ted Baker brand across all customer touch points, including social media, the Ted Baker website, packaging, graphics, studio and marketing. The team is responsible for all content creation as well as customer acquisition across these channels. Ted Baker historically has not engaged in traditional above the line advertising, in keeping with its No Ordinary brand. Ted Baker has a strong social media presence with over 2.3 million followers across global social media platforms. These followers represent both current customers and a strong source of potential future customers. The Company has made social media a key part of its marketing campaigns, making content specifically designed for these platforms and it also launches items that are available exclusively on the brand’s social media platforms. Ted Baker intends to continue investing in further online brand communication activities as part of its strategy to grow its e-Commerce channel.
Production and Supply Chain The Group’s production and supply chain team is led by Tikki Godley, also known as Victoria Singleton, as the Trading Director and is responsible for sourcing the Group’s products and managing its supplier strategy. The Group’s supply chain consists of over 150 first-tier suppliers, which are suppliers that the Group has a direct relationship with. As at 25 January 2020, 40 per cent. of the Group’s suppliers were based in China, 10 per cent. in Vietnam and 13 per cent. in Turkey, with the remainder spread across 16 other sourcing countries. Suppliers play a key role in ensuring the Group delivers quality products and services to its customers and partners efficiently and sustainably. As part of the Group’s ‘Ted’s Formula for Growth’ strategy, the Group is focusing on reducing supply chain costs primarily by simplifying its supplier base (moving from over 150 suppliers to 100) and agreeing improved terms with suppliers with a target of the reducing unit cost of sales by one per cent.
114 The Group ensures its suppliers adhere to its strict Ethical Code of Conduct Code. The Group’s direct first-tier suppliers are audited by independent third parties against the Ethical Code of Conduct and the Group has a dedicated team, Ted’s Conscience, which works directly with the business and suppliers to continually improve its suppliers’ standards. Members of Ted’s Conscience and the Group’s production teams regularly visit factories to make sure they are maintained, the standards of the Ethical Code of Code are upheld and to recommend improvements. The Group also works with Segura, an independent supply chain platform, which assists the Group with mapping and understanding its global supply base. This platform has helped improve transparency and increase the effectiveness of the due diligence conducted through enforcement of the Ethical Code of Conduct Code, auditing and factory visits. As part of the Group’s sustainability strategy, “Fashioning a Better Future”, the Group has made ambitious targets around the use of more sustainable materials. For more information see “Environmental Sustainability” below.
Licenced Products The Group’s licence partners are carefully selected as experts in their field and share the Group’s passion for unwavering attention to detail and firm commitment to quality. The Directors believe that licensing allows Ted Baker to benefit from the technical, supply chain, and distribution expertise and competitive production cost base of its partners while ensuring that the products satisfy the design and quality standards of the Group by having appropriate control measures in place.
Sales Team The Group’s sales team is led by Phil Clark as Director of Commercial and Strategy and Ricky Green as Director of Partnerships and Wholesales. The sales team oversees sales across the retail, wholesale and licensing distribution channels and manages the brand’s relationships with department stores, multi-brand retailers and independent retailers. The sales team also arranges and manages product licences, leveraging the technical expertise of the Group’s licence partners who develop, source and distribute the products. The team also arranges territory licences, establishing relationships with partners with the local expertise needed to operate Ted Baker branded stores across the Middle East, South East Asia and Eastern Europe, among other regions. The sales team works in close collaboration with Tikki Godley (also known as Victoria Singleton), the Trading Director, to ensure Ted Baker products are allocated efficiently across the Group’s distribution channels and partners so that the right product is in the right place at the right time.
Distribution Centres As at 25 January 2020, the Group operated out of three third-party warehouses. These warehouses are located in three global hubs: Derby, UK, Atlanta, USA and Hong Kong, allowing the Group to service its three key regions. In February 2019, the Group completed an update to its warehouse management system with the aim of enhancing the efficiency of its processes by automating and streamlining stock and warehouse management. The Group works closely with its distribution centres and its partners, including XPO Logistics in Derby, Future in Atlanta and Geodis Wilson Ltd. in Hong Kong, to ensure standards set out in its Ethical Code of Conduct are upheld in practice.
Properties The majority of the Group’s leases are operated on a short leasehold basis, typically 10 years or less, with the average store lease tenure being four years. Individual store leases vary as to their terms, rental provisions and expiry dates. As at 25 January 2020, the Group’s lease commitment due within one year was £36.4 million, with an average remaining lease life of four years. Concessions generally have pure turnover rents and shorter tenures than freestanding stores. In the United States, rents typically consist of a base amount each month plus a variable portion determined as a percentage of sales. In the United Kingdom and continental Europe, rents are typically fixed with no variable portion. The majority of the Group’s leases are not subject to rent reviews or a defined annual growth rate. In addition, the majority of the Group’s leases provide it with the option to renew at the expiry date.
115 In Financial Year 2020, the Group opened 10 new stores and outlets and 7 concessions, giving a total of 122 own stores and outlets (not including licencee stores and joint ventures) and 306 concessions as at 25 January 2020. On 20 March 2020, No Ordinary Designer Label Limited entered into a share purchase agreement with British Airways Pension Fund, St Pancras Way Block C Unit Trust in relation to the sale of the entire issued share capital of Big Lobster. The only material asset of Big Lobster is The Ugly Brown Building, which is the Company’s head office. The Group has also agreed a short-term lease of up to three years for its existing office space in The Ugly Brown Building. The lease also includes an option to lease space in Block A for ten years following the expiration of the three-year lease.
INTELLECTUAL PROPERTY The Group relies on intellectual property laws to protect certain aspects of its business. “Ted Baker” is registered as a trademark in key classes and territories around the world. The Group regularly opposes trademark applications which are too similar to “Ted Baker” and has been successful in a large number of oppositions (or has caused applicants to withdraw prior to opposition proceedings being issued). Similarly, the Group maintains a large domain name portfolio which is outsourced to a trademark attorney. Novel designs are selected for registration in the EU (design registrations) and the United States (design patents). The Group combats counterfeit goods with take down notices online and selected factory raids. The Group is registered with a large number of customs authorities around the world and it further supports trading standards and customs officials with counterfeits seized at premises or at borders. Ted Baker pursues and litigates infringement of design rights or trademarks, seeking full undertakings by way of damages, legal fees and publicity. The majority of cases settle on a confidential basis.
ENVIRONMENTAL SUSTAINABILITY The Group’s sustainability strategy, “Fashioning a Better Future”, focuses on Planet, People and Product. The Chief Executive Officer is responsible for overseeing the formulation of the Group’s policies and procedures to manage risks arising from social, environmental and ethical commitments (SEE). In addition, the Board has tasked five members of the Executive Committee to oversee specific areas of the Group’s SEE agenda. The Group’s full-time Conscience team co-ordinates with the Group’s cross-functional team which is responsible for addressing SEE concerns of the Group. The Group believes in three very important areas of sustainability: Planet: the Group is committed to managing and reducing its impact on the environment. The Group participates in the Carbon Disclosure Project to measure and disclose its greenhouse gas emissions and climate change strategies. It is constantly reviewing the waste its business generates in an effort to achieve its overall aim of sending no waste to landfill and continues to reduce unnecessary packaging. Through the Group’s relationships with Oxfam, Newlife and Age UK it has been able to ensure that its end of line garments are utilised in the best way, diverting over 10.1 tonnes of waste from landfill in Financial Year 2020. People: the Group is committed to looking after those who create, make and wear its products. The Group’s Ethical, Production and Buying teams regularly visit its suppliers to build and maintain relationships. All of the Group’s suppliers are governed by its Code of Conduct. The Group reviews and revises its Code of Conduct regularly to ensure that it reflects legislative changes and make sure that its suppliers continue to make improvements. The Code of Conduct is based on international conventions such as the Ethical Trade Initiative Base Code, the United Nations Universal Declaration of Human Rights and the Fundamental Conventions of the International Labour Organisation, and can be found on the Group’s website. The Group has also created an elected ‘People Forum’ to engage its employees and ensure the Group is an innovative place to work with an environment where people can be at their best. Product: the Group is committed to producing beautiful, more sustainable products. The Group is part of the Sustainable Clothing Action Plan (SCAP), an action plan organised to improve the sustainability of clothing throughout its lifecycle by bringing together industry, government and third parties. SCAP members collaborate to develop sector-wide targets along with the tools and guidance necessary to achieve them. In 2017, the Group made a public commitment to source 50 per cent. of its cotton as “more sustainable cotton” by the end of 2020. More sustainable cotton includes sustainably farmed cotton, organic cotton and recycled cotton. In its 2019 collections the Group exceed its target, with 52 per cent. (2018: 30 per cent.) of the Group’s cotton sourced as sustainable cotton. The Group is now aiming to have 100 per cent. of its cotton as sustainable cotton by 2024.
116 EMPLOYEES The average number of persons employed by the Group during Financial Year 2020 was 3,622 employees, including 2,180 permanent employees and 1,442 temporary employees. The table below sets out the average number of employees employed by the Group for Financial Years 2018, 2019 and 2020 divided by key geography:
2018 2019 2020 North America ...... 831 849 879 Europe ...... 527 675 664 UK ...... 2,158 2,005 2,026 Rest of World ...... 221 187 63 Total ...... 3,737 3,716 3,622
The table below sets out the average number of employees employed by the Group for the Financial Years 2018, 2019 and 2020 divided by function:
2018 2019 2020 Sales ...... 2,677 2,894 2,800 Design ...... 92 79 77 Administration ...... 693 743 745 Total ...... 3,462 3,716 3,622
None of the Group’s employees is covered by a collective bargaining agreement or represented by a labour organisation. To date, the Group has not experienced a labour-related work stoppage. The Group operates a number of defined contribution schemes for senior management and a stakeholder pension scheme for employees, for which the pension cost charge for the period amounted to £2.2 million (2019: £1.8 million). Contributions totalling £0.3 million (2019: £0.2 million) are included in other payables at the period end. Details of the Group’s pension schemes are included in Note 22 of the audited annual consolidated financial statements in Ted Baker Annual Report for Financial Year 2020, as described in “Part XIII—Documentation Incorporated by Reference” of this document.
REGULATORY, ENVIRONMENT AND LICENCES The Group is subject to the laws and regulations of the countries in which it operates covering a wide variety of areas affecting general consumer protection and product safety, including health and safety, environmental, product quality and safety, competition, data protection and privacy, export and import controls, anti-corruption legislation, trade sanctions and labour laws. Compliance with the applicable laws and regulations is monitored by governmental and regulations authorities and the principal objective of these regulations is to ensure that the products placed on the market are safe and duly labelled and imported. The industries in which it operates are not subject to industry-specific laws and regulations.
REGULATORY DISCLOSURE This section contains a summary of the information disclosed under Regulation (EU) No 596/2014 (Market Abuse Regulation, MAR) over the last 12 months which is relevant as at the date of this Prospectus.
Trading Updates On 8 May 2019, the Company released its full year guidance for Financial Year 2020, which was revised on 11 June 2019 and again on 10 December 2019. On 26 February 2020, the Group announced its completion of a wide-ranging review of the Company’s operational efficiency, costs and business model. This review identified strategic priorities which form the basis of a broad ‘Ted’s Formula for Growth’ strategy at the Company, which is described in more detail in “Part VI—Business Overview of the Group”.
117 Independent Review of Inventory On 2 December 2019, the Company announced that it would appoint independent accountants to undertake a comprehensive review of its stock inventory position. On 22 January 2020, following the review by the appointed independent accountant, Deloitte, the Company reported that the value of inventory held on the Group’s balance sheet at 26th January 2019 was overstated by £58 million. See “Part VII—Operating and Financial Review” for more information.
The Disposal On 23 March 2020, the Company announced the Disposal and its entry into the Block B Lease, further described in “Part III—Principal Terms of the Disposal.”
Joint Ventures and Partnerships Since 1 February 2019, the Company has announced the following joint ventures and partnerships: • On 10 April 2019, the Company entered into an agreement with Shanghai LongShang Trading Company Ltd. (LongShang) to create a joint venture in Mainland China, Hong Kong and Macau. See paragraph 16.1.10 of “Part XII—Additional Information” for more information. • On 28 August 2019, the Company appointed Sojitz Infinity as its Japanese Retail Licence Partner, which became effective on 30 September 2019. See paragraph 16.1.0 of “Part XII—Additional Information” for more information.
Directors and Senior Management Since 1 February 2019, the Company announced the following appointments and resignations of its directors and senior management: • On 4 March 2019, Chief Executive Officer Ray Kelvin resigned with immediate effect following his voluntary leave of absence since December 2018. • On 11 April 2019, Lindsay Page was appointed as Chief Executive Officer. • On 1 May 2019, Helena Feltham was appointed as an independent non-executive Director. • On 11 November 2019, Rachel Osborne was appointed to the Board as Chief Financial Officer. • On 10 December 2019, Lindsay Page resigned as Chief Executive Officer. • On 10 December 2019, Rachel Osborne was appointed as Acting Chief Executive Officer with immediate effect. • On 10 December 2019, David Bernstein resigned as Executive Chairman. • On 10 December 2019, Sharon Baylay was appointed Acting Non-Executive Chair. • On 17 December 2019, Jon Kempster was appointed as an independent non-executive Director. • On 17 December 2019, Ron Stewart resigned as non-executive Director. • On 29 January 2020, Jennifer Roebuck was appointed as Chief Customer Officer effective in April 2020 and would step down from the Board as a non-executive Director on taking up her senior management role. • On 30 March 2020, Rachel Osborne was appointed as Chief Executive Officer. • On 22 April 2020, John Barton was appointed non-executive Chairman, to take effect in July 2020. • On 18 May 2020, David Wolffe was appointed as Chief Financial Officer.
No further relevant disclosure Save for the matters described above, the Company has not made any further publications in accordance with the MAR in the last 12 months which are relevant at the date of this Prospectus.
118 PART VII—OPERATING AND FINANCIAL REVIEW The financial information below for Financial Year 2018 is extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2018. As described in “Important Information—Presentation of Financial Information”, the Group restated its Financial Year 2019 results as a result of the inventory overstatement and the inclusion of licence income in revenue. Where indicated with the caption “Reported”, financial information for Financial Year 2019 is extracted without material adjustment from the Ted Baker Annual Report for Financial Year 2019. Where indicated with the caption “restated”, financial information for Financial Year 2019 is extracted without material adjustment from the restated amounts contained in the Ted Baker Annual Report 2020, including where financial information for FY 2019 is shown in comparison with the FY 2018 figures in “Comparison of Results of Operations–Results of operations for 2019 compared to 2018”. The financial information below for Financial Year 2020 is extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. Your attention is drawn to “Impact of revaluation of inventory position as at 26 January 2019” for a discussion of the financial information referred to herein. Each of the Ted Baker Annual Reports for the Financial Years 2018, 2019 and 2020 (including the independent auditors’ reports on the Company’s audited annual consolidated financial statements) are incorporated by reference in this document as described in “Part XIII—Documentation Incorporated by Reference”. You should read the information below in conjunction with the Group’s audited annual consolidated financial statements and the independent auditors’ reports contained in the Ted Baker Annual Report for each of the Financial Years 2018, 2019 and 2020 alongside the detailed information included in this document in Part IV “Business Overview of the Group” and the other information incorporated by reference into this document and you should not rely solely on key and summarised information. Some of the information in the review set forth below and elsewhere in this document and in the information incorporated by reference into this document includes forward-looking statements that involve risks and uncertainties. The Group’s actual results may differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this document, including under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements”.
OVERVIEW Ted Baker is a global lifestyle brand offering a range of products including menswear, womenswear, childrenswear and accessories. A quintessentially British brand, Ted Baker is known for its quirky fashion offering, high quality design detailing and distinctive use of pattern and colour. Ted Baker’s approach is focused on unwavering attention to detail and firm commitment to quality. The brand operates through three main distribution channels: retail (including stores, concessions and e-Commerce), wholesale, and licensing (which includes territorial and product licences). As at 25 January 2020, the Group and its retail licencees had 563 stores and concessions worldwide, comprising of 198 in the UK, 123 in the rest of Europe, 140 in North America, 93 in the Middle East, Africa and Asia and 9 in Australasia.
Recent Trading Background In addition to the impact of the coronavirus pandemic as discussed below, in Financial Year 2020 the Group’s performance was impacted by very difficult trading conditions throughout the period, amplified by heightened levels of consumer uncertainty across many of its global markets. The external retail market has presented, and continues to present, unprecedented trading conditions, heighted competition, digital disruption, changing customer behaviour and demand and intense pressures on physical retailing has led to a dramatic increase in promotional activity and an intense level of discounting. In 2019 these pressures were exacerbated in the UK by the significant impact on consumer sentiment and spending from Brexit and political uncertainty. Consequently, several of the Group’s distribution channels have witnessed declining sales, while a number of important product segments, including formalwear and women’s occasion wear, have experienced falling demand. The Group has also faced some difficult internal issues in the last year. As previously announced, the Group experienced some challenges with its 2019 Spring/Summer collections and trading over November and the Black Friday period was below expectations, with lower than anticipated margins and sell through. In addition, the store estate underperformed driven by sales pressure and high costs, with continued high cost store expansion. The Group’s performance was also negatively impacted by high working capital driven by a three
119 year stock cycle that is no longer relevant in a fast moving fashion market. The Group also experienced high levels of operating expenditure across the business as a result of a failure to properly control costs and increase its share of e-Commerce. The Group’s free cash flow diminished as a result of lower Adjusted EBITDA, continued high levels of dividend and significant capital expenditure spend. In addition, several members of the Group’s senior management left the Group. As a result of the Group’s weaker financial performance, the Group was required to revise down guidance for Financial Year 2020 first in June 2019 and again in December 2019. The Directors expect trading conditions to be difficult for some time, especially in light of the significant challenges presented by the coronavirus pandemic. In light of the above, Group revenue decreased by 1.4 per cent. to £630.5 million in Financial Year 2020 (2019: £639.6 million, including licence income). Total retail sales including e-Commerce decreased by 4.6 per cent. to £439.9 million (2019: £461.0 million) for Financial Year 2020 and average retail square footage rose by 2.6 per cent. to 442,790 sq. ft (2019: 431,646 sq. ft). E-Commerce sales decreased by 2.4 per cent. and represented 27.0 per cent. of total retail sales (2019: 26.4 per cent., restated). Further non-underlying charges in the year related to £13.5 million in respect of a change in accounting policy for stock provision, £16.2 million in the impairment of stores, and a £7.6 million loss on disposal of the Asian businesses. As at 25 January 2020, the Facility Agreement of £180 million was fully drawn. In Financial Year 2020, the Group’s loss before tax was £79.9 million (2019: restated profit of £30.7 million). In Financial Year 2020, the Group’s underlying profit before tax was £4.8 million (£9.8 million before the impact of IFRS 16) (2019: restated underlying profit of £63.5 million). Underlying profit is adjusted for non- operating charges relating principally to inventory overstatement corrections, charges following the implementation of a revised stock provisioning policy and store impairments to reach a reported Group loss before tax of £79.9 million in Financial Year 2020 (2019: restated profit of £30.7 million). In January 2020, the Group announced that the independent review had found that the Group’s inventories, as reported at the end of Financial Year 2019, were overstated by £58 million. Following the conclusion of Deloitte’s review and the completion of the year-end process and audit, this figure was subsequently refined and finalised showing a net inventory adjustment of £52.6 million, with the Group amending the opening value of its inventory position from £225.8 million to £205.6 million, a £20.2 million restatement. The restatement of inventory was due to stock that did not physically exist (representing £6.5 million), and adjustments to correct calculations (representing £13.7 million). In addition, through this exercise the Group has reviewed its approach to estimating the carrying value of stock and adopted a better estimate methodology which resulted in a £32.4 million reduction in stock value being accounted for as a change in estimate booked as a non-underlying expense in the income statement for the period ended 25 January 2020. The change in estimate was due to inventories considered obsolete (representing £9.4 million) and changes for a revised stock costing methodology (representing £23.0 million). See—“Critical Accounting Policies” below for more details. A comprehensive internal review, with external support, has led to the implementation of several measures to strengthen the Group’s accounting systems and processes including the reorganisation of the finance function with clearer responsibilities, greater focus, and more senior and experienced leaders, an increased and detailed detective review by senior management of journal entries, balance sheet reviews and revenue-impacting balances, as well as the documentation of correct stock accounting procedures. The Group also engaged Deloitte LLP to conduct an independent review of the changes needed to the Company’s systems and controls. This review has concluded and the Group is now in the process of updating its accounting processes and systems to implement Deloitte’s recommendations and expects to complete this process in the second half of the year. Deloitte’s recommendations include: • greater segregation of duties in key areas such as journals entries, for which a monthly detective journal review is being implemented; • an assessment of general IT controls across the business (including revenue, procure to pay, inventory and record to report) to ensure they are designed and implemented effectively and increase reliance on system- generated reports; • controls over manual spreadsheets to increase the reliability and quality of information and reduce the risk of error and deficiency; • implementing simplified, standardised and centralised processes to enable increased automation across the business, derive cost efficiencies and ensure a periodic review is performed to confirm changes are captured in a timely manner and controls are operating effectively; and
120 • a training programme across finance to increase the understanding of accounting processes, the financial risks to the business and what the key controls are with the aim of reducing key person risk and improving the overall maturity of the finance environment. Following on from Deloitte’s review the Group intends to complete the implementation of a controls improvement programme, under the auspices of the Audit and Risk Committee, which includes improvements to spreadsheet controls, segregation of duties, system logs and approval matrices, followed by progressive simplification, standardisation and automation of reporting processes. The Group anticipates completing the programme in the second half of the Financial Year ending 30 January 2021.
‘Ted’s Formula for Growth’ strategy The Group has developed ‘Ted’s Formula for Growth’ strategy to improve efficiencies across the wider Group and address the key drivers of underperformance. ‘Ted’s Formula for Growth’ strategy is the culmination of six-months’ rigorous analysis, assessment work and the bringing together of insights from across the Executive team, industry trends and external experts. At its core, Ted’s Formula for growth is made up of three parts: reenergising product and brand, prioritisation of digital and capital light growth and significant cost reduction. Combined, these three elements will deliver a sustainably more profitable, higher free cash flow generating and higher return on capital employed business. This transformational strategy will see the business pivot towards a customer-centric, digital and territory approach and away from the previously adopted channels-based approach. For a description of the three building blocks see paragraph 2.3 in “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc”. The Directors believe that these steps, together with the improved capital structure following the Disposal, Placing and Open Offer and Firm Placing, should underpin a return to long-term growth.
CURRENT TRADING AND PROSPECTS In the first three months of this financial year, the Group faced the extraordinary challenge of the coronavirus pandemic across all of its trading markets, with customers, partners, suppliers and employees all impacted. The Group responded dynamically to the challenges presented by the coronavirus pandemic, including taking a series of self-help steps to reduce costs and protect cashflow and ensure the wellbeing of its teams. During the course of the coronavirus pandemic, all of the Group’s retail stores, outlets and concessions have been closed at times and as of 2 May 2020 approximately 390 retail stores, outlets and concessions remain closed in line with relevant government guidance and a gradual reopening of stores, outlets and concessions is taking place in several European markets including Germany, France and the Netherlands. Footfall in China and Hong Kong following reopening was considerably lower than prior to closure and management expects that also to be the case in other jurisdictions. As the Group reopens its stores, it is taking strong precautions to ensure the safety of its customers and employees. Social distancing measures are being adhered to, with floor markings in local languages. The stores are thoroughly cleaned every day and hand sanitiser, anti-bacterial wipes, disinfectant and gloves are available in its stores. The stores are also initially limited to one shift a day. The Group is also adhering to local regulations with respect to the coronavirus pandemic where applicable, such as mandatory face masks and holding returns in a designated area for one week before resale. The Group has furloughed approximately 85 per cent. of its employees globally in line with a variety of government schemes across its trading markets. The Group has suspended all discretionary capital expenditure, temporarily reduced executive remuneration by 15 per cent., rephased product orders and is negotiating rent deferrals and rent reductions with landlords. The Group will also benefit from a 12 month business rates holiday in the United Kingdom (which is expected to save the Group £5.8 million in Financial Year 2021). This cash preservation programme is expected to deliver permanent cash flow savings of £138.4 million (of which £88.2 million relates to savings from the reduced purchasing of stock and recent stock liquidation, £20.4 million from improved payment terms, £5.8 million from a 12 month business rates holiday, £17.2 million from the furlough schemes, £6.5 million from putting all discretionary capex on hold and £0.3 million from Board and executive management pay cuts) and defer £10.9 million of cash payments (of which £3.4 million relates to employee tax and VAT deferrals, £4.5 million from negotiated rent holidays and deferrals and £3.0 million on discretionary capex deferrals). The e-Commerce distribution channel continues to operate for customers as normal and is a channel the Group is intensively managing during this period of store closures. The e-Commerce channel has proved much more resilient with sales in the first fourteen weeks of the financial year up approximately 50.3 per cent. on last year (49 per cent. on a constant currency basis), with an increase of 77.9 per cent. in the first six weeks of the lockdown in the United Kingdom (76.5 per cent. on a constant currency basis), albeit at much lower margins due to heavily discounted sales for part of the period of up to 60
121 per cent. As the Group starts reopening stores, it expects to do so gradually and expects that there will lower footfall and consumer demand for a time. Accordingly, in respect of the Group’s financial performance for the period from 25 January 2020 compared to the corresponding period in Financial Year 2020, the Group has suffered substantial reductions to revenue, operating profit, underlying profit and an increase in net loss. In the fourteen weeks ended 2 May 2020, the Group’s total revenue decreased 36.0 per cent. (36.6 per cent. on a constant currency basis), to £90.4 million (2019: restated £141.3 million). Over the same period, retail revenue decreased 34.8 per cent. (34.5 per cent. on a constant currency basis), to £58.8 million (2019: restated £89.9 million). This included store revenue of £25.2 million (2019: restated £66.8 million) and e-Commerce revenue of £33.5 million (2019: restated £22.3 million). Over the same period, wholesale revenue decreased 40.0 per cent. (40.7 per cent. on a constant currency basis), to £28.6 million (2019: restated £47.6 million) and licence income decreased 36.0 per cent. to £3.0 million (2019: restated £4.6 million). Prior to the coronavirus pandemic, in the four weeks ended 22 February 2020 the Group’s revenue was only slightly lower than the same period in 2019. As the impact of the coronavirus pandemic deepened, the Group’s revenue began decreasing, with the greatest effect felt in the six week period ended 2 May, during which the lockdown in the United Kingdom was in full effect. During this period, all of the Group’s segments were performing significantly below the same period in 2019, aside from e-Commerce, which saw a revenue increase of 77.9 per cent. in the six week period ended 2 May, as compared to the same period in 2019. In respect of the Group’s financial position as at the date of this document, preparation of a consolidated balance sheet requires numerous judgments and estimates about future store operating performance, the dates on which the Group’s physical stores will be permitted to reopen in the markets in which it operates and the cumulative macroeconomic impact on the Group’s customers’ discretionary income and the financial position of the Group’s trade creditors, and, as at 1 June 2020, it is not possible to reliably determine or quantify the impact of the coronavirus pandemic on the Group’s significant estimates (particularly with respect to impairment of property, plant and equipment, right of use assets and intangible assets, carrying amount of inventories, and carrying amount of trade receivables). The Group's accounting policies and a description of the methodology used in these estimates are described in Note 1(w) of the Ted Baker Annual Report for Financial Year 2020 under the captions “Impairment of property, plant and equipment, right of use assets and intangible assets” and “Carrying amount of inventories”. Management undertakes an impairment review for stores meeting certain criteria (primarily established stores with a cash contribution below 10 per cent. and determines value-in-use impairment using a discount rate equal to the Group’s weighted average cost of capital. Carrying value of inventory is impaired by reference to a provisioning policy based on a two-year product lifecycle. Nonetheless, assuming the impact of the coronavirus pandemic as set out in paragraph 19 of “Part XII—Additional Information”, which, inter alia, assumes that the Group’s retail stores and concessions remain closed for a period of six months to September 2020, the Group anticipates a significant impairment of the Group’s retail store assets, a significant impairment of trade receivables and a significant impairment in stock. In aggregate, the Group expects these impairments to have a material adverse impact on its balance sheet and to have a material, substantial adverse impact on its income statement. In the event of a shorter period during which the Group’s retail stores and concessions remain closed, the impact would be lessened, but still likely result in significant impairment charges. Since 25 January 2020 the Company has paid down £19.7 million under Facility A leaving total indebtedness at £160.3 million as at 28 May 2020. As described in paragraph 8 of “Part I—Letter from the Acting Non- Executive Chair of Ted Baker Plc”, the Group expects to pay down approximately £72 million of its total indebtedness on completion of the Capital Raising and the Disposal. In light of the above, the Directors expect the Group’s profit margin to also deteriorate in the short-term with the Directors targeting a return to growth in the medium-term. With the benefit of the strengthened capital structure following the Disposal and the Capital Raising, the Directors remain confident in the ability of the Group to continue to implement its ‘Ted’s Formula for Growth’ strategy and return to long-term growth.
Impact of revaluation of inventory position as at 26 January 2019 In December 2019, the Group identified that the value of inventory held on its balance sheet at that time had been overstated following an internal review. As a result of these findings, the Group engaged Deloitte LLP to undertake an independent and comprehensive review of this issue. In January 2020, the Group announced that the independent review had found that the Group’s inventories, as reported at the end of Financial Year 2019, were overstated by £58 million. Following the conclusion of Deloitte’s review and the completion of the year-end process and audit, this figure was subsequently refined and finalised showing a net inventory
122 adjustment of £52.6 million, with the Group amending the opening value of its inventory position from £225.8 million to £205.6 million, a £20.2 million restatement. The restatement of inventory was due to stock that did not physically exist (representing £6.5 million), and adjustments to correct calculations (representing £13.7 million). In addition, through this exercise the Group has reviewed its approach to estimating the carrying value of stock and adopted a better estimate methodology which resulted in a £32.4 million reduction in stock value being accounted for as a change in estimate booked as a non-underlying expense in the income statement for the period ended 25 January 2020. The change in estimate was due to inventories considered obsolete (representing £9.4 million) and changes for a revised stock costing methodology (representing £23.0 million). See “—Critical Accounting Policies” below. Although the amount of the revaluation is a non-cash item, the revaluation has significant adverse effects on the Group’s reported statutory cost of sales in the Financial Years 2019 and 2020, and consequently, its gross profit, operating profit, profit before tax and profit for the period. Because it is not possible to allocate all or a portion of the amount of the revaluation into any specific prior financial year, the Group has not, in accordance with relevant accounting standards, restated its financial information for the Financial Year 2018. Had it been possible to do so, any such revaluation allocated to such year would have had correspondingly adverse effects on the corresponding line items in those periods. As a result, investors should not place undue reliance on any period-on-period movements within those line items in the Group’s income statement and balance sheets for Financial Year 2018 on the one hand, and Financial Years 2019 and 2020 on the other.
KEY FACTORS AFFECTING THE GROUP’S RESULTS OF OPERATIONS The results of the Group’s operations have been, and will continue to be, affected by many factors, some of which are beyond the Group’s control. This section sets out certain key factors the Directors believe have affected the Group’s results of operations in the period under review and could affect its results of operations in the future.
Impact of the coronavirus pandemic The impact of the coronavirus pandemic is rapidly evolving which creates material uncertainty across many of the Group’s markets. Public policy and government responses have differed across each market and the Group has adopted measures designed to best serve employees, customers and wider stakeholders across its trading markets. The Group responded dynamically to the challenges presented by the coronavirus pandemic, including taking a series of self-help steps to reduce costs and protect cashflow and ensure the wellbeing of its teams. During the course of the coronavirus pandemic, all of the Group’s retail stores, outlets and concessions have been closed at times and as of 2 May 2020 approximately 390 retail stores, outlets and concessions remain closed in line with relevant government guidance and a gradual reopening of stores, outlets and concessions is taking place in several European markets including Germany, France and the Netherlands. Footfall in China and Hong Kong following reopening was considerably lower than prior to closure and management expects that also to be the case in other jurisdictions. The Group has furloughed approximately 85 per cent. of its employees globally in line with a variety of government schemes across its trading markets. The Group has suspended all discretionary capital expenditure, temporarily reduced executive remuneration by 15 per cent., rephased product orders and is negotiating rent deferrals and rent reductions with landlords. The Group will also benefit from a 12 month business rates holiday in the United Kingdom (which is expected to save the Group £5.8 million in Financial Year 2021). However, these measures will not be sufficient to offset the full impact of reduced revenue due to the coronavirus pandemic. The majority of the Group’s manufacturing plants have been closed at times during the last five months due to the coronavirus pandemic, although the significant majority of its factories are now operational. The Group does not currently envisage supply disruptions and inventory levels are sufficient. However, if this pandemic continues and results in a prolonged period of commercial, manufacturing, travel and other similar restrictions, the Group could experience significant supply disruptions for its 2020 autumn/winter season. The Group may need to develop alternate sourcing and there is no assurance that the Group will be able to do so quickly and alternate suppliers may cost significantly more. In addition, if the manufacturing process is delayed, the Group may have to incur additional expense to ship its products so they arrive in a timely manner for the collections’ scheduled launch. All of these factors could increase the Group’s costs and have an adverse impact on its profit margin.
123 Evolution of the Group’s distribution network The Group’s distribution network is comprised of three channels: retail (including stores, concessions and e-Commerce), licencing (including territorial and product licences) and wholesale. Each distribution channel has different profit margin and growth characteristics, with wholesale attracting lower margins than retail, and with almost 100 per cent. of licence income as profit. As such, the mix of revenue received each financial year between the three channels impacts the Group’s results of operations, as described in detail below.
Retail The retail channel comprises stores, concessions and e-Commerce, which are an integral part of the Group’s retail experience. The Group operates stores and concessions across the United Kingdom, Europe, North America and Africa, with localised e-Commerce sites for the United Kingdom, France, Germany, US, Canada and Australia. There are also e-Commerce businesses with some of the Group’s concession partners. During Financial Year 2020, the Group restructured its Asian operations to focus on low-capex growth by completing a 50/50 joint venture agreement with a local partner and appointed a new licence partner in Japan. Stores and concessions are designed to showcase the brand’s unique style of retail theatre and to ensure customers enjoy a welcoming and pleasurable shopping experience. Each store boasts a differentiated design with innovative and distinctive touches. E-Commerce enables the Group to offer customers access to an extended product range and provides a means to talk directly with customers and engage them with the brand. E-Commerce is an increasingly important distribution channel, and, for so long as the coronavirus pandemic imposes restrictions on the Group’s retail store and concession operations, is the principal route to market for the Group’s products. The Group and the Director’s believe there are significant untapped market opportunities for the Ted Baker brand. Under ‘Ted’s Formula for Growth’ strategy, the Group is focusing its capital expenditure on e-Commerce including a new digital platform to improve the customer experience, expand mobile payment methods and facilitate online international sales. The Directors expect these initiatives to increase the Group’s Conversion Rate, which has for a time been below the market average, and result in higher percentage of total revenue attributable to e-Commerce. It should in turn increase the Group’s profit margin due to the generally higher margin for e-Commerce compared to other retail channels. The profitability of the Group is also affected by total number of stores, concessions and outlets in the Group’s distribution network, and particularly by the number of stores in the Group’s retail distribution network. The Directors believe the Group’s retail distribution network provides a more effective relationship with customers and greater control over sales than wholesale distribution. In addition, sales from the retail network have a higher margin than sales through the wholesale distribution channel or through franchises. However, given the cost structure for most of the Group’s existing stores, if store sales decline, certain expenses (such as rent and sales personnel) are relatively fixed and may result in lower margins, although a portion of the Group’s physical distribution network benefit from rental expenses tied to sales. While an increased number of stores, concessions and outlets may lead to increased revenue, the expansion of the Group’s retail network also requires capital expenditures and increased fixed costs, primarily in rent and sales personnel. Costs associated with opening a store averaged £313 per sq. ft during the period under review, depending in part on the nature of the store, for example, concessions, outlets, grooming rooms or flagships. The Directors expect that in the future the costs, on average, relating to new stores will be lower as under ‘Ted’s Formula for Growth’ strategy the Group plans to open fewer new stores and limit capital expenditure for store refurbishment, focusing instead on developing e-Commerce. In Financial Year 2020 gross margin in retail was 59.9 per cent. (Financial Year 2019: 63.1 per cent.). The Group expanded from 437 stores, concessions and outlets (excluding licence partner stores) as at 27 January 2018, to 448 as at 26 January 2019 and 428 as at 25 January 2020. All of the Group’s stores are operated on a short leasehold basis, with the average lease tenure being four years.
Licensing The Group operates both territorial and product licences. Territorial licences cover specific countries or regions in Asia, Australasia, Europe, the Middle East, Africa and Central America, where its partners operate licenced retail stores and, in some territories, wholesale operations. Product licences are categorised as either lifestyle or apparel licences. Licensing arrangements require negligible levels of capital expenditure allowing the Group to retain almost 100 per cent. of licence income as profit. Under ‘Ted’s Formula for Growth’ strategy, the Group plans to increase its revenue from this distribution channel by sourcing more global licence partners.
124 Wholesale The wholesale channel carries a higher margin than sales to retail licence partners. In Financial Year 2020, gross margin for the wholesale channel was 39.8 per cent. (Financial Year 2019: 44.1 per cent.). Wholesale revenue is currently largely generated from the United States and the United Kingdom. Under ‘Ted’s Formula for Growth’ strategy, the Group plans to expand globally by obtaining wholesale partners in other regions.
Seasonality The Group experiences seasonal fluctuations in its revenue. The seasonal nature of the Group’s business is broadly similar across geographies but varies by distribution channel. For the retail channel, sales peak from late November to the end of January, driven by the Black Friday, Christmas and New Year sales trading periods. For the wholesale channel, the peak in sales occurs on shipment of the Spring/Summer and Autumn/ Winter collections in February and August respectively, a number of months before they enter the retail stores. Seasonality between the first half and second half of the year is skewed heavily towards the second half in light of the key November to January retail sales peak. The Group’s operating costs, including personnel costs, rental expense and administrative costs are more evenly distributed during the financial year.
Macroeconomic effects on consumer buying patterns The Group’s performance is affected by macroeconomic conditions which affect the disposable income and spending patterns of consumers. The state of the economy as a whole, inflation, deflation, political uncertainty, the availability of consumer credit, taxation, unemployment, and the impact of the coronavirus pandemic are all factors that relate to the prevailing macroeconomic conditions and affect the Group’s business. Economic growth and consumer confidence are important for the Group’s strategy of expanding its global network. In addition, supply chain sustainability is becoming increasingly important to customers and may impact their purchasing decisions, requiring the Group to invest more in supply chain sustainability. A decrease in global economic growth or a slowdown in certain fast-growing markets could negatively affect the Group’s results of operations. See “Risk Factors “A downturn in the economy, the retail industry or consumer confidence in the Group’s chosen markets may affect sales of its products”.
Foreign exchange fluctuations The Group reports its consolidated financial reports in Pounds Sterling. However, its subsidiaries, which operate globally, use their local currencies. As a result, the Group’s results of operations are affected by exchange rate fluctuations between Pounds Sterling and the other currencies in which it conducts and will continue to conduct transactions, primarily the euro and US dollar. In addition, the Group predominantly pays its suppliers in euros and US dollars, and therefore it incurs its cost of goods sold in euros and US dollars. The Group sets the sales prices for its products at periodic fixed intervals in Pounds Sterling. The Group manages the foreign exchange risk by, wherever possible, building a natural hedge of euros and US dollar denominated sales and purchases so that the inflows and outflows of foreign currencies offset. To the extent that there is no natural hedge, a portion of the residual exposure is hedged using financial instruments in line with the Group’s risk management policy. To the extent that any of the Group’s foreign exchange exposure remains unhedged, adverse movements in exchange rates could impact the Group’s results.
Costs of manufacturing The Group’s industry is subject to volatility in costs related to certain raw materials used in the manufacturing of its products. This volatility applies primarily to costs driven by commodity prices, which can increase or decrease dramatically over a short period of time. The Group aims to mitigate these effects by implementing a multi-supplier strategy and sourcing its products as efficiently as possible across the Far East and Europe. In addition, manufacturing labour costs are also subject to degrees of volatility based on local and global economic conditions. The Group uses commercially reasonable efforts to source from localities that suit its manufacturing and quality standards and result in more favourable labour costs to its products.
125 KEY FACTORS AFFECTING COMPARABILITY The Ugly Brown Building Sale and Leaseback On 20 March 2020, No Ordinary Designer Label Limited entered into a share purchase agreement with British Airways Pension Fund, St Pancras Way Block C Unit Trust in relation to the sale of the entire issued share capital of Big Lobster. The only material asset of Big Lobster is The Ugly Brown Building, which is the Company’s head office. The net impact of this sale on the interest income will be a £1.4 million reduction in interest expense. The Group has also agreed a short-term lease of up to three years for its existing office space in The Ugly Brown Building. As a result, in contrast to the period covered by the historical financial information, going forward, this will result in recognition of a right of use asset relating to the lease of £7.8 million and in respect of the associated lease liability of £7.8 million. The lease also includes an option to lease space in another section of The Ugly Brown Building for 10 years following the expiration of the three-year lease.
IFRS 16 IFRS 16 (Leases) introduces a single, on balance sheet lease accounting model for lessees. IFRS 16 establishes that lessees shall recognise in the consolidated balance sheet a financial liability for the present value of the payments to be made over the remaining life of the lease agreement and a right of use asset for the underlying asset, which is measured based on the amount of the associated liability, to which the initial direct costs incurred are added. Additionally, the recognition criteria for lease expenses has changed. Lease expenses are now recorded as a depreciation charge for the lease asset and as a financial expense for the lease liability. As described in note 1(a) of the audited annual consolidated financial statements in the Ted Baker Annual Report for Financial Year 2020, IFRS 16 became effective for periods beginning on or after 1 January 2019 and replaces the previous accounting standard, IAS 17 (Leases), including related interpretations. The Ted Baker Annual Report for Financial Year 2020 gives effect to the entry into force of IFRS 16. The comparative information presented for the Financial Year 2019 has not been restated and therefore continues to be shown under IAS 17 ‘Leases.’ The Group has applied exemptions for short-term leases and leases of low value items to exclude initial direct costs form the measurement of the right-of-use assets at the date of initial application. The Group has chosen to adopt the simplified modified retrospective approach to transition and will not restate comparative amounts for the year prior to first adoption. The impact of IFRS 16 is to recognise a lease liability and a corresponding asset in the Statement of Financial Position for leases previously classified as operating leases. The most significant impact has been that the Group’s retail store operating leases are now recognised on the Consolidated Balance Sheet as £149.0 million of right of use assets representing the economic benefits of the Group’s right to use the underlying leased assets, together with associated future lease liabilities of £168.3 million at the end of the Financial Year 2020. Previously lease rentals payable under operating leases were not recognised in the Consolidated Balance Sheet and were charged to the Consolidated Income Statement on a straight-line basis over the term of the relevant lease. The Group does not have any leases previously classified as finance leases. The Group’s lease portfolio within the scope of IFRS 16 consists of leased properties only, with a fixed rental element. Concessions and turnover rents are not within the scope and therefore these will continue to be expensed as incurred. In Financial Year 2020, the Group recognised an increase in total liabilities of £26.4 million, and a similar increase in total assets (after adjustments for prepayments and accrued lease payments recognised as at 25 January 2020), together with the associated future lease liabilities. Discount rates ranging between 1.9 per cent. to 9.1 per cent. have been determined based on BB-rated corporate bond yields and vary by territory and lease length. The Group does not expect the adoption of IFRS 16 to affect its ability to comply with financial covenants described in note 23 of the audited annual consolidated financial statements in the Ted Baker Annual Report for Financial Year 2020. Operating cash flows will increase and financing cash flows will decrease because the repayment of the principal portion of the lease liabilities will be classified as cash flows from financing activities.
Acquisition of No Ordinary Shoes On 1 January 2019, the Group acquired the entire issued share capital of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC from Pentland Group Plc. Prior to this date, Pentland held the exclusive global licence to manufacture and distribute footwear under the Ted Baker brand. Consideration comprised £20.3 million payable in cash at completion, which was funded using the Group’s multi-currency revolving
126 credit facility. Acquisition-related costs of £1.7 million are included in non-underlying costs within administrative expenses in the income statement and in operating cash flows in the statement of cash flows. The acquisition completed for cash consideration of £20.3 million (which amount comprised the initial consideration stated above with adjustments for estimated cash, debt and working capital).
DESCRIPTION OF KEY LINE ITEMS ON THE INCOME STATEMENT Revenue Revenue represents amounts receivable for goods provided in the normal course of business, net of trade discounts, VAT and other sales related taxes. Retail revenue is recognised when a Group entity sells a product to a customer. Wholesale revenue is recognised when title has passed in accordance with the individual terms of trade with the relevant wholesaler (i.e. the point at which the risks of ownerships have transferred). Licence income receivable from licencees is accrued as earned on the basis of the terms of the relevant licence agreement, which is typically on the basis of a minimum payment spread over the licence period and a variable amount based on turnover. Accrued income is from licence income earned but not billed in the period. The Group sells retail products with the right of return and experience is used to estimate and provide for the value of such returns at the time of sale when considered significant. Credit notes or exchanges are available to customers returning unwanted products with proof of purchase within 28 days of the date of purchase. In the light of the coronavirus pandemic, the Group has temporarily extended return periods to 40 days. Cash refunds are available to customers returning unwanted products with proof of purchase within 14 days of the date of purchase. Sales of gift vouchers are treated as future liabilities, and revenue is recognised when the gift vouchers are redeemed against a later transaction.
Cost of sales Cost of sales principally comprises the cost of products sold, foreign exchange differences on product purchases, applicable import duties, freight costs and stock loss. The Group also accounts for obsolescence, sample costs and associated provision movements through cost of sales.
Gross profit Gross profit is revenue less cost of goods sold, and gross profit margin is gross profit as a percentage of revenue.
Distribution costs Distribution costs consist primarily of the cost of retail operations and distribution centres. It includes all costs associated with selling products to customers in retail stores, including staff costs, property costs (primarily rent and rates) and other costs such as utilities and store maintenance.
Administrative expenses Administrative expenses are comprised of wages and salaries associated with administrative staff based at the Group’s global headquarters and regional head offices. This includes the design, merchandising, brand communications, production, procurement, finance, information technology, human resources functions. Administrative expenses also includes rent and maintenance for regional head offices, communication expenses, share based payments, legal and professional costs, depreciation, and net foreign exchange differences.
Operating profit / (loss) Operating profit is revenue, less cost of sales, distribution costs, administrative expenses plus other operating income.
Net finance expense Net finance expense comprises interest income less finance costs. Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statement.
127 Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity’s right to receive payments is established which in the case of quoted securities is usually the ex-dividend date.
Profit / (loss) before tax Profit / (loss) before tax is operating profit less net finance expense.
Income tax expense Corporation tax payable is recognised on taxable profits using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax is not recognised for temporary differences relating to investments in subsidiaries to the extent they will not reverse in the foreseeable future. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Income tax comprises current and deferred tax.
RESULTS OF OPERATIONS The following tables set forth the Group’s main operating results, extracted from the Ted Baker Annual Report for the each of the Financial Years 2018, 2019 and 2020 (except as described in notes 1, 2 and 3 below). Results of operations for Financial Years 2019 and 2020
Financial Year 2019 2020 Restated(3) Reported Underlying Non-underlying Total IFRS Underlying Non-underlying Total IFRS (£ millions) Revenue(1) ...... 639.6 — 639.6 630.5 — 630.5 Cost of sales ...... (257.3) (20.2) (277.5) (279.7) (43.7) (323.4) Gross profit ...... 382.2 (20.2) 362.0 350.8 (43.7) 307.1 Distribution costs ...... (240.5) (9.3) (249.8) (244.1) (24.4) (268.5) Administration expenses ...... (77.0) (2.8) (79.8) (88.3) (12.6) (100.9) Other operating income ...... 1.8 — 1.8 0.1 — 0.1 Operating profit/(loss) ...... 66.6 (32.3) 34.3 18.4 (80.6) (62.2) Finance income ...... 0.1 0.1 0.3 0.1 — 0.1 Finance costs ...... (3.8) (0.7) (4.5) (12.7) (3.0) (15.6) Share of profit of jointly controlled entity, net of tax . . 0.5 — 0.5 (1.2) (1.0) (2.2) Profit/(loss) before tax ...... 63.5 (32.8) 30.7 4.8 (84.6) (79.9) Income tax expense ...... (12.1) 5.9 (6.2) (1.8) 11.2 9.4 Profit/(loss) for the period . . . 51.4 (26.9) 24.5 3.0 (73.4) (70.4)
Notes: (1) Historically licence income was reported below gross profit through Financial Year 2019. From Financial Year 2020, the Group reports this income above gross profit. (2) In Financial Year 2020, the Group’s underlying profit before tax was £4.8 million (£9.8 million before the impact of IFRS 16) (2019: underlying profit of £63.5 million). Underlying profit is adjusted for non-operating charges relating principally to inventory overstatement corrections, charges following the implementation of a revised stock provisioning policy and store impairments to reach a Group loss before tax of £79.9 million in Financial Year 2020 (2019: restated profit of £30.7 million). See “Important Information—Non-IFRS Information” for more details.
128 (3) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. Results of operations for Financial Years 2018 and 2019
Financial Year 2018 2019 Reported Restated(3) Underlying Non-underlying Total IFRS Underlying Non-underlying Total IFRS Reported (£ millions) Revenue(1) ...... 591.7 — 591.7 639.6 — 639.6 Cost of sales ...... (230.9) — (230.9) (257.3) (20.2) (277.5) Gross profit ...... 360.8 — 360.8 382.2 (20.2) 362.0 Distribution costs(2) ...... (232.0) (4.5) (236.5) (240.5) (9.3) (249.8) Administration expenses(2) . (75.5) (0.14) (75.6) (77.0) (2.8) (79.9) Licence income ...... 21.4 — 21.4 — — — Other operating income . . . 0.6 — 0.6 1.8 — 1.8 Operating profit/(loss) . . . 75.5 (4.7) 70.7 66.6 (32.3) 34.3 Finance income ...... 0.1 0.7 0.8 0.1 0.1 0.3 Finance costs ...... (3.3) — (3.3) (3.8) (0.7) (4.5) Share of profit of jointly controlled entity, net of tax ...... 0.6 — 0.6 0.5 — 0.5 Profit/(loss) before tax . . . 72.8 (3.9) 68.8 63.5 (32.8) 30.7 Income tax expense . . . . . (16.9) 0.8 (16.0) (12.1) 5.9 (6.2) Profit/(loss) for the period 55.9 (3.1) 52.7 51.4 (26.9) 24.5
Notes: (1) Historically licence income was reported below gross profit through Financial Year 2019. From Financial Year 2020, the Group reports this income above gross profit (2) For Financial Year 2018, exceptional items relating to impairment of retail assets of £4.5 million have been reclassified from administration expenses to distribution costs. (3) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020.
COMPARISON OF RESULTS OF OPERATIONS Results of operations for 2020 compared to 2019 Revenue The following table breaks down the Group’s revenue by geography for Financial Years 2020 and 2019:
2019(1) 2020 % Change Restated Reported (£ millions) United Kingdom ...... 372.7 360.3 (3.3) United States ...... 182.4 194.6 6.7 Rest of World ...... 84.4 75.6 (10.4) Total ...... 639.6 630.5 (1.4)
Notes: (1) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020.
129 The following table breaks down the Group’s revenue by collection for Financial Years 2020 and 2019(1):
2019(3) 2020 % Change Restated Reported (£ millions) Menswear(2) ...... 235.2 241.1 2.5 Womenswear(2) ...... 382.2 370.4 (3.1) Total ...... 617.4 611.5 (1.0)
Notes: (1) Revenue by collection excludes licence income of £19.0 million in Financial Year 2020 and £22.1 million in Financial Year 2019. (2) Other products sold including footwear, accessories, luggage, tiles, rugs and stationary, are classified as part of Menswear and Womenswear. (3) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. Total revenue was £630.5 million in Financial Year 2020 compared to a restated £639.6 million in Financial Year 2019 (including licence income). This decrease was primarily driven by a 4.6 per cent. decrease in retail sales to £439.9 million (Financial Year 2019: £461.0 million, restated), partially offset a 9.6 per cent. increase in wholesale sales to £171.5 million (Financial Year 2019: £156.5 million, restated). Wholesale sales in Financial Year 2020 benefited from incremental footwear revenue, following the acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC, which completed on 1 January 2019. On a comparable basis (excluding footwear) wholesale sales decreased by 3.7 per cent. Revenue in the United Kingdom was £360.3 million in Financial Year 2020 compared to a restated £372.7 million in Financial Year 2019. This decrease was the result of a deeply challenging external retail environment; including the structural transition from physical stores to digital retail, alongside a cyclical downturn, resulting in intense pressures on physical retail, changing customer behaviour and declining demand. In the United Kingdom these pressures were exacerbated by the significant impact on consumer sentiment and spending from Brexit and political uncertainty during Financial Year 2020. Revenue in the United States was £194.6 million in Financial Year 2020 compared to a restated £182.4 million in Financial Year 2019. This increase was due to the Group’s continued expansion in this region through new stores and concessions, growth in its e-Commerce business, partially offset by unseasonable weather across North America in the early part of the period and difficult trading conditions experienced throughout the period. Revenue in the Rest of the World was £75.6 million in Financial Year 2020 compared to a restated £84.4 million in Financial Year 2019. This decrease was primarily due to a reorganisation of the Group’s operations in this region, with the appointment of a new licence partner in Japan and a new joint venture in China. Womenswear revenue was £370.4 million in Financial Year 2020 compared to a restated £382.2 million in Financial Year 2019, and represented 60.6 per cent. (Financial Year 2019: 61.9 per cent.) of sales (excluding licence income). Menswear revenue was £241.1 million in Financial Year 2020 compared to a restated £235.2 million in Financial Year 2019, and represented 39.4 per cent. of sales (excluding licence income) (2019: 38.1 per cent., restated). The underperformance in womenswear was due to missteps on both buying and design as a result of changes in the team, which has since been addressed.
Cost of Sales and gross margin Cost of sales was £323.4 million in Financial Year 2020 compared to a restated £277.5 million in Financial Year 2019 with the Group’s gross margin decreasing to 48.7 per cent. compared to 56.6 per cent. in Financial Year 2019. Of the increase of £45.8 million, £12.2 million related to the non-cash impact of the restatement of the inventory balance as at 26 Jan 2019 and £13.5 million relating to inventory obsolescence. Excluding non-underlying costs, cost of sales was £279.7 million in Financial Year 2020 compared to a restated £257.3 million in Financial Year 2019. The retail gross margin decreased in Financial Year 2020 to 59.9 per cent. compared to a restated 63.1 per cent. in Financial Year 2019, due to an increase in promotional activity in response to the unprecedented trading conditions and a more proactive stance over working capital management and an active approach to inventory sell through, partially offset by an improved retail margin on footwear sales The wholesale gross margin decreased in Financial Year 2020 to 39.8 per cent. compared to a restated 44.1 per cent. in Financial Year 2019.
130 Gross profit As a result of the foregoing, gross profit was £307.1 million in Financial Year 2020 compared to a restated £362.0 million in Financial Year 2019 (including licence income).
Distribution costs Distribution costs were £268.5 million in Financial Year 2020 compared to a restated £249.8 million in Financial Year 2019. Of the increase of £18.8 million, £16.2 million related to the impairment of property, plant and equipment and right-of-use assets. The increase was also a result of inflationary cost increases, higher warehouse and depreciation costs and the annualisation of costs associated with operating the footwear business which was acquired in January 2019. Excluding non-underlying costs, distribution costs were £244.1 million in Financial Year 2020 compared to a restated £240.5 million in Financial Year 2019.
Administrative expenses Administrative expenses were £100.9 million in Financial Year 2020 compared to a restated £79.9 million in Financial Year 2019. This increase was primarily the result of continued investment in employees, including the additional headcount to support the recently acquired footwear business, and infrastructure to support the growth of the business as well as a higher depreciation and amortisation charge from prior year investment in systems. Excluding non-underlying costs, administrative costs were £88.3 million in Financial Year 2020 compared to a restated £77.0 million in Financial Year 2019.
Operating profit (loss) As a result of the foregoing, operating losses in Financial Year 2020 was £62.2 million, compared to a restated operating profit of £34.3 million in Financial Year 2019.
Net finance expense Net finance expense was £15.5 million in Financial Year 2020 compared to a restated net finance expense of £4.2 million in Financial Year 2019. This increase was primarily due to an interest charge of £8.1 million due to IFRS 16 and higher average borrowings following the payment to acquire the footwear business in January 2019. Excluding non-underlying costs, net finance costs were £12.4 million in Financial Year 2020 compared to a restated £3.6 million in Financial Year 2019.
Loss before tax In Financial Year 2020, the Group’s loss before tax was £79.9 million (2019: restated profit of £30.7 million). In Financial Year 2020, the Group’s underlying profit before tax was £4.8 million (£9.8 million before the impact of IFRS 16) (2019: restated underlying profit of £63.5 million). Underlying profit is adjusted for non- operating charges relating principally to inventory overstatement corrections, charges following the implementation of a revised stock provisioning policy and store impairments to reach a Group loss before tax of £79.9 million in Financial Year 2020 compared to a restated a profit of £30.7 million in Financial Year 2019.
Income tax Income tax was a credit in Financial Year 2020 of £9.4 million, compared to a restated income tax expense of £6.2 million in Financial Year 2019, largely due to the impact of the aforementioned non-underlying items. The Group’s effective income tax rate in Financial Year 2020 was 11.8 per cent. (Financial Year 2019: 20.2 per cent.). Loss for the period As a result of the foregoing, loss for the period was £70.4 million in Financial Year 2020 compared to a restated profit of £24.5 million in Financial Year 2019.
Results of operations for 2019 compared to 2018 Your attention is drawn to “—Impact of revaluation of inventory position as at 26 January 2019”. As described therein, certain line items in the financial information for the Financial Year 2018, extracted from the Ted Baker Annual Report for Financial Year 2018, are not directly comparable to the restated financial information for the Financial Year 2019 included in the Ted Baker Annual Report for the Financial Year 2020. The
131 following discussion is based on the restated financial information of the Group for Financial Year 2019 included in the Ted Baker Annual Report for the Financial Year 2020.
Revenue The following table breaks down the Group’s revenue by geography for Financial Years 2018 and 2019:
2018 2019 % Change Reported Restated(1) (£ millions) United Kingdom ...... 336.1 372.7 10.9% United States ...... 153.6 182.4 18.8% Rest of World ...... 102.0 84.4 (17.3)% Total ...... 591.7 639.6 8.1%
Notes: (1) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. The following table breaks down the Group’s revenue by product segment for Financial Years 2018 and 2019(1):
2018 2019 % Change Reported Restated(3) (£ millions) Menswear(2) ...... 249.7 235.2 (5.8)% Womenswear(2) ...... 342.0 382.2 11.8% Total ...... 591.7 617.4 4.4%
Notes: (1) Revenue by collection excludes licence income of £22.1 million in Financial Year 2019 and £21.4 million in Financial Year 2018. (2) Other products sold including footwear, accessories, luggage, tiles, rugs and stationary, are classified as part of Menswear and Womenswear. (3) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. Total revenue was a restated £639.6 million in Financial Year 2019 (including licence income) from A reported £591.7 million in Financial Year 2018 (excluding licence income). This was primarily driven by a 4.2 per cent. increase in retail sales to £461.0 million (Financial Year 2018: £442.5 million) and a 4.8 per cent. increase in wholesale sales to £156.5 million (Financial Year 2018: £149.2 million). Revenue in the United Kingdom was a restated £372.7 million in Financial Year 2019, from a reported £336.1 million in Financial Year 2018 reflecting growth in the Group’s wholesale business, a strong e- Commerce performance and new store openings, partially offset by the difficult trading conditions, unseasonable weather at different times throughout the period and the impact on the Group’s concession business from House of Fraser in the lead up to its administration in August 2018. Revenue in the United States increased was a restated £182.4 million in Financial Year 2019 from a reported £153.6 million in Financial Year 2018, driven by the Group’s continued expansion of its retail and wholesale segments in this region and strong performance in the e-Commerce business, partially offset by unseasonable weather at different points throughout the period. Revenue in the Rest of the World was a restated £84.4 million in Financial Year 2019 from a reported £102.0 million in Financial Year 2018. This decrease is partly due to the prior year transition of the Group’s retail operations in South Korea to a distributor who has the knowledge and experience to drive growth locally as well as a further refinement of its store portfolio in this territory. Womenswear revenue increased was a restated £382.2 million in Financial Year 2019, from a reported £342.0 million in Financial Year 2018, and represented 61.9 per cent. (2018: 57.8 per cent.) of total sales (excluding licence income). Menswear revenue decreased was a restated £235.2 million in Financial Year 2019, from a reported £249.7 million in Financial Year 2018, and represented 38.1 per cent. of total sales (excluding licence income) (2018: 42.2 per cent.). The increase in womenswear revenue was in part due to the increased
132 proportion of e-Commerce sales, which accounts for a higher proportion of womenswear sales than menswear, and the difficult market conditions which had a disproportionate impact on menswear sales. Licence income increased by £0.7 million, or 3.1 per cent., to £22.1 million in Financial Year 2019 from £21.4 million in Financial Year 2018. This increase was primarily due to growth in both product and territorial licences.
Cost of Sales and gross margin Cost of sales increased by was a restated £277.5 million in Financial Year 2019 from a reported £230.9 million in Financial Year 2018 with the Group’s gross margin being lower at 56.6 per cent. compared to a reported 61.0 per cent. in Financial Year 2018. This was in part due to the £20.2 million restatement of the balance of inventory at 26 January 2020. The retail gross margin was slightly lower at 63.1 per cent. (2018: 67.0 per cent.) as the prior year had benefited from an improved full price sell through, and the resultant margin was further reduced by an increase in promotional activity in response to the difficult trading conditions. This was partly offset by an increased wholesale margin at 44.1 per cent. (2018: 43.3 per cent.), due to a greater proportion of sales being made to wholesale partners, which carry a higher margin than sales to retail licence partners and some foreign exchange benefits.
Gross profit As a result of the foregoing, gross profit was a restated £362.0 million in Financial Year 2019 from a reported £360.8 million in Financial Year 2018.
Distribution costs
Distribution costs increased were a restated £249.8 million in Financial Year 2019 from a reported £236.5 million in Financial Year 2018. This increase was primarily due to a higher volume of goods sold and the dual running costs incurred in respect of the new North American distribution centre and systems roll-out.
Administrative expenses
Administrative expenses were a restated £79.9 million in Financial Year 2019 from a reported £75.6 million in Financial Year 2018. This increase was primarily due to modest growth in the Group’s central functions, both in the United Kingdom and overseas and investment in customer engagement. The increase has been partially offset by a measured and controlled approach to multiple cost saving initiatives across the central functions of the business which have started to deliver savings as well as efficiency benefits from the investment in infrastructure.
Operating profit (loss)
Operating profit in Financial Year 2019 was a restated £34.3 million, compared to a reported operating profit of £70.7 million in Financial Year 2018. This change was primarily for the reasons above.
Net finance expense
Net finance expense was a reported £4.2 million in Financial Year 2019 from a reported net finance expense of £2.5 million in Financial Year 2018. This increase was primarily due to higher average borrowings on the revolving credit facility as well as an increase in LIBOR rates in the year.
Profit before tax
As a result of the foregoing, profit before tax was a restated £30.7 million in Financial Year 2019 from a reported profit of £68.8 million in Financial Year 2018.
Income tax expense
Income tax expense in Financial Year 2019 was a restated £6.2 million, compared to a reported income tax expense of £16.0 million in Financial Year 2018. The Group’s effective income tax rate in Financial Year 2019 was 20.2 per cent. (Financial Year 2018: 23.3 per cent.), largely due to higher overseas tax rates and the non- recognition of losses in overseas territories.
133 Profit for the period
As a result of the foregoing, profit for the period was a restated £24.5 million in Financial Year 2019 from a reported £52.7 million in Financial Year 2018.
SEGMENTAL INFORMATION Results of operations by distribution channel for 2020 compared to 2019
The following table breaks down the Group’s results by distribution channel for Financial Years 2019 and 2020: Retail Wholesale Licensing 2019 2020 2019 2020 2019 2020 Restated(2) Reported Restated(2) Reported Restated(2) Reported (£ millions) Revenue(1) ...... 461.0 439.9 156.4 171.5 22.1 19.0 Cost of sales ...... (169.9) (176.5) (87.4) (103.2) — — Gross profit ...... 291.1 263.4 69.0 68.3 22.1 19.0 Operating Costs ...... (231.9) (232.2) — — — — Operating Contribution ...... 59.2 31.2 69.0 68.3 22.1 19.0
Notes: (1) Historically licence income was reported below gross profit. From Financial Year 2020, the Group reports this income above gross profit, as illustrated above. The Financial Year 2019 comparative has been restated above accordingly. (2) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020. Retail Retail revenue was £439.9 million in Financial Year 2020 compared to a restated £461.0 million in Financial Year 2019. This decrease was primarily driven by unprecedented trading conditions throughout the period. The structural transition from physical stores to digital retail, alongside a cyclical downturn, resulted in intense pressures on physical retail, changing customer behaviour and declining demand. This resulted in a highly promotional retail environment across the Group’s global markets. This was exacerbated by the well-publicised challenges that continue to face some of the Group’s UK trading partners as well as some challenges with Ted Baker’s Spring/Summer collections. Retail cost of sales was £176.5 million in Financial Year 2020 compared to a restated £169.9 million in Financial Year 2019, principally due to an increase in promotional activity in response to the challenging trading conditions. As a result of the foregoing, retail gross profit was £263.4 million in Financial Year 2020 compared to a restated £291.1 million in Financial Year 2019. Operating costs were £232.2 million in Financial Year 2020 compared to a restated £231.9 million in Financial Year 2019. This increase was primarily due to inflationary cost increases, higher headcount costs arising from the continued investment in people, including the additional headcount to support the footwear business which was acquired in January 2019, as well as the annualisation of other costs associated with operating the footwear business. As a result of the foregoing, operating contribution for retail was £31.2 million in Financial Year 2020 compared to a restated £59.2 million in Financial Year 2019.
Wholesale Wholesale revenue was £171.5 million in Financial Year 2020 compared to a restated £156.4 million in Financial Year 2019, primarily due to incremental footwear revenue, following the acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC. On a comparable basis (excluding footwear), wholesale sales decreased by 3.7 per cent. Wholesale cost of sales was £103.2 million in Financial Year 2020 compared to a restated £87.4 million in Financial Year 2019. This is principally as a result of a result of the introduction of footwear, which carries a higher cost, as well as a more proactive approach to inventory sell through as part of the Group’s working
134 capital initiatives resulting in a higher mix of off-price sales in Financial Year 2020 compared for Financial Year 2019. As a result of the foregoing, operating contribution for wholesale was £68.3 million in Financial Year 2020 compared to a restated £69.0 million in Financial Year 2019.
Licence Income Licence income was £19.0 million in Financial Year 2020 compared to a restated £22.1 million in Financial Year 2019, primarily due to being adversely impacted by the acquisition of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC. Underlying growth in licence income was 1.8 per cent, adjusting for the acquisition of the footwear licence. The Group saw a steady growth in both product and territory licence income during Financial Year 2020, despite several of the Group’s partners being impacted by the external trading conditions. In August 2019, the Group announced a new product licence agreement with Next Plc to accelerate the expansion of Ted Baker’s childrenswear collections given the significant growth potential in this area. Next will create and sell Ted Baker childrenswear products spanning baby, boys’ and girls’ clothing, shoes and accessories in collaboration with the creative team at Ted Baker. The new collections launched in Spring 2020 and are being sold through Next’s retail channels and wholesale relationships as well as through Ted Baker’s websites.
Results of operations by distribution channel for 2019 compared to 2018 The following table breaks down the Group’s results by distribution channel for Financial Years 2018 and 2019:
Retail Wholesale Licensing 2018 2019 2018 2019 2018 2019 Reported Restated(2) Reported Restated(2) Reported Restated(2) (£ millions) Revenue ...... 442.5 461.0 149.2 156.4 — — Cost of sales ...... (146.2) (169.9) (84.6) (87.4) — — Gross profit ...... 296.2 291.1 64.6 69.0 — — Operating Costs ...... (225.2) (231.9) — — — — Operating Contribution ...... 71.0 59.2 64.6 69.0 — — Licence income ...... — — — — 21.4 22.1 Total ...... 71.0 59.2 64.6 69.0 21.4 22.1
Notes: (1) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020.
Retail Retail revenue increased by 4.2 per cent. to a restated £461.0 million in Financial Year 2019 from a reported £442.5 million in Financial Year 2018. This increase was primarily driven by continued investment across the retail channel in new and existing stores and e-Commerce growth, partially offset by competitive discounting across the retail sector, consumer uncertainty and unseasonable weather. Retail cost of sales increased by 16.2 per cent., to a restated £169.9 million in Financial Year 2019 from a reported £146.2 million in Financial Year 2018, principally due to an increase in promotional activity in response to the challenging trading conditions. As a result of the foregoing, gross profit decreased by 1.7 per cent., to a restated £291.1 million in Financial Year 2019 from a reported £296.2 million in Financial Year 2018. Operating costs increased by 3.0 per cent., to a restated £231.9 million in Financial Year 2019 from a restated £225.2 million in Financial Year 2018 primarily due to store expansion. As a result of the foregoing, operating contribution for retail decreased by 16.6 per cent. to a restated £59.2 million in Financial Year 2019 from a reported £71.0 million in Financial Year 2018.
135 Wholesale Wholesale revenue increased by 4.8 per cent. to a restated £156.5 million in Financial Year 2019 from a reported £149.2 million in Financial Year 2018. This increase was primarily due to further growth in the United Kingdom and Europe wholesale business, reflecting a good performance from sales to Trustees, particularly within the growing European export business and those Trustees with a strong online proposition. Wholesale cost of sales increased by 3.3 per cent., to a restated £87.4 million in Financial Year 2019 from a reported £84.6 million in Financial Year 2018, principally as a result of the increase in sales and higher wholesale gross margin. As a result of the foregoing, operating contribution for wholesale increased by 6.8 per cent. to a restated £69.0 million in Financial Year 2019 from a reported £64.6 million in Financial Year 2018.
Licence Income Licence income increased by 3.1 per cent., to a restated £22.1 million in Financial Year 2019 from a reported £21.4 million in Financial Year 2018. This increase was primarily due to growth in both product and territorial licences, reflecting new licence partner stores in Indonesia, Malaysia, Mexico, Saudi Arabia, Singapore, Taiwan, Thailand and United Arab Emirates. The Group also opened its first licenced partner stores in the Canary Islands, India, Kazakhstan, Kosovo, and Ukraine.
LIQUIDITY AND CAPITAL RESOURCES The Group’s primary sources of liquidity for its operations are the cash flows generated from its operations, along with drawdowns under the Group’s third-party debt. While the cash flow from financing raised by the Capital Raising is likely to provide the bulk of its headroom this year, in 2022, the Company is likely to be more reliant on its cash flow from operations. As described below, the Group has agreed with its lenders amendments to its revolving credit facilities to provide for an additional £25.0 million (until 18 December 2020), which, combined with the proceeds of the Disposal and Capital Raising, are designed, inter alia, to provide an additional liquidity buffer to offset the expected reduction in cash flows generated from operations as a result of the coronavirus pandemic as more fully set out in paragraph 2.3 of “Part I—Letter from the Chair”.
Cash flows The following table sets out the condensed consolidated statement of cash flows for the periods indicated, which have been extracted without material adjustment from the Ted Baker Annual Report for the each of the Financial Years 2018, 2019 and 2020:
2018 2019 2020 Reported Restated(1) Reported (£ millions) Net cash inflow from operating activities ...... 43.9 67.0 98.4 Net cash used in investing activities ...... (35.8) (48.3) (31.8) Net cash outflow from financing activities ...... (12.0) (21.1) (25.7) Net decrease in cash and cash equivalents ...... (3.9) (2.4) 41.0 Net cash and cash equivalents at the beginning of the year ...... 21.4 16.7 14.7 Exchange rates movement ...... (0.8) 0.3 (2.7) Net cash and cash equivalents at the end of the period ...... 16.7 14.7 52.9
Notes: (1) The financial information captioned “Restated” reflects the restatement referred to in “—Impact of revaluation of inventory position as at 26 January 2019” above and has been extracted without material adjustment from the Ted Baker Annual Report for the Financial Year 2020.
Cash flow from operating activities The Group generated £98.4 million of net cash from operating activities in Financial Year 2020 compared to a restated £67.0 million in Financial Year 2019. The increase in net cash inflow from operating activities was primarily attributable to an increase in depreciation and amortisation of £39.8 million as a result of the application of IFRS 16, a £32.4 million reduction in stock levels, a charge to inventory obsolescence of £13.5 million, impairments of £7.5 million and the loss on the sale of the Asian business of £7.6 million.
136 The Group generated £67.0 million of net cash from operating activities in Financial Year 2019, as restated, compared to £43.9 million in Financial Year 2018, as reported. The increase in net cash inflow from operating activities was primarily attributable to a reduction in income tax expense of £9.9 million, an increase in trade and other payables of £13.4 million, increase in impairment expenses of £4.2 million, partially offset by a decrease in trade and other receivables of £7.8 million.
Cash flow from investing activities The Group recorded £31.8 million of net cash used in investing activities in Financial Year 2020 compared to a restated £48.3 million in Financial Year 2019. This change was primarily attributable to the impact in Financial Year 2019 of the purchase of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC. The Group recorded £48.3 million of net cash used in investing activities in Financial Year 2019, as restated, compared to £35.8 million in Financial Year 2018, as reported. This increase was primarily attributable to the purchase of No Ordinary Shoes Limited and No Ordinary Shoes USA LLC.
Cash flow from financing activities The Group recorded an outflow of £25.7 million in net cash from financing activities in Financial Year 2020 compared to a restated outflow of £21.1 million in Financial Year 2019. This increase was primarily due to the refinancing of the Group in September 2019 through the repayment of capital element of leases of £44.6 million and an increase in the repayment of existing term loan of £42.5 million partially off-set by new borrowings of £88.5 million. The Group recorded an outflow of £21.1 million in net cash from financing activities in Financial Year 2019, as restated, compared to an outflow of £12.0 million in Financial Year 2018, as reported. This increase was primarily due to the payment of £27.4 million in dividends compared to £24.6 million in Financial Year 2018.
Borrowings The Group’s total debt balance at 22 March 2020 was £180.0 million. The Group’s net debt balance at 22 March 2020 was £137.8 million. This comprised of a fully-drawn three year £180 million GBP revolving credit facility, which was entered into in September 2019 (the Facility Agreement), and cash balances of £42.2 million. Notwithstanding the contractual maturity, the Group has recorded this indebtedness as a current liability as at 25 January 2020. On 23 March 2020, the Group announced that its lending bank syndicate had agreed to provide an additional revolving credit facility of up to £13.5 million until 18 December 2020 taking the Group’s total available facilities to £193.5 million. On 20 May 2020, the Group entered into an amendment and restatement agreement with the lenders in respect of the Facility Agreement, in terms of which the Facility Agreement will be amended and restated to, among other things, increase Facility B by £11.5 million to a total of £25 million and extend Facility B’s maturity date until January 2022 (provided that any amounts drawn under Facility B must be repaid on the date on which the amendment and restatement agreement becomes effective and Facility B will be available to be drawn down from 6 September 2020 until 1 month prior to Facility B’s maturity date, except that it will not be available during the period from 27 December 2020 to 30 January 2021, inclusive). The amendments to the Facility Agreement pursuant to the Amendment and Restatement Agreement are conditional on the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing being passed at the General Meeting. Following the amendments to the Facility Agreement becoming effective, the total available bank credit facilities will increase to £205 million, as described above. The net proceeds of the sale of Big Lobster Limited will be used to repay loans outstanding under Facility A (with a corresponding portion of the Facility A commitments being cancelled following prepayment). Following the application of the net proceeds of the Disposal, Facility A will be reduced to a maximum of £108 million and, together with the increased Facility B (as described above), the total available facilities will be a maximum of £133 million. For a description of the Facility Agreement, see paragraph 16.1.2 of “Part XII—Additional Information”. The Group’s total debt balance as at the end of Financial Year 2019 was £138.5 million (2018: total debt £128.5 million.) The Group’s net borrowing position as at the end of Financial Year 2019 was £123.8 million (2018: £111.8 million). This consisted of a multi-currency revolving credit facility of £135.0 million, expiring in September 2020. As at the end of Financial Year 2019, the Group had drawn £91.3 million (2018: £72.9 million) under this facility. In addition, the Group had a term loan that was used to support the purchase of The Ugly Brown Building. The loan was originally £60.0 million. During Financial Year 2019, repayments totalling £5.5 million (2018: £6.0 million) were made.
137 Commitments and contingent liabilities Commitments The Company has various contractual obligations and commercial commitments to make future payments, including leasehold properties and concessions. The following table summarises the Company’s future obligations under these contracts due by the periods indicated as of 25 January 2020:
Less than Between one More than a year and five years five years Total (unaudited) (£ millions) Contractual obligations Concessions ...... 3.2 — — 3.2 Total ...... 3.2 — — 3.2
Following the Disposal, the Group will have a lease liability of £7.8 million relating to the Block B Lease.
Contingent liabilities The Group has no contingent liabilities.
Capital expenditure The Group’s capital expenditure in recent years has moved away from investments in new stores and instead focused on the ongoing investment in e-Commerce, warehousing and business wide IT systems and infrastructure. Capital expenditure amounted to £25.8 million, £30.3 million and £36.6 million in Financial Years 2020, 2019 and 2018, respectively. The Group’s capital expenditure in Financial Year 2020 consisted of £13.8 million in relation to retail investment (£7.5 million in new stores and £6.3 million for store refurbishment), £6.7 million for investment in the Group’s systems and £5.5 million in infrastructure projects. The Directors are targeting, based on current expectations for their recovery, capital expenditure of approximately £5.0 million in the 2021 financial year, of which £3.0 million relates to the Group’s new digital platforms with the remainder primarily maintenance to existing stores. Due to the coronavirus pandemic, the Group has deferred a significant amount of capital expenditure to the 2022 financial year and may defer approximately £3.0 million of capital expenditure relating to business and IT systems updates and special projects to the 2023 financial year if deemed necessary. This deferral is likely to result in additional capital expenditure investment in future periods. The Directors are also targeting capital expenditure of £3.0 million relating to the new platform in financial year 2022. In the long-term, Directors do not expect capital expenditure to exceed £15 million annually.
Pensions The Group operates a number of defined contribution schemes for senior management and a stakeholder pension scheme for employees, for which the pension cost charge for the period amounted to £2.2 million (2019: £1.8 million). Contributions totalling £0.3 million (2019: £0.2 million) are included in other payables at the period end. Details of the Group’s pension schemes are included in Note 22 of the audited annual consolidated financial statements in the Ted Baker Annual Report for Financial Year 2020, as described in “Part XIII—Documentation Incorporated by Reference” of this document.
Capitalisation and indebtedness The following tables set out the Group’s capitalisation and indebtedness as at the dates indicated and, as such, do not reflect the impact of the Capital Raising. The following table sets out the Group’s capitalisation as at 25 January 2020.
138 As of 25 January 2020 (£ millions) Shareholder’s equity Share capital ...... 2.2 Share premium ...... 10.6 Total ...... 12.8
Note: (1) This statement of capitalisation has been extracted without material adjustment from the Group’s audited consolidated financial statements for the year ended 25 January 2020. (2) This statement of capitalisation excludes the cash flow hedging reserve, translation reserve and retained earnings. There has been no material change in the Group’s capitalisation since 25 January 2020, being the date to which the Group’s last published financial information was drawn up. The following table sets out the Group’s total indebtedness as at 22 March 2020.
As of 22 March 2020 (£ millions) (unaudited) Total current debt Guaranteed ...... — Secured(3) ...... 180.0 Unguaranteed/unsecured ...... — 180.0 Total non-current debt (excluding current portion of long-term debt) Guaranteed ...... — Secured ...... — Unguaranteed/unsecured ...... — — Total indebtedness(3) ...... 180.0
Note: (1) This statement of total indebtedness, which is unaudited, has been extracted without material adjustment from the Group’s unaudited underlying accounting records as at 22 March 2020. (2) This statement of total indebtedness does not reflect the Group’s lease liabilities recognised under IFRS 16. The Group excludes lease liabilities arising under IFRS 16 from indebtedness, as this treatment aligns with the definition of net debt under its banking covenants. The IFRS 16 lease liabilities recognised as at 25 January 2020 were £168.4 million (split, current: £36.4 million; non- current: £132.0 million) and there has been no material change in this figure since that date. (3) Since 22 March 2020, the Group has paid down £19.7 million of its secured current debt, funded from its cash balances.
139 The following table sets out the Group’s net indebtedness as at 22 March 2020.
As of 22 March 2020 (£ millions) (unaudited) Cash(3) ...... 42.2 Cash equivalent ...... — Trading Securities ...... — Liquidity ...... 42.2 Current financial receivable ...... — Current bank debt(3) ...... (180.0) Current position of non-current debt ...... — Other financial debt ...... — Current finance debt ...... (180.0) Net current financial indebtedness ...... (137.8) Non-current bank loans ...... — Bond issued ...... — Other non-current loans ...... — Non-current financial indebtedness ...... — Net financial indebtedness(3) ...... (137.8)
Note: (1) This statement of net indebtedness, which is unaudited, has been extracted without material adjustment from the Group’s unaudited underlying accounting records as at 22 March 2020. (2) This statement of net indebtedness does not reflect the Group’s lease liabilities recognised under IFRS 16. The Group excludes lease liabilities arising under IFRS 16 from indebtedness, as this treatment aligns with the definition of net debt under its banking covenants. The IFRS 16 lease liabilities recognised as at 25 January 2020 were £168.4 million (split, current: £36.4 million; non- current: £132.0 million) and there has been no material change in this figure since that date. (3) Since 22 March 2020, the Group has paid down £19.7 million of its current bank debt, funded from its cash balances.
Indirect and contingent indebtedness As at 22 March 2020 the Group had issued financial institution backed payment guarantees in respect of rental and customs duty obligations, with an aggregate value of approximately £13.3 million.
Qualitative and quantitative disclosures about market risk Descriptions of the Group’s qualitative and quantitative disclosures about market risk are incorporated by reference from the Ted Baker Annual Report for Financial Year 2020, which is incorporated by reference in this document as described in “Part XIII—Documentation Incorporated by Reference”.
CRITICAL ACCOUNTING POLICIES Critical accounting policies are those policies that require the application of the Group’s management’s most challenging, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgements and uncertainties that are sufficiently sensitive to result in materially different results under different assumptions and conditions.
Key sources of estimation uncertainty The Directors consider the following to be the key sources of estimation uncertainty for the Group at the end of the current reporting period due to the risk of causing a material change to the carrying amount of assets and liabilities within the next year.
Impairment of property, plant and equipment, right of use assets and intangible assets Property, plant and equipment, right of use assets and intangible assets is reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. Management performs an impairment review for each cash-generating unit (CGU) that has indicators of impairment. When a review for impairment is conducted, the recoverable amount of an asset or CGU is determined based on value-in-use
140 calculations using the Board approved budget and three-year plan at the period end date, and are discounted using the weighted average cost of capital. Forecasts beyond the three-year time period are based on management’s assumptions and estimates and the value-in-use calculation for store CGUs are based on the remaining lease length of each store. Future events could cause the forecasts and assumptions used in impairment reviews to change with a consequential adverse impact on the results and net position of the Group as actual cash flows may differ from forecasts and could result in further material impairments in future years. The Directors consider an individual retail store (own stores which includes outlets) to be a CGU, and perform an impairment review if the following impairment triggers are all met: (i) net book value of the CGU’s assets (comprising of fixtures and fittings, leasehold improvements, IT equipment, and the right of use asset), is greater than £0.25m (2019: £0.5 million excluding the right of use asset as IFRS 16 had not been adopted), (ii) cash contribution for the CGU is less than 10 per cent., and (iii) the store is outside of a grace period, as stores may be loss making for an initial period of time after opening. For stores within the United Kingdom, the grace period is two years, and for stores outside of the United Kingdom, the grace period is three years as the brand is less established in those markets. The discount rate used in the value-in-use calculation is the Group’s weighted average cost of capital of 9.1 per cent. (2019: 8 per cent., restated). The carrying value and impairment charge recognised for the period is shown in notes 11 and 19. For the 52 weeks ended 25 January 2020, an impairment charge of £16.2 million has been recognised in light of the significantly reduced profitability for the Group for the period, and lower forecasts compared to those used in the prior period impairment review (2019: £8.7 million impairment charge, restated). Furthermore, sensitivity analysis has been performed as part of the impairment review. If the discount rates used increased by 3 per cent. from 9.1 per cent. to 12.1 per cent., an additional impairment charge of £1.0 million would be recognised. Additional sensitivity analysis has not been performed at 25 January 2020, as the Directors do not consider any reasonable possible change in any of the key assumptions would have led to a material change in the impairment charge as the store assets under review have largely been fully impaired. The Directors have determined that at 25 January 2020, the effects of the coronavirus pandemic pandemic are a non-adjusting post balance sheet event and the value-in-use calculations used for the impairment reviews do not include the effects of the various national lockdowns and store closures that commenced in March 2020.
Carrying amount of inventories The carrying value of inventory is recorded at the lower of cost and net realisable value. Management calculates inventory provisions based on forecast sales of stock by season during its lifecycle in determining the level and rates of provisioning required to calculate the carrying value. Sales in the fashion industry can be extremely volatile with consumer demand changing significantly based on trends. Accordingly, there is a risk that the cost of inventory can exceed its net realisable value, with provisioning adjustments being made given management’s knowledge and experience, and assumptions around consumer demand, fashion trends and macroeconomic factors. Inventory is classified by season, by year, with two seasons per year i.e. spring/summer and autumn/winter. At 26 January 2019 and earlier period ends, the inventory obsolescence provisioning commenced on current season inventory at a rate of 5 per cent. of cost, and increased over time to rates of up to 25 per cent. of cost when that season’s inventory was three seasons old. For the period ended 26 January 2019, the inventory provision amounted to £11.8m, representing 5.2 per cent. of the gross carrying value of inventory. During the 52 week period ending 25 January 2020, management has changed the basis of determining the inventory obsolescence provision in line with the board approved change in commercial strategy of reducing the lifecycle of inventory from 3 years to 2 years, i.e. only one trading season in an outlet channel as opposed to two. The new provisioning policy is based on reviewing the current physical stock on hand by season and forward forecasting the expected terminal stock value at the point at which the stock has traded through the outlet channel. At that point in time, the inventory will be provided for in full. The key estimate made under the new provisioning policy is the forecast sales by season by channel of current inventory over the next two years. Future events could cause the forecasts and assumptions used to change with a consequential adverse impact on the results and net position of the Group as actual sales may differ from forecasts and could result in further material adjustments in future years. At 25 January 2020, the inventory provision was £25.7 million, representing 16.3 per cent. of the gross carrying value of inventory. The amount required to reflect the change in estimate for inventory provisioning was £13.5 million, and this has been included as a one-off expense in non-underlying items in the current financial period's income statement.
141 Sensitivity analysis has been performed on the key estimates for inventory obsolescence provisioning. If forecast sales for the next two years were 1.0 per cent lower, then the inventory provision would be £1.2 million higher with a corresponding increase in cost of sales in the income statement. No other reasonable possible change in any of the other key assumptions would cause a material change in the level of provision and income statement expense. The carrying value of inventory is recorded at the lower of cost and net realisable value. Cost represents the purchase price of the product, and the associated freight and duty costs in getting the product to its final location for sale. All stock is recorded in the ERP system at standard cost, with estimates made at the period end for all stock on hand to estimate the standard to actual variances, using historic actual costs compared to standard costs for product, freight and duty and capitalised overheads. Estimates are made as to the extent to which overheads incurred should be carried in closing inventory amounts. These estimates are not made on a line-by-line inventory item level but instead use approximations based on observable information available. Where the actual cost of the product, freight or duty differs from the adjusted standard to actual cost, this could impact the results and net position of the Group. A detailed description of certain of the significant accounting policies used in preparing the Company’s annual consolidated financial statements is set forth in Note 1 of the audited annual consolidated financial statements of the Ted Baker Annual Report for Financial Year 2020, which are incorporated by reference in this document as described in “Part XIII—Documentation Incorporated by Reference”.
142 PART VIII—FINANCIAL INFORMATION OF THE GROUP PART A—HISTORICAL FINANCIAL INFORMATION OF THE GROUP Financial information relating to Ted Baker as at and for each of Financial Years 2018, 2019 and 2020 is incorporated into this document by reference to the Ted Baker Annual Report for the each of Financial Years 2018, 2019 and 2020, as described in “Part XIII—Documentation Incorporated by Reference” of this document. The independent auditor’s reports in respect of the historical financial information for each of Financial Years 2018, 2019 and 2020 are unqualified. However, the independent auditor’s audit report on the financial statements for Financial Year 2020 draw attention to a material uncertainty in respect of going concern.
Material uncertainty related to going concern The independent auditor’s audit report on the financial statements for Financial Year 2020 includes the following paragraph. The extract set out below should be read in conjunction with the Ted Baker Annual Report for Financial Year 2020 and the full audit report included therein. “We draw attention to note 1(a) to the financial statements which indicates that the Group’s net debt has increased from £123.8m at 26 January 2019 to £127.1m at 25 January 2020. The Group has announced a number of measures to raise liquidity, including the sale of the Group’s subsidiary that owns its head office in London (Big Lobster Limited) and the announced underwritten share issue. Both the sale of Big Lobster and the share issue are subject to approval by the shareholders of Ted Baker PLC. There is also significant uncertainty as to the future impact on the Group of the COVID-19 global pandemic, with all of the Group’s retail stores and those of its concession partners closed at some point since March 2020. These events and conditions, along with the other matters explained in note 1(a) to the financial statements, constitute a material uncertainty that may cast significant doubt on the Group’s and the parent company’s ability to continue as a going concern. This may be exacerbated by ongoing uncertainties around the longer term impact of Brexit. Our opinion is not modified in respect of this matter.”
143 PART IX—UNAUDITED PRO FORMA FINANCIAL INFORMATION
SECTION A—PRO FORMA FINANCIAL INFORMATION This “Part IX Section A” comprises: (i) unaudited pro forma statement of net assets of the Group as at 25 January 2020 (the Unaudited Pro Forma Statement of Net Assets); and (ii) unaudited pro forma income statement of the Group for the 52 week period ended 25 January 2020 (the Unaudited Pro Forma Income Statement), with (i) and (ii) collectively comprising the Unaudited Pro Forma Financial Information. The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only, and by its nature, addresses a hypothetical situation and, therefore, does not represent the Group’s actual financial position or results. The Unaudited Pro Forma Financial Information has been prepared in accordance with Annex 20 of the Prospectus Delegated Regulation. The Unaudited Pro Forma Financial Information is based on Ted Baker’s audited annual consolidated financial statements for the 52 week period ended 25 January 2020 and is stated on the basis of the accounting policies of Ted Baker adopted in the Ted Baker Annual Report for Financial Year 2020 and the matters set out in the notes below. The Unaudited Pro Forma Financial Information does not constitute financial statements within the meaning of section 434 of the Companies Act 2006. Shareholders should read the whole of this document and not rely solely on the summarised financial information contained in this “Part IX—Unaudited Pro Forma Financial Information”.
The Unaudited Pro Forma Statement of Net Assets The Unaudited Pro Forma Statement of Net Assets has been prepared to illustrate the effect on the Group’s consolidated net assets of the Placing and Open Offer and Firm Placing and the Disposal as if the Placing and Open Offer and Firm Placing and the Disposal had occurred on 25 January 2020.
144 The Unaudited Pro Forma Statement of Net Assets does not purport to represent what the Group’s financial position would have been if the Disposal, the Placing and Open Offer and Firm Placing had completed on the date indicated.
Adjustments Pro forma Consolidated Adjustment for consolidated net net assets of Placing and assets of the the Group at Open Offer Adjustment Group (excluding 25 January and Firm for the Big Lobster) as at 2020 Placing Disposal 25 January 2020 Unaudited Unaudited Unaudited Note 1 Note 2 Note 3 Note 4 £m £m £m £m Non-current assets Intangible assets ...... 42.3 42.3 Property, plant and equipment ...... 127.4 (58.0) 69.4 Right-of-use asset ...... 149.0 7.8 156.8 Investment in equity accounted investee ...... 5.1 5.1 Deferred tax assets ...... 17.6 17.6 Prepayments ...... 0.6 0.6 342.1 — (50.2) 291.8 Current assets Inventories ...... 131.7 131.7 Trade and other receivables ...... 67.3 67.3 Amount due from equity accounted investee . . . 4.5 4.5 Income tax receivable ...... 2.3 2.3 Derivative financial assets ...... 0.2 0.2 Cash and cash equivalents ...... 52.9 90.0 142.9 258.9 90.0 — 348.9 Current liabilities Trade and other payables ...... (99.3) 0.6 (98.7) Borrowings ...... (180.0) 72.0 (108.0) Lease liabilities ...... (36.4) (2.5) (38.9) Derivative financial liabilities ...... (1.1) (1.1) (316.8) — 70.1 (246.7) Net current (liabilities)/assets ...... (57.9) 90.0 70.1 102.2 Total assets less current liabilities ...... 284.2 90.0 19.9 394.0 Non-current liabilities Deferred tax liability ...... (3.6) (3.6) Lease liabilities ...... (132.0) (5.3) (137.3) (135.6) — (5.3) (140.9) Net assets ...... 148.6 90.0 14.6 253.1
Notes 1. The historical consolidated financial information as of 25 January 2020, has been extracted without adjustment from the Group’s audited consolidated financial statements incorporated by reference from the Ted Baker Annual Report for Financial Year 2020 as described in “Part XIII—Documents Incorporated by Reference” of this document. 2. This adjustment reflects the new proceeds of the Placing and Open Offer and Firm Placing receivable by the Company of £90.0 million (being gross proceeds of approximately £95.0 million less estimated fees relating to the Placing and Open Offer and Firm Placing of approximately £5.0 million, as detailed in the section headed “Capital Raising Statistics” of this document. The proceeds from the Offer for Subscription have not been taken into account.
145 3. This adjustment: (a) eliminates the assets and liabilities of Big Lobster as at 25 January 2020, as extracted without material adjustment from the consolidation schedule supporting the Group’s audited consolidated financial statements for Financial Year 2020; (b) reflects the net proceeds of the Disposal receivable by the Company of £72 million (being gross proceeds of approximately £78.8 million less estimated fees relating to the Disposal of approximately £3.1 million and corporation tax liability of approximately £3.6 million, as detailed in “Part III—Principal Terms and Conditions of the Disposal” of this document; and (c) capitalises the right of use asset of £7.8 million as per IFRS 16 in relation to the Block B Lease and recognises the associated lease liability of £7.8 million, as detailed in the paragraph headed ‘The Ugly Brown Building Sale and Leaseback’ of “Part VII—Operating and Financial Review” of this document. 4. No adjustment has been made to reflect the trading results of the Group since 25 January 2020 or any other change in its financial position in this period. 5. No adjustment has been made to reflect the £11.5 million increase in Facility B agreed with the Lenders, on the grounds that (i) this will only be made available from 6 September 2020, and (ii) Facility B did not exist at 25 January 2020. The Unaudited Pro Forma Income Statement The Unaudited Pro Forma Income Statement has been prepared to illustrate the effect on the Group’s consolidated income statement of the Placing and Open Offer and Firm Placing and the Disposal as if the Placing and Open Offer and Firm Placing and the Disposal had occurred on 27 January 2019. The Unaudited Pro Forma Income Statement does not purport to represent what the Group’s income statement would have been if the Disposal, the Placing and Open Offer and Firm Placing had completed on the date indicated.
Adjustments Pro forma Consolidated consolidated income income statement statement of of the Group the Group Adjustment for (excluding Big for the Placing and Lobster) for the 52 week Open Offer Adjustment 52 week period period ended and Firm for the ended 25 January 2020 Placing Disposal 25 January 2020 Unaudited Unaudited Unaudited Note 1 Note 2 Note 3 Note 4 £m £m £m £m Revenue ...... 630.5 630.5 Cost of sales ...... (323.4) (323.4) Gross profit ...... 307.1 — — 307.1 Distribution costs ...... (268.5) (268.5) Administrative expenses ...... (100.9) (5.0) (2.2) (108.1) Other operating income ...... 0.1 15.8 15.9 Operating loss ...... (62.2) (5.0) 13.5 (53.7) Finance income ...... 0.1 0.1 Finance expense ...... (15.6) 1.4 (14.2) Share of profit of jointly controlled entity, net of tax ...... (2.2) (2.2) Loss before tax ...... (79.9) (5.0) 14.9 (70.0) Taxation ...... 9.4 (3.4) 6.0 Loss for the period ...... (70.4) (5.0) 11.4 (64.0)
Notes 1. The historical consolidated financial information for the year ended 25 January 2020, has been extracted without adjustment from the Group’s audited consolidated financial statements incorporated by reference from the Ted Baker Annual Report for Financial Year 2020 as described in “Part XIII—Documents Incorporated by Reference” of this document. 2. This reflects an adjustment of £5.0 million in relation to the estimated fees relating to the Placing and Open Offer and Firm Placing, as detailed in the section headed “Capital Raising Statistics” of this document. For the illustrative purposes of this Unaudited Pro Forma Income Statement it has been assumed that all of the £5.0 million of fees relating to the Placing and Open Offer and Firm Placing would be expensed in the Group’s income statement. This adjustment will not have a continuing impact on the Group.
146 3. This adjustment: (a) reflects an adjustment of £15.8 million in relation to the profit, after related transaction costs, that will arise on disposal of Big Lobster on receipt of the gross cash consideration of £78.8 million. This adjustment will not have a continuing impact on the Group; (b) eliminates the administration costs of £0.5 million residing in Big Lobster (these costs primarily relate to depreciation and amortisation on The Ugly Brown Building freehold); (c) accounts for the depreciation charge of £2.7 million on the right of use asset relating to the Block B Lease; (d) accounts for the interest charge of £0.7 million on the lease liability relating to the Block B Lease right of use asset; (e) eliminates the finance costs residing in Big Lobster as well as changes in interest payable as a consequence of pay down of the Revolving Credit Facility from the Big Lobster disposal proceeds (aggregate impact of approximately £2.1 million elimination); (f) reflects a net adjustment of £3.45 million to corporation tax, which comprises: (i) an expected corporation tax charge of £3.6 million arising on the profit on disposal of Big Lobster (this adjustment will not have a continuing impact on the Group), less (ii) a £0.15 million decrease to taxation as a result of previous adjustments to administrative expenses and finance expense detailed in notes 3(b), 3(d) and 3(e) to the Unaudited Pro Forma Income Statement. These taxation adjustments are calculated at the prevailing rate of UK corporation tax of 19 per cent. 4. The pro forma income statement adjustments are expected to have a continuing effect on the Group, other than: (a) The profit on disposal of Big Lobster (note 3(a)); (b) The tax charge on the profit on the disposal of Big Lobster (note 3(f)(i)); and (c) Transaction fees associated with the Placing and Open Offer and Firm Placing (note 2). 5. No adjustment has been made to reflect the trading results of the Group since 25 January 2020 or any other change in its financial position in this period.
147 SECTION B—ACCOUNTANTS’ REPORT ON THE PRO FORMA FINANCIAL INFORMATION The Directors Ted Baker Plc The Ugly Brown Building 6a St Pancras Way London NW1 0TB 1 June 2020 Dear Sir/Madam
Ted Baker Plc (the Company) and its Subsidiary Undertakings (Together the Group)—Report On Pro Forma Financial Information We report on the unaudited pro forma financial information (the Unaudited Pro Forma Financial Information) set out in Section A of Part IX of the Company’s combined Class 1 circular and prospectus dated 1 June 2020 (the Combined Document), which has been prepared on the basis described in Section A of Part IX, for illustrative purposes only, to provide information about how: (i) the proposed disposal of the subsidiary of the Company the only material asset of which is the freehold premises known as The Ugly Brown Building; and (ii) the proposed firm placing, and placing and open offer and admission of new ordinary shares in the capital of the Company to listing on the Premium Segment of the Official List maintained by the Financial Conduct Authority (FCA) and to trading on the main market of the London Stock Exchange plc, might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the Group’s consolidated financial statements for the 52 week period ended 25 January 2020. This report is required by Section 3 of Annex 20 of Commission Delegated Regulation (EU) 2019/980 (the PR Regulation), and as applied by LR 13.3.3R of the Listing Rules of the FCA (the Listing Rules), and is given for the purpose of complying with that requirement and for no other purpose.
Responsibilities It is the responsibility of the directors of the Company (the Directors) to prepare the Unaudited Pro Forma Financial Information in accordance with Annex 20 to the PR Regulation, and as applied by LR 13.3.3R of the Listing Rules. It is our responsibility to form an opinion, as required by Section 3 of Annex 20 to the PR Regulation, and as applied by LR 13.3.3R of the Listing Rules, as to the proper compilation of the Unaudited Pro Forma Financial Information and to report that opinion to you. Save for any responsibility arising under 5.3.2R(2)(f) of the Prospectus Regulation Rules of the FCA (the Prospectus Regulation Rules) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Item 1.3 of Annex 1 of the PR Regulation and Listing Rule 13.4.1R(6), consenting to its inclusion in the Combined Document. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.
Basis of Opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the Directors.
148 We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company. Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion In our opinion: a the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated; and b such basis is consistent with the accounting policies of the Company.
Declaration For the purposes of Prospectus Regulation Rule 5.3.2R(2)(f) we are responsible for this report as part of the Combined Document and declare that, to the best of our knowledge, the information contained in this report is in accordance with the facts and that this report makes no omission likely to affect its import. This declaration is included in the Combined Document in compliance with Item 1.2 of Annex 1 to the PR Regulation. Yours faithfully
GRANT THORNTON UK LLP
149 PART X—VALUATION REPORT The Directors Ted Baker Plc 6a St Pancras Way London NW1 0TB Liberum Capital Limited Ropemaker Place 25 Ropemaker Street London EC2Y 9LY 1 June 2020 Dear Sirs / Madams Valuation: 6a St Pancras Way, London NW1 0TB (the “Property”)
Instructions We refer to the instructions from Ted Baker Plc (the “Company”) for us to provide our opinion of the Market Value of the Property held by Big Lobster Limited (an indirect, wholly-owned subsidiary of the Company), for the purpose of inclusion in a combined circular and prospectus to be issued by the Company in connection with the proposed sale of Big Lobster Limited and the proposed firm placing, placing and open offer and offer for subscription by the Company (which actions shall be put to the approval of the shareholders of the Company). We confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing the Company with our opinion of the Market Value of the Property as 1 June 2020.
Basis of Value We confirm that our Valuation will be prepared in accordance with the current RICS Valuation—Global Standards, incorporating the IVSC International Valuation Standards (“IVS”) and the RICS Valuation—Global Standards 2017—UK national supplement published by the RICS (the “RICS Red Book”) on the basis of Market Value as extracted below using the reasonable skill, care and diligence to be expected of a properly qualified and competent valuer. We confirm that our Valuation will be carried out in compliance with the IVS, and that the Valuer will assess the appropriateness of all significant inputs. Market Value: The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. We will also comply with the FCA's Prospectus Rules and Listing Rules (together, the ‘Rules’), and the ESMA update on the CESR recommendations for consistent implementation of Commission Regulation (EC) No 809/ 2004 implementing the Prospectus Directive. We can confirm that the current edition of the RICS Red Book does not contradict UK PS2.1 (Listing particulars and circulars) of the RICS Appraisal and Valuation Standards 5th Edition (in accordance with which property valuation reports must be prepared pursuant to the Rules). The report is a condensed version prepared in accordance with the rules of the Financial Conduct Authority (FCA). No allowances have been made for any expenses of realisation, or taxes (including VAT) which might arise in the event of a disposal and the property has been considered free and clear of all mortgages and other charges which may be secured thereon.
Personnel This advice has been prepared by Roger Meeds MRICS and has been overseen by Christy Bowen MRICS. We confirm that both surveyors are RICS Registered Valuers and have the knowledge, skills and understanding to provide this advice.
150 We confirm that the personnel responsible for this valuation are in a position to provide an objective and unbiased valuation and are competent to undertake the valuation assignment in accordance with the RICS Valuation—Global Standards 2017 and are RICS Registered Valuers.
Inspection The property was inspected internally on 30thJanuary 2020 by Christy Bowen MRICS and Roger Meeds MRICS. A selection of the floors were inspected. We understand that we saw representative parts of the property and we have assumed that any physical differences in parts we did not inspect will not have a material impact on value.
Status We confirm that in preparing this valuation we have acted as External Valuers in accordance with the RICS Red Book and that the valuer has sufficient current local knowledge of the particular market, and sufficiently developed skills and understanding to undertake the valuation competently. The valuers undertaking the instruction are RICS Registered Valuers. We have also acted as Independent Expert under the Rules.
Disclosure JLL are instructed on the sale of the Property. We confirm that none of the JLL staff dealing with this instruction have any material interest in the issuer. In our firm’s preceding financial year, the proportion of total fees payable by the client commissioning this valuation was less than 5 per cent of the firm’s total fee income. It is not anticipated there will be a material increase in the proportion of fees payable to the firm by the client commissioning this valuation report since the end of the last financial year or in the next financial year.
Reliance Except for the purpose of disclosure in the combined circular and prospectus to be issued by the Company in connection with the proposed sale of the Property and proposed firm placing, placing and open offer and offer for subscription by the Company (which actions shall be put to the approval of the shareholders of the Company), neither the whole nor any part of the valuation report nor any reference thereto may be included in any document, circular or statement without our prior written approval of the form and context in which it may appear, such approval not to be unreasonably withheld or delayed. Our liability is limited in accordance with our instructions with you.
Responsibility Statement For the purposes of Prospectus Regulation Rule 5.3.2R(2)(f) we are responsible for this report as part of the Prospectus and declare that, to the best of our knowledge, the information contained in this report is in accordance with the facts and this report makes no omission likely to affect its import. This declaration is included in the Prospectus in compliance with Item 1.2 of Annex 1 to the PR Regulation.
Scope and Limitations We have inspected the premises and carried out all the necessary enquiries with regard to rental and investment value, planning issues and investment considerations. We have not measured the premises and have relied on the floor areas provided. RICS property measurement (incorporating International Property Measurement Standards) 2nd edition, January 2018, requires us to report IPMS measurements in the report for this property. You have not instructed us to measure the property and as IPMS areas are not available to us we have relied on Net Internal Areas (NIA) measured on the basis of the RICS Code of Measuring Practice 6th Edition 2007. We have not been supplied with a Certificate of Title/Report on Title or other title information by your solicitor. We have been provided with the following reports, which we have relied upon: • Indicative floor area schedule prepared by Bennetts Associates. • Design and access statement prepared by Bennetts Associates and dated September 2017.
151 • CIL calculator dated November 2018 and prepared by Reef (development manager on behalf of BA pension fund the developer of the whole site). • S106 summary schedule undated (development manager on behalf of BA pension fund the developer of the whole site). • Indicative Order of Cost Estimate prepared by Gardiner and Theobald and dated 18thApril 2017. • Land Registry Title Plan. We have not undertaken any form of condition or site survey and have assumed that the property is free from defects, contamination, deleterious materials and is in good condition commensurate with its age and past and present uses; and the property complies with all current legislation and byelaws.
Special Assumptions We have not made any Special Assumptions. Our valuation does however assume that the property is sold with the benefit of vacant possession.
Valuation Date The Valuation date is 1 June 2020.
Material valuation uncertainty due to Novel Coronavirus (COVID-19) The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a “Global Pandemic” on the 11th March 2020, has impacted global financial markets. Travel restrictions have been implemented by many countries. Our valuation is therefore reported on the basis of “material valuation uncertainty” as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less certainty—and a higher degree of caution—should be attached to our valuation than would normally be the case.
Property Location The property is located to the eastern side of St Pancras Way at its junction with Granary Street approximately 500m north west of the King’s Cross areas of Granary Square and Coal Drops Yard. As part of the recently granted planning scheme, a new bridge crossing the Regent’s Canal is to be constructed which will improve access to these areas reducing travel time. Camden Town is situated around a kilometre to the north west. The area around the subject property remains mixed use in nature. Amongst a number of recently developed residential and student housing schemes, local occupiers include a Parcel Force delivery site, Travis Perkins Trading Counter and St Pancras Hospital. St Pancras International is a 12 minute walk to the south of the property which provides access to mainline services to the south east, east midlands and the continent via Eurostar. The adjacent King’s Cross station provides services to the north and east of England. Both stations provide access to the Underground network (Northern, Piccadilly, Victoria, Hammersmith and City and Metropolitan lines). Despite its proximity to King’s Cross the area is not viewed as a recognised office location primarily due to the lack of stock and remoteness from the main transport hubs. However, we would expect this to improve once the proposed development is completed based on the variety of office retail and leisure uses as well as the footbridge enhancing connections with King’s Cross Central.
Property Description The property forms the middle section of three adjoining buildings which occupy a sloping triangular site between St Pancras Way, Granary Street and the Regents Canal which bounds the western side of the site. The subject property comprises 57,737 sq. ft of office accommodation over ground and three upper floors. The building was a former post office sorting depot built in the 1980s and is not a particularly attractive building. The existing building is owner occupied and has been the headquarters of Ted Baker since 2000. The two adjoining properties situated either side of the property are currently owned by British Airways Pension Fund who are seeking to acquire the property to facilitate a development of the overall site.
152 The redevelopment of the whole site will be carried out in three phases (A, B & C) and include the demolition of the existing buildings and their replacement with six buildings of mixed uses and accompanying public open space and pedestrian routes across the site and alongside the Regents Canal. The key building at the centre of the site will be the subject property, known as Plot B. The other buildings will contain workplace and residential uses with supporting retail and restaurant uses at ground level and basement gym and storage. The subject property has planning permission to construct a building which would have a hotel to the lower three levels and offices on the six floors above. We understand that this is capable of being developed in isolation and forms the basis of our valuation as we consider any purchaser of the site would look to its development potential rather than considering the value based on the existing building given the enhanced massing this provides.
Town Planning Planning Consent A planning application was submitted to develop the whole site to include Plots A, B & C in October 2017, on completion of the planning obligations agreement (s.106 agreement). Planning permission was granted by the Council on 17 March 2020 and the s106 was completed. A summary of the planning permission is as follows: Demolition of the existing building (Class B1 and B8) and erection of 6 new buildings ranging in height from 2 storeys to 12 storeys in height above ground and 2 basement levels comprising a mixed use development of 54,522 sq. m business floorspace (B1), 73 residential units (C3) (10xstudio, 29x1 bed, 27x2 bed 7x3 bed), 87 bed hotel (C1), 1,601sq. m gym (D2), 5,858 sq. m flexible retail (A1—A4) and 6,011 sq. m storage space (B8) development with associated landscaping work. We understand that the consent was submitted on behalf of Ted Baker and British Airways Pension Fund who have an agreement in place to develop the overall site, although Plot B can be developed in isolation as illustrated in the design and access statement included in the planning application. Details of the proposed development of Plot B are limited but the design statement describes Plot B as a building over nine floors providing a hotel on levels one to three and offices on levels four to nine. It also contains a schedule of floor areas which mirror those adopted in our valuation on the basis of the consented scheme. The s.106 agreement, Borough CIL and Mayor CIL, and planning condition obligations have been apportioned through a deed of indemnity agreement between the three Plots, with specified costs of £2,358,901 apportioned to Plot B. Whilst the planning permission was submitted to include a hotel use, as Ted Baker no longer wish to occupy the offices or hotel for their own purposes (hence the reason for the sale), we consider that an investor will most likely seek an amendment to the current planning permission to allow the hotel area to be built as offices instead, which in our opinion is the option that will create the most value. We consider this to be low risk from a planning perspective, although a new submission may result in Mayoral CIL2 becoming payable which would increase the amount allocated. We have reflected this is in the profit on cost assumptions, when assessing the value of the property on this basis.
Environmental No indications of past or present contaminative land uses were noted during the inspection. Our inspection was only of a limited visual nature and we cannot give any assurances that previous uses on the site or in the surrounding areas have not contaminated subsoil or ground water. In the event of contamination being discovered, further specialist advice should be obtained.
Tenure The property is held freehold.
Tenancies The property is currently owner occupied and being sold with vacant possession. Central London Market Commentary—Q1 2020
153 Central London Occupational Market Over 2019, the office occupational market in Central London remained strong, despite the uncertain business environment caused by Brexit. Take up across Central London reached 11.5 million sq. ft over the year, above the 10-year average of 10.1 million sq. ft. Of that take up, the banking & finance and flexible office sectors were most active, each accounting for 22% of the total. This was followed by the TMT sector at 15%. At the end of Q4 2019, active demand also remained healthy at 9.1 million sq. ft, above the average of 8.3 million sq. ft. In tandem with good levels of demand, the supply pipeline across Central London was limited and this has led to a low vacancy rate of 4.1%, well below the 10-year average of 5.5per cent. For new space, supply was even tighter at sub 1%. The lack of new space has led to a strong pre-leasing market with occupiers aware of the lack of options and keen to secure accommodation at an early date. This led to the pre-let market accounting for 26% of take-up across Central London in 2019. The pre-let market has also expanded to encompass smaller requirements and occupiers are looking at an earlier stage when considering their future accommodation requirements. The supply / demand dynamic has put upward pressure on rents and over the year, prime rent benchmarks across the main Central London increased as follows:
Q4 2018 Q4 2019 % Increase West End ...... £115.00 per sq. ft £117.50 per sq. ft 2.2% City of London ...... £70.00 per sq. ft £75.00 per sq. ft 7.1% As might be expected, the first quarter of 2020 has been a tale of two halves, having started strongly following the momentum at the end 2019, take-up for March was around 375,000 sq ft in the City and 180,000 sq ft for the West End. This is ahead of 2019 for the City market and slightly less for the West End. There is also currently approximately 2,000,000 sq ft of deals under offer in the City and 920,000 sq ft in the West End. The key strength of both markets is lack of built product which is continuing to focus the current active demand, which remains ahead of the long-term average. We have seen further requirements and acquisitions be placed on hold, whilst tenants review the wider market implications of Covid-19 but positively, many are still focused on a return to normality in the long run and so many of the strategic lease event driven requirements are progressing with their preferred workspace to satisfy their long-term needs. There appears to be some renewed interest from occupiers in built schemes (albeit these are very limited now due to extremely low levels of new build supply) from occupiers who are showing concern around timing of delivery of buildings under construction. In this regard, occupiers are commencing short-term lease extensions with current landlords where the potential knock-on effect of delayed practical completion could affect possession dates for fitting out. In the context of current negotiations, the tight supply has maintained rental tones across the board with the main area of contention being how the parties deal with rent free start dates. Where occupiers may not be able to gain access due to the current restrictions, the parties are seeking to agree an equitable solution of either a short, extended contribution or the rent-free commencing from date physical possession can be achieved for fitting out. Since the pandemic began, we have witnessed new requirements across the market reduce week on week, however, over the last week we are starting to see new searches being issued. This correlates with our own observations that the current predicament is being accepted as the “new norm” and so some occupiers are starting to review their space requirements again and are at least commencing their building options analysis. Notable transactions to have completed include Covington Burlington LLP securing 86,000 sq ft on levels 51–54 at 22 Bishopsgate and Dun & Bradstreet leasing 23,000 sq ft at The Point, 37 North Wharf Road in Paddington. Currently, a number of the transactions completing or under offer are either from legal and tech/ data companies.
Investment Market Whilst the Central London investment market had generally remained strong over the first few years since the EU referendum, the imminent departure and the uncertainty throughout 2019 as the leaving date moved from March to April then to October with a subsequent General Election led many potential buyers and sellers to adopt a ‘wait and see’ approach. This resulted in a fall in sales with total investment volumes for the year at
154 £12.6 billion compared to £17.9 billion in 2018 and down on the 10-year average of £14.5 billion. That said, the year ended on a more positive note with the result of the election in December giving some more certainty and volumes over Q4 were £5.2 billion, representing 41% of the total for the whole of the year and ahead of the 10-year quarterly average of £3.7 million. The Central London Investment market entered this Covid-19 market in good health. Riding the wave of a strong Conservative mandate in the general election in Q4 2019 which provided the certainty the market had been looking for. There was a dearth of openly marketed stock and depth to the buying market which was beginning to result in yield compression. At the onset of the Covid-19 pandemic, there were 16 deals under offer totalling £2.5 billion in the City and a further 10 deals totalling £306 million under offer in the West End. The pandemic will no doubt act as a handbrake to the momentum that was gathering and the results are really yet to be seen. The liquidity in the debt markets will play a vital role in the execution and timeframe of these transactions. We are however seeing that institutional capital is ready and willing to pursue new transactions across the risk spectrum, but with investor appetite appearing strongest for core deals. A number of the UK property funds including L&G, ASI, Columbia Threadneedle, BMO, and Aviva all gated their vehicles as they look to protect the interests of their investors, raising further concerns. However, we understand this is mainly due to the uncertainty surrounding current valuations, rather than any perceived liquidity issues. At the time of writing, the market appears to be functioning with transactions occurring. However, other than at the smaller end of the market, the capital markets still do not have the data points and price discovery that inform any trend. We have witnessed price adjustments being accepted, rejected out of hand and new deals going under offer, although true price discovery is still two to four weeks away when the deals under offer should be transacting, however the final terms are still uncertain if they do go ahead. To justify entering the market now, some investors may be targeting higher return criteria or factoring in more conservative business plan assumptions, but the weight of capital and lack of opportunity, together with transactional evidence such as 90 Bartholomew Close, are causing owners to maintain pricing resilience, particularly around core product with strong fundamentals. Whilst institutional investors will continue to transact in the market (such as with 90 Bartholomew Close), given the current uncertainty in the market, we expect private buyers and those that are able to transact quickly and without formal investment committee processes to be particularly active in the coming months. Over the past few months, the challenge to parties that wanted to transact has been how to execute, when lockdown restrictions prevented access to buildings. In light of the recent relaxation of the rules, we hope to see this become less of an issue, albeit it may involve more inspections taking place outside of traditional working hours to ensure the safety of the occupiers as well as the inspecting party. As at the end of Q1 prime yields have been held stable over the quarter at 3.50% for sub £10 million, 3.75% for £10 to £80 million lot sizes and 4.00% for lot sizes over £80 million whereas in the City prime yields moved in 25 basis points to 4.00% across all lot sizes in February prior to the Covid-19 crisis and remained unchanged for the end of the quarter. It is too early for us to provide a quantitative and robust assessment of value impact at 31st March, our survey date. In this context, the JLL Q1 2020 real estate performance indices have been held at Q4 2019 values except where there has been sufficient evidence at sector and market level to make appropriate any reliable adjustments to figures.
Rental Value The subject property is situated between the two key markets of Camden and King’s Cross. Despite its closer proximity to King’s Cross where rental levels are higher, we would expect the rental value at the subject property to be aligned to Camden due to the property’s non-prominent position away from transport links and amenities. To put the market into context, prime rents are currently £87.50 per sq ft in King’s Cross (JLL House View) for an average floor within a brand-new Grade A specified building. There are limited recent open market lettings in King’s Cross but recent activity includes Sony pre-letting S1 Handyside totalling 124,627 sq ft on a 15-year lease subject to a 20-month rent free period at a confidential rent. Evidence of smaller floorplates include The Office Group taking an assignment of a lease of the 5th floor of 1 Pancras Square, comprising 7,050 sq ft at a rent of £56.20 per sq ft. We are also aware that AstraZeneca has taken an assignment of the part 7th floor totalling 15,133 sq ft at £57.00 per sq ft.
155 The expectation at the beginning of the year, is that once rental evidence comes through, prime rents will increase beyond their current level although current forecasts are more benign. King’s Cross Central benefits from a combination of Grade A office buildings, plentiful amenity and open space and enhanced transport connection and so we would expect a notable discount from these prime levels following completion of the proposed development. Refurbished Grade A buildings in more prominent positions along the Euston Road are around £65.00 per sq ft. Evidence includes a letting of 307 Euston Road to a serviced office provider known as Spaces (a brand of Regus/ IWG) at a rent of £62.50 per sq ft. This comprises a 1980s building which has been recently upgraded although does not reflect a full refurbishment. Also, Ten Lifestyle took a lease of the part 1st and entire second floor of Fitzroy House. The building provides second hand Grade A space but in a prominent office building on the south side of Euston Road, between Portland Street and Warren Street Stations. The agreed rent was based on £65.00 per sq ft on a 5-year term with a tenant’s break option in the third year. On account of the property being newly developed but also reflecting the less prominent location and lack of immediate amenity, on balance, we consider that these lettings provide a good indication of the rental value achievable at the subject property once redeveloped. There is more limited evidence further north in Camden, in part because many of the office buildings are owned by Labtech and operated as flex office space. The only lettings of note have been at Jamestown Wharf where two lettings have completed at £65.00 per sq ft and £70.00 per sq ft, with the latter to a tenant in a neighbouring building therefore there was a potential element of special purchase. This is a new development overlooking the canal in the centre of Camden and provides good indication of the rental values achievable at the subject property. Due to the limited stock in the immediate vicinity, there is more limited evidence to draw upon. Most of office stock relates to the smaller floorplates within the lower floors of residential led developments such as the Onyx on Camley Street. 2,018 sq ft in a second floor suite let recently let at £65.00 per sq ft with suites available on the ground and mezzanine floors at a similar quoting rent. The most comparable evidence is the recent letting within Rolling Stock Yard situated approximately 1km north east in a not too dissimilar location outside of King’s Cross Central. This is a brand-new office development which is an impressive building finished to a high standard in a contemporary fashion with an imposing double height reception. We understand that the seventh and part eighth floors recently let on 10-year term with a 5-year break and unknown incentives at a headline rent of £68.00 per sq ft. Previously, we were advised by the marketing agent that all the remaining floors, except for the first floor, were under offer at rents between £62.50 per sq ft and £65.00 per sq ft prior to the Covid-19. We have not been able to ascertain an update as to whether these deals are still under offer. We consider this to be a similar building, although its location is not adjacent to a canal and a little further from the main office campus at King’s Cross. We would therefore expect a similar if not marginally higher rent at the subject property. In summary, rents in core Kings Cross stand at circa £87.50 per sq ft for the best space, the best rents in Camden are £65.00-£70.00 per sq ft and refurbished buildings in more prominent positions on Euston Road command a similar level of £65.00 per sq ft. Although there is limited evidence in the immediate vicinity the letting of a small office suite in the Onyx and the floors under offer in the newly developed Rolling Stock Yard on York Way illustrate a similar tone in the mid £60s per sq ft. In light of the above, we have adopted a rental value of £65.00-£67.50 per sq ft on the upper floors of the proposed development. We would expect the building to be multi-let on lease terms of 10 years with rent free periods of circa 15-18 months per ten year term certain, although a letting of the whole may command a longer term certain.
Capitalisation Rate In the absence of any post Covid-19 transactions that are directly comparable to this asset we have had to rely on transactions that occurred prior to the current pandemic, in addition to current sentiment and advice from our capital markets teams. In terms of indicators as to where the yield might be once the subject property is refurbished and re-let, there have been no directly comparable transactions in the immediate area and therefore we have considered sales in other locations across central London. The comparables referred to above show a yield range of 4.0% to 4.80% depending on the specific characteristics such as lot size, age of building, location and leasing profile. Examples of well let, new developments include 51 Moorgate, EC2 (£61.75m/4.0%) and 20 Farringdon Street, EC4 (£130m/4.57%). The lower yield achieved for 51 Moorgate is a function of its core location, smaller lot size and indexed linked reviews, despite having a leasehold tenure. 20 Farringdon Street, on the other hand, is
156 slightly larger lot size and while located in the sought after submarket of Farringdon, its position would be viewed as secondary. This is perhaps the best comparable to the subject property on completion of the development based on the lot size, comprising a new building, similar expected lease terms and a slightly off pitch location, we would therefore expect a similar yield at the subject property. The other evidence referred to demonstrates how yields increase where the income profile, quality of the building or location is compromised. For example, Nexus, 25 Farringdon Street sold for £169.5 million reflecting 4.80% NIY. This comprises an office building originally built in 2009 providing a multi-let investment with a WAULT of 6.5 years to breaks and 8.25 years to expiry. The higher yield in this instance reflects the need for capital expenditure over the short to medium term. We would therefore expect a lower yield at the subject property on the basis of being newly developed, despite its more peripheral location. Low yields can also be achieved where there is strong reversionary potential such as 169 Union Street, SE1 (£100m/4.25%). The low initial yield in this instance reflects the low reversionary income coupled with the strong covenant. This is arguably a stronger location but poorer quality building. We would expect a similar yield to the running yield in this case of 4.5% on completion of the proposed development and once fully let In terms of the immediate area, we are aware of two sales although they are now both relatively historic. The sale of Porter’s Wharf is an example of the yield achieved for long let secure income at 4.48% IY. At the time of sale it was anticipated that this property would sell for a lower yield. Centro is an example of a larger lot size which is heavily multi-let and sold at a price reflecting 4.98%. As the subject property will be a new building and likely let to a good covenant/s, we consider that it would sell at a lower yield than that achieved at Centro and a similar yield to that achieved for Porter’s Wharf. More recently, Railpen have acquired Camden Works as described above. This comprises a different type of investor rationale to the finished building at the subject property, being a multi-let, asset management angle. Based on the newly developed building and expectation of longer leases at the subject property, we would expect a keener yield at the subject property. Lastly, there are several transactions currently under offer including Random House in Pimlico, and 20 Churchill Place in Canary Wharf. Random House is let to Penguin Random House on an 11-year lease with CPI-linked reviews. The property was brought to the market in January and received 8 bids with a French institution selected as the preferred bidder. This party fell away following the Covid-19 outbreak, but there were another three parties prepared to execute at the same level. It is currently back under offer at £70 million reflecting c4.5% NIY. This comprises an older building in a comparable secondary location but a much smaller lot size, so on balance we would consider a comparable yield at the subject property. The last on-going deal of note is 20 Churchill Place in Canary Wharf which in single let to State Street Bank for a further 10 years. The investment was put under offer pre-Covid at a price of c£300 million reflecting c4.5% NIY and at the time of writing is still under offer subject to obtaining finance. This comprises a larger lot size but is let to a strong covenant and so on balance we would expect a comparable yield at the subject property. Having regard to the above, we have adopted a yield of 4.5% when assessing the gross development value of the property. We consider this appropriately reflects the fact that it is a newly developed building of a substantial lot size, but in a non-core location.
Capital Value per sq ft A yield at this level in our appraisal produces a site value of £50.5 million (including upside—see valuation methodology) which equates to £356 per sq ft on the proposed net developable floor area and £874 per sq ft based on the existing building floor area. We have cross checked this calculation by reference to existing buildings that require a substantial refurbishment and also other land comparables. Although it should be noted that in each instance, the price paid will depend on the specific massing and cost implications. In terms of short income/vacant possession sales these show a range of values from £700 to £852 per sq ft (excluding the recently sold 10 Fenchurch Street), which is below that in our valuation due to the increased massing capable, even when making adjustments for the weaker sentiment in the post Covid-19 environment. In terms of land sale comparables, prices achieved on the net developable areas have ranged between £280 per sq ft to £375 per sq ft. These are lower than our valuation of £385 per sq ft as they generally do not have a consented permission and/or are leasehold interests.
157 The exception to this is 10 Fenchurch Street which recently sold for £95 million which reflect £1,223 psf on existing areas and £542 per sq ft based on a massing scheme provided in some old sales particulars. Although this scheme does not have planning consent, we understand that the purchaser is assuming that a substantially denser scheme can be created on the site, compared with the massing scheme we are aware of. Furthermore, this comprises a core location in the City and tower buildings have the capacity to achieve much higher rental values. Whilst this is the most recent sale, it is difficult to devalue without understanding the full proposals and we have had greater regard to the former sales.
Valuation Methodology In arriving at our valuation, we have adopted the residual method of valuation. The most appropriate method to assess the value of the site is by way of a residual appraisal. The residual appraisal analysis determines a price that could be paid for the Plots given the expected ‘as if complete’ value of the proposed development, it takes into account the cost of the proposed developments, it allows for market level profit margins and it has due regard to the known characteristics of the properties and the inherent risk involved in their development. It is our opinion that a prospective purchaser would rely heavily upon this approach as this method reflects the expectations of a purchaser in relation to costs, selling prices and profit margins. Whilst the obvious purchaser for the building is the owner of the adjacent buildings and proposed wider site developer, we consider that there would be interest from non-connected parties who would in our opinion look to acquire the building with the aim of undertaking the development for the consented scheme relating to this plot. We consider that a purchaser would be confident in obtaining an amendment to the current planning permission to grant a change of use from the current hotel use to an office use which produces a higher value than that of the consented scheme. Therefore, in assessing our opinion of value we have considered the value based on a consented scheme as well based on the assumption that an amendment to the planning permission has been granted and that the building is built wholly as offices, based on the same massing, so that we can assess the potential upside. It is more difficult to assess the market’s attitude to a development opportunity such as this, in the current market following the Covid-19 pandemic. There continues to be an acute shortage of supply of new built office space across the market and therefore we still consider that the site provides an attractive opportunity to a developer. However, we consider that the current planning consent for a mixed hotel and office scheme is less attractive and a developer would lower their GDV expectations for a hotel scheme by around 10% to take into account the impact on this market caused by the Covid-19 outbreak. Additionally, we have amended our cash flow to allow an additional 3-months to the pre-construction timing, as well as the letting period following completion. In addition, we have increased the contingency from 5.0% to 7.5% to reflect the fact that supply chain issues may result in additional unexpected costs. Lastly, we have also increased the finance rate from 5.0% to 5.5% to take into account the increased costs of finance in the market at the moment. Our appraisals provide a value of £40.1 million based on the consented scheme but a higher value of £55.7 million assuming a consent has been provided for an entire office scheme based on the same massing. Having regard to the above, we consider that an investor would be prepared to pay an amount in excess of the consented scheme (£40.1 million) to reflect the potential upside of obtaining planning consent for an office scheme, but less than the assumed office scheme (£55.7 million) to reflect the additional risk, timing and cost implications of obtaining planning consent. As a sense check, we have undertaken a further appraisal on the same basis as the assumed office scheme but this time making an allowance for the additional risk for obtaining the alteration to the current planning consent by increasing the level of profit on cost adopted to 17.5% from 15% and adding a further six month preliminary period in the cash flow to reflect the likely time needed to obtain the alteration. This results in a value of £50.6 million which is in line with our Market Value which reflects approximately two thirds of the potential upside. In summary, we consider the Market Value to be £50.5 million reflecting approximately two thirds of the potential upside between the consented office and hotel scheme and a consented office scheme and is also broadly the same as our third scenario which allows for a higher profit margin and increased timing for securing an office consent. As described earlier in the report, our site value of £50.5 million equates to £356 per sq ft on the net developable floor area and £874 per sq ft based on the existing building floor area, both of which are at the
158 upper end of the range of comparables, but reflect the increased massing when compared to existing buildings and the consented permission, when compared to the land sales, whilst also accounting for the weakened sentiment in the market following the outbreak of Covid-19.
Sensitivity Analysis The residual method of valuation takes into account a large number of subjective variables, the manipulation of which can have a significant impact on the development project being considered. Variations in sales prices, construction costs and periods and costs of finance can also have a marked effect. In accordance with the Red Book, we have carried out a residual calculation which is sensitive to fluctuations in input values and have therefore run a Sensitivity Analysis to demonstrate how the changes in input data affect values. The land value can fluctuate from as low as £31.2m to as high as £75.2m based on stepped increases and decreases in the yield of 50 basis points and £5.00 per sq ft in the rent. Having regard to the foregoing, we are of the opinion that the Market Value of the freehold interest in the property as at 1 June 2020 is: £50,500,000
(Fifty Million Five Hundred Thousand Pounds) This valuation reflects purchaser’s costs of 6.80%
Difference in the Market Value and equivalent figure included in the issuer’s latest published individual annual accounts: Ted Baker has confirmed that a book valuation of the subject property will be included in the FY20 accounts based on a figure of £58.0 million. They have confirmed that this figure does not reflect a valuation of the asset but is an accounting net book value reflecting capitalised costs less accumulated depreciation. It has therefore not been undertaken on the same basis of our valuation provided. We include as an appendix below a Valuation Certificate.
Yours faithfully,
Roger Meeds Christy Bowen
Director Director
For and on behalf of For and on behalf of
Jones Lang LaSalle Limited Jones Lang LaSalle Limited
159 Appendix 1 Valuation Certificate
Market Value as at Property Description, Age and Tenure Tenancies 1 June 2020 6a St Pancras Way, Four storey office building Sold with vacant £50,500,000 London, NW1 0TB (“the totalling circa 57,000 sq ft with possession. Property”) planning permission to create a new office building on nine floors with a hotel on the lower three floors.
160 PART XI—TAXATION
1. UK TAXATION The following statements are intended only as a general guide to certain UK tax considerations and do not purport to be a complete analysis of all potential UK tax consequences of acquiring, holding or disposing of the New Shares. Prospective acquirers of the New Shares are advised to consult their own professional advisers concerning the tax consequences of the acquisition, ownership and disposition of the New Shares. The following statements are based on current UK law and what is understood to be the current practice of HM Revenue & Customs (HMRC) as at the date of this document, both of which may change, possibly with retroactive effect. They apply only to Shareholders who are resident for tax purposes in (and only in) the United Kingdom, who hold their Shares as an investment (other than where a tax exemption applies, for example where the Shares are held in an individual savings account or pension arrangement), and who are the absolute beneficial owners of both their Shares and any dividends paid on them. The tax position of certain categories of Shareholders who are subject to special rules is not considered and it should be noted that they may incur liabilities to UK tax on a different basis from that described below. This includes persons acquiring their New Shares in connection with employment, dealers in securities, insurance companies, collective investment schemes, charities, exempt pension funds, temporary non-residents and non-residents carrying on a trade, profession or vocation in the United Kingdom. The statements summarise the current position and are intended as a general guide only. Prospective acquirers of the New Shares who are in any doubt about their taxation position or who may be subject to tax in a jurisdiction other than the United Kingdom are strongly recommended to consult their own professional advisers.
1.1 Taxation of Chargeable Gains 1.1.1 UK tax resident Shareholders 1.1.1.1 New Shares acquired pursuant to the Open Offer The published practice of HMRC to date has been to treat an acquisition of shares by an existing shareholder up to his, her or its pro rata entitlement pursuant to the terms of an open offer as a reorganisation for the purposes of UK taxation on chargeable gains (CGT). However, it is understood that HMRC may not apply this practice in circumstances where an open offer is not made to all shareholders. HMRC’s treatment of a Qualifying Shareholder’s acquisition of the New Shares up to their Open Offer Entitlement as a reorganisation cannot therefore be guaranteed and specific confirmation has not been requested in relation to the Capital Raising. If the issue of the New Shares under the Open Offer is regarded as involving a reorganisation, then a Qualifying Shareholder who acquires the New Shares up to the level of his, her or its Open Offer Entitlement will not be regarded as making any disposal of his, her or its Existing Shares. Instead, the New Shares acquired by the Qualifying Shareholder and the Existing Shares in respect of which they are issued will, for CGT purposes, be treated as the same asset and as having been acquired at the same time as the Existing Shares. The amount paid for the New Shares will be added to the base cost of the Existing Shares when computing any gain or loss on any subsequent disposal. To the extent that a Qualifying Shareholder takes up the New Shares in excess of his, her or its Open Offer Entitlement pursuant to the Excess Application Facility, that will not constitute a reorganisation. If, or to the extent that, the issue of the New Shares under the Open Offer (including pursuant to the Excess Application Facility) is not regarded as a reorganisation, the New Shares acquired by each Qualifying Shareholder will, for CGT purposes, be treated as acquired separately from the Existing Shares. It is not expected that any charge to CGT will arise in respect of that acquisition. Subject to specific rules for acquisitions within specified periods either side of disposal, the existing Shares and the New Shares will be treated as a single “pooled” asset, the base cost of which will be the aggregate of the amount paid for the New Shares and the base cost of the Existing Shares. 1.1.1.2 New Shares acquired pursuant to the Placing, Firm Placing and Offer for Subscription The issue of the New Shares under the Placing, Firm Placing and Offer for Subscription will not constitute a reorganisation of share capital for CGT purposes and, accordingly, any New Shares acquired pursuant to the Placing, Firm Placing and Offer for Subscription will be treated as acquired separately from any Existing Shares held, as described in the final paragraph of 1.1.1.1 of this Part XI above.
161 1.1.1.3 Disposals If a Shareholder sells or otherwise disposes of all or some of the New Shares, he or she may, depending on his or her circumstances and subject to any available exemption or relief, incur a liability to CGT.
1.2 Taxation of Dividends The Company is not required to withhold UK tax when paying a dividend. Liability to tax on dividends will depend on the individual circumstances of a Shareholder.
1.2.1 UK resident individual Shareholders Under current UK tax rules specific rates of tax apply to dividend income. These include a nil rate of tax (the nil rate band) for the first £2,000 of non-exempt dividend income in any tax year and different rates of tax for dividend income that exceeds the nil rate band. For these purposes “dividend income” includes UK and non UK source dividends and certain other distributions in respect of shares. An individual Shareholder who is resident for tax purposes in the United Kingdom and who receives a dividend from the Company will not be liable to UK tax on the dividend to the extent that (taking account of any other non-exempt dividend income received by the Shareholder in the same tax year) that dividend falls within the nil rate band. To the extent that (taking account of any other non-exempt dividend income received by the Shareholder in the same tax year) the dividend exceeds the nil rate band, it will be subject to income tax at 7.5 per cent. to the extent that it falls below the threshold for higher rate income tax. To the extent that (taking account of other non-exempt dividend income received in the same tax year) it falls above the threshold for higher rate income tax then the dividend will be taxed at 32.5 per cent. to the extent that it is within the higher rate band, or 38.1 per cent. to the extent that it is within the additional rate band. For the purposes of determining which of the taxable bands dividend income falls into, dividend income is treated as the highest part of a Shareholder’s income. In addition, dividends within the nil rate band which would (if there were no nil rate band) have fallen within the basic or higher rate bands will use up those bands respectively for the purposes of determining whether the threshold for higher rate or additional rate income tax is exceeded.
1.2.2 UK resident corporate Shareholders It is likely that most dividends paid on the Shares to UK resident corporate shareholders would fall within one or more of the classes of dividend qualifying for exemption from corporation tax. However, it should be noted that the exemptions are not comprehensive and are also subject to anti-avoidance rules.
1.3 UK Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)
1.3.1 The Placing and Open Offer and Firm Placing No stamp duty or SDRT will be payable on the issue of the New Shares pursuant to the Placing and Open Offer or the Firm Placing, other than as explained below.
1.3.1.1 Subsequent transfers Stamp duty at the rate of 0.5 per cent. (rounded up to the next multiple of £5) of the amount or value of the consideration given is generally payable on an instrument transferring Shares. A charge to SDRT will also arise on an unconditional agreement to transfer Shares (at the rate of 0.5 per cent. of the amount or value of the consideration payable). However, if within six years of the date of the agreement becoming unconditional an instrument of transfer is executed pursuant to the agreement, and that instrument is duly stamped upon payment of the stamp duty, any SDRT already paid will be refunded (generally, but not necessarily, with interest) provided that a claim for payment is made, and any outstanding liability to SDRT will be cancelled. The liability to pay stamp duty or SDRT is generally satisfied by the purchaser or transferee. An exemption from stamp duty is available on an instrument transferring Shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate consideration exceeds £1,000. In cases where Shares are transferred to a connected company (or its nominee), stamp duty or SDRT may be chargeable on the higher of (i) the amount or value of the consideration and (ii) the market value of the Shares.
162 1.3.1.2 Shares held through paperless means including CREST Paperless transfers of Shares, such as those occurring within CREST, are generally liable to SDRT, rather than stamp duty, at the rate of 0.5 per cent. of the amount or value of the consideration. CREST is obliged to collect SDRT on relevant transactions settled within the system. The charge is generally borne by the purchaser. Under the CREST system, no stamp duty or SDRT will generally arise on a transfer of Shares into the system unless such a transfer is made for a consideration in money or money’s worth, in which case a liability to SDRT (usually at a rate of 0.5 per cent.) will arise. In cases where Shares are transferred to a connected company (or its nominee), SDRT (or stamp duty) may be chargeable on the higher of (i) the amount or value of the consideration and (ii) the market value of the Shares.
1.3.1.3 Shares held through Clearance Systems or Depositary Receipt Arrangements Special rules apply where Shares are issued or transferred to, or to a nominee or agent for, either a person whose business is or includes issuing depositary receipts or a person providing a clearance service. In these circumstances, SDRT or stamp duty may be charged at a rate of 1.5 per cent., with subsequent transfers within the clearance service or transfers of depositary receipts then being free from SDRT or stamp duty. HMRC accept that this charge is in breach of EU law so far as it applies to new issues of shares or transfers that are an integral part of a capital raising, and it was confirmed in the Autumn 2017 Budget that the Government intend to continue this approach following Brexit. HMRC’s published view is that the 1.5 per cent. SDRT or stamp duty charge continues to apply to other transfers of shares into a clearance service or depositary receipt arrangement, although this has been disputed. Further litigation indicates that certain transfers of legal title to clearance services in connection with listing, but not integral to a new issue, are also not chargeable. In view of the continuing uncertainty, specific professional advice should be sought before incurring a 1.5 per cent. stamp duty or stamp duty reserve tax charge in any circumstances. The statements in paragraph 1.3 of this Part XI apply to any holders of Shares irrespective of their residence, summarise the current position and are intended as a general guide only. Special rules apply to agreements made by, amongst others, intermediaries.
2. UNITED STATES FEDERAL INCOME TAXATION The following discussion is a general summary based on present law of certain US federal income tax consequences of the allocation, exercise and lapse of Open Offer Entitlements and Excess Open Offer Entitlements pursuant to the Placing and Open Offer and the acquisition, ownership and disposition of the New Shares pursuant to the Capital Raising. This discussion applies only to US Holders (as defined below) that are allocated, with respect to their Existing Shares, Open Offer Entitlements and, to the extent applied for and allocated pursuant to the Excess Application Facility, Excess Open Offer Entitlements, and/or that purchase the New Shares in the Capital Raising at the Offer Price, hold Existing Shares, if any, as capital assets and will hold Open Offer Entitlements, Excess Open Offer Entitlements and the New Shares as capital assets, and use the US dollar as their functional currency. The discussion is a general summary; it is not a substitute for tax advice. It does not address all tax considerations that may be relevant to a particular US Holder or the tax treatment of US Holders subject to special rules, such as banks or other financial institutions, insurance companies, tax exempt entities, dealers, traders in securities that elect to mark-to-market, regulated investment companies, real estate investment trusts, investors liable for alternative minimum tax, US expatriates, persons that directly, indirectly or constructively own 10 per cent. or more of the total combined voting power of the Company’s voting stock or of the total value of the Company’s equity interests, investors liable for alternative minimum tax, investors that hold Open Offer Entitlements, Excess Open Offer Entitlements or New Shares in connection with a permanent establishment or fixed base outside the United States, or investors that hold New Shares as part of a hedge, straddle, conversion, constructive sale or other integrated financial transaction. This summary also does not address US federal taxes other than the income tax (such as estate or gift taxes) or US state and local, or non-US tax laws or matters. As used here, a “US Holder” means a beneficial owner of Open Offer Entitlements, Excess Open Offer Entitlements or New Shares that is for US federal income tax purposes (i) a citizen or individual resident of the United States, (ii) a corporation created or organised under the laws of the United States, any state thereof, or the District of Columbia, (iii) a trust subject to the control of one or more US persons and the primary supervision of a US court and (iv) an estate the income of which is subject to US federal income tax without regard to its source. The US federal income tax treatment of a partner in a partnership (or other entity or arrangement treated as a partnership for US federal income tax purposes) that holds Open Offer Entitlements, Excess Open Offer
163 Entitlements or New Shares will generally depend on the status of the partner and the activities of the partnership. Partnerships should consult their own tax advisers concerning the US federal income tax consequences to their partners of the receipt, exercise and expiration of Open Offer Entitlements and Excess Open Offer Entitlements and the acquisition, ownership and disposition of the New Shares. The Company believes, and the following discussion assumes, that the Company was not a passive foreign investment company (PFIC) for US federal income tax purposes in its most recently completed taxable year and will not become a PFIC in its current taxable year or in the foreseeable future. The determination of whether a company is a PFIC is made annually and a company’s status can change depending, among other things, on changes in the composition and relative value of its gross receipts and assets (including the income and assets of its 25 per cent. or more owned subsidiaries), changes in its operations and changes in the market value of its stock. Accordingly, no assurance can be provided by the Company that it will not become a PFIC in its current taxable year or in any future taxable year.
2.1 Open Offer Entitlements and Excess Open Offer Entitlements Allocation of Open Offer Entitlements and Conditional Allocation of Excess Open Offer Entitlements The characterization of allocation of Open Offer Entitlements and the conditional allocation of Excess Open Offer Entitlements for US federal income tax purposes is not entirely free from doubt. It is possible that the allocation of Open Offer Entitlements and Excess Open Offer Entitlements represent no more than a preferred allocation of the right to subscribe for and purchase the New Shares in the Placing and Open Offer at the Offer Price. Alternatively, the Open Offer Entitlements and Excess Open Offer Entitlements could represent a distribution of options and rights to acquire options to subscribe for and purchase the New Shares in the Placing and Open Offer at the Offer Price. Under either characterization, however, a US Holder should be entitled to treat the allocation of Open Offer Entitlements and the conditional allocation of Excess Open Offer Entitlements as a non-taxable distribution with respect to its Existing Shares, and the following discussion assumes the receipt or allocation of Open Offer Entitlements and Excess Open Offer Entitlements is not taxable. Were the distribution to be treated as a taxable distribution of property (not including an option to subscribe for and purchase the New Shares), the holder generally would recognise dividend income equal to the fair market value, if any, of the Open Offer Entitlements and Excess Open Offer Entitlements. If the fair market value of Open Offer Entitlements and Excess Open Offer Entitlements when received is less than 15 per cent. of the fair market value of the Existing Shares, the Open Offer Entitlements and Excess Open Offer Entitlements will have no tax basis unless the US Holder affirmatively elects to allocate its adjusted tax basis in its Existing Shares to the Open Offer Entitlements and Excess Open Offer Entitlements in proportion to the relative fair market values of the Existing Shares and the Open Offer Entitlements and Excess Open Offer Entitlements on the date Open Offer Entitlements and Excess Open Offer Entitlements are received or allocated. A US Holder must make this election in a statement attached to its tax return for the taxable year in which it receives the Open Offer Entitlements and Excess Open Offer Entitlements. If the fair market value of Open Offer Entitlements and Excess Open Offer Entitlements when received is 15 per cent. or more than the fair market value of the Existing Shares, a US Holder must allocate its adjusted tax basis in its Existing Shares between the Existing Shares and the Open Offer Entitlements and Excess Open Offer Entitlements in proportion to their relative fair market values on the date Open Offer Entitlements and Excess Open Offer Entitlements are received. However, if a US Holder does not elect to take up its Open Offer Entitlements, no gain or loss will be recognized and no allocation of tax basis will be required.
Exercise A US Holder will not recognise taxable income when it receives the New Shares by taking up its Open Offer Entitlements or Excess Open Offer Entitlements to subscribe for and purchase the New Shares. The US Holder’s tax basis in the New Shares will equal its tax basis, if any, in the Open Offer Entitlements and Excess Open Offer Entitlements taken up plus the US dollar value of the pounds sterling Offer Price paid on the acquisition date (or in the case of cash basis and electing accrual basis taxpayers, the settlement date). If a US Holder uses previously acquired pounds sterling to pay the Offer Price for the New Shares, any currency gain or loss that it recognises on the exchange of the pounds sterling for New Shares will generally be US source ordinary income or loss.
164 Expiration, Lapse or Reallocation upon failure to take up Open Offer Entitlements If a US Holder does not take up the New Shares to which it is entitled under the Open Offer Entitlements allocated to such holder and does not apply for any Excess Shares with respect to its right to subscribe to Excess Open Offer Entitlements, such US Holder’s Open Offer Entitlements and Excess Open Offer Entitlements should be deemed to have no tax basis, no gain or loss will be recognised by the US Holder upon the expiration, lapse or reallocation of such US Holder’s Open Offer Entitlements. Any tax basis that was allocated from Existing Shares to the Open Offer Entitlements or Excess Open Offer Entitlements would revert to and remain with the Existing Shares.
2.2 Dividends The gross amount of any distribution of cash or property with respect to the New Shares (other than certain pro rata distributions of ordinary stock) will be included in a US Holder’s gross income as ordinary income from foreign sources when actually or constructively received. The dividends will not be eligible for the dividends- received deduction generally available to US corporations. Dividends received by eligible non-corporate US Holders that satisfy a minimum holding period and certain other requirements generally will be taxed at the preferential rate applicable to qualified dividend income if the Company qualifies for the benefits of the income tax treaty between the United States and the United Kingdom (the US-UK Treaty), which the Company believes it does, and the Company is not a PFIC in the Company’s taxable year of distribution or the preceding taxable year. Dividends paid in pounds sterling will be included in income in a US dollar amount based on the exchange rate in effect on the date of receipt, whether or not the pounds sterling are converted into US dollars at that time. A US Holder’s tax basis in the pounds sterling will equal the US dollar amount included in income. Any gain or loss on a subsequent conversion or other disposition of the pounds sterling for a different US dollar amount generally will be US source ordinary income or loss. If dividends paid in pounds sterling are converted into US dollars on the day they are received, a US Holder generally will not be required to recognise exchange gain or loss in respect of the dividend income. Dividends received by certain non-corporate US Holders will generally be includible in “net investment income” for purposes of the Medicare contribution tax. 2.3 Disposition A US Holder generally will recognise capital gain or loss on the sale or other disposition of the New Shares equal to the difference between the US dollar value of the amount realised and the US Holder’s adjusted tax basis in the New Shares. The US Holder’s amount realised will include the gross amount of the proceeds from the sale or other disposition. Any gain or loss generally will be treated as arising from US sources. The gain or loss will be long-term capital gain or loss if the US Holder’s holding period exceeds one year. Long term capital gains of non-corporate US Holders are subject to preferential tax rates. Deductions for capital loss are subject to significant limitations. The initial tax basis of a US Holder’s New Shares will generally be the US dollar value determined in the manner described above under “—2.1 Open Offer Entitlements and Excess Open Offer Entitlements—Exercise” if the New Shares were received by exercising Open Offer Entitlements or Excess Open Offer Entitlements or the Offer Price if the New Shares were received pursuant to the Firm Placing. A US Holder that receives pounds sterling on the sale or other disposition of the New Shares will realise an amount equal to the US dollar value of the pounds sterling at the spot rate of exchange on the date of sale or other disposition (or, if the New Shares are traded on an “established securities market,” in the case of a cash basis or electing accrual basis US Holder, the settlement date). A US Holder will recognise exchange gain or loss if the US dollar value of the pounds sterling received at the spot rate of exchange on the settlement date differs from the amount realised. A US Holder will have a tax basis in the pounds sterling received equal to its US dollar value at the spot rate on the settlement date. Any exchange gain or loss realised on the settlement date or on a subsequent conversion of the pounds sterling into US dollars will be US source ordinary income or loss. Capital gains from the sale or other disposition of the New Shares received by certain non-corporate US Holders will generally be includible in “net investment income” for purposes of the Medicare contribution tax. 2.4 Passive Foreign Investment Company Rules Based on the composition of the Company’s current gross assets and income (including the income and assets of the Group) and the manner in which the Company has operated the Group’s business and expects to operate the Group’s business in the foreseeable future, the Company believes that it was not a passive foreign
165 investment company for US federal income tax purposes in its most recent taxable year and will not become a PFIC in its current taxable year or in the foreseeable future. In general, a non-US corporation will be a PFIC for any taxable year in which, taking into account a pro rata portion of the income and assets of 25 per cent. or more owned subsidiaries, either (i) 75 per cent. or more of its gross income is passive income, or (ii) 50 per cent. or more of the average quarterly value of its assets are assets that produce, or are held for the production of, passive income or which do not produce income. For this purpose, passive income generally includes, among other things and subject to various exceptions, interest, dividends, rents, royalties and gains from the disposition of assets that produce passive income. Whether the Company is a PFIC is a factual determination made annually, and the Company’s status could change depending among other things upon changes in the composition and relative value of its gross receipts and assets. Because the market value of the Company’s assets (including for this purpose goodwill) may be measured in large part by the market price of the New Shares, which is likely to fluctuate after the Capital Raising, no assurance can be given that the Company will not be a PFIC in the current year or in any future taxable year. If the Company were a PFIC for any taxable year in which a US Holder holds New Shares, such US Holder would be subject to additional taxes on any excess distributions and any gain realised from the sale or other taxable disposition of the New Shares (including certain pledges) regardless of whether the Company continues to be a PFIC. A US Holder will have an excess distribution to the extent that distributions on the New Shares during a taxable year exceed 125 per cent. of the average amount received during the three preceding taxable years (or, if shorter, the US Holder’s holding period). To compute the tax on excess distributions or any gain, (i) the excess distribution or gain is allocated rateably over the US Holder’s holding period, (ii) the amount allocated to the current taxable year and any year before the Company became a PFIC is taxed as ordinary income in the current year and (iii) the amount allocated to other taxable years is taxed at the highest applicable marginal rate in effect for each year and an interest charge is imposed to recover the deemed benefit from the deferred payment of the tax attributable to each year. A US Holder may be able to avoid some of the adverse impacts of the PFIC rules described above by electing to mark the New Shares to market annually. The election is available only if the New Shares are considered “marketable stock,” which generally includes stock that is regularly traded in more than de minimis quantities on a qualifying exchange. If a US Holder makes the mark-to-market election, any gain from marking New Shares to market or from disposing of them would be ordinary income. Any loss from marking the New Shares to market would be recognised only to the extent of unreversed gains previously included in income. Loss from marking the New Shares to market would be ordinary, but loss on disposing of them would be capital loss except to the extent of mark-to-market gains previously included in income. No assurance can be given that the New Shares will be traded in sufficient frequency and quantity to be considered “marketable stock” or whether the London Stock Exchange is or will continue to be considered a qualifying exchange for purposes of the PFIC mark-to-market election. A valid mark-to-market election cannot be revoked without the consent of the US Internal Revenue Service (the IRS) unless the New Shares cease to be marketable stock. US Holders should consult their own tax advisors concerning the Company’s possible PFIC status and the consequences to them if the Company were classified as a PFIC for any taxable year. 2.5 Information and Backup Withholding Dividends on the New Shares and proceeds from the sale or other disposition of the New Shares paid through US related intermediaries or into a US account may be reported to the IRS unless the holder establishes a basis for exemption. Backup withholding tax may apply to amounts subject to reporting. Any amount withheld may be credited against the holder’s US federal income tax liability subject to certain rules and limitations. US Holders should consult with their own tax advisers regarding the application of the US information reporting and backup withholding rules. Certain non-corporate US Holders are required to report information with respect to investments in the New Shares not held through an account with a domestic financial institution. US Holders that fail to report required information could become subject to substantial penalties. Potential investors are encouraged to consult with their own tax advisers about these and any other reporting obligations arising from their investment in the New Shares. THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN THE NEW SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
166 PART XII—ADDITIONAL INFORMATION
1 RESPONSIBILITY The Company, the Directors and the Proposed Director, whose names appear in paragraph 5 of this Part XII, accept responsibility for the information contained in this document. To the best of the knowledge of the Company, the Directors and the Proposed Director, the information contained in this document is in accordance with the facts and this document makes no omission likely to affect its import.
2 INCORPORATION AND REGISTERED OFFICE The Company was incorporated and registered in England and Wales on 23 June 1997 with registered number 03393836 under the Companies Act 1985 as a public limited company with the name Ted Baker Plc. The principal legislation under which the Company operates is the Companies Act and the regulations made thereunder. The Company’s registered office is The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB and its telephone number is +44 (0) 20 7255 4800.
3 SHARE CAPITAL Immediately prior to the publication of this document, the issued share capital of Ted Baker was £2,229,328, comprised of 44,586,562 Existing Shares of five pence each. All of the share capital is fully paid or credited as fully paid. The Existing Shares in the share capital of the Company have a nominal value of five pence each and are listed on the premium listing segment of the Official List and admitted to trading on the London Stock Exchange’s main market for listed securities. The following table shows the changes in the ordinary share capital of Ted Baker which occurred from 27 January 2018 to 19 May 2020 (being the latest practicable date prior to the date of this document):
Number of Existing Shares At 27 January 2018 ...... 44,474,208 At 26 January 2019 ...... 44,563,346 At 25 January 2020 ...... 44,563,346 At 19 May 2020 (being the latest practicable date prior to the date of this document) ...... 44,586,582 As at 19 May 2020 (being the latest practicable date prior to the date of this document), the issued and fully paid ordinary share capital of the Company was as follows:
Number of Amount of Existing Shares share capital (£) Shares ...... 44,586,562 2,229,328 The issued and fully paid ordinary share capital of the Company immediately following completion of the Placing and Open Offer and Firm Placing (excluding the impact of the Offer for Subscription), will be:
Number of Amount of Shares share capital (£) Shares ...... 171,253,229 9,229,328.10 The issued and fully paid ordinary share capital of the Company immediately following completion of the Capital Raising, assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares, will be:
Number of Amount of Shares share capital (£) Shares ...... 184,586,562 9,229,328.10 The Company remains subject to the continuing obligations of the Listing Rules with regard to the issue of securities for cash and the provisions of section 561 of the Companies Act (which confers on Shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash) apply to the issues of Shares by the Company which are not the subject of the disapplication approved by the Shareholders in a general meeting of the Company.
167 Subject to Admission, pursuant to the Placing and Open Offer and Firm Placing, 125,666,667 New Shares will be issued at a price of 75 pence per New Share. This will result in the issued share capital of the Company increasing by approximately 284.1 per cent. Shareholders who take up their pro rata Open Offer Entitlements in full will suffer 59.1 per cent. dilution to their interests in the Company as a result of the Firm Placing. Up to 13,333,333 New Shares will be issued at a price of 75 pence per New Share pursuant to the Offer for Subscription. Shareholders who do not, or are not permitted to, acquire the New Shares will be diluted by 74.0 per cent. (excluding the impact of the Offer for Subscription) or 75.8 per cent. (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares) following the Capital Raising. As described in “Part I—Letter from the Acting Non-Executive Chair of Ted Baker Plc” of this document, at the General Meeting, Shareholders will be asked to consider and vote on the Resolutions. Due to the size of the Disposal in relation to the size of the Company, the Disposal constitutes a Class 1 transaction (as defined in the Listing Rules) and requires the approval of the Shareholders under the Listing Rules by ordinary resolution. The resolution to approve the Disposal in accordance with the terms of the SPA (the Disposal Resolution) is therefore to be proposed at the General Meeting as an ordinary resolution and will pass if more than 50 per cent. of the votes cast (either in person or by proxy) are in favour. As on 19 May 2020, being the latest practicable date prior to the date of this document, the authorised share capital of the Company was £4,000,000 divided into 80,000,000 Shares and 44,586,562 Shares were in issue, as a result of which the Company is able to issue a maximum of 35,413,438 additional Shares. However, the maximum number of New Shares to be issued pursuant to the Capital Raising is 140,000,000 (assuming that no Shares are issued as a result of the exercise of any options between 19 May 2020, being the latest practicable date prior to the publication of this document, and Admission becoming effective). The resolution to amend the Articles (including the relevant provisions of the memorandum of association of the Company that is deemed to form part of the Articles) to remove the provisions specifying the authorised share capital of the Company is therefore required in order to enable the Company to issue sufficient New Shares to satisfy its obligations in connection with the Capital Raising. This resolution, referred to in this document as the Authorised Share Capital Resolution, is to be proposed at the General Meeting as a special resolution and will pass if more than 75 per cent. of the votes cast (either in person or by proxy) are in favour. The Company’s authorised share capital is set out in Article 4(A) of the Articles, which states as follows: “The authorised share capital of the Company immediately following the adoption of these Articles is £4,000,000 divided into 80,000,000 ordinary shares of 5p each” In addition, paragraph 6 of the Memorandum, which was adopted before the Companies Act came into effect, states as follows: “The share capital of the Company is £5,000,000, divided into 4,000,000 Ordinary shares of £1 each and 5,000,000 ‘A’ cumulative convertible redeemable preference shares of 10p each and 5,000,000 ‘B’ cumulative convertible redeemable preference shares of 10p each*. The Companies Act removed the concept of authorised share capital of a company. Further, section 28 of the Companies Act provides that provisions that immediately before 1 October 2009 were contained in a company’s memorandum of association but were not provisions of the kind included in the revised style of memorandum (including provisions in relation to the company’s authorised share capital) are to be treated as provisions of the company’s articles. As a result, paragraph 6 of the Company’s Memorandum is deemed to be a provision of the Company’s Articles (taking effect as setting out the maximum number of shares that may be allotted by the Company). The Authorised Share Capital Resolution is intended to delete these provisions in their entirety. This will have the effect of removing the restriction on the maximum number of shares that can be allotted by the Company, in line with market practice for listed companies. The Directors will still be limited as to the number of shares they can allot at any time because an allotment authority continues to be required under the Companies Act (save in certain circumstances). The resolutions to (i) provide the Directors with the necessary authority and power to allot 140,000,000 New Shares to undertake the Capital Raising, which would apply until the conclusion of the Annual General Meeting of the Company to be held in 2020, and (ii) approve the issue of the New Shares on the terms set out in this document at a price of 75 pence per share, representing a discount of greater than 10 per cent. to the
* The share capital of the Company as at 24 July 1997 pursuant to resolutions passed on 16 July 1997 was £4,000,000 divided into 80,000,000 Ordinary Shares of 5p each.”
168 middle market price of the Existing Shares as at 29 May 2020, are to be proposed at the General Meeting as ordinary resolutions. These resolutions will pass if more than 50 per cent. of the votes cast (either in person or by proxy) are in favour and are required under section 551 of the Act (to authorise the Directors to allot the New Shares) and Listing Rule 9.5.10(3)(a) (to approve an issue of the New Shares which is at a discount in excess of 10 per cent. to the middle market price of the Existing Shares as at 29 May 2020). These resolutions are referred to in this document as the New Share Issue Resolutions. The resolution to provide the Directors with the necessary authority and power to allot equity securities as if section 561 of the Companies Act did not apply to such allotment in order to undertake the Firm Placing and the Offer for Subscription, to apply until the conclusion of the Annual General Meeting of the Company to be held in 2020, is to be proposed at the General Meeting as a special resolution. This resolution will pass, subject to the other Resolutions being passed, if more than 75 per cent. of the votes cast (either in person or by proxy) are in favour and is required under section 571 of the Act (to disapply statutory pre-emption rights). This resolution is referred to in this document as the Firm Placing and Offer for Subscription Resolution, and together with the New Share Issue Resolutions, the Capital Raising Resolutions. The Principal Shareholder, who holds 15,540,280 Existing Shares (representing 34.85 per cent. of the Company’s issued ordinary share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document)), has agreed to acquire up to 4,666,667 New Shares in the Firm Placing and the Placing (subject to clawback to satisfy valid applications under the Open Offer), resulting in the Principal Shareholder being interested in not more than 15.8 per cent. of the enlarged issued share capital of the Company immediately following completion of the Capital Raising (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). Toscafund Asset Management LLP, which holds 6,412,776 Existing Shares (representing 14.38 per cent. of the Company’s issued ordinary share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document)), has agreed to acquire up to 38,666,667 New Shares in the Firm Placing and Placing, resulting in Toscafund Asset Management LLP being interested in not more than 26.4 per cent. of the enlarged issued share capital of the Company immediately following completion of the Placing and Open Offer and Firm Placing (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). Threadneedle Asset Management Limited, which holds 4,802,509 Existing Shares (representing 10.77 per cent. of the Company’s issued ordinary share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document)), has agreed to acquire up to 13,642,000 New Shares in the Firm Placing and Placing, resulting in Threadneedle Asset Management Limited being interested in not more than 11.5 per cent. of the enlarged issued share capital of the Company immediately following completion of the Placing and Open Offer and Firm Placing (assuming full take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares). As a consequence of the current interest of each of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited in the Company, each of their proposed participation in the Placing and Open Offer and Firm Placing is a related party transaction for the purposes of Chapter 11 of the Listing Rules and such transactions require the prior approval of independent Shareholders by ordinary resolution (with the resolution related to the Principal Shareholder, the resolution related to Toscafund Asset Management LLP and the resolution related to Threadneedle Asset Management Limited together the Related Party Resolutions, and together with the Disposal Resolution, the Authorised Share Capital Resolution, and the Capital Raising Resolutions, the Resolutions). The Related Party Resolutions are therefore to be proposed at the General Meeting as ordinary resolutions and will pass, subject to the other Resolutions being passed, if more than 50 per cent. of the votes cast (either in person or by proxy) are in favour. None of the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited is entitled to vote, and each has either undertaken to take all reasonable steps to ensure that it and its associates will abstain from voting or will appoint the Chair who will abstain from voting, on the resolution to approve its own related party transaction at the General Meeting. The New Shares will have the same rights in all respects as the Existing Shares (including the right to receive all dividends or other distributions declared after the date of issue of the New Shares). The New Shares will trade under ISIN GB0001048619 and the SEDOL number of the New Shares is 0104861.
169 4 ARTICLES OF ASSOCIATION The articles of association of the Company (the Articles) are also available for inspection and include provisions to the following effect:
4.1 Business Any branch or kind of business which the Company is either expressly or by implication authorised to undertake may be undertaken by the Board at such time or times as it shall think fit.
4.2 Authorised share capital The authorised share capital of the Company is £4,000,000 divided into 80,000,000 Shares.
4.3 Share rights Subject to any special rights previously conferred on the holders of any existing shares or class of shares, and subject to the provisions of the Act, the Companies Act 1985 and every other act of parliament or statutory instrument for the time being in force concerning companies and affecting the Company (the Statutes) and of the Articles, the Company may issue shares with such preferential, deferred, qualified or other special rights, privileges or conditions, whether in regard to dividend, voting, return of capital or otherwise (including shares which are to be redeemed or are liable to be redeemed at the option of the Company or the holders), as the Company may from time to time in general meeting determine, or if the Company does not so determine, as the Board may determine.
4.4 Dividends and other distributions The Company in general meetings may declare dividends but no dividends shall exceed the amount recommended by the Board. The Board may from time to time pay to the members such interim dividends as appear to the Board to be justified by the profits of the Company. Without prejudice to the generality of the foregoing, the Board may pay such interim dividends to holders of shares with deferred or non-preferential rights, as well as to holders of shares with preferential rights with regard to dividend, but no interim dividend shall be paid on shares carrying deferred or non-preferential rights if at the time of payment any preferential dividend is in arrears. Provided that the Board acts bona fide, the Board shall not incur any responsibility to the holders of shares conferring any preference for any damage that they may suffer by reason of the payment of an interim dividend on any shares having deferred or non- preferential rights. The Company has the power to cease sending dividend warrants by post if previous warrants sent to the same member have been returned undelivered or left uncashed, provided that such power may not be exercised until such warrants have been returned or so left uncashed on at least two consecutive occasions or, following one such occasion, reasonable enquiries have failed to establish any new address of the registered holder. All unclaimed dividends may be invested or otherwise made use of by the Company as the Board shall think fit until they are claimed, and so that the Company shall not thereby be constituted as a trustee in respect of such dividends. Any dividend or other sum remaining unclaimed for a period of 12 years after having been declared shall be forfeited and shall revert to the Company. If a member has been served a direction notice (defined in the Articles as a notice served by the Company to a member to whom a notice under section 793 of the Act has previously been served and who is in default in supplying the information requested therein to the Company) and the default shares represent 0.25 per cent. or more of the issued shares of the relevant class of shares in the Company, the Company shall retain all or any part of any dividends or other moneys which would otherwise be payable on such shares until such time as the direction ceases to have effect (without any liability on the part of the Company to pay interest on the retained amounts). Subject to the rights of persons, if any, entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid. All dividends shall be apportioned and (subject to any lien of the Company) paid to members on the register on the date the dividend is declared, made or paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. Subject to the provisions of the Statutes, any general meeting declaring a dividend may, upon the recommendation of the Board, direct payment of such dividend wholly or partly by the distribution of specific
170 assets and in particular of paid up shares or debentures of any other company, and the Board shall give effect to such resolution.
4.5 Variation of rights Subject to the terms of their issue, the rights or privileges attached to any class of shares in the capital of the Company shall be deemed to be varied or abrogated by the reduction of the capital paid up on such shares or by the allotment of further shares ranking in priority thereto for payment of a dividend or repayment of capital but shall not be deemed to be varied or abrogated by the creation or issue of any new shares ranking pari passu in all respects (save as to the date from which such new shares shall rank for dividend) with or ranking behind those already issued.
4.6 Transfer of shares The Company may issue shares which may be held, evidenced and transferred through a relevant system in uncertificated form. The Board shall have power to implement any arrangements as it may, in its absolute discretion, think fit in relation to the evidencing and transfer of shares held in uncertificated form (subject always to the Uncertificated Securities Regulations 2001, including any modifications thereto (the Regulations) and the facilities and requirements of the relevant system concerned). Subject to any restrictions in the Articles, any member may transfer all or any of their shares: (a) in the case of certificated shares, by instrument in writing in any usual or common form, or in such other form as the Board shall from time to time approve; and (b) in the case of uncertificated shares, in accordance with and subject to the Regulations and the facilities and requirements of the relevant scheme concerned. The instrument of transfer of a certificated share shall be signed by or on behalf of the transferor (and in the case of a partly-paid share by or on behalf of the transferee as well), and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register. The Board may, in its absolute discretion, refuse to register a transfer of any share: (a) to more than four joint holders; or (b) where the share is not fully paid up provided that such action does not prevent dealings in the shares from taking place on an open and proper basis; or (c) on which the Company has a lien. If a member has been served a direction notice and the default shares represent 0.25 per cent. or more of the issued shares of the relevant class of shares in the Company, no transfer of the default shares shall be registered, unless the transfer is an approved transfer (as defined in the Articles).
4.7 Alteration of share capital The Company may consolidate and divide its share capital into shares of larger amounts, cancel any shares not taken up by any person, and (subject to the provisions of the Statutes) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association. The resolution authorising the subdivision may determine that one or more of the shares may have preferred or other special rights over, or may have deferred rights or be subject to any restrictions as compared with, the others.
4.8 Reduction of share capital The Company may by special resolution reduce its share capital or any capital redemption reserve or share premium account in any manner authorised and subject to any conditions prescribed by the Statutes.
4.9 General meetings The Company shall in each year hold a general meeting as its annual shareholders meeting, which shall be held in each period of six months beginning with the day following the Company’s accounting reference date. The Company is required to give at least 21 clear days’ notice in writing in the case of an annual shareholders meeting, and at least 14 clear days’ notice in the case of any other general meeting. The notice must specify the place, the day and the hour of meeting and the general nature of the business to be dealt with at the meeting. The notice must be sent to the Auditors and such persons who are entitled to receive notice of general meetings
171 from the Company under the Articles (or such proportion thereof as is prescribed by section 307 of the Act). A meeting may be convened on shorter notice and in such manner as the persons who are entitled to receive notice of general meetings from the Company under the Articles (or such proportion thereof as is prescribed by section 307 of the Act) may approve.
4.10 Voting rights Subject to any rights or restrictions for the time being attached to any class or classes of shares and to the Articles, members will be entitled to vote at a general meeting or class meeting whether on a show of hands or a poll: (a) on a show of hands every member who (being an individual) is present in person or by duly appointed proxy or (being a corporation) is present by duly authorised representative or by duly appointed proxy shall have one vote; and (b) on a poll every member who (being an individual) is present in person or by duly appointed proxy or (being a corporation) by duly appointed representative or by duly appointed proxy and entitled to vote shall have one vote for every share held by such member. If two or more persons are jointly entitled to a share, then in voting on any question the vote of the senior who tenders the vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other registered holders of the share, and for this purpose seniority shall be determined by the order in which the names stand in the Register.
4.11 Restrictions No member shall (unless the Board otherwise determines) be entitled in respect of any share held by that member if any call or other sum presently payable by the member in respect of that share remains unpaid, and a member who has been served with a direction notice shall not be entitled in respect of the default shares, to vote at any general meeting either personally or by proxy or at any separate meeting of the holders of any class of shares or to exercise any other right conferred by membership in relation to any such meeting.
4.12 Directors
A. Number of Directors The number of Directors shall not be less than two.
B. Directors’ shareholding qualification A Director shall not be required to hold any qualification shares in the Company.
C. Appointment of Directors The Board shall have power at any time and from time to time to appoint any person to be a Director who shall hold office until the conclusion of the next following annual shareholders meeting and shall then be eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation at such meeting. The Board may from time to time appoint any one or more of its body to the office of managing Director and/ or chief executive officer and/or such other office in the management of the business of the Company or place of profit under the Company (an Executive Director) as it may decide.
D. Retirement of Directors At every annual shareholders meeting of the Company, one-third of the Directors for the time being or, if their number is not three or a multiple of three, then the number nearest to but not less than one third, shall retire from office and each Director shall retire from office at least once every three years. A retiring Director shall be eligible for re-election.
E. Removal of Directors The Company may by ordinary resolution, of which special notice has been given in accordance with the Act, remove any Director before the expiration of his or her period of office notwithstanding anything in the Articles or in any agreement between the Company and such Director.
172 F. Vacation of office The office of a Director shall be vacated if: (a) a receiving order is made against him or he or she makes any arrangement or composition with his or her creditors generally; (b) he absents himself from the meetings of the Board during a continuous period of six months without special leave of absence from the Board, and the Board passes a resolution that he or she has by reason of such absence vacated his or her office; (c) he is prohibited from being a Director by any order made under any provision of the Statutes or he or she becomes prohibited by law from being a Director; (d) in England or elsewhere an order shall be made by any court claiming jurisdiction in that behalf on the ground (however formulated) of mental disorder for his or her detention or for the appointment of a guardian or for the appointment of a receiver or other person (by whatever name called) to exercise powers with respect to his or her property or affairs; (e) by notice in writing given to the Company he or she resigns his or her office; (f) all his or her co-Directors resolve that he or she be removed from office as a Director; or (g) he or she is removed from office pursuant to the Act or the Articles.
G. Alternate Director Each Director shall have the power to nominate any other Director or any person approved for that purpose by resolution of the Board to act as alternate Director at meetings of the Board in his or her place during his or her absence and, at his or her discretion, to revoke such nomination.
H. Proceedings of the Board The Board may meet together for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit and determine the quorum necessary for the transaction of business. Any Director may participate in a meeting of the Board by means of conference telephone or similar communication equipment whereby all the Directors participating in the meeting can hear each other and the Directors participating in this manner shall be deemed to be present in person at such meeting and shall be entitled to vote or be counted in a quorum accordingly. Unless otherwise determined, but subject to the Articles, the quorum shall be two Directors. The Board may from time to time elect or otherwise appoint a Director to be chair or deputy chair and determine the period for which each of them is to hold office. Questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chair shall have a second or casting vote. The Board may delegate all or any of its powers, authorities and discretions to any committee or committees as it may think fit. Any such committee may consist of one or more members of the Board, and the Board shall also be entitled to appoint such other person or persons as it considers expedient to a committee but so that the majority at least of the members of any such committee shall consist of Directors and no resolution of the committee shall be effective unless a majority of the members of the committee present at the relevant meeting consists of Directors. Any committee so formed shall in the exercise of the power, authorities and discretions so delegated conform to any regulations that may be imposed on it by the Board. The Board may authorise any such committee to sub-delegate all or any of the powers, authorities and discretions delegated to it and the Board may at any time dissolve any such committee or revoke or vary any delegation made to any such committee.
I. Remuneration of Directors Each of the Directors (other than a managing Director or another Executive Director appointed under the Articles) shall be entitled to receive by way of ordinary remuneration for his or her services in each year such sum as the Board may determine. The Directors shall also be entitled to be repaid all travelling, hotel and other expenses necessarily incurred by them respectively in or about the performance of their duties as Directors, including their expenses of travelling to and from Board meetings, Committee meetings or general meetings or otherwise incurred while engaged on the business of the Company.
173 J. Pensions and gratuities for Directors It may be made a term of the appointment of an Executive Director that he or she shall receive a pension, gratuity or other benefit on his or her retirement.
K. Directors’ interests The Directors may authorise a Director in relation to any matter proposed to the Board which, if not so authorised, would infringe the duty to avoid conflicts of interest as set out in section 175 of the Act. The Directors may give any such authorisation upon such terms as they think fit and they may vary or terminate any such authorisation at any time. If such matter has been authorised by the Directors in accordance with the Articles then: (a) the Director shall not be required to disclose any confidential information relating to such matter to the Company if to make such a disclosure would result in a breach of a duty or obligation of confidence owed by him in relation to or in connection with that matter; (b) the Director may absent himself from meetings of the Directors at which anything relating to that matter will or may be discussed; and (c) the Director may make such arrangements as such Director thinks fit for relevant papers to be received and read by a professional adviser on behalf of that Director. A Director shall not, by reason of his or her office, be accountable to the Company for any benefit which he or she derives from any matter which has been approved by the Directors (subject in any such case to any limits or conditions to which such approval was subject).
L. Restrictions on voting Subject to any provisions in the Articles, a Director shall not vote in respect of any contract or arrangement or any other proposal whatsoever in which he or she has any material interest otherwise than by virtue of his or her interests in shares or debentures or other securities of or otherwise in or through the Company or any resolution of the Directors granting him authorisation under the Articles in relation to proposed matters which, if not so authorised, would infringe the duty to avoid conflicts of interest as set out in section 175 of the Act. A Director shall not be counted in the quorum of a meeting in relation to any resolution on which he or she is debarred from voting. A director shall (in the absence of any other material interest) be entitled to vote and be counted in the quorum in respect of any resolution concerning, among other things, a proposal concerning another company in which he or she is interested, directly or indirectly and whether as an officer or shareholder or otherwise howsoever, provided that he or she is not interested (as that term is used in section 820 of the Act) in 1 per cent. or more of any class of the equity share capital of such company (or of any third company through which his or her interest is derived) or of the voting rights available to members of the relevant company.
M. Borrowing and other powers Subject to the provisions of the Articles and the Statutes, the Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and assets (present or future) and uncalled capital or any part of it and (subject to the Act) to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. The Board shall restrict the borrowings of the Company and exercise all voting and other rights, powers of control or rights of influence exercisable by the Company in relation to its subsidiary undertakings (if any) so as to secure that the aggregate amount for the time being remaining outstanding of all monies borrowed by the Group and for the time being owing to persons outside the Group less the aggregate amount of Current Asset Investments (as defined in the Articles) shall not at any time, without the previous sanction of the Company in general meetings, exceed £10 million or (if greater) an amount equal to three times the Adjusted Capital and Reserves (as defined in the Articles).
N. Indemnity of Directors Subject to and to the fullest extent permitted by the Statutes, but without prejudice to any indemnity to which he or she may be otherwise entitled, every Director and alternate Director (and every director or alternate director of any associated company of the Company) shall be entitled to be indemnified out of the assets of the
174 Company against all costs and liabilities incurred by him in relation to any proceedings (whether civil or criminal) or any regulatory investigation or action which relate to anything done or omitted or alleged to have been done or omitted by him in his or her capacity as such, subject to certain exceptions.
5 DIRECTORS AND SENIOR MANAGERS 5.1 Directors The Directors of the Company are listed below. John Barton (the Proposed Director) will become non- executive chair of the Board from 1 July 2020.
Name Age Position John Barton* ...... 75 Chair (Proposed Director) Sharon Baylay ...... 52 Acting Non-Executive Chair Helena Feltham ...... 64 Senior Independent Director Rachel Osborne ...... 55 Chief Executive Officer David Wolffe ...... 57 Chief Financial Officer Andrew Jennings ...... 71 Non-Executive Director Jonathan Kempster ...... 57 Non-Executive Director
*with effect from 1 July 2020 The business address of each of the Directors for the purposes of matters relating to the Group is The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB, United Kingdom. The experience and principal business activities of each of the Directors are as follows:
John Barton, Chair John Barton, who will join the Board from 1 July 2020, has held senior non-executive positions across a number of leading consumer-facing businesses. He is currently Chairman of EasyJet, having been appointed in 2014. John has previously served as Chairman of Next plc and Cable and Wireless Worldwide plc and was also previously Senior Independent Director of Luceco, WH Smith plc and SSP Group plc.
Sharon Baylay, Acting Non-Executive Chair Sharon was appointed as a Non-Executive Director on 15 June 2018 and was appointed Acting Non-Executive Chair on 10 December 2019. She is a highly experienced digital and marketing executive who spent 16 years at Microsoft, latterly as General Manager of the Advertising and Online division for Microsoft UK. After Microsoft, Sharon became the Director of Marketing, Communications and Audiences at the BBC, where she also served as a member of the board and as a Non-Executive Director of BBC Worldwide.
Rachel Osborne, Chief Executive Officer Rachel joined the Group as Chief Financial Officer in November 2019 and became acting Chief Executive Officer on 10 December 2019 before being appointed as permanent Chief Executive Officer in early April 2020. Rachel qualified as a chartered accountant at KPMG and then spent the first part of her career in global fast-moving consumer goods companies such as P&G and PepsiCo before moving onto the retail sector. Rachel joined the Group from Debenhams Retail Limited, where she held the role of Chief Financial Officer from 2018 to 2019, and has previous experience working as Director of Dunelm, Chief Financial Officer of Domino’s Pizza Group plc from 2016 to 2018, Finance Director of Group Commercial & Enterprise at Vodafone, and Finance & Strategy Director at John Lewis for four years. Rachel has also held senior positions with Sodexo, Kingfisher and B&Q.
David Wolffe, Chief Financial Officer David Wolffe was appointed Chief Financial Officer in May having served as Acting CFO since January 2020. David’s prior experience spans over 20 years in listed and private companies, including the Group CFO role at HMV Group PLC where he addressed a range of retail and financial challenges. David has held senior finance and executive positions at leading global consumer and media businesses, including the roles of Finance Director of ITV Studios, CFO at AOL Europe, and Finance Director, BBC Magazines and Consumer Publishing. Since 2018, David has been Interim CFO in a series of private equity backed retail and technology businesses. His professional and educational background includes Fellowship of CIMA, the Chartered Institute
175 of Management Accounting, an MBA from INSEAD, and MEng Manufacturing Engineering, Cambridge University.
Helena Feltham, Senior Independent Director Helena was appointed as a Non-Executive Director with effect from 1 May 2019. She was subsequently appointed Senior Independent Director on 10 December 2019. In addition, she chairs the Company’s Nomination Committee. She has over 30 years’ experience in Retail and Human Resource Leadership. She is currently a Director and trustee at Retail Trust. She was formerly People Director at B&Q and, prior to that, held the role of Human Resources Director at Jack Wills Ltd, Marks & Spencer, Topshop and Woolworths South Africa. Additionally, she previously served as Independent Adviser to the National Assembly of Wales, as Non-Executive Director of an NHS Trust and as a Justice of the Peace. She has also spent a number of years of her career in executive search with Odgers Berndtson, covering senior appointments.
Andrew Jennings, Non-Executive Director Andrew was appointed as Non-Executive Director on 1 February 2014. He has worked in the international retail industry for over 40 years at some of the world’s respected high-end department and specialty stores. Previously, Chief Executive Karstadt Group (Germany) and prior to this has held a number of senior executive positions at leading UK and international retailers including President, Saks Fifth Avenue (USA); Group MD, Woolworths (SA), President, Holt Renfrew (Canada), General Manager, Harrods; CEO, House of Fraser; and Director, Brown Thomas (Ireland).
Jonathan Kempster, Non-Executive Director Jon was appointed as a Non-Executive Director on 17 December 2019. Jon’s career has included Board positions at Delta plc, Fii Group plc, Linden plc, Low & Bonar plc, Frasers Group plc, Utilitywise plc and Wincanton plc. He has been a Non-Executive Director at Redcentric plc since January 2017 and Audit and Risk Committee Chair since January 2019 and is a Trustee of the Delta plc pension scheme. Jon qualified as a Chartered Accountant with Price Waterhouse in 1990 and has a BA (Hons) in Business Studies from the University of Liverpool.
176 Set out below are the directorships and partnerships held by the Directors (other than, where applicable, directorships held in subsidiaries of the Company), in the five years prior to the date of this document:
Name Current directorships / partnerships Past directorships / partnerships John Barton (Proposed Director) ...... ● easyJet plc ● Luceco plc ● Matheson & Co Ltd. ● Next plc ● SSP Group plc ● Catlin Group Limited Sharon Baylay ...... ● Hyve Group plc ● Market Tech Ltd. ● Restore plc ● Exclaimer Group Ltd. ● Unique X Ltd ● Green Running Ltd. ● Elements Talent Consultancy ● Dot Net Solutions Ltd. Ltd. ● Indigo Blue Investments Ltd. Rachel Osborne ...... ● N/A ● Debenhams Plc ● Celine Group Holdings Limited ● Dunelm Group Plc ● Domino’s Pizza Group Plc ● Domino’s Pizza Germany (Holdings) Ltd. ● John Lewis Plc ● Her Majesty’s Court and Tribunals (MoJ) ● Vodafone Sales and Services Limited ● Vodafone Ventures Limited David Wolffe ...... ● Lupus Lycos Limited ● N/A ● Wolffeworks Limited Helena Feltham ...... ● Retail Trust ● Action for Children ● Arcadia (401k) Trustee Limited ● B&Q Properties Limited ● Kingfisher TMB Limited ● B&Q Properties New Malden Limited ● B&Q Limited ● Justice of the Peace ● National Assembly of Wales ● NHS Trust Andrew Jennings ...... ● Boschendal Holdings ● Hema Europe (South Africa) ● Myer Dept. Store Group (Australia) ● Alpha Wealth (South Africa) ● PittaRosso Shoes Company (Italy) ● The Prince’s Trust Jonathan Kempster ...... ● Redcentric plc ● JVM Ltd. ● Portcentric Solutions Limited ● JVM Equipment International Ltd. ● Delta Pension Nominees ● JVM AG Limited ● Prosped Solution OU ● Delta Group Overseas BV ● The Bowling Back Land Company Limited ● Frasers Group Plc ● Utilitywise plc 5.2 Senior Managers In addition to the Directors described above, the Company’s Senior Managers and members of its Executive Leadership Team, and the business and administrative departments they are responsible for, are indicated below.
177 Name Age Position Peter Collyer ...... 58 Chief People Officer Phil Clark ...... 46 Commercial and Strategy Director Leon Shepherd ...... 53 Chief Information Officer Tikki Godley ...... 42 Trading Director Jennifer Roebuck ...... 46 Chief Customer Officer Ricky Green ...... 58 Partnerships and Wholesale Director Ari Hoffman ...... 65 Chief Executive Officer of North America The business address of each Senior Manager is The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB, United Kingdom. The experience and principal business activities of each of the Senior Managers are as follows:
Peter Collyer, Chief People Officer Peter Collyer was appointed Chief People Officer in January 2020, and joined from Asos Plc. where he held the role of People Experience Director from 2015 to 2019. Prior to joining Ted Baker, his career spanned retail, hospitality, leisure, investment banking and consumer products. Peter began his career as a qualified chef, progressing into training and development and then into operational management. Peter’s Human Resources experience includes roles at RCI Europe Ltd and Yamaichi International Ltd. Peter was Director at Oasis Stores Plc. for three years, before spending over ten years in senior HR positions at The Walt Disney Company Ltd., in both London and Los Angeles. Peter was also Senior Vice President of Global HR of Claire’s, Inc. in Chicago.
Phil Clark, Commercial and Strategy Director Phil Clark was appointed Commercial and Strategy Director in February 2018. Early 2019, Phil also took on looking after the retail business which included stores, concessions, store design, retail ops and visual merchandising. Phil is member of the SteerCo, Risk Committee and is the executive representative for the Fresh Eyes People Forum. He is also a director of all TED’s fully-owned subsidiaries and a board member of the China and Australia JVs. Phil also represents TED on the Board for Urban Partners, a local non-profit with a mandate to enhance business engagement in local community initiatives. Since joining Ted, Phil has led transactions to bring the footwear licence in-house from Pentland, create the China JV and convert the Japanese own-operated business to a retail licence market. He has also worked closely on several of the Group’s product licence deals alongside Ricky Green, including the signing of Timex for watches and Next for childrenswear. An ex-equity analyst with over 20 years of experience covering the global consumer sector at Fidelity, Allianz Global Investors and Goldman Sachs, Phil has extensive knowledge of retail, consumer, premium brands and luxury sector industry trends and strategy.
Leon Shepherd, Chief Information Officer Leon Shepherd joined Ted Baker as Chief Information Officer in November 2017 to lead Ted’s Information Technology team, focusing on technology delivery and strategy as well as the delivery of projects and programmes. At Ted Leon has delivered key projects including Ship from Store, CRM and eCommerce technology and has also taken on the role as Covid-19 Crisis Lead. Leon has extensive experience within digital transformation and e-Commerce. Prior to joining Ted Baker, Leon started his career as a Project Manager at Vodafone and spent eight years at Vodafone before transitioning into retail, where he worked as Head of eCommerce Technology & International IT for Marks and Spencer. Leon has previously worked as IT & Business Change Director at Fat Face and as Chief Information Officer for Jack Wills. Leon pursued consulting independently for two years before joining Ted Baker.
Tikki Godley, Trading Director Tikki Godley, also known as Victoria Singleton, joined Ted Baker in 2005. Before her appointment as Trading Director, she worked in a number of departments within the Company, including merchandising, stock management, supply chain and product experience. As Trading Director Tikki has responsibility for the buying and merchandising functions on a global scale and has also recently taken on production across all product categories. Within her role, her key responsibilities include, stock management, OTB and spend management, retail sales, supplier base, critical path, intake and trading margin and product selection, phasing and ranging. Tikki also has previous retail experience at Diesel, where she worked from an entry level role up to a denim merchandiser role. Tikki studied Law at university.
178 Jennifer Roebuck, Chief Customer Officer Jennifer Roebuck joined Ted Baker in October 2017 as Non-Executive Director and stepped down from the PLC Board in April 2020 to move into the role of Chief Customer Officer. Within her role as CCO, Jennifer is responsible for the strategic and commercial oversight for the e-Commerce, brand and public relations strategy as well as the creative and customer strategy. Since April her focus has been on the Group’s coronavirus pandemic strategy and operations in addition to future strategic planning to maintain momentum on the transformation of the Ted Baker brand perception, customer strategy and e-Commerce development. Jennifer has 23 years of digital experience, 15 years of creative leadership and 10 years of E-commerce operational and commercial leadership. Jennifer joined Ted Baker from Feelunique, where she held the role of Chief Marketing Officer. In 2015, Jennifer co-founded REVL LTD, a lifestyle and events application and in 2005, she co-founded Tortilla Mexican Grill. Jennifer has held directorships at French Connection and Warehouse Fashion. She has also held senior positions in marketing at Orange, LMUK (Nectar), Bank of America and Personal Shopper Inc. Jennifer began her career as a technical analyst at KPMG.
Ricky Green, Partnerships and Wholesale Director Ricky joined Ted Baker in 1995 as Global Wholesale and Licensing Director, where he was instrumental in building the Group’s wholesale and licencing business, and then transitioned into the role of Global Wholesale and Partnerships Director in early 2020. Prior to joining Ted Baker, Ricky worked at several retail companies including Gore Brooker, Coles, Rudder Clothing, Parkes Clothing and PC Clothing. Ricky began his career with Morrisons Associate Companies (GUS) within the Retail Management Training Programme.
Ari Hoffman, Chief Executive Officer of North America Ari Hoffman joined Ted Baker as Chief Executive Officer of North America in December 2019 to reorganize and transform the North American business from a remotely managed to a fully functional subsidiary. Ari has spent his entire career working in the fashion and retail sector and has led and managed the Americas for some of the most respected international labels. Ari was formerly Chief Executive Officer of Dutch fashion retailer, Scotch & Soda and held the role of Chief Executive Officer at Gant, a Swedish based global brand. Ari has also held senior positions with Yves Saint Laurent for 13 years, and spent five years at Lacoste. Set out below are the directorships and partnerships held by the Senior Managers (other than, where applicable, directorships held in subsidiaries of the Company), in the five years prior to the date of this document:
Name Current directorships / partnerships Past directorships / partnerships Peter Collyer ...... ● N/A ● N/A Phil Clark ...... ● Heirloom Consultancy Ltd. ● N/A ● King’s Cross and St Pancras Business Partnership Limited Leon Shepherd ...... ● Solomon Jacob Limited ● N/A Tikki Godley ...... ● N/A ● N/A Jennifer Roebuck ...... ● Vivobarefoot Limited ● REVL Limited ● REVL Limited ● Mission St. Ventures Limited Ricky Green ...... ● N/A ● N/A Ari Hoffman ...... ● Qosina Corporation ● Scotch & Soda USA There is no family relationship between any of the Company’s Directors or Senior Managers. As at the date of this document, none of the Directors and the Senior Managers has at any time within the past five years: (a) save as disclosed in paragraphs 5.1 and 5.2 of this Part XII above, been a director or partner of any companies or partnerships; (b) had any convictions in relation to fraudulent offences (whether spent or unspent); (c) been adjudged bankrupt or has entered into any individual voluntary arrangements; (d) has been partner of any partnership at the time of or within a 12 month period preceding any compulsory liquidation, administration or partnership voluntary arrangement of such partnership;
179 (e) had his or her assets for the subject of any receivership; (f) been partner of any partnership at the time of or within a 12 month period preceding any assets thereof being the subject of a receivership; (g) been subject to any official public incrimination and/or sanctions by any statutory or regulatory authority (including any designated professional body); (h) ever been disqualified by a court from acting as a director or other officer of any company or from acting in the management or conduct of the affairs of any company; or (i) been a director of any company at the time of or within a 12 month period preceding any receivership, compulsory liquidation, creditors’ voluntary liquidation, administration, company voluntary arrangement or any composition or arrangement with such company’s creditors generally or with any class of creditors of such company, save that: (i) Rachel Osborne was previously a director of Debenhams plc, Debenhams Retail Limited and Debenhams Properties Limited. In 2019, Debenhams plc announced a pre-pack administration on 9 April 2019. Subsequent to this announcement, Debenhams Retail Ltd elected to enter into a company voluntary arrangement which was successfully voted through by creditors on 9 May 2019. In addition, Debenhams Retail Limited and Debenhams Properties Limited, from which Rachel resigned on 7 October 2019, entered administration on 9 April 2020. Save as set out above and for their capacities as persons legally and beneficially interested in Shares, there are: (a) no potential conflicts of interest between any duties to the Company of the Directors and the Senior Managers and their private interests and/or other duties; and (b) no arrangements or understandings with major Shareholders, members, suppliers or others, pursuant to which any Director or the Senior Managers was selected.
5.3 Corporate Governance Code The Company recognises the importance of, and is committed to, high standards of corporate governance. The following sections explain how the Company has applied the main and supporting principles set out in the Corporate Governance Code issued by the Financial Reporting Council. The Directors considered that during Financial Year 2020, the Company was in compliance with the provisions set out in the Corporate Governance Code.
5.4 Board Structure The Company is headed by a Board of Directors, comprising the Chair, two Executive Directors and three Non-Executive Directors. The Board considers the Non-Executive Directors to be independent for the purpose of the Corporate Governance Code. The offices of Chair and Chief Executive Officer are held separately, and both officers have clearly defined roles and responsibilities. The Board of the Company is responsible for setting the Group’s objectives and policies and for the stewardship of the Group’s resources. The Board’s principal responsibility is to act in the best interests of the Shareholders and is responsible to the Shareholders for the overall management of the Group. The Board considers all of the Non-Executive Directors to be independent of management and in character and judgement, and therefore free from any business or other relationship that could interfere with the exercise of their independent judgement. The Chair is available to meet shareholders, as required. The Corporate Governance Code requires a company to state its reasons if it determines that a director is independent in certain circumstances, including where a director indirectly has a material business relationship with the Company as a director of a body that has such a relationship with the Company, or has had in the last three years, and where a director has served on the Board for more than nine years. The Board reviews the independence of its Non-Executive Directors annually as part of its Board evaluation and also on the appointment of and change in circumstances of any Non-Executive Director. The Board considers that all the Non-Executive Directors bring strong independent oversight and demonstrate independent thought and judgement. Biographical details for both the Executive and Non-Executive Directors are set out in paragraph 5.1 of this Part XII above. All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with. The appointment and removal of the Company Secretary
180 are matters for the Board as a whole. Any Director, wishing to do so in furtherance of his or her duties, may take independent advice at the Company’s expense. The Company maintains an appropriate level of directors’ and officers’ insurance in respect of legal action against the Directors. The Group’s governance structure is designed to ensure that all decisions are made by the most appropriate people, in such a way that the decision making process itself does not unnecessarily delay progress. As envisaged by the Corporate Governance Code, the Board has delegated specific responsibilities to the Nomination, Remuneration and Audit and Risk Committees, as described below. Each committee has terms of reference that the whole Board has approved. Board and committee papers, including detailed financial information, strategic reports and operational overviews, are circulated in advance of each meeting to ensure that all Board members are fully briefed and supplied with the information they need in a timely manner.
5.5 Nomination Committee The Nomination Committee is responsible for regularly reviewing the structure, size and composition of the Board, advising on succession planning and making appropriate recommendations to ensure the Board retains an appropriate mix of skills, experience, knowledge and backgrounds. The Nomination Committee is also responsible for reviewing the Group’s senior executive needs. The Nomination Committee meets at least once a year and as required to select and propose to the Board suitable candidates of appropriate calibre for appointment as directors. The Nomination Committee shall have a minimum of three members, the majority of whom shall be independent non-executive directors of the Company. The committee is chaired by Helena Feltham and the other member of the Committee is Andrew Jennings. Rachel Osborne, Chief Executive Officer, Sharon Baylay, Acting Non-Executive Chair, and Peter Collyer, Chief People Officer, attend meetings at the invitation of the chair. The committee’s role and responsibilities are set out in its Terms of Reference, which are reviewed annually and approved by the Board. Further details of the Nomination Committee’s remit and activities are contained in the nomination report on pages 62 to 66 of the Ted Baker Annual Report for Financial Year 2020, as described in “Part XIII—Documentation Incorporated by Reference”.
5.6 Remuneration Committee The Remuneration Committee assists the Board in fulfilling its oversight responsibility by ensuring that remuneration policy and practices reward fairly and responsibly; are linked to corporate and individual performance; and take account of the generally accepted principles of good governance. The Committee has authority to determine the appropriate remuneration, benefits and employment conditions for the executive directors. The Committee also recommends and monitors the level and structure of remuneration for senior management and leads the Board’s discussion of remuneration issues for all staff more generally. The Remuneration Committee shall have a minimum of three members, the majority of whom shall be independent non-executive directors of the Company. The committee is chaired by Andrew Jennings and the other members of the Committee are Jonathan Kempster and Helena Feltham. Rachel Osborne, Chief Executive Officer, Sharon Baylay, Acting Non-Executive Chair, and Peter Collyer, Chief People Officer, attend meetings at the invitation of the chair. The Remuneration Committee has been established with formal terms of reference approved by the Board. Further details of the Remuneration Committee’s remit and activities are contained in the remuneration committee report on pages 67 to 94 of the Ted Baker Annual Report for Financial Year 2020, as described in “Part XIII—Documentation Incorporated by Reference”.
5.7 Audit and Risk Committee The Audit and Risk Committee is appointed by the Board, and its primary function is to assist the Board in fulfilling its oversight responsibilities in monitoring the integrity of the Group’s financial reporting, overseeing and reviewing the Group’s internal control and risk management processes, monitoring the effectiveness of internal audit, and overseeing the relationship with the Group’s external auditors. The Audit and Risk Committee meets at least three times a year, timed to coincide with key dates in the financial reporting and audit cycle. The chair may also call a meeting at the request of any member, the Company Secretary, or the Group’s internal or external auditor. All members of the Audit and Risk Committee are non-executive directors. The committee is chaired by Jonathan Kempster and the other members of the Committee are Helena Feltham and Andrew Jennings. Rachel Osborne, Chief Executive Officer, Sharon Baylay, Acting Non-Executive Chair, and David Wolffe, Chief
181 Financial Officer, attend meetings at the invitation of the chair. The Audit and Risk Committee has formal written terms of reference which provide authorisation for obtaining independent external advice at the Company’s expense. Further details of the Audit and Risk Committee’s remit and activities are contained in the Audit and Risk Committee report on pages 57 to 61 of Ted Baker’s Annual Report for Financial Year 2020, as described in “Part XIII—Documentation Incorporated by Reference” of this document.
6 DIRECTORS’ AND SENIOR MANAGERS’ INTERESTS The interests of the Directors and Senior Managers, and their immediate families, in the share capital of the Company (all of which, unless otherwise stated, are beneficial) on the date of this document and as they are expected to be immediately following the Placing and Open Offer and Firm Placing including as a percentage of the enlarged share capital (assuming full take up by the Directors and Senior Managers of their Open Offer Entitlements, no take up under the Offer for Subscription and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issue of the New Shares), are as follows:
Shares beneficially held Shares beneficially held immediately following the immediately following the Capital Raising (assuming full Shares beneficially held at Placing and Open Offer and take up under the Offer for the date of this document Firm Placing Subscription) Name No. % No. % No. % Directors John Barton (Proposed Director) ...... — — 13,333 0.08% 13,333 0.07% Sharon Baylay ...... — — 66,666 0.02% 66,666 0.04% Rachel Osborne ...... — — 33,333 0.02% 33,333 0.02% David Wolffe ...... — — 33,333 0.02% 33,333 0.02% Helena Feltham ...... — — 33,333 0.02% 33,333 0.02% Andrew Jennings ...... 5005 0.01 38,338 0.02% 38,338 0.02% Jonathan Kempster ...... — — 33,333 0.02% 33,333 0.02% Senior Managers Peter Collyer ...... — — 13,333 0.01% 13,333 0.01% Phil Clark ...... 198 0.00 13,531 0.01% 13,531 0.01% Leon Shepherd ...... — — 0 0% 0 0% Tikki Godley ...... — — 20,000 0.01% 20,000 0.1% Jennifer Roebuck ...... — — 0 0% 0 0% Ricky Green ...... — — 0 0% 0 0% Ari Hoffman ...... — — 33,333 0.02% 33,333 0.02% The Directors and the Senior Managers have the same voting rights as all other Shareholders.
182 Details of the Directors’ and Senior Managers’ non-beneficial interests in the Shares subject to options and awards under the Ted Baker 2013 Long Term Incentive Plan as at 19 May 2020 are set out below:
Number of Shares over which options/awards Exercise price Normal Name granted of options (£) Grant date vesting date Directors John Barton (Proposed Director) ...... 0 n/a n/a n/a Sharon Baylay ...... 0 n/a n/a n/a Rachel Osborne ...... 0 n/a n/a n/a David Wolffe ...... 0 n/a n/a n/a Helena Feltham ...... 0 n/a n/a n/a Andrew Jennings ...... 0 n/a n/a n/a Jonathan Kempster ...... 0 n/a n/a n/a Senior Managers Peter Collyer ...... 0 n/a n/a n/a Phil Clark ...... 8,000 £30.90 3 April 2018 2 April 2021 17,166 £19.27 16 April 2019 15 April 2022 Leon Shepherd ...... 8,000 £30.90 3 April 2018 2 April 2021 17,166 £19.27 16 April 2019 15 April 2022 Tikki Godley ...... 10,500 £30.90 3 April 2018 2 April 2021 18,500 £19.27 16 April 2019 15 April 2022 Jennifer Roebuck ...... 0 n/a n/a n/a Ricky Green ...... 13,920 £30.90 3 April 2018 2 April 2021 23,896 £19.27 16 April 2019 15 April 2022 Ari Hoffman ...... 0 n/a n/a n/a Details of the Directors’ and Senior Managers’ non-beneficial interests in the Shares subject to options under the Ted Baker Sharesave Scheme as at 19 May 2020 are set out below:
Number of Shares over which options Exercise price Normal Name granted (£) Grant date vesting date Directors John Barton (Proposed Director) ...... 0 n/a n/a n/a Sharon Baylay ...... 0 n/a n/a n/a Rachel Osborne ...... 0 n/a n/a n/a David Wolffe ...... 0 n/a n/a n/a Helena Feltham ...... 0 n/a n/a n/a Andrew Jennings ...... 0 n/a n/a n/a Jonathan Kempster ...... 0 n/a n/a n/a Senior Managers Peter Collyer ...... 0 n/a n/a n/a Phil Clark ...... 421 £21.35 30 May 2018 1 July 2021 565 £12.73 29 May 2019 1 July 2022 Leon Shepherd ...... 0 n/a n/a n/a Tikki Godley ...... 0 n/a n/a n/a Jennifer Roebuck ...... 0 n/a n/a n/a Ricky Green ...... 0 n/a n/a n/a Ari Hoffman ...... 0 n/a n/a n/a As at 19 May 2020, there are awards and options outstanding under the Ted Baker 2013 Long Term Incentive Plan over 346,538 Shares (including those held by Directors and Senior Managers referred to above), and options outstanding under the Ted Baker Sharesave Scheme over 81,622 Shares (including those held by Directors and Senior Managers referred to above). Other than as disclosed in this paragraph and paragraph 10 (“Share Schemes”), there are no other persons to whom any capital of any member of the Group is under option, or agreed conditionally or unconditionally to be put under option.
183 No Director has or has had any interest in any transactions which are or were unusual in their nature or conditions or are or were significant to the business of the Group or any of its subsidiary undertakings and which were effected by the Group or any of its subsidiaries during the current or immediately preceding financial year or during an earlier financial year and which remain in any respect outstanding or unperformed. There are no outstanding loans or guarantees granted or provided by any member of the Group to or for the benefit of any of the Directors. Save as set out in this Part XII, it is not expected that any Director will have any interest in the share or loan capital of the Company following the Capital Raising and there is no person to whom any capital of any member of the Group is under option or agreed unconditionally to be put under option.
7 INTERESTS OF MAJOR SHAREHOLDERS Insofar as is known to the Company, the name of each person who, directly or indirectly, has an interest in 3.0 per cent. Or more of the Company’s issued share capital, and the amount of such person’s interest, as at 19 May 2020 (being the latest practicable date prior to the publication of this document) are as follows:
Shares Name No. % Ray Kelvin ...... 15,540,280 34.85 Toscafund Asset Management LLP ...... 6,412,776 14.38 Threadneedle Asset Management Limited ...... 4,802,509 10.77 Schroders Investment Management ...... 2,423,379 5.44 Affiliated Managers Group ...... 1,659,330 3.72 Hargreaves Lansdown plc ...... 1,629,918 3.66 Insofar as is known to the Company, the Company is not directly or indirectly owned or controlled by another corporation, any foreign government, or any other natural or legal person, severally or jointly. None of the major Shareholders referred to above has different voting rights from other Shareholders. Insofar as is known to the Company, immediately following the Capital Raising, the interests of those persons set out above with an interest in 3.0 per cent. or more of the Company’s issued share capital, and the amount of such persons’ interests, including as a percentage of the enlarged share capital (assuming full take up by such persons of their Open Offer Entitlements, full take up of their shares under the Firm Placing and no take up under the Offer for Subscription and the Placing and Open Offer and Firm Placing, and no options granted under the Share Schemes are exercised between 19 May 2020 (being the latest practicable date prior to the publication of this document) and the issuance of the New Shares), will be as follows:
Shares % (excluding the % (assuming full take impact of the Offer up under the Offer for Name No. for Subscription) Subscription) Ray Kelvin ...... 29,087,107 17.0 15.8 Toscafund Asset Management LLP ...... 48,743,886 28.5 26.4 Threadneedle Asset Management Limited ...... 21,188,799 12.4 11.5 Schroders Investment Management ...... 24,308,167 14.2 13.2 Affiliated Managers Group ...... 2,607,518 1.5 1.4 Hargreaves Lansdown plc ...... 2,561,299 1.5 1.4 The Principal Shareholder, who holds 15,540,280 Existing Shares, representing 34.85 per cent. of the Company’s existing issued share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document), has, on behalf of himself and any other registered holder of his Shares, given an irrevocable undertaking approving the Disposal and undertaking to vote his Existing Shares in favour of the Resolutions. Toscafund Asset Management LLP, Threadneedle Asset Management Limited and Schroders Investment Management have each given a letter of intent confirming that they intend to vote, in aggregate, 12,870,076 Existing Shares, representing 28.87 per cent. of the Company’s existing issued share capital as at 19 May 2020 (being the last practicable date prior to the publication of this document), in favour of the Disposal and the Capital Raising at the General Meeting.
184 8 DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT Executive Directors The Company has entered into an employment agreement with its Chief Executive Officer, Rachel Osborne, and its Chief Financial Officer, David Wolffe, the particulars of which as at the Last Practicable Date are:
Name of Director Date of agreement Base salary (£) Notice period Rachel Osborne ...... 30 March 2020 £525,000(1) 12 months David Wolffe ...... 17 May 2020 £375,000 12 months
(1) Due to the uncertainty surrounding the coronavirus pandemic, Rachel Osborne has taken a 15 per cent. pay cut until further notice Rachel Osborne On 30 March 2020, Rachel Osborne entered into an employment agreement with the Company, terminable by either party on 12 months’ prior written notice or by the Company immediately in the case of gross misconduct or in any other circumstance in which termination with immediate effect is appropriate. The agreement contains provisions relating to pay, pension scheme enrolment, sick pay, holiday entitlement and other benefits (such as medical / insurance / life assurance (4 x salary) benefits and car allowance (£20,000 per annum)). Rachel Osborne is also entitled to a capped personal and family and friends allowance, with her agreement, to purchase the Company’s products. During her period as Chief Executive Officer the base salary is £525,000 per annum. As part of Rachel Osborne's employment contract, it was agreed that her annual bonus for financial year 2021 would be subject to a minimum of £70,000, provided she has not left the company by reason of gross misconduct before the time of payment. As a result of resigning from her previous employer, Rachel Osborne incurred certain losses due to her being required to repay part of a bonus she had received. Under her service contract, Rachel Osborne is entitled to be compensated by the Company in respect of such losses up to a maximum amount of £200,000. The total amount that Rachel Osborne will be required to repay to her previous employer is £35,821.37, which is to be repaid in 9 monthly instalments. On notice of termination (whether by Rachel Osborne or the Company), the Company is entitled at any time to make payment in lieu of notice (including in respect of the unexpired part of any notice period). The amount may also be paid in instalments, in which event Rachel Osborne will have to comply with certain additional conditions (and further amounts may be deducted from those payments if, amongst other things, Rachel Osborne earns any other amounts in the relevant period). Any such payment in lieu of notice will be equal to the base salary that would have been payable during the relevant period (less tax and national insurance). Rachel Osborne will also receive payment in respect of any unused holiday if her employment terminates. The contract places obligations and restrictions (as the case may be) on Rachel Osborne in respect of conduct (including requirements surrounding internal reporting and disclosure), confidentiality and data protection, intellectual property, and share dealings. Amongst other restrictions, for the 12 months following the termination of the agreement, Rachel Osborne undertakes not to (i) carry on or be interested in, or be engaged by or in, any business which is (or any proposed business which would be), wholly or partly in competition with the business (or proposed business) of the Company (or its subsidiaries or associates) in any country; (ii) engage in business with customers of the Company, subsidiaries or associates; or (iii) attempt to persuade certain persons engaged by the Company (or its subsidiaries or associates) to leave the business of the Company.
David Wolffe In May 2020, David Wolffe was appointed Chief Financial Officer of the Company after serving as Acting Chief Financial Officer. The Company has entered into an employment agreement with him, terminable by either party on 12 months’ prior written notice or by the Company immediately in the case of gross misconduct or in any other circumstance in which termination with immediate effect is appropriate. The agreement contains provisions relating to pay, pension scheme enrolment, sick pay, holiday entitlement and other benefits (such as medical / insurance / life assurance (4 x salary) benefits and car allowance (£20,000 per annum)). During his period as Chief Financial Officer the base salary is £375,000 per annum with a target bonus of 100 per cent. of his base salary subject to the achievement of key performance indicators as set by the remuneration committee from time to time. On notice of termination (whether by David Wolffe or the Company), the Company is entitled at any time to make payment in lieu of notice (including in respect of the unexpired part of any notice period). The amount
185 may also be paid in instalments, in which event David Wolffe will have to comply with certain additional conditions (and further amounts may be deducted from those payments if, amongst other things, David Wolffe earns any other amounts in the relevant period). Any such payment in lieu of notice will be equal to the base salary that would have been payable during the relevant period (less tax and national insurance). David Wolffe will also receive payment in respect of any unused holiday if his employment terminates. The contract places obligations and restrictions (as the case may be) on David Wolffe in respect of conduct (including requirements surrounding internal reporting and disclosure), confidentiality and data protection, intellectual property, and share dealings. Amongst other restrictions, for the 12 months following the termination of the agreement, David Wolffe undertakes not to (i) carry on or be interested in, or be engaged by or in, any business which is (or any proposed business which would be), wholly or partly in competition with the business (or proposed business) of the Company (or its subsidiaries or associates) in any country; (ii) engage in business with customers of the Company, subsidiaries or associates; or (iii) attempt to persuade certain persons engaged by the Company (or its subsidiaries or associates) to leave the business of the Company.
Non-Executive Directors The following Directors are appointed as non-executive Directors of the Company under letters of appointment effective from the dates stated below. Each non-executive Director’s appointment is subject to re-election where appropriate at any annual general meeting of the Company. Due to the uncertainty surrounding the coronavirus pandemic, the following Directors have taken a 15 per cent. pay cut until further notice. The Directors aims to recruit high-calibre non-executive Directors with broad commercial, international or other relevant experience. The remuneration policy for those non-executive directors is set by the Directors having taken account of the fees paid by other companies of a similar size and complexity.
Name of Director Date of appointment Base fee Notice period John Barton (Proposed Director) . 22 April 2020 £200,000 Terminable on three months’ notice Sharon Baylay ...... 15 June 2018 £130,000 Terminable on three months’ notice Helena Feltham ...... 1 May 2019 £60,000 Terminable on three months’ notice Andrew Jennings ...... 1 February 2014 £60,000 Terminable on three months’ notice Jonathan Kempster ...... 17 December 2019 £60,000 Terminable on three months’ notice
John Barton It is envisaged that John Barton will become a Director in July 2020. Under his letter of appointment, John Barton is entitled to receive a fee as specified above in relation to his appointment, payable in equal instalments monthly in arrears (less any compulsory deductions e.g. in respect of tax, national insurance) in addition to reasonable travelling and other expenses. He may consult the Company’s professional advisers free of charge should he consider that he needs professional advice in connection with the performance of his duties. Instruction of independent advisers at the Company’s expense should be discussed with the company secretary, in advance. John Barton is not entitled to an additional fee for sitting on the any Board committees. The letter acknowledges that John Barton shall have the benefit of directors’ and officers’ liability insurance intended to be maintained by the Company. He must discuss with the company secretary, or another non- executive Director, any conflict of interest which might arise as a result of their other business interests (and inform the Directors (or any authorised director or committee of directors) of any changes to significant commitments already disclosed). Any interest in, or engagement by, any business which competes with any business of the Group, and any proposed external appointment, must be authorised by the Directors (or any authorised director or committee of directors) in advance (subject to limited exceptions surrounding the size of the relevant interest where an interest is proposed to be acquired in a competing business). John Barton’s appointment may be terminated upon three months’ written notice.
Sharon Baylay Under her letter of appointment as Acting Non-Executive Chair dated 19 December 2019 and her non- executive director fees letter dated 15 June 2018, Sharon Baylay is entitled to receive a fee as specified above in relation to her appointment, payable in equal instalments monthly in arrears (less tax and national insurance contributions). She may consult the Company’s professional advisers free of charge should she consider that she needs professional advice in connection with the performance of her duties. Instruction of independent
186 advisers at the Company’s expense should be discussed with the chair or another non-executive Director, in advance. Sharon Baylay is not entitled to an additional fee for sitting on the any Board committees. The non-executive director fees letter, the terms of which were unaffected by her letter of appointment as Acting Non-Executive Chair, acknowledges that Sharon Baylay shall have the benefit of directors’ and officers’ liability insurance intended to be maintained by the Company. She must discuss with the chair, or another non- executive Director, any conflict of interest which might arise as a result of her other business interests (and inform the Directors (or any authorised director or committee of directors) of any changes to significant commitments already disclosed). Any interest in, or engagement by, any business which competes with any business of the Group, and any proposed external appointment, must be authorised by the Directors (or any authorised director or committee of directors) in advance (subject to limited exceptions surrounding the size of the relevant interest where an interest is proposed to be acquired in a competing business). Each non-executive Director’s appointment may be terminated upon three months’ written notice. Helena Feltham Under her letters of appointment and a non-executive Director fees letter dated 17 December 2019, Helena Feltham is entitled to receive a fee as specified above in relation to her appointment, payable in equal instalments monthly in arrears (less any compulsory deductions e.g. in respect of tax, national insurance) in addition to reasonable travelling and other expenses. She may consult the Company’s professional advisers free of charge should she consider that she needs professional advice in connection with the performance of her duties. Instruction of independent advisers at the Company’s expense should be discussed with Sharon Baylay (as Acting Non-Executive Chair), or another non-executive Director, in advance. Helena Feltham is entitled to an additional fee of £5,000 for sitting on the Remuneration Committee, an additional fee of £5,000 for sitting on the Audit and Risk Committee, an additional fee of £10,000 for chairing the Nomination Committee and an additional fee of £5,000 for her role as a Senior Independent Director. The letter acknowledges that Helena Feltham shall have the benefit of directors’ and officers’ liability insurance intended to be maintained by the Company. She must discuss with Sharon Baylay (as Acting Non-Executive Chair), or another non-executive Director, any conflict of interest which might arise as a result of her other business interests (and inform the Directors (or any authorised director or committee of directors) of any changes to significant commitments already disclosed). Any interest in, or engagement by, any business which competes with any business of the Group, and any proposed external appointment, must be authorised by the Directors (or any authorised director or committee of directors) in advance (subject to limited exceptions surrounding the size of the relevant interest where an interest is proposed to be acquired in a competing business). Each non-executive Director’s appointment may be terminated upon three months’ written notice. Jon Kempster Under his letter of appointment Jon Kempster is entitled to receive a fee as specified above in relation to his appointment, payable in equal instalments monthly in arrears (less any compulsory deductions e.g. in respect of tax, national insurance) in addition to reasonable travelling and other expenses. He may consult the Company’s professional advisers free of charge should he consider that he needs professional advice in connection with the performance of his duties. Instruction of independent advisers at the Company’s expense should be discussed with Sharon Baylay (as Acting Non-Executive Chair), or another non-executive Director, in advance. Jon Kempster is entitled to an additional fee of £5,000 for sitting on the Remuneration Committee, and an additional fee of £10,000 for chairing the Audit and Risk Committee. The letter acknowledges that Jon Kempster shall have the benefit of directors’ and officers’ liability insurance intended to be maintained by the Company. He must discuss with Sharon Baylay (as Acting Non-Executive Chair), or another non-executive Director, any conflict of interest which might arise as a result of his other business interests (and inform the Directors (or any authorised director or committee of directors) of any changes to significant commitments already disclosed). Any interest in, or engagement by, any business which competes with any business of the Group, and any proposed external appointment, must be authorised by the Directors (or any authorised director or committee of directors) in advance (subject to limited exceptions surrounding the size of the relevant interest where an interest is proposed to be acquired in a competing business). Each non-executive Director’s appointment may be terminated upon three months’ written notice. Andrew Jennings Under his letter of appointment and a non-executive Director fees letter dated 11 June 2019,
187 Andrew Jennings is entitled to receive a fee as specified above in relation to his appointment, payable in equal instalments monthly in arrears (less tax and national insurance contributions). Instruction of independent advisers at the Company’s expense shall be reimbursed in full if incurred in line with the Directors’ agreed procedure. Andrew Jennings is entitled to an additional fee of £5,000 for sitting on the Audit and Risk Committee, an additional fee of £5,000 for sitting on the Nomination Committee, and an additional fee of £10,000 for chairing the Remuneration Committee. The letter acknowledges that the Director shall have the benefit of directors’ and officers’ liability insurance as agreed to be maintained by the Company. He must seek the chair’s agreement before accepting additional commitments that might affect the time he is able to devote as non-executive Director. He must discuss with the chair and the company secretary any potential conflict as soon as they become aware of them. Each non- executive Director’s appointment may be terminated upon three months’ written notice, except in certain limited circumstances when termination of the appointment may be immediate (including, amongst other things, in case of fraud or bankruptcy) in which case an appointment may be terminated immediately. On termination of the appointment for any reason, he will only be entitled to accrued fees as at the date of termination, together with reimbursement of any expenses properly incurred prior to that date.
9 DIRECTORS’ AND SENIOR MANAGERS’ REMUNERATION In addition to the options and awards under the Share Schemes disclosed in paragraph 10 of this Part XII, the amount of remuneration paid (including any contingent or deferred compensation), and benefits in kind granted to Directors of the Company for services in all capacities to the Group (including subsidiaries where applicable) by any person who served during Financial Year 2020 was as follows:
Salary and fees Taxable Performance Share Pension Other Total Name Position (£’000) benefits(1) Related Bonus schemes benefits Items (£’000)
Sharon Baylay . . . . Acting Non- 83 — — — — — 83 Executive Chair
Rachel Osborne . . . . Chief Executive 99 5 — — 5 15 124 Officer
Helena Feltham . . . . Non-Executive 37 — — — — — 37 Director
Andrew Jennings . . . Non-Executive 76 — — — — — 76 Director
Jonathan Kempster . . Non-Executive 9 — — — — — 9 Director
Jennifer Roebuck(2) . Non-Executive — Director 67 — — — — 76 Ray Kelvin(3) . . . . . Chief Executive 40 2 — — — — 42 Officer Lindsay Page(4) . . . . Chief Executive 398 17 — — 50 — 466 Officer David Bernstein(5) . . Executive 167 — — — — — 167 Chairman/ Non-Executive Director
Ron Stewart(6) . . . . . Non-Executive 77 — — — — — 77 Director
Notes: (1) Benefits comprise private medical insurance and car benefits. (2) Jennifer Roebuck resigned from the Board on 1 April 2020. (3) Ray Kelvin resigned from the Board on 4 March 2019. (4) Lindsay Page resigned from the Board on 10 December 2019.
188 (5) David Bernstein was a non-executive director from 26 January 2019 to 3 March 2019 and then appointed as Executive Chairman on 4 March 2019. David resigned from the Board on 10 December 2019. During his executive Director role as Chairman, David received a salary of £200,000 per annum. (6) Ron Stewart resigned from the Board on 17 December 2019.
The Company is not required to, and does not otherwise, disclose publicly remuneration for the Senior Managers on an individual basis. Save as disclosed in this Part XII, none of the members of the administrative, management, or supervisory bodies’ service contracts with the Company or any of its subsidiaries provide for benefits upon termination of employment.
10 SHARE SCHEMES The Group currently operates the following employee share plans which provide for the grant of awards or options over Shares to employees of the Group.
10.1 Ted Baker Sharesave Scheme (the “SAYE”) Overview The SAYE, which was renewed and approved by shareholders in June 2010, will expire for the purposes of new option grants in June 2020, with outstanding options subsisting in accordance with the terms of scheme. The SAYE is an all-employee arrangement administered by the Board under which options to acquire shares are granted to employees of the Group in conjunction with a three- or five-year savings arrangement. The SAYE is designed to provide UK Government approved tax benefits to UK resident employees.
Eligibility Any employee (including an Executive Director) of the Group is eligible to participate in the SAYE, although the Board may set a qualifying period of employment for eligible participants.
Savings Contracts and Options An award under the SAYE takes the form of an option to acquire shares (an “Option”). An eligible employee who applies to participate in the SAYE enters into a savings contract under which he or she commits to save with a third party savings provider an amount each month from his or her net pay over a period of three or five years, or such other period as is permitted by the applicable legislation (a “Savings Contract”). No payment is required for the grant of an Option. The Board decides the maximum amount that a participant can elect to save in respect of any invitation under the SAYE, up to a maximum of £500 per month (or such other amount as may be permitted by the applicable tax legislation). The exercise price of an Option is set at a discount of up to 20 per cent. (or such other amount as may be permitted by the applicable tax legislation) to the market value of a share at the date on which eligible employees are invited to apply for Options. Ordinarily, invitations may only be issued within the 42 days following (i) the announcement of the Company’s results for any period, (ii) any day on which the Board resolves that exceptional circumstances exist which justify the grant, (iii) any day on which any change to the legislation affecting SAYE option schemes approved by HMRC is proposed or made, (iv) any day on which a new savings contract prospectus is announced or takes effect, or (v) the day immediately following any general meeting of the Company.
Scheme limit Options may be satisfied by the issue of new shares or by the transfer of existing shares. No Options may be granted under the SAYE which would cause the number of shares which have been or may be issued in respect of rights granted in the previous 10 year period under the SAYE and any other employees’ share scheme adopted by the Company to exceed 10 per cent. of the Company’s issued share capital at that time.
Exercise and lapse Options ordinarily vest and become exercisable for six months following the maturity of the Savings Contract with the proceeds of the Savings Contract. However, if a participant ceases employment due to injury,
189 disability, redundancy, retirement or the sale of the participant’s employing company or business, he or she is able to exercise his or her Option early in the period of six months following cessation of employment to the extent of the proceeds of the Savings Contract. In the event of a participant’s death, his or her Option may be exercised by the participant’s personal representative in the period of 12 months following the date of death, to the extent of the proceeds of the Savings Contract. Options will otherwise normally lapse on cessation of employment.
Corporate events In the event of a takeover or other change of control or winding up of the Company, Options may be exercised before the scheduled end of the Savings Contract in accordance with the applicable legislation and within six months of the date on which the event occurs, to the extent of the proceeds of the Savings Contract. Alternatively, Options may be exchanged for options granted over shares in the acquiring company or some other company.
Variation of share capital In the event of a variation of the Company’s share capital, the number of shares subject to an Option and the Option’s exercise price may be adjusted. Any such adjustments will require the prior approval of HMRC.
Voting, dividend and other rights Shares allotted under the SAYE rank equally in all respects with the shares then in issue, except that they do not rank for voting, dividend or other rights attaching to shares by reference to a record date prior to the date of their allotment. The benefits received under the SAYE are not pensionable. Awards are not assignable or transferable (except in the event of the participant’s death).
Amendments The Board may amend the rules of the SAYE at any time (other than to the detriment of subsisting rights of participants without the requisite consents), provided that the approval of the Company’s shareholders at a general meeting is required for any amendments to the advantage of participants relating to eligibility, limits, the basis for determining a participant’s entitlement to, and the terms of, and the shares comprised in an Option to become effective. However, any minor amendment to benefit administration, to take into account legislative changes, or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment may be made by the Board without shareholder approval. The Board may also amend the rules of the SAYE in respect of employees outside the United Kingdom to take account of any country specific requirements.
Impact of the Capital Raising The Board may make such adjustments to the number of shares subject to Options and the exercise price of such Options to take account of the Capital Raising in accordance with the rules of the SAYE and HMRC guidelines, subject to HMRC approval. Participants in the SAYE will be contacted separately with further information if any such adjustments are made.
10.2 Ted Baker 2013 Long Term Incentive Plan (the “LTIP”) Overview The LTIP was approved by shareholders in June 2013. The operation of the LTIP has been delegated to the Remuneration Committee. Eligibility Awards may be granted to any employee (including an Executive Director) of the Group, as approved by the Remuneration Committee. The LTIP is targeted at senior executive management of the Group.
190 Awards An “Award” may take the form of a right to acquire or an option to call for a specified number of shares. No payment is required for the grant of an Award. The price payable for shares under an Award is determined by the Remuneration Committee, although it is intended that no sum will be payable save where shares are to be issued by the Company in which case the aggregate nominal value of the shares acquired by the participant is payable. Awards may normally only be granted within 42 days following (i) the announcement of the Company’s annual or interim results, (ii) if grant under (i) is prevented by the Company’s share dealing code, the date on which such closed period ends, or (iii) the date on which a prospectus or other document containing equivalent information in relation to shares is published, provided that Awards may be granted at other times if the Remuneration Committee considers that there are exceptional circumstances. No Award may be granted more than 10 years after the LTIP is approved by the Company nor at any time at which a dealing would not be permitted under the Company’s share dealing code.
Scheme limit Awards may be satisfied by the issue of new shares or by the transfer of existing shares. No Awards may be granted if at the time of the proposed date of grant, it would cause the number of shares allocated in the preceding 10 year period under the LTIP and any other employees’ share scheme adopted by the Company to exceed 10 per cent. of the Company’s issued share capital at that time.
Individual limit The maximum value of Awards to an individual in any financial year (based on the market value of shares subject to Awards at the date of grant) cannot exceed 200 per cent. of that individual’s base annual salary at the time of an Award.
Vesting and lapse Vesting of Awards is subject to the achievement of performance targets set by the Remuneration Committee and is also subject to participants remaining in employment with the Group (the “vesting period”). Awards will normally lapse on the cessation of employment of a participant (or if earlier, on the date a participant gives or receives notice of cessation of employment), but if the cessation is for any “good leaver” reason (for example, death, ill health, injury, disability, retirement or redundancy), Awards will vest subject to time pro-rating and to the extent to which any performance conditions have been or would have been satisfied if pro-rated to the date of cessation of employment, and any Awards in the form of options will be exercisable for such reasonable period as the Remuneration Committee determines.
Malus and clawback Awards granted after 1 April 2018 are subject to malus and clawback provisions in case of certain circumstances, for example, a participant’s misconduct or a material misstatement of financial information.
Corporate events In the event of a takeover or other change of control or winding up of the Company, Awards will vest early based on the extent to which any performance conditions are satisfied and any Awards in the form of options will be exercisable for such reasonable period as the Remuneration Committee determines.
Variation of share capital In the event of a variation of the Company’s share capital, the number of shares subject to an Award may be adjusted in such manner as the Remuneration Committee reasonably determines.
Voting, dividend and other rights Shares allotted under the LTIP rank equally in all respects with the shares then in issue, except that they do not rank for voting, dividend or other rights attaching to shares by reference to a record date prior to the date of their allotment. The benefits received under the LTIP are not pensionable. Awards are not assignable or transferable (except in the event of the participant’s death).
191 Amendments The Board may amend the rules of the LTIP and the Remuneration Committee may alter terms of an Award at any time (other than to the detriment of subsisting rights of participants without the requisite consents), provided that the approval of the Company’s shareholders at a general meeting is required for any amendments to the advantage of participants relating to eligibility, limits, the basis for determining a participant’s entitlement to, and the terms of, the shares comprised in an Award and the impact of any variation of capital to become effective. However, any minor amendment to benefit administration, to take into account legislative changes, or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment may be made without shareholder approval. The Company may adopt additional sections of the LTIP rules to take account of any country specific requirements.
Impact of the Capital Raising The Remuneration Committee may make such adjustments to the number of shares subject to Awards to take account of the Capital Raising in accordance with the rules of the LTIP. Participants in the LTIP will be contacted separately with further information.
11 SUBSIDIARIES AND CORPORATE STRUCTURE 11.1 Corporate structure The Company was incorporated on 23 June 1997 and is the ultimate parent company of the Group, which comprises the Company and its subsidiary undertakings.
11.2 Significant subsidiary and associated undertakings The significant subsidiary and associated undertakings of the Company are set out below. All subsidiary undertakings are wholly-owned, are held by a subsidiary undertaking and operate principally in the country of incorporation or registration unless stated otherwise.
Name of company Country of incorporation Nature of business
No Ordinary Designer Label Ltd . United Kingdom Design, wholesale and retail of designer clothing and accessories Ted Baker Limited ...... United States Retail and wholesale of designer clothing and accessories Ted Baker Canada Inc...... Canada Retail and wholesale of designer clothing and accessories Ted Baker (France) SARL . . . . . France Retail of designer clothing and accessories Ted Baker Spain S.L...... Spain Retail of designer clothing and accessories Ted Baker Netherlands B.V. . . . . the Netherlands Retail of designer clothing and accessories Ted Baker Germany GmbH . . . . Germany Retail of designer clothing and accessories Ted Baker Belgium N.V...... Belgium Retail of designer clothing and accessories mats and composites Ted Baker Italy S.r.l...... Italy Retail of designer clothing and accessories Ted Baker Japan KK ...... Japan Retail of designer clothing and accessories Ted Baker SA (Pty) Ltd ...... South Africa Retail of designer clothing and accessories Big Lobster Limited ...... United Kingdom Property Little Lobster Limited ...... United Kingdom Dormant No Ordinary Shoes Limited . . . . United Kingdom Design, wholesale and retail of designer footwear No Ordinary Shoes USA LLC . . . United States Wholesale of designer footwear
192 12 PENSION SCHEMES The Group operates a number of defined contribution schemes for senior management and a stakeholder pension scheme for employees, for which the pension cost charge for the period amounted to £2.2 million (2019: £1.8 million). Contributions totalling £0.3 million (2019: £0.2 million) are included in other payables at the period end. Details of the Group’s pension schemes are included in Note 22 of the audited annual consolidated financial statements in the Ted Baker Annual Report for Financial Year 2020, as described in “Part XIII—Documentation Incorporated by Reference” of this document.
13 PROPERTY, PLANT AND EQUIPMENT Details of the material properties of the Group are set out below:
Facility Location Tenure Term Function
The Ugly Brown Building ...... 6a St Pancras Way, Freehold(1) N/A Head Office London NW1 0TB Warehouse ...... Derby, United Kingdom Leasehold Lease expires Warehouse and 2031 distribution centre Office ...... Los Angeles, United States Leasehold Lease expires Regional Office June 2021 Office ...... Ukiah, United States Leasehold Lease expires Regional Office July 2026
Note: (1) Upon completion of the Disposal, the Group will enter into a lease of The Ugly Brown Building for three years from 2020 to July 2023. See paragraph 16.1.4 of “Part XII—Additional Information” below for more information.
14 AUDITORS The independent auditors of the Company for the period from 1 February 2018 to date have been KPMG LLP, a member firm of the Institute of Chartered Accountants in England and Wales, whose address is at 15 Canada Square, Canary Wharf, London, E14 5GL. KPMG LLP have no material interest in the Company.
15 CAPITAL RAISING ARRANGEMENTS Sponsor and Underwriting Agreement On 1 June 2020, the Company and the Underwriters entered into the Sponsor and Underwriting Agreement pursuant to which Ted Baker has appointed Goldman Sachs and Liberum as joint bookrunners, joint underwriters and joint global co-ordinators in connection with the Capital raising, and Liberum as Sponsor in connection with Admission. Subject to and pursuant to the terms and conditions of the Sponsor and Underwriting Agreement, the Underwriters have agreed to fully underwrite the Placing and Open Offer and Firm Placing. The Underwriters (as agents of the Company) will use reasonable endeavours to procure subscribers for the Open Offer Shares at the Offer Price, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer. The Underwriters have also agreed to procure subscribers for the Firm Placed Shares at the Offer Price. The Underwriters have agreed to acquire (in their respective proportions) any Open Offer Shares and Firm Placed Shares which are not taken up by subscribers under the Open Offer, Placing or Firm Placing at the Offer Price. The underwriting commission payable to the Underwriters is equal to 3.0 per cent. of the Offer Price multiplied by the total number of the New Shares to be issued under the Firm Placing, Placing and Open Offer and 4.0 per cent. of the Offer Price multiplied by the total number of Offer for Subscription Shares. The Company has also agreed to pay to the Sponsor a sponsor fee. Irrespective of whether Admission occurs, the Company shall pay or reimburse to each Underwriter all reasonably and properly incurred and documented expenses of or in connection with the Capital Raising and the arrangements contemplated by the Sponsor and Underwriting Agreement, including all fees and expenses
193 incurred in connection with Admission (including fees payable pursuant to the Prospectus Regulation Rules and the Listing Rules), the Company’s legal and other professional fees, disbursements and expenses, the legal fees of the Underwriters (up to an agreed maximum amount) and their reasonably and properly incurred and documented travel and out-of-pocket expenses, all costs and expenses payable in connection with the preparation of this document and all other expenses in connection with the preparation, printing and filing of the Sponsor and Underwriting Agreement, any closing documents and any other documents in connection with the Capital Raising and the offering, allotment, issue and delivery of Shares in connection with the Capital Raising, all road show expenses, printing, public relations, marketing and advertising expenses, courier, postage and telecommunications expenses, and the costs and expenses of the Registrar and any transfer agent or depositary. The Company has given certain customary representations, warranties and undertakings to the Underwriters and customary indemnities to the Underwriters and to certain persons connected with them, in relation to the Capital Raising. The obligations of the Underwriters under the Sponsor and Underwriting Agreement are, subject to limited exceptions, subject to certain customary conditions to be satisfied prior to Admission including, amongst others: (a) the Company having complied with all its obligations and having satisfied all conditions to be satisfied, in each case under the Sponsor and Underwriting Agreement or under the terms or conditions of the Capital Raising which fall to be performed or satisfied on, or prior to, Admission; (b) the warranties, undertakings and covenants of the Company under the Sponsor and Underwriting Agreement being true, accurate and not misleading as at the date of the Sponsor and Underwriting Agreement and immediately prior to Admission (as though they had been given and made by reference to the facts and circumstances then subsisting) and no matter having arisen prior to the time of Admission which might reasonably be expected to give rise to a claim under the indemnity provisions of the Sponsor and Underwriting Agreement, save in each case to the extent as would not in the good faith opinion of the Underwriters (having consulted with the Company to the extent reasonably practicable) be material in the context of the Capital Raising, Admission or any of the transactions contemplated by the Sponsor and Underwriting Agreement; (c) no matter referred to in Section 87G of the FSMA arising between the publication of this document and Admission which requires the Company to publish a supplementary prospectus; (d) in the good faith opinion of the Underwriters, there having been no material adverse effect since the date of this document; and (e) Admission occurring not later than 8.00 a.m. on 19 June 2020 (or such later time and/or date (not later than 8.00 a.m. on 30 June 2020) as the Company and the Underwriters may agree). If any of the conditions in the Sponsor and Underwriting Agreement is not satisfied (or waived by the Underwriters) by the required time and date (or by such later time and/or date as the Underwriters may agree) then, save for certain exceptions, the Sponsor and Underwriting Agreement and all obligations of the parties under it shall immediately cease to have any effect without prejudice to any liability for any prior breach of the Sponsor and Underwriting Agreement. In addition, the Underwriters are entitled to terminate the Sponsor and Underwriting Agreement in certain circumstances, including if the conditions have not been satisfied or waived or if, in the good faith opinion of the Underwriters, there has been a material adverse effect since the date of this document, but only prior to Admission. The Company has agreed that, prior to the earlier of 90 days from the date of the Sponsor and Underwriting Agreement or the termination of the Underwriters’ obligations under the agreement, it will not without the prior written consent of the Underwriters: (a) declare, make or pay any dividend or other distribution on any of its share capital; (b) grant any option, directly or indirectly over any Shares or any securities convertible into or exchangeable for Shares; (c) grant any options to persons discharging managerial responsibilities (as that term is used under the Market Abuse Regulation (Regulation 596/2014) and the regulations pursuant to it) within the Company whether in accordance with the share option schemes of the Company or otherwise; or (d) increase, reduce or modify any part of its share capital,
194 provided that this will not prevent or restrict (i) the issue of the New Shares pursuant to the Capital Raising; or (ii) the grant of options or the issue of shares under the existing share option schemes of the Company. The Company has also provided certain other customary undertakings to the Underwriters, valid for the period from the date of the Sponsor and Underwriting Agreement until 90 days from Admission, in respect of: (a) issues of public announcements, statements or communications in relation to the Company or its Group that might be material in the context of the Capital Raising; (b) entry into any agreement, commitment or arrangement or putting itself in a position where it is obliged to announce that any agreement, commitment or arrangement may or will be entered into which is or may be material in the context of the business or affairs of the Group taken as a whole and which could have a material adverse effect, and dissemination of material other than the offer documents in connection with the Capital Raising; and (c) discussion of material new developments or changes in the Company’s financial condition or in the performance of the business of the Group with the Underwriters.
16 MATERIAL CONTRACTS The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company or another member of the Group within the two years immediately preceding and including the date of this document, and are, or may be, material or have been entered into at any time by the Company or any member of the Group and contain provisions under which the Company or any member of the Group has an obligation or entitlement which is, or may be, material to the Company or any member of the Group as at the date of this document:
16.1 The Group 16.1.1 Capital Raising Arrangements For a description of the principal terms of the Sponsor and Underwriting Agreement, see paragraph 15.
16.1.2 Revolving Credit Facilities On 29 September 2014, the Group and its subsidiaries Big Lobster Limited, No Ordinary Designer Label Limited and Ted Baker Limited as original borrowers and original guarantors (collectively, together with No Ordinary Shoes Limited, the Obligors) entered into a multicurrency revolving facility agreement with, Barclays Bank Plc, HSBC UK Bank Plc and National Westminster Bank Plc as arrangers, and Barclays Bank Plc as agent. The facility agreement was amended and restated pursuant to amendment and restatement agreements dated 15 July 2015, 15 December 2015, 31 May 2016, 25 September 2017 and 27 September 2019, further amended pursuant to the request letters countersigned by the agent on 24 January 2020, 11 February 2020 and 12 and 13 March 2020, further amended and restated by an amendment and restatement agreement dated 20 March 2020 and further amended pursuant to request letters countersigned by the agent on 9 April 2020 and 11 May 2020 (the Facility Agreement). In the amendment dated 27 September 2019, Banco Bilbao Vizcaya Argentaria S.A. joined the Facility Agreement as an arranger. The Facility Agreement provides for borrowings up to an aggregate principal amount of £193.5 million on a committed basis, comprising the original £180m revolving credit facility (Facility A) and a new £13.5 million short-term revolving credit facility (Facility B) which became effective on 23 March 2020 pursuant to the amendment and restatement agreement in respect of the Facility Agreement dated 20 March 2020. The funds under Facility A were utilised to refinance the existing financial indebtedness of the Group and thereafter for general corporate purposes of the Group. The funds under Facility B are available to be drawn for the general corporate purposes of the Group and in accordance with the Group’s short-term cash flow forecasts (see “—Conditions to utilization” below). On 20 May 2020, the Group entered into an amendment and restatement agreement with the lenders in respect of the Facility Agreement (the Amendment and Restatement Agreement), in terms of which the Facility Agreement will be amended and restated to, among other things, (i) increase Facility B by £11.5 million to a total of £25 million (available to be drawn as indicated under the heading “Maturity and Repayment” below) and extend Facility B’s maturity date until January 2022 and (ii) provide for a covenant holiday until 24 April 2021, with the existing financial covenants (described below) being removed and replaced by adjusted EBITDA and liquidity covenants (described below). The amendments to the Facility Agreement pursuant to the Amendment and Restatement Agreement are conditional on the Resolutions for the Disposal and the Placing
195 and Open Offer and Firm Placing being passed at the General Meeting and other standard conditions precedent for a financing transaction which will be satisfied prior to the General Meeting.
Conditions to utilisation The Group is entitled to utilise Facility A provided that no Default, or, in the case a rollover loan, no Event of Default, is continuing and that certain representations are true in all material respects as at the date of the proposed utilisation. In respect of Facility B, the conditions to utilisation include, in addition to the conditions specified above for Facility A, a requirement that the Company must demonstrate that either (i) its projected payments for the relevant period are not capable of being paid from its projected receipts in that period or from its Available Cash (as defined in the Facility Agreement) or (ii) the Group’s cash balance has fallen below the agreed cash buffer amount of £15 million.
Maturity and repayment In terms of the Facility Agreement, Facility A matures on 27 September 2022 and, assuming the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing are passed at the General Meeting, Facility B matures on 18 January 2022. Subject to the rollover provisions in the Facility Agreement (detailed below), each advance under Facility A and Facility B must be repaid on the last day of the interest period relating thereto. The interest period in respect of a loan under Facility A is one, three or six months at the election of the relevant borrower upon utilisation, provided that in respect of £20 million of the loans outstanding under Facility A (the Rolling Facility A Loans), the interest period must be two weeks. The interest period in respect of a loan under Facility B is two weeks. If the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing are passed at the General Meeting and the Amendment and Restatement Agreement therefore becomes effective, the interest periods in respect of Facility B loans and the Rolling Facility A Loans will increase to four weeks. On the last day of an interest period in respect of Facility B loans or, if no Facility B loans are outstanding, Rolling Facility A loans, the Company is required to apply any Excess Cash (as defined in the Facility Agreement) in prepayment of amounts outstanding under Facility B or, if no amounts are outstanding under Facility B, in prepayment of amounts outstanding under Facility A (the Cash Sweep). Subject to certain conditions and exceptions, loans under Facility A and Facility B may be borrowed, repaid and re-borrowed at any time during the availability period under the Facility Agreement. Facility A is available until 1 month prior to its maturity date on 27 September 2022. Once the Amendment and Restatement Agreement becomes effective, the Facility B availability period will be amended such that Facility B will be available to be drawn down from 6 September 2020 until 1 month prior to Facility B’s maturity date, except that it will not be available during the period from 27 December 2020 and 30 January 2021, inclusive. Accordingly, any amounts outstanding under Facility B on the date that the Amendment and Restatement Agreement becomes effective will need to be repaid on that date. On current projections, the Company does not expect any amounts to be drawn under Facility B on the effective date of the Amendment and Restatement Agreement and, if there are amounts outstanding under Facility B, the Company expects to have sufficient funds available to repay those amounts following receipt of the proceeds of the Placing and Open Offer and Firm Placing. All outstanding amounts under the Facility Agreement must be repaid in full on or prior to the relevant maturity date.
Interest rate and fees The loans under the Facility Agreement accrue interest at the percentage rate per annum equal to the aggregate of 2.10 per cent., in respect of Facility A, and 4.50 per cent, in respect of Facility B and LIBOR or, in relation to any loan in euro, EURIBOR (subject to a zero floor). Interest on each loan is payable on the last day of the interest period in respect of that loan. Default interest is calculated as an additional one per cent. on the overdue amount. A commitment fee applies to Facility A at the rate of 35 per cent. of the then applicable margin, being 2.10 per cent. and to Facility B at a rate of 50 per cent. of the applicable margin, being 4.50 per cent, payable on the unused and uncancelled amount available from each lender in respect of each facility. The commitment fees are payable in arrears on the last day of each successive period of three months during the term of the Facility
196 Agreement. Customary fees will also be payable to the agent and the security agent during the term of the Facility Agreement.
Guarantees Each of the Company, No Ordinary Designer Label Limited, Big Lobster Limited, No Ordinary Shoes Limited and Ted Baker Limited has provided a continuing guarantee of punctual performance of each of the Obligors’ obligations under the Facility Agreement and related finance documents and these guarantees extend to any liabilities incurred in relation to Facility B. As a condition subsequent to the Amendment and Restatement Agreement, Ted Baker Canada Inc, Ted Baker Netherlands B.V. and Ted Baker Spain S.L. are required to accede to the Facility Agreement as guarantors within 60 days of the Amendment and Restatement Agreement becoming effective.
Security The obligations of the Obligors under the Facility Agreement and related finance documents are secured by the following collateral: • an English law governed debenture creating fixed and floating security, as applicable, over all of the assets of each of Ted Baker PLC, No Ordinary Designer Label Limited, Big Lobster Limited and No Ordinary Shoes Limited; • a State of New York law governed security agreement creating a security interest over all of the assets of Ted Baker Limited; • a Hong Kong Law governed charge over the shares in Ted Baker Hong Kong Limited held by No Ordinary Designer Label Limited; and • a State of New York law governed pledge of the shares in Ted Baker Limited held by No Ordinary Designer Label Limited. As a condition subsequent to the Amendment and Restatement Agreement, No Ordinary Designer Label is required to provide security in favour of the security agent over its shares in Ted Baker Canada Inc, Ted Baker Netherlands B.V. and Ted Baker Spain S.L.
Rollover Loans If one or more loans are to be made available to a borrower: (1) on the same day that a maturing loan is due to be repaid by that borrower; (2) in the same currency as the maturing loan; and (3) in whole or in part for the purpose of refinancing the maturing Loan; the aggregate amount of the new loan(s) will be treated as if applied in or towards repayment of the maturing loan. Covenants The Facility Agreement requires the Obligors to comply, and to ensure the compliance by each other member of the Group, with a number of customary undertakings and covenants, which are subject to customary materiality qualifications, exceptions and baskets. As of 1 June, these covenants include, among others, the following financial covenants: • the leverage ratio in respect of the Group shall not exceed 2.5x on any testing date between 2 November 2019 and 8 August 2020, after which it shall not exceed 2.25x. • the Fixed Cover Charge shall at no time be less than 1.75x (tested quarterly). • the Total Net Tangible Assets of the Group shall at no time be less than £85,000,000 (tested quarterly). Since January 2020, these covenants have been amended on a monthly basis such that the Leverage ratio and the Fixed Charge Cover have not been tested for the financial quarters ended 25 January 2020 or 18 April 2020 and the Total Net Tangible Assets ratio has not been tested for the financial quarter ended 18 April 2020. If the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing are passed at the General Meeting and the Amendment and Restatement Agreement therefore becomes effective, the financial covenants
197 above will no longer be applicable and will be replaced with an Adjusted EBITDA covenant requiring that the adjusted EBITDA of the Group for a trading period ending on the date specified in column 1 below shall not be less than the amount set out in column 2 below opposite that date:
Column 1 Column 2 Adjusted EBITDA 24 April 2021 ...... (£30,300,000) 14 August 2021 ...... £1,700,000 6 November 2021 ...... £20,200,000 29 January 2022 ...... £38,700,000 23 April 2022 ...... £42,700,000 13 August 2022 ...... £47,300,000
In addition, the Group will have an obligation to ensure that the sum of cash held by the Group and the available commitments under the Facility Agreement shall not be less than £5 million for more than three consecutive days (subject to certain remedy periods and provisions).
Repeating representations A number of standard representations and warranties have been given in the Facility Agreement, most of which are repeated on the date of each utilisation request and the first day of each interest period. Customary materiality tests, carve-outs and grace periods apply in respect of these representations.
Events of defaults The Facility Agreement contains certain customary events of default (subject in certain cases to agreed grace periods, thresholds and other qualifications), including, for example, non-payment, breach of financial covenants and a cross-default to other financial indebtedness of any member of the Group. The occurrence of an event of default which is continuing would allow the Majority Lenders under the Facility Agreement to, amongst other things, upon written notice to the Company, accelerate all or part of the outstanding loans, cancel the commitments and declare all or part of the loans payable on demand. With effect from the date on which the Amendment and Restatement becomes effective, the Lenders will waive any event of default that had occurred prior to that date as a result of the overstatement by the Group of the value of its inventory as set out under the heading “Presentation of Financial Information” in the Important Information section of this document.
16.1.3 SPA and Block A Option For a description of the principal terms of the SPA and the Block A Option, see “Part IV—Principal Terms and Conditions of the Disposal” of this document.
16.1.4 Block B Lease (i) Block B Block B consists of: • the Property but excluding: • all external parts; and • the substation located on the ground floor; (the Main Site) and • the internal parts of Block C, Canal Reach, St Pancras Way, London, NW1 0WG known as the First Floor Data Room, Ground Floor Plant Room Space and Fourth Floor Storage Space which were demised to the Seller by a lease dated 5 January 2016 and made between (1) the Purchaser and (2) the Seller (the Block C Lease)
(ii) Parties and structure On 19 March 2020, Big Lobster (as landlord) and the Seller (as tenant) entered into the lease of the Main Site (the Block B Lease).
198 On Completion, the Purchaser and the Seller shall enter into a deed of variation of the Block C Lease to align its terms with the Block B Lease. It is intended that the Seller will continue to operate Block B as its registered office throughout the term of the Block B Lease.
(iii) Term The contractual terms of the Block B Lease and the Block C Lease (once varied) expire on 15 July 2023 with a rolling break option for the Seller to determine the leases at any time after 1 June 2022 subject to giving the landlord three months’ prior notice. The leases do not benefit from security of tenure pursuant to the Landlord and Tenant Act 1954.
(iv) Financials The annual rent passing under the Block B Lease is £1,173,500 (exclusive) until 1 June 2020, after which the annual rent then increases to £3,250,000 per annum (exclusive) for the remainder of the term. The annual rent passing under the Block C Lease is a peppercorn. In addition, insurance, rent and VAT are reserved as rents.
(v) Repair and Yield Up There is a reduced repairing obligation to take account of the fact that Block B and Block C are intended to be demolished.
(vi) Disposal Neither lease can be assigned or sublet by the Seller, but it may share occupation with group companies.
16.1.5 Section 106 Agreement A Section 106 agreement is secured to provide developer obligations to mitigate the impact of a development. The obligations contained in a Section 106 agreement are a charge which run with the ownership of the bound land. Completion of the Section 106 Agreement on 17 March 2020, relating to the development of 2-6 St Pancras Way allowed the local planning authority, the London Borough of Camden, to release planning permission reference 2017/5497/P dated 17 March 2020 (the Permission) for the demolition of the existing building and erection of six new buildings comprising a mixed use development of 54,522 sqm business floorspace, 73 residential units, 87 bed hotel, 1,601 sqm gym, 5,858 sqm flexible retail and 6,011 sqm storage space (the Development). The Development is split over “Plot A”, “Plot B” (of which Big Lobster is the owner) and “Plot C”. The obligations in the Section 106 Agreement provide for a broad range of planning obligations. These were all considered necessary by the Council to mitigate the land use planning impact of the Development, and were contained in its resolution to grant the Permission in 2018. Different obligations at are triggered at different points in the construction and occupation timeframe of the Development. Obligations include by way of example: • the provision of payments towards highway works; • securing a new canal bridge as part of the Development; • the provision of an element of Affordable Workspace in the Development; • the provision of work placement opportunities during the construction phase of the Development; and • a management plan for the hotel to be provided under the Permission for Plot B. The parties to the Section 106 Agreement are: • St Pancras Way Trustee 1 Limited and St Pancras Way Trustee 2 Limited acting in their capacity as trustees of the unit trusts known as St Pancras Way Block A Unit Trust and St Pancras Way Block C Unit Trust (the First and Second Freeholders as defined in the Section 106 Agreement);
199 • Big Lobster (the Third Freeholder as defined in the Section 106 Agreement); • Lloyds Bank Plc (the First Mortgagee) who holds a charge against St Pancras Way Trustee 2 Limited’s interest in Plot C within the Development; • Barclays Bank Plc (the Second Mortgagee) who hold a charge against Big Lobster’s interest in Plot B within the Development; and • The Mayor and Burgesses of the London Borough of Camden (the Council), All of the obligations in the Section 106 Agreement are joint and several, and bind all of the owners, including Big Lobster. However, under the Indemnity (detailed below), it has been agreed with BAPF that Big Lobster’s liability under the Section 106 Agreement is capped. In addition to the planning obligations in the Section 106 Agreement, the permission contains planning obligations which restrict the use and operation of the Development. Again, how these are to be complied with by the Parties is addressed in the Indemnity, as well as the Community Infrastructure Levy (the CIL) payments which shall fall due as a consequence of the implementation of the Permission. The overall planning costs (Section 106 Agreement and CIL) attributable across the Development come in at £11,549,132, with a potential further payment relating to District Energy Network costs (of up to £543,200) and an Affordable Housing Contribution (of up to £3,063,771) each of which are payable (if at all) during the build out of Plot C. However, in accordance with the Indemnity Big Lobster Limited is taking responsibility for only a proportion of these costs amounting to a total of £2,358,901.
16.1.6 Deed of Indemnity relating to Section 106 Agreement liability The deed of indemnity relating to Section 106 Agreement liability (the Indemnity) was entered into on 17 March 2020 to allocate the cost of, and responsibilities for, the planning obligations in the Section 106 Agreement, the planning conditions under the Permission, and the liability for CIL payments between the following parties: • St Pancras Way Trustee 1 Limited and St Pancras Way Trustee 2 Limited acting in their capacity as trustees of the unit trust known as St Pancras Way Block A Unit Trust (First Freeholder); • St Pancras Way Trustee 1 Limited and St Pancras Way Trustee 2 Limited acting in their capacity as trustees of the unit trust known as St Pancras Way Block C Unit Trust (Second Freeholder); and • Big Lobster. The Indemnity (which binds successors in title to the above parties) provides: • a fair and reasonable allocation of the Section 106 Agreement obligations, and planning condition compliance costs, apportioned as set out in the schedules; • an indemnity to the First Freeholder and Second Freeholder in respect of the Section 106 Agreement obligations and compliance with the planning conditions allocated to Big Lobster and vice versa; • for the parties to work together to ensure that the Council treats the Development as a phased scheme and agrees to the payment of any CIL payments which fall due to be paid in instalments; and • approval rights for Big Lobster in relation to Development wide schemes/plans/documents which directly impact on Plot B. The share of the above planning costs allocated to Big Lobster through the Indemnity is however as follows: • £545,147 on implementation of any works; • £401,319 on implementation of the substantive building works (i.e. more than site preparation and demolition) on Plot A; and • £1,412,435 on implementation of Plot B (including CIL payments).
200 16.1.7 Side letter The Side Letter was entered into on 17 March 2020 between: • Pancras Way Trustee 1 Limited and St Pancras Way Trustee 2 Limited acting in their capacity as trustees of the unit trust known as St Pancras Way Block A Unit Trust (First Freeholder); • St Pancras Way Trustee 1 Limited and St Pancras Way Trustee 2 Limited acting in their capacity as trustees of the unit trust known as St Pancras Way Block C Unit Trust (Second Freeholder); and • Big Lobster The parties to the letter also entered into a co-operation agreement dated 16 December 2015 with The St Pancras Way Limited Partnership (acting by its General Partner) to obtain planning and implement the proposed redevelopment of 2-6 St Pancras Way. The co-operation agreement was amended and varied by an amendment agreement dated 14 March 2017 and further varied by a supplemental agreement dated 31 July 2017 (together the Co-operation Agreement). The Side Letter makes various amendments to the Co-operation Agreement. The key terms of the Side Letter are as follows: • a loan by BAPF to Big Lobster to cover Big Lobster’s proportionate liability under the Co-operation Agreement for the first tranche of planning related costs (subject to a cap of £545,147) which will become due on implementation of the planning permission of Plot A. The proposed timing for the Disposal is such that it is likely that this loan will not be required. If required, the loan bears a nil interest rate, will be secured by way of a second charge in favour of BAPF and will be repayable (by way of deduction from the sale price) on completion of the Disposal or (if the Disposal does not happen) on other specified terms; • provision for the Co-operation Agreement (and the associated existing agreement for lease for Plot A) to be terminated on completion of the Disposal; • deletion of the obligation on Big Lobster to develop Plot B and Big Lobster’s right to co-invest in Plot A (which was only exercisable in any event in certain specified conditions including BAPF not pursuing the development); and • to cater for what would happen if the Disposal does not complete, a “no deal” scenario will allow either Big Lobster or BAPF to choose to implement the planning, triggering development of Plot A by BAPF and crystallising Big Lobster’s obligation to take a short-term lease of Plot B on the terms provided for in the current cooperation arrangements (being a 42 month lease of part of Plot A with a 30 month rent-free period and a right to break the lease on one month’s notice). If neither party chooses to implement, or if one party does so choose but then BAPF does not then commence within an agreed timetable, then Big Lobster will be entitled to require payment of £8m. If BAPF decides to implement and commence, then Big Lobster will be obliged to take this short-term lease.
16.1.8 Agreements to acquire No Ordinary Shoes Limited and No Ordinary Shoes USA LLC On 7 September 2018, No Ordinary Designer Label Limited (NODL) (a wholly-owned subsidiary of the Company) entered into a framework agreement with Pentland Group Plc (Pentland Group) and Pentland USA Inc (Pentland USA) for NODL to acquire: (a) the issued share capital of No Ordinary Shoes Limited (NOSL) from Pentland Group; and (b) the issued share capital of No Ordinary Shoes USA LLC (NOS USA) from Pentland USA, (the Acquisition, and NOSL and NOS USA together being the Target Companies). The agreement contains customary buyer and seller warranties. Customary restrictive covenants apply to each of NODL, Pentland Group and Pentland USA. NODL is responsible for all costs incurred by Pentland Group, Pentland USA and Pentland Group’s group companies in respect of the migration of the business of the Target Companies to NODL. On 1 January 2019, the Acquisition completed for cash consideration of £20.3 million (which amount comprised the initial consideration stated above with adjustments for estimated cash, debt and working capital).
201 16.1.9 Joint venture with Shanghai LongShang Trading Company Ltd. Pursuant to the terms of a joint venture agreement dated 10 April 2019 (JVA) made between NODL, Shanghai LongShang Trading Co. Ltd (LS), LongGoal Holding Co. Ltd (LG) and Ted Baker (Hong Kong) Limited (JVC) (JVC being, at the time, a wholly-owned subsidiary of NODL), LS entered into a conditional agreement to subscribe for a 50 per cent. interest in the capital of JVC. Prior to completion of the JVA on 2 October 2019, LS novated and transferred all its rights, liabilities and obligations under (and in accordance with) the JVA to Hong Kong Long Shang Trading Co. Limited (HK LS) (a subsidiary of LG). In connection with the JVA, among other things: (a) NODL and JVC entered into a distribution agreement on 2 October 2019 pursuant to which NODL grants JVC (i) on a non-exclusive basis, the right to design and source certain products, and (ii) on an exclusive basis, the right to grant sub-licences and appoint licencees, distributors and franchisees to market, sell and distribute certain products under certain trademarks in Hong Kong, Macau, and China (excluding Taiwan) (the Territories) by establishing and operating retail outlet(s) and/or marketing, selling and distributing online and offline in the Territories; (b) NODL and JVC entered into a trademark licence agreement on 2 October 2019 pursuant to which NODL licences to JVC (subject to certain termination provisions) perpetual, royalty-free, non-assignable and (subject to certain limited exceptions) non-sub-licensable rights to use certain trademarks and certain intellectual property; (c) NODL and JVC entered into a services agreement on 2 October 2019 pursuant to which JVC provides services to NODL to support NODL’s business and outlets in Asia, and NODL provides services to JVC to support IT, HR and marketing operations of JVC; and (d) LG and JVC entered into a services agreement on 2 October 2019 pursuant to which LG provides services to JVC on a “statements of work at cost” basis, covering a range of support services from HR to e- Commerce. The JVA, among other things, provides that JVC shall be indemnified by NODL for certain pre-completion liabilities to the extent they arise. The JVA, distribution agreement and trademark licence provide for intertwined termination rights, with the later documents only terminating independently from the JVA in certain circumstances. Pursuant to the terms of the JVA, each of HK LS and NODL has the benefit of key warranties regarding incorporation, capacity, authority and standing. In addition, NODL has the benefit of warranties given by HK LS regarding, amongst other things, the accuracy of responses to certain due diligence enquiries. Under the JVA, LG provided a full parent guarantee in relation to HK LS obligations under the JVA, including guaranteeing the warranties given by HK LS.
16.1.10 Transfer of assets to Sojitz Infinity Inc. On 30 September 2019, NODL and Sojitz Infinity Inc. (Infinity) entered into a distribution agreement (Distribution Agreement) pursuant to which, for an initial five years, Infinity is granted the exclusive right to open and operate certain outlets in Japan (with wholesale distribution rights being granted by NODL at the end of 2020). Under the arrangement, Infinity pays NODL for the products ordered from NODL, and Infinity is obliged to reinvest a certain proportion of revenue attributable to the outlets in product marketing. The agreement stipulates how Infinity shall open and operate the outlets and report to NODL. The arrangement can be terminated on 12 months’ written notice by either party (and in other specified events). Ted Baker Japan KK (Ted Baker Japan) (a subsidiary of the Company) (as seller), Infinity (as buyer) and NODL (as guarantor) had previously entered into an asset purchase agreement on 28 August 2019 (APA) pursuant to which Ted Baker Japan would transfer certain assets relating to the Group’s Japanese business to Infinity. Completion took place on 30 September 2019, at which time the Distribution Agreement entered into force. Limited warranties were given under the APA by Ted Baker Japan (including in respect of capacity, title to assets, stock, employees, litigation, and fixtures and fittings). Under the agreement, NODL guarantees Ted Baker Japan’s liability (if any) under those warranties. Infinity has also given limited warranties.
202 The price payable by Infinity under the APA was JPY 1 (on the basis that the assets were being transferred to support the transition of operations to Infinity), together with a payment in respect of certain of the transferring stock which amount was determined at completion.
16.1.11 Relationship Agreement with the Principal Shareholder On 14 November 2014, the Company entered into a relationship agreement with the Principal Shareholder, which replaced a prior relationship agreement dated 17 July 1997. The purpose of the relationship agreement is to ensure that the Principal Shareholder does not cause the Company to violate or circumvent the proper application of the Listing Rules, the Company is able to operate independently of the Principal Shareholder, and all transactions and arrangements between the Principal Shareholder and members of the Group are on an arm’s length basis and on normal commercial terms. Pursuant to the relationship agreement, the Principal Shareholder has undertaken that during the term of the agreement he will not, and will use all reasonable endeavours to procure that each of his associates will not: (a) exercise voting rights and any powers of control in relation to the members of the Group to prevent (i) the Group having its own dedicated management and a sufficient number of Directors who are determined by the then current Directors to be independent from the Principal Shareholder and his affiliates; (ii) the members of the Group being capable of carrying on business independently of the Principal Shareholder; and (iii) the Company operating and making decisions for the benefit of its Shareholders as a whole; (b) propose or procure the proposal of any Shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules; and/or (c) take any action that would have the effect of preventing the Company from complying with its obligations under the Listing Rules. The Principal Shareholder has further undertaken that during the term of the relationship agreement he will, and will use all reasonable endeavours to procure that each of his associates will: (a) abstain from voting on any resolution required pursuant to LR11.1.7 to approve a “related party transaction” (as defined in the Listing Rules) involving the Principal Shareholder or any of his associates; and (b) ensure that any transaction or arrangement (whether contractual or otherwise) between the Principal Shareholder or any of his associates and any member of the Group are made and conducted on an arm’s length basis and on normal commercial terms. The relationship agreement will remain in force for so long as the Principal Shareholder (and/or any of his associates) is a “controlling shareholder” of the Company for the purposes of the Listing Rules, and will terminate immediately on the earlier of the Principal Shareholder ceasing to be a controlling shareholder or the Company ceasing to have its ordinary share capital admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities. For this purpose, a “controlling shareholder” is any person who exercises or controls, on their own or together with any person with whom they are acting in concert, 30 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company.
16.2 Big Lobster 16.2.1 SPA and Block B Lease For a description of the principal terms of the SPA, see “Part III—Principal Terms and Conditions of the Disposal” of this document. For a description of the principal terms of the Block B Lease, see paragraph 16.1.4 of this Part XII. Big Lobster is also a party to the Section 106 Agreement, the Indemnity and the Side letter, which are described in paragraphs 16.1.5-16.1.7 inclusive of this section of this document.
17 RELATED PARTY TRANSACTIONS The related party transactions between Ted Baker and its subsidiaries that were entered into during each of Financial Years 2018, 2019 and 2020 are incorporated into this document by reference to the Ted Baker Annual Reports for each of Financial Years 2019 and 2020, as described in “Part XIII—Documentation Incorporated by
203 Reference” of this document. During the period from 25 January 2020 to 19 May 2020 (the latest practicable date prior to the publication of this document), there were no new related party transactions.
18 LITIGATION AND ARBITRATION PROCEEDINGS Save as described below, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware), during the period covering the 12 months preceding the date of this document which may have, or have had in the recent past, significant effects on the Company’s, the Group’s (including Big Lobster) and/or the Group’s (excluding Big Lobster) financial position or profitability. Following the announcements made by the Company in December 2019 and January 2020 that the value of inventory held on its balance sheet had been overstated, the Company provided information to and responded to enquiries from regulatory and other agencies, including the FCA. Although the Group has not received notification of any formal investigations, the inventory overstatements could result in a regulatory or other investigation which could result in regulatory, civil or criminal actions, including against the Group, and all consequent outcomes including censure, fines and compensation. There can be no assurance about the timing or outcome of any such action. There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware), during the period covering the 12 months preceding the date of this document which may have, or have had in the recent past, significant effects on Big Lobster’s financial position or profitability.
19 WORKING CAPITAL The Company is of the opinion that the Group does not have sufficient working capital for its present requirements, that is for the 12 months from the publication of this document. The Company has reached this opinion due, among other things, to the anticipated Timetable Events of Default under its Facility Agreement which will occur if any of the Disposal, the Placing and Open Offer or Firm Placing are not approved, or otherwise do not proceed to completion by no later than 2 July 2020 in respect of the Disposal and 22 June 2020 in respect of the Placing and Open Offer and Firm Placing. Any such Timetable Event of Default would entitle the requisite majority of the Lenders (who hold more than 66.67 per cent. of the commitments under the Facility Agreement) to declare all amounts outstanding under the Facility Agreement (including the Bridge Facility), which is expected to total approximately £179 million as at 22 June 2020, immediately due and payable and to take enforcement action against the Group, including without limitation to take control of the Group and/or its assets by enforcing their security over the assets of the Group, or taking other steps for example, instituting insolvency proceedings). At the time of such Timetable Event of Default, the Group will not have sufficient funds available to repay the expected amounts due, and, in the absence of being able to agree or implement successfully any of the alternatives discussed below, enforcement action by the Lenders, by way of insolvency proceedings or other actions the Lenders would be expected to take in such circumstances, would likely result in Shareholders losing all of the value of their investment in the Company. The Company’s opinion disclosed above applies to both the Group and the Group excluding Big Lobster.
Action plan to rectify working capital shortfall The Directors propose to rectify this anticipated shortfall in working capital by completing the Disposal, the Firm Placing and the Placing and Open Offer prior to the deadlines set out its Facility Agreement as described above. Having reviewed its action plan against its current estimate of the impact of the coronavirus pandemic, on completion of the Disposal and the Placing and Open Offer and Firm Placing, the Company is of the opinion that the Group would have sufficient working capital for its present requirements, that is for the period of 12 months from the date of this document. The Directors are confident in the Group’s ability to rectify the Group’s working capital shortfall due to the support the Company has received for the Disposal and the Capital Raising. In addition, the Company has received irrevocable undertakings from shareholders representing 34.9 per cent. of the Company’s issued share capital to vote in favour of the Placing and Open Offer and Firm Placing and letters of intent from shareholders representing 28.9 per cent. of the Company’s issued share capital expressing the intention of such shareholders to vote in favour of the Placing and Open Offer and Firm Placing.
204 Assumptions in respect of the impact of the coronavirus pandemic The coronavirus pandemic has created unprecedented challenges for the Group given its widespread and adverse global economic, social and operational impact, the effects of which are continuing to unfold. Given the uncertainty as to the overall impact of the coronavirus pandemic on the Group and its business, the Directors believe it is necessary to draw Shareholders’ (and those who may invest in the New Shares) attention to the assumptions relating to the coronavirus pandemic which underpin the Company’s confidence in the adequacy of its action plan to rectify the Group’s working capital shortfall: • a 100 per cent. reduction in the Group’s physical store revenue (own, outlet and concessions) until early September 2020, followed by a partial recovery to a reduction of approximately 35 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and a 25 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • an approximately 75 per cent. reduction in the Group’s trustee, other wholesale and licence income until early September 2020, followed by a partial recovery to an approximately 50 per cent. reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 20 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • an approximately 20 per cent. reduction in the Group’s ecommerce revenue until early September 2020, followed by a partial recovery to an approximately 15 per cent. reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 20 per cent. increase in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • all store employees being furloughed while the Group’s physical stores are closed and store payroll costs reduced by approximately 95 per cent. until mid-June 2020, with government support for payroll costs within the United Kingdom, and similar programmes in certain other markets in which the Group operates, for so long as the Group’s physical stores are required to be closed (to early September 2020 under the Company’s reasonable worst case scenario). Between mid-June 2020 and early September 2020 the Group anticipates a reduction in payroll costs of approximately 70 per cent. (compared to the corresponding period in the year ended 25 January 2020) as a group of store employees will return to work to prepare to reopen the Group’s stores. Following reopening in early September, the Company anticipates a reduction of store payroll costs (before redundancy costs) of approximately 25 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020), and an approximately 15 per cent. reduction thereafter (compared to the year ended 25 January 2020); • an approximately 35 per cent. reduction in the Group’s central payroll until early September 2020 and a reduction (before redundancy costs) of approximately 30 per cent. thereafter for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 30 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • a bad debt driven increase in the Group’s overhead costs, excluding property costs, of approximately 20 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 20 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); • an approximately 25 per cent. reduction in the Group’s property costs until early September 2020 followed by a reduction of approximately 20 per cent. for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 5 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020); and • a 100 per cent. reduction in the Group’s concession rent and service charges paid until early September 2020 followed by an approximately 25 per cent. reduction for the remainder of the year ending 30 January 2021 (compared to the corresponding period in the year ended 25 January 2020) and an approximately 10 per cent. reduction in the year ending 29 January 2022 (compared to the year ended 25 January 2020). Implications of a failure of the Group’s action plan to rectify working capital shortfall If any of the Disposal, Placing and Open Offer or Firm Placing do not proceed, in order to avoid the possibility of immediate action by the Majority Lenders, the Directors expect that the Company would seek to obtain
205 waivers or standstills of the Timetable Events of Default, although the Lenders have given no indication that such waivers or standstills would be forthcoming. The Directors expect that the Company would also ask the Lenders to further amend the Facility Agreement to allow additional funding to be made available to the Group (either by the lenders or by alternative third-party finance providers) and/or seek alternative financing. The Directors are not confident that additional financing will ultimately be achievable nor that the lenders would be willing to continue to support the business in these circumstances and therefore the most likely outcome would be that the Shareholders lose all of the value of their investments in the Company. Even if the Lenders were willing to agree to any such amendments and the Group was able to secure alternative financing, the Directors expect that the Group’s operational and commercial flexibility would be limited by the terms of such amendments or alternative financing and the Group may find it increasingly challenging and costly to refinance its Facility Agreement or any such alternative financing as they fall due, and the Group’s suppliers would be expected to continue to demand more onerous, and ultimately unsustainable, terms. In addition, even if the Group was able to avoid an Event of Default under the Facility Agreement or arrange alternative financing, doing so may require the Group to delay or reduce planned investments in the business, which could also have a material adverse effect on the Group’s future growth prospects.
20 NO SIGNIFICANT CHANGE The Group and the Group excluding Big Lobster Save as described below, there has been no significant change in the financial position or performance of the Group or the Group (excluding Big Lobster) since 25 January 2020, the date to which the latest audited year- end financial information in relation to the Group was prepared. The coronavirus pandemic has created significant uncertainty across the Group’s markets, and in March 2020, all of the Group’s retail stores, and those of its concession partners, closed to protect the Group’s employees and customers, in accordance with various national government requirements. The Group has furloughed approximately 85 per cent. of its employees globally in line with a variety of government schemes across its trading markets. The Group has suspended all discretionary capital expenditure, temporarily reduced executive remuneration by 15 per cent., rephased product orders and is negotiating rent deferrals and rent reductions with landlords. This cash preservation programme is expected to deliver permanent cash flow savings of £138.4 million (of which £88.2 million relates to savings from the reduced purchasing of stock and recent stock liquidation, £20.4 million from improved payment terms, £5.8 million from a 12 month business rates holiday, £17.2 million from the furlough schemes, £6.5 million from putting all discretionary capex on hold and £0.3 million from Board and executive management pay cuts) and defer £10.9 million of cash payments (of which £3.4 million relates to employee tax and VAT deferrals, £4.5 million from negotiated rent holidays and deferrals and £3.0 million on discretionary capex deferrals). The e-Commerce channel has continued to trade during this period, with sales in the first fourteen weeks of the financial year up approximately 50.3 per cent. on last year (49 per cent. on a constant currency basis), albeit at a level of sales significantly below that generated from retail stores and albeit at much lower margins due to heavily discounted sales for part of the period of up to 60 per cent. A significant number of the Group’s wholesale partners have cancelled or delayed orders, impacting wholesale revenue, and its licence partners have also been affected by the pandemic, thereby impacting licence income. Footfall in China and Hong Kong following reopening was considerably lower than prior to closure. Accordingly, in respect of the Group’s financial performance for the period from 25 January 2020 compared to the corresponding period in Financial Year 2020, the Group has suffered substantial reductions to revenue, operating profit, underlying profit and an increase in net loss. In the fourteen weeks ended 2 May 2020, the Group’s total revenue decreased 36.0 per cent. (36.6 per cent. on a constant currency basis), to £90.4 million (2019: restated £141.3 million). Over the same period, retail revenue decreased 34.8 per cent. (34.5 per cent. on a constant currency basis), to £58.8 million (2019: restated £89.9 million). This included store revenue of £25.2 million (2019: restated £66.8 million) and e-Commerce revenue of £33.5 million (2019: restated £22.3 million). Over the same period, wholesale revenue decreased 40.0 per cent. (40.7 per cent. on a constant currency basis), to £28.6 million (2019: restated £47.6 million) and licence income decreased 36.0 per cent. to £3.0 million (2019: restated £4.6 million). Prior to the coronavirus pandemic, in the four weeks ended 22 February 2020 the Group’s revenue was only slightly lower than the same period in 2019. As the impact of the coronavirus pandemic deepened, the Group’s revenue began decreasing, with the greatest effect felt in the six week period ended 2 May, during which the lockdown in the United Kingdom was in full effect. During this period, all of the Group’s segments were
206 performing significantly below the same period in 2019, aside from e-Commerce, which saw a revenue increase of 77.9 per cent in the six week period ended 2 May, as compared to the same period in 2019. In respect of the Group’s financial position as at the date of this document, preparation of a consolidated balance sheet requires numerous judgments and estimates about future store operating performance, the dates on which the Group’s physical stores will be permitted to reopen in the markets in which it operates and the cumulative macroeconomic impact on the Group’s customers’ discretionary income and the financial position of the Group’s trade creditors, and, as at 1 June 2020, it is not possible to reliably determine or quantify the impact of the coronavirus pandemic on the Group’s significant estimates (particularly with respect to impairment of property, plant and equipment, right of use assets and intangible assets, carrying amount of inventories, and carrying amount of trade receivables). The Group's accounting policies and a description of the methodology used in these estimates are described in Note 1(w) of the Ted Baker Annual Report for Financial Year 2020 under the captions “Impairment of property, plant and equipment, right of use assets and intangible assets” and “Carrying amount of inventories”. Management undertakes an impairment review for stores meeting certain criteria (primarily established stores with a cash contribution below 10 per cent. and determines value-in-use impairment using a discount rate equal to the Group’s weighted average cost of capital. Carrying value of inventory is impaired by reference to a provisioning policy based on a two-year product lifecycle. Nonetheless, assuming the impact of the coronavirus pandemic as set out in paragraph 19 of “Part XII—Additional Information”, which, inter alia, assumes that the Group’s retail stores and concessions remain closed for a period of six months to September 2020, the Group anticipates a significant impairment of the Group’s retail store assets, a significant impairment of trade receivables and a significant impairment in stock. In aggregate, the Group expects these impairments to have a material adverse impact on its balance sheet and to have a material, substantial adverse impact on its income statement. In the event of a shorter period during which the Group’s retail stores and concessions remain closed, the impact would be lessened, but still likely result in significant impairment charges. Since 25 Jan 2020 the Company has paid down £19.7 million under Facility A leaving total indebtedness at £160.3 million as at 28 May 2020. As described in paragraph 8 of “Part I—Letter from the Acting Non- Executive Chair of Ted Baker Plc”, the Group expects to pay down approximately £72 million of its total indebtedness on completion of the Capital Raising and the Disposal. On 20 March 2020, No Ordinary Designer Label Limited a wholly-owned subsidiary of the Company, entered into a share purchase agreement with a wholly-owned subsidiary of the British Airways Pension Fund, St Pancras Way Block C Unit Trust in relation to the sale of the entire issued share capital of Big Lobster Limited. Big Lobster is a wholly-owned subsidiary of the Company and its only material asset is The Ugly Brown Building, which is the Company’s head office. The expected gross aggregate cash consideration for the Disposal is £78.75 million (subject to completion of a customary completion accounts adjustment mechanism) and will be paid in cash on Completion, which is expected to take place by 30 June 2020. On 23 March 2020, the Group announced that its lending bank syndicate had agreed to provide an additional revolving credit facility of up to £13.5 million until 18 December 2020 taking the Group’s total available facilities to £193.5 million. On 20 May 2020, the Group entered into an amendment and restatement agreement with the lenders in respect of the Facility Agreement, in terms of which the Facility Agreement will be amended and restated to, among other things, increase Facility B by £11.5 million to a total of £25 million and extend Facility B’s maturity date until January 2022 (provided that any amounts drawn under Facility B must be repaid on the date on which the amendment and restatement agreement becomes effective and Facility B will be available to be drawn down from 6 September 2020 until 1 month prior to Facility B’s maturity date, except that it will not be available during the period from 27 December 2020 to 30 January 2021, inclusive). The amendments to the Facility Agreement pursuant to the Amendment and Restatement Agreement are conditional on the Resolutions for the Disposal and the Placing and Open Offer and Firm Placing being passed at the General Meeting. Following the amendments to the Facility Agreement becoming effective, the total available bank credit facilities will increase to £205 million, as described above. The net proceeds of the sale of Big Lobster Limited will be used to repay loans outstanding under Facility A (with a corresponding portion of the Facility A commitments being cancelled following such prepayment). Following the application of the net proceeds of the Disposal, Facility A will be reduced to a maximum of £108 million and, together with the increased Facility B (as described above), the total available facilities will be a maximum of £133 million.
Big Lobster There has been no significant change in the financial position or performance of Big Lobster since 25 January 2020, the date to which the last accounts of Big Lobster were prepared.
207 There have been no material changes to the Valuation Report set out in “Part X—Valuation Report” of this document since 1 June 2020, being the effective date the Valuation Report was prepared.
21 CONSENTS Grant Thornton UK LLP has given, and has not withdrawn, its written consent to the inclusion of its accountant’s report set out in Section B of “Part IX—Unaudited Pro Forma Financial Information” of this Prospectus and has authorised the contents of its report for the purposes of 5.3.2R(2)(f) of the Prospectus Regulation Rules. Each of Goldman Sachs and Liberum has given, and has not withdrawn its written consent to the inclusion in this document of its name and the references to it in the form and context in which they appear. Jones Lang LaSalle Limited has given, and not withdrawn, its written consent to the inclusion of the valuation report set out in “Part X—Valuation Report” of this Prospectus and has authorised the contents of its report for the purposes of 5.3.2R(2)(f) of the Prospectus Regulation Rules appears.
22 MISCELLANEOUS The total costs and expenses payable by the Company in connection with the Capital Raising (including the listing fees of the FCA and the London Stock Exchange, professional fees and expenses and the costs of printing and distribution of documents) are estimated to amount to £5.4 million (excluding VAT). Each New Share is expected to be issued at a premium of 70.0 pence to its nominal value of five pence.
23 DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents are available for inspection on the Company’s website at www.tedbakerplc.com/investor-relations, for a period of 12 months, following Admission: (a) the articles of association of the Company; (b) the consent letters referred to in paragraph 21 of this “Part XII” above; (c) the accountant’s report from Grant Thornton UK LLP on the unaudited pro forma financial information which is set out in “Part IX—Unaudited Pro Forma Financial Information”; (d) the Application Form; (e) the full Valuation Report; (f) the SPA; (g) the Block A Lease and the Block B Lease; (h) the documents incorporated by reference into this document as described in “Part XIII—Documentation Incorporated by Reference”; and (i) this document. Dated: 1 June 2020
208 PART XIII—DOCUMENTATION INCORPORATED BY REFERENCE The following documentation, which was sent to Shareholders at the relevant time and/or is available as described below, contains information that is relevant to the Capital Raising:
1. THE TED BAKER ANNUAL REPORTS AND ACCOUNTS FOR EACH OF THE FINANCIAL YEARS 2018, 2019 AND 2020 This contains the audited annual consolidated financial statements of the Company for each of the Financial Years 2018, 2019 and 2020, prepared in accordance with IFRS, together with the audit reports.
2. OTHER The table below sets out the various sections of the documents referred to above which are incorporated by reference into this document, so as to provide the information required pursuant to Annex 3 and Annex 12 to the Prospectus Regulation Rules and to ensure that Shareholders and others are aware of all information which, according to the particular nature of the Company and of the New Shares, is necessary to enable Shareholders and others to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Company and of the rights attaching to the New Shares:
Page number in reference Reference document Information incorporated by reference document Ted Baker Annual Report for Audit and Risk Committee Report ...... 57–61 Financial Year 2020 Nomination Committee Report ...... 62–66 Directors’ Remuneration Report ...... 67–94 Independent Auditors’ Report ...... 100–111 Financial Year 2020 Group income statement ...... 112 Group statement of comprehensive income ...... 113 Group statement of changes in equity ...... 114–116 Group statement of financial position ...... 117–118 Group cash flow statement ...... 119–120 Notes to the financial statements ...... 121–168 Ted Baker Annual Report for Independent Auditors’ Report ...... 71–75 Financial Year 2019 Group income statement ...... 78 Group statement of comprehensive income ...... 79 Group statement of changes in equity ...... 79–80 Group statement of financial position ...... 82 Group cash flow statement ...... 83 Notes to the financial statements ...... 85–122 Ted Baker Annual Report for Independent Auditors’ Report ...... 74–79 Financial Year 2018 Group income statement ...... 82 Group statement of comprehensive income ...... 83 Group statement of changes in equity ...... 83–84 Group statement of financial position ...... 86 Group cash flow statement ...... 87 Notes to the financial statements ...... 89–126 Where these documents make reference to other documents, such other documents are not incorporated into and do not form part of this document. Parts of the documents incorporated by reference which are not set out above are either not relevant or are covered elsewhere in this document.
209 PART XIV—DEFINITIONS AND GLOSSARY
“Act” or “Companies Act” . . . . . the United Kingdom Companies Act 2006 “Admission” ...... admission of the New Shares to the premium listing segment of the Official List, and trading on the London Stock Exchange’s main market for listed securities “AGM” or “Annual General Meeting” ...... the Annual General Meeting of the Company “Application Form” ...... the personalised application form on which Qualifying Non- CREST Shareholders may apply for the New Shares under the Open Offer “Articles” ...... the articles of association of the Company which are described in paragraph 4 of “Part XII—Additional Information” “Audit and Risk Committee” . . . the committee described in paragraph 5.7 of “Part XII—Additional Information” “Authorised Share Capital Resolution” ...... the special resolution to be proposed at the General Meeting to amend the Articles (including the relevant provisions of the Memorandum that is deemed to form part of the Articles) to remove the provisions related to the authorised share capital of the Company as the Company is no longer required to have an authorised share capital “Big Lobster” ...... Big Lobster Limited, a wholly-owned subsidiary of the Company, the only material asset of which is The Ugly Brown Building, which is the Company’s head office “Block A” ...... the property known as Bowline, Tribeca, St Pancras Way, which is next to the Property “Block A Lease” ...... the lease to be granted on exercise of the Block A Option “Block A Option” ...... the option to enter into a lease of Block A, to be granted to the Seller upon completion of the Disposal, as described in “Part IV” of this document “Block B Lease” ...... the lease of the Property entered into between the Seller (as tenant) and Big Lobster (as landlord) on 19 March 2020, as described in “Part XII” of this document “Board” ...... the board of directors, from time to time, of the Company “Business Days” ...... a day (other than a Saturday, Sunday or public holiday) on which banks are open for general business in London “Capital Raising” ...... the Placing, the Open Offer, the Firm Placing and the Offer for Subscription “Capital Raising Resolutions” . . . the New Share Issue Resolutions and the Firm Placing and Offer for Subscription Resolution “CCSS” ...... the CREST Courier and Sorting Service established by Euroclear to facilitate, amongst other things, the deposit and withdrawal of securities “certificated” or “in certificated form” ...... a share or other security which is not in uncertificated form (that is, not in CREST) “Chair” ...... the chair of the Company “Closing Price” ...... 153.3 pence “Company” ...... Ted Baker Plc, a public limited company incorporated in England and Wales under the Companies Act 1985 “Completion” ...... completion of the transaction contemplated by the SPA
210 “Conversion Rate” ...... the percentage of website visits leading to a sale “Corporate Governance Code” . . the UK Corporate Governance Code issued by the Financial Reporting Council, as amended from time to time “CREST” ...... the relevant system (as defined in the CREST Regulations) for the paperless settlement of trades in listed securities in the United Kingdom, of which Euroclear Limited is the operator (as defined in the CREST Regulations) “CREST Manual” ...... the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure, CREST Glossary of Terms and CREST Terms and Conditions (all as defined in the CREST Glossary of Terms, as amended from time to time) “CREST member” ...... a person who has been admitted by Euroclear as a system-member (as defined in the CREST Regulations) “CREST Regulations” ...... the Uncertificated Securities Regulations 2001 (SI 2001/3755) “CREST sponsor” ...... a CREST participant admitted to CREST as a CREST sponsor “CREST sponsored member” . . . a CREST member admitted to CREST as a sponsored member “Dealing Day” ...... a day upon which dealings in domestic securities may take place on the London Stock Exchange “Directors” ...... the Executive Directors and the Non-Executive Directors of the Company as at the date of this document “Disclosure and Transparency Rules” ...... the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority “Disposal” ...... the sale of the entire issued share capital of Big Lobster in accordance with the terms of the SPA “Disposal Resolution” ...... the ordinary resolution to be proposed at the General Meeting to approve the Disposal “ESMA” ...... European Securities and Markets Authority “EU” ...... European Union “Euroclear” ...... Euroclear UK & Ireland Limited “Excess Application Facility” . . . the facility for Qualifying Shareholders (other than Restricted Persons) to apply for Excess Shares in excess of their Open Offer Entitlements “Excess Open Offer Entitlements” in respect of each Qualifying Shareholder who has taken up his or her Open Offer Entitlement in full, the entitlement (in addition to the Open Offer Entitlement) to apply for Excess Shares, up to the number of Open Offer Shares, pursuant to the Excess Application Facility, which may be subject to scaling down at the absolute discretion of the Board in consultation with the Underwriters “Excess Shares” ...... New Shares which may be applied for by Qualifying Shareholders in addition to their Open Offer Entitlements pursuant to the Excess Application Facility “Excluded Territories” ...... the United States, the Commonwealth of Australia, its territories and possessions, Canada, Japan, the Republic of South Africa and Switzerland, and any other jurisdiction where the extension or availability of the Open Offer or the Offer for Subscription would breach any applicable law or regulation
211 “Executive Directors” ...... the executive directors of the Company as at the date of this document “Ex-Entitlement Date” ...... the date on which the Existing Shares are marked ex-entitlement, being 1 June 2020 “Existing Shares” ...... the existing Shares in issue immediately preceding the issue of the New Shares “Facility Agreement” ...... the revolving credit facility described in paragraph 16.1.2 of “Part XII—Additional Information” “Facility B” ...... the bridge facility entered into between the Company and the Lenders on 20 March 2020 “Financial Conduct Authority” or “FCA” ...... the Financial Conduct Authority acting in its capacity as the competent authority for the purposes of “Part VI” of the FSMA “Financial Year 2018” ...... the 52 week period ended 27 January 2018 “Financial Year 2019” ...... the 52 week period ended 26 January 2019 “Financial Year 2020” ...... the 52 week period ended 25 January 2020 “Firm Placed Shares” ...... in aggregate, 101,188,632 New Shares which the Company is proposing to allot and issue pursuant to the Firm Placing “Firm Placees” ...... any persons who have agreed or shall agree to subscribe for Firm Placed Shares pursuant to the Firm Placing “Firm Placing” ...... the subscription by the Firm Placees for the Firm Placed Shares “Firm Placing and Offer for Subscription Resolution” . . . . the special resolution to be proposed at the General Meeting to provide the Directors with the necessary authority and power to allot equity securities as if section 561 of the Companies Act did not apply to such allotment in order to undertake the Firm Placing and the Offer for Subscription, to apply until the conclusion of the Annual General Meeting of the Company to be held in 2020 “Form of Proxy” ...... the form of proxy for use at the General Meeting which accompanies this document “FSMA” ...... the Financial Services and Markets Act 2000, as amended “GDP” ...... gross domestic product “General Meeting” ...... the general meeting of the Company to be held at the Company’s registered office at The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB on 18 June 2020 at 11.00 a.m., notice of which is set out at the end of this document “Goldman Sachs” ...... Goldman Sachs International “Group” or “Ted Baker” ...... the Company and its subsidiary undertakings and, where the context requires, its associated undertakings “IFRS” ...... International Financial Reporting Standards, as adopted by the EU “ISIN” ...... International Securities Identification Number “Joint Global Co-ordinators” . . . Goldman Sachs International and Liberum Capital Limited “Lenders” ...... Banco Bilbao Vizcaya Argentaria S.A., Barclays Bank Plc, HSBC UK Bank Plc and National Westminster Bank Plc “Liberum” ...... Liberum Capital Limited “Listing Rules” ...... the listing rules of the FCA “London Stock Exchange” . . . . . London Stock Exchange plc “Modern Slavery Act” ...... Modern Slavery Act 2015
212 “Money Laundering Regulations” Money Laundering Regulations 2007 (SI 2007/2157) “New Share Issue Resolutions” . . the resolutions to be proposed at the General Meeting (i) to provide the Directors with the necessary authority and power to allot 140,000,000 New Shares to undertake the Capital Raising, which would apply until the conclusion of the Annual General Meeting of the Company to be held in 2020, and (ii) to approve the issue of the New Shares on the terms set out in this document at a price of 75 pence per share, representing a discount of greater than 10 per cent. to the middle market price of the Existing Shares as at 29 May 2020 “New Shares” ...... the 25,478,035 new Shares which the Company will allot and issue pursuant to the Placing and Open Offer, the 101,188,632 new Shares which the Company will allot and issue pursuant to the Firm Placing and any new Shares which the Company allots and issues pursuant to the Offer for Subscription “Nomination Committee” ...... the committee described in paragraph 5.5 of “Part XII—Additional Information” “Non-Executive Directors” . . . . . the non-executive directors of the Company as at the date of this document “Offer for Subscription” ...... the invitation to subscribe for the Offer for Subscription Shares at the Offer Price on the terms and subject to the conditions set out in this document and the Offer for Subscription Application Form “Offer for Subscription Application Form” ...... the application form appended to the end of this document on which Shareholders and other investors may apply for Offer for Subscription Shares under the Offer for Subscription “Offer for Subscription Shares” . . the up to 13,333,333 New Shares for which Shareholders and other investors are being invited to apply to be issued pursuant to the terms of the Offer for Subscription “Offer Price” ...... 75 pence per Share “Official List” ...... the Official List of the FCA “Open Offer” ...... the conditional invitation to Qualifying Shareholders to subscribe for the Open Offer Shares at the Offer Price on the terms and subject to the conditions set out in this document and, in the case of Qualifying Non- CREST Shareholders only, the Application Form “Open Offer Entitlements” . . . . . entitlements to subscribe for the Open Offer Shares, allocated to a Qualifying Shareholder pursuant to the Open Offer “Open Offer Shares” ...... the 25,478,035 New Shares for which Qualifying Shareholders are being invited to apply to be issued pursuant to the terms of the Open Offer “Overseas Persons” ...... Overseas Shareholders or other investors with registered addresses in, or who are citizens, residents or nationals of, jurisdictions outside the United Kingdom “Overseas Shareholders” ...... Shareholders with registered addresses in, or who are citizens, residents or nationals of, jurisdictions outside the United Kingdom “Placees” ...... any persons who have agreed or shall agree to subscribe for shares pursuant to the Placing “Placing” ...... the conditional placing, by the Underwriters, as agent of and on behalf of the Company, of the Open Offer Shares subject to clawback pursuant to the Open Offer, on the terms and subject to the conditions contained in the Sponsor and Underwriting Agreement “PRA” ...... Prudential Regulation Authority “Principal Shareholder” ...... Ray Kelvin
213 “Property” ...... The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB, the head office of the Company “Proposed Director” ...... John Barton “Prospectus” or “this document” . the prospectus and circular issued by the Company in respect of the Disposal and the Capital Raising, together with any supplements or amendments thereto “Prospectus Delegated Regulation” the Delegated Regulation (EU) 2019/980 of 14 March 2019 supplementing the Prospectus Regulation “Prospectus Regulation” ...... the Prospectus Regulation (EU) 2017/1129 and amendments thereto “Prospectus Regulation Rules” . . the prospectus rules published by the FCA under section 73A of FSMA “Purchaser” ...... St Pancras Way Block C Unit Trust, the proposed purchaser of the Big Lobster “Qualifying CREST Shareholders” Qualifying Shareholders holding Shares in uncertificated form “Qualifying non- CREST Shareholders” ...... Qualifying Shareholders holding Shares in certificated form “Qualifying Shareholders” . . . . . Shareholders on the register of members of the Company on the Record Date with the exclusion of persons with a registered address or located or resident in the United States or any Excluded Territory “R&D” ...... research and development “Record Date” ...... close of business on 28 May 2020 “Registrar and Receiving Agent” . Link Asset Services “Regulation S” ...... Regulation S under the Securities Act “Related Party Resolutions” . . . . the ordinary resolutions to be proposed at the General Meeting to provide the Directors with the necessary authority and power to allot up to 56,975,334 New Shares in connection with the Placing and Open Offer and Firm Placing to the Principal Shareholder, Toscafund Asset Management LLP and Threadneedle Asset Management Limited, each of which constitutes a related party transaction pursuant to the Listing Rules “Remuneration Committee” . . . . the committee described in paragraph 5.6 of “Part XII—Additional Information” “Resolutions” ...... the Disposal Resolution, the Authorised Share Capital Resolution, the Capital Raising Resolutions and the Related Party Resolutions “Restricted Persons” ...... subject to certain exceptions, persons who have registered address in, who are incorporated in, registered in or otherwise resident or located in, the United States or any other Excluded Territory “SDRT” ...... stamp duty reserve tax “Securities Act” ...... the United States Securities Act of 1933, as amended “SEDOL” ...... Stock Exchange Daily Official List “Seller” ...... No Ordinary Designer Label Limited, a wholly-owned subsidiary of the Company “Senior Managers” ...... those individuals identified as such in paragraph 5.2 of “Part XII—Additional Information” “SERP” ...... State Earnings Related Pension Scheme “Shareholders” ...... holders of Shares
214 “Shares” ...... ordinary shares of five pence each in the capital of the Company having the rights set out in the Articles as described in paragraph 4 of “Part XII—Additional Information” “Share Schemes” ...... schemes described in paragraph 10 of “Part XII—Additional Information” “SPA” ...... the conditional share purchase agreement in respect of Big Lobster dated 20 March 2020, and entered into between the Seller and the Purchaser, further details of which are set out in “Part IV—Principal Terms and Conditions of the Disposal” of this document “Sponsor” ...... Liberum Capital Limited “Sponsor and Underwriting Agreement” ...... the sponsor and underwriting agreement entered into between Ted Baker and the Underwriters on 1 June 2020 “Ted Baker Annual Report” . . . . the annual report prepared by the Company for the year indicated “UK” or “United Kingdom” . . . . the United Kingdom of Great Britain and Northern Ireland “uncertificated” or “in uncertificated form” ...... recorded on the register of members as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST “Underwriters” ...... Goldman Sachs International and Liberum Capital Limited “United States” or “US” ...... the United States of America, its territories and possessions, any state of the United States and the District of Columbia “USE Instructions” ...... Unmatched Stock Event instruction, as defined in the CREST Regulations “Valuation Report” ...... means the valuation report prepared by the Valuer contained in “Part X” of this document “Valuer” ...... Jones Lang LaSalle Limited “VAT” ...... (i) within the EU, any tax imposed by any member state in conformity with the directive of the council of the European Union on the common system of value added tax (2006/112/EC), and (ii) outside the EU, any tax corresponding to, or substantially similar to, the common system of value added tax referred to in paragraph (i) of this definition
215 NOTICE OF GENERAL MEETING Ted Baker Plc (registered in England and Wales with registered number 03393836) Notice is hereby given that a General Meeting of Ted Baker Plc (the Company) will be held at the Company’s registered office at The Ugly Brown Building, 6a St Pancras Way, London NW1 0TB on 18 June 2020 at 11.00 a.m. (the General Meeting) to consider the following resolutions. Resolutions 1, 3, 5, 6, 7 and 8 will be proposed as ordinary resolutions and resolutions 2 and 4 will be proposed as special resolutions, each with effect from the close of business on the date of the General Meeting.
Resolution 1 THAT the proposed disposal of Big Lobster Limited, the owner of the property known as The Ugly Brown Building situated at 6a St Pancras Way, London NW1 0TB, pursuant to the share purchase agreement entered into on 20 May 2020 (the SPA, as defined and described in the combined prospectus and circular of the Company dated 1 June 2020 of which this Notice forms part (the Prospectus)) (the Disposal) on and subject to the terms and conditions of the SPA and which, as described in the Prospectus, comprises a Class 1 transaction under the Listing Rules (as defined in the Prospectus), be and is hereby approved and that the directors of the Company (the Directors) (or a duly authorised committee of the Directors) be authorised: (1) to take all such steps as they consider to be necessary or desirable in connection with, and to implement, the Disposal; and (2) to agree such modifications, variations, revisions, waivers, extensions or amendments to any of the terms and conditions of the Disposal and/or the SPA and the associated and ancillary agreements and documents contemplated by the SPA and/or described in the Prospectus (provided such modifications, variations, revisions, waivers, extensions or amendments are not of a material nature), as they may in their absolute discretion think fit.
Resolution 2: THAT the articles of association of the Company (the Articles) be and are hereby amended by deleting in its entirety Article 4(A) and paragraph 6 of the memorandum of association of the Company that pursuant to section 28 of the Companies Act 2006 (the Act) is deemed to form part of the Articles.
Resolution 3: THAT, subject to and conditional upon Resolution 1, Resolution 2, Resolution 4, Resolution 5, Resolution 6, Resolution 7 and Resolution 8 set out in this “Notice of General Meeting” being passed, the Directors be and are hereby generally and unconditionally authorised pursuant to section 551 of the Act to: allot shares in the Company, and to grant rights to subscribe for or to convert any security into shares in the Company, up to an aggregate nominal amount of £7,000,000.0 pursuant to or in connection with the Capital Raising (as such term is described in the Prospectus) for a period expiring (unless previously renewed, varied or revoked by the Company in general meetings) at the end of the next annual general meeting of the Company after the date on which this resolution is passed; and to make an offer or agreement in connection with the Capital Raising which would or might require shares to be allotted, or rights to subscribe for or convert any security into shares to be granted, after expiry, revocation or variation of this authority and the Directors may allot shares and grant rights in pursuance of that offer or agreement as if this authority had not expired or been revoked or varied. The authority granted by this Resolution shall be in addition, and without prejudice, to all existing authorities to allot relevant securities granted to the Directors.
Resolution 4: THAT, subject to and conditional upon Resolution 1, Resolution 2, Resolution 3, Resolution 5, Resolution 6, Resolution 7 and Resolution 8 set out in this “Notice of General Meeting” being passed, in addition to all existing powers, the Directors be and are hereby generally and unconditionally authorised pursuant to section 570 and section 573 of the Act to allot equity securities (as defined in the Act) for cash, pursuant to the authority conferred by Resolution 3 in this “Notice of General Meeting”, as if section 561(1) of the Act did not apply to the allotment. This authorisation: (a) expires (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the next annual general meeting of the Company after the date on which this resolution is passed, but the Company may make an offer or agreement which would or might require equity securities to be allotted after expiry, revocation or variation of this authority and the Directors may allot equity securities in pursuance of that offer or agreement as if this authority had not expired or been revoked or varied; and
216 (b) shall enable the allotment of equity securities in connection with the Capital Raising, including the Firm Placing and the Offer for Subscription, and also any limits, restrictions or arrangements which the Directors consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter in connection with the Capital Raising.
Resolution 5: THAT, subject to and conditional upon Resolution 1, Resolution 2, Resolution 3, Resolution 4, Resolution 6, Resolution 7 and Resolution 8 set out in this “Notice of General Meeting” being passed, the issue of up to 140,000,000 ordinary shares of five pence each pursuant to the Capital Raising for cash at a price of 75 pence per share (which represents a discount of more than 10 per cent. to the middle market price of the Company’s ordinary shares as at 29 May 2020, being the business day prior to announcement of the Capital Raising) and otherwise on the terms set out in the Prospectus be and is hereby approved.
Resolution 6: THAT, subject to and conditional upon Resolution 1, Resolution 2, Resolution 3, Resolution 4, Resolution 5, Resolution 7 and Resolution 8 set out in this “Notice of General Meeting” being passed, the allotment and issue to Ray Kelvin of up to 4,666,667 ordinary shares of five pence each in connection with the Firm Placing and Placing, which constitutes a related party transaction pursuant to the Listing Rules (as defined in the Prospectus) by reason of the Ray Kelvin being a related party because it is a substantial shareholder in the Company (being a party which is entitled to exercise control of 10 per cent. or more of the Company’s votes able to be cast on all or substantially all of the matters at general meetings of the Company), be and is hereby approved.
Resolution 7: THAT, subject to and conditional upon Resolution 1, Resolution 2, Resolution 3, Resolution 4, Resolution 5, Resolution 6 and Resolution 8 set out in this “Notice of General Meeting” being passed, the allotment and issue to Toscafund Asset Management LLP of up to 38,666,667 ordinary shares of five pence each in connection with the Firm Placing and Placing, which constitutes a related party transaction pursuant to the Listing Rules (as defined in the Prospectus) by reason of Toscafund Asset Management LLP being a related party because it is a substantial shareholder in the Company (being a party which is entitled to exercise control of 10 per cent. or more of the Company’s votes able to be cast on all or substantially all of the matters at general meetings of the Company), be and is hereby approved.
Resolution 8: THAT, subject to and conditional upon Resolution 1, Resolution 2, Resolution 3, Resolution 4, Resolution 5, Resolution 6 and Resolution 7 set out in this “Notice of General Meeting” being passed, the allotment and issue to Threadneedle Asset Management Limited of up to 13,642,000 ordinary shares of five pence each in connection with the Firm Placing and Placing, which constitutes a related party transaction pursuant to the Listing Rules (as defined in the Prospectus) by reason of Threadneedle Asset Management Limited being a related party because it is a substantial shareholder in the Company (being a party which is entitled to exercise control of 10 per cent. or more of the Company’s votes able to be cast on all or substantially all of the matters at general meetings of the Company), be and is hereby approved.
By order of the board of directors of the Company
Peter Hearsey-Zoubie Company Secretary
1 June 2020
Registered office:
The Ugly Brown Building 6a St Pancras Way London NW1 0TB
217 Notes to the Notice of General Meeting 1. Only those Shareholders registered in the register of members of the Company as at the close of business on 16 June 2020 shall be entitled to attend or vote at the General Meeting in respect of the number of Shares registered in their name at that time. Changes to entries on the register after this time shall be disregarded in determining the rights of any person to attend or vote at the General Meeting. In accordance with LR 11.1.7 of the Financial Conduct Authority’s Listing Rules, the relevant related party Shareholders shall not be entitled to vote in respect of the separate approval of Resolutions 6, 7 and 8.
Entitlement to attend and vote 2. In light of the coronavirus outbreak, the Directors take the well-being of the Company’s employees and Shareholders very seriously. The UK Government has introduced measures to deal with the coronavirus crisis which include guidance on social distancing and restrictions on non-essential travel and public gatherings, which affect the manner in which the General Meeting can be conducted. 3. The Directors regret that to ensure Shareholders’ safety, Shareholders are not permitted to attend the General Meeting in person. Any person attempting to attend the General Meeting in person will be refused admission. In order to comply with relevant legal requirements, the General Meeting will be convened with the minimum necessary quorum. This will be facilitated by the Company. 4. The Directors therefore strongly encourage Shareholders to vote on all resolutions in advance of the General Meeting by completing their proxy forms or appointing a proxy electronically. Shareholders should appoint the Chair of the meeting (and not any named individual) to act as their proxy, otherwise their votes will be incapable of being cast. 5. The Directors will continue to keep Government guidance under review and may, if necessary, make further changes to the arrangements for the General Meeting, including how it is conducted. Further announcements and information will be provided as required and Shareholders should continue to monitor the Company’s website at www.tedbakerplc.com and announcements for any updates in relation to the General Meeting arrangements that may need to be provided.
Proxy appointment 6. A shareholder of the Company entitled to attend, speak and vote at the General Meeting is entitled to appoint one or more proxies (who need not be shareholders in the Company) to attend, speak and vote instead of him/her. A shareholder may appoint more than one proxy in relation to the General Meeting, provided that each proxy is appointed to exercise the rights attaching to a different share or shares held by him/her. The appointment of a proxy will not preclude a shareholder from attending and voting in person at the General Meeting. 7. A form of proxy is enclosed with this Notice for use in connection with the business set out above. To be valid, the form of proxy and any power of attorney or other authority under which it is signed must be received by the Company’s registrars, Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU by no later than 11:00 a.m. on 16 June 2020. Alternatively, a shareholder may appoint a proxy online by registering for a Share Portal account via the website of Link Asset Services, at www.signalshares.com. To register for the Share Portal a shareholder will need their Investor Code (IVC), which can be found on their share certificate or on any other recent shareholder communication. Once registered, a shareholder will be able to appoint a proxy online immediately. To be a valid proxy appointment, a shareholder’s electronic message confirming the details of the appointment must be transmitted, and received by Link Asset Services by no later than 11:00 a.m. on 16 June 2020. Shareholders who hold their shares in uncertificated form may also use “the CREST voting service” to appoint a proxy electronically as explained in note 12 below. A separate proxy form should be used for each proxy appointment. A shareholder appointing more than one proxy should indicate the number of shares for which each proxy is authorised to act on his/her behalf. Failure to specify the number of shares to which each proxy form relates or specifying a number which, when taken together with the number of shares set out in the other proxy appointments, is in excess of the number of shares held by the shareholder may result in the proxy appointment being invalid. If you have any queries about voting or about your shareholding, please contact Link Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am—5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that calls may be recorded and randomly monitored for security and training purposes.
218 8. In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by a duly authorized officer of the Company or attorney of the Company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included in the proxy form. 9. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the General Meeting. 10. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior). 11. Arrangements have also been made to allow Shareholders to submit questions to the Directors in advance of the General Meeting via email (see note 20 below).
CREST members 12. Shareholders who are users of the CREST system (including CREST Personal Members) may appoint one or more proxies or give an instruction to a proxy by having an appropriate CREST message (a CREST Proxy Instruction) transmitted. In order for a proxy appointment or instruction made using the CREST service to be valid, the CREST Proxy Instruction must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications, and must contain information required for such instruction, as described in the CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by Link Asset Services (ID number RA10) by the latest time for receipt of proxy appointments set out in note 7 above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp generated by the CREST system) from which Link Asset Services is able to retrieve the message. CREST personal members or other CREST sponsored members should contact their CREST sponsor for assistance with appointing proxies via CREST. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. For further information on CREST procedures, limitations and systems timings, please refer to the CREST Manual. The Company may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Availability of documents and other information 13. The contents of this Notice, details of the total number of shares in respect of which Shareholders are entitled to exercise voting rights at the General Meeting and, if applicable, Shareholders’ statements, Shareholders’ resolutions or Shareholders’ matters of business received by the Company after the date of this Notice will be available on the Company’s website at www.tedbakerplc.com. 14. You may not use any electronic address provided either in this Notice or any related documents (including the Form of Proxy) to communicate with the Company for any purposes other than those expressly stated.
Corporate Representative 15. A Shareholder of the Company which is a corporation may authorise a person or persons to act as its representative(s) at the General Meeting. In accordance with the provisions of the Act (as amended by the Companies (Shareholders’ Rights) Regulations 2009), each such representative may exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual member of the Company, provided that they do not do so in relation to the same shares.
219 Total voting rights 16. As at 19 May 2020 (being the latest practicable date prior to publication of this document), the Company’s issued share capital consisted of 44,586,562 ordinary shares of five pence each, carrying one vote each.
Nominated persons 17. A person to whom this Notice is sent who is a person nominated under Section 146 of the Act to enjoy information rights (a Nominated Person) may, under an agreement between him/her and the Shareholder by who he/she was nominated, have the right to be appointed (or to have someone else appointed) as a proxy for the General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the Shareholder as to the exercise of voting rights. 18. The statements of the rights of shareholders in relation to the appointment of proxies in this Notice do not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by registered Shareholders of the Company.
Questions at the General Meeting and written questions in advance 19. In light of the coronavirus outbreak and the UK Government’s measures, arrangements have been made to provide an audio cast facility for the General Meeting to allow Shareholders to listen to the proceedings remotely given that they will be unable to attend in person. Please note that as the audio cast will be a listen-only facility, Shareholders will not be able to vote or ask questions on the day of the General Meeting. In order to access the audio cast facility, Shareholders are first required to pre-register online in advance of the General Meeting at https://www.incommglobalevents.com/registration/client/4038/ted- baker/. In order to register, Shareholders will need to provide their Investor Code, which can be found on their share certificate or any other recent shareholder communication. Shareholders should connect to the audio cast up to 15 minutes in advance of the meeting. 20. All Shareholders will have the opportunity to ask written questions in advance of the General Meeting. Shareholders may submit questions, together with their name as it appears on the Company’s register of members, in relation to the General Meeting via email to [email protected] any time before 11.00 a.m. on 11 June 2020. Written answers to such questions will be published on the Company’s website after the General Meeting. 21. Any Shareholder attending the General Meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the General Meeting, but no such answer need be given if: (a) to do so would interfere unduly with the preparation for the General Meeting or involve the disclosure of confidential information; (b) the answer has already been given on a website in the form of an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the General Meeting that the question be answered.
220 Toppan Merrill - Endurance Application Form OPEN SUBSCRIPTION [OSF] ED | 105037 | 01-Jun-20 05:25 | 20-19654-7.ba | Sequence: 1 CHKSUM Content: 49885 Layout: 62224 Graphics: 0 CLEAN
TED BAKER PLC (incorporated in England and Wales under the Companies Act 1985 with registered number 03393836) (the “Company”)
OFFER FOR SUBSCRIPTION APPLICATION FORM
IMPORTANT: BEFORE COMPLETING THIS OFFER FOR SUBSCRIPTION APPLICATION FORM, YOU SHOULD READ THE COMBINED PROSPECTUS AND CIRCULAR OF THE COMPANY DATED 1 JUNE 2020 (THE “PROSPECTUS”), INCLUDING THE TERMS AND CONDITIONS SET OUT IN PART V OF THE PROSPECTUS (TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION), AND THE NOTES ACCOMPANYING THIS FORM. THE DEFINITIONS USED IN THE PROSPECTUS ALSO APPLY IN THIS OFFER FOR SUBSCRIPTION APPLICATION FORM.
The distribution of this Offer for Subscription Application Form and the making of the Offer for Subscription to persons resident in, or who are citizens of, or who have a registered address in countries other than the United Kingdom may be affected by the law of the elevantr jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to participate in the Offer for Subscription. Save for at the sole discretion of the Company, this Offer for Subscription Application Form should not be forwarded to or transmitted in or into the United States of America or any of the other Excluded Territories. The attention of overseas persons (being those investors with registered addresses in, or who are citizens, residents or nationals of, jurisdictions outside the United Kingdom) is drawn to paragraph 6 entitled “Overseas Persons” set out in Part V of the Prospectus and to the representations and warranties given by applicants in paragraph 12 of the Notes to the Offer for Subscription Application Form below.
The terms and conditions of the Offer for Subscription in the Prospectus also apply to this Offer for Subscription Application rm.Fo Queries relating to this form should be referred to Link Asset Services on +44 (0) 371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. Copies of the Prospectus can be obtained from the Company’s website at www.tedbakerplc.com/investor-relations. Applications should be returned so as to be received by Link Asset Services no later than 11.00 a.m. on 17 June 2020.
To: Link Asset Services Corporate Actions The Registry 34 Beckenham Road Beckenham, Kent BR3 4TU United Kingdom
1. Application I/We, the person(s) detailed in section 2 below, offer to subscribe for the number of New Shares and for the amount shown in the box below pursuant to the Offer for Subscription on the terms set out in the Prospectus (including the terms and conditions in Part V of the Prospectus) and subject to the Articles of Association of the Company.
In the box below, write in figures in box (A) the number of New Shares that you wish to apply for and in box (B) the aggregate value, at the Offer Price (being 75 pence per New Share), of the New Shares that you wish to apply for. Your application must be for a minimum amount of 500 New Shares and thereafter in multiples of 50 New Shares, up to the number of Offer for Subscription Shares set out in the Prospectus.
(A) Number of New Shares (B) Aggregate value at the Payment Method (Tick appropriate box) Offer Price (being 75 pence per New Share) Cheque/Banker’s Bank transfer CREST draft (CHAPS) Settlement (DvP) £
2. Details of holder(s) in whose name(s) New Shares will be issued (please enter in BLOCK CAPITALS)
Mr, Mrs, Miss or Title ......
Forenames (in full) ......
Surname/Company Name ......
Address (in full) ......
Designation (if any) ......
Date of Birth ......
F-1
JOB: 20-19654-7 CYCLE#;BL#: 6; 0 TRIM: 8.25" x 11.75" AS: London: 011-44-20-7422-6100 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Endurance Application Form OPEN SUBSCRIPTION [OSF] ED | 105037 | 01-Jun-20 05:25 | 20-19654-7.ba | Sequence: 2 CHKSUM Content: 40855 Layout: 39923 Graphics: 0 CLEAN
Mr, Mrs, Miss or Title ......
Forenames (in full) ......
Surname ......
Date of Birth ......
Mr, Mrs, Miss or Title ......
Forenames (in full) ......
Surname ......
Date of Birth ......
Mr, Mrs, Miss or Title ......
Forenames (in full) ......
Surname ......
Date of Birth ......
3. CREST details Only complete this section if New Shares allotted are to be deposited in a CREST account which must be in the same name as the holder(s) given in section 2.
CREST Participant ID:
CREST Member Account ID:
4. Signature(s) (all holders named in section 2 must sign) Execution by individuals: First Applicant Signature Date Second Applicant Signature Date Third Applicant Signature Date Fourth Applicant Signature Date
Execution by a company:
Executed by Date (Name of company):
Name of Director: Signature Date
Name of Director/ Date Secretary: Signature
If you are affixing a company seal, please mark a cross here: Affix Company Seal here:
F-2
JOB: 20-19654-7 CYCLE#;BL#: 6; 0 TRIM: 8.25" x 11.75" AS: London: 011-44-20-7422-6100 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Endurance Application Form OPEN SUBSCRIPTION [OSF] ED | 105037 | 01-Jun-20 05:25 | 20-19654-7.ba | Sequence: 3 CHKSUM Content: 34311 Layout: 59344 Graphics: 0 CLEAN
5. Settlement details (a) Cheque/Banker’s Draft If you are subscribing for New Shares and paying by cheque or banker’s draft, enclose with this form your cheque or banker’s draft for the exact amount shown in box (B) in section 1. Cheques or banker’s drafts in Pounds Sterling must be made payable to “Link Market Services Limited RE: Ted Baker plc – Offer for Subscription A/C” and crossed “A/C payee only”. Cheques must be for the full amount payable on acceptance and sent by post to Link Asset Services so as to be received as soon as possible and, in any event, not later than 11.00 a.m. on 17 June 2020. Third party cheques may not be accepted except building society cheques or banker’s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque or banker’s draft to such effect. It is recommended that the account name should be the same as that shown on the application. Cheques or banker’s drafts must be drawn on an account at a bank or building society or a branch of a bank or building society which must be in the UK or the Channel Islands and which is either a settlement member of the Cheque and Credit Company Clearing Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker’s drafts to be cleared through the facilities provided by either of those companies. Cheques and banker’s drafts must bear the appropriate sorting code number in the top right-hand corner. Post-dated cheques will not be accepted. You should tick the relevant payment method box in section 1. (b) Bank transfer Only bank transfers via CHAPS are acceptable. Payments via BACS will not be accepted. For applicants sending subscription monies by electronic bank transfer (CHAPS), payment must be made for value by no later than 11.00 a.m. on 17 June 2020 directly into the bank account detailed below: Bank: Lloyds Bank plc Sort Code: 30-80-12 Account No: 20186460 Account Name: Link Market Services Limited RE: Ted Baker plc – Offer for Subscription CHAPs A/C The payment instruction must also include a unique reference comprising your name and a contact telephone number which should be entered in the reference field on the payment instruction (for example: MJ SMITH 01234 567 8910). Electronic payments must come from a UK bank account and from a personal account in the name of the individual applicant where they have sole or joint title to the funds. The account name should be the same as that inserted in section 2 of the Offer for Subscription Application Form and payments must relate solely to your application. You should tick the relevant payment method box in section 1. It is recommended that such transfers are actioned within 24 hours of posting your application. Evidence of the source of funds will also be required. Typically, this will be a copy of the remitting bank account statement clearly identifying the applicant’s name, the value of the debit (equal to the application value) and the crediting account details or application reference. A photocopy of the transaction can be enclosed with your application or a pdf copy can also be scanned and emailed to [email protected]. Photographs of the electronic transfer are not acceptable. Any delay in providing monies may affect acceptance of the application. If the Company’s Receiving Agent, Link Asset Services, is unable to match your application with a bank payment, there is a risk that your application could be delayed or will not be treated as a valid application and may be rejected by the Company and/or Link Asset Services. Link Asset Services cannot take responsibility for correctly identifying payments without a unique reference or where a payment has been received but without an accompanying application form. Note: You should check with your bank regarding any limits imposed on the level and timing of transfers allowed from your account (for example, some banks apply a maximum transaction or daily limit, and you may need to make the transfer as more than one payment). You should also ensure that any charges levied by your bank for completing the transfer are paid separately. (c) CREST Settlement The Offer for Subscription Application Form contains details of the information which the Company’s Receiving Agent, Link Asset Services, will require from you in order to settle your application within CREST, if you so choose. You will need to input the delivery versus payment (“DvP”) instructions into the CREST system in accordance with your application. The input returned by Link Asset Services of a matching or acceptance instruction to our CREST input will then allow the delivery of your Offer for Subscription Shares to your CREST account against payment of the Offer Price through the CREST system.
F-3
JOB: 20-19654-7 CYCLE#;BL#: 6; 0 TRIM: 8.25" x 11.75" AS: London: 011-44-20-7422-6100 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Endurance Application Form OPEN SUBSCRIPTION [OSF] ED | 105037 | 01-Jun-20 05:25 | 20-19654-7.ba | Sequence: 4 CHKSUM Content: 22825 Layout: 38522 Graphics: 0 CLEAN
If you so choose to settle your application within CREST, that is by DvP, you or your settlement agent/custodian’s CREST account must allow for the delivery and acceptance of New Shares to be made against payment of the Offer Price per New Share using the CREST matching criteria set out below: Trade date: 17 June 2020 Settlement date: 19 June 2020 Company: Ted Baker Plc Security description: Ordinary Shares of five pence SEDOL: 0104861 (in respect of Ordinary Shares traded in Sterling) ISIN: GB0001048619 CREST message type: DEL 6. Contact details To ensure the efficient and timely processing of this application please enter below the contact details of a person the Company (or any of its agents) may contact with all enquiries concerning this application. If no details are provided this may delay obtaining the additional information required and may result in your application being rejected or revoked.
E-mail address
Telephone No
7. Return of forms Completed Offer for Subscription Application Forms should be returned by post or by hand (during normal office hours only) to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to be received by Link by no later than 11.00 a.m. on 17 June 2020, after which time, subject to limited exceptions, Offer for Subscription Application Forms will not be valid. Applications delivered by hand will not be checked upon delivery and no receipt will be provided. Within the UK, applicants should note that applications, once made, will, subject to the very limited withdrawal rights set out in the Prospectus, be irrevocable and receipt thereof will not be acknowledged. 8. Share certificates Definitive share certificates in respect of the New Shares to be held in certificated form are expected to be despatched within 14 days of Admission, at the risk of the person(s) entitled to them, to applicants or, in the case of joint holdings, to the first-named applicant, in each case at their registered address. 9. Queries If you have any enquiries in connection with this form, please call Link Asset Services on +44 (0) 371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Please note that Link Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
NOTES TO THE OFFER FOR SUBSCRIPTION APPLICATION FORM
1. Application Fill in (in figures) in box (A) in section 1 the number of New Shares that you wish to apply for and in box (B) in section 1 the aggregate value, at the Offer Price (being 75 pence per New Share), of the New Shares that you wish to apply for. Your application must for a minimum amount of 500 New Shares and thereafter in multiples of 50 New Shares, up to the number of Offer for Subscription Shares set out in the Prospectus. Multiple applications will not be accepted. If valid applications are received under the Offer for Subscription for more than the maximum number of Offer for Subscription Shares available, applications shall be allocated in such manner as the Board may determine in its absolute discretion (in consultation with Liberum Capital Limited and Goldman Sachs International). If no number is inserted in either box (A) or box (B) (or if a number is inserted in either box (A) or box (B) which is inconsistent with the amount of the payment accompanying this Offer for Subscription Application Form), you shall be deemed to have applied for the lesser of (i) the number of New Shares shown in box (A), (ii) such number of New Shares at 75 pence per New Share as is represented by the amount shown in box (B), or (iii) such number of New Shares at 75 pence per New Share as is covered by the payment which accompanies this Offer for Subscription Application Form. Financial intermediaries who are investing on behalf of clients should make separate applications for each client. Further copies of this form and the relevant form for corporate entity holdings can be requested from Link Asset Services.
F-4
JOB: 20-19654-7 CYCLE#;BL#: 6; 0 TRIM: 8.25" x 11.75" AS: London: 011-44-20-7422-6100 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Endurance Application Form OPEN SUBSCRIPTION [OSF] ED | 105037 | 01-Jun-20 05:25 | 20-19654-7.ba | Sequence: 5 CHKSUM Content: 52691 Layout: 14454 Graphics: 0 CLEAN
2. Payment method Mark in the relevant box in section 1 to confirm your payment method, i.e. cheque/banker’s draft or settlement via CREST. 3. Holder details Fill in (in block capitals) the full name(s) and other details of each holder and the address of the first named holder. Applications may only be made by persons aged 18 or over. In the case of joint holders only the first named may bear a designation reference. A maximum of four joint holders is permitted. All holders named must sign the Offer for Subscription Application Form in section 4. 4. CREST If you wish your Offer for Subscription Shares to be deposited in a CREST account in the name of the holder(s) given in section 2, enter in section 3 the details of that CREST account. Where it is requested that Offer for Subscription Shares be deposited into a CREST account, please note that payment for such Offer for Subscription Shares must be made prior to the day such Offer for Subscription Shares might be allotted and issued, unless settling by DvP in CREST. Where no CREST account details are entered, or if the CREST account details entered are incorrect, the New Shares will be issued to you in certificated form. 5. Signature All holders named in section 2 must sign section 4 and insert the date. The Offer for Subscription Application Form may be signed by another person on behalf of each holder if that person is duly authorised to do so under a power of attorney. The power of attorney (or a copy duly certified by a solicitor or a bank) must accompany this Offer for Subscription Application Form for inspection (which originals will be returned by post at the addressee’s risk). A corporation should sign under the hand of a duly authorised official whose representative capacity should be stated and a copy of a notice issued by the corporation authorising such person to sign should accompany this Offer for Subscription Application Form. 6. Bank transfer Only bank transfers via CHAPS are acceptable. Payments via BACS will not be accepted. You should tick the relevant payment method box in section 1. It is recommended that such transfers are actioned within 24 hours of posting your application. Any delay in providing monies may affect acceptance of the application. If the Company’s Receiving Agent, Link Asset Services, is unable to match your application with a bank payment, there is a risk that your application could be delayed or will not be treated as a valid application and may be rejected by the Company and/or Link Asset Services. Note: You should check with your bank regarding any limits imposed on the level and timing of transfers allowed from your account (for example, some banks apply a maximum transaction or daily limit, and you may need to make the transfer as more than one payment). Link Asset Services cannot take responsibility for correctly identifying payments without a unique reference or where a payment has been received but without an accompanying application form. 7. CREST settlement If you do not provide any CREST details or if you provide insufficient CREST details for Link Asset Services to match to your CREST account, Link Asset Services will deliver your Offer for Subscription Shares in certificated form provided payment has been made in terms satisfactory to the Company. The right is reserved to issue your Offer for Subscription Shares in certificated form should the Company, having consulted with Link Asset Services, consider this to be necessary or desirable. This right is only likely to be exercised in the event of any interruption, failure or breakdown of CREST or any part of CREST or on the part of the facilities and/or system of Link Asset Services in connection with CREST. The person named for registration purposes in your Offer for Subscription Application Form must be: (a) the person procured by you to subscribe for or acquire the Offer for Subscription Shares; or (b) yourself; or (c) a nominee of any such person or yourself, as the case may be. Neither Link Asset Services nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. By returning your Offer for Subscription Application Form you agree that you will do all things necessary to ensure that you or your settlement agent/custodian’s CREST account allows for the delivery and acceptance of Offer for Subscription Shares to be made against payment of the Offer Price. Should you wish to settle by DvP, you will need to input your CREST DEL instructions to Link Asset Services’ Participant Account RA06 by no later than 11.00 a.m. on 17 June 2020. You must also ensure that you or your settlement agent/custodian has a sufficient “debit cap” within the CREST system to facilitate settlement in addition to your/its own daily trading and settlement requirements. Applicants wishing to settle by DvP will still need to complete and submit a valid Offer for Subscription Application Form by the deadline of 11.00 a.m. on 17 June 2020. You should tick the relevant payment method box in section 1.
F-5
JOB: 20-19654-7 CYCLE#;BL#: 6; 0 TRIM: 8.25" x 11.75" AS: London: 011-44-20-7422-6100 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Endurance Application Form OPEN SUBSCRIPTION [OSF] ED | 105037 | 01-Jun-20 05:25 | 20-19654-7.ba | Sequence: 6 CHKSUM Content: 1981 Layout: 4406 Graphics: 0 CLEAN
Note: Link Asset Services will not take any action until a valid DEL message has been alleged to the Participant Account by the applicant. No acknowledgement of receipt or input will be provided. In the event of late/non settlement the Company reserves the right to deliver New Shares outside of CREST in certificated form provided that payment has been made in terms satisfactory to the Company and all other conditions of the Offer for Subscription have been satisfied. 10. Anti-money Laundering Anti-money laundering checks are required by law to be performed on certain financial transactions. The checks are undertaken to make sure investors are genuinely who they say they are and that any application monies have not been acquired illegally or that Link itself is not being used as part of criminal activity, most commonly the placement, layering and integration of illegally obtained money. Whist Link may carry out checks on any application, they are usually only performed when dealing with application values above a certain threshold, commonly referred to as the anti-money laundering threshold – which is the Sterling equivalent of €15,000 (currently approximately £13,000). Link will make enquiries to credit reference agencies to meet its anti-money laundering obligations and the applicant may be required to provide an original or certified copy of their passport, driving licence and recent bank statements to support such enquiries. Anti-money laundering checks do not mean the applicant is suspected of anything illegal and there is nothing to worry about. The checks made at credit reference agencies leave an ‘enquiry footprint’ – an indelible record so that the applicant can see who has checked them out. The enquiry footprint does not have any impact on their credit score or on their ability to get credit. Anti-money laundering checks appear as an enquiry/soft search on the applicant’s credit report. The report may contain a note saying, “Identity Check to comply with Anti Money Laundering Regulations”. The person lodging the Offer for Subscription Application Form with payment (the “acceptor”), including any person who appears to Link to be acting on behalf of some other person, shall thereby be deemed to agree to provide Link with such information and other evidence as Link may require to satisfy the anti-money laundering requirements. Submission of an Offer for Subscription Application Form shall constitute a warranty to the Company, Liberum Capital Limited and Goldman Sachs International that the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 will not be breached by the acceptance of remittance, and an undertaking by the acceptor to provide promptly to Link such information as may be required by Link in order to carry out relevant anti-money laundering checks and agree for Link to make a search using a credit reference agency for the purposes of confirming such identity; where deemed necessary a record of the search will be retained. 11. Overseas Persons No person receiving a copy of the Prospectus and/or this Offer for Subscription Application Form and/or any other document issued by the Company in connection with the Offer for Subscription in any territory other than the UK may treat the same as constituting an invitation or offer to him or her, nor should he or she in any event use the Offer for Subscription Application Form unless, in the relevant jurisdiction, such an invitation or offer could lawfully be made to him and the Offer for Subscription Application Form could lawfully be used or dealt with without contravention of any unfulfilled registration or other legal or regulatory requirements. In such circumstances, where an invitation or offer would contravene any registration or other legal or regulatory requirements, the Prospectus and/or this Offer for Subscription Application Form must be treated as sent for information only and should not be copied or redistributed. Accordingly, persons receiving a copy of the Prospectus and/or this Offer for Subscription Application Form and/or any other document issued by the Company in connection with the Offer for Subscription should not, in connection with the Offer for Subscription, distribute or send the same in or into any Excluded Territory, including the United States. Save for at the sole discretion of the Company, this Offer for Subscription Application Form may not be published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into any of the United States of America or any of the other Excluded Territories. This Offer for Subscription Application Form does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States of America or any other Excluded Territory. The New Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (“Securities Act”) or under any securities laws of any state or other jurisdiction of the United States of America, and may not be offered, sold, taken up, exercised, resold, transferred or delivered, directly or indirectly, within the United States of America, absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States of America. There will be no public offer of the New Shares in the United States of America. The New Shares have not been, and will not be, registered under the applicable securities laws of any of the other Excluded Territories. Neither the New Shares, this Offer for Subscription Application Form, the Prospectus nor any other document connected with the Capital Raising have been or will be approved or disapproved by the United States Securities
F-6
JOB: 20-19654-7 CYCLE#;BL#: 6; 0 TRIM: 8.25" x 11.75" AS: London: 011-44-20-7422-6100 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5 Toppan Merrill - Endurance Application Form OPEN SUBSCRIPTION [OSF] ED | 105037 | 01-Jun-20 05:25 | 20-19654-7.ba | Sequence: 7 CHKSUM Content: 32552 Layout: 59344 Graphics: 0 CLEAN
and Exchange Commission or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, nor have any of the foregoing authorities or any securities commission passed upon or endorsed the merits of the offering of the New Shares, this Offer for Subscription Application Form, or the accuracy or adequacy of the Prospectus or any other document connected with the Capital Raising. Any representation to the contrary is a criminal offence in the United States. 12. Representations and Warranties By submitting this Offer for Subscription Application Form, you represent, warrant, acknowledge, certify, undertake, confirm and agree that: • the dates and times referred to in this Offer for Subscription Application Form may be altered by the Company or its agent(s), and references to times in this Offer for Subscription Application Form are to London time unless otherwise stated; • you are not within the United States of America and will not be within the United States of America at the time that any buy order for New Shares is originated by you; • you are not, nor are you applying on behalf of any person who is, a citizen or resident or which is a corporation, partnership or other entity created or organised in or under any laws of any Excluded Territory or any other jurisdiction in which the application for New Shares is prevented by law, except where proof satisfactory to the Company has been provided to the Company that you or such person for whom you are applying on behalf of are able to accept the invitation by the Company without satisfaction of any requirement which the Company (in its absolute discretion) regards as unduly burdensome; • you are not applying with a view to reoffering, reselling, transferring or delivering any of the New Shares which are the subject of this application to, or for the benefit of, a person who is a citizen or resident or which is a corporation, partnership or other entity created or organised in or under any laws of, or otherwise located in, the United States of America or any other Excluded Territory or any other jurisdiction in which the application for New Shares is prevented by law, nor are you acting on behalf of any such person, except where proof satisfactory to the Company has been provided to the Company that you are able to accept the invitation by the Company without satisfaction of any requirement which the Company (in its absolute discretion) regards as unduly burdensome; • you make the representations, warranties, acknowledgements, certifications, undertakings and agreements set out in paragraph 7 of Part V of the Prospectus as if set out in full in this Offer for Subscription Application Form; • subject to certain limited exceptions as agreed with the Company, the Company reserves the right to treat any application as invalid if it is received in an envelope postmarked in, or which otherwise appears to the Company or its agents to have been despatched in or from, the United States of America, any Excluded Territory or any other jurisdiction where the extension or availability of the Offer for Subscription would breach any applicable laws or regulations for registration or issue of certificates representing New Shares and that the Company reserves the right to treat an Offer for Subscription Application Form as invalid if it believes the making of such an application may violate any legal or regulatory requirements in any jurisdiction; • in making this application you are not relying on any information or representation in relation to the Company other than that contained in the Prospectus, and no person responsible solely or jointly for the Prospectus or any part thereof or involved in the preparation thereof shall have any liability for any such other information; • the Company reserves the right, in its absolute discretion, to reject any application or purported application under the Offer for Subscription in accordance with the terms and conditions of the Offer for Subscription; • submission of this Offer for Subscription Application Form will constitute a warranty that the terms and conditions in this Offer for Subscription Application Form and in the Prospectus have been complied with; • having had the opportunity to read the Prospectus, you shall be deemed to have had notice of all the information contained therein; and • the terms and conditions of the Offer for Subscription as set out in the Prospectus and this Offer for Subscription Application Form and any non-contractual obligations arising out of or in relation to the Capital Raising shall be governed by, and construed in accordance with, English law.
F-7
JOB: 20-19654-7 CYCLE#;BL#: 6; 0 TRIM: 8.25" x 11.75" AS: London: 011-44-20-7422-6100 COLORS: Black, ~note-color 2 GRAPHICS: none V1.5