Edison Institutional Note Template

19 August 2014 Ted Baker (Ted) has fallen 23% ytd and we believe its attractive growth profile is now being mispriced by the market. Ted has a long runway for expansion in North America and Asia, as well as growth in Europe. There is potential for meaningful margin expansion, and we believe management has made good capital allocation decisions with a long-term mind-set. We initiate with a fair value of 2,200p, implying 25% upside.

Year end Revenue

(£m) PBT (£m)

EPS* (p)

P/E (x)

EV/EBITDA (x)

ROCE** (%)

Div. Yield (%)

01/13 254.5 31.8 56.5 30.4 20.1 29.7 1.5 01/14 321.9 40.6 70.1 25.1 15.3 33.9 1.9 01/15e 369.1 47.2 80.4 21.9 12.8 35.3 2.2 01/16e 425.2 56.9 98.7 17.9 10.8 35.6 2.5 01/17e 488.3 67.2 116.5 15.2 9.2 36.7 2.9

Note: *PBT and diluted EPS are normalised and excluding intangible amortisation, exceptional items and share-based payments. **ROCE is pre-tax, pre-exceptional return on (closing) capital employed before exceptional costs. Capital employed is defined as equity plus net debt. Priced at 18 August 2014.

“Fashionomics” Ted Baker’s idiosyncratic fashions, product focus and distinctive store formats have propelled the brand to enormous success, both creatively and financially, with revenues and EPS growing at 16% and 19% CAGR respectively over the past five years. We forecast this to continue due to management’s disciplined approach to profitable growth, the unique culture it has nurtured and our belief that Ted can leverage its British heritage in international markets.

International opportunity Ted Baker has grown from one “shirting” shop in Glasgow in 1988 to 181 retail locations in the UK as of January 2014 and a total of 362 including Ted’s international footprint. We forecast it will continue to prudently expand space and sales density, and show that Ted’s long-term opportunities in North America and Asia are particularly compelling given its small market share of the apparel market and low base of retail stores and concessions. We think Ted’s “quirky British humour” and styles will travel well. International consumers have taken to the proposition with retail sales in North America and Asia growing at 32% and 59% CAGR respectively over the past three years.

Valuation Ted Baker trades at high absolute P/E and EV/EBITDA multiples. However, considering its growth potential and the margin analysis we have undertaken (see pages 12-13), we think the shares are undervalued. We employ three valuation methods: a PEG analysis and a lease-adjusted EV/EBITDAR comparison with peers, as well as a discounted cash flow approach. Our reverse DCF shows the current share price does not imply any margin expansion (on page 15).

Ted Baker Institutional initiation of coverage

Teducation

Price 1,760p

Valuation 2,200p

Difference 25%

Market cap £766m

Net debt (£m) at FY14 9

Minimum operating lease liability (£m)

159

Shares in issue 43.5m

Free float 63%

Code TED

Primary exchange LSE

Share price performance

% 1m 3m 12m

Abs 6.8 7.0 (4.6)

Rel (local) 6.8 9.0 (8.0)

52-week high/low 2,327p 1,660p

Business description

Ted Baker is a global lifestyle brand, famed for its quirky and distinctive fashions and high-quality designs at attractive prices. Ted Baker operates 362 stores and concessions around the world, as well as through wholesale and licence partners.

Next events H115 results 2 October 2014

Analysts Sohil Chotai +44 (0)20 3077 5733 Jeremy Silewicz +44 (0)20 3077 5704

[email protected]

Retail

Ted Baker | 19 August 2014 2

Investment summary

Company description: Ted’s track record Ted Baker (Ted) is a global lifestyle brand with 362 retail stores and concessions globally

(FY14). Ted is known for its attention to detail, colourful prints and value proposition for its customers.

Ted’s competitive advantage stems from its brand image, interaction with consumers and its management team.

Management has grown the business rapidly but prudently since inception, and has done so without financial leverage.

The business generates a high ROCE and we expect this to continue, especially as capital expenditure decreases as a percentage of sales.

The company has grown its dividend every year (maintaining a 50% payout ratio) since its listing on the London Stock Exchange in 1997, with adjusted earnings and dividends growing at 18% and 15% CAGR over the past five years.

Sales growth and margin expansion: More to come Ted Baker’s global market share is still very small, giving it a long runway for growth.

Ted’s disciplined North American and Asian expansion has been well received, with revenues growing at 32% and 59% CAGR respectively over 2012-14.

There is scope to expand existing concession relationships in Europe and North America, which we highlight on page 8-9.

Operating margins have been depressed by investment spend – as this moderates, we expect margin expansion.

Ted Baker’s high gross margin is not being leveraged into operating margins when compared to peers and its own history.

Valuation: Undervalued relative to growth prospects Ted Baker’s high P/E multiple does not account for its superior earnings growth (18% 2015-

17e) by our estimates.

On a PEG ratio basis, Ted stands at a c 40% discount to its peers.

Our reverse DCF shows that the current price implies no margin expansion beyond the 15.7% EBITDA margin achieved in 2014.

Risks: Valuation, business and financial risk Valuation risk – a de-rating of Ted Baker or the peer set, along with a weaker macroeconomic

backdrop and poor environment for disposable incomes, could occur.

Key man risk – Ray Kelvin has been a significant contributor to the company’s growth, and we would be nervous if he were to leave the organisation for any reason.

Fashion and brand image risk – susceptibility to weak collections and changing consumer tastes.

Execution risk – Ted’s expansion into international markets may not be as successful as its domestic presence.

Financial risk – Ted has very modest financial leverage and we expect its strong balance sheet to sustain it in a tough economic climate. However, it does have a bank overdraft facility, which is due for refinancing by 1 March 2015.


Company description: Ted’s track record

Ted Baker (Ted) is a global lifestyle brand known for its attention to detail, bold colours and quirky prints, with menswear and womenswear accounting for 44% and 56% of 2014 revenue respectively. Ted also offers accessories such as eyewear and watches, as well as fragrances through licence partners. Ted operates through its own retail stores and concessions (store-within-store formats), as well as wholesale stores – “trustees” that bear inventory risk and licence partners that operate retail stores. Ted also has a growing e-commerce business, which sits in its retail operating line. Exhibit 1 shows the growth of these business units over the past 10 years. Revenue per retail store has also grown significantly since the step-down in 2009.

Exhibit 1: Ted has compounded revenue through three channels – tripling in the past 10 years

Source: Company data, Edison Investment Research

Ted Baker has grown without large-scale advertising campaigns, which is very unusual, relying instead on word of mouth about the quality of the designs, an engaging store format with amusing displays and social media initiatives.

Ted’s retail strategy has led to excellent financial performance. Its retail footprint is principally through concessions with leading department stores, which tends to drive high footfall, high sales/sqft and low capex requirements. Exhibit 2 highlights Ted’s sales/sqft relative to other UK peers.

Exhibit 2: Ted’s model lends itself to higher sales densities, last FY


The inspiration for Ted Baker comes from Ray Kelvin, the company’s founder and chief executive (“Closest man to Ted”, according to the company website). He envisioned a company presenting high-quality, high-fashion clothing at reasonable prices relative to luxury brands – offering customers good value.

050100150200250300350

050

100150200250300350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

£m

Retail Wholesale Licence Retail store (RHS)

Average growth (CAGR) 5 yearRetail 17%Wholesale 13%Licence 10%Retail stores 13%

330 313 364

780

1134

0

200

400

600

800

1000

1200

Next French Connection Supergroup Ted Baker Burberry

£ Sales Density (£/sq.ft)


Ted’s spread Mr Kelvin has grown the brand from a “shirting shop of much repute” in Glasgow to an international operation with 362 stores, and we think Ted Baker’s international revenues will grow relative to the total given current lower brand penetration, combined with higher space growth and higher income growth abroad.

Exhibit 3: International revenues to double as a percentage of retail revenue 2012-17e

Source: Company data, Edison Investment Research estimates

Placing Ted Baker in context To demonstrate Ted Baker’s place in the apparel market, we constructed a basket of 10 key menswear (five) and womenswear (five) items. We used the average price of new season merchandise from each brand’s respective UK website to construct a representative shopping basket for Ted and 15 competitors. Our findings show:

Ted Baker on average is priced higher than “fast fashion” brands H&M and Inditex’s Zara;

Ted is also slightly above the higher-end high street brands such as Reiss and Jigsaw;

Ted’s closest peers at the higher end are Tommy Hilfiger, Ralph Lauren and Hugo Boss; and

Ted is at a meaningfully lower price point than Burberry and Ralph Lauren’s luxury lines.

Ted Baker is successful in providing the intended attention to detail and high fashion experience at lower prices than luxury brands. This “bridge” positioning has helped the company during tough economic conditions as some traditional luxury brand customers trade down (we point out that Hugo Boss revenues declined in 2009 and so did Ralph Lauren’s in FY10 [March year end]). By comparison, Ted Baker delivered 7.3% and 7.2% revenue growth for FY09 and FY10 respectively. In EPS terms, both Hugo Boss and Ralph Lauren had two falling years of EPS relative to one for Ted Baker.

Exhibit 4: Comparable baskets, significantly different prices: our analysis of similar items shows Ted Baker is towards the top end of the high street

Source: Company UK retail websites. Notes: Polo Ralph Lauren – Lauren for WW. Burberry – Brit range (London range for formal MW). Ralph Lauren - Purple Label (MW) and Collection (WW). Methodology: We have summed the five menswear items (suit, shirt, chinos, polo t-shirt and t-shirt) and five womenswear items (two dresses, a top, skirt and handbag). We have tried to average the current season’s prices for these items to give a general estimate of each brand’s place in the high street. Priced on 8 July 2014.

85% 75% 69%

13%21% 25%

2% 4% 7%

0%

20%

40%

60%

80%

100%

2012 2014 2017E

Retail Revenue

Asia North America UK & Europe

240 278 413 447 498 593 792 848 1077 1088 1413 1455 15342142

3482

5772

0100020003000400050006000

Uniql

o

H&M

Next

Zara

Topm

an/sh

op

Espr

it

Fren

ch C

onne

ction

Mass

. Dutt

i

Reiss

Jigsa

w

Ted B

aker

Tomm

y Hilfi

ger

Polo

RL

Hugo

Bos

s

Burb

erry

Ralph

Laur

en

£


“No Ordinary Designer Label”

Ted Baker's competitive advantage is derived from its quirky brand, its customer interaction (through social media, the store format or jokes on the labels) and its management team.

We think there are a few key business strengths that have come from the founder’s decision not to name the brand after himself. Ted Baker has its own persona, which appeals to a wide range of customers, and the company does not have a narrow target audience in mind. In the core UK market, Ted tends to target younger, fashion-focused shoppers, whereas in overseas markets it appeals to luxury customers as well – a significant asset to the company.

The company’s branding tries to achieve a sense of mystery and intrigue, which has been used in marketing and promotions. The employees feel that they too have “ownership” of the Ted Baker label and we think the management has handled the brand image well.

Given that Ted Baker does not spend on large-scale mainline advertising, emphasis is placed on product quality and value, creating a buzz about new stores openings (including promotional gifts) and social media interaction. Exhibits 5 and 6 show the increase in followers on Twitter and Google+ for the last three months for Ted Baker and other brands.

Exhibit 5: Increase in Twitter followers 19 April to 18 July 2014

Exhibit 6: Increase in Google+ followers 19 April to 18 July 2014

Source: twittercounter.com on July 18 2014, Edison Investment Research

Source: circlecount.com on July 18 2014, Edison Investment Research

Ted Baker’s stores are inimitably engaging, with individual layouts for each store based on local features of the city, or displaying various British tropes (black taxis, red telephone boxes, Union Jacks, etc). A store event might serve “Tedtinis” cocktails to shoppers as they browse. The US flagship store on Fifth Avenue has an Instagram Instant Photobooth. Ted makes shopping a fun experience which, along with refreshing the product offering, drives loyalty to the brand. These traits enhance the in-store experience and entice consumers to shop in store versus online, a key strength for brands in today’s market.

Exhibit 7: Acceleration in retail sales growth shows Ted’s formula works


6% 6% 8%11%

12% 14%

19% 19%

0%2%4%6%8%

10%12%14%16%18%20%

Burb

erry

Mass

imo D

utti

H&M

Hugo

Bos

s

Ralph

Laur

en

Tomm

y Hilfi

ger

Ted B

aker

Zara

Change in followers

2%

4% 5%

7%8%

0%1%2%3%4%5%6%7%8%9%

Tomm

y Hilfi

ger

Ted B

aker

Hugo

Bos

s

Burb

erry

H&M

Change in followers

15.4%11.9%

14.1%

19.4%

24.6%

13.6%

7.4% 6.6%

14.0%10.7%

0%

5%

10%

15%

20%

25%

2010 2011 2012 2013 2014

% Growth

Retail sales growth Space growth


Ted’s stores have unique traits, for example the changing rooms in Hong Kong are replicas of a British telephone box, playing to Ted’s “Britishness”. The idiosyncratic layouts, compared to the more formal and standardised store layout of Hugo Boss for instance, create a fun shopping environment that we think is a key differentiator and has led to the strong retail sales growth performance shown in Exhibit 7.

Management and capital allocation

Management The board of directors (alongside three non-executive directors) includes:

Ray Kelvin, founder and chief executive of Ted Baker;

Lindsay Page, chief operating officer (since 2014) and finance director (since 1997); and

David Bernstein, non-executive chairman (2013, board member since 2003).

The chief executive is pivotal to Ted’s ongoing success, not only through relationships with suppliers and customers, but also his involvement in product design and maintaining the unique culture of the organisation. The management team has also created shareholder value through its capital allocation record, both by being financially disciplined and by seizing opportunities.

Capital allocation Capital allocation is key to the growth of Ted Baker, and the company is highly selective when choosing new locations in which to expand. For example despite operating retail stores in Europe for over a decade, it has not found the “right location” in Spain to date (and has entered that market through concessions), which we believe shows financial discipline. When investing in new stores, the management team uses profit contribution and ROCE metrics to determine the feasibility of the location. The proposed stores are visited several times and the final investment decision lies with at least two key executives (CE, COO, and global retail director). The stores (retail and licence partner stores) are designed entirely from London.

The business has consistently generated high ROCE. With capex moderating, our estimates show the business should return to mid-30s percent pre-tax ROCE over 2015-17e.

Exhibit 8: As capex abates, we forecast ROCE to increase

Source: Company data, Edison Investment Research. Note: Capex defined as purchases of PPE.

Ted Baker has been able to fund its capital expenditure programme primarily through cash generated from operations, and pays out surplus cash as dividends. Cumulative cash usage exceeded cash generated over 2012-14, and over this period Ted has utilised a bank overdraft facility. The company’s international growth has required an increase in working capital, which has been the primary use of the facility.

34%

39% 39%

32%

29%

33% 35% 36%37%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

25%

28%

30%

33%

35%

38%

40%

2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

Capex/SalesROCE

Pre tax pre exceptionals ROCE Capex/Sales (RHS)


Exhibit 9: Largest cash uses have been capex, dividend and cash taxes respectively


Exhibit 10 shows the earnings and dividend the company has delivered over the long term.

Exhibit 10: Long-term double-digit EPS and DPS CAGR

Source: Company data, Edison Investment Research estimates. Note: EPS is on company-adjusted basis.

The dividend growth is noteworthy in our view – the double-digit EPS growth has not come at the expense of cash returns to owners. Management views this as a discipline – the business growth has never been cash-constrained and it expects to adhere to a 50% payout ratio over time.

Investment case Ted Baker has only a tiny share of the global apparel market, which we illustrate in Exhibit 11. It has an estimated 0.68% share of revenue (converting wholesale and licence to retail equivalent) against a limited sample of 21 comparable companies detailed below.

Exhibit 11: Revenue analysis last FY – apparel brands by domicile

Source: Bloomberg, Edison Investment Research. Note: UK: (FC, SGP,BRBY, NXT), Eur. Luxury: (SFER, 1913, RMS), Eur. Apparel:(GWI, BOSS, HMB, ITX), Asia: (330, 9983), US :(GES, URBN, RL, PVH, VFC).

2% 3% 3%27% 20% 21%

61%44% 40%

36%

29% 24%

4% 12%

0%20%40%60%80%

100%120%

2012-2014 Total 2014 2015E-2017E Total

% of Cash Flow from Operations

Generation of netcashDividend

Capex

Cash Tax

Cash Interest

5.4 6.3 7.0 7.8 8.7 9.6 10.8 12.1 14.6 16.4 16.7 17.2 20.6 23.426.6

33.7

11.2 13.90 13.90 16.5 18.6 22.7 26.8 30.6 33.8 36.229.5 32.5

41.548.9

56.4

69.0

0%

10%

20%

30%

40%

50%

60%

01020304050607080

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Payout RatioEPS/DPS

DPS EPS (adj) Payout Ratio (RHS)

Average growth (CAGR) 5 year 10 year 15 year EPS (adj) 18% 11% 12% DPS 15% 13% 13%

322638

6690

15578

29608

10213

31128

05,000

10,00015,00020,00025,00030,00035,000

Ted Baker Ted Baker(system sales)

UK Apparel EuropeanLuxury

EuropeanApparel

Asian Apparel US Apparel

£m


Sales evolution – sustainable mid-teens growth In our view, Ted Baker has a large opportunity to open retail stores and concessions, as well as further its wholesale business. We therefore believe our forecast of 15% revenue growth CAGR for 2014-17e is attainable. We analyse the retail segments by geography in further detail below.

Core UK franchise: Growing strong We believe Ted Baker’s brand is not saturated in the UK. We would highlight John Lewis’s 2013 retail report, which cites Ted Baker as the number one “most popular” search on its website, ahead of iPad and Cath Kidston, with a 42% increase in searches y-o-y. While the UK store portfolio has been optimised over the past few years, with new store openings being limited and concessions falling, the UK & Europe business has been a strong performer, growing retail revenues at 12.6% CAGR from 2012-14.

European growth opportunity: Concession driven Over time, we believe incremental growth is likely to come from European expansion, both through own stores (Marseille this year) and through retail concessions (c five a year for 2015-17e) by our estimates. While Ted Baker has grown concessions rapidly, we show that the opportunity here is still very large. Exhibit 13 shows our estimates of a handful of European department stores with which Ted Baker has concession arrangements and their total department store count. Assuming one concession each for menswear and one for womenswear (see discussion), Ted still has lots of room left to grow.

Exhibit 12: Europe ex-UK concessions 2012-17e Exhibit 13: European concession opportunity

Source: Company data, Edison Investment Research estimates Source: Store data, Edison Investment Research

We note that not all of the above department store locations will be suitable for Ted Baker, but we believe the company will be able to judge which locations are suitable based on its research, and it is likely this will still identify ample investment opportunities over time. We therefore estimate Ted can grow the UK & Europe Retail business at an 8.3% revenue CAGR over 2014-17e through space growth and some sales/sqft growth as space matures and brand awareness in Europe grows.

26

44

6368

7379

0102030405060708090

2012 2013 2014 2015E 2016E 2017E

Ted Baker Concessions European

dept. stores

Current Stores with Ted

Concessions

Total Current Stores

Potential Ted Concessions

Galeries Lafey ette

4 61 122

Karstadt 6 80 160

De Bijenkorf 7 10 20

El Corte Ingles 21 86 172

Total 38 237 474


Exhibit 14: UK & Europe retail sales (ex-e-commerce) 2012-17e


North America: Medium-term expansion prospects North America is likely to be a key contributor to Ted Baker. Success in our view is to be driven by growth in own retail stores and by unlocking the concession market. In particular, US department stores appear to be more receptive to concession arrangements than in the past. In the 2008-09 period, many luxury brands were displeased with their retail partners, which marked down prices, hurting their image. Operating concessions within a department store is favourable for the brand, as the label can control the concession display and atmosphere, obtain better staff and, importantly, control product pricing. Both Saks and Neiman Marcus have started concession relationships with European luxury brands in recent years. Ted Baker's US business comprises of retail stores, concessions with Bloomingdale’s and a wholesale business that is largely a supplier to Nordstrom and Lord and Taylor.

Two key points here are that Ted Baker still has scope to expand its existing Bloomingdale’s relationship (42 concessions) and based on Topshop’s 50 concessions within Nordstrom’s, suggesting an opportunity over time to convert the wholesale relationship to concessions.

Exhibit 15: North American concessions 2012-17e Exhibit 16: North American concession opportunity

Source: Company data, Edison Investment Research estimates Source: Store data, Edison Investment Research

Due to the scale of the opportunity, we forecast that Ted Baker can grow North American retail revenues at 17.5% CAGR for 2014-17e through space expansion in own stores and concessions, as well as modest sales/sqft growth. While the North American market has structurally lower sales/sqft, we estimate moderate increases as Ted’s brand matures and customers become more familiar with its offer.

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2012 2013 2014 2015E 2016E 2017E

Sales/sq ftSales (£m)

Retail sales Sales per sq ft

11

3342

4856

64

010203040506070

2012 2013 2014 2015E 2016E 2017E

Ted Baker Concessions North America dept. stores Total Current Stores

Potential Ted Concessions

Bloomingdales 50 100

Neiman Marcus 77 154

Saks Fifth Av enue 39 78

Nordstrom 117 234

Total USA 283 566

Total Canada 10 20

Total 293 586


Exhibit 17: North America retail sales (ex-e-commerce) 2012-17e


Asia: Longer-term development Asia is a key longer-term driver of the brand’s expansion, given its relative immaturity (the first retail store only opened in 2011). There is an increasing sophistication in Chinese consumer tastes towards more quality-led design over “bling” and logo-driven purchasing; we think Ted’s growth here could be extremely successful. The “quintessentially British” label will be very marketable and the company has exploited this well to date. Burberry has utilised its British heritage to garner success in Asian markets, growing its Asia Pacific revenues at 29.4% CAGR over the past five years from £240m to £870m. We forecast Ted Baker’s Asian retail revenue growth CAGR for 2014-17e to be 32%, from a lower base of £9.9m to £23m. In our view, this is likely to come about through space growth and sales/sqft, which has been depressed over the past few years, as space has quadrupled over the past three years.

Exhibit 18: Sales/sqft hampered by rapid space growth in 2012-14


E-commerce E-commerce is a small proportion of Ted’s revenues (7% of 2014). It has grown at 55% CAGR over the past four years (Q115 growth was 48% y-o-y). We forecast the revamped UK and recent relaunch of the US website will quickly contribute, growing revenue share to 13% of 2017e. We expect this to be higher margin and support margin expansion going forward.

Wholesale: 13% five-year CAGR after 2010 reset Ted Baker’s wholesale business has performed well, but shrunk as a proportion of total revenue as the retail business has outpaced it (as shown in Exhibit 1). This is a positive development for gross margin as shown by Exhibit 19.

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2012 2013 2014 2015E 2016E 2017E



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2012 2013 2014 2015E 2016E 2017E




Exhibit 19: Faster retail growth has led to a 360bp expansion in gross margin


The key for Ted Baker is finding partners that will not diminish the brand with poor store displays and unsupportive staff. Since the company retook control of its US wholesale business from Hartmax Corp., total wholesale revenue has grown by 21.5% CAGR from 2011-14. Given the build-out of the US operation and the growing international maturity of the brand, we forecast this momentum will continue. We estimate Ted can grow wholesale revenue at 15% for 2014-17e.

Exhibit 20: Wholesale revenues fell after Hartmax’s bankruptcy, strong growth thereafter


Operating margin expansion as growth spend moderates Ted’s global expansion has led to one-off costs that we think will yield returns. These include:

fit-out and promotional marketing for flagship stores in early-stage markets (US, Asia);

step change in central/administrative costs (headcount, procurement and IT spend); and

set-up costs of the US wholesale operations and revamped e-commerce platforms in the UK and US, as well as start-up costs for expansion into China.

Ted is also implementing a new Microsoft Dynamics ERP system (total capex estimate of £8.9m).

We also believe that Ted’s high gross margins should be converted to higher operating margins. Historic EBITDA margin to gross margin percentage was previously greater than 30% (average of 2004-08: 33%). An improvement should be driven by higher operating leverage as Ted’s international store portfolio matures, higher margin e-commerce influencing the retail mix, and efficiencies as the company derives benefits from its IT investments.

We also expect there to be fewer exceptional costs as the company incurs fewer market entry costs and rental costs for stores not open. We think there will be fewer impairments, which have also depressed margins in previous years. Margins have been expanding since 2013 and we forecast 120bp of adjusted margin expansion over the next three years.

64.9% 63.2% 64.9% 65.5% 65.2% 66.2% 66.1%

40.3%42.5% 41.9%

44.8% 45.1% 45.2% 43.4%

58.1% 58.5%61.1% 61.7% 61.3% 62.4% 61.7%

40%

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70%

2008 2009 2010 2011 2012 2013 2014

Gross Margin

Retail Wholesale Composite

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100

2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

Sales £m


Exhibit 21: Ted Baker’s high gross margins have not converted to EBITDA margins

Source: Company data, Edison Investment Research estimates. Note: Last financial year for peers.

Operating margin analysis Exhibit 22 details the historic margin of the company and factors contributing to its 300bp decline over the past 10 years. We expect the impact of the financial crisis and the high investment spend to be a temporary feature. Unusual items such as impairments and rent for stores not yet open hurt reported margins in 2012 and 2013. While these are recurring issues for a retail operator, we think the company will become more efficient at designing and executing stores in new locations and these expenses will fall as a percentage of revenue.

Exhibit 22: We forecast Ted’s EBIT margin’s will start to recover to historic levels

Source: Company data, Edison Investment Research. Note: Reported operating margins.

Exhibit 23 highlights the operating costs in further detail. Distribution costs as a percentage of revenue were increasing until 2013, and similarly administration expenses to revenue peaked in 2012 (when margins troughed). We explain below why we think these should decline.

Exhibit 23: Ted’s international expansion has temporarily lowered operating margins

Source: Company data, Edison Investment Research. Note: Adjusted operating margins (company basis).

61.7%57.9% 59.1% 65.0% 59.3% 71.2% 68.8%

15.7%

18.7% 20.5% 23.1% 23.5% 26.0% 36.2%

0%

20%

40%

60%

80%

Ted Baker Ralph Lauren Hennes &Mauritz

Hugo Boss Inditex Burberry Hermes

Margin

Gross Margin EBITDA MarginTED 2014 Gross margin TED 2014 EBITDA margin

15.5% 15.6% 16.0% 15.6%

11.2% 12.1% 12.9%11.3% 11.6% 12.3% 12.9% 13.4% 13.8%

0%2%4%6%8%

10%12%14%16%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

EBIT Margin

23.9%25.0% 24.7% 26.1% 25.9%

5.1% 4.6% 5.6% 5.3% 5.0%

12.1%

12.9%

11.3%11.6%

12.3%

10.0%

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11.5%

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2010 2011 2012 2013 2014

Operating Margin (adj.)Cost/Sales

Distribution cost/sales Admin cost/sales Operating margin (adj.) (RHS)

Operating

Leverage? Driven down by investment spend and exceptional items

Driven down by financial crisis

Increase in retail square footage and property costs

Increase in US wholesale expansion as well as central distribution and IT functions depressed margins

Luxury brands for comparison Closer peer set


Forecasts We believe that this investment spend, which was key to supporting the long-term future of the business, is likely to yield returns, and Exhibit 25 shows our forecasts for margin expansion.

Exhibit 25: Operating margin 2005-17e Margin 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e EBIT margin 16.0% 15.6% 11.2% 12.1% 12.9% 11.3% 11.6% 12.3% 12.9% 13.4% 13.8%

EBIT margin (adj)

16.0% 15.6% 12.4% 12.6% 12.9% 12.6% 12.6% 12.6% 12.9% 13.4% 13.8%

change (bp) 40 -39 -316 14 31 -30 7 0 33 50 33

EBITDA margin (adj)

19.1% 18.9% 16.3% 16.4% 16.3% 16.1% 16.2% 16.0% 16.4% 16.9% 17.3%

change (bp) 32 -18 -261 6 -10 -19 7 -17 44 50 33

Source: Company data, Edison Investment Research estimates Note: EBIT margin (adj. – company basis)

Sales growth and the margin expansion detailed above drive our three-year adjusted EPS CAGR forecast of 18.8%. As explained above, we forecast retail revenues to grow at 15% CAGR for the next three years and with a similar growth rate for wholesale, our revenue forecast is for 15% CAGR in 2014-17e. This is driven by c 7% pa space growth and sales density growth making up the balance. We think this sales density will drop through to modestly higher operating margins, along with efficiency increases, as distribution costs to revenues fall and IT spend moderates.

Our adjusted EPS estimates are 2% below consensus for 2015e and 2% and 5% above consensus for 2016e and 2017e respectively.

Exhibit 26 Summary financial data and forecasts 2014-17e £000s 2014 2015e 2016e 2017e Retail revenue 259,143 296,878 342,128 392,812 Wholesale revenue 62,778 72,220 83,053 95,511 Revenue 321,921 369,098 425,181 488,323 Revenue growth 26.5% 14.7% 15.2% 14.9% Gross Profit 198470 227138.4 261517.1 300325.4 Gross profit margin 61.7% 61.5% 61.5% 61.5% Operating Profit (adj) 40,634 47,795 57,166 67,254 Operating margin (adj) 12.6% 13.0% 13.4% 13.8% Net Income (adj) 29,627 34,650 41,917 49,674 EPS (adj) 69.0 80.7 97.6 115.6 EPS (adj) consensus 69.0 82.7 96.0 110.5 Difference -2% 2% 5%

Source: Company data, Edison Investment Research estimates. Note: Adjustments for exceptional items, EPS and operating profit/margin are company-adjusted basis.

Exhibit 24: Drop-through FY0-3: we forecast Ted will increase modestly through to 2017e

Source: Bloomberg estimates for peers, Edison Investment Research for Ted Baker

25%32% 35% 36% 37% 40%

53%

28% 28%35% 37%

33%41%

54%

0%

10%

20%

30%

40%

50%

60%

Ted Baker Ralph Lauren Hennes &Mauritz

Hugo Boss Burberry Inditex Hermes

EBITDA Margin to Gross Margin

FY0

FY3


Valuation: Fair value 2,200p

We value Ted Baker using three methods and arrive at our target price using a simple average of the three approaches:

Price/earnings/growth (PEG) ratio for FY1 and FY2.

Lease-adjusted EV/EBITDAR for FY1.

A discounted cash flow approach.

The most relevant peer set in our view includes H&M, Inditex (two global high street fashion giants), Ralph Lauren and Hugo Boss (two “lifestyle brands”). All have executed successfully outside their home markets and continue to have attractive growth prospects:

H&M and Inditex have grown revenues at 9.7% and 11.6% CAGR respectively over the past 10 years.

Ralph Lauren and Hugo Boss have grown revenues at a 10-year CAGR of 9.4% and 7.6% respectively.

Valuation comparables Exhibit 27: Ted on lower ratings than fast fashion giants, but higher than lifestyle brands Company Ticker Year

End FY1 P/E FY2 P/E FY3 P/E FY 1

EV/EBITDA FY 2

EV/EBITDA Div.

Yield Ted Baker TED LN Jan 21.8 18.0 15.6 12.8 10.8 2.2 Hennes & Mauritz HMB SS Nov 24.5 21.7 19.6 15.7 13.5 3.4 Inditex ITX SM Jan 26.3 23.1 20.8 15.0 13.2 2.4 Ralph Lauren RL US Mar 18.8 16.4 14.1 9.4 7.9 1.1 Hugo Boss BOSS GR Dec 19.8 17.4 15.5 12.6 11.2 3.6 Source: Bloomberg (consensus estimates 18 August 2014), Edison Investment Research estimates for Ted Baker. Note: EV multiples uses reported net debt (cash). EPS used for P/E multiples are company adjusted basis.

PEG analysis – Ted a significant outlier We feel the headline P/E ratio neither does justice to Ted Baker’s fast-growing international operations nor give it credit for margin expansion. Using our EPS forecasts, Ted Baker trades on a FY15 and FY16 PEG ratio of 1.11x and 0.92x respectively, relative to an average of 1.82x and 1.60x for its four peers. This is illustrated in the two scatter charts and the table below.

Exhibit 28: Current year P/E vs three-year EPS growth Exhibit 29: Next year P/E vs three-year EPS growth

Source: Bloomberg (consensus estimates 1 August 2014), Edison Investment Research estimates for TED

Source: Bloomberg (consensus estimates 1 August 2014), Edison Investment Research estimates for TED

In our view, the c 40% discount on this basis is unjustified given Ted Baker’s growth profile, and we accept some investor concerns about the pace of expansion and execution risk, and account for it with a 25% discount.

TED

ITXHMB

RL BOSSAVG

10x

14x

18x

22x

26x

30x

5 9 13 17 21

FY1 P/E

Next 3 year EPS growth %

TED

ITXHMB

RL BOSSAVG

10.0x

14.0x

18.0x

22.0x

26.0x

30.0x

5 7 9 11 13 15 17 19 21

FY2 P/E

Next 3 year EPS growth %


Exhibit 30: PEG analysis – Ted Baker’s growth is undervalued Company FY1 PEG FY2 PEG EPS growth FY1-FY3 (%) Ted Baker 1.11 0.92 18.8 Average (ex-Ted) 1.82 1.60 12.0 Average (H&M and Inditex) 2.14 1.89 11.7 Ted Baker PEG discount to average 39% 43% Ted Baker target multiple (applying 25% discount to average) 25.6 22.6 EPS (adj) 80.7 97.6 Price 2,066 2,202 Source: Bloomberg, Edison Investment Research. Note: EPS is on company-adjusted basis.

Lease-adjusted EV/EBITDAR – Ted at slight discount to peers We use a lease-adjusted EV/EBITDAR and compare Ted Baker to the same peer set. We have estimated rental expense based on the peers’ historical rent/sales ratios. We have capitalised this figure using a 6% discount rate for all of the companies and added it to enterprise value.

Exhibit 31: Lease-adjusted EV/EBITDAR comparison Company FY0 EV/EBITDAR FY1 EV/EBITDAR EBITDAR growth FY0-FY1 (%) Ted Baker 16.0 13.7 17% Average (ex-Ted) 15.3 14.2 7% Average (H&M and Inditex) 17.9 16.1 11% Ted Baker target multiple 16.1 Price 2,211 Source: Bloomberg (consensus estimates except TED on 1 August 2014), Edison Investment Research estimates. Edison Investment Research estimates for rental expense added to consensus EBITDA for peers.

Discounted cash flow As Exhibit 33 overleaf shows, our base case DCF valuation comes to 2,190p. We detail our assumptions on the next page.

Our reverse DCF implies lower revenue growth (12.5% from 2015-24) than the company has delivered (16.1%, 13.2% and 16.8% compounded revenue growth over the past five, 10 and 15 years respectively). The market price also assumes no EBITDA margin expansion beyond the 15.7% achieved in 2014. We have assumed a tax rate of 25%, a WACC of 10% and terminal growth rate of 3%.

Exhibit 32: Reverse DCF – minimal margin improvement in today’s price Ted Baker 2009-14 (five-year average) 2015-23e 2024e (Terminal year) Net revenue growth (CAGR) 16.1% 12.5% 12.5% EBITDA margin 15.6% 15.7% 15.7% Changes in WC/Sales -3.6% -0.5% -0.5% Capex/Sales -5.6% -5% -3% Cumulative PV of cash flows (£m) 235 PV of Terminal cash flows (£m) 509 Implied Enterprise Value (£m) 744 Net Debt (£m) 9 Implied Equity Value (£m) 735 Implied share price (p) Current share price (p) Difference (p) Upside (%)

1,673 1,667

7 0.4

Source: Company data, Edison Investment Research estimates. Note: Current share price on 1 August 2014.

Fair value – 2,200p Averaging our DCF base case valuation of 2,190p with our EV/EBITDAR price of 2,211p and 2016e PEG-based price of 2,202p, we arrive at a simple average of 2,201p. We set a fair value of 2,200p, implying 25% upside.

Ted Baker | 19 A

ugust 2014 16

Exhibit 33: Base case DCF – valuation 2,190p

Source: Company data, Edison Investment Research. Note: We use reported operating profit in the EBITDA calculations above.

Beyond our explicit forecast period, we have assumed 15% revenue growth (fading to 10% after 2022) supported by a backdrop of international expansion, primarily through the retail channel across North America and Asia. We have also assumed elevated capital expenditure levels (6% of sales until 2020 and 5% afterwards) to support this growth. We have assumed that today’s mid-teens EBITDA margin can expand to 20%, as margins are currently depressed due to higher administrative spend on personnel and IT systems. In our view while part of these will be ongoing, some are non-recurring such as set-up costs and one-time investments in distribution. We also expect to see greater operating leverage over time as the brand matures in international markets. We believe these are feasible given the peers in apparel retail and Ted’s historic EBITDA to gross margin drop-through before the financial crisis. Since we believe Ted can at least maintain its gross margins, a return to 33% drop-through would result in EBITDA margins in excess of 20%.

We have assumed a tax rate of 25%, a WACC of 10% and terminal growth rate of 3%.

TED BAKER 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024EGroup net revenue (£m) 126 142 153 164 188 216 254 322 369 425 488 562 646 743 854 939 1,033 1,137change yoy -99.9% 13.2% 7.3% 7.2% 14.7% 14.9% 18.0% 26.5% 14.7% 15.2% 14.9% 15.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0%

EBITDA 24 27 23 26 31 32 39 50 63 72 84 101 123 149 171 188 207 227EBITDA margin 19.1% 18.9% 15.2% 15.9% 16.3% 14.8% 15.2% 15.7% 17.2% 16.9% 17.3% 18.0% 19.0% 20.0% 20.0% 20.0% 20.0% 20.0%change yoy 1.1% 12.1% -14.1% 12.6% 17.4% 4.3% 20.8% 30.9% 25.6% 13.6% 17.1% 19.8% 21.4% 21.1% 15.0% 10.0% 10.0% 10.0%

Change in working capital -4 -4 -10 0 -6 -13 -13 -11 2 -14 -12 -3 -3 -4 -4 -5 -5 -6Work ing capital/sales -3.5% -2.8% -6.6% -0.1% -3.4% -5.9% -5.0% -3.5% 0.6% -3.3% -2.5% -0.5% -0.5% -0.5% -0.5% -0.5% -0.5% -0.5%

Capex/sales -5 -9 -12 -5 -10 -15 -20 -18 -25 -27 -28 -34 -39 -45 -43 -47 -52 -57Capex/sales -3.9% -6.1% -7.7% -2.8% -5.3% -6.7% -7.8% -5.6% -6.8% -6.3% -5.8% -6.0% -6.0% -6.0% -5.0% -5.0% -5.0% -5.0%

DCF valuationEBITDA - Capex 19 18 11 22 21 17 19 32 38 45 56 67 84 104 128 141 155 171Cash Tax -6 -4 -5 -7 -7 -8 -7 -8 -12 -14 -17 -17 -21 -26 -32 -35 -39 -43Change in working capital -4 -4 -10 0 -6 -13 -13 -11 2 -14 -12 -3 -3 -4 -4 -5 -5 -6Other noncash charges 0 1 3 2 1 0 0 2 2 2 2 0 0 0 0 0 0 0Cash Interest 0 0 0 0 0 0 -1 -1 -2 -2 -2 -2 -2 -2 -2 -2 -2 -2Free cashflow 9 11 -1 17 8 -3 -2 14 27 17 28 46 58 72 90 99 109 120Terminal value 1,717Total cashflow 17 8 -3 -2 14 27 17 28 46 58 72 90 99 109 1,717Discounted cash flows 17 8 -3 -2 14 25 14 21 31 36 41 46 46 46 662

968Valuation Terminal growth rateEnterprise value (£m) 968 WACC 0 0% 1% 2% 3% 4%

8.0% 2347 2574 2876 3300 3936Net Cash (Debt) (£m) -9 8.5% 2165 2355 2604 2944 3434Equity valuation (£m) 959 9.0% 2005 2166 2373 2649 3035Number of shares (m) 43.8 9.5% 1863 2000 2174 2401 2711Per share (p) 2190 10.0% 1737 1854 2001 2190 2442Current share price (p) 1670 10.5% 1624 1725 1850 2009 2216Difference (p) 520 11.0% 1522 1610 1717 1851 2024Upside (%) 31% 11.5% 1430 1506 1599 1713 1858

12.0% 1346 1413 1494 1592 171412.5% 1270 1329 1399 1484 1588

------------------Terminal growth rate------------------

------

------

-WA

CC

------

------

-


Risks and sensitivities

Valuation risk: Heavily geared towards sales growth Exhibit 34: DCF sensitivity for share price (p), parameters for 2015-24e

Source: Edison Investment Research estimates

Ted Baker and the apparel retail sector trade at high valuation multiples as the companies have delivered excellent performance. If there were to be a material de-rating in the sector, the share prices could fall.

Similarly, the business and its valuation are highly geared towards sales growth and EBITDA margins. As the exhibit above shows, a 1% change in the long-term margin could result in a 100-200p swing in the value of the company.

Business risk: Markets, men and mode Both fashion and retail are extremely difficult area in which to operate, being affected by both macroeconomic conditions and microeconomic factors. Ted has shown resilience in past recessions, but a negative environment for disposable income could affect its revenues. We believe Ray Kelvin is integral to the operations of Ted Baker, so there is meaningful key man risk. Fashion risk is inherent in Ted’s business model, but its strong presence in both menswear and womenswear and its ability to refresh product lines in season partly mitigates this risk in our view. If the brand image of Ted Baker were to be tarnished, it could damage the company’s value. Our thesis is also predicated on a global expansion that may not be a smooth growth trajectory, and the shares could be trading lower than their global large-cap peers to account for this execution risk.

Financial risk: Minimal leverage Ted Baker has a clean balance sheet, with no long-term debt, but does have a bank overdraft facility (which expires 1 March 2015) with short-term financial borrowings at £37.3m at FY14. The FY14 net debt to EBITDA ratio is 0.2x and net debt to total capital is 6%. As Exhibit 35 shows, cash conversion has been relatively strong over time (with working capital outflows resulting in lower conversion in 2012 and 2013.

Exhibit 35: Cash conversion Cash conversion 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e OCF/EBITDA 89% 71% 107% 82% 61% 66% 82% 106% 83% 88%


431 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0%12% 431 537 667 823 1012 1238 150813% 518 643 793 975 1194 1456 177114% 606 748 920 1127 1376 1675 203315% 694 853 1046 1279 1559 1894 229616% 781 959 1173 1431 1741 2113 255817% 869 1064 1299 1583 1924 2332 282118% 957 1169 1425 1735 2106 2551 308319% 1044 1274 1552 1886 2288 2770 334620% 1132 1380 1678 2038 2471 2989 360821% 1220 1485 1805 2190 2653 3208 3871---

-----E

BITD

A Ma

rgin-

------

------

------------------Revenue Growth------------------


Exhibit 36: Financial summary £'000s 2012 2013 2014 2015e 2016e 2017e January IFRS IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue 215,625 254,466 321,921 369,098 425,181 488,323 Cost of Sales (83,419) (95,740) (123,451) (141,959) (163,664) (187,997) Gross Profit 132,206 158,726 198,470 227,138 261,517 300,325 EBITDA 35,185 41,408 52,129 61,713 73,048 85,346 Operating Profit (before amort. and except.) 27,529 32,368 41,240 48,795 58,166 68,254 Intangible Amortisation 0 0 0 0 0 0 Exceptionals (2,814) (2,614) (1,046) 2,700 0 0 Share based payments (446) (240) (606) (1,000) (1,000) (1,000) Operating Profit 24,269 29,514 39,588 50,495 57,166 67,254 Share of profit from JV, net of tax 149 198 331 500 750 1,000 Net Interest (163) (790) (996) (2,094) (2,027) (2,023) Profit Before Tax (norm) 27,515 31,776 40,575 47,201 56,890 67,232 Profit Before Tax (FRS 3) 24,255 28,922 38,923 48,901 55,890 66,232 Tax (6,698) (7,325) (10,071) (12,225) (13,972) (16,558) Profit After Tax (norm) 20,817 24,451 30,504 34,975 42,917 50,674 Profit After Tax (FRS 3) 17,557 21,597 28,852 36,675 41,917 49,674 Average Number of Shares Outstanding (m) 41.6 41.9 43.0 43.0 43.0 43.0 EPS - normalised (p) 50.0 58.3 71.0 81.4 99.9 118.0 EPS - normalised and fully diluted (p) 48.2 56.5 70.1 80.4 98.7 116.5 EPS - (IFRS) (p) 42.2 51.5 67.2 85.4 97.6 115.6 Dividend per share (p) 23.4 26.6 33.7 38.8 44.6 51.3 Gross Margin (%) 61.3 62.4 61.7 61.5 61.5 61.5 EBITDA Margin (%) 16.3 16.3 16.2 16.7 17.2 17.5 Operating Margin (before GW and except.) (%) 12.8 12.7 12.8 13.2 13.7 14.0 BALANCE SHEET Fixed Assets 41,255 52,285 57,201 69,536 81,453 92,562 Intangible Assets 968 983 6,080 8,080 9,580 9,580 Tangible Assets 35,680 45,412 45,083 55,418 65,835 76,944 Investments 4,607 5,890 6,038 6,038 6,038 6,038 Current Assets 91,837 112,389 144,409 168,403 188,393 219,034 Stocks 51,872 67,673 80,432 83,506 96,273 110,587 Debtors 30,587 34,124 34,793 42,183 48,592 55,808 Cash 8,560 9,823 28,521 42,052 42,865 51,976 Other 818 769 663 663 663 663 Current Liabilities (46,487) (65,284) (89,546) (102,126) (107,131) (116,625) Creditors (39,697) (45,422) (52,264) (64,844) (69,849) (79,343) Short term borrowings (6,790) (19,862) (37,282) (37,282) (37,282) (37,282) Long Term Liabilities (1,420) (497) 0 0 0 0 Long term borrowings 0 0 0 0 0 0 Other long term liabilities (1,420) (497) 0 0 0 0 Net Assets 85,185 98,893 112,064 135,813 162,715 194,971 CASH FLOW Operating Cash Flow 19,454 25,482 41,448 67,030 59,626 74,310 Net Interest (192) (633) (1,169) (2,237) (2,237) (2,237) Tax (7,738) (7,122) (8,470) (12,225) (13,972) (16,558) Capex (14,542) (19,765) (18,009) (23,253) (25,298) (28,201) Acquisitions/disposals 0 0 0 0 0 0 Financing 182 360 (412) (1,857) (1,290) 214 Dividends (8,930) (10,131) (12,110) (13,927) (16,015) (18,418) Net Cash Flow (11,766) (11,809) 1,278 13,531 813 9,111 Opening net debt/(cash) (13,536) (1,770) 10,039 8,761 (4,770) (5,583) HP finance leases initiated 0 0 0 0 0 0 Other 0 0 0 0 (0) 0 Closing net debt/(cash) (1,770) 10,039 8,761 (4,770) (5,583) (14,694) Source: Company data, Edison Investment Research estimates


Contact details Revenue by geography Ted Baker plc The Ugly Brown Building 6a St Pancras Way London NW1 0TB United Kingdom 02072554800 www.tedbakerplc.com

CAGR metrics Profitability metrics Balance sheet metrics Sensitivities evaluation EPS 12-16e 19.3% EPS 14-16e 18.2% EBITDA 12-16e 20.0% EBITDA 14-16e 18.3% Sales 12-16e 18.5% Sales 14-16e 14.9%

ROCE 15e 27.8% Avg ROCE 12-16e 27.8% ROE 15e 25.4% Gross margin 15e 61.5% Operating margin 15e 12.9% Gr mgn / Op mgn 4.8

Gearing 15e N/A Interest cover 15e 22.8 CA/CL 15e 1.6 Stock days 15e 82.6 Debtor days 15e 41.7 Creditor days 15e 57.2

Litigation/regulatory Pensions Currency Stock overhang Interest rates Oil/commodity prices

Management team Chief Executive: Ray Kelvin, CBE Chief Operating Officer and Finance Director: Lindsay Page Ray, the founder of Ted Baker, has worked in the fashion industry for over 40 years. In 1973 he founded PC Clothing, a supplier of womenswear to high street retailers. In 1987 Ray developed the Ted Baker brand and has been chief executive of Ted Baker since its launch in 1988. In the New Year Honours’ List of 2011 Ray was awarded the CBE for services to the fashion industry.

Lindsay joined Ted Baker as Finance Director in February 1997. He joined Binder Hamlyn in 1981, became a founder member of the corporate finance department in 1986 and a partner in 1990. Binder Hamlyn subsequently merged with Arthur Andersen in 1994. Lindsay is a Trustee of the Retail Trust.

Non-executive Chairman: David Alan Bernstein, CBE David is chairman of the British Red Cross. Previously he was joint managing director of Pentland Group, chairman of Blacks Leisure, Manchester City and the Football Association. He is chairman of the Nomination Committee and a member of the Audit and Remuneration Committees. David is an independent director. In the New Year Honours’ List of 2014 David was awarded the CBE for services to football.

Principal shareholders Ray Kelvin 35.6% Capital Group 8.1% Schroders 7.1% Standard Life Investments 7.1% Blackrock 6.0% Legal & General Investment Management 3.6% Threadneedle Asset Management 3.3%

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