Jimmy Choo Regulatory News (CHOO)

31 August 2017

Jimmy Choo PLC

Half year results for the six months ended 30 June 2017

Margin Improvement and Significant Deleveraging

Jimmy Choo PLC ("Jimmy Choo" or "the Group") the British luxury brand specialising in shoes and accessories, today announces its unaudited results for the six months ended 30 June 2017.

Financial Highlights

· Continued revenue growth ahead of the market despite a challenging operating environment:

o 16.5% growth (4.5% at constant currency1);

o 3.5% like for like retail sales growth2, with growth across virtually all regions.

· Adjusted EBITDA3 of £37.4m, up 19.5% with EBITDA margin up 50bps to 18.6%.

· Adjusted EBIT4 of £26.9m, up 24.5%, with EBIT margin up 90bps to 13.3%.

· Profit before tax up 174.2% to £18.1m.

· EBITDA cash conversion5 increased from 84.5% to 118.9%.

· Significant improvement in net debt driven by strong focus on working capital optimisation.

Strategic and Operating Highlights

· Store investment programme continued in H1 2017, with six new Directly Operated Stores ("DOS"), eight renovations and relocations and five closures.

· 151 DOS in total, with New Concept Stores representing over 50% of the retail network.

· Growth in Men's continues, now representing 9% of revenue.

· Continued Licensing growth demonstrates brand flexibility and versatility.

· Joint Venture in UAE effective from July 2017, covering 6 stores.

· Progressive roll out of Omni-channel services continues, fuelling revenue growth.

· Successful insourcing of online fulfilment operations completed in H1 2017.

· Recommended cash acquisition of Jimmy Choo PLC by Michael Kors Holdings Limited ("Michael Kors") on 25 July 2017.

Pierre Denis, CEO of Jimmy Choo PLC, said:

 "We are delighted with our performance during the period, having delivered growth in revenue and margins, despite challenging market conditions. Strong underlying cash conversion has also allowed us to deleverage, providing us with a stable platform to deliver further strong growth. Our long-term growth strategy is to nurture the brand's unique DNA, to strive for excellence in business execution and to enhance client experience, in order to deliver superior growth and profitability, as well as leveraging the significant investments we have made in the business to date. We have continued to make good progress through the first half and are well positioned to deliver over the remainder of the year."

Peter Harf, Chairman of Jimmy Choo PLC, commented:

 "The strong performance in the first half of the year highlights the excellent strategic progress Pierre and his team have made further developing the Jimmy Choo brand and enhancing our global client offering. These strong foundations will prove to be invaluable as we embark on the next phase of our strategic development, and I would like to thank all Jimmy Choo employees for their continued energy and hard work as we look ahead. We are excited about the opportunities presented to Jimmy Choo through Michael Kors' all cash offer to our shareholders, as set out in the announcement on 25 July 2017. The shared vision and distinctive appeal of these two iconic brands will provide an exciting platform to achieve global leadership in luxury retail."

Enquiries

Non-GAAP measures

Certain discussions and analyses set out in this report include measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. We believe this information, along with comparable GAAP measurements, is useful to investors because it provides a basis for measuring our operating performance, and our ability to retire debt and invest in new business opportunities. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance and value creation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Wherever appropriate and practical, we provide reconciliations to relevant GAAP measures. For a reconciliation of adjusted performance measures to statutory figures, please see note 14 of Appendix 2 - Notes to the Financial Statements.

1 Constant currency revenue growth is calculated by applying the exchange rates for the half year ended 30 June 2017 to the half year ended 30 June 2016 on a month by month basis and calculating the growth percentage by reference to the total period.

2 Like for like ("LFL") sales growth is calculated by taking retail sales in all locations where trading occurred for a full financial year prior to the start of the period being measured, and calculating sales growth for those locations at constant currency.

3 Adjusted EBITDA is defined as operating profit for the period adjusted for exceptional costs, loss on disposal of property, plant and equipment and intangible assets, depreciation and amortisation charges and realised and unrealised foreign exchange gains and losses on the revaluation of monetary items.

4 Adjusted EBIT is defined as operating profit for the period adjusted for exceptional costs, share of the result of associates and joint ventures and realised and unrealised foreign exchange gains and losses on the revaluation of monetary items.

5 EBITDA cash conversion is defined as Adjusted Operating Cash Flow (cash generated from operations adjusted for exceptional costs) divided by Adjusted EBITDA.

6 Adjusted Consolidated Net Income is defined as profit for the period adjusted for exceptional costs, foreign exchange gains and losses on the revaluation of external bank facilities, changes in the fair value of forward foreign exchange contracts used to manage exposure to foreign currency gains and losses arising on external bank facilities and refinancing interest break costs. Tax charged in Adjusted Consolidated Net Income is per the Income Statement, excluding deferred tax.

7 Adjusted EPS is calculated as Adjusted Consolidated Net Income divided by 378,591,494 shares (2016: 377,786,469 shares).

8 Net debt is calculated as current and non-current borrowings less cash and cash equivalents.

9 Working capital is calculated as stock and trade and other receivables less trade and other payables.

Notes to Editors

Jimmy Choo encompasses a complete luxury accessories brand. Women's shoes remain the core of the product offer, alongside handbags, small leather goods, scarves, sunglasses, eyewear, belts, fragrance and men's shoes. CEO Pierre Denis and Creative Director Sandra Choi together share a vision to create one of the world's most treasured luxury brands. Jimmy Choo has a global store network encompassing more than 150 stores and is present in the most prestigious department and specialty stores worldwide. Jimmy Choo PLC is publicly listed on the London Stock Exchange with the ticker CHOO.

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements. Jimmy Choo PLC undertakes no obligation to update these forward-looking statements and will not publicly release any revisions it may make to these forward-looking statements that may result from events or circumstances arising after the date of this document. All persons, wherever located, should consult any additional disclosures that Jimmy Choo PLC may make in any regulatory announcements or documents which it publishes. All persons, wherever located, should take note of these disclosures. This announcement does not constitute an invitation to underwrite, subscribe for or otherwise acquire or dispose of any Jimmy Choo PLC shares, in the UK, or in the US, or under the US Securities Act 1933 or in any other jurisdiction.

OPERATING REVIEW

Jimmy Choo made further strategic progress in the first six months of 2017, building on our iconic heritage and continuing our development into a leading global luxury brand. As part of the Group's strategy to deliver growth ahead of the market, we further developed our collections in the first half, building our presence in accessories and Men's footwear. We also continued to invest in our distribution network and online platform in the period, supporting revenue growth across our international markets.

Product Collections

Luxury shoes remain the Group's core product offering, representing 74% of first half revenue. However, we continued to diversify our product ranges in the period, with 23% of revenue now coming from Accessories, up from 22% in the six months to 30 June 2016.

In Women's shoes, growth continued to be driven by the launch of key new styles in both the seasonal fashion and the core ranges. Our bridal collection, launched at the end of 2016 included an extended range of our Cinderella heels, characterised by their Swarovski crystals coverage, to include new heel heights and colours. The Romy pump continued to perform strongly in the period, and we saw good growth in sales of sandals and luxury trainers. We continue to innovate through new product launches, which included the Bridget round toe shoe, the Edina wedge sandal, inspired by the Icons capsule collection, and the Ren 35, a modern fashion twist on the classic Jimmy Choo caged sandal.

Our iconic Lockett bags continue to contribute to the popularity of Accessories, supporting the strong growth within the line, and we grew our product range further with the launch of the new Artie shoulder bag.

Men's remains the fastest growing category, helped by editorial growth in the period. It now represents 9% of global revenue, demonstrating the flexibility and versatility of our brand. The Men's Pre-Fall collection has been influenced by a nautical style, and included the launch of the Cash sneaker. We have continued to increase the number of stores selling Men's products and now have 86 dual gender stores globally, up from 71 at 31 December 2016.

Marketing

Jimmy Choo's marketing strategy is centred around the brand's strong visual merchandising, with spend typically weighted towards the second half of the year. The first half of 2017 saw activities supporting our affinity with the red carpet with strong placements on the red carpet at the key awards ceremonies including the Golden Globes, Oscars and Cannes Film Festival, where Jimmy Choo continues to have an unrivalled success with more dressings than any other brand across shoes.

Our social channels, strengthened by collaborations with celebrities, stylists and influencers, are helping attract new clients while ensuring existing clients remain engaged with the brand. In the first half, our total YouTube views continued to increase and now stand at 23.5m (FY 2016: 22.2m), and we have seen a strong increase in Instagram followers, up 22% to 6.7m during the last six months (FY 2016: 5.5m).

Distribution

We opened six new DOS and closed five DOS in the first half, bringing the total number of DOS at 30 June 2017 to 151 (31 December 2016: 150 DOS).

The roll out of our New Store Concept across out store portfolio continues to progress, with eight renovations and relocations in the period. As a result, over 50% of our stores are operating in the New Store Concept, up from some 40% in the six months to 30 June 2016. Overall, the Group is making good progress towards our medium-term target of 200 DOS, through a targeted 10 - 15 new DOS openings each year, and a further 10 - 15 DOS renovations annually.

We are also making progress opening flagship stores in key locations around the world, with seven of our targeted 10 stores already open. New Bond Street, Sloane Street, Milan, Paris, Beverly Hills, Madison Avenue and Harbour City Hong Kong are already open, with the final three flagship stores expected to be opened in Asia by the end of the calendar year, completing our global footprint.

Following a review of the Group's store portfolio, coinciding with the Omni-channel rollout, we have commenced a programme to close a limited number of underperforming stores. The closure programme is a one-off initiative targeted at improving the Group's operating leverage, which is expected to be completed within the current financial year. As part of this programme five stores were closed in the period and the Group plans to close up to five more stores in the second half of the year. Exceptional costs in the first half, directly associated with exiting the stores, were £0.4m.

Franchise relationships remain core to our strategy, supporting lower risk expansion outside of our core regional markets. During the period, we opened four franchise doors in Brazil, Russia and South Korea, including two travel retail doors, and we closed two franchise doors in Indonesia and Australia.

After the period end, six franchise doors in the UAE were converted to retail doors following the establishment of a joint venture with Al-Tayer Group.

Omni-channel services

We have continued to progress with the roll out of Omni-channel services in our UK stores (from the second half of 2016) and USA stores (from the first half of 2017), and are seeing strong demand from clients, supporting our revenue growth. This has resulted in a significant improvement in trend, especially in the USA.

The Group also invested in further developing our eCommerce channel in the first half. We have now successfully moved our fulfilment operations in-house, having previously outsourced these to a white label provider.

FINANCIAL REVIEW

Revenue Analysis

Overall revenue increased by 4.5% on a constant currency basis (16.5% on a reported basis), with growth driven by retail, in line with our strategy.

Retail

In the period, retail revenue grew by 6.7% on a constant currency basis to £127.1m (H1 2016: £107.3m). Reported revenue was 18.5% ahead of last year. We continued to see good performance from our New Concept Stores, partially offset by strong prior period comparatives as well as disruption from our store development programme. We renovated or relocated eight stores during the period, bringing the total stores trading in the New Store Concept at the period end to more than 50% of the DOS estate, including our seven flagships. Our Online business, at 6.3% of total revenue, performed particularly well in the first half, driven by the roll out of Omni-channel services in the UK and the USA. Overall, we achieved like for like sales growth of 3.5% in the first half.

Wholesale

Our wholesale revenue fell by 1.6% on a constant currency basis, but increased 10.4% on a reported basis, despite the expected reduction in purchasing by USA department stores in the face of weaker footfall in the USA generally. In the second half we plan to implement Electronic Data Interchange (EDI) with key wholesale accounts in the USA, which will support faster stock replenishment and should facilitate improved sell through of collections.

Licensing/Other

We have continued to experience strong growth in licencing income with our partners Safilo and Interparfums for sunglasses & eyewear and fragrance respectively, leading to revenue growth of 40.3% in the first half (constant currency growth of 24.3%). We launched a new Women's fragrance, "L'Eau" and our third Men's fragrance, "Man Ice" during the first half.

We continue to see strong growth across Asia, further diversifying our revenue by destination. Japan delivered the strongest performance in the first half, with revenue up 11.0% on a constant currency basis, driven by sustained growth in domestic clients. Growth was underpinned by Men's, which continues to be our fastest growing category, particularly in Japan, where it represented 28% of first half revenue, up from 26% for the same period last year.

Asia ex-Japan recorded revenue growth of 8.2% in constant currency terms, with all territories in the region delivering strong like for like growth. Mainland China continues to experience double digit like for like growth, driven by increased brand awareness and greater demand for the seasonal fashion offerings. We have also seen strong results in Singapore and Malaysia, following conversion of franchise stores to retail in 2015, driven by improved merchandising and store performance. Within wholesale, we continue to expand our travel retail footprint, with two additional franchise doors opening in Asia in the first half.

EMEA continues to be impacted by geopolitical events, with tourist traffic experiencing continued disruption. In addition, three key stores were temporarily closed for refurbishment during the first half, disrupting performance. Despite these headwinds, the region delivered constant currency growth of 5.9% in the first half, boosted by the initial launch of some Omni-channel services across the region and a weaker sterling attracting a greater level of tourist expenditure in the UK.

Our business in the Americas continued to be adversely impacted by department stores' reduced purchasing. However, despite the adverse impact of softer luxury demand in the region as a whole, the USA retail business reported growth versus the prior period, helped by the progressive rollout of Omni-channel services.

Profit Analysis

Gross Margin

Gross margin in the first half benefitted from volume growth, lower markdowns and logistics costs as well as the movement in GBP, partially offset by our continued reinvestment in Men's and Fashion collections. As a result, the gross margin improved by 0.2% to 63.8% (H1 2016: 63.6%).

Costs 

Selling and distribution expenses continued to increase in the period as a result of the store development programme. This included the opening of six new DOS and the renovation and relocation of eight DOS in the first half. As a result, these costs increased by £11.1m (21.6%) in H1 2017, of which £3.5m related to the store development programme, £0.3m to the insourcing of online fulfilment and £5.9m (53.2%) was currency driven.

Our investment in brand was lower than the prior year comparative figure due to the costs of the 20th Anniversary marketing campaign being incurred in H1 2016. Investment of £6.9m or 3.4% of revenue in H1 2017 was down from £7.2m or 4.2% of revenue in H1 2016.

Overheads in the first half of 2017 increased 7.4% to £21.9m (H1 2016: £20.4m) compared to revenue growth of 16.5%, thus significantly improving overheads to 10.9% of revenue (H1 2016: 11.8%) reflecting tight control of costs.

Exceptional costs of £3.3m (H1 2016: £0.4m) were incurred during the period. Of these, £1.4m related to costs associated with the Strategic Review, £0.7m to restructuring initiatives including the outsourcing of the management of our Swiss warehouse, £0.4m to replatfoming costs, £0.4m to legal costs and £0.4m to the store closure programme.

Profits and Earnings

Adjusted EBITDA increased by 19.5% year-on-year to £37.4m (H1 2016: £31.3m), equating to an improved Adjusted EBITDA margin of 18.6% (H1 2016: 18.1%). The increase reflects both improvement in the gross margin and operating leverage on lower overheads. This was partially offset by the higher exceptional costs in the period, which more than offset the benefit of the DOS opening and refit programme. 

Depreciation and amortisation increased in absolute terms to £10.6m in the first half, up from £9.7m in the prior period, but decreased as a proportion of revenue to 5.3% (H1 2016: 5.6%). These costs reflect the ongoing investment in new stores, the roll out of the New Store Concept and the completion of the later stages of the replatforming of business systems. As a result, Adjusted EBIT increased by 24.5% to £26.9m (H1 2016: £21.6m) with a margin of 13.3% (H1 2016: 12.4%).

Profit before tax increased by £11.5m, driven by an improvement in Adjusted EBIT and a favourable movement in financing expense. The prior period included a foreign exchange loss on external borrowings relating to the close out on the previous debt facilities that is not repeated in the current period. In addition, we incurred a loss on financial instruments of £6.4m in the first half of 2016 compared to a gain of £1.4m in the current period.

Adjusted Consolidated Net Income for the period was £17.5m (H1 2016: £14.3m), benefitting from the growth in Adjusted EBIT and a gain of £1.4m in trading swaps in the current period compared to a loss of £7.0m in the prior year.

Overall, Adjusted EPS increased 21% to 4.6 pence per share (H1 2016: 3.8 pence per share). EPS increased from 1.5p in the prior period to 3.6p this period.

Cash Flows

Cash flows before financing activities improved by £16.3m to £16.5m (H1 2016: £0.2m). This was driven by a significant improvement in cash generated from operating activities and our ongoing focus on working capital management. As a result, EBITDA cash conversion improved to 118.9% of Adjusted EBITDA in H1 2017 (H1 2016: 84.5% of Adjusted EBITDA).

Net Debt

Net debt decreased to £119.4m from £136.1m at 30 June 2016, largely reflecting a reduction in working capital9, which fell to 4.0% of revenue at 30 June 2017 (H1 2016: 11.3%). The bank reported leverage measure improved significantly in the period and provides for substantially increased headroom compared to the year end.

STRATEGIC REVIEW

On 25 July 2017 the boards of directors of Michael Kors and Jimmy Choo announced that they had reached agreement on the terms of a recommended cash acquisition by which the entire issued and to be issued ordinary share capital of Jimmy Choo will be acquired by JAG Acquisitions (UK) Limited ("Michael Kors Bidco"), a wholly-owned subsidiary of Michael Kors (the "Acquisition") (the "Rule 2.7 Announcement").

Under the terms of the Acquisition, each Scheme Shareholder (as defined in the Rule 2.7 Announcement) will receive 230 pence in cash for each Jimmy Choo ordinary share of 100 pence ("Jimmy Choo Share"), valuing Jimmy Choo's existing issued and to be issued ordinary share capital at approximately £896 million. The price of 230 pence per Jimmy Choo Share represents a premium of approximately:

· 36.5% to Jimmy Choo's share price of 168.50 pence at the close of business on 21 April 2017, the last business day before the Jimmy Choo board of directors announced the commencement of the formal sale process for Jimmy Choo under the terms of the City Code on Takeovers and Mergers;

· 42.7% to Jimmy Choo's three month volume weighted average share price of 161.2 pence to 21 April 2017; and

· 59.6% to Jimmy Choo's six month volume weighted average share price of 144.1 pence to 21 April 2017.

The Acquisition implies an enterprise value multiple of approximately 17.5 times Jimmy Choo's Adjusted EBITDA (as defined in the Rule 2.7 Announcement) for the 12 months ended 31 December 2016.

It is intended that the Acquisition will be implemented by way of a Court-sanctioned scheme of arrangement under Part 26 of the Companies Act (the "Scheme"), and is expected to complete during the fourth quarter of 2017, subject to fulfilment of the conditions set out in the Scheme document in respect of the Acquisition published on 21 August 2017.

The Court convened general meeting to seek shareholder approval of the Scheme and the general meeting convened to authorise the Jimmy Choo board of directors to implement the Scheme and make certain Scheme-related amendments to Jimmy Choo's articles of association have been scheduled for 11 a.m. and 11.15 a.m. (respectively) on 18 September 2017.

OUTLOOK

Jimmy Choo delivered a strong operating and financial performance in the first half of the financial year. We continue to make progress with new store openings, including strategically located flagship stores, and have established our joint venture in the UAE by acquiring a share in the business operated by our existing franchisee. The Group's one-off store closure plan in 2017, together with targeted renovations and relocations, is expected to support further progress towards our medium-term objectives. Reflecting the strength of the Jimmy Choo brand, we continue to diversify our revenue streams and we saw growth in all categories in the half year, led by excellent growth in Men's shoes and Women's accessories.

Strategic investment and innovation across the business, including further development of our online business as we roll out our Omni-channel services (notably in the USA), is driving operating efficiencies while enhancing the overall client experience. While we remain cautious around the wider economy, especially given the prevailing geopolitical uncertainty, our first half performance and strategic vision give us confidence as we look ahead to the remainder of the financial year. Over the medium-term we will continue to build on Jimmy Choo's iconic heritage as we realise our ambition to become a leading global luxury brand.

Appendix 1 - Financial Information

Condensed consolidated income statement

For the period ended 30 June 2017 (Unaudited)

The accompanying notes are an integral part of the unaudited condensed financial statements.

Condensed consolidated statement of comprehensive income

For the period ended 30 June 2017 (Unaudited)

The accompanying notes are an integral part of the unaudited condensed financial statements.

 Condensed consolidated statement of financial position

As at 30 June 2017 (Unaudited)

The accompanying notes form an integral part of the unaudited condensed financial statements.

 Condensed consolidated statement of changes in equity

For the period ended 30 June 2017 (Unaudited)

The accompanying notes form an integral part of the unaudited condensed financial statements.

Condensed consolidated statement of cash flows

For the period ended 30 June 2017 (Unaudited)

The accompanying notes form an integral part of the unaudited condensed financial statements.

Appendix 2 - Notes to the Financial Statements

For the period ended 30 June 2017 (Unaudited)

1. Basis of preparation and principal accounting policies

The condensed set of financial statements of Jimmy Choo PLC ("the Company") as at, and for, the six month period ended 30 June 2017 comprises the Company and its subsidiaries (together referred to as "the Group"). The Directors have a reasonable expectation that the Group has sufficient resources to continue in existence for the foreseeable future, being a period of not less than 12 months from the date of this report. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

The Group financial statements as at, and for, the year ended 31 December 2016 prepared in accordance with IFRSs as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, are available on the Company's website at www.jimmychooplc.com/investors/results-and-investors-presentations.

The comparative figures for the year ended 31 December 2016 are not the Company's statutory accounts for that year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified (ii) did not include any reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The condensed set of financial statements for the six months ended 30 June 2017 is unaudited but has been reviewed by the auditors. The Independent review report is set out at the end of this report.

Statement of compliance

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The condensed set of financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's financial statements as at, and for the year ended 31 December 2016.

This condensed set of financial statements was approved by the Board of Directors on 31 August 2017.

Adoption of new and revised standards

No changes to new or revised accounting standards have had a material impact on the consolidated financial statements of the Group.

Estimates and judgements

The preparation of a condensed set of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Refer to note 2 of the financial statements of the Group for the year ended 31 December 2016 for further detail.

2. Operating segments

The following is an analysis of the Group's revenue and results by reportable segment in the six months ended 30 June 2017:

The following is an analysis of the Group's revenue and results by reportable segment in the six months ended 30 June 2016:

The following is an analysis of the Group's revenue and results by reportable segment in the year ended 31 December 2016:

The following table provides an analysis of the Group's revenue by geographical destination, irrespective of the origin of the goods:

 The following table provides an analysis of the Group's total assets by reportable segment:

3. Exceptional costs

The Group incurred the following costs during the periods presented which are considered to be exceptional:

Strategic review costs include professional fees and expenses directly attributable to the proposed acquisition of the Group by Michael Kors Holdings Limited. Further costs will be incurred in H2 2017, consistent with disclosure in the Scheme of Arrangement, with total transaction costs expected to be approximately £15.97m.

Restructuring costs include the one-off costs associated with the outsourcing of the Group's Swiss warehouse to a third party provider in order to realise operational efficiencies. In addition, we have incurred costs during the first half in connection with restructuring of LLX GBS SA and its subsidiaries, the shared services organisation owned by the majority shareholder, following the announcement of the strategic review.

Replatforming costs represent one-off costs associated with SAP implementation and scaling up the information systems capability and office infrastructure to support the growth strategy, as well as associated streamlining of the organisation. During the first half the majority of these costs relate to the insourcing of our online fulfilment operations and roll out of Omni-channel services.

Legal exceptional costs of £0.4m relate to two complaints brought in the USA courts against Jimmy Choo, in which it denies liability. These include a complaint by Tamara Mellon, OBE and a class action involving credit card receipts. In both cases, Jimmy Choo denies responsibility. A liability has been recognised for costs incurred by the Group.

Following a review of the portfolio, we have commenced a programme of selective closures of a limited number of underperforming stores. As part of this programme we closed five stores in the first half, incurring costs of £0.4m in respect of asset write downs, redundancy and rent for unutilised space. The closure programme is a one-off initiative targeted at improving our operating leverage that is expected to be completed within the calendar year.

4. Operating profit

Operating profit is stated after charging/(crediting):

5. Net financial expense

The foreign exchange loss on external borrowings in 2016 relates to the close-out on the old debt facilities.

6. Income tax expense

Tax for the six month period is charged at 23.7% before adjustments in respect of deferred tax (six months ended 30 June 2016: 25.1%; year ended 31 December 2016: 12.9%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six month period.

7. Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. There were no shares issued during the period. The difference between basic and diluted earnings per share is not material.

In order to provide a measure of underlying performance, the Group has chosen to present an additional illustrative measure of adjusted earnings per share. Adjusted earnings per share has been calculated using Adjusted Consolidated Net Income (see note 14) and dividing by the basic weighted average number of ordinary shares in issue during the period.

Weighted average number of ordinary shares

Earnings per share

8. Property, plant and equipment

During the period, the Group made additions to property, plant and equipment of £14.2 million (six months ended 30 June 2016: £11.7 million, 12 months ended 31 December 2016: £17.9 million).

9. Interest bearing loans and borrowings

Bank loan and facilities

The principal amounts, interest margins and expiry dates for the main bank facilities as at 30 June 2017 are:

The Group's current bank facility came into effect on 17 March 2016. It consists of two term loans and a revolving credit facility, held by two of the Company's subsidiary undertakings, Choo USD Finance and Choo EUR Finance Limited.

During the period, the Group made no repayments against Facility A1 or Facility A2.

10. Financial Instruments' fair value disclosures

Fair value disclosure

The carrying amount of financial assets and liabilities approximate their fair values. The majority of the financial assets are current. The majority of the current interest-bearing liabilities are at variable interest rates. The fair values of the non-current fixed rate interest-bearing liabilities are not materially different from their carrying amounts.

The fair value of non-current fixed rate interest-bearing liabilities is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

The fair value of derivative instruments (currency forwards and options) is determined based on current and available market data. Pricing models commonly used in the market are used, taking into account relevant parameters such as forward rates, spot rates, discount rates, yield curves and volatility.

Fair value hierarchy

Financial instruments carried at fair value are categorised into the below levels, reflecting the significance of the inputs used in estimating the fair values:

Level 1: Quoted prices (unadjusted) in active markets for identical instruments;

Level 2: Valuation techniques based on observable inputs, other than quoted prices included within level 1, that are observable either directly or indirectly from market data;

Level 3: Valuation techniques using significant unobservable inputs, this category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation.

The Group had the following financial instruments at 30 June 2017, all of which have been measured using a level 2 valuation method.

11. Related party transactions

There have been no changes in the nature of related party transactions to those described in the 2016 Annual Report that could have a material effect on the financial position or performance of the Group in the period to 30 June 2017.

12. Events after the balance sheet date

UAE Joint Venture

On 6 July 2017, six franchise doors in the UAE were converted to retail doors following the establishment of a joint venture with Al-Tayer Group.

Strategic Review

On 25 July 2017, the board of directors of Jimmy Choo PLC and Michael Kors Holdings Limited entered into a definitive agreement (Form 2.7) and a cooperation agreement ("the Agreements") on the terms of a recommended cash acquisition ("the Acquisition") by which the entire issued and to be issued ordinary share capital of Jimmy Choo PLC will be acquired by JAG Acquisitions (UK) Limited, a wholly-owned subsidiary of Michael Kors Holdings Limited, subject to the regulatory clearances and terms and conditions set out in the Agreements. Upon the completion of the Acquisition, Michael Kors Holdings Limited will become the controlling party of the company. Further details are set out on Michael Kors Holdings Limited's published announcement dated 25 July 2017 and which may be viewed on www.jimmychooplc.com.

The EGM and Court Meeting Associated with the announcement is scheduled for 18 September 2017.

13. Principal Risks

The Board carries out a formal process to identify, evaluate and manage significant risks faced by the Group. In the view of the Board, the principal risks and uncertainties affecting the Group for the remaining six months of the financial year are those set out on pages 31 to 34 of the 2016 Annual Report and Financial Statements (http://www.jimmychooplc.com/investors/reports-and-news).

These risks have remained unchanged and the Group continues to actively monitor and manage these risks.

14. Reconciliation of non-GAAP performance measures

Adjusted EBITDA

Adjusted EBIT

Adjusted Consolidated Net Income

The tax impact on adjusting items in Adjusted Consolidated Net Income would be £0.6m (6 months ended 30 June 2016: £1.8m, 12 months ended 31 December 2016: £2.6m).

Adjusted Operating Cash Flow

Responsibility statement of the directors in respect of the half-yearly financial report

 We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

· the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

Pierre Denis 

Chief Executive Officer

31 August 2017

INDEPENDENT REVIEW REPORT TO JIMMY CHOO PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Condensed consolidated income statement, the Condensed consolidated statement of comprehensive income, the Condensed consolidated statement of changes in equity, the Condensed consolidated statement of financial position, the Condensed consolidated statement of cash flows and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

Graham Neale

for and on behalf of KPMG LLP

Chartered Accountants

One Snowhill

Snow Hill Queensway

Birmingham

B4 6GH

31 August 2017