Liberty Plc
Regent Street
London W1B 5AH
T el: 020 7734 1234
www.liberty.co.uk
Annual Report and Financial Statements2009
THE RENAISSANCE
OF LIBERTY
“Liberty offers exciting,
eclectic but accessible
fashion unavailable
elsewhere in London, right
across the fashion palette.” Contents
1 Operating Highlights
3 Chairman’s Statement
5 Chief Executive’s Report
8 Financial Performance
9 Key Financial Highlights
10 Operating Review
14 Directors and Principal Advisers
15 Report of the Directors
23 Report on Corporate Governance
26 Statement of Directors’ Responsibilities in respect
of the Annual Report and Financial Statements
27 Independent Auditors’ Report to the Members of Liberty Plc
28 Consolidated Income Statement
29 Consolidated Statement of Comprehensive Income
30 Consolidated Balance Sheet
31 Consolidated Statement of Changes in Equity
33 Consolidated Cash Flow Statement
34 Notes to the Consolidated Financial Statements
62 Parent Company Balance Sheet
63 Notes to Parent Company Financial Statements
65 Notice of Annual General Meeting
Love Individuality Britishness Ec LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
1
LIBERTY HAS DEMONSTRATED ITS ABILITY TO
BUCK THE ECONOMIC TRENDS BY RETURNING
TO PROFITABILITY DURING ONE OF THE WORST
DOWNTURNS IN RECENT RETAIL HISTORY.
It has created an environment that is increasingly appealing to an ever-
widening customer base while at the same time enhancing the brand
and the values it represents.
Operating Highlights
 20% revenue uplift to £59.6m against £49.9m last year.
 Flagship store sales 18% higher at £37.3m against £31.5m a year earlier.
 Liberty produced positive EBITDA for the year ended 31 December 2009, which was the first time
in ten years.
 Liberty accepted as showcase for established international and new design talent including
Grayson Perry, Alexander McQueen, Ronnie Wood and Stella McCartney.
 March 2010 – contracts exchanged for the sale and leaseback of iconic flagship store for £41.5m cash.
centricity Rebellion Theatre Youth Richard Balfour-Lynn
Chairman LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
3
Chairman’s Statement
“This has probably been the most exciting, and successful, year in Liberty’s
recent history , despite the challenging economic environment. ”
Strong Progress
All our principal performance indicators rose strongly as the
Company is beginning to benefit from the changes introduced
by the current management team and for the first time in
a decade Liberty has recorded a positive EBITDA for a
12 months trading period.
At the heart of this sea change was last February’s
launch of the Renaissance of Liberty , which revitalised the
Regent Street flagship store and attracted an increasing
number of customers as well as strong media attention.
The result was a 18% revenue lift in the store for the year
to 31 December 2009 to £37.3m against £31.5m for the
previous 12-month period.
This excellent performance should be seen against a
background of extremely difficult trading conditions, especially
in the retail sector. Importantly the revenue uplift within the
flagship store was a major contributor to the Company’s
overall 19% increase in like-for-like revenue over the year
to £59.6m against £49.9m last time.
Once more Liberty fabrics performed strongly ,
generating revenue 23% higher at £21.5m compared to
£17.4m in the previous year, although a major factor in the
uplift in our Japanese fabrics business was currency
conversion. While inYen terms Japanese revenue increased
by 9%, when converted to Sterling the rise was some 43%.
Importantly for Liberty this stronger overall performance
has meant the Company has delivered positive EBITDA for
the year of approximately £0.1m against a negative £3.9m
for the 2008 period. Pre-tax losses after depreciation and
interest reduced from £7.0m last year to £4.5m for the 2009
period, reflecting close cost control. We have also benefited
from the recovering commercial property market as the
Tudor Building freehold has been revalued upwards to
£30.25m as at 31 December 2009 against £28.8m at June
2009, further underpinning the value of Liberty .
On 15 March 2010 we announced that contracts
had been exchanged for the sale of the freehold of the
Tudor Building for £41.5m, a considerable uplift over the
31 December 2009 valuation. As part of the proposed
freehold sale, Liberty will lease back the Great Marlborough
Street flagship store on a 30 year operating lease at an initial
annual rent of £2.1m, with fixed five yearly uplifts.
While our top line performance has been strong,
margins across the various divisions have come under
pressure over the course of the year resulting in an overall
fall in gross margin from 47% in the year to December 2008
to 45% for the year under review .
Over the course of the year we have continued to
fine-tune our restructuring of the business as it constantly
evolves to meet the demand of both customers and
changing market conditions. Apart from the impact of the
Renaissance of Liberty on the flagship store itself, we have
made key changes to other parts of the business,
particularly the Liberty of London brand.
As shareholders are aware, we took the decision to close
the Sloane Street stand-alone Liberty of London store
following an unsolicited approach from a French retailer
which paid us a £0.7m premium for our lease. Since the
year-end we have conducted an internal reorganisation
of Liberty of London and slimmed down the operation
expanding the brand across a wider product mix. We are
confident that this change will enhance profitability .
Since Autumn we have embarked on a strategic review
of the business with the principal aim of identifying options
that would enable us to build upon Liberty’s recent success
and to develop and grow its business. We are examining
a number of options in great detail as we seek to develop
a strategy that is best for Liberty , its employees and its
shareholders.
On 12 March 2010 we announced that the Company had
received approaches that could lead to an offer being made
for the business. We will report back to shareholders if any
of the approaches we have received lead to an offer being
made for the Company .
It has been an exciting year for Liberty . Increasing
numbers of new customers are discovering both the flagship
store and our internet-based shop for the first time.We have
recaptured our reputation for offering customers cutting
edge design in a unique retail environment. Our focus for
the current year is to further develop that reputation and
to become firmly established as London’s leading iconic
retail destination.
We continue to make progress and 2010 has started well.
While there are some signs of a return to economic stability ,
the uncertainties surrounding the year ahead make it difficult
to forecast performance with certainty . But we do have an
excellent management team that continues to breathe new
life into Liberty and develop the business in a sustainable
way . To that end I am cautiously optimistic about the coming
year as we build on the success of the past 12 months.
Richard Balfour-Lynn
Chairman
30 March 2010 Geoffroy de La Bourdonnaye
Chief Executive LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
5
Chief Executive’s Review
The Renaissance of Liberty recaptured the store’s
original spirit, quirkiness and cutting-edge design
“This has been an historic year for our iconic brand. For the
first time in a decade Liberty has produced positive EBITDA
against a background of possibly one of the most difficult economic
environments the retail sector has experienced since the
early 1990s. ”
Our Renaissance
As shareholders know , much of this success has
been driven by the highly acclaimed Renaissance
of Liberty which was launched in February 2009.
Looking back at the launch, which was opened by
Slumdog Millionaire actress Freida Pinto, it is clear
that the Renaissance was a watershed for both the
flagship store and the brand itself.
In many ways the Renaissance recaptured the
original spirit of Liberty: quirkiness and cutting
edge design, all set in a redesigned store. This not
only brought back many of our former customers
but attracted many thousands of new customers
who began to explore the store and brand for the
first time.
Very quickly Liberty became the watchword
for new and exciting fashion with many brands
being introduced by the store to London for the
first time. As well as showcasing established
international designers, during 2009 we did much
to promote young British designers both the little
known as well as the well known. These included
Michael Birch, Lost Property , Alexander McQueen,
Stella McCartney , Nudie, Grayson Perry , Barbour
and Ronnie Wood.
Once more, Liberty was offering exciting,
eclectic but accessible fashion unavailable
elsewhere in London, right across the fashion
palette – from scarves to jewellery , from dresses
to perfume, and bags to sunglasses. Liberty was
even home to Hermès’ first ever pop-up shop
which was a tremendous success.
The result was an overall 20% uplift in Liberty’s
like-for-like revenues for 2009 to £59.6m against
£49.9m during the previous year. Sales at the
flagship store also rose strongly with total revenue
for 2009 18% higher at £37.3m against £31.5m a
year earlier.
What has been particularly pleasing is that we
have maintained the momentum established at the
time of the Renaissance launch not only through
the 2009 Spring/Summer seasons but also through
Autumn/Winter and into the first quarter of 2010.
2009 also saw the introduction of the Liberty
Style Service which has attracted a new group
of VIP’s to the store. The Style Service offers one-
to-one styling advice to individual customers that
helps them to select not only the most appropriate
range of garments but also the most suitable
accessories that complement those choices. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
6
It enables the serious customer to access the
entire Liberty range in one room and allows them
to experiment in a discreet environment as well as
enhancing their shopping experience.
While it is often fashion and designers that
capture the headlines as well as customers hearts,
Liberty has made great progress in other areas
too. Our well-established fabrics business has had
another record year as demand for new designs
as well as the back catalogue continues unabated.
Not only have collaborations with designers
such as Grayson Perry delivered great results but
our fabrics have been used in some unlikely
settings, such as recycled coffee bags. This eco-
bag from Lost Property took the humble coffee
bean bag, lined it with a Liberty print and created
another fashion must-have that flew out of the door
at £50 a time. We also re-introduced a collection of
souvenir items such as mugs and handkerchiefs,
all with Liberty prints. These instant gifts, which
we brought to the store during Summer 2009,
have been extremely successful and we continue
to sell them today .
Additionally we have created new , and even
more vibrant, prints in a range of different fabrics
that have included silk and wool for the first time.
This division has been supported by an expanded
commercial team.
The end result has been another extremely
strong contribution from our fabrics division that
saw revenue rise a further 23% to £21.5m
compared to £17.4m in 2008, which in itself was
a record performance. As has been noted in the
Chairman’s Statement, the Japanese element of
our Fabrics division benefited from a strongYen
in comparison to the Pound as it produced a 43%
increase in revenue in our financial statements.
It is also pleasing to see our Internet division
making solid progress over the year. Clearly the
division is benefiting from the increased exposure
the Liberty brand is receiving, both at home and
internationally . As we expanded our on-line store
it attracted a growing customer base, which was
particularly evident in the run-up to Christmas as
sales of seasonal gifts grew rapidly . We believe
this division has a great future and will be a major
component in the business as we go forward.
Chief Executive’s Review
Flagship store revenues
£37.3m
2008: £31.5m
“Very quickly Liberty
became the watchword
for new and exciting
fashion with many
brands being introduced
by the store to London
for the first time. ” LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
7
As shareholders know we took the strategic
decision to close our Knightsbridge stand-alone
Liberty of London store in the Summer of 2009.
The decision was principally taken as we had
received an extremely attractive offer for our lease
on the shop in Sloane Street. In turn this gave us
the opportunity to re-structure the division by
re-modelling the brand and product offer across
the Liberty range, as well as exploring other
opportunities to develop Liberty of London both
at home and internationally .
There is no doubt in our mind that 2009 has
been a year of great progress for the business with
all divisions reporting sustainable growth, at a time
when there is great uncertainty in the economy
and the political climate. All our operating
divisions delivered EBITDA growth and it is
satisfying to be able to report that our Internet
business, which was only launched in July 2008
is already breaking even at the EBITDA level.
Liberty has demonstrated its ability to buck
economic and retail trends by returning to
profitability during one of the worst downturns in
recent retail history . It has created an environment
that is increasingly appealing to an ever widening
customer base while at the same time enhancing
the brand and the values that it represents. Once
more Liberty has become an exciting, eclectic but
accessible place to shop and therefore we view
the future with confidence.
Geoffroy de La Bourdonnaye
Chief Executive
30 March 2010
Chief Executive’s Review
Total revenue
£59.6m
2008: £49.9m LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
8
Financial Performance
Current trading in 2010 throughout our business is ahead
of expectations and we now have a robust platform on which
Liberty can continue to grow over the medium term.
“2009 was a year of strong performance throughout Liberty’s
core business lines. But it was the Flagship that underpinned
this year of success, with revenues increasing 18% and EBITDA
improving by over £3m on 2008 comparatives, an impressive
184% uplift.
Strong performance
The sales rise was generated from a shift in product mix which led to
a renewed interest in the Liberty Flagship store, seen through increased
footfall and higher average transaction values.
Liberty Art Fabrics continues its resurgence with sales levels up 23%
on the prior year, although margins did come under pressure during the
second half of 2009 due to cost pressures and an increase in the bespoke
business. Management’s clear focus for 2010 is on margin control.
Importantly , we have exchanged contracts for the sale and leaseback
of the Tudor Building in which the retail business resides. Not only have we
achieved a price significantly ahead of the balance sheet value, but the
transaction will leave a debt free group with an enhanced net asset value,
and cash for the business to expand.
Current trading in 2010 throughout our business is ahead of
expectations and we now have a robust platform on which Liberty
can continue to grow over the medium term.
Paul Harris
Finance Director
Liberty Plc LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
9
Key Financial Highlights
Liberty Plc is in the process of transforming itself into a dynamic retail destination, underpinned by a strong and expanding
retail brand. The historical trading and balance sheet performance of Liberty Plc is summarised below:-
Financial performance
Year ended Year ended
31 December 31 December
2009 2008*
£’000 £’000
Revenue 59,620 49,889
EBITDA before brand expenditure and reorganisation costs 3,004 1,822
EBITDA 108 (3,868)
Results from operating activities before brand expenditure, reorganisation costs 54 (535)
Brand expenditure (2,761) (4,344)
Reorganisation costs (135) (1,346)
Profit on lease surrender 85 –
Loss before taxation (4,456) (6,975)
Balance sheet composition
31 December 31 December
2009 2008
£’000 £’000
Intangible assets – brand and goodwill 18,382 18,382
Property, plant and equipment 31,859 31,006
Net debt (23,543) (19,937)
Net assets 24,622 29,835
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes – see note 1.
Tudor Building
£30.25m
(2008: £28.8m)
Tudor Building sale price achieved
post year end
£41.5m
(surplus of £10.9m over
December 2009 value) LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
10
Operating Review
The Liberty Flagship Store
F
reida Pinto, star of award-winning
film Slumdog Millionaire, brought
red-carpet glamour to Liberty when she
launched the Renaissance of Liberty .
With Liberty’s Chief Executive, Geoffroy
de La Bourdonnaye at her side, Pinto
cut the ribbon to mark Liberty’s official
re-opening after a six month long
refurbishment, designed to highlight its
reputation for innovative design, high
fashion and exceptional brands.
H
ermès and Liberty collaborated on
a new Hermès scarf and tie shop
which operated for six weeks during
Autumn 2009. This ‘pop-up’ store
covered 100 square metres in Liberty’s
scarf room. The temporary boutique
exploded with styling ideas and
animations as customers were
encouraged to come in to play and
experiment with different ways of
wearing Hermès scarves.
L
iberty , one of London’s best loved and
completely unique retail emporiums,
embarked on a dramatic ‘Retail
Renaissance’ with a sharp new look and
a global initiative that debuted in Spring
2009. The store underwent a complete
fashion makeover with a dynamic, more
expansive offering and from February
2009, Liberty staked its claim as the
preferred destination for avant garde
fashion and design in London.
A
s part of its Renaissance, Liberty
introduced a fast-paced Bazaar on
the ground floor. Customers can find a
wide and eclectic range of items, many
of which are limited edition and always
changing. This room takes its visual
inspiration from a traditional bazaar;
tables with intricate wooden mosaic
inlay display the must-have items for
that week.
Liberty’s flagship store is probably London’s
most iconic retail destination. Built during the
early 1920s the Tudor Building became
synonymous with cutting edge and eclectic
design. Today it is upholding that tradition and
last February’s Renaissance of Liberty once
more established the flagship store as a design
and fashion mecca.
The Tudor building is more elegant bazaar
than boutique or department store. Within its
70,000 sq ft of retail space there is a dazzling
array of goods – from avant garde fashion and
scarves to beauty products and jewellery as
well as handbags and furniture. The store also
showcases its Liberty of London collection
produced by Liberty’s own in-house design
studio.
Over the past two years the flagship store has
undergone a sensitive refurbishment and improved
internal layout. This, together with the Renaissance,
has widened the emporium’s appeal to a new
generation as well as re-affirming its credentials
with the established Liberty aficionado.
Sarah Halsall
Retail Operations Director
Ed Burstell
Buying Director LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
11
Operating Review
Liberty Art Fabrics
H
aving globally influenced the work
of leading fashion houses, textile
designers and producers, the world-
renowned heritage of Liberty entered into a
new sphere for Autumn Winter 2009. Fusing
the compelling work of six established
British artists, including Turner Prize
winner Grayson Perry , with the innovative
creations from the Liberty Art Fabric Design
Studio, 14 exclusive prints were included in
the Autumn Winter 2009 Fabric Collection.
I
n Spring 2009 the Nike Design team
used Liberty’s Phoebe, Nina, Venus
Leaf and Strawberry Thief fabrics,
patched together on the shoe like a quilt,
to re-invent the iconic Nike Dunk and
Blazer. The Nike Liberty Blazer was
available exclusively at Liberty for one
week this February and sold out in
one day .
T
o celebrate the Hermès Pour Liberty
collaboration, Hermès created an
exclusive limited edition range of scarves
and ties, using Liberty’s renowned Tana
Lawn cottons. Designed by Bali Barret,
Creative Director of Hermès Silk, the
scarves came in two sizes and in six
different micro floral prints, each one
screen printed with Hermès’ iconic
‘Ex Libris’ design.
I
n Autumn Winter 2009, Liberty fabrics
in 100% silk twill or Lantana wool-cotton
blend joined the textile options on offer, while
brand-new prints complement the Liberty
Classics range and new-season creations
from the Liberty Art Fabrics Design studio.
The artist collection included sixty-three
original designs created by artists Grayson
Perry , Paul Morrison, Mike McInnerney ,
Michael Angove, Anj Smith, Simon Hart,
and the Liberty Art Fabric Design Studio.
If there is one single aspect of the business that
is wholly unique, it is Liberty’s Art Fabrics. Dating
back to Liberty’s original inception it remains
integral to the brand with catalogues containing
more than 43,000 designs dating back to the 1800s.
And every year Liberty’s London and Tokyo studios
refresh the catalogue with a further 120 designs.
While much of the fabric is sold through the
wholesale market it is also retailed through the
flagship store and online. In recent years classic
and instantly recognisable fabric designs have
been used by global brands such as Gap, Nike,
Chanel, Louis Vuitton, APC and Junya Watanabe.
There have also been collaborations with
Grayson Perry and Kate Moss.
Today , the fabrics division is a key part of the
Liberty story as it continues to grow . In the year
to end December 2009 the division generated
revenue of £21.5m, reflecting growth of 23%.
Kirstie Carey
Managing Director – Liberty Art Fabrics LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
12
S
pring Summer 2010 sees Flower
Power blossom as Liberty celebrates
its famous florals with a year-long
programme of activity and events
championing creativity , rebellion and
love. Liberty pays tribute to the universal
appeal of its florals with a series of
collaborations with renowned international
designers. Resplendent in this Flower
Power is an exclusive, limited edition
capsule collection by Nicholas Kirkwood.
L
iberty has a well-earned reputation
for showcasing some of the most
inspirational and eclectic home and
lifestyle products in the world. It continues
to push boundaries by introducing
innovative new brands. Carefully curated,
Liberty’s new collections will blend the
contemporary with the vintage, the more
established brands with the up and
coming, and will showcase a range
of exclusive new lines to the store.
T
he boutique Editions de Parfums has
been designed by Frédéric Malle
himself who was inspired by Mies van
der Rohe’s Barcelona pavilion. With four
of the innovative scent columns which
were originally designed by Frédéric
Malle to develop and test new fragrance
compounds, customers can experience
a true sensory impression of the olfactory
trail they leave behind when wearing the
fragrance.
Only launched in July 2008, Liberty’s
transactional website has grown rapidly over the
past 18 months. It has become an excellent
platform to accelerate revenue, further develop
the brand and reach a broader customer base,
both within the UK and internationally .
The website represents a huge opportunity
for growth as it becomes Liberty’s global shop
window and leverages off the Company’s
increasing international market penetration
of the brand, especially as it does not compete
with its own store network.
Significant potential exists to develop the
site, globally as well as domestically , through
investment in stock, improved fulfilment and
supply chain logistics, expanded product
offering, targeted marketing initiatives and
partnerships.
Guy Hipwell
Managing Director Liberty .co.uk /
Supply Chain Director Liberty Plc
Liberty Online
S
ophisticated collections from established
brands hang next to a younger
generation of designers. At the heart of
these transformations was the philosophy
that the best designer products in the world
should be brought together within the
new space to create an irresistible retail
destination. Christopher Kane sits next to
Balmain and Jil Sander while Calvin Klein sits
with Josh Goot and Michael van der Ham and
Antonio Berardi with Alexander McQueen.
Operating Review LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
13
Liberty of London
T
his portrait of Arthur and Emma
Liberty from 1894 has been made
into a giant cashmere wrap on sale for
Autumn Winter 2009 at Liberty . The scarf
is inspired from a photo taken in 1894
of Mr & Mrs Liberty on their travels
in Grenada on their way to Tangier.
The building behind them on the scarf
is the Alhambra Palace in Andalucia,
Southern Spain.
L
iberty of London collaborated with
legendary musician and acclaimed
artist Ronnie Wood to produce a
collection that translated Wood’s vibrant
paintings from canvas into prints onto
leather, cotton, jersey , foil and nylon.
Three paintings are the star prints of this
capsule collection which included men
and women’s ready-to-wear as well as
an extensive line of fashion accessories.
L
iberty’s dedicated Scarf Room is one
of the biggest in London. Within its
hallowed walls is a showcase of all the
beautiful Liberty of London items from
silk pockerchiefs to swathes of printed
cashmere. Vibrant florals sit next to
resplendent peacock feathers, abstract
clouds and debonair stingray prints.
Pictured is Liberty of London’s ‘Phoenix’
scarf, inspired by a fragment of Victorian
lace.
F
ebruary 2010 saw the launch of a
world class retail collaboration
between directional Milanese concept
store, 10 Corso Como, and Liberty’s
own brand Liberty of London. ‘10 Corso
Como for Liberty of London’ is an
exquisite limited edition capsule
collection for Spring Summer 2010
and part of Liberty’s celebration of
Flower Power throughout 2010.
Designed by our in-house studio, Liberty
of London is the Group’s branded wholesale
fashion division. It is a key pillar in the creation
of a global luxury brand, promoting Liberty
products and design through its wholesale
operations in 18 countries.
Apart from the flagship store itself, Liberty of
London merchandise is retailed through around
80 prestigious and directional stores world-wide
including Corso Como in Milan, Tokyo and Seoul,
Jeffrey in NewYork and Le Bon Marche in Paris,
Isetan in Tokyo, and Barneys in the US.
Collaborations with MAC cosmetics, Corso
Como, Target and Apple all help to broaden Liberty
of London’s appeal as well as promote and develop
the Liberty brand. Another unique collaboration
was with Hermes, which created a “pop-up” shop
in the flagship store selling scarves and ties.
Dominika Dudziuk
Liberty Designer
Ed Forster
Liberty Designer
Operating Review DIRECTORS
R.G. Balfour-Lynn BA (Hons)
EXECUTIVE CHAIRMAN
G. de La Bourdonnaye
CHIEF EXECUTIVE
P . Harris ACMA
FINANCE DIRECTOR
J. Singh
NON-EXECUTIVE DIRECTOR
J.W . Harrison FRICS
NON-EXECUTIVE DIRECTOR
B.A. Myerson
NON-EXECUTIVE DIRECTOR
J. Peggie
NON-EXECUTIVE DIRECTOR
HEAD OFFICE
Regent Street
London W1B 5AH
Telephone: 020 7734 1234
Website: www.liberty.co.uk
SECRETARY
Filex Services Limited
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NOMINATED ADVISER & BROKER
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London EC4M 7EN
CORPORATE FINANCE ADVISERS
Global Leisure Partners LLP
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London W1S 4PT
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London W1B 1NB
AUDITORS
KPMG Audit Plc
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Head Office
The Mound
Edinburgh EH1 1YZ
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Overseas: +44 208 639 3399
Directors and Principal Advisers
LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
14 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
15
Report of the Directors
for the year ended 31 December 2009
INTRODUCTION
The Directors present their report and the audited financial statements of the Group for the year ended 31 December 2009.
DIRECTORS
The Directors who served during the year were as follows:
R.G. Balfour-Lynn Executive Chairman
G. de La Bourdonnaye Chief Executive
P. Harris Finance Director
J. Singh Non-Executive Director
J.W. Harrison Non-Executive Director
B.A. Myerson Non-Executive Director
J. Peggie Non-Executive Director
K.K.D. Thong Non-Executive Director Resigned 8 March 2010
The Articles of Association of the Company require that all Directors appointed by the Board during the year and prior to the next Annual
General Meeting, as well as one third of all other Directors, retire at the next Annual General Meeting.
J. Singh and R.G. Balfour-Lynn are the Directors retiring by rotation this year and they have both put themselves forward for re-election at the
2010 Annual General Meeting. The Board has concluded that, subject to shareholder approval, the retiring Directors should continue in office.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Company operates as a holding company principally for its Retail, Fabric and Liberty of London wholesale operating subsidiaries. The
principal activities of the Retail Division (operating as Liberty Retail Plc) are the retailing of luxury fashion, homeware, gift and beauty products.
The principal activities of the Fabric Division are the distribution of Liberty fabric through wholesale and licensing channels in the UK and abroad.
The principal activities of the Brand Division involve the development of an internationally distributed luxury goods brand and retailing of this brand
in our Flagship store.
A detailed review of the activities and development of the Group during the year is set out in the Chairman’s Statement, Chief Executive’s
Review and Operating Review on pages 3 to 13. The Company’s Ordinary Shares are quoted on AIM (Alternative Investment Market of the
London Stock Exchange) and the parent company, MWB Group Holdings Plc has retained a 68% interest in the Company.
CORPORATE STRATEGY
The Group comprises three operational businesses: Retail, Fabric and Liberty of London wholesale product. Each of our three businesses has its
own Business Plan and the Board manages adherence to these plans on a continual basis.
The strategy of the Group, led by the activities of the Board, is firstly to return the Liberty retail business to profitability by repositioning the
business as a luxury design emporium housed in the iconic Tudor Building on Great Marlborough Street. At the heart of the store is the newly
developed Liberty of London luxury goods range. The Group also operates the Liberty fabric business which is focused on growing the market for
its quality printed shirting fabric. It is identifying routes to diversify its product and design service offering to grow the profitability of Liberty Fabric
and to diversify away from reliance on printed shirting fabric.
The long-term strategy of the Group is focused on developing Liberty of London into a luxury goods brand that will be distributed on a global
scale. The store and the brand are becoming increasingly popular and well known to domestic customers and international retailing organisations.
In summary, ownership and intensive management of the Group’s three businesses is planned to enable the Company to be well placed to
produce cash which will be used principally to repay debt and also re-invested in the longer term development of the Liberty of London brand.
The Board is committed to ensuring delivery of this strategy, which is the central focus of the Group’s business activities. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
16
Report of the Directors
for the year ended 31 December 2009
KEY PERFORMANCE INDICATORS MONITORED BY THE BOARD
The Directors use a number of KPIs which they consider are effective in measuring delivery of their strategy, and which assist the Directors in
management of the business. The KPIs relating to the business are shown below. These are for the year ended 31 December 2009 and for the
year ended 31 December 2008, in order that shareholders can gauge the trends achieved over these periods. The results of these are as follows:-
Year ended Year ended
31 December 31 December
2009 2008*
Total revenue £’000 59,620 49,889
Positive variance to prior year % 19.5 8.8
Retail revenue £’000 37,311 31,497
Variance to prior year % 18.5 (0.1)
Fabric revenue £’000 21,484 17,426
Variance to prior year % 23.3 31.3
Liberty of London wholesale revenue £’000 825 966
Flagship sales per square foot (including concession revenue) £ 657 552
Variance to prior year % 19.0 0.9
Gross profit % 43.6 44.8
EBITDA before brand expenditure and reorganisation costs £’000 3,004 1,822
As a percentage of sales % 5.0 3.7
Expenditure on brand £’000 (2,761) (4,344)
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes – see note 1.
BUSINESS RISKS AND UNCERTAINTIES
The Board and the Senior Executive team identify and evaluate risks and uncertainties in the period covered by the Group Business Plan and
design controls to mitigate these. Responsibility for management of each key risk is identified and delegated by the Board to specific Executive
Directors and Senior Executives within each of the Group’s operating businesses.
This section describes some of the specific risks that could materially affect the Group’s businesses. The risks outlined below should be
considered in connection with any financial and forward-looking information in the financial statements. The risks below are not the only ones that
the Group faces and some that the Group does not currently believe to be material could later turn out to be material. These risks could materially
affect the Group’s business, its operating profits, earnings, net assets, liquidity and capital resources.
Economic, political, social and regulatory changes adversely affecting the Group’s financial performance
The Group is exposed to the risks of global and regional adverse political, economic and financial market developments (including recession,
inflation and currency fluctuations), that could lower the Group’s revenues and operating results in the future.
The Group’s results could also be adversely affected by events that reduce domestic or international travel, such as actual or threatened acts
of terrorism or war, epidemics, travel-related accidents or industrial action, increased transportation and fuel costs and natural disasters.
Financial market volatility adversely affecting the Group’s financial performance
Most of the risks faced by the Group at the date of this report emanate from the volatility of financial markets, the resultant reduction in supply of
credit and its significant increase in cost. This was accentuated during 2008, arising from the rapid deterioration in financial markets in the UK,
and has continued to be a management focus during 2009. For Liberty, these risks fall into a number of categories as set out below, all of which
are proactively managed by the Board.
Liquidity risk affects the Group, in that this could result in it being unable to meet its financial obligations as they fall due. The Board’s
approach to managing liquidity is to ensure, as far as possible, that the Group has sufficient liquidity to meet its liabilities, without incurring
unacceptable losses or risking damage to the Group’s reputation and business. The Group uses detailed divisional cash flow reporting to assist
the Board in monitoring cash flow requirements and optimising cash returns on investments across the whole Group.
The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Investments in short-
term receivables and payables are not exposed to interest rate risk. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
17
Report of the Directors
for the year ended 31 December 2009
BUSINESS RISKS AND UNCERTAINTIES (continued)
Reliance on bank loan and support from the Group’s ultimate parent
Note 1 to the consolidated financial statements summarises liquidity risks associated with the financing arrangements of the Group.
Technology and systems disruption adversely affecting the Group’s efficiency
To varying degrees, the Group is reliant upon information technologies and systems for the running of its businesses, particularly those which are
highly integrated with business processes. Any disruption to those technologies or systems could adversely affect the efficiency of the business.
Loss of key management personnel
The Group is reliant on its team of executives. The future success of the Group depends on the ability of its existing management team, the
identification and appointment of suitable additional executives when required, and on the Group’s ability to motivate and retain staff with the
requisite experience.
Changes in fashion trends
Liberty is dependent upon its ability to interpret and offer fashion products that consumers wish to purchase. The Liberty printed fabric business
is susceptible to industry change. Failure to be successful in this area of activity, particularly noting the long lead times before product is available
for sale in the Store, would cause an adverse impact on Liberty’s revenues and profitability.
Reliance on reputation of Liberty of London brand
If an event occurred that materially damaged the reputation of any of Liberty’s core brands or there was a failure to sustain the appeal of Liberty’s
brands to its customers, this could have an adverse impact on Liberty’s revenues and resultant shareholder value.
In addition, the value of Liberty’s brands is influenced by a number of external factors including consumer preference and perceptions. Liberty
is focused on service delivery to ensure that the product provided matches customer preferences. Strict controls are in place to help ensure
adherence to all legislative aspects affecting the business and experienced executives manage these important areas of Liberty.
Potential uninsured product liability claims
Many manufacturers and retailers are potentially vulnerable to product liability claims. Liberty conducts regular reviews with its external insurance
agent to assess potential insurance risk and to ensure that adequate product and public liability insurance is in place. Liberty could also face
liability and/or reputational damage relating to counterfeit products. Accordingly, Liberty pursues all copyright and trademark infringement to the
extent necessary to protect its intellectual property rights that would be materially affected.
Pension scheme shortfalls
The Liberty Retail Plc Pension Scheme, which is a defined benefit pension scheme, is currently showing a deficit of £2.8m. The level of deficit of
the scheme has fluctuated significantly over the last 12 months. If the value of the Scheme assets were to decline materially relative to its
liabilities, the pension scheme would be likely to show an increased deficit and Liberty might be required to make additional contributions to cover
this shortfall. This would have an adverse impact on cash flow available to the Group, with resultant adverse effects on the cash flow and net
worth of the Group.
Management and Pension Scheme Trustees meet regularly and have made major changes to the investment strategy of the Scheme over
recent years, to respond to changes in the market and to underpin its financial performance. They also receive advice from external actuaries and
investment advisers which assists in mitigating this risk through the Scheme’s diversified investments and risk minimisation strategy.
Foreign exchange fluctuations
The Group settles a significant proportion of its merchandise purchases in foreign currency. The Group mitigates to a large extent the effect of any
adverse movement in exchange rates by arranging forward exchange contracts. Consolidation of the Group’s Japanese Fabric business in these
Financial Statements includes the impact of the movement in the Sterling/Yen exchange rate during the year and at the year end on the results
and Balance Sheet of the foreign operations. No specific hedging instruments are deployed against dividend receipts in Yen from Liberty Japan as
the financial effect is considered by the directors of Liberty not to be material. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
18
Report of the Directors
for the year ended 31 December 2009
BUSINESS RISKS AND UNCERTAINTIES (continued)
Ownership of Grade II listed building
The Group owns the freehold interest in the Tudor Building on Great Marlborough Street. The bank facility requires that drawdown on the bank
debt does not exceed 67% of the value of the property. This covenant is tested quarterly. The existing use value of this property may decline,
adversely impacting Shareholder value. In order to protect this the Board reviews the market value of the property at least twice a year against
external professional valuations and reviews insurance cover on a regular basis throughout the year and in detail at the insurance renewal date of
May in each year.
The Tudor Building is a Grade II listed building and may require significant investment to refurbish departments within the store as well as to
maintain the interior and exterior fabric of the building. The board of the operational business undertakes ongoing assessments of refurbishment
expenditure with internal project managers and external quantity surveyors in order to ensure, where reasonably possible, that cost is minimised
and value protected.
Currently the business is heavily reliant on its principal retail trading location in the heart of London’s West End. The development of a
wholesale distribution network for Liberty product as well as the new transactional website is expected to help reduce the Company’s reliance on
the sales activity of the Tudor Building.
Changes in tax legislation materially changing the tax paid by the Group
The Group is exposed to financial risks from increases in tax rates and changes in the basis of taxation, including corporation tax and VAT. The
engagement of experienced executives within the Group and by its parent undertaking to handle these matters enhances the protection to the
Group in this area of its activities. The Group and its parent undertaking also maintain a regular monitoring of legislative proposals and undertakes
detailed analysis and review with external (non-audit related) advisers to evaluate and, if possible, mitigate the impact of the changes.
RESULTS
The consolidated loss of the Group in the Income Statement for the year ended 31 December 2009 was £5.1m and is set out on page 28 of the
financial statements. The financial position of the Group, showing a net asset value of £24.6m, is set out in the consolidated balance sheet on
page 30 of the financial statements. The equity attributable to ordinary shareholders amounts to £23.8m or 105p per share and is set out in note
24 on page 60. The developments of the Group’s activities are reviewed in the Chairman’s Statement and Chief Executive’s Review, on pages
3 to 7.
DIVIDEND
Whilst the Group is trading at a loss, the Directors do not recommend the payment of an ordinary dividend. At 31 December 2009 the Company
had a deficiency on its profit and loss account reserve.
INTANGIBLE ASSET
The Directors consider that the Group’s brand has an indefinite life due to the durability of the underlying business. This has been demonstrated
over many years. Accordingly the brand has not been amortised but has instead been subject to an annual impairment review. An impairment
review of the carrying value of the Liberty brand was performed by the Board at 31 December 2009, based on the business and operations of the
Group at that date. The value in use was determined by discounting future cash flows generated from continuing use of the cash generating unit.
This is based on projected cash flows in the Company’s 5 year business plan and further projections for years 6 to 10 to produce a 10 year cash
flow model. This supported the value in use of the Liberty brand at more than the book value of £18.2m at which it has been included in the
financial statements of the Group throughout the year and accordingly the brand has been retained at a value of £18.2m in these financial
statements.
PROPERTY
The Group owns the freehold of the Tudor Building in Great Marlborough Street. Details of the property valuation which has increased in value
from £28.8m at 31 December 2008 to £30.25m at 31 December 2009, are explained further in note 12 to the financial statements on pages 50
and 51.
Since the year end, an offer has been received for the freehold interest in the Tudor building at £41.5 million and contracts were exchanged
for the sale on 12 March 2010. Further details of this are set out in note 26 to the financial statements. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
19
Report of the Directors
for the year ended 31 December 2009
CASH FLOW
The consolidated cash flow statement on page 33 shows the funds generated by the Group, those raised from external sources, the investments
made and the effect thereof on the Group’s cash position.
This can be summarised as follows:-
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Net cash used in operating activities (58) (8,150)
Net cash used in investing activities (2,173) (2,483)
Net cash from financing activities 2,391 8,176
Net increase / (decrease) in cash and cash equivalents 160 (2,457)
Opening cash and cash equivalents 1,903 4,296
Currency translation differences (120) 64
Closing cash and cash equivalents 1,943 1,903
SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY
The Company has been notified of the following interests that represent 3% or more of the issued share capital of the Company at 30 March 2010:-
Number
of ordinary
shares held Percentage
MWB Group Holdings Plc 15,440,432 68.3%
Cartesian Partners 2,359,177 10.4%
Principle Capital Holdings S.A. 1,693,541 7.5%
Dawnfield Pte 960,000 4.2%
20,453,150 90.4%
INCENTIVE ARRANGEMENTS OF DIRECTORS OF THE COMPANY
Arrangements have been put in place to incentivise certain Executive Directors and Senior Executives of the Group, to realise value for
shareholders in cash or cash equivalents at levels significantly in excess of current book values. For each individual, a minimum level of cash
realisation (in all cases materially in excess of current net book value) has to be achieved before a minimum level of bonus becomes payable.
Thereafter, varying levels of bonus become payable after the achievement of further target amounts of cash realisation. These arrangements are
not capped so as to incentivise participants to achieve material outperformance for the benefit of all shareholders.
If cash and cash equivalent realisations are received by shareholders in excess of a minimum of £27m, incentive payments would accrue as follows:-
Incentive pool as percentage of realised
Base value value in excess of base value
£m %
Share options granted to certain Executive Directors and senior management £27m, being 10%
120p per share
For cash and cash equivalents received by shareholders in excess of £71.1m, further incentive payments would accrue and follows:
Incentive payment in
Gross Cash Returns percentage terms for each band of Cumulative Incentive Payment
to shareholders Gross Cash Returns to shareholders £m
£0m – £71.1m 0.0% £0.0m
£71.1m Fixed amount £0.7m
£71.1m – £113.0m 13.5% £0.7m – £6.3m
In addition to the long term incentives referred to above, Executive Directors of the Company have the opportunity to earn an annual performance
bonus which is only payable if the Company exceeds profit targets set by the Board. In 2009 the profit target was set by reference to EBITDA
performance. The Executive Directorate also need to achieve annual performance related personal targets in order to trigger any annual
performance bonus payment. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
20
Report of the Directors
for the year ended 31 December 2009
EMPLOYMENT
It is Group policy to keep employees informed of the aims, objectives, activities and financial performance of the Group and to encourage them to
take a wider interest in its affairs. This is achieved in a variety of ways, including electronic media, operational reporting and briefing sessions, as
well as consultation of employees or their representatives on a regular basis so that their views can be taken into account in making decisions
likely to affect their interests.
The health and safety of employees is important to the Group. This is reviewed from time to time and also in light of good practice and
developing legislation.
The Group is an equal opportunities employer and is committed to developing a working culture which enables all employees to make their own
distinctive contribution. Employment policies are designed to be fair and equitable, and to be consistent with the abilities of the employees and the
needs of the Group. Applications for employment by disabled persons are fully considered, bearing in mind the aptitudes of the applicant concerned.
In the event of any member of staff becoming disabled, effort would be made to enable their employment with the Group to continue. It is the policy of
the Group that the training, career development and promotion of disabled persons should, as far as possible, be similar to that of other employees.
PENSIONS AND LIFE ASSURANCE
The Group operates two Defined Benefit Pension Schemes for certain employees of the Group, one in the UK and one in Japan. The UK Defined
Benefit Scheme was closed to new members in February 2001. Since that date, all new UK employees of Liberty Plc have been invited to join the
Liberty Plc Defined Contribution Personal Pension Plan. In January 2007 after full consultation with members, the UK Defined Benefit Pension
Scheme was closed to future benefit accrual. All previous active members of the Scheme retained their accrued benefits (subject to the investment
performance of the Scheme) as deferred members and were offered membership of the Liberty Defined Contribution Personal Pension Plan.
Principally as a result of an increase in bond yields and the continuing strategy followed by the Trustees of the Defined Benefit Pension
Scheme during the year ended 31 December 2009, coupled with the reduction in liability arising from the closure of the Scheme to future benefit
accrual, the deficit in the Scheme has been reduced from £6.8m at 30 June 2005 to £2.8m at 31 December 2009. On the Company’s adoption of
IFRSs on 1 July 2005, the deficit at 30 June 2005 of £6.8m was charged against income in accordance with IFRSs. Accordingly, all subsequent
surpluses or deficits arising from the strategy adopted by the Trustees and the Group are shown as movements through reserves of the Group.
Having taken advice from external Investment Consultants, the Trustees of the UK Defined Benefit Scheme have also reviewed the Scheme’s
investment arrangements and implemented further changes to its investment strategy. The type of liabilities incurred by the Scheme suggest a
higher investment in bonds is appropriate and this has been followed by the Trustees of the Scheme. The remaining investments, currently
invested in equities has also been further diversified. This has been structured by the Trustees to improve predictability and stability of investment
returns, by investing a proportion in alternative asset classes. The Trustees have considered the funding position of the Scheme and after taking
this and the closure of the Scheme to future benefit accrual into account, have made further amendments to the investment strategy of the
Scheme which were implemented during the year ended 31 December 2007. These amendments are expected to stabilise the rate of return
achieved by the Scheme by reference to the general investment market and therefore, subject to other factors affecting the value of assets and
liabilities of the Scheme, to continue to manage effectively the deficit of the UK Scheme, which currently amounts to £2.8m.
DONATIONS
The Group made no charitable or political donations during the year (2008: £nil).
PAYMENT POLICY FOR CREDITORS
The Group’s policy is to purchase fairly, and wherever possible to pay in accordance with terms agreed with suppliers. The Group agrees payment
terms with suppliers when it orders items or commits expenditure. It is the Group’s policy to make payments for purchases on a fair basis, provided
that the relevant invoice is presented to the Group in a timely fashion and is complete. It seeks to adhere to these arrangements, providing it is
satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. Amounts due to creditors of the
Group are paid on average within 48 days (2008: 50 days) from receipt of invoice. The Company itself does not have a significant level of trade creditors.
ENVIRONMENTAL RESPONSIBILITY AND HEALTH AND SAFETY
The Company considers that corporate social responsibility and effective corporate governance are important components of its businesses.
The Group is committed to fair treatment of all stakeholders in the business, and to responsible employment policies.
The Group’s risk review assists the Board in identifying and assessing risks that could affect the businesses of the Group. This in turn
enables them to implement appropriate social, ethical and environmental policies in conjunction with the financial policies of the Group. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
21
Report of the Directors
for the year ended 31 December 2009
ENVIRONMENTAL RESPONSIBILITY AND HEALTH AND SAFETY (continued)
The Group does not operate in areas of high environmental risk. One of its principal environmental impacts arises from energy consumption,
which the Group continues to monitor and to set reduction targets where practicable. The Group also seeks to reduce the impact of paper usage
by recycling and by the increasing use of online transmissions and electronic data collection.
The Board continues to operate the business in pursuit of good environmental standards, including the following:-
• Respecting the environment in which we operate, whilst maintaining commercial viability and long term profitability.
• Setting objectives and targets and monitoring our performance to ensure adherence.
• Raising the environmental awareness of our employees and customers. Working in partnership with suppliers and contractors to ensure
effective management of our environmental and social impacts and to minimise any adverse impact of our operations on the environment.
• Compliance with relevant legislation and related requirements.
Ultimate responsibility for environmental issues within the Group rests with Geoffroy de La Bourdonnaye, the Chief Executive of the Group.
The Board continues to adopt high levels of health and safety at work. Health and safety considerations are addressed as follows:-
• Providing a good working environment for our employees and treating employees with fairness, dignity and respect.
• Promoting a high standard of health and safety for our staff and contractors.
• Operating an equal opportunities policy to ensure all job applicants are treated equally.
• Compliance with relevant legislation and related requirements.
• Ensuring that a safe and healthy working environment is maintained for the well-being of all employees.
Ultimate responsibility for health and safety issues within the Group rests with Geoffroy de La Bourdonnaye, the Chief Executive of the Group.
DIRECTORS’ INDEMNITIES AND DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
In accordance with the Company’s Articles of Association, the Directors are granted an indemnity from the Company to the extent permitted by
law in respect of liabilities incurred as a result of their office as Directors. Liability insurance cover has also been maintained during the year by the
Group in respect of Directors and Senior Executives of the Group.
SUPPLY CHAIN
The Group has specifically avoided suppliers or regions where the employment or environmental practices are known to be below acceptable
standards. The employment standards required of our suppliers accord with industry standards including inter alia that employees should: be
given a safe and healthy environment to work in; be given the right to free admission; be paid a fair wage; have freedom of association; not be
forced or bonded labour; be of an appropriate age; and; work only reasonable hours.
The Board recognises that it is not possible to provide absolute assurance that standards expected of our suppliers are adhered to. Where
transgressions are identified we would work with the supplier to develop an appropriate remediation programme. However we will not hesitate to
stop using any supplier who we identify is persistently operating in contravention of our standards or failing to implement agreed remediation
programmes.
SIGNIFICANT AGREEMENTS
At the date of this report, the Group is a party to an agreement with its bank relating to the provision of £15m of loan facilities. As is customary for
financing facilities of this nature, provisions in these agreements may affect the continuation of these facilities in the event of a change of control of
the Company, dependent upon the identity of the party obtaining control. At 31 December 2009, the Group had borrowings of £12.5m under this
agreement.
The share schemes operated by the Company contain provisions relating to a change of control. Under these provisions, a change of control
would be a vesting event crystallising exercise of outstanding options and awards. Further details of these arrangements are provided on page 59
of these financial statements.
There are a number of commercial contracts in the Group that could alter in the event of a change of control of the Company, although none
is considered to be material in terms of their potential impact on the Group as a whole. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
22
Report of the Directors
for the year ended 31 December 2009
AUDIT INFORMATION
The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant audit
information of which the Group’s auditors are unaware; and each director has taken all the steps that he ought to have taken as a director to
make himself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.
AUDITORS
In accordance with section 489 of the Companies Act 2006, a resolution for the reappointment of KPMG Audit Plc as auditors of the Company is
to be proposed at the forthcoming annual general meeting. A resolution proposing the re-appointment of KPMG Audit Plc as Auditors of the Company
and authorising the Directors to agree their remuneration, will be proposed at the Annual General Meeting. It is the Board’s opinion that the
appointment of the Auditors and the fees payable to the Auditors are inter-related issues and they are therefore dealt with as part of one resolution.
ANNUAL GENERAL MEETING
The Company holds an annual general meeting in each calendar year, which it normally aims to hold approximately one month after publication
of its year end financial statements. A notice convening the 2010 Annual General Meeting, which will be held on 9 June 2010, is set out on
pages 65 and 66.
Approval of financial statements and related matters – Resolutions 1 to 4
Resolutions 1 to 4 deal with the Company’s Annual Report and Financial Statements for the year ended 31 December 2009, Directors retiring
by rotation and the re-appointment of the Company’s auditors. These resolutions are similar to resolutions passed on these matters in previous
years. J. Singh and R.G. Balfour-Lynn are the Directors retiring by rotation this year and they have each put themselves forward for re-election at
the 2010 Annual General Meeting.
Other business to be considered at the 2010 Annual General Meeting
In addition to the ordinary business referred to in resolutions 1 to 4 of the Notice, the Directors propose certain special business as set out in
resolutions 5 and 6 of the Notice. Where appropriate, the proposed authorities and the conditions which attach to these resolutions are within the
guidelines laid down by the Investment Committees of the Insurance and Pension Management Industries and by the UK Listing Authority.
Resolutions 5 and 6 are similar to those passed at the 2009 Annual General Meeting of the Company held in June 2009.
A summary of the special business proposed at the meeting, which is the subject of resolutions 5 and 6 is as follows:
Resolution 5
Resolution 5 will grant the Directors authority to allot, pursuant to Section 551 of the Companies Act 2006, up to 7.3 million Ordinary Shares
(being £1.825 million in nominal amount) of the Company’s share capital.
The Directors have no present intention of issuing the shares for which authority to allot is being sought. If approved, the authority to allot up
to 7.3 million Ordinary Shares, representing slightly less than 33% of the issued Ordinary Share capital at the date of approval of this report, will
expire at the conclusion of the 2011 Annual General Meeting of the Company.
Resolution 6
Resolution 6 relates to issues of shares for cash. Section 561(1) of the Companies Act 2006 requires that when Directors propose to allot
Ordinary Shares for cash, they must first offer such shares to existing shareholders in proportion to their existing holdings, unless powers have
previously been given to the Directors under Section 570 of the Act to disapply these provisions.
This resolution refers to proposed disapplications of these statutory pre-emption rights in the very limited instance of allotments for cash of up
to £280,000 in nominal value of the Company’s share capital (being 1,120,000 Ordinary Shares), representing slightly less than 5% of the issued
Ordinary Share capital at the date of approval of this report. If approved, this authority will expire at the conclusion of the 2011 Annual General
Meeting of the Company.
By order of the Board
Filex Services Limited
Secretary
179 Great Portland Street
London W1W 5LS
30 March 2010 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
23
Report on Corporate Governance
for the year ended 31 December 2009
INTRODUCTION
Liberty’s policy is to adhere to good practice standards in its business operations. These procedures are documented or form part of the agreed
operational procedures of the Group; the principal policies are referred to below. This section of the Annual Report and Financial Statements
describes how the Company has applied the principles set out in Section 1 of the Combined Code on Corporate Governance.
Although the Company is listed on AIM rather than the Main Market, the Board fully supports the principles of good governance through the
operation of the Board. Accordingly, whenever practicable, it has continued to adopt elements of the Combined Code (June 2006) during the year
ended 31 December 2009, as outlined below. The Company and its subsidiaries have a policy of seeking to comply with established good
practice in the field of corporate governance. The Board has adopted core values and Group standards which set out the behaviours expected of
staff in their dealings with shareholders, customers, colleagues, suppliers and other stakeholders of the Group.
THE BOARD
Composition
The Company is run by the Board, which leads and controls the Group. The current Board comprises three Executive Directors including the
Chairman and five Non-Executive Directors; the Directors bring a wide range of experience and skills to the Company.
The division of responsibilities between the Chairman of the Board Richard Balfour-Lynn, and the Chief Executive Geoffroy de La
Bourdonnaye, is clearly defined and has been approved by the Board. This ensures there is a balance of power and authority within the Board.
The Chairman leads the Board in the determination of its strategy and in the achievement of its objectives. The Chairman provides advice on
strategy and targets to be achieved by the Group, he is responsible for organising the business of the Board, he ensures its effectiveness and
sets out matters to be handled by the Board. The Chairman also facilitates the effective contribution of Non-Executive Directors and ensures that
constructive relations exist between Executive and Non-Executive Directors. Through Paul Harris, the Finance Director of the Company, he is also
responsible for ensuring that Directors receive accurate, timely and clear information.
The Chief Executive is responsible for running the business and for implementing Board strategy and policy. He also has direct charge and
overall control of the Group on a day-to-day basis and is directly accountable to the Board for the financial and operational performance of the
Group.
The terms of appointment of the Non-Executive Directors are available for inspection during normal business hours from the Company
Secretary at the Company’s registered office.
Responsibility
The Board’s main roles are to increase value for shareholders, principally through enhanced profitability and creation of capital value. It achieves
this by leadership of the Group, defining the Group’s strategic objectives and ensuring that the necessary financial and other resources are made
available to enable the Group and the Board to meet those objectives. The specific responsibilities reserved to the Board include the growth of
the Company; the setting of Group strategy; approving annual budgets and medium term projections; reviewing operational and financial
performance; borrowing limits; treasury policy; reviewing the Group’s systems of financial control and risk management; ensuring that appropriate
management development and succession plans are in place; reviewing the environmental, health and safety performance of the Group;
approving appointments to the Board and of the Company Secretary; approving policies relating to Directors’ remuneration and the severance of
Directors’ service contracts; and ensuring that a satisfactory dialogue takes place with shareholders over the Group’s results and its aspirations
for the future.
The Board has delegated certain responsibilities to the Executive Directors and to an Operating Board comprising the Executive Directors and
certain Senior Executives of the Group. These include development and recommendation of strategic plans for consideration by the Board that
reflect the objectives and priorities established by the Board, including implementation of the strategies and policies of the Group as determined
by the Board; monitoring the operating and financial results against plans and budgets; management and control of borrowing limits and treasury
policy; technical and human resources; and developing and implementing risk management systems.
ROTATION OF DIRECTORS
Each Director’s appointment is subject to the Company’s Articles of Association, the Companies Acts and satisfactory performance by the
Director concerned. All Directors are appointed for an initial term. At the first Annual General Meeting after a Director’s appointment and also prior
to the third Annual General Meeting after he or she was elected, the Board discusses with the Director concerned whether it is appropriate for a
further term to be served. If re-election is agreed, that Director will be proposed for re-election at the next Annual General Meeting of the Company. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
24
Report on Corporate Governance
for the year ended 31 December 2009
THE COMPANY SECRETARY AND EXTERNAL PROFESSIONAL ADVICE
The Company Secretary is responsible for advising the Board through the Chairman on all governance matters. All Directors have access to the
advice and services of the Company Secretary. The Company’s Articles of Association and the schedule of matters reserved to be decided only
by the Board provide that the appointment and removal of the Company Secretary is a matter for the Board. Subject to prior written approval and
due consideration at a meeting of the Board, the Directors are given access to external professional advice at the Group’s expense, if the Board
deems this necessary, in order to enable them to carry out their responsibilities.
INTERNAL CONTROL AND RISK MANAGEMENT
The Directors operate the Company in accordance with its Articles of Association which set out the overall operating framework of the Group. The
Board acknowledges its responsibility to maintain systems of internal control which safeguard shareholder investment in the Company and control
the Company’s assets.
The Board has established procedures that monitor the effectiveness of the Group’s internal controls. These include risk management and the
review of internal controls by Directors at Board and management meetings. The results of these reviews are monitored throughout the year.
Ongoing reporting and improvement of internal controls are performed by the Finance Department, under the overall control of the Finance Director.
The Board is responsible for the Group’s systems of internal control and risk management and for reviewing the effectiveness of those
systems. These systems are designed to manage, rather than to eliminate, risks within the business, as a balanced level of risk can enhance the
rate of return achieved for shareholders. These systems are structured to enable business objectives to be met, whilst accepting that any system
can provide only reasonable and not absolute assurance against material misstatement or loss. Within this environment, the Board places reliance
on adherence to the Group’s control framework by employees and senior executives of the Group.
The Directors are also responsible for the Group’s internal financial controls. These are structured to ensure that transactions are executed in
accordance with management authority, transactions are appropriately recorded to permit the preparation of reliable financial statements that are
free from material misstatement, the Company’s assets are protected, and that fraud should be prevented or detected.
The Group’s management structure has delegated authority levels, functional reporting lines and accountability within the Group. The Group
operates a comprehensive budgeting and financial reporting system, which compares actual performance to budget on a monthly as well as year
to date basis. Variances against forecasts and budgeted performance are examined and business enhancements are implemented where
feasible, enabling management to monitor financial and operational performance on a continuing basis.
The Group has policies for health and safety which ensure that appropriate standards are maintained. These policies, together with
environmental considerations, have been integrated into the day to day business management of the Group, its operating businesses and
its property.
Due to the Group’s small size, with equity shareholders’ funds of less than £30 million, internal audit functions are not an established feature
of the Group. However, major elements of its operations are subject to regular checking and review. When reviewing the Company’s interim and
final financial statements, the Board receives detailed analytical reports on the results and financial position of the Group. These are presented to
the Board by Paul Harris, Finance Director.
The Directors of the Company acknowledge their responsibility for the Group’s systems of internal control and the framework for this control.
They have reviewed this throughout the year and its appropriateness for the Group for succeeding years. Systems have been established for
many years in respect of the principal financial areas of the Group.
The principal financial controls that are in operation across the Group are as follows:-
• A defined control environment. There is a clear organisational structure with defined lines of responsibility, authorisation procedures and
delegation of authority. Formal policies, including the documentation of key systems and procedures, are in place and are controlled.
• The assessment of risk and the improvement of returns therefrom. The Board is responsible for identifying business risks affecting the Group,
and for assessing the likelihood of their impact. The Board’s approach to risk management and internal control aims to assist the Group in
meeting the challenge of balancing commercial success with cost efficiency. This is managed by the Executive Directors through formal
decision making processes.
• Financial management and results. Monthly budgets and annual forecasts are prepared for the three principal divisions of the business,
against which actual results are monitored and controlled by the Executive Directors.
• Financial reporting. Monthly management accounts are provided to all members of the operating Board. These provide detailed analysis of
the financial performance, sales, balance sheet, cash flow and profitability projections and related KPI based information for the Group on a
monthly performance and on a year to date basis. This enables members of the Operating Board to appraise actual and projected
performance for the current and future years and to consider improvement where appropriate.
• Employment. Experienced staff are responsible for the human resource requirements of the Group. Annual appraisal procedures assess
performance against agreed objectives and where necessary identify changes to improve the Group’s performance. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
25
Report on Corporate Governance
for the year ended 31 December 2009
INVESTOR RELATIONS
The investor relations activities of the Group are designed to provide a balanced level of communication between the Company and its
shareholders. The Group publishes Interim and Annual results within the time periods stipulated by the AIM Rules. The Group’s public relations
activity ensures that press releases and related announcements issued by the Group are provided to key shareholders, to financial analysts and to
the press, at the same time as they are released to the Stock Market for the benefit of all shareholders and for transparent market awareness,
aimed at improving awareness of the objectives and achievements of the Group.
It is the Company’s policy to enable shareholders to be involved in the affairs of the Group and to give them the opportunity at the Annual
General Meeting to ask questions about its activities and prospects. The Board runs these meetings so that shareholders can vote separately on
each matter, by proposing separate resolutions for each item to be considered. It is the Board’s opinion that the re-appointment of the auditors
and the fees payable to the auditors are inter-related issues and these are therefore dealt with as part of one resolution.
The proxy votes for and against each resolution are counted before the Annual General Meeting. Each resolution is voted upon by
shareholders and only after they have voted are the results of the proxy votes provided to the meeting, thus enabling shareholders present to vote
independently of the results of proxy votes already received.
In accordance with the provisions of the Combined Code, the notice of the 2010 Annual General Meeting is being sent to shareholders at
least 20 working days before the meeting. Shareholders have the opportunity to vote separately on each proposal at the Annual General Meeting,
either in person or by proxy.
GOING CONCERN
The provisions of the Combined Code require directors to confirm whether, after making appropriate enquiries, they have reasonable expectations
that the Company and the Group have adequate financial resources to continue in operational existence for the foreseeable future. Details relating
to the basis of preparation in respect of the going concern assumption are included in Note 1 to the Consolidated Financial Statements.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. For these reasons, the Directors consider it appropriate to prepare the financial statements on a
going concern basis. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
26
Statement of Directors’ Responsibilities in respect
of the Annual Report and Financial Statements
The directors are responsible for preparing the Annual Report and the group and parent company financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by the AIM
Rules of the London Stock Exchange they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU
and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice).
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company
financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will
continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its
financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them
to safeguard the assets of the group and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
• the directors’ report includes a fair review of the development and performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Richard Balfour-Lynn Geoffroy de La Bourdonnaye
Chairman Chief Executive
30 March 2010 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
27
Independent Auditors’ Report to the members of Liberty Plc
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
We have audited the financial statements of Liberty Plc for the year ended 31 December 2009 which comprise the Group Income Statement,
the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheets, the Group Cash Flow Statement, the Group
Statement of Changes in Equity, the Parent Company Reconciliation of Movements in Shareholders’ Funds and the related notes. The financial
reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 26, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s web-site at www.frc.org.uk/apb/scope/UKNP.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2009 and
of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• the parent company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice;
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with
the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Mike Barradell
(Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
8 Salisbury Square
London
EC4Y 8BB
30 March 2010 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
28
Consolidated Income Statement
for the year ended 31 December 2009
Year ended Year ended
31 December 31 December
2009 2008*
Notes £’000 £’000
Revenue 2 59,620 49,889
Cost of sales (33,650) (27,561)
Gross profit 25,970 22,328
Selling and distribution costs (25,138) (24,310)
Administrative expenses (4,828) (4,934)
Other operating income 1,154 691
Results from operating activities (2,842) (6,225)
Gain on lease surrender 12 85 –
Finance income 7 853 1,439
Finance expenses 7 (2,552) (2,189)
Loss before taxation 8 (4,456) (6,975)
Taxation 9 (690) (395)
Loss for the year (5,146) (7,370)
Attributable to:
Equity shareholders of the Company (5,200) (7,424)
Minority interests 54 54
Loss for the year (5,146) (7,370)
Loss per share (basic and diluted) 10 (23.0p) (32.8p)
All results relate to continuing operations. The notes on pages 34 to 64 form part of these financial statements. * Restated as a result of adoption
of IFRIC 13: customer loyalty programmes – see note 1. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
29
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2009
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Other comprehensive income for year after tax:
Loss for the year (5,146) (7,370)
Foreign exchange translation differences for foreign operations (251) 1,070
Revaluation of property, plant and equipment 950 (3,520)
Defined benefit pension scheme actuarial losses (966) (2,019)
Total comprehensive income for the year (5,413) (11,839)
Attributable to:
Equity shareholders of the Company (5,467) (11,893)
Minority interests 54 54
Total comprehensive income for the year (5,413) (11,839) LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
30
Consolidated Balance Sheet
at 31 December 2009
31 December 31 December
2009 2008
Notes £’000 £’000
Non-current assets
Intangible assets and goodwill 11 18,382 18,382
Property, plant and equipment 12 31,859 31,006
50,241 49,388
Current assets
Inventories 13 12,017 9,190
Trade and other receivables 14 9,507 10,108
Cash and cash equivalents 15 1,943 1,903
Derivative financial instruments 21 – 341
23,467 21,542
Total assets 73,708 70,930
Current liabilities
Derivative financial instruments 21 (1) –
Trade and other payables 16 (31,871) (23,689)
Tax payable 17 (393) (157)
(32,265) (23,846)
Non-current liabilities
Loans and borrowings 18 (12,542) (14,633)
Employee benefits 6 (2,814) (2,066)
Provisions 19 (1,465) (550)
(16,821) (17,249)
Total liabilities (49,086) (41,095)
Net assets 24,622 29,835
Equity
Share capital 22 6,036 6,036
Other reserves 69,221 68,271
Retained earnings (51,459) (45,242)
Total equity attributable to shareholders of the Company 23,798 29,065
Minority interests 824 770
Total equity 24,622 29,835
The notes on page 34 to 64 form part of these financial statements. Approved by the Board of Directors on 30 March 2010 and signed on its
behalf by:
Richard Balfour-Lynn Geoffroy de La Bourdonnaye
Chairman Chief Executive LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
31
Consolidated Statement of Changes in Equity
for the year ended 31 December 2009
Total equity
Share Merger Revaluation Translation Retained Attributable to Minority Total
capital reserve reserve reserve earnings Shareholders interests equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2009 6,036 61,503
(2)
6,768
(2)
1,113
(1)
(46,355)
(1)
29,065 770 29,835
Foreign exchange translation
differences for foreign operations ––– (251) – (251) – (251)
Revaluation of property, plant and equipment–– 950 –– 950 – 950
Defined benefit pension scheme
actuarial gains, net of tax ––– – (966) (966) – (966)
Loss for the year ––– – (5,200) (5,200) 54 (5,146)
Share based payments ––– – 200 200 – 200
Balance at 31 December 2009 6,036 61,503
(2)
7,718
(2)
862
(1)
(52,321)
(1)
23,798 824 24,622
(1)
Disclosed as ‘Retained earnings’ in consolidated balance sheet.
(2)
Disclosed as ‘Other Reserves’ at 31 December 2009 totalling £69,221,000 in consolidated balance sheet.
Translation reserve: The translation reserve represents the movement on the translation of assets and liabilities held or recorded in foreign
currencies other than Sterling at the balance sheet date. Exchange differences arising in the ordinary course of trading are included in the Income
Statement.
Merger Reserve: This arose when the Company acquired its subsidiaries in 2000 at a premium to the nominal value of the shares issued on
acquisition.
Revaluation Reserve: Freehold property is included in the Consolidated Balance Sheet at its market value at the Balance Sheet date, on the
basis of an annual external valuation. Surpluses or deficits arising on valuation are transferred to the revaluation reserve to the extent that a credit
balance exists in the valuation reserve in respect of the property concerned.
Minority Interests: This represents the 9½% preference shares in the Company’s wholly owned subsidiary Liberty Retail Plc. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
32
Consolidated Statement of Changes in Equity
for the year ended 31 December 2008
Total equity
Share Merger Revaluation Translation Retained Attributable to Minority Total
capital reserve reserve reserve earnings Shareholders interests equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 January 2008 6,036 61,503
(2)
10,288
(2)
43
(1)
(36,912)
(1)
40,958 578 41,536
Foreign exchange translation
differences for foreign operations ––– 1,070 – 1,070 – 1,070
Revaluation of property, plant and equipment–– (3,520) –– (3,520) – (3,520)
Defined benefit pension scheme
actuarial gains, net of tax ––– – (2,019) (2,019) – (2,019)
Loss for the year ––– – (7,424) (7,424) 192 (7,232)
Balance at 31 December 2008 6,036 61,503
(2)
6,768
(2)
1,113
(1)
(46,355)
(1)
29,065 770 29,835
(1)
Disclosed as ‘Retained earnings’ in consolidated balance sheet.
(2)
Disclosed as ‘Other Reserves’ at 31 December 2008 totalling £68,271,000 in consolidated balance sheet.
Translation reserve: The translation reserve represents the movement on the translation of assets and liabilities held or recorded in foreign
currencies other than Sterling at the balance sheet date. Exchange differences arising in the ordinary course of trading are included in the Income
Statement.
Merger Reserve: This arose when the Company acquired its subsidiaries in 2000 at a premium to the nominal value of the shares issued on
acquisition.
Revaluation Reserve: Freehold property is included in the Consolidated Balance Sheet at its market value at the Balance Sheet date, on the
basis of an annual external valuation. Surpluses or deficits arising on valuation are transferred to the revaluation reserve to the extent that a credit
balance exists in the valuation reserve in respect of the property concerned.
Minority Interests: This represents the 9 ½% preference shares in the Company’s wholly owned subsidiary Liberty Retail Plc. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
33
Consolidated Cash Flow Statement
for the year ended 31 December 2009
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Loss for the year (5,146) (7,370)
Adjustments
Taxation 690 395
Finance income (853) (1,439)
Finance expenses 2,552 2,189
Gain on lease surrender (85) –
Depreciation of property, plant and equipment 2,278 2,357
Equity-settled share based payments 200 –
Cash flows from operations before changes in working capital (364) (3,868)
Change in inventories (2,827) (1,595)
Change in trade and other receivables 601 (3,296)
Change in trade and other payables 2,655 1,789
Change in provisions and employee benefits 555 –
Cash generated from / (used in) operating activities 620 (6,970)
Interest paid (292) (877)
Taxation paid (386) (303)
Net cash used in operating activities (58) (8,150)
Cash flows from investing activities
Interest received 2 –
Proceeds from sale of lease 593 –
Purchase of property, plant and equipment (2,768) (2,483)
Net cash used in investing activities (2,173) (2,483)
Cash flows from financing activities
Proceeds from drawdown of borrowings (2,091) 1,633
Proceeds from drawdown from related parties 4,361 6,543
Proceeds from settlement of derivatives 121 –
Net cash from financing activities 2,391 8,176
Net increase / (decrease) in cash and cash equivalents 160 (2,457)
Opening cash and cash equivalents 1,903 4,296
Currency translation differences (120) 64
Closing cash and cash equivalents 1,943 1,903 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
34
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
1. ACCOUNTING POLICIES
Reporting Entity
Liberty Plc (the “Company”) is a company domiciled in the United Kingdom. The address of the Company’s registered office is 179 Great
Portland Street, London W1W 5LS. The consolidated financial statements of the Company at, and for the year ended, 31 December 2009
comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Group is primarily
involved in the operation of a retail luxury goods store and the manufacture of fabric and luxury goods.
Basis of preparation
The Group financial statements for the year ended 31 December 2009 have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU (“Adopted IFRS”). The Company has elected to prepare its parent company financial
statements in accordance with UK GAAP.
These financial statements incorporate the results of Liberty Plc and its subsidiary undertakings. The results have been prepared on
the basis of the accounting policies adopted in the financial statements of the Group for the year ended 31 December 2009, consistently
applied in all material respects.
The Group is dependent for its future working capital, and ongoing investment in Liberty of London and the flagship store, on cash
generated from its operations, cash holdings of £1.9m at 31 December 2009, funds provided to it through a £20m revolving credit and
ancillary facilities with Bank of Scotland (the ‘bank facility’) and a £16.5m facility provided by MWB Group Holdings Plc (‘MWB’), the
Company’s ultimate parent company.
On 12 March 2010 the Group exchanged contracts for the sale of the freehold interest in the Tudor Property for £41.5m to Sirosa
Liberty Ltd (see note 26). Under the terms of the proposed deal, the Group will take an institutional 30 year lease on the building at an
initial annual rent of £2.1m. (The sale is conditional on approval by the shareholders of Liberty’s 68% shareholder, MWB Group Holdings
Plc, which is expected to be sought during April 2010.) Management intend that the proceeds from the sale of the property will be used to
repay the bank facility and the facility provided by MWB as well as to fund future working capital.
The Group reported an operating loss of £2.8m for the year ended 31 December 2009. At 31 December 2009, the Group had
net assets of £24.6m, net current liabilities of £8.8m (which included a loan of £12.9m from MWB provided under a facility expiring in
31 December 2010), and further net debt of £10.6m (which included an amount drawn down under the bank facility of £12.5m, the term
of which runs to 31 December 2011). The availability of additional drawings from MWB up to the facility limit of £16.5m is subject to the
financial position of MWB. Having made appropriate enquiries about MWB's financial position, the Directors are confident that the full MWB
facility will be available to the Group throughout its term.
The nature of the Group’s business is such that there can be unpredictable variations in the timing of cash inflows and performance.
This is amplified in the business risks and uncertainties section in the Report of the Directors. The Directors recognise that, in the current
economic environment, risks may exist regarding the achievability of forecast sales and margins within different parts of the Group and the
timing of cash flows. The Directors have prepared projected cash flow information for the period to 31 December 2011 (the ‘Projections’).
The Projections are based on reasonable assumptions and show that the Group is capable of operating within the facilities currently
available and meeting the financial covenant tests for the full term covered by the Projections.
The Group has three covenant tests in relation to its bank facility, namely Loan to Value Security Cover, Debt Service Cover and Senior
Interest Cover, with Liberty of London brand costs and other one-off costs excluded from the test of the latter two. Security Cover requires
the loan to be no more than 67% of the Realisation Value of the Tudor Building. At 31 December 2009, the Tudor Building was valued at
£30.25m, and £12.5m of facilities were utilised. Accordingly, the Loan to Value Security Cover was only 41% at that date, demonstrating
significant headroom. Sufficient headroom is also forecast over the period covered by the Projections. Debt Service Cover requires the ratio
of EBITDA to Total Debt Service to be not less than 1.25:1. This covenant was met for the year ended 31 December 2009 with continuing
headroom forecast over the period covered by the Projections. Senior Interest Cover requires the ratio of EBIT to Senior Interest to be not
less than 1.5:1. This covenant was first tested at 31 December 2009 and was met with continuing headroom forecast over the period
covered by the projections. Liberty trading results for the first part of 2010 have been strong, and demonstrate sales levels well ahead of
2008 levels, thus underpinning the Projections. The Directors continue to monitor adherence to these covenants carefully and to take
reasonable steps to ensure adherence at all times. The bank facility also permits the Group to cash cure any breach that might occur
within 14 days of the relevant test date.
The Directors have tested the impact of variations from the Projections by assessing adequacy of the Group’s funds, and the ability of
the Group to operate within the financial covenants, under a combination of different scenarios constructed to reflect reasonable possible
downside risks to the assumptions contained within the Projections. In such downside scenarios, the ability to continue to operate within
the facilities available and maintain compliance with the financial covenants would be dependent on implementing various cost saving
initiatives and mitigating actions referred to below within the timescales required, should these downside scenarios crystallise. These cost
saving initiatives and mitigating actions, all of which are already formulated, are under the control of the Board and can be implemented as required. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
35
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
1. ACCOUNTING POLICIES (continued)
Basis of preparation (continued)
The consolidated financial statements are prepared on the historical cost basis except for the freehold property and derivative financial
instruments which are measured at fair value.
These consolidated financial statements are presented in UK Sterling, which is the Company’s functional currency. All financial
information has been rounded to the nearest thousand pounds.
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that
have the most significant effect on the amount recognised in the financial statements are described in the following notes:
• Note 6 – the assumptions used to measure defined benefit obligations
• Note 11 – the assumptions used to assess value in use for impairment testing of the Group’s brand.
• Note 12 – the valuation of the Group’s property
Basis of consolidation
Where necessary, adjustments are made to the information included in the financial statements of subsidiaries to bring their accounting
policies in line with those used by the Group and so reflect that information on a consistent basis with the rest of the Group.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are
currently exercisable or convertible are taken into account.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. Dilution gains and losses on increases in minority interests, where no change of control results, are
recognised directly in equity. Where necessary, accounting policies of subsidiaries are changed on acquisition to align them with the
policies adopted by the Group.
Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures.
Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in the
income statement.
Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment
over the carrying amount of the net assets acquired at the date of exchange.
Goodwill is measured at cost less impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is
included in the carrying amount of the investment.
Brands
In accordance with IFRS 3, brands acquired by the Group are initially included in the financial statements at their fair value. The Directors
consider that the Group’s brand has an indefinite useful life due to the durability of its underlying businesses which has been demonstrated
over many years. An annual assessment of the useful life is performed at the end of each financial year.
Accordingly, the brand has not been amortised but has instead been subject to an impairment assessment conducted at each
financial year end. Where this reveals a surplus, the value of the brand is retained, where it reveals a deficit, the brand is written down and
the deficit is charged to the income statement. Subsequent expenditure on the brand is recognised in the income statement when incurred. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
36
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
1. ACCOUNTING POLICIES (continued)
Subsidiary companies
The subsidiary undertakings of the Company are all engaged in retail activities, wholesale distribution or licensing activities, or act as
intermediary holding companies for such operations. Details of the Group’s principal subsidiary undertakings are set out in note 28 to the
financial statements.
Property, plant and equipment
Property is land and buildings held for use in the production or supply of goods or services, or for administrative purposes, and are stated
in the balance sheet at their revalued amounts, being the fair value, determined from market-based evidence and appraisals undertaken by
professional valuers at the balance sheet date.
Any revaluation increase arising on the revaluation of such land and buildings is credited to the revaluation reserve within equity, except
to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is
credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the
revaluation of such land and buildings is charged as an expense in the income statement to the extent that it exceeds the balance, if any,
held in the revaluation reserve relating to previous revaluations of that asset.
The gain or loss on disposal or retirement of property, plant and equipment is determined by comparing the sale proceeds with the
carrying amount of the asset at the date of disposal or retirement, and is recognised in the income statement. When revalued assets are
sold, the amounts included in the revaluation reserve relating to those assets are transferred directly to retained earnings.
Depreciation is charged so as to write off the cost or valuation of property, plant and equipment, other than land and property under
construction and less residual amounts, using the straight line method, over their following estimated useful lives:-
Freehold property 100 years
Air conditioning and lifts or plant forming part of the property 15 years
Fixtures and equipment 5 to 10 years
IT equipment 3 to 7 years
Freehold land is not depreciated.
Assets held under operating leases are not recognised as assets of the Group. Rentals payable are recognised in the Income
Statement on a straight-line basis over the term of the lease.
Impairment
The carrying amounts of the Group’s non-financial assets other than inventories are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For intangible
assets that have an indefinite useful life, the recoverable amount is estimated at each balance sheet date.
The recoverable amount of an asset or cash generating unit is the higher of its value in use and its fair value, less costs to sell. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money, and the risks specific to the asset. For the purpose of impairment testing, assets
are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets (the “cash generating unit”).
For the purpose of impairment testing the brand, the cash generating unit comprises all the businesses in the Group, as all these
revenues are dependent on the brand.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit/group of units exceeds its
recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying amount of any intangible asset allocated to the unit and then to reduce the
carrying amount of other assets in the unit on a pro-rata basis.
Impairment losses, on assets other than goodwill, recognised in prior periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised.
Impairment losses in respect of goodwill are not reversed. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
37
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
1. ACCOUNTING POLICIES (continued)
Inventories
Inventories are measured at the lower of cost and net realisable value. Cost is based on the first in, first out principle and comprises direct
materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing inventories to their existing
location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the dates of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on transactions are recognised in the income statement. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets
and liabilities denominated in foreign currencies that are stated at fair value are translated at a foreign exchange rates ruling at the dates
the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated at
foreign exchange rates ruling at the balance sheet date. The income and expenses of foreign operations are translated at an average rate
for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from the translation of foreign operations are taken directly to the translation reserve.
Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and
other payables. Non-derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, non-derivative
financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the
statement of cash flows.
The Group’s activities expose it primarily to the financial risk of changes in exchange rates and foreign exchange rates on its trading
operations with overseas suppliers and customers. The Group uses an extendable forward plus financial instrument to reduce the
exposure of the business to foreign currency risk.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in the income statement as incurred.
Subsequent to initial recognition, derivatives are measured at fair value.
Changes in the fair value of derivative financial instruments that are designated and effective as cash flow hedges are recognised
directly in equity to the extent that the hedge is effective. To the extent the ineffective changes impair value, they are recognised in the
income statement. If the cash flow hedge of a firm commitment or a forecast transaction results in the recognition of an asset or a liability,
then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised
in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a
liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net income.
Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income
statement as they arise.
Ordinary share capital is classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options
are recognised as a deduction from equity, net of any tax effects.
Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed price is not available then fair value
is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of
the contract using a risk free interest rate based on government bonds. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
38
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
1. ACCOUNTING POLICIES (continued)
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of
money and, the risks specific to the liability.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Obligations for contributions to
defined contribution pension schemes are recognised as an expense in the Income Statement.
The Group’s net obligation in respect of defined benefit pension schemes is calculated separately for each scheme by estimating the
amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to
determine its present value at the date of the financial statements. Any unrecognised past service costs and the fair value of any scheme
assets is deducted in calculating the Group’s net obligation to the scheme for the retirement benefits to be provided. The discount rate
used is the yield at the balance sheet date on AA credit rated bonds that have maturity dates approximating to the term of the Group’s
obligations under the scheme, and which are denominated in the same currency in which the benefits are expected to be paid. The
calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit
to the Group, the recognised asset is limited to the net total of any unrecognised past service costs and the present value of any future
refunds from the scheme or reductions in future contributions to the scheme.
When the benefits of a scheme are improved, the portion of the increased benefit relating to past service by employees is recognised
as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that
the benefits vest immediately, the expense is recognised immediately in the income statement.
Revenue
Revenue is measured at the fair value of consideration received or receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of staff discounts and the costs of loyalty scheme rewards and is stated net of value added
tax and other sales-related taxes. Revenue on Flagship and Liberty of London store sales of goods and commission on concession sales
are recognised when goods are sold to the customer. Internet and Fabric sales are recognised when the goods are delivered to the
customer. Revenue from gift vouchers and gift coins sold by the Group is recognised on redemption of the gift voucher or gift coin. It is the
Group’s policy to sell its products to the end customer with a right of return. Accumulated experience is used to consider the need for a
provision for such returns on an annual basis.
Based on past experience, it is not possible to make a reliable estimate of the amount of goods that will be returned and therefore no
deferred revenue is recognised in relation to the right of return offered to customers.
Cost of sales
Cost of sales comprises the cost of goods sold, together with the direct costs incurred in managing and operating the Group’s operating
activities.
Share-based payment transactions
The share option programme allows certain employees to acquire shares in the Group.
The fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over
the period in which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using
an option valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised as
an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due only to share prices not
achieving the threshold for vesting.
Dividends
Dividends that have been approved by shareholders at previous Annual General Meetings are included within liabilities. Dividends proposed
at the balance sheet date that are subject to approval by shareholders at the annual general meeting are not included as a liability in the
current period’s financial statements. Dividend income is recognised in the income statement on the date the Group entity’s right to receive
the income is established. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
39
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
1. ACCOUNTING POLICIES (continued)
Finance income and expenses
Finance income comprises interest receivable on funds invested and dividend income. Interest income is recognised in the income
statement as it accrues, using the effective interest rate method. All interest payable is charged to the Income Statement.
Finance expenses comprise interest paid or payable that are recognised in the Income Statement.
Taxation
The income tax expense in the Consolidated Income Statement comprises current and deferred tax. Income tax expense is recognised in
the Consolidated Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the
following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities
to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable
temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied
to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are only offset if there is a legally enforceable right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities but they intend to settle
current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the
temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
Additional income taxes which arise from the distribution of dividends are recognised at the same time as the liability to pay the related
dividend is recognised.
Debt/equity
Under IAS 32, preference shares are classed as equity instruments in the financial statements of Liberty Retail Plc, and in the consolidated
financial statements of Liberty Plc as:
• the preference shares include no contractual obligation to deliver cash or another financial asset to another entity; and
• they include no contractual obligation to exchange financial assets or financial liabilities with another entity under conditions that are
potentially unfavourable to the issuer.
Adoptions of standards and interpretations during the year
Revised IAS 1 Presentation of Financial Statements (2007) introduces the term “Total Comprehensive Income”, which represents changes
in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total
Comprehensive Income may be presented in either a single statement of comprehensive income (effectively combining both the income
statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of
comprehensive income. Revised IAS 1, which is mandatory for the Group’s 2009 consolidated financial statements, is expected to have a
significant impact on the presentation of consolidated financial statements. The Group has applied revised IAS1 Presentation of financial
statements, which became effective on 1 January 2009. This presentation has been applied in this Financial Report for the year ended
31 December 2009. Comparative information has been re-presented so that it is also in conformity with the revised standard. Since the
change in accounting policy only impacts presentation aspects, there is no impact on the previously disclosed pre-tax profit of the Group.
Amendment to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations clarifies the definition of vesting conditions,
introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the
accounting treatment for non-vesting conditions and cancellations. The amendments to IFRS 2 are mandatory for the Group’s 2009
consolidated financial statements, with retrospective application. The Group has not yet determined the potential effect of the amendment,
although the Directors do not consider it will be material in the context of the Company’s consolidated financial statements as a whole. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
40
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
1. ACCOUNTING POLICIES (continued)
Adoptions of standards and interpretations during the year (continued)
IFRS 8 The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. This new accounting policy in respect of
segment operating disclosures has not led to a change in the number and/or definition of segments previously presented, on the basis that
the information disclosed is consistent to that provided to the Board of Liberty Plc, led by the Chief Executive, who is the Group’s chief
operating decision maker.
IFRIC 14 and IAS 19 The limit on a defined benefit asset, minimum funding requirements and their interaction (see note 6). IFRIC 14
provides additional guidance on assessing the amount that can be recognised as an asset of a defined benefit pension surplus and as a
consequence the amount of deferred tax on that surplus. The Group has assessed the impact of IFRIC 14 and IAS 19 at 31 December 2009.
The adoption of IFRIC 14 at 31 December 2009 had no impact on the balance sheet of the Group at 31 December 2008. Had IFRIC 14
been applied at 1 January 2008, the net liability on the balance sheet at that date would have been £1.5 million.
Revised IAS 23 Borrowing Costs requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction
or production of a qualifying asset as part of the cost of that asset and removes the option to expense the related borrowing costs. The
revised IAS 23 is mandatory for the Group’s 2009 consolidated financial statements and accords with the policy already adopted by the
Group. In accordance with the transitional provisions, the Group will apply the revised IAS 23 to qualifying assets for which capitalisation of
borrowing costs commences on or after the effective date. Therefore there is no impact on prior periods in the Group’s 2009 consolidated
financial statements.
IFRIC 13 The Group has applied in its Financial Statements IFRIC 13 which clarifies the accounting treatment for customer loyalty
programmes. This standard has been applied retrospectively in accordance with IAS8 and comparatives have been restated accordingly.
As a result of the Group’s adoption of IFRIC 13; customer loyalty programmes, the Directors have reviewed the accounting policy in
respect of the treatment of the Liberty Card reward programme. As a result of this amendment, the Directors believe that it is more
appropriate to deduct these costs from revenue as opposed to charging them as a marketing expense as was the case in previous years.
The Group therefore adopted a revised accounting policy for such costs in line with IFRIC 13 and will recognise all costs related to the
programme within revenue.
The effect of this change was to reduce revenue in the year ended 31 December 2008 by £270,000, and to reduce selling and
distribution costs by the same amount. Accordingly, this has no effect on the pre-tax profits as previously reported by the Group.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been issued recently but are not effective for the financial
year ended 31 December 2009. Accordingly, they have not been applied in preparing these financial statements. Their adoption is not
expected to have a material affect on the financial statements. The main standards that may affect future financial statements of the Group
are:-
• IFRS 3 (Revised) Business Combinations (effective from 1 July 2009) broadens the definition of a business, requires contingent
consideration to be fair valued, transaction costs other than share and debt issue costs to be expensed as incurred, any pre-existing
interest in an acquiree to be measured at fair value with the gain or loss recognised in profit or loss and minority interests to be either
measured at its fair value or at its proportionate interest in the identifiable assets and liabilities of the acquiree on a transaction by
transaction basis. The Group has not yet determined the potential effect of this standard, although the Directors do not consider it will
be material to the consolidated financial statements as a whole.
• IAS 27 Consolidated and Separate Financial Statements (effective 1 July 2009) requires accounting for ownership changes in a
subsidiary while maintaining control to be recognised as an equity transaction. If control of a subsidiary is lost, any interest retained is
to be measured at its fair value and the gain or loss recognised in profit or loss. The Group has not yet determined the potential effect
of this standard, although the Directors do not consider it will be material to the consolidated financial statements as a whole. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
41
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
2. SEGMENT REPORTING
Segment information is presented in respect of the Group’s businesses and geographical segments. The primary format is based on the
Group’s management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Inter-segment pricing is determined on an arm’s length basis. Unallocated items comprise mainly central loans and
borrowings and related expenses, corporate assets (primarily the Company’s head office operations) and tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment.
Operating segments
The Group has three reportable segments, as described below, which are the Group’s strategic business units. The strategic business
units offer different products and services, and are managed separately. For each of the strategic business units, the Group’s CEO reviews
internal management reports on a monthly basis. The following summary describes the operations in each of the Group’s reportable
segments:
• Retail including Liberty of London retail and Internet; the UK retail operations at Regent Street and the transactional internet site;
• Wholesale Fabric; the results of the UK and Japanese fabric businesses;
• Liberty of London Wholesale; our branded product that is distributed globally.
The Retail business purchases stock from both the Wholesale Fabric business and Liberty of London Wholesale. In addition the Liberty
of London Wholesale business purchases stock from Wholesale Fabric.
Information regarding the results of each reportable segment is included below. Performance is measured on Revenue, Profit/(Loss)
and EBITDA as included in the internal management reports that are reviewed by the Group’s Chief Executive. EBITDA is used to measure
performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to
other entities that operate within the Retail and Wholesale industry. Inter-segment pricing is determined on an arm’s length basis.
Cash balances and bank loans are allocated to Retail as this division utilises the cash balances and buildings against which debt is
secured.
The primary format of the segmental information in respect of the Group’s business is based on its internal reporting structure.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Inter-
segment pricing is determined on an arms length basis.
Revenue from no single customer represents more than 10% of the Group's total external revenues.
Geographical segments
In presenting information on the basis of geographical segments, segmental revenue and assets are based on the geographical location of
the assets.
The Group operates substantially from the UK although its Wholesale Fabric and Liberty of London businesses have a global outreach
through a sales team and agents’ network. In addition the Wholesale Fabric business operates a fully owned Japanese subsidiary. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
42
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
2. SEGMENT REPORTING (continued)
Year ended 31 December 2009 Year ended 31 December 2008
External Internal Total External Internal Total
2009 2009 2009 2008* 2008* 2008*
£’000 £’000 £’000 £’000 £’000 £’000
Revenue by business division
Retail including Liberty of London
retail and Internet 37,311 – 37,311 31,497 – 31,497
Wholesale fabric 21,484 953 22,437 17,426 700 18,126
Liberty of London wholesale 825 2,663 3,488 966 2,219 3,185
59,620 3,616 63,236 49,889 2,919 52,808
Revenue by geographical origin
United Kingdom 49,555 3,616 53,171 42,832 2,919 45,751
Japan 10,065 – 10,065 7,057 – 7,057
59,620 3,616 63,236 49,889 2,919 52,808
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes – see note 1.
Year ended Year ended
31 December 31 December
2009 2008*
£’000 £’000
Revenue by geographical destination
United Kingdom 39,441 33,342
Japan 10,211 7,124
Other 9,968 9,423
59,620 49,889
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes – see note 1.
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
(Loss) / profit by business division
Retail including Liberty of London retail and Internet (4,897) (7,067)
Wholesale fabric 3,775 3,738
Liberty of London wholesale (including brand expenditure) (1,478) (2,552)
Provision for unrealised profit (242) (344)
Results from operating activities (2,842) (6,225)
Gain on Lease surrender 85 –
Net finance expenses (1,699) (750)
Taxation (690) (395)
Loss for the year (5,146) (7,370)
(Loss) / profit for the year by geographical origin
United Kingdom (4,354) (7,124)
Japan 1,512 899
Operating loss (2,842) (6,225)
Gain on lease surrender 85 –
Net finance expenses (1,699) (750)
Taxation (690) (395)
Loss for the year (5,146) (7,370) LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
43
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
2. SEGMENT REPORTING (continued)
31 December 31 December
2009 2008
Net assets £’000 £’000
By business division
Retail including Liberty of London retail and Internet 20,172 10,159
Wholesale fabric 16,597 14,112
Liberty of London wholesale (12,147) 5,564
24,622 29,835
By geographical origin:
United Kingdom 21,635 27,071
Japan 2,987 2,764
24,622 29,835
EBITDA £’000 £’000
By business division
Retail including Liberty of London retail and Internet 4,693 1,651
Wholesale fabric 4,238 4,206
Liberty of London wholesale (2,213) (2,715)
Reorganisation (135) (1,346)
Support Costs (6,475) (5,664)
108 (3,868)
Concession revenue
Sales from concession departments are included on a commission only basis within revenue above. Gross revenue of concession
departments was as follows:
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Gross revenue of concession departments 11,145 9,379
3. EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION AND AMORTISATION (“EBITDA”)
Year ended Year ended
31 December 31 December
2009 2008
The EBITDA of the Group is calculated as follows: £’000 £’000
Results from operating activities (2,842) (6,225)
Add depreciation of property, plant and equipment for the year 2,278 2,357
Operating EBITDA (564) (3,868)
Gain on lease surrender 85 –
Write down of fixtures charged against lease surrender (note 12) 587 –
Total EBITDA for the year 108 (3,868) LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
44
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
4. REMUNERATION OF DIRECTORS
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Remuneration as Executives 385 495
Payments for loss of office – 209
Share based payment transactions 118 –
Pension contributions 72 4
575 708
The aggregate emoluments of the highest paid director were £275,000 in the year ended 31 December 2009 (2008: £340,000). The
payments to defined contribution pension schemes in respect of Directors were £72,000 (2008: £4,000).
5. STAFF NUMBERS AND COSTS
The average full time equivalent number of staff employed by the Group, including part time employees, was as follows:
Year ended Year ended
31 December 31 December
2009 2008
Number Number
Selling and distribution 228 232
Administration 95 98
323 330
The payroll cost of the Group was as follows:
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Wages and salaries 10,162 12,072
Social security costs 1,005 1,104
Share based payment transactions 200 –
Pension costs 163 102
11,530 13,278
Share based payments
The Company operates an employee Share Option Scheme. Options granted under the scheme cannot be exercised during the first three
years of ownership and lapse at the end of 10 years. A charge of £200,195 (2008: £nil) has been included in Administrative expenses in
the Consolidated Income Statement to reflect the value of these options that accrued to the employees concerned during the year ended
31 December 2009. The same amount has been credited to Retained Earnings in the Consolidated Statement of Changes in Equity. See
also note 22.
Incentive Arrangements of the Directors of the Company
Arrangements are in place to incentivise management for the realisation of value for equity shareholders in cash or cash equivalents at
levels in excess of current book values. If such cash or cash equivalent realisations are below £71.1m, no incentive is payable. If cash or
cash equivalent realisations total £71.1m an incentive payment totalling £0.7m would become payable by the Company. If realisations
exceed £71.1m, the incentive payable by the Company would increase at the rate of 13.5% of such excess up to £113.0m, producing a
cumulative incentive payment of £6.3m. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
45
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
6. EMPLOYEE BENEFITS
Pensions – overall summary
Liberty operates a defined contribution pension scheme and two defined benefit pension schemes. One of the defined benefit schemes is
for certain UK employees of its wholly owned subsidiary Liberty Retail Plc. This scheme has been closed to new entrants since February
2001 and was closed to future benefit accrual with effect from 1 January 2007. The other scheme is a minor defined benefit pension
arrangement for the Japanese subsidiary of Liberty Retail Plc.
The assets of all pension schemes of the Group are held in separate trust administered funds. The total pension charge of the Group
for the year ended 31 December 2009 was £196,000 (year ended 31 December 2008: £63,000).
Defined contribution schemes
During the year ended 31 December 2009 the Group paid £82,000 (year ended 31 December 2008: £94,000) in respect of contributions
to Defined Contribution Pension Schemes operated on behalf of Group employees.
Future contributions
The Group expects to contribute approximately £296,000 to its defined benefit schemes in 2010 and incur approximately £100,000 of
operating costs in running the scheme.
Defined benefit schemes
The Group contributions to the UK defined benefit scheme of Liberty Retail Plc during the year ended 31 December 2009 amounted to
£360,000 (year ended 31 December 2008: £360,000). At 31 December 2009, £30,000 was due by the Group to the UK pension scheme,
which was paid shortly after the period end. The contribution rate is determined by an independent qualified actuary, using the projected
unit method, on the basis of triennial valuations. A full actuarial valuation was carried out at 2 June 2006 by the scheme’s independent
qualified actuary.
Actuarial valuation
A full actuarial valuation of the UK defined benefit scheme was carried out at 2 June 2006 by a qualified independent actuary. An IAS19
valuation has been prepared at 31 December 2009 by the actuary based on assumptions set by the Company and is reflected in these
financial statements. The assumptions used by the actuary are those recommended by the Trustees of the Pension Scheme and, in the
actuary’s opinion, are the best estimates chosen from a range of possible actuarial assumptions. Due to the timescale covered, these
assumptions may not necessarily be borne out in practice. The major assumptions used by the actuary were as follows:-
Year ended Year ended
31 December 31 December
2009 2008
Discount rate of scheme liabilities at year end 5.7% 6.4%
Expected rate of return on Scheme assets 5.9% 6.4%
Inflation per annum 3.4% 2.5%
Rate of increase per annum in pensions in payment accrued before 5 April 1997 3.0% 3.0%
Rate of increase per annum in pensions in payment accrued after 5 April 1997 3.4% 2.5%
Percentage of members taking cash at retirement 75% 75%
Forecast life expectancy of Scheme members 86 86
Rate of increase per annum in deferred pensions 3.4% 2.5%
Expected long term rate of return on Scheme assets 5.9% 6.4%
Mortality assumption: In 2009 the mortality assumption was based on S1 (normal) birth year medium cohort with a 1% p.a. underpin; in
2008 it was based on pxa 00 birth year.
The overall expected return on assets is calculated as the weighted average of expected returns on each individual asset class. The
expected return on equities is the sum of inflation, the dividend yield, economic growth and investment expenses. The return on gilts and
bonds is the current market yield on long term gilts and bonds. The expected return on other assets is set equal to expected inflation.
Assumptions relating to the rate of increase in salaries at 31 December 2009 are not applicable because the Scheme was closed to
future benefit accrual with effect from 1 January 2007.
The pxa 00 birth year mortality assumption used in 2008 refers to the male and female tables weighted by pension amount and using
a long cohort, based on experience occurring in insurance company data in 2000 (a year which is now used generally in the assessment of
pension obligations), projected forwards from the date of birth of members. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
46
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
6. EMPLOYEE BENEFITS (continued)
As the scheme is closed to future benefit accrual, there is no expected contribution rate for future years calculated by reference to
Contribution Earnings of Participating Earnings. The expected contribution for future years for the UK scheme is £396,000 per annum,
payable by Liberty Retail Plc.
31 December 31 December
2009 2008
£’000 £’000
Summary
Cumulative net liability of UK scheme (2,804) (2,044)
Cumulative net liability of Japanese scheme (10) (22)
Total present value of employee benefits (2,814) (2,066)
Movement of deficit in the UK defined benefit pension scheme of Liberty Retail Plc
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Movement in present value of defined benefit obligations
Present value of defined benefit obligations at start of year 15,751 17,402
Benefits paid by the scheme (1,022) (899)
Interest cost in finance expense 976 984
Actuarial gains recognised in equity 2,494 (1,736)
Present value of defined benefit obligations at year end 18,199 15,751
Movement in fair value of Scheme assets
Fair value of Scheme assets at start of year 13,707 16,988
Contributions paid by the Group 360 360
Benefits paid by the Scheme (1,022) (899)
Expected return on Scheme assets in finance income 851 1,007
Actuarial (losses) / gains on Scheme assets recognised in equity 1,499 (3,749)
Fair value of Scheme assets at year end 15,395 13,707
Expense recognised in Income Statement
Interest on obligation (976) (984)
Expected return on Scheme assets 851 1,007
Income recognised in Income Statement (125) 23
Actuarial gains and losses recognised directly in equity
Cumulative liability at start of year (2,044) (414)
Actuarial gains and losses recognised directly in equity during year (995) (2,013)
Contributions paid by the Group 360 360
Income recognised in income statement (125) 23
Cumulative liability at year end (2,804) (2,044)
Actual return on Scheme assets 2,350 (2,742) LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
47
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
6. EMPLOYEE BENEFITS (continued)
Movement of deficit in the Japan defined benefit pension scheme of Liberty Plc
The movement in the Japan defined benefit pension scheme during the year was as follows:-
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Deficit in scheme at beginning of year (22) (2)
Movements in year:-
Contributions received 7 7
Current service cost (27) (21)
Increase in value of scheme assets less increase in actuarial valuation of current scheme liabilities 29 (6)
Foreign exchange movements 3 –
Deficit in scheme at year end (10) (22)
Analysis of amount recognised in Statement of Consolidated Income
The fair values of both the UK and Japan schemes’ assets are not intended to be realised in the short term and may be subject to
significant change before they are realised. The present value of the scheme’s liabilities is derived from cash flow projections over long
periods of time and is thus inherently uncertain. However, both tables represent the Trustee’s and the Actuary’s best estimate of the deficit
in the schemes at the dates referred to.
31 December 31 December
2009 2008
£’000 £’000
Actual return less expected return on pension scheme assets in UK 1,499 (3,749)
Changes in assumptions underlying present value of scheme liabilities in UK (2,494) 1,736
(995) (2,013)
Actual return less expected return on pension scheme assets in Japan 29 (6)
Actuarial (loss)/gain in consolidated statement of consolidated income (966) (2,019)
Historical information
31 December 31 December 31 December 31 December 30 June
2009 2008 2007 2006 2005
UK scheme £’000 £’000 £’000 £’000 £’000
Equities 5,602 5,275 9,867 10,682 8,945
Bonds 9,786 8,400 7,085 5,790 4,695
Other investments 7 32 36 12 31
Fair value of scheme assets 15,395 13,707 16,988 16,484 13,671
Present value of defined benefit obligations (18,199) (15,751) (17,402) (18,077) (20,493)
Deficit in the Scheme (2,804) (2,044) (414) (1,593) (6,822)
Experience adjustments arising on Scheme assets 1,499 (3,749) (270) 1,492 303
Experience adjustments arising on Scheme liabilities (2,494) 1,736 1,073 3,635 4,423 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
48
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
7. FINANCE INCOME AND EXPENSES
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
The finance income arose as follows:-
Interest income on cash deposits 2 91
Forward currency contracts – 341
Defined benefit pension scheme expected return on scheme assets 851 1,007
Total finance income for the year 853 1,439
The finance expenses arose on financial liabilities measured at amortised cost as follows:-
Bank loans and overdrafts (292) (877)
Loan from ultimate holding company (1,065) (321)
Interest on pension scheme liabilities (976) (984)
Forward currency contracts (219) –
Other interest payable – (7)
Total finance expense for the year (2,552) (2,189)
8. LOSS BEFORE TAXATION
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
The loss before taxation is stated after charging the following:
Depreciation-property, plant and equipment owned 2,278 2,357
Operating lease expense 765 1,107
Auditors’ remuneration charged in Income Statement:-
Audit of the financial statements of the Company 108 100
Audit of financial statements of subsidiaries pursuant to legislation 71 35
Other Advisory Fees 20 –
Foreign exchange loss 775 257
And after crediting the following:
Rent receivable – 21
Licensing and royalty income 909 696
Foreign exchange gains 702 7
9. TAXATION
The taxation charge for the year in the Income Statement arose as follows:
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Foreign tax
Tax on Japanese profits for the year (690) (395)
No tax was recognised directly in equity during the year ended 31 December 2009 or during the previous year. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
49
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
9. TAXATION (continued)
The taxation charge has been reduced from the amount that would arise from applying the prevailing corporation tax rate to the loss before
taxation in the Consolidated Income Statement, as follows:
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
UK corporation tax credit at 28% (2008: 28.5%) on Group loss before tax 1,248 1,988
Excess of depreciation charged over capital allowances claimed (638) (672)
Accounting profit on disposal greater than chargeable gains (142) –
Expenditure permanently disallowed for taxation purposes and unrelieved tax losses (1,060) (1,573)
Taxation on overseas earnings at higher rate than UK corporation tax (264) (138)
Tax losses brought forward utilised 166 –
Taxation charge for the year (690) (395)
10. LOSS PER SHARE
The loss per share figures are calculated by dividing the loss attributable to equity shareholders of the Company for the year, by the
weighted average number of ordinary shares in issue during the year, as follows:-
Year ended Year ended
31 December 31 December
2009 2008
Loss for the year attributable to equity shareholders of the Company £’000 (5,200) (7,424)
Weighted average number of ordinary shares in issue during the year ’000 22,603 22,603
Loss per share (basic and diluted) Pence (23.0p) (32.8p)
As the basic EPS is negative, in line with IAS 33 Earning per Share, share options are not considered dilutive.
11. INTANGIBLE ASSETS AND GOODWILL
Goodwill Brand Total
£’000 £’000 £’000
Balance at 1 January 2008 and 1 January 2009 182 18,200 18,382
Balance at 31 December 2008 and 31 December 2009 182 18,200 18,382
Assessment of the useful life and impairment testing on the carrying value of the Brand
The Directors consider that the Group’s brand has an indefinite life due to the durability of the underlying business. This has been demonstrated
over many years. Accordingly the brand has not been amortised but has instead been subject to an annual impairment review. An external
professional valuation of the Liberty brand was undertaken by Equilibrium Consulting at 31 December 2007. The principal assumptions in
the 2007 valuation included a discount rate of 10.2% and a long term growth assumption of 2% into perpetuity. At 31 December 2009, the
value in use was determined by discounting future cash flows generated from continuing use of the cash generating unit. This is based on
projected cash flows in the Company’s 5 year business plan and further projections for years 6 to 10 to produce a 10 year cash flow
model. A 2% growth assumption has been applied to cash flows at the end of year 10. Forecast annual revenue growth included in the
projections is 5.8% in 2010, 3.4% by year 5 reflecting the 5 year business plan and 3.2% by year 10. The cash flows generated from the
business plan project net outflows in 2009 and 2010 with net cash inflows beginning in 2011. A pre-tax discount rate of 10% was applied
to resultant cash flows to determine present day value in use, reflecting current market assessments of risk specific to the asset. The values
assigned also represent assessments of future trends in the retail industry and are based on both external sources and internal historical data.
The above calculation of value in use is particularly sensitive in two areas: a movement of 1% in the discount rate would affect the calculated
value of the brand by £5m, and a movement of 1% in future planned net cash inflows before capital expenditure, central costs and working
capital movements would affect the calculated value of the brand by approximately £7m. The impairment review at 31 December 2009
supported the value in use of the Liberty brand at more than the book value of £18.2m at which it has been included in the financial
statements of the Group throughout the year accordingly the brand has been retained at a value of £18.2m in these financial statements. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
50
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
12. PROPERTY, PLANT AND EQUIPMENT
Plant,
machinery,
Freehold fixtures
property & equipment Total
£’000 £’000 £’000
Cost or valuation
At 1 January 2009 25,595 16,428 42,023
Additions – 2,768 2,768
Disposals (724) (724)
Revaluation 612 – 612
At 31 December 2009 26,207 18,472 44,679
Depreciation
At 1 January 2009 – (11,017) (11,017)
Charge for the year (338) (1,940) (2,278)
Disposals – 137 137
Revaluation 338 – 338
At 31 December 2009 – (12,820) (12,820)
Net book value at 31 December 2009 26,207 5,652 31,859
On 19 June 2009 Liberty surrendered the lease on its Sloane Street store for a cash premium of £700,000. As a result, Liberty released a
rent-free provision with residual value of £79,000 previously held as a liability and incurred costs of £107,000. In addition, fixtures and
fittings relating to the shop with a net book value of £587,000 were deemed to have no further value in use and written off, giving rise to a
net gain on lease surrender of £85,000.
Plant,
machinery,
Freehold fixtures
property & equipment Total
£’000 £’000 £’000
Cost or valuation
At 1 January 2008 29,474 13,945 43,419
Additions – 2,483 2,483
Revaluation (3,879) – (3,879)
At 31 December 2008 25,595 16,428 42,023
Depreciation
At 1 January 2008 – (9,019) (9,019)
Charge for the year (359) (1,998) (2,357)
Revaluation 359 – 359
At 31 December 2008 – (11,017) (11,017)
Net book value at 31 December 2008 25,595 5,411 31,006 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
51
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
12. PROPERTY, PLANT AND EQUIPMENT (continued)
Valuation
The Group’s property, plant and equipment is primarily located in the United Kingdom, with a minor amount located in Japan. The Group’s
property was valued at 31 December 2009 by qualified professional valuers working for the company of DTZ, Chartered Surveyors,
(“DTZ”), acting in the capacity of External Valuers. All such valuers are Chartered Surveyors, being members of the Royal Institution of
Chartered Surveyors (“RICS”).
DTZ act as valuers to the Group and undertake half year and year end valuations for accounting purposes. DTZ has been carrying out
this valuation instruction for the Group for a continuous period since 1999 and Paul Wolfenden has been the signatory of Valuation Reports
provided to the Group for the same period. In addition, DTZ provide ad-hoc valuation advice to the Group. DTZ is a wholly owned
subsidiary of DTZ Holdings plc. In the financial year to 30 April 2009, the proportion of total fees payable by the Group to the total fee
income of DTZ Holdings plc was less than 5%. It is not anticipated that this situation will vary in terms of the financial year of DTZ to
30 April 2010. DTZ has not received any introductory fees or acquisition fees in respect of the property owned by the Liberty Group
within the 12 months prior to the date of valuation.
The valuation was carried out in accordance with the RICS Appraisal and Valuation Standards 6th Edition (“the Manual”) and the
property was valued on the basis of Existing Use Value. Existing Use Value is defined in the Manual as the estimated amount for which a
property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction, after proper
marketing, wherein the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant
possession of all parts of the property required by the business and disregarding potential alternative uses and any other characteristics
of the property that would cause its Market Value to differ from that needed to replace the remaining service potential.
The valuation includes the land and buildings; the trade fixtures, fittings, furniture, furnishings and equipment; and the market’s
perception of the trading potential excluding personal goodwill; together with an assumed ability to renew existing licences, consents,
certificates and permits. The value excludes consumables and stock in trade. The valuation excludes any goodwill associated with the
management by the Company or its subsidiaries.
The valuation of the Tudor property and fixtures totalled £30.3m, including fixtures and equipment with a net book value of £4.0m at
31 December 2009. The historic cost of the Group’s property at 31 December 2009 includes capitalised interest of £0.2m (2008: £0.2m).
Reconciliation of values
The reconciliation of the values at which the property is included in the above table with their original cost less accumulated depreciation is
as follows:
Original
cost less Cumulative
accumulated valuation
depreciation at surplus at Valuation at
31 December 31 December 31 December
2009 2009 2009
£’000 £’000 £’000
Freehold property 18,489 7,718 26,207
Fixtures and equipment within Tudor property 4,043 – 4,043
Total Tudor property and fixtures 22,532 7,718 30,250
Other fixtures and equipment 1,609 – 1,609
Total property, fixtures and equipment 24,141 7,718 31,859 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
52
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
13. INVENTORIES
31 December 31 December
2009 2008
£’000 £’000
Raw materials 1,258 1,247
Finished goods 10,759 7,943
12,017 9,190
14. TRADE AND OTHER RECEIVABLES
31 December 31 December
2009 2008
£’000 £’000
Trade receivables 7,996 7,772
Amount due from related parties (note 23) – 12
Other receivables 565 1,211
Prepayments and accrued income 946 1,113
9,507 10,108
15. CASH AND CASH EQUIVALENTS
31 December 31 December
2009 2008
£’000 £’000
Cash and cash equivalents 1,943 1,931
Less bank overdraft – (28)
Net cash and cash equivalents per consolidated cash flow statement 1,943 1,903
16. TRADE AND OTHER PAYABLES
31 December 31 December
2009 2008
£’000 £’000
Trade payables 12,169 9,349
Amounts due to related parties (note 23) 12,943 7,548
Other payables 487 1,436
PAYE, NIC and VAT 1,579 1,157
Accruals and deferred income 4,693 4,199
31,871 23,689
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 21.
Amounts due to related parties relate to amounts due to MWB Group Holdings Plc. The loan was provided under a facility that had a
term that ran to December 2010. Subsequent to the year end, this facility was extended to 30 June 2011. Drawings under this facility incur
interest at a rate of 9% per annum. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
53
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
17. TAX PAYABLE
31 December 31 December
2009 2008
£’000 £’000
Japanese corporation tax 393 157
18. LOANS AND BORROWINGS
The Group’s interest-bearing loans and borrowings are measured at amortised cost. Details of the Group’s exposure to interest rate,
foreign currency and liquidity risk are set out in note 21.
The Group utilises a financing facility provided by Bank of Scotland (“BoS”) for a loan facility of £20m which comprises a revolving
credit facility of £15m and an ancillary facility of £5m. At 31 December 2009, the Group has drawn £12.5m (2008: £14.6m) of the £15m
revolving credit facility and £0.9m (2008: £0.2m) of the ancillary facility.
Terms and debt repayment schedule
The Group’s loans are denominated in Sterling and no foreign exchange risk existed on its debt arrangements during the year ended
31 December 2009 or during the previous year. The Group’s loans bear variable rates of interest which are set by reference to BoS base
rate as follows:-
31 December 2009 31 December 2008
Nominal interest Latest year Face Carrying Face Carrying
rate per annum of maturity value amount value amount
£’000 £’000 £’000 £’000
Secured bank loan 2.5% 2011 12,542 12,542 14,633 14,633
The facility has a term that runs until December 2011, at which time, or prior to which, discussions will be held with BoS with regard to
refinancing, repayment or extending the loan repayment date.
The bank loan is secured on freehold property with a carrying amount of £30.3m (2008:£28.8m) (see note 12), a debenture and
corporate guarantee provided by Liberty Plc in favour of BoS.
Net debt
31 December 31 December
2009 2008
£’000 £’000
Current liabilities
Cash and cash equivalents 1,943 1,903
Derivative financial instruments (1) 341
Related party balances (note 23) (12,943) (7,548)
Non-current liabilities
Secured bank loan (12,542) (14,633)
Net debt (23,543) (19,937)
Undrawn facilities
At 31 December 2009, the Group had £2.5m (2008: £0.4m) of undrawn credit financing facilities available for use by the Group.
Funding financial risk
The Group’s funding financial risk centres on the total interest cost incurred on the Group’s short and medium term loans, which at
31 December 2009 included bank borrowings of £12.5m (2008: £14.6m). The Board has currently chosen to retain the bank borrowings
at variable rates due to the low level of current interest rates. The Board reviews this policy on a regular basis to ensure good management
of its exposure to interest rate fluctuations. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
54
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
19. PROVISIONS
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Balance at start of year 550 550
Provision created during year 915 –
Balance at end of year 1,465 550
An obligation exists under a Section 106 agreement to reinstate an oak panelled staircase into the Tudor Building at a future date. The
provision brought forward of £550,000 is the estimated building cost necessary to incorporate the staircase into the existing fabric of the
building. The provision created during the year relates to a potential claim made during the year and a restructuring provision. The outcome
of these is expected to be determined during 2010.
20. DEFERRED TAXATION
The deferred tax liabilities/(assets) at 31 December 2009 and at the previous year end arose as follows.
31 December 31 December
2009 2008
£’000 £’000
Deferred tax liability provided
Liberty brand net of other capital losses 5,012 4,499
Accelerated capital allowances (5,060) (4,552)
Short term temporary differences 48 53
Deferred tax liability provided at year end – –
Deferred tax assets not provided
Accelerated capital allowances (2,169) (2,103)
Potential tax recoverable on property valuation and pension deficits (1,695) (578)
Trading tax losses (15,405) (14,116)
Deferred tax (assets) not provided at period end (19,269) (16,797)
Deferred tax assets not provided
After deducting all deferred tax liabilities including those relating to the brand, the Group had unrelieved capital expenditure from current
and prior years at 31 December 2009 of approximately £11m (2008: £7.5m). At the same date, it had net trading losses carried forward in
certain parts of the Group of approximately £55m (2008: £50.4m) and a cumulative net liability in respect of its defined benefit pension
scheme of £2.8m. These gross tax assets totalling £68.8m are reflected at the prevailing tax rate of 28% in the deferred tax asset of
£19.3m referred to above. Due to uncertainty as to timing and use of these net tax assets, particularly the trading losses and pension
deficit which are restricted in their use, these net tax assets have not been recognised as an asset in the consolidated balance sheet at
31 December 2009 or previous periods but continue to be available as required. No charges or credits were made in the Consolidated
Income Statement in respect of deferred taxation during the years referred to above. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
55
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
21. FINANCIAL INSTRUMENTS
Overall summary
The Group has exposure to the following principal risks in the operation and management of its business:-
(i) Liquidity risk;
(ii) Market risk;
(iii) Interest rate risk;
(iv) Currency risk; and
(v) Credit risk.
Set out below is information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for
measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these
consolidated financial statements.
The Directors have overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies to provide protection for the Group’s activities
are reviewed during the year to reflect changes in market conditions. The Group, through its management standards and procedures, aims
to develop a disciplined and constructive control environment in which employees understand their roles and obligations. This is managed
and controlled through a detailed funding policy and capital management strategy, details of which are set out below.
The Group borrows from banks at variable rates of interest. The Group does not use hedging arrangements to speculate on interest
rate movements.
The Group’s treasury policies are designed to ensure that sufficient committed loan facilities are available to support current and future
business requirements. Cash and loan management is a core feature of the Board’s business model and two year rolling cash flow
forecasts, updated on a monthly basis, are controlled by the Executive Directors to manage these requirements.
Liquidity risk
Note 1 to the financial statements refers to liquidity risks associated with the financing arrangements of the Group. Note 25 provides details
of capital commitments.
Market risk
Market risk that affects the Group is the risk that changes in market prices, such as interest rates, foreign currency rates and equity prices,
will affect the Group’s income or the value of its holdings of financial instruments. The objective of the Group’s market risk management is
to manage and control market risk exposures within acceptable parameters, while seeking to optimise returns to shareholders.
The Group buys derivatives for its financial liabilities, and also incurs financial liabilities, in order to manage market risks. The Group
does not enter into hedge contracts on a speculative or trading basis.
Equity price risk arises generally from available-for-sale equity securities held within the Liberty Retail Plc pension scheme. These
investments are held to meet the funded and unfunded portion of the Group’s defined benefit pension obligations. Group Management
monitors the mix of debt and equity securities in this investment portfolio using pro-active third party advice. Material investments within
the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Trustees of the pension scheme, in
conjunction with Senior Executives of the Group. The investment portfolio of the pension scheme at its most recent year end of 2 June
2008 totalled £16.0 million and the current value of pension scheme liabilities, which are valued principally by reference to investment bond
yields, totalled £18.9 million.
The primary goal of the Group’s available-for-sale equity securities investment strategy is to maximise investment returns
commensurate with acceptable levels of risk, in order to meet as much as possible the Group’s defined scheme pension obligations.
Management is assisted in this regard by professional external advisors. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
56
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
21. FINANCIAL INSTRUMENTS (continued)
Interest rate risk
The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. The Group may hold
financial instruments to hedge financial risk on finance drawn for its operations, or for the temporary investment of short-term funds, and to
manage the interest rate risks arising from its operations and sources of finance. In addition, various financial amounts – for example trade
debtors and trade creditors – arise directly from the Group’s normal trading operations.
The Group’s interest rate is set at a margin above the Bank of Scotland’s base rate. If the base rate had increased by 1% point during
the year the Group would have incurred an extra interest cost of £0.1m.
Currency risk
Substantially all Group revenue is denominated in Sterling, the Group’s functional currency. The Group is currently mainly exposed to
currency risk on sales and purchases that are denominated in Euros and US dollars. Payments in Euros accounted for 17% (2008: 14%)
and payments in US dollars accounted for 5% (2008: 3%) of total payments in the year to 31 December 2009. The Group uses forward
exchange contracts to hedge its currency risk, most of which have a maturity of less than one year from the balance sheet date. The
Group does not have any loans taken out by any Group entities, in any currency other than Sterling.
As 88% (2008: 91%) of the Group’s net assets are denominated in Sterling, the Group did not have a material exposure to foreign
currency risk at 31 December 2009 or at the previous year end. The remaining 12% (2008: 9%) of Group assets are denominated in
Japanese Yen. Accordingly, strengthening of Sterling against the Yen would not have had a material effect on the Group at 31 December 2009
or at the previous year end.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The risk to the Group arises principally from the Group’s receivables from customers.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the
Group’s customer base, including the general default risk in the principal sectors in which the Group operates, has less of an influence on
credit risk. The Group maintains credit insurance which protects against any bad debt that may arise, with an excess of £1,000 payable
per claim.
For many years, losses from impairment of the Group’s customer receivables have been minimal and this continued during the year
ended 31 December 2009. Customers that are graded as high risk are placed on a restricted customer list, and future sales are only made
on a restricted basis.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting
date was:
31 December 31 December
2009 2008
£’000 £’000
Trade receivables 7,996 7,772
Cash and cash equivalents 1,943 1,903
9,939 9,675 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
57
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
21. FINANCIAL INSTRUMENTS (continued)
Exposure to credit risk (continued)
The ageing of trade receivables at 31 December 2009 was as follows:-
Impairment Impairment
Gross provision Gross provision
31 December 31 December 31 December 31 December
2009 2009 2008 2008
£’000 £’000 £’000 £’000
Not overdue 3,635 – 4,210 –
0-30 days overdue 1,646 – 695 –
31-120 days overdue 2,248 – 2,628 (67)
120 days to one year overdue 548 (107) 359 (93)
More than one year overdue 166 (140) 94 (54)
8,243 (247) 7,986 (214)
The impairment provision at 31 December 2009 of £247,000 relates to debts mainly from overseas customers that are not covered by
insurance.
Based on historic default rates, the Board believes that no material amount of impairment allowance is necessary in respect of trade
receivables not past due or past due by up to 120 days. The majority of the balance relates to customers that have good financial track
records with the Group.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
2009 2008
£’000 £’000
Balance at start of year (214) (100)
Impairment loss provided (33) (114)
Balance at end of year (247) (214)
The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of
the amount owing is possible; at that point the amounts considered irrecoverable and is written off against the financial asset directly.
Liquidity risk – maturity analysis
2009 2009
Less than Between
1 year 1 & 2 years
Non derivative financial liabilities £’000 £’000
Trade and other payables (18,928) –
Amounts due to related parties (12,943) –
Secured bank loan – (12,542)
Determination of fair values
The following tables show the carrying amounts and fair values of the Group’s financial instruments at 31 December 2009 and at the
previous year end. The carrying amounts are included in the Group balance sheet. The fair values of the financial instruments are the
amounts at which the instruments could be exchanged in a current transaction between willing parties.
2009 2008
£’000 £’000
Balance at start of year 341 –
Fair Value changes through Income Statement (219) 341
Fair Value of contracts settled (123) –
Balance at end of year (1) 341 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
58
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
21. FINANCIAL INSTRUMENTS (continued)
Determination of fair values (continued)
The carrying amounts of financial assets and liabilities, together with their fair values at 31 December 2009 and at the previous year end,
were as follows:-
31 December 2009 31 December 2008
Carrying Fair Carrying Fair
amount value amount Value
£’000 £’000 £’000 £’000
Amounts due to related party (12,943) (12,943) (7,548) (7,548)
Trade and other receivables 9,507 9,507 10,108 10,108
Cash and cash equivalents 1,943 1,943 1,903 1,903
Secured bank loan and overdraft (12,542) (12,542) (14,633) (14,633)
Trade payables (12,169) (12,169) (9,349) (9,349)
Other payables (487) (487) (1,436) (1,436)
(26,691) (26,691) (20,955) (20,955)
Fair value hierarchy: Financial instruments carried at fair value are defined as Level 2 under IFRS 7.
22. SHARE CAPITAL
2009 2008
£’000 £’000
Allotted, called up and fully paid
22,602,808 ordinary shares of 25p each 5,651 5,651
385,000 6% cumulative non-redeemable preference shares of £1 each 385 385
6,036 6,036
Dividends on ordinary shares
No dividends were declared during the year ended 31 December 2009. Holders of ordinary shares are entitled to receive dividends per
share as declared from time to time and are entitled to one vote per share at Shareholder meetings of the Company.
6% cumulative non-redeemable preference shares
The Company’s preference shares are non-redeemable and have a right of preferential return of capital in the event of a winding up of the
Company. They include no contractual obligation to pay dividends. At 31 December 2009, the preference shares are in arrears of dividend
of £219,000 (2008: £196,000), and accordingly they have the same voting rights as the ordinary shares until the arrears are paid. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
59
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
22. SHARE CAPITAL (continued)
Share options
In May 2003 the Company established the Liberty Plc Executive Share Option Scheme 2003 (“the Option Scheme”) after Shareholder
approval. The Option Scheme enables the Board to grant options over shares to certain employees (including Directors) which are
exercisable between three and ten years after the date of grant. The exercise of options granted under the Option Scheme are subject to
the achievement of certain performance criteria that are established at the date of grant of the options. The options previously granted
under the scheme are summarised below:
At At Weighted average
1 January Lapsed 31 December exercise price
Date of grant 2009 during year 2009 per share pence Exercisable from Expiry date
27 March 2003 372,093 (372,093) – 215p 26 March 2006 24 March 2013
26 September 2005 283,636 (283,636) – 275p 25 September 2008 24 September 2015
30 March 2006 207,272 (207,272) – 262.5p 29 March 2009 27 March 2016
11 May 2006 427,184 (427,184) – 257.5p 10 May 2009 8 May 2016
Outstanding 1,290,185 (1,290,185) – 249.9p
On 21 October 2009 the Company issued share options to certain key management personnel under the Company’s share option
scheme, with an exercise price of 120p per share. All such options granted remain outstanding at 31 December 2009. These options are
exercisable between three and ten years after the date of grant and are summarised below:
Weighted average
exercise price
Date of grant At 31 December 2009 per share pence Exercisable from Expiry date
21 October 2009 1,930,000 120.0p 21 October 2012 21 October 2019
The total expense recognised as employee costs in respect of options in the year ended 31 December 2009 was £200,195 (see note 5).
Inputs for measurement of grant date fair values
The grant date fair value of all share based payment plans was measured based on the Black-Scholes formula. Expected volatility is
estimated by considering historic average share price volatility, The inputs used in the measurement of the fair values at grant date of the
share-based payment plans are the following:
Fair value of share options and assumptions Inputs
Fair value at grant date 160p
Share price at grant date 272p
Exercise price 120p
Expected volatility (weighted average volatility) 10%
Option life (expected weighted average life) 10 years
Risk-free interest rate (based on government bonds) 2.167% LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
60
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
23. RELATED PARTY BALANCES AND TRANSACTIONS
31 December 31 December
2009 2008
Trade and other receivables (note 14) £’000 £’000
Amounts due from related parties
Wholly owned subsidiaries of a fellow subsidiary, MWB Business Exchange Plc – 12
– 12
Current liabilities
Trade and other payables (note 16)
MWB Group Holdings Plc
Loan 10,904 6,543
Other 2,039 1,005
12,943 7,548
Related party transactions during the year
Wholly owned subsidiaries of MWB Group Holdings Plc for administrative fees paid during the year – 56
24. EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF LIBERTY PLC IN PENCE PER SHARE
The Equity attributable to shareholders of Liberty plc in pence per share is calculated by dividing the Equity attributable to shareholders of
Liberty plc at each year end by the number of ordinary shares in issue at such year end. They are calculated as follows:-
31 December 31 December
2009 2008
Equity attributable to shareholders of Liberty plc per consolidated balance sheet
on page 30 of the financial statements £’000 23,798 29,065
Number of ordinary shares in issue at year end ’000 22,603 22,603
Equity attributable to shareholders of Liberty Plc in pence per share Pence 105p 129p
25. COMMITMENTS AND GUARANTEES
31 December 31 December
2009 2008
Capital commitments £’000 £’000
Authorised but not contracted – in relation to property, plant & equipment 242 1,816
Capital commitments will be financed from available cash and cash equivalents of £1.9m in note 15 and undrawn bank facilities totalling
£2.5m in note 18. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
61
Notes to the Consolidated Financial Statements
for the year ended 31 December 2009
25. COMMITMENTS AND GUARANTEES (continued)
Operating lease commitments
Non-cancellable operating lease commitments of the Group relate to land and buildings. These expire in years subsequent to
31 December 2009 and involve total payments in future years as follow:-
31 December 31 December
2009 2008*
£’000 £’000
Within one year 789 1,142
Between two and five years 3,074 6,945
After more than five years 1,875 4,846
5,738 12,933
* The prior year numbers have been restated to show total commitment rather than annual commitment.
One of the Group’s leasehold interests has been sublet by the Group until 15 February 2016. Annual sublease income of £251,000,
which is equal to the rent payable by the Group on the interest, is received.
26. POST BALANCE SHEET EVENT
On 12 March 2010 the Group exchanged contracts for the sale of the freehold interest in the Tudor Property for £41.5m to Sirosa Liberty Ltd.
Under the terms of the proposed deal, the Group will take a 30 year operating lease on the building at an initial annual rent of £2.1m, with
fixed five yearly uplifts
The sale is conditional on approval by the shareholders of Liberty’s 68% shareholder, MWB Group Holdings Plc, which is expected
to be sought during April 2010. The Board of MWB Group Holdings Plc which owns 15.8% of the issued share capital of MWB Group
Holdings Plc has confirmed its approval of the sale, and shareholders associated with the Board owning a further 17.5% have also
confirmed their approval to the sale. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
62
Parent Company Balance Sheet
at 31 December 2009
31 December 31 December
2009 2008
Notes £’000 £’000
Fixed Assets
Investment in subsidiary undertakings 28 9,174 9,174
Creditors: amounts falling due within one year 29 (215) (217)
Total assets less current liabilities 8,959 8,957
Creditors: amounts falling due after more than one year 30 (2,946) (2,944)
Net assets 6,013 6,013
Capital and reserves
Called up share capital 6,036 6,036
Profit and loss account (23) (23)
Total Shareholders’ funds 6,013 6,013
The notes on pages 63 and 64 form part of these financial statements. Approved by the Board of Directors on 30 March 2010 and signed on its
behalf by:
Richard Balfour-Lynn Geoffroy de La Bourdonnaye
Chairman Chief Executive LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
63
Notes to Parent Company Financial Statements
27. ACCOUNTING POLICIES FOR PARENT COMPANY FINANCIAL STATEMENTS
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the
financial statements.
Basis of preparation
The financial statements have been prepared on a going concern basis in the manner disclosed in Note 1 to the Consolidated Financial
Statements.
Under section 408(4) of the Companies Act 2006, the Company is exempt from the requirement to present its own profit and loss
account.
Under Financial Reporting Standard 1, the Company is exempt from the requirement to prepare a cash flow statement on the grounds
that the consolidated cash flow statement included in these published financial statements, includes the cash flow of the Company.
As permitted by FRS 8, no related party disclosures in respect of transactions with wholly owned subsidiaries have been included.
Investment in subsidiary undertakings
The interest of the Company in the shares of subsidiary undertakings is stated at cost less any provision for impairment. The carrying
values of fixed asset investments are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be
recoverable. An impairment is recognised by comparing the carrying amount to the higher of the recoverable amount and value in use.
28. INVESTMENT IN SUBSIDIARY UNDERTAKINGS
31 December 31 December
2009 2008
£’000 £’000
Investment in subsidiary undertakings 9,174 9,174
The results of all subsidiary undertakings of the Company have been included in the financial statements. A full list of subsidiary
undertakings is included with the Company’s Annual Return. The material subsidiary undertakings of the Company at 31 December 2009,
all of which are engaged in retail operations or related activities, or act as intermediary holding companies for such operations, were
incorporated and operate in England and Wales, and which are all wholly owned unless stated below, were as follows:
Name of undertaking Classes of issued share capital held by the Group Immediate holding company in the Group
Liberty Retail Plc Ordinary & 6% Preference Liberty Plc
Liberty Japan Co. Limited* Ordinary Liberty Investment Limited
Liberty Fabric Limited Ordinary Liberty Retail Plc
Retail Stores Property Holdings Limited Ordinary Liberty (Regent and Tudor) Holdings Limited
Liberty of London Limited Ordinary Liberty Plc
* Incorporated and operates in Japan
29. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
31 December 31 December
2009 2008
£’000 £’000
Accruals and deferred income 215 217 LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
64
Notes to Parent Company Financial Statements
30. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
31 December 31 December
2009 2008
£’000 £’000
Other creditors 2,946 2,944
31. REMUNERATION OF DIRECTORS
Year ended Year ended
31 December 31 December
2009 2008
£’000 £’000
Remuneration as Executives 385 495
Payments for loss of office – 209
Share based payment transactions 200 –
Pension contributions 72 4
657 708
The aggregate emoluments of the highest paid director were £275,000 in the year ended 31 December 2009 (year ended 31 December 2008:
£340,000). The payments to defined contribution pension schemes in respect of Directors were £72,000 (2008: £4,000).
32. IMMEDIATE AND ULTIMATE HOLDING COMPANY
The Company’s immediate parent is MWB Retail Stores Shareholder Limited, a company registered in England and Wales and which owns
68.3% of the Company’s issued ordinary share capital. Consolidated financial statements are not produced by MWB Retail Stores
Shareholder Limited. The Company’s ultimate holding company is MWB Group Holdings Plc, which is registered in England and Wales and
listed on the London Stock Exchange.
The only group in which the results of the Company are consolidated is that headed by MWB Group Holdings Plc. These consolidated
financial statements of Liberty Plc are available to the public and may be obtained from its company secretary, Filex Services Limited at the
Company’s registered office of 179 Great Portland Street, London W1W 5LS. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
65
Liberty Plc
(Incorporated and registered in England and Wales with registered number 3967671)
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Liberty Plc will be held at 11.00am on 9 June 2010 at the offices of Liberty Plc,
210-220 Regent Street, London W1B 5AH, for the following purposes:
As Ordinary business, to consider and, if thought fit, pass the following resolutions which will be proposed as Ordinary Resolutions:
1. To receive the financial statements of the Company for the year ended 31 December 2009, together with the Report of the Directors and the
Report of the Auditors thereon.
2. To re-elect as a Director, J. Singh who retires in accordance with Article 79 of the Company’s Articles of Association.
3. To re-elect as a Director, R.G. Balfour-Lynn who retires in accordance with Article 79 of the Company’s Articles of Association.
4. To re-appoint KPMG Audit Plc to hold office as Auditors of the Company until the conclusion of the next Annual General Meeting at which
financial statements for the Company are presented and to authorise the Directors to agree their remuneration.
As Special Business, to consider and, if thought fit, pass the following resolutions which will be proposed as Special Resolutions:–
5. That:
(1) in accordance with section 551 of the Companies Act 2006 the Directors be and are hereby authorised to exercise all powers of the
Company to allot any shares in the Company and to grant rights to subscribe for or convert any security into shares in the Company
up to an aggregate nominal amount of £1,825,000 provided that this authority will expire (unless renewed, varied or revoked by the
Company in general meeting) at the earlier of the conclusion of the annual general meeting of the Company held in 2011 and 30 June 2011,
save that the Company shall be entitled to make, prior to the expiry of such authority, any offer or agreement which would or might
require shares to be allotted or rights to subscribe for or convert any securities into shares to be granted after the expiry of such authority
and the Directors may allot shares or grant rights to subscribe for or convert securities into shares in pursuance of such offer or
agreement as if the authority conferred hereby had not expired.
(2) for the purposes of sub-paragraph (1) above, words or expressions defined in or for the purposes of Part 17 of the Companies Act 2006
shall bear the same meaning herein.
(3) the authority granted by this resolution shall replace all existing authorities to allot relevant securities (as defined in section 80(2) of the
Companies Act 1985) or any shares in the Company previously granted to the Directors pursuant to section 80 of the Companies Act
1985 or section 551 of the Companies Act 2006.
6. That:
(1) in accordance with section 570 of the Companies Act 2006 the Directors be and are hereby given power to allot equity securities for
cash pursuant to the general authority conferred upon the Directors in Resolution 5 referred to in the Notice of General Meeting at which
this resolution is being proposed, as if Section 561 of the Companies Act 2006 did not apply to any such allotment, provided that the
power hereby granted:
(a) shall be limited to:
(i) the allotment of equity securities in connection with or pursuant to an offer by way of rights to the holders of Shares in the capital
of the Company and other persons entitled to participate therein for cash in proportion (as nearly as may be) to the holdings of
Ordinary Shares of such holders (or, as appropriate, to the number of Ordinary Shares which such other persons are for these
purposes deemed to hold) subject only to such exclusions or other arrangements as the Directors may consider necessary or
expedient to deal with fractional entitlements or legal or practical problems under the laws of or the requirements of any
recognised regulatory body in any territory;
(ii) the allotment (otherwise than pursuant to sub-paragraph (a)(i) of this proviso) of equity securities pursuant to the authority
granted under resolution 5 and/or by virtue of section 560(3) of the Companies Act 2006, up to an aggregate nominal value of
£280,000; and LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
66
Notice of Annual General Meeting
(b) this authority will expire upon expiry of the general authority conferred by resolution 5 above, save that the Company may, before
such expiry, make offers or agreements which would or might require equity securities to be sold after such expiry, and the Directors
may allot equity securities in pursuance of any such offer or agreement as if the power conferred by this resolution had not expired.
The authority granted by this resolution shall replace all existing authorities previously granted to the Directors to allot equity
securities for cash as if section 89(1) of the Companies Act 1985 or section 561 of the Companies Act 2006 did not apply.
(2) the said power shall allow and enable the Directors to make an offer or agreement before the expiry of that power which would or might
require equity securities to be allotted after such expiry.
(3) words and expressions defined in or for the purposes of Part 17 of the Companies Act 2006 shall bear the same meanings herein.
By Order of the Board
Filex Services Limited Registered Office:
Secretary 179 Great Portland Street
6 May 2010 London W1W 5LS
Note relating to Notice of Annual General Meeting
Commentary on the resolutions proposed at the Annual General Meeting is included on page 22 of the Report of the Directors. LIBERTY PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2009
67
Notes
1. A shareholder entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to exercise all or any of his rights to
attend, speak and vote at the meeting. A shareholder can appoint more than one proxy in relation to the meeting, provided that each proxy is
appointed to exercise the rights attaching to different shares held by him.
2. A proxy need not also be a shareholder of the Company but must attend the meeting in person. A form of proxy accompanies this notice of
Annual General Meeting and the notes to the form of proxy set out the details of how to appoint a proxy. To be effective, the relevant proxy
form must be completed and lodged with the Company’s registrar, Capita Registrars, whose address is Capita Registrars, Proxy Department,
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, no later than 48 hours before the meeting together with the original of any
power of attorney or other authority under which the form of proxy has been signed. Shareholders may not use any electronic address
provided either in this notice of Annual General Meeting or any related documents (including the proxy form) to communicate with the
Company for any purpose other than those expressly stated. In the case of a corporation, the form of proxy must be executed under its
common seal or under the hand of any officer or attorney duly authorised. A shareholder may only appoint a proxy using the procedures set
out in these notes and the notes to the form of proxy. If a shareholder wishes to terminate the authority of a person(s) to act as their proxy,
they must notify Capita Registrars in writing at the address provided above no later than 48 hours before the meeting. Completion and return
of a proxy form will not prevent a shareholder from attending and voting in person. If a shareholder has appointed a proxy and attends the
meeting in person, his proxy appointment will automatically be terminated and his votes in person will stand in its place.
3. 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 name being the most senior).
4. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), shareholders who hold shares in uncertificated
form must be entered on the register at 6.00 p.m. on 7 June 2010 to be entitled to attend and vote at the Annual General Meeting or if the
Annual General Meeting is adjourned, at 6.00 p.m. on the day two days before the time fixed for the adjourned meeting (as the case may be).
Such shareholders may only cast votes in respect of such shares held at such time. Changes to entries on the register after that time shall be
disregarded in determining the rights of any person to attend and vote at the Annual General Meeting or adjourned Annual General Meeting.
5. A “Vote Withheld” is not a vote at law, which means that the vote will not be counted in the proportion of votes “For” and “Against” the
relevant resolution. A shareholder who does not give any voting instructions in relation to a resolution should note that his proxy will have
authority to vote or withhold a vote on that resolution as he thinks fit. A proxy will also have authority to vote or to withhold a vote on any
other business (including amendments to resolutions) which is properly put before the Annual General Meeting, as he thinks fit.
6. Shareholders attending the Annual General Meeting in person or by proxy or, in the case of a body corporate, by duly authorised corporate
representative, are entitled to ask questions at the Annual General Meeting. If a shareholder has a general query about the Annual General
Meeting or wishes to give the Company prior notification of any question he wishes to ask at the Annual General Meeting, he should call our
shareholder helpline on 0871 664 0300 if calling within the United Kingdom or +44 20 8639 3399 if calling from outside the United Kingdom
or write to the Company Secretary at the registered office address of 30 City Road, London EC1Y 2AG. The Shareholder Helpline is available
from 8.30 a.m. and 5.30 p.m. Monday to Friday (except public holidays). Calls to the helpline from within the United Kingdom cost 10 pence
per minute (including VAT) from a BT landline. Other service providers’ costs may vary. Call to the helpline from outside the United Kingdom
will be charged at applicable international rates. Calls may be recorded and monitored for security and training purposes.
7. The following documents will be available for inspection at the Company’s registered office, 30 City Road, London EC1Y 2AG during normal
business hours on any weekday (Saturdays and public holidays excepted) from the date of this Notice until the date of the Annual General
Meeting and at the place of the Annual General Meeting for 15 minutes prior to and during the Meeting:
(i) copies of service contracts of the Executive Directors and Letters of Appointment of the Non-Executive Directors of the Company; and
(ii) The Articles of Association of the Company. Designed and produced by MAGEE
www.magee.co.uk
Printed by PUSH Vote
For Against withheld
Special Business
5. T o grant authority to the Directors to allot shares
and other equity securities in accordance with
Section 551 of the Companies Act
6. T o grant authority to the Directors to allot equity
securities for cash in limited circumstances in accordance
with Section 570 of the Companies Act
FORM OF PROXY
LIBERTY PLC
ANNUAL GENERAL MEETING
To be held at: the offices of the Company, 210-220 Regent
Street, London W1B 5AH on 9 June 2010, commencing
at 11.00 a.m.
See notes overleaf
Barcode
Investor
code
Barcode
Investor
code
Event
code
FORM OF PROXY
Liberty Plc – Annual General Meeting
I/W e being (a) registered holder(s) of ordinary shares of 25p each (“Ordinary Shares”)
in the capital of the Company, hereby appoint the duly appointed Chairman of the Meeting
or (see note 1)
as my/our proxy to attend and vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at the offices of the Company, at 210-220 Regent Street,
London W1B 5AH on 9 June 2010 commencing at 11.00 a.m. and at any adjournment thereof. In the event of a poll being directed or demanded, I/we desire my/our vote(s) to be cast
as shown below on the Resolution set out in the Notice of Annual General Meeting.
Please indicate with a cross in the appropriate box below how you wish your votes on the Resolution to be cast. If you sign this Form of Proxy and return it without any specific
direction as to how you wish your votes to be cast, the proxy may vote as he or she thinks fit or abstain from voting in respect of the Resolution and also on any other business
(including amendments to the Resolution) which may properly come before the meeting.
Please note that a ‘V ote withheld’ is not a vote under English law and will not be counted in the calculation of the proportion of votes ‘For’ or ‘Against’.
Vote
For Against withheld
Ordinary Business and Ordinary Resolution
1. T o receive the 2009 Financial Statements
and associated reports of the Company
2. T o re-elect J. Singh as a Director
3. T o re-elect R.G. Balfour-Lynn as a Director
4. T o re-appoint KPMG Audit Plc as Auditors of the
Company and to authorise the Directors
to agree their remuneration
Signature
Date
Whether or not you intend to be present at the Annual General Meeting of Liberty Plc (“the Company”), you are asked to complete and return this Form of Proxy in accordance with
the instructions hereon as soon as possible and, in any event, so that it is received not later than 48 hours before the time of the Annual General Meeting.The completion and return of
this Form of Proxy will not preclude you from attending the Annual General Meeting and voting in person if you so wish. Notes:
1. A member of the Company entitled to attend, speak and vote at the Annual General Meeting may appoint a proxy to attend, speak and vote instead of that member.A member of the Company may
appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different Unit held by the appointing member.
2. In the case of joint holders, the vote of the first name on the register who tenders a vote whether in person or by proxy will be accepted to the exclusion of the votes of the other joint holders.
3. A proxy need not be a member of the Company. If you sign and return this proxy form with no name inserted in space provided, the Chairman of the Meeting will be deemed to be your proxy. If you
wish to appoint as your proxy someone other than the Chairman of the Meeting, delete the words “the Chairman of the Meeting” and insert the name and address of your chosen proxy in the space
provided. If the proxy is being appointed in relation to part of your holding only, please enter in space provided under the proxy’s name and address the number of shares in relation to which they are
authorised to act as your proxy. If this box is left blank, they will be authorised in respect of your full voting entitlement.Where you appoint as your proxy someone other than the Chairman, you are
responsible for ensuring that they attend the meeting and are aware of your voting intentions. If you wish your proxy to make any comments on your behalf, you will need to appoint someone other
than the Chairman and give them the relevant instructions directly.
4. T o appoint more than one proxy you may copy this proxy form. Please indicate in the space provided under the proxy’s name and address the number of shares in relation to which they are authorised
to act as your proxy. Multiple proxy appointments should be returned together in the same envelope.
5. Please indicate with an “X” in the appropriate boxes how you wish your votes on the resolutions to be cast. Unless otherwise instructed, your proxy may vote or abstain from voting as he/she thinks fit.
6. Any alteration should be initialled by the person signing this proxy form.
7. T o be effective, this card and the power of attorney (if any) or a notarily certified copy thereof under which it is signed must be lodged with the Company’s registrars at Capita Registrars, Proxy
Department, 34 Beckenham Road, Beckenham, Kent BR3 4TU not later than 48 hours before the meeting. In the case of a corporation, this proxy must be executed under its common seal or under
the hand of any officer or attorney duly authorised.
8. Y ou can only appoint a proxy using the procedures set out in these notes and the notes to the notice of the Annual General Meeting. Completion and return of the relevant proxy form enclosed
herewith will not prevent a member of the Company from attending and voting in person. If you have appointed a proxy and attend the meeting in person, your proxy appointment will automatically
be terminated.
9. T o have the right to attend, speak and vote (and also for the purpose of calculating how many votes a person may cast), a person must have his/her name entered on the register of members of the
Company by no later than 6.00 p.m. on 7 June 2010 or, in the event that the meeting is adjourned, 48 hours prior to the date of the adjourned meeting. Changes to entries on the register after this
time shall be disregarded in determining the rights of any person to attend, speak or vote at the meeting.
10. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
11. Y ou may not use any electronic address provided in this proxy form to communicate with the Company for any purposes other than those expressly stated.
Business Reply
Licence Number RSBH-UXKS-LRBC
PXS
34 Beckenham Road
Beckenham
BR3 4TU  Liberty Plc
Regent Street
London W1B 5AH
T el: 020 7734 1234
www.liberty.co.uk
Annual Report and Financial Statements2009
THE RENAISSANCE
OF LIBERTY
“Liberty offers exciting,
eclectic but accessible
fashion unavailable
elsewhere in London, right
across the fashion palette.”