Agent Provocateur Limited

Agent Provocateur Limited

München

Jahresabschluss zum Geschäftsjahr vom 27.03.2011 bis zum 31.03.2012

AGENT PROVOCATEUR LIMITED, LONDON

Annual Report and Financial statements For the 53 week period ended 31 March 2012

Contents

Company Information

Directors' report

Independent auditors' report to the members of Agent Provocateur Limited

Consolidated profit and loss account

Consolidated statement of recognised gains and losses

Consolidated and company balance sheet

Notes to the financial statements

Agent Provocateur Limited for the 53 week period ended 31 March 2012

Company Information

Directors' report

The Directors present their report and audited consolidated financial statements for the 53 week period ended 31 March 2012.

Principal activities

The principal activity of the Group continues to be that of the sale of women's luxury lingerie.

Review of the business

For the Group's trading companies, the period was again a successful one with revenue growth of 18 % and EBITDA growth of 23 %. Revenue growth came from positive like-for-like trading in existing stores and also from new stores. The Directors believe the Group is in a position to continue enjoying material improvements in both turnover and profitability as the business continues its growth and global expansion.

The Group made an EBITDA (earnings before interest, tax, depreciation and amortisation and before exceptional costs) of £ 4,058,000 for the period on a turnover of £ 31,365,000. The Group made an EBITDA of £ 3,301,000 for the period ended 26 March 2011 on a turnover of £ 26,682,000.

The period saw a strong performance from the retail stores, with a like-for-like sales ahead of the previous period by 5.8 % (2011: increase of 5.0 %), with sales performing ahead of the prior period in all territories around the world.

New retail boutiques were opened in Amsterdam, Coral Gables (Miami), Madrid, Vancouver, and Rome, with additional boutiques opened in Milan, Berlin, Montreal, a second site in Amsterdam, London, Hamburg, Rotterdam and Hong Kong since the balance sheet date. A second site in Rome is under construction, and new boutiques in Munich, Sydney and Melbourne are on track to open early 2013.

Two successful franchise boutiques in Vienna and Prague were bought back from franchise partners, and new franchise boutiques opened in Moscow and Beirut in the financial year. Since the balance sheet date further boutiques have opened in Knokke (Belgium), Kiev and Kuwait.

These openings brought the total number of Agent Provocateur boutiques worldwide to 67 at the current time.

In October 2012 Agent Provocateur announced the launch of a new diffusion range in a design collaboration with Penelope and Monica Cruz. L'Agent by Agent Provocateur will be wholesaled to department stores and will be launched in August 2013.

The directors continue to deliver a strategic growth plan for the expansion of the business both in the UK and internationally, with opportunities to increase significantly the number of stores worldwide.

Whilst the global economic outlook still remains unsettled, particularly in Europe, the directors are satisfied that the business is in a very robust position to move forward.

Future developments

The company continues to look at new stores in the UK and overseas. The company continues with its development of the website to improve that channel's performance. The company is working with licensors to extend its product offer which is complimentary to its core product and utilises the strength of the company's brand.

Results and dividends

The profit for the financial period after taxation amounted to £ 1,070,000 (2011: profit after taxation £ 672,000). No dividends have been paid or proposed in the period (2011: nil).

Principal risks and uncertainties

The principal risks and uncertainties facing the company relate to the underlying performance of its investments, these are addressed in the individual financial statements of these companies.

Employment of disabled persons

Agent Provocateur Limited is an equal opportunity employer. Applications for employment by disabled persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the company continues and the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability.

Key Performance Indicators 'KPIs'

The business is managed at the Pearl (AP) Group level. The KPIs used to manage the business are described below:

The Directors use various measures to assess the performance of the business at a store level and for the overall business the most significant are changes in like-for-like sales and EBITDA. Like- for-like sales changes reflect the change in sales recorded in the same stores on a year-on-year basis. The measure which, in the opinion of the Directors, gives the best indication of the business' performance is earnings before interest, tax, depreciation and amortisation ("EBITDA") and will normally exclude the effect of exceptional or one-off items. This has been highlighted in the Pearl (AP) Group Limited financial statements and will be measured on a consistent basis in future periods.

Financial risk management

The company's operations expose it to a variety of financial risks that include the effects of credit risk, liquidity risk and interest rate risk. The company seeks to limit the adverse effects on the financial performance of the company by monitoring levels of cash holdings, debt finance and the related finance costs.

These risks, as detailed below, are managed at the Pearl (AP) Group Limited level.

Given the size of the company, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The policies set by the board of Directors are implemented by the company's finance department.

Credit risk

The majority of revenue earned by the Group is received in cash or through credit card payments which in the opinion of the Directors represent a very low credit risk. Where sales are made on franchisors or distributors, credit checks are undertaken to help the business understand the risk. Where the Directors have been unable to gain comfort over the credit risk, payment is required to be made in advance.

Liquidity risk

The company's funding is provided by its parent company, Pearl (AP) Group Limited. It has some short term facilities that are in place to ensure the company has sufficient available funds for operations and planned expansions.

Interest rate cash flow risk

The company has both interest bearing assets and interest bearing liabilities. Interest bearing assets comprise of only cash balances, all of which earn interest at floating rate. The company's short term facilities attract interest at a floating rate.

Directors

The Directors who served during the period and up to the date of approval of the financial statements were:

Statement of directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare the group and parent company financial statements for each financial period. Under that law the Directors have prepared the group and parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 the company and of the profit or loss of the group for that period. In preparing these financial statements, the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Disclosure of information to auditors

So far as the Directors are aware, there is no relevant audit information, being information required by the auditors in connection with the preparation of the auditors' report, of which the auditors are unaware. Having made enquiries of fellow Directors and the group auditors, each Director has taken all steps that he is obliged to take as a Director in order to make himself aware of any relevant audit information and to establish that the auditors are aware of that information.

Independent Auditors' Report to The Members of Agent Provocateur Limited

We have audited the group and parent company financial statements (the "financial statements") of Agent Provocateur Limited for the 53 week period ended 31 March 2012 which comprise the Consolidated Profit and Loss Account, the Consolidated Statement of Total Recognised Gains and Losses, the Consolidated and Parent Company Balance Sheets and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statement set out on pages 2 to 5, 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 and express an opinion on 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 Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report and financial statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

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:

Consolidated profit and loss account

The profit and loss account has been prepared on the basis that all operations are continuing operations.

There is no material difference between the profit on ordinary activities before taxation and the profit for the period stated above and their historical cost equivalents.

Consolidated statement of total recognised gains and losses For the 53 week period ended 31 March 2012

Balance sheets as at 31 March 2012

The notes on pages 10 to 24 form part of the financial statements.

The financial statements were approved by the Board on 19 December 2012 and signed on its behalf by:

Notes to the financial statements

1 Accounting policies

Basis of preparation

These financial statements are prepared on a going concern basis under the historical cost convention and in accordance with applicable United Kingdom accounting standards and Companies Act 2006. The accounting policies have been applied consistently in the current and preceding period and throughout the group.

Agent Provocateur Limited is a wholly owned subsidiary of Pearl (AP) Group Limited, a company incorporated in the United Kingdom, which produces a consolidated cash flow statement in accordance with Financial Reporting Standard 1 (FRS 1) revised 1996. Consequently the company has taken advantage of the exemption in FRS 1 revised 1996, from producing a cash flow statement in these financial statements.

The company is also exempt under the terms of Financial Reporting Standard 8 (FRS 8) from disclosing related party transactions with other group companies, on the grounds that 100 % of the voting rights in the company are controlled within the group and the company is included in consolidated financial statements prepared by the group.

Basis of consolidation

The consolidated financial statements incorporate the results of Pearl (AP) Group Limited and all of its subsidiary undertakings drawn up to 31 March using the acquisition method of accounting. The results of subsidiary undertakings are included from the date of acquisition. Intragroup sales and profits are eliminated fully on consolidation.

The profits of overseas subsidiary undertakings are translated at the weighted average of month end exchange rates. The closing balance sheets of overseas subsidiary undertakings and foreign currency assets and liabilities are translated at period end exchange rates. Exchange differences arising from the restatement of opening balance sheets and profits for the period of overseas undertakings to closing exchange rates are dealt with through reserves.

Goodwill

Goodwill arising on an acquisition of a subsidiary undertaking is the difference between the fair value of the consideration paid and the fair value of the identifiable assets and liabilities acquired. It is capitalised and amortised through the profit and loss account over the Directors' estimate of its useful economic life. Impairment tests on the carrying value of goodwill are undertaken:

Provision is made for any impairment.

Fair value accounting adjustments are made in respect of acquisitions. In the year of acquisition, some adjustments are made using provisional estimates, based on information available at the time the financial statements are prepared, and amendments are sometimes necessary in the following accounting period, with a corresponding adjustment to goodwill, when the information necessary to determine these estimates is available.

Professional fees arising in respect of the acquisition of a subsidiary undertaking are capitalised as part of goodwill and amortised through the profit and loss account over a period consistent with the treatment of the underlying goodwill arising on that acquisition.

Turnover

Sale of goods

Turnover represents the invoiced value of goods sold net of applicable sales tax. Revenue is recognised as follows:

Royalties

Royalty revenue is recognised when a royalty is earned by the distributor. Royalties are principally earned in connection with the distribution of Agent Provocateur perfume.

Franchise and trademark costs

Franchise costs are written off over a 4 year period straight line.

Trademark costs are written off over a 10 year period straight line.

Key money

Key money payments on properties in certain European countries are recorded as Intangible Fixed Assets, as these amounts represent the right to occupy the underlying properties and the ongoing benefits associated with this right. These amounts are likely to be recovered from a future successor tenant if we decide to vacate the properties. Key money is amortised on a straight line basis over 50 years. Where the directors believe that the recoverable amount is equal to the key money paid, no amortization is charged.

Tangible fixed assets and depreciation

Fixed assets are recorded at cost less accumulated depreciation for permanent diminution in value. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Useful lives are as follows:

Leasing and hire purchase commitments

Assets held under finance leases and hire purchase contracts are treated as if they had been purchased outright at the present value of the rentals payable, less finance charges, over the primary period of the agreements. The corresponding obligations under these agreements are included in creditors. The finance element of the rentals payable is charged to the profit and loss account so as to produce a constant rate of charge on the outstanding balance in each period.

Rental payments under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease.

Investments

Fixed asset investments are stated at cost less any provision for permanent diminution in value.

Stocks

Stock is stated at the lower of cost and net realisable value. Cost includes all direct costs incurred in bringing the stocks to their present location and condition.

Net realisable value is based on estimated selling price less further costs expected to be incurred to completion and disposal.

Deferred taxation

Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law.

Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets where there is no commitment to sell the assets.

Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

Foreign currency translation

Transactions denominated in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. All differences are taken to profit and loss account.

2 Turnover

Geographical market

Turnover is derived from the Group's principal activity. Turnover is split geographically by destination as follows:

Turnover by origin is not materially different from the split above.

3 Operating profit / (loss)

Audit fees for the Company included in the above amounted to £ 45,000 (2011: £ 45,000).

4 Directors' emoluments

Retirement benefits are accruing to £ nil (2011 - £ nil) Directors under defined contribution schemes. Emoluments disclosed above include the following amounts paid to the highest paid Director:

5 Exceptional items

Contract termination costs relate to the one off costs associated with the cessation of service contracts in the period with key managers.

6 Employees

Number of employees

The average monthly number of employees (including Directors) during the period was:

Employment costs (including Directors' emoluments)

7 Interest receivable and similar income

8 Interest payable and similar charges

9 Tax on profit on ordinary activities

The tax assessed for the year is higher (2011: higher) than the standard rate of corporation tax in the UK (26 %).

Factors affecting the tax charge for the period

10 Profit for the period

As permitted by section 408(4) of the Companies Act 2006 the company has elected not to present its own profit and loss account for the period. The company's profit for the financial period of £ 1,681,000 (2011: Profit £ 1,090,000) is shown in note 20.

11 Intangible assets

Group

Company

12 Tangible assets

Group

Finance leases and hire purchase contracts

The net book value of tangible fixed assets includes an amount of £ 14,000 (2011: £ 12,000) in respect of assets held under finance leases or hire purchase contracts.

Company

Finance leases and hire purchase contracts

The net book value of tangible fixed assets includes an amount of £ 14,000 (2011: £ 12,000) in respect of assets held under finance leases or hire purchase contracts.

13 Fixed asset investments

Company

The directors believe that the carrying value of the investments is supported by their underlying net assets

The company holds the share capital of the following companies:

The aggregate amount of capital and reserves and the results of these undertakings for the last relevant financial period were as follows:

14 Stocks

There is no material difference between the replacement cost and carrying value of stocks held at period end.

15 Debtors

Amounts owed by group and subsidiary undertakings are interest free and repayable on demand.

16 Creditors: Amounts falling due within one year

17 Creditors: Amounts falling due after more than one year

18 Deferred Taxation

Deferred taxation is recognised in the balance sheet as follows:

Deferred tax is provided at 24 % (2011: 27 %) analysed over the following timing differences:

19 Called up Share capital

20 Reconciliation of movements in shareholders' funds

Group

Company

21 Commitments under operating leases

The annual commitments under non-cancellable operating leases for land and buildings were as follows:

22 Related party transactions

During the period purchases totalling £ nil (2011: £ nil) were made from Agent Provocateur Parfum Limited. At the period end Agent Provocateur Limited owed £ 878,078 (2011:£ 878,078) to Agent Provocateur Parfum Limited. At the period end Agent Provocateur Parfum Limited owed Agent Provocateur Limited £ nil (2011 :£ nil).

During the 53 week period ended 31 March 2012, £ nil (2011: £ nil) royalties were received from Agent Provocateur Parfum Limited.

23 Controlling party

At 31 March 2012, the Directors consider that 3i Group pic, through various managed funds, is the company's ultimate controlling party.

Copies of the consolidated financial statements of 3i Group pic are available from 16 Palace Street, London, SW1E5JD.

The immediate parent is Pearl Acquisitions Limited; the smallest and largest parent company into which the company's results are consolidated is Pearl (AP) Group Limited. Copies of Pearl (AP) Group Limited consolidated financial statements can be obtained from Companies House, Crown House, Cardiff, CF4 3UZ.