TIDMBWNG
RNS Number : 4286O
Brown (N.) Group PLC
08 October 2021
8 October 2021
HALF YEAR RESULTS FOR THE 26 WEEKSED 28 AUGUST 2021
Strong growth in strategic brands
GBPm 26 weeks to 26 weeks to % Change
28 August 2021 29 August 2020
(Restated(1)
)
(H1 22) (H1 21)
Group revenue 346.8 347.2 (0.1%)
----------------------- ----------------- --------
Product revenue 222.1 215.0 3.3%
----------------------- ----------------- --------
Financial services revenue 124.7 132.2 (5.7%)
----------------------- ----------------- --------
Adjusted EBITDA(2) 53.0 48.0 10.4%
----------------------- ----------------- --------
Statutory operating
profit 31.0 26.5 17.0 %
----------------------- ----------------- --------
Adjusted profit before
tax(3) 24.2 22.6 7.1%
----------------------- ----------------- --------
Statutory profit before
tax 28.2 14.1 100.0%
----------------------- ----------------- --------
Unsecured net cash /
(debt)(4) 41.9 (32.2) n/a
----------------------- ----------------- --------
Adjusted net debt(5) (268.3) (411.1) 34.7%
----------------------- ----------------- --------
(1) H1 21 restated for the value added tax element on customer
debt written off, previously reported within Revenue rather than
being offset against Cost of Sales (refer to Prior Year Adjustment,
note 32, in the 2021 Annual Report and Accounts).
(2) Adjusted EBITDA is defined as operating profit, excluding
exceptional items, with depreciation and amortisation added back.
The Directors believe that adjusted EBITDA represents the most
appropriate measure of the Group's underlying trading
performance.
(3) Defined as excluding exceptional items and fair value
movement on financial instruments. The Directors believe that
adjusted profit before tax represents the most appropriate measure
of the Group's underlying profit before tax as it removes items
that do not form part of the recurring operational activities of
the Group.
(4) Cash balances, net of cash utilised to reduce amounts drawn
down on securitised debt, less a mount drawn on the Group's
unsecured debt facilities. Excludes debt securitised against
receivables (customer loan book) of GBP310.2m and lease liabilities
of GBP3.9m. The Directors believe that this is the most appropriate
measure of the Group's unsecured net cash / borrowings and is used
to calculate the Group's leverage ratio, a key debt covenant
measure.
(5) Total liabilities from financing activities less cash,
excluding lease liabilities. The Directors believe this is the most
appropriate measure of the Group's overall net debt in relation to
both its secured and unsecured borrowings.
H1 Results Highlights
-- Strategic transformation delivering sustained momentum in
product revenue
o Five strategic brands grew product revenue 14.9% as benefits
of transformation accelerate
o Overall product revenue grew 3 .3%, reflecting ongoing managed
decline of legacy brands
o Increase in active customers of 1.1% Q2 on Q1, demonstrating
impact of improving product offer and marketing outreach
-- Accelerating strategic investments in brand and product
following our recent fundraise
o Step-up in marketing activity to support new campaigns, with
several high-profile partnerships; Amanda Holden and Davina McCall
signed as brand ambassadors for JD Williams; Frankie Bridge and
Nicki Bamford-Bowes for Home Essentials
o Ongoing improvements in digital experience, including an
improved customer checkout
o New in-house studio significantly enhances ability to create
customised content
-- Financial Services stabilisation
o Financial Services revenue declined 5.7%, as a result of
smaller debtor book at the start of the financial year
o Bad debt provision rates remain similar year-on-year
o Year-on-year movement in Financial Services margin rate
reflects the initial increase in provision rate last year and a
lower than normal level of write-offs this year
-- Delivered profit growth
o Adjusted EBITDA growth of 10.4%, to GBP53.0m with the
improvement in Financial Services margin more than offsetting
normalisation of costs
o Operating costs as percentage of Group revenue of 36.0%, lower
than equivalent pre-pandemic level as efficiencies and cost
flexibility retained
o Adjusted profit before tax increased by GBP1.6m or 7.1% to
GBP24.2m
-- Robust balance sheet that positions us well for the
future
o Net cash of GBP41.9m, with further c.GBP57m cash utilised in
the period to reduce draw-down on securitisation funding facility
to deliver greater balance sheet efficiency and interest
savings
o Adjusted Net debt of GBP268.3m, compared to GBP301.1m at the
end of February 2021; net customer loan book of GBP509.6m
significantly exceeds adjusted net debt
-- Continued progress with SUSTAIN our leading Group-wide
sustainability strategy
o Committed to increasing our proportion of sustainably sourced
own brand product; on track to hit the exit run rate target of 30%
by the end of FY22
o Membership of Better Cotton Initiative (BCI): we will source
50% of own brand cotton through BCI certified routes by the end of
this year
o Greenhouse Gas Emissions per item shipped down 42% compared to
base line; positions us well for target of a 35% reduction by the
end of this year
Steve Johnson, Chief Executive, said:
"Over the last six months the consumer environment has been
volatile. Nevertheless, momentum has continued throughout the
business, with customers responding well to our improved product
ranges; particularly across our five strategic brands. This is
testament to the restructuring work we have done across the Group
and the investments we are beginning to make to support our
refreshed strategy. None of this would be possible without the
talent, drive and commitment of our team, who have responded
incredibly to the uncertainties we face.
Our mission is to be the most inclusive retailer in the UK,
across both fashion and home. We're excited to see new brand
partnerships resonating with both existing and new customers,
bringing this mission to life, including Amanda Holden and Davina
McCall on JD Williams, and Frankie Bridge and Nicki Bamford-Bowes
on Home Essentials.
We continue to deliver on our plan and are feeling well prepared
for peak trading. EBITDA remains in-line with our expectations, and
we are looking forward to exciting our customers with our new
ranges as we head towards the Christmas peak. However, we do so
with the backdrop of continued uncertainty around consumer
confidence."
Webcast for analysts and investors:
A webcast presentation of these results will take place at 9am
on 8 October 2021 followed by a Q&A conference call for
analysts and investors. Please contact Nbrown@mhpc.com for
details.
For further information:
N Brown Group
Sarah Nichol, Group Financial Controller
David Fletcher, Head of Investor Relations +44 7557 014549
MHP Communications
Simon Hockridge / James Midmer +44(0) 20 3128 8789
NBrown@mhpc.com
Shore Capital - Nomad and Broker
Dru Danford / Stephane Auton / Daniel Bush
/ John More +44 (0) 20 7408 4090
About N Brown Group:
N Brown is a top 10 UK clothing & footwear digital retailer.
Our retail brands are JD Williams, Simply Be, Jacamo, Ambrose
Wilson and Home Essentials and our financial services proposition
allows customers to spread the cost of shopping with us. We are
headquartered in Manchester where we design, source and create our
product offer and we employ over 1,800 people across the UK.
PERFORMANCE REVIEW
Since June 2020 we have been focused on a refreshed strategy to
return N Brown to sustainable growth by developing stronger brands
and product propositions for our customers, driving profitability
through the retail business and continuing to offer attractive and
flexible credit solutions. Our strategy is predicated on five
growth pillars and a short update on the progress made so far this
year in each pillar is set out below. Our five growth pillars are
underpinned by three key enablers; our people and culture, data and
a sustainable cost base appropriate for a digital retailer.
Despite the challenging and volatile consumer environment, we
have been pleased to see early momentum from our strategy in the
KPIs which we use to assess the business and which are explained in
greater detail below. The total number of active customers fell
year-over-year by 5.7%, driven by the decline of our non-Strategic
brands. However, the number of orders per customer increased by
12.5%, as each customer shopped with us more frequently. For the
quarter ending August 2021 the number of active customers grew,
compared with the May 2021 quarter. The Average Order Value (AOV)
also increased by 1.3% year-on-year.
KPIs
Last year we disclosed a range of digital customer metrics to
provide insight into progress on the implementation of our business
performance. Several KPIs still reflect the impact of Covid-19 on
the business. We are focussed on driving improvements across a
range of measures.
H1 22 H1 21 Change FY 21
------------------------ -------- -------- ---------- --------
Total website sessions 119m 107m 11.2% 232m
Conversion 3.8% 3.8% - 3.8%
Total Orders(1) 5.0m 4.7m 6.4% 10.0m
AOV GBP69.4 GBP68.5 1.3% GBP69.0
Items per order 2.9 2.8 3.6% 2.8
AIV GBP24.1 GBP24.3 (0.8)% GBP25.0
Total active customers 2.83m 3.00m (5.7)% 2.82m
Orders per customer 1.8 1.6 12.5% 3.5
FS arrears 7.3% 8.0% (70)bps 7.9%
NPS 61 64 (4.7)% 63
------------------------ -------- -------- ---------- --------
(1) (Total orders includes online and offline orders)
Total website sessions grew 11.2% as we stepped up marketing
investment in line with our strategy and consumers responded
positively to the refreshed product offering and our marketing
messages. Conversion rates were broadly steady, while orders grew
by 6.4% versus the prior period. The increase in orders reflects
robust demand for clothing and footwear merchandise from our
Strategic brands.
Average item value declined, reflecting the product mix moving
back into clothing, which typically have lower average prices,
which was also behind the drive into a higher number of items per
order, resulting in average order value (AOV) rising. Due to the
managed decline in the non-strategic brands, the number of total
active customers declined by 5.7%, while orders per customer rose
by 12.5% as frequency of purchase increased sharply, indicating
that consumers are more engaged with our brands and products.
Financial Services arrears were 7.3% as the quality of the loan
book improved and customers continued to pay down balances in the
period. Net promotor score (NPS) declined modestly.
1. Distinct brands to attract broader ranges of customers
We continue to focus on our five core brands; Simply Be, Jacamo,
JD Williams, Ambrose Wilson and Home Essentials. In pursuit of our
strategy of building clearer brand propositions, we have focused on
developing a distinctive identity for each, and have begun to
amplify our investment in different types of marketing based on
relevance to each brand. In the last six months we made good
progress on our strategy as shown in the increase in the number of
visitors to our websites, growth in social media followers, and
14.9% product revenue growth.
We have increased our use of social media during the last six
months with positive results; revenue generated via social media
was up 15% across the Group, with a total of 2.1m followers across
Facebook, Instagram and Twitter, of whom 13% were added in the last
12 months. We have also built a new in-house LED photographic
studio, which enables us to create bespoke content suited to each
brand's distinctive style, as well as shooting content for
different media such as social and video.
JD Williams' partnership with Amanda Holden and Davina McCall is
indicative of how we see the future of the brand; both women are
aspirational for JD Williams' target customers and highly
representative of the brand's values of offering inspiration,
championing individuality and recognising grown women. The response
to our campaign has been positive, with increased JD Williams'
social media followers and engagement.
Simply Be is focussed on a younger customer group and we have
particularly invested in social media, with Instagram followers
growing strongly over the past six months. We have worked with a
range of influencers to build our social reach. Jacamo's "Beauty of
Big" campaign ran throughout the summer across TV, social media,
online video and out-of-home.
With a number of campaigns due to run through the balance of the
year, we will continue to invest in marketing, with the aim of
building brand reach in our target customer segments and driving
customer acquisition.
As part of our focus on brand building activities and the most
effective deployment of our marketing expenditure, we have
appointed 'the7stars', the largest independent media agency in the
UK, with a track record of innovation, experience in retail and
finance and a suite of market leading data and tools. We expect the
appointment to further our ability to deliver integrated and
effective marketing campaigns.
2. Improved product to drive customer frequency
We have continued to build on the strong foundations set last
year to strengthen our product offer to drive customer frequency.
Customer response has been very positive and orders per customer
rose 12.3% year-over-year.
We continue to focus on delivering our redefined
good/better/best mix and pricing architecture. We have increased
investment in own brand, which increased 15% compared to last year,
replacing the "good" elements of the third-party range with our
own. In parallel, we rebalanced our use of third-party brands to
focus on aspirational brands that extend the "best" part of our
range and are aligned with the overall brand message. This year we
have added a number of third-party brands including Nobody's Child
and Finery on Simply Be and Phase Eight, Studio 8 and Damsel in a
Dress on JD Williams, with several more launching through the
balance of the year including Mango, Wrangler, Y.A.S., Khost and
Selected Femme.
We have also been consolidating the number of suppliers we work
with, focussing on responsible sourcing and ensuring flexibility of
supply, which has enabled us to deal well with global freight
disruptions.
3. New Home offering for customers to shop more across categories
Home Essentials is our newest brand, launched in April 2020 at
the start of the pandemic, and has been highly successful, with
revenue rising more than threefold year-over-year, albeit from a
low base. Our customers come to Home Essentials to find furniture
alongside soft furnishings, lighting, small appliances and storage
solutions. The brand already makes up c.5% of total product
revenue, and our emphasis this year is on developing the
proposition, with a focus on in-house design which ensures the
complete offer is individual and bespoke to this customer
cohort.
Home Essentials has continued to see strong growth in customer
numbers during the last six-month period. Social media has proven
to be a strong channel, with growth in the number of followers
supported by an influencer campaign across Facebook and
Instagram.
We have recently partnered with Frankie Bridge and Nicki
Bamford-Bowes to showcase how our products can help customers build
their "dream room". A campaign to build awareness of the brand
commenced in September 2021 and will be supported by above-the-line
marketing investment in the second half of our financial year.
4. Enhanced digital experience to increase customer conversion
As part of the transformation of N Brown we continue to invest
in our digital capabilities. Our current priority is the
development of new front-end websites, which will replace the
current websites, built over many years on a legacy technology
stack.
The new, cleaner websites will improve customer experience
resulting in better conversion rates and search optimisation
benefits, and will feature a new sales journey, improved search,
navigation, product listing, details pages, bag and checkout
functions. The new websites are an important step on N Brown's
technology roadmap as we move away from the legacy web technology
stack, improve stability and accelerate the pace of future
change.
5. Flexible credit to help customers shop
Providing credit to make shopping affordable lies at the heart
of N Brown's business model and remains core to our strategy.
Importantly, we seek to provide credit to our customers in a
supportive and responsible way, and continue to evolve our
Financial Services business.
Overall, performance in Financial Services continues to be
robust, with lower levels of write-offs and a normalisation in
customer repayment rates. Customer behaviour remains stable and we
have not seen elevated signs of distress. At the end of the period,
no customers were on Covid-19 payment deferrals; all customers are
either up to date or being supported through normal forbearance
processes.
We remain focussed on our medium-term strategic priority of
building a new, more flexible, Financial Services platform and
launching innovative credit products to broaden the appeal of our
proposition.
Key enablers
Our people are our key resource, and their expertise is central
to our mission of being the most inclusive retailer on the market.
We have remained fully operational throughout the pandemic,
strictly following Government guidelines to ensure that our sites
are Covid-secure. With office-based colleagues primarily working
from home during the lockdown periods, we see the benefits of
moving to a blended model in the future. We have committed to a
hybrid working structure which sees colleagues, depending on the
role, working part from the office and part from home, to promote a
combination of productivity, collaboration and colleague
well-being.
As a digital retailer, data is fundamental to our business. We
have invested heavily in our data science and analytics functions
over the past two years with the objective of upskilling and
increasing our internal resources, and we are focused on building
internal data capabilities to drive the performance of the
business.
A particular area of focus in the first half of the current
financial year has been on optimising our strategy regarding
discounts and promotions. Following a set of discovery projects to
determine the optimal pricing strategies for our brands, we have
built models which determine how to maximise revenue, margin or
other strategic KPIs through promotional pricing.
The third enabler of our strategy is the development of a
sustainable and appropriate cost base, to help build retail
profitability. Last year, during the onset of the pandemic, we took
rapid action to significantly reduce costs; marketing expenditure
in particular had previously been identified as an area for
efficiency improvements. This year, we have judiciously increased
our marketing costs to support our strategic brands and reach a
broader set of customers. Marketing expenditure rose GBP7.6m
compared to last year but remains 55% below the equivalent
pre-pandemic period. The increase in marketing investment, along
with a normalisation in other expenditure, resulted in adjusted
operating costs as a percentage of revenue increasing by six
percentage points to 36%, substantially improved compared to 41% in
the equivalent pre-pandemic period.
Environment, Social and Governance
We proudly launched our sustainability plan SUSTAIN in FY21,
engaging all colleagues with our commitment to Our People and Our
Planet.
A key pillar of SUSTAIN is our commitment to responsibly sourced
own-brand product, which now sits at 20% of our Clothing and Home
Textile ranges (from 0% in 2019). We are on track to hit our exit
run rate target of 30% responsibly sourced own-brand product by the
end of FY22, growing to 50% in FY23 and 100% by FY30.
We entered into an agreement with the Better Cotton Initiative
(BCI) in July 2021. We are on track to deliver 50% of the cotton we
source through BCI certified routes by the end of this year, rising
to 100% by the end of FY24.
Our Greenhouse Gas Emissions per item shipped [1] are 42% lower
compared to the base line and we are on track to achieve our target
of a 35% reduction by the end of this year.
FY22 Guidance
As a result of our improved product and branding, we have taken
the decision to focus on profitable growth, rather than
promotion-led sales. As a result, product revenue is now expected
to grow +1% to +4%. We expect the Financial Services rate of
revenue decline to improve in the second half of the financial year
and to be c.(5)% for FY22. Overall, we now expect Group revenue to
be broadly flat. As a result of our focus on profitable growth, we
re-iterate our previously communicated expectation for adjusted
EBITDA to be in the range of GBP93m to GBP100m.
We now expect capex to be c.GBP25m in FY22, lower than
previously guided but a step up on last year due to strategic
investment, net of certain project spend now being expensed. Net
interest costs are now expected to be slightly lower at c.GBP15m.
Depreciation and amortisation is expected to be c.GBP40m. At the
end of FY22 we expect the Group to have a strong unsecured net cash
position and at that point the Board will consider the resumption
of dividend payments. FY22 year-end net debt is now anticipated to
be slightly lower than previously guided, in the range of GBP270m
to GBP280m.
Summary
In the past six months we have made good progress on the
execution of our strategy and see momentum across the Group.
Customers have responded well to our improved product ranges and
clearer brand propositions, which is reflected in the growth in our
Strategic brands. After a managed decline in customer numbers
year-over-year, due to non-strategic "other" brands, we are seeing
quarter-on-quarter increases in the number of active customers,
which positions us well for the future. Financial Services revenue
declined, following last year's fall in retail sales. Stabilisation
in Financial Services customer behaviour has led to a lower than
normal level of write-offs this year. The Group has focused on
profitability and cost control, driving growth in EBITDA and good
cash generation.
We remain committed to our medium-term targets of 7% product
revenue growth per annum and a 14% adjusted EBITDA margin.
Achieving these will deliver sustainable returns for
shareholders.
FINANCIAL REVIEW
In the first half of the current financial year the environment
in which N Brown operates has continued to be unpredictable and
volatile. Lockdown restrictions across the U.K. were gradually
lifted. However, delays in the timing of rules easing, foreign
travel uncertainty, self-isolation advice (the so-called
"pingdemic") and rapid growth in Covid-19 cases over the summer
months all led to an uncertain environment for consumers.
Despite the challenges, N Brown moved forward on all key
profitability measures and delivered a robust financial
performance, with year-on-year Adjusted EBITDA growth and strong
cash generation. Product revenue grew, led by our Strategic brands
and driven by a resurgence in demand for clothing and footwear as
pandemic restrictions were eased. The clothing and footwear market
saw the re-opening of physical stores in the period and was highly
competitive and promotional. Freight rates rose and the market saw
supply chain challenges. We increased our investment in marketing
to build our Strategic brands and showcase our improved product. We
invested further in our technology to enhance the customer journey.
Despite increased spending versus the prior period, we focussed on
maintaining an efficient and sustainable cost base. Adjusted EPS
has declined year-on-year as a result of the dilution impact
following the equity raise.
Financial Services revenue fell, while profitability increased
reflecting lower than normal levels of write offs in the period
whilst the bad debt provision rate for future expected credit
losses has been maintained at similar levels to last year.
Inventory levels rose as we invested in our improved product
offering and ensured availability of supply for our customers. As a
result of good cash generation, adjusted net debt fell to GBP268.3m
compared to GBP301.1m at the end of FY21.
Revenue
GBPm H1 22 H1 21 Change
(Restated)(1)
--------------------------------------- ------ --------------- ----------
Revenue
--------------------------------------- ------ --------------- ----------
Strategic brands(2) 180.5 157.1 14.9%
Other brands(3) 41.6 57.9 (28.2%)
Total product revenue 222.1 215.0 3.3%
--------------------------------------- ------ --------------- ----------
Financial services revenue 124.7 132.2 (5.7%)
--------------------------------------- ------ --------------- ----------
Total Group revenue 346.8 347.2 (0.1%)
--------------------------------------- ------ --------------- ----------
(1) H1 21 restated for the value added tax element on customer
debt written off, previously reported within Revenue rather than
being offset against Cost of Sales (refer to Prior Year Adjustment,
note 32, in the 2021 Annual Report and Accounts).
(2) JD Williams, Simply Be, Ambrose Wilson, Jacamo and Home
Essentials.
(3) Other brands are Fashion World, Marisota, Oxendales and
Premier Man. High & Mighty and House of Bath were folded into
Strategic brands in FY21. Figleaves was closed in March 2021 and is
now sold on Simply Be.
Total Group revenue was broadly flat as a 3.3% increase in Total
product revenue was offset by the decline of 5.7% in Financial
Services revenue. Product revenue growth was driven by Strategic
brands, up 14.9%, offset by the reduction in revenue from Other
brands. Revenue from Other brands is a declining proportion of
total product revenue, accounting for 18.7% in H1 22, down from
26.9% in the prior period. The managed decline in non-strategic
Other brands is primarily due to the closure of the Figleaves
website in March 2021 and the discontinuation of the High &
Mighty and House of Bath brands in September 2020. Due to the
timing of the closure of the Figleaves website, we expect to see
this decline continue in H2 FY22. However, from FY23 Figleaves will
no longer be in our comparative period results for Other
brands.
Returns increased by 3.8 percentage points against a comparative
period that was characterised by exceptional demand for
lower-returning Home and Gift products and a customer pivot towards
certain lower-returning apparel categories. This year, as customer
demand for higher-returning apparel increased, we saw a
corresponding increase in returns, albeit to rates that are 5.9
percentage points below pre-pandemic levels, inclusive of both mix
and underlying like for like improvement.
Financial Services revenue decreased 5.7% to GBP124.7m, due to
the smaller debtor book driven by lower retail sales last year
through the pandemic.
Adjusted Gross profit(1)
GBPm H1 22 H1 21(3) Change
Product gross profit 96.7 99.8 (3.1%)
Product gross margin % 43.6% 46.4% (2.8 ppts)
Financial services gross profit 81.1 53.9 50.5%
Financial services gross margin
% 65.0% 40.8% 24.2ppts
--------------------------------- ------ --------- -----------
Adjusted Group gross profit(1) 177.8 153.7 15.7%
--------------------------------- ------ --------- -----------
Adjusted Group gross profit
margin(2) 51.3% 44.3% 7.0ppts
--------------------------------- ------ --------- -----------
(1) Adjusted gross profit is Gross profit excluding exceptional
items. The Directors believe adjusted Gross profit represents the
most appropriate measure of the Group's underlying trading
performance.
(2) Adjusted gross profit margin is calculated as adjusted gross
profit as a percentage of Group Revenue. The Directors believe
adjusted Gross profit margin represents the most appropriate
measure of the Group's underlying trading performance.
(3) H1 21 restated for the value added tax element on customer
debt written off, previously reported within Revenue rather than
being offset against Cost of Sales (refer to Prior Year Adjustment,
note 32, in the 2021 Annual Report and Accounts).
The Group's overall adjusted gross margin was 51.3%, compared to
44.3% in H1 21. The increase in Financial Services gross margin is
due to the reduction of the Covid-19 expected credit loss overlay,
first introduced in H1 21, from GBP17.0m to GBP5.2m, which more
than offset the decline in Product gross margin.
Product gross margin reduced 2.8 percentage points to 43.6% as a
result of inflationary pressures in freight rates, a high level of
discounting due to the competitive and promotional environment and
a decline in VAT bad debt relief due to lower customer write-offs.
The pressures on Product gross margin were partially offset by
growth in higher margin clothing and footwear. Financial Services
gross margin increased 24.2 percentage points to 65.0% reflecting
the initial increase in provision rate last year and a lower than
normal level of write-offs this year. At the end of H1 22 the
future impact of Covid-19 has been reassessed at GBP5.2m, from
GBP17.0m in the prior period, as customers who were on Covid-19
payment deferrals are now up-to-date or being supported through our
normal arrears and forbearance processes.
Adjusted operating costs(1)
GBPm H1 22 H1 21 Change
Warehouse & fulfilment costs 31.9 30.3 (5.3%)
Marketing & production costs 33.5 25.9 (29.3%)
Admin & payroll costs 59.4 49.5 (20.0%)
------------------------------- ------ ------ ----------
Adjusted operating costs(1) 124.8 105.7 (18.1%)
------------------------------- ------ ------ ----------
Adjusted operating costs as a
% of Group Revenue(2) 36.0% 30.4% (5.6)ppts
------------------------------- ------ ------ ----------
(1) Adjusted operating costs are defined as operating costs less
depreciation, amortisation and exceptional items. The Directors
believe this is the most appropriate measure of the Group's
operating cost base as it removes items that do not form part of
the recurring activities of the Group.
(2) Adjusted o perating costs less depreciation, amortisation
and exceptional items as a percentage of Group revenue. The
Directors believe this is the most appropriate measure to
demonstrate the efficiency of the Group's operating cost base.
Adjusted operating costs as a percentage of Group revenue
increased by 5.6 percentage points to 36.0% as our cost base
normalised. During the prior period, at the onset of the pandemic,
we took rapid action to significantly reduce costs. Marketing
expenditure had previously been identified as an area for
efficiency improvements and was heavily curtailed. In the current
period we have increased our marketing investment to support our
strategic brands and reach a broader set of customers. In H1 22
marketing and production expenditure rose 29.3% or GBP7.6m compared
to last year but remains 57% below the equivalent pre-pandemic
period. Administration and payroll expenses rose by 20.0% or
GBP9.9m due to higher payroll costs compared to the initial
pandemic period, when the company took exceptional measures to
reduce levels of spending. Warehouse and fulfilment costs rose 5.3%
or GBP1.6m due to higher despatch volumes.
Adjusted EBITDA
Adjusted EBITDA increased by 10.4% to GBP53.0m, with the
adjusted EBITDA margin increasing by 150bps to 15.3% (H1 21:13.8%)
as a result of the temporary improvement in Financial Services
profitability.
Depreciation and Amortisation
Depreciation and Amortisation was GBP22.0m, compared to GBP17.0m
in the prior period primarily due to the acceleration of
amortisation of the intangible assets following the review of
estimated useful economic lives of the Group's legacy assets that
was performed at the end of FY21.
Operating profit
Both adjusted and statutory operating profit were GBP31.0m as
exceptional items were net GBPnil in the period. This compares to
adjusted operating profit in H1 21 of GBP31.0m and statutory
operating profit of GBP26.5m. Adjusted operating profit margin has
remained flat year on year, whilst statutory operating profit
margin has increased by 1.3bps to 8.9%.
Net finance costs
Net finance costs were GBP6.8m, down 19.0% compared to last year
primarily driven by the lower drawdown on the securitisation
facility and no drawdown on the Group's unsecured debt
facilities.
Exceptional items
Exceptional items were net GBPnil in the period. Further details
can be found in note 5.
GBPm H1 22 H1 21
------------------------------------------- ------ ------
Legal costs 1.0 -
Customer redress (0.2) (0.7)
Tax matters (0.8) 2.0
Strategic change - 2.9
Impairment of tangible, intangible assets
and brands - 1.7
Gain from early settlement of derivative
contracts - (1.4)
------------------------------------------- ------ ------
Items charged to profit before tax - 4.5
------------------------------------------- ------ ------
Allianz claim and counterclaim
The Group is currently involved in a claim and counterclaim with
Allianz Insurance plc regarding the sale of historical insurance
products. The claim and counterclaim are extremely complex and
proceedings remain at an early stage. Each party has undertaken a
long disclosure exercise with further elements still to be
completed. The Group has concluded that these issues mean it is not
possible to reliably estimate the amount of any potential financial
outflow and has, therefore, not made provision for this claim at
this time and instead a contingent liability has been disclosed.
Further details can be found in note 16.
Adjusted profit before tax and statutory profit before tax
Adjusted profit before tax was GBP24.2m, an increase of 7.1%
year-on-year as a result of increased gross profit and a 19.0%
reduction in net finance costs. Statutory profit before tax was
GBP28.2m (H1 21: GBP14.1m) which reflects a GBP4.5m improvement in
exceptional costs and GBP8.0m fair value movement on the Group's
financial instruments.
Taxation
The taxation charge for the period is based on the underlying
estimated effective tax rate for the full year of 18.1%. Total
interim effective tax rate for the six months period, after
factoring in discrete items, was 16.7%. Further details are
contained in Note 7.
Earnings per share
Adjusted earnings per share was 4.41p (HY 21: 6.72p). The
decline in EPS is due to the increase in the weighted average
number of shares, issued as part of the equity raise in December
2020. Statutory earnings per share was 5.10p (H1 21: 4.33p).
Dividend
As announced on 23 March 2020 due to the impact of Covid-19 the
Board has suspended dividend payments for the foreseeable future.
Therefore, the Board has not declared an interim dividend (H1 21:
GBPnil). The Directors recognise that dividends are an important
part of the Company's returns to shareholders and the Board will
consider the resumption of dividend payments at the end of
FY22.
Financial Services
In the half year, the quality of the Financial Services debtor
book remained robust. The impact of Covid-19 has not been as severe
as previously anticipated, arrears rates remained at low levels.
The debtor book has contracted as a result of lower retail sales in
FY21 and strong collections.
During H1 22, write-offs were GBP16.8m lower than the prior
period largely driven by Government support measures deferring
customer defaults, the lower overall size of the debtor book and
also tighter credit controls introduced in FY21.
Bad debt provision rates remain similar year-on-year as Covid-19
overlays have been replaced by underlying model refinements
including predictive analytics for customer behaviour in moving
between expected credit loss stages. The prior year one-off
Covid-19 overlay of GBP17.0m has been partially captured within the
normal account provisions leaving a GBP5.2m residual Covid-19
overlay for the risk associated with the cessation of the
Government support schemes. Model refinements include the increase
in Stage 2 balances driven by a shift in balances from Stage 1 to
Stage 2 of GBP77.0m due to updated SICR methodology to capture more
accounts with significant increase in credit risk prior to them
rolling into arrears.
GBPm H1 22 H1 21 Change
---------------------------------- ------- ------- --------
Gross customer loan balances 597.7 632.1 (5.4%)
IFRS 9 bad debt provision (88.1) (91.7) (3.9%)
Normal account provisions (60.3) (52.3) (15.3%)
Payment arrangement provisions (22.6) (22.4) (0.9%)
Covid-19 impacts (5.2) (17.0) 69.4%
Loan book provision ratio 14.7% 14.5% 0.2ppts
Net customer loan balances 509.6 540.4 (5.7%)
---------------------------------- ------- ------- --------
In the half year, the net impairment charge was GBP43.0m,
GBP34.3m lower than last year due to lower write-offs and Covid-19
impacts being less severe than expected.
Inventory
Net inventory levels at the half year end were up 11.8%, to
GBP90.0m (H1 FY21: GBP80.5m ). Inventory levels rose as we invested
in our improved product offering and ensured availability of supply
for our customers.
Cash Flow
Total net cash generated in the period was GBP18.3m compared to
GBP45.3m in the same period last year. The improvement in Adjusted
EBITDA is offset by the higher investment in inventory and other
working capital movements in comparison to the cash preservation
actions taken by management at the beginning of the pandemic in the
prior period. Non operating tax and treasury returned to normal
outflow levels after the deferral of tax liabilities during the
pandemic. Lower cash generation is a result of higher investment in
Inventory, partially offset by a reduction in the level of
exceptional costs and interest costs.
GBPm H1 22 H1 21
------------------------------------------------ ------- ---------
Adjusted EBITDA 53.0 48.0
Inventory working capital (12.4) 14.3
Other working capital 4.1 6.4
------------------------------------------------ ------- ---------
Cashflow adjusted for working capital 44.7 68.7
------------------------------------------------ ------- ---------
Exceptional items (0.8) (8.4)
Capital investment (10.5) (11.3)
Non-operating tax & treasury (4.8) 1.6
Interest (6.7) (9.3)
Non-operational cash outflows (22.8) (27.4)
------------------------------------------------ ------- ---------
Net repayment in customer loan book 10.9 44.7
Decrease in securitisation debt in
line with customer loan book (14.5) (40.7)
Net cash (outflow) /inflow from the
customer loan book (3.6) 4.0
------------------------------------------------ ------- ---------
Net cash generated from operations 18.3 45.3
Voluntary flexible repayment of securitisation (57.2) -
loan(1)
Repayment of unsecured loans - (50.0)
------------------------------------------------ ------- ---------
Net cash decrease before the impact
of foreign exchange (38.9) (4.7)(2)
------------------------------------------------ ------- ---------
(1) During the period we have agreed with our banks that the
securitisation does not need to be fully drawn and that surplus
cash be used to repay drawings from time to time. The full drawdown
level remains accessible.
(2) H1 21 excludes the impact of foreign exchange of GBP2m.
Adjusted Net Debt and Unsecured net cash
GBPm H1 22 H1 21
------------------------------------------------ -------- ----------
Debt (310.2) (455.9)
Cash and cash equivalents 41.9 214.5
Bank overdrafts - (169.7)
------------------------------------------------ -------- ----------
Adjusted Net Debt (268.3) (411.1)
------------------------------------------------ -------- ----------
Unsecured Net Cash /(debt) 41.9 (32.2)
------------------------------------------------ -------- ----------
Decrease in adjusted net debt in
the period 32.8 86.0
Decrease in securitisation debt in
line with customer loan book (14.5) (40.7)
Voluntary flexible repayment on securitisation (57.2) -
loan
Repayment on unsecured loans - (50.0)
------------------------------------------------ -------- ----------
Net cash decrease before the impact
of foreign exchange (38.9) (4.7) (1)
------------------------------------------------ -------- ----------
(1) H1 21 excludes the impact of foreign exchange of GBP2m.
As a result of the Group's on-going focus on cash generation and
careful cost control, adjusted net debt has continued to decline.
Unsecured net cash was GBP41.9m compared to net cash of GBP80.8m at
the end of FY21, with the difference principally reflecting the
decision to reduce the drawdown on the Group's securitisation
funding facility by GBP57.2m. Adjusted net debt was GBP268.3m, a
decline of 10.9% compared to the GBP301.1m level at the end of FY21
and a decline of GBP142.8m from the prior period. Adjusted net debt
is net of GBP41.9m of cash and GBP310.2m of debt drawn against the
securitisation funding facility which is backed by the eligible
customer receivables. The GBP509.6m net customer loan book
significantly exceeds this adjusted net debt figure.
Pension scheme
The Group's defined benefit pension scheme has a surplus of
GBP27.1m (H1 FY21 : GBP31.0m surplus). The small reduction in the
surplus is primarily due to lower return on the scheme assets
during the period.
Financial KPI's
The Group's non-financial KPIs are contained in the Chief
Executive Officer's statement. The Group also uses a number of
financial KPIs to manage the business. These are laid out below and
the Group will continue to report these going forwards.
H1 22 H1 21 Change
(Restated(6)
)
------------------------------------ ---------- -------------- --------
Product revenue GBP222.1m GBP215.0m 3.3%
Adjusted EBITDA(1) GBP53.0m GBP48.0m 10.4%
Adjusted EBITDA margin(2) 15.3% 13.8% 1.5ppts
Adjusted operating costs to
Group revenue(3) 36.0% 30.4% 5.6ppts
Net cash / (unsecured net debt)(4) GBP41.9m GBP(32.2)m n/m
Adjusted EPS(5) 4.41p 6.72p (34.4%)
------------------------------------ ---------- -------------- --------
(1) Adjusted EBITDA is calculated as operating profit, excluding
exceptional items, with depreciation and amortisation added back.
The Directors believe adjusted EBITDA represents the most
appropriate measure of the Group's underlying trading performance
as it removes items that do not form part of the recurring
activities of the Group.
(2) Adjusted EBITDA margin is calculated as operating profit,
excluding exceptional items, with depreciation and amortisation
added back, as a percentage of revenue. The Directors believe
adjusted EBITDA margin represents the most appropriate measure of
the Group's underlying trading performance.
(3) Adjusted operating costs to revenue ratio is calculated as
operating costs less depreciation, amortisation and exceptional
items as a percentage of Group revenue. The Directors believe this
is the most appropriate measure to demonstrate the efficiency of
the Group's operating cost base.
(4) Cash balances, net of cash utilised to reduce amounts drawn
down on securitised debt, less a mount drawn on the Group's
unsecured debt facilities. Excludes debt securitised against
receivables (customer loan book) of GBP310.2m and lease liabilities
of GBP3.9m. The Directors believe that this is the most appropriate
measure of the Group's unsecured net cash / borrowings and is used
to calculate the Group's leverage ratio, a key debt covenant
measure.
(5) Adjusted earnings per share based on earnings before
exceptional items and fair value adjustments, which are those items
that do not form part of the recurring operational activities of
the Group. The Directors believe that this is the most appropriate
measure of the Group's earnings per share as it removes items that
do not form part of the recurring activities of the Group.
(6) H1 21 restated for the value added tax element on customer
debt written off, previously reported within Revenue rather than
being offset against Cost of Sales (refer to Prior Year Adjustment
, note 32, in the 2021 Annual Report and Accounts).
Reconciliation of Statutory financial results to adjusted
results
The Directors believe that the adjusted measures provide useful
information for shareholders to evaluate the Group's underlying
trading performance. These measures are used by management for
budgeting, planning and monthly reporting purposes and are the
basis for executive and colleague incentive schemes. The adjusted
figures are presented before the impact of exceptional items.
Exceptional items are items of income and expenditure which are
one-off in nature and material to the current financial year or
represent true ups to items presented as exceptional in prior
periods. These are detailed in note 5. Adjusted EBITDA represents
the most appropriate measure of the Group's underlying trading
performance. Adjusted EBITDA is defined as operating profit,
excluding exceptional items, with depreciation and amortisation
added back. Adjusted profit before tax represents the most
appropriate measure of the Group's underlying profit before tax as
it removes the exceptional items and the fair value adjustments to
financial instruments. A full glossary of Alternative Performance
Measures and their definitions is at the end of this statement.
GBPm H1 22 H1 21
Notes Statutory Exceptional Adjusted Statutory Exceptional Adjusted
items items
(note (note 5)
5)
Group Revenue 4 346.8 - 346.8 347.2 - 347.2
Gross profit 4 177.8 - 177.8 153.7 - 153.7
Group gross
profit margin 4 51.3% - 51.3% 44.3% - 44.3%
Operating profit 4 31.0 - 31.0 26.5 4.5 31.0
Operating profit
margin 4 8.9% - 8.9% 7.6% - 8.9%
Depreciation
& amortisation 4 (22.0) - (22.0) (17.0) - (17.0)
EBITDA 4 53.0 - 53.0 43.5 4.5 48.0
EBITDA margin 4 15.3% - 15.3% 12.5% - 13.7%
Net finance
costs 4 (6.8) - (6.8) (8.4) - (8.4)
------ ---------- ------------ --------- ---------- ------------ ---------
Profit before
taxation and
fair value adjustments
to financial
instruments 4 24.2 - 24.2 18.1 4.5 22.6
------ ---------- ------------ --------- ---------- ------------ ---------
Fair value adjustments
to financial
instruments 6 4.0 - 4.0 (4.0) - (4.0)
------ ---------- ------------ --------- ---------- ------------ ---------
Profit before
taxation 4 28.2 - 28.2 14.1 4.5 18.6
------ ---------- ------------ --------- ---------- ------------ ---------
Taxation 7 (4.8) - (4.8) (1.8) (0.9) (2.7)
------ ---------- ------------ --------- ---------- ------------ ---------
Profit for the
period 23.4 - 23.4 12.3 3.6 15.9
------ ---------- ------------ --------- ---------- ------------ ---------
Basic earnings
per share (p) 8 5.10 4.41 4.33 6.72
Diluted earnings
per share (p) 8 5.09 4.39 4.32 6.72
------ ---------- ------------ --------- ---------- ------------ ---------
Unaudited Condensed consolidated income statement
for the 26 weeks ended 28 August 2021
26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks
to 28 to 28 to 28 to 29 to 29 to 29
August August August August August August
2021 2021 2021 2020 2020 2020
Before Exceptional Total Before Exceptional Total
exceptional items exceptional items (*Restated)
items (Note items (Note
5) 5)
Note GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----- ------------- ------------ --------- ------------- ------------ -------------
Revenue 232.3 - 232.3 225. 2 - 225.2
Credit account
interest 4 114.5 - 114.5 122.0 - 122.0
--------------------------- ----- ------------- ------------ --------- ------------- ------------ -------------
Total revenue 4 346.8 - 346.8 347.2 - 347.2
Cost of sales (126.0) - (126.0) (116.2) (116.2)
Impairment losses
on customer receivables 4 (43.0) - (43.0) (77.3) - (77.3)
Gross profit 4 177.8 - 177.8 153.7 - 153.7
Operating profit 4 31.0 - 31.0 31.0 (4.5) 26.5
Finance costs (6.8) - (6.8) (8.4) - (8.4)
--------------------------- ----- ------------- ------------ --------- ------------- ------------ -------------
Profit before taxation
and fair value adjustments
to financial instruments 24.2 - 24.2 22.6 (4.5) 18.1
Fair value adjustments
to financial instruments 6 4.0 - 4.0 (4.0) - (4.0)
--------------------------- ----- ------------- ------------ --------- ------------- ------------ -------------
Profit before taxation 28.2 - 28.2 18.6 (4.5) 14.1
Taxation 7 (4.8) - (4.8) (2.7) 0.9 (1.8)
--------------------------- ----- ------------- ------------ --------- ------------- ------------ -------------
Profit for the
period 23.4 23.4 15.9 (3.6) 12.3
--------------------------- ----- ------------- ------------ --------- ------------- ------------ -------------
* Revenue and Cost of Sales restated for the value added tax element
on customer debt written off, previously reported within Revenue
rather than being offset against Cost of Sales (refer to Prior Year
Adjustment note 32 in the 2021 Annual Report and Accounts).
Earnings per share
Basic 8 5.10p 4.33p
Diluted 8 5.09p 4.32p
Unaudited condensed consolidated statement of comprehensive
income
for the 26 weeks ended 28 August 2021
26 weeks to 26 weeks to
28 August 29 August 2020
2021
GBPm GBPm
------------------------------------------------ ------------ ----------------
Profit for the period 23.4 12.3
Items that will not be classified subsequently
to profit or loss:
Actuarial gains on defined benefit pension
schemes 1.0 4.7
Tax relating to items not reclassified (0.4) (1.7)
------------------------------------------------ ------------ ----------------
0.6 3.0
------------------------------------------------ ------------ ----------------
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
foreign operations (0.2) 0.5
------------------------------------------------ ------------ ----------------
Total comprehensive income for the period
attributable to equity holders of the
parent 23.8 15.8
------------------------------------------------ ------------ ----------------
Condensed consolidated balance sheet
As at 28 August 2021
As at 27
As at 28 August As at 29 August February
2021 (unaudited) 2020 (unaudited) 2021 (audited)
Note *Restated
GBPm GBPm GBPm
Non-current assets
Intangible assets 10 122.6 145.0 133.0
Property, plant & equipment 11 60.2 61.8 60.9
Right-of-use assets 3.0 4.7 3.6
Retirement benefit surplus 27.1 31.0 25.5
Derivative financial instruments 6 0.5 0.6 -
Deferred tax assets 12.7 13.2 12.7
---------------------------------- ----- ------------------ ------------------ ----------------
226.1 256.3 235.7
---------------------------------- ----- ------------------ ------------------ ----------------
Current assets
Inventories 90.0 80.5 77.7
Trade and other receivables 12 536.8 568.7 549.0
Derivative financial instruments 6 0.5 1.3 0.4
Cash and cash equivalents 14 41.9 214.5 94.9
---------------------------------- ----- ------------------ ------------------ ----------------
669.2 865.0 722.0
---------------------------------- ----- ------------------ ------------------ ----------------
Total assets 895.3 1,121.3 957.7
---------------------------------- ----- ------------------ ------------------ ----------------
Current liabilities
Bank overdraft 14 - (169.7) (14.1)
Provisions (3.9) (7.2) (4.7)
Trade and other payables 13 (113.5) (112.2) (110.6)
Lease liability (1.3) (2.2) (1.8)
Derivative financial instruments 6 (3.1) (1.5) (6.2)
Current tax liability (2.1) (17.6) (4.5)
---------------------------------- ----- ------------------ ------------------ ----------------
(123.9) (310.4) (141.9)
---------------------------------- ----- ------------------ ------------------ ----------------
Net current assets 545.3 554.6 580.1
Non-current liabilities
Bank loans 15 (310.2) (455.9) (381.9)
Lease liability (2.6) (3.8) (3.1)
Derivative financial instruments 6 (0.9) (1.5) (1.3)
Deferred tax liabilities (16.9) (16.4) (13.2)
---------------------------------- ----- ------------------ ------------------ ----------------
(330.6) (477.6) (399.5)
---------------------------------- ----- ------------------ ------------------ ----------------
Total liabilities (454.5) (788.0) (541.4)
---------------------------------- ----- ------------------ ------------------ ----------------
Net assets 440.8 333.3 416.3
---------------------------------- ----- ------------------ ------------------ ----------------
Equity
Share capital 50.9 31.4 50.9
Share premium 85.0 11.0 85.0
Own shares 0.2 (0.3) (0.3)
Foreign currency translation
reserve 0.2 3.5 0.4
Retained earnings 304.5 287.7 280.3
---------------------------------- ----- ------------------ ------------------ ----------------
Total equity 440.8 333.3 416.3
---------------------------------- ----- ------------------ ------------------ ----------------
* Both Cash and cash equivalents and Bank overdrafts have been restated
in H1 21 to gross up the effect of bank accounts in overdraft and
cash separately (see note 14).
Condensed consolidated cash flow statement
For the 26 weeks ended 28 August 2021
For the
For the 26 For the 26 52 weeks
weeks ended weeks ended ended 27
28 August 29 August February
2021 (unaudited) 2020 (unaudited) 2021 (audited)
GBPm GBPm GBPm
Net cash inflow from operating
activities 51.1 105.5 143.8
Investing activities
Purchase of property, plant and
equipment (1.6) (0.5) (1.4)
Expenditure on intangible assets (8.9) (10.8) (18.6)
---------------------------------------- ------------------ ------------------ ----------------
Net cash used in investing activities (10.5) (11.3) (20.0)
---------------------------------------- ------------------ ------------------ ----------------
Financing activities
Interest paid (6.7) (9.3) (19.0)
Repayment of bank loans (71.7) (38.7) (37.8)
Repayment of unsecured bank loans - (50.0) (125.0)
Principal elements of lease payments (1.0) (0.9) (1.7)
Proceeds on issue of share capital - - 99.6
Transaction costs relating to
the issue of share capital - - (6.1)
----------------------------------------
Net cash outflow from financing
activities (79.4) (98.9) (90.0)
---------------------------------------- ------------------ ------------------ ----------------
Net foreign exchange difference (0.1) 2.0 (0.5)
---------------------------------------- ------------------ ------------------ ----------------
Net (decrease) /increase in cash
and cash equivalents and bank
overdraft (38.9) (2.7) 33.3
---------------------------------------- ------------------ ------------------ ----------------
Cash and cash equivalents and
bank overdraft at beginning of
period 80.8 47.5 47.5
---------------------------------------- ------------------ ------------------ ----------------
Cash and cash equivalents and
bank overdraft equivalents at
end of period 41.9 44.8 80.8
---------------------------------------- ------------------ ------------------ ----------------
Reconciliation of operating profit to net cash from operating
activities
For the
For the 26 26 weeks For the 52
weeks ended ended 29 weeks ended
28 August August 2020 27 February
2021 (unaudited) (unaudited) 2021 (audited)
GBPm GBPm GBPm
----------------------------------------- -------------------- ------------- ----------------
Profit for the period 23.4 12.3 8.3
Adjustments for:
Taxation charge 4.8 1.8 1.6
Fair value adjustments to financial
instruments (4.0) 4.0 10.0
Net foreign exchange gain / (loss) 0.1 (2.0) 0.8
Finance costs 6.8 8.4 16.6
Depreciation of right-of-use assets 0.6 0.9 1.6
Depreciation of property, plant
and equipment 2.1 2.0 3.3
Impairment of intangible assets - 1.7 1.9
Amortisation of intangible assets 19.2 14.7 34.9
Share option charge 0.6 - 0.8
------------------------------------------ -------------------- ------------- ----------------
Operating cash flows before movements
in working capital 53.6 43.8 79.8
(Increase) /decrease in inventories (12.4) 14.4 17.0
Decrease in trade and other receivables 11.9 46.3 64.4
Increase in trade and other payables 3.2 2.6 0.7
Decrease in provisions (0.9) (3.9) (6.2)
Pension obligation adjustment (0.6) 0.1 (0.8)
------------------------------------------ -------------------- ------------- ----------------
Cash generated by operations 54.8 103.3 154.9
Taxation (paid)/ received (3.7) 2.2 (11.1)
Net cash inflow from operating
activities 51.1 105.5 143.8
------------------------------------------ -------------------- ------------- ----------------
Changes in liabilities from financing As at 28 As at 29 As at 27
activities August 2021 August 2020 February
(unaudited) (unaudited) 2021 (audited)
GBPm GBPm GBPm
----------------------------------------- -------------------- ------------- ----------------
Loans and borrowings balance brought
forward 386.8 551.5 551.8
Changes from financing cashflows
Net repayment on loans and borrowings (71.5) (88.5) (161.7)
Lease payments in the period (1.0) (0.9) (2.0)
Decrease in loans and borrowings
due to changes in interest rates (0.2) (0.2) (1.0)
------------------------------------------ -------------------- ------------- ----------------
Decrease in loans and borrowings (72.7) (89.6) (164.7)
------------------------------------------ -------------------- ------------- ----------------
Loans and borrowings balance carried
forward 314.1 461.9 386.8
------------------------------------------ -------------------- ------------- ----------------
Unaudited consolidated statement of changes in equity
Foreign
currency
Share Share translation Retained
Capital premium Own shares reserve earnings Total
Changes in equity for the GBPm GBPm GBPm GBPm GBPm GBPm
26 weeks to 29 August 2020
------------------------------ --------- --------- ----------- ------------- ---------- -------
Balance at 29 February
2020 31.4 11.0 (0.3) 3.0 272.4 317.5
Total comprehensive income
for the period
Profit for the period - - - - 12.3 12.3
Other items of comprehensive
income for the period - - - 0.5 3.0 3.5
------------------------------ --------- --------- ----------- ------------- ---------- -------
Total comprehensive income
for the period - - - 0.5 15.3 15.8
------------------------------ --------- --------- ----------- ------------- ---------- -------
Balance at 29 August 2020 31.4 11.0 (0.3) 3.5 287.7 333.3
Total comprehensive income
for the period
Loss for the period - - - - (4.0) (4.0)
Other items of comprehensive
loss for the period - - - (3.1) (4.2) (7.3)
------------------------------
Total comprehensive income
for the period - - - (3.1) (8.2) (11.3)
------------------------------ --------- --------- ----------- ------------- ---------- -------
Transactions with owners
recorded directly in equity
Issue of shares 19.5 74.0 - - - 93.5
Share option charge - - - - 0.8 0.8
Total contributions by
and distributions to the
owners 19.5 74.0 - - 0.8 94.3
------------------------------ --------- --------- ----------- ------------- ---------- -------
Balance at 27 February
2021 50.9 85.0 (0.3) 0.4 280.3 416.3
Total comprehensive income
for the period
Profit for the period - - - - 23.4 23.4
Other items of comprehensive
income for the period - - - (0.2) 0.6 0.4
------------------------------
Total comprehensive income
for the period - - - (0.2) 24.0 23.8
------------------------------ --------- --------- ----------- ------------- ---------- -------
Transactions with owners
recorded directly in equity
Issue of own shares by
ESOT - - 0.5 - (0.4) 0.1
Share option charge - - - - 0.6 0.6
Total contributions by
and distributions to the
owners - - 0.5 - 0.2 0.7
------------------------------ --------- --------- ----------- ------------- ---------- -------
Balance at 28 August 2021 50.9 85.0 0.2 0.2 304.5 440.8
------------------------------ --------- --------- ----------- ------------- ---------- -------
Notes to the unaudited consolidated financial statements
For the 26 weeks ended 28 August 2021
1. Basis of preparation
This condensed set of consolidated interim financial statements
has been prepared in accordance with IAS 34 Interim Financial
Reporting in conformity with the requirements of the Companies Act
2006. They do not include all the information required for full
annual financial statements and should be read in conjunction with
the consolidated financial statements of the Group as at and for
the year ended 27 February 2021. The annual financial statements of
the Group are prepared in accordance with International Financial
Reporting Standards (IFRSs) in conformity with the requirements of
the Companies Act 2006.
The comparative figures for the year ended 27 February 2021 are
extracted from the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the Registrar of Companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
of matter, and (iii) did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
After making appropriate enquiries, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in the
preparation of these financial statements. This is explained in
further detail in note 3.
The accounting policies and presentation adopted in the
preparation of these consolidated interim financial statements are
consistent with those disclosed in the published annual report
& accounts for the 52 weeks ended 27 February 2021.
At the date of issue of these interim financial statements the
following standards and interpretations became effective in the
current financial year, and have been applied for the first time in
these financial statements:
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform - Phase 2
None of these new standards and interpretations have had any
material impact on these financial statements.
Critical judgements and key sources of estimation
uncertainty
In preparing the condensed interim financial statements, the
areas of critical judgements made by management in applying the
Group's accounting policies and the key sources of estimation
uncertainty related to the same areas as those applied to the
consolidated financial statements for the year ended 27 February
2021.
The key areas of significant judgements made by management in
applying the Group's accounting policies during the period were as
follows:
-- Impairment of customer receivables (critical judgement and estimation uncertainty)
-- Software and development costs (critical judgement and estimation uncertainty)
-- Impairment of non-financial assets (critical judgement and estimation uncertainty)
-- Allianz claim and counterclaim (critical judgement and estimation uncertainty)
-- Defined benefit plan (critical judgement)
2. Key risks and uncertainties
During the year the Group has continued its investment in risk
management capability and capacity across the three lines of
defence resulting in enhanced risk management practices that
support the N Brown Enterprise Risk Management Framework ("RMF").
Significant progress has been made in transitioning from the
previously reported Enterprise Risk RMF Programme to an embedded
state of business-as-usual risk management that complements and
supports business activities. The RMF enables the Group to maintain
robust governance and oversight around emerging risks, risk
management activities and Key Risk Indicators to underpin a
consistent and dynamic approach to managing risks.
The Group operates a consolidated and standardised set of 13
Principal Risk Categories; all sub-risks are mapped and indexed
directly to one of the 13 Categories. During the year the number of
Principal Risk Categories was reduced from 14 to 13, the Process
category now being incorporated as a factor in each of the
remaining 13 categories.
To identify the Group's areas of Principal Risk and determine
risk appetite, risk profiles have been mapped against the Group's
strategic priorities, transformation plan and legal and regulatory
obligations. A suite of Risk Policies summarising risk statements,
appetite metrics and key risk indicators have been developed for
each area of principal risk.
Principal risks with the potential to impact on performance and
the delivery of the strategic roadmap in year or through the
planning cycle have been defined as:
1 Conduct and Customer 8 Legal and Regulatory Compliance
2 Information Security 9 Credit
3 Financial Crime 10 Technology
4 Business Resilience 11 People
5 Financial 12 Strategic
6 Change 13 Supplier and Outsourcing
7 Data
The Board of Directors maintains a continuous process for
identifying, evaluating, and managing risk as part of its overall
responsibility for maintaining internal controls and RMF. This
process is intended to provide reasonable assurance regarding
compliance with laws and regulations as well as strategic,
commercial, and operational risks. The process is supported further
through the Group-wide alignment with the Senior Management
Function ("SMF") structure and reasonable steps programme.
Specific review and identification of existing and emerging
risks is facilitated by routine Board-level risk assessment cycles
completed during the year, as informed by a routine of regular risk
assessments at business unit level. Outputs are reported to the
Audit and Risk Committee. The process is facilitated by the Group
Business Risk team
In setting strategy, the Board considers Environmental, Social
and Governance ("ESG") factors, drivers and impacts on the health
and sustainability of the business. Furthermore, in general terms
the strategy is designed to deliver long term sustainable business
management. The RMF continues to be applied at an enterprise level
to provide an overview of strategic risk and as such incorporates
assessments of risks that have the potential to create ESG
exposures; these are reported through the governance framework and
managed accordingly by the Board.
Except as described below, the residual risk profile of the
principal risk categories remains broadly the same as disclosed in
the year-end report and accounts. Control enhancements are
identified routinely and on a continuous basis through the RMF's
application across each principal risk category.
The Group has successfully steered its way through the Covid-19
crisis, however the global impacts are still ongoing across our
supply chain. Throughout the period the Group has continued its
stress testing and scenario planning activity.
In addition to the Covid-19 disruption to the supply chain,
there are also industry wide stresses in the distribution chain for
our products. The availability and pricing of international
shipping is in flux, and there are emerging challenges with UK
freight transportation.
Whilst we have exited the European Union, some transitional
difficulties are impacting our risk profile such as availability of
staff and operational difficulties around the application of the
Trade and Co-Operation Agreement between the UK and EU. Whilst the
impact of Brexit-related risk has reduced, the Board continues to
monitor Brexit risks.
The Group recognises that no system of controls can provide
absolute assurance against material misstatement, loss, or failure
to meet its business objectives.
3. Going Concern
After reviewing the Group's forecasts and risk assessments, the
Directors have formed a judgement at the time of approving these
financial statements, that there is a reasonable expectation that
the Group have adequate resources to continue in operational
existence for the 12 months following the date of approval of the
half year results. For this reason, the Directors continue to adopt
the going concern basis in preparing the financial statements.
In arriving at their conclusion, the Directors considered the
following:
a) the Group's cash flow forecasts and revenue projections for
the 12 months from the date of signing these results (the "Base
Case"), reflecting, amongst other things the following
assumptions:
- The business continues to be fully operational throughout the
remainder of the pandemic (as has been the case since the
outset);
- Product gross margin pressure continues due to product mix, a
highly promotional retail market and industry wide increase in
freight rates and supply chain challenges;
- Financial Services revenue reduces as the size of the loan
book reduces as a function of the lower product sales;
- FS gross margin improves due to lower bad debt and write off
levels following better than expected economic and employment
impact of Covid-19; and
- Operating costs have a 2 - 3% higher cost to revenue ratio than FY21.
b) The impact on trading performance of severe but plausible
downside scenarios (the "Downside Case"), including continued
Covid-19 restrictions, the removal of government support schemes
such as Stamp Duty Relief and the Coronavirus Jobs Retention Scheme
and adverse macroeconomic conditions. In particular, the downside
scenario assumes that the lockdown restrictions experienced during
the year ended February 2021 and the first half of the current
year, will apply throughout the rest of the year ending February
2022 resulting in an adverse impact on retail sales, a reduction in
customer receivable collection rates with a consequent increase in
bad debts and a reduction in the debt securitisation advance rate.
It has also been assumed that the current unusually high freight
rates and supply chain pressures will continue to apply with an
adverse effect on gross margin, as well as one off potential
exceptional cash outflows.
c) the committed facilities available to the Group and the
covenants thereon. Details of the Group's committed facilities are
set out in note 16, the main components of which are:
- A GBP500m securitisation facility committed until December
2023, drawings on which are linked to prevailing levels of eligible
receivables (GBP313.4m drawn against an accessible GBP370.6m based
on the maximum of eligible customer receivables at 28 August 2021).
The Board have approved the proposed refinancing of the facility to
reduce the limit down to GBP400m and extend maturity to December
2024. This is expected to complete in October 2021.
- An RCF of GBP100m committed until December 2023, which is fully undrawn; and
- An overdraft facility of GBP12.5m which is subject to an
annual review every July (undrawn as at date of signing of these
accounts)
d) that there are no forecast breaches of any covenants in
either the Base Case or Downside Case. In the event that trading
deteriorated further than envisaged in the Downside Case additional
management actions could be implemented which would include sale of
customer receivables, temporary reductions in inventory and capital
expenditure and further discretionary cost reductions.
e) the Group's robust policy towards liquidity and cash flow
management. As at 28 August 2021, the Group had cash of GBP41.9m
million, net restricted cash of GBP3.9m and undrawn facilities of
GBP169.7m, giving rise to total accessible liquidity ("TAL") of
GBP207.8m (H1 21: GBP164.5m) reflecting positive cash generation in
the current financial period.
f) the Group management's ability to successfully manage the
principal risks and uncertainties outlined on pages 25 to 26 during
periods of uncertain economic outlook and challenging macroeconomic
conditions.
4. Business Segments
The Group has identified two operating segments in accordance
with IFRS 8 - Operating segments, Product Revenue and Financial
Services ("FS"). The Board receives regular financial information
at this level and uses this information to monitor the performance
of the Group, allocate resources and make operational decisions.
Internal reporting focuses and tracks revenue, cost of sales and
gross margin performance across these two segments separately.
However, it does not track operating costs or any other income
statement items.
Revenues and costs associated with the product segment relate to
the sale of goods through various brands. The Product cost of sales
is inclusive of VAT bad debt relief claimed of GBP7.2m (H1 21:
GBP9.5m) as a consequence of customer debt write off, with the
write off presented in Financial Services cost of sales. The
revenue and costs associated with the Financial Services segment
relate to the income from provision of credit terms for customer
purchases, and the costs to the business of providing such funding.
To increase transparency, the Group has included additional
voluntary disclosure analysing product revenue within the relevant
operating segment, by strategic and other brand categorisation.
Analysis of revenue 26 weeks to 26 weeks
28 August 2021 to 29 August
2020
(Restated(1)
GBPm )
GBPm
--------------------------------------------- ---------------- --------------
Analysis of revenue:
Sale of goods 211.8 206.6
Postage and packaging 10.3 8.4
---------------------------------------------- ---------------- --------------
Product - total revenue 222.1 215.0
---------------------------------------------- ---------------- --------------
Other financial services revenue 10.2 10.2
Credit account interest 114.5 122.0
---------------------------------------------- ---------------- --------------
Financial Services - total revenue 124.7 132.2
---------------------------------------------- ---------------- --------------
Total Group Revenue 346.8 347.2
---------------------------------------------- ---------------- --------------
Analysis of cost of sales:
--------------------------------------------- ---------------- --------------
Product - total cost of sales (125.4) (115.2)
---------------------------------------------- ---------------- --------------
Impairment losses on customer receivables (43.0) (77.3)
Other financial services cost of sales (0.6) (1.0)
---------------------------------------------- ---------------- --------------
Financial Services - total cost of
sales (43.6) (78.3)
---------------------------------------------- ---------------- --------------
Cost of sales (169.0) (193.5)
---------------------------------------------- ---------------- --------------
Gross profit 177.8 153.7
Gross profit margin 51.3% 44.3%
Gross margin - Product 43.6% 46.4%
Gross margin - Financial Services 65.0% 40.8%
Warehouse and fulfilment (31.9) (30.3)
Marketing and production (33.5) (25.9)
Other administration and payroll (59.4) (49.5)
---------------------------------------------- ---------------- --------------
Adjusted operating costs before exceptional
items 124.8 105.7
---------------------------------------------- ---------------- --------------
Adjusted EBITDA 53.0 48.0
---------------------------------------------- ---------------- --------------
Adjusted EBITDA margin 15.3% 13.8%
---------------------------------------------- ---------------- --------------
Depreciation and amortisation (22.0) (17.0)
Exceptional items charged to operating
profit (note 5) - (4.5)
---------------------------------------------- ---------------- --------------
Operating profit 31.0 26.5
---------------------------------------------- ---------------- --------------
Finance costs (6.8) (8.4)
Fair value adjustments to financial
instruments including exceptional fair
value gain (note 6) 4.0 (4.0)
---------------------------------------------- ---------------- --------------
Profit before taxation 28.2 14.1
---------------------------------------------- ---------------- --------------
26 weeks to 26 weeks
28 August 2021 to 29 August
2020
GBPm (Restated(1)
)
GBPm
--------------------------------------------- ---------------- --------------
Analysis of Product revenue:
Strategic brands (2) 180.5 157.1
Other brands (3) 41.6 57.9
---------------------------------------------- ---------------- --------------
Total Product revenue 222.1 215.0
Financial Services revenue 124.7 132.2
---------------------------------------------- ---------------- --------------
Total Group revenue 346.8 347.2
---------------------------------------------- ---------------- --------------
(1) Revenue and Cost of Sales restated for the value added tax
element on customer debt written off, previously reported within
Revenue rather than being offset against Cost of Sales (refer to
Prior Year Adjustment note 32 in the 2021 Annual Report and
Accounts).
(2) Strategic brands include JD Williams, Simply Be, Ambrose
Wilson, Jacamo and Home Essentials.
(3) Other brands are Fashion World, Marisota, Oxendales and
Premier Man. High & Mighty and House of Bath were folded into
Strategic brands in FY21. Figleaves was closed in March 2021 and is
now sold on Simply Be.
The Group has one significant geographical segment, which is the
United Kingdom. Revenue derived from Ireland and the US amounted to
GBP10.8m (HY 21: GBP10.2m). Operating profits from international
markets amounted to GBP2.2m profit (HY 21, GBP3.9m profit). All
segment assets are located in the UK and Ireland. All non-current
assets are located in the UK with the exception of GBP0.1m located
in Ireland.
For the purposes of monitoring segment performance, assets and
liabilities are not measured separately for the two reportable
segments of the Group and therefore disclosed together. Impairments
of tangible and intangible assets in the current period were GBPnil
(HY 21: GBP1.7m).
5. Exceptional items
26 weeks to 26 weeks
28 August to 29 August
2021 2020
GBPm GBPm
------------------------------------------- ------------ --------------
Legal costs 1.0 -
Customer redress (0.2) (0.7)
Tax matters (0.8) 2.0
Strategic change - 2.9
Impairment of tangible, intangible assets
and brands - 1.7
Gain from early settlement of derivative
contracts - (1.4)
------------------------------------------- ------------ --------------
Items charged to profit before tax - 4.5
------------------------------------------- ------------ --------------
Legal Costs
During the period, Allianz sought to increase the scope of its
original claim in relation to a further customer redress exercise,
yet to be undertaken. An additional GBP1.0m provision was
recognised in the period for future expected legal costs to defend
the Allianz Insurance plc claim and continuing to proceed with the
counterclaim referred to in note 16.
Customer Redress
Redress activity, other than the Official Receiver complaints,
has been concluded during the prior period, resulting in a net
release to the provision of GBP0.2m. The provision held as at 28
August 2021 is GBP1.5m.
Tax Matters
The Group has now reached agreement with HMRC over a number of
historical VAT and other tax matters, and the release in the period
relates to opening provisions no longer required.
Strategic Change
In line with the Board's strategic reviews and multi-year
transformation of the business, a material level of cost reduction
programs have been completed as well as an increased focus and
refinement of the Group's five strategic brands. During the prior
period, total redundancy costs of GBP2.9m were incurred in order to
align the Group's people costs to deliver an organisational design
that supports the revised strategy.
Impairment of Tangible, Intangible Assets and Brands
In the prior period, a total impairment of GBP1.7m was
recognised in relation to the intangible assets held for the
International and Figleaves businesses, following the Group's
strategic decision in the prior the year to focus on the UK as a
market and the five strategic brands. Gain On Early Settlement Of
Derivative Contracts
A GBP1.4m credit was recognised in the period representing the
gain achieved on the early settlement of foreign currency
derivative contracts that were no longer required following the
decline in product purchases driven by the sudden and significant
impact of Covid-19 at the start of the period.
6. Derivative financial instruments
At the balance sheet date, details of outstanding forward
foreign exchange contracts that the Group has committed to are as
follows:
28 August 29 August
2021 2020
GBPm GBPm
------------------------------------------- ---------- ----------
Notional amount - Sterling contract value 156.9 218.9
Fair value of liability recognised (3.0) (1.1)
The fair value of foreign currency derivative contracts is their
market value at the balance sheet date. Market values are based on
the duration of the derivative instrument together with the
observable market data including interest rates, foreign exchange
rates and market volatility at the balance sheet date.
Changes in the fair value of derivatives recognised, being
currency derivatives where hedge accounting has not been applied,
amounted to a P&L credit of GBP4.0m (HY 21: charge of GBP4.0m)
in the period.
Financial instruments that are measured subsequent to initial
recognition at fair value are all grouped into Level 2 (HY 21: and
FY 21: Level 2). Level 2 fair value measurements are those derived
from inputs other than quoted prices included within Level 1 that
are observable for the asset or the liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
There were no transfers between Level 1 and Level 2 during the
current or prior period.
7. Taxation
The underlying effective tax rate for the full year is estimated
to be 18.1% (HY 21: 19.2%) and applying this to the profits for the
26 weeks period ended 28 August 2021, after also factoring in
discrete items, gives a total interim effective tax rate for the
six months period of 16.7% (HY 21: 13.2%). These are both lower
than the expected statutory UK tax rate of 19% due to deferred tax
assets being recalculated at 25% from 19% (following the enactment
in the period of this future tax rate change), the availability of
the super deduction announced by the government on fixed asset
expenditure and a lower country rate of tax being applied to those
profits arising in Ireland.
In respect of Corporation tax, as at 28 August 2021 the Group
held a total provision of GBPnil (HY 21: GBP15.9m) relating to the
Malta entities' legacy tax positions. The Group has resolved the
historical open corporation tax provisions with the closing 2021
provision settled during March 2021.
8. Earnings per share
The calculation of earnings per ordinary share is based on
earnings after tax and the weighted average number of ordinary
shares in issue during the period.
The adjusted earnings per share figures have also been
calculated based on earnings before exceptional items that are
one-off in nature and material by size and fair value adjustments
that are considered to be distortive of the true underlying
performance of the business. These have been incorporated to allow
shareholders to gain an understanding of the underlying trading
performance of the Group. For diluted earnings per share, the
weighted average number of ordinary shares in issue is adjusted to
assume conversion of all dilutive potential ordinary shares.
Earnings for the purposes of basic and diluted 26 weeks 26 weeks
earnings per share: to to
28 August 29 August
2021 2020
GBPm GBPm
------------------------------------------------- ----------- -----------
Total net profit attributable to equity holders
of the parent 23.4 12.3
Fair value adjustment to financial instruments
(net of tax) (3.2) 3.2
Exceptional items (net of tax) - 3.6
------------------------------------------------- ----------- -----------
Adjusted profit for the period as used in
headline earnings per share 20.2 19.1
------------------------------------------------- ----------- -----------
Number of shares for the purposes of basic 26 weeks 26 weeks
and diluted earnings per share: to to
28 August 29 August
2021 2020
m m
------------------------------------------------- ----------- -----------
Weighted average number of shares in issue
- basic 458.5 284.2
Dilutive effect of share options 1.4 0.2
-------------------------------------------------
Weighted average number of shares in issue
- diluted 459.9 284.4
------------------------------------------------- ----------- -----------
Earnings per share
Basic 5.10 4.33p
Diluted 5.09 4.32p
Adjusted earnings per share
Basic 4.41 6.72p
Diluted 4.39 6.72p
In December 2020, the Group completed an equity raise for
GBP93.5m net proceeds, which were used to eliminate unsecured debt
and accelerate the Group's strategic investment. As part of the
equity raise, a total number of 174,666,053 ordinary shares was
issued, which has subsequently led to an increase in the weighted
average number of shares used in the calculation of both the basic
and diluted earnings per share, and therefore a reduction in both
against the prior year. There have been no transactions involving
ordinary shares or potential ordinary shares in the current
year.
9. Dividends
As announced on 23 March 2020 due to the impact of Covid-19 the
Board suspended dividend payments for the foreseeable future. The
Directors recognise that dividends are an important part of the
Company's returns to shareholders and the Board will consider the
resumption of dividend payments at the end of FY22.
The Board have therefore not declared an interim dividend (HY
21: GBPnil).
Brands Software Customer Total
database
GBPm GBPm GBPm GBPm
------------------------------- ------- --------- ---------- -------
Cost
As at 29 February 2020 16.9 358.2 1.9 377.0
Additions - 10.4 - 10.4
Disposals - - - -
------------------------------- ------- --------- ---------- -------
As at 29 August 2020 16.9 368.6 1.9 387.4
Additions - 8.0 - 8.0
Disposals - - - -
------------------------------- ------- --------- ---------- -------
As at 27 February 2021 16.9 376.6 1.9 395.4
Additions - 8.9 - 8.9
Disposals - (12.3) - (12.3)
------------------------------- ------- --------- ---------- -------
As at 28 August 2021 16.9 373.2 1.9 392.0
------------------------------- ------- --------- ---------- -------
Amortisation
As at 29 February 2020 16.9 206.8 1.9 225.6
Charge for the period - 14.7 - 14.7
Impairment - 1.7 - 1.7
Transfer from tangible assets - 0.4 - 0.4
Disposals - - - -
------------------------------- -------
As at 29 August 2020 16.9 223.6 1.9 242.4
Charge for the period - 19.8 - 19.8
Impairment - 0.2 - 0.2
Disposals - - - -
------------------------------- -------
As at 27 February 2021 16.9 243.6 1.9 262.4
Charge for the period - 19.2 - 19.2
Impairment - - - -
Disposals - (12.2) - (12.2)
------------------------------- -------
As at 28 August 2021 16.9 250.6 1.9 269.4
------------------------------- -------
Carrying amounts
As at 28 August 2021 - 122.6 - 122.6
------------------------------- ------- --------- ---------- -------
As at 27 February 2021 - 133.0 - 133.0
------------------------------- ------- --------- ---------- -------
As at 29 August 2020 - 145.0 - 145.0
------------------------------- ------- --------- ---------- -------
10. Intangible assets
Assets in the course of construction included in intangible
assets at the period end total GBP15.7m (HY 21: GBP13.7m). No
amortisation is charged on these assets until they are available
for use.
As at 28 August 2021, the Group had entered into contractual
commitments for the further development of intangible assets of
GBP6.1m (HY 21: GBP11.9m) of which GBP3.6m (HY 21: GBP6.4m) is due
to be paid within 1 year.
Impairment testing of intangible assets
The Group performed its impairment review in August 2021. The
Group considers the relationship between its market capitalisation
and its book value, among other factors, when reviewing for
indicators of impairment. At the balance sheet date, the market
capitalisation of the Group was lower than the Group's net assets.
As this, represents an indicator for impairment, management is
required to test for impairment over the Group's total assets, with
the recoverable amount being determined from value in use
calculations. In addition, included within intangibles assets are
ongoing projects that are not yet available for use and therefore
not being amortised. Where intangible assets are not being
amortised management is required to test for impairment.
The value in use assessment has been performed over the Group's
total assets under one CGU, being the smallest group of assets
which generate independent cash inflows. From last year the Group's
results, performance and viability are assessed for the Group as a
whole. In line with IAS 36, management therefore considered the
assessment on a single CGU basis as appropriate.
The value in use calculations use Board approved forecasts
covering a two and a half year period as the basis for its cashflow
projections, with accounting adjustments taken to comply with
specific requirements of IAS 36. The Board approved medium term
targets of product revenue growth of 7% and an adjusted EBITDA
margin of 14%.
These forecasts had regard to historic performance and knowledge
of the current market, together with management's views on the
future achievable growth and impact of technological developments.
After cash flows taken to FY24 year end (2.5 years) from adjusted
forecasts, management have extrapolated the cash flows to the end
of year 5 using a growth rate assumption of 3.4% taken from
analysis of external views of the overall market growth expected in
future. After the fifth year cash flow, a terminal value was
calculated based upon the long-term growth rate and the Group's
risk adjusted pre-tax discount rate.
The Group's cash flow projections were based upon the Group's
most recent Board approved three-year plan as at 28 August
2021.
The key assumptions in the value in use calculations are
considered to be the determination of years 1-2.5 cashflows
incorporating expected product revenue growth not attributed to
future capital expenditure and expected EBITDA margin growth, the
risk adjusted pre-tax discount rate, and the level of capital
expenditure cashflows considered to be of a replacement nature. The
key assumptions on revenue and EBITDA growth reflect historic
experience, the expected recovery in demand post Covid-19 and the
anticipated benefits of product, marketing and other
initiatives.
The years 2.5-5 growth rate and long-term growth rate were
determined with reference to retail market publications and IMF
forecast GDP growth respectively which management believe are
reasonable indicators of expected market growth rates available at
28 August 2021, however the value in use is relatively insensitive
to these assumptions and are therefore not considered to be key
assumptions.
The long-term growth rate used is purely for the impairment
testing of intangible assets under IAS 36 "Impairment of Assets"
and does not reflect long-term planning assumptions used by the
Group for investment proposals or for any other assessments. The
pre-tax discount rate was based on the Group's weighted average
cost of capital as at 28 August 2021, taking into account the cost
of capital and borrowings, to which specific market-related premium
adjustments are made.
The key assumptions are as follows:
- Years 1 to 2.5 expected product revenue and EBITDA margin growth;
- Replacement Capital expenditure of GBP22m per year;
- Pre-tax discount rate: 13.1% (H1 FY21: 13.4%).
The impairment review performed over the Group's CGU has
indicated that no impairment is required over the remaining assets
of the Group. The recoverable amount exceeds its carrying amount by
GBP367m.
The following sensitivities have been performed:
a. Within years 1-2.5 expected cashflows, if product revenue
growth were to drop to a contraction of 3.3% on average per annum
or if EBITDA margin improvement were to drop to a contraction of
2.9% on average per annum the value in use would indicate an
impairment;
b. An increase to replacement capital expenditure cashflows by
greater than GBP58.0m per year (164% increase) would result in an
impairment;
c. Increasing the discount rate by 1% reduces the headroom
calculated through the value in use by GBP104m, an increase to the
discount rate of more than 4.8% would result in an impairment.
It is reasonably possible that the Revenue and EBITDA margin
growth assumptions may not be realised in full or in the timescale
envisaged. In these circumstances, an impairment would be required
if, all other things being equal, Group EBITDA per annum was
GBP25.6m lower than forecast in the medium term.
11. Property, plant and equipment
Additions to tangible fixed assets during the period of GBP1.3m
(HY 21: GBP0.5m) primarily relate to warehousing improvement
projects. Depreciation of GBP2.1m (HY 21: GBP2.0m) was charged
during the period. Additionally, depreciation relating to IFRS 16
right of use assets amounted to GBP0.6m (HY 21: GBP0.9m) during the
period.
Assets in the course of construction included in fixtures and
equipment at the period end total GBP1.9m (HY 21: GBP1.2m), and in
land and buildings total GBPnil (HY 21: GBPnil). No depreciation is
charged on these assets until they are available for commercial
use.
12. Trade and other receivables
28 August 29 August 27 February
2021 2020 2021
GBPm GBPm GBPm
----------------------------------- ---------- ---------- ------------
Amounts receivable for the
sale of goods and services 597.7 632.1 605.8
Allowance for expected credit
losses (88.1) (91.7) (85.2)
----------------------------------- ---------- ---------- ------------
Net trade receivables 509.6 540.4 520.6
Other receivables and prepayments 27.2 28.3 28.4
----------------------------------- ---------- ---------- ------------
Trade and other receivables 536.8 568.7 549.0
----------------------------------- ---------- ---------- ------------
Movement in the allowance
for doubtful debts
Balance at the beginning of
the period 85.2 71.7 71.7
Impairment 45.6 82.5 148.1
Utilised during the period (42.7) (62.5) (134.6)
----------------------------------- ---------- ---------- ------------
Balance at the end of the
period 88.1 91.7 85.2
----------------------------------- ---------- ---------- ------------
Income statement impairment
charge
Impairment 45.6 82.5 148.1
Recoveries (4.5) (7.0) (12.4)
Other items 1.9 1.8 3.4
----------------------------------- ---------- ---------- ------------
Net impairment charge 43.0 77.3 139.1
----------------------------------- ---------- ---------- ------------
Other receivables and prepayments include a balance of GBP3.1m
(HY 21: GBP1.0m) relating to amounts due from wholesale
partners.
Trade receivables are measured at amortised cost.
H1 22 as at 28 August 2021
Stage Stage
Stage 1 2 3 Total
Gross trade receivables 380.2 146.1 71.4 597.7
Allowance for ECL excl.
Covid-19 Impact (6.8) (27.2) (49.0) (82.9)
Covid-19 Impact
on ECL 0.0 (4.7) (0.5) (5.2)
Allowance for ECL incl. (31.9 (49.5
Covid-19 Impact (6.8 ) ) ) ( 88.1)
Net trade receivables 373.5 114.2 21.9 509.6
-------------------------- -------- -------- -------- --------
ECL % excl Covid-19
impact (1.8%) (18.6%) (68.7%) (13.9%)
ECL %* (1.8%) (21.8%) (69.4%) (14.7%)
-------------------------- -------- -------- -------- --------
Balances proportion 63.6% 24.4% 11.9% 100.0%
ECL proportion 7.7% 36.1% 56.2% 100.0%
Net trade receivables
proportion 73.3% 22.4% 4.3% 100.0%
-------------------------- -------- -------- -------- --------
H1 21 as at 29 August 2020
Stage Stage
Stage 1 2 3 Total
Gross trade receivables 495.0 56.3 80.8 632.1
Allowance for ECL
excl. Covid-19 Impact (10.2) (13.2) (51.3) (74.7)
Covid-19 Impact
on ECL (9.4) (2.6) (5.0) (17.0)
Allowance for ECL
incl. Covid-19 Impact (19.6) (15.8) (56.3) (91.7)
Net trade receivables 475.4 40.5 24.5 540.4
-------------------------- -------- -------- -------- --------
ECL % excl Covid-19
impact (2.1%) (23.3%) (63.5%) (11.8%)
-------------------------- -------- -------- -------- --------
ECL %* (4.0%) (28.0%) (69.7%) (14.5%)
-------------------------- -------- -------- -------- --------
Balances proportion 78.3% 8.9% 12.8% 100.0%
ECL proportion 21.4% 17.2% 61.4% 100.0%
Net trade receivables
proportion 88.0% 7.5% 4.5% 100.0%
-------------------------- -------- -------- -------- --------
The increase in Stage 2 balances and ECLs is driven by a shift
in balances from Stage 1 to Stage 2 of GBP77.0m due to updated SICR
methodology to capture more accounts with significant increase in
credit risk prior to them rolling into arrears.
13. Trade and other payables
28 August 2021 29 August 27 February
2020 2021
GBPm GBPm GBPm
-------------------------------- --------------- --------------- ------------
Trade payables 53.6 50.1 46.7
Other payables 8.3 10.9 4.7
Accruals and deferred income 51.6 51.2 59.2
-------------------------------- ---------------
Trade and other payables 113.5 112.2 110.6
-------------------------------- --------------- --------------- ------------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases, based on invoice date, at
HY 22 is 54 days (HY 21: 55 days) (based on invoice creation date:
HY 22: 42 days, HY 21: 41 days).
The Group has financial risk management policies in place to
ensure that all payables are paid within agreed credit terms.
The Group continues to have a supplier financing arrangement
which is facilitated by HSBC. The principal purpose of this
arrangement is to enable the supplier, if it so wishes, to sell its
receivables due from the Group to a third-party bank prior to their
due date, thus providing earlier access to liquidity. From the
Group's perspective, the invoice payment due date remains unaltered
and the payment terms of suppliers participating in the programme
are similar to those suppliers that are not participating. The
maximum facility limit as at 28 August 2021 was GBP15.0m (HY 21:
GBP12.5m). At 28 August 2021, total of GBP10.3m (HY 21: GBP9.1m)
had been funded under the programme. The scheme is based around the
principle of reverse factoring whereby the bank purchases from the
suppliers approved trade debts owed by the Group. Access to the
supplier finance scheme is by mutual agreement between the bank and
supplier, where the supplier wishes to be paid faster than standard
Group payment terms; the Group is not party to this contract. The
scheme has no cost to the Group as the fees are paid by the
supplier directly to the bank. The bank has no special seniority of
claim to the Group upon liquidation and would be treated the same
as any other trade payable. As the scheme does not change the
characteristics of the trade payable, and the Group's obligation is
not legally extinguished until the bank is repaid, the Group
continues to recognise these liabilities within trade payables and
all cash flows associated with the arrangements are included within
operating cash flow as they continue to be part of the normal
operating cycle of the Group. There is no fixed expiry date on this
facility.
14. Cash and cash equivalents
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less. Included in the amount below is GBP0.9m (HY
21: GBP3.6m) of restricted cash which is held in respect of the
Group's customer redress programmes and GBP3.0m (HY 21: GBP3.0m) in
respect of our securitisation reserve account. This cash is
available to access by the Group.
A breakdown of significant cash and cash equivalent balances by
currency is as follows:
28 August 2021 29 August 27 February
2020 2021
GBPm GBPm GBPm
------------------------------------ -------------------------------- ------------- ---------------
Sterling 20.4 11.2 69.1
Euro 4.7 14.5 6.2
US dollar 16.8 19.1 5.5
------------------------------------ -------------------------------- ------------- ---------------
Net cash and cash equivalents and
bank overdrafts 41.9 44.8 80.8
------------------------------------ -------------------------------- ------------- ---------------
Made up of:
------------------------------------ -------------------------------- ------------- ---------------
Cash and cash equivalents 41.9 214.5 94.9
------------------------------------ -------------------------------- ------------- ---------------
Bank overdrafts - (169.7) (14.1)
==================================== ================================ ============= ===============
The Group operates a notional pooling and net overdraft facility
whereby cash and overdraft balances held with the same bank have a
legal right of offset. In line with the requirements of IAS 32,
gross balance sheet presentation is required where there is no
intention to settle any amounts net. The balance has therefore been
separated between overdrafts and cash balances and the Group has
restated both the Cash and cash equivalents and the Bank loans and
overdraft balances as at 29 August 2020 to show these amounts
gross.
This adjustment has no impact on the Group's net profit or loss
in the prior and preceding years, nor its net assets. In addition,
there was no impact on net cashflows in the prior or preceding
years.
The prior period has accordingly been restated for this
adjustment as demonstrated below:
29 August
Balance sheet (extract) 29 August Adjustment 2020 (Restated)
2020
GBPm GBPm GBPm
--------------------------- ------------------- ------------- ------------------
Current assets
Cash and cash equivalents 44.8 169.7 214.5
Current liabilities
Bank loans and overdrafts - (169.7) (169.7)
Net current assets 554.6 - 554.6
Net assets 333.3 - 333.3
Total Equity 333.3 - 333.3
15. Bank Borrowings
28 August 2021 29 August 2020 27 February
2021
GBPm GBPm GBPm
--------------------------------------- ------------------ ------------------ ---------------
Bank loans (310.2) (455.9) (381.9)
Bank overdrafts -- -
Repayable as follows:
* Within one year - (2.0) -
-- -
* In the second year
* In the third to fifth year (310.2) (453.9) (381.9)
--------------------------------------- ------------------ ------------------ ---------------
Amounts due for settlement after
12 months (310.2) (455.9) (381.9)
The bank overdrafts are repayable
on demand.
All borrowings are held in sterling.
28 August 2021 29 August 2020 27 February
2021
%% %
--------------------------------------- ------------------ ----------------- ---------------
The weighted average interest rates
were as follows:
Net overdraft facility 1.6 2.3 1.6
Bank loans 2.4 2.9 2.5
The principal features of the Group's borrowings are as
follows:
The Group operates a notional pooling and net overdraft facility
whereby cash and overdraft balances held with the same bank have a
legal right of offset. The Group has an overdraft facility of
GBPnil (HY 21: GBPnil). The facility had a maximum overdraft limit
of GBP12.5m at HY 22: (HY 21: GBP27.5m). The overdraft is repayable
on demand, unsecured and bears interest at a margin over bank base
rates. In line with the requirements of IAS 32, gross balance sheet
presentation is required where there is no intention to settle any
amounts net or simultaneously before maturity.
The Group has a bank loan of GBP310.2m (HY 21: GBP378.9m)
secured by a charge over certain "eligible" trade debtors (current
and 0-28 days past due) of the Group and is without recourse to any
of the Group's other assets. The facility has a current limit of
GBP500m which is committed to December 2023. The Board have
approved the proposed refinancing of the facility to reduce the
limit down to GBP400m and extend maturity to December 2024. This is
expected to complete in October 2021. During the period, the Group
took the decision to reduce the drawdown on the securitisation
facility by c.GBP60m to deliver greater balance sheet efficiency
and interest savings. As a result, net unsecured cash reduced down
to GBP41.9m at 28 August 2021, from GBP80.8m at 28 February 2021.
Accessible headroom on the securitisation facility amounted to
GBP57.2m at 28 August 2021.
The Group also has unsecured bank loans of GBPnil (HY 21:
GBP75m) drawn down under a medium-term bank revolving credit
facility (RCF). The facility had a maximum limit of GBP100m at HY
22, and is committed to December 2023.
During the prior period, the Group secured a new up to GBP50
million three-year Term Loan facility, provided by its lenders
under the government's Coronavirus Large Business Interruption Loan
Scheme ("CLBILS"). The facility, which was committed until May 2023
was fully repaid and handed back without penalty on 24 December
2020.
The covenants inherent to these borrowing arrangements are
closely monitored on a regular basis. Borrowing covenants continue
to be in place on the securitisation and RCF facilities
respectively. Key covenants for the Group are as follows:
-- Leverage, representing the ratio of adjusted net debt on adjusted EBITDA; and
-- Interest cover, representing the ratio of adjusted EBITDA on net finance charges.
All borrowings are arranged at floating rates, thus exposing the
Group to cash flow interest rate risk. The Group uses interest rate
cap derivatives to manage this risk. The fair value of interest
rate caps outstanding at HY 22 was GBP0.6m (H1 21: GBP0.9m), the
caps cover the whole facility of GBP500m on a notional basis.
The Group continues to have a supplier financing arrangement
which is facilitated by HSBC as described in note 13.
There is no material difference between the fair value and
carrying amount of the Group's borrowings.
16. Contingent Liabilities
Allianz claim and counterclaim
Until 2014, JD Williams & Company Limited ("JDW"), a
subsidiary of N Brown Group plc sold (amongst other insurance
products) payment protection insurance ("PPI") to its customers
when they bought JDW products. This insurance was underwritten by
Allianz Insurance plc ("the Insurer"). JDW was an unregulated
entity prior to 14 January 2005 in respect of the sale of PPI
insurance. The regulated entity prior to 14 January 2005 was the
Insurer.
In recent years, JDW and the Insurer have paid out significant
amounts of redress to customers in respect of certain insurance
products, including PPI. In July 2014 JDW and the Insurer entered
into an indemnity agreement in respect of certain PPI mis-selling
liabilities (Indemnity Agreement). In September 2018 JDW and the
Insurer entered into a Complaints Handling Agreement (CHA) to
regulate complaints handling and redress payments for both parties
in respect of pre-2005 PPI claims.
In January 2020, a claim was issued against JDW by the Insurer
in respect of all payments of redress the Insurer has made to JDW's
PPI customers together with all associated costs. The Insurer has
made a claim in contribution as well as asserting a number of
direct claims against JDW in relation to:
-- the Indemnity Agreement;
-- alleged negligence as its agent; and
-- alleged breaches of the CHA.
On 5 March 2020 JDW issued its defence which refuted each
element of the claim and also issued counterclaims in respect of
the losses JDW has suffered in respect of two separate insurance
policies underwritten by the Insurer. JDW has claimed that:
-- the Insurer is liable to compensate JDW for such loss and
damage by way of a contribution to JDW's liability in relation to
Product Protection Insurance sales (a separate product to PPI);
-- the Insurer has been unjustly enriched to the extent that its
liability to the complainants was discharged and JDW seeks
restitution of all such sums; and
-- JDW seeks contribution from the Insurer in respect of sums
paid by JDW pursuant to the CHA as the Insurer was also liable for
the same damages in relation to Payment Protection Insurance.
On 9 April 2020 JDW received a Reply and Defence to JDW's
counterclaim. This document asserted that the amount of the
Insurer's claim was GBP28m plus interest. A Claims Management
Conference was held in September 2020 following which a timetable
to trial was set by the Court. The deadline for disclosure was
extended due to challenges resulting from searching legacy systems
and the very substantial volumes of data and documentation involved
and was substantially completed in April 2021.
On 10 June 2021 Allianz sought leave to increase the scope of
its original claim in relation to a further customer redress
exercise ("the Additional Cohort"), yet to be undertaken. Allianz
estimates the value of this additional element of the claim, to be
up to GBP36m. Allianz also revised the value of its original claim
to GBP30m plus interest.
A second Claims Management Conference (CMC) was held on 25 June
2021, at which the Court permitted Allianz to bring forward its
amended claim. JDW subsequently filed and served its amended
defence by the deadline of 26 July 2021. At the second CMC the
Court also (among other things):
-- Vacated (cancelled) the March 2022 trial date.
-- Set a third CMC date for late January 2022. The trial will
not now be rescheduled until January 2022 and will not take place
until very late 2022 or possibly early 2023;
-- Varied the existing ADR order to provide for the parties to
take steps toward Alternative Dispute Resolution (ADR) before 10
January 2022, in advance of the third CMC.
JDW have approached Allianz and proposed an ADR process.
The outcome of the second CMC, and in particular, the
introduction of the claim in relation to the Additional Cohort has
introduced further legal complexity, extended the amount of legal
procedural steps and disclosure that will be required and increased
the range of potential financial outcomes, as previously advised in
the RNS on 16 June 2021. Accordingly, it will increase the legal
costs to defend/press the claim and counterclaim. This has resulted
in an increase in the Provision for legal expenses (within
exceptional items) of GBP1.0m.
Witness and Expert evidence will play a significant role in
helping to establish likely quantum and merits in relation to both
the claim and the counter claim. All claims made by the Insurer,
and counterclaimed by JDW, remain subject to final determination by
the court, both as to their success and quantum. The claim and
counterclaim are extremely complex, and both parties only recently
completed the initial lengthy disclosure exercise. More disclosure
work is now required. Both parties will continue to gather detailed
and factual expert and witness evidence in relation to multiple
elements of the claim and counterclaim over the coming months.
There is also considerable uncertainty as to the timing of any
resolution of the claim / counterclaim given that the legal court
process will continue well into 2022 and the trial is not yet
scheduled. Legal fees are expected to continue to be incurred
during FY22, but it is likely that the cashflows resulting from the
claim and /or counterclaim may not arise until FY23.
Having taken legal advice on its own position, the Group has
concluded that as the case remains at an early stage and there had
been no meaningful progress in relation to either the quantum or
merits during the year, it is still not possible to reliably
estimate the amount of any potential financial outcomes and has
therefore continued to not provide any amount for this claim.
IAS 37 (Provisions, contingent liabilities and contingent
assets) requires a provision to be recognised when there is a
present obligation as a result of a past event, it is more likely
than not that there will be an outflow of economic benefits to
settle the obligation and a reliable estimate can be made of the
amount of the obligation. The Insurer's claim represents a present
obligation, and it is likely than there will be an outflow of
economic benefits to settle it. However, given the complexities of
the claim, the volume of the data elements involved, the historic
nature of the claims and the difficulties associated with
establishing all the relevant facts, it is not possible to estimate
reliably the amount of the obligation. In these circumstances, IAS
37 requires a contingent liability to be disclosed. The protracted
nature of the disclosure process and the volume of material to
assess has contributed to the lack of progress in the year.
IAS 37 defines a contingent asset as a possible asset that
arises from past events and whose existence will be confirmed only
by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the entity. A contingent
asset is only recognised in the financial statements when an inflow
of economic benefits is virtually certain. It is disclosed as a
contingent asset when an inflow of economic benefits is probable.
The counter claim does not meet either of these criteria and the
description of the counterclaim is provided in accordance with
requirements of IAS 1 (Presentation of financial statements) on the
basis that claim, and counterclaim are relevant to an overall
understanding of the overall position.
17. Government grants and other support
The UK government offered a range of financial support packages
to help companies affected by coronavirus. During the six month
period ended 28 August 2021 the Group has received a total
government grant of GBPnil (HY 21: GBP3.3m) in respect of the
furlough scheme. The Group stopped receiving furlough support in
November 2020. In the prior year, the Group elected to deduct the
grant in reporting the related expense.
KPI DEFINITIONS
Measure Definition
Total website sessions Total number of sessions across N Brown apps,
mobile and desktop websites in the 6 or 12 month
period
Total active customers Customers who placed an accepted order in the
12 month period to reporting date
Total orders Total accepted orders placed in the 6 or 12 month
period. Includes online and offline orders.
AOV Average order value based on accepted demand(1)
AIV Average item value based on accepted demand
Items per order Average number of items per accepted order
Orders per customer Average number of orders placed per ordering
customer
Conversion % of app/web sessions that result in an accepted
order
NPS Customers asked to rate likelihood to "recommend
the brand to a friend or colleague" on a 0-10
scale (10 most likely). NPS is (% of 9-10) minus
(% of 0-6). NPS is recorded on JD Williams, Simply
Be, Ambrose Wilson, Jacamo, Home Essentials and
Fashion World.
FS Arrears Arrears are stated including both customer debts
with two or more missed payments, or customer
debts on a payment hold (including Covid-19 payment
deferrals).
----------------------- -----------------------------------------------------
(1) Accepted demand is defined as the value of Orders from
customers (including VAT) that we accept, i.e. after our credit
assessment processes. Excludes Figleaves for FY21 due to different
internal reporting systems
APM GLOSSARY
Alternative Performance Measure Definition
Adjusted gross profit Gross profit excluding exceptional
items. The Directors believe adjusted
Gross profit represents the most appropriate
measure of the Group's underlying trading
performance.
----------------------------------------------
Adjusted gross profit margin Adjusted gross profit as a percentage
of Group Revenue. The Directors believe
adjusted Gross profit margin represents
the most appropriate measure of the
Group's underlying trading performance.
----------------------------------------------
Adjusted EBITDA Operating profit, excluding exceptional
items, with depreciation and amortisation
added back. The Directors believe adjusted
EBITDA represents the most appropriate
measure of the Group's underlying trading
performance.
----------------------------------------------
Adjusted EBITDA margin Operating profit, excluding exceptional
items, with depreciation and amortisation
added back, as a percentage of revenue.
The Directors believe adjusted EBITDA
margin represents the most appropriate
measure of the Group's underlying trading
performance.
----------------------------------------------
Adjusted profit before tax Profit before tax, excluding exceptional
profit items and fair value movement on financial
instruments. The Directors believe
that adjusted profit before tax represents
the most appropriate measure of the
Group's underlying profit before tax
as it removes items that do not form
part of the recurring activities of
the Group.
----------------------------------------------
Adjusted profit before tax Profit before tax, excluding exceptional
margin items and fair value movement on financial
instruments, expressed as a percentage
of Group Revenue. The Directors believe
that adjusted profit before tax margin
represents the most appropriate measure
of the Group's underlying profit before
tax as it removes items that do not
form part of the recurring activities
of the Group.
----------------------------------------------
Cash generation Net cash generated from the Group's
operating activities. The Directors
believe that net cash generated is
the most appropriate measure of the
Group's cash generation from underlying
performance as it demonstrates the
Group's ability to support operations
and invest in the future.
----------------------------------------------
Adjusted Operating costs Operating costs less depreciation,
amortisation and exceptional items.
The Directors believe this is the most
appropriate measure of the Group's
operating cost base as it removes items
that do not form part of the recurring
activities of the Group.
----------------------------------------------
Adjusted Operating costs Operating costs less depreciation,
to revenue ratio amortisation and exceptional items
as a percentage of Group revenue. The
Directors believe this is the most
appropriate measure to demonstrate
the efficiency of the Group's operating
cost base.
----------------------------------------------
Adjusted Net debt Total liabilities from financing activities
less cash, excluding lease liabilities.
The Directors believe this is the most
appropriate measure of the Group's
overall net debt in relation to both
its secured and unsecured borrowings.
Unsecured net cash /(debt) Cash balances, net of cash utilised
to reduce amounts drawn down on securitised
debt, less a mount drawn on the Group's
unsecured debt facilities. The Directors
believe that this is the most appropriate
measure of the Group's unsecured net
cash / borrowings and is used to calculate
the Group's leverage ratio, a key debt
covenant measure.
---------------------------------------------
Total Accessible Liquidity Total cash and cash equivalents and
available headroom on secured and unsecured
debt facilities. The Directors believe
that this is the most appropriate measure
of the Group's liquidity.
---------------------------------------------
Adjusted Earnings per share Adjusted earnings per share based on
earnings before exceptional items and
fair value adjustments, which are those
items that do not form part of the
recurring operational activities of
the Group. The Directors believe that
this is the most appropriate measure
of the Group's earnings per share as
it removes items that do not form part
of the recurring activities of the
Group.
---------------------------------------------
[1] Rolling 12-month basis
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END
IR FZMGGRNKGMZM
(END) Dow Jones Newswires
October 08, 2021 02:00 ET (06:00 GMT)
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