TIDMSDRY
RNS Number : 0983M
Superdry PLC
19 January 2021
Superdry Plc
("Superdry" or "the Company")
19 January 2021
Interim results for the 26-week period to 24 October 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Brand reset journey continues; robust balance sheet despite
Covid-19 disruption
26 weeks 26 weeks
ended 24 ended 26
October October Change
2020 2019
Total Group revenue GBP282.7m GBP369.1m (23.4)%
Gross margin 51.7% 56.3% (460)bps
Underlying(1) loss before tax GBP(10.6)m GBP(2.3)m 360.9%
Exceptional and other items excluded
from underlying results GBP(8.3)m GBP(1.9)m 336.8%
Statutory loss before tax GBP(18.9)m GBP(4.2)m 350.0%
Underlying(1) basic loss per share (10.5)p (5.7)p 84.2%
Statutory basic loss per share (18.8)p (7.9)p 138.0%
Proposed interim ordinary dividend
per share 0.0p 2.0p (100.0)%
Net cash/(debt)(1) position GBP34.1m GBP(9.3)m 466.7%
Financial Overview (H1)
-- Revenue decline of 23.4% reflects Covid-19 effects, with 23%
of owned store trading days(2) lost due to lockdown restrictions
and the continued impact of social distancing on footfall even when
open.
-- Ecommerce performance, up 49.8% year on year, partially
offset lost Store sales (down 44.8%) as consumers moved online,
accounting for 50% of Retail revenue (1H20: 27%).
-- Gross margin decline of 460bps, predominantly due to
increased online promotional activity to clear excess
inventory.
-- Underlying loss before tax of GBP(10.6)m driven by trading
disruption, net of cost saving actions (GBP13.5m) and government
support (GBP12.3m), and is after the impact of reduced depreciation
arising from prior impairments and the utilisation of the onerous
lease provision (net GBP31.6m benefit).
-- Statutory loss before tax of GBP(18.9)m after GBP(8.3)m of
exceptional costs, predominantly relating to unrealised mark to
market losses on forward contracts.
-- No interim dividend is proposed given the continuing uncertainty and financial performance.
-- Liquidity remains strong, with closing net cash position of
GBP34.1m, GBP43.4m better than 1H20, reflecting continued focus on
managing cash and costs tightly, driven by rent deferrals and the
significant, sustainable reduction in our inventory levels (down
GBP26.5m, 13.7% year on year).
-- As at 9 January net cash is GBP54.8m, and our refinanced ABL
facility undrawn. Net cash remained positive throughout 2020.
Operational Highlights
-- Continued momentum with the brand reset, with the
Autumn/Winter 20 ("AW20") range fully launched across all channels,
with key marketing campaigns driving record levels of
engagement.
-- Sustainability increasingly embedded, with 38% of AW20
revenues from organic cotton, recyclable and low-impact material
product, and 100% of AW20 padded outerwear jackets using recycled
materials.
-- Key new brand partnership agreed with Neymar Jr, who leads
our portfolio of global influencers.
-- Strengthened executive management team with Julian Dunkerton
appointed permanent Chief Executive Officer, supported by the
appointment of Silvana Bonello as Chief Operating Officer and
Justin Lodge as Chief Marketing Officer.
Julian Dunkerton, Founder and Chief Executive Officer, said:
"Covid-19 has brought substantial challenges to Superdry as with
many other brands, and this has continued through the first half
and into the second with renewed lockdowns in our key markets. Our
team has responded incredibly well and above all we've been focused
on looking after our colleagues and customers and ensuring everyone
is keeping safe.
While revenue and underlying profit have been impacted by the
external conditions, the brand has continued to focus on the reset,
however, with over 70% of stores currently closed and having to
shut a significant number over peak, it will take time to see the
benefits of all our hard work flow through to the results.
We are making great progress with our influencer-led, digital
marketing strategy, enabling us to better target new and existing
customers. I am particularly excited about our recently announced
partnership with Neymar Jr, a globally recognised sports star with
over 143m worldwide social media followers. I am also very proud of
how we are embedding sustainability in every part of the business,
with responsibly sourced ranges at the heart of our AW20
collection. I believe sustainability is becoming critically
important to our customers and I'm committed to Superdry becoming
one of the leading global sustainable fashion brands.
With Silvana Bonello joining our team as Chief Operating
Officer, we are well on the way to having the right leadership team
in place to see us through the current difficult environment,
oversee the delivery of our strategy and return the brand to
long-term, sustainable growth once the pandemic recedes."
H2 trading to date (11 weeks to 9 January 2021)
Trading continued to be disrupted going into Q3 with further
national and regional lockdowns across the UK and Europe,
restricting the operations of our store estate. This has resulted
in 38% store days lost due to lockdowns in the 11 week period,
including the all-important weeks before and after Christmas in
several key markets. As at 9 January, 173 stores are now
temporarily closed, representing 72% of our portfolio.
11 weeks to 9 January
YoY Change
Group Revenue (27.2)%
----------------------
Channel Revenue
----------------------
Stores (52.1)%
----------------------
Ecommerce 13.2%
----------------------
Wholesale (23.0)%
----------------------
Stores have continued to be significantly impacted by Covid-19
lockdown closures, with revenue for the 11 weeks to 9 January 2021
down 52.1%. Over that period 38% of store days were lost, with
like-for-like store sales ending the period down (30.8)%
year-on-year (compared with last year when stores were open), as
reduced footfall from social distancing restrictions weighs on our
trading environment.
Ecommerce sales were up 13.2% for the period, helping to offset
some of the lost store sales, with the strongest performance being
seen on our owned sites which were up 25.7% year-on-year, which
also benefit from a lower rate of customer returns. As a
consequence of protecting our core and current season product
through disciplined pricing strategies, Black Friday promotional
period sales(3) were lower year-on-year, driven by 3(rd) party
revenue declines. However, the resultant product mix over this key
promotional window drove an improvement in both gross profit and
contribution year on year. These sales declines were offset by
strong pre-Christmas trading, particularly on our owned sites,
across early November and December.
Our Wholesale performance ended the 11 week period down 23.0%
year-on-year as our partners continue to face the same Covid-19
related headwinds as our store estate. This was predominantly
driven by more cautious AW20 forward orders given the backdrop of
Covid-19. These declines were partially offset by In Season Orders
up 29%, driven by online wholesale customers.
FY21 Outlook
The continued uncertainty and disruption caused by Covid-19,
including the impact from sudden and protracted store closures
across our estate as a result of government restrictions, makes it
more difficult than ever to forecast the outturn for the year.
Consequently we recognise the material uncertainty noted in our
going concern assessment, and we are not providing formal guidance
at this time for FY21 or beyond.
In the balance of the year we anticipate:
-- Prolonged store closures and subdued footfall in early 2021
to negatively impact revenues year-on-year, even after considering
the six weeks of lockdown in late FY20. These shortfalls will be
partially offset by rent waivers and furlough support.
-- Given the elevated levels of clearance activity throughout
the 2020 calendar year, and as we adopt a more balanced promotional
stance in 2021, Ecommerce growth will decelerate in Q4 21.
-- Wholesale revenues to end the year broadly in line with current market expectations.
The Company's liquidity remains strong with net cash of GBP54.8m
at 9 January 2021, through continued cash preservation measures,
including accessing government support initiatives across the UK
and internationally, reduction and rephasing of stock intake, rent
deferrals and associated Covid-19 waivers, rigorous cost control
and cash management. Consequently, we currently expect to remain in
a net cash position for the remainder of FY21.
We continue to have a total of over GBP130m of available
liquidity at hand. Our GBP70m Asset Backed Lending Facility remains
available, having not been used in the year to date, and is
currently still undrawn. Given the continued volatility caused by
Covid-19, we have agreed with our existing lenders to reprofile the
profit related covenant tests for the period ended April 2022.
Notes
1. 'Underlying' and 'Net cash' are used as alternative
performance measures ('APM'). Definition of APMs and how they are
calculated are disclosed in the financial statements in note
23.
2. 'Lost trading days' calculated as the simple average number
of stores closed each day of the period as a percentage of total
potential trading days in the period.
3. 'Black Friday promotional period' defined as the 11 days ending Monday 30 November 2020.
Market Briefing
A webcast for analysts and investors will be held today starting
at 9.00am, followed by a Q&A with management. The webcast will
be publicly available to join live, but questions will be limited
to analysts. If you would like to register, please click
https://secure.emincote.com/client/superdry/superdry008 . A
recording of the event will also be available on our corporate
website afterwards.
For further information:
Superdry:
Adam Smith adamj.smith@superdry.com +44 (0) 1242 586747
Candice Johnson candice.johnson@superdry.com +44 (0) 1242
586747
Media enquiries
Tim Danaher, Imran Jina superdry@brunswickgroup.com +44 (0) 207 404 5959
Notes to Editors
The Superdry brand is obsessed with design, quality and fit and
committed to relentless innovation. We design affordable, premium
quality clothing, accessories and footwear which are sold around
the world. We have a unique purpose to help our consumers feel
amazing through wearing our clothes. We have a clear strategy for
delivering continued growth via a multi-channel approach combining
Ecommerce, Wholesale and physical stores. We operate in over 60
countries and have over 4,100 colleagues globally.
Cautionary Statement
This announcement contains certain forward-looking statements
with respect to the financial condition and operational results of
Superdry Plc. These statements and forecasts involve risk,
uncertainty and assumptions because they relate to events and
depend upon circumstances that will occur in the future. There are
a number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements. These forward-looking statements are
made only as at the date of this announcement. Nothing in this
announcement should be construed as a profit forecast. Except as
required by law, Superdry Plc has no obligation to update the
forward-looking statements or to correct any inaccuracies
therein.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain. The person responsible for this announcement on
behalf of Superdry is Ruth Daniels, Group General Counsel and
Company Secretary of Superdry.
Chief Executive's Review
The first half of FY21 has continued to be impacted by the
trading volatility and operational disruption caused by Covid-19.
Despite these headwinds, as a business we are fully focused on our
longer-term strategy and the brand reset and have moved quickly to
adapt to the ever-changing landscape.
Reflecting this challenging trading environment, first half
revenues declined 23.4%, driven by unavoidably lower physical store
trade from either temporary store closures (23% lost trading days)
or substantially reduced footfall from social distancing measures,
partially offset by strong Ecommerce performance. A focus on cash
preservation and clearing stock meant that levels of promotion were
higher than originally planned, leading to a 460bps reduction in
gross margin.
The resulting half-year underlying loss before tax of GBP(10.6)m
(1H20: GBP(2.3)m) includes an expected accounting benefit of
GBP31.6m from lower depreciation and utilisation of an onerous
lease provision. Statutory loss before tax was GBP(18.9)m versus a
loss of GBP(4.2)m in the prior year, reflecting the challenges of
Covid-19.
In line with the decision at the year end, the Board believes it
is prudent and in the long-term interest of shareholders to
continue to focus on cash preservation in the short-term and has
decided to not propose an interim dividend.
Strategic Leadership
Recognising the increasing need to be agile across our supply
chain, I am delighted to have appointed Silvana Bonello as Chief
Operating Officer, joining us in March 2021. Silvana brings with
her a wealth of experience, having spent her career in operational
roles with Nike and most recently Vans, and will be responsible for
sourcing, logistics, merchandising, IT, corporate strategy and
business transformation, which will include a review of our IT
infrastructure, systems and operational processes, to drive far
greater flexibility and efficiencies across all aspects of the
business. Together with the key hires in Creative (Phil Dickinson),
Retail (Craig McGregor) and Marketing and Digital (Justin Lodge),
we can now focus on returning the brand to long-term, sustainable
growth, through our three brand priorities: i) product &
design, ii) social & digital, and iii) sustainability.
The process of hiring a permanent Chief Financial Officer is
well underway and an announcement will be made in due course.
Product and Design
One of the fundamental initiatives since April 2019 has been to
return the business to a design-led philosophy. A key moment in
doing this has been the launch of AW20, the first collection
designed end-to-end under my and Phil Dickinson's leadership.
Despite the challenges of Covid-19, the new product fully launched
across all channels, segmented into the four style choices, each
with their own collection (Original & Vintage, Superdry
Studios, Superdry X and Sport).
As we look ahead to the 2021 ranges, we will have fully embedded
this new design framework, and will begin building out the mainline
collection through short-lead time product to generate ongoing
excitement and newness through more frequent drops, particularly on
our online channels.
Social and Digital
A key driver of our brand reset has been to embed an
influencer-led, digital marketing strategy, enabling better and
more relevant communications with target customer demographics,
leveraging the newly segmented product range. Our campaigns
featuring Hero Fiennes Tiffin and Zara Larsson to support the
launch of AW20 saw record levels of engagement using brand and
performance marketing. These campaigns substantially increased
communication with both current and potential customers across all
style choices and younger age ranges, and we will continue to grow
and amplify our portfolio of influencers in 2021, taking this to
another level with our organic underwear campaign featuring Neymar
Jr, a globally recognised sports star with over 143m worldwide
social media followers.
Through this approach, we have seen active customer numbers
increase by 17% and our number of followers across all channels
increase to 3.3m, +5% growth since the start of FY21. I am
particularly pleased to see that our Net Promoter Score has
remained ahead of our competitor set for both men and women.
Sustainability
Sustainability has remained at the forefront of our design
processes and operations, with all AW20 padded outerwear jackets
using recycled materials, diverting 34m bottles from the ocean and
landfill sites. AW20 also saw the first launch of our vegan
trainers which have been certified by the Vegan Society. With over
4,000 units sold to date, they have been featured by publications
including Vogue, Marie Claire, Stylist and supplements of national
newspapers, all with a combined circulation totalling 88.7m.
Reflecting the increasing consumer demand for responsibly
sourced clothing, sustainable products (organic cotton, recyclable
and low-impact materials) generated 38% of revenues over the AW20
season.
We continue to embed sustainable practices across our supply
chain, and 95% of all our packaging has now been moved away from
single use virgin plastic. We also launched our new Ecommerce bags
which are made from Forest Stewardship Council (FSC) certified
paper, making them easier to recycle, but without compromising on
durability, along with our new paper store bags (made from the same
paper). Both bags are produced in the UK and have reduced their
carbon footprint by 60%.
Retail
Retail revenues declined 19.3% in H1, driven by store revenue
declines due to enforced temporary closures, as well as suppressed
footfall and demand upon reopening. More customers shopped online,
benefitting our Ecommerce channel which was also supported by
targeted clearance of older stock, with revenues growing nearly 50%
year on year. This resulted in Ecommerce generating half of all
retail sales in the period.
Recognising the increasing importance of Ecommerce within a
multichannel operation, which has been accelerated by the forced
closure of stores, we are prioritising investment in digital. We
will continue to optimise performance on our Ecommerce platforms
through the use of enhanced search capabilities, improvements in
our ability to re-target abandoned purchases, and via an ongoing
website refresh, the first stage of which allowed customers to
navigate product through our segmented style choices.
In November, following a series of stricter lockdown
announcements in the UK and Europe, we reacted quickly, embedding
the operational learnings from earlier in the year. This included
rapidly increasing the number of stores with fulfil-from-store
capability from 31 to 70, running a skeleton operation (in
accordance with government guidance) in those stores thereby
unlocking trapped store stock during the lockdowns and increasing
product availability for our online customers, while furloughing
remaining staff in closed stores.
Following the initial wave of lockdowns in summer 2020, we
agreed GBP3.7m of permanent rent waivers from landlords relating to
the disrupted periods. We expect to secure further savings as
disruption from lockdowns continues, and we conclude negotiations
on impacted stores. This one-off rent waiver benefit is in addition
to the previously flagged GBP10m ongoing lease renewal savings we
expect to deliver in FY21.
Through this ongoing renegotiation of our portfolio, our store
estate is under a continuous review process. Though we continue to
believe that most stores can be returned to profitability, we will
exit locations where we cannot agree sufficiently flexible lease
terms.
We continue to utilise all available government support in light
of the Covid-19 pandemic across all territories, the largest
benefit being seen in the UK with the 12-month rates holiday
(GBP14m in FY21) and furlough of all retail staff in closed stores
and some head office staff (GBP4.1m in 1H21; GBP8.0m to date since
start of pandemic). For as long as there is uncertainty and
volatility due to the pandemic, continued support will be needed
from the government for all retailers in the sector, and we would
encourage a review to extend the current rates holiday as well as a
reduction in value-added tax.
Wholesale
Wholesale partners continue to suffer from their own store
closures and footfall declines due to Covid-19 restrictions and
uncertainty. Performance in the half was partly impacted by the
later phasing of AW20 forward orders in comparison to 1H20 and the
deferred intake of stock due to supply chain disruption from
earlier in the year. However, we have started to see positive signs
from the distinct segmentation by style choice of the sales
packages available to our Wholesale partners. Our newly created
Superdry X range has enabled us to sell into the luxury department
store chain Nordstrom in the USA for the first time.
Operations
Our logistics team have been working hard over the period of
increased online demand, ensuring our customers continue to get our
product all over the world, whilst keeping our colleagues safe by
maintaining rigorous social distancing and sanitation measures in
place. This was supported by the implementation of high-performance
racking at our warehouses using robotics to improve efficiency.
Although a Brexit deal was finally agreed in late December,
which should make the transition smoother than if there were
no-deal, the UK has still left the EU and there are many impacts on
our business relating to tariffs, trade, logistics, product
standard regulations, currency fluctuations, and the impact on
people within our organisation. While we have minimised the direct
costs of these changes by optimising our inventory management and
intake processes ahead of 31 December, we anticipate that it will
be some time before we have better visibility on both the financial
and operational implications that Brexit will have on our
business.
Our internal working group have implemented plans covering all
critical legal risks and operational challenges with particular
focus on reducing the long-term movement of product cross-region,
unless required, to reduce the impact of additional duty/tariffs,
and to avoid potential delays. This group will be monitoring the
key areas of impact in the coming weeks and months to ensure
processes and plans are updated as required to best mitigate the
impact of Brexit on our business.
Superdry is a global business with corporate and operational
capability both in the UK and mainland Europe, which means that we
are well-equipped to deal with the challenges of Brexit, as we can
service EU customers from within the EU and not as a UK-only
organisation. However, though this diversified distribution centre
network has allowed us to mitigate many of the potential costs,
there are now additional considerations and frictional costs of
relocating inventory once it has been received into the
business.
Summary
We have made steps forward in the first half of this financial
year despite the continued significant challenges. I am delighted
that despite the challenges from Covid-19, we launched AW20 and am
pleased with the progress we are making in strengthening the brand
and engaging our new and existing consumers.
We are firmly on the journey to turning the brand around,
although we recognise that this is made more challenging by the
pandemic and expect it to take time. To enable us to capitalise on
these product and brand developments, we will make further
investment in systems and IT infrastructure, following a detailed
review of our existing technology and processes.
We will continue to inspire and engage the contemporary and
style obsessed customer through a constant flow of new and
innovative product and designs, while leaving a positive
environmental legacy through our commitment to sustainability.
I would like to thank all my colleagues for their continued
dedication, enthusiasm and hard work. I am confident that we will
overcome the challenges that face us and restore Superdry to a full
price proposition, with strong brand recognition and a loyal
customer base.
Financial Review
Group revenue decreased by GBP86.4m to GBP282.7m. This decrease
of 23.4% in the first half was driven primarily by the challenging
consumer environment for Stores and Wholesale, both of which
experienced similar impacts from Covid-19, and which led to the
loss of 23% of total trading days in the period across our owned
store estate. This was partially offset by the strong performance
in Ecommerce.
This contributed to the increase in the underlying loss before
tax of GBP(10.6)m, after the impact of reduced depreciation arising
from prior impairments and the utilisation of the onerous lease
provision driving a net benefit of GBP31.6m. Statutory loss before
tax increased by GBP14.7m to GBP(18.9)m, predominately as a result
of trading performance.
Group profit or loss
Unaudited Unaudited
1H21 1H20
GBPm GBPm % change
---------- ------------------------- ---------- ---------- ----------
Revenue: Retail 173.6 215.1 (19.3)%
Wholesale 109.1 154.0 (29.2)%
------------------------------------ ---------- ----------
Group revenue 282.7 369.1 (23.4)%
Gross profit 146.2 207.8 (29.6)%
Gross profit margin % 51.7% 56.3% (4.6)%pts
------------------------------------- ---------- ---------- ----------
Selling and distribution costs (130.2) (165.5) (21.3)%
Central costs (31.1) (46.3) (32.8)%
Other gains and losses 8.1 5.3 52.8%
------------------------------------- ---------- ---------- ----------
Underlying operating profit (1) (7.0) 1.3 (638.5)%
Underlying operating margin
(1) (2.5)% 0.4% (2.9)%pts
Net finance (expense)/income (3.6) (3.6) 0.0%
------------------------------------- ---------- ---------- ----------
Underlying profit before tax
(1) (10.6) (2.3) 360.9%
Exceptional and other items:
Fair value movement on
forward contracts (7.4) (0.6) 1133.3%
IFRS 2 charge - Founder
Share Plan (0.3) 0.1 (400.0)%
Exceptional items (0.6) (1.4) (57.1)%
------------------------------------ ---------- ----------
Total non-underlying adjustments (8.3) (1.9) 336.8%
------------------------------------- ---------- ---------- ----------
Loss before tax (18.9) (4.2) 350.0%
------------------------------------- ---------- ---------- ----------
Tax expense 3.5 (2.3) (252.2)%
Loss for the period (15.4) (6.5) 136.9%
------------------------------------- ---------- ---------- ----------
Retail channel revenue decreased by GBP41.5m, 19.3%
year-on-year, to GBP173.6m (1H20: GBP215.1m), with a decline in
Store revenue of 44.8% to GBP86.8m (1H20: GBP157.3m) being
partially offset by growth in Ecommerce, an increase of 49.8%
year-on-year to GBP86.6m (1H20: GBP57.8m), benefitting from channel
shift and promotional activity to clear excess stock.
Like-for-like store revenue over the first half was down 30.2%
year-on-year, with stores having been closed for the start of the
financial year and as we continue to trade through difficult and
unpredictable times. Due to government mandated closures, 23% of
available trading days were lost to lockdowns during the first half
across our portfolio, with Q1 more heavily impacted (43% of days
lost), while the store estate was largely open in Q2 (3% of days
lost). This position has worsened again during our peak trading
period, with 38% of trading days lost to lockdowns in the 11 weeks
to 9 January.
Wholesale revenue declined 29.2% to GBP109.1m (1H20: GBP154.0m),
largely due to our wholesale partners' physical retail network
facing similar Covid-19 related closures, with revenue from
online-only wholesale customers only declining 3% year on year,
significantly outperforming franchise stores and wholesale
customers with a physical presence (33% decline). This was
exacerbated by the later phasing of AW20 forward order deliveries
and the deferred intake of stock due to widespread supply chain
disruption at the start of the pandemic.
Gross profit margin decreased by 460bps to 51.7%, of which
400bps was rate variance and 60bps was channel mix. The gross
margin rate was lower predominately due to the need for wider
discounting due to the prolonged period of store closures which
removed 23% of store trading days, resulting in the need for
tactical stock clearance activity to drive cash and clear excess
stock, as well as an element of channel shift away from the higher
margin store channel. Within retail, the 6.6%pt fall in the gross
margin rate is explained by a 2.1%pt mix variance, with Ecommerce
sales being 50% of the retail mix in 1H21 compared to 27% of retail
sales in 1H20, and a 4.5%pt rate variance, as explained above. Our
full price mix in the first half was 44.2%, down 6.8%pts from H120,
predominantly from trading dynamics in Q1.
Unaudited Unaudited
Gross Margin by channel 1H21 1H20 Change
------------------------- ---------- ---------- ----------
Retail 59.7% 66.3% (6.6)%pts
---------- ---------- ----------
Stores 64.3% 68.9% (4.6)%pts
---------- ---------- ----------
Ecommerce 55.2% 59.4% (4.2)%pts
---------- ---------- ----------
Wholesale 39.0% 42.3% (3.3)%pts
---------- ---------- ----------
Total Gross Margin 51.7% 56.3% (4.6)%pts
------------------------- ---------- ---------- ----------
Selling, general and administrative expenses, pre-exceptional
costs, as a % of revenue improved by 0.3%pts to 57.1% despite
significant store closures. These costs include the sales and
distribution costs for the Retail and Wholesale channels and
central costs.
A key driver in the reduction of the SG&A costs is the
decrease in store costs (GBP21.8m year-on-year) from continued
lease renegotiations, which include GBP3.7m of Covid-19 rent
waivers, an onerous lease provision utilisation of GBP2.9m, UK
rates benefit of GBP8.1m, store payroll reductions of GBP7.4m and a
furlough benefit in relation to store employees across the UK and
the EU of GBP3.4m. In addition to store costs, there was a GBP7.3m
reduction in bad debt expense as a result of the specific one-off
provisions included in 1H20 for Norway and China and a reduction in
depreciation of GBP17.5m, largely due to the GBP136.8m impairment
charge booked at the end of FY20.
Other gains and losses (which include royalty income and other
income) were GBP8.1m (1H20: GBP5.3m), an increase of 53%, largely
due to the IFRS16 impact of lease modifications and exits, offset
by a reduction in royalty income of 67% year on year as licensees
suffered similar trading challenges from Covid-19.
Net finance costs were GBP3.6m (1H20: GBP3.6m), of which GBP3.0m
relates to interest expense on the leases arising from IFRS 16. We
have not drawn our GBP70m ABL facility in the current year whereas
we had utilised our RCF in 1H20, resulting in a decrease in
interest costs year-on-year.
Underlying loss before tax for the period was GBP10.6m (1H20
loss: GBP(2.3)m). Statutory loss before tax for the period was
GBP18.9m (1H20 loss: GBP(4.2)m).
Retail
Our Retail division includes Owned Store and Ecommerce as routes
to market. Owned Store revenue declined 44.8% and Ecommerce
increased by 49.8%, resulting in the Retail division delivering
revenue of GBP173.4m (1H20: GBP215.1m), down 19.4%
year-on-year.
Unaudited Unaudited
1H21 1H20
GBPm GBPm % change
------------------------ ------------- ---------- ---------- -----------
Revenue: Store 86.8 157.3 (44.8)%
Ecommerce 86.6 57.8 49.8%
-------------------------------------- ---------- ---------- -----------
% Group Revenue: Store 30.7% 42.6% (11.9)%pts
Ecommerce 30.6% 15.7% 14.9%pts
-------------------------------------- ---------- ---------- -----------
Retail Underlying Operating Profit 5.1 5.5 (7.3)%
Retail Underlying operating profit
margin 2.9% 2.6% 0.3%pts
--------------------------------------- ---------- ---------- -----------
Retail Operating Profit (0.2) 5.1 (103.9)%
Retail operating profit margin (0.1)% 2.4% (2.5)%pts
--------------------------------------- ---------- ---------- -----------
During H1 there was negligible change in the Group's retail
space, from 1,178sqft to 1,160sqft. There has been a focus on rent
renegotiations, of which 53 have now been completed with a weighted
average reduction of 44%. At the end of 1H21 there are 239 owned
stores (1H20: 245). 29 of the leases renegotiated to date are
turnover-based; of those 14 have been moved from fixed to
turnover-based rent.
Retail underlying margins of 2.9% (1H20: 2.6%) were 30bps higher
than the previous year largely due to cost savings from rent
negotiations (non-IFRS16), government rates holiday and store
payroll savings.
Please see note 23 - Alternative Performance Measures where we
have defined underlying operating profit and margin.
Wholesale
Unaudited Unaudited
1H21 1H20
GBPm GBPm % change
----------------------------------- ---------- ---------- -----------
Revenue 109.1 154.0 (29.2)%
% Group Revenue 38.6% 41.7% (3.1)%pts
------------------------------------ ---------- ---------- -----------
Wholesale Underlying Operating
Profit 19.0 42.0 (54.8)%
Wholesale Underlying operating
profit margin 17.4% 27.3% (9.9)%pts
------------------------------------ ---------- ---------- -----------
Wholesale Operating Profit 16.7 41.8 (60.0)%
Wholesale operating profit margin 15.3% 27.1% (11.8)%pts
------------------------------------ ---------- ---------- -----------
Our Wholesale division includes franchise and license stores in
secondary catchments and developing markets, multi-brand
independents and distributors, and physical and online department
stores as routes to market.
Wholesale revenue of GBP109.1m was down 29.2% year-on-year
(1H20: GBP154.0m). Cautious AW20 forward orders against the
backdrop of Covid-19 in the summer were exacerbated by the
continued supressed demand and delays to shipments. As expected,
online-only partners remained resilient with revenues down 3%,
significantly outperforming franchise stores and wholesale
customers with a physical presence (33% decline year on year).
The underlying wholesale operating profit of GBP19.0m, a decline
of 54.8% on 1H20 (GBP42.0m) is driven by the above. Underlying
wholesale operating profit margin is down 9.9%pts year-on-year as a
result of a prior year one-off benefits from loss-making accounts
exited in FY20 and from the closure of the US warehouses in
1H20.
Please see note 23 - Alternative Performance Measures where we
have defined underlying operating profit and margin.
Exceptional and other items
Exceptional and other items are detailed in note 6 and include a
GBP7.4m debit in respect of the fair value movement in financial
derivatives (H120: GBP0.6m debit). This has been driven by changes
to the timing of derivatives used to hedge Euro receivables and US
Dollar payables, and by rate movements during the period against
those derivative contracts. This non-cash movement is taken to the
income statement as the Company does not apply hedge accounting to
forward contracts.
Other items include GBP0.6m costs relating to restructuring
activities, driven in part by the Covid-19 pandemic.
The IFRS 2 charge of GBP0.3m is in respect of the Founder Share
Plan, which lapsed in September 2020. Consequently, no further
charges are expected in relation to this plan.
Taxation
The Group's income tax credit for 1H21 is GBP3.5m (1H20: GBP2.3m
income tax expense). Excluding discrete tax credits of GBP0.2m, the
residual underlying income tax credit of GBP2.0m represents an
underlying effective tax rate of 18.7% compared to 19.8% in 1H20
and 14.6% in FY20. The Group's tax credit on exceptional losses of
GBP1.5m represents an effective tax rate of 18.2%. Taken together
the Group's total income tax credit of GBP3.5m represents a total
effective tax rate of 18.7% for the period ended 24 October 2020.
The Group's total effective tax rate of 18.7% is lower than the
statutory rate of tax of 19.0%.
This is primarily due to the level of overseas losses to which
no tax benefit has been recognised, permanent differences on
consolidation adjustments, the level of lease liabilities on the
balance sheet to which no tax benefit continues to be recognised
together with depreciation and amortisation on non-qualifying
assets.
Loss for the period
After exceptional and other items, Group statutory loss after
tax for the period was GBP15.4m, compared to a GBP6.5m loss in
H120.
Loss per share
Reflecting the loss achieved by the Group during the year,
underlying basic EPS is (10.5)p (H120: (5.7)p). Reported basic EPS
was (18.8)p (1H20: (7.9)p), calculated using the basic weighted
average number of ordinary shares outstanding for the period of
82,020,620 (1H20: 81,998,661) shares.
Diluted EPS is (18.6)p (1H20: (7.9)p) based on a diluted
weighted average of 82,624,901 (1H20: 82,260,984) shares.
Dividends
In light of the current situation, the Board has made the
decision not to propose an interim dividend for the six months to
24 October 2020.
Cash flow, investments and working capital
The Company had net cash of GBP34.1m as at the end of 1H21,
compared to a net debt position at the end of 1H20 of GBP(9.3)m,
despite the first-half being a period of working capital investment
as inventories are built in advance of the peak trading period
within the third quarter. A key driver of this is the GBP30m
deferral of rent payments as a consequence of government mandated
closures during the first half.
Since the outbreak of the pandemic, there has been a significant
focus on cash preservation which has ensured we remained cash
positive throughout the first half, without having to utilise any
of our available facility. As at 9 January, our net cash position
of GBP54.8m which, together with our Asset Backed Lending Agreement
facility of up to GBP70m and an uncommitted overdraft of GBP10m,
provided us with GBP134.8m of headroom.
Having reviewed trading scenarios again following the
announcement of further lockdowns, management believe the
combination of the cash preservation measures in place and the
available facility continue to provide sufficient liquidity to
trade through this prolonged period of uncertainty.
Capital investment
Unaudited Unaudited
1H21 1H20
GBPm GBPm % change
------------------ --------------------- ---------- ---------- ---------
Store portfolio 0.8 2.6 (69.2)%
Infrastructure 2.0 1.5 33.3%
IT (including software development) 2.2 4.3 (48.8)%
----------------------------------------- ---------- ---------- ---------
Total Capital Investment 5.0 8.4 (40.5)%
----------------------------------------- ---------- ---------- ---------
Capital Creditor 0.3 (1.8) (116.7)%
5.3 6.6 (19.7)%
Cash outflow Tangible Assets 3.0 2.9 3.4%
------------------- -------------------- ---------- ---------- ---------
Intangible Assets 2.3 3.7 (37.8)%
------------------- -------------------- ---------- ---------- ---------
5.3 6.6 (19.7)%
----------------------------------------- ---------- ---------- ---------
Reflecting the strategic importance of Ecommerce in the current
environment, which has been accelerated as a result of the
pandemic, we have focused our first half capital investment in IT
infrastructure. This targeted investment enabled us to increase
inventory option count and availability on our owned website ahead
of the peak trading period. There has been a reduced investment in
the store portfolio as a result of the current economic climate,
with any renewals and renegotiations requiring landlord-funded
capital investment into the stores, and maintenance investment kept
to a minimum given the trading climate and temporary store
closures.
Property, plant and equipment and intangible assets (excluding
the impact of IFRS 16) totalled GBP82.4m, a decrease since the
financial year-end of GBP7.7m, as a result of depreciation and
amortisation being higher than the level of capital additions.
We expect full year spend on capital expenditure to be in the
range of GBP12m-GBP15m, with all non-critical projects deferred or
cancelled until at least the end of the financial year. We expect
this level of investment to increase into FY22 once trading has
normalised, as we continue to prioritise the enhancement of our IT
and digital infrastructure.
Working Capital
Unaudited Unaudited
1H21 1H20
GBPm GBPm % change
---------------------------------- ---------- ---------- ---------
Inventories 166.5 193.0 (13.7)%
Trade and similar receivables(1) 97.5 130.5 (25.3)%
Trade and similar payables(2) (155.2) (112.6) 37.8%
----------------------------------- ---------- ---------- ---------
Total Working Capital 108.8 210.9 (48.4)%
----------------------------------- ---------- ---------- ---------
Notes:
1. Trade and other similar receivables exclude items not
considered to be working capital being derivatives, cash
contributions and rent deposits.
2. Trade and similar payables exclude items not considered to be
working capital being derivatives, lease incentives and other taxes
payable.
Despite the challenging trading conditions, we remain committed
to reducing our working capital for the full financial year
FY21.
Inventory has reduced by GBP26.5m to GBP166.5m compared to 1H20
due to targeted clearance activity, and a disciplined forward
season buy supported by the recoding of stock to future seasons.
The Covid-19 specific obsolescence provision booked at the full
year has reduced by GBP0.7m to GBP5.7m, despite the second
lockdown, as a result of the measures above and favourable
in-season wholesale orders.
Trade and similar receivables reduced by GBP33.0m to GBP97.5m,
reducing broadly in line with Wholesale Revenue (-29.2%) and as a
result of cash collections, which have been better than expected.
There has been a modest GBP1.4m increase in the bad debt provision
since the year end due to the continued disruption.
Trade and similar payables have increased by GBP42.6m to
GBP155.2m, largely due to deferred rental payments of GBP30m and
timing of the stock intake in the current year due to Covid-19, as
we managed the Company's cash position.
Assessment of Group's prospects
The financial position of the Group, its cash flows and
liquidity position are set out in the financial statements.
Furthermore, the Group Financial statements include the Group's
objectives and policies for managing its capital, its financial
risk management objectives, details of its financial instruments
and exposure to credit and liquidity risk (please refer to note
19).
Background
On 10 August 2020 the Group announced that it had completed a
refinancing of its facilities, from a Revolving Credit Facility
('RCF') for GBP70m due to expire in January 2022 to a new Asset
Backed Lending ('ABL') facility for up to GBP70m due to expire in
January 2023, with amended covenants and the option to extend at
the discretion of the lender for a further 12 months. Through a
number of cash preservation measures set out in the FY20 Prelims
announcement on 21 September 2020 (and detailed in Mitigating
actions section, below), the group has tightly managed cash and
costs throughout the pandemic, remaining cash positive throughout
2020, and therefore the ABL has remained undrawn since it was
agreed. As at 9 January 2021 net cash is GBP54.8m.
As at 21 September 2020, the Group directors noted that the
risks of the recovery in consumer demand, the Group's ability to
capture this during the Autumn/Winter 2020 ("AW20") season, and the
ability of the Group to meet the new covenants from debt providers
represent material uncertainty and may cast significant doubt on
the Group's ability to continue as a going concern and, therefore,
that it may be unable to realise its assets and discharge its
liabilities in the normal course of business. This uncertainty
related specifically to the covenant tests over the 12 month going
concern period; the Directors assessed the liquidity requirements
of the group under these downside scenarios and believed them to be
adequate.
Impact of continuing lockdowns and social distancing
restrictions in H221
With infection rates in our key markets having substantially
reduced by late September 2020 following the "initial wave"
beginning March 2020, and the majority of our owned store estate
reopening, the prevailing view at that time was that further
widespread lockdowns appeared unlikely (though not a remote
possibility).
However, with the announcement of a second wave of lockdowns
resulting in temporary store closures in the UK and certain EU
markets from late October 2020, and the wider factors affecting
open stores, such as social distancing measures, and broader
economic and health concerns, the Group directors expect a
significant negative impact on consumer demand, at least in the
short term.
These regional lockdowns materially impacted trading in UK,
France, Belgium and Ireland across late 2020, leading to 50% of
available trading days lost in November due to temporary closures.
While this improved somewhat in December (25% of trading days
lost), the situation has deteriorated once again following
widespread national lockdowns imposed in early 2021. As at 9
January 173 of our owned stores (72% of the estate) were closed,
the highest level since April 2020. Though we have seen a 13.2%
increase in Ecommerce sales in the 11 weeks to 9 January, this
represents a material shortfall in total sales receipts versus
previous forecasts.
There are several key mitigations that the Group has undertaken
which partially offset the adverse revenue impacts of these
lockdowns:
-- Following the initial wave of lockdowns in summer 2020, we
agreed GBP3.7m of permanent rent waivers from landlords relating to
the disrupted periods. We expect this number to increase as
disruption from lockdowns continues, and we conclude negotiations
on impacted stores. This one-off rent waiver benefit is in addition
to the previously flagged GBP10m ongoing lease renewal savings we
expect to achieve in FY21.
-- In many markets, governments have extended furlough support
where store closures have been mandated. Superdry has received
GBP4.1m of furlough support in 1H21, predominantly relating to
store colleagues, and a total of GBP8.0m across the period from
March to December 2020. We currently expect to continue to access
this government support, at least for the period of the currently
imposed national lockdowns.
-- The reduction in future stock purchases, aided by the carry
over and recoding of core product remains our largest cash
mitigation, though given the long lead times from order through to
receipt and payment of the stock, our ability to manage cash relies
on forecast sales. In addition to the volume of intake, we will
continue to work closely with our suppliers to manage payment
terms, particularly through our cash trough ahead of the Autumn /
Winter season.
While these continued lockdowns have worsened the immediate
trading environment, the subsequent announcement of a number of
effective vaccines has improved the medium-term outlook, though we
remain cautious on the trading, operational and financial
impacts.
Finally, as a consequence of the impact of Covid-19 on global
trade, the Group and the company are aware of constraints to the
global supply of containers for shipping goods for resale from Asia
to Europe, and while the Group remains confident that the majority
of goods will be shipped, it is expected that the cost of these
shipments will increase and that there may be some movement in the
shipping dates from Q3 and Q4 FY21 to Q4 FY21 and Q1 FY22.
The Group's going concern assessment has been based on a
16-month financial plan (the 'Base Case Plan') which builds from
the latest FY21 reforecast (actualising to December 2020), together
with a revised view of FY22.
In determining the going concern forecast, management has made a
number of different assumptions regarding the Group's trading
performance in light of the Coronavirus pandemic. The most
significant assumptions are:
-- All trading channels benefitting from the ongoing product
improvements, operational initiatives and marketing activity to
support the brand reset which began in October 2020.
-- Current UK store closures to continue until the end of
February 2021, with subdued footfall upon reopening continuing
through the first half of FY22. Trading continues to recover as
stores reopen and consumer demand returns, reflecting the
macroeconomic uncertainties in FY22 and the ongoing channel shift
towards online, with profitability delivered through full price
trading margins, renegotiated leases and payroll restructuring, but
with revenues remaining materially below pre-Covid levels in
FY22.
-- UK property rates conservatively assumed to return from April 2021 (GBP16m annualised cost).
-- Ecommerce trading benefiting from the underlying and recently
accelerated channel shift towards digital from physical retailing,
together with planned development activities to improve website
user experience, though with consideration of the tougher
comparables in 2021, and the likely continuation of an elevated
level of promotional activity to clear excess stock and generate
cash.
-- Wholesale performance beginning to recover in FY22 reflecting
the latest forward order book performance, and the continuation of
FY21 trends such as increased In Season Orders to online
partners.
-- Gross margin conservatively reflects a continuation of
elevated promotional activity through FY22 to clear excess
stock.
-- Disciplined cost management and savings programmes, including
an acceleration of lease renegotiations, logistics benefits
relating to operational changes and US DC closures in FY20.
-- An increase in marketing spend in FY22, reflecting both
increased performance marketing in the short-term, together with
longer-term brand investment as part of the turnaround.
Given the Base Case Plan reflects uncertainties surrounding
forecasts due to the Covid-19, it is already considered to be
modelled on a 'reasonable downside' basis. A 'reverse stress test'
approach has subsequently been applied, modelling the shortfall to
forecasted sales that the Group would be able to absorb, after
implementing feasible mitigating actions, before requiring
additional sources of financing in excess of those that are
committed.
Whilst management consider this further downside scenario to be
unlikely, it is considered to be more than remote. However, the
Group directors have considered the feasible mitigating actions
that are available to them and could reasonably be implemented,
together with the availability of its banking facilities until at
least January 2023.
Mitigating actions
If there are different outcomes to the Base Case Plan that have
a materially adverse impact on the Group, the continued impact of
these events could result in a reduction in liquidity and/or a
longer period of lower EBITDAR, which in turn risks covenant
breaches. Management have considered the plausible mitigating
actions available to them, which includes a reduction in
uncommitted capital expenditure, a reduction in Head Office costs
and discretionary spend such as marketing, the confirmed and
expected forgiveness of rent relating to periods of temporary
closures and a reduced purchase of new season stock in line with
the lower sales values.
Management believe that the likelihood of this revenue decline
scenario together with other downside impacts occurring is low,
albeit more than remote, in the event of an even more severe and
prolonged downside trading scenario than that modelled by the
reverse stress test and, should the mitigating actions outlined
above not be sufficient, management would likely adapt the current
store portfolio strategy to exit a greater proportion of stores,
with 65% of leases falling due in the next 3 years.
Covenant testing
We continue to have a total of over GBP130m of available
liquidity at hand. Our GBP70m Asset Backed Lending Facility remains
available, having not been used in the year to date, and is
currently still undrawn. Given the continued volatility caused by
Covid-19, we have agreed with our existing lenders to reprofile the
profit related covenant tests for the period ended April 2022.
The covenants in the ABL facility are tested quarterly and are
based around the Group's adjusted EBITDAR (relative to the Base
Case Plan) until the end of Q1 22 and fixed charge (rent and
interest) cover thereafter.
Under the reverse stress test, which management considers to be
more than a remote possibility, liquidity headroom remains
adequate, though the covenants would be under pressure over the 12
month going concern period in this scenario. Consequently, they are
most sensitive to the macroeconomic recovery and performance over
the next 12 months, since all covenants are on a trailing 12 month
basis.
If this were to occur management would approach lenders for a
covenant waiver. Whilst there would be no guarantee that such a
waiver would be made available, in making their assessment
management note that they currently have a good relationship with
their lenders, and the lenders have been made aware of all key
inputs into the Base Case Plan, as well as the implications of the
short-term disruption . In addition, it should be noted that the
Group expects to be cash positive for the majority of the year,
given the seasonal working capital cycle, with substantial
liquidity maintained throughout the going concern period.
Significant judgements
In using these financial forecasts for the going concern
assessment, the Group directors recognise that significant
judgements were required in deciding what assumptions to make
regarding the impact of the coronavirus pandemic on the retail
sector and wider economy, and specifically to Superdry, the ability
to execute the turnaround plans required to recover brand health
and return the business to profitable growth. Whilst H1 trading was
ahead of original expectations, H2 has been materially impacted by
further mandated store closures, the short- and medium-term
macroeconomic environment, and its impact on the efficacy of our
strategic turnaround initiatives, result in greater uncertainty
than would usually be the case in making the key judgements and
assumptions that underpin the financial forecasts for the business.
The coronavirus pandemic is unprecedented, and so in making their
assessment of the future prospects of the Group, the Group
directors have incorporated additional risk adjustments into the
Base Case Plan.
Summary
The Group directors noted that the risks set out above indicate
that a material uncertainty exists and may cast significant doubt
on the Group's ability to continue as a going concern and,
therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
The material uncertainty relates to:
-- the duration and impact of the second-wave of national
lockdowns and subsequent recovery in consumer demand, and the
Group's ability to capture this in future trading; and,
-- the ability of the Group to meet its covenants from debt providers
This uncertainty relates specifically to the covenant tests over
the 12 month going concern period; the Group directors have
assessed the liquidity requirements of the group under these
downside scenarios and believe them to be adequate.
After considering the forecasts, sensitivities and mitigating
actions available to management and having regard to the risks and
uncertainties to which the Group is exposed (including the material
uncertainty referred to above), the Group directors have a
reasonable expectation that the Group have adequate resources to
continue in operational existence for the foreseeable future, and
operate within its borrowing facilities and covenants for a period
of at least 12 months from the date of signing the financial
statements, taking into account the working capital troughs in
FY22. Accordingly, the financial statements continue to be prepared
on the going concern basis.
Principal risks and uncertainties
The principal risks and uncertainties were outlined in the 2020
Annual Report (pages 42-50). These have been reviewed and amended
to ensure they are reflective of our existing risk profile and are
assessed on an on-going basis.
Also within the Annual Report, as part of the CFO's review, was
an analysis of the impact Covid-19 had on the FY21 outlook and a
Covid-19 statement which explained the impact on the wider
business. Covid-19 continues to represent a significant risk at a
macro level with an increased probability of a sustained economic
recession, impacting consumer spend as well as the risk profile of
the business including the nature and severity of a number of the
risks identified below.
Given the significance of Covid-19 related risks and the
associated impact they have had and could have on the Group, we
have developed and continue to develop measures designed to try and
reduce their impact. To oversee the response to the virus, we
continue to deploy a Covid-19 Incident Management Team ('IMT')
formed of members of the Group's Executive team that meet twice
weekly. The safety of colleagues and customers continue to be the
key priority for the IMT. For example, since November, we have been
offering weekly Covid-19 antigen testing to those colleagues who
need to work at Head Office because they cannot perform their role
from home.
Specific principal risks and uncertainties include:
Damage may occur to the Superdry Brand or the Brand may lose
its resonance.
Superdry's ability to achieve success depends on a commercial
product strategy that is aligned to brand position, market
dynamics and consumer aspiration.
Compromise to our key technological / physical assets would
significantly impede our ability to trade, particularly during
the peak trading period from November to January. Key assets
include: Ecommerce platform, Distribution Centres, Critical
IT Systems and Head Office.
Elevated stock levels represent a risk in terms of shortfall
in cash flow and additional storage costs.
Performance across our global, omni-channel proposition represents
a risk. Specifically:
* Retail store performance represents a risk and in
line with market trends, the ongoing consumer
preference shift towards digital shopping channels
has seen declining consumer visits to stores and
declining profitability in the physical retail
environment. Covid-19 has accelerated the move
towards digital, but the risk associated with retail
remains at an elevated level with a significant
proportion of our store estate closed as a result of
current lockdown measures.
* Wholesale performance is at risk from a number of
factors, including grey market distribution, an
inability to meet the critical path and failing to
deliver on time and in full to customers. Covid-19
has led to a significant proportion our franchise
store estate to also close as a result of current
lockdown measures.
* Ecommerce performance represents a significant growth
opportunity, however, represents a risk in terms of
reliance on the channel to offset lost store sales in
the short term and delivery of medium- and long-term
business objectives. For example, we will be unable
to achieve these objectives if the consumer is moving
faster than we can adapt and that our Ecommerce
platforms trail in the wake of competition.
* Failure to deliver on our growth aspirations in the
Group's key future development markets, in particular,
the USA.
Our financial results could be impacted by changes in exchange
rates. In addition, given the size of our wholesale partners
and associated order book, overdue debt will always represent
a risk for the business.
Financial results are also at risk if the controls that operate
within key financial systems are not operating effectively.
With our recent asset backed lending agreement, we now have
access to sufficient financing facilities, but we must now
ensure we mitigate risks associated with adhering to the various
reporting and compliance requirements and meeting the financial
covenants of the facility.
We need to recruit, develop and retain the calibre of leadership
that will enable us to achieve our strategic goals.
There is a risk our information security is breached causing
data and / or systems compromise. Covid-19 has exacerbated
this risk and could impact our ability to trade, lead to regulatory
scrutiny and fines and cause damage to the brand, e.g. loss
of customer trust.
Further to recent reports and scrutiny (e.g. by the Environmental
Audit Committee and prevalent television documentaries) on
fast fashion and its associated impact on workers' rights,
there is a risk that if we cannot demonstrate our credentials
in these areas, we face significant reputational damage.
In terms of environmental sustainability, we are a consumer
goods brand adding more consumables to an increasingly deteriorating
environment and we have exposure across both our direct operations
and our supply chain.
Specific risks include:
* an increased expectation on fashion brands to
decarbonise their operations;
* the cost of environmental change is high and rapidly
increasing, including across regulation / compliance
mechanisms, resource costs, environmental
contributions / taxes, and CAPEX requirements to
adapt, and;
* we are heavily reliant on key raw materials across
key global markets (Turkey, India, China) to make our
products which are all impacted by the effects of
climate change and other environmental changes. These
materials and markets are at risk of becoming harder
to source and more expensive.
Brexit potentially introduces significant risks to the retail
sector. For example, reduction in consumer spending and increased
delays on goods crossing borders.
Responsibility statement of the Directors in respect of the
condensed consolidated interim financial information
On 18 January 2021 the Board of Directors of Superdry Plc
approved this statement.
The Directors confirm that to the best of their knowledge:
-- The condensed financial information has been prepared in
accordance with IAS 34, Interim Financial Reporting, as adopted by
the EU; and
-- The interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
26 weeks of the financial year and their impact on the condensed
financial information, and a description of the principal risks and
uncertainties for the remaining 26 weeks of the financial year;
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first 26
weeks of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last Annual Report that could do so.
The Directors of Superdry Plc are listed on the Board section of
the Group website:
www.corporate.superdry.com
On behalf of the Board of Directors:
Julian Dunkerton
Chief Executive Officer
18 January 2021
Condensed Group Statement of Comprehensive Income for the 26
weeks ended 24 October 2020 (unaudited)
Underlying Exceptional Total Underlying Exceptional Total
October and other October October and other October
2020 items 2020 2019 items 2019
(note 6) (note 6)
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 5 282.7 - 282.7 369.1 - 369.1
Cost of sales (136.5) - (136.5) (161.3) - (161.3)
------------ ------------- --------- ------------ ------------- ---------
Gross profit 146.2 - 146.2 207.8 - 207.8
Selling, general
and administrative
expenses (161.3) (0.9) (162.2) (211.8) (1.3) (213.1)
Other gains and losses
(net) 8.1 (7.4) 0.7 5.3 (0.6) 4.7
------------ ------------- --------- ------------ ------------- ---------
Operating
(loss)/profit (7.0) (8.3) (15.3) 1.3 (1.9) (0.6)
Net finance expense (3.6) - (3.6) (3.6) - (3.6)
Loss before tax (10.6) (8.3) (18.9) (2.3) (1.9) (4.2)
Tax credit/(expense) 8 2.0 1.5 3.5 (2.4) 0.1 (2.3)
------------ ------------- --------- ------------ ------------- ---------
Loss for the period (8.6) (6.8) (15.4) (4.7) (1.8) (6.5)
------------ ------------- --------- ------------ ------------- ---------
Attributable to:
Owners of the company (8.6) (6.8) (15.4) (4.7) (1.8) (6.5)
(8.6) (6.8) (15.4) (4.7) (1.8) (6.5)
------------ ------------- --------- ------------ ------------- ---------
Other comprehensive
loss net of tax :
Items that may be
subsequently
reclassified
to profit or loss - - -
------------ ------------- --------- ------------ ------------- ---------
Currency translation
differences 4.6 - 4.6 1.1 - 1.1
------------ ------------- --------- ------------ ------------- ---------
Total comprehensive
expense for the
period (4.0) (6.8) (10.8) (3.6) (1.8) (5.4)
------------ ------------- --------- ------------ ------------- ---------
Attributable to:
Owners of the company (4.0) (10.8) (3.6) (5.4)
(10.8) (5.4)
--------- ---------
Earnings per share
Basic 16 (10.5) (18.8) (5.7) (7.9)
Diluted 16 (10.4) (18.6) (5.7) (7.9)
Condensed Group Balance Sheet as at 24 October 2020
Unaudited Restated Audited
October Unaudited April
2020 October 2020
2019
Note GBPm GBPm GBPm
ASSETS Note 21
Non-current assets
Property, plant and equipment 11 35.5 65.6 41.7
Right of use assets 13 110.7 261.1 118.0
Intangible assets 12 46.9 49.4 48.4
Deferred income tax assets 61.0 33.6 53.3
Derivative financial instruments 19 - - 0.1
Total non-current assets 254.1 409.7 261.5
Current assets
Inventories 166.5 193.0 158.7
Trade and other receivables 112.1 135.3 91.6
Current tax debtor 4.5 10.8 6.8
Derivative financial instruments 19 0.2 1.5 2.5
Assets classified as held for - 2.4
sale -
Cash and cash equivalents 18 34.1 228.2 307.4
---------- ----------- --------
Total current assets 317.4 571.2 567.0
LIABILITIES
Current liabilities
Borrowings 18 - 237.5 270.7
Trade and other payables 143.5 115.3 103.3
Provisions for other liabilities
and charges 3.2 5.7 4.2
Current tax liabilities 5.0 4.2 -
Derivative financial instruments 19 7.3 0.3 2.1
Lease liabilities 80.9 71.9 80.1
Total current liabilities 239.9 434.9 460.4
Non-current liabilities
Trade and other payables 2.1 1.9 2.2
Provisions for other liabilities
and charges 8.7 21.3 10.8
Deferred tax liabilities 0.8 0.8 -
Derivative financial instruments 19 - 3.4 0.2
Deferred liabilities 1.3 1.7 1.4
Lease liabilities 216.0 265.9 240.8
---------- ----------- --------
Total non-current liabilities 228.9 295.0 255.4
---------- ----------- --------
Net assets 102.7 251.0 112.7
---------- ----------- --------
EQUITY
Share capital 15 4.1 4.1 4.1
Share premium 149.1 149.1 149.1
Translation reserve (0.9) (1.9) (5.5)
Merger reserve (302.5) (302.5) (302.5)
Retained earnings 252.9 402.2 267.5
Equity attributable to the owners
of the company 102.7 251.0 112.7
Total equity 102.7 251.0 112.7
---------- ----------- --------
Condensed Group Cash Flow Statement for the 26 weeks ended 24
October 2020 (unaudited)
Restated
October October
2020 2019
Note GBPm GBPm
Cash generated from operating activities 9 19.2 4.0
Interest paid (0.6) (0.7)
Tax received/(paid) 4.5 (10.5)
-------- ---------
Net cash generated from/(used in) operations 23.1 (7.2)
-------- ---------
Cash flow from investing activities
Purchase of property, plant and equipment (3.0) (2.9)
Purchase of intangible assets (2.3) (3.7)
Net cash used in investing activities (5.3) (6.6)
-------- ---------
Cash flow from financing activities
Dividend payments 10 - (1.8)
Draw down on borrowings - 30.0
Repayment of leases - principal amount (20.0) (31.1)
Repayment of leases - interest amount (3.0) (2.9)
-------- ---------
Net cash used in financing activities (23.0) (5.8)
-------- ---------
Net decrease in cash and cash equivalents 18 (5.2) (19.6)
Cash and cash equivalents at beginning of
period 18 36.7 35.9
Exchange gains on cash and cash equivalents 18 2.6 4.4
-------- ---------
Net cash and cash equivalents at end of period 18 34.1 20.7
-------- ---------
Of which: Cash and cash equivalents 34.1 228.2
Of which: Overdraft - (207.5)
-------- ---------
See note 21 for details of the prior period restatement.
Condensed Group Statement of Changes in Equity for the 26 weeks
ended 24 October 2020 (unaudited)
Attributable to the owners of the company
Share Share Translation Merger Retained Other Total
capital premium reserve reserve earnings
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 26 April
2020 4.1 149.1 (5.5) (302.5) 267.5 - 112.7
Comprehensive income
Loss for the period - - - - (15.4) - (15.4)
Other comprehensive
income
Currency translation
differences - - 4.6 - - - 4.6
--------- --------- ------------ --------- ---------- ------ -------
Total other comprehensive
income - - 4.6 - - - 4.6
Total comprehensive
income for the period - - 4.6 - (15.4) - (10.8)
--------- --------- ------------ --------- ---------- ------ -------
Transactions with
owners
Employee share award
scheme - - - - 0.8 - 0.8
Shares issued 15 - - - - - - -
Dividend payments 10 - - - - - - -
Total transactions
with owners - - - - 0.8 - 0.8
Balance at 24 October
2020 4.1 149.1 (0.9) (302.5) 252.9 - 102.7
--------- --------- ------------ --------- ---------- ------ -------
Condensed Group Statement of Changes in Equity for the 26 weeks
ended 26 October 2019 (unaudited)
Attributable to the owners of the company
Share Share Translation Merger Retained Other Total
capital premium reserve reserve earnings
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 27 April
2019 4.1 149.1 (3.0) (302.5) 413.0 - 260.7
Prior year restatement - - - - (3.2) - (3.2)
Restated balance
at 27 April 2019 4.1 149.1 (3.0) (302.5) 409.8 - 257.5
--------- --------- ------------ --------- ---------- ------ ------
Effect of change
in accounting policy
for IFRS 16 - - - - 0.2 0.2
Comprehensive income
Loss for the period - - - - (6.5) - (6.5)
Other comprehensive
income
Currency translation
differences - - 1.1 - - - 1.1
--------- --------- ------------ --------- ---------- ------ ------
Total other comprehensive
income - - 1.1 - - - 1.1
Total comprehensive
income for the period - - 1.1 - (6.3) - (5.2)
--------- --------- ------------ --------- ---------- ------ ------
Transactions with
owners
Employee share award
scheme - - - - 0.5 - 0.5
Shares issued 15 - - - - - - -
Dividend payments 10 - - - - (1.8) - (1.8)
Total transactions
with owners - - - - (1.3) - (1.3)
Balance at 26 October
2019 4.1 149.1 (1.9) (302.5) 402.2 - 251.0
--------- --------- ------------ --------- ---------- ------ ------
Condensed Group Statement of Changes in Equity for 25 April 2020
(audited)
Attributable to the owners of the company
----------------------------------------------------------------
Share Share Translation Merger Retained Other Total
capital premium reserve reserve earnings
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 27 April
2019 4.1 149.0 (3.0) (302.5) 409.8 - 257.5
IFRS 16 adjustments - - - - 3.3 - 3.3
--------- --------- ------------ --------- ---------- ------ --------
Restated balance
at 27 April 2019 4.1 149.0 (3.0) (302.5) 413.1 260.8
--------- --------- ------------ --------- ---------- ------ --------
Comprehensive income
Restated loss for
the period - - - - (143.4) - (143.4)
Other comprehensive
income
Currency translation
differences - - (2.5) - - - (2.5)
--------- --------- ------------ --------- ---------- ------ --------
Total other comprehensive
income - - (2.5) - - - (2.5)
Total comprehensive
income for the period - - (2.5) - (143.4) - (145.9)
--------- --------- ------------ --------- ---------- ------ --------
Transactions with
owners
Employee share award
schemes 15 - - - - 1.2 - 1.2
Dividend payments 10 - - - - (3.4) - (3.4)
--------- --------- ------------ --------- ---------- ------ --------
Total transactions
with owners - - - - (2.2) - (2.2)
--------- --------- ------------ --------- ---------- ------ --------
Balance at 25 April
2020 4.1 149.1 (5.5) (302.5) 267.5 - 112.7
--------- --------- ------------ --------- ---------- ------ --------
Explanatory Notes to the Interim Financial Information
(unaudited)
1. Basis of preparation
Superdry Plc is a company domiciled in the United Kingdom. The
condensed interim financial information ("interim financial
information") of Superdry Plc for the 26 weeks ended 24 October
2020 ("October 2020") comprise the company and its subsidiaries
(together referred to as "the Group"). The prior comparative period
is for the 26 weeks ended 26 October 2019 ("October 2019").
This interim financial information does not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. The Group statutory financial statements for the 52 weeks
ended 25 April 2020 ("April 2020") are available upon request from
the company's registered office at Superdry Plc, Unit 60, The
Runnings, Cheltenham, Gloucestershire, GL51 9NW or
www.corporate.superdry.com.
This interim financial information has been prepared in
accordance with IAS 34 "Interim Financial Reporting" as adopted by
the EU and the requirements of the Disclosures and Transparency
Rules. They do not include all of the information required for full
annual financial statements and should be read in conjunction with
the Group financial statements as at and for the 52 weeks ended 25
April 2020 ("Group Annual Report FY20), which have been prepared in
accordance with International Financial Reporting Standards
('IFRSs') as adopted by the European Union. This interim financial
information was approved by the Board of Directors on 18 January
2021 .
The comparative figures for April 2020 are extracted from the
Group'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 (i) was
unqualified; (ii) included a reference to draw attention to the
Directors' conclusion that there was a material uncertainty
relating to going concern in respect of the Group's ability to have
access to sufficient, committed bank facilities; and (iii) did not
contain statements under section 498(2) or (3) of the Companies Act
2006. These sections address whether proper accounting records have
been kept, whether the Group's accounts are in agreement with these
records and whether the auditor has obtained all the information
and explanations necessary for the purposes of the audit. Full
details of the material uncertainty can be found in the Independent
Auditor's Report in the Group's Annual Report FY20.
The financial information in this interim financial information
document is neither audited nor reviewed by the auditor.
This interim financial information has been prepared under the
going concern basis.
For the reasons set out in within the Assessment of Going
Concern section of this announcement the Directors noted that the
risks set out there indicate that a material uncertainty exists
that may cast significant doubt on the Group's and the Company's
ability to continue as a going concern and, therefore, that it may
be unable to realise its assets and discharge its liabilities in
the normal course of business.
The material uncertainty relates to:
-- the duration and impact of the second-wave of national
lockdowns and subsequent recovery in consumer demand, and the
Group's ability to capture this in future trading; and,
-- the ability of the Group to meet its covenants from debt providers
As detailed above management has considered the forecasts,
sensitivities and mitigating actions available and having regard to
the risks and uncertainties to which the Group is exposed
(including the material uncertainty referred to above), the Group
directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future, and operate within its borrowing facilities and covenants
for a period of at least 12 months from the date of signing the
financial statements, taking into account the working capital
troughs in FY22. Accordingly, the financial statements continue to
be prepared on the going concern basis.
2. Significant accounting policies
The accounting policies adopted are consistent with those of the
previous financial period (see pages 132 to 138 of the Group Annual
Report FY20) except as described below.
Taxation
Taxes on income in the interim period are accrued using the tax
rate that would be applicable to expected total annual
earnings.
IFRS 16
The Group has applied Covid-19-Related Rent Concessions, as
permitted under amended IFRS 16, issued by the IASB in May 2020.
The practical expedient is only applicable to rent concessions
provided as a direct result of the COVID-19 pandemic with no other
substantive changes to other terms and condition of the lease. Rent
concessions meeting the criteria have been recognised in the period
to which they relate. Adoption of the practical expedient has
resulted in a GBP3.7m credit to the underlying operating loss.
3. Critical accounting estimates and judgements in applying accounting policies
The preparation of interim financial information requires
judgements, estimates and assumptions to be made that affect the
reported value of assets, liabilities, revenue and expenses. The
nature of estimation and judgement means that actual outcomes could
differ from expectation.
In preparing this interim financial information, unless stated
otherwise, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation were the same as those that applied to the consolidated
financial statements for the 52 weeks ended 25 April 2020 (as set
out on pages 136 to 138 of the Group Annual Report FY20). These
were as follows:
-- Store impairments;
-- Onerous property-related contract provisions;
-- Recoverability of trade debtors;
-- Inventory provisions;
-- IFRS 16 break options;
-- IFRS 16 discount rates;
-- Attributing Ecommerce sales and costs to stores; and
-- Determination of exceptional and other items.
4. Seasonality of operations
Due to the seasonal nature of the Retail segment, higher
revenues and operating profits are usually expected in the second
half of the year under normal trading conditions. This weighting of
higher revenues in the second half of the year is a consequence of
the brand's strength in cooler weather categories, such as
outerwear, which also carry higher average selling prices.
Operating profits therefore benefit from operating cost leverage,
particularly in the Group's stores. Wholesale seasonality is more
evenly spread across the year.
However, due to the timing of the impact of Covid-19 in the
financial period ended 25 April 2020, second half performance was
substantially impacted due to the outbreak of Covid-19 in the
fourth quarter with all owned stores and the majority of franchise
locations closed from late-March. Consequently, the financial
period ended 25 April 2020 had 52.4% of total revenues accumulated
in the first half of the year, with 47.6% in the second half. This
corresponded to 5.5% of underlying loss before tax in the first
half of the year and 94.5% of the underlying loss before tax in the
second half.
Given the impact of the ongoing Covid-19 pandemic and ongoing
lockdowns we do not expect to see the same level of seasonality
benefit from cold weather categories as in previous years.
5. Segmental information
The Group's operating segments under IFRS 8 have been determined
based on the reports reviewed by the Group's Chief Operating
Decision Maker (Executive Committee Members "the CODM"). The CODM
assesses the performance of the operating segments based on
underlying profit before interest and before inter-segment
royalties. The CODM considers the business from a customer
perspective only, being Retail and Wholesale. The CODM reviews the
balance sheet at a Group level. No separate balance sheet measures
are provided between the Retail and Wholesale segments. Ecommerce
is not identified separately as an operating segment due to the
levels of cross-over between physical store sales, Ecommerce sales
and retail customers.
The CODM receives information, reviews the performance of the
business, allocates resources and approves budgets for two
operating segments, and therefore information is disclosed in
respect of the following two segments:
-- Retail - p rincipal activities comprise the operation of UK,
Republic of Ireland, European and US stores, concessions and all
internet sites. Revenue is derived from the sale to individual
consumers of own brand clothing, footwear and accessories;
-- Wholesale - principal activities comprise the ownership of
brands, wholesale distribution of own brand products (clothing,
footwear and accessories) worldwide and trade sales.
Segment results and assets include items directly attributable
to a segment as well as those that can be allocated on a reasonable
basis. The Group reports and manages central functions separately
to the Retail and Wholesale operations, which includes design,
finance, HR, IT, legal, merchandising, property, sourcing and the
goodwill and intangibles arising on consolidation.
The revenue from external parties reported to the CODM is
measured in a manner consistent with that of the IFRS financial
statements.
Inter-segment royalties, transfers or transactions entered into
under a cost plus pricing structure are not reflected in the
performance of each business segment.
Segment information for the business segments of the Group for
October 2020 is set out below:
October 2020 segmental analysis (unaudited) Retail Wholesale Central Group
GBPm GBPm GBPm GBPm
Total segment revenue 173.6 204.0 - 377.6
Inter-segment revenue - (94.9) - (94.9)
------- ---------- -------- -------
Revenue from external customers 173.6 109.1 - 282.7
------- ---------- -------- -------
Exceptional
Underlying* and other Reported
October 2020 segmental analysis (unaudited) October 2020 items 2020
GBPm GBPm GBPm
Revenue
Retail 173.6 - 173.6
Wholesale 109.1 - 109.1
Total revenue 282.7 - 282.7
Operating (loss)/profit
Retail 5.1 (5.3) (0.2)
Wholesale 19.0 (2.3) 16.7
Central (31.1) (0.7) (31.8)
Total operating (loss)/profit (7.0) (8.3) (15.3)
(Loss)/profit before tax
Retail 2.1 (5.3) (3.2)
Wholesale 19.0 (2.3) 16.7
Central costs (31.7) (0.7) (32.4)
------------------- ----------- --------
Total (loss)/profit before tax (10.6) (8.3) (18.9)
------------------- ----------- --------
*Underlying is defined as reported results before exceptional
items and other items, and is further explained in note 23.
The GBP0.7m exceptional and other charge in the central segment
is in relation to restructuring costs and the Founder Share Plan.
Of the GBP7.6m loss in the retail and wholesale segments, GBP0.2m
relates to restructuring costs and GBP7.4m relates to the fair
value of forward exchange contracts, as disclosed further in note
6.
October 2019 segmental analysis
(unaudited) Retail Wholesale Central Group
GBPm GBPm GBPm GBPm
Total segment revenue 215.1 266.0 - 481.1
Inter-segment revenue - (112.0) - (112.0)
------- ---------- -------- --------
Revenue from external customers 215.1 154.0 - 369.1
------- ---------- -------- --------
The following additional information is considered useful to the
reader.
Exceptional
Underlying* and other Reported
October 2019 segmental analysis (unaudited) October 2019 items 2019
GBPm GBPm GBPm
Revenue
Retail 215.1 - 215.1
Wholesale 154.0 - 154.0
Total revenue 369.1 - 369.1
Operating (loss)/profit
Retail 5.5 (0.4) 5.1
Wholesale 42.0 (0.2) 41.8
Central (46.3) (1.3) (47.6)
Total operating (loss)/profit 1.3 (1.9) (0.6)
(Loss)/profit before tax
Retail 2.6 (0.4) 2.2
Wholesale 42.0 (0.2) 41.8
Central costs (46.9) (1.3) (48.2)
------------- ----------- --------
Total (loss)/profit before tax (2.3) (1.9) (4.2)
------------- ----------- --------
*Underlying is defined as reported results before exceptional
items and other items, and is further explained in note 23.
The GBP1.3m charge in the Central Segment is in relation to
restructuring, strategic change and other costs, and the Founder
Share Plan and other share schemes. The GBP0.6 loss in the other
segments relates to the fair value of forward exchange contracts,
as disclosed further in note 6.
The Group has subsidiaries which are incorporated and resident
in the UK and overseas. Revenue from external customers in the UK
and the total revenue from external customers from other countries
are:
Unaudited
Unaudited October
October 2020 2019
GBPm GBPm
External revenue - UK 96.3 123.2
External revenue - Europe 160.8 199.4
External revenue - Rest of world 25.6 46.5
-------------- ----------
Total external revenue 282.7 369.1
-------------- ----------
Included within non-UK external revenue is GBP61.0m (October
2019: GBP95.3m) generated by our overseas subsidiaries.
The total of non-current assets, other than deferred tax assets,
located in the UK is GBP75.8m (October 2019: GBP141.6m, April 2020:
GBP84.5m), and the total of non-current assets located in other
countries is GBP117.3m (October 2019: GBP230.6m, April 2020:
GBP123.6m).
6. Exceptional and other items
Non-underlying adjustments constitute exceptional and other
items. These are defined in note 23 and are disclosed separately in
the Group statement of comprehensive income.
Unaudited Unaudited
October October
2020 2019
GBPm GBPm
Exceptional and other items
Unrealised loss on financial derivatives (7.4) (0.6)
Restructuring, strategic change and other costs (0.6) (1.4)
IFRS 2 (charge)/credit in respect of Founder
Share Plan ('FSP') (0.3) 0.1
Exceptional and other items (8.3) (1.9)
---------- ----------
Taxation
Tax impact of non-underlying adjustments 1.5 0.1
Taxation on exceptional and other items 1.5 0.1
---------- ----------
Total exceptional and other items after taxation (6.8) (1.8)
---------- ----------
Exceptional and other items are included within:
Selling, general and administrative expenses (0.9) (1.3)
Other gains and losses (net) (7.4) (0.6)
Exceptional and other items (8.3) (1.9)
---------- ----------
7. Share of loss of joint venture
As at 25 April 2020, the carrying value of the investment in the
Joint Ventures of Trendy & Superdry Holding Limited and Horace
SARL was GBPnil, and no further investment has been provided during
the period by Superdry Plc. As such the carrying value of the
investment at 24 October 2020 is still GBPnil (October 2019:
GBPnil). The unrecognised share of joint venture losses in the
period are GBPnil in line with the Group policy (FY20: GBP3.7m,
1H19: GBP2.6m, cumulative GBP8.8m). Further information about the
exit of investment in Trendy & Superdry Holding Limited was
included in note 39 of the FY20 Group Annual Report.
8. Tax
The Group's income tax credit for 1H21 is GBP3.5m (H1 FY20:
GBP2.3m income tax expense). Excluding discrete tax credits of
GBP0.2m, the residual underlying income tax credit of GBP2.0m
represents an underlying effective tax rate of 18.7% compared to
19.8% in 1H20 and 14.6% in FY20. The Group's tax credit on
exceptional losses of GBP1.5m represents an effective tax rate of
18.2%. Taken together the Group's total income tax credit of
GBP3.5m represents a total effective tax rate of 18.7% for the
period ended 24 October 2020. The Group's total effective tax rate
of 18.7% is lower than the statutory rate of tax of 19%.
This is primarily due to the level of overseas losses to which
no tax benefit has been recognised, permanent differences on
consolidation adjustments, the level of lease liabilities on the
balance sheet to which no tax benefit continues to be recognised
together with depreciation and amortisation on non-qualifying
assets.
Factors affecting the tax expense for the period are as
follows:
Unaudited Unaudited
October October
2020 2019
GBPm GBPm
Loss before income tax (18.9) (4.2)
Loss multiplied by the standard rate in the
UK - 19.0% (1H20: 19.0%) (3.6) (0.8)
Expenses not deductible for tax purposes (4.7) 0.5
Overseas tax differentials 5.2 0.2
Deferred tax not recognised (1.4) -
Non-qualifying depreciation 0.7 -
Prior year items 0.3 2.4
Total income tax (credit)/expense (3.5) 2.3
---------- ----------
9. Note to the cash flow statement
Reconciliation of operating loss to cash generated from
operations
Note October October
2020 2019
GBPm GBPm
Operating loss (15.3) (0.6)
Adjusted for:
- Loss on unrealised financial derivatives 6 7.4 0.6
- Depreciation of property, plant and equipment 11 8.8 12.2
- Net depreciation of right of use asset
and deferred liability 13 13.2 27.3
- Amortisation of intangible assets 12 5.1 4.5
- Loss on disposal of property, plant and
equipment 0.7 0.1
- Release of lease incentives (0.2) (0.7)
- Employee share award schemes 0.8 0.6
- Foreign exchange gains (2.1) (0.1)
------- -------
Operating cash flow before movements in working
capital 18.4 43.9
------- -------
Changes in working capital:
- Increase in inventories (8.2) (6.1)
- Increase in trade and other receivables (32.8) (19.7)
- Increase in trade and other payables,
and provisions 41.8 (14.1)
------- -------
Cash generated from operating activities 19.2 4.0
------- -------
The increase in trade and other receivables stems mainly from
the later phasing of the AW20 wholesale forward orders in 2020.
The higher increase in trade and other payables is primarily a
result of GBP30m of Covid-19 rent deferrals and waiver
negotiations.
10. Dividends
For the year ended 25 April 2020, the Board made the decision
not to recommend paying a final dividend for the financial year in
light of the prevailing situation.
In line with the decision at the year end, the Board believes it
is prudent and in the long-term interest of shareholders to
continue to focus on cash preservation in the short-term, and has
taken the decision to not propose an interim dividend.
11. Property, plant and equipment
Movements in the net book value ("NBV") of property, plant and
equipment in the period to October 2020 were as follows:
Furniture,
Land and Leasehold fixtures Computer Total
buildings improvements and fittings equipment Group
GBPm GBPm GBPm GBPm GBPm
NBV as at 25 April
2020 4.3 23.4 11.2 2.8 41.7
Additions - 0.1 2.4 0.2 2.7
Disposal - (0.2) (0.1) - (0.3)
Depreciation - (4.8) (2.7) (1.3) (8.8)
Exchange differences - 0.2 - - 0.2
NBV as at 24 October
2020 4.3 18.7 10.8 1.7 35.5
----------- -------------- -------------- ----------- -------
12. Intangible assets
Movements in the net book value ("NBV") of intangible assets in
the period to October 2020 were as follows:
Websites Lease Distribution Total
Trademarks & software premiums agreements Goodwill Group
GBPm GBPm GBPm GBPm GBPm GBPm
NBV as at 25 April
2020 1.4 23.1 - 2.4 21.5 48.4
Additions 0.5 1.8 - - - 2.3
Amortisation (0.3) (4.5) - (0.3) - (5.1)
Exchange differences - 0.2 - 0.2 0.9 1.3
NBV as at 24 October
2020 1.6 20.6 - 2.3 22.4 46.9
----------- ------------ ---------- ------------- --------- -------
13. Right of use assets
The Group transitioned to IFRS 16 during the 52 weeks ended 25
April 2020. As a result, Right of use assets are recognised in
relation to the Group's leases. The Group's leased portfolio
comprises various store and head office properties and motor
vehicles. The Group has applied the practical expedient in relation
to rent concessions provided as a result of the Covid-19 pandemic
where relevant, as allowed by an amendment to IFRS 16 in May
2020.
Movements in the net book value ("NBV") of Right of use assets
in the period to October 2020 were as follows:
Total
Group
GBPm
NBV as at 25 April 2020 118.0
Additions 2.1
Disposal (0.2)
Lease modification 2.2
Depreciation (13.2)
Exchange differences 1.8
-------
NBV as at 24 October 2020 110.7
-------
14. Capital expenditure commitments
The Group has capital expenditure commitments on property, plant
and equipment of GBPnil at October 2020 (GBPnil at October 2019 and
GBPnil at April 2020).
15. Equity securities
19,640 ordinary shares of 5p each were authorised, allotted and
issued in the period under the Superdry Plc Share based Long Term
Incentive Plans, Save As You Earn and Buy As You Earn schemes.
16. Loss per share
Unaudited Unaudited
October October
2020 2019
GBPm GBPm
Loss
Loss for the period attributable to owners
of the company (15.4) (6.5)
Number Number
Number of shares at period end 82,030,428 82,002,204
Weighted average number of ordinary shares
- basic 82,020,620 81,998,661
----------- -----------
Effect of dilutive options and contingent shares 604,281 262,323
----------- -----------
Weighted average number of ordinary shares
- diluted 82,624,901 82,260,984
----------- -----------
Basic loss per share (pence) (18.8) (7.9)
----------- -----------
Diluted loss per share (pence) (18.6) (7.9)
----------- -----------
Underlying basic loss per share
Unaudited Unaudited
October October
2020 2019
GBPm GBPm
Loss
Underlying loss for the period attributable
to owners of the company (8.6) (4.7)
Number Number
Weighted average number of ordinary shares
- basic 82,020,620 81,998,661
----------- -----------
Weighted average number of ordinary shares
- diluted 82,624,901 82,260,984
----------- -----------
Underlying basic loss per share (pence) (10.5) (5.7)
----------- -----------
Underlying diluted loss per share (pence) (10.4) (5.7)
----------- -----------
17. Related parties
Directors of the Group within the period and their immediate
relatives control 20.3% (October 2019: 18.5%) of the voting shares
of the Group. There have been no material transactions in the
period with related parties, including Directors.
18. Net (debt)/cash
Other
April Net cash non-cash October
Analysis of net cash - October 2020 2020 flow changes 2020
(unaudited) GBPm GBPm GBPm GBPm
Cash and short-term deposits 307.4 (275.9) 2.6 34.1
Bank overdraft (270.7) 270.7 - -
-------- --------- ---------- --------
Net cash and overdraft 36.7 (5.2) 2.6 34.1
Other short-term borrowings - - - -
Total net (debt)/cash 36.7 (5.2) 2.6 34.1
-------- --------- ---------- --------
Restated Other Restated
April Net cash non-cash October
Analysis of net cash - October 2019 2019 flow changes 2019
(unaudited) GBPm GBPm GBPm GBPm
Cash and short-term deposits 35.9 187.9 4.4 228.2
Bank overdraft - (207.5) - (207.5)
------ ---------- ---------- ---------
Net Cash and overdraft 35.9 (19.6) 4.4 20.7
Other short-term borrowings - (30.0) - (30.0)
------ ---------- ---------- ---------
Total net cash/(debt) 35.9 (49.6) 4.4 (9.3)
------ ---------- ---------- ---------
See note 21 for details of the prior period restatement relating
to the gross up of cash and overdraft balances.
Included with cash and cash equivalents is GBP0.1m of rent
deposits held for sub-tenants of the Regent Street Store (October
2019: GBP0.2m), and GBP1.1m of cash deposits from franchise
customer guarantees (October 2019: GBP1.2m). Additionally, there is
EUR 1.9m (GBP1.7m) (October 2019: EUR 1.9m, GBP1.7m ) deposited in
an account with Europäisch-Iranische Handelsbank AG. These amounts
are restricted cash .
Other non-cash changes relate to foreign exchange gains and
losses.
Refinancing
In August 2020, the Group entered into a new financing facility
with existing lenders, HSBC and BNPP in the form of a new GBP70m
Asset Backed Lending Facility ("ABL Facility"), with a term until
January 2023 with amended covenants.
This ABL Facility replaces the revolving credit facility that
the Company had in place following the breach of non-financial
covenants in respect of the timing of submission of subsidiary
statutory accounts, The RCF was due to expire in January 2022. The
new facility is subject to a number of financial covenants and the
borrowing base will vary throughout the year dependent on the level
of the Company's eligible inventory and receivables.
The covenants outlined in this agreement include specific
EBITDAR (earnings before interest, tax, depreciation, amortisation
and rent) and Fixed Charge Cover (earnings before interest and tax
over fixed charges) to be attained on specified dates throughout
the year and along with a clear down period of 5 successive days in
January 2021 to be achieved. The EBITDAR covenant is different from
that defined in note 23 as it is based on an internal budget
basis.
19. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks
including: market risk (including foreign currency risk and cash
flow interest rate risk), credit risk and liquidity risk. The
condensed interim financial information does not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group Annual Report FY20. There have been no changes in
the risk management department or in any risk management policies
since the year end.
Liquidity risk
Compared to the year end, there was no material change in the
contractual undiscounted cash out flows for financial
liabilities.
Fair value estimation
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
-- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
The following table presents the Group's assets and liabilities
that are measured at fair value at 24 October 2020 and 26 October
2019.
Level
Unaudited 1 Level 2 Level 3 Level 1 Level 2 Level 3
2020 2020 2020 2019 2019 2019
GBPm GBPm GBPm GBPm GBPm GBPm
ASSETS
Derivative financial instruments
- Forward foreign exchange
contracts - 0.2 - - 1.5 -
- Option contracts - - - - - -
LIABILITIES
Derivative financial instruments
- Forward foreign exchange
contracts - 7.3 - - 0.5 -
- Option contracts - - - - 3.2 -
There were no transfers between levels during the period.
The fair value of the following financial assets and liabilities
is approximate to their carrying amount:
-- Trade and other receivables
-- Cash and cash equivalents
-- Trade and other payables
20. Government assistance
The Group has continued to utilise available government cash
preservation measures across the business including the deferral of
tax payments, seeking reductions in UK business rates, utilising
government support packages offered in many countries where we
operate, and furloughing staff during the period stores were
closed.
Government grants during the period in relation to the UK's
Coronavirus Job Retention Scheme (CJRS) and equivalent schemes in
other territories represents a value of GBP4.1m. Business rates
relief provided by the UK government during the Covid-19 pandemic
represents an estimated saving of GBP8.1m.
Government grants are recognised in profit or loss on a
systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to
compensate. The value is netted off against the salary expense in
selling, general and administrative expenses. Government grants are
not recognised until there is reasonable assurance that the Group
will comply with the conditions attaching to them and that the
grants will be received.
No government grants were utilised by the Group in the prior
period.
21. Prior year restatement
During the second half of the financial period to 25 April 2020,
it was determined that the Group's cash and overdrafts within
notional cash pooling arrangements did not meet the requirements
for offsetting in accordance with IAS 32: 'Financial Instruments:
Presentation'. This affects the balances reported as at 26 October
2019. For presentational purposes, cash and bank balances in the
prior period have been restated in accordance with IAS 8:
'Accounting Policies, Change in Accounting Policies and Errors'
with an additional GBP196.6m within borrowings, and cash balances
increased by an equal and opposite amount. There is no impact on
net assets.
Additionally, there are two adjustments associated with IFRS 16
that require the balances as at 26 October 2019 to be restated.
Firstly, GBP5.8m remained within trade and other receivables on the
balance sheet at the transition date to IFRS 16 which should have
been reclassified to the right of use asset. Accordingly, this has
been reclassified correctly below. Secondly, there was an
adjustment to the calculations of the present value of lease
payments which resulted in a decrease of both the right of use
asset and lease liability to the value of GBP1.9m.
The impact of these adjustments on the relevant financial
statement line items is set out below:
GBPm 26 October Cash IFRS 16 26 October
2019 Adjustment transition 2019
As reported Adjustment Restated
ASSETS
Property, plant and equipment 65.6 - - 65.6
Right of use assets 257.2 - 3.9 261.1
Intangible assets 49.4 - - 49.4
Deferred income tax assets 33.6 - - 33.6
Non-current assets 405.8 - 3.9 409.7
Current assets
Inventories 193.0 - - 193.0
Trade and other receivables 141.1 - (5.8) 135.3
Current tax debtor 10.8 - - 10.8
Derivative financial instruments 1.5 - - 1.5
Assets classified as held
for sale 2.4 - - 2.4
Cash and cash equivalents 31.6 196.6 - 228.2
Total current assets 380.4 196.6 (5.8) 571.2
LIABILITIES
Current liabilities
Borrowings 40.9 196.6 - 237.5
Trade and other payables 115.3 - - 115.3
Provisions for other liabilities
and charges 5.7 - - 5.7
Current tax liabilities 4.2 - - 4.2
Derivative financial instruments 0.3 - - 0.3
Lease liabilities 73.8 - (1.9) 71.9
Total current liabilities 240.2 196.6 (1.9) 434.9
Non-current liabilities 295.0 - - 295.0
NET ASSETS 251.0 - - 251.0
EQUITY 251.0 - - 251.0
Note 18 has also been restated following this adjustment:
As Reported
Other
April Net cash non-cash October
Analysis of net cash - October 2019 2019 flow changes 2019
(unaudited) GBPm GBPm GBPm GBPm
Cash and short-term deposits 35.9 (8.7) 4.4 31.6
Bank overdraft - (10.9) - (10.9)
------ --------- ---------- --------
Net Cash and overdraft 35.9 (19.6) 4.4 20.7
Adjustment
Other
April Net cash non-cash October
Analysis of net cash - October 2019 2019 flow changes 2019
(unaudited) GBPm GBPm GBPm GBPm
Cash and short-term deposits - 196.6 - 196.6
Bank overdraft - (196.6) - (196.6)
------- --------- ---------- --------
Net Cash and overdraft - - - -
Restated
Other
April Net cash non-cash October
Analysis of net cash - October 2019 2019 flow changes 2019
(unaudited) GBPm GBPm GBPm GBPm
Cash and short-term deposits 35.9 187.9 4.4 228.2
Bank overdraft - (207.5) - (207.5)
------ --------- ---------- --------
Net Cash and overdraft 35.9 (19.6) 4.4 20.7
22. Subsequent events
Brexit
The transition period following the UK's withdrawal from the
European Union came to an end on 31 December 2020. We are now
following the requirements of the EU-UK Trade and Cooperation
Agreement, which was provisionally signed on 30 December 2020.
The operational implications of this for the Group have been
outline in the Chief Executive's Review section of this
announcement.
Covid-19
On 31 October 2020 the UK Government announced a second national
lockdown for England in response to the Covid-19 pandemic to last
from 4 November 2020 to 2 December 2020. As part of this lockdown,
non-essential retailers were required to close, including the
Group's store estate across England. This followed similar measures
affecting the store estate in Wales, Northern Ireland and certain
EU markets.
From December onwards there have been a series of additional
tier-based and national lockdown measures across the UK and EU
markets, as well as wider factors affecting open stores, such as
social distancing measures, and broader economic and health
concerns.
The directors expect a significant negative impact on consumer
demand, at least in the short term. These regional lockdowns
impacted trading in UK, France, Belgium and Ireland, with temporary
store closures leading to 50% of available trading days lost in
November and 25% of available trading days lost in December.
While these continued lockdowns have worsened the immediate
trading environment, the subsequent announcement of a number of
effective vaccines has improved the medium-term outlook, though we
remain cautious on the trading, operational and financial
impacts.
These ongoing changes to the trading environment as a result of
the Covid-19 pandemic are considered to be non-adjusting subsequent
events for the purposes of the interim financial statements, as at
the balance sheet date the prevailing view that a "second wave"
lockdown appeared unlikely.
23. Alternative performance measures
Introduction
The Directors assess the performance of the Group using a
variety of performance measures, some are IFRS, and some are
adjusted and therefore termed "non-GAAP" measures or "Alternative
Performance Measures" ("APMs"). The rationale for using adjusted
measures is explained below. The Directors principally discuss the
Group's results on an "underlying" basis. Results on an underlying
basis are presented before exceptional and other items.
The APMs used in this Interim Report are: underlying gross
profit and margin, underlying operating (loss)/profit and margin,
like-for-like revenue growth, underlying (loss)/profit before tax,
underlying tax expense and underlying effective tax rate,
underlying earnings per share and net cash/debt.
A reconciliation from these non-GAAP measures to the nearest
measure prepared in accordance with IFRS is presented below. The
APMs we use may not be directly comparable with similarly titled
measures used by other companies. There have been no changes in
definitions from the prior period.
Exceptional and other items
The Group's statement of comprehensive income and segmental
analysis separately identify trading results before exceptional and
other items. The Directors believe that presentation of the Group's
results in this way is an alternative analysis of the Group's
financial performance, as exceptional and other items are
identified by virtue of their size, nature or incidence. This
presentation is consistent with the way that financial performance
is measured by management and reported to the Board and the
Executive Committee and assists in providing a relevant analysis of
the trading results of the Group. It is also consistent with the
way that management is incentivised. In determining whether events
or transactions are treated as exceptional and other items,
management considers quantitative as well as qualitative factors
such as the frequency or predictability of occurrence.
Examples of charges or credits meeting the above definition and
which have been presented as exceptional and other items in the
current and/or prior years include:
Exceptional items
-- Acquisitions/disposals of significant businesses and
investments (including related to the joint venture);
-- Impact on deferred tax assets/liabilities for changes in tax rates;
-- Business restructuring programmes;
-- Derecognition of deferred tax assets (including related to the joint venture); and
-- Asset impairment charges and onerous lease provisions.
Other items
-- The movement in the fair value of unrealised financial derivatives; and
-- IFRS 2 charges in respect of Founder Share Plan ('FSP').
In the event that other items meet the criteria, which are
applied consistently from year to year, they are also treated as
exceptional and other items.
Exceptional and other items in this period
The following items have been included within exceptional and
other items for the 26 weeks ended 24 October 2020:
Fair value re-measurement of foreign exchange contracts - 1H21,
FY20 and 1H20 item
The fair value of unrealised financial derivatives is reviewed
at the end of each reporting period and unrealised losses/gains are
recognised in the Group statement of comprehensive income.
The Directors consider unrealised losses/gains to be
'exceptional and other items' due to both their size and nature.
The size of the movement on the fair value of the contracts is
dependent in particular on the spot foreign exchange rate at the
balance sheet date and an assessment of future foreign exchange
volatility applied to the relevant contract currencies; as such the
size of the movements can be substantial. The unrealised foreign
exchange contracts have been entered into in order to achieve an
economic hedge against future payments and receipts and are not a
reflection of historic performance. The Directors do not therefore
consider these unrealised losses/gains to be a reflection of the
trading performance in the period. When contracts mature, the
profit or loss is reflected in underlying profit before tax. Hedge
accounting is not applied to forward contracts.
Restructuring, strategic change and other costs - 1H21, FY20 and
1H20 item
In June 2020, it was announced that the Group would undergo a
restructuring programme which included redundancies in order to
make the Group fit for the future. This resulted in investing in
certain areas of the Group whilst changing the structure and
reporting lines in other areas of the business. This has resulted
in restructuring costs during the period of GBP0.6m. The Directors
consider these to be "exceptional and other" costs due to their
size and their "one-off" nature. These are not considered to be a
reflection of the trading performance in the period.
Store asset impairment and onerous property related contracts
provision - FY20 item
A store asset impairment and onerous property related contracts
provision review was performed during FY20 across the Group's store
portfolio. This resulted in fixed assets, intangible assets and
right of use assets impairment of GBP136.8m on the basis that the
recoverable amount is less than the carrying value. In addition an
onerous property related contracts provision of GBP12.0m has been
recognised, reflecting the shortfall in the net present value of
the future rent obligations within the lease.
No such review has been performed during the current period. The
Directors consider the store impairment and onerous property
related contracts provision to be an "exceptional and other item"
due to the materiality of the charge.
Founder Share Plan ('FSP') - IFRS 2 charge - 1H21, FY20 and 1H20
item
While there are no cost or cash implications for the Group, the
Founder Share Plan ('FSP') falls within the scope of IFRS 2. The
Group has included the IFRS 2 charge and related deferred tax
movement in relation to the FSP within 'exceptional and other
items' for the current and subsequent periods.
The Directors consider the plan to be one-off in nature and
unusual in that the share awards are being funded exclusively by
the Founders. The full year charge for FY21 has been estimated
between GBP0.3m and GBP2m. While the charge is spread over a number
of financial years, the plan is a one-time scheme. Accordingly the
IFRS 2 charge in respect of the FSP is considered to be an
'exceptional and other item' due to the size, nature and incidence
of the scheme. There are no known recent examples within quoted
companies of incentive arrangements operating in a similar way to
the FSP. While unusual in terms of size, the plan is also unusual
with regard to its treatment in what is essentially a personal
arrangement, with no net cost or cash and minimal administrative
burden to the Company. There are no other adjustments anticipated
in respect of the scheme other than the IFRS 2 charge.
Therefore, the Directors consider the charge to be significant
in terms of its potential influence on the readers' interpretation
of the Group's financial performance and not a reflection of the
trading performance in the period.
Underlying gross profit and margin
In the opinion of the Directors, underlying gross profit and
margin are measures which seek to reflect the underlying
performance of the Group that will contribute to long-term
sustainable profitable growth. It is a key internal management
metric for assessing segmental performance. As such, they exclude
the impact of exceptional and other items.
A reconciliation from gross profit, the most directly comparable
IFRS measure, to the underlying gross profit and margin is set out
below.
1H21 1H20 FY20
GBPm GBPm GBPm
-------- ------ ------
Reported revenue 282.7 369.1 704.4
-------- ------ ------
Gross profit 146.2 207.8 377.9
Exceptional and other items - - -
-------- ------ ------
Underlying gross profit 146.2 207.8 377.9
-------- ------ ------
1H21 1H20 FY20
% % %
Gross margin 51.7% 56.3% 53.6%
-------- ------ ------
Underlying gross margin 51.7% 56.3% 53.6%
-------- ------ ------
Underlying operating (loss)/profit and margin
In the opinion of the Directors, underlying operating
(loss)/profit and margin are measures which seek to reflect the
underlying performance of the Group that will contribute to
long-term sustainable profitable growth. The Directors focus on the
trends in underlying operating profit and margins, and it is a key
internal management metric for assessing segmental performance. As
such, they exclude the impact of exceptional and other items.
A reconciliation from operating (loss)/profit, the most directly
comparable IFRS measure, to the underlying operating (loss)/profit
and margin is set out below.
1H21 1H20 FY20
GBPm GBPm GBPm
------- ------- --------
Reported revenue 282.7 369.1 704.4
------- ------- --------
Operating loss (15.3) (0.6) (159.4)
Exceptional and other items 8.3 1.9 125.1
------- ------- --------
Underlying operating (loss)/profit (7.0) 1.3 (34.3)
------- ------- --------
1H21 1H20 FY20
% % %
Operating margin (5.4)% (0.2)% (22.6)%
------- ------- --------
Underlying operating margin (2.5)% 0.4% (4.9)%
------- ------- --------
Like-for-like revenue growth
In the opinion of the Directors, like-for-like revenue growth is
a measure which seeks to reflect the underlying performance of the
Group's stores without the impact of new or closed stores in the
year. The Directors consider this to be an important measure of
Group performance and is consistent with how the business
performance is reported to and assessed by the Board and the
Executive Committee. It is a key internal management metric for
assessing revenue performance. Like-for-like sales growth is
defined as the year-on-year increase in revenue from stores and
concessions open for more than one year, and allowing for store
upsizing of no more than 100% in original trading space, less the
impact of store closures. As such, they exclude the changes to the
store portfolio. This is a new measure in the period following the
change in Directors.
A reconciliation from reported revenue growth, the most directly
comparable IFRS measure, to the like-for-like revenue growth is set
out below.
1H21 1H20 FY20
% % %
Reported retail revenue growth % (19.3%) (11.4%) (19.2)%
-------- -------- --------
Like-for-like store revenue growth
% (30.2%) (11.8%) (14.4)%
-------- -------- --------
Underlying loss before tax
In the opinion of the Directors, underlying loss before tax is a
measure which seeks to reflect the underlying performance of the
Group that will contribute to long-term sustainable profitable
growth. The Directors consider this to be an important measure of
Group performance and is consistent with how the business
performance is reported to and assessed by the Board and the
Executive Committee.
This is a measure used within the Group's incentive plans. Refer
to the Remuneration Report in the Group Annual Report FY20 for
explanation of why this measure is used within incentive plans.
As such underlying loss before tax excludes the impact of exceptional and other items.
A reconciliation from loss before tax, the most directly
comparable IFRS measures, to the underlying loss before tax is set
out below.
1H21 1H20 FY20
GBPm GBPm GBPm
------- ------ --------
Loss before tax (18.9) (4.2) (166.9)
Exceptional and other items 8.3 (1.9) 125.1
------- ------ --------
Underlying loss before tax (10.6) (2.3) (41.8)
------- ------ --------
Underlying tax expense and underlying effective tax rate
In the opinion of the Directors, underlying tax expense is the
total tax charge for the Group excluding the tax impact of
exceptional and other items. Correspondingly, the underlying
effective tax rate is the underlying tax expense divided by the
underlying loss before tax. For interim reporting purposes, we
categorise the prior year items and specific other balances as
discrete items, in the calculation of our underlying effective tax
rate.
These measures are an indicator of the ongoing tax rate of the
Group.
A reconciliation from tax expense, the most directly comparable
IFRS measures, to the underlying tax expense is set out below:
1H21 1H20 FY20
GBPm GBPm GBPm
-------- ------ --------
Loss before tax (18.9) (4.2) (166.9)
Exceptional and other items 8.3 1.9 125.1
Underlying loss before tax (10.6) (2.3) (41.8)
Tax credit/(expense) 3.5 (2.3) 23.5
Exceptional and other items - tax
impact of items included in loss
before tax - (0.1) (0.1)
Exceptional and other items - impact
on deferred tax assets/liabilities
for changes in tax rates (1.5) - (17.3)
-------- ------ --------
Underlying tax credit/(expense) 2.0 (2.4) 6.1
-------- ------ --------
Underlying effective tax rate (18.7%) 19.8% (14.6)%
-------- ------ --------
Underlying EPS
In the opinion of the Directors, underlying earnings per share
is calculated using basic earnings, adjusted to exclude exceptional
and other items net of current and deferred tax. See note 16 for
the Group's underlying EPS.
Net cash/debt
In the opinion of the Directors, net cash/debt is a useful
measure to monitor the overall cash position of the Group. It is
the total of all short and long-term loans and borrowings, less
cash and cash equivalents. See note 18 for the Group's net
cash/(debt) position. This position is exclusive of financial
liabilities in relation to IFRS 16.
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