REG - Frasers Group PLC - Final Results
18/07/2024 07:00
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RNS Number : 8449W Frasers Group PLC 18 July 2024
18 July 2024
FRASERS GROUP PLC ("Frasers Group", "the Group", or "the Company")
Full year results for the 52 weeks ended 28 April 2024 ("FY24")
Sustained profitable growth
Headlines
· Continued strategic progress against key priorities:
1. Profitable growth
· APBT ((1)) of £544.8m (+13.1%), at the top end of our guidance
range (£500-£550m).
· Adjusted EPS ((1)) of 95.8p (+33.6%).
· Continued strong profitable growth - FY25 APBT expected to be
£575m-£625m.
2. Elevation Strategy and brands
· Continued successful execution of Elevation Strategy and
strengthened brand partnerships, including onboarding new brands such as The
North Face, On and Columbia. This contributed to a strong trading performance
especially from Sports Direct, which delivered continuing year-on-year revenue
and gross profit growth.
· The continued strength of third-party brand relationships and
Sports Direct's positioning, are unlocking further international expansion
opportunities. Growing our presence in the Nordics, a joint venture in
Southeast Asia, and currently acquiring a leading sports retailer in the
Netherlands.
3. Integrations and synergies
· Virtual completion of warehouse automation project increased the
efficiency of our warehouse and inventory handling processes resulting in a
£138.2m (8.2%) reduction in gross stock holding year-on-year. This represents
a £266.7m (14.7%) reduction compared to October 2023 and marks significant
progress in reducing the like-for-like gross inventory balance by 5-15% by the
end of the calendar year.
· Successful integration of acquisitions which will improve
efficiency and profitability in coming years.
· Rolling out a new group-wide digital platform, streamlining and
enhancing retail operations and improving consumer experiences across all
digital brand channels.
4. Frasers Plus
· Very encouraging early performance of Frasers Plus. We see a
great deal of potential for Frasers Plus as a new revenue stream and a key
pillar of our brand ecosystem. We have a long-term ambition of £1bn+ in
sales, £600m in balances delivering a greater than 15% yield with over 2
million active Frasers Plus customers - this is excluding any third-party
partnerships.
· Agreed strategic partnership with THG plc ("THG"), post year-end.
The partnership includes the integration of Frasers Plus into THG's Ingenuity
platform, benefiting customers across THG's retail sites. This marks the first
Frasers Plus partnership with an external partner.
5. Strong balance sheet and cash flow
· The Group's strategy is underpinned by a strong balance sheet
with net assets increasing to £1,873.0m even after a £126.4m share buyback
programme in the year.
· Cash inflow from operating activities before working capital
movements of £834.6m, largely driven by strong trading performance
particularly at Sports Direct, down 4.7% year-on-year reflecting the
non-repeat of the £95.0m reversal of legal and regulatory provisions in the
prior year.
Michael Murray, Chief Executive of Frasers Group:
"This has been a break-out year for building Frasers' future growth. As well
as delivering a strong trading performance, particularly from Sports Direct,
we made significant progress with our Elevation Strategy. We expanded our
retail ecosystem, establishing valuable partnerships with new brands. Our
brand relationships have never been stronger, giving us invaluable support as
we continue the international expansion of our business. We invested in
group-wide operational efficiencies in warehouse automation and digital
infrastructure, which we expect to yield a tangible impact as early as
FY25. And we generated new growth opportunities with the rollout of Frasers
Plus, including recently signing our first third party partner in THG.
I'm really proud of what we have achieved at Frasers this year and would like
to thank all colleagues for their continued hard work and our brand partners
for their support. Together, we are building a resilient, profitable growth
retail ecosystem that delivers exceptional value for our partners, consumers
and shareholders. We have built a lot of momentum this year and are entering
the new financial year with many exciting growth opportunities ahead of us,
which we will continue to invest in for the long-term benefit of the
Group."
Outlook
Our successful Elevation Strategy is powering our strong financial
performance, with strategic brand relationships giving us better access to
product across the Frasers Group. As we move into FY25 and the Summer of
Sport, we remain confident that our strategy will drive continued strong
performance, and we expect significant synergies from both our automation
programme and the integration of acquisitions. We continue to build a diverse
business within retail, both in the UK and internationally, and also within
financial services and property, that can deliver sustainable multi-year
profitable growth. For FY25, we expect to achieve another strong increase in
APBT in the range £575m-£625m.
FY24 FY23 ((2)) Change
52 weeks 53 weeks
Income statement summary
UK Sports Retail £2,860.8m £2,959.1m (3.3%)
Premium Lifestyle £1,204.0m £1,218.1m (1.2%)
International Retail £1,289.2m £1,247.7m 3.3%
Retail revenue £5,354.0m £5,424.9m (1.3%)
Property £72.7m £36.1m 101.4%
Financial Services £111.0m £125.0m (11.2%)
Group revenue £5,537.7m £5,586.0m (0.9%)
Retail gross margin 41.8% 41.5% +30 bps
Group gross margin 43.3% 42.9% +40 bps
Retail operating costs (£1,501.0m) (£1,506.7m) 0.4%
Retail profit from trading £738.9m £745.3m (0.9%)
Other operating costs (£73.6m) (£68.8m) (7.0%)
Fair value adjustments to investment properties £11.5m (£6.5m) 276.9%
Gain on disposal of properties £3.5m £95.4m (96.3%)
Group profit from trading £835.6m £908.4m (8.0%)
Depreciation & amortisation (£284.6m) (£242.4m) (17.4%)
Impairments net of impairment reversals/impairments (£21.4m) (£239.7m) 91.1%
Share-based payments (£23.4m) (£19.3m) (21.2%)
Foreign exchange realised £14.4m £31.2m (53.8%)
Exceptional items - £97.1m (100.0%)
Operating profit £520.6m £535.3m (2.7%)
Reported profit before tax ("PBT") from continuing operations £507.0m £638.0m (20.5%)
Exceptional items - (£97.1m)
Result from discontinued operations (£12.5m) £26.4m
Fair value adjustment to derivative financial instruments (£27.6m) (£32.5m)
Fair value losses/(gains) and loss/(profit) on disposal of equity derivatives £68.9m (£41.1m)
Foreign exchange realised (£14.4m) (£31.2m)
Share-based payments £23.4m £19.3m
Adjusted profit before tax ("APBT") ((1)) £544.8m £481.8m 13.1%
Reported basic earnings per share ("EPS") 86.8p 106.9p (18.8%)
Adjusted basic EPS ((1)) 95.8p 71.7p 33.6%
Balance Sheet summary
Property, plant & equipment £962.6m £1,132.0m (15.0%)
Investment property £350.5m £160.0m 119.1%
Inventories (net of provision) £1,355.3m £1,464.9m (7.5%)
Net assets £1,873.0m £1,668.2m 12.3%
Cashflow & capital allocation
Cash inflow from operating activities before working capital £834.6m £875.6m (4.7%)
Net capital expenditure (including sale & leasebacks) (£211.3m) (£214.5m) 1.5%
Purchase of own shares (£126.4m) (£155.3m) 18.6%
Summary of financial performance
· APBT ((1)) increased by 13.1% to £544.8m despite lower profits
from the disposal of properties and subsidiaries (£28.5m in the current
period vs. £113.0m in prior year) and a £12.5m loss in respect of the
Group's acquisition of Matches Fashion (vs. a £26.3m gain on disposal of
Bob's in prior year). Property and acquisition related impairments returned to
more normalised levels in the current year as a result of the strong trading
performance combined with the rationalisation of loss-making stores, and
future forecasts outweighing our downside impairment assumptions (a net
impairment charge of £21.4m in the current period vs. £239.7m charge in the
prior year).
· Retail profit from trading of £738.9m, down 0.9%. A strong
trading performance from Sports Direct reflecting the continuing success of
the Elevation Strategy and strengthening brand relationships, was broadly
offset by expected declines in Game UK and Studio Retail, planned House of
Fraser store closures, and a softer luxury market. The previous year's result
also included the benefit of a 53(rd) week of trading.
· Reported PBT of £507.0m, a decrease of 20.5%. The Group's
trading performance has been offset by a decrease in foreign exchange gains,
non-cash fair value movements on equity derivatives and the non-repeat of
exceptional gains (primarily related to the gain made on businesses acquired
from JD Sports Fashion plc).
· Group:
· Retail revenue decreased by 1.3%. A strong trading performance
from the core Sports Direct business offset the majority of the planned sales
declines in Game UK and Studio Retail, as well as the impact of House of
Fraser store closures and a softer luxury market in Premium Lifestyle.
Excluding the impact of the 53(rd) week from prior year, revenue increased by
0.6%. ((3))
· Group gross margin % increased to 43.3% from 42.9%, driven by an
increase in retail gross margin reflecting improvements in Sports Direct's
product mix as a result of strengthening brand relationships mitigated by the
softer luxury market.
· UK Sports (51.7% of total group revenue):
· Revenue decreased by 3.3% with Sports Direct largely mitigating
planned declines in Game UK and Studio Retail. Excluding the impact of the
53(rd) week from prior year, revenue decreased by 1.5%. ((3))
· Gross profit increased by £28.9m and gross margin increased by
+250 bps to 45.5% reflecting an improved product mix at Sports Direct due to
strengthening brand relationships, as well as reduced lower margin sales from
Game UK and Studio Retail. This contributed to a £13.7m (3.0%) increase in
the segment's profit from trading.
· Premium Lifestyle (21.7% of total group revenue):
· We have invested in a unique proposition in our luxury business
and are well positioned for the future. Our long-term ambitions for this
business remain unchanged, although it is likely that progress will remain
subdued for the short to medium term in the face of a softer market. However,
we view this as an opportunity for continued consolidation in order to further
strengthen our position.
· Revenue decreased by 1.2%, as the impact of planned House of
Fraser store closures and a softer luxury market were partially offset by
sales from the businesses acquired from JD Sports Fashion plc in H2 of FY23.
Excluding the impact of the 53(rd) week from prior year, revenue increased by
0.7%. ((3))
· Segment profit from trading was broadly flat at £137.2m with the
planned clearance of surplus inventory from businesses acquired from JD Sports
Fashion plc and the impact of continuing closures of legacy House of Fraser
stores leading to a 340bps reduction in gross margin to 35.8%. This was offset
by overheads savings arising from the closure of House of Fraser stores and
acquired businesses being integrated into the Group.
· International Retail (23.3% of total group revenue):
· Revenue increased by 3.3% due to growth from the Sports Direct
International business, as well as the acquisition of the MySale business in
Australia in mid FY23. Excluding the impact of the 53(rd) week from prior
year, revenue increased by 5.3%. ((3))
· Segment profit from trading decreased by £23.3m (14.9%) year on
year as gross profit growth (achieved at a lower margin % due to Game Spain
(console sales) and MySale) was more than offset by the one-off costs
associated with integrating acquired businesses (such as Sportmaster in
Denmark), and inflation linked operating cost increases.
· We continue to explore opportunities for growth having invested
in our Indonesian joint venture and expect to complete on the purchase of
Netherlands retailer, Twinsport post year-end.
· Property (1.3% of total group revenue):
· Property investment remains a key focus for the Group, unlocking
occupational demand for our retail business whilst delivering strong property
returns that can be recycled at the appropriate time.
· Revenue increased by 101.4%, largely due to the annualisation of
the prior year acquisitions of Luton, Dundee and Coventry Arena, as well as
the impact of current year acquisitions such as the Castleford shopping
centre.
· Segment profit from trading declined by £58.2m, with the
equivalent result in FY23 including a £95.4m gain on disposal of properties.
· Financial Services (2.0% of total group revenue):
· We see a great deal of potential for Frasers Plus as a new
revenue stream and a key pillar of our compelling brand ecosystem. We are
excited to grow our new Financial Services division with a long-term ambition
of £1bn+ in sales, £600m in balances delivering a greater than 15% yield
with over 2 million active Frasers Plus customers - this is excluding any
third-party partnerships.
· Our focus is to prioritise the growth of our new Frasers Plus
credit offering and reduce the Studio Retail book. As a result of this, and
the planned reduction in sales as Studio Retail was integrated into the
Group's warehouse and ecommerce infrastructure, revenue decreased 11.2%.
· Segment profit from trading decreased £8.2m (12.5%) year-on-year
with the impairment charge returning to normalised levels (following a release
of impairment provision in the prior year as a result of the cost-of-living
crisis being less severe than anticipated) and an increase in overhead costs
arising from the implementation of Frasers Plus.
· Post year-end, we agreed a strategic partnership with THG. The
partnership includes the integration of Frasers Plus into THG's Ingenuity
platform, benefiting customers across THG's retail sites. This marks the first
Frasers Plus partnership with an external partner.
· Basic EPS of 86.8p, a decrease of 20.1p year-on-year. Adjusted
EPS ((1)) of 95.8p, an increase of 24.1p (33.6%) due to increased underlying
profitability, the impact of share buy-backs and a lower effective tax rate.
· Net assets have increased to £1,873.0m from £1,668.2m at 30
April 2023, due to the profitability of the Group offset by share buybacks.
· Cash inflow from operating activities before working capital
movements of £834.6m, largely driven by strong trading performance
particularly in Sports Direct, down 4.7% year-on-year reflecting the
non-repeat of the £95.0m reversal of legal and regulatory provisions in the
prior year.
Acquisitions and investments
· We expect to complete on the purchase of Netherlands retailer,
Twinsport post year-end further supporting our growth ambitions in Europe.
· Launched new joint venture in Indonesia to support our expansion
plans in Southeast Asia.
· Made further strategic investments as the Group continues to
explore opportunities to expand commercial relationships and further develop
the Group's ecosystem.
· Strategic disposal of several non-core properties and
lesser-performing brands, optimising the Group's portfolio and allowing us to
focus on high-growth areas.
Revised segments
Following a review of the Group's operating segments at the start of the
2023/24 financial year, a decision was taken to change the Group's segmental
reporting to more accurately reflect the impact of recent acquisitions and
strategy changes on how management views the business and makes decisions, and
to allow a more granular analysis of the Group's operating base. Further
details are given in note 3 to the financial information below.
Other notes
(1) This is an Alternative Performance Measure. APBT is
reconciled to the equivalent GAAP measure in note 3 to the financial
information. Adjusted EPS is discussed in note 10 to the financial
information.
(2) Restated to reflect the Group's revised segmental
reporting, the reclassification of rental income and the change in accounting
policy regarding the valuation of investment property. Please refer to note 1
of the financial information for details.
(3) A reconciliation to results excluding the 53(rd) week in
prior year can be found in performance review by segment section below.
Enquiries
Andrew Kasoulis
Investor Relations Director
E. andrew.kasoulis@frasers.group
T. 07826 532191
Ronnie Laffar
Group Head of Communications
E. fgpr@frasers.group
T. 07931 841082
Rosie Oddy
Brunswick Group, PR
Advisors
E. frasersgroup@brunswickgroup.com
T. 07557 804 512
CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
Introduction
Reflecting on this past year, I am proud of the strides we have made at
Frasers Group and the disciplined execution of our Elevation Strategy, which
is bringing the business closer to where we want to be for our consumers,
people, brand partners, and shareholders. Despite macro-economic challenges,
we continue to remain focused on delivering our Elevation Strategy and further
building our brand ecosystem across attractive segments. Given the scale of
growth the Frasers Group has experienced in recent years, it is more important
than ever to ensure we keep our business simple. With this in mind, from FY24,
we have clearly defined our segments as UK Sports Retail, Premium Lifestyle,
International Retail, Property and Financial Services to best illustrate our
focus areas. FY24 has been an exceptional year. We have delivered a strong
financial performance thanks in part to the breadth of our business across
these segments, and affirming the Frasers equity story: best brands, diverse
growth, and cash compounder.
Best Brands
· Our brand relationships are stronger than they have ever been,
unlocking selectively distributed products from the world's best brands.
· Continued commitment to the Elevation Strategy reaffirms our new
positioning, creating more opportunities and securing the Group in markets
with high barriers to entry.
· The strength of our ecosystem positions us as a key strategic
wholesale partner for the world's best brands, giving them access to new
consumers, an elevated omni-channel experience, and an aligned wholesale
strategy.
Diverse Growth
· While Sport has always and continues to be a core tenet of the
business, we have exciting profitable growth opportunities across a diverse
range of segments including differentiated retail and international
opportunities and, most recently, property and financial services.
· A focus on leveraging these new revenue streams for the Group
whilst fixating on profitable growth.
Cash Compounder
· Frasers Group is highly cash generative and a cash compounder,
consistently generating new and diverse profit growth opportunities.
· The business has delivered £3.7bn in operating cash over the
last 9 years which has been reinvested, funding the Elevation Strategy which
started in 2016, and delivered great value for all stakeholders whilst
maintaining consistently low leverage.
· This impressive cash compounder model is supported by
conservative, consistent and simple accounting principles.
Financials
We have seen strong trading momentum across much of our diversified portfolio,
especially in Sports Direct, underscoring the resilience of our operations and
the strength of our business. We continue our practice of adopting
conservative, consistent, and simple accounting principles. This disciplined
approach to our balance sheet ensures that stakeholders have a transparent
view of the value creation within the business.
Our financial performance has been robust, with our cash compounder model
driving significant returns. We maintained strong financials across our
diverse growth sectors, including Retail across multiple sectors,
international markets, Property, and Financial Services. Our commitment to a
strong balance sheet provides a solid foundation for future growth and
stability, positioning us well to capitalise on emerging opportunities.
Key financial metrics include:
· UK Sports segment gross margin increased 250bps to 45.5%
demonstrating the strength of our proposition and brand relationships, and
improving product access.
· Adjusted PBT ((1)) increased to £544.8m (13.1%) driven
particularly by Sports Direct, and more normalised impairment levels as
results and forecasts outperform downside assumption scenarios.
· Reported PBT of £507.0m, a decrease of 20.5%. The Group's
trading performance has been offset by a decrease in foreign exchange gains,
non-cash fair value movements on equity derivatives and the non-repeat of
exceptional gains (primarily related to the gain made on businesses acquired
from JD Sports Fashion plc).
· Adjusted EPS ((1)) up 33.6% to 95.8p due to improved
profitability supported by the significant share buy-back programme in the
year and lower effective tax rate.
· Net assets have increased 12.3% to £1.9bn.
· £126.4m of capital returned to shareholders by way of share
buy-backs in the year.
· Very strong cash inflow from operating activities before working
capital movements of £834.6m versus the prior year of £875.6m, which
included £95.0m of legal and regulatory provision reversals not repeated in
the current year.
· Continued self-funded growth of the Group and investment in the
Elevation Strategy with leverage remaining consistently low.
Retail
Our mission at Frasers Group is to build the planet's most admired and
compelling brand ecosystem. We obsess over our relationships with the best
brands across Sport, Premium and Luxury. Part of the strength of our ecosystem
is its diversity: no single brand supplier represents more than 15% of our
total Group sales. Our brand portfolio is strengthened by an ever-evolving
roster of new brands, such as The North Face, ON, Salomon, Columbia and Alo
Yoga, which we have onboarded this year. Importantly, this is underpinned by
Frasers' owned brands, which generate higher gross margin for the Group. This
brand mix not only provides consumers with a wide selection of products across
sectors but also provides varied price points to serve different consumer
groups. As brands continue to evaluate their direct-to-consumer model,
wholesale partners are becoming increasingly imperative. Our Elevation
Strategy has enabled clear alignment with the world's best brands making us a
key strategic partner and presenting us with greater opportunities.
The mutual value of our brand relationships came to life at the Frasers
Festival held in May, where over 40 of our strategic brand partners joined us
for two days to celebrate and foster collaboration. We had founders and CEOs
join us from the world's biggest brands, such as Kevin Plank, Founder and CEO
of Under Armour, Bjørn Gulden, CEO of adidas, Daniel Grieder, CEO of Hugo
Boss, Marc Maurer, Co-CEO of ON, and more. It was fantastic to celebrate our
achievements together and their endorsement of Frasers Festival 2024 truly
demonstrated their trust in the repositioning of our business and their
alignment to-- our vision.
Sports Direct continues to reinforce its position as an undisputed leader in
Sport. The Sport industry is not slowing down; high consumer demand, coupled
with our unique proposition continues to drive profitable growth for the
division. In FY24, we have built on our strong foundations with the successful
roll-out of new elevated stores, experiential-led flagship store openings and
best-in-class category concepts. We will continue to invest significantly in
our store estate over the coming years, always ensuring our robust payback
model for store investment is adhered to. In line with our international
expansion ambition, we have made meaningful progress with acquiring the
intellectual property of sporting goods retailers Perry Sport, and Atkiesport,
and contracted to acquire Twinsport post year-end - which now makes us the #1
top Sport retailer in Benelux. We have increased our equity investment in
Norwegian sports retailer, XXL and remain close to agreeing a strategic
partnership to further develop our presence across the Nordics. We are also
excited about our joint venture with international retail giant, PT MAP
Active, having already opened 3 stores in Indonesia. We will be further
growing our presence across Southeast Asia and are very excited about the
opportunities that arise from this partnership.
While Sport moves from strength-to-strength, our Premium and Luxury division
experienced the softening of the global luxury market felt by most high-end
retailers and brands. We made the difficult but necessary decision to put
MATCHES into administration once it became clear that too much further
investment would be required to sustain the business. Following an extensive
process by the Joint Administrators, we reached an agreement to acquire
certain intellectual property assets. We remain committed to the luxury market
and, whilst the environment is likely to remain challenging for the
medium-term, we are confident in our well-invested and differentiated
proposition with FLANNELS; we have strong relationships with key brand
partners and remain well-placed to capitalise on longer-term opportunities. In
our Premium division, we have made good progress on consolidating the House of
Fraser store estate and introduced other Frasers Group fascias to make the
retail space more productive whilst increasing the product offering for the
consumer. This new retail model with more of our concepts under one roof is
proving hugely attractive and is a commercial way to incorporate multiple
fascias together.
Over the last 12 months, we have made excellent progress on our warehouse
automation programme across our supply chain, which is set to transform our
Group-wide retail operations. The project is now 99% complete and already
enabling further Group efficiencies and synergies, and we have already made
significant headway rationalising our stock holding by £138.2m year-on-year.
This improvement in our operations enables us to accelerate the integrations
of acquisitions, unlocking potential for the years ahead by reducing warehouse
locations, systems and infrastructure costs and, ultimately, increasing
profitability. Finally, we are nearing completion of the integration of
several acquisitions, including Studio Retail, Sportmaster and GAME which we
expect to produce further efficiency and profitability improvements once
completed.
Our strong infrastructure has been a key enabler for the elevation of our
digital platform. Earlier this year, we started the overhaul of our digital
offering with the creation of a cutting-edge platform that is transforming the
consumer e-commerce experience through personalisation and better product
discoverability, building on our operational efficiencies and improvements. To
complement our international expansion, we launched 10 new localised Sports
Direct websites this year, which allows us to unlock the strong demand across
Europe, and we are looking forward to scaling this further.
Strategic investments
Building a compelling brand ecosystem requires a dynamic M&A strategy
which is central to the Group's DNA. Starting with one store in 1982, the
Group has grown to over £5 billion in sales across a number of diverse
sectors and countries, nearly all of which have been acquired as part of our
ongoing M&A strategy. We regularly review our investment portfolio to
ensure it is diverse and resilient, but also conducive to synergies and future
growth as demonstrated by our recently increased investment in Hugo Boss. We
are and always have been incredibly supportive of Hugo Boss' strategy and work
closely with the management team to bring synergies for both businesses. It is
our intention to remain a long-term and supportive shareholder.
Property
Frasers Group occupies over 20 million square feet of stores, warehouses, and
office space. Actively managing this vast estate is essential, and our
presence in large towns and cities often exceeds 150,000 square feet. Our
unique advantage lies in our deep understanding of trading data, enabling us
to effectively underwrite our occupational demand, giving us an edge over
other investors. This insight has unlocked numerous opportunities to acquire
property assets at attractive prices.
By leveraging these acquisitions, we not only fulfil our retail representation
requirements but also drive additional footfall, enhance the tenant mix, and
ultimately increase the value of our assets. When market conditions are
favourable, we maintain the flexibility to sell these assets, capturing the
value created and redeploying the proceeds across the Group. In FY24, we
successfully executed property acquisitions totalling £91.0m and completed
£12.1m of disposals. As we move forward, we remain vigilant in monitoring
further opportunities to expand and optimise our portfolio.
Financial Services
We are incredibly optimistic about our Financial Services proposition, further
expanding our diverse ecosystem. The platform evolves our capability, allowing
us to better understand our consumers cross-fascia, streamline the consumer
experience with a one-click checkout, and reward our most loyal consumers.
Our improved capabilities support the continued success of Frasers Plus - our
FCA-regulated credit payment account and rewards product - which is changing
how consumers shop across the Group's brands and third-party platforms. The
early performance of Frasers Plus has been very encouraging, as it is an
attractive product for consumers, and has driven a rise in spending across
categories and segments, and Average Order Value above where we initially
forecasted.
After a promising early uptake from our consumers within Frasers Group, which
generated invaluable consumer insights and data that will help us better serve
our consumers, we entered our first external Frasers Plus partnership with
THG. Frasers Plus will be integrated into THG's Ingenuity platform, benefiting
consumers across THG retail sites and unlocking new growth opportunities for
the business by recruiting new consumers and offering existing Frasers Plus
members exciting new products.
We see a great deal of potential for Frasers Plus as a new revenue stream and
a key pillar of our compelling brand ecosystem. We are excited to grow our new
Financial Services division with a long-term ambition of £1bn+ in sales,
£600m in balances delivering a greater than 15% yield with over 2 million
active Frasers Plus customers - this is excluding any third-party
partnerships.
Our teams
Our people are our best and most important asset - whether on the shop floor,
in our warehouse, or at head office - and we're always looking for new ways to
inspire and drive them. That's why we hosted our second Frasers Festival in
May, which brought together over 1,500 of our top-performing colleagues from
across the world. The day aimed to inspire, connect and motivate our teams
through fitness challenges, brand activations and panel talks from global
brand leaders. Feedback from employees has been overwhelmingly positive as we
head into a busy summer period. We strongly believe that rewarding colleagues
for their contribution is crucial, which is why our Fearless 1000 bonus scheme
recognises and rewards the Group's top 1,000 performers. We also introduced
'Retail Reconnect' for Head Office staff whereby they spend two days a year in
either a Retail or Warehouse environment. The experience drives collaboration
and a better understanding of the demands facing our Retail and Warehouse
teams, as well as an understanding of our consumers. We're already reaping the
benefits of this initiative and seeing greater cohesion among our people.
Continued focus on environmental, social, and governance
This year, we introduced Frasers Group's global Sustainability framework
against which we benchmark and measure our ESG progress and impact. We have
made significant strides against our ESG framework, underpinning our
dedication to environmental stewardship and social responsibility. While we
have made progress we can be proud of, we recognise that meaningful change
will take time and that we are at the beginning of a long journey.
We're in the process of completing our global carbon footprint audit for FY24,
which demonstrates our commitment to transparency and continuous improvement.
Our collaborative efforts with brand partners have optimised shipping,
significantly increased efficiency and reduced our carbon footprint. We have
also focused on reducing our reliance on single-use plastics, as well as
saving over 2-million hangers from disposal to keep them in circulation for
longer. We have implemented energy-saving initiatives, including voltage
optimisation projects and LED installations, which led to a noteworthy
reduction in energy consumption.
Outlook
As I mark two years as Chief Executive at Frasers Group, I want to extend my
gratitude and thanks to every member of the Frasers Group team, our Board of
Directors, investors, and partners. Your ongoing commitment and support drive
us forward every day, and here's to continuing our shared success in the years
to come.
Looking ahead to FY25, we are confident that our strategy will continue to
drive strong trading, bolstered by a Summer of Sport, the integration of
recent acquisitions and synergies from our automation programme. We also
expect to reduce the like-for-like gross inventory balance by 5% to 15% by the
end of the calendar year, and have already made significant progress. We're
continuing to build a diversified and global retail business for sustained
multi-year growth and expect to achieve another significant increase in FY25
APBT in the range £575m-£625m.
Michael Murray
Chief Executive Officer
17 July 2024
PERFORMANCE OVERVIEW
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
((1))
Retail revenue £5,354.0m £5,424.9m
Total revenue £5,537.7m £5,586.0m
Retail gross profit £2,239.9m £2,252.0m
Group gross profit £2,395.2m £2,395.0m
Retail gross margin 41.8% 41.5%
Group gross margin 43.3% 42.9%
Retail profit from trading £738.9m £745.3m
Group profit from trading £835.6m £908.4m
Reported profit before tax ("PBT") from continuing operations £507.0m £638.0m
Adjusted profit before tax ("APBT") ((2)) £544.8m £481.8m
Reported basic earnings per share ("EPS") 86.8p 106.9p
Adjusted basic EPS ((2)) 95.8p 71.7p
Net assets £1,873.0m £1,668.2m
Cash inflow from operating activities before working capital £834.6m £875.6m
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
(2) This is an Alternative Performance Measure. APBT is reconciled to the
equivalent GAAP measure in note 3 to the financial information. Adjusted EPS
is discussed in note 10 to the financial information.
The Directors have adopted Alternative Performance Measures (APM's). APM's
should be considered in addition to UK-Adopted International Accounting
Standards ("UK IAS") measures. The Directors believe that Adjusted profit
before tax ("APBT") and Adjusted basic EPS provide further useful information
for shareholders on the underlying performance of the Group in addition to the
reported numbers and are consistent with how business performance is measured
internally. They are not recognised profit measures under UK IAS and may not
be directly comparable with "adjusted" or "alternative" profit measures used
by other companies.
Retail revenue decreased by 1.3%. A strong trading performance from the core
Sports Direct business has offset the majority of the planned sales declines
in Game UK and Studio Retail, as well as the impact of House of Fraser store
closures and a softer luxury market in Premium Lifestyle. Excluding the impact
of the 53rd week from prior year, retail revenue increased by 0.6%. Total
group revenue decreased by 0.9% with growth in the property segment partially
mitigating declines in Retail and Financial Services. Excluding the impact of
the 53rd week from prior year, total revenue increased by 1.0%.
Group gross margin % increased to 43.3% from 42.9%, driven by an increase in
retail gross margin reflecting improvements in Sports Direct's product mix as
a result of strengthening brand relationships mitigated by the softer luxury
market.
Retail profit from trading of £738.9m, down 0.9%. A strong trading
performance from Sports Direct reflecting the continuing success of the
Elevation Strategy and strengthening brand relationships, was broadly offset
by expected declines in Game UK and Studio Retail, planned House of Fraser
store closures, and a softer luxury market. The previous year's result also
included the benefit of a 53(rd) week of trading.
APBT ((2)) increased by 13.1% to £544.8m despite lower profits from the
disposal of properties and subsidiaries (£28.5m in the current period vs.
£113.0m in prior year) and a £12.5m loss in respect of the Group's
acquisition of Matches Fashion (vs. a £26.3m gain on disposal of Bob's in
prior year). Property and acquisition related impairments returned to more
normalised levels in the current year as a result of the strong trading
performance combined with the rationalisation of loss-making stores, and
future forecasts outweighing our downside impairment assumptions (a net
impairment charge of £21.4m in the current period vs. £239.7m charge in the
prior year).
Reported PBT of £507.0m, a decrease of 20.5%. The Group's trading performance
has been offset by a decrease in foreign exchange gains, non-cash fair value
movements on equity derivatives (which have moved from a £41.1m gain in FY23
to a loss of £68.9m in FY24 and account for a significant portion of the
year-on-year decline in statutory PBT) and the non-repeat of exceptional gains
(primarily related to the gain made on businesses acquired from JD Sports
Fashion plc).
Basic EPS of 86.8p, a decrease of 20.1p year-on-year. Adjusted EPS ((2)) of
95.8p, an increase of 24.1p (33.6%) due to increased underlying profitability,
the impact of share buy-backs and a lower effective tax rate.
Net assets have increased to £1,873.0m from £1,668.2m at 30 April 2023, due
to the profitability of the Group offset by share buybacks.
Cash inflow from operating activities before working capital movements of
£834.6m, largely driven by strong trading performance particularly in Sports
Direct, down 4.7% year-on-year reflecting the non-repeat of the £95.0m
reversal of legal and regulatory provisions in the prior year.
REVIEW BY BUSINESS SEGMENT
UK SPORTS
This segment now includes the results of the Group's core sports retail store
operations in the UK, plus all the Group's sports retail online business,
other UK-based sports retail and wholesale operations, GAME UK stores and
online operations, retail store operations in Northern Ireland, Frasers
Fitness, and the Group's central operating functions (including the Shirebrook
campus).
UK Sports accounts for 51.7% (FY23: 53.0%) of the Group's revenue.
52 weeks ended 53 weeks ended Pro-forma 52 weeks ended April 2023
28 April 2024
30 April 2023((1))
Revenue £2,860.8m £2,959.1m £2,903.3m
Cost of sales (£1,558.5m) (£1,685.7m) (£1,653.9m)
Gross profit £1,302.3m £1,273.4m £1,249.4m
Gross margin % 45.5% 43.0% 43.0%
Trading result £468.4m £454.7m £446.1m
Operating profit £353.1m £328.3m £322.1m
Store numbers 797 812
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
Revenue decreased by 3.3% with Sports Direct largely mitigating planned
declines in Game UK and Studio Retail. Excluding the impact of the 53rd week
from prior year, revenue decreased by 1.5%.
Gross profit increased by £28.9m and gross margin increased by +250 bps to
45.5% reflecting an improved product mix at Sports Direct due to strengthening
brand relationships, as well as reduced lower margin sales from Game UK and
Studio Retail. This contributed to a £13.7m (3.0%) increase in the segment's
profit from trading.
UK Sports' operating profit result of £353.1m (FY23: £328.3m) includes
impairment reversals of £8.4m (FY23: impairments of £25.1m), a result of the
strong trading performance, and future forecasts outweighing our downside
impairment assumptions, and foreign exchange gains of £9.2m (FY23: £35.8m).
Store numbers decreased from 812 to 797 mainly driven by the replacement of
standalone Game stores with Game concessions situated inside larger Sports
Direct stores.
PREMIUM LIFESTYLE
This segment includes the results of the Group's premium and luxury retail
businesses FLANNELS, Cruise, Van Mildert, Jack Wills, House of Fraser, Gieves
and Hawkes, and Sofa.com along with the related websites, the businesses
acquired from JD Sports in FY23, as well as the results from the I Saw it
First website and the Missguided website until the disposal of the Missguided
intellectual property in October 2023.
Premium Lifestyle accounts for 21.7% (FY23: 21.8%) of the Group's revenue
52 weeks ended 53 weeks ended Pro-forma 52 weeks ended April 2023
28 April 2024
30 April 2023((1))
Revenue £1,204.0m £1,218.1m £1,195.1m
Cost of sales (£773.2m) (£741.0m) (£727.0m)
Gross profit £430.8m £477.1m £468.1m
Gross margin % 35.8% 39.2% 39.2%
Trading result £137.2m £134.0m £131.5m
Operating profit £98.6m £91.0m £89.3m
Store numbers 181 221
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
Revenue decreased by 1.2%, as the impact of planned House of Fraser store
closures and a softer luxury market were partially offset by sales from the
businesses acquired from JD Sports Fashion plc in H2 of FY23. Excluding the
impact of the 53(rd) week from prior year, revenue increased by 0.7%.
Segment profit from trading was broadly flat at £137.2m with the planned
clearance of surplus inventory from businesses acquired from JD Sports Fashion
plc and the impact of continuing closures of legacy House of Fraser stores
leading to a 340bps reduction in gross margin to 35.8%. This was offset by
overheads savings arising from the closure of House of Fraser stores and
acquired businesses being integrated into the Group.
Premium Lifestyle's operating profit result of £98.6m (FY23: £91.0m)
includes impairments of £2.5m (FY23: impairments of £56.9m including £20.5m
in respect of writing down intangibles recognised on the acquisition of
Missguided and I Saw it First).
We have invested in a unique proposition in our luxury business and are well
positioned for the future. Our long-term ambitions for this business remain
unchanged, although it is likely that progress will remain subdued for the
short to medium term in the face of a softer market. However, we view this as
an opportunity for continued consolidation in order to further strengthen our
position.
Store numbers decreased from 221 to 181 as we continued to rationalise the
House of Frasers store estate and close unprofitable stores in the businesses
acquired from JD Sports Fashion plc in H2 of FY23.
INTERNATIONAL RETAIL
This segment includes the results all of the Group's sports retail stores,
management and operating functions in Europe, Asia and the rest of the world,
including the Group's European Distribution Centres in Belgium and Austria,
GAME Spain stores and e-commerce offering, the Baltics & Asia e-commerce
offerings, the MySale business in Australia, the Group's US retail operations
until they were disposed of in 2022, and all non-UK based wholesale and
licensing activities (relating to brands such as Everlast, Karrimor and
Slazenger).
International accounts for 23.3% (FY23: 22.3%) of the Group's revenue.
52 weeks ended 53 weeks ended Pro-forma 52 weeks ended April 2023
28 April 2024
30 April 2023((1))
Revenue £1,289.2m £1,247.7m £1,224.2m
Cost of sales (£782.4m) (£746.2m) (£732.1m)
Gross profit £506.8m £501.5m £492.1m
Gross margin % 39.3% 40.2% 40.2%
Trading result £133.3m £156.6m £153.6m
Operating profit/(loss) £44.1m (£11.3m) (£11.1m)
Store numbers 575 597
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
Revenue increased by 3.3% due to growth from the Sports Direct International
business, as well as the acquisition of the MySale business in Australia in
mid FY23. Excluding the impact of the 53(rd) week from prior year, revenue
increased by 5.3%.
Segment profit from trading decreased by £23.3m (14.9%) year on year as gross
profit growth (achieved at a lower margin % due to Game Spain (console sales)
and MySale) was more than offset by the one-off costs associated with
integrating acquired businesses (such as Sportmaster in Denmark), and
inflation linked operating cost increases.
International's operating profit result of £44.1m (FY23: loss of £11.3m)
includes impairments of £12.5m (FY23: impairments of £133.8m, including
£87.9m in respect of intangible assets allocated to the Everlast CGU) and
foreign exchange gains of £0.3m (FY23: losses of £4.7m).
We continue to explore opportunities for growth having invested in our
Indonesian joint venture and expect to complete on the purchase of Netherlands
retailer, Twinsport post year-end.
Store numbers decreased from 597 to 575 as we continued to evaluate our stores
at lease expiries and breaks, to rationalise the store international store
portfolio.
PROPERTY
This segment includes the results from the Group's freehold property owning
and long leasehold holding property companies that generate third party rental
and other property related income (e.g., car parking, conference and events
income). The results of the Coventry Arena are reported in this segment.
Property accounts for 1.3% (FY23: 0.6%) of the Group's revenue.
52 weeks ended 53 weeks ended Pro-forma 52 weeks ended April 2023
28 April 2024
30 April 2023((1))
Revenue £72.7m £36.1m £35.4m
Cost of sales (£7.8m) (£2.6m) (£2.6m)
Gross profit £64.9m £33.5m £32.8m
Gross margin % 89.3% 92.8% 92.7%
Trading result £39.1m £97.3m £95.5m
Operating (loss)/profit (£31.3m) £37.4m £36.7m
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
Revenue increased by 101.4%, largely due to the annualisation of the prior
year acquisitions of Luton, Dundee and Coventry Arena, as well as the impact
of current year acquisitions such as the Castleford retail park retail park.
Segment profit from trading declined by £58.2m, with the equivalent result in
FY23 including a £95.4m gain on disposal of properties.
Property's operating loss of £31.3m (FY23: profit of £37.4m) includes a net
impairment charge of £14.8m (FY23: impairments of £23.9m), fair value gains
on investment property £11.5m (FY23: fair value loss of £6.5m) and
depreciation of £60.2m (FY23: £36.0m).
Property investment remains a key focus for the Group, unlocking occupational
demand for our retail business whilst delivering strong property returns that
can be recycled at the appropriate time.
FINANCIAL SERVICES
This segment includes the results of Frasers Group Financial Services. This
includes interest charged on amounts advanced to consumer credit customers,
along with the associated impairment and operating costs.
Financial Services accounts for 2.0% (FY23: 2.2%) of the Group's revenue.
52 weeks ended 53 weeks ended Pro-forma 52 weeks ended April 2023
28 April 2024
30 April 2023((1))
Revenue £111.0m £125.0m £122.6m
Impairment losses on credit receivables (£20.6m) (£15.5m) (£15.2m)
Gross profit £90.4m £109.5m £107.4m
Gross margin % 81.4% 87.6% 87.6%
Trading result £57.6m £65.8m £64.6m
Operating profit £56.1m £89.9m £88.2m
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
Our focus is to prioritise the growth of our new Frasers Plus credit offering
and reduce the Studio Retail book. As a result of this, and the planned
reduction in sales as Studio Retail was integrated into the Group's warehouse
and ecommerce infrastructure, revenue decreased 11.2%.
Segment profit from trading decreased £8.2m (12.5%) year-on-year with the
impairment charge returning to normalised levels (following a release of
impairment provision in the prior year as a result of the cost-of-living
crisis being less severe than anticipated) and an increase in overhead costs
arising from the implementation of Frasers Plus.
We see a great deal of potential for Frasers Plus as a new revenue stream and
a key pillar of our compelling brand ecosystem. We are excited to grow our new
Financial Services division with a long-term ambition of £1bn+ in sales,
£600m in balances delivering a greater than 15% yield with over 2 million
active Frasers Plus customers - this is excluding any third-party
partnerships.
Post year-end, we agreed a strategic partnership with THG plc ("THG"), post
year-end. The partnership includes the integration of Frasers Plus into THG's
Ingenuity platform, benefiting customers across THG's retail sites. This marks
the first Frasers Plus partnership with an external partner.
DISCONTINUED OPERATION
52 weeks ended 53 weeks ended
28 April 2024
30 April 2023((1))
Result from discontinued operation (net of tax) (£12.5m) £26.3m
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
On 20 December 2023, the Group acquired the Matches business ("Matches") from
MF Intermediate Limited, by way of the purchase of 100% of the shares of a
group of 6 companies (of which MatchesFashion Limited was the main trading
subsidiary) and the acquisition of the senior and junior debt owed by those
companies. The consideration payable was £51.9m.
Following the acquisition, the Group provided significant funding to Matches
but the business continued to generate material trading losses. As a result of
this, management concluded that the funding requirements of the business would
be far in excess of amounts that the Group considers to be viable and on 8
March 2024 administrators were appointed. Since the Group lost control of
Matches upon the administrators' appointment, its net assets (including the
associated goodwill) were derecognised and the loans due to the Group from
Matches were recognised at this point, net of a provision for expected credit
loss.
The £12.5m loss from discontinued operation reflects a trading loss of £8.4m
for the period during which Matches was a subsidiary of the Group and £4.1m
loss on disposal, reflecting the difference between the carrying value of the
net assets at the point the Group ceased to control Matches and the recoveries
expected from the administration.
In the period between the administrators' appointment and 28 April 2024, the
Group purchased the brand names and intellectual property of Matches for
£20.0m, with the consideration payable being treated as a reduction in the
amounts owed to the Group by Matches.
In the prior period, the Group disposed of its US retail businesses trading as
Bobs Stores and Eastern Mountain Sports for net cash consideration of
approximately £43.6m. The £26.3m profit from discontinued operation reflects
a break even trading performance (after tax) for the period during which these
businesses were subsidiaries of the Group and a £26.3m gain on disposal.
FINANCIAL REVIEW
The consolidated financial statements for the 52 weeks ended 28 April 2024 are
presented in accordance with UK-adopted International Accounting Standards (UK
IAS).
SUMMARY OF RESULTS
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
((1))
Revenue £5,537.7m £5,586.0m
Reported profit before tax £507.0m £638.0m
Adjusted PBT ((2)) £544.8m £481.8m
Reported basic EPS 86.8p 106.9p
Adjusted basic EPS ((2)) 95.8p 71.7p
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
(2) This is an Alternative Performance Measure. APBT is reconciled to the
equivalent GAAP measure in note 3 to the financial information. Adjusted EPS
is discussed in note 10 to the financial information.
FOREIGN EXCHANGE AND TREASURY
The Group reports its results in GBP but trades internationally and is
therefore exposed to currency fluctuations on currency cash flows in various
ways. These include purchasing inventory from overseas suppliers, making sales
in currencies other than GBP and holding overseas assets in other currencies.
The Board mitigates the cash flow risks associated with these fluctuations
with the careful use of currency hedging using forward contracts and other
derivative financial instruments.
The Group uses forward contracts that qualify for hedge accounting in two main
ways - to hedge highly probable EUR sales income and USD inventory purchases.
This introduces a level of certainty into the Group's planning and forecasting
process. Management has reviewed detailed forecasts and the growth assumptions
within them and is satisfied that the forecasts meet the criteria for being
highly probable forecast transactions.
As at 28 April 2024, the Group had the following forward contracts and bought
options that qualified for hedge accounting under IFRS 9 Financial Instruments
("IFRS 9"), meaning that fluctuations in the value of the contracts before
maturity are recognised in the Hedging Reserve through Other Comprehensive
Income. After maturity, the sales and purchases are then valued at the hedge
rate.
Currency Hedging against Currency value Timing Rates
USD / GBP USD Inventory Purchases USD 275m FY25 1.31
EUR / GBP Euro sales EUR 456m FY25-FY26 0.98-1.08
The Group also uses currency options, swaps and spots for more flexibility
against cash flows that are less than highly probable and therefore do not
qualify for hedge accounting under IFRS 9. The fair value movements before
maturity are recognised in the Income Statement.
The Group has the following sold currency options and unhedged forwards:
Currency Expected use Currency value Timing Rates
USD / GBP USD inventory purchases USD 240m FY25 1.26 - 1.31
USD / EUR USD inventory purchases USD 95m FY25 1.04 - 1.31
EUR / GBP Euro sales EUR 1,056m FY25 - FY27 0.98 - 1.15
The Group is proactive in managing its currency requirements. The Treasury
team works closely with senior management to understand the Group's plans and
forecasts and discusses and understands appropriate financial products with
various financial institutions, including those within the Group Financing
Facility. This information is then used to implement suitable currency
products to align with the Group's strategy.
Regular reviews of the hedging performance are performed by the Treasury team
alongside senior management to ensure the continued appropriateness of the
currency hedging in place and, where suitable, to implement additional
strategies and or restructure existing approaches, in conjunction with our
financial institution partners.
Given the potential impact of commodity prices on raw material costs, the
Group may hedge certain input costs, including cotton, crude oil and
electricity.
EARNINGS
Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the financial period. Shares held in
Treasury and the Employee Benefit Trust are excluded from this figure.
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023 ((1))
Reported EPS (Basic) 86.8p 106.9p
Adjusted EPS (Basic) ((2)) 95.8p 71.7p
Weighted average number of shares (actual) 438,504,703 459,911,330
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
(2) This is an Alternative Performance Measure. Adjusted EPS is discussed in
note10 to the financial information.
Basic EPS of 86.8p, a decrease of 20.1p year-on-year. Adjusted EPS ((2)) of
95.8p, an increase of 24.1p (33.6%) due to increased underlying profitability,
the impact of share buy-backs and a lower effective tax rate.
DIVIDENDS & SHARE BUYBACKS
The Board has decided not to pay a final dividend in relation to FY24 (FY23:
£nil). The Board remains of the opinion that it is in the best interests of
the Group and its shareholders to preserve financial flexibility and
facilitate future investments and other growth opportunities. The payment of
dividends remains under review.
The Group's share buyback programme has continued during the year which is a
demonstration of our commitment to shareholder returns, our confidence in our
strategy and our potential for future growth. Share buy-backs totalled
£126.4m (FY23: £155.3m).
CAPITAL EXPENDITURE
During the period, gross capital expenditure (excluding IFRS 16) amounted to
£267.2m (FY23: £468.4m - this figure was inflated as a result of the sale
and leaseback transaction entered into in the prior year).
STRATEGIC INVESTMENTS
The Group continues to hold various strategic investments as detailed in note
15. In addition, the Group also holds indirect strategic investments within
contracts for difference and options.
On initial application of IFRS 9 the Group made the irrevocable election to
account for long term financial assets (i.e., strategic investments) at fair
value through other comprehensive income (FVOCI) given these are not held for
trading purposes. The election is made on an instrument-by-instrument basis,
only qualifying dividend income is recognised in profit and loss, changes in
fair value are recognised within OCI and never reclassified to profit and
loss, even if the asset is impaired, sold or otherwise derecognised.
The fair values of the contracts for difference and options are recognised in
Derivative Financial Assets or Liabilities on the Group's Balance Sheet, with
the movement in fair value recorded in the Income Statement.
The Frasers Group's strategic investment strategy is a key enabler in the
growth and success of the Group and is in the ordinary course of business.
ACQUISITIONS
The Group acquired a number of businesses during the period.
RELATED PARTIES
Relationship Between Frasers Group plc and Mike Ashley
Mike Ashley opened his first sports shop in 1982 and built the Frasers Group
into a multi-billion-pound retailer over the next forty years. The Group was
initially floated on the London Stock Exchange in 2007 and following continued
growth Mike stepped down as CEO in 2022. He also stepped down from the Board
of Directors in 2022 and has no day-to-day involvement or responsibility for
the strategic direction of the Group or any Board matters.
However, given his extensive involvement in leading the business for over
forty years, the Board has an agreement with Mr Ashley, through his own
company MASH Holdings Limited, which provides for management to seek his
expertise in discrete areas where he has specific knowledge, for example in
warehousing, logistics or strategic relationships with the supply chain. He
does not receive any remuneration for providing this advice to management and
has no decision-making powers.
TAXATION
Total tax contribution
The effective tax rate on profit before tax in FY24 was 21.8% (FY23 restated:
24.0%). The Group has contributed approximately £500m (FY23: £469m) in taxes
paid and collected during the year. Taxes paid by the Group of approximately
£220m (FY23: £204m) are primarily business rates, corporation tax and
employer's national insurance contributions. Taxes collected by the Group of
approximately £280m (FY23: £265m) are primarily net VAT, PAYE and employee's
national insurance contributions.
The Group's Tax Strategy is published at:
https://frasers-cms.netlify.app//assets//files/financials/fy24-tax-strategy.pdf
(https://frasers-cms.netlify.app/assets/files/financials/fy24-tax-strategy.pdf)
Taxes paid by country
The Group generates 92.6% of its profits in companies that are resident in the
UK and pays 88.3% of its corporation tax liabilities to HMRC in the UK.
Plastic Packaging Taxes
During FY24 the Group has paid approx. £0.1m in respect of the new UK
Plastics Packaging Tax.
CASH FLOW AND NET DEBT
Net debt increased by £30.8m from £416.8m at 30 April 2023 to £447.6m at 28
April 2024. Net debt includes £126.8m of borrowings relating to the Frasers
Group Financial Services Limited securitisation facility (30 April 2023:
£161.6m). Net interest on bank loans and overdrafts increased to £51.4m in
the year (FY23: £37.2m) largely due to increased interest rates and increased
usage of the Revolving Credit Facility ("RCF") in the period.
Analysis of net debt:
28 April 2024 30 April 2023
Cash and cash equivalents £358.6m £332.9m
Borrowings (£806.2m) (£749.7m)
Net debt (£447.6m) (£416.8m)
Securitisation (disclosed within borrowings) (£126.8m) (£161.6m)
Net debt excluding securitisation (£320.8m) (£255.2m)
The Group enacted the second one-year extension to its Group facility and
currently has access to a combined term loan and RCF with total commitments of
£1,432.5m until November 2025. This reduces to 1,372.5m from December 2025
until maturity in November 2026.
The Group continues to operate comfortably within its banking facilities and
covenants and the Board remains comfortable with the Group's available
headroom.
SUMMARY OF CASH FLOW
28 April 2024 30 April 2023 ((1))
Operating cash inflow before changes in working capital £834.6m £875.6m
(Increase)/decrease in receivables (£47.4m) £95.8m
Decrease/(increase) in inventories £114.1m (£71.6m)
Decrease in payables (£42.6m) (£132.4m)
Decrease in provisions (£47.5m) (£132.5m)
Cash inflows from operating activities £811.2m £634.9m
Income taxes paid (£129.0m) (£93.2m)
Net cash inflows from operating activities £682.2m £541.7m
Lease payments (£162.8m) (£140.7m)
Net finance costs paid (£35.6m) (£30.4m)
Net capital expenditure (including sale & leasebacks) (£211.3m) (£214.5m)
Net proceeds from acquisition and disposal of subsidiary undertakings (£35.9m) £18.5m
Purchase of listed investments, net of disposal proceeds (£249.3m) (£70.9m)
Proceeds in relation to equity derivatives £58.0m £66.2m
Decrease in deposits relating to equity derivatives £51.1m £53.8m
Investment income £2.3m £3.0m
Exchange movement on cash balances (£3.1m) £3.6m
Purchase of own shares (£126.4m) (£155.3m)
Dividends paid to non-controlling interests - (£0.7m)
Movement in net debt (£30.8m) £74.3m
1) Restated to reflect the change in accounting policy regarding the
valuation of investment property. Please refer to note 1 of the financial
information for details.
SUMMARY OF CONSOLIDATED BALANCE SHEET
28 April 2024 30 April 2023 ((1))
Property, plant & equipment £962.6m £1,132.0m
Investment properties £350.5m £160.0m
Long-term financial assets £495.4m £289.6m
Intangible assets £42.2m £24.1m
Inventories £1,355.3m £1,464.9m
Trade & other receivables £674.9m £720.1m
Trade & other payables (£683.9m) (£711.9m)
Provisions (£259.0m) (£306.5m)
Net debt (excluding securitisation borrowings) (£320.8m) (£255.2m)
Securitisation borrowings (£126.8m) (£161.6m)
Lease liabilities (£646.3m) (£679.9m)
Other £28.9m (£7.4m)
Net assets £1,873.0m £1,668.2m
1) Restated to reflect the change in accounting policy regarding the
valuation of investment property. Please refer to note 1 of the financial
information for details.
The decrease within property, plant and equipment from 30 April 2023 is
largely due to net additions offset by depreciation and the transfer of three
properties with a net book value of approximately £79.4m to investment
property following a change of use in the period. The increase in investment
property reflects this transfer, acquisitions in the year (including the
Junction 32 retail park in Castleford, Yorkshire) and fair value gains of
£11.5m.
The year-on-year increase within intangible assets primarily reflects the
purchase of the Matches intellectual property and brand names for £20m offset
by the amortisation of brands allocated to the Everlast cash generating unit
("CGU").
Long-term financial assets have increased since 30 April 2023 due to the
business making significant strategic investments including in AO World plc,
ASOS plc and Boohoo plc during the period.
Gross inventory has reduced by £138.2m (8.2%) year-on-year. This reflects the
increased the efficiency of our warehouse and inventory handling processes
following the virtual completion of the automation project, as well as the
rationalisation of inventory from the businesses acquired from JD sports
fashion plc in the second half of FY23.
Trade and other receivables include £139.0m relating to deposits in respect
of derivative financial instruments (30 April 2023: £190.1m) and the Frasers
Group Financial Services consumer credit receivables portfolio with a carrying
value of £206.2m (30 April 2023: £225.9m).
Trade and other payables have reduced by £28.0m from £711.9m to £683.9m
reflecting the timing of supplier payments around the prior year end due to
the 53(rd) week.
Provisions have reduced by £47.5m from £306.5m to £259.0m reflecting the
utilisation and partial release of property related provisions due to the
Group's strong trading performance, combined with the rationalisation of
loss-making stores and future forecasts outweighing our downside assumptions.
Included within other, the closing corporation tax creditor at 28 April 2024
is approximately £94.4m (FY23: £102.6m) and net deferred tax assets of
£82.1m (FY23: £66.4m) have been recognised.
Chris Wootton
Chief Financial Officer
17 July 2024
KEY PERFORMANCE INDICATORS
The Board manages the Group's performance by reviewing a number of key
performance indicators (KPIs). The table below summarises the Group's KPIs.
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
((1))
Group revenue £5,537.7m £5,586.0m
Reported PBT £507.0m £638.0m
Adjusted PBT ((2)) £544.8m £481.8m
Cash inflow from operating activities before working capital £834.6m £875.6m
Net assets £1,873.0m £1,668.2m
NON-FINANCIAL KPIs
Number of retail stores 1,551 1,630
Workforce turnover 31.0% 32%*
Electricity consumption on like for like stores improvement vs FY20 24.8% 15.9%
(1) Restated to reflect the Group's revised segmental reporting, the
reclassification of rental income and the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 of the
financial information for details.
(2) This is an Alternative Performance Measure. APBT is reconciled to the
equivalent GAAP measure in note 3 to the financial information. Adjusted EPS
is discussed in note 10 to the financial information.
The Directors have adopted Alternative Performance Measures (APM's). APMs
should be considered in addition to UK-Adopted International Accounting
Standards ("UK IAS") measures. The Directors believe that Adjusted profit
before tax ("APBT") provides further useful information for shareholders on
the underlying performance of the Group in addition to the reported numbers,
and is consistent with how business performance is measured internally. They
are not recognised profit measures under UK IAS and may not be directly
comparable with 'adjusted' or 'alternative' profit measures used by other
companies.
Adjusted PBT is profit before tax excluding the effects of exceptional items,
realised foreign exchange, fair value adjustments to derivative financial
instruments included within finance income/costs, fair value gains/losses and
profit on disposal of equity derivatives, and share schemes. This measure has
been reviewed by the Audit Committee which has appropriately challenged
management on the presentation and the adjusting items included in this APM.
Group Revenue
The Board considers that this measurement is a key indicator of the Group's
growth.
Reported Profit Before Tax
Reported PBT shows both the Group's trading and operational efficiency, as
well as the effects on the Group of external factors as shown in the fair
value movements in Strategic investments and FX.
Adjusted Profit Before Tax
Adjusted PBT shows how well the Group is managing its ongoing trading
performance and controllable costs and therefore the overall performance of
the Group.
Cash Inflow from Operating Activities Before Working Capital
Cash inflow from operating activities before working capital is considered an
important indicator for the Group of the cash generated and available for
investment in the Elevation strategy.
Net Assets
The Board considers that this measurement is a key indicator of the Group's
financial position and health.
Number of Retail Stores
The Board considers that this measure is an indicator of the Group's growth.
The Group's Elevation strategy is replacing older stores and often this can
result in the closure of two or three stores, to be replaced by one larger new
generation store.
Workforce Turnover
The Board considers that this measure is a key indicator of the contentment of
our people We have adjusted the measure this year to report only
non-redundancy related staff turnover in order to drive a focus on the parts
of our business that have a higher attrition. *The prior period figure has
been restated on an equivalent basis (FY23: reported figure 44.5%).
Like for Like electricity consumption
This measure links to our targets in the TCFD report around the installation
of LED lighting, building management services, and voltage optimisation. This
measure allows the board to determine the effectiveness of these projects in
reducing the Group's energy consumption. Like for like stores includes stores
in Great Britain, above a de minimis consumption, and that were open from 2019
onwards.
FINANCIAL INFORMATION
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 28 April 2024
Total Total
52 weeks ended 28 April 2024 53 weeks ended 30 April 2023
(restated)(1)
Note
(£'m) (£'m)
CONTINUING OPERATIONS
Revenue 5,426.7 5,461.0
Credit account interest 111.0 125.0
Total revenue (including credit account interest) 3 5,537.7 5,586.0
Cost of sales (3,121.9) (3,175.5)
Impairment losses on credit customer receivables 16 (20.6) (15.5)
Gross profit 3 2,395.2 2,395.0
Selling, distribution and administrative expenses (1,886.0) (1,957.8)
Other operating income 10.9 11.7
Property related impairments 12,13 (14.5) (99.6)
Exceptional items 4 - 97.1
Profit on sale of properties 3.5 95.4
Fair value adjustment to investment properties 13 11.5 (6.5)
Operating profit 3 520.6 535.3
Gain on sale of subsidiaries 11 25.0 17.6
Investment income 5 78.4 112.6
Investment costs 6 (68.9) (4.6)
Finance income 7 43.4 46.1
Finance costs 8 (91.5) (69.0)
Profit before taxation 3 507.0 638.0
Taxation 9 (107.9) (159.3)
Profit after taxation from continuing operations 399.1 478.7
DISCONTINUED OPERATIONS
Result from discontinued operation, net of tax 11 (12.5) 26.3
Profit for the period 386.6 505.0
ATTRIBUTABLE TO:
Equity holders of the Group 380.8 491.7
Non-controlling interests 5.8 13.3
Profit for the period 386.6 505.0
Pence per share Pence per share
Basic earnings per share - Continuing operations 10 89.7 101.2
Basic earnings per share - Discontinued operations 10 (2.9) 5.7
Basic earnings per share - Total 10 86.8 106.9
Diluted earnings per share - Continuing operations 10 89.7 101.2
Diluted earnings per share - Discontinued operations 10 (2.9) 5.7
Diluted earnings per share - Total 10 86.8 106.9
(1) Restated to reflect the change in presentation of discontinued
operations into a single line, accounting policy regarding the valuation of
investment property and reclassification of rental income. Please refer to
note 1 for further details.
Discontinued operations relate to MATCHES in the current year and the Group's
US retail businesses which were disposed of in the prior year. See note 11.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 28 April 2024
52 weeks ended 53 weeks ended
Note 28 April 2024 30 April 2023
(restated)(1)
(£'m) (£'m)
Profit for the period 386.6 505.0
OTHER COMPREHENSIVE (LOSS)/INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Fair value movement on long-term financial assets (43.7) 9.9
Remeasurements of defined benefit pension scheme 0.4 (0.5)
Fair value adjustment in respect of properties transferred to investment 1.2 -
property
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Exchange differences on translation of foreign operations (21.7) 13.4
Foreign exchange impact of disposal of discontinued operations - (1.6)
Fair value movement on hedged contracts - recognised in the period 25.5 6.5
Fair value movement on hedged contracts - recognised time value of options (0.7) 0.7
Fair value movement on hedged contracts - reclassified and reported in sales (6.1) (24.6)
Fair value movement on hedged contracts - reclassified and reported in (8.1) (38.5)
inventory/cost of sales
Fair value movement on hedged contracts - taxation taken to reserves (2.9) 14.6
OTHER COMPREHENSIVE LOSS FOR THE PERIOD, NET OF TAX (56.1) (20.1)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 330.5 484.9
Continuing operations 343.0 460.2
Discontinued operations (12.5) 24.7
330.5 484.9
ATTRIBUTABLE TO:
Equity holders of the Group 324.7 471.6
Non-controlling interest 5.8 13.3
330.5 484.9
(1) Restated to reflect the change in accounting policy regarding the
valuation of investment property and reclassification of rental income. Please
refer to note 1 for further details.
CONSOLIDATED BALANCE
SHEET
Company number: 06035106
As at 28 April 2024
Note 28 April 2024 30 April 2023 24 April 2022
(restated)(1) (restated)(1)
(£'m) (£'m) (£'m)
ASSETS - NON CURRENT
Property, plant and equipment 12 962.6 1,132.0 1,011.0
Investment properties 13 350.5 160.0 95.5
Intangible assets 14 42.2 24.1 120.6
Long-term financial assets 495.4 289.6 206.6
Investment in associate undertakings 18.0 16.9 -
Retirement benefit surplus 0.6 0.8 2.2
Deferred tax assets 109.6 82.1 100.8
1,978.9 1,705.5 1,536.7
ASSETS - CURRENT
Inventories 1,355.3 1,464.9 1,277.6
Trade and other receivables 16 674.9 720.1 841.4
Derivative financial assets 87.2 79.3 116.5
Cash and cash equivalents 358.6 332.9 336.8
2,476.0 2,597.2 2,572.3
Assets in disposal groups classified as held for sale - - 40.0
TOTAL ASSETS 4,454.9 4,302.7 4,149.0
LIABILITIES - NON CURRENT
Lease liabilities (533.8) (560.3) (503.6)
Borrowings 17 (806.2) (749.7) (827.9)
Retirement benefit obligations (1.8) (1.7) (1.6)
Deferred tax liabilities (27.5) (15.7) (40.4)
Provisions 18 (247.8) (290.2) (433.0)
(1,617.1) (1,617.6) (1,806.5)
LIABILITIES - CURRENT
Derivative financial liabilities (62.8) (66.5) (107.2)
Trade and other payables (683.9) (711.9) (729.8)
Lease liabilities (112.5) (119.6) (117.0)
Provisions 18 (11.2) (16.3) -
Current tax liabilities (94.4) (102.6) (50.9)
(964.8) (1,016.9) (1,004.9)
Liabilities in disposal groups classified as held for sale - - (22.7)
TOTAL LIABILITIES (2,581.9) (2,634.5) (2,834.1)
NET ASSETS 1,873.0 1,668.2 1,314.9
EQUITY
Share capital 64.1 64.1 64.1
Share premium 874.3 874.3 874.3
Treasury shares reserve (770.6) (644.2) (488.9)
Permanent contribution to capital 0.1 0.1 0.1
Capital redemption reserve 8.0 8.0 8.0
Foreign currency translation reserve 25.7 47.4 35.6
Reverse combination reserve (987.3) (987.3) (987.3)
Own share reserve (66.8) (66.8) (66.8)
Hedging reserve 21.7 14.0 55.3
Share based payment reserve 51.4 33.1 14.1
Revaluation reserve 1.2 - -
Retained earnings 2,623.0 2,285.5 1,784.4
Issued capital and reserves attributable to owners of the parent 1,844.8 1,628.2 1,292.9
Non-controlling interests 28.2 40.0 22.0
TOTAL EQUITY 1,873.0 1,668.2 1,314.9
1) Restated to reflect the change in
accounting policy regarding the valuation of investment property and
reclassification of rental income. Please refer to note 1 for further details.
The Group's Financial Statements were approved by the Board and authorised for
issue on 17 July 2024 and were signed on its behalf by:
Chris Wootton
Chief Financial Officer
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 28 April 2024
52 weeks ended 53 weeks ended
Note 28 April 2024 30 April 2023
(restated)(1)
(£'m) (£'m)
Profit before income tax from:
Continuing operations 507.0 638.0
Discontinued operation (12.5) 26.4
Profit before taxation including discontinued operations 494.5 664.4
Net finance costs 49.6 23.0
Net investment income (9.5) (108.0)
Gain on disposal of subsidiaries (20.9) (43.9)
Depreciation of property, plant and equipment 282.8 262.3
Amortisation of intangible assets 1.8 6.9
Net impairment of tangible and intangible assets and investment properties 21.4 239.7
Loss/(gain) on modification/remeasurement of lease liabilities 6.6 (26.8)
Profit on disposal of property, plant and equipment (3.5) (95.4)
Fair value adjustments in respect of investment property (11.5) 6.5
Fair value gain on recognition of associated undertaking - (16.9)
Gain on bargain purchase (0.7) (56.1)
Employee bonus scheme charge 23.4 19.0
Pension contributions less income statement charge 0.6 0.9
Operating cash inflow before changes in working capital 834.6 875.6
(Increase)/decrease in receivables (47.4) 95.8
Decrease/(increase) in inventories 114.1 (71.6)
Decrease in payables (42.6) (132.4)
Decrease in provisions (47.5) (132.5)
Cash inflows from operating activities 811.2 634.9
Income taxes paid (129.0) (93.2)
Net cash inflows from operating activities 682.2 541.7
Proceeds on disposal of property, plant and equipment and investment property 55.9 14.8
Proceeds from sale and leaseback transactions - 185.6
Proceeds on disposal of listed investments 133.3 172.4
Proceeds in relation to equity derivatives 58.0 66.2
Disposal of subsidiary undertakings 25.0 46.5
Purchase of subsidiaries, net of cash acquired (60.9) (28.0)
Purchase of property, plant and equipment, intangible assets and investment (267.2) (469.4)
property
Purchase of listed investments (382.6) (243.3)
Decrease in deposits relating to equity derivatives 51.1 53.8
Investment income received 2.3 3.0
Finance income received 29.3 20.1
Net cash outflows from investing activities (355.8) (178.3)
Lease payments (162.8) (140.7)
Finance costs paid (64.9) (50.5)
Borrowings drawn down 482.1 616.8
Borrowings repaid (425.6) (695.0)
Proceeds from sale and leaseback transactions - 54.5
Dividends paid to non-controlling interests - (0.7)
Purchase of own shares (126.4) (155.3)
Net cash outflows from financing activities (297.6) (370.9)
Net increase/(decrease) in cash and cash equivalents including overdrafts 28.8 (7.5)
Exchange movement on cash balances (3.1) 3.6
Cash and cash equivalents including overdrafts at beginning of period 332.9 336.8
Cash and cash equivalents including overdrafts at the period end 358.6 332.9
(1) Restated to reflect the change in accounting policy regarding the
valuation of investment property. Please refer to note 1 for further details.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 28 April 2024
Share capital Share premium((1)) Treasury shares Share- based payment reserve Foreign currency translation reserve Own share reserve Retained earnings Other((2)) Total attributable to owners of parent Non-controlling interests Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
At 24 April 2022 (previously presented) 64.1 874.3 (488.9) 14.1 35.6 (66.8) 1,778.1 (923.9) 1,286.6 22.0 1,308.6
Restatement (see note 1) - - - - - - 6.3 - 6.3 - 6.3
At 24 April 2022 (restated) 64.1 874.3 (488.9) 14.1 35.6 (66.8) 1,784.4 (923.9) 1,292.9 22.0 1,314.9
Acquisitions - - - - - - - - - 4.0 4.0
Share scheme - - - 19.0 - - - - 19.0 - 19.0
Purchase of own shares - - (155.3) - - - - - (155.3) - (155.3)
Dividends paid to non-controlling interests - - - - - - - - - 0.7 0.7
Transactions with owners in their capacity as owners - - (155.3) 19.0 - - - - (136.3) 4.7 (131.6)
Profit for the financial period (restated) - - - - - - 491.7 - 491.7 13.3 505.0
Other comprehensive income
Cashflow hedges - recognised in the period - - - - - - - 6.5 6.5 - 6.5
Cashflow hedges - recognised time value of options - - - - - - - 0.7 0.7 - 0.7
Cashflow hedges - reclassified and reported in sales - - - - - - - (24.6) (24.6) - (24.6)
Cashflow hedges - reclassified and reported in inventory/cost of sales - - - - - - - (38.5) (38.5) - (38.5)
Cashflow hedges - taxation - - - - - - - 14.6 14.6 - 14.6
Fair value adjustment in respect of long-term financial assets - recognised - - - - - - 9.9 - 9.9 - 9.9
Remeasurements of defined benefit pension scheme - - - - - - (0.5) - (0.5) - (0.5)
Foreign exchange impact of disposal of discontinued operations - - - - (1.6) - - - (1.6) - (1.6)
Translation differences - Group - - - - 13.4 - - - 13.4 - 13.4
Total comprehensive income for the period - - - - 11.8 - 501.1 (41.3) 471.6 13.3 484.9
At 30 April 2023 (restated) 64.1 874.3 (644.2) 33.1 47.4 (66.8) 2,285.5 (965.2) 1,628.2 40.0 1,668.2
Acquisitions((3)) - - - - - - - - - (17.6) (17.6)
Share scheme - - - 18.3 - - - - 18.3 - 18.3
Purchase of own shares - - (126.4) - - - - - (126.4) - (126.4)
Transactions with owners in their capacity as owners - - (126.4) 18.3 - - - - (108.1) (17.6) (125.7)
Profit for the financial period - - - - - - 380.8 - 380.8 5.8 386.6
Other comprehensive income
Cashflow hedges - recognised in the period - - - - - - - 25.5 25.5 - 25.5
Cashflow hedges - recognised time value of options - - - - - - - (0.7) (0.7) - (0.7)
Cashflow hedges - reclassified and reported in sales - - - - - - - (6.1) (6.1) - (6.1)
Cashflow hedges - reclassified and reported in inventory/cost of sales - - - - - - - (8.1) (8.1) - (8.1)
Cashflow hedges - taxation - - - - - - - (2.9) (2.9) - (2.9)
Fair value adjustment in respect of long-term financial assets - - - - - - (43.7) - (43.7) - (43.7)
Fair value adjustment in respect of investment properties - - - - - - - 1.2 1.2 - 1.2
Remeasurements of defined benefit pension scheme - - - - - - 0.4 - 0.4 - 0.4
Translation differences - Group - - - - (21.7) - - - (21.7) - (21.7)
Total comprehensive income for the period - - - - (21.7) - 337.5 8.9 324.7 5.8 330.5
At 28 April 2024 64.1 874.3 (770.6) 51.4 25.7 (66.8) 2,623.0 (956.3) 1,844.8 28.2 1,873.0
(1) The share premium account is used to record the excess
proceeds over nominal value on the issue of shares.
(2) Other reserves comprise permanent contribution to capital,
capital redemption reserve, reverse combination reserve, the hedging reserve
and the revaluation reserve. All movements in the period related to the
hedging reserve . Equity as at 24 April 2022 and the results for the financial
period ended 30 April 2023 have been restated to reflect the change in
accounting policy regarding the valuation of investment property and
reclassification of rental income. Please refer to note 1 for further details.
(3) In the current period, the Group increased its ownership in
Sports Direct Malaysia.
1. ACCOUNTING POLICIES
Frasers Group Plc (Company number: 06035106) is a company incorporated and
domiciled in the United Kingdom, its shares are listed on the London Stock
Exchange. The registered office is Unit A, Brook Park East, Shirebrook, NG20
8RY. The principal activities and structure of the Group can be found in the
Directors' Report and the 'Our Business' section of the Annual Report.
BASIS OF PREPARATION
Whilst the financial information included in this Preliminary Announcement has
been prepared on the basis of UK-adopted International Accounting standards,
this announcement does not itself contain sufficient information to comply
with UK-adopted International Accounting Standards.
The financial information set out in this Preliminary Announcement does not
constitute the Group's Consolidated Financial Statements for the period ended
28 April 2024 but is derived from those Financial Statements which were
approved by the Board of Directors on 17 July 2024. The auditor, RSM UK Audit
LLP, has reported on the Group's Consolidated Financial Statements and the
report was unqualified and did not contain a statement under section 498 (2)
or 498 (3) of the Companies Act 2006.
The statutory financial statements for the period ended 28 April 2024 have not
yet been delivered to the Registrar of Companies and will be delivered
following the Company's Annual General Meeting.
The Group financial statements have been prepared and approved by the
Directors in accordance with UK-adopted International Accounting Standards.
The Group's accounting policies are set out in the 2023 Annual Report and
Accounts and have been applied consistently in 2024 except as noted below.
Going Concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chief
Executive's Report and Business Review section above.
The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the Financial Review. In addition, the
financial statements include the Group's objectives, policies and processes
for managing its capital, its financial risk management objectives, details of
its financial instruments and hedging activities, and its exposures to credit
risk and liquidity risk.
The Group is profitable, highly cash generative and has considerable financial
resources. The Group is able to operate within its banking facilities and
covenants, which run until November 2026, and is well placed to take advantage
of strategic opportunities as they arise. As a consequence, the Directors
believe that the Group is well placed to manage its business risks
successfully despite the continued uncertain economic outlook.
Management have assessed the level of trading and have forecast and projected
a conservative base case and also a number of even more conservative
scenarios, including taking into account the Group's open positions in
relation to strategic investment options. These forecasts and projections show
that the Group will be able to operate within the level of the current
facility and its covenant requirements (being interest cover and net debt to
EBITDA ratios). Management also has a number of mitigating actions which could
be taken if required such as selling strategic investments at a discount to
the market price if a significant share price fall occurred, reducing capital
expenditure, putting on hold discretionary spend, liquidating certain assets
on the Balance Sheet and paying down the Group Financing Facility. See the
Viability Statement in the Annual Report for further details.
Having thoroughly reviewed the performance of the Group and Parent Company and
having made suitable enquiries, the Directors are confident that the Group and
Parent Company have adequate resources to remain in operational existence for
the foreseeable future which is at least 12 months from the date of these
financial statements. Trading would need to fall significantly below levels
observed during the pandemic to require mitigating actions or a relaxation of
covenants. On this basis, the Directors continue to adopt the going concern
basis for the preparation of the Annual Report and financial statements which
is a period of at least 12 months from the date of approval of these financial
statements.
New Accounting Standards, Interpretations and Amendments Adopted By The Group
The Group has not early adopted any new accounting standard, interpretation or
amendment that has been issued but is not effective. The Group has applied for
the first time the following new standards:
· IFRS 17 - Insurance contracts
· Disclosure on Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
· Definition of Accounting Estimates - Amendments to IAS 8
· International Tax Reform - Pillar Two Model Rules (Amendments to
IAS 12) - application of the exception and disclosure of that fact
· International Tax Reform - Pillar Two Model Rules (Amendments to
IAS 12) - other disclosure requirements
· Deferred Tax relating to assets and liabilities arising from a
single transaction - Amendments to IAS 12.
By adopting the above, there has been no material impact on the Financial
Statements.
International Financial Reporting Standards ("Standards") In Issue But Not Yet
Effective
At the date of authorisation of these consolidated Financial Statements, there
are no standards in issue from the International Accounting Standards Board
("IASB") or International Financial Reporting Interpretations Committee
("IFRIC") which are effective for annual accounting periods beginning on or
after 28 April 2024 that will have a material impact on these Financial
Statements.
Restated financial information
During the period the Group made several changes including presentation of
discontinued operations, operating segments, classification of rental income
and changing accounting policy to the fair value model for investment
properties. For comparative purposes, the results for the 53-week period ended
30 April 2023, and the restated balance sheet as at 24 April 2022 have been
presented showing the new basis of presentation.
1) Change to classification of rental income
As a result of the changes in operating segments, see note 3, management has
concluded that is more appropriate to disclose rental income received from
third parties within revenue from the property segment rather than in other
operating income in various retail segments as was previously disclosed.
The impact of this change is to increase reported revenue in the 53-week
period ended 30 April 2023 by £29.3m and reducing the amounts reported in
other operating income by an equivalent amount.
The changes to our segmental analysis and the reclassification of rental
income have no impact on the Group's profit before tax as previously reported
for FY23.
2) Change in accounting policy in respect of investment properties
Following the creation of the Property operating segment, management conducted
a review of the accounting treatment of investment properties (properties held
to earn rentals or for capital appreciation or both, rather than for use in
operations) and concluded that it would be more appropriate to adopt the fair
value model set out in paragraphs 33-35 of IAS 40 Investment Property for
remeasuring the value of these properties, rather than on the cost model set
out in paragraph 56 of the standard, which was previously used. As a result,
these assets will not be depreciated but held at fair value with changes in
fair value being recorded in the income statement in the period in which they
occur.
Management has considered this voluntary change in accounting policy in
accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors and concluded that the fair value model results in the financial
statements providing reliable and more relevant information. The changes have
been applied retrospectively and as such prior period figures have been
restated on an equivalent basis to allow for meaningful comparison.
The impact of this change in accounting policy is to increase the carrying
value of the Group's investment properties held on 25 April 2022 by £6.3m,
with a corresponding adjustment being made the Group's opening retained
earnings at this date. The carrying value of these assets as at 24 April 2023
increased by £10.0m vs. the amount previously reported, resulting in an
increase to profit before tax for the 53-week period ended 2023 of £3.7m and
an increase in basic and diluted earnings per share of 0.8p.
This change in accounting policy does not have a material impact on the
reported tax charge in the comparative period, nor on the Group's consolidated
cash flow statement.
The impact on APBT for the 53-week period ended 30 April 2023 is summarised as
follows:
FY23
Reported APBT £478.1m
Impact of change in accounting policy £3.7m
Revised APBT £481.8m
3) Change in presentation regarding discontinued operations
Management has voluntarily elected to change the presentation of discontinued
operations to disclose the impact as a single line in the statement of profit
and loss in line with IFRS 5.33.
Impact on the Consolidated Income Statement and Comprehensive Income
53-week period ended 30 April 2023
Amounts previously reported 1) Rental income 2) Investment property 3) Discontinued operation As restated
(£'m) (£'m) (£'m) (£'m) (£'m)
CONTINUING OPERATIONS
Revenue 5,449.8 19.7 - (8.5) 5,461.0
Credit account interest 115.4 9.6 - - 125.0
Total revenue (including credit account interest) 5,565.2 29.3 - (8.5) 5,586.0
Cost of sales (3,179.9) - - 4.4 (3,175.5)
Impairment losses on credit customer receivables (15.5) - - - (15.5)
Gross profit 2,369.8 29.3 - (4.1) 2,395.0
Selling, distribution and administrative expenses (1,972.0) - 10.2 4.0 (1,957.8)
Other operating income 41.1 (29.3) - (0.1) 11.7
Property related impairments (99.6) - - - (99.6)
Exceptional items 97.1 - - - 97.1
Profit on sale of properties 95.4 - - - 95.4
Fair value adjustment to investment properties - - (6.5) - (6.5)
Operating profit 531.8 - 3.7 (0.2) 535.3
Gain on sale of subsidiaries 43.9 - - (26.3) 17.6
Investment income 112.6 - - - 112.6
Investment costs (4.6) - - - (4.6)
Finance income 46.1 - - - 46.1
Finance costs (69.1) - - 0.1 (69.0)
Profit before taxation 660.7 - 3.7 (26.4) 638.0
Taxation (159.4) - - 0.1 (159.3)
Profit after taxation from continuing operations 501.3 - 3.7 (26.3) 478.7
DISCONTINUED OPERATIONS
Result from discontinued operation - - - 26.3 26.3
Profit for the period 501.3 - 3.7 - 505.0
ATTRIBUTABLE TO:
Equity holders of the Group 488.0 - 3.7 - 491.7
Non-controlling interests 13.3 - - - 13.3
Profit for the period 501.3 - 3.7 - 505.0
Pence per share Pence per share Pence per share
Basic earnings per share - Continuing operations 100.4 - 0.8 - 101.2
Basic earnings per share - Discontinued operations 5.7 - - - 5.7
Basic earnings per share - Total 106.1 - 0.8 - 106.9
Diluted earnings per share - Continuing operations 100.4 - 0.8 - 101.2
Diluted earnings per share - Discontinued operations 5.7 - - - 5.7
Diluted earnings per share - Total 106.1 - 0.8 - 106.9
Total comprehensive income 481.2 - 3.7 - 484.9
Impact on the Consolidated Balance Sheet
30 April 2023
Amounts previously reported 2) Investment property As restated
(£'m) (£'m) (£'m)
ASSETS - NON CURRENT
Property, plant and equipment 1,150.7 (18.7) 1,132.0
Investment properties 131.3 28.7 160.0
Intangible assets 24.1 - 24.1
Long-term financial assets 289.6 - 289.6
Investment in associate undertakings 16.9 - 16.9
Retirement benefit surplus 0.8 - 0.8
Deferred tax assets 82.1 - 82.1
1,695.5 10.0 1,705.5
ASSETS - CURRENT
Inventories 1,464.9 - 1,464.9
Trade and other receivables 720.1 - 720.1
Derivative financial assets 79.3 - 79.3
Cash and cash equivalents 332.9 - 332.9
2,597.2 - 2,597.2
TOTAL ASSETS 4,292.7 10.0 4,302.7
LIABILITIES - NON CURRENT
Lease liabilities (560.3) - (560.3)
Borrowings (749.7) - (749.7)
Retirement benefit obligations (1.7) - (1.7)
Deferred tax liabilities (15.7) - (15.7)
Provisions (290.2) - (290.2)
(1,617.6) - (1,617.6)
LIABILITIES - CURRENT
Derivative financial liabilities (66.5) - (66.5)
Trade and other payables (711.9) - (711.9)
Lease liabilities (119.6) - (119.6)
Provisions (16.3) - (16.3)
Current tax liabilities (102.6) - (102.6)
(1,016.9) - (1,016.9)
TOTAL LIABILITIES (2,634.5) - (2,634.5)
NET ASSETS 1,658.2 10.0 1,668.2
EQUITY
Share capital 64.1 - 64.1
Share premium 874.3 - 874.3
Treasury shares reserve (644.2) - (644.2)
Permanent contribution to capital 0.1 - 0.1
Capital redemption reserve 8.0 - 8.0
Foreign currency translation reserve 47.4 - 47.4
Reverse combination reserve (987.3) - (987.3)
Own share reserve (66.8) - (66.8)
Hedging reserve 14.0 - 14.0
Share based payment reserve 33.1 - 33.1
Revaluation reserve - - -
Retained earnings 2,275.5 10.0 2,285.5
Issued capital and reserves attributable to owners of the parent 1,618.2 10.0 1,628.2
Non-controlling interests 40.0 - 40.0
TOTAL EQUITY 1,658.2 10.0 1,668.2
24 April 2022
Amounts previously reported 2) Investment property As restated
(£'m) (£'m) (£'m)
ASSETS - NON CURRENT
Property, plant and equipment 1,011.0 - 1,011.0
Investment properties 89.2 6.3 95.5
Intangible assets 120.6 - 120.6
Long-term financial assets 206.6 - 206.6
Retirement benefit surplus 2.2 - 2.2
Deferred tax assets 100.8 - 100.8
1,530.4 6.3 1,536.7
ASSETS - CURRENT
Inventories 1,277.6 - 1,277.6
Trade and other receivables 841.4 - 841.4
Derivative financial assets 116.5 - 116.5
Cash and cash equivalents 336.8 - 336.8
2,572.3 - 2,572.3
Assets in disposal groups classified as held for sale 40.0 - 40.0
TOTAL ASSETS 4,142.7 6.3 4,149.0
LIABILITIES - NON CURRENT
Lease liabilities (503.6) - (503.6)
Borrowings (827.9) - (827.9)
Retirement benefit obligations (1.6) - (1.6)
Deferred tax liabilities (40.4) - (40.4)
Provisions (433.0) - (433.0)
(1,806.5) - (1,806.5)
LIABILITIES - CURRENT
Derivative financial liabilities (107.2) - (107.2)
Trade and other payables (729.8) - (729.8)
Lease liabilities (117.0) - (117.0)
Current tax liabilities (50.9) - (50.9)
(1,004.9) - (1,004.9)
Liabilities in disposal groups classified as held for sale (22.7) - (22.7)
TOTAL LIABILITIES (2,834.1) - (2,834.1)
NET ASSETS 1,308.6 6.3 1,314.9
EQUITY
Share capital 64.1 - 64.1
Share premium 874.3 - 874.3
Treasury shares reserve (488.9) - (488.9)
Permanent contribution to capital 0.1 - 0.1
Capital redemption reserve 8.0 - 8.0
Foreign currency translation reserve 35.6 - 35.6
Reverse combination reserve (987.3) - (987.3)
Own share reserve (66.8) - (66.8)
Hedging reserve 55.3 - 55.3
Share based payment reserve 14.1 - 14.1
Retained earnings 1,778.1 6.3 1,784.4
Issued capital and reserves attributable to owners of the parent 1,286.6 6.3 1,292.9
Non-controlling interests 22.0 - 22.0
TOTAL EQUITY 1,308.6 6.3 1,314.9
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
Climate Change
We have considered the potential impact of climate change in preparing these
financial statements. Tackling climate change is a global imperative.
Measures which support climate change initiatives and our wider ESG agenda
continue to be key components of our strategic direction, supporting
sustainability, the broader social agenda and consumer choice. The risks
associated with climate change have been deemed to be arising in the medium to
long term, however we are working to mitigate these risks as detailed within
the TCFD section of the annual report.
We have considered climate change as part of our cash flow projections within
going concern, impairment assessments and viability, and the impact of climate
change is not deemed to have a significant impact on these assessments
currently and therefore they are not deemed to be a key source of estimation
uncertainty. The Group will continue to monitor the impacts of climate change
over the coming years.
Critical Accounting Judgements
Determining Related Party Relationships
Management determines whether a related party relationship exists by assessing
the nature of the relationship by reference to the requirements of IAS 24,
Related Party Disclosures. This is in order to determine whether significant
influence exists as a result of control, shared directors or parent companies,
or close family relationships. The level at which one party may be expected to
influence the other is also considered for transactions involving close family
relationships.
Control and Significant Influence Over Certain Entities
Under IAS 28 Investments in Associates and Joint Ventures ("IAS 28"), if an
entity holds 20% or more of the voting power of the investee, it is presumed
that the entity has significant influence, unless it can clearly demonstrate
that this is not the case.
In assessing the level of control that management have over certain entities,
management will consider the various aspects that allow management to
influence decision making. This includes the level of share ownership, board
membership, the level of investment and funding and the ability of the Group
to influence operational and strategic decisions and affect its returns
through the exercise of such influence. If management were to consider that
the Group does have significant influence over these entities then the equity
method of accounting would be used and the percentage shareholding multiplied
by the results of the investee in the period would be recognised in profit or
loss.
Shareholdings in investees greater than 20%
During the period the Group has held greater than 20% of the voting rights of
Mulberry Group plc, XXL ASA, ASOS plc, AO World plc, Boohoo Group plc and N
Brown Group plc. Management consider that the Group does not have significant
influence over these entities for combinations of the following reasons:
• The Group does not have any representation on the board of
directors of the investees.
• There is no participation in decision making and strategic
processes, including participation in decisions about dividends or other
distributions.
• There have been no material transactions between the entity
and the investee companies.
• There has been no interchange of managerial personnel.
• No non-public essential technical management information is
provided to the investees.
Four (Holdings) Limited
The Group holds 49% of the share capital of Four (Holdings) Limited which is
accounted for as an associate using the equity method. The Group does not have
any representation on the board of directors and no participation in decision
making about relevant activities such as establishing operating and capital
decisions, including budgets, appointing or remunerating key management
personnel or service providers and terminating their services or employment.
However, in prior periods the Group has provided Four (Holdings) Limited with
a significant loan. At the reporting date, the amount owed by Four (Holdings)
Limited for this loan totalled £30.0m (FY23: £37.5m), being £6.4m (FY23:
£4.3m) net of amounts recognised in respect of loss allowance. The Group is
satisfied that the existence of these transactions provides evidence that the
entity has significant influence over the investee but in the absence of any
other rights, in isolation it is insufficient to meet the control criteria of
IFRS 10, as the Group does not have power over Four (Holdings) Limited.
Tymit Limited
The Group holds 28.2% of the share capital of Tymit Limited. This holding is
accounted for as an associate under IAS 28, although the carrying value of the
investment is £nil as a result of management's assessment of future trading
prospects of the business. Management has advanced Tymit convertible loans of
£15.8m at 28 April 2024 (£7.2m as 30 April 2023), which have been fully
provided for. Management has considered whether any of the rights attaching to
the loan notes could give rise to control and concluded that this was not the
case.
Kangol LLC
During the prior period, the Group sold 51% of its shareholding in Kangol LLC
to Bollman Hat Company for £17.6m, retaining a 49% stake. Management
considered the criteria set out in IFRS 10 when assessing whether or not it
retains control of the entity or significant influence as defined by IAS 28.
It was concluded that the Group has significant influence by virtue of its
holding more than 20% of the voting power of the investee, but not control
since Bollman holds 51% of total voting rights. Consequently, the Group's 49%
shareholding has been accounted for as an associate under IAS 28.
Cash Flow Hedging
The Group uses a range of forward and option contracts that are entered into
at the same time; they are in contemplation with one another and have the same
counterparty. A judgement is made in determining whether there is an economic
need or substantive business purpose for structuring the transactions
separately that could not also have been accomplished in a single transaction.
Management are of the view that there is a substantive distinct business
purpose for entering into the options and a strategy for managing the options
independently of the forward contracts. The forward and options contracts are
therefore not viewed as one instrument; accordingly hedge accounting for the
forwards is permitted.
Under IFRS 9 in order to achieve cash flow hedge accounting, forecast
transactions (primarily Euro denominated sales and USD denominated purchases)
must be considered to be highly probable. The hedge must be expected to be
highly effective in achieving offsetting changes in cash flows attributable to
the hedged risk. The forecast transaction that is the subject of the hedge
must be highly probable and must present an exposure to variations in cash
flows that could ultimately affect profit or loss. Management have reviewed
the detailed forecasts and the growth assumptions within them and are
satisfied that forecasts on which the cash flow hedge accounting has been
based meet the criteria per IFRS 9 as being highly probable forecast
transactions. Should the forecast levels not pass the highly probable test,
any cumulative fair value gains and losses in relation to either the entire or
the ineffective portion of the hedged instrument would be recognised in the
Consolidated Income Statement.
Management considers various factors when determining whether a forecast
transaction is highly probable. These factors include detailed sales and
purchase forecasts by channel, geographical area and seasonality, conditions
in target markets and the impact of expansion in new areas. Management also
consider any change in alternative customer sales channels that could impact
on the hedged transaction.
If the forecast transactions were determined to be not highly probable and all
hedge accounting was discontinued, amounts in the Hedging reserve of up to
£21.7m (FY23: £14.0m) would be shown in Finance Income.
Adjustment to Regulatory Provisions in Frasers Group Financial Services
(formerly Studio Retail Limited)
In the prior period, a revision to management's best estimate of the probable
costs of remediating customers who may have been adversely impacted by legacy
decisions resulted in a reduction in the amount provided of approximately
£25.0m. Management considered whether or not the reduction in provision
should result in an adjustment to the amounts recognised in the acquisition
balance sheet in accordance with the requirements of IFRS3.45 and IFRS3.47 and
concluded that the release should be treated as a prospective change in
accounting estimate under IAS8.34 since it arose as a result of new
information which came to light after the acquisition date. It is the Group's
policy to present items that "merit separate presentation" by reference to
their "their size, nature and infrequency of the events giving rise to them"
as exceptional items. Given the unusual size, nature and infrequency of
movements in provisions of this nature, management disclosed the income
statement impact within exceptional items in the prior period consolidated
income statement.
Sale and Leaseback transactions
During the prior period, the Group disposed of a number of freehold properties
by means of the sale of shares in the limited companies that owned the
relevant properties but accounted for these as sale and leaseback transactions
under IFRS 16 Leases ("IFRS 16"). Management exercised judgement in
determining whether or not these sales should be treated as a loss of control
of subsidiaries under IFRS 10 Consolidated Financial Statements or sale and
leaseback transactions as defined by IFRS 16, paying due consideration to the
IFRS Interpretations Committee's tentative agenda decision on this topic from
September 2020.
Classification of investment properties
Upon the acquisition of a property, management perform an assessment of the
rationale for holding the property in line with IAS 40. Management applies
judgement in the consideration of whether or not is feasible to sell or let
parts of the property under a finance lease, whether this is commercially
viable in the relevant marketplace, and whether or not any owner-occupied
portion is insignificant.
During the current period, the Group acquired four properties, all of which
met the criteria to be classified as investment properties and were considered
to be non-separable, with either insignificant or no owner-occupied portions.
Key Estimates
Inventory provisioning
The Group carries significant amounts of inventory, against which there are
provisions for expected losses to be incurred in the sale of slow moving,
obsolete and delisted products. At 28 April 2024 a provision of £192.0m
(FY23: £220.6m) was held against a gross inventory value of £1,547.3m (FY23:
£1,685.5m).
In assessing the level of provision required, management has applied its
experience and industry knowledge to divide the core UK inventory holding into
separate categories based on internal management classifications and
behavioural characteristics, taking account of experience by fascia and
segment, as follows:
· Continuity inventory - inventory that is considered to be
perennial and therefore exhibits limited risk of obsolescence.
· Current season inventory - inventory that has been purchased
specifically for seasons in the current calendar year and future years.
· Out of season inventory (including inventory previously
classified as continuity) - inventory that has moved out of the two categories
above because of its age, range development or because it is being sold at
below cost to clear warehouse/store space.
An adjusted rate of loss is then calculated based on losses incurred on the
sale of out of season inventory over the past three years (being management's
assessment of the time taken to clear through out of season inventory), with
any inventory remaining on hand after three years of being classified as out
of season being assumed to require a 100% provision rate. The historical rate
is sensitised to reflect management's best estimate of future performance by
making assumptions around changes to sales prices achieved on the sale of out
of season inventory vs. those achieved in the past three years and the level
of inventory remaining after three years of being classified as out of season.
In the current period, management have estimated that selling prices will need
to reduce by a further 15% (FY23: 10%) to clear an equivalent volume of out of
season inventory and that approximately fifteen times (FY23: twelve times) as
much Premium Lifestyle out of season inventory will remain on hand at the end
of the three-year period of assessment than has typically been the case
historically, requiring a 100% provision rate, reflecting the different
profile of this inventory to Sports inventory.
The changes in assumptions around selling prices and Premium Lifestyle out of
season inventory will remain on hand reflect management's best estimates based
on performance seen in the past 12 months.
In addition, management has applied a provision rate of 100% against a portion
of the inventory holding that is either currently being sold at a loss or
exhibits an unusually high level of obsolescence risk. The 100% provision rate
reflects the costs associated with clearing and disposing of this inventory.
The adjusted rate of loss is applied to the gross value of inventory in each
of the categories above as follows:
· Continuity inventory - the adjusted loss rate is applied to 30%
of the gross holding (representing the proportion of inventory in this
category that is expected to roll into the out of season category based on
historical experience and anticipated future trends).
· Current season inventory - the adjusted loss rate is applied to
30% of the gross holding (representing the proportion of inventory in this
category that is expected to roll into the out of season category based on
historical experience and anticipated future trends).
· Out of season inventory (including inventory previously
classified as continuity) - the adjusted loss rate is applied to this
population, excluding those specific items that carry a 100% provision rate
based on the analysis detailed above.
The provisioning calculations require a high degree of judgement, given the
significant level of estimation uncertainty in the roll rates between
classifications, as well as the use of estimates around future sales prices
and the remaining inventory holding for out of season inventory. Sensitivity
analysis relating to these key assumptions and its impact upon the core UK
inventory holding (which makes up the most significant part of the Group's
inventory holding) is set out below.
% of inventory rolling into out of season (including inventory previously
classified as continuity) category
Base assumption 30%
Sensitised assumption 35%/25%
Increase/(decrease) to provision £5.5m/(£5.5m)
Decrease in sales prices on out of season inventory
Base assumption -15%
Sensitised assumption -20%/-10%
Increase/(decrease) to provision £7.0m/(£2.0m)
Increase in out of season Premium Lifestyle inventory on hand after
three-years
Base assumption 15 times historical rate
Sensitised assumption 16 times historical rate/14 times historical rate
Increase/(decrease) to provision £2.1m/(£2.6m)
These sensitivities reflect management's assessment of reasonably possible
changes to key assumptions which could result in adjustments to the level of
provision within the next financial year.
Dilapidations
The Group provides for its legal responsibility for dilapidation costs
following advice from chartered surveyors and previous experience of exit
costs (including strip out costs and professional fees). Management do not
consider these costs to be capital in nature and therefore dilapidations are
not capitalised, except for in relation to the sale and leaseback of
Shirebrook for which a material dilapidations provision was capitalised in
FY20.
Management calculates its best estimate of the provision required by reference
to the proportion of closed stores for which a dilapidation cost is likely to
be incurred, based on past experience, and an estimate for the level of costs
based on advice from chartered surveyors.
Sensitivity analysis to changes in key assumptions is as follows:
Estimated cost per sq. ft. % of stores where a dilapidation cost is incurred
Base assumption 18.10 30%
Sensitised assumption £19.10/£17.10 35%/25%
Increase to provision £3.2m £7.8m
(Decrease) to provision (£3.2m) (£7.8m)
Legal and regulatory provisions
Provisions are made for items where the Group has identified a present legal
or constructive obligation arising as a result of a past event, it is probable
that an outflow of resources will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Legal and regulatory provisions reflect management's best estimate of the
potential costs arising from the settlement of outstanding disputes of a
commercial and regulatory nature. A substantial portion of the amounts
provided relates to ongoing legal claims and non-UK tax enquiries. Management
have made a judgement to consider all claims collectively given their similar
nature. In accordance with IAS37.92, management have concluded that it would
prejudice seriously the position of the entity to provide further specific
disclosures in respect of amounts provided for non-UK tax enquiries and legal
claims.
Other receivables and amounts owed by related parties
Other receivables and amounts owed by related parties are stated net of
provision for any impairment. Management have applied estimates in assessing
the recoverability of working capital and loan advances made to investee
companies. Matters considered include the relevant financial strength of the
underlying investee company to repay the loans, the repayment period and
underlying terms of the monies advanced, forecast performance of the
underlying borrower, and where relevant, the Group's intentions for the
companies to which monies have been advanced. Management have applied a
weighted probability to certain potential repayment scenarios, with the
strongest weighting given to expected default after two years.
Impairment of non-financial assets
a) IFRS 16 right-of-use assets and associated plant and equipment
IFRS 16 defines the lease term as the non-cancellable period of a lease
together with the options to extend or terminate a lease, if the lessee were
reasonably certain to exercise that option. The Group will assess the
likelihood of extending lease contracts beyond the break date by taking into
account current economic and market conditions, current trading performance,
forecast profitability and the level of capital investment in the property.
IFRS 16 states that the lease payments shall be discounted using the lessee's
incremental borrowing rate where the rate implicit in the lease cannot be
readily determined. Accordingly, all lease payments have been discounted using
the incremental borrowing rate (IBR). The IBR has been determined by using a
synthetic credit rating for the Group which is used to obtain market data on
debt instruments for companies with the same credit rating; this is split by
currency to represent each of the geographical areas the Group operates within
and adjusted for the lease term.
The weighted average discount rates based on incremental borrowing rates used
throughout the period across the Group's lease portfolio are shown below. The
discount rate for each lease is dependent on lease start date, term and
location.
Lease Term FY24 UK Europe Rest of World
Up to 5 years 1.4% - 5.7% 0.3% - 4.0% 1.5% - 6.2%
Greater than 5 years and up to 10 years 1.4% - 5.7% 0.3% - 4.0% 1.5% - 6.0%
Greater than 10 years and up to 20 years 2.0% - 5.7% 0.3% - 4.0% 1.5% - 6.2%
Greater than 20 years 2.0% - 5.9% 0.5% - 4.0% 1.5% - 6.3 %
Lease Term FY23 UK Europe Rest of World
Up to 5 years 1.4% - 5.1% 0.3% - 4% 1.5% - 5.3%
Greater than 5 years and up to 10 years 2.0% - 5.7% 0.5% - 4% 1.5% - 5.3%
Greater than 10 years and up to 20 years 2.2% - 5.7% 0.8% - 4% 1.5% - 5.4%
Greater than 20 years 2.5% - 5.9% 1.1% - 4% 1.5% - 5.6%
An asset is impaired when the carrying amount exceeds its recoverable amount.
Equally previous impairments are reversed when the recoverable amount exceeds
the carrying amount and there are previous impairments against the asset. IAS
36 defines recoverable amount as the higher of an asset's or cash-generating
unit's fair value less costs of disposal and its value in use. The Group has
determined that each store is a separate CGU.
The recoverable amount is calculated based on the Group's latest forecast cash
flows which are then extrapolated to cover the period to the break date of the
lease taking into account historic performance and knowledge of the current
market, together with the Group's views on future profitability of each CGU.
The key assumptions in the calculations are the sales growth rates, gross
margin rates, changes in the operating cost base and the pre-tax discount rate
derived from the Group's weighted average cost of capital using the capital
asset pricing model, the inputs of which include a risk-free rate, equity risk
premium and a risk adjustment (Beta). Given the number of assumptions used,
the assessment involves significant estimation uncertainty.
In the period, a net reversal of previous impairments has been recognised for
the amount of £0.4m (FY23: impairment charge £66.1m) due to the improving
conditions in the retail sector on the forecast cash flows of the CGU since
the COVID-19 pandemic where material impairments were incurred. This is broken
down as follows:
• £5.2m reversal (FY23: impairment charge £43.1m) against
right-of-use assets; and
• £4.8m impairment charge (FY23: £23.0m) against plant and
equipment.
The key assumptions, which are equally applicable to each CGU, in the cash
flow projections used to support the carrying amount of the right of use asset
are consistent with the cashflow projections for the freehold land and
buildings impairment assessment.
A sensitivity analysis has been performed in respect of sales, margin, the new
store exemption and operating costs as these are considered to be the most
sensitive of the key assumptions:
Forecast: Impact of change in assumption: Reversal increase / (decrease) (£'m)
Sales decline year 1 10% improvement to 7% increase 14.4
Sales decline year 1 10% reduction to 13% (11.8)
Existing gross margin year 1 > 40% 100bps - improvement 3.2
Existing gross margin year 1 > 40% 100bps - reduction (3.2)
New store exemption ((1)) Change from 2 to 3 years 5.5
Operating costs increase year 1 Change from 3% to 6% (4.0)
(1) Stores which have been open for less than two years are not
reviewed for impairment. This has changed in the current period on the basis
that management do not consider that a trading performance in the first two
years that is worse than an appraisal forecast constitutes an indicator of
impairment. Management also notes that new stores can take up to two years to
develop an established trading pattern. Stores trading for less than two years
are still reviewed for impairment if there are other significant indicators of
impairment present such as a deterioration in local market conditions.
b) Freehold land and buildings, long-term leasehold and associated
plant and equipment
Freehold land and buildings and long-term leasehold assets are assessed at
each reporting period for as to whether there is any indication of impairment
or reversal in line with IAS 36.
An asset is impaired when the carrying amount exceeds its recoverable amount.
Equally previous impairments are reversed when the recoverable amount exceeds
the carrying amount and there are previous impairments against the asset. IAS
36 defines recoverable amount as the higher of an asset's or cash-generating
unit's fair value less costs of disposal and its value in use. the Group has
determined that each store is a separate CGU.
Key triggers considered by management include store (i.e., CGU) EBITDA showing
a material year-on-year movement, significant changes in property valuations,
and whether any new, wider economic factors may impact the forecast
performance. Based on the criteria set by management, a net impairment charge
of approximately £14.9m (FY23: £33.5m) was recorded for the current period
due to certain properties under performing against forecasted results where
material impairments were incurred. This is broken down as follows:
• £6.8m reversal (FY23: impairment charge £24.1m) against freehold
land and buildings and a £6.7m impairment charge (FY23: impairment charge
£0.2m) in relation to long leasehold properties; and
• £15.0m impairment charge (FY23: £9.2m) against plant and
equipment.
Value In Use (VIU)
The value in use is calculated based on five-year cash flow projections. These
are formulated by using the Group's forecast cash flows for each individual
CGU, taking into account historic performance of the CGU, and then adjusting
for the Group's current views on future profitability for each CGU. The key
assumptions in the calculations are the sales growth rates, gross margin
rates, changes in the operating cost base and the pre-tax discount rate
derived from the Group's weighted average cost of capital using the capital
asset pricing model, the inputs of which include a risk-free rate, equity risk
premium and a risk adjustment (Beta). Given the number of assumptions used,
the assessment involves significant estimation uncertainty.
The key assumptions, which are equally applicable to each CGU, in the cash
flow projections used to support the carrying amount of the freehold land and
buildings were as follows:
Key assumptions FY24 Year 1 Year 2 Year 3 Year 4 Year 5
Sales decline -3% -2% -2% -2% -2%
Existing gross margin > 40% -100bps -75bps -50bps -25bps -
Operating costs increase per annum 3% 3% 3% 3% 3%
Discount rate 9.8% 9.8% 9.8% 9.8% 9.8%
Terminal growth rate of 2%
Properties purchased within one year, or stores that have not traded for two
years, are not reviewed for impairment.
Key assumptions FY23 Year 1 Year 2 Year 3 Year 4 Year 5
Sales decline -5% -4% -3% -2% -2%
Existing gross margin > 40% -175bps -150bps -125bps -100bps -75bps
Operating costs increase per annum 3% 3% 3% 3% 3%
Discount rate 8.5% 8.5% 8.5% 8.5% 8.5%
Terminal growth rate of 2%
Properties purchased within one year, or stores that have not traded for one
year, are not reviewed for impairment.
A sensitivity analysis has been performed in respect of sales, margin and
operating costs as these are considered to be the most sensitive of the key
assumptions.
Forecast: Impact of: Impairment increase / (decrease) (£'m)
Sales decline year 1 10% improvement to 7% (4.1)
Sales decline year 1 10% reduction to 13% 7.0
Existing gross margin year 1 > 40% 100bps - improvement (0.8)
Existing gross margin year 1 > 40% 100bps - reduction 0.8
Operating costs increase year 1 Change from 3% to 6% 0.8
Fair value less costs of disposal
For those CGUs where the value in use is less than the carrying value of the
asset, the fair value less costs of disposal has been determined using both
external and internal market valuations. This fair value is deemed to fall
into Level 3 of the fair value hierarchy as per IFRS 13. The property
portfolio consists of vacant, Frasers Group occupied and third party tenanted
units; one property can include all three types. The following valuation
methodology has been adopted for each:
Scenario Valuation methodology Key assumptions
Vacant units Estimated Rental Value (ERV) and suitable reversionary yield applied to Void period and rent-free band - three bands applied depending on
reflect the market to generate a net capital value. A deduction to the capital circumstances:
value generated is then made based on the void period with applicable rates
payable for the unit and rent-free incentive. • 1 year void, 1 year rent free; or
• 1 year void, 2 years rent free; or
• 2 years void, 3 years rent free.
Yield bands - ranging from 5.5% - 20.0%
Frasers Group occupied Will be assumed the unit is vacant given there is no legally binding Void period and rent-free band - three bands applied depending on
inter-company agreement in place. Therefore, a void and rent-free incentive circumstances:
period assumed, the cost amount then deducted from the capital value generated
by the ERV and reversionary yield. Although we consider the commercial reality • 1 year void, 1 year rent free; or
is that fair value less costs to sell will be higher than vacant possession,
this very conservative assumption is in line with both technical accounting
rules and that of our management experts.
• 1 year void, 2 years rent free; or
• 2 years void, 3 years rent free.
Yield bands - ranging from 5.5% - 20.0%
Third party tenanted An ERV is applied using a percentage band on the passing rent. An appropriate ERV is applied reflecting the market for the applicable unit. An appropriate
reversionary yield is applied reflecting the risk of tenant and renewal to reversionary yield is applied reflecting the risk of tenant and renewal to
generate a capital value. This will also provide a net initial yield based off generate a capital value. This will also provide a net initial yield based off
the current passing rent. the current passing rent.
A 10% increase in the market valuation amounts used in the impairment/reversal
calculations would result in a decrease in impairment of £0.8m (FY23:
£3.4m).
The total recoverable amount of the assets that were impaired and reversed at
the period end was £61.8m (FY23: £72.2m), with £7.7m (FY23: £60.5m) of
this being based on their fair value less costs of disposal and £54.1m (FY23:
£11.7m) being based on their value in use.
Onerous lease provisions
IAS 37 defines a contract is onerous when the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be
received under it. The unavoidable costs under a contract reflect the least
net cost of exiting from the contract, which is the lower of the cost of
fulfilling it and any compensation or penalties arising from failure to fulfil
it. Accordingly, the Group provides for the future unavoidable costs that will
be incurred under the lease obligations at the present date when the outflow
of future economic benefits is deemed probable.
The Group has determined that each store is a separate CGU and assess the
profitability of lease contracts by taking into account current economic and
market conditions, current trading performance and forecast profitability over
the remaining life of the lease.
The key assumptions in the calculations are the sales growth rates, gross
margin rates, changes in the operating cost base and the pre-tax discount rate
derived from the Group's weighted average cost of capital using the capital
asset pricing model, the inputs of which include a risk-free rate, equity risk
premium and a risk adjustment (Beta). Given the number of assumptions used,
the assessment involves significant estimation uncertainty. Given the number
of assumptions used, the assessment involves significant estimation
uncertainty. During the period, net reversals of provisions amounted to
£34.5m.
A sensitivity analysis has been performed in respect of sales, margin, the new
store exemption and operating costs as these are considered to be the most
sensitive of the key assumptions:
Forecast: Impact of change in assumption: Reversal increase / (decrease) (£'m)
Sales decline year 1 10% improvement to 7% increase 10.9
Sales decline year 1 10% reduction to 13% (22.8)
Existing gross margin year 1 > 40% 100bps - improvement 2.1
Existing gross margin year 1 > 40% 100bps - reduction (2.3)
New store exemption ((1)) Change from 2 to 3 years 2.3
Operating costs increase year 1 Change from 3% to 6% (4.0)
Investment Property valuations
Investment properties valued by the Group's internal property team are valued
on an open market basis based on active market prices adjusted for any
differences in the nature, location or condition of the specified asset such
as plot size, encumbrances and current use. If this information is not
available, alternative valuation methods are used such as recent prices on
less active markets, or discounted cashflow projections.
The market value of the investment properties is also supported by comparison
to that produced using the valuation methodology described in the "Fair value
less costs of disposal" section above. The range of yield applied across the
investment property portfolio is 7.0% to 14.0%.
Credit Customer Receivables
The Group's credit customer receivables are recognised on the balance sheet at
amortised cost (i.e., net of provision for expected credit loss). At 28 April
2024, trade receivables with a gross value of £286.9m (FY23: £326.0m) were
recorded in the consolidated balance sheet, less a provision for impairment of
£80.7m (FY23: £100.1m).
Expected credit loss
An appropriate allowance for expected credit loss in respect of trade
receivables is derived from estimates and underlying assumptions such as the
Probability of Default and the Loss Given Default, taking into consideration
forward looking macro-economic assumptions. The assessment involves
significant estimation uncertainty. Changes in the assumptions applied such as
the value and frequency of future debt sales in calculating the Loss Given
Default, and the estimation of customer repayments and Probability of Default
rates, as well as the weighting of the macro-economic scenarios applied to the
impairment model could have a significant impact on the carrying value of
trade receivables. These assumptions are continually assessed for relevance
and adjusted appropriately. Revisions to estimates are recognised
prospectively. Sensitivity analysis is given in note 16.
Macroeconomic scenarios
The principial macroeconomic driver factored into the impairment model is
unemployment. The latest economic scenarios used in the model along with the
probably weighting applied to each are summarised as follows:
Scenario Qualitative explanation Probability weighting applied
Upside Inflation recedes quickly and the Bank of England cuts interest rates to 4% by 10%
end of 2024. Unemployment falls back to 3.6%. and wage growth remains strong.
Baseline Inflation recedes but monetary policy is still tight and the unemployment rate 55%
rises to 4.4% in H2 2024.
Downside The Bank of England raises interest rates to 5.5% and unemployment peaks at 25%
6.0% in Q3 2025.
Stress A combination of shocks sees inflation rise sharply, hitting a peak of 7.2% 10%
early in 2025 leading to an increase in interest rates to 6.25%. Unemployment
peaks at 8%.
Post model adjustment
In the prior year, a post model adjustment was applied to the output of the
statistical impairment model as the model was not designed to take into
account changes to customer payment and default performance arising as a
result of the cost-of-living crisis. This increased the provision required at
30 April 2023 by £6.6m. It is management's view that the post model
adjustment is no longer required, as the statistical model, which uses
unemployment rates as the principal determinant in considering forward looking
macro-economic assumptions, is now considered to be sufficiently effective.
Valuation of assets acquired in business combinations
Matches
Following the acquisition of Matches, the principal estimates were around the
fair value of inventory acquired and the intangible asset recognised in
respect of the trademarks and intellectual property acquired. The fair value
of inventory, which primarily included finished goods, was estimated at
£97.5m, an increase of £7.9m on the carrying value prior to the acquisition.
The fair value adjustment related only to finished goods and was calculated as
the estimated selling price less costs to complete and sell the inventory.
The Group recognised intangible assets with a fair value of £20.0m on
acquisition in respect of the trademarks and intellectual property acquired
This represents management's assessment of the price that would be paid for
the acquired assets in an orderly transaction between market participants at
the acquisition date.
Prior year acquisitions
In the prior year, on the acquisition of JD premium brands, the principal
estimate was around the fair value of inventory acquired. The fair value of
inventory, which primarily included finished goods was estimated at £73.4m, a
reduction of £6.9m on the carrying value prior to the acquisition. The fair
value adjustment related only to finished goods and was calculated as the
estimated selling price less costs to complete and sell the inventory. The
fair value adjustment amortised during the current financial year in line with
revenue, as expected.
A gain on bargain purchase arose on the acquisition of JD premium brands. In
light of this, management considered the fair values attributed to the
acquired assets and liabilities and concluded that they were appropriate. If
the fair value of assets and liabilities recognised were to increase/decrease
by £5m, there would be a corresponding increase/decrease to the gain on
bargain purchase by an equivalent amount.
3. SEGMENTAL ANALYSIS
IFRS 8 requires operating segments to be identified on the basis of the
internal financial information reports to the Chief Operating Decision Maker
("CODM") who is primarily responsible for the allocation of resources to
segments and assessment of performance of the segments.
Historically the Group has presented four operating segments:
· UK Sports
This segment included the Group's core sports retail store operations in the
UK, plus all the Group's sports retail online business, Frasers Fitness, the
Group's Shirebrook campus operations, freehold property owning companies
excluding Premium Lifestyle fascia properties, GAME UK stores and online
operations, Frasers Group Financial Services Limited, and retail store
operations in Northern Ireland.
· Premium Lifestyle
This segment included the results of the Group's premium and luxury retail
businesses FLANNELS, Cruise, Van Mildert, Jack Wills, House of Fraser, Gieves
and Hawkes, and Sofa.com along with the related websites, the Missguided and I
Saw it First websites, and freehold property owning companies where trading
was purely from Premium Lifestyle fascias.
· International
This segment included all of the Group's sports retail stores, management and
operating functions in Europe, Asia and the rest of the world, including the
Group's European Distribution Centres in Belgium and Austria, European
freehold property owning companies, GAME Spain stores and e-commerce offering,
the Baltics & Asia e-commerce offerings and the MySale business in
Australia.
· Wholesale & Licensing
This segment included the results of the Group's portfolio of internationally
recognised brands such as Everlast, Karrimor, and Slazenger.
Following the acquisition of Frasers Group Financial Services Limited
(formerly known as Studio Retail Limited) and the launch of the Group's
consumer credit offering, Frasers Plus, as well as recent acquisitions of
investment property, the Group has decided that its financial services and
property divisions should be disclosed as separate operating segments.
In addition, the Group's wholesale and licensing activities have become less
of an area of focus in recent periods and therefore management judge the
results from these activities no longer warrant separate presentation as an
operating segment.
As a result, the Group will now present five operating segments, with the
creation of new Property and Financial Services segments, and the Wholesale
and Licensing Segment being absorbed into the UK Sports and International
segments:
· UK Sports
This segment now includes the results of the Group's core sports retail store
operations in the UK, plus all the Group's sports retail online business,
other UK-based sports retail and wholesale operations, GAME UK stores and
online operations, retail store operations in Northern Ireland, Frasers
Fitness, Studio Retail's sales and the Group's central operating functions
(including the Shirebrook campus).
· Premium Lifestyle
This segment includes the results of the Group's premium and luxury retail
businesses FLANNELS, Cruise, Van Mildert, Jack Wills, House of Fraser, Gieves
and Hawkes, and Sofa.com along with the related websites, the businesses
acquired from JD Sports Fashion Plc in FY23, as well as the results from the I
Saw it First website and the Missguided website until the disposal of the
Missguided intellectual property in October 2023.
· International
This segment includes the results all of the Group's sports retail stores,
management and operating functions in Europe, Asia and the rest of the world,
including the Group's European Distribution Centres in Belgium and Austria,
GAME Spain stores and e-commerce offering, the Baltics & Asia e-commerce
offerings, the MySale business in Australia, the Group's US retail operations
until they were disposed of in 2022, and all non-UK based wholesale and
licensing activities (relating to brands such as Everlast, Karrimor, and
Slazenger).
· Property
This segment includes the results from the Group's freehold property owning
and long leasehold holding property companies that generate third party rental
and other property related income (e.g., car parking, conference and events
income). The results of the Coventry Arena are reported in this segment.
· Financial Services
This segment includes the results of Frasers Group Financial Services. This
includes interest charged on amounts advanced to consumer credit customers,
along with the associated impairment and operating costs.
The operating performance of each segment is assessed by reference to revenue,
gross margin, and profit from trading activities after operating expenses. For
the avoidance of doubt, operating costs in the Group's three retail operating
segments include rents payable to third party landlords. Intra-group rent
payments are eliminated on consolidation.
For the property segment, profit from trading activities includes fair value
gains and losses in respect of investment properties (see further below) and
gains or losses on disposal of properties since the Group's property
businesses seek to generate income from rentals and capital appreciation of
properties held.
In the Financial Services segment, impairment losses on consumer credit
receivables are disclosed within gross margin, which management deem to be the
appropriate treatment for a financial services business.
Depreciation, amortisation and impairments (net of any reversals) are
disclosed as part of each segment's operating profit/(loss).
Net investment and finance income and costs are not split by segment as
management consider that these items relate to the Group as a whole and any
split would not be meaningful. The segmental results for the comparative
period ended 30 April 2023 have been restated to present segmental information
on a consistent basis and to restate for changes to the reclassification of
rental income, see first note 1 for further details.
Segmental information for the 52 weeks ended 28 April 2024:
UK Sports Premium lifestyle International Retail Property Financial Services Group
Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Revenue 2,860.8 1,204.0 1,289.2 5,354.0 72.7 111.0 5,537.7
Cost of sales (1,558.5) (773.2) (782.4) (3,114.1) (7.8) (20.6) (3,142.5)
Gross profit 1,302.3 430.8 506.8 2,239.9 64.9 90.4 2,395.2
Gross Margin % 45.5% 35.8% 39.3% 41.8% 89.3% 81.4% 43.3%
Operating costs (833.9) (293.6) (373.5) (1,501.0) (40.8) (32.8) (1,574.6)
Fair value adjustments to investment properties - - - - 11.5 - 11.5
Gain on disposal of properties - - - - 3.5 - 3.5
Profit from trading 468.4 137.2 133.3 738.9 39.1 57.6 835.6
Depreciation & amortisation (109.9) (36.4) (76.6) (222.9) (60.2) (1.5) (284.6)
Impairments net of impairment reversals 8.4 (2.5) (12.5) (6.6) (14.8) - (21.4)
Share-based payments (23.0) - (0.4) (23.4) - - (23.4)
Foreign exchange realised 9.2 0.3 0.3 9.8 4.6 - 14.4
Operating profit/(loss) 353.1 98.6 44.1 495.8 (31.3) 56.1 520.6
Gain on sale of subsidiaries/discontinued operations 25.0
Net investment income 9.5
Net finance costs (48.1)
Profit before tax 507.0
Result from discontinued operation (12.5)
Fair value adjustment to derivative financial instruments (27.6)
Fair value losses on equity derivatives 68.9
Realised FX gain (14.4)
Share-based payments 23.4
Adjusted profit before tax ("APBT") 544.8
Revenue from external customers in Frasers Group Financial Services Limited
includes credit account interest of £111.0m (FY23: £125.0m), and gross
profit includes impairment losses on credit customer receivables of £20.6m
(FY23: £15.5m), both of which are recognised in the newly created Financial
Services segment.
Other segmental items included in the income statement for the 52 weeks ended
28 April 2024:
UK Sports Premium lifestyle International Retail Property Financial Services Group Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Property, plant & equipment depreciation (68.7) (26.9) (41.7) (137.3) (60.2) (2.1) (199.6)
Property, plant & equipment impairment (3.0) 3.0 (4.9) (4.9) (14.8) - (19.7)
IFRS 16 ROU depreciation (40.7) (9.5) (33.6) (83.8) - 0.6 (83.2)
IFRS 16 ROU (impairment)/reversals 11.9 (0.3) (6.4) 5.2 5.2
Fair value adjustments to investment properties - 11.5 11.5
IFRS 16 disposal and modification/remeasurement of lease liabilities (2.1) 4.9 (9.4) (6.6) - - (6.6)
Intangible amortisation (0.5) - (1.3) (1.8) - - (1.8)
Intangible impairment (0.5) (5.2) (1.2) (6.9) - - (6.9)
Segmental information for the 53 weeks ended 30 April 2023((1))
UK Sports Premium lifestyle International Retail Property Financial Services Group
Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Revenue 2,959.1 1,218.1 1,247.7 5,424.9 36.1 125.0 5,586.0
Cost of sales (1,685.7) (741.0) (746.2) (3,172.9) (2.6) (15.5) (3,191.0)
Gross profit 1,273.4 477.1 501.5 2,252.0 33.5 109.5 2,395.0
Gross Margin % 43.0% 39.2% 40.2% 41.5% 92.8% 87.6% 42.9%
Operating costs (818.7) (343.1) (344.9) (1,506.7) (25.1) (43.7) (1,575.5)
Fair value adjustments to investment properties - - - - (6.5) - (6.5)
Gain on disposal of properties - - - - 95.4 - 95.4
Profit from trading 454.7 134.0 156.6 745.3 97.3 65.8 908.4
Depreciation & amortisation (117.8) (41.4) (46.3) (205.5) (36.0) (0.9) (242.4)
Impairments net of impairment reversals (25.1) (56.9) (133.8) (215.8) (23.9) - (239.7)
Share-based payments (19.3) (19.3) (19.3)
Foreign exchange realised 35.8 0.1 (4.7) 31.2 31.2
Exceptional items - 55.2 16.9 72.1 - 25.0 97.1
Operating profit 328.3 91.0 (11.3) 408.0 37.4 89.9 535.3
Gain on sale of subsidiaries/discontinued operations 17.6
Net investment income 108.0
Net finance costs (22.9)
Profit before tax 638.0
Exceptional items (97.1)
Result from discontinued operation 26.4
Fair value adjustment to derivative financial instruments (32.5)
Fair value losses on equity derivatives (41.1)
Realised FX gain (31.2)
Share-based payments 19.3
Adjusted profit before tax ("APBT") 481.8
1) The FY23 results have been re-categorised due to changes in the
reporting segments, with the creation of new Property and Financial Services
segments, and the Wholesale and Licensing Segment being absorbed into the UK
Sports and International segments. They have also been restated for the
reclassification as rental income (note 1).
Inter-segment sales are priced at cost plus a 10% mark-up.
Other segmental items included in the income statement for the 53 weeks ended
30 April 2023:
UK Sports Premium lifestyle International Retail Property Financial Services Group Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Property, plant & equipment depreciation (95.6) (35.6) (19.0) (150.2) (36.0) (0.9) (187.1)
Property, plant & equipment impairment (14.0) (17.2) (1.4) (32.6) (23.9) - (56.5)
IFRS 16 ROU depreciation (40.0) (6.6) (28.6) (75.2) - - (75.2)
IFRS 16 ROU impairment (6.2) (19.2) (17.7) (43.1) - - (43.1)
Fair value adjustments to investment properties - - - - (6.5) - (6.5)
IFRS 16 disposal and modification/remeasurement of lease liabilities 17.8 0.8 8.2 26.8 - - 26.8
Intangible amortisation - - (6.9) (6.9) - - (6.9)
Intangible impairment (4.9) (20.5) (114.7) (140.1) - - (140.1)
1) The FY23 results have been re-categorised due to changes in the
reporting segments, with the creation of new Property and Financial Services
segments, and the Wholesale and Licensing Segment being absorbed into the UK
Sports and International segments.
4. EXCEPTIONAL ITEMS
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
(£'m) (£'m)
Fair value gain on associate - 16.9
Adjustment to Studio regulatory provision - 25.0
Gain on bargain purchase - 55.2
- 97.1
The gain on bargain purchase in the prior period relates to acquisition of JD
brands.
The fair value gain on associate in the prior year arose as a result of the
disposal of 51% of Kangol LLC, following the loss of control.
5. INVESTMENT INCOME
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
(£'m) (£'m)
Premium received on equity derivatives 76.1 63.9
Fair value gain on equity derivatives - 45.7
Dividend income 2.3 3.0
78.4 112.6
The premium received on equity derivatives mainly relates to written Hugo Boss
options. In the prior year, the fair value gain on equity derivatives mainly
relates to Hugo Boss options.
6. INVESTMENT COSTS
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
(£'m) (£'m)
Loss on disposal of equity derivatives 36.5 4.6
Fair value loss on equity derivatives 32.4 -
68.9 4.6
The loss on equity derivatives relates to losses across the strategic
investments portfolio including Hugo Boss.
7. FINANCE INCOME
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
(£'m) (£'m)
Bank interest receivable 15.8 9.7
Other finance income - 3.9
Fair value adjustment to derivatives* 27.6 32.5
43.4 46.1
*Includes £6.1m (FY23: £8.4m) from interest rate swaps.
8. FINANCE COSTS
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
(£'m) (£'m)
Interest on bank loans and overdrafts 66.8 41.4
Other interest 0.4 9.4
IFRS 16 lease interest 24.3 18.2
91.5 69.0
9. TAXATION
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
(£'m) (£'m)
Current tax 127.5 145.2
Adjustment in respect of prior periods (8.9) (1.0)
Total current tax 118.6 144.2
Deferred tax (0.7) 39.7
Adjustment in respect of prior periods (10.0) (24.5)
Total deferred tax (10.7) 15.2
107.9 159.4
Profit before taxation - continuing operations 507.0 638.0
(Loss)/profit before taxation - discontinued operations (12.5) 26.4
Total Profit before taxation 494.5 664.4
Taxation at the standard rate of tax in the UK of 25% (FY23: 19.5%) 123.6 129.6
Non-taxable income (23.5) (18.7)
Expenses not deductible for tax purposes 34.3 70.9
Other tax adjustments (7.6) 3.1
Adjustments in respect of prior periods - current tax (8.9) (1.0)
Adjustments in respect of prior periods - deferred tax (10.0) (24.5)
Changes in deferred tax rate - -
107.9 159.4
Tax charge - continuing operations 107.9 159.3
Tax charge - discontinued operations - 0.1
Total tax charge 107.9 159.4
Expenses not deductible for tax purposes largely relates to non-qualifying
depreciation and impairments not qualifying for tax allowances.
10. EARNINGS PER SHARE FROM TOTAL AND CONTINUING OPERATIONS ATTRIBUTABLE TO
THE EQUITY SHAREHOLDERS
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders of the parent by the weighted average number of
ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of shares,
438,504,703 (FY23: 459,911,330), is adjusted to assume conversion of all
dilutive potential ordinary shares under the Group's share schemes, being nil
(FY23: nil), to give the diluted weighted average number of shares of
438,504,703 (FY23: 459,911,330). There is therefore no difference between the
Basic and Diluted EPS calculations for both periods. Shares bought back into
treasury are deducted when calculating the weighted average number of shares
below.
Basic and Diluted Earnings Per Share
52 weeks ended 52 weeks ended 52 weeks ended 53 weeks ended 53 weeks ended 53 weeks ended
28 April 2024 28 April 2024 28 April 2024 30 April 2023 30 April 2023 30 April 2023
(restated)(1) (restated)(1) (restated)(1)
Basic and diluted, continuing operations Basic and diluted, discontinued operations Basic and diluted, total Basic and diluted, continuing operations Basic and diluted, discontinued operations Basic and diluted, total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Profit for the period 393.3 (12.5) 380.8 465.4 26.3 491.7
Number in thousands Number in thousands Number in thousands Number in thousands Number in thousands Number in thousands
Weighted average number of shares 438,505 438,505 438,505 459,911 459,911 459,911
Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share
Earnings per share 89.7 (2.9) 86.8 101.2 5.7 106.9
(1) Restated to reflect the change in accounting policy regarding the
valuation of investment property and reclassification of rental income. Please
refer to note 1 for further details.
Adjusted Earnings Per Share
The adjusted earnings per share reflects the underlying performance of the
business compared with the prior period and is calculated by dividing adjusted
earnings by the weighted average number of shares for the period. Adjusted
earnings is used by management as a measure of profitability within the Group.
Adjusted earnings is defined as profit for the period attributable to equity
holders of the parent for each financial period but excluding the post-tax
effect of certain non-trading items. Tax has been calculated with reference to
the effective rate of tax for the Group.
The Directors believe that the adjusted earnings and adjusted earnings per
share measures provide additional useful information for shareholders on the
underlying performance of the business and are consistent with how business
performance is measured internally. Adjusted earnings is not a recognised
profit measure under IFRS and may not be directly comparable with adjusted
profit measures used by other companies.
52 weeks ended 52 weeks ended 53 weeks ended 53 weeks ended
28 April 2024 28 April 2024 30 April 2023 30 April 2023
Basic Diluted Basic Diluted
(£'m) (£'m) (£'m) (£'m)
Profit for the period 380.8 380.8 491.7 491.7
Pre-tax adjustments to profit / (loss) for the period for the following items:
Exceptional items - - (97.1) (97.1)
Fair value adjustment to derivatives included within finance (income) (27.6) (27.6) (32.5) (32.5)
Fair value losses/(gains) and loss/(profit) on disposal of equity derivatives 68.9 68.9 (41.1) (41.1)
Realised foreign exchange gains (14.4) (14.4) (31.2) (31.2)
Share based payments 23.4 23.4 19.3 19.3
Tax adjustments on the above items (11.0) (11.0) 20.8 20.8
Adjusted profit for the period 420.1 420.1 329.9 329.9
Number in thousands Number in thousands Number in thousands Number in thousands
Weighted average number of shares 438,505 438,505 459,911 459,911
Pence per share Pence per share Pence per share Pence per share
Adjusted Earnings per share 95.8 95.8 71.7 71.7
11. DISCONTINUED OPERATIONS AND SALE OF SUBSIDIARIES
On 20 December 2023, the Group acquired the Matches business ("Matches") from
MF Intermediate Limited, by way of the purchase of 100% of the shares of a
group of 6 companies (of which MatchesFashion Limited was the main trading
subsidiary) and the acquisition of the senior and junior debt owed by those
companies. The consideration payable was £51.9m.
Following the acquisition, the Group provided significant funding to Matches
but the business continued to generate material trading losses. As a result of
this, the management concluded that the funding requirements of the business
would be far in excess of amounts that the Group considers to be viable and on
8 March 2024 administrators were appointed. From this point, the Group was no
longer exposed to and no longer had rights to variable returns from Matches
and lost its ability to influence these returns through its power over the
entity. Therefore, in accordance with IFRS 10 Consolidated Financial
Statements ("IFRS 10") management concluded that it no longer had control over
Matches.
In accordance with IFRS 5.32, management considered that Matches constituted a
separate major line of business that had been disposed of and that it
therefore met the criteria to be classified as a discontinued operation.
Details of the disposal
Period ended
28 April 2024
(£'m)
Total disposal consideration 74.7
Carrying amount of net assets disposed of (78.8)
Loss on disposal after income tax (4.1)
All amounts are attributable to the owners of the parent.
Total disposal consideration of £74.7m reflects loans due to the Group from
Matches at the point of disposal, net of a provision for expected credit loss.
In period between the administrators' appointment and 28 April 2024, the Group
purchased the brand names and intellectual property of Matches for £20.0m,
with the consideration payable being treated as a reduction in the amounts
owed to the Group by Matches.
A first dividend of £30.0m was received from the administrators prior to
year-end leaving and outstanding balance of £24.7m at year end, which is
recorded within trade and other receivables.
Financial performance and cash flow information
20 December 2023 to
28 April 2024
(£'m)
Revenue 29.9
Expenses (38.3)
Loss after tax of discontinued operation (8.4)
Loss on disposal (4.1)
Loss from discontinued operation (12.5)
Net cash outflow from operating activities (9.1)
Net cash outflow from investing activities (5.3)
Net decrease in cash generated by the discontinued operation (14.4)
The carrying amounts of assets and liabilities at the date of disposal on 8
March 2024 were as follows:
(£'m)
Goodwill 1.9
Intangible assets 20.0
Inventories 73.9
Trade and other receivables 34.9
Cash and cash equivalents 20.0
Total assets 150.7
Trade and other payables (45.8)
Provisions (12.3)
Lease liabilities (13.8)
Total liabilities (71.9)
Net assets of the disposal group 78.8
Disposal of subsidiaries
During the current period, the Group sold certain intellectual property assets
relating to Missguided for net consideration of approximately £25.0m.
Summary of FY23 discontinued operation and disposals of subsidiaries
On 24 May 2022, the Group disposed of its US retail businesses trading as Bobs
Stores and Eastern Mountain Sports for net cash consideration of approximately
£43.6m. The disposal took place through the sale of 100% of the share capital
of Roberts 50 USA LLC and its subsidiaries to GoDigital Media Group.
As per IFRS 5, this disposal group was classified as held for sale and as a
discontinued operation in FY22. A profit on disposal of £26.3m was recognised
in the Consolidated Income Statement in the prior year.
The reconciliation of the transaction is detailed below:
30 April 2023
(£'m)
Net assets disposed of (including FX revaluation) (18.9)
Cash received, net of transaction costs and cash disposed of 43.6
Gain on sale before income tax and reclassification of foreign currency 24.7
translation reserve
Reclassification of foreign currency translation reserve 1.6
Gain on sale after income tax 26.3
The Consolidated Cash Flow Statement in the prior year included the following
amounts relating to this discontinued operation:
53 weeks ended
30 April 2023
(£'m)
Operating activities (2.2)
Financing activities (0.5)
Net cash outflow from discontinued operations (2.7)
Additionally, during the prior period, consideration of £2.9m was received in
respect of the Group's disposal of a 51% shareholding in Kangol LLC to Bollman
Hat Company. Total proceeds received from disposals of discontinued operations
and subsidiaries in the prior period was therefore £46.5m.
12. PROPERTY, PLANT AND EQUIPMENT
Right of use assets* Freehold land and Buildings Long-term Leaseholds Short-term leasehold improvements Plant and Equipment Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
COST
At 24 April 2022 686.6 904.0 155.7 125.1 995.8 2,867.2
Acquisitions (see note 32) 43.0 - 15.7 - 7.6 66.3
Additions 98.0 97.5 6.0 1.1 275.5 478.1
Eliminated on disposals (111.2) (60.1) (34.3) - (65.6) (271.2)
Reclassifications / Remeasurements 7.6 (1.5) - - - 6.1
Exchange differences 12.6 (13.3) 0.6 0.3 18.6 18.8
At 30 April 2023 736.6 926.6 143.7 126.5 1,231.9 3,165.3
Additions 81.3 15.5 6.8 - 169.4 273.0
Eliminated on disposals (75.1) (16.5) (2.1) (14.7) (96.0) (204.4)
Reclassifications / Remeasurements 15.2 (83.9) (3.0) - (10.6) (82.3)
Exchange differences (2.6) (3.3) (0.4) (0.5) (5.2) (12.0)
At 28 April 2024 755.4 838.4 145.0 111.3 1,289.5 3,139.6
ACCUMULATED DEPRECIATION AND IMPAIRMENT
At 24 April 2022 (491.9) (420.5) (63.0) (121.4) (759.4) (1,856.2)
Charge for the period (75.2) (43.8) (11.4) (1.7) (130.2) (262.3)
Impairment (43.1) (23.9) (0.2) - (32.2) (99.4)
Eliminated on disposals 110.8 16.7 11.6 (0.9) 57.0 195.2
Reclassifications / Remeasurements - 0.2 - - - 0.2
Exchange differences (9.4) 4.3 (0.3) (0.3) (5.1) (10.8)
At 30 April 2023 (508.8) (467.0) (63.3) (124.3) (869.9) (2,033.3)
Charge for the period (83.2) (17.4) (17.4) (0.1) (164.7) (282.8)
Impairment 5.2 6.8 (6.7) - (19.8) (14.5)
Eliminated on disposals 75.1 4.4 3.0 14.1 32.0 128.6
Reclassifications / Remeasurements (3.4) 12.7 (3.7) 0.2 8.9 14.7
Exchange differences 5.1 0.6 0.2 0.4 4.0 10.3
At 28 April 2024 (510.0) (459.9) (87.9) (109.7) (1,009.5) (2,177.0)
NET BOOK VALUE
At 28 April 2024 245.4 378.5 57.1 1.6 280.0 962.6
At 30 April 2023 227.8 459.6 80.4 2.2 362.0 1,132.0
At 24 April 2022 194.7 483.5 92.7 3.7 236.4 1,011.0
*ROU assets have been restated to reflect the change in accounting policy
regarding the valuation of investment property. Please refer to note 1 for
further details. Lease arrangements for ground rents have also been
reclassified to investment properties as they are now recognised and measured
as part of the fair values of investment property.
13. INVESTMENT PROPERTIES
Freehold land and Buildings
(£'m)
Fair value at 24 April 2022* 95.5
Direct acquisitions 107.0
Less right-of-use asset additions (18.7)
Transfer from property, plant and equipment - at fair value 1.3
Disposals (37.3)
Net loss from fair value adjustment on investment properties (6.5)
Market value per valuation report 141.3
Lease liabilities on ground leases 18.7
Fair value at 30 April 2023* 160.0
Lease liabilities on ground leases brought forward (18.7)
Direct acquisitions 99.2
Less right-of-use asset additions (23.7)
Transfer from property, plant and equipment - at fair value 79.4
Net gain from fair value adjustment on investment properties 11.5
Market value per valuation report 307.7
Lease liabilities on ground leases 42.8
Fair value at 28 April 2024 350.5
*Restated to reflect the change in accounting policy regarding the valuation
of investment property. Please refer to note 1 for further details.
The rental income from Investment Properties recognised in the consolidated
income statement for the year was £38.7m (FY23: £23.7m).
Valuation processes
The Group's investment properties were valued as at 28 April 2024 by the
Group's internal property team who are appropriately qualified chartered
surveyors, follow the applicable valuation methodology of the Royal Institute
of Chartered Surveyors, and have recent experience in the locations and
segments of the investment properties valued. For all investment properties,
their current use equates to the highest and best use. The Group's finance
department includes a team that reviews the valuations performed by the
property team for financial reporting purposes. This team reports directly to
the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussions of
valuation processes and results are held between the finance department and
the property team in August and February each year.
At each financial discussion, the finance department verifies all major inputs
to the valuation report and assesses property valuation movements when
compared to the previous valuation report.
Measurement of fair value of investment property
Properties valued by the Group's internal property team are valued on an open
market basis based on active market prices adjusted for any differences in the
nature, location or condition of the specified asset such as plot size,
encumbrances and current use. If this information is not available,
alternative valuation methods are used such as recent prices on less active
markets, or discounted cashflow projections. The significant unobservable
input is the adjustment for factors specific to the properties in question.
The extent and direction of this adjustment depends on the number and
characteristics of the observable market transactions in similar properties
that are used as the starting point for the valuation. Although this input is
a subjective judgement, management consider that the overall valuation would
not be materially altered by any reasonable alternative assumptions. All of
the valuations across the Group's investment property are considered to be
level 3 fair values.
The market value of the investment properties has been supported by comparison
to that produced under income capitalisation techniques applying yield as a
key unobservable input. The range of yield applied is 7.0% to 20.0%.
The fair value of an investment property reflects, among other things, rental
income from current leases and assumptions about future rental lease income
based on current market conditions and anticipated plans for the property
14. INTANGIBLE ASSETS
Goodwill Trademarks and licenses Brands Customer related Total
(£'m) (£'m) (£'m) (£'m) (£'m)
COST
At 24 April 2022 176.8 91.1 87.0 5.7 360.6
Acquisitions (note 32) 35.6 11.7 - - 47.3
Additions - 1.0 - - 1.0
Disposals (0.2) (2.3) - - (2.5)
Exchange adjustments 2.5 0.3 1.8 - 4.6
At 30 April 2023 214.7 101.8 88.8 5.7 411.0
Acquisitions (note 32) 4.2 20.0 - - 24.2
Additions - 25.0 - - 25.0
Disposals (1.9) (20.0) - - (21.9)
Exchange adjustments - (0.1) 0.3 - 0.2
At 28 April 2024 217.0 126.7 89.1 5.7 438.5
AMORTISATION AND IMPAIRMENT
At 24 April 2022 (132.4) (87.3) (19.3) (1.0) (240.0)
Amortisation charge - (0.9) (6.0) - (6.9)
Impairment (71.7) (11.7) (52.0) (4.7) (140.1)
Disposals 0.4 2.3 - - 2.7
Exchange adjustments (1.1) (0.3) (1.2) - (2.6)
At 30 April 2023 (204.8) (97.9) (78.5) (5.7) (386.9)
Amortisation charge - (0.5) (1.3) - (1.8)
Impairment (2.3) (4.6) - - (6.9)
Disposals - - - - -
Exchange adjustments - (0.4) (0.3) - (0.7)
At 28 April 2024 (207.1) (103.4) (80.1) (5.7) (396.3)
At 28 April 2024 9.9 23.3 9.0 - 42.2
At 30 April 2023 9.9 3.9 10.3 - 24.1
At 24 April 2022 44.4 3.8 67.7 4.7 120.6
Amortisation is charged to selling, distribution and administrative expenses
in the Consolidated Income Statement.
Goodwill, trademarks and licenses and brands that are acquired in a business
combination are allocated, at acquisition, to the CGUs that are
expected to benefit from that business combination. After recognition of
impairment losses, the carrying amount of these assets at the start and end of
the current period are allocated as follows:
28 April 2024
Goodwill Trademarks and licenses Brands Total
(£'m) (£'m) (£'m) (£'m)
Wholesale & Licensing (excl. Everlast) 9.9 - - 9.9
Everlast - 3.0 9.0 12.0
Matches - 20.0 - 20.0
9.9 23.0 9.0 41.9
30 April 2023
Goodwill Trademarks and licenses Brands Total
(£'m) (£'m) (£'m) (£'m)
Wholesale & Licensing (excl. Everlast) 9.9 - - 9.9
Everlast - 3.3 10.3 13.6
9.9 3.3 10.3 23.5
Acquisitions
In the current period, goodwill and trademarks with a fair value of £24.2m
(FY23: £47.3m) were recognised as part of business combinations with £21.9m
relating to the Matches acquisition. See note 32 for details. The goodwill and
trademarks recognised in respect of Matches were derecognised once the
business went into administration on 8 March 2024. See note 16 for details.
Following a review of the trading performance of the other businesses acquired
the goodwill was fully impaired as the recoverable amount on a value in use
basis was estimated to be £nil.
Additions
In period between the administrators' appointment and 28 April 2024, the Group
purchased the brand names and intellectual property of Matches for £20.0m
(see note 11 for further details). The assets acquired were assumed to have a
useful economic life of 15 years. Management does not consider that there was
any indicator of impairment at the reporting date.
During the current period, the Group also acquired other trademarks and brand
names with a cost value of £5m. These assets were fully impaired as the
recoverable amount on a value in use basis was estimated to be £nil.
Amortisation
The brands, trademarks & licenses allocated to the Everlast CGU are being
amortised over a 15-year period. The amortisation charge in the current period
is £1.3m (FY23: £6.5m) and is disclosed within selling, distribution and
administrative expenses in the Consolidated Income Statement. The remaining
useful economic life of these assets is 10 years (FY23: 11 years).
Impairment review
The Group tests the carrying amount of goodwill and intangible assets with an
indefinite life for impairment annually or more frequently if there are
indications that their carrying value might be impaired. The carrying amounts
of other intangible assets are reviewed for impairment if there is an
indicator of impairment.
The recoverable amounts of the Wholesale & Licensing (excl. Everlast) and
Everlast CGUs have been determined by reference to value in use calculations.
The recoverable amounts were then compared to the carrying value of the assets
allocated to each CGU to assess the level impairment required, if any.
No impairment testing was performed on the intellectual property purchased
from Matches due to the absence of any indicator of impairment and the
proximity of the transaction to the reporting date.
Significant judgements, assumptions, and estimates
In determining the value in use of CGUs it is necessary to make a series of
assumptions to estimate the present value of future cash flows. In each case,
these key assumptions have been made by management reflecting past experience,
current trends, and where applicable, are consistent with relevant external
sources of information. The key assumptions are as follows:
28 April 2024 30 April 2023
Wholesale & Licensing (excl. Everlast) Everlast Wholesale & Licensing (excl. Everlast) Everlast
5-year average annual forecast sales decline (1.7%) (1.8%) (3.0%) (2.6%)
Discount rate 9.8% 13.5% 8.5% 14.2%
Annual % increase in operating costs - - - 3.0%
Terminal growth rate 2.0% 2.0% 2.0% 2.0%
Management has prepared cash flow forecasts for a five-year period derived
from the actual results for financial year 2023/24. These forecasts include
assumptions around sales prices and volumes, specific customer relationships
and operating costs and working capital movements.
The average rate of annual sales decline forecast for the Everlast CGU of 1.7%
pa is less pessimistic than the 2.6% pa in the prior year and is reflective of
management's latest view of the business' prospects in the medium-term due to
current restructuring underway.
The pre-tax rates used to discount the forecast cash flows are shown above and
are derived from the Group's weighted average cost of capital as adjusted for
the specific risks related to each CGU.
Overhead costs in the Everlast CGU have been assumed to remain flat (FY23:
3.0% pa increase) throughout the forecast period on the basis that
inflationary cost increases will be offset by operational efficiencies due to
current restructuring underway.
To forecast beyond the detailed cash flows into perpetuity, a long-term
average growth rate of 2.0% (FY23: 2.0%) has been used. This is not greater
than the published International Monetary Fund average growth rate in gross
domestic product for the next five-year period in the territories where the
CGUs operate. The growth rate was assessed separately for each CGU however the
2.0% rate was deemed appropriate in both cases.
Results
The recoverable amount of the Wholesale & Licensing (excluding Everlast)
CGU exceeds its carrying value by approximately £72.7m (FY23: £82.0m) and as
such no impairment was required.
The recoverable amount of the Everlast CGU exceeds its carrying value by
approximately £9.0m (FY23: £87.9m impairment loss) and as such no impairment
was required.
Sensitivity Analysis
The table below shows changes to the terminal growth rate, risk adjusted
discount rate and forecast operating cash flow assumptions used in the
calculation of value in use for the Everlast CGU to make recoverable amount of
CGU equal to its carrying value:
Everlast
Value in use £55.2m
Current headroom £9.0m
Change in key assumption required to make recoverable amount of CGU equal to
its carrying value
Current Terminal Growth Rate 2.0%
Revised Terminal Rate of Decline (0.9%)
Current Discount Rate 13.5%
Revised Discount Rate 13.9%
Current 5-year average annual forecast sales decline (1.8%)
Revised 5-year average annual forecast sales decline (2.1%)
Current annual % increase in operating costs -
Revised annual % increase in operating costs 1.5%
Based on the results of the impairment test for the Wholesale & Licensing
(excluding Everlast) CGU and the immaterial carrying value of the remaining
goodwill, management are satisfied that there is sufficient headroom against
the carrying value such that a reasonably possible change in assumption would
not lead to an impairment. Consequently, no sensitivity analysis has been
disclosed for this CGU.
Climate Change
Management considered the impact of climate change when conducting its
impairment review and concluded that it was unlikely to have a material impact
on the assumptions based on the following:
· The relevant tangible assets have relatively short useful
economic lives and are not considered to be in locations that will be
materially impacted by climate change (i.e., they are in the USA - a developed
country).
· The forecasts include estimates for ongoing capital expenditure,
which management consider to be sufficient to make any essential climate
change related acquisitions (e.g., solar panels or building energy management
systems).
15. LONG-TERM FINANCIAL ASSETS
The Group is not looking to make gains through increases in market prices of
its long-term financial assets, therefore on initial application of IFRS 9 the
Group made the irrevocable election to account for long term financial assets
at fair value through other comprehensive income (FVOCI). The election has
been made on an instrument-by-instrument basis, only qualifying dividend
income is recognised in profit and loss, changes in fair value are recognised
within OCI and never reclassified to profit and loss, even if the asset is
impaired, sold or otherwise derecognised. All of the Group's long-term
financial assets are recognised in the UK Sports segment.
The fair value of the long-term financial assets is based on bid quoted market
prices at the balance sheet date or where market prices are not available, at
management's estimate of fair value.
The following table shows the aggregate movement in the Group's financial
assets during the period:
28 April 2024 30 April 2023
(£'m) (£'m)
At beginning of period 289.6 206.6
Additions 382.6 243.3
Disposals (133.3) (172.4)
Amounts recognised through other comprehensive income (43.7) 9.9
Exchange differences 0.2 2.2
495.4 289.6
Included within long-term financial assets at the period ended 28 April 2024
are the following direct interests held by the Group:
• 36.9% (FY23: 36.9%) interest in Mulberry Group Plc
• 31.1% (FY23: Nil%) interest in XXL ASA
• 24.5% (FY23: Nil%) interest in AO World Plc
• 22.7% (FY23: Nil%) interest in Boohoo Group Plc
• 20.4% (FY23: 17.6%) interest in N Brown Group Plc
• 20.2% (FY23: 5.5%) interest in ASOS Plc
• 9.3% (FY23: Nil%) interest in Hornby Plc
• 6.6% (FY23: Nil%) interest in Currys Plc
• Various other interests, none of which represent more than 5.0%
of the voting power of the investee
The following table shows the fair value of each of the Group's long-term
financial assets (all listed):
28 April 2024 30 April 2023
(£'m) (£'m)
AO World plc 150.1 -
Boohoo Group plc 98.4 -
ASOS plc 83.1 40.5
Currys plc 46.1 -
XXL ASA 31.9 -
Mulberry Group plc 23.8 53.2
N Brown Group plc 13.4 23.5
Hornby plc 5.2 -
Other* 43.4 172.4
At end of period 495.4 289.6
*Other relates to interests which do not represent more than 5.0% of the
voting power of the investee as at 28 April 2024.
These holdings have been assessed under IFRS 9 Financial Instruments and
categorised as long-term financial assets, as the Group does not consider them
to be associates and therefore, they are not accounted for on an equity basis,
see note 2.
Our strategic investments are intended to allow us to develop relationships
and commercial partnerships with the relevant retailers and brands.
16. TRADE AND OTHER RECEIVABLES
52 weeks ended 53 weeks ended
28 April 2024 30 April 2023
(£'m) (£'m)
Gross credit customer receivables 286.9 326.0
Allowance for expected credit loss on credit customer receivables (80.7) (100.1)
Net credit customer receivables 206.2 225.9
Trade receivables 91.6 65.6
Deposits in respect of derivative financial instruments 139.0 190.1
Amounts owed by related parties (see note 34) 6.6 4.7
Other receivables 128.1 122.3
Prepayments 103.4 111.5
674.9 720.1
Following the acquisition of Frasers Group Financial Services Limited
(formerly known as Studio Retail Limited) in FY22, credit customer receivables
now make up a significant element of trade and other receivables. Further
disclosure with regards to the credit customer receivables and the associated
allowance for expected credit loss can be found at the end of this note.
Trade and other receivables
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of asset above, plus any
cash balances. Other receivables also include unremitted sales receipts.
Deposits in respect of derivative financial instruments are collateral to
cover margin requirements for derivative transactions held with
counterparties. The collateral requirement changes with the market (which is
dependent on share price and volatility), the financial institutions'
assessment of the Group's creditworthiness and further purchases / sales of
underlying investments held.
Credit Customer Receivables
Certain of the Group's trade receivables are funded through a securitisation
facility that is secured against those receivables. The finance provider will
seek repayment of the finance, as to both principal and interest, only to the
extent that collections from the trade receivables financed allows and the
benefit of additional collections remains with the Group. At the period end,
receivables of £201.3m (FY23: £256.4m) were eligible to be funded via the
securitisation facility, and the facilities utilised were £126.8m (FY23:
£161.6m).
Other information
The average credit period taken on sales of goods is 264 days (FY23: 222
days). On average, interest is charged at 3.4% (FY23: 3.4%) per month on the
outstanding balance.
The Group will undertake a reasonable assessment of the creditworthiness of a
customer before opening a new credit account or significantly increasing the
credit limit on that credit account. The Group will only offer credit limit
increases for those customers that can reasonably be expected to be able to
afford and sustain the increased repayments in line with the affordability and
creditworthiness assessment. There are no customers (FY23: None) who represent
more than 1% of the total balance of the Group's trade receivables.
Where appropriate, the Group will offer forbearance to allow customers
reasonable time to repay the debt. The Group will ensure that the forbearance
option deployed is suitable in light of the customer's circumstances (paying
due regard to current and future personal and financial circumstances). Where
repayment plans are agreed, the Group will ensure that these are affordable to
the customer and that unreasonable or unsustainable amounts are not requested.
At the balance sheet date there were 25,170 accounts (FY23: 21,395) with total
gross balances of £16.6m (FY23: £14.3m) on repayment plans. Provisions are
assessed as detailed above.
During the current period, overdue receivables with a gross value of £35.6m
(FY23: £56.0m) were sold to third party debt collection agencies. As a result
of the sales, the contractual rights to receive the cash flows from these
assets were transferred to the purchasers. Any gain or loss between actual
recovery and expected recovery is reflected within the impairment charge.
Allowance for expected credit loss
The following tables provide information about the exposure to credit risk and
ECLs for trade receivables from individual customers as at 28 April 2024:
28 April 2024 30 April 2023
Trade receivables Trade receivables on forbearance arrangements Total Trade receivables Trade receivables on forbearance arrangements Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Ageing of trade receivables
Not past due 206.7 15.7 222.4 242.5 13.0 255.5
Past due:
0 - 60 days 22.0 0.9 22.9 23.4 1.3 24.7
60 - 120 days 9.3 - 9.3 9.6 - 9.6
120+ days 32.3 - 32.3 36.2 - 36.2
Gross trade receivables 270.3 16.6 286.9 311.7 14.3 326.0
Allowance for expected credit loss (69.0) (11.7) (80.7) (90.2) (9.9) (100.1)
Carrying value 201.3 4.9 206.2 221.5 4.4 225.9
1 May 2023 to 28 April 2024
Stage 1 Stage 2 Stage 3 Total
(£'m) (£'m) (£'m) (£'m)
Gross trade receivables 185.6 47.3 54.0 286.9
Allowance for doubtful debts:
Opening balance (17.2) (37.2) (45.7) (100.1)
Impairment (charge)/release (6.9) 5.0 (19.9) (21.8)
Utilisation in period 6.4 13.3 21.5 41.2
Closing balance (17.7) (18.9) (44.1) (80.7)
Carrying value 167.9 28.4 9.9 206.2
Analysis of impairment charge:
1 May 2023 to 28 April 2024 25 April 2022 to 30 April 2023
(£'m) (£'m)
Impairment charge impacting on provision (21.8) (22.2)
Recoveries 9.5 9.2
Other (8.3) (2.5)
Impairment charge (20.6) (15.5)
Sensitivity analysis
Management judgement is required in setting assumptions around probabilities
of default, cash recoveries and the weighting of macro-economic scenarios
applied to the impairment model, which have a material impact on the results
indicated by the model.
A 1% increase/decrease in the probability of default would increase/decrease
the provision amount by approximately £1.4m.
A 1% increase in the assumed recoveries rate would result in the impairment
provision decreasing by approximately £0.8m.
Changing the weighting of macro-economic scenarios to a more positive outlook
so that the severe-case scenario's weighting is halved to 5% and base reducing
by 10% to 45% (with upside increasing by 15% to 25% and downside remaining at
25%) would result in the impairment provision reducing by approximately
£0.7m.
17. BORROWINGS
28 April 2024 30 April 2023
(£'m) (£'m)
Current:
Lease liabilities 112.5 119.6
Non-Current
Bank and other loans 806.2 749.7
Lease liabilities 533.8 560.3
1,452.5 1,429.6
An analysis of the Group's total borrowings other than bank overdrafts is as
follows:
28 April 2024 30 April 2023
(£'m) (£'m)
Borrowings - sterling 806.2 749.7
Group borrowings (excluding Frasers Group Financial Services Limited) are at a
rate of interest of 3.4% (FY23: 2.0%) over the interbank rate of the country
within which the borrowing entity resides. The securitisation loan relating to
Frasers Group Financial Services Limited had a balance at 28 April 2024 of
£126.8m (FY23: £161.6m). The average interest rate paid on the
securitisation loan was 7.02% (FY23: 5.41%).
Reconciliation Of Liabilities Arising From Financing Activities
The changes in the Group's liabilities arising from financing activities can
be classified as follows:
Non-current borrowings Current borrowings Total
(£'m) (£'m) (£'m)
At 24 April 2022 1,331.5 117.0 1,448.5
Cash-flows:
- Borrowings drawn down 616.8 - 616.8
- Borrowings repaid (695.0) - (695.0)
Lease liability:
- IFRS 16 Lease Liabilities - cash-flows - (140.7) (140.7)
- IFRS 16 Lease Liabilities - modifications/remeasurements, transfers from (121.4) 101.8 (19.6)
non-current to current, and foreign exchange adjustments
- IFRS 16 Lease Liabilities - new leases 137.1 35.2 172.3
- IFRS 16 Lease Liabilities - acquired through business combinations (note 41.0 6.3 47.3
32)
At 30 April 2023 1,310.0 119.6 1,429.6
Cash-flows:
- Borrowings drawn down 482.1 - 482.1
- Borrowings repaid (425.6) - (425.6)
Lease liability:
- IFRS 16 Lease Liabilities - cash-flows - (162.8) (162.8)
- IFRS 16 Lease Liabilities - modifications/remeasurements, transfers from (121.3) 133.3 12.0
non-current to current, and foreign exchange adjustments
- IFRS 16 Lease Liabilities - new leases 82.3 21.1 103.4
- IFRS 16 Lease Liabilities - acquired through business combinations (note 12.5 1.3 13.8
32)
At 28 April 2024 1,340.0 112.5 1,452.5
On 30 November 2021 the Group refinanced its existing borrowings and entered
into a combined term loan and revolving credit facility of £930.0m for a
period of 3 years, with the possibility to extend this by a further 2 years.
This facility was extended by two years and the facility increased to
£1,322.5m as at the reporting date, increasing to 1,432.5m from December 2024
then reducing to £1,372.5m from December 2025 until November 2026. Given the
revolving credit facility is available for a minimum of 2 years and the
limited restriction of lending under the facility, the balance is classified
as non-current on the Consolidated Balance Sheet.
The Group continues to operate comfortably within its banking facilities and
covenants and the Board remains comfortable with the Group's available
headroom. The carrying amounts and fair value of the borrowings are not
materially different.
Reconciliation of Net Debt:
28 April 2024 30 April 2023
(£'m) (£'m)
Borrowings (1,452.5) (1,429.6)
Add back:
- Lease liabilities 646.3 679.9
Cash and cash equivalents 358.6 332.9
Net debt (447.6) (416.8)
18. PROVISIONS
Legal and regulatory Property related Financial services related Other Total
(£'m) (£'m) (£'m) (£'m) (£'m)
At 24 April 2022 230.2 161.2 41.6 - 433.0
Acquired through business combinations - 6.0 - - 6.0
Amounts provided 1.3 69.7 - 0.8 71.8
Amounts utilised / reversed (108.0) (70.2) (25.6) (0.5) (204.3)
At 30 April 2023 123.5 166.7 16.0 0.3 306.5
Acquired through business combinations - 12.3 - - 12.3
Amounts provided 24.1 38.5 1.6 2.7 66.9
Amounts utilised / reversed (23.9) (93.4) (9.4) - (126.7)
At 28 April 2024 123.7 124.1 8.2 3.0 259.0
Financial services related and other provisions are categorised as current
liabilities, while legal and regulatory and property related provisions are
non-current.
Legal and regulatory provisions
Legal and regulatory provisions reflect management's best estimate of the potential costs arising
from the settlement of outstanding disputes of a commercial and regulatory
nature.
A substantial portion of the amounts provided relates to ongoing legal claims
and non-UK tax enquiries. In accordance with IAS37.92, management have
concluded that it would prejudice seriously the position of the Group to
provide further specific disclosures in respect of amounts provided for legal
claims and non-UK tax enquiries.
The timing of the outcome of legal claims and non-UK tax inquiries is
dependent on factors outside the Group's control and therefore the timing of
settlement is uncertain. After taking appropriate legal advice, the outcomes
of these claims are not expected to give rise to material loss in excess of
the amounts provided.
Property related provisions
Included within property related provisions are onerous lease provisions and
provisions for dilapidations in respect of the Group's retail stores and
warehouses. Further details of management's estimates are included in note 2.
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