REG - Frasers Group PLC - Half-year Report
05/12/2024 07:00
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RNS Number : 8756O Frasers Group PLC 05 December 2024
5 December 2024
FRASERS GROUP PLC ("Frasers Group", "the Group", or "the Company")
Unaudited half year results for the 26 weeks ended 27 October 2024 ("FY25 H1")
Further strong Elevation Strategy progress:
best brands; international expansion; significant cost savings and synergies.
Michael Murray, Chief Executive of Frasers Group:
"The first half of this year has been another period of progress for the
Group, delivering on our objectives as the Elevation Strategy continues to
take the business to the next level. Sports Direct UK delivered further sales
growth, and our Property and Financial Services divisions are seeing
encouraging progress. We continue to operate with discipline to ensure our
business is as resilient as possible - proactively right-sizing recent
acquisitions to set them up for profitable long-term growth and driving
further automation benefits to exceed our stock reduction targets for the
period. We have also made significant strides in international expansion,
developing new partnerships across Australia and Africa, and unlocking
opportunities as we move further towards our goal of becoming a leading global
sports retailer. We are set to deliver another year of profitable growth but,
given recent weaker consumer confidence leading up to and following the
Budget, FY25 APBT is now expected to be in the range of £550m to £600m."
Headlines
· Continued strategic progress against key priorities:
1. Focus on profitable growth
· APBT ((1)) of £299.2m (-1.5%). On track to achieve another year
of profitable growth.
· Group and retail gross margin % both up +40 bps year-on-year.
· Delivered £74.7m cost saving and synergy benefits from recent
investments in warehouse automation and acquisitions.
· Another period of sales growth in Sports Direct UK. UK Sports'
profit from trading up £8.5m (3.4%) to £255.2m.
· Premium Lifestyle's profit from trading up £16.4m (41.1%) to
£56.3m, with integration and other cost benefits offsetting the continuing
challenging luxury market.
2. Elevation Strategy, best brands and international expansion
· Continue to drive stronger relationships with the biggest global
brands including with new partners FENDI, Ferragamo and Prada Beauty.
· Working with global brand partners and utilising our consistently
strong cash flow to deploy capital to international sport and lifestyle
investment opportunities:
i. Completed the acquisition of Twinsport in the Netherlands.
ii. Invested in Australia/New Zealand group Accent.
iii. Invested in Maltese/North Africa retailer/Nike distributor Hudson.
iv. After period end, announced the acquisition of Holdsport in South
Africa/Namibia.
· Further UK property investments at attractive yields to satisfy
our occupational demand, with new shopping centres and retail park
acquisitions in Doncaster, Lancaster, Exeter, Maidstone, and Quedgeley.
· Continue to invest in UK luxury and premium retail, further
consolidating a market that remains challenging but in anticipation of future
improvement. Added ten new stores and 162k sq. ft, including flagships
FLANNELS Leeds and FRASERS/Sports Direct Sheffield.
3. Acquisition integrations and automation synergies
· £74.7m of cost savings and synergy benefits offset the planned
reductions in low margin sales at Studio and Game, and the impact of
right-sizing JD Sports Fashion Premium Brands and SportMaster in Denmark.
· Increased warehouse efficiency, driven by automation and
rationalisation of our warehouse estate, enabled a £298.8m
(16.5%) reduction in gross inventory year on year, ahead of our target of a
5%-15% reduction by the end of 2024.
4. Frasers Plus
· Good progress towards our long-term ambitions of delivering
£1bn+ in sales, £600m in credit balances, a greater than 15% yield, and over
2 million active Frasers Plus customers (excluding any third-party
partnerships). The business added 272k new customers in FY25 H1 and ended the
period with an active customer base of 377k, at which point Frasers Plus
accounted for 13.7% of UK online sales.
· Strategic partnership with THG plc ("THG") off to a positive
start. After period end, announced a second Frasers Plus partnership with
Hornby plc.
5. Strong balance sheet and cash flow
· The Group's strategy is underpinned by a strong balance sheet
with net assets increasing to £2,101.7m from £1,873.0m at year-end.
· Cash inflow from operating activities before working capital
movements of £411.4m has enabled the Group to continue to invest in
international sports, UK luxury retail, Frasers Plus, our property portfolio
and our strategic partnerships such as Hugo Boss.
· Net debt excluding securitisation of £725.0m (£320.8m at year
end), reflecting the capital expenditure and strategic investments in FY25 H1,
particularly Accent Group and Hugo Boss.
Outlook
FY25 H1 was another period of progress for the evolution of our Elevation
Strategy: further strengthening global strategic brand partnerships; growing
Sports Direct, Frasers Plus and our property investments in the UK; beginning
to benefit from substantial acquisition integration and automation synergies;
delivering on our ambitious stock reduction target; and a very significant
step up in our international ambitions. We remain confident in developing and
delivering our plans for multi-year, sustainable profitable growth, and still
expect another year of APBT progress in FY25. However, both ahead of and after
the recent Budget, consumer confidence has weakened and recent trading
conditions have been tougher. Given this current uncertainty, FY25 APBT is now
expected to be in the range £550m to £600m. Further out, we expect to incur
at least £50m of incremental costs going into FY26 as a result of the recent
Budget, but we are working hard to mitigate these in order to maintain our
profitable growth ambitions.
FY25 H1 FY24 H1 Change
Income statement summary
UK Sports Retail £1,372.3m £1,485.0m (7.6%)
Premium Lifestyle £472.7m £550.1m (14.1%)
International Retail £611.4m £645.8m (5.3%)
Retail revenue £2,456.4m £2,680.9m (8.4%)
Property £38.0m £31.4m 21.0%
Financial Services £45.7m £57.3m (20.2%)
Group revenue £2,540.1m £2,769.6m (8.3%)
Retail gross margin 42.2% 41.8% +40 bps
Group gross margin 43.4% 43.0% +40 bps
Retail operating costs (£671.0m) (£755.9m) 11.2%
Retail profit from trading £365.6m £364.7m 0.2%
Other operating costs (£31.7m) (£21.5m) (47.4%)
Group profit from trading £400.6m £412.5m (2.9%)
Depreciation & amortisation (£134.8m) (£132.9m) (1.4%)
Impairments net of impairment reversals £14.5m £5.9m 145.8%
Share-based payments (£4.7m) (£9.3m) 49.5%
Foreign exchange realised (£8.8m) £21.9m (140.2%)
Operating profit £266.8m £298.1m (10.5%)
Reported profit before tax ("PBT") from continuing operations £207.2m £310.2m (33.2%)
Result from discontinued operations £4.3m -
Fair value adjustment to derivative financial instruments £10.2m (£15.7m)
Fair value losses and loss on disposal of equity derivatives £64.0m £21.9m
Foreign exchange realised £8.8m (£21.9m)
Share-based payments £4.7m £9.3m
Adjusted profit before tax ("APBT") ((1)) £299.2m £303.8m (1.5%)
Reported basic earnings per share ("EPS") 35.9p 53.0p (32.3%)
Adjusted basic EPS ((1)) 51.0p 53.7p (5.0%)
Balance Sheet summary
Property, plant & equipment £897.2m £1,173.1m (23.5%)
Investment property £484.0m £192.9m 150.9%
Long-term financial assets £1,007.2m £410.7m 145.2%
Inventories (net of provision) £1,341.9m £1,590.2m (15.6%)
Net assets £2,101.7m £1,736.2m 21.1%
Cashflow & capital allocation
Cash inflow from operating activities before working capital £411.4m £441.1m (6.7%)
Net capital expenditure (£204.3m) (£151.4m) (34.9%)
Purchase of listed investments, net of disposal proceeds (£448.6m) (£184.9m) (142.6%)
Purchase of own shares - (£102.3m) 100.0%
Summary of financial performance
· APBT ((1)) decreased by 1.5% to £299.2m despite the
non-recurrence of the £20.0m gain on disposal of the Missguided intellectual
property in FY24 H1 and dual running costs associated with the rollout of
Frasers Plus. A net reversal of property related impairments of £14.5m has
been recorded in the current period (FY24 H1: £5.9m) as a result of our
future forecasts outweighing our previous downside impairment assumptions.
· Reported PBT of £207.2m, a decrease of 33.2%. The Group's
trading performance has been offset by a decrease in foreign exchange gains
and non-cash fair value movements on equity derivatives, primarily relating to
the material decline in the Hugo Boss share price.
· Group:
· Retail revenue decreased by 8.4%. Continued sales growth from
Sports Direct, reflecting the ongoing success of the Elevation Strategy and
strengthening brand relationships, was more than offset by planned declines in
Game UK, Studio Retail, the companies acquired from JD Sports and SportMaster
in Denmark as these previously unprofitable businesses were right-sized and
put on a more sustainable footing, as well as a challenging luxury market.
· Group gross margin % increased to 43.4% from 43.0% due to an
improved mix effect, as the lower margin % businesses reduce as a proportion
of total revenue and the higher margin Sports Direct business increases its
share.
· UK Sports (54.0% of total group revenue):
· Revenue decreased by 7.6%. Continued sales growth from Sports
Direct reflecting the ongoing success of the Elevation Strategy and
strengthening brand relationships, was more than offset by planned declines in
Game UK and Studio Retail.
· Gross profit decreased by £35.8m as a result of the sales
decline but gross margin % increased by +100 bps to 45.4% reflecting the fact
that the higher margin Sports Direct business now makes up a greater
proportion of this segment.
· Operating costs reduced by £44.3m as the benefits of integrating
and right-sizing the lower margin businesses were realised. This contributed
to an £8.5m (3.4%) increase in the segment's profit from trading.
· Premium Lifestyle (18.6% of total group revenue):
· We continue to develop and invest in our unique luxury
proposition, including the recent opening of flagships FLANNELS in Leeds and
FRASERS in Sheffield, and right-sizing the premium businesses such as House of
Fraser and JD Sports acquisitions. Our long-term ambitions for the luxury
business remain unchanged, although it is likely that progress will remain
subdued for the short to medium term in the face of a challenging market.
However, we continue to view this as an opportunity for consolidation in order
to further strengthen our position.
· Revenue decreased by 14.1% as we continued to optimise our store
portfolio in House of Fraser and in the businesses acquired from JD Sports,
reducing the number of stores from 66 at 29 October 2023 to 37 at 27 October
2024 and reducing square footage from 2.3m sq. ft to 1.5m sq. ft.
· Segment profit from trading increased by £16.4m, with a £38.5m
decrease in gross profit, driven by the revenue decline noted above and a
-210bps reduction of gross margin % from 36.9% to 34.8% as inventory was
cleared in closing stores and as a result of continuing luxury market
softness, was more than offset by a £54.9m decrease in operating costs as the
benefits of integrating and right-sizing the premium businesses was realised.
· International Retail (24.1% of total group revenue):
· Revenue decreased by 5.3% as growth from the Sports Direct
International business was more than offset by declines in revenue from Game
Spain, which has now reached the end of its current games console cycle, and
Sportmaster, which was integrated in FY24 H2.
· Segment profit from trading decreased by £24.0m year on year.
Gross profit decreased by £9.7m as a result of the revenue declines noted
above, although gross margin % increased by +60bps to 40.6% as the higher
margin Sports Direct International business grows as proportion of the
segment, whilst overhead costs increased by £14.3m due to inflationary
pressures and acquisition related costs.
· We continue to explore opportunities for international expansion
and have completed the acquisition of Twinsport in the Netherlands, invested
in Australia/New Zealand group Accent, and invested in Maltese/North Africa
retailer/Nike distributor Hudson. After period end, we announced the
acquisition of Holdsport in South Africa/Namibia.
· Property (1.5% 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 £6.6m (21.0%), largely due to the impact of
prior year acquisitions such as the Castleford shopping centre and
acquisitions in FY25 H1.
· Segment profit from trading increased by £12.6m, with the
additional rental income being supplemented by lower operating costs.
· Financial Services (1.8% of total group revenue):
· We see a great opportunity for Frasers Plus as a new revenue
stream and a key pillar of our compelling brand ecosystem.
· Frasers Plus has made good early progress towards our long-term
ambition of delivering £1bn+ in sales, £600m in credit balances, a greater
than 15% yield, and over 2 million active Frasers Plus customers (excluding
any third-party partnerships). The business added 272k new customers in FY25
H1 and ended the period with an active customer base of 377k, at which point
Frasers Plus accounted for 13.7% of UK online sales.
· We continue to prioritise the growth of our new Frasers Plus
credit offering and reduce the Studio Retail receivables book and as a result,
revenue decreased by £11.6m (20.2%) vs. FY24 H1.
· Segment profit from trading decreased by £25.4m due to the
revenue decline noted above, partially offset by a moderate decrease in the
impairment charge and an increase in overhead costs arising from the dual
running of Frasers Plus. H1 FY24 also benefited from an £11.8m gain in
respect of exiting a legacy property lease.
· The strategic partnership with THG has gotten off to a positive
start. After period end, we announced a second Frasers Plus partnership
with Hornby plc.
· Basic EPS of 35.9p, a decrease of 17.1p year-on-year. Adjusted
EPS ((1)) of 51.0p, a decrease of 2.7p (5.0%) reflecting the moderate
reduction in APBT ((1)).
· The Group's strategy is underpinned by a strong balance sheet
with net assets increasing to £2,101.7m from £1,873.0m at year-end due to
the Group's profitability in FY25 H1 and an increase in the fair value of the
Group's strategic investments with gains in physical shares through reserves
outweighing fair value losses on equity derivatives through the income
statement.
· Cash inflow from operating activities before working capital
movements of £411.4m has enabled the Group to continue to invest in
international sports and leisure, UK luxury retail, Frasers Plus, our property
portfolio and our strategic partnerships such as Hugo Boss.
· Net debt excluding securitisation of £725.0m (£320.8m at year
end), reflecting the capital expenditure and strategic investments in FY25 H1,
particularly Accent Group and Hugo Boss.
Acquisitions and investments
· During H1 FY25 the Group has made further substantial strategic
investments, particularly in Hugo Boss as the Group continues to explore
opportunities to expand commercial relationships and further develop the
Group's ecosystem.
· After period end, the Group announced the acquisition of
Holdsport in South Africa/Namibia.
Other notes
(1) This is an Alternative Performance Measure, for which the
reconciliation to the equivalent GAAP measure is set out in note 3 to the
financial information. Adjusted EPS is discussed in note 8.
Enquiries
Andrew Kasoulis
Investor Relations Director
E. andrew.kasoulis@frasers.group
T. 07826 532191
Kathleen Glover
Frasers Group PR
E. fgpr@frasers.group
T. 07878 771 800
Rosie Oddy
Brunswick Group, PR
Advisors
E. frasersgroup@brunswickgroup.com
T. 07557 804 512
CHIEF EXECUTIVE'S REPORT
The first half of FY25 has been another period of progress for Frasers Group.
We delivered on our objectives for the period and have made headway in each of
our core business segments.
We have continued to execute our Elevation Strategy with purpose and
discipline and have started building meaningful partnerships as we expand
further into international markets, strengthening our brand ecosystem and
bringing us a step closer to becoming a leading force for sport in global
retail. We are focused on enhancing operational efficiencies, acquisitions and
strategic investments, and continuing to build strong property and financial
services offerings.
Our financial performance this half underscores the resilience and breadth of
our diversified business model, and reaffirms the Frasers equity story: best
brands, diverse growth, and a highly effective cash compounder model. While
trading conditions are tougher and consumer sentiment is weakened at present,
we remain confident in developing and delivering our plans for multi-year
sustainable profitable growth.
Financials
We are committed to conservative, consistent, and straightforward accounting
practices, ensuring our stakeholders have a transparent understanding of the
value being created within the business. During the first half, we delivered
another robust performance.
Key FY25 H1 financial metrics include:
· APBT ((1)) of £299.2m (-1.5%). On track to achieve another year
of profitable growth.
· Group and retail gross margin % both up +40 bps year-on-year.
· Delivered £74.7m cost saving and synergy benefits from recent
investments in warehouse automation and acquisitions.
· Another period of sales growth in Sports Direct UK. UK Sports'
profit from trading up £8.5m (3.4%) to £255.2m.
· Premium Lifestyle's profit from trading up £16.4m (41.1%) to
£56.3m, with integration and other cost benefits offsetting the continuing
challenging luxury market.
Our disciplined approach to cash management has been instrumental in
supporting our sustained growth. Cash inflow from operating activities before
working capital movements was £411.4m, enabling continued long-term
investments in international sports and lifestyle opportunities, as well as UK
luxury, property and Frasers Plus. This financial resilience, combined with
our conservative accounting principles, provides a solid foundation for the
Group as we move into the second half of FY25 and beyond.
Retail
Retail remains the core of our business, driving our mission to build the
world's most admired and compelling brand ecosystem across sport, premium, and
luxury. Sport retail has continued to outperform, bolstered by new brand
partnerships and the 2024 Summer of Sport, which drove consumer demand for
sporting goods globally.
The most significant advancement in Sport retail this half has been our
strategic expansion into new international markets, aligning with our vision
to become an undisputed leader in sport globally. We invested in performance
and lifestyle retail and distribution company Accent Group, opening doors for
Frasers' concepts and brands across Australia and New Zealand - two new key
markets for the Group. Additionally, our investment in the Malta-based premium
sports and fashion retailer and Nike distributor Hudson Group will strengthen
our footprint across North Africa and Southern Europe through its extensive
distribution network. After period end, we further expanded our reach into
Africa with the agreement to acquire Holdsport, South Africa's leading
sporting, outdoor, and recreational goods retailer, adding 88 stores across
South Africa and Namibia to our portfolio. During FY25 H1, we also completed
the acquisition of Dutch sports retailer Twinsport in the Netherlands, further
strengthening our footprint in the Benelux region.
Whilst the backdrop in premium and luxury remains challenging, our continued
investment in these segments ensures we are best positioned for success when
the market turns. Already during the first half, Premium Lifestyle profit from
trading was up with integration and other cost benefits more than offsetting
the still tough luxury market conditions. We also celebrated flagship openings
for FLANNELS in Leeds and FRASERS in Sheffield, which have both received
excellent feedback from brand partners and customers. As we near the end of
the expansion phase for FLANNELS with over 80 locations across the country, we
are proud of how we have transformed luxury retail for the regional consumer
and are committed to continuing to deliver on this.
Acquisition integration and automation synergies
We are now seeing real benefits from our recent investments in acquisitions
and warehouse automation, creating substantial cost and profit synergies. We
are reducing complexity and improving efficiency across our operations, which
will strengthen our retail brands, unlock longer-term profitability and
enhance our resilience as a business. Our warehouse automation programme has
also reached a key milestone, enabling us to optimise stock management and
reduce our inventory holdings. We saw a £298.8m (16.5%) reduction in gross
inventory compared to last year, exceeding our target of a 5-15% reduction by
the end of 2024. We have executed planned sales declines and consolidations to
right-size less profitable assets including Studio, Game, SportMaster and the
acquired JD Sports businesses to focus on longer term profitable growth.
Property
Securing properties which serve as the primary retail destination for
communities remains a top priority for the Group. Such acquisitions unlock new
occupational demand for our retail concepts, while revitalising high streets
and physical shopping locations. During the period, we made significant
investments in key retail destinations across the UK, including shopping
centres and retail parks in Doncaster, Lancaster, Exeter, Maidstone, and
Quedgeley. Over time, these acquisitions will allow us to meet our retail
space needs, improve the mix of tenants when appropriate and ultimately
increase the value of our assets.
Financial Services
We see a great opportunity for Frasers Plus - our FCA-regulated, market
leading credit and loyalty proposition - as a new revenue stream and a key
pillar of our compelling brand ecosystem. We're working hard to reach our
long-term ambition to generate over £1bn+ in sales, £600m
of credit balances, a greater than 15% yield, and 2 million active Frasers
Plus customers. Frasers Plus has got off to a strong start with impressive
uptake across our retail brands and positive customer feedback. The business
added 272k new customers in FY25 H1 and ended the period with an active
customer base of 377k, at which point Frasers Plus accounted for 13.7% of UK
online sales.
We launched our first third-party partnership with THG in July, followed by a
second after period end with Hornby plc, expanding the reach of Frasers Plus
to new customers. These are the first of many potential third-party
partnerships, and we're excited to offer even more customers the opportunity
to benefit from a seamless, omni-channel shopping experience - particularly as
we approach the festive season.
Our teams
We wouldn't be the successful business we are today without our people,
whether at head office, in the warehouse, or on the shop floor. Our people
make our business, and we will continue to inspire, incentivise and reward our
highest performers. Our Fearless 1000 programme is a great example of this and
reflects our commitment to empowering our people to excel.
Michael Murray
Chief Executive Officer
4 December 2024
PERFORMANCE OVERVIEW
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Retail revenue £2,456.4m £2,680.9m
Total revenue £2,540.1m £2,769.6m
Retail gross profit £1,036.6m £1,120.6m
Group gross profit £1,103.3m £1,189.9m
Retail gross margin 42.2% 41.8%
Group gross margin 43.4% 43.0%
Retail profit from trading £365.6m £364.7m
Group profit from trading £400.6m £412.5m
Reported profit before tax ("PBT") from continuing operations £207.2m £310.2m
Adjusted profit before tax ("APBT") ((1)) £299.2m £303.8m
Reported basic earnings per share ("EPS") 35.9p 53.0p
Adjusted basic EPS ((1)) 51.0p 53.7p
Net assets £2,101.7m £1,736.2m
Cash inflow from operating activities before working capital £411.4m £441.1m
(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 8 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 8.4%. Continued sales growth from Sports Direct,
reflecting the ongoing success of the Elevation Strategy and strengthening
brand relationships, was more than offset by planned declines in Game UK,
Studio Retail, the companies acquired from JD Sports and SportMaster in
Denmark as these previously unprofitable businesses were right-sized and put
on a more sustainable footing, as well as a challenging luxury market.
Retail gross margin % increased to 42.2% from 41.8% group gross margin %
increased to 43.4% from 43.0% due to an improved mix effect, as the lower
margin % businesses reduce as a proportion of total revenue and the higher
margin Sports Direct business increases its share.
APBT ((1)) decreased by 1.5% to £299.2m despite the non-recurrence of the
£20.0m gain on disposal of the Missguided intellectual property in FY24 H1
and dual running costs associated with the rollout of Frasers Plus. A net
reversal of property related impairments of £14.5m has been recorded in the
current period (FY24 H1: £5.9m) as a result of our future forecasts
outweighing our previous downside impairment assumptions.
Reported PBT of £207.2m, a decrease of 33.2%. The Group's trading performance
has been offset by a decrease in foreign exchange gains and non-cash fair
value movements on equity derivatives, primarily relating to the material
decline in the Hugo Boss share price.
Basic EPS of 35.9p, a decrease of 17.1p year-on-year. Adjusted EPS ((1)) of
51.0p, a decrease of 2.7p (5.0%) reflecting the moderate reduction in APBT
((1)).
The Group's strategy is underpinned by a strong balance sheet with net assets
increasing to £2,101.7m from £1,873.0m at year-end due to the Group's
profitability in FY25 H1 and an increase in the fair value of the Group's
strategic investments with gains in physical shares through reserves
outweighing fair value losses on equity derivatives through the income
statement.
Cash inflow from operating activities before working capital movements of
£411.4m has enabled the Group to continue to invest in international sports
and leisure, UK luxury retail, Frasers Plus, our property portfolio and our
strategic partnerships such as Hugo Boss.
Net debt excluding securitisation of £725.0m (£320.8m at year end),
reflecting the capital expenditure and strategic investments in FY25 H1,
particularly Accent Group and Hugo Boss.
REVIEW BY BUSINESS SEGMENT
UK SPORTS
This segment 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).
UK Sports accounts for 54.0% (FY24 H1: 53.6%) of the Group's revenue.
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Revenue £1,372.3m £1,485.0m
Cost of sales (£748.8m) (£825.7m)
Gross profit £623.5m £659.3m
Gross margin % 45.4% 44.4%
Profit from trading £255.2m £246.7m
Operating profit* £189.9m £226.8m
Store numbers 782 807
* The prior period operating profit figure has been restated to show
depreciation by segment on a like for like basis, following the finalisation
of the change in operating segments in the year ended 28 April 2024. The
impact of this restatement is to increase the prior period depreciation charge
in the UK Sports segment by £15.0m and to reduce the charge in the Property
segment by an equivalent amount. This change does not impact the overall
result of the Group.
Revenue decreased by 7.6%. Continued sales growth from Sports Direct
reflecting the ongoing success of the Elevation Strategy and strengthening
brand relationships, was more than offset by planned declines in Game UK and
Studio Retail.
Gross profit decreased by £35.8m as a result of the sales decline but gross
margin % increased by +100 bps to 45.4% reflecting the fact that the higher
margin Sports Direct business now makes up a greater proportion of this
segment.
Operating costs reduced by £44.3m as the benefits of integrating and
right-sizing the lower margin businesses was realised. This contributed to an
£8.5m (3.4%) increase in the segment's profit from trading.
UK Sports' operating profit result of £189.9m (FY24 H1: £226.8m) includes
impairment reversals of £5.5m (FY24 H1: impairment reversals of £23.7m), a
result of future forecasts outweighing our downside impairment assumptions,
and foreign exchange losses of £4.4m (FY24 H1: gain of £24.9m).
Store numbers decreased from 807 to 782 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 18.6% (FY24 H1: 19.9%) of the Group's revenue.
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Revenue £472.7m £550.1m
Cost of sales (£308.1m) (£347.0m)
Gross profit £164.6m £203.1m
Gross margin % 34.8% 36.9%
Profit from trading £56.3m £39.9m
Operating profit £48.3m £23.1m
Store numbers 167 205
Revenue decreased by 14.1% as we continued to optimise our store portfolio in
House of Fraser and in the businesses acquired from JD Sports, reducing the
number of stores from 66 at 29 October 2023 to 37 at 27 October 2024 and
reducing square footage from 2.3m sq. ft to 1.5m sq. ft.
Segment profit from trading increased by £16.4m, with a £38.5m decrease in
gross profit, driven by the revenue decline noted above and a -210bps
reduction of gross margin % from 36.9% to 34.8% as inventory was cleared in
closing stores and as a result of continuing luxury market softness, was more
than offset by a £54.9m decrease in operating costs as the benefits of
integrating and right-sizing the premium businesses was realised.
Premium Lifestyle's operating profit result of £48.3m (FY24 H1: £23.1m)
includes impairment reversals of £7.3m (FY24 H1: impairment reversals of
£2.4m), a result of future forecasts outweighing our downside impairment
assumptions.
We continue to develop and invest in our unique luxury proposition, including
the recent opening of flagships FLANNELS in Leeds and FRASERS in Sheffield,
and right-sizing the premium businesses such as House of Fraser and JD Sports
acquisitions. Our long-term ambitions for the luxury business remain
unchanged, although it is likely that progress will remain subdued for the
short to medium term in the face of a challenging market. However, we continue
to view this as an opportunity for consolidation in order to further
strengthen our position.
Store numbers decreased from 205 to 167 as a result of the closure of stores
in House of Fraser and in the businesses acquired from JD Sports, partially
offset by the opening of Flannels and Frasers/Sport Direct concept stores in
the period.
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, and all non-UK based wholesale
and licensing activities (relating to brands such as Everlast, Karrimor and
Slazenger).
International accounts for 24.1% (FY24 H1: 23.3%) of the Group's revenue.
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Revenue £611.4m £645.8m
Cost of sales (£362.9m) (£387.6m)
Gross profit £248.5m £258.2m
Gross margin % 40.6% 40.0%
Profit from trading £54.1m £78.1m
Operating profit £17.3m £35.9m
Store numbers 595 583
Revenue decreased by 5.3% as growth from the Sports Direct International
business was more than offset by declines in revenue from Game Spain, which
has now reached the end of its current games console cycle, and Sportmaster,
which was integrated in FY24 H2.
Segment profit from trading decreased by £24.0m year on year. Gross profit
decreased by £9.7m as a result of the revenue declines noted above, although
gross margin % increased by +60bps to 40.6% as the higher margin Sports Direct
International business grows as proportion of the segment, whilst overhead
costs increased by £14.3m due to inflationary pressures and acquisition
related costs.
International's operating profit result of £17.3m (FY24 H1: £35.9m) includes
impairment reversals of £2.4m (FY24 H1: impairments of £4.2m) and foreign
exchange losses of £4.4m (FY24 H1: losses of £4.6m).
Store numbers increased from 583 to 595 due to the acquisition of Twinsport,
partially offset by the closure of certain stores as we continued to evaluate
our stores at lease expiries and breaks, to rationalise the international
store portfolio, where appropriate.
We continue to explore opportunities for international expansion and have
completed the acquisition of Twinsport in the Netherlands, invested in
Australia/New Zealand group Accent, and invested in Maltese/North Africa
retailer/Nike distributor Hudson. After period end, we announced the
acquisition of Holdsport in South Africa/Namibia.
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 1.5% (FY24 H1: 1.1%) of the Group's revenue.
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Revenue £38.0m £31.4m
Cost of sales (£4.4m) (£4.2m)
Gross profit £33.6m £27.2m
Gross margin % 88.4% 86.6%
Profit from trading £22.1m £9.5m
Operating loss* (£0.9m) (£25.2m)
* The prior period operating loss figure has been restated to show
depreciation by segment on a like for like basis, following the finalisation
of the change in operating segments in the year ended 28 April 2024. The
impact of this restatement is to increase the prior period depreciation charge
in the UK Sports segment by £15.0m and to reduce the charge in the Property
segment by an equivalent amount. This change does not impact the overall
result of the Group.
Revenue increased by £6.6m (21.0%), largely due to the impact of prior year
acquisitions such as the Castleford shopping centre and acquisitions in FY25
H1.
Segment profit from trading increased by £12.6m, with the additional rental
income being supplemented by
lower operating costs.
Property's operating loss of £0.9m (FY24 H1: loss of £25.2m) includes a net
impairment charge of £0.7m (FY24 H1: impairments of £16.0m).
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 1.8% (FY24 H1: 2.1%) of the Group's revenue.
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Revenue £45.7m £57.3m
Impairment losses on credit receivables (£12.6m) (£15.2m)
Gross profit £33.1m £42.1m
Gross margin % 72.4% 73.5%
Profit from trading £12.9m £38.3m
Operating profit £12.2m £37.5m
We continue to prioritise the growth of our new Frasers Plus credit offering
and reduce the Studio Retail receivables book and as a result, revenue
decreased by £11.6m (20.2%) vs. FY24 H1. As such, Studio Pay has ceased to
accept new customers during FY25 H1. We also continue to maintain and enhance
our governance processes around our credit offerings.
Segment profit from trading decreased by £25.4m due to the revenue decline
noted above, partially offset by a moderate decrease in the impairment charge,
and an increase in overhead costs arising from the dual running of Frasers
Plus. H1 FY24 also benefited from an £11.8m gain in respect of exiting a
legacy property lease.
We see a great opportunity for Frasers Plus as a new revenue stream and a key
pillar of our compelling brand ecosystem. Frasers Plus has made good early
progress towards our long-term ambition of delivering £1bn+ in sales, £600m
in credit balances, a greater than 15% yield, and over 2 million active
Frasers Plus customers (excluding any third-party partnerships). The business
added 272k new customers in FY25 H1 and ended the period with an active
customer base of 377k, at which point Frasers Plus accounted for 13.7% of UK
online sales.
DISCONTINUED OPERATION
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Result from discontinued operation (net of tax) £4.3m -
The result from discontinued operation relates to amounts received from the
Matches administration in excess of those assumed at FY24 year-end.
STRATEGIC INVESTMENTS
Included within long-term financial assets at the period ended 27 October 2024
are the following percentage voting rights, as publicly announced, held by the
Group:
27 October 2024 29 October 2023 28 April 2024
(unaudited) (unaudited) (audited)
% % %
Mulberry Group Plc 37.3 36.9 36.9
XXL ASA 32.5 12.2 31.1
Boohoo Group Plc 26.2 16.5 22.7
AO World Plc 24.0 22.8 24.5
ASOS Plc 21.1 12.6 20.2
N Brown Group Plc 20.3 19.8 20.4
Hugo Boss AG 15.2 1.6 1.0
Accent Group Ltd 14.6 - -
Hornby Plc 9.1 1.9 9.3
Currys Plc - 3.7 6.6
In addition to those listed, there are various other interests held, none of
which represent more than 5% of the voting power of the investee. The
movements in fair value of these long-term financial assets are recognised
within other comprehensive income.
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. The Group is actively seeking a board seat at
Hugo Boss and has recently had a representative appointed to the board of
Accent Group.
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 mitigate 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 are satisfied that the forecasts meet the criteria as being
highly probable forecast transactions.
At 27 October 2024, the Group had the following forward contracts that
qualified for hedge accounting under IFRS 9 Financial Instruments, 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
EUR / GBP Euro sales EUR 336m FY25-FY26 0.98 - 1.08
USD / GBP USD inventory purchases USD 720m FY25-FY26 1.27 - 1.32
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 Financial Instruments. The fair
value movements before maturity are recognised in the income statement.
The Group has the following currency options and unhedged forwards:
Currency Expected use Currency value Timing Rates
EUR / GBP Euro sales Up to EUR 480m FY25 - FY27 1.09
EUR / GBP Euro costs Up to EUR 680m FY25 - FY27 1.20 - 1.22
USD / GBP USD inventory purchases Up to USD 240m FY28 - FY29 1.41
USD / EUR USD inventory purchases Up to USD 30m FY25 1.31
AUD / GBP AUD costs Up to AUD 240m FY26 2.01
The Group also holds short-term swaps for treasury management purposes:
Currency Expected use Currency value Timing Rates
EUR / GBP Cash flow management EUR 325m FY25 1.18 - 1.20
AUD / GBP Cash flow management AUD 126m FY25 1.93 - 1.98
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, they also discuss and understand appropriate financial products
with various financial institutions, including those within the Group's bank
financed 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, either implementing additional
strategies and/or restructuring 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.
CASH FLOW AND NET DEBT
Net debt increased by £383.7m from £447.6m at 28 April 2024 to £831.3m at
27 October 2024. Net debt includes £106.3m of borrowings relating to the
Frasers Group Financial Services Limited securitisation facility (29 October
2023: £146.3m; 28 April 2024: £126.8m). Net interest on bank loans and
overdrafts increased to £36.8m (FY24 H1: £25.0m) largely due to increased
usage of the Revolving Credit Facility ("RCF") in the period.
Analysis of net debt:
27 October 2024 (Unaudited) 29 October 2023 (Unaudited) 28 April 2024 (Audited)
Cash and cash equivalents £323.7m £266.7m £358.6m
Borrowings (£1,155.0m) (£864.2m) (£806.2m)
Net debt (£831.3m) (£597.5m) (£447.6m)
Securitisation (disclosed within borrowings) (£106.3m) (£146.3m) (£126.8m)
Net debt excluding securitisation (£725.0m) (£451.2m) (£320.8m)
The Group continues to operate comfortably within its banking facilities and
covenants and the Board remains comfortable with the Group's available
headroom.
Cash flow:
26 weeks ended 27 October 2024 (Unaudited) 26 weeks ended 29 October 2023 (Unaudited)
Operating cash inflow before changes in working capital £411.4m £441.1m
(Increase)/decrease in receivables (£2.4m) £3.7m
Decrease/(increase) in inventories £13.4m (£125.3m)
Increase in payables £51.0m £162.7m
Decrease in provisions (£17.4m) (£46.6m)
Cash inflows from operating activities £456.0m £435.6m
Income taxes paid (£76.7m) (£68.2m)
Net cash inflows from operating activities £379.3m £367.4m
Lease payments (£81.5m) (£70.6m)
Net finance costs paid (£29.4m) (£19.3m)
Net capital expenditure (£204.3m) (£151.4m)
Purchase and disposal of subsidiary undertakings and associates (£16.4m) -
Net cashflows in relation to equity derivatives £16.2m (£21.4m)
Purchase of listed investments, net of disposal proceeds (£448.6m) (£184.9m)
Purchase of own shares - (£102.3m)
Other £1.0m £1.8m
Movement in net debt (£383.7m) (£180.7m)
SUMMARY CONSOLIDATED BALANCE SHEET (EXTRACT)
27 October 2024 (Unaudited) 29 October 2023 (Unaudited) 28 April 2024 (Audited)
Property, plant & equipment £897.2m £1,173.1m £962.6m
Investment properties £484.0m £192.9m £350.5m
Long-term financial assets £1,007.2m £410.7m £495.4m
Intangible assets £55.5m £24.2m £42.2m
Inventories £1,341.9m £1,590.2m £1,355.3m
Trade & other receivables £721.1m £790.7m £674.9m
Trade & other payables (£752.5m) (£874.9m) (£683.9m)
Provisions (£241.6m) (£259.9m) (£259.0m)
Net debt (excluding securitisation borrowings) (£725.0m) (£451.2m) (£320.8m)
Securitisation borrowings (£106.3m) (£146.3m) (£126.8m)
Lease liabilities (£608.3m) (£684.2m) (£646.3m)
Other £28.5m (£29.1m) £28.9m
Net assets £2,101.7m £1,736.2m £1,873.0m
The decrease within property, plant and equipment from 28 April 2024 is due to
depreciation partially offset by net additions.
The increase to investment property since 28 April 2024 reflects acquisitions
totalling approximately £133.5m at sites including Doncaster, Lancaster,
Exeter, Maidstone, and Quedgeley.
Long-term financial assets have increased since 28 April 2024 due to the
business making significant investments in Hugo Boss and Accent Group in H1 of
FY25 and as a result of fair value gains on existing holdings.
The increase to intangible assets since 28 April 2024 reflects the recognition
of approximately £19.1m of goodwill in respect of the acquisition of
Twinsport in H1 of FY25, offset by amortisation charged in respect of other
intangible assets. The fair value of acquired assets and thus goodwill value
will be finalised by year-end in accordance with IFRS 3 Business Combinations.
The decrease in the inventory balance year-on-year is reflective of increased
warehouse efficiency, driven by automation and rationalisation of our
warehouse estate. This enabled a £298.8m (16.5%) reduction in gross
inventory year on year.
Trade and other receivables includes £182.8m relating to deposits in respect
of derivative financial instruments (29 October 2023: £244.4m; 28 April 2024:
£139.0m) and the Frasers Group Financial Services consumer credit receivables
portfolio with a carrying value of £195.6m (29 October 2023: £211.5m; 28
April 2024: £206.2m).
See note 10 for further details in relation to provisions.
The increase in trade and other payables since 28 April 2024 largely follows
seasonal patterns and the timing of payments around the end of October.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 14. There have been no
material changes in the related party transactions described in the last
annual report.
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 later 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.
GOING CONCERN
Having thoroughly reviewed the performance of the Group and having made
suitable enquiries, the Directors are confident that the Group has adequate
resources to remain in operational existence for the foreseeable future which
is at least 12 months from the date of approval of these unaudited condensed
consolidated financial statements. Full details of this assessment can be
found in note 1.
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the directors confirm that to the best of their knowledge:
· The condensed set of financial statements has been prepared in
accordance with UK-adopted IAS 34 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules Sourcebook of the United Kingdom's
Financial Conduct Authority.;
· The interim management report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events during the first 26 weeks of the financial year
and their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining 26
weeks of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related
party transactions that have taken place in the first 26 weeks of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
The summary of results for the 52 weeks ended 28 April 2024 is an extract from
the published Annual Report and Financial Statements which have been reported
on by the Group's auditors at the time and delivered to the Registrar of
Companies. The audit report was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under s498 (2) or
s498 (3) of the Companies Act 2006.
Michael Murray
Chief Executive Officer
4 December 2024
FINANCIAL INFORMATION
CONSOLIDATED INCOME STATEMENT
FOR THE 26 WEEKS ENDED 27 OCTOBER 2024
26 weeks ended 26 weeks ended
27 October 2024 29 October 2023
Note (unaudited) (unaudited)
£m £m
Revenue 2,494.5 2,716.4
Credit account interest 45.6 53.2
Total revenue (including credit account interest) 2,540.1 2,769.6
Cost of sales (1,424.2) (1,564.5)
Impairment losses on credit customer receivables (12.6) (15.2)
Gross profit 1,103.3 1,189.9
Selling, distribution and administrative expenses (858.3) (899.9)
Other operating income 7.3 2.2
Property related impairment reversals 14.5 5.9
Operating profit 3 266.8 298.1
(Loss)/gain on sale of subsidiaries / discontinued operation (0.8) 20.0
Investment income 4 73.3 34.9
Investment costs 5 (73.9) (21.9)
Finance income 6 8.8 28.0
Finance costs 7 (68.0) (48.9)
Share of profits of associate 1.0 -
Profit before taxation 207.2 310.2
Taxation (52.8) (75.6)
Profit for the period from continuing operations 154.4 234.6
DISCOUNTINUED OPERATIONS
Result from discontinued operation, net of tax 4.3 -
Profit for the period 158.7 234.6
ATTRIBUTABLE TO:
Equity holders of the Group 155.3 234.2
Non-controlling interests 3.4 0.4
Profit for the period 158.7 234.6
EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Pence per share Pence per share
Basic earnings per share - Continuing operations 8 34.9 53.0
Basic earnings per share - Discontinued operation 8 1.0 -
Basic earnings per share - Total 8 35.9 53.0
Diluted earnings per share - Continuing operations 8 34.9 53.0
Diluted earnings per share - Discontinued operation 8 1.0 -
Diluted earnings per share - Total 8 35.9 53.0
The accompanying accounting policies and notes form part of these condensed
consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 26 WEEKS ENDED 27 OCTOBER 2024
26 weeks ended 26 weeks ended
27 October 2024 29 October 2023
Note (unaudited) (unaudited)
£m £m
Profit for the period 158.7 234.6
OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Fair value movement on long-term financial assets 64.3 (66.4)
Remeasurements of defined benefit pension scheme - 0.2
Fair value adjustment in respect of investment properties - 1.2
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Exchange differences on translation of foreign operations (1.0) (12.9)
Fair value movement on hedged contracts - recognised in the period 11 5.8 10.7
Fair value movement on hedged contracts - recognised time value of options 11 - -
Fair value movement on hedged contracts - reclassified and reported in sales 11 (3.5) (1.5)
Fair value movement on hedged contracts - reclassified and reported in 11 (1.4) (2.4)
inventory/cost of sales
Fair value movement on hedged contracts - taxation taken to reserves 11 (0.3) (2.1)
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD, NET OF TAX 63.9 (73.2)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 222.6 161.4
Continuing operations 218.3 161.4
Discontinued operation 4.3 -
222.6 161.4
ATTRIBUTABLE TO:
Equity holders of the Group 219.2 161.0
Non-controlling interests 3.4 0.4
222.6 161.4
The accompanying accounting policies and notes form part of these condensed
consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
27 October 2024 29 October 2023 28 April 2024
(unaudited)
(unaudited)
Note
(audited)
£m £m
£m
ASSETS - NON CURRENT
Property, plant and equipment 897.2 1,173.1 962.6
Investment properties 484.0 192.9 350.5
Intangible assets 55.5 24.2 42.2
Long-term financial assets 1,007.2 410.7 495.4
Investment in associated undertakings 19.0 17.2 18.0
Retirement benefit surplus 0.2 0.8 0.6
Deferred tax assets 123.2 81.9 109.6
2,586.3 1,900.8 1,978.9
ASSETS - CURRENT
Inventories 1,341.9 1,590.2 1,355.3
Trade and other receivables 9 721.1 790.7 674.9
Derivative financial assets 11 90.7 92.6 87.2
Cash and cash equivalents 323.7 266.7 358.6
2,477.4 2,740.2 2,476.0
TOTAL ASSETS 5,063.7 4,641.0 4,454.9
LIABILITIES - NON CURRENT
Lease liabilities (480.5) (513.4) (533.8)
Borrowings (1,155.0) (864.2) (806.2)
Retirement benefit obligations (1.3) (1.6) (1.8)
Deferred tax liabilities (25.9) (16.6) (27.5)
Provisions 10 (230.7) (251.9) (247.8)
(1,893.4) (1,647.7) (1,617.1)
LIABILITIES - CURRENT
Derivative financial liabilities 11 (94.5) (92.1) (62.8)
Trade and other payables (752.5) (874.9) (683.9)
Lease liabilities (127.8) (170.8) (112.5)
Provisions 10 (10.9) (8.0) (11.2)
Current tax liabilities (82.9) (111.3) (94.4)
(1,068.6) (1,257.1) (964.8)
TOTAL LIABILITIES (2,962.0) (2,904.8) (2,581.9)
NET ASSETS 2,101.7 1,736.2 1,873.0
EQUITY
Share capital 64.1 64.1 64.1
Share premium 874.3 874.3 874.3
Treasury shares reserve (770.6) (746.5) (770.6)
Permanent contribution to capital 0.1 0.1 0.1
Capital redemption reserve 8.0 8.0 8.0
Foreign currency translation reserve 24.7 34.5 25.7
Reverse combination reserve (987.3) (987.3) (987.3)
Own share reserve (66.8) (66.8) (66.8)
Hedging reserve 11 22.3 18.7 21.7
Share-based payment reserve 58.9 42.0 51.4
Revaluation reserve 1.2 1.2 1.2
Retained earnings 2,842.6 2,453.5 2,623.0
Issued capital and reserves attributable to owners of the parent 2,071.5 1,695.8 1,844.8
Non-controlling interests 30.2 40.4 28.2
TOTAL EQUITY 2,101.7 1,736.2 1,873.0
The accompanying accounting policies and notes form part of these condensed
consolidated financial statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 26 WEEKS ENDED 27 OCTOBER 2024
26 weeks ended 26 weeks ended
27 October 2024 29 October 2023
(unaudited) (unaudited)
£m £m
Profit before income tax from:
Continuing operations 207.2 310.2
Discontinued operation 4.3 -
Profit before taxation including discontinued operations 211.5 310.2
Net finance costs 59.2 20.9
Net investment costs/(income) 0.6 (13.0)
Loss/(gain) on disposal of subsidiaries 0.8 (20.0)
Depreciation of property, plant and equipment 133.0 131.3
Amortisation of intangible assets 1.8 1.6
Net impairment reversals of tangible and intangible assets and investment (14.5)
properties
(5.9)
Other adjustments to lease liabilities 21.3 6.5
Profit on disposal of property, plant and equipment (0.3) -
Gain on bargain purchase (6.7) -
Employee bonus scheme charge 4.7 9.3
Pension contributions less income statement charge - 0.2
Operating cash inflow before changes in working capital 411.4 441.1
(Increase)/decrease in receivables (2.4) 3.7
Decrease/(increase) in inventories 13.4 (125.3)
Increase in payables 51.0 162.7
Decrease in provisions (17.4) (46.6)
Cash inflows from operating activities 456.0 435.6
Income taxes paid (76.7) (68.2)
Net cash inflows from operating activities 379.3 367.4
Proceeds on disposal of property, plant and equipment and investment property 6.4 5.9
Proceeds on disposal of listed investments 76.3 85.0
Proceeds in relation to equity derivatives 60.0 32.9
Purchase of subsidiaries, net of cash acquired (16.4) -
Purchase of property, plant and equipment, intangible assets and investment (210.7) (157.3)
property
Purchase of listed investments (524.9) (269.9)
Increase in deposits relating to equity derivatives (43.8) (54.3)
Investment income received 3.4 2.0
Finance income received 8.8 2.0
Net cash outflows from investing activities (640.9) (353.7)
Lease payments (81.5) (70.6)
Finance costs paid (38.2) (21.3)
Borrowings drawn down 619.5 199.2
Borrowings repaid (270.7) (84.7)
Purchase of own shares - (102.3)
Net cash inflows/(outflows) from financing activities 229.1 (79.7)
Net decrease in cash and cash equivalents including overdrafts (32.5) (66.0)
Exchange movement on cash balances (2.4) (0.2)
Cash and cash equivalents including overdrafts at beginning of period 358.6 332.9
Cash and cash equivalents including overdrafts at the period end 323.7 266.7
The accompanying accounting policies and notes form part of these condensed
consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 26 WEEKS ENDED 27 OCTOBER 2024 (UNAUDITED)
Share Share premium Treasury shares reserve Share-based payment reserve Foreign currency translation reserve Own share reserve Retained earnings Other Total attributable to owners of Non-controlling Total
capital parent interests
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
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
Acquisition and disposal of subsidiaries - - - - - - - - - (1.4) (1.4)
Share scheme - - - 7.5 - - - - 7.5 - 7.5
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS - - - 7.5 - - - - 7.5 (1.4) 6.1
Profit for the financial period - - - - - - 155.3 - 155.3 3.4 158.7
OTHER COMPREHENSIVE INCOME
Cashflow hedges - recognised in the period - - - - - - - 5.8 5.8 - 5.8
Cashflow hedges - reclassified and reported in sales - - - - - - - (3.5) (3.5) - (3.5)
Cashflow hedges - reclassified and reported in inventory/cost of sales - - - - - - - (1.4) (1.4) - (1.4)
Cashflow hedges - taxation - - - - - - - (0.3) (0.3) - (0.3)
Fair value adjustment in respect of long-term financial assets - recognised - - - - - - 64.3 - 64.3 - 64.3
Translation differences - Group - - - - (1.0) - - - (1.0) - (1.0)
Total comprehensive income for the period - - - - (1.0) - 219.6 0.6 219.2 3.4 222.6
At 27 October 2024 64.1 874.3 (770.6) 58.9 24.7 (66.8) 2,842.6 (955.7) 2,071.5 30.2 2,101.7
FOR THE 26 WEEKS ENDED 29 OCTOBER 2023 (UNAUDITED)
Share Share premium Treasury shares reserve Share-based payment reserve Foreign currency translation reserve Own share reserve Retained earnings Other Total attributable to owners of Non-controlling Total
capital parent interests
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
At 30 April 2023 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
Purchase of own shares - - (102.3) - - - - - (102.3) - (102.3)
Share scheme - - - 8.9 - - - - 8.9 - 8.9
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS - - (102.3) 8.9 - - - - (93.4) - (93.4)
Profit for the financial period - - - - - - 234.2 - 234.2 0.4 234.6
OTHER COMPREHENSIVE INCOME
Cashflow hedges - recognised in the period - - - - - - - 10.7 10.7 - 10.7
Cashflow hedges - reclassified and reported in sales - - - - - - - (1.5) (1.5) - (1.5)
Cashflow hedges - reclassified and reported in inventory/cost of sales - - - - - - - (2.4) (2.4) - (2.4)
Cashflow hedges - taxation - - - - - - - (2.1) (2.1) - (2.1)
Fair value adjustment in respect of long-term financial assets - recognised - - - - - - (66.4) - (66.4) - (66.4)
Remeasurements of defined benefit pension scheme - - - - - - 0.2 - 0.2 - 0.2
Fair value adjustment in respect of investment properties - - - - - - - 1.2 1.2 - 1.2
Translation differences - Group - - - - (12.9) - - - (12.9) - (12.9)
Total comprehensive income for the period - - - - (12.9) - 168.0 5.9 161.0 0.4 161.4
At 29 October 2023 64.1 874.3 (746.5) 42.0 34.5 (66.8) 2,453.5 (959.3) 1,695.8 40.4 1,736.2
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
FOR THE 26 WEEKS ENDED 27 OCTOBER 2024
1. BASIS OF PREPARATION
Non-Statutory
The results for the first half of the financial year have not been audited or
reviewed by external auditors. The financial information in the Group's Annual
Report and Financial Statements for the 52 week period ended 28 April 2024 is
prepared in accordance with UK-adopted International Accounting Standards and
the requirements of the Companies Act 2006 and which have been delivered to
the Registrar of Companies. The Interim Results have been prepared on the
basis of the policies set out in the 2024 Annual Report and in accordance with
International Accounting Standard (IAS) 34 'Interim Financial Reporting' as
adopted by the UK and the Disclosure Guidance and Transparency Rules of the
UK's Financial Conduct Authority (DTR). The Interim Results do not include all
of the information required for full annual statements and should be read in
conjunction with the 2024 Annual Report.
The summary of results for the 52 weeks ended 28 April 2024 is an extract from
the published Annual Report and Financial Statements which have been reported
on by the Group's auditors at the time and delivered to the Registrar of
Companies. The audit report was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under s498 (2) or
s498 (3) of the Companies Act 2006.
Going Concern
The Directors have reviewed the current financial performance and liquidity of
the business, including modelling a number of downside scenarios. The Group is
still profitable, highly cash generative and has considerable financial
resources. The Group is able to operate within its banking facilities which
mature in 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 scenario and also a number of even more conservative
scenarios taking into account the Group's open positions in relation to
various option positions. These forecasts and projections show that the Group
will be able to operate within the current facility and its covenant
requirements (being interest cover and net debt to EBITDA ratios). Management
have also identified a number of mitigating actions which could be taken if
required such as putting on hold discretionary spend, liquidating certain
assets on the balance sheet and paying down the Revolving Credit Facility.
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 these condensed consolidated financial
statements.
New accounting standards, interpretations and amendments adopted by the Group
The principal accounting policies have remained unchanged from those applied
for the 52 week period ended 28 April 2024 except as noted below.
Several amendments apply for the first time during the period but have not
resulted in any changes to the Group's accounting policies or had any other
material impact on the financial position or performance of the Group. The
Group continues to monitor the potential impact of new standards and
interpretations which have been or may be endorsed and require adoption by the
Group in future reporting periods. The Group does not consider that any
standards, amendments or interpretation issued by the UK Endorsement Board,
but not yet applicable, will have a significant impact on the condensed
consolidated financial statements.
Risks and uncertainties
The Board has considered the risks and uncertainties for the remaining half of
the financial year and determined that the risks and the level of risks
presented in the FY24 Annual Report, noted below, also remain relevant for the
rest of the financial year and that there aren't any further risks or
uncertainties to add at this stage:
· Strategy
· Third-party brand relationships, key suppliers and supply chain
management
· Global macro-economic conditions, events (pandemic) or political
factors
· Treasury, liquidity and credit risks
· Customer
· Governance, legal and regulatory compliance
· Technology capability and infrastructure renewal
· Cyber risks, data loss and data privacy
· Business continuity management and incident response
· Group Entities and Extended Enterprise
· People, talent management and succession
· Environmental, social & governance (ESG)
· Property
· Mergers & acquisitions
· Governance
Detailed explanations of the principal risks and uncertainties can be found in
the Principal Risks and Uncertainties section of the FY24 Annual Report.
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 and
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 and we are working to mitigate these risks as detailed within the
TCFD section of the FY24 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.
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 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 the entity 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, Boohoo Group Plc, AO World Plc, ASOS 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 Group 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 provided Four (Holdings) Limited with a
significant loan. At the reporting date, the gross amount owed by Four
(Holdings) Limited for this loan totalled £30m (£12.3m 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 Consolidated Financial Statements, as the Group does not have power over
Four (Holdings) Limited.
Tymit Limited
At the period end date, the Group held 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 £16m (FY24 H1: £11.0m), 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
In the year ended 30 April 2023, the Group sold 51% of its shareholding in
Kangol LLC to Bollman Hat Company for £17.6m, retaining a 49% shareholding.
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. This
treatment remains the same for the current period.
Cash Flow Hedging
The Group uses a range of forward and option contracts that are entered into
at the same time, 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 and hedge accounting for the forwards
is permitted.
Under IFRS 9 Financial Instruments, 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 growth assumptions within
them and are satisfied that forecasts in 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
£22.3m (28 April 24: £21.7m) would be shown in finance income.
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 Investment Property.
Management applies judgement in the consideration of whether or not it 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 five 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 Sources of Estimation Uncertainty
The critical estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below:
Property Related Provisions
Property related estimates and judgements are continually evaluated and are
based on historical experience, external advice and other factors, including
expectations of future events that are believed to be reasonable under the
circumstances.
Dilapidations - Note 10
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 25%
Sensitised assumption £19.10/£17.10 30%/20%
Increase to provision £2.5m £7.9m
(Decrease) to provision (£2.5m) (£7.9m)
Legal and Regulatory Provisions - Note 10
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. Further
details can be found in note 10. 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 Group 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 Assets
a) IFRS 16 right-of-use assets and associated plant and equipment
IFRS 16 Leases 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 Leases 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 right of use assets are assessed for impairment at each reporting period
in line with IAS 36 Impairment of Assets to review whether the carrying amount
exceeds its recoverable amount. For impairment testing purposes the Group has
determined that each store is a separate cash generating unit ("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.
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.
In the period, net reversals of previous impairments have been recognised for
the amount of £15.2m (FY24 H1: impairment charge of £3.0m) 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:
· £16.8m reversal (FY24 H1: £34.2m reversal) against the
right-of-use assets; and
· £1.6m impairment charge (FY24 H1: £2.1m impairment charge)
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 8% increase 4.5
Sales decline year 1 10% reduction to -12% (7.8)
Existing gross margin year 1 > 40% 100bps - improvement 1.2
Existing gross margin year 1 > 40% 100bps - reduction (1.2)
New store exemption ((1)) Change from 2 to 3 years -
Operating costs increase year 1 Change from 3% to 6% (1.3)
(1) Stores which have been open for less than two years are not reviewed for
impairment. This was introduced in the year ended 28 April 2024, 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, investment property and
associated plant and equipment
Freehold land and buildings and long-term leasehold assets are assessed at
each reporting period for whether there is any indication of impairment in
line with IAS 36 Impairment of Assets.
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 Impairment of Assets defines recoverable amount as the higher of an asset's
or CGU'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 £0.7m (FY24 H1: £39.7m) 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:
· £0.5m impairment charge (FY24 H1: £2.4m impairment charge)
against freehold land and buildings
· £nil (FY24 H1: £8.3m impairment charge) against long-term
leasehold; and
· £0.2m impairment charge (FY24 H1: £15.5m impairment charge)
plant and equipment
Value in use (VIU)
The value in use is calculated based on a five year cash flow projection. This
is formulated by using the Group's forecast cash flows of each individual CGU,
taking into account historic performance of the CGU, and then adjusting for
the Group's current 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.
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 HY25 Year 1 Year 2 Year 3 Year 4 Year 5
Sales decline -2% -2% -2% -2% -2%
Existing gross margin > 40% -100bps -75bps -50bps -25bps -
Operating costs increase per annum 3% 3% 3% 3% 3%
Discount rate 9.5% 9.5% 9.5% 9.5% 9.5%
Terminal growth rate of 2%
Properties purchased within one year, or stores that have not traded for two
years, 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 8% (3.6)
Sales decline year 1 10% reduction to -12% 5.4
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% 1.0
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 Fair Value
Measurement. 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 years 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 years 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 • 1 years void, 2 years rent free; or
rules and that of our management experts.
• 2 years void, 3 years rent free.
Yield bands - ranging from 5.5% - 20.0%
Third party tenanted ERV is applied reflecting the market for the applicable unit. 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
calculations would result in a decrease in impairment of £nil (FY24 H1:
£2.0m).
The total recoverable amount of the assets that were impaired, or on which
impairments were reversed, at the period end was £64.0m (FY24 H1: £19.9m),
with £nil (FY24 H1: £19.9m) of this being based on their fair value less
costs of disposal and £64.0m (FY24 H1: £nil) being based on their value in
use.
Credit Customer Receivables
The Group's credit customer receivables are recognised on balance sheet at
amortised cost (i.e., net of provision for expected credit loss). At 27
October 2024, consumer credit receivables with a gross value of £276.1m were
recorded on the balance sheet, less a provision for impairment of £80.5m (28
April 2024: gross value of £289.6m, less a provision for impairment of
£80.7m). Further details are provided in Note 9.
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 accordingly. Revisions to estimates are recognised prospectively.
Sensitivity analysis is given in note 9.
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 remains close to target and the Bank of England cuts interest rates 10%
to 4% by mid-2025. Unemployment falls back to 3.7% and wage growth remains
strong.
Baseline Inflation is forecast to end 2024 at 2.4% but then fall back to 2% thereafter. 55%
Interest rates end 2024 at 4.75% and reduce to 3.75% by the end of 2025. The
unemployment rate increases from 4.1% to 4.4% by the end of 2024 and remains
at that level throughout 2025.
Downside Inflation heads well below target and the Bank of England cuts interest rates 25%
sharply from February 2025. Unemployment peaks at 6% in Q4 2025.
Stress A combination of shocks sees inflation rise sharply, hitting a peak of 6.6% in 10%
Q3 2025. The Bank of England raises interest rates to 6.25%. The unemployment
rate rises to 8%.
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 27 October 2024 a provision of £173.3m (28
April 2024: £192.0m; 29 October 2023: £223.8m) was held against a gross
inventory value of £1,515.2m (28 April 2024: £1,547.3m; 29 October 2023:
£1,814.0m).
In assessing the level of provision required, management applies 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, 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.
· 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 10% (FY24: 15%; HY24: 5%) to clear an equivalent volume
of out of season inventory and that approximately ten times (FY24: fifteen
times; HY24: 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.
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%
(FY24: 30%; HY24: 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).
· Current season inventory - the adjusted loss rate is applied to
30% (FY24: 30%; HY24: 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).
· 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 at 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 classification of
inventory lines and 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 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 £4.9m/(£4.9m)
Decrease in sales prices on out of season inventory
Base assumption -10%
Sensitised assumption -9%/-11%
(Decrease)/Increase to provision (£2.0m)/£2.0m
Increase in out of season Premium Lifestyle inventory on hand after
three-years
Base assumption 10 times historical rate
Sensitised assumption 8 times historical rate/12 times historical rate
(Decrease)/increase to provision (£4.1m)/£4.1m
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.
Valuation of assets acquired in business combinations
Twinsport
The principal estimate in the acquisition of Twinsport was around the fair
value of inventory acquired. The fair value of inventory, which primarily
included finished goods, was estimated at £10.3m, an increase of £0.6m on
the carrying value prior to the acquisition. Overall, the Group recognised
goodwill of £19.1m on acquisition of Twinsport, with total consideration of
£16.9m for net liabilities at fair value of £2.2m. A summary of the assets
acquired and liabilities assumed can be found below:
Recognised at acquisition date
£'m
Intangible assets 0.8
Trade and other receivables 3.0
Inventory 10.3
Trade and other creditors (16.3)
Net liabilities acquired (2.2)
Consideration 16.9
Goodwill arising 19.1
Post acquisition revenue of £15.2m and profit before tax of £1.4m has been
recognised in the period. If the business had been acquired at the beginning
of the period, the Group's reported total revenue would be £2,553.5m and
profit before tax would be £208.1m. Acquisition costs of £0.6m have been
recognised in selling, distribution and administrative expenses in the income
statement.
3. SEGMENTAL ANALYSIS
IFRS 8 Operating Segments 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.
The Group presents five operating segments:
· UK Sports
This segment 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, 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 Property segment, profit from trading activities includes fair value
gains and losses in respect of investment properties 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).
Segmental information for the 26 weeks ended 27 October 2024 (unaudited):
UK Sports Premium Lifestyle International Retail Property Financial Services Group
Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Revenue 1,372.3 472.7 611.4 2,456.4 38.0 45.7 2,540.1
Cost of sales (748.8) (308.1) (362.9) (1,419.8) (4.4) (12.6) (1,436.8)
Gross profit 623.5 164.6 248.5 1,036.6 33.6 33.1 1,103.3
Gross Margin % 45.4% 34.8% 40.6% 42.2% 88.4% 72.4% 43.4%
Operating costs (368.3) (108.3) (194.4) (671.0) (11.5) (20.2) (702.7)
Profit from trading 255.2 56.3 54.1 365.6 22.1 12.9 400.6
Depreciation & amortisation (61.7) (15.2) (34.8) (111.7) (22.4) (0.7) (134.8)
Impairments net of impairment reversals 5.5 7.3 2.4 15.2 (0.7) - 14.5
Share-based payments (4.7) - - (4.7) - - (4.7)
Foreign exchange realised (4.4) (0.1) (4.4) (8.9) 0.1 - (8.8)
Operating profit 189.9 48.3 17.3 255.5 (0.9) 12.2 266.8
Loss on sale of subsidiaries/discontinued operations (0.8)
Net investment costs (0.6)
Share of profit of associated undertaking 1.0
Net finance costs (59.2)
Profit before tax 207.2
Result for discontinued operation 4.3
Fair value adjustment to derivative financial instruments 10.2
Fair value losses on equity derivatives 64.0
Realised FX loss 8.8
Share-based payments 4.7
Adjusted profit before tax ("APBT") 299.2
Segmental information for the 26 weeks ended 29 October 2023 (unaudited):
UK Sports Premium Lifestyle International Retail Property Financial Services Group
Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Revenue 1,485.0 550.1 645.8 2,680.9 31.4 57.3 2,769.6
Cost of sales (825.7) (347.0) (387.6) (1,560.3) (4.2) (15.2) (1,579.7)
Gross profit 659.3 203.1 258.2 1,120.6 27.2 42.1 1,189.9
Gross Margin % 44.4% 36.9% 40.0% 41.8% 86.6% 73.5% 43.0%
Operating costs (412.6) (163.2) (180.1) (755.9) (17.7) (3.8) (777.4)
Profit from trading 246.7 39.9 78.1 364.7 9.5 38.3 412.5
Depreciation & amortisation* (59.2) (19.0) (33.4) (111.6) (20.5) (0.8) (132.9)
Impairments net of impairment reversals 23.7 2.4 (4.2) 21.9 (16.0) - 5.9
Share-based payments (9.3) - - (9.3) - - (9.3)
Foreign exchange realised 24.9 (0.2) (4.6) 20.1 1.8 - 21.9
Operating profit 226.8 23.1 35.9 285.8 (25.2) 37.5 298.1
Gain on sale of subsidiaries/discontinued operations 20.0
Net investment income 13.0
Net finance costs (20.9)
Profit before tax 310.2
Fair value adjustment to derivative financial instruments (15.7)
Fair value losses on equity derivatives 21.9
Realised FX loss (21.9)
Share-based payments 9.3
Adjusted profit before tax ("APBT") 303.8
* Prior period operating profit figures have been restated to show
depreciation by segment on a like for like basis, following the finalisation
of the change in operating segments in the year ended 28 April 2024. The
impact of this restatement is to increase the prior period depreciation charge
in the UK Sports segment by £15.0m and to reduce the charge in the Property
segment by an equivalent amount. This change does not impact the overall
result of the Group.
Other segment items included in the income statement for the 26 weeks ended 27
October 2024 (unaudited):
UK Sports Premium Lifestyle International Retail Property Financial Services Group Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Property, plant & equipment depreciation (41.2) (11.4) (15.3) (67.9) (22.4) (0.7) (91.0)
Property, plant & equipment impairment - - (1.6) (1.6) (0.7) - (2.3)
IFRS 16 ROU depreciation (20.5) (3.7) (17.8) (42.0) - - (42.0)
IFRS 16 ROU impairment reversal 5.5 7.3 4.0 16.8 - - 16.8
Intangible amortisation - (0.1) (1.7) (1.8) - - (1.8)
Other segment items included in the income statement for the 26 weeks ended 29
October 2023 (unaudited):
UK Sports Premium Lifestyle International Retail Property Financial Services Group Total
(£'m) (£'m) (£'m) (£'m) (£'m) (£'m) (£'m)
Property, plant & equipment depreciation (27.1) (14.6) (15.8) (57.5) (35.5) (0.8) (93.8)
Property, plant & equipment impairment (2.1) (6.2) (4.0) (12.3) (16.0) - (28.3)
IFRS 16 ROU depreciation (17.1) (4.4) (16.0) (37.5) - - (37.5)
IFRS 16 ROU reversal / (impairment) 25.8 8.6 (0.2) 34.2 - - 34.2
Revaluation on transfer to investment property* - - - - 1.2 - 1.2
Intangible amortisation - - (1.6) (1.6) - - (1.6)
*Recorded in other comprehensive income
4. INVESTMENT INCOME
26 weeks ended 26 weeks ended
27 October 2024
29 October 2023
(unaudited) (unaudited)
(£m) (£m
Premiums received on equity derivatives 60.0 32.9
Fair value gain on equity derivatives 9.9 -
Dividend income 3.4 2.0
73.3 34.9
5. INVESTMENT COSTS
26 weeks ended 26 weeks ended
27 October 2024
29 October 2023
(unaudited) (unaudited)
(£m) (£m
Fair value loss on equity derivatives - 21.9
Loss on disposal of equity derivatives 73.9 -
73.9 21.9
6. FINANCE INCOME
26 weeks ended 26 weeks ended
27 October 2024
29 October 2023
(unaudited) (unaudited)
(£m) (£m
Bank interest receivable 6.6 11.9
Other finance income 2.2 0.4
Fair value adjustment to derivatives - 15.7
8.8 28.0
7. FINANCE COSTS
26 weeks ended 26 weeks ended
27 October 2024
29 October 2023
(unaudited) (unaudited)
(£m) (£m
Interest on bank loans and overdrafts 41.7 31.7
Other interest 3.9 5.6
IFRS 16 lease interest 12.2 11.6
Fair value adjustment to derivatives 10.2 -
68.0 48.9
The fair value adjustment to derivative financial instruments relates to
differences between the fair value of forward foreign currency contracts and
written options that were not designated for hedge accounting from one period
end to the next and fair value movements in respect of interest rate swaps.
8. EARNINGS PER SHARE ATTRIBUTABLE TO 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 period.
For diluted earnings per share, the weighted average number of shares,
432,929,122 (29 October 2023: 441,787,344), is adjusted to assume conversion
of all dilutive potential ordinary shares under the Group's share schemes,
being nil (29 October 2023: nil). There is therefore no difference between the
basic and diluted EPS calculations for all periods. Shares bought back into
treasury and own shares held are deducted when calculating the weighted
average number of shares below.
BASIC AND DILUTED EARNINGS PER SHARE
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
27 October 2024
27 October 2024
27 October 2024
29 October 2023
(unaudited) (unaudited) (unaudited) (unaudited)
Basic and diluted, continuing operations Basic and diluted, discontinued operation Basic and diluted, total Basic and diluted, total
£m £m £m £m
Profit for the period 151.0 4.3 155.3 234.2
Number in millions Number in millions Number in millions Number in millions
Weighted average number of shares 432.9 432.9 432.9 441.8
Pence per share Pence per share Pence per share Pence per share
Earnings per share 34.9 1.0 35.9 53.0
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.
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
27 October 2024
27 October 2024
29 October 2023
29 October 2023
(unaudited) (unaudited) (unaudited) (unaudited)
Basic Diluted Basic Diluted
£m £m £m £m
Profit for the period 155.3 155.3 234.2 234.2
Pre-tax adjustments to profit for the period for the following items:
Fair value adjustment to derivatives included within finance costs/(income) 10.2 10.2 (15.7) (15.7)
Fair value movement and losses on disposal of equity derivatives 64.0 64.0 21.9 21.9
Realised foreign exchange loss/(gain) 8.8 8.8 (21.9) (21.9)
Share-based payments 4.7 4.7 9.3 9.3
Tax adjustments on the above items (22.3) (22.3) 9.3 9.3
Adjusted profit for the period 220.7 220.7 237.1 237.1
Number in millions Number in millions
Weighted average number of shares 432.9 432.9 441.8 441.8
Pence per share Pence per share
Adjusted earnings per share 51.0 51.0 53.7 53.7
9. TRADE AND OTHER RECEIVABLES
26 weeks ended 26 weeks ended 53 weeks ended
27 October 2024
29 October 2023
28 April 2024
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Gross credit customer receivables 276.1 309.6 286.9
Allowance for expected credit loss on credit customer receivables (80.5) (98.1) (80.7)
Net credit customer receivables 195.6 211.5 206.2
Trade receivables 93.1 117.1 91.6
Deposits in respect of derivative financial instruments 182.8 244.4 139.0
Amounts owed by related parties 13.3 6.8 6.6
Other receivables 119.4 107.6 128.1
Prepayments 116.9 103.3 103.4
721.1 790.7 674.9
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, interest rates and volatility) and further purchases
/ sales of underlying investments held.
Credit Customer Receivables
Following the acquisition of Frasers Group Financial Services Limited
(formerly known as Studio Retail Limited), 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.
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 £168.7m (28 April 2024: £201.3m, 29 October 2023: £232.8m)
were eligible to be funded via the securitisation facility, and the facilities
utilised were £106.3m (28 April 2024: £126.8m, 29 October 2023: £146.3m).
Other information
On average, interest is charged at 3.1% (FY24 H1: 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 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 30,256 accounts with total gross balances
of £18.9m (28 April 2024: 25,170 with total gross balances of £16.6m, 29
October 2023: 22,291 with total gross balances of £14.9m) on repayment plans.
Provisions are assessed as detailed above.
During the current period, overdue receivables with a gross value of £14.9m
(28 April 2024: £35.6m, 29 October 2023: £16.2m) 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 27 October 2024:
27 October 2024 (unaudited) 29 October 2023 (unaudited) 28 April 2024 (audited)
Trade receivables Trade receivables on forbearance arrangements Total Trade receivables Trade receivables on forbearance arrangements Total Trade receivables Trade receivables on forbearance arrangements Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Ageing of trade receivables
Not past due 202.5 17.6 220.1 226.8 13.5 240.3 206.7 15.7 222.4
Past due
0 - 60 days 17.1 1.2 18.3 23.3 1.4 24.7 22.0 0.9 22.9
60 - 120 days 6.5 0.1 6.6 8.9 - 8.9 9.3 - 9.3
120+ days 31.1 - 31.1 35.7 - 35.7 32.3 - 32.3
Gross trade receivables 257.2 18.9 276.1 294.7 14.9 309.6 270.3 16.6 286.9
Allowance for expected credit loss (67.6) (12.9) (80.5) (87.7) (10.4) (98.1) (69.0) (11.7) (80.7)
Carrying value 189.6 6.0 195.6 207.0 4.5 211.5 201.3 4.9 206.2
29 April 2024 to 27 October 2024
Stage 1 Stage 2 Stage 3 Total
(£m) (£m) (£m) (unaudited)
(£m)
Consumer credit receivables 181.2 41.5 53.4 276.1
Allowance for doubtful debts:
28 April 2024 (17.7) (18.9) (44.1) (80.7)
Impairment charge (1.5) (2.9) (9.8) (14.2)
Utilisation in period 0.6 3.8 10.0 14.4
Closing balance (18.6) (18.0) (43.9) (80.5)
Carrying value 162.6 23.5 9.5 195.6
29 April 2024 to 27 October 2024 1 May 2023 to 29 October 2023 1 May 2023 to 28 April 2024
(unaudited) (unaudited) (audited)
(£m) (£m) (£m)
Impairment charge impacting on provision (14.2) (19.5) (21.8)
Recoveries 2.6 6.0 9.5
Other (1.0) (1.7) (8.3)
Impairment charge (12.6) (15.2) (20.6)
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 £1.6m (FY24: £1.4m).
A 1% increase/decrease in the assumed recoveries rate would result in the
impairment provision decreasing/increasing by approximately £0.6m (FY24:
£0.8m).
10. PROVISIONS
26 weeks ended 27 October 2024 (unaudited)
Legal and regulatory Property related Financial services related Other Total
(£m) (£m) (£m) (£m) (£m)
At 28 April 2024 123.7 124.1 8.2 3.0 259.0
Amounts provided - 10.4 - 0.1 10.5
Amounts utilised / reversed (5.1) (22.4) - (0.4) (27.9)
At 27 October 2024 118.6 112.1 8.2 2.7 241.6
26 weeks ended 23 October 2023 (unaudited)
Legal and regulatory Property related Financial services related Other Total
(£m) (£m) (£m) (£m) (£m)
At 30 April 2023 123.5 166.7 16.0 0.3 306.5
Amounts provided - 6.0 - - 6.0
Amounts utilised / reversed (9.2) (35.1) (11.1) 2.8 (52.6)
At 29 October 2023 114.3 137.6 4.9 3.1 259.9
52 weeks ended 28 April 2024 (audited)
Legal and regulatory Property related Financial services related Other Total
(£m) (£m) (£m) (£m) (£m)
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 a material loss in excess of
the amounts provided.
Property related provisions
Included within property related provisions are provisions for dilapidations
and onerous lease contracts in respect of the Group's retail stores and
warehouses. Further details of management's estimates are included in note 2.
Financial services provisions
Details in respect of these balances can be found in note 2.
As a regulated business, Frasers Group Financial Services Limited has an
obligation to proactively review its business to ensure that appropriate
outcomes were delivered to customers. £8.3m remains provided at 27 October
2024 (28 April 2024: £8.2m, 29 October 2023: £4.9m) in respect of the
probable costs of remediating customers who may have been adversely impacted
by legacy decisions and this is expected to be utilised within 12 months of
the balance sheet date.
Other provisions
Other provisions relate to provisions for restructuring and employment
(non-retirement related).
11. FINANCIAL INSTRUMENTS
(a) Financial assets and liabilities by category and fair value hierarchy
The fair value hierarchy for financial assets and liabilities, which are
principally denominated in Sterling or US Dollars, were as follows:
27 October 2024 (unaudited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS
Amortised cost:
Trade and other receivables* - - - 590.9 590.9
Cash and cash equivalents - - - 323.7 323.7
Amounts owed by related parties - - - 13.3 13.3
FVOCI:
Long Term Financial Assets (Equity Instruments) 1,007.2 - - - 1,007.2
Derivative financial assets (FV):
Foreign forward purchase and sales contracts - 63.7 - - 63.7
Derivative financial assets - contracts for difference & equity options - 14.6 - - 14.6
Interest rate swaps - 12.4 - - 12.4
- 90.7 - - 90.7
FINANCIAL LIABILITIES
Amortised cost:
Non-current borrowings - - - (1,155.0) (1,155.0)
Trade and other payables** - - - (700.4) (700.4)
IFRS 16 lease liabilities - - - (608.3) (608.3)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (14.7) - - (14.7)
Derivative financial liabilities - contracts for difference & equity - (79.8) - - (79.8)
options
- (94.5) - - (94.5)
*Prepayments of £116.9m are not included as a financial asset.
**Other taxes including social security costs of £52.1m are not included as a
financial liability.
29 October 2023 (unaudited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS
Amortised cost:
Trade and other receivables* - - - 680.6 680.6
Cash and cash equivalents - - - 266.7 266.7
Amounts owed by related parties - - - 6.8 6.8
FVOCI:
Long Term Financial Assets (Equity Instruments) 410.7 - - - 410.7
Derivative financial assets (FV):
Foreign forward purchase and sales contracts - 63.7 - - 63.7
Derivative financial assets - contracts for difference & equity options - 0.7 - - 0.7
Interest rate swaps - 28.2 - - 28.2
- 92.6 - - 92.6
FINANCIAL LIABILITIES
Amortised cost:
Non-current borrowings - - - (864.2) (864.2)
Trade and other payables** - - - (791.7) (791.7)
IFRS 16 lease liabilities - - - (684.2) (684.2)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (15.7) - - (15.7)
Derivative financial liabilities - contracts for difference & equity - (76.4) - - (76.4)
options
- (92.1) - - (92.1)
*Prepayments of £103.3m are not included as a financial asset.
**Other taxes including social security costs of £83.2m are not included as a
financial liability.
28 April 2024 (audited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS
Amortised cost:
Trade and other receivables* - - - 564.9 564.9
Cash and cash equivalents - - - 358.6 358.6
Amounts owed by related parties - - - 6.6 6.6
FVOCI:
Long Term Financial Assets (Equity Instruments) 495.4 - - - 495.4
Derivative financial assets (FV):
Foreign forward purchase and sales contracts - 65.9 - - 65.9
Interest rate swaps - 21.3 - - 21.3
- 87.2 - - 87.2
FINANCIAL LIABILITIES
Amortised cost:
Non-current borrowings - - - (806.2) (806.2)
Trade and other payables** - - - (661.7) (661.7)
IFRS 16 lease liabilities - - - (646.3) (646.3)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (8.6) - - (8.6)
Derivative financial liabilities - contracts for difference & equity - (54.2) - - (54.2)
options
- (62.8) - - (62.8)
*Prepayments of £103.4m are not included as a financial asset.
**Other taxes including social security costs of £22.2m are not included as a
financial liability.
(b) Financial assets and liabilities
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
• Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
• Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly
or indirectly; and
• Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable market
data.
Contracts for difference are classified as Level 2 as the fair value is
calculated using quoted prices for listed shares at contract inception and the
period end.
Foreign forward purchase and sales contracts and options are classified as
Level 2, the Group enters into these derivative financial instruments with
various counterparties, principally financial institutions with investment
grade credit ratings. Foreign exchange forward contracts and options are
valued using valuation techniques, which employ the use of market observable
inputs. The most frequently applied valuation techniques include forward
pricing and swap models using present value calculations. The models
incorporate various inputs including the credit quality of counterparties,
foreign exchange spot and forward rates, and yield curves of the respective
currencies.
Long-term financial assets such as equity instruments are classified as Level
1 as the fair value is calculated using quoted prices.
Sold options are classified as Level 2 as the fair value is calculated using
other techniques, where inputs are observable.
Trade receivables / payables, amounts owed from related parties, other
receivables / payables, cash and cash equivalents and current / non-current
borrowings are held at amortised cost.
The maximum exposure to credit risk as at 27 October 2024 is the carrying
value of each class of asset in the Balance Sheet, except for amounts owed
from related parties which is the gross carrying amount of £46.0m (29 October
2023: £30.0m, 28 April 2024: £44.0m).
(c) Derivatives: Foreign currency forward contracts
(c)(i) Hedged currency instruments
The most significant exposure to foreign exchange fluctuations relates to
purchases made in foreign currencies, principally the US Dollar, and online
sales in Euros. The Group's policy is to reduce substantially the risk
associated with foreign currency spot rates by using forward fixed rate
currency purchase contracts, taking into account any foreign currency cash
flows. The Group does not hold or issue derivative financial instruments for
trading purposes, however if derivatives, including both forwards and written
options, do not qualify for hedge accounting they are accounted for as such
and accordingly any gain or loss is recognised immediately in the Income
Statement. Management are of the view that there is a substantive distinct
business purpose for entering into the written options and a strategy for
managing the written options independently of the forward contracts. The
forward and written options contracts are therefore not viewed as one contract
and hedge accounting for the forwards is permitted under IFRS 9 Financial
Instruments.
Hedge effectiveness is determined at inception of the hedge relationship and
at every reporting period end through the assessment of the hedged items and
hedging instrument to determine whether there is still an economic
relationship between the two.
The critical terms of the foreign currency forwards entered into exactly match
the terms of the hedged item. As such the economic relationship and hedge
effectiveness are based on the qualitative factors and the use of a
hypothetical derivative where appropriate. Hedge ineffectiveness may arise
where the critical terms of the forecast transaction no longer meet those of
the hedging instrument, for example if there was a change in the timing of the
forecast sales transactions from what was initially estimated, or if the
volume of currency in the hedged item was below expectations leading to
over-hedging. Differences can arise when the initial value on the hedging
instrument is not zero.
The hedged items and the hedging instrument are denominated in the same
currency and as a result the hedging ratio is always one to one.
All derivative financial instruments used for hedge accounting are recognised
initially at fair value and reported subsequently at fair value in the
Statement of Financial Position. To the extent that the hedge is effective,
changes in the fair value of derivatives designated as hedging instruments in
cash flow hedges are recognised in other comprehensive income and included
within the cash flow hedge reserve in equity. Any ineffectiveness in the hedge
relationship is recognised immediately in profit or loss.
At the time the hedged item affects profit or loss, any gain or loss
previously recognised in other comprehensive income is reclassified from
equity to profit or loss and presented as a reclassification adjustment within
other comprehensive income. If a forecast transaction is no longer expected to
occur, any related gain or loss recognised in other comprehensive income is
transferred immediately to profit or loss. If the hedging relationship ceases
to meet the effectiveness conditions, hedge accounting is discontinued, and
the related gain or loss is held in the equity reserve until the forecast
transaction occurs.
The fair value of hedged contracts as at 27 October 2024 was:
27 October 2024 29 October 2023 28 April 2024
(unaudited) (unaudited) (audited)
(£m) (£m) (£m)
Assets
US Dollar purchases - GBP 4.5 6.4 9.7
US Dollar purchases - EUR - 4.7 -
Euro sales 43.8 35.7 41.4
Total 48.3 46.8 51.1
Liabilities
US Dollar purchases - GBP 2.2 - -
Total 2.2 - -
The details of hedged forward foreign currency purchase contracts and
contracted forward rates were as follows:
27 October 2024 (unaudited) 29 October 2023 (unaudited) 28 April 2024 (audited)
Currency (millions) GBP (millions) Rates Currency (millions) GBP (millions) Rates Currency (millions) GBP (millions) Rates
Euro sales (EUR / GBP) 336.0 329.4 0.98 - 1.08 576.0 550.3 0.98 - 1.09 456.0 440.1 0.98 - 1.08
US Dollar purchases (USD / GBP) 720.0 554.4 1.27 - 1.32 390.0 318.2 1.21 - 1.26 275.0 209.9 1.30
US Dollar purchases (USD / EUR) - - - 30.0 22.9 1.30 - - -
The timing of the contracts is as follows:
Currency Hedging against Currency value Timing Rates
EUR / GBP Euro sales USD 720m FY25 - FY26 0.98 - 1.08
USD / GBP USD inventory purchases EUR 336m FY25 - FY26 1.27 - 1.32
Hedge ineffectiveness may arise where the critical terms of the forecast
transaction no longer meet those of the hedging instrument, for example if
there was a change in the timing of the forecast sales transactions from what
was initially estimated or if the volume of currency in the hedged item was
below expectations leading to over-hedging.
At 27 October 2024 £554.4m of purchase contracts (29 October 2023: £341.1m;
28 April 2024: £209.9m) and £329.4m of forward sales contracts (29 October
2023: £550.3m; 28 April 2024: £440.1m) qualified for hedge accounting and
the gain on fair valuation of these contracts of £5.8m (29 October 2023:
£10.7m, 30 April 2024: £24.8m) has therefore been recognised in other
comprehensive income.
At 27 October 2024, £240.0m hedged purchase contracts had a maturity of
greater than 12 months (29 October 2023: £16.5m; 28 April 2024: £nil) and
£109.3m of hedged sales contracts had a maturity of greater than 12 months
(29 October 2023: £329.4m; 28 April 2024: £216.0m).
The movements through the hedging reserve are:
USD/GBP EUR/GBP USD/EUR Total Hedge Movement Deferred Tax Total Hedging Reserve
As at 30 April 2023 (audited) 6.1 11.8 0.1 18.0 (4.0) 14.0
Recognised 3.5 6.0 1.2 10.7 - 10.7
Reclassified in sales - (1.5) - (1.5) - (1.5)
Reclassified in inventory / cost of sales 1.3 - (3.7) (2.4) - (2.4)
Deferred tax - - - - (2.1) (2.1)
As at 29 October 2023 (unaudited) 10.9 16.3 (2.4) 24.8 (6.1) 18.7
Recognised (2.9) 18.2 (1.2) 14.1 - 14.1
Reclassified in sales - (4.6) - (4.6) - (4.6)
Reclassified in inventory / cost of sales (9.3) - 3.6 (5.7) - (5.7)
Deferred tax - - - - (0.8) (0.8)
As at 28 April 2024 (audited) (1.3) 29.9 - 28.6 (6.9) 21.7
Recognised 9.7 (3.9) - 5.8 - 5.8
Reclassified in sales (3.5) - - (3.5) - (3.5)
Reclassified in inventory / cost of sales - (1.4) - (1.4) - (1.4)
Deferred tax - - - - (0.3) (0.3)
As at 27 October 2024 (unaudited) 4.9 24.6 - 29.5 (7.2) 22.3
(c)(ii) Unhedged currency instruments
The sterling principal amounts of unhedged forward contracts and written
currency option contracts and the contracted rates were as follows:
27 October 2024 29 October 2023 28 April 2024
(unaudited) (unaudited) (audited)
(£m) (£m) (£m)
US Dollar purchases - GBP 170.2 462.9 183.2
Contracted rates USD / GBP 1.41 1.21 - 1.26 1.31
US Dollar purchases - EUR 22.9 71.4 76.8
Contracted rates USD / EUR 1.31 1.11 - 1.31 1.04 - 1.31
Euro sales 440.4 1,116.0 992.0
Contracted rates EUR / GBP 1.09 0.98 - 1.09 0.98 - 1.09
Euro costs 559.4 1,116.0 992.0
Contracted rates EUR / GBP 1.20 - 1.22 0.98 - 1.09 0.98 - 1.09
AUD costs 119.4 1,116.0 992.0
Contracted rates AUD / GBP 2.01 0.98 - 1.09 0.98 - 1.09
Included within finance costs, classified within fair value adjustment to
derivatives, is a loss on fair value of unhedged forward contracts, written
currency option contracts and swaps of £8.8m (29 October 2023: gain of
£15.7m included in finance income, 28 April 2024: gain of £13.5m included in
finance income).
At 27 October 2024, £220.2m of unhedged purchase contracts had a maturity at
inception of greater than 12 months (29 October 2023: £20.0m, 28 April 2024:
£nil) and £326.6m of unhedged sales contracts had a maturity at inception of
greater than 12 months (29 October 2023: £816.0m, 28 April 2024: £550.8m).
These contracts form part of the treasury management activities, which
incorporates the risk management strategy for areas that are not reliable
enough in timing and amount to qualify for hedge accounting. This includes
acquisitions, disposals of overseas subsidiaries, related working capital
requirements, dividends and loan repayments from overseas subsidiaries and
purchase and sale of overseas property. Written options carry additional risk
as the exercise of the option lies with the purchaser. The options involve the
Group receiving a premium on inception in exchange for accepting that risk and
the outcome is that the bank may require the Group to sell Euros or buy USD.
However, the Group is satisfied that the use of options as a treasury
management tool is appropriate.
The October 2024 values above excludes short term swaps of EUR/GBP of EUR 325m
and AUD/GBP of AUD 126m which are required for treasury management purposes
only (29 October 2023: USD/EUR of EUR 70m and EUR/GBP of EUR 120m; 28 April
2024: EUR/GBP of EUR 300m and USD EUR of USD 50m short term swaps).
(d) Interest rate swaps
The Group uses interest rate swaps to manage its exposure to interest rate
movements on its bank borrowings. The Group has one contract in place that
fixes interest payments on variable rate debt. The contract covers a notional
amount of £250.0m and fixes the interest rate at 0.985% per annum until 29
May 2026. A second contract covered a notional amount of £100.0m and fixed
the interest rate at 0.45% per annum until 2 September 2024, expiring in the
period. The fair value of these interest rate swaps is an asset of £12.4m (28
April 2024: £21.3m; 29 October 2023: £28.2m). The fair value loss of £8.9m
has been recognised in finance costs classified as fair value adjustments to
derivatives.
Capital Management
The capital structure of the Group consists of equity attributable to the
equity holders of the parent company, comprising issued share capital (less
treasury shares), share premium, retained earnings and cash and borrowings.
It is the Group's policy to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain the development of the
business.
In respect of equity, the Board has decided, in order to maximise flexibility
in the near term with regards to a number of inorganic growth opportunities
under review, not to return any cash by way of a final dividend at this time.
The Board is committed to keeping this policy under review and to looking to
evaluate methods of returning cash to shareholders when appropriate.
The objective of the share scheme is to encourage employee share ownership and
to link employee's remuneration to the performance of the Company. It is not
designed as a means of managing capital. From time to time the Board may
initiate share buy back programmes.
In respect of cash and borrowings, the Board regularly monitors the ratio of
net debt to Reported EBITDA (Pre-IFRS 16), the working capital requirements
and forecasted cash flows, however no minimum or maximum ratios are set
outside of maintaining a ratio of net debt to Reported EBITDA (pre IFRS 16)
below 3.0.
Based on this analysis, the Board determines the appropriate return to equity
holders whilst ensuring sufficient capital is retained within the Group to
meet its strategic objectives, including but not limited to, acquisition
opportunities.
The Group allocates capital in the following order:
- The existing business such as automation and infrastructure
- Growth opportunities such as acquisitions and property purchases
- Strategic investments where the Group believes that there is a
mutually beneficial commercial relationship
- Returns to shareholders in the form of share buy backs
These capital management policies have remained unchanged from the prior
period.
12. POST BALANCE SHEET EVENTS
The Group has continued to increase its holdings across its strategic
investments portfolio through the following transactions after the period end:
• It was announced on 29 October 2024 that the Group acquired an additional
holding in Boohoo Group PLC bringing total ownership to 27.0%.
• It was announced on 28 October 2024 that the Group had increased it's
holding in AO World PLC bringing total ownership to 24.0%.
• It was announced on 8 November 2024 that the Group had increased it's
holding in ASOS PLC bringing total ownership to 24.2%.
On 26 November 2024, the Group confirmed that it had come to an agreement to
acquire Holdsport Group. The transaction is subject to customary regulatory
approvals and is expected to close in the coming months. The fair value of the
assets acquired and liabilities assumed cannot be quantified as no fair value
exercise has been carried out by the date of this report. Due to the proximity
of this acquisition to the date of issue of these condensed consolidated
financial statements, it is impracticable for the pro forma revenue and profit
to be disclosed.
13. CAPITAL COMMITMENTS
The Group had capital commitments of £3.8m as at 27 October 2024 (29 October
2023: £56.5m; 28 April 2024 £nil) relating to plant and machinery, and
property purchases.
14. RELATED PARTY TRANSACTIONS
The Group has taken advantage of the exemptions contained within IAS 24
Related Party Disclosures from the requirement to disclose transactions
between group companies as these have been eliminated on consolidation.
The Group entered into the following material transactions with related
parties:
26 weeks ended 27 October 2024 (unaudited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries((1)) Associate 1.3 23.1 12.8 4.1
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley((2)) Majority shareholder 0.7 - - -
Reath SW Limited Connected persons - 0.3 - 0.1
VX3 Limited Associate - - 0.3 -
IWL Realisations 2023 Ltd Associate 0.4 0.2 - -
Kangol LLC Associate - 0.2 - -
(1) The outstanding balance with Four (Holdings) Limited reflects the
funding related to Agent Provocateur. Management consider that the underlying
results of Four (Holdings) Limited supports the recoverability of the
receivables balance. The results of Four (Holdings) Limited are not material
on the basis of net assets and profit before tax, subsequently detailed
disclosures have not been presented under IFRS 12 Disclosure of Interests in
Other Entities.
(2) Use of the Company jet and helicopter are charged at commercial rates.
26 weeks ended 29 October 2023 (unaudited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries((1)) Associate 0.2 25.8 6.8 -
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley((2)) Majority shareholder 1.1 - - -
Rangers Retail Limited Associate - - - 0.1
Tymit Limited Associate - 0.2 - -
Reath SW Limited Connected persons - 0.3 - 0.1
(1) The outstanding balance with Four (Holdings) Limited reflects the
funding related to Agent Provocateur. Management consider that the underlying
results of Four (Holdings) Limited supports the recoverability of the
receivables balance. The results of Four (Holdings) Limited are not material
on the basis of net assets and profit before tax, subsequently detailed
disclosures have not been presented under IFRS 12 Disclosure of Interest in
Other Entities.
(2) Use of the Company jet and helicopter are charged at commercial rates.
52 weeks ended 28 April 2024 (audited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries ((1)) Associate 2.5 35.7 6.4 1.6
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley ((2)) Majority shareholder 2.7 - - -
Tymit Ltd Associate - 0.2 - -
Reath SW Limited Connected persons - 0.6 - 0.1
X Channel Marketing Limited Associate - 1.4 - -
IWL Realisations 2023 Ltd Associate 0.1 - - -
(1) The outstanding balance with Four (Holdings) Limited reflects the
funding related to Agent Provocateur. Management consider that the underlying
results of Four (Holdings) Limited supports the recoverability of the
receivables balance. The results of Four (Holdings) Limited are not material
on the basis of net assets and profit before tax, subsequently detailed
disclosures have not been presented under IFRS 12.
(2) Use of the Company jet and helicopter are charged at commercial rates.
The trade and other receivables balance with Four (Holdings) Limited includes
a loan balance of £30m (gross of amounts recognised in respect of loss
allowance) which attracts interest at a rate of SONIA + 2.5% within current
assets (29 October 2023: £30.0m; 28 April 2024: £30.0m). This has been
accounted for at amortised cost in accordance with IFRS 9 Financial
Instruments. The carrying value has been determined by assessing the
recoverability of the receivable balance, discounted at an appropriate market
rate of interest. £nil was recognised in the period in respect of doubtful
debts. The sales amounts in relation to Four (Holdings) Limited relates to the
interest charge on the loan and the purchases relate to the purchase of
clothing products.
The trade and other receivables balance includes a loan balance of £16.0m due
from Tymit Ltd, an associate. (gross of amounts recognised in respect of loss
allowance; £nil net of amounts recognised in respect of loss allowance).
Reath SW Limited is a company in which Robert Palmer, the Group's Company
Secretary, is a director. Reath SW Limited provide professional services to
the Group.
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