REG - Frasers Group PLC - Interim Results - 26 weeks to 23 October 2022
08/12/2022 07:00
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RNS Number : 9865I Frasers Group PLC 08 December 2022
8 December 2022
Unaudited Interim Results for the 26 weeks to 23 October 2022 ("FY23 H1")
Change (%)
FY23 H1 FY22 H1
(unaudited) (unaudited)
£m £m
Group revenue 2,638.0 2,339.8 12.7
UK Sports Retail 1,526.1 1,367.1 11.6
Premium Lifestyle 533.5 427.9 24.7
International Retail ((4)) 492.2 465.4 5.8
Wholesale & licensing 86.2 79.4 8.6
42.0% 44.7%
Group gross margin (%)
Reported profit before tax 284.6 186.0 53.0
Adjusted profit before tax (PBT) ((3)) 267.1 192.4 38.8
Adjusted profit before tax (PBT) as a percentage of revenue (%) 10.1% 8.2%
Reported profit after tax 219.6 143.7 52.8
Reported basic earnings per share 46.1p 28.2p 63.5
Adjusted basic earnings per share (EPS) ((1)) 44.8p 30.3p 47.9
Cash inflow from operating activities before working capital 389.9 454.1 (14.1)
Net assets 1,382.3 1,367.2 1.1
Number of retail stores (number) 1,596 1,561 2.2
Outlook: Whilst the macroeconomic environment is clearly challenging and the
backdrop for the coming year is hard to predict with any certainty, we have
strong strategic and trading momentum behind us and we remain confident in our
guidance for Adjusted PBT of between £450m to £500m for this financial year.
· Group revenue increased by 12.7%, largely due to acquisitions
• Excluding acquisitions, disposals and on a currency neutral
basis, revenue increased by 3.9% ((2))
· UK Sports Retail revenue increased by 11.6%, largely due to the
acquisition of Studio Retail Limited ('SRL') on 24 February 2022
• Excluding acquisitions, revenue decreased by 3.1% ((2))
largely due to a reduction within Game UK and the very strong reopening of
stores after the last lockdown in March 2021 in the prior period
· Premium Lifestyle revenue increased by 24.7%, largely due to new
FLANNELS stores and continued growth in online
• Excluding acquisitions, revenue increased by 22.2% ((2))
· International Retail revenue increased by 5.8%, largely due to
the acquisition of Sportmaster on 16 May 2022 and an increase in the Malaysian
business, offset by the reduction in revenue following the disposal of the US
retail businesses on 25 May 2022
• Excluding acquisitions, disposals and on a currency neutral
basis, revenue increased by 9.2% ((2)) largely due to increases in the
Malaysian business due to the prior period being impacted by Covid
· Group gross margin decreased to 42.0% from 44.7% in line with our
guidance given above, which reflects mix effects (from the acquisition of
Studio Retail, the disposal of the US retail businesses and House of Fraser
store closures), a strong prior year comparative of full price trading, cost
of goods inflation, and a maintained inventory provision percentage in the
current period
· Reported profit before tax was £284.6m, up 53.0% reflecting:
• Continually improving product choice in the core UK business
• FLANNELS growth through store roll out and online
• Profit on disposal of assets (property at £91.2m, US retail
businesses at £26.3m) with mitigations including impairments of property of
£50.2m (FY22 H1: £135.3m) and intangibles of £27.5m (FY22 H1: £4.4m),
non-recurring profit before tax in the prior period from the disposed of US
retail businesses (FY22 H1: £17.9m), an increased inventory provision amount,
and the prior period in FY22 benefitting from business rates relief
· Adjusted PBT was £267.1m, up 38.8%. As a percentage of revenue,
Adjusted PBT is 10.1%, up from 8.2%
• Excluding acquisitions, disposals and on a currency neutral
basis, adjusted PBT increased by 53.8% ((2))
· Cash inflow from operating activities before working capital
decreased to £389.9m compared to £454.1m largely due to increased operating
costs, new acquisitions, and the business rates relief in the prior period
· Net assets have increased to £1,382.3m from £1,308.6m at 24
April 2022 (FY22 H1: £1,367.2m), largely due to the increased profitability
of the Group offset by significant share buybacks
· Reported basic earnings per share grew by 63.5% to 46.1p, from
28.2p
• Adjusted basic earnings per share increased by 47.9% to 44.8p
from 30.3p ((1))
· Reported profit after tax was £219.6m up 52.8% from £143.7m
(1) Adjusted basic EPS is reported basic EPS less the effects
of exceptional items, realised foreign exchange, fair value adjustments to
derivative financial instruments included within Finance income/costs, fair
value gains/losses and profit on disposal of equity derivatives, share schemes
and the tax impact of these items. Further detail on this calculation can be
found in note 9.
(2) A reconciliation excluding acquisitions, disposals and
currency neutral performance measures can be found in the Glossary.
(3) Adjusted profit before tax (PBT) is reported profit before
less the effects of exceptional items, realised foreign exchange, fair value
adjustments to derivative financial instruments included within Finance
income/costs, fair value gains/losses and profit on disposal of equity
derivatives, and share schemes. Further detail on this calculation can be
found in the Glossary.
(4) Following the disposal of the US retail businesses in the
period, the reporting segments have been re-categorised with the previous Rest
of World Retail segment and European Retail segment now being reported under
an International Retail segment. This change is deemed to fall in line with
the aggregation criteria and quantitative thresholds outlined in IFRS 8
Operating Segments.
Frasers Group plc T: 0344 245 9200
Chris Wootton, Chief Financial Officer
Robert Palmer, Company Secretary
CHAIR'S STATEMENT
BUSINESS PERFORMANCE
We have delivered a strong performance during the period, despite the
challenging backdrop of heightened economic uncertainty in the UK, soaring
energy costs, rapidly rising inflation, a widespread cost of living crisis and
continued geopolitical instability. Whilst post pandemic issues with the
global supply chain remain, there are signs that these are beginning to ease.
We once again remind our stakeholders of our key accounting principles, namely
being conservative, consistent, and simple, and this will always factor into
our forecasting, including provisioning and impairment reviews. Despite the
above potential headwinds and in this context, Frasers has delivered a robust
set of first half results which demonstrate the resilience of our business and
the continued success of our Elevation Strategy.
Financial Highlights
· Revenue increased to £2,638.0m (FY22 H1: £2,339.8m)
· Reported PBT increased to £284.6m (FY22 H1: £186.0m)
· Adjusted PBT increased to £267.1m (FY22 H1: £192.4m)
· Net assets of £1,382.3m (FY22 H1: £1,367.2m)
· Cash inflow from operating activities before working capital of
£389.9m (FY22 H1: £454.1m)
Strategic Highlights
· Continued progress of the Elevation Strategy, including further
growth of our key brand partner relationships
· Strengthened relationship with strategic brand partner Hugo Boss
AG, with increased investment reflecting our confidence in the brand's future
· Strategic acquisitions, including Missguided, I Saw It First and
Gieves & Hawkes (post period-end), unlocking new capabilities and customer
bases
· Recently launched flagship stores proving very popular, including
FLANNELS Liverpool which has recently won Drapers award for Best Store Design
I'd like to thank Michael Murray for his leadership during his first six
months as CEO and commend him and his team on a strong performance in the
first half of the year.
OUTLOOK
Whilst the macroeconomic environment is clearly challenging and the backdrop
for the coming year is hard to predict with any certainty, we have strong
strategic and trading momentum behind us and we remain confident in our
guidance for adjusted PBT of between £450m to £500m for this financial
year.
GROWTH STRATEGY
Under Michael Murray's leadership the Elevation Strategy is working.
Our relationships with our brand partners are stronger than ever and
consequently, we can now offer our consumers an even wider choice of brands
and even better choices of product. We have a clear vision to build the
planet's most admired and compelling brand ecosystem. Over the past six
months, our brand relationships have continued to go from strength to
strength, and today we partner with 19 of the 20 hottest brands in the World
as ranked by the Lyst index.
We will continue to elevate our stores and business in 2023, both organically
and through disciplined acquisitions. A new FLANNELS flagship store is planned
for Leeds, and a Sports Direct flagship store in Manchester. The FLANNELS
store roll out strategy to offer our consumers a luxury retail experience in
key locations around the country also continues with approximately 6 stores to
open in 2023. With the support of our brand partners, our European expansion
strategy will continue with a number of opportunities currently being
assessed.
Acquisitions and strategic investments are a core part of our Elevation
Strategy:
· Earlier in 2022 we acquired the leading Danish sporting goods
retailer Sportsmaster into our International Retail operations.
· The Studio Retail acquisition supports the strategy for bringing
a credit offering to our customers. Taking this skillset and capability, we
have just launched our Frasers 'Plus' product in our Cruise and House of
Fraser fascias and associated websites. This will roll out across the majority
of the Group, including Sports Direct and FLANNELS, in 2023.
· In Premium Lifestyle the acquisitions of Missguided, I Saw it
First and Mysale in the half expands our digital offering and brings short
lead time sourcing and further social media marketing expertise to that
segment and the Frasers Group.
· Since the period end we have acquired Gieves and Hawkes,
including the leasehold of 1 Saville Row. This iconic premium luxury menswear
brand is a great fit for our Elevated offering.
· Luxury homewares brand Amara Living was also acquired after the
period end. Once integrated, the business will support in building FLANNELS as
a credible luxury homeware destination
· We now hold interests of up to approximately 34% of Hugo Boss
(through a combination of direct and indirect financial instruments) as at 4
November 2022.
· Looking further forward to support our continued growth and
ambition, we are intending on investing approx. £600m in a new distribution
centre and offices in Coventry over the next ten years subject to planning,
and we recently purchased the site for this exciting development for Frasers
and the Coventry area. As part of this strategy we have also purchased the CBS
Arena in the city which strengthens our investment in the area and supports
our future plans for the region.
At the same time we continue to release capital and realise profits from our
assets as appropriate:
· Bob's Stores and Eastern Mountain Sports fascias and their
corresponding e-commerce offerings were disposed of for $70m. The Bobs and EMS
store estate did not include any of the new elevated stores which are core to
the Frasers Group Elevation strategy. The disposal of these non-core
businesses allows an even greater focus on delivering the Elevation Strategy
by focusing on store experience, digital and product.
· A number of freehold and long leasehold retail parks were sold
for a total of £205m, realising a profit on disposal of £84.7m. We buy and
sell properties in the ordinary course of business from time to time, to
secure attractive sites for our retail operations, and Frasers Group fascias
will operate from leases within a number of these properties.
EXTERNAL RECOGNITION
The team's hard work and success over many years has rightly received
recognition from the retail industry with recent awards including Drapers'
Lifetime Achievement Award for Mike Ashley, recognising his achievement in
growing the Group from a single store in Maidenhead in 1982, to over 1,500
stores today. Our FLANNELS store in Liverpool, the most recent and best
iteration of the FLANNELS concept, won the Drapers award for Best Store
Design.
Sports Direct's "Just a Game" advert from the UEFA Men's 2020 European
Championships won the Clio Sports Awards Gold winner for Best Integrated
Campaign. This ad was the focal point of an integrated campaign that reached
thousands of young footballers during the tournament.
PEOPLE
I would like to thank our hard working staff for their continued passion,
energy and commitment. We have made extraordinary progress over the past six
months, which has delivered an impressive set of half year results.
We have just welcomed our third intake of highly talented, high potential
people into the Frasers Group Elevation Programme. This helps us to build a
pipeline of high calibre individuals that we believe will become the leaders
of our business in the future.
In line with our rewards-based culture, we are continuing to work collectively
towards our Fearless 1000 share scheme, which will reward colleagues who live
and breathe our values. Despite the challenging economic backdrop, we remain
laser focused, and it has been pleasing to see the impressive progress we have
made in a short space of time.
In addition, each month we recognise the performance and achievements of our
employees through the Frasers Champions programme. This enables us to
acknowledge and recognise those employees who have made significant
contributions to the business and are helping the business to prosper. We also
hosted Frasers Festival in September, which brought together our top
performing colleagues for a day of assault courses, interactive brand pop-ups
and live entertainment.
BUSINESS RATES
It is pleasing to see that the Government has finally decided to address the
outdated business rates issue in April 2023 including addressing the
detrimental transitional relief regime. The whole retail industry, including
ourselves, have been asking for this recalibration for several years and this
review is strongly welcomed by Frasers Group.
SUSTAINABILITY
Sustainability continues to be a key focus for the Group and the Board. We
have built a Sustainability Team structure which reports directly into the
Board and its appropriate sub-committees.
We have a number of continuing strategic priorities including energy usage
reduction, achieved through education programmes to staff, the roll out of LED
lighting across our store estate, building management systems installation,
and container optimisation working hand in glove with our brand partners to
ensure fewer containers, with their inherent carbon emissions during
transportation, are required.
During 2022 we delivered our Taskforce on Climate-related Financial
Disclosures (TCFD) within the Annual Report and we are continuing to work
through our targets, and to look for improvements in our reporting.
GROUP FINANCING AND LIQUIDITY
We have recently enacted the one year extension to our Group facility and now
have a combined term loan and revolving credit facility (RCF) of £980.0m
until November 2024 and £930.0m until November 2025, with the possibility to
extend this by a further year.
We believe this is a great endorsement of the business and our Elevation
Strategy and I want to say thank you to our banking partners for their
support.
DIVIDEND / SHARE BUYBACK
No dividend was paid during the half year period and the Board has decided not
to declare an interim dividend in respect of this period.
During the half year we repurchased £80.4m of Frasers Group shares, or 2.5%
of the outstanding share capital, as part of our share buyback programme.
This programme has continued into the second half, which is a demonstration of
our commitment to shareholder returns, our confidence in the Group and the
strategy for future growth.
David Daly
Non-Executive Chair
8 December 2022
CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
SUMMARY OF RESULTS
26 weeks ended 26 weeks ended
23 October 2022 24 October 2021
(Unaudited) (Unaudited)
Group revenue £2,638.0m £2,339.8m
Adjusted PBT ((1)) £267.1m £192.4m
Group gross margin 42.0% 44.7%
Adjusted basic earnings per share ((2)) 44.8p 30.3p
Cash inflow from operating activities before working capital ((4)) £389.9m £454.1m
Net Assets £1,382.3m £1,367.2m
Number of retail stores ((3)) 1,596 1,561
(1) Adjusted profit before tax (PBT) is reported profit before
less the effects of exceptional items, realised foreign exchange, fair value
adjustments to derivative financial instruments included within Finance
income/costs, fair value gains/losses and profit on disposal of equity
derivatives, share schemes and the tax impact of these items. Further detail
on this calculation can be found in the Glossary.
(2) Adjusted basic EPS is reported basic EPS less the effects of
exceptional items, realised foreign exchange, fair value adjustments to
derivative financial instruments included within Finance income/costs, fair
value gains/losses and profit on disposal of equity derivatives, and share
schemes. Further detail on this calculation can be found in note 9.
(3) Excluding associates and stores in the Baltic states that
trade under fascias other than SPORTLAND or SPORTSDIRECT.com and other niche
fascias.
(4) Details of Key Performance Indicators can be found in the
Glossary
The Directors have adopted Alternative Performance Measures (APM's). APM's
should be considered in addition to IFRS measures. The Directors believe that
Adjusted profit before tax (PBT) 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 IFRS and may not be directly comparable with "adjusted" or "alternative"
profit measures used by other companies.
PERFORMANCE OVERVIEW
Group revenue was up 12.7% to £2,638.0m, largely due to acquisitions, new
FLANNELS stores and continued growth in online.
Group gross margin decreased to 42.0% from 44.7% in line with our guidance
given above, which reflects mix effects (from the acquisition of Studio
Retail, the disposal of the US retail businesses and House of Fraser store
closures), a strong prior year comparative of full price trading, cost of
goods inflation, and a maintained inventory provision percentage in the
current period.
Adjusted PBT is up 38.8%, reflecting:
• Continually improving product choice in the core UK business
• FLANNELS growth through store roll out and online
• Profit on disposal of assets (property at £91.2m, US retail
businesses at £26.3m) with mitigations including impairments of property of
£50.2m (FY22 H1: £135.3m) and intangibles of £27.5m (FY22 H1: £4.4m),
non-recurring profit before tax in the prior period from the disposed of US
retail businesses (FY22 H1: £17.9m), an increased inventory provision amount,
and the prior period in FY22 benefitting from business rates relief
Excluding acquisitions, disposals and on a currency neutral basis adjusted PBT
is up 53.8%.
In FY23 H1, property related impairments of £50.2m (FY22 H1: £135.3m) have
been recognised following a reassessment of future expected cash flows,
largely driven by the increased cost of living, the change in consumer
behaviour in moving from physical to online shopping, and the impact of
direct-to-consumer and increasing product costs. Further details including
sensitivity analysis are included within note 2.
Adjusted basic earnings per share increased by 47.9% to 44.8p (FY22 H1:
30.3p).
Reported Profit Before Tax increased by 53.0% to £284.6m (FY22 H1: £186.0m).
Cash inflow from operating activities before working capital decreased to
£389.9m compared to £454.1m largely due to increased operating costs, new
acquisitions, and the business rates relief in the prior period.
Total net assets as at the period end totalled £1,382.3m compared to
£1,308.6m as at 24 April 2022, largely due to the profitability of the Group
mitigated by significant share buybacks.
REVIEW BY BUSINESS SEGMENT
UK SPORTS RETAIL
UK Sports Retail includes core sports retail store operations in the UK, plus
all the Group's sports retail online business (excluding Bob's Stores &
Eastern Mountain Sports which were disposed of during the period, Malaysia and
Baltics), the gyms, the Group's Shirebrook campus operations, freehold
property owning companies excluding Premium Lifestyle fascia properties, GAME
UK stores and online operations, Studio Retail Limited, and retail store
operations in Northern Ireland. UK Sports Retail is the main driver of the
Group and accounts for 57.9% (FY22 H1: 58.4%) of Group revenue.
26 weeks ended 26 weeks ended
23 October 2022 24 October 2021
(unaudited) (unaudited)
Revenue £1,526.1m £1,367.1m
Cost of Sales £(883.8)m £(768.1)m
Gross Profit £642.3m £599.0m
Gross Margin % 42.1% 43.8%
Adjusted PBT £184.1m £123.0m
Revenue increased 11.6%. Excluding acquisitions revenue decreased 3.1%. This
was largely due to a reduction within Game UK and the very strong reopening of
stores after the last lockdown in March 2021 in the prior period.
Gross margin decreased to 42.1%, largely due to the acquisition of Studio
Retail, in which the online trading business operates at a lower average
margin than the rest of the Group, a strong prior year comparative of full
price trading, cost of goods inflation, and a maintained inventory provision
percentage in the current period.
Adjusted PBT for UK Sports Retail was £184.1m, an increase of 49.7% for the
period, largely due to significant profit on disposal of properties and a
reduction in property related impairments, mitigated to some extent by an
increased inventory provision amount and intangible asset write-offs in Studio
Retail Limited. It should also be noted that the prior period benefitted from
business rates relief.
UK SPORTS RETAIL STORE PORTFOLIO ((3))
23 October 2022 24 October 2021 24 April 2022
England 387 390 387
Scotland 37 39 37
Wales 29 31 30
Northern Ireland 19 20 19
Isle of Man 1 1 1
GAME UK ((1)) 276 258 259
Evans Cycles ((2)) 60 53 57
USC 17 23 18
Total 826 815 808
Opened 60 58 90
Closed (42) (49) (88)
Acquired - - -
Area (sq.ft.) approx 6.8m approx 6.9m approx. 6.7m
(1) The GAME UK store numbers include 169 concessions operating
within Sports Direct fascia stores (24 April 2022: 125) and does not include
BELONG arenas.
(2) The Evans Cycles store numbers include 2 concessions
operating within House of Fraser fascia stores (24 April 2022: 2).
(3) Table excludes the Group's standalone gyms.
( )
PREMIUM LIFESTYLE
Premium Lifestyle includes the results of the premium and luxury retail
businesses FLANNELS, Cruise, van mildert, Jack Wills, House of Fraser and
Sofa.com along with the related websites, the Missguided and I Saw it First
websites, and freehold property owning companies where trading is purely from
Premium Lifestyle fascias.
26 weeks ended 26 weeks ended
23 October 2022 24 October 2021
(unaudited) (unaudited)
Gross Transaction Value (GTV)((1)) £557.5m £468.0m
Revenue £533.5m £427.9m
Cost of Sales £(310.3)m £(223.6)m
Gross Profit £223.2m £204.3m
Gross Margin % 41.8% 47.7%
Adjusted PBT / (LBT) £11.3m £(9.7)m
(1) GTV being gross sales net of VAT, discounts and returns and
gross sales where the Group acts as agent.
Revenue grew 24.7%. This was largely due to new FLANNELS stores and continued
growth in online.
Gross margin decreased to 41.8% largely due to House of Fraser store closures,
a strong prior year comparative of full price trading and cost of goods
inflation.
The House of Fraser business has shown a year on year trading improvement. The
business rates changes announced in the November 2022 Government budget should
proportionally benefit the House of Fraser business given the significant and
disproportionate current cost to House of Fraser.
Adjusted PBT for Premium Lifestyle increased from a loss of £9.7m in FY22 H1
to a profit of £11.3m for the period, largely due to a reduction in property
and other related impairments, growth in the FLANNELS business and
improvements in House of Fraser performance, mitigated by impairments to
intangible assets within recent acquisitions. It should also be noted that the
prior period benefitted from business rates relief, especially within House of
Fraser.
PREMIUM LIFESTYLE STORE PORTFOLIO
23 October 2022 24 October 2021 24 April 2022
Jack Wills ((2)) 48 56 52
FLANNELS 56 44 53
House of Fraser / Frasers ((2)) 34 43 39
Sofa.com ((1)) 23 25 23
Cruise 5 6 5
18 Montrose 3 4 4
Garment Quarter 1 1 1
Psyche - 1 1
Van Mildert - 1 1
Total 170 181 179
Opened 7 11 21
Acquired - - -
Closed (16) (9) (21)
Area (sq.ft.) approx. 3.8m approx. 4.3m approx. 4.0m
(1) Sofa.com store numbers include 16 concessions operating
within House of Fraser fascia stores (24 April 2022: 17).
(2) Jack Wills and Frasers stores in Republic of Ireland are
shown in the International store numbers as opposed to the Premium Lifestyle
store numbers.
INTERNATIONAL RETAIL ((1))
26 weeks ended 26 weeks ended
23 October 2022 24 October 2021
(unaudited) (unaudited)
Revenue £492.2m £465.4m
Cost of Sales £(287.3)m £(255.8)m
Gross Profit £204.9m £209.6m
Gross Margin % 41.6% 45.0%
Adjusted PBT £62.5m £75.2m
(1) Following the disposal of the US retail businesses in the
period, the reporting segments have been re-categorised with the previous Rest
of World Retail segment and European Retail segment now being reported under
an International Retail segment. This change is deemed to fall in line with
the aggregation criteria and quantitative thresholds outlined in IFRS 8
Operating Segments.
Revenue increased 5.8%. This is largely due to the acquisition of Sportmaster
on 16 May 2022 and an increase in the Malaysian business, offset by the
reduction in revenue following the disposal of the US retail businesses on 25
May 2022.
Gross margin decreased to 41.6%, largely due to acquisition revaluation
impacts in relation to Sportmaster and the prior period including inventory
holding efficiencies in relation to the US retail businesses not recurring in
the current period.
Adjusted PBT for International Retail was £62.5m, a decrease of 16.9% for the
period, largely due to the disposal of the US retail businesses.
23 October 2022 24 October 2021 24 April 2022
GAME Spain 234 236 235
Sportmaster - Denmark 75 - -
Republic of Ireland(2) 44 41 43
Belgium 34 34 34
Estonia(1) 22 21 20
Portugal 21 20 21
Austria 19 20 19
Lithuania(1) 19 18 19
Latvia(1) 18 17 18
Poland 13 14 13
Slovenia 12 13 13
Czech Republic 12 12 12
Spain 12 10 10
Hungary 7 8 8
Cyprus 6 6 6
Holland 5 5 5
Slovakia 5 5 5
France 4 4 4
Luxembourg 2 2 2
Iceland 2 1 1
Germany 1 2 1
Malaysia 33 34 34
Bob's Stores - 21 21
Eastern Mountain Sports - 21 21
Total 600 565 565
Opened 8 6 12
Acquired 75 - -
Closed (6) (3) (9)
Disposed (42) - -
Area (sq.ft.) approx. 4.3m approx. 5.0m approx. 5.0m
(1) Includes only stores with SPORTSDIRECT.com and SPORTLAND
fascias.
(2) Excluding Heatons fascia stores.
WHOLESALE & LICENSING
The portfolio of Group brands includes a wide variety of world-famous sport
and lifestyle brands. The Group's Sports Retail division sells products under
these brands in its stores, and the Wholesale & Licensing division sells
the brands through its wholesale and licensing activities. The Wholesale &
Licensing division continues to sponsor a variety of prestigious events and
retains a variety of globally recognised celebrities and sporting
professionals as brand ambassadors.
26 weeks ended 26 weeks ended
23 October 2022 24 October 2021
(unaudited) (unaudited)
Wholesale £74.6m £68.7m
Licensing £11.6m £10.7m
Total Revenue £86.2m £79.4m
Cost of Sales £(48.9)m £(46.4)m
Gross Profit £37.3m £33.0m
Gross Margin % 43.3% 41.6%
Adjusted PBT £9.2m £3.9m
Revenue increased by 8.6%. Wholesale revenues are up 8.6% and Licensing
revenues increased 8.4%, largely due an increase in Everlast revenue.
Total gross margin increased to 43.3% (FY22 H1: 41.6%) largely due to improved
product mix in Everlast.
Adjusted PBT increased 135.9% to £9.2m (FY22 H1: £3.9m) largely due to
impairment of Goodwill in the prior period.
STRATEGIC INVESTMENTS
Included within long-term financial assets at the period ended 23 October 2022
are the following direct interests held by the Group:
23 October 2022 24 October 2021 24 April 2022
(unaudited) (unaudited) (audited)
% % %
Mulberry Group plc 36.9 36.8 36.9
Hugo Boss AG 4.3 6.8 2.2
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. Subsequent to the period end the Group
acquired over 5% of the voting rights of ASOS plc.
The Group also holds indirect strategic investments within contracts for
difference and options. The fair value of the contracts for difference and
options are recognised in Derivative Financial Assets or Liabilities on the
Group Balance Sheet, with the movement in fair value recorded in the Income
Statement.
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.
As at 23 October 2022, 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 696m FY23 - FY26 0.98-1.08
USD / GBP USD inventory purchases USD 240m FY23 1.41
USD / EUR USD inventory purchases USD 90m FY23 - FY24 1.26-1.31
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 EUR 696m FY23 - FY27 0.98-1.08
USD / EUR USD inventory purchases USD 90m FY23 - FY25 1.26-1.31
The Group also holds short-term swaps for Treasury management purposes:
Currency Expected use Currency value Timing Rates
USD / GBP Cash flow management EUR 70m FY23 1.15
The Group is proactive in managing its currency requirements. The Treasury
team works closely with senior management to understand the Group's plans and
forecasts, 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 £8.0m from £491.1m at 24 April 2022 to £499.1m at 23
October 2022. Net debt includes £104.6m of net debt relating to the Studio
Retail Limited securitisation facility (24 April 2022: £107.3m). Net interest
on bank loans and overdrafts increased to £16.8m (FY22 H1: £4.8m) largely
due to increased usage of the Revolving Credit Facility ("RCF"), increased
interest rates in the period, and the addition of Studio Retail Limited and
its securitisation facility to the Group.
Analysis of net debt:
23 October 2022 24 October 2021 24 April 2022
(unaudited) (unaudited) (audited)
£m £m £m
Cash and cash equivalents 314.8 350.7 336.8
Borrowings (813.9) (375.0) (827.9)
Total (499.1) (24.3) (491.1)
Cash flow:
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022 24 October 2021 24 April 2022
(unaudited) (unaudited) (audited)
£m £m £m
Cash inflow from operating activities 171.8 559.8 628.9
Income taxes paid (58.4) (62.6) (121.0)
Invested in:
Purchase of subsidiaries, net of cash acquired (40.9) - (0.2)
Purchase of listed investments (113.5) (107.1) (198.4)
Proceeds on disposal of listed investments 17.4 96.6 238.4
Proceeds on disposal of subsidiary undertaking 51.4 1.0 1.0
Premiums in relation to equity derivatives 48.6 - 117.4
Net capital income/(expenditure) 103.6 (112.0) (280.2)
Exchange movement on cash balances 5.3 (1.9) 0.1
Investment income received 1.4 5.6 1.0
Finance income received less finance costs paid (23.9) (14.4) (26.5)
Lease payments (71.5) (61.9) (176.2)
Purchase of own shares (80.4) (78.5) (193.2)
Purchase of associated undertakings (11.9) - -
Borrowings acquired through business combinations (7.0) - (232.0)
Dividend paid to non-controlling interest - - (1.3)
(Increase) / decrease in net debt (8.0) 224.6 (242.2)
SUMMARY CONSOLIDATED BALANCE SHEET (EXTRACT)
23 October 2022 24 October 2021 24 April 2022
(unaudited) (unaudited) (audited)
£m £m £m
Property, plant and equipment 787.5 800.8 816.3
Right of use assets 203.1 211.9 194.7
Investment properties 49.6 52.7 89.2
Long-term financial assets 241.4 352.4 206.6
Deferred tax assets 93.7 103.7 100.8
Inventory 1,466.5 1,201.5 1,277.6
Trade and other receivables 942.0 490.7 841.4
Provisions (426.1) (351.9) (433.0)
Trade and other payables (838.9) (789.4) (729.8)
Lease liabilities (659.9) (684.7) (620.6)
Borrowings (813.9) (375.0) (827.9)
The decrease within property, plant and equipment from 24 April 2022 is
largely due to property and other related impairments, offset by additions for
store fitouts and warehouse automation in the period. Right of use assets have
increased from 24 April 2022 largely due to acquisition and additions in the
period, offset by impairments of £23.6m.
The decrease in investment properties from 24 April 2022 relates to the sale
and leaseback of the Robin Retail Park, Wigan in the period.
Long-term financial assets have increased during the period from 24 April 2022
due to the additions of Hugo Boss AG offset by decrease in fair value of the
Hugo Boss AG and Mulberry Group plc investments.
Inventory has increased from 24 April 2022 as holdings are increased in the
build up to the Christmas period and also due to acquisitions. Inventory has
increased from 24 October 2021 largely due to acquisitions. Inventory
provision as a percentage has decreased from 15.2% at 24 April 2022 to 14.9%
at period end.
Trade and other receivables includes a £nil reimbursement asset in relation
to the Group's ongoing non-UK tax enquiries (24 April 2022: £88.3m), £389.7m
relating to deposits in respect of derivative financial instruments (24 April
2022: £243.9m), and the Studio Retail net credit customer receivables of
£240.3m (24 April 2022: £234.2m, 24 October 2021: £nil).
See note 11 for further details in relation to provisions.
Trade and other payables have increased from 24 April 2022 largely due to the
increase in inventory supplier payables in the run up towards the Christmas
period and acquisitions in the period.
The lease liability has increased largely due to acquisitions and additions,
offset by repayments made in the period.
Borrowings have decreased slightly from 24 April 2022 largely due to positive
cashflow inflows mitigated by significant investment in acquisitions,
strategic investments and the share buybacks.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 19. There have been no
material changes in the related party transactions described in the last
annual report.
GOING CONCERN
Having thoroughly reviewed the performance of the Group and having made
suitable enquiries, the Directors are confident that the Group have 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 Interim
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';
· 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 24 April 2022 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
8 December 2022
CONSOLIDATED INCOME STATEMENT
FOR THE 26 WEEKS ENDED 23 OCTOBER 2022
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 52 weeks ended 52 weeks ended 52 weeks ended
23 October 2022 23 October 2022 23 October 2022 24 October 2021 24 October 2021 24 October 2021 24 April 2022 24 April 2022 24 April 2022
Note (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited)
£m £m £m £m £m £m £m £m £m
Continuing operations Discontinued operations Total Continuing operations Discontinued operations Total Continuing operations Discontinued operations Total
Revenue 2,573.3 8.5 2,581.8 2,284.1 55.7 2,339.8 4,672.9 114.2 4,787.1
Credit account interest 56.2 - 56.2 - - - 18.2 - 18.2
Total revenue (including credit account interest) 2,629.5 8.5 2,638.0 2,284.1 55.7 2,339.8 4,691.1 114.2 4,805.3
Cost of sales (1,529.7) (4.4) (1,534.1) (1,267.8) (26.1) (1,293.9) (2,647.2) (56.1) (2,703.3)
Impairment reversals/(losses) on credit customer receivables 3.8 - 3.8 - - - (13.3) - (13.3)
Gross profit 1,103.6 4.1 1,107.7 1,016.3 29.6 1,045.9 2,030.6 58.1 2,088.7
Selling, distribution and administrative expenses (877.8) (4.0) (881.8) (717.0) (12.6) (729.6) (1,557.3) (31.5) (1,588.8)
Other operating income 16.0 0.1 16.1 17.6 1.1 18.7 45.4 2.6 48.0
Property related impairments (50.2) - (50.2) (135.3) - (135.3) (227.0) - (227.0)
Exceptional items 4 - - - - - - (1.3) - (1.3)
Profit on sale of properties 3 91.2 - 91.2 - - - 10.8 - 10.8
Gain on sale of discontinued operation 18 - 26.3 26.3 - - - - - -
Operating profit 282.8 26.5 309.3 181.6 18.1 199.7 301.2 29.2 330.4
Investment income 5 27.2 - 27.2 28.8 - 28.8 43.8 - 43.8
Investment costs 6 (40.4) - (40.4) (38.8) - (38.8) (19.7) - (19.7)
Finance income 7 24.7 - 24.7 12.6 - 12.6 30.3 - 30.3
Finance costs 8 (36.1) (0.1) (36.2) (16.1) (0.2) (16.3) (48.9) (0.3) (49.2)
Profit before taxation 258.2 26.4 284.6 168.1 17.9 186.0 306.7 28.9 335.6
Taxation (64.9) (0.1) (65.0) (39.9) (2.4) (42.3) (75.5) (3.2) (78.7)
Profit for the period 193.3 26.3 219.6 128.2 15.5 143.7 231.2 25.7 256.9
ATTRIBUTABLE TO:
Equity holders of the Group 186.1 26.3 212.4 122.7 15.5 138.2 224.1 25.7 249.8
Non-controlling interests 7.2 - 7.2 5.5 - 5.5 7.1 - 7.1
Profit for the period 193.3 26.3 219.6 128.2 15.5 143.7 231.2 25.7 256.9
EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share
Basic earnings per share 9 40.4 5.7 46.1 25.0 3.2 28.2 47.5 5.4 52.9
Diluted earnings per share 9 40.4 5.7 46.1 25.0 3.2 28.2 47.5 5.4 52.9
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 26 WEEKS ENDED 23 OCTOBER 2022
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022 24 October 2021 24 April 2022
Note (unaudited) (unaudited) (audited)
£m £m £m
Profit for the period 219.6 143.7 256.9
OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Fair value movement on long-term financial assets (69.7) 80.5 (8.1)
Remeasurements of defined benefit pension scheme (1.2) - (26.8)
Deferred tax on remeasurements of defined benefit pension scheme 0.3 - 6.7
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Exchange differences on translation of foreign operations (2.4) (11.4) 6.8
Fair value movement on hedged contracts - recognised in the period 12 24.6 21.6 52.1
Fair value movement on hedged contracts - reclassified and reported in sales 12 (12.6) - -
Fair value movement on hedged contracts - reclassified and reported in 12 (19.6) 3.6 7.5
inventory/cost of sales
Fair value movement on hedged contracts - taxation taken to reserves 12 2.2 (7.2) (15.8)
OTHER COMPREHENSIVE (LOSS) / INCOME FOR THE PERIOD, NET OF TAX (78.4) 87.1 22.4
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 141.2 230.8 279.3
ATTRIBUTABLE TO:
Equity holders of the Group 134.0 225.3 272.2
Non-controlling interest 7.2 5.5 7.1
141.2 230.8 279.3
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 23 OCTOBER 2022
23 October 2022 24 October 2021 24 April 2022
(unaudited)
(unaudited)
Note
(audited)
£m £m
£m
ASSETS - NON CURRENT
Property, plant and equipment 990.6 1,012.7 1,011.0
Investment properties 49.6 52.7 89.2
Intangible assets 152.0 113.5 120.6
Investment in associated undertakings 11.9 - -
Long-term financial assets 241.4 352.4 206.6
Retirement benefit surplus 0.6 - 2.2
Deferred tax assets 93.7 103.7 100.8
1,539.8 1,635.0 1,530.4
ASSETS - CURRENT
Inventories 1,466.5 1,201.5 1,277.6
Trade and other receivables 10 942.0 490.7 841.4
Derivative financial assets 12 131.6 61.4 116.5
Cash and cash equivalents 314.8 350.7 336.8
2,854.9 2,104.3 2,572.3
Assets in disposal groups classified as held for sale - - 40.0
TOTAL ASSETS 4,394.7 3,739.3 4,142.7
Share capital 64.1 64.1 64.1
Share premium 874.3 874.3 874.3
Treasury shares reserve (569.3) (374.2) (488.9)
Permanent contribution to capital 0.1 0.1 0.1
Capital redemption reserve 8.0 8.0 8.0
Foreign currency translation reserve 33.2 17.4 35.6
Reverse combination reserve (987.3) (987.3) (987.3)
Own share reserve (66.8) (66.7) (66.8)
Hedging reserve 12 49.9 29.5 55.3
Share based payment reserve 20.0 5.2 14.1
Retained earnings 1,919.9 1,775.1 1,778.1
Issued capital and reserves attributable to owners of the parent 1,346.1 1,345.5 1,286.6
Non-controlling interests 36.2 21.7 22.0
TOTAL EQUITY 1,382.3 1,367.2 1,308.6
LIABILITIES - NON CURRENT
Borrowings 813.9 375.0 827.9
Lease liabilities 516.6 505.2 503.6
Retirement benefit obligations 1.7 1.7 1.6
Deferred tax liabilities 44.7 30.0 40.4
Provisions 11 426.1 351.9 433.0
1,803.0 1,263.8 1,806.5
LIABILITIES - CURRENT
Derivative financial liabilities 12 180.8 28.4 107.2
Trade and other payables 838.9 789.4 729.8
Lease liabilities 143.3 179.5 117.0
Current tax liabilities 46.4 111.0 50.9
1,209.4 1,108.3 1,004.9
Liabilities in disposal groups classified as held for sale - - 22.7
TOTAL LIABILITIES 3,012.4 2,372.1 2,834.1
TOTAL EQUITY AND LIABILITIES 4,394.7 3,739.3 4,142.7
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 26 WEEKS ENDED 23 OCTOBER 2022
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022 24 October 2021 24 April 2022
Note (unaudited) (unaudited) (audited)
£m £m £m
CASH INFLOW FROM OPERATING ACTIVITIES 14 171.8 559.8 628.9
Income taxes paid (58.4) (62.6) (121.0)
NET CASH INFLOW FROM OPERATING ACTIVITIES 113.4 497.2 507.9
Proceeds on disposal of property, plant and equipment and investment property 3 0.1 0.7 32.0
Proceeds from sale and leaseback transactions 3 171.5 - 9.5
Premiums in relation to equity derivatives 48.6 5.4 117.4
Proceeds on disposal of listed investments 17.4 96.6 238.4
Proceeds on disposal of subsidiary undertaking 18 51.4 1.0 1.0
Purchase of subsidiaries, net of cash acquired 13 (40.9) - (0.2)
Purchase of property, plant and equipment and investment property (118.8) (112.7) (323.2)
Purchase of listed investments (113.5) (107.1) (198.4)
Purchase of associated undertakings (11.9) - -
Investment income received 1.4 0.2 1.0
Finance income received 3.7 0.1 6.3
NET CASH INFLOW / (OUTFLOW) FROM INVESTING ACTIVITIES 9.0 (115.8) (116.2)
Lease payments (71.5) (61.9) (176.2)
Finance costs paid (27.6) (14.5) (32.8)
Borrowings drawn down 466.3 409.0 1,374.4
Borrowings repaid (487.3) (739.9) (1,484.4)
Proceeds from sale and leaseback transactions 3 50.8 - 1.5
Dividends paid to non-controlling interests - - (1.3)
Purchase of own shares 17 (80.4) (78.5) (193.2)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES (149.7) (485.8) (512.0)
NET DECREASE IN CASH AND CASH EQUIVALENTS (27.3) (104.4) (120.3)
Exchange movement on cash balances 5.3 (1.9) 0.1
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS AT BEGINNING OF PERIOD 336.8 457.0 457.0
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS AT THE PERIOD END 314.8 350.7 336.8
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 26 WEEKS ENDED 23 OCTOBER 2022 (UNAUDITED)
Share scheme reserve Foreign currency translation Total attributable to owners of Non-controlling
Share Share premium((1)) Treasury shares Own share reserve Retained earnings Other((2)) parent interests Total
capital
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
At 24 April 2022 64.1 874.3 (488.9) 14.1 35.6 (66.8) 1,778.1 (923.9) 1,286.6 22.0 1,308.6
Acquisitions - - - - - - - - 7.0 7.0
Purchase of own shares - - (80.4) - - - - - (80.4) - (80.4)
Share scheme - - - 5.9 - - - - 5.9 - 5.9
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS - - (80.4) 5.9 - - - - (74.5) 7.0 (67.5)
Profit for the financial period - - - - - - 212.4 - 212.4 7.2 219.6
OTHER COMPREHENSIVE INCOME
Cash flow hedges - recognised in the period - - - - - - - 24.6 24.6 - 24.6
Cash flow hedges - reclassified and reported in sales - - - - - - - (12.6) (12.6) - (12.6)
Cash flow hedges - reclassified and reported in inventory/cost of sales - - - - - - - (19.6) (19.6) - (19.6)
Cash flow hedges - taxation - - - - - - - 2.2 2.2 - 2.2
Fair value adjustment in respect of long term financial assets - recognised - - - - - - (69.7) - (69.7) - (69.7)
Remeasurements of defined benefit pension scheme - - - - - - (1.2) - (1.2) - (1.2)
Deferred tax on remeasurements of defined benefit pension scheme - - - - - - 0.3 - 0.3 - 0.3
Translation differences - Group - - - - (2.4) - - - (2.4) - (2.4)
Total comprehensive income for the period - - - - (2.4) - 141.8 (5.4) 134.0 7.2 141.2
At 23 October 2022 64.1 874.3 (569.3) 20.0 33.2 (66.8) 1,919.9 (929.3) 1,346.1 36.2 1,382.3
FOR THE 26 WEEKS ENDED 24 OCTOBER 2021 (UNAUDITED)
Share scheme reserve Foreign currency translation Total attributable to owners of Non-controlling
Share Share premium((1)) Treasury shares Own share reserve Retained earnings Other((2)) parent interests Total
capital
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
At 25 April 2021 64.1 874.3 (295.7) 1.3 28.8 (66.7) 1,554.5 (967.7) 1,192.9 18.1 1,211.0
Acquisitions - - - - - - 1.9 - 1.9 (1.9) -
Purchase of own shares - - (78.5) - - - - - (78.5) - (78.5)
Share scheme - - - 3.9 - - - - 3.9 - 3.9
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS - - (78.5) 3.9 - - 1.9 - (72.7) (1.9) (74.6)
Profit for the financial period - - - - - - 138.2 - 138.2 5.5 143.7
OTHER COMPREHENSIVE INCOME
Cash flow hedges - recognised in the period - - - - - - - 21.6 21.6 - 21.6
Cash flow hedges - reclassified and reported in inventory/cost of sales - - - - - - - 3.6 3.6 - 3.6
Cash flow hedges - taxation - - - - - - - (7.2) (7.2) - (7.2)
Fair value adjustment in respect of long term financial assets - recognised - - - - - - 80.5 - 80.5 - 80.5
Translation differences - Group - - - - (11.4) - - - (11.4) - (11.4)
Total comprehensive income for the period - - - - (11.4) - 218.7 18.0 225.3 5.5 230.8
At 24 October 2021 64.1 874.3 (374.2) 5.2 17.4 (66.7) 1,775.1 (949.7) 1,345.5 21.7 1,367.2
FOR THE 52 WEEKS ENDED 24 APRIL 2022 (AUDITED)
Share scheme reserve Foreign currency translation Total attributable to owners of Non-controlling
Share Share premium((1)) Treasury shares Own share reserve Retained earnings Other((2)) parent interests Total
capital
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
At 25 April 2021 64.1 874.3 (295.7) 1.3 28.8 (66.7) 1,554.5 (967.7) 1,192.9 18.1 1,211.0
Acquisitions - - - - - - 1.9 - 1.9 (1.9) -
Share scheme - - - 12.8 - (0.1) 0.1 - 12.8 - 12.8
Dividends paid to non-controlling interests - - - - - - - - - (1.3) (1.3)
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS - - - 12.8 - (0.1) 2.0 - 14.7 (3.2) 11.5
Profit for the financial period - - - - - - 249.8 - 249.8 7.1 256.9
OTHER COMPREHENSIVE INCOME
Purchase of own shares - - (193.2) - - - - - (193.2) - (193.2)
Cash flow hedges - recognised in the period - - - - - - - 52.1 52.1 - 52.1
Cash flow hedges - reclassified and reported in inventory/cost of sales - - - - - - - 7.5 7.5 - 7.5
Cash flow hedges - taxation - - - - - - - (15.8) (15.8) - (15.8)
Fair value adjustment in respect of long term financial assets - recognised - - - - - - (8.1) - (8.1) - (8.1)
Remeasurements of defined benefit pension scheme - - - - - - (26.8) - (26.8) - (26.8)
Deferred tax on remeasurements of defined benefit pension scheme - - - - - - 6.7 - 6.7 - 6.7
Translation differences - Group - - - - 6.8 - - - 6.8 - 6.8
Total comprehensive income for the period - - (193.2) - 6.8 - 221.6 43.8 79.0 7.1 86.1
At 24 April 2022 64.1 874.3 (488.9) 14.1 35.6 (66.8) 1,778.1 (923.9) 1,286.6 22.0 1,308.6
(1) The share premium account is used to record the excess
proceeds over nominal value on the issue of shares.
(2) Other reserves comprise permanent contribution to capital,
capital redemption reserve, reverse combination reserve and the hedging
reserve. All movements in the period related to the hedging reserve.
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
NOTES TO THE FINANCIAL INFORMATION
FOR THE 26 WEEKS ENDED 23 OCTOBER 2022
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 24 April 2022 is
prepared in accordance with UK-adopted International Accounting Standards in
conformity with 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 2022 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 2022 Annual Report.
The summary of results for the 52 weeks ended 24 April 2022 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 and
covenants of £980.0m until November 2024 and £930.0m until November 2025,
with the possibility to extend this by a further year 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 Hugo
Boss options. 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 also have 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 Group's performance and having made suitable
enquiries, the Directors are confident that the Group has adequate resources
to remain in operational existence for at least 12 months from the date of
approval 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 Unaudited Interim
Financial Statements which is a period of at least twelve months from the date
of approval of these Unaudited Interim Financial Statements.
New accounting standards, interpretations and amendments adopted by the Group
The principal accounting policies have remained unchanged from the prior
financial information for the 52 weeks ended 24 April 2022. Several amendments
apply for the first time during the period but have not resulted in any
changes to the Group's accounting policies or have 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 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 FY22 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
· 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
Detailed explanations of the principal risks and uncertainties can be found in
the Principal Risks and Uncertainties section of the FY22 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 FY22 Annual Report.
We have considered climate change as part of our cash flow projections within
going concern, impairment assessments and viability, and the impact of climate
change is not deemed to have a significant impact on these assessments
currently and therefore they are not deemed to be a key source of estimation
uncertainty. The Group will continue to monitor the impacts of climate change
over the coming years.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
The critical accounting estimates and judgements made by the Group regarding
the future or other key sources of estimation, uncertainty and judgement that
may have a significant risk of giving rise to a material adjustment to the
carrying values of assets and liabilities within the next financial period
are:
Critical Accounting Judgements
The following are the critical judgements made in applying the accounting
policies of the group that have the most significant effect on the amounts
recognised in the financial statements:
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. During the period the Group has held greater than 20% of the
voting rights of Mulberry Group Plc, whereby management consider that the
Group does not have significant influence over this entity for combinations of
the following reasons:
· The Group does not have any representation on the board of
directors of the investee;
· There is no participation in decision making and strategic
processes, including participation in decisions about dividends or other
distributions;
· There have been no material transactions between the entity and
the investee company;
· There has been no interchange of managerial personnel;
· No non-public essential technical management information is
provided to the investee
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 effect 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.
The Group holds 49% of the share capital of Four (Holdings) Limited which is
accounted for as an associate using the equity method. The Group does not have
any representation on the board of directors and no participation in decision
making about relevant activities such as establishing operating and capital
decisions, including budgets, appointing or remunerating key management
personnel or service providers and terminating their services or employment.
However, in prior periods the Group has provided Four (Holdings) Limited with
a significant loan. At the reporting date, the gross amount owed by Four
(Holdings) Limited for this loan totalled £60.0m (£21.6m net of amounts
recognised in respect of loss allowance). The Group is satisfied that the
existence of these transactions provides evidence that the entity has
significant influence over the investee but in the absence of any other
rights, in isolation it is insufficient to meet the control criteria of IFRS
10, as the Group does not have power over Four (Holdings) Limited.
Cash Flow Hedging
The Group uses a range of forward and option contracts that are entered into
at the same time, they are in contemplation with one another and have the same
counterparty. A judgement is made in determining whether there is an economic
need or substantive business purpose for structuring the transactions
separately that could not also have been accomplished in a single transaction.
Management are of the view that there is a substantive distinct business
purpose for entering into the options and a strategy for managing the options
independently of the forward contracts. The forward and options contracts are
therefore not viewed as one instrument and hedge accounting for the forwards
is permitted.
Under IFRS 9 in order to achieve cash flow hedge accounting, forecast
transactions (primarily Euro denominated sales and USD denominated purchases)
must be considered to be highly probable. The hedge must be expected to be
highly effective in achieving offsetting changes in cash flows attributable to
the hedged risk. The forecast transaction that is the subject of the hedge
must be highly probable and must present an exposure to variations in cash
flows that could ultimately affect profit or loss. Management have reviewed
the detailed forecasts and 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
£49.9m (24 April 22: £55.3m) would be shown in Finance Income.
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:
Provision For Obsolete, Slow Moving or Defective Inventories
The Directors have applied their knowledge and experience of the retail
industry in determining the level and rates of provisioning required in
calculating the appropriate inventory carrying values. Specific estimates and
judgements applied in relation to assessing the level of inventory provisions
required are considered in relation to the following areas:
· Continuity inventory
· Seasonal inventory lines - specifically seasons that have now
finished
· Third party versus own brand inventory
· Ageing of inventory
· Sports Retail or Premium Lifestyle
· Local economic conditions
· Divisional specific factors
· Increased cost of inventory and lower margins with the
devaluation of the Pound
· Over-stock and out of season inventory as a result of
macro-economic factors
Provision estimates are forward looking and are formed using a combination of
factors including historical experience, management's knowledge of the
industry, group discounting, sales pricing protocols and the overall
assessment made by management of the risks in relation to inventory.
Management use a number of internally generated reports to monitor and
continually re-assess the adequacy and accuracy of the inventory provision.
The additional cost of repricing inventory and handling charges in relation to
relocating inventory (tunnelling) are considered in arriving at the
appropriate percentage provision. The assessment involves significant
estimation uncertainty, therefore in order to check that the assumptions
applied remain valid, management produces a range of outcomes and the
provision is set within this range.
Key assumptions used to create the estimates are:
· Discounting - Based on historical experience and managements
anticipated future discounting including the continuing impact of the
pandemic, Brexit, global supply chain challenges and macro-economic factors
· Tunnelling - Cost of handling stock for reworking and repacking
· Repricing - Labour cost associated with repricing units of stock
· Shrinkage - Stock lost
Total Group inventory provision at 23 October 2022 is 14.9% (24 April 2022:
15.2%) of gross inventory. A 1% change in the provision as a percentage of
gross inventory would impact profit before tax by approx. £17.2m (24 April
2022: £15.5m). Management do not consider it appropriate to disclose
sensitivities for key assumptions in isolation as in practice changes in one
assumption would lead to an offset in another.
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
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 use a
reference estimate of £100,000 (FY22: £100,000) for large leasehold stores,
£50,000 (FY22: £50,000) for smaller leasehold stores (£25,000 per store for
Game UK and Game Spain stores) and $/€50,000 (FY22: $/€50,000) for non-UK
stores. 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.
A 10% increase in dilapidation cost per store would result in an approx.
£8.3m (FY22: £8.5m) reduction in profit before tax.
Other Provisions
Provisions are made for items where the Group has identified a present legal
or constructive obligation arising as a result of a past event, it is probable
that an outflow of resources will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Legal and regulatory provisions relate to management's best estimates of
provisions required for legal and regulatory claims and ongoing non-UK tax
enquiries. Other provisions relate to management's best estimates of
provisions required for restructuring, employment and commercial. Where
applicable these are inclusive of any estimated penalties, interest and legal
costs.
In relation to the non-UK tax enquiries management have made a judgement to
consider all claims collectively, applying the following key estimates to the
gross amounts (excluding re-imbursement assets):
· 10% penalty (FY22: 10%). A 5% increase to 15% would result in
approx. £6.5m increase in the provision (FY22: approx. £6.5m increase).
· 3% interest on the liability (FY22: 3%). A 1% increase to 4%
would result in approx. £14.0m increase in the provision (FY22: approx.
£14.0m increase).
Management are satisfied that the judgement to consider all claims
collectively is the only reasonable approach because they are all dependant on
the outcome of a court ruling on the interpretation of the non-UK tax
enquiries. Management are satisfied that with regard to timing, a reasonable
range of outcomes are all greater than one year and so are satisfied with
including the provisions as non-current.
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 defines the lease term as the non-cancellable period of a lease
together with the options to extend or terminate a lease, if the lessee were
reasonably certain to exercise that option. The Group will assess the
likelihood of extending lease contracts beyond the break date by taking into
account current economic and market conditions, current trading performance,
forecast profitability and the level of capital investment in the property.
IFRS 16 states that the lease payments shall be discounted using the lessee's
incremental borrowing rate where the rate implicit in the lease cannot be
readily determined. Accordingly, all lease payments have been discounted using
the incremental borrowing rate (IBR). The IBR has been determined by using a
synthetic credit rating for the Group which is used to obtain market data on
debt instruments for companies with the same credit rating, this is split by
currency to represent each of the geographical areas the Group operates within
and adjusted for the lease term.
The weighted average discount rates based on incremental borrowing rates used
throughout the period across the Group's lease portfolio are shown below. The
discount rate for each lease is dependent on lease start date, term and
location.
Lease Term UK Europe Rest of World
Up to 5 years 2.6% - 4.9% 1.0% - 3.0% 2.9% - 5.2%
Greater than 5 years and up to 10 years 3.2% - 5.4% 1.9% - 3.6% 4.1% - 5.6%
Greater than 10 years and up to 20 years 3.4% - 5.4% 2.2% - 3.8% 4.3% - 5.6%
Greater than 20 years 3.5% - 5.4% 2.5% - 4.1% 4.6% - 5.8%
The right of use assets are assessed for impairment at each reporting period
in line with IAS 36 to review whether the carrying amount exceeds its
recoverable amount. For impairment testing purposes the Group has determined
that each store is a separate CGU. The recoverable amount is calculated based
on the Group's latest forecast cash flows which are then extrapolated to cover
the period to the break date of the lease taking into account historic
performance and knowledge of the current market, together with the Group's
views on future profitability of each CGU. The key assumptions in the
calculations are the sales growth rates, gross margin rates, changes in the
operating cost base and the pre-tax discount rate derived from the Group's
weighted average cost of capital using the capital asset pricing model, the
inputs of which include a risk-free rate, equity risk premium and a risk
adjustment (Beta). Given the number of assumptions used, the assessment
involves significant estimation uncertainty.
Impairments in the period have been recognised for the amount of £38.7m (FY22
H1: £55.2m) due to the ongoing challenges in the retail sector on the
forecast cash flows of the CGU, including price increases and the
cost-of-living squeeze on customers. This is broken down as follows:
· £23.6m (FY22 H1: £29.5m) against the right-of-use asset (£6.4m
UK Sports Retail segment, £14.2m Premium Lifestyle segment, and £3.0m
International Retail segment); and
· £15.1m (FY22 H1: £25.7m) against plant and equipment (£3.1m UK
Sports Retail segment, £8.9m Premium Lifestyle segment, £3.1m International
Retail segment).
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 (see below).
In line with IAS 36 Impairment of Assets, management have considered whether
any amounts should be recognised for the reversal of prior period impairment
losses with £nil (FY22: £nil) being recognised in the period.
A sensitivity analysis has been performed in respect of sales, margin and the
new store exemption as these are considered to be the most sensitive of the
key assumptions:
Forecast: Impact of change in assumption: Impairment increase / (decrease) £m
Sales year 1 5% - improvement (10.0)
Sales year 1 5% - reduction 7.8
Existing Gross Margin year 1 >40% 100bps - improvement (5.6)
Existing Gross Margin year 1 >40% 100bps - reduction 2.9
New store exemption ((1)) Change from 1 to 2 years (32.2)
Operating costs increase year 1 Change from 3% to 6% 3.2
(1) Stores which have been open for less than one year are not
reviewed for impairment.
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.
An asset is impaired when the carrying amount exceeds its recoverable amount.
IAS 36 defines recoverable amount as the higher of an asset's or
cash-generating unit's fair value less costs of disposal and its value in use,
the Group has determined that each store is a separate CGU.
Impairments in the period have been recognised in the amount of £11.5m (FY22
H1: £80.1m) due to the ongoing challenges in the retail sector on the
forecast cash flows of the CGU. This is broken down as follows:
· £6.4m (FY22 H1: £79.9m) against freehold land and buildings
(£4.2m UK Sports Retail segment, £2.2m Premium Lifestyle segment)
· £3.5m (FY22 H1: £nil) against long-term leasehold (£3.5m
Premium Lifestyle segment); and
· £1.6m (FY22 H1: £0.2m) plant and equipment (£0.7m UK Sports
Retail segment, £0.9m Premium Lifestyle segment).
In line with IAS 36 Impairment of Assets, management have considered whether
any amounts should be recognised for the reversal of prior period impairment
losses with £nil (FY21: £nil) being recognised in the period.
Value In Use (VIU)
The value in use is calculated based on a five year cash flow projections.
These are 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 Year 1 Year 2 Year 3 Year 4 Year 5
Sales decline -5% -4% -3% -2% -2%
Existing gross margin > 40% -175bps -150bps -125bps -100bps -75bps
Operating costs increase per annum 3% 3% 3% 3% 3%
Discount rate (post tax) of 8.7%
Terminal growth rate of 2%
Properties purchased within a year, or stores which have been open for less
than one year, are not reviewed for impairment
A sensitivity analysis has been performed in respect of sales and margin as
these are considered to be the most sensitive of the key assumptions.
Forecast: Impact of: Impairment increase / (decrease) £m
Sales year 1 5% improvement to 0% (1.6)
Sales year 1 5% reduction to 10% 4.3
Existing Gross Margin year 1 > 40% 100bps - improvement (0.6)
Existing Gross Margin year 1 > 40% 100bps - reduction 1.4
Operating costs increase year 1 Change from 3% to 6% 1.6
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 in
to Level 3 of the fair value hierarchy as per IFRS 13. The property portfolio
consists of vacant, Frasers Group occupied and third party tenanted units, one
property can include all three types. The following valuation methodology has
been adopted for each:
Scenario Valuation methodology Key assumptions
Vacant units Estimated Rental Value (ERV) and suitable reversionary yield applied to Void period and rent free band - two bands applied depending on circumstances:
reflect the market to generate a net capital value. A deduction to the capital
value generated is then made based on the void period with applicable rates • 1 year void, 2 years rent free;
payable for the unit and rent-free incentive. or
• 2 years void, 3 years rent free.
Yield bands - ranging from 5.5% - 14.0%
Frasers Group occupied Will be assumed the unit is vacant given there is no legally binding Void period and rent free band - two bands applied depending on circumstances:
inter-company agreement in place. Therefore, a void and rent free incentive
period assumed, the cost amount then deducted from the capital value generated • 1 year void, 2 years rent free;
by the ERV and reversionary yield. Although we consider the commercial reality 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 • 2 years void, 3 years rent free.
rules and that of our management experts.
Yield bands - ranging from 5.5% - 14.0%
Third party tenanted ERV is applied reflecting the market for the applicable unit. An appropriate Yields bands - ranging from 6.0% to 11.0%
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
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 £1.3m (FY22 H1:
£4.3m).
The total recoverable amount of the assets that were impaired at the period
end was £29.5m (FY22 H1: £60.3m), with £21.6m (FY22 H1: £40.3m) of this
being based on their fair value less costs of disposal and £7.9m (FY22 H1:
£20.0m) 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 23 October
2022, trade receivables with a gross value of £355.3m (FY22 H1: £nil) were
recorded on the balance sheet, less a provision for impairment of £115.0m
(FY22 H1: £nil). Further details are provided in Note 10.
Expected credit loss
An appropriate allowance for expected credit loss in respect of trade
receivables is derived from estimates and underlying assumptions such as the
Probability of Default and the Loss Given Default, taking into consideration
forward looking macro-economic assumptions. The assessment involves
significant estimation uncertainty. Changes in the assumptions applied such as
the value and frequency of future debt sales in calculating the Loss Given
Default, and the estimation of customer repayments and Probability of Default
rates, as well as the weighting of the macro-economic scenarios applied to the
impairment model could have a significant impact on the carrying value of
trade receivables. These assumptions are continually assessed for relevance
and adjusted appropriately. Revisions to estimates are recognised
prospectively.
Post model adjustment
The impairment model was not designed to take into account changes to customer
payment and default performance arising as a result of the current cost of
living crisis where levels of price inflation greatly exceed income growth, as
the existing model uses unemployment rates as the principal determinant in
considering forward looking macro-economic assumptions.
It is our expectation that SRL's customer base has seen and will continue to
see a significant reduction in real earnings as a result of the current cost
of living crisis and, whilst the adverse impact payment and arrears
performance has been less severe than anticipated to date, it will continue to
be felt in the future. Judgement has therefore been exercised in applying a
post model adjustment of £20.0m (24 April 2022: £40.0m) to the output of the
impairment model in arriving at the provision. This reflects management's best
estimate based on the information available to them and has been calculated
using broadly the same methodology as that used at 24 April 2022, although the
probability weightings applied to the relevant scenarios have been modified to
reflect management's latest view of the risks to customer payment and default
performance posed by the current macro-economic outlook. We note that the
unprecedented level of uncertainty around the cost of living and the UK
economy as a whole, and the impact this will have on Studio's customer base,
will continue to cause challenges in assessing bad debt on a forward-looking
basis.
3. SEGMENTAL ANALYSIS
Management has determined to present its segmental disclosures consistently
with the presentation in the 2022 Annual Report with the exception of merging
the European Retail and Rest of World Retail segments in to a new
International Retail segment. The prior period numbers have been
re-categorised for this change. Management considers operationally that the UK
Retail divisions (UK Sports Retail and Premium Lifestyle) are run as one
business unit in terms of allocating resources, inventory management and
assessing performance. Under IFRS 8 we have not at this reporting date met the
required criteria with enough certainty to aggregate these operating segments.
We will continually keep this under review at subsequent reporting dates. We
continue to monitor the impacts of Covid-19, Brexit, and the continued
uncertainties this has brought relating to the political and economic
environments, and market and currency volatility in the countries we operate
in. European and other international countries have been identified as
operating segments and have been aggregated into a single operating segment as
permitted under IFRS 8. The decision to aggregate these segments was based on
the fact that they each have similar market characteristics, similar long-term
financial performance expectations, and are similar in each of the following
respects:
• The nature of the products;
• The type or class of customer for the products; and
• The methods used to distribute the products.
In accordance with paragraph 12 of IFRS 8 the Group's operating segments have
been aggregated into the following reportable segments:
1) UK Retail:
i) UK Sports Retail - includes core sports retail store operations
in the UK, plus all the Group's sports retail online business (excluding Bob's
Stores & Eastern Mountain Sports which were disposed of during the period,
Malaysia and Baltics), the gyms, the Group's Shirebrook campus operations,
freehold property owning companies excluding Premium Lifestyle fascia
properties, GAME UK stores and online operations, Studio Retail Limited, and
retail store operations in Northern Ireland.
ii) Premium Lifestyle - includes the results of the premium and luxury
retail businesses FLANNELS, Cruise, van mildert, Jack Wills, House of Fraser
and Sofa.com along with the related websites, the Missguided and I Saw it
First websites, and freehold property owning companies where trading is purely
from Premium Lifestyle fascias.
2) International Retail - includes all of the Group's sports retail
stores, management and operating in Europe and Asia, including the Group's
European Distribution Centres in Belgium and Austria, European freehold
property owning companies, GAME Spain stores, and Baltics & Asia
e-commerce offerings. The Mysale acquisition will be reported in this segment.
International Retail also includes the results of the US based retail
activities until the disposal in May 2022.
3) Wholesale & Licensing - includes the results of the Group's
portfolio of internationally recognised brands such as Everlast, Karrimor, and
Slazenger.
It is management's current intention to run the Group as three operating
segments being UK Retail (including UK Sports Retail and Premium Lifestyle),
International Retail, and Wholesale & Licensing. Management is satisfied
that the UK Sports Retail and Premium Lifestyle segments will meet the
criteria permitted under IFRS 8 to aggregate as one segment in due course.
Segmental information for the 26 weeks ended 23 October 2022 (unaudited):
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Wholesale & Licensing Eliminations Group
Retail Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Sales to external customers 1,526.1 533.5 2,059.6 492.2 2,551.8 86.2 - 2,638.0
Sales to other segments - - - - - 40.9 (40.9) -
Revenue 1,526.1 533.5 2,059.6 492.2 2,551.8 127.1 (40.9) 2,638.0
Gross profit 642.3 223.2 865.5 204.9 1,070.4 37.3 - 1,107.7
Operating profit before foreign exchange, exceptional items, property and 111.6 41.9 153.5 37.3 190.8 7.4 - 198.2
other related impairments, profit on sale of properties, and gain on sale of
discontinued operation
Realised foreign exchange gain / (loss) 47.7 (0.1) 47.6 (5.5) 42.1 1.7 - 43.8
Property and other related impairments (14.4) (29.7) (44.1) (6.1) (50.2) - - (50.2)
Profit on sale of properties 84.5 - 84.5 6.7 91.2 - - 91.2
Gain on sale of discontinued operation - - - 26.3 26.3 - - 26.3
Operating profit 229.4 12.1 241.5 58.7 300.2 9.1 - 309.3
Investment income 27.2 - 27.2 - 27.2 - - 27.2
Investment costs (40.4) - (40.4) - (40.4) - - (40.4)
Finance income 24.2 - 24.2 0.5 24.7 - - 24.7
Finance costs (33.1) (0.9) (34.0) (2.2) (36.2) - - (36.2)
Profit before taxation 207.3 11.2 218.5 57.0 275.5 9.1 - 284.6
Taxation (65.0)
Profit for the period 219.6
Total assets 4,880.9 1,319.0 6,199.9 671.1 6,871.0 382.3 (2,858.6) 4,394.7
Total liabilities (3,647.2) (1,400.9) (5,048.1) (748.1) (5,796.2) (74.8) 2,858.6 (3,012.4)
Property, Plant & Equipment asset additions 85.6 20.0 105.6 12.9 118.5 0.3 - 118.8
Right-of-use asset additions 23.8 2.3 26.1 17.1 43.2 - - 43.2
During the period a number of freehold and long leasehold retail parks &
properties were sold. Total proceeds received were £222.4m (£199.5m UK
Sports Retail, £23.0m International Retail) resulting in a profit on disposal
of £91.2m (£84.5m UK Sports Retail, £6.7m International Retail) being
recognised in the Income Statement.
Sales to other segments are priced at cost plus a 10% mark-up.
Segmental information for the 26 weeks ended 24 October 2021 (unaudited)
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Wholesale & Licensing Eliminations Group
Retail Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Sales to external customers 1,367.1 427.9 1,795.0 465.4 2,260.4 79.4 - 2,339.8
Sales to other segments - - - - - 45.0 (45.0) -
Revenue 1,367.1 427.9 1,795.0 465.4 2,260.4 124.4 (45.0) 2,339.8
Gross profit 599.0 204.3 803.3 209.6 1,012.9 33.0 - 1,045.9
Operating profit before foreign exchange, exceptional items and property and 174.5 70.2 244.7 81.7 326.4 4.1 - 330.5
other related impairments
Realised foreign exchange gain / (loss) 0.7 (0.5) 0.2 1.1 1.3 3.2 - 4.5
Property and other related impairments (51.0) (79.3) (130.3) (5.0) (135.3) - - (135.3)
Operating profit / (loss) 124.2 (9.6) 114.6 77.8 192.4 7.3 - 199.7
Investment income 28.8 - 28.8 - 28.8 - - 28.8
Investment costs (38.8) - (38.8) - (38.8) - - (38.8)
Finance income 12.6 - 12.6 - 12.6 - - 12.6
Finance costs (14.0) (0.6) (14.6) (1.5) (16.1) (0.2) - (16.3)
Profit / (loss) before taxation 112.8 (10.2) 102.6 76.3 178.9 7.1 - 186.0
Taxation (42.3)
Profit for the period 143.7
Total assets 3,470.90 565.6 4,036.5 550.1 4,586.6 341.7 (1,189.0) 3,739.3
Total liabilities (2,138.6) (692.5) (2,831.1) (609.5) (3,440.6) (120.5) 1,189.0 (2,372.1)
Property, Plant & Equipment asset additions 65.0 40.7 105.7 6.4 112.1 0.6 - 112.7
Right-of-use asset additions 5.0 15.3 20.3 15.5 35.8 - - 35.8
Sales to other segments are priced at cost plus a 10% mark-up.
Segmental information for the 52 weeks ended 24 April 2022 (audited):
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Wholesale & Licensing Eliminations Group
Retail Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Sales to external customers 2,640.1 1,056.6 3,696.7 940.5 4,637.2 168.1 - 4,805.3
Sales to other segments - - - - - 80.1 (80.1) -
Revenue 2,640.1 1,056.6 3,696.7 940.5 4,637.2 248.2 (80.1) 4,805.3
Gross profit 1,136.8 474.8 1,611.6 414.0 2,025.6 63.1 - 2,088.7
Operating profit before foreign exchange, exceptional items and property and 289.4 124.0 413.4 144.2 557.6 6.9 - 564.5
other related impairments
Exceptional (1.3) - (1.3) - (1.3) - - (1.3)
Realised foreign exchange gain / (loss) (1.1) (0.1) (1.2) (3.7) (4.9) (0.9) - (5.8)
Property and other related impairments (103.4) (103.5) (206.9) (20.1) (227.0) - - (227.0)
Operating profit 183.6 20.4 204.0 120.4 324.4 6.0 - 330.4
Investment income 43.8 - 43.8 - 43.8 - - 43.8
Investment costs (19.7) - (19.7) - (19.7) - - (19.7)
Finance income ((1)) 36.8 - 36.8 2.0 38.8 - (8.5) 30.3
Finance costs ((1)) (42.8) (10.0) (52.8) (4.9) (57.7) - 8.5 (49.2)
Profit before taxation 201.7 10.4 212.1 117.5 329.6 6.0 - 335.6
Taxation (78.7)
Profit for the period 256.9
Total assets 4,161.9 1,002.1 5,164.0 569.9 5,733.9 349.7 (1,940.9) 4,142.7
Total liabilities (2,908.9) (1,098.9) (4,007.8) (673.8) (4,681.6) (93.4) 1,940.9 (2,834.1)
Property, Plant & Equipment asset additions 228.1 63.6 291.7 30.7 322.4 0.8 - 323.2
Right-of-use asset additions 27.8 25.0 52.8 47.7 100.5 0.4 - 100.9
Intangible assets acquired 7.0 - 7.0 - 7.0 - - 7.0
(1) Includes inter-company related finance income in UK Sports
Retail and the equivalent finance cost in Premium Lifestyle that eliminates on
consolidation.
Sales to other segments are priced at cost plus a 10% mark-up.
Other segment items included in the income statement for the 26 weeks ended 23
October 2022:
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m)
Property, plant & equipment depreciation 52.3 15.1 67.4 7.8 75.2 0.7 75.9
Property, plant & equipment impairment 8.0 15.5 23.5 3.1 26.6 - 26.6
IFRS 16 ROU depreciation 20.0 2.4 22.4 14.6 37.0 - 37.0
IFRS 16 ROU impairment 6.4 14.2 20.6 3.0 23.6 - 23.6
Investment property depreciation 2.6 - 2.6 - 2.6 - 2.6
IFRS 16 disposal and modification/remeasurement of lease liabilities (1.5) (0.7) (2.2) (1.2) (3.4) - (3.4)
Intangible amortisation - - - - - 3.3 3.3
Intangible impairment 4.7 20.5 25.2 2.3 27.5 - 27.5
Other segment items included in the income statement for the 26 weeks ended 24
October 2021:
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m)
Property, plant & equipment depreciation 62.2 11.7 73.9 3.4 77.3 0.6 77.9
Property, plant & equipment impairment 26.2 76.5 102.7 3.1 105.8 105.8
IFRS 16 ROU depreciation 24.9 3.0 27.9 10.7 38.6 - 38.6
IFRS 16 ROU impairment 25.0 2.7 27.7 1.8 29.5 - 29.5
Investment property depreciation 1.3 - 1.3 - 1.3 - 1.3
IFRS 16 disposal and modification/remeasurement of lease liabilities (4.8) (0.9) (5.7) (0.2) (5.9) - (5.9)
Intangible amortisation - - - - - 3.4 3.4
Intangible impairment - - - - - 4.4 4.4
Other segment items included in the income statement for the 52 weeks ended 24
April 2022:
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m)
Property, plant & equipment depreciation 122.2 22.9 145.1 22.6 167.7 1.3 169.0
Property, plant & equipment impairment 51.7 94.0 145.7 3.5 149.2 - 149.2
IFRS 16 ROU depreciation 47.8 6.4 54.2 23.0 77.2 0.4 77.6
IFRS 16 ROU impairment 50.7 9.5 60.2 16.6 76.8 - 76.8
Investment property depreciation 5.9 - 5.9 - 5.9 - 5.9
Investment property impairment 1.0 - 1.0 - 1.0 - 1.0
IFRS 16 disposal and modification/remeasurement of lease liabilities (14.2) (3.9) (18.1) (10.2) (28.3) - (28.3)
Intangible amortisation 1.0 - 1.0 - 1.0 6.5 7.5
Intangible impairment 1.3 - 1.3 - 1.3 4.4 5.7
The following table reconciles the reported profit before tax to the Adjusted
PBT as it is one of the main measures used by the Chief Operating Decision
Maker when reviewing performance:
Reconciliation of Reported PBT to Adjusted PBT for the 26 week period ended 23
October 2022 (unaudited):
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m)
Reported PBT 207.3 11.2 218.5 57.0 275.5 9.1 284.6
Fair value adjustment to derivatives included within Finance (income) / costs (12.4) - (12.4) - (12.4) - (12.4)
Fair value (gains)/losses and profit on disposal of equity derivatives 32.0 - 32.0 - 32.0 - 32.0
Realised FX (gain) / loss (47.7) 0.1 (47.6) 5.5 (42.1) (1.7) (43.8)
Share scheme 4.9 - 4.9 - 4.9 1.8 6.7
Adjusted PBT 184.1 11.3 195.4 62.5 257.9 9.2 267.1
Reconciliation of Reported PBT to Adjusted PBT for the 26 week period ended 24
October 2021 (unaudited):
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m)
Reported PBT 112.8 (10.2) 102.6 76.3 178.9 7.1 186.0
Fair value adjustment to derivatives included within Finance (income) / costs (10.7) - (10.7) - (10.7) - (10.7)
Fair value (gains)/losses and profit on disposal of equity derivatives 15.6 - 15.6 - 15.6 - 15.6
Realised FX (gain) / loss (0.7) 0.5 (0.2) (1.1) (1.3) (3.2) (4.5)
Share scheme 6.0 - 6.0 - 6.0 - 6.0
Adjusted PBT 123.0 (9.7) 113.3 75.2 188.5 3.9 192.4
Reconciliation of Reported PBT to Adjusted PBT for the 52 week period ended 24
April 2022 (audited):
UK Sports Retail Premium Lifestyle UK Retail Total International Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m)
Reported PBT 201.6 10.4 212.0 117.6 329.6 6.0 335.6
Exceptional items 1.3 - 1.3 - 1.3 - 1.3
Fair value adjustment to derivatives included within Finance (income) / costs (7.6) - (7.6) - (7.6) - (7.6)
Fair value (gains)/losses and profit on disposal of equity derivatives (9.9) - (9.9) - (9.9) - (9.9)
Realised FX loss / (gain) 1.1 0.1 1.2 3.7 4.9 0.9 5.8
Share scheme 10.4 - 10.4 - 10.4 4.2 14.6
Adjusted PBT 196.9 10.5 207.4 121.3 328.7 11.1 339.8
4. EXCEPTIONAL ITEMS
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022
24 October 2021
24 April 2022
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Impairments - - 1.3
- - 1.3
The prior period impairment relates to goodwill, whereby the discounted
present value of future cash flows do not support the full value of the
assets. Given the recurring nature of goodwill impairments being recognised by
the Group, the current period goodwill impairments of £11.6m have been
included in administrative expenses.
5. INVESTMENT INCOME
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022
24 October 2021
24 April 2022
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Profit on disposal of equity derivatives - 23.2 23.2
Premium received on equity derivatives 17.4 5.4 13.2
Fair value gain on equity derivatives 8.4 - 6.4
Dividend income 1.4 0.2 1.0
27.2 28.8 43.8
The prior period profit on disposal of equity derivative financial instruments
largely relates to Hugo Boss contracts for difference. The premium received on
derivative financial instruments largely relates to Hugo Boss options. The
fair value gain on derivative financial instruments largely relates to
options.
6. INVESTMENT COSTS
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022
24 October 2021
24 April 2022
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Fair value loss on equity derivatives 38.4 38.8 19.7
Loss on disposal of equity derivatives 2.0 - -
40.4 38.8 19.7
The fair value loss on derivative financial instruments largely relates to
Hugo Boss options.
7. FINANCE INCOME
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022
24 October 2021
24 April 2022
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Bank interest receivable 3.3 0.1 4.5
Interest on retirement benefit obligations - - 0.1
Other finance income 0.4 - 1.7
Fair value adjustment to derivatives 21.0 12.5 24.0
24.7 12.6 30.3
The fair value adjustment to derivatives largely relates to movement in the
fair value of interest rate swaps.
8. FINANCE COSTS
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022
24 October 2021
24 April 2022
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Interest on bank loans and overdrafts 16.8 4.8 13.6
Other interest 3.7 4.0 7.0
IFRS 16 lease interest 7.1 5.7 12.2
Fair value adjustment to derivatives 8.6 1.8 16.4
36.2 16.3 49.2
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.
9. EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders of the parent by the weighted average number of
ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of shares,
460,090,844 (24 October 2021: 489,203,650, 24 April 2022: 471,975,282), is
adjusted to assume conversion of all dilutive potential ordinary shares under
the Group's share schemes, being nil (24 October 2021: 10,125, 24 April 2022:
nil), to give the diluted weighted average number of shares of 460,090,844 (24
October 2021: 489,213,775, 24 April 2022: 471,975,282).
BASIC AND DILUTED EARNINGS PER SHARE
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended
23 October 2022
23 October 2022
23 October 2022
24 October 2021
24 October 2021
24 October 2021
24 April 2022
24 April 2022
24 April 2022
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited)
Basic and diluted, continuing operations Basic and diluted, discontinued operations Basic and diluted, total Basic and diluted, continuing operations Basic and diluted, discontinued operations Basic and diluted, total Basic and diluted, continuing operations Basic and diluted, discontinued operations Basic and diluted, total
£m £m £m £m £m £m £m £m £m
Profit for the period 186.1 26.3 212.4 122.7 15.5 138.2 224.1 25.7 249.8
Number in millions Number in millions Number in millions
Weighted average number of shares 460.1 460.1 460.1 489.2 489.2 489.2 472.0 472.0 472.0
Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share Pence per share
Earnings per share 40.4 5.7 46.1 25.0 3.2 28.2 47.5 5.4 52.9
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 profitfor 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 52 weeks ended 52 weeks ended
23 October 2022
23 October 2022
24 October 2021
24 October 2021
24 April 2022
24 April 2022
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
(audited)
Basic Diluted Basic Diluted Basic
Diluted
£m £m £m £m £m £m
Profit for the period 212.4 212.4 138.2 138.2 249.8 249.8
Pre-tax adjustments to profit / (loss) for the period for the following items:
Exceptional items - - - - 1.3 1.3
Fair value adjustment to derivatives included within Finance (income) / costs (12.4) (12.4) (10.7) (10.7) (7.6) (7.6)
Fair value (gains) / losses and (profit) / loss on disposal of equity 32.0 32.0 15.6 15.6 (9.9) (9.9)
derivatives
Realised foreign exchange (gain) / loss (43.8) (43.8) (4.5) (4.5) 5.8 5.8
Share scheme 6.7 6.7 6.0 6.0 14.6 14.6
Tax adjustments on the above items 11.0 11.0 3.8 3.8 0.3 0.3
Adjusted profit for the period 205.9 205.9 148.4 148.4 254.3 254.3
Number in millions Number in millions Number in millions
Weighted average number of shares 460.1 460.1 489.2 489.2 472.0 472.0
Pence per share Pence per share Pence per share
Adjusted earnings per share 44.8 44.8 30.3 30.3 53.9 53.9
10. TRADE AND OTHER RECEIVABLES
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022
24 October 2021
24 April 2022
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Gross credit customer receivables 355.3 - 372.7
Allowance for expected credit loss on credit customer receivables (115.0) - (138.5)
Net credit customer receivables 240.3 - 234.2
Trade receivables 70.4 53.6 56.4
Deposits in respect of derivative financial instruments 389.7 117.3 243.9
Amounts owed by related parties 26.8 27.3 24.2
Other receivables 126.4 215.9 170.2
Prepayments 88.4 76.6 112.5
942.0 490.7 841.4
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.
Included within other receivables is the reimbursement asset totalling £nil
(24 October 2021: £118.3m, 24 April 2022: £88.3m). Other receivables also
includes rent deposits and deposits on fixed asset additions.
Credit Customer Receivables
Certain of the Group's trade receivables are funded through a securitisation
facility that is secured against those receivables. The finance provider will
seek repayment of the finance, as to both principal and interest, only to the
extent that collections from the trade receivables financed allows and the
benefit of additional collections remains with the Group. At the period end,
receivables of £269.1m (24 April 2022: £287.2m) were eligible to be funded
via the securitisation facility, and the facilities utilised were £134.5m (24
April 2022: £143.6m).
Other information
The average credit period taken on sales of goods is 254 days (24 April 2022:
219 days). On average, interest is charged at 3.5% 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. Studio 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 24,159 accounts with total gross balances
of £15.6m (24 April 2022: 24,711 with total gross balances of £16.2m) on
repayment plans. Provisions are assessed as detailed above.
During the current period, overdue receivables with a gross value of £27.2m
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 23 October 2022:
(Unaudited) 23 October 2022 (Audited) 24 April 2022 24 February 2022 (acquisition date)
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 257.2 14.2 271.4 272.1 14.3 286.4 298.4 13.6 312.0
Past due
0 - 60 days 22.9 1.4 24.3 36.7 1.8 38.5 36.8 1.5 38.3
60 - 120 days 8.9 - 8.9 20.0 0.1 20.1 14.9 - 14.9
120+ days 50.7 - 50.7 27.7 - 27.7 17.8 - 17.8
Gross trade receivables 339.7 15.6 355.3 356.5 16.2 372.7 367.9 15.1 383.0
Allowance for expected credit loss (104.2) (10.8) (115.0) (127.3) (11.2) (138.5) (118.5) (10.5) (129.0)
Carrying value 235.5 4.8 240.3 229.2 5.0 234.2 249.4 4.6 254.0
24 April 2022 to 23 October 2022
Stage 1 Stage 2 Stage 3 Total
(£m) (£m) (£m) (unaudited)
(£m)
Gross trade receivables 238.5 45.0 71.8 355.3
Allowance for doubtful debts:
24 April 2022 (60.4) (25.7) (52.4) (138.5)
Impairment credit/(charge) 21.3 1.1 (22.4) -
Utilisation in period 1.1 7.6 14.8 23.5
Closing balance (38.0) (17.0) (60.0) (115.0)
Carrying value 200.5 28.0 11.8 240.3
24 April 2022 to 23 October 2022
(unaudited)
(£m)
Impairment charge impacting on provision -
Recoveries 5.0
Other (1.2)
Impairment credit (3.8)
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 £2.6m (FY22: £2.2m).
A 1% increase/decrease in the assumed recoveries rate would result in the
impairment provision decreasing/increasing by approximately £1.0m (FY22:
£1.1m).
These sensitivities reflect management's assessment of reasonably possible
changes to key assumptions which could result in a material adjustment to the
level of provision within the next financial year.
11. PROVISIONS
26 weeks ended 23 October 2022 (unaudited)
Legal and regulatory Property related Financial services related Total
(£m) (£m) (£m) (£m)
At 24 April 2022 230.2 161.2 41.6 433.0
Acquired through business combinations - 2.3 - 2.3
Amounts provided 0.5 30.8 - 31.3
Amounts utilised / reversed - (30.1) (10.4) (40.5)
At 23 October 2022 230.7 164.2 31.2 426.1
26 weeks ended 24 October 2021 (unaudited)
Legal and regulatory Property related Other Total
(£m) (£m) (£m) (£m)
At 25 April 2021 215.8 144.1 1.3 361.2
Amounts provided 3.8 18.7 - 22.5
Amounts utilised / reversed (1.4) (29.9) (0.5) (31.8)
At 24 October 2021 218.2 132.9 0.8 351.9
52 weeks ended 24 April 2022 (audited)
Legal and regulatory Property related Financial services related Other Total
(£m) (£m) (£m) (£m) (£m)
At 25 April 2021 215.8 144.1 - 1.3 361.2
Acquired through business combinations 7.1 2.7 42.4 - 52.2
Amounts provided 17.7 53.7 - - 71.4
Amounts utilised / reversed (10.4) (39.3) (0.8) (1.3) (51.8)
At 24 April 2022 230.2 161.2 41.6 - 433.0
Legal and regulatory provisions relate to management's best estimate of the
potential impact of claims including legal, commercial, regulatory and ongoing
non-UK tax enquiries. The timing of the outcome of non-UK tax inquiries and
legal claims made against the Group is dependent on factors outside the
Group's control and therefore the timing of settlement is uncertain. After
taking appropriate legal advice, the outcomes of these claims are not expected
to give rise to material loss in excess of the amounts provided. Included
within Legal and regulatory provisions, are amounts relating to the Group's
ongoing discussions with HMRC with regard to agreeing a new Partial Exemption
Special Method (the means by which the recovery of input VAT on costs relating
to the company's financial services activities is restricted). As at 23
October 2022, the company held a provision of £6.8m (24 April 2022: £6.9m)
which represents management's best estimate of the likely increase in the
level of restriction on the recovery of input VAT over and above that which
has already been restricted in the company's quarterly VAT returns. We note
that management's best estimate is one of a number of different outcomes so
the amounts provided may differ to the final costs incurred by the company in
respect of this matter.
A reimbursement asset of £nil (24 April 2022: £88.3 and 24 October 2021:
£118.3m) has been recognised separately within debtors relating to ongoing
non-UK tax enquiries.
Included within property related provisions are provisions for dilapidations
in respect of the Group's retail stores and warehouses. Further details of
managements estimates are included in note 2.
Included above is a provision of £31.2m (24 April 2022: £41.6m) for probable
outflows in respect of the financial services business.
As a regulated business, one of the group's subsidiaries Studio Retail Limited
has an obligation to proactively review its business to ensure that
appropriate outcomes were delivered to customers. Based on work undertaken as
at the balance sheet date it is considered likely that some level of
remediation will be required to fully satisfy this obligation.
The provision recognises the inherent uncertainties in any such remediation
including a number of customers who might have been impacted, the proportion
of those who were adversely affected by the legacy decisions, the possible
remediation payable, and overlays these uncertainties with a risk-based
consideration of the proportion of the population identified above that
suffered adverse outcomes, and the period over which such adverse outcomes may
have been suffered. Assumptions have been overlaid in respect of the timing
and mechanism for undertaking any remediation.
At this stage a detailed analysis of the relevant customer cohorts has not yet
been completed and as such there are a range of outcomes which could result in
a settlement which is significantly lower or higher than the amount estimated.
This variation could be significant and therefore highly material for a user
of these accounts. This range of outcomes is expected to narrow as the work to
substantiate each of the uncertainties set out above is completed. It is
anticipated this work will be completed within the 12 month fair value
measurement period in line with IFRS3.
The timing of any potential outflows is also uncertain, but we have assumed
that these take place within two years.
The recognition of a provision by the Group is not an admission of liability
for the payment of this amount, but rather to comply with the directors'
obligations to prepare financial statements that give a true and fair view of
the performance and financial position of the Group in accordance with IFRS.
12. 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:
(Unaudited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS - 23 October 2022
Amortised cost:
Trade and other receivables* - - - 826.8 826.8
Cash and cash equivalents - - - 314.8 314.8
Amounts owed by related parties - - - 26.8 26.8
FVOCI:
Long Term Financial Assets (Equity Instruments) - designated 241.4 - - - 241.4
Derivative financial assets (FV):
Foreign forward purchase and sales contracts, and interest rate swaps - 130.3 - - 130.3
Derivative financial assets - contracts for difference & equity options - 1.3 - - 1.3
- 131.6 - - 131.6
FINANCIAL LIABILITIES - 23 October 2022
Amortised cost:
Non-current borrowings - - - (813.9) (813.9)
Trade and other payables** - - - (801.8) (801.8)
IFRS 16 lease liabilities - - - (659.9) (659.9)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (40.4) - - (40.4)
Derivative financial liabilities - contracts for difference & equity - (140.4) - - (140.4)
options
- (180.8) - - (180.8)
*Prepayments of £88.4m are not included as a financial asset.
**Other taxes including social security costs of £37.1m are not included as a
financial liability.
(Unaudited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS - 24 October 2021
Amortised cost:
Trade and other receivables* - - - 386.8 386.8
Cash and cash equivalents - - - 350.7 350.7
Amounts owed by related parties - - - 27.3 27.3
FVOCI:
Long Term Financial Assets (Equity Instruments) - designated 352.4 - - - 352.4
Derivative financial assets (FV):
Foreign forward purchase and sales contracts, and interest rate swaps - 61.4 - - 61.4
- 61.4 - - 61.4
FINANCIAL LIABILITIES - 24 October 2021
Amortised cost:
Non-current borrowings - - - (375.0) (375.0)
Trade and other payables** - - - (719.7) (719.7)
IFRS 16 lease liabilities - - - (684.7) (684.7)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (7.6) - - (7.6)
Derivative financial liabilities - contracts for difference & equity - (20.8) - - (20.8)
options
- (28.4) - - (28.4)
*Prepayments of £76.6m are not included as a financial asset.
**Other taxes including social security costs of £69.7m are not included as a
financial liability.
(Audited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS - 24 April 2022
Amortised cost:
Trade and other receivables* - - - 704.7 704.7
Cash and cash equivalents - - - 336.8 336.8
Amounts owed by related parties - - - 24.2 24.2
FVOCI:
Long Term Financial Assets (Equity Instruments) - designated 206.6 - - - 206.6
Derivative financial assets (FV):
Foreign forward purchase and sales contracts, and interest rate swaps - 116.5 - - 116.5
- 116.5 - - 116.5
FINANCIAL LIABILITIES - 24 April 2022
Amortised cost:
Non-current borrowings - - - (827.9) (827.9)
Trade and other payables** - - - (721.7) (721.7)
IFRS 16 lease liabilities - - - (620.6) (620.6)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (31.3) - - (31.3)
Derivative financial liabilities - contracts for difference & equity - (75.9) - - (75.9)
options
- (107.2) - - (107.2)
*Prepayments of £112.5m are not included as a financial asset.
**Other taxes including social security costs of £8.1m 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 and commodities 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.
The fair value of equity derivative agreements are included within the
derivative financial assets balance of £1.3m (24 October 2021: £nil, 24
April 2022: £nil) and derivative financial liabilities balance of £140.4m
(24 October 2021: £20.8m, 24 April 2022: £75.9m). The derivative financial
assets and derivative financial liabilities as at 23 October 2022 relate to
strategic investments held of between 0.9% and 24.7% of investee share
capital.
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 23 October 2022 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 £62.6m (24 October
2021: £62.4m, 24 April 2022: £62.6m).
(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.
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 23 October 2022 was:
23 October 2022 24 October 2021 24 April 2022
(unaudited)
(unaudited)
(audited)
(£m)
(£m) (£m)
Assets
US Dollar purchases - GBP 41.3 9.6 32.9
US Dollar purchases - EUR 17.0 7.6 12.8
Euro sales 34.4 41.1 54.2
Total 92.7 58.3 99.9
Liabilities
US Dollar purchases - GBP - 2.0 -
Total - 2.0 -
The details of hedged forward foreign currency purchase contracts and
contracted forward rates were as follows:
23 October 2022 (unaudited) 24 October 2021 (unaudited) 24 April 2022 (audited)
Currency (millions) GBP (millions) Rates Currency (millions) GBP (millions) Rates Currency (millions) GBP (millions) Rates
US Dollar purchases (USD / GBP) 240.0 170.2 1.41 720.0 516.8 1.36 - 1.41 480.0 340.4 1.41
US Dollar purchases (USD / EUR) 90.0 60.8 1.26 - 1.31 150.0 104.0 1.21 - 1.31 120.0 78.6 1.26 - 1.31
Euro sales (EUR / GBP) (696.0) (672.0) 0.98 - 1.08 (360.0) (353.1) 0.99 - 1.08 (600.0) (574.5) 0.99 - 1.08
The timing of the contracts is as follows:
Currency Hedging against Currency value Timing Rates
USD / GBP USD inventory purchases USD 240m FY23 1.41
USD / EUR USD inventory purchases USD 90m FY23-FY24 1.26-1.31
EUR / GBP Euro sales EUR 696m FY23-FY26 0.98-1.08
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.
Fair value movement on hedged contracts - recognised in the period:
23 October 2022 24 October 2021 24 April 2022
(unaudited) (unaudited) (audited)
(£m)
(£m) (£m)
Change in the fair value of the currency forward Change in the fair value of the hedged item Change in the fair value of the currency forward Change in the fair value of the hedged item Change in the fair value of the currency forward Change in the fair value of the hedged item
US Dollar purchases - GBP 25.1 (25.1) 9.0 (9.0) 30.6 (30.6)
US Dollar purchases - EUR 7.6 (7.6) 5.4 (5.4) 9.6 (9.6)
Euro sales (8.1) 8.1 7.2 (7.2) 11.9 11.9
Total recognised 24.6 (24.6) 21.6 (21.6) 52.1 (52.1)
At 23 October 2022 £231.0m of purchase contracts (24 October 2021: £620.8m,
24 April 2022: £419.0m) and £672.0m of forward sales contracts (24 October
2021: £353.1m, 24 April 2022: £574.5m) qualified for hedge accounting and
the gain on fair valuation of these contracts of £24.6m (24 October 2021:
£21.6m, 24 April 2022: £52.1m) has therefore been recognised in other
comprehensive income.
At 23 October 2022, £20.0m hedged purchase contracts had a maturity of
greater than 12 months (24 October 2021: £231.5m, 24 April 2022: £38.6m) and
£550.8m of hedged sales had a maturity of greater than 12 months (24 October
2021: £231.9m, 24 April 2022: £332.1m).
The movements through the Hedging reserve are:
USD/GBP EUR/GBP USD/EUR Total Hedge Movement Deferred Tax Total Hedging Reserve
As at 25 April 2021 (audited) (4.9) 17.0 2.2 14.3 (2.8) 11.5
Recognised 9.0 7.2 5.4 21.6 - 21.6
Reclassified in inventory/ cost of sales 3.6 - - 3.6 - 3.6
Deferred tax - - - - (7.2) (7.2)
As at 24 October 2021 (unaudited) 7.7 24.2 7.6 39.5 (10.0) 29.5
Recognised 21.6 4.7 4.2 30.5 - 30.5
Reclassified in inventory / cost of sales 3.7 - 0.2 3.9 - 3.9
Deferred tax - - - - (8.6) (8.6)
As at 24 April 2022 (audited) 33.0 28.9 12.0 73.9 (18.6) 55.3
Recognised 25.1 (8.1) 7.6 24.6 - 24.6
Reclassified in sales - (12.6) - (12.6) - (12.6)
Reclassified in inventory / cost of sales (16.8) - (2.8) (19.6) - (19.6)
Deferred tax - - - - 2.2 2.2
As at 23 October 2022 (unaudited) 41.3 8.2 16.8 66.3 (16.4) 49.9
(c)(ii) Unhedged currency instruments
The sterling principal amounts of unhedged written currency option contracts
and the contracted rates were as follows:
23 October 2022 24 October 2021 24 April 2022
(unaudited)
(unaudited)
(audited)
(£m)
(£m) (£m)
US Dollar swaps - GBP - 72.3 -
Contracted rates USD / GBP - 1.37-1.42 -
US Dollar purchases - EUR 60.8 82.2 78.6
Contracted rates USD / EUR 1.26-1.31 1.26-1.31 1.26-1.31
Euro sales (672.0) (494.5) (715.9)
Contracted rates EUR / GBP 0.98-1.08 0.99-1.08 0.99-1.08
The loss on fair value of the written options and swaps of £9.1m has been
included within finance costs (24 October 2021: £1.8m, 24 April 2022:
£28.9m).
At 23 October 2022, £40.0m of unhedged purchase contracts had a maturity at
inception of greater than 12 months (24 October 2021: £61.3m, 24 April 2022:
£78.6m) and £550.8m of unhedged sales contracts had a maturity at inception
of greater than 12 months (24 October 2021: £231.9m, 24 April 2022:
£715.9m).
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 FY23 H1 values above excludes short term swaps of GBP/EUR of Euro 70m
which are required for Treasury management purposes only (24 October 2021:
GBP/USD of USD 100.0m, 24 April 2022: USD/GBP of USD 40m and EUR/USD of EUR
40m 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 two contracts in place that
fix interest payments on variable rate debt. The first contract covers
notional amount of £250.0m and fixes the interest rate at 0.985% per annum
until 29 May 2026. The second contract covers a notional amount of £100.0m
and fixes the interest rate at 0.45% per annum until 2 September 2024. The
fair value of these interest rate swaps is an asset of £37.6m (24 April 2022:
£16.6m, 24 October 2021: £1.8m). The fair value gain of £21.0m has been
recognised in finance income 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 that, 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 dividend at
this time.
The Board is committed to keeping this policy under review and to evaluating
alternative methods of returning cash to shareholders when appropriate.
The objective of Group Share Schemes 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.
In respect of cash and borrowings, the Board regularly monitors the ratio of
net debt to LTM Reported EBITDA((1)), as part of covenant compliance (the
objective is to keep this figure below 3.0), the working capital requirements
and forecasted cash flows, however no minimum or maximum ratios are set
outside of covenant compliance.
(1) LTM EBITDA is the last twelve months historic Reported EBITDA excluding IFRS
16.
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.
These capital management policies have remained unchanged from the prior year.
13. ACQUISITIONS
i. On 16 May 2022 the Group acquired the entire share capital of leading
Danish sport retailer Sportmaster Danmark ApS ('Sportmaster') for cash
consideration of £0.9m which is deemed to be the fair value of the
consideration. The acquisition will help to grow the Group's retail presence
in Denmark. At the date of acquisition, included within Borrowings was £15.3m
owed by Sportmaster Danmark ApS to its parent company Sportmaster Operations
PTE. Ltd. As part of the transaction, a debt transfer took place which
transferred this loan to the Group which becomes the new lender and the fair
value adjustment against borrowings relates to this. The fair value adjustment
to intangible assets, property, plant & equipment assets, and inventory
relates to management's assessment of the price that would be paid for the
acquired assets in an orderly transaction between market participants at the
acquisition date. The asset and liability values at acquisition are detailed
below. Due to the recent timings of the acquisition and the availability of
information, the fair values attributable to the assets and liabilities
acquired are provisional. The acquisition accounting will be finalised as part
of the FY23 Annual Report.
Sportmaster Book Value Fair Value adjustment Provisional fair values
(£m)
(£m)
(unaudited)
(£m)
Property, plant and equipment 23.2 (5.0) 18.2
Intangible assets 2.4 (2.4) -
Inventories 19.8 3.1 22.9
Cash and cash equivalents 2.1 - 2.1
Trade and other receivables 9.2 - 9.2
Trade and other payables (22.9) - (22.9)
Borrowings (22.3) 15.3 (7.0)
Lease liability (21.6) - (21.6)
Provisions (2.3) - (2.3)
Goodwill - 2.3 2.3
Net (liabilities) / assets acquired (12.4) 13.3 0.9
ii. On 1 June 2022 the Group acquired certain intellectual property,
freehold property and inventory of the online women's fashion retailer
Missguided Limited (in administration), Mennace Limited (in administration)
and Missguided (IP) Limited for £30.8m which is deemed to be the fair value
of the consideration. The acquisition will add additional expertise to the
Group's digital women's fashion offering. The fair value adjustments to
intangible assets, property, plant & equipment, and inventory relates to
management's assessment of the price that would be paid for the acquired
assets in an orderly transaction between market participants at the
acquisition date. The asset and liability values at acquisition are detailed
below. The intangible assets acquired relate to the IP/Brand. Due to the
recent timings of the acquisition and the availability of information, the
fair values attributable to the assets and liabilities acquired are
provisional. The acquisition accounting will be finalised as part of the FY23
Annual Report.
Missguided Book Value Fair Value adjustment Provisional fair values
(£m)
(£m)
(unaudited)
(£m)
Property, plant and equipment 4.4 1.6 6.0
Intangible assets - 11.7 11.7
Inventories 17.0 (12.2) 4.8
Goodwill - 8.3 8.3
Net assets acquired 21.4 9.4 30.8
iii. On 28 July 2022 the Group acquired the entire share capital of online
fashion retailer I Saw It First Limited for cash consideration of £1. At the
date of acquisition, I Saw It First Limited owed £13.0m to its shareholders.
As part of the transaction, a debt transfer took place which transferred this
loan to the Group which becomes the new lender and the fair value adjustment
against borrowings relates to this. The asset and liability values at
acquisition are detailed below. Due to the recent timings of the acquisition
and the availability of information, the fair values attributable to the
assets and liabilities acquired are provisional. The acquisition accounting
will be finalised as part of the FY23 Annual Report.
I Saw It First Book Value Fair Value adjustment Provisional fair values
(£m)
(£m)
(unaudited)
(£m)
Property, plant and equipment 0.7 - 0.7
Inventories 5.0 - 5.0
Cash and cash equivalents 1.8 - 1.8
Trade and other receivables 1.2 - 1.2
Trade and other payables (9.2) - (9.2)
Borrowings (13.0) 13.0 -
Goodwill - 0.5 0.5
Net assets acquired (13.5) 13.5 -
iv. On 17 August 2022 the Group made a cash offer to acquire the entire
issued and to be issued ordinary share capital of Mysale Group plc ('Mysale')
not already held by Frasers Group at a price of 2 pence per MySale share. On
26 September 2022 the Group announced that the offer had become a mandatory
cash offer and on 18 October 2022 the mandatory offer became unconditional.
The deadline for acceptance of the offer was 1 November 2022 and at that date
the Group owned or had received valid acceptances in respect of 95.35% of
Mysale's issued share capital. The shareholding passed 50% on 13 October 2022
and at the period end, the Group held 66.48% of Mysale's issued share capital
and therefore it has been treated as a subsidiary and consolidated in the
results of Frasers Group Plc with the acquisition date provisionally being
treated as 13 October 2022. The acquisition will accelerate the Group's global
growth strategy, enhance its operational capabilities and its offering to
consumers and provide a platform from which to explore further opportunities
for investment in retail opportunities in Australia and the surrounding
regions. The fair value adjustment to intangible assets relates to
management's assessment of the price that would be paid for the acquired
assets in an orderly transaction between market participants at the
acquisition date. The asset and liability values at acquisition are detailed
below. Due to the recent timings of the acquisition and the availability of
information, the fair values attributable to the assets and liabilities
acquired are provisional. The acquisition accounting will be finalised as part
of the FY23 Annual Report.
Mysale Book Value Fair Value adjustment Provisional fair values
(£m)
(£m)
(unaudited)
(£m)
Property, plant and equipment 2.3 - 2.3
Intangible assets 12.9 (12.9) -
Inventories 2.3 - 2.3
Cash and cash equivalents 1.7 - 1.7
Trade and other receivables 1.7 - 1.7
Trade and other payables (10.1) - (10.1)
Lease liability (2.2) - (2.2)
Non-controlling interests - (7.0) (7.0)
Goodwill - 25.1 25.1
Net assets acquired 8.6 5.2 13.8
v. On 23 September 2022 the Group acquired the trade and assets of
Sneakerboy PTY Limited for £1.0m. The asset and liability values at
acquisition are detailed below. Due to the recent timings of the acquisition
and the availability of information, the fair values attributable to the
assets and liabilities acquired are provisional. The acquisition accounting
will be finalised as part of the FY23 Annual Report.
Sneakerboy Book Value Fair Value adjustment Provisional fair values
(£m)
(£m)
(unaudited)
(£m)
Inventories 1.0 - 1.0
Net assets acquired 1.0 - 1.0
Summary of FY23 acquisitions
The following table summarises the fair values of consideration paid:
Sportmaster Missguided I Saw It First Mysale Sneakerboy Total
(£m)
(£m)
(£m) (£m) (£m) (unaudited)
(£m)
Cash consideration 0.9 30.8 - 13.8 1.0 46.5
The asset and liability values of all the acquisitions are summarised below.
Total acquisitions Provisional fair values
(unaudited)
(£m)
Property, plant and equipment 27.2
Intangible assets 11.7
Inventories 36.0
Cash and cash equivalents 5.6
Trade and other receivables 12.1
Trade and other payables (42.2)
Borrowings (7.0)
Lease liability (23.8)
Provisions (2.3)
Non-controlling interests (7.0)
Goodwill 36.2
Net assets acquired 46.5
Since the date of control, the following amounts have been included within the
Group's Financial Statements for the period:
Sportmaster Missguided I Saw It First Mysale Sneakerboy Total
(£m)
(£m)
(£m) (£m) (£m) (unaudited)
(£m)
Revenue 36.3 5.2 5.6 - - 47.1
Operating loss (6.6) (1.2) (5.8) - - (13.6)
Loss before tax (7.0) (1.2) (5.8) - - (14.0)
Had the acquisitions been included from the start of the period the following
amounts would have been included within the Group's Financial Statements for
the period:
Sportmaster Missguided I Saw It First Mysale Sneakerboy Total
(£m)
(£m)
(£m) (£m) (£m) (unaudited)
(£m)
Revenue 43.3 5.2 17.1 18.8 3.6 88.0
Operating loss (7.9) (1.2) (8.4) (2.1) (0.2) (19.8)
Loss before tax (8.2) (1.2) (8.4) (2.4) (0.3) (20.5)
There were no contingent liabilities acquired as a result of the above
transactions.
Reconciliation of net cash outflow from investing activities:
Sportmaster Missguided I Saw It First Mysale Sneakerboy Total
(£m)
(£m)
(£m) (£m) (£m) (unaudited)
(£m)
Cash consideration (0.9) (30.8) - (13.8) (1.0) (46.5)
Fair value of cash and cash equivalents acquired 2.1 - 1.8 1.7 - 5.6
Purchase of subsidiaries, net of cash acquired 1.2 (30.8) 1.8 (12.1) (1.0) (40.9)
14. CASH INFLOW FROM OPERATING ACTIVITIES
26 weeks ended 26 weeks ended 52 weeks ended
23 October 2022
24 October 2021
24 April 2022
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Profit before taxation 284.6 186.0 335.6
Net finance costs 11.5 3.7 18.9
Net investment costs / (income) 13.2 10.0 (24.1)
Operating profit 309.3 199.7 330.4
Depreciation of property, plant and equipment 112.9 116.5 246.6
Depreciation on investment properties 2.6 1.3 5.9
Gain on disposal and modification/remeasurement of lease liabilities (3.4) (5.9) (28.3)
Amortisation of intangible assets 3.3 3.4 7.5
Impairment of tangible and intangible assets and investment properties 77.7 139.7 232.7
Profit on disposal of property, plant and equipment (91.2) (0.6) (10.8)
Gain on bargain purchase - - (4.8)
Profit on disposal of discontinued operation (26.3) - -
Share based payment charge in equity (excluding deferred tax) 4.6 - 9.2
Pension contributions less income statement charge 0.4 - (1.6)
Operating cash inflow before changes in working capital 389.9 454.1 786.8
(Increase) / decrease in receivables (99.3) 79.6 (33.3)
Increase in inventories (152.3) (109.7) (155.0)
Increase in payables 43.3 143.5 7.5
(Decrease) / increase in provisions (9.8) (7.7) 22.9
Cash inflows from operating activities 171.8 559.8 628.9
15. POST BALANCE SHEET EVENTS
On 4 November 2022, the Group increased its investment in Hugo Boss resulting
in the total interests as follows:
· 3,025,000 shares of common stock, representing 4.3% of Hugo
Boss's total share capital
· 21,139,000 shares of common stock via the sale of put options,
representing 30.03% of Hugo Boss's total share capital
On 7 November 2022, the Group commenced a share buyback programme with the
aggregate purchase price of shares acquired under the programme of no greater
than £70.0m and the maximum number of shares that may be purchased under the
programme of 10m ordinary shares with a nominal value of 10p each. The purpose
of the programme is to reduce the share capital of the Company. To the date of
this report, 2,413 ordinary shares of 10p each for consideration of less than
£0.1m have been acquired through the programme.
On 17 November 2022 the Group acquired the trade and assets of CBS Arena for
cash consideration of £15.8m. Due to the proximity of the acquisition date to
the date these financial statements are authorised for issue, the initial
accounting for the business combination is incomplete and so the disclosures
required by IFRS 3 Business Combinations cannot be made at this stage.
16. CAPITAL COMMITMENTS
The Group had capital commitments of £111.5m as at 23 October 2022 (24
October 2022: £68.5m, 24 April 2022 £145.0m) relating to warehouse
automation, aircraft, other plant and machinery, and property purchases.
17. PURCHASE OF OWN SHARES
On 25 April 2022 and 20 June 2022 the Group commenced share buyback programmes
with the aggregate purchase price of all shares acquired under these
programmes of no greater than £105.0m and the maximum number of shares that
may be purchased under the programmes of 15m ordinary shares with a nominal
value of 10p each. The purposes of the programmes was to reduce the share
capital of the Company. 11,884,438 ordinary shares of 10p each for
consideration of £80.4m were acquired through these programmes.
18. SALE OF DISCONTINUED OPERATION
On 25 May 2022 the Group disposed of its US retail businesses trading as Bobs
Stores ("Bobs") and Eastern Mountain Sports ("EMS"). The disposal took place
through sale of 100% of the share capital of Roberts 50 USA LLC and its
subsidiaries. As per IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, this disposal group was classified as a discontinued operation in
the current and prior period, and held for sale in the 25 April 2022
Consolidated Statement of Financial Position. Proceeds of £51.4m were
received and a profit on disposal of £26.3m has been recognised in the
Consolidated Income Statement. Given the proximity of the disposal to the FY22
year-end, the amounts included in the Cash Flow Statement in the period
relating to this discontinued operation are not considered to be material.
19. 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 23 October 2022 (unaudited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries((1)) Associate 0.1 36.3 23.0 -
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley((2)) Majority shareholder 1.1 - - -
Rangers Retail Limited Associate - - - 0.1
Tymit Limited Associate - - 3.6 -
(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.
26 weeks ended 24 October 2021 (unaudited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries((1)) Associate 0.3 32.1 23.7 -
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley((2)) Plc Director 0.7 - - -
N M Design London Limited Connected persons - 0.2 - -
Rangers Retail Limited 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.
52 weeks ended 24 April 2022 (audited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries((1)) Associate 2.6 63.7 24.0 -
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley((2)) Plc Director 1.5 - - -
N M Design London Limited Connected persons - 0.2 - -
Rangers Retail Limited Associate - - - 0.1
MM Prop Consultancy Limited & M.P.M Elevation Limited Connected persons - 21.0 - -
(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.
N M Design London Limited is a company in which Nicola Murray, Michael
Murray's mother, is a director. N M Design London Limited perform design work
for the Group in relation to some of the Group's sites.
The trade and other receivables balance with Four (Holdings) Limited includes
a loan balance of £60.0m (gross of amounts recognised in respect of loss
allowance) which attracts interest at a rate of 3% within current assets (FY22
H1: £60.0m, FY22: £60.0m). This has been accounted for at amortised cost in
accordance with IFRS 9. 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.
At the period end the Group does not have significant influence over, but
holds greater than 20% of the voting rights of Mulberry Group plc. The latest
equity amounts and results are shown below:
Mulberry Group plc
26 weeks ended 1 October 2022
(£m)
Share Capital 3.0
Share Premium 12.2
Retained Earnings & other reserves 24.7
Total equity 39.9
(Loss) for the period (4.0)
The Group does not consider it has the power to participate in the financial
and operating policy decisions of the entity and so management do not consider
the Group to be able to exert significant influence over this entity as per
IAS 28 Investments in Associates and Joint Ventures and IAS 24 Related Party
Disclosures.
On 1 May 2022 Michael Murray was appointed as CEO. Prior to his appointment MM
Prop Consultancy Limited and the Group finalised the terms on which any
relevant prior consultancy services agreements terminated. The Board has now
completed its assessment of the unsettled value created by MM Prop Consultancy
Limited to the Group, with the assistance of independent third party experts.
GLOSSARY
ALTERNATIVE PERFORMANCE MEASURES
Excluding acquisitions, disposals and currency neutral performance measure
reconciliation:
UK Sports Retail Premium Lifestyle International Retail ((1)) Wholesale & Licensing Group
Total
Revenue
FY23 H1 Reported 1,526.1 533.5 492.2 86.2 2,638.0
Adjustments for acquisitions, disposals and currency neutral (200.7) (10.8) (44.8) - (256.3)
FY23 H1 Excluding acquisitions, disposals and currency neutral 1,325.4 522.7 447.4 86.2 2,381.7
FY22 H1 Reported 1,367.1 427.9 465.4 79.4 2,339.8
Adjustments for acquisitions, disposals and currency neutral - - (55.8) 7.9 (47.9)
FY22 H1 Excluding acquisitions, disposals and currency neutral 1,367.1 427.9 409.6 87.3 2,291.9
% Variance (3.1%) 22.2% 9.2% (1.3%) 3.9%
Adjusted PBT
FY23 H1 Reported 184.1 11.3 62.5 9.2 267.1
Adjustments for acquisitions, disposals and currency neutral (12.8) 27.1 (12.5) - 1.8
FY23 H1 Excluding acquisitions, disposals and currency neutral 171.3 38.4 50.0 9.2 268.9
FY22 H1 Reported 123.0 (9.7) 75.2 3.9 192.4
Adjustments for acquisitions, disposals and currency neutral - - (18.4) 0.8 (17.6)
FY22 H1 Excluding acquisitions, disposals and currency neutral 123.0 (9.7) 56.8 4.7 174.8
% Variance 39.3% 495.9% (12.0%) 95.7% 53.8%
(1) Following the disposal of the US retail businesses in the
period, the reporting segments have been re-categorised with the previous Rest
of World Retail segment and European Retail segment now being reported under
an International Retail segment.
Reconciliation of Adjusted PBT performance measure, 5 year record:
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 27 October 2019 26 weeks ended 28 October 2018
23 October 2022 24 October 2021 25 October 2020
PBT (£'m) PBT (£'m) PBT (£'m) PBT (£'m) PBT (£'m)
REPORTED PBT 284.6 186.0 106.1 90.2 74.4
Exceptional items - - (3.7) 3.3 -
Fair value adjustments to derivatives included within Finance (income) / costs (12.4) (10.7) 8.6 3.2 5.9
Fair value (gains) / losses and profit on disposal of equity derivatives 32.0 15.6 (2.9) (3.0) 1.8
Realised foreign exchange (gain) / loss (43.8) (4.5) 7.4 (4.8) (17.6)
Share scheme 6.7 6.0 - - -
ADJUSTED PBT 267.1 192.4 115.5 88.9 64.5
KEY PERFORMANCE INDICATORS
Performance Measure Closest equivalent statutory measure Reconciling items to statutory measure Definition and purpose
Group revenue - - The Board considers that this measure is a key indicator of the Group's growth
Reported PBT - - Reported PBT shows both the Group's trading and operational efficiency, as
well as the effects on the Group of external factors as shown in the fair
value movements in strategic investments and foreign exchange.
Adjusted PBT Profit before taxation Adjusting items (see Glossary reconciliation above). The adjusting items are Adjusted PBT shows how well the Group is managing its ongoing trading
those deemed by the Board to be volatile and therefore difficult to forecast. performance and controllable costs and therefore the overall performance of
the Group.
Cash inflow from operating activities before working capital - - Cash inflow from operating activities before workings capital is considered an
important indicator for the business of the cash available for investment in
the Elevation strategy. The change to this KPI from cash inflow from operating
activities is due to the acquisition of SRL and the distortion in working
capital caused by the consumer credit business.
Net assets - - The Board considers that this measurement is a key indicator of the Group's
health.
Number of retail stores - - The Board considers that this measure is an indicator of the Group's growth.
The Group's Elevation strategy is replacing older stores and often this can
result in the closure of two or three stores to be replaced by one larger new
generation store.
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