REG - Frasers Group PLC - Interim Results - 26 weeks to 24 October 2021
09/12/2021 07:00
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RNS Number : 0484V Frasers Group PLC 09 December 2021
9 December 2021
Unaudited Interim Results for the 26 weeks to 24 October 2021 ("FY22 H1")
Change (%)
FY22 H1 FY21 H1
£m £m
Group revenue 2,339.8 1,893.3 23.6
UK Sports Retail 1,367.1 1,071.6 27.6
Premium Lifestyle 427.9 320.4 33.6
European Retail 399.8 352.0 13.6
Rest of World Retail 65.6 77.1 (14.9)
Wholesale & licensing 79.4 72.2 10.0
Group gross margin (%) 44.7% 44.0%
Reported profit before tax 186.0 106.1 75.3
Adjusted profit before tax (PBT)((4)) 186.8 115.5 61.7
Reported profit after tax 143.7 84.4 70.3
Reported basic earnings per share 28.2p 16.0p 76.3
Adjusted basic earnings per share (EPS)((1)) 29.2p 17.5p 66.9
Cash inflow from operating activities 559.8 330.5 69.4
Net debt ((2)) (24.3) (250.1) 90.3
Outlook: Since our last outlook statement given at our FY21 results
announcement on 5 August 2021, our performance continues to be strong in both
our store estate and online. We do however remain cautious with a number of
well publicised macroeconomic headwinds on the horizon in the form of but not
limited to cost increases, supply chain issues and potential squeezes on
consumer spending power. There is also still the risk that Covid-19 measures
could adversely affect outlook and we are now seeing restrictions return,
including lockdowns in Europe.
Notwithstanding the above risks, which are appropriately considered in our
forecasts including for impairments, we do believe the Group can achieve an
adjusted profit before tax((4)) of between £300m to £350m for the period
ended 24 April 2022 on the proviso there are no substantial lockdowns imposed
in the UK, particularly over the important Christmas period.
• Group revenue increased by 23.6%
• Excluding acquisitions and on a currency neutral basis, revenue
increased by 24.6%((3))
• UK Sports Retail revenue increased by 27.6%, largely due to the
strong reopening of stores after the last lockdown in March 2021 and the
comparative period being impacted by lockdowns as a result of Covid-19
• Excluding acquisitions, revenue increased by 27.0%(3)
• Premium Lifestyle revenue increased by 33.6%, largely due to new
Flannels stores, continued growth in online, and the strong reopening of
stores after the last lockdown in March 2021
• Flannels revenue growth continues to exceed all expectations. The
compound annual growth rate (CAGR) from taking full ownership in FY18 to the
end of FY22 H1 is 40%+
• European Retail revenue increased by 13.6%, largely due to strong
growth in Ireland and the lockdowns experienced in the prior year
• Excluding acquisitions and on a currency neutral basis, revenue
increased by 18.4%(3)
• Group gross margin increased to 44.7% from 44.0%, as we maintained
product margin over the period
• Reported profit before tax was £186.0m, up 75.3% from £106.1m
driven by the strong reopening of stores after lockdown, new Flannels stores,
continued growth in online, continued operating efficiencies, and the FY21
comparative including Covid-19 related lockdowns
• Adjusted PBT was £186.8m, up 61.7%
• Excluding acquisitions and on a currency neutral basis, adjusted PBT
increased by 88.4%((3))
• Cash inflow from operating activities increased to £559.8m compared
to £330.5m in the prior period due to the increase in operating profit and
improved working capital
• Reported basic earnings per share grew by 76.3% to 28.2p, from 16.0p
• Adjusted basic earnings per share increased by 66.9% to 29.2p from
17.5p((1))
• Reported profit after tax was £143.7m up 70.3% from £84.4m
• Net debt decreased to £24.3m from £248.9m at 25 April 2021 (FY21
H1: £250.1m)(()(2))
(1) Adjusted basic EPS is reported basic EPS less the effects
of exceptional items, unhedged foreign exchange (FX), gains and losses on
strategic investments, and share schemes. Further detail on this calculation
can be found in note 9.
(2) Net debt is borrowings (excluding IFRS 16 lease
liabilities) less cash and cash equivalents held.
(3) A reconciliation excluding acquisitions and currency
neutral performance measures can be found in the Glossary.
(4) Adjusted profit before tax (PBT) is reported profit before
tax less the effects of exceptional items, unhedged foreign exchange (FX),
gains and losses on strategic investments, and share schemes. Further detail
on this calculation can be found in the Glossary.
Frasers Group plc T: 0344 245 9200
Chris Wootton, Chief Financial Officer
Tom Piper, Company Secretary
CHAIR'S STATEMENT
BUSINESS PERFORMANCE
The Board is very pleased with the overall trading performance of the Frasers
Group during the first half of the year and I want to extend my thanks on
behalf of the Board to our hardworking and dedicated teams across the Group.
As noted in our outlook statement, both our bricks and mortar and online
businesses have continued to perform well since reopening from the last
lockdown in the UK in March 2021.
Unfortunately we still have the shadow of uncertainty cast by the ongoing
Covid-19 pandemic, with restrictions including lockdowns returning to parts of
Europe and with the emergence of new variants. There are also supply chain
risks which to date we have proven resilient to but which must be factored
into our future forecasting given these could continue for some time. On top
of this there are the well-publicised macroeconomic factors contributing to a
likely cost of living squeeze which could impinge on consumers spending plans
heading into the new year.
We once again remind our stakeholders of our key accounting principles, namely
being conservative, consistent, and simple. Noting the above potential
headwinds our results highlights are:
· Revenue increased to £2,339.8m (FY21 H1: £1,893.3m)
· Statutory PBT increased to £186.0m (FY21 H1: £106.1m)
· Adjusted PBT increased to £186.8m (FY21 H1: £115.5m)
· Net debt of £24.3m (FY21 H1: £250.1m)
More underlying detail is given throughout this Results Announcement. The
highlights and explanations of these by segment is set out in the Chief
Executive's Report and Business Review.
OUTLOOK
With a successful half year's trading mitigated to some extent by our
conservative forecasting and based on the above mentioned headwinds, we still
believe we can achieve an adjusted PBT of between £300m to £350m by the end
of the financial year, assuming no significant UK lockdowns before then.
ELEVATION NO LIMITS
Despite the current uncertainty, we continue to invest for the long term
including on our store estate and on our digital and fulfilment capabilities.
We opened our new Sports Direct flagship store on Oxford Street in London to
great acclaim in June, and have recently opened two Flannels regional flagship
stores at Meadowhall in Sheffield and at Leicester Fosse Park. Both are
performing above expectations.
There is continued investment in our automation within the Shirebrook
warehouse and in November we completed the purchase of land in Bitburg,
Germany. The site is planned to house a new 1 million square foot warehouse
and will significantly expand our fulfilment capabilities in Europe.
MARKETING CAMPAIGNS
We've made monumental strides repositioning Sports Direct with our brand
partners. This has been fuelled by our brand campaigns - physical proof that
showcases our new direction to external stakeholders. Momentum started with
our Euros campaign, "Just A Game?!" featuring Eric Cantona and a host of
England athletes. Then "Back To School" starred Gen-Z megastars Ollie &
Jacob. But our recent Christmas campaign shows the true extent of what we've
achieved shifting perceptions. Last year we featured 1 athlete. Fast forward
12 months, we featured 15 athletes including Emma Raducanu and Jack Grealish.
A multi-million pound campaign that had the brands, and their talent, fighting
to be featured. It's called "Go All Out This Christmas", and we did. It's been
a pivotal year, bringing the brands on our elevation journey. And the
undeniable progress we have made will unlock even more opportunities from our
partners next year and beyond.
OUR PEOPLE
We continue to invest in our people and our organisation as we build the Group
to make us stronger and well prepared for the future.
Michael Murray will become CEO of Frasers Group in May 2022. Michael has made
a significant impact on the business in recent years as we have reshaped our
property portfolio. He has been a significant driver of the Elevation No
Limits strategy which has been a great success and he is considered by the
Board to be the best person to lead the Group as we continue on this path in
the coming years.
Our Frasers Group Elevation Programme has welcomed the second intake of twenty
four highly talented people who are rotating through different departments in
the business as they learn and develop their skills. It is intended that the
future generations of leaders for the Group will come through this recruitment
programme and we are pleased with the quality and talent that have joined
Frasers Group through this initiative.
Anouska Kapur has recently joined the Frasers Group board as a Non-Executive
Director. Anouska is a partner at the law firm Child & Child and she
brings both legal and property expertise to the board.
The Board are proud that its composition is 37.5% female, which is in excess
of the 33% target set by the Hampton Alexander review. The Board are also
proud that as a FTSE 250 company, we are ahead of the target of the Parker
Review to have at least one director from an ethnic minority background on the
Board by 2024. The Board continually monitors diversity at Board level not
just in relation to gender and ethnic diversity but also other factors
including, but not limited to, age and socio-economic background.
SUSTAINABILITY
Sustainability and Elevation go hand in hand and both are important priorities
for the Group and its stakeholders. We have built a Sustainability Team
structure within the organisation with our CFO Chris Wootton as the executive
sponsor. There are Sustainability Champions across the business and hundreds
of dedicated people across our stores who are responsible for helping deliver
against our priorities.
We have set ourselves targets to reduce emissions and single use plastic, and
improve our waste management and recycling. We now offer a carbon neutral
delivery option on the web.
So far in FY22 we are surpassing our UK stores' 10% energy reduction target
for the year which is a sterling effort to effect change and we are grateful
to our store staff.
We continue to make progress with delivery of our Taskforce on Climate-related
Financial Disclosures (TCFD). We have completed a thorough gap analysis with
the support of external advisers and have identified and ranked climate
related risks and opportunities of greatest materiality to Frasers Group. This
assessment will be used to inform scenario analysis modelling which will feed
into our risk management framework. We are on track for full TCFD disclosures
in line with the next annual reporting period.
GROUP REFINANCING
We were pleased to announce a refinance of our Group facility whereby we now
have a combined term loan and revolving credit facility (RCF) of £930.0m for
a period of 3 years, with the possibility to extend this by a further 2 years.
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 both new and
existing 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.
Our share buyback programme has continued which is a demonstration of our
confidence in the Group and the strategy for future growth.
On 4 May 2021 the Group commenced a share buyback programme with the purpose
to reduce the share capital of the Company. 3,895,385 ordinary shares of 10p
each for consideration of £22.4m were acquired through this programme.
On 21 June 2021 the Group commenced an irrevocable non-discretionary share
buyback programme to purchase the Group's shares with the purpose to reduce
the share capital of the Company. 2,024,127 ordinary shares of 10p each for
consideration of £12.0m were acquired through this programme.
On 6 August 2021 the Group commenced a share buyback programme with the
purpose to reduce the share capital of the Company. 4,309,458 ordinary shares
of 10p each for consideration of £28.3m were acquired through this programme.
On 4 October 2021 the Group commenced a share buyback programme with the
purpose to reduce the share capital of the Company. Up to 24 October 2021,
2,522,661 ordinary shares of 10p each were acquired for consideration of
£15.8m. The programme became irrevocable on 5 November 2021. The programme
has a maximum number of ordinary shares of 10,000,000 and the aggregate
purchase price of all shares acquired will be no greater than £70.0m. In
total 6,564,523 ordinary shares of 10p each for consideration of £43.1m have
been acquired through this programme.
David Daly
Non-Executive Chair
9 December 2021
CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW
SUMMARY OF RESULTS
26 weeks ended 26 weeks ended
24 October 2021 25 October 2020
(Unaudited) (Unaudited)
Group revenue £2,339.8m £1,893.3m
Adjusted PBT ((1)) £186.8m £115.5m
Group gross margin 44.7% 44.0%
Adjusted basic earnings per share ((2)) 29.2p 17.5p
Cash inflow from operating activities £559.8m £330.5m
Net debt £24.3m £250.1m
Number of retail stores ((3)) 1,561 1,557
(1) Adjusted profit before tax (PBT) is reported profit before
tax less the effects of exceptional items, unhedged foreign exchange (FX),
gains and losses on strategic investments, and share schemes. 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, unhedged foreign exchange (FX), gains and losses on
strategic investments, 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.
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.
From FY22 management changed the main reporting KPI from Underlying EBITDA to
Adjusted PBT. Adjusted PBT is Reported Profit Before Tax less the effects of
unhedged FX, exceptional items, share scheme charges and gains and losses on
strategic investments. This change has been reviewed by the Audit Committee
who have appropriately challenged management on the presentation and the
adjusting items included in this APM. Management have taken this decision for
the following reasons:
· With the continued significant investment in and roll out of our
elevation strategy on both the physical and digital fronts, the importance of
depreciation and amortisation to both the Board and our stakeholders in terms
of assessing performance has grown.
· Our understanding from a number of financial sectors including
the banking sector is that IFRS 16 Leases is becoming an increasingly
important consideration.
· With this new measure being introduced we are trying to align
with the Financial Reporting Council's thematic standpoint with regard to
'alternative performance measures' as far as possible whilst retaining a
degree of interpretation given factors outside of our control, such as FX and
strategic investments movements which are exceptionally difficult to forecast,
particularly months in advance.
PERFORMANCE OVERVIEW
Group revenue was up 23.6% to £2,339.8m, largely due to the strong reopening
of stores after lockdowns, continuing strong online performance, and the
comparative period being impacted by lockdowns as a result of Covid-19.
Gross margin for the Group increased 70 basis points to 44.7% (FY21 H1: 44.0%)
as we maintained product margins over the period.
Adjusted PBT is up 61.7%, largely driven by the strong reopening of stores
after lockdown, new Flannels stores, the FY21 comparative including the impact
of Covid-19 related lockdowns, and continued operating efficiencies. Excluding
acquisitions and on a currency neutral basis adjusted PBT is up 88.4% with the
difference to the 61.7% growth figure largely because of impairments.
In FY22 H1, impairments of £135.3m (FY21 H1: £128.9m) have been recognised
due to the ongoing impact of the Covid-19 pandemic, further restrictions
including lockdowns returning to parts of Europe, the availability and cost of
shipping containers and other supply chain cost increases, and the likely cost
of living squeeze on consumers, all being factored into our future
forecasting.
Adjusted basic earnings per share increased by 66.9% to 29.2p (FY21 H1:
17.5p).
Reported Profit Before Tax increased by 75.3% to £186.0m (FY21 H1: £106.1m).
The Group generated cash inflow from operating activities of £559.8m during
the period, up from £330.5m in the prior period.
As at 24 October 2021, the Group had a Revolving Credit Facility (RCF) of
£913.5m (FY21 H1: £913.5m) valid until November 2021 and £847.5m valid to
November 2022. On 30 November 2021 the Group refinanced its existing
borrowings and entered into a combined term loan and revolving credit facility
of £930.0m for a period of 3 years, with the possibility to extend this by a
further 2 years. The Group continues to operate comfortably within its banking
facilities and covenants and the Board remains comfortable with the Group's
available headroom.
Net debt decreased to £24.3m at the period end (£248.9m at 25 April 2021).
It should be noted this figure is calculated at period end not month end and
thus does not include items such as month end supplier payments and payroll
costs, this means there is always a material difference between period end net
debt and the corresponding month end net debt.
REVIEW BY BUSINESS SEGMENT
UK SPORTS RETAIL
UK Sports Retail includes all of the Group's sports retail and USC store
operations in the UK (including Northern Ireland), all of the Group's sports
online businesses (excluding Bob's Stores, Eastern Mountain Sports, Baltics
and Malaysia), the Group's gyms, Evans Cycles, GAME UK stores and online
operations and the Group's Shirebrook campus operations. UK Sports Retail is
the main driver of the Group and accounts for 58% of Group revenue.
26 weeks ended 26 weeks ended
24 October 2021 25 October 2020
(unaudited) (unaudited)
Revenue £1,367.1m £1,071.6m
Cost of Sales £(768.1)m £(595.4)m
Gross Profit £599.0m £476.2m
Gross Margin % 43.8% 44.4%
Adjusted PBT £117.4m £55.6m
Revenue increased 27.6% to £1,367.1m. Excluding acquisitions revenue grew
27.0%. This was largely due to the strong reopening of stores after the last
lockdown in March 2021, and the prior period comparative including Covid-19
related lockdowns.
Gross margin decreased to 43.8%, mostly due to strong growth in GAME UK
console sales which have a lower gross margin, but also because of an
increased inventory provision in this segment.
Adjusted PBT for UK Sports Retail was £117.4m, an increase of 111.2% for the
period, largely due the strong reopening of stores after lockdown and the
comparative period being impacted by lockdowns as a result of Covid-19.
UK SPORTS RETAIL STORE PORTFOLIO((2))
24 October 2021 25 October 2020 25 April 2021
England 390 395 394
Scotland 39 42 39
Wales 31 32 31
Northern Ireland 20 21 21
Isle of Man 1 1 1
GAME UK ((1)) 258 244 247
Evans Cycles 53 53 48
USC 23 27 25
Total 815 815 806
Opened 58 42 93
Closed (49) (38) (98)
Acquired - 42 42
Area (sq.ft.) approx 6.9m approx 7.1m approx. 6.8m
(1) The GAME UK store numbers include 105 concessions operating
within Sports Direct fascia stores (25 April 2021: 71) and does not include
BELONG arenas.
(2) Table excludes the Group's standalone gyms.
( )
PREMIUM LIFESTYLE
Premium Lifestyle consists of Flannels, Cruise, van mildert, House of Fraser,
Jack Wills and Sofa.com fascia stores and corresponding web sales.
26 weeks ended 26 weeks ended
24 October 2021 25 October 2020
(unaudited) (unaudited)
Gross Transaction Value (GTV)((1)) £468.0m £350.4m
Revenue £427.9m £320.4m
Cost of Sales £(223.6)m £(169.9)m
Gross Profit £204.3m £150.5m
Gross Margin % 47.7% 47.0%
Adjusted PBT £(9.7)m £26.3m
(1) GTV being gross sales net of VAT, discounts and returns and
gross sales where the Group acts as agent.
Revenue grew 33.6% to £427.9m. This was largely due to new Flannels stores,
continued growth in online, growth in House of Fraser, and the impact of
Covid-19 related lockdowns on the prior period comparative.
Gross margin increased to 47.7% as product margins were maintained over the
period.
It should be noted that despite year on year trading improvements in the House
of Fraser business, business rates in their current form continue to be a
significant and disproportionate cost to House of Fraser.
Adjusted PBT for Premium Lifestyle decreased from a profit of £26.3m in FY21
H1 to a loss of £9.7m for the period, largely due to property and other
related impairments being recognised in the period. Adjusted PBT excluding
these impairments is £69.6m, compared to £26.9m in the prior period.
PREMIUM LIFESTYLE STORE PORTFOLIO
24 October 2021 25 October 2020 25 April 2021
Jack Wills 56 64 60
Flannels 44 38 41
House of Fraser / Frasers 43 45 43
Sofa.com ((1)) 25 19 24
Cruise 6 6 5
18 Montrose 4 - 3
Van Mildert 1 1 1
Garment Quarter 1 - 1
Psyche 1 - 1
Total 181 173 179
Opened 11 2 12
Acquired - - 5
Closed (9) (8) (17)
Area (sq.ft.) approx. 4.3m approx. 4.4m approx. 4.2m
(1) Sofa.com store numbers include 18 concessions operating
within House Of Fraser fascia stores (25 April 2021: 17).
EUROPEAN RETAIL
The European Retail division includes the Group's sports retail store
management and operations in Europe, including the Group's European
distribution centres in Belgium and Austria, stores and corresponding web
business in the Baltic regions and GAME Spain stores and corresponding web
business.
26 weeks ended 26 weeks ended
24 October 2021 25 October 2020
(unaudited) (unaudited)
Revenue £399.8m £352.0m
Cost of Sales £(225.0)m £(205.3)m
Gross Profit £174.8m £146.7m
Gross Margin % 43.7% 41.7%
Adjusted PBT £60.9m £19.0m
Revenue increased 13.6% to £399.8m. On a currency neutral basis and excluding
acquisitions, European Retail revenue increased by 18.4% largely due to
temporary store closures as a result of Covid-19 in the prior period
comparative.
Gross margin increased to 43.7% largely due to continually improving product
mix in the core business mitigated to some extent by increased lower margin
console sales in GAME Spain.
Adjusted PBT was £60.9m, an increase of 220.5% for the period, largely due to
strong reopening of stores in the current period, particularly in The Republic
of Ireland and the impact of lockdowns on the prior period comparative.
All of the following stores are operated by companies wholly owned by the
Group, except Estonia, Latvia and Lithuania where the Group owns 60.0%.
EUROPEAN RETAIL STORE PORTFOLIO((1))
24 October 2021 25 October 2020 25 April 2021
GAME Spain 236 241 236
Republic of Ireland(2) 41 33 39
Belgium 34 36 34
Estonia(1) 21 25 21
Austria 20 22 20
Portugal 20 21 20
Lithuania(1) 18 18 18
Latvia(1) 17 19 17
Poland 14 15 14
Slovenia 13 14 13
Czech Republic 12 12 12
Spain 10 4 9
Hungary 8 8 8
Cyprus 6 6 6
Holland 5 5 5
Slovakia 5 5 5
France 4 4 4
Germany 2 2 2
Luxembourg 2 2 2
Iceland 1 1 1
Total 489 493 486
Opened 6 7 13
Acquired - - (38)
Closed (3) (25) -
Area (sq.ft.) approx. 3.7m approx. 3.9m approx. 3.6m
(1) Includes only stores with SPORTSDIRECT.com and SPORTLAND
fascias.
(2) Excluding Heatons fascia stores.
REST OF WORLD RETAIL
Rest of World Retail includes sports stores in Malaysia trading under the
SPORTS DIRECT fascia, retail stores in the US trading under Bob's Stores and
Eastern Mountain Sports and their online businesses. In Malaysia the stores
are 51.0% owned by the Group.
26 weeks ended 26 weeks ended
24 October 2021 25 October 2020
(unaudited) (unaudited)
Revenue £65.6m £77.1m
Cost of Sales £(30.8)m £(46.6)m
Gross Profit £34.8m £30.5m
Gross Margin % 53.0% 39.6%
Adjusted PBT £14.3m £7.7m
Revenue decreased 14.9% to £65.6m mostly due to Covid-19 related restrictions
in Malaysia. Gross margin increased to 53.0% from 39.6% largely due to
inventory holding efficiencies combined with less year on year promotional
activity in the US businesses. Adjusted PBT was £14.3m, compared to £7.7m in
FY21 H1, largely due to overall operating efficiencies in the US businesses.
REST OF WORLD RETAIL STORE PORTFOLIO
24 October 2021 25 October 2020 25 April 2021
Malaysia 34 31 33
Bob's Stores 21 24 22
Eastern Mountain Sports 21 21 21
Total 76 76 76
Area (sq.ft.) approx. 1.3m approx. 1.3m approx. 1.3m
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
24 October 2021 25 October 2020
(unaudited) (unaudited)
Wholesale £68.7m £61.6m
Licensing £10.7m £10.6m
Total Revenue £79.4m £72.2m
Cost of Sales £(46.4)m £(42.3)m
Gross Profit £33.0m £29.9m
Gross Margin % 41.6% 41.4%
Adjusted PBT £3.9m £6.9m
Revenue increased by 10.0% to £79.4m. Wholesale revenues are up 11.5% to
£68.7m, and Licensing revenues increased 0.9% to £10.7m, largely due to the
impact of Covid-19 related lockdowns on the prior year comparative.
Total gross margin was consistent with the prior period at 41.6% (FY21 H1:
41.4%).
Adjusted PBT decreased 43.5% to £3.9m (FY21 H1: £6.9m) largely due to
impairment of Goodwill in the period.
STRATEGIC INVESTMENTS
Included within long-term financial assets at the period ended 24 October 2021
are the following direct interests held by the Group:
24 October 2021 25 October 2020 25 April 2021
(unaudited) (unaudited) (audited)
% % %
Mulberry Group plc 36.8 12.5 36.8
Studio Retail Group plc 27.1 36.7 35.6
Hugo Boss AG 6.8 2.5 5.1
French Connection Group plc - 26.6 -
In addition to those listed, there are various other interests held, none of
which represent more than 5.0% of the voting power of the investee. The
movements in fair value of these long-term financial assets are recognised
within Other Comprehensive Income.
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 24 October
2021, 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 360m FY23, FY25 0.99 - 1.08
USD / GBP USD inventory purchases USD 720m FY22 - FY23 1.36 - 1.41
USD / EUR USD inventory purchases USD 150m FY22 - FY24 1.21 - 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 500m FY23, FY26 0.99 - 1.08
USD / EUR USD inventory purchases USD 120m 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 USD 100m FY22 1.37 - 1.39
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 decreased by £224.6m from £248.9m at 25 April 2021 to £24.3m at 24 October
2021. Net interest on bank loans and overdrafts decreased
to £4.7m (FY21 H1: £5.6m) largely due to reduced usage of the RCF in the
period.
Analysis of net debt:
24 October 2021 25 October 2020 25 April 2021
(unaudited) (unaudited) (audited)
£m £m £m
Cash and cash equivalents 350.7 371.3 457.0
Borrowings (375.0) (621.4) (705.9)
Total (24.3) (250.1) (248.9)
On 30 November 2021 the Group refinanced its existing borrowings and entered
into a combined term loan and revolving credit facility of £930.0m for a
period of 3 years, with the possibility to extend this by a further 2 years.
The Group continues to operate well within its banking covenants and the Board
remains comfortable with the Group's available headroom.
Cash flow:
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021 25 October 2020 25 April 2021
(unaudited) (unaudited) (audited)
£m £m £m
Cash inflow from operating activities 559.8 330.5 578.3
Income taxes paid (62.6) (54.3) (59.3)
Invested in:
Purchase of subsidiaries, net of cash acquired - (37.0) (39.4)
Purchase of listed investments (107.1) (49.9) (113.3)
Proceeds on disposal of listed investments and derivatives 96.6 4.2 55.1
Proceeds on disposal of subsidiary undertaking 1.0 - -
Net capital expenditure (112.0) (49.7) (192.3)
Exchange movement on cash balances (1.9) 1.4 (5.3)
Investment income received 5.6 0.3 0.5
Finance income received less finance costs paid (14.4) (12.5) (22.6)
Lease payments (61.9) (17.1) (78.0)
Purchase of own shares (78.5) - (4.3)
Repayment of acquired debt - - (1.4)
Dividend paid to non-controlling interest - - (0.9)
Decrease in net debt 224.6 115.9 117.1
SUMMARY CONSOLIDATED BALANCE SHEET (EXTRACT)
24 October 2021 25 October 2020 25 April 2021
(unaudited) (unaudited) (audited)
£m £m £m
Property, plant and equipment 800.8 1,049.3 915.2
Right of use assets 211.9 259.3 249.7
Investment properties 52.7 18.2 14.1
Long-term financial assets 352.4 127.2 263.3
Deferred tax assets 103.7 59.3 66.8
Inventory 1,201.5 1,110.3 1,096.6
Trade and other receivables 490.7 578.8 546.5
Provisions 351.9 331.8 361.2
Trade and other payables 789.4 626.0 646.3
Lease liabilities 684.7 715.6 722.7
Borrowings 375.0 621.4 705.9
The decrease within property, plant and equipment 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 relate to leasehold
properties capitalised under IFRS 16. Right of use assets have decreased from
25 April 2021 largely due to impairments in the period of £29.5m.
The increase in investment properties relates to the reclassification of the
Robin Retail Park, Wigan as an investment property.
Long-term financial assets have increased during the period due to the
additions of Hugo Boss AG and increase in fair value of the Hugo Boss AG
investment.
Deferred tax assets have increased during the period largely due to the change
in UK tax rate from 19% to 25% which was substantively enacted in May 2021.
Inventory has increased from 25 April 2021 as holdings are increased in the
build up to the Christmas period. Inventory provision percentages have
decreased from 16.6% at 25 April 2021 to 16.1% at period end.
Trade and other receivables includes a £118.3m reimbursement asset in
relation to the Group's ongoing non-UK tax enquiries (25 April 2021: £118.3m)
and £109.4m relating to deposits in respect of derivative financial
instruments (25 April 2021: £131.0m).
Provisions have decreased to £351.9m largely due to utilisation of property
related provisions.
Trade and other payables has increased from 25 April 2021 largely due to the
increase in inventory supplier payables in the run up towards the Christmas
period.
Lease liabilities relate to the present value of property lease payments
expected to be made over the remaining life of the lease under IFRS 16. The
lease liability has decreased largely due to repayments made in the period.
Borrowings have decreased from 26 April 2021. Continued positive net cash
inflow from operating activities in the current period have allowed for
reductions in the RCF drawn balance.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 16. 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 25 April 2021 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.
Mike Ashley
Chief Executive
9 December 2021
CONSOLIDATED INCOME STATEMENT
FOR THE 26 WEEKS ENDED 24 OCTOBER 2021
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021 25 October 2020 25 April 2021
Note (unaudited) (unaudited) (audited)
£m £m £m
Revenue 2,339.8 1,893.3 3,625.3
Cost of sales (1,293.9) (1,059.5) (2,094.5)
Gross profit 1,045.9 833.8 1,530.8
Selling, distribution and administrative expenses((1)) (729.6) (599.4) (1,319.0)
Other operating income 18.7 15.1 36.8
Property and other related impairments((1)) (135.3) (128.9) (317.0)
Exceptional items 4 3.7 (1.6)
-
Profit on sale of properties - - 9.7
Operating profit / (loss) 199.7 124.3 (60.3)
Investment income 5 28.8 40.0 103.7
Investment costs 6 (38.8) (37.1) (7.7)
Finance income 7 12.6 2.2 9.0
Finance costs 8 (16.3) (23.3) (36.2)
Profit before taxation 186.0 106.1 8.5
Taxation (42.3) (21.7) (86.5)
Profit / (loss) for the period 143.7 84.4 (78.0)
ATTRIBUTABLE TO:
Equity holders of the Group 138.2 80.4 (83.0)
Non-controlling interests 5.5 4.0 5.0
Profit / (loss) for the period 143.7 84.4 (78.0)
EARNINGS PER SHARE ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Pence per share Pence per share Pence per share
Basic earnings per share 9 28.2 16.0 (16.5)
Diluted earnings per share 9 28.2 16.0 (16.5)
(1) Property and other related impairments have been separately
presented for the period ended 24 October 2021 and further details can be
found in Note 2. The prior year comparative was previously included within
Selling, distribution and administrative expenses in the FY20 H1 Report and
has been represented to be comparable.
The Unaudited Consolidated Income Statement has been prepared on the basis
that all operations are continuing.
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 26 WEEKS ENDED 24 OCTOBER 2021
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021 25 October 2020 25 April 2021
Note (unaudited) (unaudited) (audited)
£m £m £m
Profit / (loss) for the period 143.7 84.4 (78.0)
OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Fair value movement on long-term financial assets 80.5 (0.5) 77.3
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Exchange differences on translation of foreign operations (11.4) (9.9) (49.1)
Fair value movement on hedged contracts - recognised in the period 11 21.6 (15.3) 0.4
Fair value movement on hedged contracts - reclassified and reported in sales 11 - (1.3) (2.8)
Fair value movement on hedged contracts - reclassified and reported in cost of 11 3.6 (8.7) (17.1)
sales
Fair value movement on hedged contracts - taxation taken to reserves 11 (7.2) 4.3 3.0
OTHER COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD, NET OF TAX 87.1 (31.4) 11.7
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD 230.8 53.0 (66.3)
ATTRIBUTABLE TO:
Equity holders of the Group 225.3 49.0 (71.3)
Non-controlling interest 5.5 4.0 5.0
230.8 53.0 (66.3)
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 24 OCTOBER 2021
24 October 2021 25 October 2020 25 April 2021
(unaudited)
(unaudited)
Note
(audited)
£m £m
£m
ASSETS - NON CURRENT
Property, plant and equipment 1,012.7 1,308.6 1,164.9
Investment properties 52.7 18.2 14.1
Intangible assets 113.5 131.7 120.5
Long-term financial assets 352.4 127.2 263.3
Deferred tax assets 103.7 59.3 66.8
1,635.0 1,645.0 1,629.6
ASSETS - CURRENT
Inventories 1,201.5 1,110.3 1,096.6
Trade and other receivables 490.7 578.8 546.5
Derivative financial assets 11 61.4 64.9 55.4
Cash and cash equivalents 350.7 371.3 457.0
2,104.3 2,125.3 2,155.5
TOTAL ASSETS 3,739.3 3,770.3 3,785.1
Share capital 64.1 64.1 64.1
Share premium 874.3 874.3 874.3
Treasury shares reserve (374.2) (295.7) (295.7)
Permanent contribution to capital 0.1 0.1 0.1
Capital redemption reserve 8.0 8.0 8.0
Foreign currency translation reserve 17.4 68.0 28.8
Reverse combination reserve (987.3) (987.3) (987.3)
Own share reserve (66.7) (67.0) (66.7)
Hedging reserve 11 29.5 7.0 11.5
Share based payment reserve 5.2 - 1.3
Retained earnings 1,775.1 1,644.8 1,554.5
Issued capital and reserves attributable to owners of the parent 1,345.5 1,316.3 1,192.9
Non-controlling interests 21.7 17.0 18.1
TOTAL EQUITY 1,367.2 1,333.3 1,211.0
LIABILITIES - NON CURRENT
Borrowings 375.0 621.4 705.9
Lease liabilities 505.2 585.9 534.2
Retirement benefit obligations 1.7 2.0 1.9
Deferred tax liabilities 30.0 19.6 27.0
Provisions 10 351.9 331.8 361.2
1,263.8 1,560.7 1,630.2
LIABILITIES - CURRENT
Derivative financial liabilities 11 28.4 88.4 19.2
Trade and other payables 789.4 626.0 646.3
Lease liabilities 179.5 129.7 188.5
Current tax liabilities 111.0 32.2 89.9
1,108.3 876.3 943.9
TOTAL LIABILITIES 2,372.1 2,437.0 2,574.1
TOTAL EQUITY AND LIABILITIES 3,739.3 3,770.3 3,785.1
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 26 WEEKS ENDED 24 OCTOBER 2021
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021 25 October 2020 25 April 2021
Note (unaudited) (unaudited) (audited)
£m £m £m
CASH INFLOW FROM OPERATING ACTIVITIES 12 559.8 330.5 578.3
Income taxes paid (62.6) (54.3) (59.3)
NET CASH INFLOW FROM OPERATING ACTIVITIES 497.2 276.2 519.0
Proceeds on disposal of property, plant and equipment 0.7 2.7 20.6
Proceeds on disposal of intangible assets - 4.6 7.5
Proceeds on disposal of listed investments and derivatives 96.6 4.2 55.1
Proceeds on disposal of subsidiary undertaking 1.0 - -
Purchase of subsidiaries, net of cash acquired - (37.0) (39.4)
Purchase of property, plant and equipment (112.7) (57.0) (219.4)
Purchase of intangible assets - - (1.0)
Purchase of listed investments (107.1) (49.9) (113.3)
Investment income received 5.6 0.3 0.5
Finance income received 0.1 2.2 9.0
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (115.8) (129.9) (280.4)
Lease payments (61.9) (17.1) (78.0)
Finance costs paid (14.5) (14.7) (31.6)
Borrowings drawn down 409.0 1,551.4 1,128.1
Borrowings repaid (739.9) (1,830.0) (1,323.6)
Dividends paid to non-controlling interests - - (0.9)
Purchase of own shares 15 (78.5) - (4.3)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES (485.8) (310.4) (310.3)
NET DECREASE IN CASH AND CASH EQUIVALENTS (104.4) (164.1) (71.7)
Exchange movement on cash balances (1.9) 1.4 (5.3)
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS AT BEGINNING OF PERIOD 457.0 534.0 534.0
CASH AND CASH EQUIVALENTS INCLUDING OVERDRAFTS AT THE PERIOD END 350.7 371.3 457.0
The accompanying accounting policies and notes form part of these Interim
Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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 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 26 WEEKS ENDED 25 OCTOBER 2020 (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 26 April 2020 64.1 874.3 (295.7) - 77.9 (67.0) 1,564.9 (951.2) 1,267.3 13.0 1,280.3
Profit for the financial period - - - - - - 80.4 - 80.4 4.0 84.4
OTHER COMPREHENSIVE INCOME
Cash flow hedges - recognised in the period - - - - - - - (15.3) (15.3) - (15.3)
Cash flow hedges - reclassified and reported in sales - - - - - - - (1.3) (1.3) - (1.3)
Cash flow hedges - reclassified and reported in cost of sales - - - - - - - (8.7) (8.7) - (8.7)
Cash flow hedges - taxation - - - - - - - 4.3 4.3 - 4.3
Fair value adjustment in respect of long term financial assets - recognised - - - - - - (0.5) - (0.5) - (0.5)
Translation differences - Group - - - - (9.9) - - - (9.9) - (9.9)
Total comprehensive income for the period - - - - (9.9) - 79.9 (21.0) 49.0 4.0 53.0
At 25 October 2020 64.1 874.3 (295.7) - 68.0 (67.0) 1,644.8 (972.2) 1,316.3 17.0 1,333.3
FOR THE 52 WEEKS ENDED 25 APRIL 2021 (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 26 April 2020 64.1 874.3 (295.7) - 77.9 (67.0) 1,564.9 (951.2) 1,267.3 13.0 1,280.3
Acquisitions - - - - - - - - - 1.0 1.0
Share scheme - - - 1.3 - 0.3 (4.7) - (3.1) - (3.1)
Dividends paid to non-controlling interests - - - - - - - - - (0.9) (0.9)
TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS - - - 1.3 - 0.3 (4.7) - (3.1) 0.1 (3.0)
(Loss)/profit for the financial period - - - - - - (83.0) - (83.0) 5.0 (78.0)
OTHER COMPREHENSIVE INCOME
Cash flow hedges - recognised in the period - - - - - - - 0.4 0.4 - 0.4
Cash flow hedges - reclassified and reported in sales - - - - - - - (2.8) (2.8) - (2.8)
Cash flow hedges - reclassified and reported in cost of sales - - - - - - - (17.1) (17.1) - (17.1)
Cash flow hedges - taxation - - - - - - - 3.0 3.0 - 3.0
Fair value adjustment in respect of long term financial assets - recognised - - - - - - 77.3 - 77.3 - 77.3
Translation differences - Group - - - - (49.1) - - - (49.1) - (49.1)
Total comprehensive (loss) for the period - - - - (49.1) - (5.7) (16.5) (71.3) 5.0 (66.3)
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
(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 24 OCTOBER 2021
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 25 April 2021 is
prepared in accordance with International Financial Reporting Standards in
conformity with the requirements of the Companies Act 2006 and in accordance
with International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. The Interim
Results have been prepared on the basis of the policies set out in the 2021
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 2021 Annual
Report. In the year to 24 April 2022 the annual financial statements will be
prepared in accordance with IFRS as adopted by the UK Endorsement Board. This
change in the basis of preparation is required by UK company law for financial
reporting as a result of the UK's exit from the European Union on 31 January
2020 and the cessation of the transition period on 31 December 2020. This
change does not constitute a change in accounting policy, rather a change in
framework which is required to group the use of IFRS in company law. There is
no impact on the recognition, measurement or disclosure between the two
frameworks in the period reported.
The summary of results for the 52 weeks ended 25 April 2021 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 Group is still operating in the shadow of uncertainty cast by the ongoing
Covid-19 pandemic, with restrictions including lockdowns returning to parts of
Europe and with the emergence of new variants. There are also supply chain
risks which to date we have proven resilient to but which must be factored
into our future forecasting given these could continue for some time. On top
of this there are the well-publicised macroeconomic factors contributing to a
likely cost of living squeeze which could impinge on consumers spending plans
heading into the new year. 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
new banking facilities and covenants, which run until at least November 2024,
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, for the purpose of Viability and Going Concern Reporting,
forecast and projected a conservative base case scenario and also a number of
even more conservative scenarios taking into account assumptions impacting
gross profit margins, consumer shift from physical stores to web, impact of
direct to consumer, foreign exchange exposure and increases to direct costs.
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 banking 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, including during the
various lockdowns already experienced, 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 25 April 2021. The Group
continues to monitor the potential impact of new standards and interpretations
which have been or may be endorsed and required adoption by the Group in
future reporting period. 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.
The Group has received government support in the period relating to business
rates relief as a result of the Covid-19 pandemic. The amount of business
rates relief received by the Group in the period (or equivalent where received
in non-UK territories) was approx. £23m (52 weeks to 25 April 2020: approx.
£97.5m). Government grants that compensate the Group for expenses incurred
are recognised in profit or loss, as a deduction against the related expense,
over the periods necessary to match them with the related costs. The amounts
quoted have been recognised in Selling, distribution and administrative
expenses in the period.
Risks and uncertainties
The Board has considered the risks and uncertainties for the remaining half of
the financial year and determined that the risks presented in the FY21 Annual
Report, noted below, also remain relevant for the rest of the financial year:
· Strategy
· Third-party brand relationships, key suppliers and supply chain
management
· Brexit or 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 FY21 Annual Report.
2. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
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:
Key Judgements
Determining Related Party Relationships
Management determines whether a related party relationship exists by assessing
the nature of the relationship by reference to the requirements of IAS 24,
Related Party Disclosures. This is in order to determine whether significant
influence exists as a result of control, shared directors or parent companies,
or close family relationships. The level at which one party may be expected to
influence the other is also considered for transactions involving close family
relationships.
Control And Significant Influence Over Certain Entities
Under IAS 28 Investments in Associates and Joint Ventures, 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. The Group holds
greater than 20% of the voting rights of Studio Retail Group Plc and Mulberry
Group Plc, whereby management
consider that the Group does not have significant influence over these entities for combinations of the following reasons:
•
The Group does not have any representation on the board of directors of the investee other than a Frasers
Group representative having an observer role on the board of Studio
Retail
Group Plc. Management have reviewed the terms of the observer arrangement
and have concluded that this does not give them the right to participate in or
influence the financial or operating decisions of Studio Retail Group
Plc. Studio Retail Group Plc
can terminate this arrangement at any time, and can determine which parts of the board
meetings the representative can be present at and what information they are given access to.
It should also be noted that the Frasers Group representative did not attend
any board meetings in full or part during the reporting period;
•
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 its investee companies;
• 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 these entities then the equity method of
accounting would be used and the percentage shareholding multiplied by the
results of the investee in the period would be recognised in profit or loss.
The Group holds 49% of the share capital of Four (Holdings) Limited which is
accounted for using the equity method. The Group does not have any
representation on the board of directors and no participation in decisions
about relevant activities such as establishing operating and capital
decisions, including budgets, appointing or remunerating key management
personnel or service providers and terminating their services or employment.
However, in prior periods the Group has provided Four (Holdings) Limited with
a significant loan. At the reporting date, the amount owed by Four (Holdings)
Limited totalled £60.0m (£21.5m net of amounts recognised in respect of
expected credit losses). 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 and therefore Four (Holdings) Limited
is not equity accounted.
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 taken to the Income
Statement.
Management considers various factors when determining whether a forecast
transaction is highly probable. These factors include detailed sales 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, the Hedging reserve of £29.5m (excluding
deferred tax) would be shown in Finance Income.
Key Estimates
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:
a) Continuity inventory
b) Seasonal inventory lines - specifically seasons that have now
finished
c) Third party versus own brand inventory
d) Ageing of inventory
e) Sports Retail or Premium Lifestyle
f) Local economic conditions
g) Divisional specific factors
h) Increased cost of inventory and lower margins with the devaluation
of the Pound
i) Over-stock and out of season inventory as a result of Covid-19
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 impact of Covid-19
• Tunnelling - Cost of handling stock for reworking, repacking and
repricing
• Repricing - Labour cost associated with repricing units of stock
• Shrinkage - Stock lost through damage and theft
Total Group inventory provision at 24 October 2021 is 16.1% (25
October 2020: 15.9%, 25 April 2021:
16.6%). A 1% change in the total provision would impact adjusted and
reported PBT by approx. £14.3m (25 October 2020: £13.6m, 25 April 2021:
£13.2m). 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 (FY21: £100,000)
for large leasehold stores, £50,000 (FY21: £50,000) for smaller
leasehold stores (£25,000 per store for Game UK and Game Spain stores) and
$/€50,000 (FY21: $/€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 in
FY20 in which a material dilapidations provision was recognised.
A 10% increase per store would result in an approx. £8.0m charge to the
income statement.
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 during H1 FY22
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 (FY21: 10%). A 5% increase would result in approx.
£6.5m increase in the provision.
• 3% interest on the liability (FY21: 3%). A 1% increase would result
in approx. £11.5m increase in the provision.
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.
IFRS 16
The key areas of judgement in relation to property leases recognised under
IFRS 16 are below:
• 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 1.4% - 1.8% 0.3% - 0.8% 1.5% - 3.3%
Greater than 5 years and up to 10 years 2.0% - 2.2% 0.5% - 1.2% 2.5% - 3.5%
Greater than 10 years and up to 20 years 2.2% - 2.5% 0.8% - 1.4% 2.9% - 3.7%
Greater than 20 years 2.5% - 2.8% 1.1% - 1.7% 3.5% - 3.8%
• The right of use asset will be reviewed for impairment at each
reporting period in line with IAS 36 impairment 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. The assumptions used
are consistent with those disclosed in the Freehold Land and Buildings and
Long-term leasehold section below. Impairments in the period have been
recognised for the amount of £55.2m, being £29.5m against the right-of-use
asset (£25.0m UK Sports Retail segment, £2.7m Premium Lifestyle segment,
£1.0m European Retail segment, and £0.8m Rest of the World Retail segment)
and £25.7m against plant & equipment and short-term leasehold
improvements (£23.2m UK Sports Retail segment, £2.0 Premium Lifestyle
segment, £0.5m European Retail segment). The impairments were due to the
ongoing impact of Covid-19 and the challenges in the retail sector on the
forecast cash flows of the CGU, including supply chain issues and the
anticipated cost of living squeeze on consumers.
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.
Management have reviewed whether there is any indication that an impairment
loss recognised in prior periods relating to IFRS 16 may no longer exist or
may have decreased. Management have performed an assessment taking into
account the uncertainty cast by the ongoing Covid-19 pandemic, supply chain
risks, and macroeconomic factors and are satisfied that there is no indication
of impairment loss reversals, and therefore £nil has been recognised in the
Consolidated Income Statement (FY21: £nil).
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. With
regard to the sales and gross margin assumptions, below we have performed a
sensitivity for both an improvement and a decline against the existing
assumptions used:
Forecast: Impact of change in assumption: Impairment increase / (decrease) £m
Sales year 1 5% - improvement (4.9)
Sales year 1 5% - reduction 9.5
Existing Gross Margin year 1 >40% 100bps - improvement (0.6)
Existing Gross Margin year 1 >40% 100bps - reduction 1.4
Freehold Land and Buildings and Long-term leasehold
Freehold land and buildings and long-term leasehold assets are assessed at
each reporting period for whether there is any indication of impairment in
line with IAS 36 impairment.
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 £80.1m due to the ongoing impact
of Covid-19 and the challenges in the retail sector on the forecast cash flows
of the CGU. This is split £79.9m against freehold land and buildings (£2.8m
UK Sports Retail segment, £74.5m Premium Lifestyle segment, £1.4m European
Retail segment, £1.2m Rest of World segment) and £0.2m plant and equipment.
Value in use (VIU)
The value in use is calculated based on five year cash flow projections. These
are formulated by using the Group's forecast cash flows of each individual CGU
excluding any Covid-19 impact, taking into account historic performance of the
CGU, and then adjusting for the Group's current views on future profitability
of each CGU as a result of Covid-19 and knowledge of the current market. 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) 6% 6% 6% 6% 6%
Terminal growth rate of 2%
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. With
regard to the sales and gross margin assumptions, below we have performed a
sensitivity for both an improvement and a decline against the existing
assumptions used:
Forecast: Impact of: Impairment increase / (decrease) £m
Sales year 1 5% - improvement (1.0)
Sales year 1 5% - reduction 0.6
Existing Gross Margin year 1 > 40% 100bps - improvement (0.3)
Existing Gross Margin year 1 > 40% 100bps - reduction 0.4
Fair value less cost 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; or
payable for the unit and rent free incentive.
· 2 years void, 3 years rent free.
Yield bands - ranging from 7% - 15%
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; or
by the ERV and reversionary yield. Although we consider the commercial reality
is that fair value less costs to sell will be higher than vacant possession · 2 years void, 3 years rent free.
this very conservative assumption is in line with both technical accounting
rules and that of our management experts. Yield bands - ranging from 7% - 15%
Third party tenanted An ERV is applied using a percentage band on the passing rent. An appropriate ERV bands applied to passing rent -50%
reversionary yield is applied reflecting the risk of tenant and renewal to
Yield bands - ranging from 6.5% - 15%
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 £4.3m.
The total recoverable amount of the assets that were impaired at the period
end was £60.3m, with £40.3m of this being based on their fair value less
costs of disposal and £20.0m being based on their value in use.
Management have reviewed whether there is any indication that an impairment
loss recognised in prior periods relating to freehold land & buildings and
Long-term leasehold assets may no longer exist or may have decreased.
Management have performed an assessment taking into account the uncertainty
cast by the ongoing Covid-19 pandemic, supply chain risks, and macroeconomic
factors and are satisfied that there is no indication of impairment loss
reversals, and therefore £nil has been recognised in the Consolidated Income
Statement (FY21: £nil).
3. SEGMENTAL ANALYSIS
Management has determined to present its segmental disclosures consistently
with the presentation in the 2021 Annual Report. 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 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 economic 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, 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, and
retail store operations in Northern Ireland.
ii) Premium Lifestyle - includes the results of the premium retail
businesses Flannels, Cruise, van mildert, Jack Wills, House of Fraser and
Sofa.com along with the related websites, and freehold property owning
companies where trading is purely from Premium Lifestyle fascias.
2) European Retail - includes all the Group's sports retail stores,
management and operations in Europe including the Group's European
Distribution Centres in Belgium and Austria, European freehold property owning
companies, as well as GAME Spain stores and Baltics online.
3) Rest of World Retail - includes the results of US based retail
activities, Asia based retail activities along with their e-commerce
offerings.
4) 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 four operating
segments being UK Retail (including UK Sports Retail and Premium Lifestyle),
European Retail, Rest of World 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.
The FY21 numbers have been re-categorised due to changes in the reporting
segments, with freehold property owning companies where trading is purely from
Premium Lifestyle fascias being moved from UK Sports Retail to Premium
Lifestyle.
Segmental information for the 26 weeks ended 24 October 2021 (unaudited):
UK Sports Retail Premium Lifestyle UK Retail Total European Retail Rest of World Retail Total Wholesale & Licensing Eliminations Group
Retail Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Sales to external customers 1,367.1 427.9 1,795.0 399.8 65.6 2,260.4 79.4 - 2,339.8
Sales to other segments - - - - - - 45.0 (45.0) -
Revenue 1,367.1 427.9 1,795.0 399.8 65.6 2,260.4 124.4 (45.0) 2,339.8
Gross profit 599.0 204.3 803.3 174.8 34.8 1,012.9 33.0 - 1,045.9
Operating profit before foreign exchange, exceptional items and property and 174.5 70.2 244.7 65.1 16.6 326.4 4.1 - 330.5
other related impairments
Realised foreign exchange gain / (loss) 0.7 (0.5) 0.2 1.5 (0.4) 1.3 3.2 - 4.5
Property and other related impairments (51.0) (79.3) (130.3) (3.1) (1.9) (135.3) - - (135.3)
Operating profit 124.2 (9.6) 114.6 63.5 14.3 192.4 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) (1.1) (0.4) (16.1) (0.2) - (16.3)
Profit before taxation 112.8 (10.2) 102.6 62.4 13.9 178.9 7.1 - 186.0
Taxation (42.3)
Profit for the period 143.7
Total assets 3,470.90 565.6 4,036.5 470.4 79.7 4,586.6 341.7 (1,189.0) 3,739.3
Total liabilities (2,138.6) (692.5) (2,831.1) (604.9) (4.6) (3,440.6) (120.5) 1,189.0 (2,372.1)
Tangible asset additions 65.0 40.7 105.7 6.0 0.4 112.1 0.6 - 112.7
Right-of-use asset additions 5.0 15.3 20.3 14.7 0.8 35.8 - - 35.8
Segmental information for the 26 weeks ended 25 October 2020((1)) (unaudited):
UK Sports Retail Premium Lifestyle UK Retail Total European Retail Rest of World Retail Total Wholesale & Licensing Eliminations Group
Retail Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Sales to external customers 1,071.6 320.4 1,392.0 352.0 77.1 1,821.1 72.2 - 1,893.3
Sales to other segments - - - - - - 30.6 (30.6) -
Revenue 1,071.6 320.4 1,392.0 352.0 77.1 1,821.1 102.8 (30.6) 1,893.3
Gross profit 476.2 150.5 626.7 146.7 30.5 803.9 29.9 - 833.8
Operating profit before foreign exchange, exceptional items and property and 171.5 33.7 205.2 34.0 10.6 249.8 7.1 - 256.9
other related impairments
Exceptional 3.7 - 3.7 - - 3.7 - - 3.7
Realised foreign exchange (loss)/gain (13.7) (0.6) (14.3) 7.6 (0.1) (6.8) (0.6) - (7.4)
Property and other related impairments (107.1) (6.6) (113.7) (14.8) (0.4) (128.9) - - (128.9)
Operating profit 54.4 26.5 80.9 26.8 10.1 117.8 6.5 - 124.3
Investment income 40.0 - 40.0 - - 40.0 - - 40.0
Investment costs (37.1) - (37.1) - - (37.1) - - (37.1)
Finance income 2.1 - 2.1 0.1 - 2.2 - - 2.2
Finance costs (19.4) (0.8) (20.2) (0.4) (2.5) (23.1) (0.2) - (23.3)
Profit before taxation 40.0 25.7 65.7 26.5 7.6 99.8 6.3 - 106.1
Taxation (21.7)
Profit for the period 84.4
Total assets 2,866.9 510.1 3,377.0 459.1 125.9 3,962.0 340.6 (532.3) 3,770.3
Total liabilities (1,751.5) (329.0) (2,080.5) (615.9) (185.8) (2,882.2) (87.1) 532.3 (2,437.0)
Tangible asset additions 31.5 8.3 39.8 12.5 4.7 57.0 - - 57.0
Right-of-use asset additions 26.9 13.3 40.2 9.7 - 49.9 - - 49.9
(1) The FY21 numbers have been re-categorised due to changes in
the reporting segments, with freehold property owning companies where trading
is purely from Premium Lifestyle fascias being moved from UK Sports Retail to
Premium Lifestyle.
Sales to other segments are priced at cost plus a 10% mark-up.
Segmental information for the 52 weeks ended 25 April 2021((1)) (audited):
UK Sports Retail Premium Lifestyle UK Retail Total European Retail Rest of World Retail Total Wholesale & Licensing Eliminations Group
Retail Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Sales to external customers 1,968.5 735.6 2,704.1 615.2 152.7 3,472.0 153.3 - 3,625.3
Sales to other segments - - - - - - 95.4 (95.4) -
Revenue 1,968.5 735.6 2,704.1 615.2 152.7 3,472.0 248.7 (95.4) 3,625.3
Gross profit 829.3 330.3 1,159.6 239.7 64.0 1,463.3 67.5 - 1,530.8
Operating profit before foreign exchange, exceptional items and property and 191.0 34.3 225.3 20.5 18.6 264.4 20.2 - 284.6
other related impairments
Exceptional 3.1 (1.6) 1.5 (3.1) - (1.6) - - (1.6)
Realised foreign exchange (loss) / gain (20.2) (0.2) (20.4) 0.8 (1.4) (21.0) (5.3) - (26.3)
Property and other related impairments (201.9) (40.9) (242.8) (71.6) (2.6) (317.0) - - (317.0)
Operating (loss) / profit (28.0) (8.4) (36.4) (53.4) 14.6 (75.2) 14.9 - (60.3)
Investment income 103.7 - 103.7 - - 103.7 - - 103.7
Investment costs (7.7) - (7.7) - - (7.7) - - (7.7)
Finance income 6.5 - 6.5 2.5 - 9.0 - - 9.0
Finance costs (28.1) (1.2) (29.3) (2.7) (3.8) (35.8) (0.4) - (36.2)
Profit before taxation 46.4 (9.6) 36.8 (53.6) 10.8 (6.0) 14.5 - 8.5
Taxation (86.5)
Loss for the period (78.0)
Total assets 3,305.9 668.0 3,973.9 670.8 158.6 4,803.3 344.7 (1,362.9) 3,785.1
Total liabilities (2,357.8) (499.6) (2,857.4) (857.0) (95.1) (3,809.5) (127.5) 1,362.9 (2,574.1)
Tangible asset additions 163.4 33.1 196.5 17.4 3.0 216.9 2.5 - 219.4
Right-of-use asset additions 77.5 14.1 91.6 24.3 2.4 118.3 0.5 - 118.8
(1) The FY21 numbers have been re-categorised due to changes in
the reporting segments, with freehold property owning companies where trading
is purely from Premium Lifestyle fascias being moved from UK Sports Retail to
Premium Lifestyle.
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 24
October 2021 (unaudited):
UK Sports Retail Premium Lifestyle UK Retail Total European Retail Rest Of World Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Reported PBT 112.8 (10.2) 102.6 62.4 13.9 178.9 7.1 186.0
Fair value adjustment to derivative financial instruments (10.7) - (10.7) - - (10.7) - (10.7)
Net investment costs / (income) 10.0 - 10.0 - - 10.0 - 10.0
Realised FX (gain) / loss (0.7) 0.5 (0.2) (1.5) 0.4 (1.3) (3.2) (4.5)
Share scheme 6.0 - 6.0 - - 6.0 - 6.0
Adjusted PBT 117.4 (9.7) 107.7 60.9 14.3 182.9 3.9 186.8
Reconciliation of Reported PBT to Adjusted PBT for the 26 week period ended 25
October 2020((1)) (unaudited):
UK Sports Retail Premium Lifestyle UK Retail Total European Retail Rest Of World Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Reported PBT 40.0 25.7 65.7 26.5 7.6 99.8 6.3 106.1
Exceptional items (3.7) - (3.7) - - (3.7) - (3.7)
Fair value adjustment to derivative financial instruments 8.6 - 8.6 - - 8.6 - 8.6
Net investment (income) / costs (2.9) - (2.9) - - (2.9) - (2.9)
Realised FX loss / (gain) 13.6 0.6 14.2 (7.5) 0.1 6.8 0.6 7.4
Adjusted PBT 55.6 26.3 81.9 19.0 7.7 108.6 6.9 115.5
(1) The FY21 numbers have been re-categorised due to changes in
the reporting segments, with freehold property owning companies where trading
is purely from Premium Lifestyle fascias being moved from UK Sports Retail to
Premium Lifestyle.
Reconciliation of Reported PBT to Adjusted PBT for the 52 week period ended 25
April 2021((1)) (audited):
UK Sports Retail Premium Lifestyle UK Retail Total European Retail Rest Of World Retail Total Retail Wholesale & Licensing Group Total
(£m) (£m) (£m) (£m) (£m) (£m) (£m) (£m)
Reported PBT 46.4 (9.6) 36.8 (53.6) 10.8 (6.0) 14.5 8.5
Exceptional items (3.1) 1.6 (1.5) 3.1 - 1.6 - 1.6
Fair value adjustment to derivative financial instruments 4.6 - 4.6 - - 4.6 - 4.6
Net investment (income) / costs (96.0) - (96.0) - - (96.0) - (96.0)
Realised FX loss / (gain) 20.2 0.2 20.4 (0.8) 1.4 21.0 5.3 26.3
Share scheme 1.3 - 1.3 - - 1.3 - 1.3
Adjusted PBT (26.6) (7.8) (34.4) (51.3) 12.2 (73.5) 19.8 (53.7)
(1) The FY21 numbers have been re-categorised due to changes in
the reporting segments, with freehold property owning companies where trading
is purely from Premium Lifestyle fascias being moved from UK Sports Retail to
Premium Lifestyle.
4. EXCEPTIONAL ITEMS
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021
25 October 2020
25 April 2021
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Impairments - 3.7 9.1
Profit on disposal of intangible assets - (7.4) (7.5)
- (3.7) 1.6
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. The prior period profit on disposal of intangible assets in the prior
period relates to the sale of certain IP relating to the BELONG business.
5. INVESTMENT INCOME
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021
25 October 2020
25 April 2021
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Profit on disposal of financial assets and equity derivative financial 23.2 4.0 27.4
instruments
Premium received on derivative financial instruments 5.4 16.9 20.6
Fair value gain on derivative financial instruments - 18.8 55.2
Dividend income 0.2 0.3 0.5
28.8 40.0 103.7
The profit on disposal of financial assets and 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 in the prior
period largely relates to Hugo Boss options.
6. INVESTMENT COSTS
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021
25 October 2020
25 April 2021
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Fair value loss on derivative financial instruments 38.8 37.1 7.7
38.8 37.1 7.7
The fair value loss on derivative financial instruments largely relates to
Hugo Boss options and contracts for difference.
7. FINANCE INCOME
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021
25 October 2020
25 April 2021
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Bank interest receivable 0.1 - 3.5
Other finance income - 2.2 5.5
Fair value adjustment to derivative financial instruments 12.5 - -
12.6 2.2 9.0
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. Other finance income largely relates to premiums received on
option contracts.
8. FINANCE COSTS
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021
25 October 2020
25 April 2021
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Interest on bank loans and overdrafts 4.8 5.6 11.1
Other interest 4.0 2.6 8.6
Interest on retirement benefit obligations - - 0.1
IFRS 16 lease interest 5.7 6.5 11.8
Fair value adjustment to derivate financial instruments 1.8 8.6 4.6
16.3 23.3 36.2
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,
489,203,650 (25 October 2020: 501,953,439, 25 April 2021: 501,955,281), is
adjusted to assume conversion of all dilutive potential ordinary shares under
the Group's share schemes, being 10,125 (25 October 2020: 1,239,075, 25 April
2021: 88,605), to give the diluted weighted average number of shares of
489,213,775 (25 October 2020: 503,192,514, 25 April 2021: 502,043,886). For
the 52 weeks ended 25 April 2021, as there was a loss for the period the
effect of potentially dilutive ordinary shares was anti-dilutive, and
therefore the weighted average number of shares for the Diluted EPS
calculation was kept the same as for the Basic EPS calculation for that
period.
BASIC AND DILUTED EARNINGS PER SHARE
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 52 weeks ended 52 weeks ended
24 October 2021
24 October 2021
25 October 2020
25 October 2020
25 April 2021
25 April 2021
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
(audited)
Basic Diluted Basic Diluted Basic
Diluted
£m £m £m £m £m £m
Profit / (loss) for the period 138.2 138.2 80.4 80.4 (83.0) (83.0)
Number in millions Number in millions Number in millions
Weighted average number of shares 489.2 489.2 502.0 503.2 502.0 502.0
Pence per share Pence per share Pence per share
Earnings per share 28.2 28.2 16.0 16.0 (16.5) (16.5)
ADJUSTED EARNINGS PER SHARE
The adjusted earnings per share reflects the underlying performance of the
business compared with the prior period and is calculated by dividing adjusted
earnings by the weighted average number of shares for the period. Adjusted
earnings is used by management as a measure of profitability within the Group.
Adjusted earnings is defined as profit/(loss) for the period attributable to
equity holders of the parent for each financial period but excluding the
post-tax effect of certain non-trading items. Tax has been calculated with
reference to the effective rate of tax for the Group.
The Directors believe that the adjusted earnings and adjusted earnings per
share measures provide additional useful information for shareholders on the
underlying performance of the business and are consistent with how business
performance is measured internally. Adjusted earnings is not a recognised
profit measure under IFRS and may not be directly comparable with adjusted
profit measures used by other companies.
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 52 weeks ended 52 weeks ended
24 October 2021
24 October 2021
25 October 2020
25 October 2020
25 April 2021
25 April 2021
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
(audited)
Basic Diluted Basic Diluted Basic
Diluted
£m £m £m £m £m £m
Profit / (loss) for the period 138.2 138.2 80.4 80.4 (83.0) (83.0)
Pre-tax adjustments to profit / (loss) for the period for the following items:
Exceptional items - - (3.7) (3.7) 1.6 1.6
Fair value adjustment to derivative financial instruments (10.7) (10.7) 8.6 8.6 4.6 4.6
Net investment costs / (income) 10.0 10.0 (2.9) (2.9) (96.0) (96.0)
Realised FX (gain) / loss (4.5) (4.5) 7.4 7.4 26.3 26.3
Share scheme 6.0 6.0 - - 1.3 1.3
Tax adjustments on the above items 3.8 3.8 (2.2) (2.2) (5.9) (5.9)
Adjusted profit / (loss) for the period 142.8 142.8 87.6 87.6 (151.1) (151.1)
Number in millions Number in millions Number in millions
Weighted average number of shares 489.2 489.2 502.0 503.2 502.0 502.0
Pence per share Pence per share Pence per share
Adjusted earnings per share 29.2 29.2 17.5 17.4 (30.1) (30.1)
10. PROVISIONS
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
26 weeks ended 25 October 2020 (unaudited)
Legal and regulatory Property related Other Total
(£m) (£m) (£m) (£m)
At 26 April 2020 225.4 107.9 2.7 336.0
Amounts provided 1.5 18.1 - 19.6
Amounts utilised / reversed (1.4) (21.8) (0.6) (23.8)
At 25 October 2020 225.5 104.2 2.1 331.8
52 weeks ended 25 April 2021 (audited)
Legal and regulatory Property related Other Total
(£m) (£m) (£m) (£m)
At 26 April 2020 225.4 107.9 2.7 336.0
Amounts provided 7.3 41.5 - 48.8
Amounts utilised / reversed (16.9) (5.3) (1.4) (23.6)
At 25 April 2021 215.8 144.1 1.3 361.2
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 enquiries 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.
A reimbursement asset of £118.3m (25 April 2021 and 25 October 2020:
£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.
Other provisions relate to provisions for restructuring and employment
(non-retirement related).
11. FINANCIAL INSTRUMENTS
(a) Financial assets and liabilities by category and fair value hierarchy
The fair value hierarchy for financial assets and liabilities, which are
principally denominated in Sterling or US Dollars, were as follows:
(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* - - - 390.1 390.1
Cash and cash equivalents - - - 350.7 350.7
Amounts owed by related parties - - - 24.0 24.0
FVOCI:
Long Term Financial Assets (Equity Instruments) - designated 352.4 - - - 352.4
Derivative financial assets (FV):
Foreign forward purchase and sale contracts - 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.
(Unaudited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS - 25 October 2020
Amortised cost:
Trade and other receivables* - - - 473.5 473.5
Cash and cash equivalents - - - 371.3 371.3
Amounts owed by related parties - - - 35.2 35.2
FVOCI:
Long Term Financial Assets (Equity Instruments) - designated 127.2 - - - 127.2
Derivative financial assets (FV):
Foreign forward purchase and sale contracts - 28.4 - - 28.4
Derivative financial assets - contracts for difference & equity options - 36.5 - - 36.5
- 64.9 - - 64.9
FINANCIAL LIABILITIES - 25 October 2020
Amortised cost:
Non-current borrowings - - - (621.4) (621.4)
Trade and other payables** - - - (568.1) (568.1)
IFRS 16 lease liabilities - - - (715.6) (715.6)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (6.6) - - (6.6)
Derivative financial liabilities - contracts for difference & equity - (81.8) - - (81.8)
options
- (88.4) - - (88.4)
*Prepayments of £70.1m are not included as a financial asset.
**Other taxes including social security costs of £57.9m are not included as a
financial liability.
(Audited) Level 1 Level 2 Level 3 Other Total
(£m) (£m) (£m) (£m) (£m)
FINANCIAL ASSETS - 25 April 2021
Amortised cost:
Trade and other receivables* - - - 435.1 435.1
Cash and cash equivalents - - - 457.0 457.0
Amounts owed by related parties - - - 26.8 26.8
FVOCI:
Long Term Financial Assets (Equity Instruments) - designated 263.3 - - - 263.3
Derivative financial assets (FV):
Foreign forward purchase and sale contracts - 35.3 - - 35.3
Derivative financial assets - contracts for difference & equity options - 20.1 - - 20.1
- 55.4 - - 55.4
FINANCIAL LIABILITIES - 25 April 2021
Amortised cost:
Non-current borrowings - - - (705.9) (705.9)
Trade and other payables** - - - (620.1) (620.1)
IFRS 16 lease liabilities - - - (722.7) (722.7)
Derivative financial liabilities (FV):
Foreign forward and written options purchase and sales contracts - unhedged - (17.5) - - (17.5)
Derivative financial liabilities - contracts for difference & equity - (1.7) - - (1.7)
options
- (19.2) - - (19.2)
*Prepayments of 84.6m are not included as a financial asset.
**Other taxes including social security costs of £26.2m are not included as a
financial liability.
(b) Financial assets and liabilities
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
• Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
• Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly
or indirectly; and
• Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable market
data.
Contracts for difference are classified as Level 2 as the fair value is
calculated using quoted prices for listed shares 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 £nil (25 October 2020: £36.5m, 25
April 2021: £20.1m) and derivative financial liabilities balance of £20.8m
(25 October 2020: £81.8m, 25 April 2021: £1.7m). The derivative financial
assets and derivative financial liabilities as at 24 October 2021 relate to
strategic investments held of between 0.02% and 0.05% 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 24 October 2021 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 £62.4m (25 October
2020: £68.8m, 25 April 2021: £65.2m).
(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 24 October 2021 was:
24 October 2021 25 October 2020 25 April 2021
(unaudited)
(unaudited)
(audited)
(£m)
(£m) (£m)
Assets
US Dollar purchases - GBP 9.6 0.4 2.4
US Dollar purchases - EUR 7.6 4.6 2.3
Euro sales 41.1 23.3 30.7
Total 58.3 28.3 35.4
Liabilities
US Dollar purchases - GBP 2.0 - 7.3
US Dollar purchases - EUR - - 0.1
Total 2.0 - 7.4
The details of hedged forward foreign currency purchase contracts and
contracted forward rates were as follows:
24 October 2021 (unaudited) 25 October 2020 (unaudited) 25 April 2021 (audited)
Currency (millions) GBP (millions) Rates Currency (millions) GBP (millions) Rates Currency (millions) GBP (millions) Rates
US Dollar purchases (USD / GBP) 720.0 516.8 1.36 - 1.41 160.0 122.1 1.31 720.0 523.1 1.36 - 1.41
US Dollar purchases (USD / EUR) 150.0 104.0 1.21 - 1.31 60.0 40.0 1.32 120.0 83.9 1.21 - 1.31
Euro sales (EUR / GBP) (360.0) (353.1) 0.99 - 1.08 (390.0) (381.1) 0.99 - 1.09 (240.0) (242.4) 0.99
The timing of the contracts is as follows:
Currency Hedging against Currency value Timing Rates
USD / GBP USD inventory purchases USD 720m FY22 - FY23 1.36 - 1.41
USD / EUR USD inventory purchases USD 150m FY22 - FY24 1.21 - 1.31
EUR / GBP Euro sales EUR 360m FY23, FY25 0.99 - 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.
24 October 2021 25 October 2020 25 April 2021
(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 9.0 (9.0) (0.4) 0.4 (4.8) 4.8
US Dollar purchases - EUR 5.4 (5.4) (3.9) 3.9 2.1 (2.1)
Euro sales 7.2 (7.2) (11) 11 3.1 (3.1)
At 24 October 2021 £620.8m of purchase contracts (25 October 2020:
£167.6m, 25 April 2021: £607.0m)
and £353.1m of forward sales contracts (25 October 2020: £381.1m, 25
April 2021: £242.4m) qualified for hedge accounting and the
gain on fair valuation of these contracts of £21.6m (25 October 2020:
£15.3m, 25 April 2021: £0.4m) has therefore
been recognised in other comprehensive income.
At 24 October 2021, £231.5m hedged purchase contracts had a maturity of
greater than 12 months (25 October 2020: £nil, 25 April 2021:
£210.5m) and £231.9m of hedged sales had a maturity of greater than 12 months (25
October 2020: £242.0m, 25 April 2021: £242.4m).
The movements through the Hedging reserve are:
USD/GBP EUR/GBP USD/EUR Total Hedge Movement Deferred Tax Total Hedging Reserve
As at 26 April 2020 (audited) - 16.6 17.2 33.8 (5.8) 28.0
Recognised (0.4) (11.0) (3.9) (15.3) - (15.3)
Reclassified in sales - (1.3) - (1.3) - (1.3)
Reclassified in inventory / cost of sales - - (8.7) (8.7) - (8.7)
Deferred tax - - - - 4.3 4.3
As at 25 October 2020 (unaudited) (0.4) 4.3 4.6 8.5 (1.5) 7.0
Recognised (4.5) 14.2 6.0 15.7 - 15.7
Reclassified in sales - (1.5) - (1.5) - (1.5)
Reclassified in inventory / cost of sales - - (8.4) (8.4) - (8.4)
Deferred tax - - - - (1.3) (1.3)
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
(c)(ii) Unhedged currency instruments
The sterling principal amounts of unhedged written currency option contracts
and swaps and the contracted rates were as follows:
24 October 2021 25 October 2020 25 April 2021
(unaudited)
(unaudited)
(audited)
(£m)
(£m) (£m)
US Dollar swaps - GBP 72.3 - -
Contracted rates USD / GBP 1.37-1.42 - -
US Dollar purchases - EUR 82.2 - 40.3
Contracted rates USD / EUR 1.26-1.31 - 1.31
Euro sales (494.5) (457.5) (383.8)
Contracted rates EUR / GBP 0.99-1.08 0.99-1.09 0.99
The loss on fair value of the written options and swaps of £1.8m has been
included within finance costs (25 October 2020: £8.6m, 25 April 2021:
£4.6m).
At 24 October 2021, £61.3m of unhedged purchase contracts had a maturity at
inception of greater than 12 months (25 October 2020: £nil, 25 April 2021:
£nil) and £231.9m of unhedged sales contracts had a maturity at inception
of greater than 12 months (25 October 2020: £242.0m, 25 April 2021:
£335.4m).
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 FY22 H1 value excludes short term swaps of GBP/USD of USD 100m which are
required for Treasury management purposes only (25 October 2020: EUR/USD of
EUR 100.0m, 25 April 2021: £nil short term swaps).
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.
12. CASH INFLOW FROM OPERATING ACTIVITIES
26 weeks ended 26 weeks ended 52 weeks ended
24 October 2021
25 October 2020
25 April 2021
(unaudited) (unaudited)
(audited)
(£m) (£m)
(£m)
Profit before taxation 186.0 106.1 8.5
Net finance costs 3.7 21.1 27.2
Net investment costs / (income) 10.0 (2.9) (96.0)
Operating profit 199.7 124.3 (60.3)
Depreciation & impairment of property, plant and equipment 251.8 247.3 615.5
Depreciation on investment properties 1.3 0.7 1.9
Gain on disposal of lease liabilities (5.9) (19.3) (27.7)
Amortisation of intangible assets 3.4 4.1 7.1
Impairment of intangible assets 4.4 3.7 9.1
Profit on disposal of property, plant and equipment (0.6) - (9.7)
Profit on disposal of intangibles - (7.4) (7.5)
Gain on bargain purchase - - (3.1)
Operating cash inflow before changes in working capital 454.1 353.4 525.3
Decrease / (increase) in receivables 79.6 (141.7) (136.6)
(Increase) / decrease in inventories (109.7) 92.0 99.3
Increase in payables 143.5 31.0 64.9
(Decrease) / increase in provisions (7.7) (4.2) 25.4
Cash inflows from operating activities 559.8 330.5 578.3
13. POST BALANCE SHEET EVENTS
On 30 November 2021 the Group refinanced its existing borrowings and entered
into a combined term loan and revolving credit facility of £930.0m for a
period of 3 years, with the possibility to extend this by a further 2 years.
On 4 October 2021 the Group commenced a share buyback programme with the
purpose to reduce the share capital of the Company. Up to 24 October 2021,
2,522,661 ordinary shares of 10p each were acquired for consideration of
£15.8m. The programme became irrevocable on 5 November 2021. The programme
has a maximum number of ordinary shares of 10,000,000 and the aggregate
purchase price of all shares acquired will be no greater than £70.0m. In
total 6,564,523 ordinary shares of 10p each for consideration of £43.1m have
been acquired through this programme.
14. CAPITAL COMMITMENTS
At the period end, the Group had capital commitments of £nil relating to
property purchases (25 October 2020: £10.6m, 25 April 2021: £nil) and
£68.5m relating to warehouse development (25 October 2020: £48.0m, 25 April
2021: £87.1m).
15. PURCHASE OF OWN SHARES
On 4 May 2021 the Group commenced a share buyback programme with the purpose
to reduce the share capital of the Company. 3,895,385 ordinary shares of 10p
each for consideration of £22.4m were acquired through this programme.
On 21 June 2021 the Group commenced an irrevocable non-discretionary share
buyback programme to purchase the Group's shares with the purpose to reduce
the share capital of the Company. 2,024,127 ordinary shares of 10p each for
consideration of £12.0m were acquired through this programme.
On 6 August 2021 the Group commenced a share buyback programme with the
purpose to reduce the share capital of the Company. 4,309,458 ordinary shares
of 10p each for consideration of £28.3m were acquired through this programme.
On 4 October 2021 the Group commenced a share buyback programme with the
purpose to reduce the share capital of the Company. Up to 24 October 2021,
2,522,661 ordinary shares of 10p each were acquired for consideration of
£15.8m.
16. 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 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.
(2) Use of the Company jet and helicopter are charged at
commercial rates.
26 weeks ended 25 October 2020 (unaudited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries((1)) Associate 1.0 22.6 34.8 1.2
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley((2)) Plc Director 0.4 - - -
N M Design London Limited Connected persons - 0.1 - -
Rangers Retail Limited Associate - - - 0.1
Newcastle United Football Club & St James Holdings Limited((3)) Connected persons 0.1 - 0.2 2.0
(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
(2) Use of the Company jet and helicopter are charged at
commercial rates.
(3) The sales relate to inventory.
52 weeks ended 25 April 2021 (audited):
Related party Relationship Sales Purchases Trade and other receivables Trade and other payables
(£m) (£m) (£m) (£m)
Four (Holdings) Limited & subsidiaries((1)) Associate 2.2 41.1 26.5 0.1
Mash Holdings Limited Parent company - - 0.2 -
Mike Ashley((2)) Plc Director 1.3 - - -
N M Design London Limited Connected persons - 0.1 - -
MM Prop Consultancy Limited Connected persons - 2.5 - 2.5
Newcastle United Football Club & St James Holdings Limited((3)) Connected persons 0.2 (1.9) 0.1 -
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.
(2) Use of the Company jet and helicopter are charged at
commercial rates.
(3) The sales relate to inventory and purchases include the
reversal of the FY20 advertising charge.
An agreement has been entered into with Double Take Limited, a company owned
by Mash Holdings Limited and in which Matilda Ashley, Mike Ashley's daughter,
is a director. Under the agreement, Double Take Limited licenses the Group the
exclusive rights to the cosmetic brand SPORT FX. During the period a review
has been undertaken and no royalties or other fees are expected to be payable
to Double Take Limited for these rights until at least September 2022, the fee
arrangement will continue to be reviewed on an ongoing basis, no provision is
required in the financial statements. It should be noted that the Group
(rather than Double Take Limited) owns the rights to SPORT FX for clothing,
footwear and sports equipment.
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 (25
October 2020: £67.5m, 25 April 2021: £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.
The sales amount 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 Studio Retail Group plc and
Mulberry Group plc. Studio Retail Group plc have disclosed transactions with
the Group as a related party within their most recent Financial Statements.
Transactions between Studio Retail Group plc and the Group related to normal
commercial trading arrangements and are not considered material to the results
of the Group. The latest equity amounts and results are shown below:
Mulberry Group plc Studio Retail Group plc
26 weeks ended 25 September 2021 26 weeks ended 24 September 2021
(£m) (£m)
Share Capital 3.0 48.7
Share Premium 12.2 -
Other Reserves 0.1 1.0
Retained Earnings 14.5 49.6
Total equity 29.8 99.3
Profit for the period 7.3 15.4
The Group does not consider it has the power to participate in the financial
and operating policy decisions of the entities and so management do not
consider the Group to be able to exert significant influence over these
entities as per IAS 28 Investments in Associates and Joint Ventures and IAS 24
Related Party Disclosures.
MM Prop Consultancy Limited, a company owned and controlled by Michael Murray,
who is a member of key management personnel as per IAS 24, continues to
provide property consultancy services to the Group. MM Prop Consultancy
Limited is primarily tasked with finding and negotiating the acquisition of
new sites, and implementing developments, and disposals, in the UK, Europe and
Rest of the World for both our larger format stores and our combined retail
and gym units but it also provides advice to the Company's in-house property
team in relation to existing sites in the UK, Europe and Rest of the World.
During the reporting period all properties are assessed and those that are
considered by the Group's independent non-executive directors to be eligible,
and which have completed development and/or been disposed of at the
period-end, are assessed and if required valued by an independent valuer who
confirms the value created by MM Prop Consultancy Limited. The Group's
independent non-executive directors then review and agree the value created
and have full discretion to approve a payment to MM Prop Consultancy Limited
of up to 25% of the value created. There is a continuous pipeline of
properties that may be eligible to be assessed both positively and negatively
by the Group's Non-executive directors in future.
At period end £nil has been accrued (25 April 2021: £2.5m accrued based on
crystalised gains and subsequently paid in FY22, 25 October 2020: £nil) as
payable to MM Prop Consultancy. In the 26 weeks to 24 October 2021 there were
no property disposals within scope to be assessed. Due to the resurgent market
uncertainty, including but not limited to risks associated with Covid-19
including the return of restrictions, the independent non-executive directors
consider any potential value created at period end to be unreliable at this
time and hence no accrual has currently been recognised.
During FY21 the Group entered into an agreement with M.P.M Elevation Limited,
a company owned and controlled by Michael Murray in relation to elevation
strategy services. M.P.M Elevation Limited will be paid an annual fee of
£0.1m in relation to the provision of elevation strategy services.
GLOSSARY
ALTERNATIVE PERFORMANCE MEASURES
Excluding acquisitions and currency neutral performance measure
reconciliation:
UK Sports Retail Premium Lifestyle European Retail Rest Of World Retail Wholesale & Licensing Group
Total
Revenue
FY22 H1 Reported 1,367.1 427.9 399.8 65.6 79.4 2,339.8
Adjustments for acquisitions and currency neutral (12.4) - - - - (12.4)
FY22 H1 Excluding acquisitions and currency neutral 1,354.7 427.9 399.8 65.6 79.4 2,327.4
FY21 H1 Reported 1,071.6 320.4 352.0 77.1 72.2 1,893.3
Adjustments for acquisitions and currency neutral (4.7) - (14.2) (6.0) - (24.9)
FY21 H1 Excluding acquisitions and currency neutral 1,066.9 320.4 337.8 71.1 72.2 1,868.4
% Variance 27.0% 33.6% 18.4% (7.7%) 10.0% 24.6%
Adjusted PBT
FY22 H1 Reported 117.4 (9.7) 60.9 14.3 3.9 186.8
Adjustments for acquisitions and currency neutral 29.1 - - - - 29.1
FY22 H1 Excluding acquisitions and currency neutral 146.5 (9.7) 60.9 14.3 3.9 215.9
FY21 H1 Reported((1)) 55.6 26.3 19.0 7.7 6.9 115.5
Adjustments for acquisitions and currency neutral 0.6 - (0.8) (0.6) (0.1) (0.9)
FY21 H1 Excluding acquisitions and currency neutral 56.2 26.3 18.2 7.1 6.8 114.6
% Variance 160.7% (136.9%) 234.6% 101.4% (42.6%) 88.4%
(1) The FY21 numbers have been re-categorised due to changes in
the reporting segments, with freehold property owning companies where trading
is purely from Premium Lifestyle fascias being moved from UK Sports Retail to
Premium Lifestyle.
Reconciliation of Adjusted PBT performance measure, 5 year record:
26 weeks ended 26 weeks ended 26 weeks ended 27 October 2019 26 weeks ended 28 October 2018 26 weeks ended 29 October 2017
24 October 2021 25 October 2020
PBT (£'m) PBT (£'m) PBT (£'m) PBT (£'m) PBT (£'m)
REPORTED 186.0 106.1 90.2 74.4 45.8
Exceptional items - (3.7) 3.3 - 5.0
Fair value adjustment to derivative financial instruments (10.7) 8.6 3.2 5.9 36.3
Net investment costs / (income) 10.0 (2.9) (3.0) 1.8 32.5
Realised FX (gain) / loss (4.5) 7.4 (4.8) (17.6) (15.1)
Share scheme 6.0 - - - -
ADJUSTED 186.8 115.5 88.9 64.5 104.5
KEY PERFORMANCE INDICATORS
Performance Measure Closest equivalent statutory measure Reconciling items to statutory measure Definition and purpose
Group revenue - - Total revenue for the Group. The Board considers that this measure is a key
indicator of the Group's growth
Adjusted PBT Profit before taxation Adjusting items Adjusted PBT shows how well the Group is managing its trading and operational
efficiency, and its investment in its elevation strategy, and therefore the
(see Glossary reconciliation above) overall performance of the Group
Group gross margin - - The Board considers that this measure is a key indicator of the Group's
trading profitability
Underlying basis earnings per share (EPS) Earnings per share Adjusting items Underlying basis EPS is a measure of adjusted total shareholder return and
ultimately an indicator to our shareholders of the success of our elevation
(see note 9) strategy
Cash inflow from operating activities - - Cash inflow from operating activities is considered an important indicator for
the business of the cash generated from the trading business for further
investment in the elevation strategy
Net debt None Lease liabilities Net debt is borrowings excluding IFRS 16 lease liabilities less cash and cash
equivalents. Net debt is an indicator of both the Group's investment in the
elevation strategy and its covenant headroom which is a key component of the
Group's going concern considerations
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 replace by one larger new
generation store
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