REG - Quiz PLC - Interim Results
27/12/2024 15:15
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RNS Number : 4869R Quiz PLC 27 December 2024
27 December 2024
QUIZ plc
("QUIZ" or the "Group")
Interim Results for the six months ended 30 September 2024
QUIZ, the omni-channel fashion brand, announces its unaudited interim results
for the six months ended 30 September 2024 ("H1 2025" or the "Period").
H12025 FINANCIAL SUMMARY:
Six months to 30 September 2024 (unaudited) Six months to 30 September 2023 (unaudited)
Group revenue £39.1m £42.3m
EBITDA (£0.5m) £1.1m
Loss before tax prior to non-recurring costs (£4.1m) (£1.5m)
Loss before tax (£4.7m) (£1.5m)
Loss per share (4.69p) (0.96p)
Operating cash flows £1.7m £2.1m
Net (borrowings)/cash (£3.0m) £3.6m
POST PERIOD-END EVENTS
Trading update
· As announced in the Group's trading update on 6 December 2024, for
the first three months of the period from 1 August to 31 October, several of
the Group's KPIs were trending positively. However, during the important
trading month of November, QUIZ experienced a marked decline in traffic both
online and in-store compared to previous months and the comparable period in
the prior year. Revenues in the period from 1 August to 30 November 2024
amounted to £24.9 million, a £1.5 million reduction on the prior period.
· Since that update, while demand in December has shown signs of
improvement with online revenues broadly consistent with the prior year on a
like-for-like basis, sales in store continue to trend behind those achieved
last year. As a result, total revenues in December continue to fall short of
management's expectations and have not compensated for the shortfall in
revenues experienced in November.
· Ongoing improvements in the Group's cost base to date will be offset
by the recent proposed changes to the National Living Wage and Employer's
National Insurance arrangements, resulting in circa £1.7 million per annum of
additional costs from April 2025.
Cash position
· The Group has £4.0 million of bank facilities which are scheduled to
expire on 30 June 2025. There are no financial covenants applicable to these
facilities which are repayable on demand.
· As at 26 December 2024, the Group had net borrowings of £3.5 million
and total liquidity headroom of £0.5 million.
· Given the disappointing level of revenues in the important Christmas
trading period, as announced on 6 December 2024, the cash headroom available
to the business is less than previously anticipated. As a result, the Board
anticipates that additional funding will be required by the Group in early
2025.
Proposed de-listing from AIM
· As announced by the Company on 20 December 2024, the Directors have,
after an extensive review, concluded that it is in the best interests of the
Company and its Shareholders to seek Shareholder approval for the voluntary
cancellation of admission of the Ordinary Shares to trading on AIM and for the
Company to be re-registered as a private limited company. In accordance with
Rule 41 of the AIM Rules, the Company has notified Shareholders and the London
Stock Exchange of the date of the proposed Cancellation.
· The Company is seeking Shareholder approval for the Cancellation and
Re-registration at the General Meeting, which has been convened for 11am on 8
January 2025 at 61 Hydepark Street, Glasgow, G3 8BW. The Company is also
seeking Shareholder approval at the General Meeting for the amendment of the
Current Articles.
· If the Cancellation Resolution is passed at the General Meeting, it
is anticipated that the Cancellation will become effective at 7.00 a.m. on 23
January 2025. The Cancellation Resolution is conditional, pursuant to Rule 41
of the AIM Rules, upon the approval of Shareholders holding not less than 75
per cent of the votes cast by Shareholders (whether present in person or by
proxy) at the General Meeting, notice of which is set out at the end of this
Document.
· The Company has received irrevocable undertakings from to vote in
favour of the Resolutions set out in the Notice of General Meeting represent
in aggregate approximately 66.7 per cent of the Company's issued share
capital.
· Subject to the Cancellation becoming effective, it is anticipated
that the Non-Executive Directors of the business will stand down from the
Board.
Enquiries:
QUIZ plc Via Hudson Sandler
Sheraz Ramzan, Chief Executive Officer
Gerry Sweeney, Chief Financial Officer
Panmure Liberum +44 (0) 207 886 2500
(Nominated Adviser and Sole Broker)
Emma Earl, Ailsa Macmaster
Rupert Dearden
Hudson Sandler LLP (Public Relations) +44 (0) 207 796 4133
Alex Brennan quiz@hudsonsandler.com (mailto:quiz@hudsonsandler.com)
Emily Brooker
Notes:
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018 ("MAR").
Chairman's Interim Statement
The Group's disappointing financial results for six months ended 30 September
2024 ("H1 25" or the "Period") in part reflect the impact of inflationary
pressures on consumer confidence and spending. This has led to an 8% reduction
in revenues during the Period to £39.1 million. Despite management's efforts
to control costs tightly and improve the gross margin the Group incurred a
loss before tax of £4.7 million (H1 24: loss of £1.5 million).
The financial statements continue to be prepared on the going concern basis
but it is noted that given the material uncertainties highlighted in the Basis
of Preparation, including the need to secure additional funding in early 2025
and substantially reduce the Group's cost base going forward which is likely
to involve the cessation of certain parts of the business, there exists
substantial risks associated with the Group's ability to continue as a Going
Concern and to realise its assets and discharge its liabilities in the normal
course of business should these factors not be addressed satisfactorily.
The Group's revenue by channel during the Period is set out below:
Six months to 30 September 2024 (unaudited) Six months to 30 September 2023 (unaudited) Year-on-year change
Online £10.6m £12.6m -15.9%
UK stores and concessions £20.3m £22.0m -7.7%
International £8.2m £7.7m +6.5%
Total £39.1m £42.3m -7.6%
Online: sales have been impacted by lower levels of traffic to QUIZ's own
website reflecting subdued consumer demand for the brand, partly offset by the
benefit of commencing sales through the Debenhams website earlier in the year.
UK stores and concessions: as at 30 September 2024 the Group operated 62
stores and 47 concessions in the UK (30 September 2023: 64 stores and 60
concessions). The performance of the UK stores and concessions channel has
been impacted by weak footfall trends reflecting subdued consumer demand.
Three stores closed in the Period and one store in Sunderland was opened
which is concentrated on sale product allowing our flagship stores to
increasingly focus on full priced product.
International: revenues benefited from a good performance with the Group's
partners in the Middle East and the USA. The transfer of QUIZ's largest
international market to a new partner during the Period resulted in increased
revenues.
The gross margin performance in the Period was consistent year-on-year.
Post-period end events
Trading update
As announced in the Group's trading update on 6 December 2024, for the first
three months of the Period from 1 August to 31 October, several of the Group's
KPIs were trending positively. However, during the important trading month of
November, QUIZ experienced a marked decline in traffic both online and
in-store compared to previous months and the comparable period in the prior
year. Revenues in the period from 1 August to 30 November 2024 amounted to
£24.9 million, a £1.5 million reduction on the prior year period.
Since that update, while demand in December has shown signs of improvement
with online revenues broadly consistent with the prior year on a like-for-like
basis, sales in store continue to trend behind those achieved last year. As a
result, total revenues in December continue to fall short of management's
expectations and have not compensated for the shortfall in revenues
experienced in November.
The Company continues to proactively manage its cost base and identify
opportunities to improve performance and profits. However, ongoing
improvements being made in these areas will be offset by the recent proposed
changes to the National Living Wage and Employer's National Insurance
arrangements, resulting in circa £1.7 million per annum of additional costs
from April 2025.
Cash position
The Group has £4.0 million of bank facilities which are scheduled to expire
on 30 June 2025. There are no financial covenants applicable to these
facilities which are repayable on demand.
As at 26 December 2024, the Group had net borrowings of £3.5 million and
total liquidity headroom of £ 0.5 million.
Subject to trading in the post-Christmas trading period the it is anticipated
that the Group's existing bank facilities will be fully utilised in early
2025. The Group are currently considering additional funding options which
may be available.
The Company previously announced, on 29 August 2024, that Tarak Ramzan, the
Group's founder, and largest shareholder, proposed to provide the Company with
a £1.0 million secured loan facility to provide additional liquidity headroom
for working capital purposes. The agreement in relation to the loan remains
outstanding and is awaiting approval from the provider of the Company's
banking facilities, (who are required to approve any subsequent security over
the assets of the Group).
Proposed de-listing
As announced by the Company on 20 December 2024, post the Period end, the
Directors have, after an extensive review, concluded that it is in the best
interests of the Company and its Shareholders to seek Shareholder approval for
the voluntary cancellation of admission of the Ordinary Shares to trading on
AIM and for the Company to be re-registered as a private limited company. In
accordance with Rule 41 of the AIM Rules, the Company has notified the London
Stock Exchange of the date of the proposed Cancellation.
The Company's Ordinary Shares have been admitted to trading on AIM since its
initial public offering ("IPO") in July 2017 with the Group's revenue growing
from £89.8 million at the time of IPO to £130.8 million in 2019. Following
the very significant impact of Covid-19 on the Group's revenue from 2020 and
subsequent restructuring of the Group's store portfolio revenues partially
recovered and grew to £91.7 million in the year ended 31 March 2023.
Subsequently customer demand was impacted by the widely reported cost of
living and inflationary pressures with revenue declining to £82.0 million
during the 2024 financial year, with the Group generating a loss in comparison
to a profit in the prior period. Given the ongoing decline in customer
demand, revenue in the year ended 31 March 2025 is expected to be below 2024
revenue.
As a consequence of the challenging trading environment and impact on Group
revenue, on 5 December 2023, the Company initiated a review of strategic
options (the "Strategic Review") available to the Company to maximise
shareholder value. The Strategic Review considered a range of factors,
including but not limited to, a refreshed business plan, management team and
leadership and funding requirements and availability. On 28 March 2024, the
Company announced an update as part of the Strategic Review, Tarak Ramzan, CEO
and founder of Quiz, stepped down as CEO to become a Non-Executive Director
and Sheraz Ramzan, previously Chief Commercial Officer, was appointed as CEO
to implement a turnaround strategy, with the aim of recalibrating the business
back into profitable growth. In 2024, the Group implemented a number of
strategic initiatives such as restructuring the Buying and Merchandising
function and a refreshed marketing brand and social media activity.
Despite the steps taken, since announcing the Strategic Review, the Group has
continued to experience a decline in customer traffic both online and in store
compared to the same period in the prior year, with a notable decline in
traffic and footfall in November, which is a key period for retailers. The
Board expects that trading will continue to prove challenging for the sector
throughout the 2025 calendar year with continuing macro-economic headwinds
from the continuation of the cost of living crisis, the ongoing impact of high
business rates, above inflation increases to other costs, low consumer
confidence and the impact of the increase to the National Living Wage and
Employer's National Insurance arrangements.
Although demand in December has shown signs of improvement with online
revenues broadly consistent with the prior year on a like-for-like basis,
sales in store continue to trend behind those achieved last year. Total
revenue to date continues to fall short of management's expectations and has
not compensated for the shortfall in revenue experienced in November.
Given the decline in revenue and the requirement to improve the liquidity of
the business the Board is reviewing the Group's options and has engaged
advisors to consider appropriate options, in particular as to the Group's
structure and cost base. The Board is focused on ensuring the Group has
sufficient working capital to take the Group through to growth (albeit this
cannot be guaranteed). In particular, the Board considers that operating as a
private limited company will eliminate the considerable costs associated with
maintaining the admission and could provide the flexibility necessary to
implement these changes effectively as the Company can focus on the long-term
transformation of the business without the immediate pressures and scrutiny of
public markets.
For the reasons set out in more detail in the Company's announcement on 20
December 2024 the Directors are of the view that the continued admission of
the Ordinary Shares to trading on AIM is unlikely to provide the Company with
the optimal platform to access further significant capital in the future. As a
result of this review, and following careful consideration, the Board
considers the disadvantages associated with maintaining the admission of the
Ordinary Shares to trading to be disproportionately high when compared to the
perceived benefits of being listed on AIM.
The current non-executive directors of the Company propose to resign upon
Delisting and Gerry Sweeney, Chief Financial Officer and Company Secretary,
intends to step down from his position but will remain with the Company until
31 March 2025 to ensure a steady transition of responsibilities to his
successor, as stated in a Company announcement on 11 October 2024.
QUIZ plc
Unaudited consolidated statement of comprehensive income
For the six months ended 30 September 2024
Notes Unaudited six months ended 30 September 2024 Unaudited six months ended 30 September 2023
£000 £000
Audited year ended 31 March 2024
£000
Continuing operations
Revenue 3 39,143 42,295 81,957
Cost of sales (14,734) (16,148) (30,976)
Gross profit 24,409 26,147 50,981
Recurring administrative costs (22,187) (21,925) (44,218)
Non-recurring administrative cots 4 (605) - (1,512)
Total administrative costs (22,792) (21,925) (45,730)
Distribution costs (5,836) (5,521) (11,422)
Other operating income - 9 212
Total operating costs (28,628) (27,437) (56,940)
Operating loss 5 (4,219) (1,290) (5,959)
Finance income - 79 79
Finance costs (499) (282) (830)
Loss before income tax (4,718) (1,493) (6,710)
Income tax (charge)/credit 6 (1,103) 300 435
Loss for the period (5,821) (1,193) (6,275)
Other comprehensive expense
Foreign currency translation differences - foreign operations (95) (27) (72)
Loss and total comprehensive expense for the period (5,916) (1,220) (6,347)
Loss per share 8 (4.69)p (0.96)p (5.05)p
All of the above (expense)/income is attributable to the shareholders of the
Parent Company.
QUIZ PLC
Unaudited consolidated statement of financial position
As at 30 September 2024
Notes Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
£000 £000 Audited as at 31 March 2024
£000
Assets
Non-current assets
Property, plant and equipment 9 5,306 6,832 5,912
Right-of-use assets 10 8,542 6,790 8,417
Intangible assets 11 2,235 2,801 2,486
Deferred tax assets - 1,041 1,103
Total non-current assets 16,083 17,464 17,918
Current assets
Inventories 10,231 11,334 11,259
Trade and other receivables 12 8,109 7,253 9,950
Cash and cash equivalents 14 103 3,850 284
Total current assets 18,443 22,437 21,493
Total assets 34,526 39,901 39,411
Liabilities
Current liabilities
Trade and other payables 13 (11,981) (12,435) (12,563)
Loans and borrowings 15 (3,117) (258) (2,327)
Lease liabilities (3,938) (2,384) (3,732)
Derivative financial liabilities (22) (43) (36)
Corporation tax payable - (95) -
Total current liabilities (19,058) (15,215) (18,658)
Non-current liabilities
Lease liabilities (6,745) (4,951) (6,129)
Total non-current liabilities (6,745) (4,951) (6,129)
Total liabilities (25,803) (20,166) (24,787)
Net assets 8,723 19,735 14,624
Equity
Called up share capital 373 373 373
Share premium 10,315 10,315 10,315
Merger reserve 1,130 1,130 1,130
Retained (loss)/earnings (3,095) 7,917 2,806
Total equity 8,723 19,735 14,624
QUIZ PLC
Unaudited consolidated statement of changes in equity
For the six months ended 30 September 2024
Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
£000 £000 Audited as at 31 March 2024
£000
Share capital
Balance at beginning and end of period 373 373 373
Share premium
Balance at beginning and end of period 10,315 10,315 10,315
Merger reserve
Balance at beginning and end of the period 1,130 1,130 1,130
Retained (loss)/earnings
Balance at beginning of period 2,806 9,115 9,115
Total comprehensive expense (5,916) (1,220) (6,347)
Share based payments 15 22 38
Balance at end of period (3,095) 7,917 2,806
Total equity at beginning of period 14,624 20,933 20,933
Total equity at end of period 8,723 19,735 14,624
QUIZ PLC
Unaudited consolidated statement of changes of cash flows
For the six months ended 30 September 2024
Unaudited six months ended 30 September 2024 Unaudited six months ended 30 September 2023
£000 £000 Audited year ended 31 March 2024
£000
Cash flows from operating activities
Cash generated by operations
Loss for the period (5,821) (1,193) (6,275)
Adjusted for:
Depreciation of property, plant and equipment 1,042 845 1,837
Depreciation of right-of-use asset 1,711 1,282 2,872
Amortisation of intangible assets 334 293 602
Impairment of property, plant and equipment 249 - 935
Impairment of right-of-use asset 303 - 400
Impairment of intangible assets 53 - 177
Share based payment charges 15 22 38
Exchange movement (100) (31) (68)
Finance income - (79) (79)
Finance cost expense 499 282 830
Income tax charge/(credit) 1,103 (300) (435)
Decrease in inventories 1,028 988 1,063
Decrease/(increase) in receivables 1,841 176 (2,537)
Decrease in payables (582) (189) (69)
Net cash from operating activities 1,675 2,096 (709)
Interest paid (102) (34) (129)
Income taxes paid (3) - (12)
Net cash inflow/(outflow) from operating activities 1,570 2,062 (850)
Cash flow from investing activities
Payments to acquire intangible assets (136) (391) (562)
Payments to acquire property, plant and equipment (685) (2,989) (3,996)
Interest received - 79 79
Net cash outflow from investing activities (821) (3,301) (4,479)
Cash flows from financing activities
Borrowings drawn/(repaid) 124 (1,152) 336
Payment of lease liabilities (1,712) (1,338) (2,874)
Net cash outflow from financing activities (1,588) (2,490) (2,538)
Net decrease in cash and cash equivalents (839) (3,729) (7,867)
Cash and cash equivalents at beginning of period (297) 7,575 7,575
Effect of foreign exchange rates (8) 4 (5)
Cash and cash equivalents at end of period 14 (1,144) 3,850 (297)
The Group considers bank overdrafts to be an integral part of its cash management activities and these are included in cash and cash equivalents for the purposes of the cash flow statement.
Basis of Preparation
1.1 General Information
QUIZ plc is a public limited company incorporated and registered in Jersey and listed on the Alternative Investment Market (AIM) of the London Stock Exchange. Its registered office is: 22 Grenville Street, St Helier, Jersey, Channel Islands, JE4 8PX.
1.2 Basis of Preparation
These interim financial statements for the six months to 30 September 2024 have been prepared in accordance with "IAS 34 Interim Financial Reporting." They are unaudited and do not include all of the information required for full annual financial statements and do not constitute statutory accounts within the meaning of Companies (Jersey) Law 1991.
The comparative figures for the year ended 31 March 2024 are not the Group's statutory accounts for that financial year. The interim financial statements should be read in conjunction with the Group's Annual Report and Accounts for the year ended 31 March 2024, which were prepared and approved by the directors in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the Companies (Jersey) Law 1991. The auditors reported on those accounts: their report was unqualified, included a material uncertainty related to going concern and did not include reference to any matters on which the auditor was required to report by exception under Companies (Jersey) Law 1991. The Annual Report and Financial Statements for the year ended 31 March 2024 has been filed with the Jersey Companies Registry and are available on www.quizgroup.co.uk
The auditors' report drew the reader's attention to the macro-economic factors
outside the Group's control, primarily in respect of the recent cost of living
pressures facing consumers, which could continue to have, a material impact on
the Group's trading performance for the foreseeable future. The uncertainty
this created in the Group's ability to accurately forecast trading cash flows
and continue to trade within their current facilities indicated that a
material uncertainty existed that may cast significant doubt on the Group's
ability to continue as a going concern The auditors opinion was not
modified in respect of this matter and did not include reference to any
matters on which auditors were required to report by exception under Companies
(Jersey) Law 1991.
The Group's business activities together with the factors that are likely to
affect its future developments, performance and position are set out in the
Business and Financial Reviews of its Annual Report and Financial Statements
for the year ended 31 March 2024. The Financial Review describes the Group's
financial position, cash flows and bank facilities. The interim financial
statements are unaudited and were approved by the board of directors on 26
December 2024.
The interim financial statements have been prepared by the directors of the
Company (the "Directors") under the historical cost basis, except for certain
financial instruments which are carried at fair value.
1.3 Accounting Standards
The accounting policies applied in these interim financial statements are the same as those set out in the Group's Annual Report and Financial Statements for the year ended 31 March 2024. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not effective.
There are several standards and interpretations issued by the IASB that are effective for financial statements after this reporting period. Of these new standards, amendments and interpretations, there are none which are expected to have a material impact on the Group's consolidated financial statements.
1.4 Use of Estimates and Judgements
In the application of the Group's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
value of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised where the revision affects only that year, or in the year
of the revision and future years where the revision affects both current and
future years.
Information about such estimations and judgements are contained in individual
accounting policies. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are:
Impairment of property, plant and equipment, right-of-use assets and
intangible assets
Property, plant and equipment, right-of-use assets and intangible assets are
reviewed for impairment if events or changes in circumstances indicate that
the carrying amount may not be recoverable.
Management performs an impairment review for each cash generating unit ("CGU")
that has indicators of impairment. When a review for impairment is conducted,
the recoverable amount of an asset or CGU is determined based on value-in-use
calculations using the Board approved budget and future outlook and is
discounted using the weighted average cost of capital. Forecasts beyond the
period of the approved budget are based on management's assumptions and
estimates.
Future events could cause the forecasts and assumptions used in impairment
reviews to change with a consequential adverse impact on the results and net
position of the Group as actual cash flows may differ from forecasts and could
result in further material impairments in future years.
The Directors consider each revenue channel/steam to be a CGU; being stores,
concessions, online and international. In determining the anticipated
contribution from stores each individual store is considered to be a separate
CGU. In the current year we have performed an impairment review for each CGU.
For the period ended 30 September 2024, an impairment charge of £0.6 million
was recognised in light of the reduced profitability of the Group in the
period and lower expectations in the relevant forecasts for each CGU compared
to those used in the prior year impairment review (Six months ended 30
September 2023: £nil, Year ended 31 March 2024: £1.5m).
Impairment of store CGU assets
Management has assessed whether impaired and unprofitable stores require an
impairment charge with regard to their right-of-use and property, plant and
equipment assets. This is recognised when the Group believes that the
unavoidable costs of meeting or exiting the lease obligations exceed the
benefits expected to be received under the lease.
The charge in the period based on anticipated future cash flows from stores
amounted to £332,000. Of the charge £87,000 of the charge is attributable to
property, plant and equipment and £245,000 to right-of-use assets. The charge
was split between seven individual store CGUs.
The recoverable amount is based on the value in use. Value in use is
calculated from expected future cash flows using suitable discount rates being
14.6% (30 September 2023: 10%, 31 March 2024: 14.6%) and includes management
assumptions and estimates of future performance. Store asset carrying values
are considered net of the carrying value of any cash contribution received in
relation to that store. The cash flows are modelled for each store through to
the lease expiry date. Cash flows beyond the two-year board approved forecasts
are extrapolated at a 0% growth rate. No lease extensions have been assumed in
the modelling. Stores which have been opened for less than 18 months are
excluded from the assessment.
Impairment of corporate/central assets
Further to the assessment of each CGU there was an impairment charge of
£273,000; £53,000 in relation to intangible assets, £162,000 property,
plant and equipment and £58,000 right-of-use assets held at Group level which
support the cash generating units operations.
The recoverable amount is based on the value in use. Value in use is
calculated from expected future cash flows using suitable discount rates being
14.6% (30 September 2023: 10%, 31 March 2024: 14.6%) and includes management
assumptions and estimates of future performance. The cash flows are modelled
for each cash generating unit using two years of board approved forecasts,
extrapolated at a 0-2% growth rate for years three to five, and a terminal
growth rate of 2%. Corporate/central costs and assets are allocated to CGUs
based on either revenue generated or the proportion of costs directly
attributable to the CGU.
Sensitivities
Management has performed sensitivity analysis on the key assumptions in the
impairment model using reasonably possible changes in these key assumptions. A
reduction in sales of 5% from that assumed and a 5% increase in the discount
rate used would increase the impairment charge by £0.4 million and £0.1
million respectively. This is the total increase across both stages of the
impairment review.
Inventory provision
Provision is made for those items of inventory where the net realisable value
is estimated to be lower than cost. Net realisable value is based on both
historical experience and assumptions regarding future selling prices and is
consequently a source of estimation uncertainty.
In the current period, management performed an assessment of all inventory,
taking into consideration current sales and forecast sell-through plans to
consider the impact on the period-end stock holding. The provision for aged
inventory is calculated by providing for 25% of inventory that is more than
three seasons old and providing for 88% of inventory that is more than three
years old. Given the potential for demand to be impacted going forward the
Group has provided up to 5% of the remaining inventory. Given this approach
the provision for aged inventory totalled £1,336,000 at 30 September 2024 (31
March 2024: £1,487,000, 30 September 2023: £1,674,000).
1.5 Going concern
The financial statements continue to be prepared on the going concern basis
consistent with the Group financial statements for the year ended 31 March
2024 signed on 28 August 2024 are subject to a material uncertainty linked to
cash headroom above facility limits.
The Group has £4.0 million of banking facilities, which expire on 30 June
2025. These facilities comprise a £2.0 million overdraft and £2.0 million
working capital facility. There are no financial covenants associated with
these facilities, which are reviewed annually and are repayable on demand. The
trading forecasts assume that these facilities will be available to the Group
through to 30 June 2025 and will be renewed in due course.
As at 26 December 2024, the Group had net debt of £3.5 million and available
liquidity headroom of £0.5 million, which related to unutilised banking
facilities.
As noted in the financial statements for the year ended 31 March 2024, the
anticipated facilities for the year included the provision of a £1.0 million
loan facility to provide additional liquidity headroom for working capital
purposes which had been offered from, Tarak Ramzan, the Company's founder and
largest shareholder. The agreement in relation to this loan remains
outstanding and is subject to approval from the provider of the Company's
banking facilities.
Further to the lower than planned level of revenues in the year to date it is
anticipated that the Group's existing bank facilities will be fully utilised
in early 2025 and as a result the Board anticipates that additional funding
will be required by the Group. The Group are currently considering
additional funding options which may be available.
In addition to the requirement for additional funding, the Group needs to
reduce its existing cost base substantially to allow it to return to
profitability which is likely to involve the cessation of certain parts of the
business.
Given the continued challenges in the macro environment coupled with the
requirement for additional funding, the Directors note that until and unless
key mitigations can be actioned with certainty, there exists a material
uncertainty related to Going Concern. This casts significant doubt over the
Group's ability to continue as a going concern until said mitigations result
in cost savings and additional financing sufficient to increase headroom is
available and therefore, the Group may not be able to realise its assets and
discharge its liabilities in the normal course of business.
The material uncertainty related to Going Concern arises due to:
• The anticipated requirement of additional funding in
the first quarter of 2025 and the uncertainty that it can be secured;
• The continued uncertain macro-economic environment and
its impact on trading;
• The requirement to substantially reduce the existing
cost base and the uncertainty as to whether the targeted savings or potential
restructuring can be realised;
• The availability of committed banking facilities until
30 June 2025, which is less than twelve months from the date when these
accounts are authorised to be issued.
The financial statements continue to be prepared on the going concern basis
but it is noted that given the material uncertainties noted above there are
substantial risks associated with the Group's ability to continue as Going
Concern and thereby realise its assets and discharge its liabilities in the
normal course of business should these factors not be addressed
satisfactorily.
2. Principal risks and uncertainties
The board considers the principal risks and uncertainties which could impact the group over the remaining six months of the financial year to 31 March 2025 to be unchanged from those set out on in the Annual Report and Financial Statements for the year ended 31 March 2024 which related to the following matters:
· Brand and Reputational Risk
· Development of Overseas Markets
· Fashion and Design
· Challenging Economic Environment
· Competitor Actions
· Product Sourcing;
· Loss of Key Trading Partner
· Physical Infrastructure
· IT Infrastructure and Cyber Security
· Infrastructure for E-commerce Sales
· People
· Loss of Key Staff
· Regulatory and Legal Framework
· Foreign Exchange
Further information on the nature of these risks, their potential impact and
the existing mitigating factors to address them is detailed on pages 14 to 17
of the Annual report and Financial Statements for the year ended 31 March 2024
3. Revenue
An analysis of revenue by source and geographical destination is as follows:
Unaudited six months ended 30 September 2024 Unaudited six months ended 30 September 2023
Audited year ended 31 March 2024
£000 £000 £000
UK stores and concessions 20,260 22,004 41,640
Online 10,665 12,555 24,517
International 8,218 7,736 15,800
39,143 42,295 81,957
United Kingdom 30,848 33,879 65,729
Rest of the world 8,295 8,416 16,228
39,143 42,295 81,957
4. Non-recurring administrative costs
Non-recurring administrative costs comprise:
Unaudited six months ended 30 September 2024 Unaudited six months ended 30 September 2023
Audited year ended 31 March 2024
£000 £000 £000
Impairment of right-of-use assets 303 - 400
Impairment of intangible assets 53 - 177
Impairment of property, plant and equipment 249 - 935
605 - 1,512
The Directors consider each revenue channel/stream to be a CGU; being stores,
concessions, online and international. In determining the anticipated
contribution from stores each individual store is considered to be a separate
CGU. In the period ended 30 September 2024 we performed an impairment review
for each CGU. Following this review an impairment charge of £0.6 million
was recognised in light of the reduced profitability of the Group for the year
and lower expectations in the relevant forecasts for each CGU compared to
those used in previous impairment reviews (Six months ended 30 September 2023:
£nil, Year ended 31 March 2024: £1.5m).
5. Operating loss
Operating loss is stated after charging/ (crediting):
Unaudited six months ended 30 September 2024 Unaudited six months ended 30 September 2023
Audited year ended 31 March 2024
£000 £000 £000
Cost of inventories recognised as an expense 14,734 16,148 30,976
Distribution costs 5,836 5,521 11,422
Employment costs 10,697 10,879 21,208
Depreciation 2,753 2,127 4,709
Amortisation 334 293 602
Impairment 605 - 1,512
Short-term lease payments 947 1,048 1,358
Other operating income - (9) (212)
Other expenses 7,456 7,578 16,351
43,362 43,585 87,926
Employment costs reflect the costs incurred for those employees directly
employed by the Group and agency costs.
6. Income Tax (Charge)/Credit
The Group's effective tax rate in respect of continuing operations for the six
months ended 30 September 2024 is a charge of 23.4% (six months ended 30
September 2023 - credit of 20.1% and year ended 31 March 2024: credit of
6.7%).
Given the losses incurred in the period and the uncertainty with regards to
future trading and the availability of taxable profits, it was considered
appropriate to reverse previously recognised deferred tax assets. This gave
rise to the tax charge of £1.1 million in the period.
7. Dividends
No dividend was paid in the current or previous periods.
8. Earnings per share
Unaudited six months ended 30 September 2024 Unaudited six months ended 30 September 2023
Unaudited year ended 31 March 2024
Weighted number of ordinary shares outstanding - basic and diluted 124,230,905 124,230,905 124,230,905
Loss (£000) (5,821) (1,193) (6,275)
Loss per share (pence) (4.69) (0.96) (5.05)
Diluted earnings per share is the same as the basic earnings per share for all
period as the average share price during the year was less than the exercise
price applicable to the outstanding options and therefore the outstanding
options were not dilutive.
9. Property, Plant and Equipment
Computer equipment Fixtures, fittings and equipment
Leasehold property Motor vehicles
Total
£000 £000 £000 £000 £000
Cost
At 1 April 2024 909 157 2,161 18,925 22,152
Additions 71 25 59 530 685
At 30 September 2024 980 182 2,220 19,455 22,837
Depreciation
At 1 April 2024 758 122 1,473 13,887 16,240
Depreciation charge 83 10 139 810 1,042
Impairment charge - - 14 235 249
At 30 September 2024 841 132 1,626 14,932 17,531
Net book value
At 30 September 2024 139 50 594 4,523 5,306
At 31 March 2024 151 35 688 5,038 5,912
Assets are reviewed for impairment if events or changes in circumstances
indicate that the carrying value may not be recoverable and provision is made
where necessary. The method and assumptions used in these calculations,
together with the associated sensitivities and reasons for impairment, are set
out in the basis of preparation - critical accounting estimates and
judgements. Any impairment charge/ (reversal) is charged to administrative
costs in the consolidated statement of comprehensive income.
10. Right-of-Use Assets
Property
£000
Cost
At 1 April 2024 13,511
Additions 2,139
At 30 September 2024 15,650
Depreciation
At 1 April 2024 5,094
Depreciation charge 1,711
Impairment charge 303
At 30 September 2024 7,108
Net book value
At 30 September 2024 8,542
At 31 March 2024 8,417
The Group presents lease liabilities separately within the statement of
financial position. The movement in the period comprised:
£000
Cost
At 1 April 2024 9,861
New leases entered into 2,139
Interest expense related to lease liabilities 395
Repayment of lease liabilities (including interest) (1,712)
At 30 September 2024 10,683
Current lease liabilities 3,938
Non-current lease liabilities 6,745
11. Intangibles
Computer software Trademarks
Goodwill Total
£000 £000 £000 £000
Cost
At 1 April 2024 6,175 4,899 165 11,239
Additions - 136 - 136
At 30 September 2024 6,175 5,035 165 11,375
Depreciation
At 1 April 2024 5,248 3,395 110 8,753
Amortisation charge - 319 15 334
Impairment charge - 53 - 53
At 30 September 2024 5,248 3,767 125 9,140
Net book value
At 30 September 2024 927 1,268 40 2,235
At 31 March 2024 927 1,504 55 2,486
12. Trade and other receivables
Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
Audited as at 31 March 2024
£000 £000 £000
Trade receivables - gross 3,273 3,144 3,372
Allowance for doubtful debts (387) (283) (417)
Trade receivables - net 2,886 2,861 2,955
Other receivables 1,184 533 1,782
Prepayments and accrued income 4,039 3,859 5,213
8,109 7,253 9,950
13. Trade and other payables
Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
Audited as at 31 March 2024
£000 £000 £000
Trade payables 8,653 8,442 9,513
Other taxes and social security costs 1,552 377 710
Accruals 824 2,418 1,042
Other payables 952 1,198 1,298
11,981 12,435 12,563
14. Cash and cash equivalents
Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
Audited as at 31 March 2024
£000 £000 £000
Cash at bank and in hand 103 3,850 284
Bank overdraft (1,247) - (581)
(1,144) 3,850 (297)
15. Borrowings
Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
Audited as at 31 March 2024
£000 £000 £000
Bank loans 1,870 258 1,746
Bank overdraft 1,247 - 581
3,117 258 2,327
16. Financial Instruments
The following table shows the carrying amounts and fair values of financial
assets and liabilities. All financial liabilities are measured at amortised
cost.
Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
Audited as at 31 March 2024
£000 £000 £000
Carrying value of financial assets:
Cash and cash equivalents 103 3,850 284
Trade and other receivables 4,070 3,394 3,486
Total financial assets 4,173 7,244 3,770
Carrying value of financial liabilities:
Trade and other payables (10,429) (12,058) (11,853)
Bank and other borrowings (3,117) (258) (2,327)
Derivative financial instruments (22) (43) (36)
Lease liabilities (10,683) (7,334) (9,861)
Total financial liabilities (24,251) (19,693) (24,077)
The cash and cash equivalents are held with bank and financial institution
counterparties, which are rated P-1 and A-1, based on Moody's ratings.
17. Related party transactions
The Group considers its Executive and Non-Executive Directors as key
management and therefore has a related party relationship with them.
Two Directors, Tarak Ramzan and his son Sheraz Ramzan, and their relatives
control 48.7% of the voting shares of the Company (2023: 48.7%).
The Group transacts with companies in which Tarak and Sheraz Ramzan have an
interest. The amounts of the transactions and balances due to and from the
related parties during the year and at the year-end are:
Unaudited as at 30 September 2024 Unaudited as at 30 September 2023
Audited as at 31 March 2024
£000 £000 £000
Purchases from:
Big Blue Concepts Limited 187 187 375
Tarak Manufacturing Company Limited 131 131 263
Ocean 9 Limited 15 15 30
Balance owed to:
Big Blue Concepts Limited - - -
Tarak Manufacturing Company Limited 26 - -
Ocean 9 Limited - 3 -
The charges from Big Blue Concepts Limited and Tarak Manufacturing Limited
solely relate to the rental of the Group's distribution centre and head office
respectively. These leases were entered into further to the Independent
Non-Executive Directors of the Company having received independent legal
advice and independent commercial real estate advice and being satisfied that
they reflect arm's length legal and commercial terms.
The charges from Ocean 9 Limited relate to consultancy fees payable to the
spouse of one of Tarak Ramzan's children for the provision of property advice.
18. Contingent Liability
As previously announced, the Company received a claim letter in July 2024
from a supplier of IT software in relation to a contract for services entered
into February 2020. Further to the provision of initial advice from Kings
Counsel, the Group does not consider that any monies are due under this
contract and as such does not accept any liability in respect of this
matter. The potential claim amounts to £673,000 plus VAT with the
potential for interest of £573,000 to be sought on this amount.
19. Post Balance Sheet Events
On 20 December 2024, the Directors concluded that it is in the best interests
of the Company and its Shareholders to seek Shareholder approval for the
voluntary cancellation of admission of the Ordinary Shares to trading on AIM
and for the Company to be re-registered as a private limited company. In
accordance with Rule 41 of the AIM Rules, the Company has notified the London
Stock Exchange of the date of the proposed Cancellation.
The Company is seeking Shareholder approval for the Cancellation and
Re-registration at the General Meeting, which has been convened for 8 January
2025.
If the Cancellation Resolution is passed at the General Meeting, it is
anticipated that the Cancellation will become effective at 7.00 a.m. on 23
January 2025. The Cancellation Resolution is conditional, pursuant to Rule 41
of the AIM Rules, upon the approval of Shareholders holding not less than 75
per cent of the votes cast by Shareholders (whether present in person or by
proxy) at the General Meeting, notice of which is set out at the end of this
Document.
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