REG-Superdry plc Superdry plc: Interim results
20/01/2022 07:05
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Superdry plc (SDRY)
Superdry plc: Interim results
20-Jan-2022 / 07:01 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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SuperdryPlc
("Superdry" or "the Company")
20 January 2022
Interim Results for the 26-week period ending 23 October 2021
Clear signs of brand and financial recovery
Superdry announces its Interim results covering the 26-week period from 25
April 2021 to 23 October 2021 ("1H 22") and a trading update covering the
11-week period from 24 October 2021 to 8 January 2022. Where relevant, given
the disruption to trading from Covid-19 and to provide more meaningful
analysis, we have provided comparisons on a two-year basis.
Half Year
£m 1H 22 1H 21 1H 20 Vs 1H 21 Vs 1H 20
Group Revenue £277.2m £282.7m £369.1m (1.9)% (24.9)%
Gross Margin Rate 55.2% 51.7% 56.3% 3.5%pts (1.1)%pts
Adjusted loss before tax1 £(2.8)m £(10.6)m £(2.3)m n/a n/a
Adjusting items1 £6.8m £(8.3)m £(1.9)m n/a n/a
Statutory profit/(loss) before tax £4.0m £(18.9)m £(4.2)m n/a n/a
Adjusted basic loss per share1 (3.8)p (10.5)p (5.7)p n/a n/a
Basic profit/(loss) per share 3.0p (18.8)p (7.9)p n/a n/a
Net working capital1 £120.6m £135.1m £213.0m (10.7)% (43.4)%
Net (debt)/cash position1 £(3.9)m £34.1m £(9.3)m n/a n/a
Julian Dunkerton, Chief Executive Officer, said:
"I'm really pleased with our progress against each of our strategic initiatives
with clear signs of brand and financial recovery. The health of the brand is
best demonstrated by the improving sales run-rate and a +12%pts2 increase in
Retail full-price sales mix which helped drive Group gross margin up +3.5%pts
year-on-year.
The Autumn/Winter 21 ('AW21') season3 has been the first opportunity to present
our improved product to consumers. Our core category of jackets drove
performance, up 40% year-on-year and it was encouraging to see positive trends
across a number of categories, particularly in womenswear, where we saw an
increase in mix +4%pts vs AW19. We have also seen our short order product begin
to show promising traction with teen consumers.
Illustrating our long-term commitment to the high street, our new Oxford Street
flagship store launched in November, showing the best representation of our
style choices and how we plan to engage with our customers, wholesale partners
and the influencer community. It has been pleasing to see early trading
performance, which has exceeded expectations.
We continue to make progress on our digital marketing strategy and reigniting
consumer interest in the brand, with the number of influencers we have engaged
increasing sixfold year-on-year to more than 2,000 at the end of December,
supported by our increasing investment in social marketing activities and
ever-improving product.
I was also delighted to see our Carbon Disclosure Project rating increase, once
again, to A-. We have consistently improved our grade over the last three years
and, while there is still a lot left to do, I'm proud of the team's efforts as
we strive to be the leading listed sustainable fashion brand.
While there remains uncertainty about the impact of Covid-19 and the
macro-economic environment, I am increasingly confident in the accelerating
momentum of our reset and the strengthening of the brand."
Financial overview
• Revenue declined (1.9)% on a one-year basis and (24.9)% on a two-year basis
reflecting the continued impact of Covid-19 and our move to a full-price
trading stance, but with a consistently improving run-rate through the
period.
• Gross margin gains more than offset the decline in sales, driven by an
increase of +12%pts in the full price mix2, with growth across Stores and
Ecommerce, up +5.1%pts and +7.7%pts year-on-year.
• Adjusted loss before tax improved to £(2.8)m (from £(10.6)m) and is in line
with 1H 20, a pre-pandemic comparative, benefitting from the re-opening of
the store estate.
• Statutory profit before tax increased to £4.0m, from a loss in both 1H 21
and 1H 20, benefiting from the fair value movement on foreign exchange
forward contracts (£6.2m credit in 1H 22).
• Net working capital has reduced £14.5m year-on-year as we saw reductions in
inventory (£(7.1)m) and trade receivables (£(2.7)m) and an increase in
trade payables (£4.7m), largely from later intake timing of inventory
caused by the global supply chain issues felt across the sector and
deferred rent.
• We ended the half with £(3.9)m net debt as we partially unwound deferred
rent (around £10m repayment since year-end). This is significantly lower
than 1H 21 (£34.1m net cash), which benefitted from the initial deferrals
and rate holidays, but remains ahead of the pre-covid 1H 20 position
(£(9.3)m net debt), which is more reflective of our normalised working
capital cycle.
• As at 17 January the business had net cash of £20.4m.
Current Trading (11 weeks from 24 October 2021 to 8 January 2022)
The table below shows the revenue change on a one- and two-year basis for the
11-week period ending 8 January 2022:
£m Vs FY21 Vs FY20
Group Revenue 19.6% (11.7)%
Stores 84.4% (18.8)%
Ecommerce (17.6)% 0.3%
Retail (Stores and Ecommerce) 21.7% (11.8)%
Wholesale 12.9% (11.3)%
Over the 11-week period, revenue was up 19.6% versus FY21 as physical trading
continued to recover. On a two-year basis, Group revenue has seen a significant
step-up in run-rate since the first half of FY22, improving from (24.9)% to
(11.7)%. This is despite footfall remaining suppressed against pre-Covid
levels, the development of Omicron leading to further European restrictions and
a significant reduction in our mark-down offer in our Black Friday and
post-Christmas sales.
In line with our full-price strategy, we have not held an end of season sale in
our stores and, over the past 11-weeks, have seen a +4.1%pts gross margin
improvement compared to two years ago.
In a continuation of the full-price dynamic seen in H1, Ecommerce revenue
declines year-on-year were partially offset by strong margin accretion and
variable cost savings. More than half of our owned site Ecommerce sales have
been at full price since 23 December (the start of our online sale), versus
mid-teens in FY20, with gross margin up 5.7%pts and average order value up
+19.2%.
In Wholesale, we shipped the vast majority of the delayed AW21 despatches,
evidencing the demand from customers to take the product even at this later
point in the season, driving a 12.9% year-on-year increase in sales.
Outlook
The emergence of the Omicron variant has resulted in more uncertainty, but we
remain encouraged the brand is clearly resonating with consumers, reflected by
the strong gross margin performance as we returned to a full-price stance. Our
performance over the peak trading period has given us confidence that we will
achieve current market expectations for FY22 adjusted PBT.
In line with the rest of the sector, we expect to be impacted by inflationary
cost pressures. However, we expect to fully offset these headwinds through
further gross margin improvement (via a reducing mark-down mix), together with
some price realignments in selected categories and markets.
Notes
1. 'Adjusted', 'Adjusting' and 'Net (Debt)/Cash' are used as alternative
performance measures ('APMs'). Definition of APMs and how they are
calculated are disclosed in the financial statements in Note 21. 'Net
working capital' has been reconciled within the Finance Review.
2. Full-price sales within our full-price owned channels.
3. Autumn/Winter 21 (full price trading period) defined as the period between
weeks 19-34, 29 August 2021 to 18 December 2021.
Market briefing
A webcast for analysts and investors will be held today starting at 08:30,
followed by a Q&A with management. The webcast will be available to join live,
but questions will be limited to analysts. If you would like to register,
please go to 1 https://secure.emincote.com/client/superdry/superdry010. A
recording of the event will also be available on our corporate website shortly
afterwards.
A separate meeting with an opportunity for retail investors to ask questions
will be held at 12.30 through the 'Investor Meets Company' platform, register
2 here.
For further information:
Superdry:
Adam Smith adamj.smith@superdry.com +44 (0) 1242 586747
Candice Johnson candice.johnson@superdry.com +44 (0) 1242 586747
Media enquiries
Tim Danaher, Imran Jina superdry@brunswickgroup.com +44 (0) 207 404 5959
Notes to Editors
Our mission is "To be the #1 sustainable style destination" through our
distinct collections, defined by consumer style choices. We design affordable,
premium quality clothing, accessories and footwear which are sold around the
world. We have a clear strategy for delivering continued growth via a
multi-channel approach combining Stores, Ecommerce, and Wholesale.
Superdry has 228 physical stores and around 480 franchisees and licensees. We
operate in over 50 countries and have over 4,000 colleagues globally.
Cautionary Statement
This announcement contains certain forward-looking statements with respect to
the financial condition and operational results of Superdry Plc. These
statements and forecasts involve risk, uncertainty, and assumptions because
they relate to events and depend upon circumstances that will occur in the
future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements. These forward-looking statements are made only as
at the date of this announcement. Nothing in this announcement should be
construed as a profit forecast. Except as required by law, Superdry Plc has no
obligation to update the forward-looking statements or to correct any
inaccuracies therein.
CEO Review
The momentum behind our brand turnaround continues to grow, with clear signs of
brand and financial recovery. Autumn/Winter 2021 ('AW21') was our first full
opportunity to showcase our new design philosophy and segmentation to our
customers, across all our channels and I am very pleased with the performance
despite the ongoing macroeconomic headwinds. We have strengthened consumer
engagement with the brand while accelerating our commitment to a full price
trading stance, driving improvements in the gross margin and profitability.
Whilst revenue growth was significantly impacted while we traded against prior
year promotional periods and by Wholesale delays, we are pleased to have ended
the half with sales only down 1.9% year-on-year. A disciplined promotional
stance meant that we saw the gross margin rate increase by 3.5%pts
year-on-year, delivering a 4.7% increase in gross profit. This overall
performance signals to us that the strengthened strategy and reignition of the
brand is resonating with consumers.
This dynamic has continued over our peak trading period with year-on-year
Retail margins up +2.3%pts in the 11-week period to 8 January 2022, and up
+2.7pts on a two-year basis. All markets are beginning to show improvements,
albeit at different paces, and our two-year footfall measure in shopping
centres and high streets has been ahead of the BRC index for the last four
months1. Ecommerce sales and profitability have both increased on a 2-year
basis in the last 11-weeks, with more than half of our owned site Ecommerce
sales at full price since 23 December (the start of our online sale), versus
around 15% for the equivalent period in FY20, with improvements to gross margin
(+5.7%pts) and average order value (+19.2%). We have also shipped the vast
majority of the delayed AW21 Wholesale despatches, evidencing the demand from
customers to take the product even at a later point in the season.
The half-year adjusted loss before tax improved by over 70% year-on-year,
reflecting the full price trading performance, and returning to the level seen
in H1 20. Statutory profit before tax of £4.0m (1H21: loss £(18.9)m) includes a
benefit from fair value movements on forward contracts.
Style and sustainability continue to be the overarching focus in everything we
do. Reflecting this, we have simplified our mission further: "To be the #1
sustainable style destination". To achieve this, we are continuing to focus on
our four strategic objectives:
• Inspire through product & style
• Engage through social
• Lead through sustainability
• Strong operational foundations to 'Make it happen'.
Inspire through product & style
I am incredibly proud of the new product, which has been well received by
consumers and our partners, especially jackets where we have seen a step-change
in the designs for AW21, with revenues growing 40%2 compared to AW20. However,
we saw improvements across a number of key categories across the same
time-frame, particularly in womenswear, driving a mix increase of +4%pts
compared to two-years ago.
Our short-order offering has enabled us to communicate with a younger
demographic, taking advantage of in-season trends, with our mini-skirt range
resonating with teen consumers, and our Recycled capsule being showcased by our
sustainability-focused influencers.
Engage through social
Our accelerating use of influencers and focus on social channels, particularly
TikTok and Instagram, has allowed us to increase engagement with this younger
target demographic. We now have over 2,000 influencers, up sixfold
year-on-year, and our Instagram followers grew by +23%. Superdry saw the
largest growth in online traffic among the UK's top 50 busiest retail websites
over the Black Friday weekend (and one of only three that increased
year-on-year)3, despite a reduced mark-down offering.
Lead through sustainability
Our continued emphasis on sustainability saw nearly half of our AW21 buy being
either organic or made from recycled or low impact materials, up 10%pts vs
AW20. Our share of sales from sustainable product continues to grow, with all
our jackets in the AW21 range containing recycled padding.
As expected, we improved our Carbon Disclosure Project rating from B to A-.
Among our peers, we are the only brand to have improved our grade consistently
for the last 3 years, evidencing our growing momentum on the journey towards
Net Zero, and re-affirming our market leading ambitions and commitment to
sustainability.
We published our first Sustainability report in September 2021 which can be
found on our Corporate Website
( 3 https://corporate.superdry.com/sustainability/sustainability-report/), this
provides additional detail on everything we have committed to, achieved so far
and ultimately challenged ourselves on.
Make it happen
In November we were joined by Cathryn Petchey, our Global People Director, and
Matt Horwood, our Chief Technology Officer. Both bring significant experience,
skills and capabilities developed within the retail sector, and we are
delighted to have them onboard.
One of the most exciting milestones so far this year has been the opening of
our new flagship store on Oxford Street. The store is a statement of our intent
for our future and is the best expression of the brand, with the style choices
clearly merchandised and a dedicated area for our influencers. Since opening,
the store has consistently outperformed expectations and key trading metrics
such as conversion, basket value and average selling price have all
outperformed averages in our UK stores, with our vintage initiatives helping to
attract a materially younger customer.
Building on this, we opened a Studios and Performance Sport concept store in
Cheltenham in December, our clearest physical segmentation of style choices
yet.
On a digital front, we are making good progress with the migration of our
legacy Ecommerce platform over to microservices technology and will begin to
see the benefits in FY23 and beyond. In addition, we are also investing in our
back-office systems with upgrades to both our inventory and accounting systems.
Despite continued challenges from Covid-19, we continue to reduce our inventory
holding and at the end of the first half had 9% fewer units than the same time
last year, and 14% fewer than H1 20. Our efficient management of the stock and
optimised use of clearance channels, including through Black Friday, means that
we are confident we will be able to reduce our inventory even further by the
year-end.
Looking forward
As detailed above, we have made solid progress against each of our strategic
pillars in 2021, despite the ongoing uncertainty and challenges from Covid-19,
which continue to impact consumer demand, operations, and the global supply
chain.
Our continually improving and sustainable product, supported by the building
momentum behind our social marketing activities, is now starting to resonate
with younger consumers and women in particular.
Though we remain cautious, the early signs of progress we are seeing give us
increasing confidence in the delivery of the brand turnaround.
Notes
1. BRC Data taken from the BRC-Sensormatic IQ Footfall Monitor for the four
months ended December 2021 compared to December 2019.
2. Autumn/Winter 21 (full price trading period) defined as the period between
weeks 19-34, 29 August 2021 to 18 December 2021.
3. As per Retail Week article on 9 December 2021, 4 here.
Finance Review
Group revenue decreased by 1.9% in the first half reflecting the continued
impact of Covid-19 and our move to a full-price trading stance. Ecommerce
decreased 30.0% to £62.2m year-on-year, but this was largely offset by Stores
sales which increased by 21.5%, and Wholesale sales which increased 2.7%
year-on-year.
Our accelerated strategy to move to a full-price trading stance resulted in a
12%pts increase in mix of full-price sales1 and a 3.5%pts increase in gross
margin rate which more than offset the overall reduction in revenue. The
adjusted loss before tax has improved by £7.8m to £(2.8)m, in line with the
pre-pandemic 1H 20 loss and benefiting from the re-opening of the store estate.
Statutory profit before tax also improved from a loss of £(18.9)m to a profit
of £4.0m, benefiting from £6.2m of fair value movements on foreign exchange
forward contracts (1H 21: £(7.4)m).
1H 22 1H 21 Change
£m £m %
Revenue: Stores 103.0 84.8 21.5%
Ecommerce 62.2 88.8 (30.0)%
Wholesale 112.0 109.1 2.7%
Group revenue 277.2 282.7 (1.9)%
Gross profit: Stores 71.7 54.7 31.1%
Ecommerce 39.1 49.0 (20.2)%
Wholesale 42.3 42.5 (0.5)%
Group profit 153.1 146.2 4.7%
Gross profit margin % 55.2% 51.7% 3.5%pts
Selling and (126.5) (130.2) (2.8)%
distribution costs
Central costs (34.0) (31.1) 9.3%
Impairment credit on trade receivables 2.0 - 100.0%
Other gains and 6.1 8.1 (24.7)%
(losses)
Adjusted operating 0.7 (7.0) (110.0)%
profit/(loss)*
Adjusted operating 0.3% (2.5)% 2.8%pts
margin*
Net finance expense (3.5) (3.6) (2.8)%
Adjusted loss before (2.8) (10.6) (73.6)%
tax*
Adjusting items:
Fair value movement on 6.2 (7.4) (183.8)%
forward contracts
IFRS2 credit/(charge) - 0.6 (0.3) (300.0)%
Founder Share Plan
Restructuring, - (100.0)%
strategic costs (0.6)
Total adjusting items 6.8 (8.3) (181.9)%
Profit/(Loss) before 4.0 (18.9) (121.2)%
tax
Tax (expense)/credit (1.5) 3.5 (142.9]%
Profit/(Loss) for the 2.5 (15.4) (116.2)%
period
* Adjusted operating loss, adjusted operating margin and adjusted loss before
tax are defined as reported results before adjusting items as further explained
in Note 21.
Retail revenue ('Stores' and 'Ecommerce')
1H 22 1H 21 Vs 1H 21 1H 20 Vs 1H 20
Retail revenue £m £m £m
% %
Stores 103.0 84.8 21.5% 157.3 (34.5)%
Ecommerce 62.2 88.8 (30.0)% 57.8 7.6%
Total Retail revenue 165.2 173.6 (4.8)% 215.1 (23.2)%
Ecommerce revenue as a proportion of 37.7% 51.2% (13.5)%pts 26.9% 10.8%pts
Retail revenue
Ecommerce revenue as a proportion of 22.4% 31.4% (9.0)%pts 15.7% 6.7%pts
Group revenue
Stores
Store revenue declined 34.5% compared to FY20, as we made the shift to a
full-price stance and footfall remained subdued in all markets, despite the
easing of social distancing restrictions across the first half. However, we did
begin to see an improvement in the run-rate as we moved through the half, which
has continued into the second half.
UK footfall recovered strongly throughout the first half, but Europe continued
to suffer, largely from Covid-related temporary closures in key markets, ending
the half down (11.2)% year-on-year. The Rest of the World revenue relates to
the US stores which began to show recovery during the half, albeit still at
severely disrupted levels.
Store revenue by territory* 1H 22 1H 21 Change 1H 20 Change
£m £m % £m %
UK and Republic of Ireland 53.0 35.1 51.0% 75.8 (30.1)%
Europe 38.7 43.6 (11.2)% 62.5 (38.1)%
Rest of World 11.3 6.1 85.2% 19.0 (40.4)%
Total Store revenue 103.0 84.8 21.5% 157.3 (34.5)%
*For all channels the geographic territories have been aligned to the internal
management operational structure.
We closed 15 stores in the year to 1H 22, all during the second half of FY21,
and opened 2 new stores, ending the half with 226 stores. Since the half-year
end we have opened our new flagship store on Oxford Street and our first
Studios and Performance Sport concept store in Cheltenham in addition to 5
other stores, but also saw 5 closures, bringing our total owned stores to 228
as at the end of December.
Ecommerce
Ecommerce continues to face tough comparables year-on-year due to elevated
levels of promotional activity during FY21, resulting in revenue ending the
half down 30.0%. However, we are encouraged by the more indicative performance
on a 2-year basis which is up 7.6%, evidencing of our improved social
engagement and focus on digital marketing.
Ecommerce revenue by territory** 1H 22 1H 21* Change 1H 20 Change
£m £m % £m %
UK and Republic of Ireland 29.8 48.2 (38.2)% 26.1 14.2%
Europe 29.5 34.0 (13.2)% 27.8 6.2%
Rest of World 2.8 6.6 (57.6)% 3.9 (28.3)%
Total Ecommerce revenue 62.2 88.8 (30.0)% 57.8 7.6%
* In the prior year all eBay sales were allocated between UK and RoW. From the
end of FY21 eBay was allocated to the relevant territory for clarity. To ensure
consistent comparatives, this methodology has been applied retrospectively to
H1 21.
** For all channels the geographic territories have been aligned to the
internal management operational structure.
As expected, the store re-openings after lockdowns resulted in a decrease of
Ecommerce participation as a percentage of total Retail revenue year-on-year
from 51.2% to 37.7%. However, on a 2-year basis, Ecommerce as a proportion of
Retail revenue has increased by 10.8%pts highlighting that an element of the
shift online we have seen since the start of the pandemic has been permanent.
Wholesale
Many of our Wholesale partners, most of which have a physical presence,
suffered the same trading headwinds from Covid as our owned store channels. In
addition, global supply chain delays have had a greater impact in this channel
due to the need to consolidate stock in our distribution centres before
despatching to customers.
Despite the drag experienced from restrictions in Europe, and the timing issues
caused by the supply chain delays noted above (the majority of which has since
caught up during H2), Wholesale revenue began to recover, increasing 2.7%
year-on-year. However, the ongoing Covid-related restrictions over peak may
result in partners carrying forward more stock than anticipated.
Wholesale revenue by territory** 1H 22 1H 21* Change 1H 20 Change
£m £m % £m %
UK and Republic of Ireland 10.7 14.8 (27.7)% 21.3 (49.7)%
Europe 73.4 74.3 (1.2)% 101.4 (27.6)%
Rest of World 27.9 20.0 39.5% 31.3 (10.9)%
Total Wholesale revenue 112.0 109.1 2.7% 154.0 (27.3)%
* In the prior year Russia and Ukraine were included within Europe. At the end
of FY21 these territories were reallocated to Rest of World in line with the
internal management structure. To ensure consistent comparatives, this
methodology has been applied retrospectively to H1 21.
** For all channels the geographic territories have been aligned to the
internal management operational structure.
Gross margin
The acceleration of our return to a full price trading stance resulted in our
total gross margin increasing 3.5%pts to 55.2%.
This was evidenced by our full price mix1 growing by 12%pts, driving gross
margin improvements in both our Store and Ecommerce channels, with year-on-year
increases of 5.1%pts and 7.7%pts respectively.
Gross margin by channel 1H 22 1H 21 Vs 1H 21 1H 20 Vs 1H 20
Stores 69.6% 64.5% 5.1%pts 68.9% 0.7%pts
Ecommerce 62.9% 55.2% 7.7%pts 59.4% 3.5%pts
Retail 67.1% 59.7% 7.4%pts 66.3% 0.8%pts
Wholesale 37.8% 39.0% (1.2)%pts 42.3% (4.5)%pts
Total gross margin 55.2% 51.7% 3.5%pts 56.3% (1.1)%pts
Total operating costs
Total operating costs, pre-adjusting items, reduced by (0.5)% to £152.4m and
includes store, distribution, marketing, head office, central and depreciation
costs, impairment credit on trade receivables and other gains and losses. The
balance is roughly in line with 1H 21, despite the increased activity this year
as stores re-opened and our employees began a return to the office.
1H 22 1H 21 Change
Gross Profit 153.1 146.2 4.7%
Selling and distribution costs (126.5) (130.2) (2.8)%
Central costs (34.0) (31.1) 9.3%
Impairment (credit) on trade receivables 2.0 - 100.0%
Other (gains) and losses 6.1 8.1 (24.7)%
Total operating costs pre-adjusting items (152.4) (153.2) (0.5)%
Net finance expense (3.5) (3.6) (2.8)%
Adjusted loss before tax (2.8) (10.6) (73.6)%
Selling and distribution costs decreased £3.7m, predominately as a result of
distribution costs decreasing £10.4m year-on-year from reduced Ecommerce
volumes. These savings were partially offset through upweighted brand and
performance marketing spend (£5.8m increase year-on-year), in line with our
strategy to improve engagement with a younger demographic.
Central costs increased £2.9m to £(34.0)m. The key driver for the increase is
largely due to an anticipated normalisation of performance related pay
(following the reintroduction of the bonus scheme which was suspended in FY21),
the return of business rates on our corporate offices and a greater volume of
travel and corporate activity as social distancing restrictions begin to relax.
Reflecting the steady rate of collections against our debtor book, we
recognised a £2.0m impairment credit on trade receivables (1H 21: £nil).
Within the above costs, there was a modest decrease of £3.7m in depreciation
charges, the majority of which sits in selling and distribution costs, due to a
lower asset base from historic store impairments and rent negotiations for IFRS
16 leases.
Other gains and losses reflect modifications on IFRS 16 leases and royalty
income and this net credit has reduced £(2.0)m year-on-year to £6.1m.
Net finance costs were roughly in line with the prior year at £3.5m (1H 21:
£3.6m). £2.3m (1H 21: £3.0m) relates to interest expense on leases under IFRS
16. There was an expected year-on-year increase to the remaining finance costs
as we utilised our financing facility in the first half, following the partial
unwind of deferred rent during H1 22.
Adjusting items
£m 1H 22 1H 21 Change
Adjusted loss before tax (2.8) (10.6) (73.6)%
Fair value movement on forward contracts 6.2 (7.4) (183.8)%
IFRS2 charge - Founder Share Plan 0.6 (0.3) (300.0)%
Restructuring, strategic costs - (0.6) (100.0)%
Total adjusting items 6.8 (8.3) (181.9)%
Statutory profit/(loss) before tax 4.0 (18.9) (121.2)%
Adjusting items primarily relate to a £6.2m credit in respect of the fair value
movement in financial derivatives (1H 21: £(7.4)m debit) which has been driven
by changes to the timing of derivatives used to hedge Euro receivables and US
Dollar payables and by rate movements during the hedging period.
Profit/Loss before tax
Despite the continued disruption from Covid-19, the adjusted loss before tax
improved to £(2.8)m from £(10.6)m, driven by the re-opening of physical trading
locations (both owned and Wholesale) as well as continued cost saving measures.
The adjusted loss before tax of £(2.8)m is roughly in line with the two-year
comparative (1H 20: £(2.3)m).
In addition to the above, the statutory profit before tax, improved to a profit
of £4.0m, benefitting from the £6.2m fair value movement on forward contracts
(1H 21: £(7.4)m).
Taxation
Our tax charge on adjusted losses is £0.3m (1H 21: £2.0m tax credit on adjusted
loss). In 1H 22, an accounting tax charge arises on an adjusted loss due to the
geographic split of our results and also the recognition/derecognition of
deferred tax balances.
Our tax charge on statutory profits is £1.5m (1H 21: £3.5m tax credit on
statutory loss). This represents an effective tax rate of 37.5% (1H 21: 18.7%).
The Group's effective tax rate on statutory profits is higher than the
statutory rate of 19% (1H 21: 19%). This is primarily due to movements in
deferred taxation recognised in respect of leases, tax losses and the provision
made for uncertain tax positions as required by accounting standards.
The net tax charge on adjusting items totals £1.2m (1H 21: £1.5m tax credit),
which arises on accounting gains in respect of future foreign exchange
contracts.
Profit/Loss after tax
Group statutory profit after tax for the first half was £2.5m, compared to a
£15.4m loss in 1H 21.
Profit/Loss per share
Adjusted basic EPS is (3.8)p (1H 21: EPS (10.5)p).
The adjusted performance of the business, offset by the adjusting items
outlined above, results in a reported basic EPS of 3.0p (1H 21: EPS (18.8)p)
based on a basic weighted average of 82,054,759 shares (1H 21: 82,020,620
shares).
Adjusted diluted EPS is (3.8)p (1H 21: EPS (10.4)p) and diluted EPS is 3.0p (1H
21: EPS (18.6)p. These are based on a diluted weighted average of 84,441,491
shares (1H 21: 82,624,901 shares).
Dividends
In line with the decisions made since the start of the pandemic, the Board
believes it is prudent and in the long-term interest of shareholders to
continue to focus on cash preservation in the short-term and has decided not to
propose an interim dividend.
Cash Flow
We ended the half with £(3.9)m net debt as we partially unwound deferred rent
(around £10m repayment since year-end). This is significantly lower than 1H 21
(£34.1m net cash), which benefitted from the initial deferrals and rate
holidays, but remains ahead of the pre-covid 1H 20 position (£(9.3)m net debt),
which is more reflective of our normalised working capital cycle. Further
detail can be found in the Consolidated Group Cash Flow Statement and note 8.
As at 17 January, we are held net cash of £20.4m.
Working Capital
1H 22 1H 21 Change Change
£m £m £m £m
%
Inventories 159.4 166.5 (7.1) (4.3)%
Trade and other receivables1 109.4 112.1 (2.7) (2.4)%
Trade and other payables2 (148.2) (143.5) (4.7) 3.3%
Net working capital 120.6 135.1 (14.5) (10.7)%
At H1 22, our inventory balance has reduced by 4.3% (£7.1m) to £159.4m and the
number of units has reduced 9% year-on-year, despite the reduction in sales and
challenging trading environment. We remain committed to a full year reduction
in inventory as we continue with our targeted clearance activity and
disciplined forward season buys.
Trade and other receivables are in line year-on-year, decreasing (2.4)% (£2.7m)
to £109.4m, due to stronger than anticipated collections on the debtor book.
Trade and other payables have increased by 3.3% to £148.2m, impacted by
inventory timings. This line also includes rent deferrals of non-IFRS 16 leases
which stands at £4.5m. Deferred rent relating to IFRS 16 leases of £9.9m is
included within lease liabilities.
Net working capital decreased in the first half by 10.7% (£14.5m) to £120.6m
and as a proportion of Group revenue was 43.5% (1H 21: 47.8%).
Capital Expenditure
Additions in property, plant and equipment and intangible assets totalled £9.0m
(1H 21: £5.0m), as the business has re-started its investment programme. We
focused our first half spend on IT infrastructure, including the re-platforming
of our Ecommerce website to microservices.
We still expect full year capital expenditure to be in the range of £15-£20m,
with this level increasing into FY23 as we accelerate our investment into our
technology, data and digital capabilities].
Outlook
The emergence of the Omicron variant has resulted in more uncertainty, but we
remain encouraged the brand is clearly resonating with consumers, reflected by
the strong gross margin performance as we returned to a full-price stance. Our
performance over the peak trading period has given us confidence that we will
achieve current market expectations for FY22 adjusted PBT.
In line with the rest of the sector, we expect to be impacted by inflationary
cost pressures. However, we expect to fully offset these headwinds through
further gross margin improvement (via a reducing mark-down mix), together with
some price realignments in selected categories and markets.
Assessment of Group's prospects
The financial position of the Group, its cash flows and liquidity position are
set out in the financial statements. Furthermore, the Group Financial
statements include the Group's objectives and policies for managing its
capital, its financial risk management objectives, details of its financial
instruments and exposure to credit and liquidity risk (please refer to note
18).
Background - Impact of continuing lockdowns and social distancing restrictions
The lasting impact of the pandemic saw unprecedented levels of disruption
throughout FY21, which have continued into FY22, with trading and operations
having been disrupted for nearly two full years.
Following the "initial wave" of lockdowns, beginning March 2020 and impacting
much the first quarter of FY21, infection rates in our key markets
substantially reduced by late September 2020 and, with the majority of our
owned store estate reopening, the prevailing view at that time was that further
widespread lockdowns appeared unlikely.
However, the announcement of a second wave of lockdowns resulted in temporary
store closures in the UK and certain EU markets from late October 2020, albeit
with a brief opening period before a further hard lockdown from January through
to April 2021. Together with the wider factors affecting open stores, such as
social distancing measures and broader economic and health concerns, the Group
saw a continued suppression of footfall in stores which was only partially
offset by Ecommerce sales.
This dynamic has continued across our markets to varying degrees though
calendar 2021, most recently as a consequence of the Omicron variant which
began spreading rapidly in December, our busiest trading month of the year.
However, unlike previous infection waves, social distancing and the
accompanying footfall declines were largely self-imposed by the general public,
with comparatively few measures imposed by governments (particularly in the
UK). Consequently the impact on trading, while challenging, has been less
severe than in previous waves given the store estate's ability to continue
trading throughout.
Although there is no certainty that there will not be further lockdowns, this
most recent variant suggests that we may see less binary effects than
previously. In addition, vaccine rollouts and booster programmes are
progressing well in many of our core markets and government communications
reflect an increasing pressure to keep economies open.
There are several key mitigations that the Group has undertaken to partially
offset the adverse revenue impacts of these lockdowns:
• We recognised £7.7m of one-off rent savings in FY21 relating to the
disrupted periods with further savings expected to be realised in FY22.
These one-off rent benefits are in addition to the ongoing lease renewal
savings that have been achieved to date, which we expect will continue to
be realised as we review our store estate.
• Reduced future stock purchases to offset the carry over and recoding of
core product, which remains our largest cash mitigation.
Liquidity headroom
The Group will look to refinance its Asset Backed Lending ('ABL') facility for
up to £70m, prior to its expiry in February 2023.
The Group's ability to preserve and manage cash has been clearly evidenced (and
detailed in the Mitigating actions section, below), with the business
maintaining a positive net cash balance in excess of £20m throughout FY21,
despite the pressures of the pandemic.
The maximum drawdown on the ABL facility was £21m in October 2021, as peak
working capital coincided with us weathering the impact of temporary closures
in the EU and continuing suppressed footfall across all markets. Despite the
partial unwind of around £10m deferred rent over the first half, we closed the
period with net debt of only £(3.9)m, compared to a pre-covid borrowing of
£(9.3)m at H1 20. As at 17 January net cash had increased to £20.4m.
In addition, the Group has an overdraft facility of up to £10m available on a
rolling annual basis, albeit as this is not committed, it has not been
considered by management as part of the going concern or viability assessment.
Base case:
The Group's going concern assessment has been based on a 12-month financial
plan (the 'Plan') derived from the latest FY22 and FY23 forecasts. Though the
effects of Covid-19 on consumer behaviour long term are yet to be fully
understood, the trading dynamics seen throughout the year to date are reflected
in the Plan.
In determining the Plan, management has made a number of assumptions regarding
the Group's trading performance in light of the Coronavirus pandemic. The most
significant of those are:
• All trading channels benefit from ongoing product improvements, operational
initiatives and marketing activity to support the brand reset which began
in October 2020, the full benefit of which is not yet realised, given the
ongoing footfall suppression throughout 2021.
• Stores trade for the remainder of FY22 and entirety of FY23 following the
reopening of those European markets which remained closed at the start of
the financial year. Footfall is assumed to recover steadily over the
duration of FY22 as stores reopen and consumer demand returns, reflecting
the macroeconomic uncertainties in FY22 and the ongoing channel shift
towards online, though stabilising at a lower level than previously
forecast, and below pre-Covid-19 levels. Profitability will be delivered
through increased full price trading margins, the recurring benefits of
renegotiated leases.
• Ecommerce trading benefits from the underlying channel shift towards
digital from physical retailing (versus pre-Covid levels), together with
planned investments to improve the website user experience, most notably
the migration to a microservices platform by the end of FY22. Following the
return to a full price trading stance during FY22, the latest FY23
projections now reflect this lower volume, high margin trading dynamic, and
the associated variable savings.
• Wholesale performance begins to modestly recover in FY23, reflecting the
latest forward order book and the continuation of FY22 trends such as
increased In Season Orders to online partners, recovering to pre-Covid-19
levels over the medium term. A more normalised delivery phasing is planned,
following the disruption experienced during FY22.
• Intake pressures on the gross margin rate are largely offset through the
continued full price trading and selective price increases, together with
channel mix benefits as stores (our highest margin channel) trade for the
duration of the year.
• Marketing spend continues to increase in FY23 to reflect increased
performance marketing in the short-term together with longer-term brand
investment as part of the turnaround.
Reverse stress test
Given the base case reflects both the results of the turnaround plan, and the
uncertainties surrounding forecasts due to Covid-19, the Group has modelled a
'reverse stress test' scenario.
A reverse stress test calculates the shortfall to forecast sales in the Plan
that the Group would be able to absorb after implementing feasible mitigating
actions before either:
a) requiring additional sources of financing, in excess of those that are
committed; or
b) breaching the lending covenants on our committed facility
Given the projected headroom over our covenants, and our proven ability to
manage cash, the Board considers the likelihood of breaching our facilities to
be remote.
This assessment is linked to a robust assessment of the principal risks facing
the Group, and the reverse stress test reflects the potential impact of these
risks being realised. The principal risks are outlined in the 'Principal risks
and uncertainties' section.
Mitigating actions
If performance deviates materially from the Base Case Plan, the impact could
result in a reduction in liquidity and/or a longer period of lower
profitability, which in turn could risk covenant breaches. Management has
considered what plausible mitigating actions are available to them, including:
• a reduction in uncommitted capital expenditure;
• a reduction in overheads and discretionary spend, particularly marketing
and variable pay;
• reducing the purchase quantities of new season stock through lower
short-order volumes, and the deferral and cancellation of orders;
• negotiating extended supplier payment terms; and,
• incremental clearance activity through our off-price channels
For the purposes of the going concern calculations, we have modelled only the
first two in the above list and held the remainder as contingent activities.
Covenant testing
As at 17 January we have net cash of £20.4m and access to our Asset Backed
Lending ("ABL") Facility, together with an uncommitted overdraft.
Our relationship with our lending group remains strong, with several covenant
resets agreed during the pandemic as the macroeconomic impact of social
distancing and lockdown restrictions continued to extend past initial
expectations when the financing was agreed in August 2020.
The amended covenants in the ABL facility are tested quarterly and are based
around the Group's adjusted fixed charge (rent and interest). The covenants are
tested on a 'frozen GAAP' basis and hence unaffected by IFRS 16, "Leases".
Under the reverse stress test, which tests for the breakeven point against our
borrowing facilities, the October 2022 (Q2 23) covenant test would breach
first. However, management considers the revenue shortfall required to cause
this breach to be remote. The directors are confident that under the mitigated
reverse stress test there is sufficient liquidity headroom over the going
concern period.
If this scenario was to occur, management would approach lenders for a covenant
waiver. Whilst there would be no guarantee that such a waiver would be made
available, in making their assessment management notes that it currently has a
good relationship with the Group's lenders and has held positive discussions
throughout the year. These lenders have been made aware of all key inputs into
the Base Case Plan, as well as the implications of the short-term disruption,
and have agreed to re-gear the covenants on several occasions, to reflect the
unforeseen duration and magnitude of the impact from Covid-19.
Significant judgements
In using these financial forecasts for the going concern assessment, the
Group's Directors recognise that significant judgement was required to decide
what assumptions to make regarding the impact of the coronavirus pandemic on
the retail sector and wider economy and specifically to Superdry, and the
ability to execute the turnaround plans required to recover brand health and
return the business to profitable growth. Consequently, though the level of
visibility has improved year-on-year, there remains more uncertainty than would
usually be the case in making the key judgements and assumptions that underpin
the financial forecasts for the business. The directors believe that this
uncertainty is reflected in the Base Case Plan, and trading year to date
continues to give us confidence that we are through the worst effects of the
pandemic.
The Plan does not anticipate a further, extended period of store closures, and
the likelihood of this scenario is deemed remote, particularly in light of
recent evidence following the reaction of Governments to the Omicron variant in
our key markets. While it is conceivable that there is a further territory-wide
lockdown, key factors in making this judgment include:
• vaccine rollouts and booster programmes are progressing well in many of our
core markets;
• social distancing restrictions have been relaxed far more significantly
than in between previous lockdowns, with broader cultural acceptance of the
need for hygiene measures (e.g. mask-wearing and hand sanitising);
• Government communications reflect an increasing pressure to keep economies
open, with furlough support coming to an end on 30 September 2021 in the
UK;
• The UK has announced that most social distancing measures will end on 26
January 2022.
Summary
After considering the forecasts, sensitivities and mitigating actions available
to management and having regard to the risks and uncertainties to which the
Group is exposed, the Directors have a reasonable expectation that the Company
and the Group has adequate resources to continue operating for the foreseeable
future, and to operate within its borrowing facilities and covenants for a
period of at least 12 months from the date of signing the financial statements,
taking into account the working capital cycle in FY23. Accordingly, the
financial statements continue to be prepared on the going concern basis.
Notes
1. Full-price sales within our full-price owned channels.
2. BRC Data taken from the BRC-Sensormatic IQ Footfall Monitor for the four
months ended December 2021 compared to December 2019.
Principal risks and uncertainties
The principal risks and uncertainties were outlined in the 2021 Annual Report
(pages 56-66). These have been reviewed and amended to ensure they are
reflective of our existing risk profile and are assessed on an on-going basis.
Also, within the Annual Report, the CFO Review included an analysis of the
actions taken to preserve the long-term financial position of Superdry (page
81) and a Covid-19 statement (page 20) which explained the impact on the wider
business. Covid-19 continues to represent a significant risk at a macro level
with an increased probability of a sustained economic recession, impacting
consumer spend as well as the risk profile of the business including the nature
and severity of several risks identified below.
Given the significance of Covid-19 related risks and the associated impact they
have had and could have on the Group, we have developed and continue to develop
measures designed to try and reduce their impact. To oversee the response to
the virus, we continue to deploy a Covid-19 Incident Management Team ('IMT')
formed of members of the Group's Executive team that meet twice weekly. The
safety of colleagues and customers continue to be the key priority for the IMT.
Specific principal risks and uncertainties include:
Damage may occur to the Superdry Brand, or the Brand may lose its resonance.
Superdry's ability to achieve success depends on setting a consumer centric and
relevant commercial product strategy that is aligned to brand position, market
dynamics and consumer perception
Compromise to our key technological / physical assets would significantly
impede our ability to trade, particularly during the peak trading period from
November to January. Key assets include Ecommerce platform, Distribution
Centres, Critical IT Systems, Head Office and large stores.
Elevated stock levels represent a risk in terms of shortfall in cash flow and
additional storage costs.
Performance across our global, omni-channel proposition represents a risk.
Specifically:
• Retail store performance represents a risk and in line with market trends,
the ongoing consumer preference shift towards digital shopping channels has
seen declining consumer visits to stores and declining profitability in the
physical retail environment. Covid-19 has accelerated the move towards
digital, but the risk associated with retail remains at an elevated level
with the threat of further lockdowns and additional Covid-19 measures, such
as numbers of customers permitted in stores also impacting performance.
• Wholesale performance is at risk from a number of factors, including grey
market distribution, an inability to meet the critical path and failing to
deliver on time and in full to customers. Covid-19 continues to represent a
risk in terms of our partners being able to trade and surplus stock levels
where partners have return and cancel orders.
• Ecommerce performance represents a significant growth opportunity, however,
represents a risk in terms of reliance on the channel to offset lost store
sales in the short term and delivery of medium- and long-term business
objectives. For example, we will be unable to achieve these objectives if
the consumer is moving faster than we can adapt and that our Ecommerce
platforms trail in the wake of competition.
• Failure to deliver on our growth aspirations in the Group's key future
development markets, in particular, the USA could lead to investment
without sufficient return in a reasonable timeframe and/or losses and the
deployment of significant management resource at a time when we have
multiple priorities.
Our financial results could be impacted by changes in exchange rates. In
addition, given the size of our wholesale partners and associated order book,
overdue debt will always represent a risk for the business.
Financial results are also at risk if the controls that operate within key
financial systems are not operating effectively.
Significant cash inflows, for example, peak trading, do not align with the
timing of peak outflows of cash. As such, there is a requirement to manage
working capital within the business to ensure we have sufficient cash at all
times. In addition, Covid-19 related store closures has put pressure on the
cash balance, resulting in the need for close cash management.
We need to recruit, develop, and retain the calibre of leadership that will
enable us to achieve our strategic goals.
There is a risk our information security is breached causing data and/or
systems compromise. Covid-19 has exacerbated this risk and could impact our
ability to trade, lead to regulatory scrutiny and fines and cause damage to the
brand, e.g., loss of customer trust.
Failure by suppliers to adhere to our Ethical Trading Code of Practice could
erode our reputation as a responsible brand. Customer enquiries on ethical
trading continue to increase, awareness is also growing in line with the modern
slavery and the fast fashion debate, and failure to demonstrate our credentials
in this area could also lead to reputational damage.
Increased risk of human rights issues through the supply chain, as a result of
changing local conditions, for example, Covid-19.
Awareness of environmental sustainability is increasing, and stakeholder
expectations and regulatory attention are also developing at pace. Failure to
meet expectations or adhere to regulatory standards would adversely impact our
brand. A consequence of enhanced reporting is additional resource requirements.
These factors also represent a risk in that they could influence the rate the
business may need to cut its carbon emissions and add additional cost to
achieve environmental compliance (for example, raw materials and lower emission
technologies).
In addition, the Group is heavily reliant on key raw materials which will be
impacted by the effects of climate change in the long-term making them harder
and more expensive to source.
A longer-term risk is shifting customer preferences as result of climate
change, requiring the brand to adapt further.
Responsibility statement of the Directors in respect of the condensed
consolidated interim financial information
On 19 January 2022 the Board of Directors of Superdry Plc approved this
statement.
The Directors confirm that to the best of their knowledge:
* The condensed financial information has been prepared in accordance with IAS
34, Interim Financial Reporting, as adopted by the EU, and gives a true and
fair view of the assets, liabilities, financial position and financial
performance of the consolidation as a whole; and
* The interim management report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first 26 weeks of the financial
year and their impact on the condensed financial information, and a description
of the principal risks and uncertainties for the remaining 26 weeks of the
financial year;
b) DTR 4.2.8R of the Disclosure 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 Directors of Superdry Plc are listed on the Board section of the Group
website:
www.corporate.superdry.com
On behalf of the Board of Directors:
Julian Dunkerton
Chief Executive Officer
19 January 2022
Condensed Group Statement of Comprehensive Income for the 26 weeks ended 23
October 2021 (unaudited)
Adjusted Adjusting Total Adjusted Adjusting Total
items
October October October items October
(note 6)
2021 2021 2020 (note 6) 2020
Note £m £m £m £m £m £m
Revenue 5 277.2 - 277.2 282.7 - 282.7
Cost of sales (124.1) - (124.1) (136.5) - (136.5)
Gross profit 153.1 - 153.1 146.2 - 146.2
Selling, general
and (160.5) 0.6 (159.9) (161.3) (0.9) (162.2)
administrative
expenses
Impairment
credit on trade 2.0 - 2.0 - - -
receivables
Other gains and 6.1 6.2 12.3 8.1 (7.4) 0.7
losses (net)
Operating 0.7 6.8 7.5 (7.0) (8.3) (15.3)
profit/(loss)
Net finance (3.5) - (3.5) (3.6) - (3.6)
expense
(Loss)/profit (2.8) 6.8 4.0 (10.6) (8.3) (18.9)
before tax
Tax 7 (0.3) (1.2) (1.5) 2.0 1.5 3.5
(expense)/credit
(Loss)/profit (3.1) 5.6 2.5 (8.6) (6.8) (15.4)
for the period
Attributable to:
Owners of the (3.1) 5.6 2.5 (8.6) (6.8) (15.4)
company
(3.1) 5.6 2.5 (8.6) (6.8) (15.4)
Other
comprehensive
loss net of tax:
Items that may
be subsequently - - -
reclassified to
profit or loss
Currency
translation (1.1) - (1.1) 4.6 - 4.6
differences
Total
comprehensive (4.2) 5.6 1.4 (4.0) (6.8) (10.8)
(expense)/income
for the period
Attributable to:
Owners of the (4.2) 1.4 (4.0) (10.8)
company
1.4 (10.8)
Earnings per
share
Basic 15 (3.8) 3.0 (10.5) (18.8)
Diluted 15 (3.8) 3.0 (10.4) (18.6)
Condensed Group Balance Sheet as at 23 October 2021
Unaudited Unaudited Audited April
October 2021 October 2020 2021
Note £m £m £m
ASSETS
Non-current assets
Property, plant and equipment 10 28.1 35.5 29.4
Right of use assets 12 95.1 110.7 91.1
Intangible assets 11 41.8 46.9 41.7
Deferred income tax assets 54.8 61.0 53.8
Derivative financial 18 0.2 - 0.3
instruments
Total non-current assets 220.0 254.1 216.3
Current assets
Inventories 159.4 166.5 148.3
Trade and other receivables 109.4 112.1 102.3
Current tax debtor 3.8 4.5 4.0
Derivative financial 18 4.1 0.2 2.4
instruments
Assets classified as held for - - -
sale
Cash and cash equivalents 17 44.1 34.1 38.9
Total current assets 320.8 317.4 295.9
LIABILITIES
Current liabilities
Borrowings 17 48.0 - -
Trade and other payables 148.2 143.5 126.5
Provisions for other 4.7 3.2 6.2
liabilities and charges
Current tax liabilities - 5.0 -
Derivative financial 18 2.5 7.3 5.7
instruments
Lease liabilities 66.1 80.9 94.1
Total current liabilities 269.5 239.9 232.5
Non-current liabilities
Trade and other payables 1.3 2.1 1.2
Provisions for other 8.4 8.7 10.0
liabilities and charges
Deferred tax liabilities - 0.8 1.5
Derivative financial 18 0.1 - -
instruments
Deferred liabilities 1.0 1.3 1.1
Lease liabilities 168.5 216.0 175.5
Total non-current liabilities 179.3 228.9 189.3
Net assets 92.0 102.7 90.4
EQUITY
Share capital 14 4.1 4.1 4.1
Share premium 149.2 149.1 149.2
Translation reserve 5.5 (0.9) 6.6
Merger reserve (302.5) (302.5) (302.5)
Retained earnings 235.7 252.9 233.0
Equity attributable to the 92.0 102.7 90.4
owners of the company
Total equity 92.0 102.7 90.4
Condensed Group Cash Flow Statement for the 26 weeks ended 23 October 2021
(unaudited)
October 2021 October 2020
Note
£m £m
Cash generated from operating activities 8 12.5 19.2
Tax (paid)/received (2.3) 4.5
Net cash generated from operations 10.2 23.7
Cash flow from investing activities
Purchase of property, plant and equipment (5.0) (3.0)
Purchase of intangible assets (4.0) (2.3)
Net cash used in investing activities (9.0) (5.3)
Cash flow from financing activities
Net interest paid (3.5) (3.6)
Repayment of leases - principal amount (40.0) (20.0)
Draw down on borrowings 20.6 -
Net cash used in financing activities (22.9) (23.6)
Net decrease in cash and cash equivalents 17 (21.7) (5.2)
Cash and cash equivalents at beginning of 17 38.9 36.7
period
Exchange gains on cash and cash equivalents 17 (0.5) 2.6
Net cash and cash equivalents at end of period 17 16.7 34.1
Of which: Cash and cash equivalents 44.1 34.1
Of which: Overdraft 17 (27.4) -
Condensed Group Statement of Changes in Equity for the 26 weeks ended 23
October 2021 (unaudited)
Attributable to the owners of the company
Share Share Translation Merger Retained Total
capital premium reserve reserve earnings
Note £m £m £m £m £m £m
Balance at 24 April 4.1 149.2 6.6 (302.5) 233.0 90.4
2021
Comprehensive income
Profit for the period - - - - 2.5 2.5
Other comprehensive
income
Currency translation - - (1.1) - - (1.1)
differences
Total other - - (1.1) - - (1.1)
comprehensive income
Total comprehensive - - (1.1) - 2.5 1.4
income for the period
Transactions with
owners
Employee share award
scheme - - - - 0.2 0.2
Shares issued 14 - - - - - -
Dividend payments 9 - - - - - -
Total transactions with - - - - 0.2 0.2
owners
Balance at 23 October 4.1 149.2 5.5 (302.5) 235.7 92.0
2021
Condensed Group Statement of Changes in Equity for the 26 weeks ended 24
October 2020 (unaudited)
Attributable to the owners of the company
Share Share Translation Merger Retained Total
capital premium reserve reserve earnings
Note £m £m £m £m £m £m
Balance at 25 April 4.1 149.1 (5.5) (302.5) 267.5 112.7
2020
Comprehensive income
Loss for the period - - - - (15.4) (15.4)
Other comprehensive
income
Currency translation - - 4.6 - - 4.6
differences
Total other - - 4.6 - - 4.6
comprehensive income
Total comprehensive - - 4.6 - (15.4) (10.8)
income for the period
Transactions with
owners
Employee share award
scheme - - - - 0.8 0.8
Shares issued 14 - - - - - -
Dividend payments 9 - - - - - -
Total transactions - - - - 0.8 0.8
with owners
Balance at 24 October 4.1 149.1 (0.9) (302.5) 252.9 102.7
2020
Condensed Group Statement of Changes in Equity for the 52 weeks ended 24 April
2021 (audited)
Attributable to the owners of the company
Share Share Translation Merger Retained Total
capital premium reserve reserve earnings
£m £m £m £m £m £m
Balance at 25 April 2020 4.1 149.1 (5.5) (302.5) 267.5 112.7
Comprehensive income
Loss for the period - - - - (36.1) (36.1)
Other comprehensive
income
Currency translation - - 12.1 - - 12.1
differences
Total other comprehensive - - 12.1 - - 12.1
income
Total comprehensive - - 12.1 - (36.1) (24.0)
income for the period
Transactions with owners
Shares issued - 0.1 - - - 0.1
Employee share award - - - - 1.6 1.6
schemes
Dividend payments - - - - - -
Total transactions with - 0.1 - - 1.6 1.7
owners
Balance at 24 April 2021 4.1 149.2 6.6 (302.5) 233.0 90.4
Explanatory Notes to the Interim Financial Information (unaudited)
1. Basis of preparation
Superdry Plc is a company domiciled in the United Kingdom. The condensed
interim financial information ("interim financial information") of Superdry Plc
for the 26 weeks ended 23 October 2021 ("October 2021") comprise the company
and its subsidiaries (together referred to as "the Group"). The prior
comparative period is for the 26 weeks ended 24 October 2020 ("October 2020").
This interim financial information does not comprise statutory accounts within
the meaning of section 434 of the Companies Act 2006. The Group statutory
financial statements for the 52 weeks ended 24 April 2021 ("April 2021") are
available upon request from the company's registered office at Superdry Plc,
Unit 60, The Runnings, Cheltenham, Gloucestershire, GL51 9NW or
www.corporate.superdry.com.
This interim financial information has been prepared in accordance with IAS 34
"Interim Financial Reporting" as adopted by the EU and the requirements of the
Disclosures and Transparency Rules. They do not include all of the information
required for full annual financial statements and should be read in conjunction
with the Group financial statements as at and for the 52 weeks ended 24 April
2021 ("Group Annual Report FY21), which have been prepared in accordance with
International Financial Reporting Standards ('IFRSs') as adopted by the
European Union. This interim financial information was approved by the Board of
Directors on 19 January 2022.
The comparative figures for April 2021 are extracted from the Group's statutory
accounts for that financial year. Those accounts have been reported on by the
company's auditor and delivered to the registrar of companies. The report of
the auditor (i) was unqualified; (ii) did not drawn attention to any matters by
way of emphasis; and (iii) did not contain statements under section 498(2) or
(3) of the Companies Act 2006. These sections address whether proper accounting
records have been kept, whether the Group's accounts are in agreement with
these records and whether the auditor has obtained all the information and
explanations necessary for the purposes of the audit.
The financial information in this interim financial information document is
neither audited nor reviewed by the auditor.
This interim financial information has been prepared under the going concern
basis.
The Group directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future, and
operate within its borrowing facilities and covenants for a period of at least
12 months from the date of signing the financial statements. Accordingly, the
financial statements continue to be prepared on the going concern basis.
2. Significant accounting policies
The accounting policies adopted are consistent with those of the previous
financial period (see pages 148 to 154 of the Group Annual Report FY21) except
as described below.
Taxation
Taxes on income in the interim period are accrued using the tax rate that would
be applicable to expected total annual earnings.
3. Critical accounting estimates and judgements in applying accounting policies
The preparation of interim financial information requires judgements, estimates
and assumptions to be made that affect the reported value of assets,
liabilities, revenue and expenses. The nature of estimation and judgement means
that actual outcomes could differ from expectation.
In preparing this interim financial information, unless stated otherwise, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation were the same as those that applied
to the consolidated financial statements for the 52 weeks ended 24 April 2021
(as set out on pages 155 to 157 of the Group Annual Report FY21). These were as
follows:
• Store impairments;
• Onerous property-related contract provisions;
• Recoverability of trade debtors;
• Uncertain tax position;
• Inventory provisions;
• Attributing Ecommerce sales and costs to stores; and
• Determination of adjusting items.
4. Seasonality of operations
Due to the seasonal nature of the Retail segment, higher revenues and operating
profits are usually expected in the second half of the year under normal
trading conditions. This weighting of higher revenues in the second half of the
year is a consequence of the brand's strength in cooler weather categories,
such as outerwear, which also carry higher average selling prices. Operating
profits therefore benefit from operating cost leverage, particularly in the
Group's stores. Wholesale seasonality is more evenly spread across the year.
In the financial period ended 24 April 2021, 50.8% of total revenues
accumulated in the first half of the year, with 49.2% in the second half. This
corresponded to 84.1% of adjusted profit before tax in the first half of the
year and 15.9% in the second half. This did not follow the historic seasonal
pattern, due to forced store closures during the ongoing Covid-19 pandemic. A
total 39% of store trading days were lost in the financial period ended 24
April 2021 (23% lost trading days in the first half of the year compared to 56%
lost trading days in the second half).
5. Segmental information
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief Operating Decision-Maker ("CODM"). The CODM,
which is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Executive Committee.
Revenue is generated from the same products (clothing and accessories) in all
segments; the reporting of segments is based on how these sales are generated.
Gross profit is the measure reported to the Group's CODM for the purpose of
resource allocation and assessment of segment performance. The Group derives
its revenue from contracts with customers for the transfer of goods and
services at a point in time. The CODM reviews the balance sheet at a Group
level, and so no separate balance sheet measures are provided between the
segments.
The Group's operating segments have been modified since the previous interim
financial information. Previously the operating segments were defined as Retail
and Wholesale. Due to a significant shift in consumer behaviour and a material
increase in the Ecommerce sales mix, the Group has chosen to focus on the three
channels separately in the management of the business with distinct reporting
and decision making. Consequently, the level at which the Group's CODM receives
information has changed, and the Group is now reporting revenue and gross
profit under three operating segments - Stores, Ecommerce and Wholesale. The
term 'Retail' will be used to define the total of the Ecommerce and Stores
segments. The prior year comparatives have been split to provide the same level
of information for the three segments:
• Stores - principal activities comprise the operation of UK, Republic of
Ireland, European and US stores and concessions. Revenue is derived from
the sale to individual consumers of own brand clothing, footwear and
accessories;
• Ecommerce - principal activities comprise the operation of all owned
websites and partnerships with third party websites. Revenue is derived
from the sale to individual consumers of own brand clothing, footwear and
accessories; and
• Wholesale - principal activities comprise the ownership of the brand and
wholesale distribution of own brand products (clothing, footwear and
accessories) worldwide.
Segmental results and assets include items directly attributable to a segment
as well as those that can be allocated on a reasonable basis. The Group reports
and manages central functions separately to the segmental operations. These
include design, finance, HR, IT, legal, merchandising, property and sourcing.
Segment information for the business segments of the Group for October 2021 is
set out below. The 'Retail' subtotal of the 'Stores' and 'Ecommerce' segments
presented below is considered useful additional information to the reader:
Stores Ecommerce Retail Wholesale Central Group
Subtotal
October 2021 segmental £m £m £m £m £m £m
analysis (unaudited)
Total segment revenue 103.0 62.2 165.2 187.8 - 353.0
Inter-segment revenue - - - (75.8) - (75.8)
Revenue from external 103.0 62.2 165.2 112.0 - 277.2
customers
Gross profit 71.7 39.1 110.8 42.3 - 153.1
Profit/(loss) before tax 12.5 26.2 (34.7) 4.0
The segment measure of profit required to be presented under IFRS 8 Segments is
gross profit. Profit/(loss) before tax has been presented as an additional
profit measure which is considered to provide useful information to the reader.
Certain costs have not been allocated between the Stores and Ecommerce segments
in FY21.
Adjusted * Reported
Adjusting items
October 2021 2021
October 2021 segmental analysis £m £m £m
(unaudited)
Revenue
Retail 165.2 - 165.2
Wholesale 112.0 - 112.0
Total revenue 277.2 - 277.2
Operating profit/(loss)
Retail 10.2 4.5 14.7
Wholesale 24.5 1.7 26.2
Central (34.0) 0.6 (33.4)
Total operating profit/(loss) 0.7 6.8 7.5
Profit/(loss) before tax
Retail 8.0 4.5 12.5
Wholesale 24.5 1.7 26.2
Central costs (35.3) 0.6 (34.7)
Total profit/(loss) before tax (2.8) 6.8 4.0
*Adjusted is defined as reported results before adjusting items and is further
explained in note 21.
The £0.6m adjusting item in the Central segment is in relation to the Founder
Share Plan. The £6.2m adjusting items in the Retail and Wholesale segments
relate to the fair value of forward exchange contracts, as disclosed further in
note 6.
Stores Ecommerce Retail Wholesale Central Group
Subtotal
October 2020 segmental £m £m £m £m £m £m
analysis (unaudited)
Total segment revenue 84.8 88.8 173.6 204.0 - 377.6
Inter-segment revenue - - - (94.9) - (94.9)
Revenue from external 84.8 88.8 173.6 109.1 - 282.7
customers
Gross profit 54.7 49.0 103.7 42.5 - 146.2
(Loss)/profit before tax (3.2) 16.7 (32.4) (18.9)
The following additional information is considered useful to the reader.
Adjusted* Reported
Adjusting items
October 2020 2020
October 2020 segmental analysis £m £m £m
(unaudited)
Revenue
Retail 173.6 - 173.6
Wholesale 109.1 - 109.1
Total revenue 282.7 - 282.7
Operating (loss)/profit
Retail 5.1 (5.3) (0.2)
Wholesale 19.0 (2.3) 16.7
Central (31.1) (0.7) (31.8)
Total operating (loss)/profit (7.0) (8.3) (15.3)
(Loss)/profit before tax
Retail 2.1 (5.3) (3.2)
Wholesale 19.0 (2.3) 16.7
Central costs (31.7) (0.7) (32.4)
Total (loss)/profit before tax (10.6) (8.3) (18.9)
*Adjusted is defined as reported results before adjusting items and is further
explained in note 21.
The £0.7m adjusting item in the Central segment is in relation to restructuring
costs and the Founder Share Plan. Of the £7.6m loss in the Retail and Wholesale
segments, £0.2m relates to restructuring costs and £7.4m relates to the fair
value of forward exchange contracts, as disclosed further in note 6
The Group has subsidiaries which are incorporated and resident in the UK and
overseas. Revenue from external customers in the UK and the total revenue from
external customers from other countries are:
Unaudited Unaudited
October 2021 October 2020
£m £m
External revenue - UK 93.5 98.1
External revenue - Europe 141.6 151.9
External revenue - Rest of world 42.1 32.7
Total external revenue 277.2 282.7
For all channels the geographic territories have been aligned to the internal
management operational structure. In the previous reporting period Russia and
Ukraine were included within Europe. For October 2021 these territories have
been reallocated to Rest of World in line with the internal management
structure. In the previous reporting period, all eBay sales were allocated
between UK and Rest of World, but for October 2021 eBay has been allocated to
the relevant territory. To ensure consistent comparatives, these two changes in
methodology have been applied retrospectively to October 2020.
Included within non-UK external revenue is £59.6m (October 2020: £61.0m)
generated by our overseas subsidiaries.
The total of non-current assets, other than deferred tax assets, located in the
UK is £75.7m (October 2020: £75.8m, April 2021: £68.9m), and the total of
non-current assets located in other countries is £89.5m (October 2020: £117.3m,
April 2021: £123.6m).
6. Adjusting items
The below adjustments are disclosed separately in the Group statement of
comprehensive income and are applied to the reported loss before tax to arrive
at the adjusted profit before tax. Further information about the determination
of adjusting items in financial year 2021 is included in note 21.
Unaudited October Unaudited October
2021 2020
£m £m
Adjusting items
Unrealised loss on financial 6.2 (7.4)
derivatives
Restructuring, strategic change and - (0.6)
other costs
IFRS 2 (charge)/credit in respect of 0.6 (0.3)
Founder Share Plan ('FSP')
Adjusting items 6.8 (8.3)
Taxation
Tax impact of adjusting items (1.2) 1.5
Taxation on adjusting items (1.2) 1.5
Total adjusting items after taxation 5.6 (6.8)
Adjusting items are included within:
Selling, general and administrative 0.6 (0.9)
expenses
Other gains and losses (net) 6.2 (7.4)
Adjusting items 6.8 (8.3)
7. Tax
The Group's income tax charge for October 2021 is £1.5m (October 2020: £3.5m
income tax credit). The Group's tax charge on adjusting items of £1.2m
represents an effective tax rate of 17.5%. Taken with the adjusted tax charge
of £0.3m, the Group's total income tax expense of £1.5m represents a total
effective tax rate of 37.5% for the period (October 2020: 18.7%, April 2021:
1.6%). The Group's total effective tax rate of 37.5% is higher than the
statutory rate of tax of 19%.
This is primarily due to overseas tax rates in excess of 19%, certain overseas
losses for which no tax benefit has been recognised, permanent differences on
consolidation adjustments and an increase to the provision recognised in
respect of uncertain tax positions.
Factors affecting the tax expense for the period are as follows:
Unaudited October Unaudited October
2021 2020
£m £m
Profit/(loss) before income tax 4.0 (18.9)
Profit/(loss) multiplied by the standard 0.8 (3.6)
rate in the UK - 19.0% (1H21: 19.0%)
Expenses not deductible for tax purposes 1.2 (4.7)
Overseas tax differentials 1.4 5.2
Uncertain tax provisions 0.5 -
Deferred tax not recognised (2.5) (1.4)
Non-qualifying depreciation - 0.7
Prior year items 0.1 0.3
Total income tax expense/(credit) 1.5 (3.5)
8. Note to the cash flow statement
Reconciliation of operating loss to cash generated from operations
October October
Note
2021 2020
£m £m
Operating profit 7.5 (15.3)
Adjusted for:
- (Gain)/loss on unrealised financial derivatives 6 (6.2) 7.4
- Depreciation of property, plant and equipment 10 6.4 8.8
- Net depreciation of right of use asset and deferred 12 12.9 13.2
liability
- Amortisation of intangible assets 11 3.8 5.1
- Loss on disposal of property, plant and equipment - 0.7
- Release of lease incentives - (0.2)
- Non-cash lease modifications (10.3) -
- IFRS 16 Covid-19 rent concessions (1.3) -
- Decrease in onerous property related contracts (2.8) -
provision
- Net impairment credit of trade receivables (2.0) -
- Write down of inventory 1.0 -
- Employee share award schemes 0.4 0.8
- Foreign exchange losses/(gains) 1.2 (2.1)
Operating cash flow before movements in working capital
10.6 18.4
Changes in working capital:
- Increase in inventories (12.3) (8.2)
- Increase in trade and other receivables (5.8) (32.8)
- Increase in trade and other payables, and provisions 20.0 41.8
Cash generated from operating activities 12.5 19.2
9. Dividends
For the year ended 24 April 2021, the Board made the decision not to recommend
paying a final dividend for the financial year given the ongoing uncertainty
and to maintain liquidity.
In line with the decision at the year end, the Board believes it is prudent and
in the long-term interest of shareholders to continue to focus on cash
preservation in the short-term, and has taken the decision to not propose an
interim dividend.
10. Property, plant and equipment
Movements in the net book value ("NBV") of property, plant and equipment in the
period to October 2021 were as follows:
Land and Leasehold Furniture, fixtures and Computer Total
buildings improvements fittings equipment
Group
£m £m £m £m £m
NBV at 25 April 4.2 13.1 9.1 3.0 29.4
2021
Additions - 3.0 1.7 0.3 5.0
Disposals - - - - -
Depreciation - (3.3) (2.2) (0.9) (6.4)
Exchange - - 0.1 - 0.1
differences
NBV at 23 4.2 12.8 8.7 2.4 28.1
October 2021
11. Intangible assets
Movements in the net book value ("NBV") of intangible assets in the period to
October 2021 were as follows:
Trademarks Websites & Lease Distribution Goodwill Total
software premiums agreements Group
£m £m £m £m £m £m
NBV at 25 April 2.0 16.7 - 1.5 21.5 41.7
2021
Additions 0.3 3.7 - - - 4.0
Disposals - - - - - -
Amortisation (0.2) (3.6) - - - (3.8)
Exchange - - - 0.5 (0.6) (0.1)
differences
NBV at 23 2.1 16.8 - 2.0 20.9 41.8
October 2021
12. Right of use assets
Right of use assets are recognised in relation to the Group's leases. The
Group's leased portfolio comprises various store and head office properties and
motor vehicles. The Group has applied the practical expedient in relation to
rent concessions provided as a result of the Covid-19 pandemic where relevant.
Movements in the net book value ("NBV") of Right of use assets in the period to
October 2021 were as follows:
Total
Group
£m
NBV at 25 April 2021 91.1
Additions 33.8
Disposal (15.8)
Lease modification (1.0)
Depreciation (13.1)
Exchange differences 0.1
NBV at 23 October 2021 95.1
13. Contingencies and commitments
The Group has capital expenditure commitments on property, plant and equipment
of £nil at October 2021 (£nil at October 2020 and £nil at April 2021).
The Company is party to an unlimited cross guarantee over all liabilities of
the Group. The value of this amount is deemed not practical to disclose. The
Group has contractual agreements with third party wholesale agents which
include a right for the wholesale agent to be indemnified when the contract is
terminated. These future indemnity amounts are held as contingent liabilities
until the contract is terminated, at which point they are held as provisions or
accruals. The value of future obligations for contracts which have not yet been
terminated (and have no defined end date) is £3.4m.
14. Equity securities
67,886 ordinary shares of 5p each were authorised, allotted and issued in the
period under the Superdry Plc Share based Long Term Incentive Plans, Save As
You Earn and Buy As You Earn schemes.
15. Profit/(loss) per share
Unaudited October Unaudited October
2021 2020
£m £m
Profit/(loss)
Profit/(loss) for the period attributable 2.5 (15.4)
to owners of the company
Number Number
Number of shares at period end 82,109,706 82,030,428
Weighted average number of ordinary 82,054,759 82,020,620
shares - basic
Effect of dilutive options and contingent 2,386,732 604,281
shares
Weighted average number of ordinary 84,441,491 82,624,901
shares - diluted
Basic profit/(loss) per share (pence) 3.0 (18.8)
Diluted profit/(loss) per share (pence) 3.0 (18.6)
Adjusted basic loss per share
Unaudited
Unaudited October 2020
October 2021
£m £m
Loss
Adjusted loss for the period (3.1) (8.6)
attributable to owners of the company
Number Number
Weighted average number of ordinary 82,054,759 82,020,620
shares - basic
Weighted average number of ordinary 82,054,759 82,624,901
shares - diluted
Adjusted basic loss per share (pence) (3.8) (10.5)
Adjusted diluted loss per share (pence) (3.8) (10.4)
On 23 October 2021, 2,386,732 share options were outstanding that could
potentially dilute basic EPS. These are antidilutive when the Group is in a
loss-making position, so have not been included in the EPS calculations where
this is the case. There is no dilutive effect from the FSP scheme (note 9).
There were no share-related events after the balance sheet date that may affect
basic earnings per share.
16. Related parties
Directors of the Group within the period and their immediate relatives control
20.7% (October 2020: 20.3%) of the voting shares of the Group. There have been
no material transactions in the period with related parties, including
Directors.
17. Net (debt)/cash
Net cash Other
Analysis of net cash - April 2021 October 2021
October 2021 (unaudited) flow non-cash changes
£m £m
£m £m
Cash and short-term deposits 38.9 5.7 (0.5) 44.1
Bank overdraft - (27.4) - (27.4)
Net cash and cash equivalents 38.9 (21.7) (0.5) 16.7
Other short-term borrowings - (20.6) - (20.6)
Total net (debt)/cash 38.9 (42.3) (0.5) (3.9)
Net cash Other non-cash
Analysis of net cash - October April 2020 changes October 2020
2020 (unaudited) flow
£m £m £m
£m
Cash and short-term deposits 307.4 (275.9) 2.6 34.1
Bank overdraft (270.7) 270.7 - -
Net cash and cash equivalents 36.7 (5.2) 2.6 34.1
Other short-term borrowings - - - -
Total net cash/(debt) 36.7 (5.2) 2.6 34.1
Included with cash and cash equivalents is £0.1m of rent deposits held for
sub-tenants of the Regent Street Store (October 2020: £0.1m), and £1.4m of cash
deposits from franchise customer guarantees (October 2020: £1.1m).
Additionally, there is EUR 1.8m (£1.6m) (October 2020: EUR 1.9m, £1.7m)
deposited in an account with Europäisch-Iranische Handelsbank AG. These amounts
are restricted cash.
Other non-cash changes relate to foreign exchange gains and losses.
Short-term borrowings
The Group has up to a net £10m uncommitted overdraft facility which has no
financial covenants and is included within the cash pooling arrangements.
On 7 August 2020, the Group entered a new financing facility with existing
lenders HSBC and BNPP in the form of a new Asset Backed Lending facility (ABL
facility) which is for up to £70m, with a term until January 2023. The ABL
facility can be extended by up to one year at the request of the Group and the
agreement of the lenders. The borrowing base will vary throughout the year
dependent on the level of the Group's eligible inventory and receivables. The
ABL facility with HSBC and BNPP was first drawn down in September 2021, and the
total funds in use amounted to £20.6m at 23 October 2022.
The ABL facility has two financial covenants: an EBITDAR (earnings before
interest, tax, depreciation, amortisation and rent) covenant which is
calculated on an internal budget basis; and a fixed charge cover covenant.
These covenants exclude the impact of IFRS 16, IFRS 15 and IFRS 9. Both
covenants are measured over a 12-month period and are tested quarterly.
The ABL facility also has operational covenants: a debt turn, a dilution
percentage with regards to notified debt and an inventory turn. These covenants
are calculated monthly. Also, if at any time headroom is less than £10m for a
period of five consecutive days or a termination event is continuing, each
Company will grant a fixed charge to the security agent.
The bank overdraft balance represents individual overdrawn balances within the
Group's cash-pooling arrangements. These had been disclosed gross in line with
the requirements of IAS 32.
18. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks including:
market risk (including foreign currency risk and cash flow interest rate risk),
credit risk and liquidity risk. The condensed interim financial information
does not include all financial risk management information and disclosures
required in the annual financial statements; they should be read in conjunction
with the Group Annual Report FY21. There have been no changes in the risk
management department or in any risk management policies since the year end.
Liquidity risk
Compared to the year end, there was no material change in the contractual
undiscounted cash out flows for financial liabilities.
Fair value estimation
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
• Quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1).
• Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2).
• Inputs for the asset or liability that are not based on observable market
data (that is, unobservable inputs) (Level 3).
The following table presents the Group's assets and liabilities that are
measured at fair value at 23 October 2021 and 24 October 2020.
October 2021 October 2020
Unaudited Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
£m £m £m £m £m £m
ASSETS
Derivative financial
instruments
- Forward foreign exchange - 4.3 - - 0.2 -
contracts
- Option contracts - - - - - -
LIABILITIES
Derivative financial
instruments
- Forward foreign exchange - (2.6) - - (7.3) -
contracts
- Option contracts - - - - - -
There were no transfers between levels during the period.
The fair value of the following financial assets and liabilities is approximate
to their carrying amount:
• Trade and other receivables
• Cash and cash equivalents
• Trade and other payables
19. Government assistance
The Group received government support within the UK and EU territories during
the current and prior years in response to the Covid-19 pandemic. This
included: deferring tax payments; obtaining reductions in business rates from
the UK government; seeking compensation for lost revenue and subsidies to cover
fixed costs; and placing staff on furlough during the periods of store
closures.
Furlough support across all territories of £0.2m was recognised in the period
(October 2020: £4.1m), through the UK's Coronavirus Job Retention Scheme (CJRS)
and equivalent schemes in other countries. A provision was recognised in FY21
to cover any existing furlough related clawbacks. This provision now totals
£1.7m (October 2020: £nil, FY21: £1.6m).
The business rates reductions from the UK government totalled £3.9m (October
2020: £8.1m).
Lost revenue and subsidy support in the UK and other territories of £0.7m has
been recognised in the period (October 2020: £nil).
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attached to them and that the grants
will be received.
Government grants are recognised in profit or loss on a systematic basis over
the periods in which the Group recognises as expenses the related costs for
which the grants are intended to compensate. The value is netted off against
costs in selling, general and administrative expenses.
20. Subsequent events
Covid-19
The Covid-19 pandemic has continued to have a disruptive impact on the Group's
operations and trading performance. There have been enforced store closures and
shortened trading hours in a small number of the Group's store estate, as well
as a continued impact on footfall.
In December 2021 the Omicron variant of Covid-19 rapidly spread through the UK
and Europe, the Group's largest markets, which prompted local governments to
tighten restrictions particularly around the use of face masks. However, the
restrictions have not been as severe as previous waves, with no widespread
enforced closures. The impact to trade has therefore not been as significant
compared to earlier in the pandemic. It is not possible to quantify any
potential impact from the spread of the Omicron variant, or to separate it from
the general ongoing Covid-19 related uncertainty.
This trading volatility and uncertainty during our peak trading period has been
exacerbated by the decision to accelerate the return to a full price stance,
which materially impacts the underlying trading dynamics (driving higher
margin, lower volume sales as a consequence of reduced mark-down penetration).
The ongoing disruption to the trading environment as a result of the Covid-19
pandemic is considered to be non-adjusting subsequent events for the purposes
of the interim financial statements.
21. Alternative performance measures
Introduction
The Directors assess the performance of the Group using a variety of
performance measures, some are IFRS, and some are adjusted and therefore termed
''non-GAAP'' measures or "Alternative Performance Measures" (''APMs''). The
rationale for using adjusted measures is explained below. The Directors
principally discuss the Group's results on an "adjusted'' basis. Results on an
adjusted basis are presented before adjusting items.
The APMs used in this Interim Report are: adjusted operating (loss)/profit and
margin, adjusted (loss)/profit before tax, adjusted tax expense and adjusted
effective tax rate, adjusted earnings per share and net cash/debt.
A reconciliation from these non-GAAP measures to the nearest measure prepared
in accordance with IFRS is presented below. The APMs we use may not be directly
comparable with similarly titled measures used by other companies. There have
been no changes in definitions from the prior period.
Adjusting items
The Group's statement of comprehensive income and segmental analysis separately
identify adjusted results before adjusting items. The adjusted results are not
intended to be a replacement for the IFRS results. The Directors believe that
presentation of the Group's results in this way provides stakeholders with
additional helpful analysis of the Group's financial performance. This
presentation is consistent with the way that financial performance is measured
by management and reported to the Board and the Executive Committee. It is also
consistent with the way that management is incentivised. In determining whether
events or transactions are treated as adjusting items, management considers
quantitative as well as qualitative factors such as the frequency or
predictability of occurrence. Adjusting items are identified by virtue of their
size, nature or incidence.
Examples of charges or credits meeting the above definition and which have been
presented as adjusting items in the current and/or prior years include:
• Acquisitions/disposals of significant businesses and investments (including
related to the joint venture);
• Impact on deferred tax assets/liabilities for changes in tax rates;
• Business restructuring programmes;
• Derecognition of deferred tax assets (including related to the joint
venture); and
• Asset impairment charges and onerous lease provisions.
• The movement in the fair value of unrealised financial derivatives; and
• IFRS 2 charges in respect of Founder Share Plan ('FSP').
In the event that other items meet the criteria, which are applied consistently
from year to year, they are also treated as adjusting items. In previous
reporting periods "Adjusting items" were described as "Exceptional and other
items".
Adjusting items in this period
The following items have been included within adjusting items for the 26 weeks
ended 23 October 2021:
Fair value re-measurement of foreign exchange contracts - 1H22, FY21 and 1H21
item
The fair value of unrealised financial derivatives is reviewed at the end of
each reporting period and unrealised losses/gains are recognised in the Group
statement of comprehensive income.
The Directors consider unrealised losses/gains to be adjusting items due to
both their size and nature. The size of the movement on the fair value of the
contracts is dependent on the spot foreign exchange rate at the balance sheet
date and an assessment of future foreign exchange volatility applied to the
relevant contract currencies, as such the size of the movements can be
substantial. The unrealised foreign exchange contracts have been entered into
in order to achieve an economic hedge against future payments and receipts and
are not a reflection of historical performance.
Founder Share Plan ('FSP') - IFRS 2 charge - 1H22, FY21 and 1H21 item
While there are no cost or cash implications for the Group, the Founder Share
Plan ('FSP') falls within the scope of IFRS 2. The Group has included the IFRS
2 charge and related deferred tax movement in relation to the FSP within
'adjusting items' for the current and subsequent periods.
The Directors consider the plan to be one-off in nature and unusual in that the
share awards are being funded exclusively by the Founders. The full-year charge
for FY21 and FY22 has been estimated between £0.2m - £0.5m each period. While
the charge is spread over a few financial years, the plan is a one-time scheme.
Accordingly, the IFRS 2 charge in respect of the FSP is an adjusting item due
to the size, nature and incidence of the scheme. There are no known recent
examples within quoted companies of incentive arrangements operating in a
similar way to the FSP. While unusual in terms of size, the plan is also
unusual regarding its treatment in what is essentially a personal arrangement,
with no net cost or cash and minimal administrative burden to the Group. There
are no other adjustments anticipated in respect of the scheme other than the
IFRS 2 charge. Therefore, the Directors consider the charge to be significant
in terms of its potential influence on the readers' interpretation of the
Group's financial performance.
Adjusted operating (loss)/profit and margin
In the opinion of the Directors, adjusted operating profit and margin are
measures which seek to reflect the performance of the Group that will
contribute to long-term sustainable profitable growth. The Directors focus on
the trends in adjusted operating profit and margins, and they are key internal
management metrics in assessing the Group's performance. As such, they exclude
the impact of adjusting items. Although the Group is currently making an
adjusted operating loss, adjusted operating profit and margin remain key
metrics monitored by management given the Group's intention to return to
profitability.
In previous reporting periods "Adjusted operating profit and margin" was
described as "Underlying operating profit and margin".
A reconciliation from operating profit/(loss), the most directly comparable
IFRS measure, to the adjusted operating /profit/(loss) and margin is set out
below.
October 2021 October 2020 April 2021
£m £m £m
Reported revenue 277.2 282.7 556.1
Operating profit/(loss) 7.5 (15.3) (29.5)
Adjusting items (6.8) 8.3 24.1
Adjusted operating profit/(loss) 0.7 (7.0) (5.4)
October 2021 October 2020 April 2021
% % %
Operating margin 2.7% (5.4)% (5.3)%
Adjusted operating margin 0.3% (2.5)% (1.0)%
Adjusted loss before tax
In the opinion of the Directors, adjusted (loss)/profit before tax is a measure
which seeks to reflect the performance of the Group that will contribute to
long-term sustainable profitable growth. As such, adjusted (loss)/profit before
tax excludes the impact of adjusting items. The Directors consider this to be
an important measure of Group performance and is consistent with how the
business performance is reported to and assessed by the Board and the Executive
Committee. In previous reporting periods "Adjusted (loss)/profit before tax"
was described as "Underlying (loss)/profit before tax".
This is a measure used within the Group's incentive plans. Refer to the
Remuneration Report in the Group Annual Report FY21 for explanation of why this
measure is used within incentive plans.
A reconciliation from profit/(loss) before tax, the most directly comparable
IFRS measures, to the adjusted loss before tax is set out below.
October 2021 October 2020 April 2021
£m £m £m
Profit/(loss) before tax 4.0 (18.9) (36.7)
Adjusting items (6.8) 8.3 24.1
Adjusted loss before tax (2.8) (10.6) (12.6)
Adjusted tax expense and adjusted effective tax rate
In the opinion of the Directors, adjusted tax expense is the total tax charge
for the Group excluding the tax impact of adjusting items. Correspondingly, the
adjusted effective tax rate is the adjusted tax expense divided by the adjusted
(loss)/profit before tax. For interim reporting purposes, we categorise the
prior year items and specific other balances as discrete items, in the
calculation of our adjusted effective tax rate.
These measures are an indicator of the ongoing tax rate of the Group. In
previous reporting periods "Adjusted tax expense and adjusted effective tax
rate" was described as "Underlying tax expense and underlying effective tax
rate".
A reconciliation from tax expense, the most directly comparable IFRS measures,
to the adjusted tax expense is set out below:
October 2021 October 2020 April 2021
£m £m £m
Adjusted loss before tax (2.8) (10.6) (12.6)
Tax credit/(expense) (1.5) 3.5 0.6
Adjusting items - tax impact 1.2 (1.5) (3.9)
Adjusted tax credit/(expense) (0.3) 2.0 (3.3)
Adjusted effective tax rate 10.7% (18.7%) 26.2%
Adjusted EPS
In the opinion of the Directors, adjusted earnings per share is calculated
using basic earnings, adjusted to exclude adjusting items net of current and
deferred tax. See note 15 for the Group's adjusted EPS. In previous reporting
periods "Adjusted EPS" was described as "Underlying EPS".
Net cash/(debt)
In the opinion of the Directors, net cash/(debt) is a useful measure to monitor
the overall cash position of the Group. It is the total of all short- and
long-term loans and borrowings, less cash and cash equivalents. Net cash and
cash equivalents is used to define the net cash/(debt) position excluding short
and long-term loans. See note 17 for the Group's net cash/(debt) position. This
position is exclusive of financial liabilities in relation to IFRS 16.
═══════════════════════════════════════════════════════════════════════════════
ISIN: GB00B60BD277
Category Code: IR
TIDM: SDRY
LEI Code: 213800GAQMT2WL7BW361
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 137675
EQS News ID: 1270595
End of Announcement EQS News Service
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