Interim results for the six months to 31 July 2022
20/09/2022 07:00
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RNS Number : 9312Z Unbound Group PLC 20 September 2022
Unbound Group plc
Interim results for the six months to 31 July 2022
Continued growth and strategic progress in a challenging consumer environment
20(th) September 2022
Half Year Financial Highlights:
· Revenue growth of 10.4% to £27.6m (H1 FY22 £25m), illustrating
benefits of multi-channel sales model despite challenging market conditions
· Expansion of Gross Margin to 63.4%, growth of 180 bps over the prior
year, driven by progress in efficiency plan and delivery of product strategy,
resulting in gross profit growth of £2.1m
· EBIT loss of £0.3m after costs incurred in technical launch of
Unbound platform of £1.0m and non-recurring PLC costs of £0.15m
· Cash at H1 FY22 of £2.7m (H1 FY22 £3.4m) with net debt of £8.4m
(H1 FY22 £16.4m), pre-equity fundraise in August 2022 raising £3.1m (net of
expenses)
Summarised key financials (£000):
A+B+C A B C
Unbound Group Consolidated Unbound Group Costs Unbound Development Costs Hotter Shoes Hotter Shoes Hotter YOY
July 22 July 22 July 22 July 22 July 21
Revenue 27,630 - - 27,630 25,028 +10.4%
Gross Profit 17,518 - - 17,518 15,417 +£2.1m
Gross Margin % 63.4% - - 63.4% 61.6% -
Costs (17,865) (343) 1 (#_ftn1) (978) 2 (#_ftn2) (16,544) (14,094) 3 (#_ftn3) +17.4%
Operating (loss)/ profit - Pre Exceptional (347) (343) (978) 974 1,323 -26.4%
Net Debt(1) £8.4m - - - £16.4m
Inventory £7.2m - - £7.2m £4.6m +£2.6m 4 (#_ftn4)
Notes:
In the above table and throughout this document references to Hotter Shoes
refer to the trading activities of Beaconsfield Footwear Limited.
Alternative performance measures are defined in Note 7.
(1) Unbound PLC related costs (including LTIP charge of £0.1m) of which
approx. £0.6m will be recurring (per annum) – post cost reduction programme
referenced below
(2 )Unbound platform development costs of which £0.7m are one-off in nature
(3) Hotter Shoes prior year operating costs reduced by Covid-related support
of £1.5m
(4 )Prior year inventory reduced from optimal by approx. £2.5m due to impact
of supply chain disruption
Half Year Operational and Strategic Highlights:
Unbound Group
· Successful equity raise of £3.1m (net of expenses) post half-year,
enabling the execution of our strategic growth plan as market conditions
improve, increasing the resilience and significantly strengthening the
liquidity position of the Group
· Unbound trading platform roll-out is on track with technical delivery
and costs complete on schedule in July, with partner brands continuing to be
on-boarded throughout Q3 and Q4
· Established an 'always-on' community of target consumers, 'U_Space',
to fuel deep insight into their lifestyles, attitudes and behaviours, shaping
the future development of Unbound Group. Further roll out is underway, to
position Unbound as the authority voice in the 55+ consumer
Hotter Shoes
· All channels growing YoY, with notably strong performance in Retail
+71.6%, adjusting for COVID related closures in FY22 +17%
· The combination of our UK manufacturing facility and strengthened
supply chain enabled us to respond to changing consumer behaviour in-season,
which has and will continue to benefit our performance in an unpredictable
environment
· Strong strategic and operational progress delivered year to date:
§ Autumn Winter stock availability for Hotter at highest ever levels for
season launch
§ Continuous Improvement culture expanded throughout the business, with
targeted project groups working across departments, focussed on efficiency and
cost savings
§ ISO9001 Quality Management Systems accreditation achieved
§ Awarded Drapers Footwear 'Best Store Design' for Solihull concept store
§ Finalists for 'Best Retailer' (£10-100m) at Drapers
§ Finalists for parliamentary Responsible Business Award, acknowledging our
ESG improvements and plans.
Outlook:
· We have seen tougher trading conditions in recent weeks, the
short-term outlook is very challenging to predict, given the volatility of the
economic backdrop and resultant impact on consumer confidence
· Medium term growth objectives remain unchanged and, with 10% sales
growth achieved in H1 despite challenging economic circumstances, we remain
confident, but recognise an increased short-term risk. Focus will continue to
be on managing costs, protecting margins and cashflow, ensuring the
appropriate levels of working capital and managing capital investment tightly
· The launch of the Unbound platform will allow for a greater degree of
revenue diversification over the medium term, in addition to growing and
engaging with our active customer base
· We have made good progress with partner brand sign-ups for Unbound,
and will continue to focus on onboarding further complementary brands within
apparel, with plans to introduce wellness categories in Q1 2023. As planned,
Unbound revenues in H2 will be small in the context of the Group, with the
focus being onboarding partners onto the platform
· Given the challenging short term economic outlook we anticipate full
year Operating Profit (pre-exceptional) will be between £nil and a £1m loss
after H1 non-recurring costs of £0.7m
Ian Watson, Chief Executive Officer of Unbound Group plc, commented:
"Unbound Group has delivered an encouraging first half performance that builds
on the momentum of 2021, despite the increased challenges of high inflation
and a volatile and unpredictable consumer environment. The combination of
further growth in sales and gross margins demonstrates the effectiveness of
our strategic initiatives and the value that our customers attach to our core
Hotter product, giving us confidence despite the market conditions, which have
become more challenging in recent weeks. We have made good strategic
progress in H1 and will continue to focus on efficiency gains and cost
management in H2 to protect margins. We are confident in our brand and the
benefits that will result from this focus and our continued ability to deliver
our strategy over the long term.
The broader revenue base we have created with the launch of the Unbound
platform marks an important strategic shift for the Group. However, we
remain mindful of the growing pressures on consumer spend. Consequently, we
continue to review and adapt to the changing market conditions, maintaining
our specialist focus on our core customer demographic of financially resilient
55+ consumers."
ENDS
Enquiries
Unbound Group plc
Ian Watson / Dan Lampard
investorrelations@unboundgroup.com
020 3874 8300
Singer Capital Markets
Peter Steel / Tom Salvesen / Alaina Wong / Kailey Aliyar
0207 496 3000
Vico Partners
Sofia Newitt
snewitt@vicopartners.com
020 3957 5045
CHIEF EXECUTIVE'S REVIEW
Unbound Group plc - overview:
Unbound Group plc is the parent company for a group selling a range of brands
focused on the 55+ demographic. Unbound Group will build on the solid
foundation of Hotter Shoes, its current main business, to grow value through
its curated, multi-brand retail platform supporting the active lifestyles of
the 55+ demographic with a range of products and services. Unbound Group's
platform is powered by Mirakl's leading marketplace technology to enable the
Group to partner seamlessly with selected third-party brands, on a drop ship
model while negating the need to invest in working capital. Unbound Group's
expanded offering beyond footwear will feature a broad range of active
lifestyle products and services, with third-party complementary brands
featuring alongside new Unbound Group brands, as well as Hotter.
Hotter Shoes - overview:
Hotter Shoes, an Unbound Group plc company, is one of the UK's leading
specialist footwear brands, selling over 1.4 million pairs of shoes per year.
Hotter's footwear has an uncompromising focus on 'customised comfort' and
perfect fit through the use of its differentiating technology, including its
e-commerce platform, 3D foot scanner and augmented reality app which enables
the consumer to try products virtually from home. Hotter has been transformed
from a retail to a digitally led, omni-channel business over the past 3 years,
selling its footwear to over 4 million customers via online, its direct mail
order channel and its targeted 17 Technology Centres and 8 garden centre
concessions in the UK. Over 75% of sales are direct to consumer through
digital channels. With its clearly defined, large and growing target
demographic, Hotter now reaches 29% of the female population in the UK over
the age of 55. Digital partnerships have recently been established with
several online retailers including Next, John Lewis, The Very Group and
M&S.
Brand awareness:
Hotter Shoes has a strong brand reputation amongst its core demographic,
demonstrated by recent studies showing that 60 per cent. of the people
surveyed (aged 50+) recognise Hotter Shoes as the number one brand for comfort
shoes in the UK, ahead of Clarks on 57 per cent., Ecco on 49 per cent. and
M&S and Gabor on 27 per cent. each. This sector (comfort and fit) is a
significant segment of the footwear market, where numerous trends support
positive market growth dynamics compared to other market segments.
Furthermore, Hotter Shoes has a differentiated, premium product range, where
68 per cent. of its range is continuity product rather than fashion footwear,
focusing on "Cushion+" lightweight cushioned soles, "Stability+" ultra
supportive and "Precision fit" with over 40 width and size combinations.
Market drivers and expansion opportunity:
As a result of the Hotter Shoes' history and brand, the Group has a growing
(currently 4.6 million individuals) customer database, with approximately 30
per cent. of the 55+ female population in the UK represented. With c. 15
million website visits each year, the customer base continues to grow, with
the Group's email database having exceeded 1 million individuals in 2022.
Unbound's target demographic is not only the fastest growing demographic of
the UK population, it is also an increasingly wealthy demographic generally
experiencing a higher discretionary spend compared with the under 55s. The
Group's target cohort of customers aged 55+ is increasingly focusing on health
and wellbeing and becoming more active with the largest percentage rise in
exercise participation being in this cohort. The majority of e-commerce
businesses tend to be focussed on younger demographics leaving, in the opinion
of the Directors, the Group's target demographic materially underserved
online, despite online shopping participation and general digital literacy
increasing the most amongst the over 65s age group.
The Directors believe that this offers an opportunity for sustainable
incremental growth beyond that already being targeted by the Group's Hotter
footwear brand. The Directors believe that Unbound has a specialist
'insight-led' focus on this under-served demographic and therefore intend to
seek to capitalise on this opportunity by accelerating the Company's growth
strategy as and when market conditions allow.
Trading performance:
In the first half of the year, performance was hit by significant
macro-economic disruption, which was unforeseen and not factored into our
original assumptions. The on-going conflict in Ukraine, political
destabilisation, high inflation and the cost-of-living crisis were incremental
impacts felt. Despite this, Hotter delivered a successful first half, and we
built and launched our Unboundgroup.co.uk trading site, on time, on budget and
to specification.
Our performance benefitted from our UK manufacturing base, including our
strengthened supply chains which allowed us to react in season to changing
customer demand patterns, as we saw a return to event-led and seasonal
products.
Whilst volatility remains, management have taken swift action to address a
number of external factors meaning Unbound has made strong operational
progress in the first half of the year and approaches the second half with a
clear set of strategic priorities and optimised stock availability. In
addition, the Group now carries significantly less net debt, allowing for a
more agile approach to executing on our strategic priorities to deliver
shareholder value over the medium term.
Post period-end equity raise:
We have been able to progress all aspects of our strategy during H1. Our
successful equity raise in August allows the acceleration of this, covering
the areas below while also significantly strengthening the liquidity of the
Group:
· Driving digital connection with our target customer base through
growth of our Unbound Group partner brand strategy;
· Further expansion of our garden centre concession model;
· Investment in technology to improve customer experience, deliver cost
efficiencies and facilitate accelerated scalable growth; and
· Increasing inventory effectiveness by utilising near shore suppliers
with shorter lead time procurement of design-led and own-brand goods.
As detailed at the time of completion in August 2022, we will deploy the
proceeds of the equity raise in controlled fashion as and when market
conditions allow. We look forward to updating shareholders on our progress.
Strategic and business update
Our five strategic principles:
1. Guided by Insight - Insight excellence drives all we do
We build our business out of unrivalled insight into the needs, attitudes and
behaviours of our 55+ audience.
We go the extra mile to engage with, listen to and respond to their changing
needs. We continuously track, measure and improve based on our learnings -
embedding insight into everything we do.
Progress made during H1:
In March, we set up 'U_Space', an 'always-on' community of target Unbound
Group consumers, to fuel deep insight into their lifestyles, attitudes and
behaviours. This platform is used to shape the future development of Unbound
Group. Further roll out is underway, to position Unbound as the authority
voice in the 55+ consumer.
'U_Space' has two core insight objectives:
1. Connection
a. Provide the insight to help us connect with and sell to our audience
b. Development of group strategy, partner offer and own brand offer
c. Guiding communications strategy and execution
2. Credibility
a. Provide the data to underpin Unbound's position of expertise in the
55+ audience
b. Driving Unbound profile and perceptions in media and broader
discourse
2. Superiority through specialism - Expert and focus are how we win
We're focused and undistracted. Focused on the 55+ consumer. Experts in
comfort that helps you do more of what you love. We leverage our audience and
comfort specialism to both strengthen our roots in footwear and expand into
relevant adjacent categories. Growing and leveraging our unique database of
engaged consumers is central to our business strategy and the tactics we
deploy to achieve our goals.
Progress made during H1 - Focus on our next generation of core comfort styles:
We continue to enhance our products and build superiority through specialism.
Our Autumn Winter (AW) 22 Hotter collection sees a +10% growth in shoes
featuring our unique, comfort technologies, specific to the needs of the 55+
consumer.
We have increased real choice for the season, with +17% more styles available
within the range. A culture of continual improvement sees the brand striving
to establish next generation, comfort hero styles. Successful new
constructions from Spring Summer (SS) 2022 have been developed with seasonally
appropriate styling, adding further breadth and consumer choice.
H1 FY23 saw a return to normalised product category demand. Seasonal styling
outperformed versus plan and bounced back to pre-pandemic mix levels. We have
reshaped our AW22 collection to reflect this behavioural change, resulting in
style growth of 16% within our boot category, for example.
Our SS23 range continues to evolve and become a wider offer, as we expand into
new comfort constructions following the success of recent sourcing and styling
trials. We expect overall style growth of +4% on SS22.
Our expertise in comfort is further enhanced through the launch of a new
technology Flex+. This addition to our family of technologies supports natural
movement through anatomically placed flex grooves within Hotter exclusive sole
designs. Comfort technology within the collection has grown by +25% vs last
season.
Hotter SS23 product strategy reflects the ongoing market shift towards
Athleisure and Sport styling. Following a strong performance of +32% on prior
year in SS22, further style growth has been planned for the season at +11%.
New for SS23 is an exclusive range of functional athletic footwear suitable
for light exercise.
Insight, gained via product testing with our core consumer, demonstrates the
equal importance of desirability and comfort when buying. SS23 sees the range
evolve from being 'item led' with a focus on improved styling and a nod to
relevant fashion trends. Trends were validated and product tested with Hotter
customers ahead of orders being placed.
Within 'superiority through specialism', we have focussed on improving the
capabilities of our supply chain, which allowed us to respond in-season to
changing customer demand patterns, with a return to seasonal, event-led
demand. Our own UK-based manufacturing plant provides flexibility and
resilience within our supply chain and as we enter the autumn / winter season
our inventory levels and availability are at optimal levels.
3. Growth through connection - We grow our business by curating,
connecting and engaging
We have unique access to and understanding of the 55+ consumer. Leveraging our
combination of access and understanding we bring together a highly curated
group of brands with deep relevancy for our consumer.
Our connected commerce excellence means we enable our customers to shop when,
where and how they want. We drive loyalty, frequency and advocacy by engaging
our customers with targeted marketing and personalised journeys, amplified by
our digital content and community.
Progress made during H1: Significant progress bringing partners onto
Unboundgroup.co.uk
The Unboundgroup.co.uk website successfully launched on time, on budget and to
specification on Thursday 28(th) July with 7 brands operating on a capital
light, drop-ship basis, live at point of launch. The team continue to engage
with complementary partner brands, with further apparel brands expected to be
on-boarded during October before developing a wellness category in Q1 2023.
The partner brands we have met and are working with have unanimously
recognised the strategic opportunity that Unbound Group presents.
The initial launch phase had the objective of ensuring technical and business
readiness (for both Unbound and partner brands), for a seamless customer
journey. The site stability and performance has been resilient and
transactions, despatch and returns successful ahead of our further partner
brands on-boarding in the coming weeks and months.
4. Working Smarter - We fuel success by driving productivity
We continuously assess and improve the ways we work - seeking to maximise our
efficiency and enhance our outputs. We utilise LEAN 6 Sigma principles to
minimise wastage and maximise the customer experience. We do this every day
in all we do - believing in the power of marginal gains to drive our business
forward.
Progress made during H1: Robust operational performance and tight cost
control, with Continuous Improvement at the heart of our culture
We have developed a culture of Continuous Improvement, which began within the
operations team and has been expanded, driving productivity across the
business. Over 80 members of the workforce are now trained and skilled in the
tools of LEAN 6 Sigma, delivering six figure productivity savings. This
culture is underpinned by our corporate values and behaviours, which were
rolled out across the business in May, embedding a culture of efficiency and
cost saving focus throughout our workforce. This initiative comes in to
sharper focus in volatile periods and will remain a core part of our drive to
protect margins in the short term and enhance them over time, as evidenced in
this set of results.
Our Corporate Values & Behaviours:
Our Vision: We're here to help people move better, feel better and do more of what they
love
Our Values: EMPATHY COURAGE COMMITMENT COLLABORATION
Our behaviours: Start with the customer Lead the way Strive for better Succeed together
We believe every member of the team should be able to walk in our customers' We think courage is the quality that sets apart great businesses from good We think good enough is never good enough, always striving to improve We think together we can go further and move faster
shoes businesses
5. Stepping up - We step up - for our business, our planet & our
community
We believe in taking responsibility - individually and collectively for the
way we operate as a business. For reducing our impact on the planet. And for
contributing to the communities, we are part of.
Progress made during H1: Driving our culture to enable team success in an
unpredictable environment
During H1 we have increased focus on ESG initiatives, with business wide
targets agreed and set in July, formalising much of the existing work that was
on-going. The focus and passion of the teams earned us a place as finalist in
the parliamentary Responsible Business Award.
Staff training and development continues to be a core focus, as we build an
empowered and agile team to fuel our performance culture. The robustness and
strength of the team to deliver multiple projects during H1 has been
highlighted against the unprecedented macro backdrop that we are experience
and gives us confidence in our resilience entering into H2.
Summary
Since the beginning of H1, and increasingly in the recent weeks, the external
environment has become more challenging and harder to predict. The business,
however, has performed well, delivering double digit growth and completing a
range of strategic objectives to improve reach, scale and improved
efficiencies. The team has applied LEAN principles, controlled costs
successfully and acted decisively to manage the factors within our control.
A culture of continuous improvement is now engrained in our business and will
allow for a greater degree of resilience during this period of volatility.
In an uncertain environment, the team has delivered a solid performance in H1
and remain focused on strategic deliverables, cash conservation and driving
inefficiencies out of the business.
FINANCIAL REVIEW
Unbound Group plc was renamed from Electra Private Equity PLC ('Electra') on
21 January 2022. Electra was a Main Market listed investment company with
a private equity strategy. Following Electra's decision to dispose of its
investment business, as announced on 21 May 2021, it sold or demerged a number
of companies. Following the demerger of Hostmore plc on 1 November 2021,
Electra's only remaining trading subsidiary was Beaconsfield Footwear Limited,
trading as Hotter.
As part of the move from the Main Market to trading on AIM, Electra/Unbound
Group plc ceased to be an investment trust so was no longer exempt from the
obligation to prepare consolidated accounts. Thus, the Unbound Group plc
accounts for the period ending 31 July 2022 contain all the trading activities
and operational assets and liabilities of the Hotter Group. During the
previous accounting period, the Electra accounts did not contain the trading
activities and operational assets and liabilities of the Hotter Group whilst
the accounts of Beaconsfield Footwear Limited did contain all of the trading
activities and operational assets and liabilities of the Hotter Group and
these accounts, which were included in the AIM Admission Document, have been
used to show the comparative figures for the corresponding period.
As a result of the transfer to AIM, the capital structure of the group changed
so that the financing (cash and borrowings) and equity of Unbound Group plc is
different to that shown in the comparatives for Beaconsfield Footwear
Limited. In addition, the balance sheet of Unbound Group plc included a
number of financial and non-trading assets that were previously owned by
Electra most of which were disposed of prior to the reporting date.
In order to comply with the requirements of AIM rule 18 which requires that
the information contained in a half-yearly report must include at least a
balance sheet, an income statement, a cash flow statement and must contain
comparative figures for the corresponding period in the preceding financial
year (apart from the balance sheet which may contain comparative figures from
the last balance sheet notified), the half-yearly report shows the comparative
data in a consistent format to that which will be adopted in the AIM company's
annual accounts having regard to the accounting standards applicable to such
annual accounts i.e accounts that are in the format of a commercial group
rather than an investment group as was the case for the published accounts for
Unbound Group plc when it was listed on the Main Market as an Investment trust
which included the set of accounts published for the year ended 31 January
2022.
KPIs
Unbound Group
6 months ended 31st July 2022 6 months ended 1st August 2021 Change %
£'000s £'000s
Revenue 27,630 25,028 +10.4%
Gross Profit 17,518 15,417 +13.6%
Gross Margin % 63.4% 61.6% +180bps
Operating Loss pre exceptionals(1) (347) 1,323 -126.2%
EBITDA pre exceptionals(1) 1,619 3,154 -48.7%
(1) Alternative Performance Measures are defined in Note 7.
Hotter Online Direct to Consumer Metrics
6 months ended 31st July 2022 6 months ended 1st August 2021 Change %
Visits (000's) 9,313 9,315 (0.0)%
Conversion Rate % (i) 3.4% 3.7% (0.3)%
No. of Orders (000's) 317 341 (7.0)%
Average Order Value (ii) £64.17 £57.14 12.3%
Active Customer Base (iii) 619 587 5.5%
Order Frequency (iv) 1.58 1.54 2.6%
i. Calculated as total orders divided by total
visits
ii. Calculated as total order value divided by total
orders
iii. Defined as having shopped in the last 12 months as
at 31 July 2022
iv. Calculated as last 12 months total shipped orders
divided by active customers
6 months ended 31st July 2022 6 months ended 1st August 2021 Change %
Segmental £'000s £'000s
Direct to Consumer 20,703 20,218 +2.4%
Retail 5,052 2,944 +71.6%
Wholesale 1,875 1,866 +0.5%
Total Revenue - Hotter 27,630 25,028 +10.4%
Gross Profit 17,518 15,417
Administration costs (14,578) (12,263) +18.9%
EBITDA pre exceptionals - Hotter 2,940 3,154
Unbound Trading (978) -
PLC Costs (223) -
Share based payment (120) -
EBITDA pre exceptionals - Unbound Group 1,619 3,154 -48.7%
Depreciation and amortisation (1,966) (1,831) +7.4%
Operating (loss) / profit pre exceptional items (347) 1,323 -126.2%
(1) Alternative Performance Measures are defined in Note 7.
Hotter Online Direct to Consumer Metrics
6 months ended 31st July 2022 6 months ended 1st August 2021 Change %
Visits (000's) 9,313 9,315 (0.0)%
Conversion Rate % (i) 3.4% 3.7% (0.3)%
No. of Orders (000's) 317 341 (7.0)%
Average Order Value (ii) £64.17 £57.14 12.3%
Active Customer Base (iii) 619 587 5.5%
Order Frequency (iv) 1.58 1.54 2.6%
i. Calculated as total orders divided by total
visits
ii. Calculated as total order value divided by total
orders
iii. Defined as having shopped in the last 12 months as
at 31 July 2022
iv. Calculated as last 12 months total shipped orders
divided by active customers
6 months ended 31st July 2022
6 months ended 1st August 2021
Change %
Segmental
£'000s
£'000s
Direct to Consumer
20,703
20,218
+2.4%
Retail
5,052
2,944
+71.6%
Wholesale
1,875
1,866
+0.5%
Total Revenue - Hotter
27,630
25,028
+10.4%
Gross Profit
17,518
15,417
Administration costs
(14,578)
(12,263)
+18.9%
EBITDA pre exceptionals - Hotter
2,940
3,154
Unbound Trading
(978)
-
PLC Costs
(223)
-
Share based payment
(120)
-
EBITDA pre exceptionals - Unbound Group
1,619
3,154
-48.7%
Depreciation and amortisation
(1,966)
(1,831)
+7.4%
Operating (loss) / profit pre exceptional items
(347)
1,323
-126.2%
Hotter
Hotter performed strongly across all channels with growth in all segments,
most notably Retail stores with annual growth being driven from COVID related
closures in H1 FY22, however on a like for like trading day basis excluding
this impact over 17% annualised growth.
Total revenue in the period has increased by 10.4% to £27.6m and gross margin
expansion to 63.4%, growth of 180 bps over the prior year. Revenue growth was
driven by higher average selling prices, due to a combination of increased
technology within the range and increased RRPs. The higher selling prices
combined with the progress in operational efficiencies more than offset
operational inflationary pressures resulting in gross profit growth of £2.1m.
Digital KPIs on the whole improved compared to the prior period, as
demonstrated by stable levels of web traffic and strong conversion levels.
Growth in the active customer database, average order value and frequency was
the driver of revenue growth.
We controlled costs tightly across all areas, with the annual increase in
costs predominantly driven by the removal of one-off support events such as
CJRS, rent and rates relief which were £1.5m in H1 FY22.
We delivered efficiencies in marketing costs with spend in H1 FY23 being 20.1%
of revenue compared to 20.9% in the prior year. Fixed cost underlying growth
was 3.6% with the removal of the rent and rates non-recurring benefit of H1
FY22.
EBITDA (pre-exceptional charges) was £2.9m delivering a 10.6% margin. As
noted above, comparative profits have been impacted by the removal of one-off
support events such as CJRS, rent and rates relief which were £1.5m in H1
FY22.
Unbound Trading
As previously disclosed, the costs associated with the launch of the Unbound
platform have resulted in a HY loss of £1m. The costs incurred relate to
people, marketing and launch related costs. Of these costs c£0.7m are one off
in nature.
As the trading platform launched (www.unboundgroup.co.uk
(http://www.unboundgroup.co.uk) ) at the end of H1, no revenues occurred
during H1.
Group Costs
Net of residual income streams the PLC costs were £0.2m in H1 HY23. The
Company has given notice on the offices at Old Park Lane in London and these
will be vacated by the end of the calendar year. This will result in an
annualised cost reduction of £0.3m. Ongoing recurring cash costs (i.e.
excluding LTIPs) are anticipated to be £0.6m per annum.
Balance Sheet and Cash Flow
The increase in intangible assets, up by £1.2 million to £31.2 million (31
January 2022: £30.1 million), reflects the investment during the period in
the ecommerce and technology platform.
The reduction in investments held for sale of £3.7 million to £0.1 million
(31 January 2022: £3.8 million) relates to the disposal of the Company's
shares in Hostmore plc and leasehold property investment during H1. These
transactions generated gross cash proceeds of £2.4m and an aggregated loss on
disposal of £1.3 million.
Inventory increased by £2.3 million to £7.2 million (31 January 2022: £4.9
million; H1 FY22 (Hotter Shoes): £4.6m). The overriding majority of inventory
is represented by Hotter Shoes, with the increase driven by supply chain
issues in the comparative period and strong availability for the autumn winter
season.
Cash at H1 FY23 was £2.7m (31 January 2022: £5.5 million; H1 FY22 (Hotter
Shoes): £3.4m) with net debt of £8.4m (31 January 2022: £6.6 million; H1
FY22 (Hotter Shoes): £16.4m). The H1 FY23 cash and net debt positions are
stated pre the equity fundraise in August 2022 which raised £3.1m (net of
expenses). The bulk of the net debt position is accounted for by Hotter Shoes,
the decrease since H1 FY22 due to the refinancing completed in December 2021
which reduced debt by £5m and a further £1m repaid in July 2022.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE
INCOME FOR THE 6 MONTHS ENDED 31 JULY 2022
Unbound Group plc Hotter Shoes
Notes 6 months ended 31(st) July 2022 6 months ended 1(st) August 2021
£'000s £'000s
Revenue 3 27,630 25,028
Operational Costs (10,112) (9,611)
Gross Profit 3 17,518 15,417
Other operating income 288 804
Administrative expenses (16,067) (13,067)
Share based payment (120) -
Depreciation and amortisation (1,966) (1,831)
Operating (loss) / profit pre-exceptional items (347) 1,323
Exceptional items 4 (1,152) (3,160)
Operating loss post exceptional items (1,499) (1,837)
Finance cost (645) (284)
Loss on ordinary activities before tax (2,144) (2,121)
Taxation - 707
Loss on ordinary activities after tax (2,144) (1,414)
Loss on investments held for sale (1,292) -
Other comprehensive income - -
Total comprehensive income for the period (3,436) (1,414)
Attributable to:
Equity holders of the parent (3,436) (1,414)
Total comprehensive loss for the period (3,436) (1,414)
Loss per share:
Loss per share - basic and diluted, attributable to ordinary equity holders of (0.08)
the parent (pence)
The comparative financial information presented represents the historical
financial information of Beaconsfield Footwear Limited, as was set out in
Section B of Part 3 of the admission document dated 27 January 2022 (the
"Admission Document") of Unbound Group plc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2022
Unbound Group plc Hotter Shoes Unbound Group plc
Notes 6 months ended 31(st) July 2022 6 months ended 1(st) August 2021 16 months ended 31(st) January 2022(1)
£'000s £'000s £'000s
Assets
Non-current assets
Intangible assets 31,229 3,968 30,057
Right-of-use asset 6,207 7,640 6,922
Property, plant and equipment 2,163 2,749 2,665
Deferred tax 3,894 4,163 3,887
Total non-current assets 43,493 18,520 43,531
Current assets
Investments 38 - 3,755
Inventories 7,220 4,582 4,855
Trade and other receivables 2,691 1,989 2,283
Cash and cash equivalents 2,705 3,425 5,484
Total current assets 12,654 9,996 16,377
Total assets 56,147 28,516 59,908
Equity and liabilities
Equity
Share capital 5 10,565 42 10,565
Share premium 5 4,959 - 4,959
Own shares held 5 (2,273) - (2,426)
Revenue reserve 5 7,958 (9,972) 11,427
Equity attributable to owners of the parent 21,209 (9,930) 24,525
Total equity 21,209 (9,930) 24,525
Current liabilities
Trade and other payables 15,809 9,366 14,114
Borrowings 2,000 19,778 2,000
Lease liability 1,462 1,312 1,383
Provisions 107 - 490
Total current liabilities 19,378 30,456 17,987
Non-Current liabilities
Borrowings 9,100 - 10,100
Provisions 876 975 981
Lease liability 5,584 7,015 6,315
Total non-current liabilities 15,560 7,990 17,396
Total liabilities 34,938 38,446 35,383
Total equity and liabilities 56,147 28,516 59,908
(1) Unaudited Group Statement of Financial Position following the transition
of Electra Private Equity Plc, an investment company to Unbound Group Plc, a
trading group with effect from 1 February 2022.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS
ENDED 31 JULY 2022
Unbound Group plc Hotter Shoes
Notes 6 months ended 31(st) July 2022 6 months ended 1(st) August 2021
£'000s £'000s
Cash flows from operating activities
Group loss for the period (3,436) (2,121)
Share based payments 120 -
Depreciation and amortisation 1,966 1,831
(Profit) on disposal of property, plant and equipment - (11)
Loss on disposal of investments held for sale 1,292 -
Impairment of intercompany loan receivable - 2,524
Gain on extinguishment of lease liabilities - (1)
Finance expense 645 284
Working capital adjustments
Change in inventories (2,380) 1,389
Change in trade and other receivables (688) 552
Change in trade and other payables 1,793 (1,504)
Cash (used in)/ generated from operating activities (688) 2,943
Corporation tax refunded - 55
Net cash flow (used in)/ generated from operating activities (688) 2,998
Cash flow from investing activities
Addition of property, plant and equipment (9) (92)
Addition of intangibles (1,912) (384)
Proceeds from disposal of investments held for sale 2,424 -
Proceeds from disposal of property, plant and equipment - 19
Bank interest paid (596) -
Net cash flow from investing activities (93) (457)
Cash flow from financing activities
Payment of lease liabilities (763) (629)
Payment of interest on lease liabilities (235) (276)
Payment of borrowings (1,000) (2,524)
Other interest paid - (8)
Net cash flow from financing activities (1,998) (3,437)
Net change in cash and cash equivalents (2,779) (896)
Cash and cash equivalents at beginning of period 5,484 4,321
Cash and cash equivalents at end of period 2,705 3,425
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6
MONTHS ENDED 31 JULY 2022
Share capital Share premium Own shares held Capital reserve Revenue reserve
Total equity
£'000s £'000s £'000s £'000s £'000s £'000s
As at 1 February 2022 - Electra 10,565 4,959 (2,426) (35,350) 45,325 23,073
On transition from Electra to
Unbound(1) - - - - 1,452 1,452
Reserves combination on ceasing to be an investment trust
- - - 35,350 (35,350) -
As at 1 February 2022 - Unbound (2,426) - 11,427 24,525
10,565 4,959
Total comprehensive expense for the period
Loss during the period - - - - (3,436) (3,436)
Total comprehensive expense for the period - - - -
(3,436) (3,436)
Contributions by and distributions to owners of the Company
Share based payments - - 153 - (33) 120
As at 31 July 2022 10,565 4,959 (2,273) - 7,958 21,209
(1) The net impact of the transition of Electra (an investment trust) to
Unbound (a trading group) which recognises the assets and liabilities of
Hotter Shoes (Beaconsfield Footwear Limited) on a line by line basis within
the Group's results.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOR THE 6 MONTHS
ENDED 31 JULY 2022
1. General Information
Unbound Group Plc (the 'Company') is a limited liability company incorporated
and domiciled in the United Kingdom. The address of the Company's Registered
Office is 17 Old Park Lane, London, United Kingdom, W1K 1QT with Hotter Shoe's
Registered Office being 2 Peel Road, Skelmersdale, Lancashire, WN8 9PT.
The Company is listed on the Alternative Investment Market (AIM) of the London
Stock Exchange (ticker: UBG).
The financial information set out in this Interim report does not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006. These
condensed consolidated interim financial statements as at and for the six
months ended 31 July 2022 comprise of the Company and its subsidiaries
(together referred to as the 'Group'). These condensed consolidated interim
financial statements has not been audited or reviewed by the Company's
auditor.
This condensed consolidated interim financial information was approved and
authorised for issue by a duly appointed and authorised committee of the Board
of Directors on 16 September 2022.
2. Basis of preparation and significant accounting policies
The interim financial statements, which are unaudited, have been prepared on
the basis of the accounting policies expected to apply for the financial year
to 5 February 2023 and in accordance with recognition and measurement
principles of International Financial Reporting Standards (IFRSs) as endorsed
by the European Union. The accounting policies applied in the preparation of
these interim financial statements are consistent with those used in the
financial statements for the year ended 31 January 2021 for Beaconsfield
Footwear Limited as disclosed in the Admission Document published by the
company on 1 February 2022.
The interim financial statements do not include all of the information
required for full annual financial statements and do not comply with all of
the disclosures in IAS34 'Interim Financial Reporting'. Accordingly, while
the interim financial statements have been prepared in accordance with IFRS
they cannot be construed as being in full compliance with IFRS.
The Group's statutory financial information for the year ended 31 January 2022
does not constitute the full statutory accounts for that period. The Annual
Report and Accounts for 31 January 2022 for the Group, prepared under
International Financial Reporting Standards ("IFRS"), have been filed with the
Registrar of Companies. The Independent Auditors' Report on the Annual
Report and Accounts for the year ended 31 January 2022 was unqualified and did
not include references to any matters which the auditors drew attention to by
way of emphasis without qualifying their report and did not contain statements
under Section 498(2) or 498(3) of the Companies Act 2006. Similarly the
Annual Report and Accounts for 31 January 2022 for Beaconsfield Footwear
Limited have been filed with the Registrar of Companies and the Independent
Auditors' Report on the Annual Report and Accounts for the year ended 31
January 2022 was unqualified and did not include references to any matters
which the auditors drew attention to by way of emphasis without qualifying
their report and did not contain statements under Section 498(2) or 498(3) of
the Companies Act 2006.
Going concern
The Directors have reviewed current performance and cash flow forecasts, and
are satisfied that the Group's forecasts and projections, taking account of
potential changes in trading performance, along with potential mitigations
available, in addition to factoring in the successful equity raise completed
post half year (in August 2022) show that the Group will be able to operate
within the level of its available facilities for the foreseeable future. The
Directors have therefore continued to adopt the going concern basis in
preparing the Group's financial statements.
3. Segmental reporting
The Chief Operating Decision Maker has been identified as the Directors. In
the opinion of the Directors, the Group has one single operating segment, the
manufacture and sale of footwear with the sales of the products being through
three channels as follows:
Unbound Group Plc: 6 months ended 31st July 2022
Direct to consumer Retail Wholesale Group
£'000s £'000s £'000s £'000s
Revenue 20,703 5,052 1,875 27,630
Gross Profit 13,375 3,277 866 17,518
Gross Profit % 64.6% 64.9% 46.2% 63.4%
Hotter Shoes: 6 months ended 1st August 2021
Direct to consumer Retail Wholesale Group
£'000s £'000s £'000s £'000s
Revenue 20,218 2,944 1,866 25,028
Gross Profit 12,993 1,830 594 15,417
Gross Profit % 64.3% 62.2% 31.8% 61.6%
4. Exceptional items
Unbound Group plc Hotter Shoes
6 months ended 31st July 2022 6 months ended 1st August 2021
£'000s £'000s
Impairment of amounts owed by group undertakings (i) - 2,524
IPO and transition related costs (ii) 656 -
Profit on disposal of property, plant and equipment - (11)
Refinancing costs (iii) - 155
Other restructuring and one-off costs (iv) 496 492
1,152 3,160
Exceptional items include the following:
i. Impairment of amounts owed by group undertakings
- sums due from intermediate holding companies have been provided against when
the recoverability of those loans is considered in doubt.
ii. Legal, transitional costs, advisory and insurance
fees incurred directly in relation to the Group relinquishing its listing on
the FTSE Main Market and subsequent admission to the 'Alternative Investment
Market ('AIM') on 1 February 2022.
iii. Refinancing costs incurred in the prior period as a
result of the need to renegotiate banking facilities that whilst held
primarily by a holding company were effectively for the benefit of Hotter
Shoes as the trading company in the group.
iv. Other restructuring and one-off costs include
severance costs associated with headcount reductions as well as the costs
associated with strategic reviews.
5. Share capital and reserves
Share capital
Unbound Group plc
6 months ended 31st July 2022
No. £'000s
Allotted, called up and fully paid shares
Opening number of 25p ordinary shares 42,258,128 10,564
Closing number of 25p ordinary shares 42,258,128 10,564
Hotter Shoes
6 months ended 1st August 2021
No. £'000s
Allotted, called up and fully paid shares
Opening number of £1 ordinary shares 42,000 42
Opening number of £1 ordinary shares 42,000 42
Own Shares Held
Own shares held are shares purchased by the Company's Employee Benefit Trust
(the "Trust"). The Trust waives its rights to dividends on the shares held.
The number of shares held by the Trust was 690,481 as at 31 January 2022 held
at a historic cost of £2.4 million. 43,650 were withdrawn from the Trust in
HY FY23 and issued to all employees of the Group at nil cost on the date of
entry to AIM.
Share Premium
Issuance of the 690,566 ordinary shares in settlement of vesting of the
Electra Share of Value Plan (SoVP) in May 2021 and 3,284,799 ordinary shares
in settlement of the Hotter MIP in January 2022 created a £5.0 million share
premium account.
Capital and Revenue Reserve
The brought forward capital reserve has been combined with the revenue reserve
following Unbound Group Plc ceasing to be an investment trust.
The revenue reserve is the accumulated net revenue profits and losses of the
Group.
6. Loss per share
Basic loss per share is calculated by dividing the loss attributable to the
owners of the parent company by the weighted average number of ordinary shares
in issue during the period. Own shares held by the Employee Benefit Trust are
eliminated from the weighted average number of ordinary shares.
Diluted loss per share is calculated by dividing the profit attributable to
the owners of the parent company by the weighted average number of ordinary
shares in issue during the period, adjusted for the effects of potentially
dilutive share options.
Unbound Group plc
6 months ended 31st July 2022
Loss for the period attributable to equity shareholders (£000's) (3,436)
Weighted average share capital (No. of shares)
- Issued ordinary shares at beginning of year 42,258,128
- Effect of own shares held (646,831)
Weighted average shares in issue for basic earnings per share 41,611,297
Weighted average effect of dilutive options -
Weighted average shares in issue for diluted earnings per share 41,611,297
Basic loss per share / (0.08)
Diluted loss per share
No meaningful comparative is available for the prior period as the prior year
results shown is that for Hotter Shoes, a limited company with 42,000 shares.
The Group has issued 1,390,398 nil cost LTIP options which are potentially
convertible on vesting. These have not been included in the calculation of
diluted earnings per share because they are anti-dilutive for the six months
ended 31 July 2022.
7. Alternative performance measures
The Group use the below alternative performance measures to assist
shareholders to better understand underlying financial performance and
position, in addition to being used by the Board in evaluating performance.
However, this additional information presented is not required by IFRS or
uniformly defined by all companies. Certain measures are derived from amounts
calculated in accordance with IFRS but are not in isolation an expressly
permitted GAAP measure. The measures are as follows:
i. Operating loss/profit pre-exceptional items is
based on ordinary operating performance before the impact of exceptional
items. This metric is used by the Board to assess the underlying performance
of the business excluding items that are, in aggregate, material in size and /
or unusual or infrequent in nature. Exceptional items are disclosed in note 4;
ii. EBITDA pre-exceptional items is ordinary loss
before finance costs, tax, depreciation, amortisation, and exceptional items.
This metric is used as a measure of the Group's underlying cash generating
ability for the period;
Unbound Group plc Hotter Shoes
6 months ended 31st July 2022 6 months ended 1st August 2021
£'000s £'000s
Loss on ordinary activities after tax (2,144) (1,414)
Taxation - (707)
Finance costs 645 284
Depreciation and amortisation 1,966 1,831
Exceptional items 1,152 3,160
EBITDA pre-exceptional items 1,619 3,154
iii. Net debt is cash and cash equivalents less any
borrowings drawn down at the period end, but excluding outstanding lease
liabilities. This metric is used as a measure of the Group's liquidity.
Unbound Group plc Hotter Shoes
6 months ended 31st July 2022 6 months ended 1st August 2021
£'000s £'000s
Cash and cash equivalents 2,705 3,425
Borrowings - current (2,000) (19,778)
Borrowings - non current (9,100) -
Net debt (8,395) (16,353)
The borrowings in relation to Hotter Shoes (an unconsolidated view) for the 6
months ended 1st August 2021 represents a related party loan payable, which
was classified as due within one year as there was no formal agreement.
8. Post balance sheet events
In August 2022, the Company successfully raised £3.1 million (net of
expenses) through an equity raise. As a result on 11 August 2022, the Company
issued and allotted 20,783,334 Placing Shares, 1,221,281 Subscription Shares
and 893,237 Open Offer accordingly.
The issue price was 15 pence a share which was less than the nominal value of
an ordinary share of 25 pence. The issue of new shares at a price which is
less than the current nominal value is prohibited under the Companies Act
2006. A Share Capital Reorganisation was performed accordingly whereby each
existing Ordinary Share was subdivided into 1 ordinary share of £0.01 (New
Ordinary Share) and 1 deferred ordinary share of £0.24 (Deferred Share).
The interests of existing Shareholders (both in terms of their economic
interest and voting rights) will not be diluted by the implementation of the
Share Capital Reorganisation.
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