Trading Update and Operating Review
17/01/2023 07:00
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RNS Number : 8967M Unbound Group PLC 17 January 2023
Unbound Group plc
('the Group')
Trading Update and Operating Review
Unbound Group plc today provides an update on its trading performance in the
year to 5(th) February 2023 (FY23) and announces significant initiatives
focused on optimising the efficiency and growth of the Group.
Trading Update
Despite a cautionary outlook at the Group's interim results, trading
conditions in the second half of the financial year have been more
challenging. Several external factors, including the extended period of hot
weather, the impact of Royal Mail industrial action and broader economic
conditions significantly impacted sales of our Autumn/Winter range in the
final five months of the year.
Following a strong start to the year, revenue growth has slowed with a poor Q3
and November performance and a small return to growth in December and in
January to date. As a result, full year revenue is now expected to be
£53-£54m, 3-4% growth on the prior year. Gross margins have been broadly in
line with expectation. Given this, we now expect to incur a pre-IFRS16
adjusted EBITDA loss of £0.75-£1.25m and adjusted pre-tax loss of
£4.25-£4.75m (both pre-exceptional and after non-recurring costs of c.£1m)
in FY23, below current market expectations*.
Net banking debt as at 31 December 2022 was £8.8m after investing £1.5m in
pre-payment of spring range extension stock. This provides current funding
headroom of at least £1.3m, which the Board expects will increase in Q1 of
the financial year ending 4(th) February 2024 ("FY24") as the incremental
inventory investment in working capital reverses. Having developed the Unbound
platform in the current financial year, capital expenditure in FY24 will be
substantially lower than FY23.
Despite the short-term challenges experienced, the Group is well positioned
for an enhanced Spring / Summer product portfolio launch supported by
well-balanced inventory levels. Following the success of recent sourcing
trials, we will be introducing incremental new product styles, including a new
range of athleisure products.
The Unbound Group currently has 11 partner brands that have gone live over the
past five months. We anticipate signing further partnerships in 2023 and still
see significant scope for growth and complementary brand diversification over
the medium term. However, given the current consumer backdrop the partnership
model has had a slow start to trading, as management has focused attention on
its core Hotter brand.
Focus on efficiency and growth
As highlighted previously, to optimise the Group's trading performance in the
current challenging economic and market conditions, focus will remain on
managing costs, protecting margins and cashflow, ensuring that appropriate
levels of working capital are maintained and managing capital investment
tightly. In line with strategy, annualised cost savings of approximately
£2.3m have already been identified within the Group's existing operating
model, with £1.3m being realised across the final quarter of the current
financial year and into the first quarter of the next financial year. A
further £1m will be realised across Q2 and Q3 of FY24.
The cost reduction activity outlined above is intended to underpin a return to
pre-IFRS16 EBITDA profitability during the next financial year. Furthermore,
the Board has accelerated its planned review of the operating structure of the
Group. This is focused on streamlining activities and simplifying processes in
order to drive growth of revenue and profits.
The review will cover areas including:
· The most appropriate structure and strategy for the future of its US
business, which contributes 11% of revenues
· Broadening the product range to ensure that styles remain relevant and
attractive to the consumer but with reduced SKUs and resultant business
complexity
· Further development of the Unbound Group trading platform, which now
has 11 partner brands selected for relevance to our over 55-year-old target
customer demographic.
Further detail on the key outputs from the Board's growth and efficiency
review will be provided alongside the Group's FY23 annual results, expected to
be published in May.
Ian Watson, Chief Executive, commented:
"Since our strong start to the year, trading in the second half has been
disappointing, with weakened demand from the current economic slowdown and a
number of external factors. However, we are pleased that margin discipline was
maintained.
Our core brand Hotter retains a highly loyal and engaged customer base. We
will focus on a broader product range, driven by our insight into our
customer's needs, attitudes and behaviours. In reaction to the challenging
trading environment, our strategic focus is centred around growth and
simplification. The Group will also generate significant annualised cost
savings which will be fully implemented by the end of October 2023.
As we continue to navigate our way through the current challenging consumer
backdrop, I remain confident in the long-term future of Hotter and the wider
Unbound platform as we build strategic partnerships with brands who want to
partner with us to target our Group's key demographic."
* Current consensus market expectations for the year ending 5(th) February
2023 are for revenue of £57.7m, pre-IFRS16 adjusted EBITDA of £2.3m and an
adjusted pre-tax loss of £1.2m and adjusted pre-tax profit of £1.0m
respectively.
Enquiries
Unbound Group plc
Ian Watson, CEO c/o Alma PR
Gavin Manson, CFO
Singer Capital Markets +44 (0) 20 7496 3000
Peter Steel / Tom Salvesen / Alaina Wong
+44 (0) 20 3405 0205
Alma PR Limited (Financial PR)
Josh Royston / Sam Modlin/ Hannah Campbell unbound@almapr.co.uk
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