TIDMITS

RNS Number : 9441S

In The Style Group PLC

19 July 2022

In The Style Group plc

("In The Style", the "Company" or the "Group")

Full Year Results for the Year Ended 31 March 2022

In The Style Group plc (AIM:ITS), the disruptive and inclusive digital womenswear fashion brand, announces full year results for the financial year ended 31 March 2022 ("FY22", "2022").

Financial highlights

 
                                         Year ended   Year ended 
                                           31 March     31 March      Change 
                                               2022         2021           % 
--------------------------------------  -----------  -----------  ---------- 
 Revenue (GBP'000)                           57,317       44,705         28% 
 Gross profit(1) (GBP'000)                   25,169       20,589         22% 
 Gross profit margin(2) (%)                   43.9%        46.1%   (2.2%pts) 
 Adjusted EBITDA(3) (GBP'000)                   551        3,799       (85%) 
 Adjusted EBITDA margin(4) (%)                 1.0%         8.5%   (7.5%pts) 
 (Loss) / profit before tax (GBP'000)       (1,545)          125         n.m 
 Net cash as at 31 March (GBP'000)            5,823       11,939       (51%) 
--------------------------------------  -----------  -----------  ---------- 
 
   --      Group revenue increased by 28% to GBP57.3m (2021: GBP44.7m) 

o Direct-to-consumer ("DTC") revenue grew by 23% to GBP44.7m (2021: GBP36.4m)

o Wholesale revenue grew by 52% to GBP12.6m (2021: GBP8.3m)

o Revenue growth was driven by the ongoing expansion and optimisation of the influencer-based business model

   --      Gross profit (1) grew 22% to GBP25.2m (2021: GBP20.6m) 

o Gross profit margin (2) reduced by 2.2%pts to 43.9% (2021: 46.1%) as the proportion of revenue from our wholesale channel increased

o Product cost increases were well managed through DTC but reduced wholesale gross margin. Cost pressures remain as we move into the current year

   --      Adjusted EBTIDA (3) for the year of GBP0.6m (2021: GBP3.8m) 

o Adjusted EBTIDA margin (4) of 1.0% (2021: 8.5%)

   --      The Group made a loss before tax of GBP1.5m (2021: profit of GBP0.1m) 

-- Cash at 31 March 2022 was GBP5.8m (March 2021: GBP11.9m). As was expected, cash levels reduced in the year as the Group invested in its technology platform and had increased working capital requirements due to growth within the wholesale channel. Following the year end, the Group has entered into a new invoice discounting facility to provide liquidity over trade receivables. This replaces the previous facility that was cancelled in December 2021. Cash at 30 June 2022 was GBP10.5m.

Operational highlights

   --      We have seen strong progress across all of our operational KPIs: 

o Total orders (5) increased by 13% to 1,523,000 (2021: 1,343,000)

o Cross-platform visits increased by 4% across app and web

o Conversion rate (6) improved to 3.16% (2021: 2.89%)

o Average order value (7) increased by 21% to GBP52.00 (2021: GBP42.85)

o New customers increased by 391,000 in the year; active customer (8) base grew by 4% to 677,000 (2021: 653,000)

o Order frequency (9) increased by 9% to 2.25 times per year (2021: 2.06 time per year)

Strategic highlights

-- The Group continued to leverage its highly distinctive social-influencer collaboration model, launching 193 collaboration collections across 27 influencers. This influencer base included both established names such as Jac Jossa and Lorna Luxe as well as a number of new influencers including Perrie Sian, Gemma Atkinson and Stacey Solomon, with whom In The Style launched its first ever sustainable collection.

-- Our first collaboration with Stacey Solomon in April 2021 was our largest ever single launch night. At its peak, we processed 500 orders per second and took over GBP1 million gross order value in the first hour after launch.

-- Consumer engagement with the In The Style proprietary app continues to be strong, with over 850,000 downloads in the year. We made good strides in the app customer journey including the addition of 'selling fast' flags and the ability for customers to save card details to make the checkout process easier.

-- We reached an agreement to collaborate with Dame Deborah James in early 2022 which was well aligned to our purpose of inspiring confidence. As we grew to know Deborah, we ourselves were inspired by her desire to make a difference. Following the year end, we have helped raise over GBP1.25m for the Bowelbabe fund for Cancer Research UK by donating all profits from both the original collection and a range of Rebellious Hope T-shirts which Deborah designed. We are saddened by Deborah's passing and hope In The Style's contribution will play some small part in the fight against cancer.

-- Sam Perkins joined the Company as Chief Executive Officer in January 2022 allowing Adam Frisby to focus on leading the Group's creative direction in a new role as Chief Brand Officer. Richard Monaghan joined the Company in March 2022 as Chief Financial Officer following Paul Masters decision to retire.

Q1 2023 trading

-- Trading through Q1 2023 has been robust in a challenging trading environment. Through the first quarter of the financial year we have launched 44 ranges in collaboration with 18 influencers.

   --   Our customer KPIs have continued to improve and return rates have been in line with management expectations. 

-- Through Q1, we have seen year-on-year revenue growth in our DTC channel of +12%. This includes revenue generated from the collaborations with Dame Deborah James, the profits of which will go to the Bowelbabe fund for Cancer Research UK. We have raised >GBP1.25 million for the charity so far.

-- Total revenue was broadly flat year-on-year in the quarter. Wholesale revenue decreased year-on-year as we reviewed how our launch model works in physical retail.

   --     Overall gross profit margin was in line with Q1 FY22. 
   --     As at 30 June 2022, the Group had cash of GBP10.5m. 

FY23 Outlook

-- As we consider the outlook for FY23 as a whole, we have to balance our confidence in the underlying business model and the opportunity to implement our growth strategy. The combination of our authentic inclusive brand, our differentiated influencer collaboration model, our agile supply chain and our well invested technology platform provides us with a competitive edge that can be further leveraged.

-- We are planning for Group revenue to be broadly flat, with DTC revenue growing at mid-single digit rates. Revenue from our wholesale channel is expected to decline at a double-digit rate as we focus on our digital partners.

   --      We expect DTC gross margin to reduce but wholesale gross margin to return to FY21 levels. 

-- We anticipate that by the end of September 2022 we will have moved to a new warehouse and we will improve our fulfilment efficiency as a result. We anticipate exceptional costs of cGBP0.5m in relation to the move.

-- Taking into account all of the above, together with the very uncertain market conditions, we are forecasting an adjusted EBITDA loss for the year of GBP2.0 million.

-- The Group manages cash carefully and we are well capitalised to navigate through this difficult period.

-- The Board is excited by the future growth strategy set out and is confident of the medium- and long-term growth prospects.

Sam Perkins, Chief Executive Officer of In The Style Group plc said:

"I am pleased to report that in our first full year as a public company In The Style has delivered further strong revenue growth, representing almost +200% on a two-year basis. This has been supported by encouraging improvements across all our key customer and brand metrics.

"Our purpose is to inspire confidence, and this drives us to create unique products that help our customers to feel great about themselves. We have a strong, inclusive brand and differentiated influencer collaboration model which gives us fantastic reach, highly effective marketing, and broad customer appeal. This underpins our long-term confidence to create one of the UK's most exciting fashion brands.

"This year is expected to be a challenging one for consumers and retailers. We are taking actions to respond including prudent cost control, cash management and executing against our refined growth strategy."

Analyst presentation

A presentation for analysts will be held at the offices of Hudson Sandler at 9.30am, Tuesday 19 July 2022. If you wish to attend, please contact Hudson Sandler on the details below.

A live presentation relating to the Group's Preliminary Results for the year ended 31 March 2022 will be conducted via the Investor Meet Company platform on Wednesday 20th July 2022 at 3:00pm BST. The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet In The Style via:

https://www.investormeetcompany.com/in-the-style-group-plc/register-investor

For media enquiries:

Please contact the team at Hudson Sandler on +44 (0)20 7796 4133 or email inthestyle@hudsonsandler.com .

In The Style Group plc Via Hudson Sandler

Sam Perkins, CEO

Rich Monaghan, CFO

Liberum Capital Limited (Nomad and Broker) +44 (0)20 3100 2000

Clayton Bush

Scott Mathieson

Ed Thomas

Miquela Bezuidenhoudt

Hudson Sandler +44 (0)20 7796 4133

Alex Brennan inthestyle@hudsonsandler.com

Lucy Wollam

Ben Wilson

About In The Style

In The Style is a fast-growing digital womenswear fashion brand with an innovative social media influencer collaboration model. Founded in 2013 by entrepreneur Adam Frisby, the brand champions inclusivity, body positivity and real beauty.

The brand's innovative and highly adaptable influencer collaboration model, which sees it work with influencers on a long-term basis to collaboratively design, develop and promote branded collections, differentiates it from competitors. In The Style currently partners with a stable of 25+ influencers, including Jac Jossa, Stacey Solomon and Perrie Sian. Together they enjoy a combined global social media reach of over 30m followers.

For more information, please visit https://corporate.inthestyle.com/about/

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

Cautionary statement

This announcement of annual results does not constitute or form part of and should not be construed as an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any In The Style Group plc (the "Company") shares or other securities in any jurisdiction nor is it an inducement to enter into investment activity nor should it form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. It does not constitute a recommendation regarding any securities. Past performance, including the price at which the Company's securities have been bought or sold in the past, is no guide to future performance and persons needing advice should consult an independent financial advisor. Certain statements in this announcement constitute forward looking statements (including beliefs or opinions). Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward looking statements are subject to risks and uncertainties because they relate to events that may or may not occur in the future, that may cause actual results to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this results announcement. As a result, you are cautioned not to place reliance on such forward-looking statements, which are not guarantees of future performance. Except as is required by applicable laws and regulatory obligations, no undertaking is given to update the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast. This announcement has been prepared for the Company's group as a whole and, therefore, gives greater emphasis to those matters which are significant to the Company and its subsidiary undertakings when viewed as a whole.

Summary financial performance

 
                                                 Year ended   Year ended   Year-on-year 
                                                   31 March     31 March         change 
                                         Units         2022         2021              % 
---------------------------------  -----------  -----------  -----------  ------------- 
 Income statement 
---------------------------------  -----------  -----------  -----------  ------------- 
 Direct-to-consumer revenue            GBP'000       44,683       36,374            23% 
---------------------------------  -----------  -----------  -----------  ------------- 
 Wholesale revenue                     GBP'000       12,634        8,331            52% 
---------------------------------  -----------  -----------  -----------  ------------- 
 Revenue                               GBP'000       57,317       44,705            28% 
---------------------------------  -----------  -----------  -----------  ------------- 
 Gross profit(1)                       GBP'000       25,169       20,589            22% 
---------------------------------  -----------  -----------  -----------  ------------- 
 Gross profit margin(2)                      %        43.9%        46.1%      (2.2%pts) 
---------------------------------  -----------  -----------  -----------  ------------- 
 Adjusted EBITDA(3)                    GBP'000          551        3,799          (86%) 
---------------------------------  -----------  -----------  -----------  ------------- 
 Adjusted EBITDA margin(4)                   %         1.0%         8.5%      (7.5%pts) 
---------------------------------  -----------  -----------  -----------  ------------- 
 (Loss) / profit before tax            GBP'000      (1,545)          125            n.m 
---------------------------------  -----------  -----------  -----------  ------------- 
 Basic (loss) / earnings per 
  share(10)                              pence       (2.53)         1.19         (313%) 
---------------------------------  -----------  -----------  -----------  ------------- 
 
 Cash flow 
---------------------------------  -----------  -----------  -----------  ------------- 
 Net cash as at 31 March               GBP'000        5,823       11,939          (51%) 
---------------------------------  -----------  -----------  -----------  ------------- 
 Cash (used in) / generated from 
  operations                           GBP'000      (3,771)        1,129            n.m 
---------------------------------  -----------  -----------  -----------  ------------- 
 Capital expenditure including 
  intangible assets                    GBP'000      (2,121)        (414)            n.m 
---------------------------------  -----------  -----------  -----------  ------------- 
 
 Key performance indicators 
---------------------------------  -----------  -----------  -----------  ------------- 
 Total orders(5)                          '000        1,523        1,343            13% 
---------------------------------  -----------  -----------  -----------  ------------- 
 Conversion rate(6)                          %        3.16%        2.89%          27bps 
---------------------------------  -----------  -----------  -----------  ------------- 
 Average order value(7)                    GBP        52.00        42.85            21% 
---------------------------------  -----------  -----------  -----------  ------------- 
 Active customers(8)                      '000          677          653             4% 
---------------------------------  -----------  -----------  -----------  ------------- 
                                     Times per 
 Order frequency(9)                       year         2.25         2.06             9% 
---------------------------------  -----------  -----------  -----------  ------------- 
 

(1) Gross profit is defined as revenue less all direct costs incurred in purchasing products for resale.

   (2)      Gross profit margin is gross profit as a percentage of retail. 

(3) Adjusted EBITDA is defined as profit before net finance costs, tax, depreciation, amortisation, share-based payments and exceptional items (which are material and non-recurring in nature).

   (4)      Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue. 

(5) Total orders is defined as the total number of orders placed through our direct-to-consumer channel in the year.

   (6)      Conversion rate is defined as total orders divided by visits to the Group's platform. 

(7) Average order value is defined as gross sales (including sales tax) divided by total orders.

(8) Active customers is defined as the number of consumers who have made at least one purchase in the last twelve months through either the In The Style website or the In The Style app.

(9) Order frequency has been defined as the total number of orders placed by consumers divided by the number of active customers.

(10) Basic EPS has been calculated for the comparative periods using the weighted average number of shares in issue immediately prior to the IPO in March 2021.

FY22 performance overview

This has been a truly landmark year for In The Style. In our first year as a listed company, and against a challenging market backdrop, we improved all of our key customer metrics including visits, conversion, order frequency and average order value. Revenue of GBP57.3m (2021: GBP44.7m) represented a strong year-on-year increase of 28% and transformational growth of 197% on a two-year basis. Adjusted EBITDA for the year was GBP0.6m (2021: GBP3.8m) which resulted in an adjusted EBITDA margin of 1% (2021: 8.5%).

Continued revenue growth and strategic progress

The continued momentum in revenue growth was driven by the ongoing expansion and optimisation of our influencer-based business model, through which we launched 193 collaborations across 27 influencers, creating over 7,500 new products. Our collaborations over the past year included established partners such as Jac Jossa and Lorna Luxe, along with a number of new partnerships with Perrie Sian, Gemma Atkinson and Stacey Solomon, with whom In The Style launched its first ever sustainable collection.

In The Style's platforms attracted 48.2 million visits from consumers in 2022 (2021: 46.5 million), an increase of 4% on the prior year. Consumer engagement with the In The Style proprietary app continued to be particularly strong, with over 850,000 downloads during the year. Conversion from visit to order increased to 3.16% (2021: 2.89%) as our inspirational product designs and increased social reach were backed up by improvements in the customer journey. During the year we added features such as 'fast selling' flags to products, quick purchase, and the ability to save card details to allow a smooth checkout journey.

Total orders increased by 13% to 1,523,000 (2021: 1,343,000). On average, we attracted an average of 33,000 new customers a month through 2022 to grow our active customer base by 4% to 677,000 (2021: 653,000). Order frequency increased by 9% to 2.25x per year (2021: 2.06x) as we leveraged the use of our proprietary app, along with an increase in launch frequency, to increase the propensity to purchase. Although we are pleased that both of these core metrics improved in the year, we believe that there is a great opportunity to reactivate customers to grow our active customer base.

Our collaboration model allows us to design products which resonate with consumers and promote high levels of body confidence. By taking this approach we have been able to increase the value we provide to our customers. Average order value increased by 21% to GBP52.00 (2021: GBP42.85) through both retail price inflation and as the sales mix shifted to higher value product categories, such as occasion wear, following the end of lockdown restrictions in May 2021.

The Group's wholesale channel continued to grow, increasing by 52% to GBP12.6m (2021: GBP8.3m) to represent 22% of total revenue (2021: 19%). Retail partnerships provide the Group with additional consumer reach which support increased levels of brand awareness. In the year, the Group started to retail product to key European markets through Zalando and About You. Although sales to international markets remained small in 2022, this remains an important growth opportunity for the Group in the coming years.

Managing costs through a challenging period

Adjusted EBITDA margin reduced to 1.0% in 2022 (2021: 8.5%) which equated to adjusted EBITDA of GBP0.6m (2021: GBP3.8m).

Disruption to worldwide supply chains and inflationary pressures as a result of Covid-19 and the Russia-Ukraine conflict have been well documented, and we were not immune to these. Increases to product costs and the cost of freight put pressure on our gross margin whilst delivery timelines became less predictable which had an impact on our launch schedule. Our teams were able to react quickly to any disruption in our supply chain and flex our sourcing channels. That led to some substantial changes in our supplier base in the year, away from China and into new territories such as Morocco and India.

As a result of this cost management and increasing retail prices on our platform, inflation was well managed through our direct-to-consumer segment, but it did impact our growing wholesale channel where retail prices are set in advance. Overall gross margin therefore decreased by 220bps to 43.9% (2021: 46.1%).

Adjusted EBITDA margin was also impacted from rising distribution costs, an increase in return rates following a year of lockdown restrictions, and an increase in salaries and overheads as we invested for future growth.

Investment for sustained growth

During the year we made several key investments in our team and infrastructure to strengthen our business for long-term, sustainable growth.

We strengthened our senior team with appointments across product, people and finance. In addition, we made several hires in our technology team under the leadership of John Allen, our Chief Technology Officer. As well as the customer journey improvements mentioned previously, we added features such as a chatbot to gain efficiencies in customer services and we have substantially replatformed our site. The team are now working to a detailed roadmap of further app and website improvements that put the customer journey at its centre.

We know that the environment in which our people work is important to them, and we want to provide a space which gives our creative talent the best chance to flourish. In October 2021 we moved our head office to a new, larger premises close to our previous headquarters in Salford. Our new site offers space for, amongst other things, an on-site photography studio, as well as a better collaborative environment for our teams.

Operating responsibly

We are committed to operating responsibly and we are mindful of the communities we impact, our customers, our suppliers and the environment. During the year we made further progress against the actions resulting from a supply chain review undertaken by Anthesis ahead of the Group's IPO in March 2021. This included mapping our supply chain for visibility, strengthening our due diligence processes as we onboard suppliers and throughout our supplier relationships, and updating our CSR policies. 70% of all short- and medium-term recommendations from this review are now complete, with plans in place to deliver against the remaining recommendations.

Furthermore, led by the Group's CSR Committee, we have sought to reduce our impact on the environment and improve the lives of people in our supply chain. We have delivered our first full collection featuring more sustainable fabrics, strengthened our commitment to only work with suppliers committed to meeting our ethical standards, and reviewed our own purchasing practices and the impact these have on our supply chain.

In January 2022, we launched the first In The Style collection made from sustainable and recycled materials. The collection, created in partnership with ITS influencer Stacey Solomon, was received well by customers and has presented a number of useful insights for future collections of this kind.

An evolution of our strategy

The Group is well positioned and has three competitive advantages which we can build on in the coming years:

   --      Our authentic brand purpose-built around inclusivity 

As a brand, In The Style was born out of a desire to inspire all women to love who they are by giving them the best inclusive fashion and unique influencer collaborations. This brand purpose is authentic, runs through the very lifeblood of the Group, and is not easy for others to replicate.

   --      Our differentiated, influencer-led business model 

ITS operates a differentiated social influencer-led business model, which sees us work collaboratively with social influencers to develop and launch its eponymous design-led collections. This model creates real engagement with consumers, an ability to respond rapidly to changing consumer trends, and drives the Group's robust economic model.

   --      Our well-invested technology platform 

Comprising the In The Style e-commerce site and proprietary app, the Group's scalable technology platform has been developed to deliver a seamless customer experience, particularly during periods of very high browsing and transaction volumes and frequencies. The In The Style app, which is created by our in-house tech team and is bespoke to the Group, successfully drives engagement and conversion.

As we look ahead to the Company's next phase of growth, we have taken the opportunity to evolve and refine our growth strategy to maximise value for all stakeholders, built around the following pillars:

   1.   A retail experience equal to the brand 

The Group's model of collaborating with influencers to launch small but regular ranges that are size inclusive has been well received. Our collaborative launch model will always be at the heart of the brand. The model is an unrivalled source of new customers and gives us great reach in a cost-effective way. As we move forward, we will look to adapt this to become the 'best of launch and browse'. To do that we will relentlessly focus on product quality and fit, increasing our assortment and improve our customer experience by honing our app and our website.

   2.   Reach through partnerships 

Our brand is attractive to established retailers and marketplaces, and we have grown wholesale revenue as a result. We have an opportunity to use our partners to increase our consumer reach both in the UK and internationally. We aim to develop technology that allows us to partner at scale and speed with efficiencies for all.

   3.   New influencer-based business models 

Engaging consumers through social has been key to In The Style's success. In 2022 we collaborated with 27 influencers and launched 193 collections. As this approach evolves, over the long-term we will look to new business models that could be incremental to our success and the potential of new brands to expand our consumer reach. This could mean retailing to different customer types, helping influencers to launch their own brands, or helping others adopt a similar launch model. This could be accelerated through the right acquisitions.

The Board

During the year we announced two important changes to our leadership team. Firstly, having founded In The Style and led the Company for the last eight years, Adam Frisby took the decision to become Chief Brand Officer, a newly created Board-level Executive Director role with responsibility for developing the Group's influencer partnerships and the brand's creative direction. At the same time, we were delighted to announce the appointment of Sam Perkins as the Group's new CEO.

Sam has a proven track record of delivering strategic and commercial success across multichannel and pureplay retailers.

He joined In The Style from The Very Group, where he held the role of Managing Director of the Group's retail division since 2018 and helped to drive the company's transformation from a multi-brand catalogue business to a fast-paced pure-play retailer.

In March 2022, Paul Masters, the Group's CFO & COO, stepped down from his role to focus on his health. Paul joined In The Style in 2017 and during his tenure played a critical role in driving the Company's growth, including through its IPO in March 2021. I would like to again take this opportunity to thank Paul on behalf of everyone at In The Style for his outstanding commitment and significant contributions during his time with the Group.

In Richard Monaghan the Group identified a high calibre successor. Richard is an ICAEW qualified Chartered Accountant with significant experience at consumer-facing businesses, having previously held the roles of Director of Finance at Victorian Plumbing Group plc, and Deputy CFO and Group Financial Controller at Auto Trader Group plc.

The Board has been delighted with both Sam and Richard's contributions since joining the business and we believe that along with Adam, we have a formidable and ambitious executive leadership team to help drive the business through the next chapters of its growth.

Financial review

In our first full year as a public company, we achieved another strong year of revenue growth.

 
                                           2022       2021   Change 
                                        GBP'000    GBP'000        % 
------------------------------------  ---------  ---------  ------- 
 Direct-to-consumer ('DTC')              44,683     36,374      23% 
 Wholesale                               12,634      8,331      52% 
------------------------------------  ---------  ---------  ------- 
 Revenue                                 57,317     44,705      28% 
 Cost of sales                         (32,148)   (24,116)    (33%) 
------------------------------------  ---------  ---------  ------- 
 Gross profit                            25,169     20,589      22% 
 Distribution costs                    (10,036)    (7,402)    (36%) 
 Underlying administrative expenses    (14,582)    (9,665)    (51%) 
 Other operating income                       -        277   (100%) 
------------------------------------  ---------  ---------  ------- 
 Adjusted EBITDA                            551      3,799    (85%) 
 Depreciation and amortisation            (980)      (934)     (5%) 
 Share-based payments                     (861)          -     n.m. 
 Exceptional items                        (216)    (2,346)      91% 
------------------------------------  ---------  ---------  ------- 
 Operating (loss)/ profit               (1,506)        519   (390%) 
------------------------------------  ---------  ---------  ------- 
 

Revenue

The past financial year saw another strong year of revenue growth. Revenue increased by 28% to GBP57.3m (2021: GBP44.7m). Growth came through both our Direct-to-consumer ('DTC') and Wholesale channels.

DTC revenue, which is generated through the sale of apparel on the Group's platforms, increased by 23% to GBP44.7m (2021: GBP36.4m). This was achieved through increases in total order volumes and the average revenue per order.

The Group leverages its distinctive collaboration launch model with influencers to drive engagement with consumers. An increase in visits to our platform was amplified by an increase in conversion and resulted in a 13% increase in the total number of orders served by the Group to over 1,523,000 (2021: 1,343,000).

These orders were generated from 677,000 active customers, an increase of 4% on the prior year (2021: 653,000). Order frequency, defined as total orders divided by active customers, increased by 9% to 2.25 times per year (2021: 2.06 times per year).

Average revenue per order increased by 8% to GBP29.34 (2021: GBP27.08) with an increase in average order value being offset somewhat by an increase in return rates.

Average order value, which we define as gross sales including sales tax divided by the number of orders, increased by 21% to GBP52.00 (2021: GBP42.85). This increase in average order value resulted from a combination of a change in sales mix between both influencers and product categories, and an increase in average recommended retail prices. The number of items per order remained flat at 2.4 (2021: 2.4).

Return rates increased by 900bps to 34.3% (2021: 25.3%), partly due to the forementioned change in sales mix between product categories. In addition, the Group temporarily experienced particularly high levels of returns in the first half of 2022 as improvised changes in the supplier base made to mitigate disruption caused by Covid-19, resulted in challenges in product fit. This normalised through the second half of the year.

Wholesale revenue, which is generated through sales to third-party retail partners, increased by 52% to GBP12.6m (2021: GBP8.3m). The brand's association with high profile retail partners such as ASOS and The Very Group provide a profitable revenue stream and access to a broader consumer base which increases brand awareness.

Gross profit

Gross profit increased by 22% to GBP25.2m (2021: GBP20.6m) although gross profit margin reduced by 220bps to 43.9% (2021: 46.1%).

Direct-to-consumer gross profit margin remained flat at 52% (2021: 52%). The Group incurred cost inflation due to supply chain disruption caused by Covid-19 and the Russia-Ukraine conflict. Increases in average revenue per order were therefore largely offset by increases in raw material costs and increased rates for both air and sea freight.

These cost pressures were more challenging to mitigate as effectively through our wholesale channel. Wholesale gross margin reduced as a result to 15% (2021: 19%).

Distribution costs

Distribution costs, which includes postage, direct warehouse costs and transaction fees, increased by 36% to GBP10.0m (2021: GBP7.4m) which was equivalent to 17.5% of revenue (2021: 16.6%). The Group incurred increases in direct warehouse costs due to staff labour inflation, an increased out-of-hours operation to keep up with rapid growth, and the outsourcing of returns on a short-term basis to conserve warehouse space. It is expected that by moving to a larger warehouse space in the coming year we will be able to gain efficiencies on a cost per unit basis.

Underlying administrative expenses

Underlying administrative expenses increased by 51% to GBP14.6m (2021: GBP9.6m).

 
                                            2022       2021   Change 
                                         GBP'000    GBP'000        % 
-------------------------------------  ---------  ---------  ------- 
 Marketing                                 7,076      4,995      42% 
 People costs (exc direct warehouse)       4,311      2,843      52% 
 Overheads                                 3,195      1,801      77% 
-------------------------------------  ---------  ---------  ------- 
 Underlying administrative expenses       14,582      9,639      51% 
-------------------------------------  ---------  ---------  ------- 
 

Marketing costs increased by 42% to GBP7.1m (2021: GBP5.0m), equating to 12% of revenue (2021: 11%). The majority of marketing costs relate to influencer commissions on collaborations. The Group also increased the amount invested in performance marketing through the first half of 2022 to amplify consumer traffic to our platforms.

People costs, excluding direct warehouse costs and share-based payments, increased by 52% year-on-year to GBP4.3m (2021: GBP2.8m). The number of full-time equivalent employees, excluding warehouse colleagues, increased by 42% to 122 (2021: 86). Cost per FTE increased by 10%, primarily as a result of changes in staff mix as we invested in the middle and senior management level of the team to give us the best possible chance of achieving future sustainable growth.

Overheads increased by 75% to GBP3.2m (2021: GBP1.8m). Of the GBP1.4m increase in overheads year-on-year, GBP0.3m were costs incurred in relation to being a listed business. Other increases related to supply chain governance, tech infrastructure and services to improve our platform, and an increase in travel following the easing of lockdown restrictions.

Adjusted EBITDA

Significant items of income and expense that do not relate to the trading of the Group are disclosed separately. Examples of such items are exceptional items and share-based payment charges relating to one-off awards.

The table below provides a reconciliation from operating profit to adjusted EBITDA, which is a non-GAAP metric used by the Group to assess the operating performance.

 
                                          2022       2021   Change 
                                       GBP'000    GBP'000        % 
-----------------------------------  ---------  ---------  ------- 
 Operating (loss)/ profit              (1,506)        519   (390%) 
 Share-based payments                      861          -     n.m. 
 Exceptional items                         216      2,346      91% 
-----------------------------------  ---------  ---------  ------- 
 Adjusted operating (loss)/ profit       (429)      2,865   (115%) 
 Depreciation and amortisation             980        934     (5%) 
-----------------------------------  ---------  ---------  ------- 
 Adjusted EBITDA                           551      3,799    (85%) 
-----------------------------------  ---------  ---------  ------- 
 

Adjusted EBTIDA for the year was GBP0.6m (2021: GBP3.8m) which resulted in an adjusted EBITDA margin of 1.0% (2021: 8.5%).

Operating loss/(profit)

The Group made an operating loss for the year of GBP1.5m (2021: GBP0.5m operating profit).

Depreciation and amortisation for the year amounted to GBP1.0m (2021: GBP0.9m) and primarily related to capitalised development of the Group's web and app platforms.

The Group incurred share-based payment charges (including associated NI) of GBP0.9m (2021: GBPnil). The majority of the charge recognised relates to shares awarded to management at IPO. The award made vests over three years.

Costs associated with the Board reorganisation and the appointment of Sam Perkins (CEO) and Richard Monaghan (CFO) amounted to GBP0.2m (2021: GBPnil) and have been recognised as exceptional. Exceptional items in 2021 related to IPO expenses.

Loss/(profit) before tax

The Group made a loss before tax of GBP1.5m in the year (2021: GBP0.1m profit).

Taxation

The Group recognised a deferred tax credit of GBP0.2m in the year in respect of losses carried forward.

Earnings per share

Basic earnings per share ('EPS') from continuing operations, which is calculated for both the current and comparative year based upon the weighted average number of shares in issue immediately prior to the IPO, was a 2.53 pence loss per share (2021: 1.19 pence profit per share).

The adjusted basic earnings per share from continuing operations decreased to a 0.56 pence loss per share (2021: 5.66 pence profit per share). The table shows the effect on the Group's basic earnings per share of the exceptional items and share-based payments.

 
                                                                             2022       2021   Change 
                                                                          GBP'000    GBP'000        % 
----------------------------------------------------------------------  ---------  ---------  ------- 
 (Loss)/profit for EPS                                                    (1,329)        519   (356%) 
 Share-based payments                                                         861          -     n.m. 
 Exceptional items                                                            216      2,346    (91%) 
 Tax effect                                                                  (41)          -     n.m. 
----------------------------------------------------------------------  ---------  ---------  ------- 
 Adjusted (loss)/profit for EPS                                             (293)      2,865   (110%) 
 Weighted average number of ordinary shares for basic EPS (thousands)      52,450     52,450        - 
----------------------------------------------------------------------  ---------  ---------  ------- 
 Adjusted EPS                                                              (0.56)       5.66   (110%) 
----------------------------------------------------------------------  ---------  ---------  ------- 
 

Cash flow and net cash

Net cash at the year end was GBP5.8m (2021: GBP11.9m). Net cash outflows from operating activities totalled GBP3.8m (2021: GBP1.1m inflow). Changes in working capital resulted in a cash outflow of GBP4.1m. An increase in trade receivables relating to the growing wholesale business was the primary reason for that movement. In total, movements in trade and other receivables resulted in a GBP3.5m cash outflow. Following the period end, the Group has signed into a new invoice discounting arrangement which allows the Group prepayment of up to 85% of the trade receivables balance. This replaces the previous facility which was cancelled during the past year.

Stock increased by GBP1.2m causing an additional working capital cash outflow. Increased stock levels are a result of an increase in purchase price, additional volume held as the business stocks up to fuel growth, and increased levels of stock in transit as we look to gain efficiencies by moving to a 'Free-on-Board' model. Payables increased by GBP0.6m resulting in an offsetting cash inflow.

Cash flows used in investing activities, and specifically capital expenditure, amounted to GBP2.1m (2021: GBP0.4m). The majority of capital expenditure relates to the development of the Group's web and app platforms. Costs related to the fit out of the Group's new head office were included within the GBP0.7m investment in property, plant and equipment.

Cash flows used in financing activities totalled GBP0.2m (2021: GBP9.2m inflow) and primarily related to lease payments. Cash inflows in the prior year were in relation to the IPO that took place in March 2021.

Events after the reporting period

On 16 June 2022 the Group entered into an agreement to lease for a circa 84,000 sqft warehouse in Heywood, Lancashire. It is expected that the warehouse will be available for occupation at the end of July and the Group expects this facility to be the main fulfilment centre from September 2022. The lease term is 10 years with a rental cost of GBP5.06 per square foot for the first three years of the term and GBP6.50 thereafter. As part of the terms of the agreement, GBP0.4m will be paid to the landlord to be held on deposit until the end of the lease term.

On 24 June 2022 the Group signed into an invoicing discounting facility. The facility allows prepayment of up to 85% of the Group's trade receivables up to a limit of GBP4.0m. Interest is charged on pre-paid amounts at a rate of 2.0% per annum.

Dividend

No final dividend for the year ended 31 March 2022 has been declared.

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

For the year ended 31 March 2022

 
                                                                      Note        2022       2021 
                                                                               GBP'000    GBP'000 
 
 Revenue                                                               3        57,317     44,705 
 Cost of sales                                                         4      (32,148)   (24,116) 
------------------------------------------------------------------  -------  ---------  --------- 
 Gross profit                                                                   25,169     20,589 
 
 Distribution costs                                                    4      (10,036)    (7,428) 
 Administrative expenses                                               4      (16,639)   (12,919) 
 Other operating income                                                4             -        277 
------------------------------------------------------------------  -------  ---------  --------- 
 Operating profit/(loss)                                                       (1,506)        519 
 
 Adjusted EBITDA(1)                                                    3           551      3,799 
 Depreciation                                                        11, 16      (585)      (360) 
 Amortisation                                                          10        (395)      (574) 
 Share-based payments charge                                           18        (861) 
 Exceptional items                                                     5         (216)    (2,346) 
 
 Operating (loss)/profit                                                       (1,506)        519 
 
 Finance income                                                        6             1          1 
 Finance costs                                                         7          (40)      (395) 
------------------------------------------------------------------  -------  ---------  --------- 
 (Loss)/profit before taxation                                                 (1,545)        125 
 
 Income tax                                                            8           216        500 
------------------------------------------------------------------  -------  ---------  --------- 
 (Loss)/profit and total comprehensive (loss)/income for the year              (1,329)        625 
------------------------------------------------------------------  -------  ---------  --------- 
 
 
 Earnings per share (pence) 
 (Loss)/profit per share - basic and diluted                           9        (2.53)       1.19 
------------------------------------------------------------------  -------  ---------  --------- 
 

Note 1: Adjusted EBITDA is defined as EBITDA (earnings before interest, tax, depreciation and amortisation) less exceptional items and IFRS 2 charges in respect of share-based payments along with associated national insurance. Adjusted EBITDA is a non-GAAP metric used by management and the Board to assist in providing analysis of trading results and is not an IFRS disclosure. Exceptional items are items which are material and non-recurring in nature as disclosed in note 5.

All results derive from continuing operations.

Profit/(loss) and total comprehensive profit/(loss) is attributable to equity holders of the Company.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March

 
                                                     2022      2021 
                                           Note   GBP'000   GBP'000 
 Assets 
 Non-current assets 
 Intangible assets                          10      2,154     1,125 
 Property, plant and equipment              11        773       272 
 Right-of-use assets                        16        972       292 
 Deferred tax asset                         8         716       500 
----------------------------------------  -----  --------  -------- 
 Total non-current assets                           4,615     2,189 
----------------------------------------  -----  --------  -------- 
 
 Current assets 
 Inventories                                12      3,142     1,955 
 Trade and other receivables                13      5,191     1,746 
 Cash and cash equivalents                          5,823    11,939 
----------------------------------------  -----  --------  -------- 
 Total current assets                              14,156    15,640 
----------------------------------------  -----  --------  -------- 
 
 Total assets                                      18,771    17,829 
----------------------------------------  -----  --------  -------- 
 
 Equity 
 Share capital                              17        131       131 
 Share premium                                     10,942    10,942 
 Merger reserve                                      (58)      (58) 
 Share-based payments reserve                         861         - 
 Accumulated losses/(retained earnings)           (1,161)       168 
 Total equity                                      10,715    11,183 
 
 Liabilities 
 Non-current liabilities 
 Provisions                                           127         - 
 Lease liability                            16        686       281 
----------------------------------------  -----  --------  -------- 
 Total non-current liabilities                        813       281 
----------------------------------------  -----  --------  -------- 
 
 Current liabilities 
 Trade and other payables                   14      5,908     5,088 
 Contract liabilities                       15        871     1,113 
 Provisions                                           179         - 
 Lease liability                            16        285       164 
----------------------------------------  -----  --------  -------- 
 Total current liabilities                          7,243     6,365 
----------------------------------------  -----  --------  -------- 
 
 Total liabilities                                  8,056     6,646 
----------------------------------------  -----  --------  -------- 
 
 Total equity and liabilities                      18,771    17,829 
----------------------------------------  -----  --------  -------- 
 

These financial statements were approved by the Board of Directors on 19 July 2022 and authorised for issue.

Richard Monaghan

Chief Financial Officer

In The Style Group plc

Registered number: 13245400

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2022

 
                                                                     Share based 
                                                          Merger        payments    Retained earnings / 
                   Share Capital   Share Premium         reserve         reserve   (accumulated losses)   Total equity 
                         GBP'000         GBP'000         GBP'000         GBP'000                GBP'000        GBP'000 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 As at 31 March 
  2020                        15           4,914               -               -                (7,606)        (2,677) 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 
 Profit for the 
  year                         -               -               -               -                    625            625 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 Total 
  comprehensive 
  income for the 
  year                         -               -               -               -                    625            625 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 
 Transactions 
 with 
 shareholders: 
 Dividend                      -               -               -               -                (1,250)        (1,250) 
 Share 
  reorganisation 
  - preference 
  share 
  redesignation 
  as equity and 
  cancellation 
  of share 
  premium (note 
  17)                          -               -               -               -                  3,470          3,470 
 Share capital 
  reduction 
  (note 17)                 (15)         (4,914)               -               -                  4,929              - 
 Issued on 
  incorporation 
  (note 17)                   59               -               -               -                      -             59 
 Group 
  reorganisation 
  (note 17)                   58               -            (58)               -                      -              - 
 Share issue on 
  IPO (note 17)               14          10,986               -               -                      -         11,000 
 IPO costs (note 
  17)                          -            (44)               -               -                      -           (44) 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 Total 
  transactions 
  with 
  shareholders               116           6,028            (58)               -                  7,149         13,235 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 
 As at 31 March 
  2021                       131          10,942            (58)               -                    168         11,183 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 
 Loss for the 
  year                         -               -               -               -                (1,329)        (1,329) 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 Total 
  comprehensive 
  loss for the 
  year                         -               -               -               -                (1,329)        (1,329) 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 
 Transactions 
 with 
 shareholders: 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 Employee share 
  schemes - 
  value of 
  employee 
  services (note 
  18)                          -               -               -             861                      -            861 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 Total 
  transactions 
  with 
  shareholders                 -               -               -             861                      -            861 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 
 As at 31 March 
  2022                       131          10,942            (58)             861                (1,161)         10,715 
----------------  --------------  --------------  --------------  --------------  ---------------------  ------------- 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2022

 
                                                                           Year Ended       Year Ended 
                                                                        31 March 2022    31 March 2021 
                                                                Note          GBP'000          GBP'000 
 Net cash flow from operating activities 
 (Loss)/profit for the year                                                   (1,329)              625 
 
   Adjustments for: 
 Share based payments charge                                     18               861                - 
 Amortisation of intangible assets                               10               395              574 
 Depreciation of property, plant and equipment                   11               585              360 
 Finance income                                                  6                (1)              (1) 
 Finance costs                                                   7                 40              395 
 Income tax expense                                              8              (216)            (500) 
 
   Working capital adjustments 
 Increase in inventories                                                      (1,187)          (1,103) 
 Increase in trade and other receivables                                      (3,499)            (771) 
 Increase in trade and other payables                                             580            1,550 
 
 Taxation paid                                                                      -                - 
-------------------------------------------------------------  -----  ---------------  --------------- 
 Net cash (used in)/ generated from operations                                (3,771)            1,129 
-------------------------------------------------------------  -----  ---------------  --------------- 
 
   Cash flows used in investing activities 
 Purchase of intangible assets                                   10           (1,424)            (325) 
 Purchase of property, plant and equipment                       11             (698)             (89) 
 Interest received                                                                  1                1 
-------------------------------------------------------------  -----  ---------------  --------------- 
 Net cash used in investing activities                                        (2,121)            (413) 
-------------------------------------------------------------  -----  ---------------  --------------- 
 
   Cash flows (used in)/ generated from financing activities 
 Issue of ordinary shares                                        17                 -           11,000 
 Costs incurred on IPO charged to share premium                                     -             (44) 
 Receipt from/(repayment of) invoice discounting facility                          53            (365) 
 Dividend paid                                                                      -          (1,250) 
 Interest paid on lease liabilities                              16              (40)             (19) 
 Repayment of lease liabilities                                  16             (237)            (146) 
-------------------------------------------------------------  -----  ---------------  --------------- 
 Net cash (used in)/ generated from financing activities                        (224)            9,176 
-------------------------------------------------------------  -----  ---------------  --------------- 
 
 Net (decrease)/ increase in cash and cash equivalents                        (6,116)            9,892 
 Cash and cash equivalents brought forward                                     11,939            2,047 
 
 Cash and cash equivalents carried forward                                      5,823           11,939 
-------------------------------------------------------------  -----  ---------------  --------------- 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information

The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, and in accordance with UK-adopted international accounting standards. The consolidated financial statements have been prepared on the going concern basis and under the historical cost convention. The financial information is presented in sterling and has been rounded to the nearest thousand (GBP'000).

The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on 1 April 2021:

   --    COVID-19-Related Rent Concessions (Amendment to IFRS 16); 

-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);

-- COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) The adoption of these amendments has had no material effect on the Group's consolidated financial statements.

There are a number of amendments to IFRS that have been issued by the IASB that become mandatory in a subsequent accounting period including:

   --    Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 
   --    Annual Improvements to IFRS Standards 2018-2020 
   --    Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) 
   --    Reference to the Conceptual Framework (Amendments to IFRS 3) 

-- IFRS 17 Insurance Contracts -- Classification of liabilities as current or non-current (Amendments to IAS 1) -- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

   --    Definition of Accounting Estimate (Amendments to IAS 8) 

-- Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction - Amendments to IAS 12 Income Taxes

-- Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

The Group has evaluated these changes and none are expected to have a significant impact on these consolidated financial statements.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2022 or 31 March 2021 but is derived from those accounts. Statutory accounts for 31 March 2021 have been delivered to the registrar of companies, and those for 31 March 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Going concern

The Group's ability to continue as a going concern is dependent on maintaining adequate levels of resources to continue to operate for the foreseeable future. The Directors have considered a number of key dependencies which are set out in the group's risk management section, specifically the group's exposure to liquidity risk and foreign exchange risk.

When assessing the going concern of the Group, the Directors have reviewed the year-to-date financial results, as well as detailed financial forecasts for the Going Concern Review period up to 31 July 2023. The assumptions used in the financial forecasts are based on the Group's historical performance and management's extensive experience of the industry. Taking into consideration the wider economic environment, the forecasts have been assessed and stress tested to ensure that a robust assessment of the Group's working capital and cash requirements has been performed.

Liquidity and financing

At 31 March 2022, the Group held instantly accessible cash and cash equivalents of GBP5.8m. In addition, in June 2022 the Group signed into an invoice discounting facility. There is a sufficient level of liquidity/financing headroom post stress testing across the going concern forecast period to 31 July 2023, as outlined in more detail below.

Approach to stress testing

The going concern analysis, which was approved by the Board in July 2022, reflected the actual trading to May 2022, as well as detailed financial forecasts for the period up to 31 July 2023. The Group has taken a measured approach to its forecasting. The Group has balanced the expected trading conditions with opportunities available in the market which is still transitioning online. Given the uncertainty of the impact of Covid-19, the conflict in Ukraine and the current high levels of inflation in the UK, the Board has in its assessment of going concern considered the potential impact of a generalised economic downturn leading to a greater impact on the spending patterns of consumers than has been experienced to date.

In addition, the Board has considered the impact of disruption to the supply chain caused by Covid-19, climate change risks and the impact on gross margin. The extent to which these factors could adversely affect the Group's revenue, gross margin and customer acquisition costs, as well as the extent to which this can be offset by cost savings, was modelled. The Group has prepared a reasonable worst case downside scenario, which incorporated the assumptions listed below:

-- Reduction in customer numbers and conversion when compared with the Base Case and 2022 actual

-- Maintenance of average order value at 2022 actual levels, despite seeing average order value grow in recent years

   --      Increased marketing spend as a proportion of revenue 
   --      Reduction in gross margin 
   --      Increased stock holding due to the reduction in sales 

The effect of the combination of applying all the above downsides is a reduction in adjusted EBITDA on the 2022 base case and an increased level of cash burn which resulted in additional funding being necessary within the forecasting period. Mitigating factors were then considered, including reducing stock buys to reduce the working capital requirement and increase the level of full price sales, reducing the level of software development planned to make improvements to the Group's platform and reducing the level of marketing through channels other than the Group's influencer relationships. All of these mitigations are within the Group's control and would be expected in a consumer downturn. The severe downside scenario with reasonable mitigations results in sufficient cash forecast to be held throughout the period to 31 July 2023 to cover the Group's liabilities as they fall due.

Going concern conclusion

Based on the analysis described above, the Group has sufficient liquidity headroom through the forecast period. The Directors therefore have reasonable expectation that the Group has the financial resources to enable it to continue in operational existence for the period to 31 July 2023. Accordingly, the Directors conclude it is appropriate that these consolidated financial statements be prepared on a going concern basis.

2. Critical accounting estimates and judgements

The preparation of these Group financial statements requires management to make judgements and estimates that affect the reported amounts of assets and liabilities at each Statement of Financial Position date and the reported amounts of revenue during the reporting periods. Actual results could differ from these estimates. Information about such judgements and estimations are contained in individual accounting policies. The key judgements and sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting period are outlined below:

Accounting estimates

2.1 Impairment of intangible assets

The Group tests goodwill for impairment every year in accordance with the relevant accounting policies. The recoverable amounts of the cash-generating unit is determined by calculating value in use. This calculation requires the use of estimates.

Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired and amounts to GBP528,000 as at 31 March 2022 (2021: GBP528,000). At the date of preparation of the Group financial statements the Management have not identified any indicators of impairment in respect of the goodwill. As explained in note 10, goodwill relates to the business as a whole and given the strong trading in the financial year and considering the low value of the goodwill held there is little sensitivity to the recoverability of the carrying value.

2.2 Useful economic lives of intangible assets

Intangible fixed assets are amortised over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. The net book value of these assets is GBP1,193,000 as at 31 March 2022 (2021: 597,000). Management regularly review the status of the capitalised projects to ensure that their useful economic life remains appropriate and as such there is little sensitivity to the carrying value.

2.3 Returns provision

The provision for sales returns is estimated based on recent historical returns and management's best estimates and is allocated to the period in which the revenue is recorded. Actual returns could differ from these estimates. The historic difference between the provision estimate and the actual returns is not material. The gross value of the provision for returns as at 31 March 2022 is GBP754,000 (2021: GBP628,000). A difference of 1% in returns rates based on overall gross order value would give rise to a difference of +/- GBP34,000 in gross margin. Management have reviewed the actual returns incurred post year end and given the amounts involved, the short return window, and compared to returns actually incurred they are satisfied with the estimate made at the reporting date.

2.4 Inventory valuation

Inventory is carried at the lower of cost and net realisable value, on a first-in first-out basis. A provision is made to write down any slow-moving or obsolete inventory to net realisable value. The provision is GBP552,000 at 31 March 2022 (2021: GBP372,000), an overall charge to the consolidated statement of comprehensive income of GBP180,000 (2021: GBP165,000) was recognised during the year. A difference of 1% in the provision as a percentage of gross inventory would give rise to a difference of +/- GBP32,000 in gross margin.

Accounting judgements

2.5 Capitalisation of software development costs

Intangible assets include capitalised internal salaries and third-party costs for computer software development. A certain proportion of the total costs are capitalised, as they relate to development costs, whilst the remaining costs are deemed to be maintenance costs and are expensed to the statement of comprehensive income. The proportion is calculated using a combination of management's best estimate and information provided by the third party.

2.6 Calculation for share-based payment charges

The charge related to equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date they are granted, using an appropriate valuation model selected according to the terms and conditions of the grant. Judgement is applied in determining the most appropriate valuation model and estimates are used in determining the inputs to the model. Third-party experts are engaged to advise in this area where necessary. Judgements are also applied in relation to estimations of the number of options which are expected to vest, by reference to historic leaver rates and expected outcomes under relevant performance conditions.

3. Segmental analysis and non-GAAP measures

The Chief Operating Decision Maker ("CODM") has been identified as the Senior Leadership Team ('SLT'). The SLT reviews internal reporting in order to assess performance and allocate resources. The SLT has determined that there are two operating segments, being wholesale and direct to consumer retail, and together they form the 'Operating group'.

 
                             Revenue            Gross Profit 
--------------------  --------------------  -------------------- 
                           2022       2021       2022       2021 
                        GBP'000    GBP'000    GBP'000    GBP'000 
--------------------  ---------  ---------  ---------  --------- 
 Wholesale               12,634      8,331      1,855      1,594 
 Direct-to-consumer      44,683     36,374     23,314     18,995 
--------------------  ---------  ---------  ---------  --------- 
                         57,317     44,705     25,169     20,589 
--------------------  ---------  ---------  ---------  --------- 
 

There are no sales between the two operating segments, and all revenue is earned from external customers. The operating segments gross profit is reconciled to profit before taxation as per the Statement of Total Comprehensive Income.

The Group's overheads are managed centrally by the SLT and consequently there is no reconciliation to profit before tax at a segmental level. The Group's assets are managed centrally by the SLT and consequently there is no reconciliation between the Group's assets per the Statement of Financial Position and the segment assets.

Information about major customers

The Group has not generated revenue from any individual customer that accounted for greater than 10% of total revenue in either the current or the prior year.

Analysis of revenue by geographical destination

 
                          2022       2021 
                       GBP'000    GBP'000 
-------------------  ---------  --------- 
 United Kingdom         53,558     42,388 
 Europe                  2,598      1,336 
 Rest of the World       1,161        981 
-------------------  ---------  --------- 
                        57,317     44,705 
-------------------  ---------  --------- 
 

The above revenues are all generated from contracts with customers and are recognised at a point in time. All assets of the Group reside in the UK.

Adjusted EBITDA

Operating costs, comprising administrative expenses, are managed on a Group basis. The SLT measures the overall performance of the Operating group by reference to the following non-GAAP measure:

-- Adjusted EBITDA which is EBITDA (earnings before interest, tax, depreciation and amortisation) less exceptional items and IFRS 2 charges in respect of share-based payments along with associated national insurance.

This adjusted profit measure is applied by the SLT to understand the earnings trends of the Operating group and is considered an additional, useful measure under which to assess the operating performance of the Operating group.

In addition to annual bonuses which are linked to the Operating group's financial performance, the Operating group has implemented a number of longer-term share-based payment incentives linked to changes in ownership of the Operating group rather than the achievement of individual or Company-specific financial performance targets.

A reconciliation of Adjusted EBITDA is set out below:

 
                                Note       2022       2021 
                                        GBP'000    GBP'000 
-----------------------------  -----  ---------  --------- 
 Operating (loss)/profit         4      (1,506)        519 
 Depreciation                    11         585        360 
 Amortisation                    10         395        574 
 Share-based payments charge     18         861          - 
 Exceptional items               5          216      2,346 
-----------------------------  -----  ---------  --------- 
 Adjusted EBITDA                            551      3,799 
-----------------------------  -----  ---------  --------- 
 

4. Operating profit

The operating (loss)/profit is stated after charging the following expenses.

 
                                                                                              2022       2021 
                                                                                           GBP'000    GBP'000 
---------------------------------------------------------------------------------------  ---------  --------- 
 Inventories recognised as an expense                                                       31,968     22,464 
 Impairment of inventories                                                                     180        165 
 Staff costs included in administrative expenses                                             4,263      4,687 
 Contractors                                                                                    48          - 
 Adjusting and non-recurring items                                                             216      2,346 
 Distribution costs                                                                         10,036      7,428 
 Loss on disposal of property, plant and equipment and intangible assets                         1          - 
 Depreciation - property, plant and equipment                                                  193        118 
 Depreciation - right of use assets                                                            392        242 
 Amortisation                                                                                  395        574 
 Share-based payment charges                                                                   861          - 
 Marketing expenses                                                                          7,076      4,995 
 Research and development income                                                                 -      (277) 
 Foreign exchange                                                                               11       (10) 
 Auditor's remuneration                                                                         50         42 
 Other operating expenses                                                                    3,133      1,412 
---------------------------------------------------------------------------------------  ---------  --------- 
 Total cost of sales, distribution costs, administrative expenses and operating income      58,823     44,186 
---------------------------------------------------------------------------------------  ---------  --------- 
 

5. Exceptional items

 
                             2022       2021 
                          GBP'000    GBP'000 
----------------------  ---------  --------- 
 Board reorganisation         216          - 
 IPO related expenses           -      2,346 
----------------------  ---------  --------- 
                              216      2,346 
----------------------  ---------  --------- 
 

To understand the underlying performance of the business, certain costs included within administrative costs are classified as exceptional items on the basis of their size and their nature of being non-recurring. In the year ended 31 March 2022 these costs related to search and recruitment fees incurred for Sam Perkins and Richard Monaghan. In the year ended 31 March 2021 these items principally related to legal and professional fees relating to the IPO of GBP1,638,000 and bonuses of GBP708,000.

6. Finance income

 
                                 2022       2021 
                              GBP'000    GBP'000 
--------------------------  ---------  --------- 
 Bank interest receivable           1          1 
--------------------------  ---------  --------- 
                                    1          1 
--------------------------  ---------  --------- 
 

7. Finance expense

 
                                      2022       2021 
                                   GBP'000    GBP'000 
-------------------------------  ---------  --------- 
 Preference share dividends              -        376 
 Interest on lease liabilities          40         19 
-------------------------------  ---------  --------- 
                                        40        395 
-------------------------------  ---------  --------- 
 

During the year ended 31 March 2021 the Group had outstanding 2,500,000 GBP1 preference shares on which dividends were paid. The preference shares were redesignated as part of the Group reorganisation in March 2021.

8. Taxation

 
                                           2022       2021 
                                        GBP'000    GBP'000 
------------------------------------  ---------  --------- 
 Deferred tax 
 Origination and timing differences       (216)      (500) 
------------------------------------  ---------  --------- 
 Total deferred tax credit                (216)      (500) 
------------------------------------  ---------  --------- 
 Total tax credit                         (216)      (500) 
------------------------------------  ---------  --------- 
 

The taxation credit for the year is lower than the effective rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained below:

 
                                                              2022       2021 
                                                           GBP'000    GBP'000 
-------------------------------------------------------  ---------  --------- 
 (Loss)/Profit before taxation                             (1,545)        125 
 Tax at the UK corporation tax rate of 19% (2021: 19%)       (294)         24 
 
 Expenses not deductible for taxation purposes                 286        465 
 Deferred taxation not previously recognised                     -      (989) 
 Timing differences                                           (76)          - 
 Adjustments in respect of prior years                          40          - 
 Changes in the tax rate                                     (172)          - 
-------------------------------------------------------  ---------  --------- 
 Total taxation credit                                       (216)      (500) 
-------------------------------------------------------  ---------  --------- 
 

The tax charge for the year is based on the standard rate of UK corporation tax for the period of 19% (2021: 19%). Deferred income taxes have been measured at the tax rate expected to be applicable at the date the deferred income tax assets and liabilities are realised.

On 10 June 2021, Royal Assent to the Finance Act was given to increase the UK corporation tax from 19% to 25% from 1 April 2023. Management has performed an assessment, for all material deferred income tax assets and liabilities, to determine the period over which the deferred income tax assets and liabilities are forecast to be realised, which has resulted in an average deferred income tax rate of 25% being used to measure all deferred tax balances as at 31 March 2022 (2021: 19%).

 
 Movement in deferred taxation in the year        2022       2021 
                                               GBP'000    GBP'000 
-------------------------------------------  ---------  --------- 
 Balance brought forward                           500          - 
 Credited to profit or loss                        216        500 
-------------------------------------------  ---------  --------- 
 Balance carried forward                           716        500 
-------------------------------------------  ---------  --------- 
 

Deferred taxation consists of losses carried forward of GBP716,000 (2021: GBP500,000). The value of the unrecognised deferred tax asset at 31 March 2022 is GBPnil (2021: GBP158,000).

9. Earnings per share

Basic and diluted earnings per share

 
                             Weighted average number of ordinary shares 
                                                                            Total earnings         Pence 
                                                                                   GBP'000     per share 
--------------------------  -------------------------------------------  -----------------  ------------ 
 Year ended 31 March 2022 
 Basic                                                       52,499,998            (1,329)        (2.53) 
 Diluted                                                     52,499,998            (1,329)        (2.53) 
 
 Year ended 31 March 2021 
 Basic                                                       52,499,998                625          1.19 
 Diluted                                                     52,499,998                625          1.19 
--------------------------  -------------------------------------------  -----------------  ------------ 
 

Basic earnings per share and diluted earnings per share are calculated by dividing profit for the year attributable to equity holders of the parent by the weighted average number of shares in issue.

The weighted average number of shares for the year to March 2021 has been stated as if the Group reorganisation completed on 7 March 2021 had occurred at the beginning of the 2021 financial year. The weighted average number of shares in issue in the period from 7 March 2021 to the year end was 52,499,998.

Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the number of incremental ordinary shares, calculated using the treasury stock method, that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The difference between the basic and diluted weighted average number of shares represents the dilutive effect of options issued under the In The Style Fashion Enterprise Management Incentive Option Plan . The options issued under the plan are anti-dilutive in both 2022 and 2021 and so there is no difference between basic and dilutive EPS for either year.

Adjusted earnings per share

Adjusted basic and diluted earnings per share figures are calculated by dividing adjusted profit after tax for the year by the weighted average number of shares in issue (as set out above).

 
                                                    2022       2021 
                                                 GBP'000    GBP'000 
---------------------------------------------  ---------  --------- 
 (Loss)/profit for basic EPS                     (1,329)        625 
 Exceptional items                                   216      2,346 
 Share-based payments                                861          - 
 Tax impact                                         (41)          - 
---------------------------------------------  ---------  --------- 
 Adjusted (loss)/profit                            (293)      2,971 
---------------------------------------------  ---------  --------- 
 
 Adjusted basic earnings per share (pence)        (0.56)       5.66 
 Adjusted diluted earnings per share (pence)      (0.56)       5.66 
---------------------------------------------  ---------  --------- 
 

10. Intangible assets

 
                                                  Software development costs 
                                                                     GBP'000     Assets under construction 
                                       Goodwill                                                    GBP'000       Total 
                                        GBP'000                                                                GBP'000 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 Cost 
 At 1 April 2020                            528                        1,562                             -       2,090 
 Additions                                    -                          325                             -         325 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 At 31 March 2021                           528                        1,887                             -       2,415 
 Additions                                    -                          991                           433       1,424 
 Disposals                                    -                            -                             -           - 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 At 31 March 2022                           528                        2,878                           433       3,839 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 
 Accumulated amortisation 
 At 1 April 2020                              -                        (716)                             -       (716) 
 Amortisation charged in the year             -                        (574)                             -       (574) 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 At 31 March 2021                             -                      (1,290)                             -     (1,290) 
 Amortisation charged in the year             -                        (395)                             -       (395) 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 At 31 March 2022                             -                      (1,685)                             -     (1,685) 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 
 Carrying amount 
 At 31 March 2020                           528                          846                             -       1,374 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 At 31 March 2021                           528                          597                             -       1,125 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 At 31 March 2022                           528                        1,193                           433       2,154 
----------------------------------  -----------  ---------------------------  ----------------------------  ---------- 
 

Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired and represents goodwill in the business as a whole.

In accordance with International Financial Reporting Standards, goodwill is not amortised, but instead is tested annually for impairment, or more frequently if there are indicators of impairment. Goodwill is carried at cost less accumulated impairment losses.

Software development costs comprises both internal salaries and external development capitalised in relation to the Group's bespoke operational software. This includes development over bespoke front-end software and functionality relating to the Group's website and app and development to the Group's back-end operational systems and infrastructure.

Assets are categorised as assets under construction if costs have been incurred which meet the definition of an intangible asset under IAS 38 but have not yet been completed and brought into use.

The Group increased its investment in technology during 2022 in three areas: customer journey, increasing the scalability of the platform, and back-end operational systems that have the ability to streamline the Group's operation. Additions to software development costs and assets under construction in the year relate to these three areas.

Intangible assets which have a finite useful life are carried at cost less accumulated amortisation. Amortisation of these intangible assets is calculated using the straight-line method to allocate the cost of the assets over their estimated useful lives (3 years). The longest estimated useful life remaining at 31 March 2022 is 3 years (31 March 2021: 3 years).

For the year to 31 March 2022, the amortisation charge of GBP395,000 (2021: GBP574,000) has been charged to administrative expenses in the consolidated statement of comprehensive income.

11. Property, plant and equipment

 
                                                                             Fixture and 
                          Property         Plant and    Motor vehicles          fittings          Computer 
                      improvements         machinery           GBP'000           GBP'000         equipment       Total 
                           GBP'000           GBP'000                                               GBP'000     GBP'000 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 Cost or 
 valuation 
 At 1 April 2019                83                32                 1               283               190         589 
 Additions                       -                23                 -                13                53          89 
 Disposals                       -                 -                 -                 -               (2)         (2) 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 At 31 March 2020               83                55                 1               296               241         676 
 Additions                     467                 -                 -               126               105         698 
 Disposals                       -                 -                 -               (1)               (3)         (4) 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 At 31 March 2022              550                55                 -               421               343       1,370 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 
 Depreciation 
 At 1 April 2020                45                 5                 -               104               132         286 
 Depreciation                   20                14                 -                42                42         118 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 At 31 March 2021               65                19                 -               146               174         404 
 Depreciation                   70                 2                 -                74                50         196 
 Disposals                       -                 -                 -                 -               (3)         (3) 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 At 31 March 2022              135                21                 -               220               221         597 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 
 Carrying amount 
 At 31 March 2020               38                27                 1               179                58         303 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 At 31 March 2021               18                36                 1               150                67         272 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 At 31 March 2022              415                34                 1               201               122         773 
-----------------  ---------------  ----------------  ----------------  ----------------  ----------------  ---------- 
 

For the year to 31 March 2022, the depreciation charge of GBP196,000 (2021: GBP118,000) has been charged to administrative expenses in the consolidated statement of comprehensive income.

12. Inventories

 
                                            2022       2021 
                                         GBP'000    GBP'000 
-------------------------------------  ---------  --------- 
 Finished goods and goods for resale       2,755      1,583 
 Right-of-return inventory                   387        372 
-------------------------------------  ---------  --------- 
                                           3,142      1,955 
-------------------------------------  ---------  --------- 
 

The Directors believe that the replacement value of inventories at would not be materially different than book value.

Inventories at 31 March 2022 are stated after provisions for impairment of GBP552,000 (2021: GBP372,000).

13. Trade and other receivables

 
                                         2022       2021 
                                      GBP'000    GBP'000 
----------------------------------  ---------  --------- 
 Trade receivables                      4,070        993 
 Prepayments                              688        641 
 Called up share capital not paid           -         59 
 Other debtors                            433          - 
 Invoice finance facility                   -         53 
----------------------------------  ---------  --------- 
                                        5,191      1,746 
----------------------------------  ---------  --------- 
 

Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan.

Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. There is no provision at 31 March 2022 for impairment loss against trade receivables (2021: nil).

14. Trade and other payables

 
                                           2022       2021 
                                        GBP'000    GBP'000 
------------------------------------  ---------  --------- 
 Trade payables                           2,154      2,041 
 Other taxation and social security         166        425 
 Other payables                              53          - 
 Accruals                                 3,535      2,622 
------------------------------------  ---------  --------- 
                                          5,908      5,088 
------------------------------------  ---------  --------- 
 

15. Contract liabilities

 
                                                  2022       2021 
                                               GBP'000    GBP'000 
-------------------------------------------  ---------  --------- 
 Balance at 1 April                              1,113        362 
 Recognised as revenue in the year             (1,113)      (362) 
 New and existing contracts with customers         871      1,113 
-------------------------------------------  ---------  --------- 
 Balance at 31 March                               871      1,113 
-------------------------------------------  ---------  --------- 
 

Deferred revenue outstanding at each year end is expected to be recognised within revenue within 12 months from the reporting date.

16. Leases

The group leases offices and warehouses. Rental contracts are typically made for fixed periods of 3 to 5 years. There are no judgements over the length of the lease term for any of the Group's leases. There are no variable lease payments in any of the Group's leases.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases of the Group, the incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

Amounts recognised in the Statement of Financial Position

 
 Right-of-use assets                  GBP'000 
-----------------------------------  -------- 
 Balance at 31 March 2020                 303 
 New leases recognised in the year         65 
 Lease modifications                      166 
 Depreciation charge for the year       (242) 
-----------------------------------  -------- 
 Balance at 31 March 2021                 292 
 New leases recognised in the year        942 
 Lease modifications                      127 
 Depreciation charge for the year       (389) 
-----------------------------------  -------- 
 Balance at 31 March 2022                 972 
-----------------------------------  -------- 
 

The net book value of the right of use assets all relates to property leases.

 
 Lease liabilities                                        2022       2021 
                                                       GBP'000    GBP'000 
---------------------------------------------------  ---------  --------- 
 Maturity analysis - contractual undiscounted cash 
  flows 
 Less than one year                                        315        171 
 More than one year, less than two years                   218        283 
 More than two years, less than three years                212          6 
 More than three years, less than four years               212          - 
 More than four years, less than five years                 88          - 
 Total undiscounted lease liabilities at year end        1,045        460 
 Finance costs                                            (74)       (15) 
---------------------------------------------------  ---------  --------- 
 Total discounted lease liabilities at year end            971        445 
---------------------------------------------------  ---------  --------- 
 
 Lease liabilities included in the statement of 
  financial position 
 Current                                                   285        164 
 Non-current                                               686        281 
---------------------------------------------------  ---------  --------- 
                                                           971        445 
---------------------------------------------------  ---------  --------- 
 

Amounts recognised in the consolidated statement of comprehensive income.

The consolidated statement of comprehensive income shows the following amounts relating to leases:

 
                                                             2022       2021 
                                                          GBP'000    GBP'000 
------------------------------------------------------  ---------  --------- 
 Depreciation charge (within administrative expenses)         389        242 
 Interest expense (within finance costs)                       40         19 
 Expense relating to leases of low-value assets                 -          - 
------------------------------------------------------  ---------  --------- 
 

The total cash outflow for in relation to lease liabilities in the year was GBP277,000 (2021: GBP165,000).

17. Share capital

 
                                         Ordinary 
                        Ordinary           shares           Ordinary           Ordinary            Deferred 
                          shares               of          A1 shares          B1 shares           shares of 
                    of GBP0.0025     GBP0.0000001    of GBP0.0000001    of GBP0.0000001        GBP0.0000001      Total 
                             No.              No.                No.                No.                 No.        GBP 
----------------  --------------  ---------------  -----------------  -----------------  ------------------  --------- 
 At 31 March 
  2020                         -                -     12,986,532,000     12,400,000,000     128,470,950,000     15,386 
 Issue in the                  -          237,141                  -                  -                   -          - 
 year 
 Re-designation 
  ordinary 
  shares                       -       22,637,858   (12,986,532,000)   (12,400,000,000)      25,363,894,142          - 
 Re-designation 
  preference 
  shares                       -          625,000                  -                  -           1,875,000          - 
 Purchase and 
  cancellation                 -                -                  -                  -   (153,836,719,142)   (15,386) 
 Issued on 4 
  March 
  2021                23,499,999                -                  -                  -                   -     58,750 
 Group 
  reorganisation      23,499,999     (23,499,999)                  -                  -                   -     58,750 
 Issued on IPO         5,500,000                -                  -                  -                   -     13,750 
----------------  --------------  ---------------  -----------------  -----------------  ------------------  --------- 
 At 31 March 
  2021                52,499,998                -                  -                  -                   -    131,250 
----------------  --------------  ---------------  -----------------  -----------------  ------------------  --------- 
 At 31 March 
  2022                52,499,998                -                  -                  -                   -    131,250 
----------------  --------------  ---------------  -----------------  -----------------  ------------------  --------- 
 

All shares rank pari-passu except the deferred shares which are non-voting and have no right to dividends.

In anticipation of the IPO in March 2921, the share capital structure was re-organised with the following:

-- The Ordinary A1 and B1 shares were re-designated as Ordinary shares of GBP0.0000001 and Deferred shares of GBP0.0000001;

-- The 2,500,000 GBP1 preference shares were re-designated as 625,000 Ordinary shares of GBP0.0000001 and 1,875,000 Deferred shares of GBP0.0000001; and

   --      The Deferred shares were purchased and cancelled. 

The Company was incorporated on 4 March 2021 as a public company limited by shares in England and Wales with the issue of 23,499,999 GBP0.0025 ordinary shares.

On 4 March 2021 the Company allotted and credited as fully paid 23,499,499 Ordinary shares of GBP0.0025 in exchange for the entire issued share capital of In The Style Fashion Limited pursuant to an exchange agreement entered into between the Company and the then shareholders of In The Style Fashion Limited.

On 15 March 2021, the Company issued 5,500,000 Ordinary shares of GBP0.0025 each for consideration of GBP11,000,000 in an IPO, with the balance recorded as share premium. IPO costs of GBP1,638,000 have been charged to the income statement and GBP44,000 were recorded within share premium.

The Ordinary shares of GBP0.0025 relate solely to the Company. The other classes of share disclosed above show the movements of In The Style Fashion Limited.

18. Share-based payments

During the year the Group operated one share plan, being the In The Style Fashion Enterprise Management Incentive Option Plan (the "MIOP" or "LTIP").

The total charge in the year relating to the scheme was GBP861,000 (2021: GBPnil) with a Company charge of GBPnil (2021: GBPnil). This included associated national insurance ('NI') at 15.05%, which management expects to be the prevailing rate when the awards are exercised, and apprentice levy at 0.5%, based on the share price at the reporting date.

 
                                                 Group                Company 
                                         --------------------  -------------------- 
                                              2022       2021       2022       2021 
                                           GBP'000    GBP'000    GBP'000    GBP'000 
---------------------------------------  ---------  ---------  ---------  --------- 
 Management incentive option plan              861          -          -          - 
 National insurance and apprentice levy          -          -          -          - 
---------------------------------------  ---------  ---------  ---------  --------- 
                                               861          -          -          - 
---------------------------------------  ---------  ---------  ---------  --------- 
 

All share-based incentives carry a service condition. Such conditions are not taken into account in the fair value of the service received. The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted. The estimate of the fair value of the share-based incentives is measured using the Black-Scholes pricing model. Sensitivity analysis has been performed in assessing the fair value of the share-based incentives. There are no changes to key assumptions that are considered by the Directors to be reasonably possible, which give rise to a material difference in the fair value of the share-based incentives.

The Group operates a Management Incentive Option Plan (the "MIOP" or "LTIP") for the Senior Leadership Team and certain key employees. The awards will vest in three tranches, with the first tranche vesting on the first anniversary of the award, and subsequent tranches vesting on the second and third anniversaries, subject to continuing employment.

On 24 January 2022, the Group awarded 1,574,999 options under the MIOP scheme with an exercise price of GBP0.91 per option. The fair was determined to be GBP0.34 per option. The awards have been valued using a Black-Scholes pricing model.

The resulting share-based payments charge is being spread evenly over the period between the grant date and the vesting date. MIOP award holders are entitled to receive dividends accruing between the grant date and the vesting date and this value will be delivered in shares. The assumptions used in the measurement of the fair value at grant date of the MIOP awards are as follows:

 
 Grant date    Share        Exercise     Expected     Option life   Risk-free    Dividend     Non-vesting   Fair value 
               price at     price        volatility    years        rate         yield        condition     per option 
               grant date   GBP          %                          %            %            % 
               GBP 
 15/03/2021    2.00         2.00         56%          4             0.25%        0.0%         0.0%          GBP0.85 
              -----------  -----------  -----------  ------------  -----------  -----------  ------------  ----------- 
 24/01/2022    0.91         0.91         47%          4             0.90%        0.0%         0.0%          GBP0.34 
              -----------  -----------  -----------  ------------  -----------  -----------  ------------  ----------- 
 

As the Company listed on or just before the dates of grant, there is no share price history available to use to derive a volatility assumption directly. Expected volatility is therefore derived from the historical 4-year volatility of the constituents of the FTSE AIM Retailers super-sector (to the extent that they have sufficient share price history prior to the respective date of grant), as of the date of grant.

During the year, the Directors in office in total had gains of GBPnil (2021: GBPnil) arising on the exercise of share-based incentive awards.

 
                                       2022        2021 
                                     number      number 
-------------------------------  ----------  ---------- 
 Outstanding at 1 April           1,862,500           - 
 Options granted in the year      1,574,999   1,862,500 
 Options forfeited in the year    (354,375)           - 
-------------------------------  ----------  ---------- 
 Outstanding at 31 March          3,083,124   1,862,500 
-------------------------------  ----------  ---------- 
 Exercisable at 31 March                  -           - 
-------------------------------  ----------  ---------- 
 

19. Post balance sheet events

On 16 June 2022 the Group entered into an agreement to lease for a circa 84,000 sqft warehouse in Heywood, Lancashire. It is expected that the warehouse will be available for occupation at the end of July and the Group expects this facility to be the main fulfilment centre from September 2022. The lease term is 10 years with a rental cost of GBP5.06 per square foot for the first three years of the term and GBP6.50 thereafter. As part of the terms of the agreement, GBP0.4m will be paid to the landlord to be held on deposit until the end of the lease term.

On 24 June 2022 the Group signed into an invoicing discounting facility. The facility allows prepayment of up to 85% of the Group's trade receivables up to a limit of GBP4.0m. Interest is charged on pre-paid amounts at a rate of 2.0% per annum.

Principle risks and uncertainties

 
 RISK                 POTENTIAL IMPACT                           CHANGES IN THE YEAR 
 1. Economy,          Specific macroeconomic factors             Covid-19 restrictions across 
  market and           and changes due to geopolitical            the world resulted in some 
  business             uncertainty can have an impact             disruption in the supply chain 
  environment          on how customers behave and                through 2021. Logistics costs 
                       can also have an impact on                 increased as a result of a 
                       our operations and the operations          container shortage and port/airport 
                       of our supply chain. In turn,              closures. As we entered into 
                       this could impact our overall              2022, these pressures began 
                       financial performance. Examples            to normalise. 
                       of such events include a pandemic          The conflict in Ukraine has 
                       or national conflict.                      placed renewed pressure on 
                                                                  logistics providers, particularly 
                                                                  air freight from the Far East. 
                                                                  Cost of raw materials have 
                                                                  increased. 
                                                                  Inflation levels in the UK 
                                                                  have risen, and with energy 
                                                                  prices increasing, there is 
                                                                  a cost-of-living crisis in 
                                                                  the UK. This could reduce 
                                                                  the discretionary spend available 
                                                                  to consumers. 
                     -----------------------------------------  -------------------------------------- 
 2. Influencer        The Group's business model                 The Group expanded its influencer 
  model                is based heavily on designing              base with a number of influencers 
                       products in conjunction with               signed up to do collaborations. 
                       influencers and marketing                  These included Perrie Sian, 
                       these products using both                  Gemma Atkinson and Stacey 
                       the Group's and the relevant               Solomon. 
                       influencer's social media                  The Group's founder, Adam 
                       platforms.                                 Frisby, stepped down from 
                       If the Group is not able to                his role as CEO to become 
                       develop and maintain positive              Chief Brand Officer. This 
                       relationships with its network             role allows Adam to focus 
                       of influencers, the Group's                more on building the brand 
                       ability to promote and maintain            and working with the influencers. 
                       awareness of its brand and                 The Group invested in its 
                       leverage social media platforms            product and merchandising 
                       to drive visits to its website             teams that work alongside 
                       and app may be adversely affected.         the influencers to produce 
                       The Group's network of influencers         product. 
                       currently comprises c.27 influencer        During the year a small number 
                       relationships. Negative publicity          of the influencers we work 
                       relating to any one of these               with have been warned by the 
                       influencers (including in                  Advertising Standards Agency 
                       relation to the matters outlined           for not adhering to the CAP 
                       further on within this section)            code. Our social team have 
                       or a breakdown in such relationship        increased their efforts in 
                       with the Group may have a                  educating influencers as to 
                       material adverse effect on                 why this is important and 
                       the Group's business, results              now monitors posts to ensure 
                       of operations and financial                compliance. 
                       condition. 
                       Influencer commissions may 
                       increase over time and/or 
                       the market for influencers 
                       may become more competitive 
                       over time. There is no guarantee 
                       a new influencer will be a 
                       success. 
                       Influencers are often responsible 
                       for creating their own content, 
                       and the commission model means 
                       that they can often do this 
                       independent from In The Style. 
                       A risk therefore exists that 
                       influencers do not comply 
                       with the relevant advertising 
                       standards or provide false 
                       information to consumers. 
                     -----------------------------------------  -------------------------------------- 
 3. Social            Social media platforms may                 Social media platforms such 
  media                change their advertising policies,         as Instagram and Facebook 
                       or be required to do so by                 are continually changing their 
                       changes to regulation.                     algorithms and seemingly placing 
                       If any change to these policies            more relevance on paid-for 
                       delays or prevents the Group               advertisements. This has the 
                       from advertising through these             ability over time to reduce 
                       channels or reduces the effectiveness      the number of impressions 
                       of its influencer strategy,                served to consumers. 
                       this could result in a reduction           Instagram users are being 
                       in consumer traffic to the                 drawn more towards 'stories' 
                       Group's website and app and                than posts. Although the use 
                       reduced sales of its products.             of stories is an effective 
                       In addition, the Group's social            way to reach consumers with 
                       media presence amplifies consumer          dynamic content, they are 
                       engagement but is less controllable,       not as permanent as a traditional 
                       due to consumer comments and               post. 
                       hashtags, than more traditional            New platforms such as Tik 
                       public relations and marketing             Tok continue to grow consumer 
                       methods. This could associate              audience. The Group ensures 
                       the brand with content which               that it quickly grows a presence 
                       is not aligned with the Group's            on these platforms as they 
                       values, something that could               emerge so we learn how to 
                       result in negative publicity               market effectively and whether 
                                                                  different influencers are 
                                                                  required for different audiences. 
                     -----------------------------------------  -------------------------------------- 
 4. Design            As a design-led female apparel             The Group invested in product 
                       and accessories brand, there               and merchandising teams in 
                       is a risk that the Group's                 the year, including appointing 
                       product proposition does not               a head of product to lead 
                       satisfy the needs of our customer          the design area alongside 
                       base, or that the Group fails              Adam Frisby who moved into 
                       to correctly identify trends               a Chief Brand Officer role. 
                       that are desired by its customer           The Group collaborates on 
                       base.                                      product with influencers and 
                       As a result, lower sales,                  worked with 15 new influencers 
                       excess inventories and increased           to design apparel through 
                       levels of discounting may                  the year. 
                       occur. 
                     -----------------------------------------  -------------------------------------- 
 5. Supply            The Group may be subject to                Ongoing spotlight on labour 
  chain ethics         potential reputational damage              conditions in UK garment industry. 
                       if one or more of its suppliers            National and international 
                       violates or is alleged to                  scrutiny on ethical trading 
                       have violated applicable laws              is increasing and we continue 
                       or regulations including improper          to engage with stakeholders 
                       labour conditions or human                 to monitor and react to ethical 
                       rights abuses, fails to meet               risk in the supply chain. 
                       the Group's requirements or 
                       does not meet industry standards 
                       and safety specifications. 
                     -----------------------------------------  -------------------------------------- 
 6. Supply            The Group's ability to remain              Since March 2020, disruption 
  chain operations     competitive is highly dependent            caused by Covid-19 resulted 
                       on its success in maintaining              has resulted in challenges 
                       access to its production facilities        across our supply chain. 
                       and an efficient distribution              Over the past year the Group 
                       network. ITS typically works               further diversified its geographical 
                       with a relatively tight supplier           base of suppliers, moving 
                       base of circa 50 product suppliers         away from China which was 
                       and so the loss of one or                  impacted by both factory shutdowns 
                       a handful of those suppliers               and logistics availability. 
                       could have a material impact               A reduction in the availability 
                       on the Group's business.                   of space for freight and a 
                       One or more of the Group's                 resulting increase in costs 
                       suppliers may be unable to                 relating to shipping have 
                       supply or decide to cease                  been a challenge in the year. 
                       supplying the Group for reasons            This was caused first through 
                       beyond the Group's control,                Covid-19 lockdown restrictions 
                       or they may increase prices                and subsequently impacted 
                       significantly where it is                  by the conflict in Ukraine. 
                       not possible to pass on price              The Group has invested in 
                       increases to customers. Alternative        a small but specialised logistics 
                       suppliers may be difficult                 team so that it can source 
                       or impossible to identify                  more product on an 'Free On 
                       and, in any event, may take                Board' ('FOB') basis, improving 
                       a significant period of time               rates and allowing for greater 
                       to begin supplying the Group.              visibility of stock before 
                       Moreover, if the Group expands             it reaches our warehouse. 
                       beyond the production capacity             The Group has defined improving 
                       of its current suppliers as                our 'critical path' as a focus 
                       it continues to grow, it may               area for the year. As part 
                       not be able to find new suppliers          of this focus, the Group is 
                       with an appropriate level                  exploring ways in which it 
                       of expertise and capacity                  can move a greater proportion 
                       in a timely manner. The Group              of its product by sea rather 
                       operates a just-in-time supply             than by air. 
                       chain in relation to stock 
                       which adds risk to the business 
                       model. 
                       The Group's supply chain could 
                       also be materially adversely 
                       affected by a number of other 
                       factors, including, among 
                       other things, potential economic 
                       and political instability 
                       in countries where its suppliers 
                       are located, increases in 
                       shipping or other transportation 
                       costs, manufacturing and transportation 
                       delays and interruptions, 
                       whether as a result of pandemics, 
                       natural disasters, political 
                       crises, civil unrest and other 
                       catastrophic events. Given 
                       the profit margins of the 
                       business, any supply chain 
                       cost inflation or disruption 
                       that leads to higher costs, 
                       could have a significant impact 
                       on profitability given it 
                       may not be possible to pass 
                       on price increases to customers. 
                     -----------------------------------------  -------------------------------------- 
 7. Employees         The Group's business, development          Over the past year the Group 
  and key              and prospects are dependent                has invested in its senior 
  individuals          on a small number of key management        leadership team, bringing 
                       personnel. The loss of the                 on key roles such as Head 
                       service of one or more of                  of Product and Head of People. 
                       such key management personnel              In addition, the Group went 
                       may have an adverse effect                 through significant change 
                       on the Group. The Directors                at Board level. Adam Frisby, 
                       believe that the experience,               the founder of In The Style, 
                       technical know-how and commercial          stepped down from his role 
                       relationships of the Group's               as CEO to become Chief Brand 
                       key management personnel help              Officer. Sam Perkins joined 
                       provide the Group with strategic           the business in January 2022 
                       focus and a competitive advantage.         as CEO. Subsequently, in March 
                       The Group's ability to develop             2022, Paul Masters retired 
                       its business and achieve future            from his position on the Board 
                       growth and profitability will              and Richard Monaghan joined 
                       depend in large part on the                the Group as CFO. 
                       efforts of these individuals               These changes and overall 
                       and the Group's ability, when              investment in the management 
                       required, to attract new key               structure further mitigate 
                       management personnel of a                  risks of key personnel loss. 
                       similar calibre. 
                       The loss of the services of 
                       any key management personnel, 
                       for any reason, or failure 
                       to attract and retain necessary 
                       additional personnel, could 
                       adversely impact on the business, 
                       development, financial condition, 
                       results of operations and 
                       prospects of the Group. The 
                       Directors believe that the 
                       Group operates a progressive 
                       and competitive remuneration 
                       policy which will play an 
                       important part in retaining 
                       and attracting key management 
                       personnel. 
                     -----------------------------------------  -------------------------------------- 
 8. Response          The focus on climate change                Through the year we have placed 
  to sustainability    and sustainability is growing,             further focus on how we can 
                       and is in the spotlight more               make a difference in this 
                       now than ever before. We recognise         area. We have started to define 
                       that we need to play our part              our ESG strategy across three 
                       in combating climate change                pillars, one of which is how 
                       and, if we fail to do this,                we help the planet. 
                       we risk adversely impacting                We launched our first sustainable 
                       our brand and reputation.                  range in collaboration with 
                                                                  Stacey Solomon in the year. 
                     -----------------------------------------  -------------------------------------- 
 9. IT and            The Group relies on systems                External threats are now managed 
  cyber security       and websites that allow for                through web application firewalls 
                       the secure storage and transmission        and multi-layer security so 
                       of proprietary or confidential             that the core line of business 
                       information regarding its                  data, including customer transaction 
                       consumers, customers, suppliers,           data, is at least two levels 
                       employees and others, including            away from the external interfaces. 
                       credit card information and                These tools ensure low level 
                       personal information.                      attempts to probe or attempt 
                       Advances in computer capabilities,         to run scripts against our 
                       new technological discoveries              sites are automatically blocked 
                       or other developments may                  and monitored. 
                       result in the whole or partial             More sophisticated brute force 
                       failure of this technology                 attacks intending to stop 
                       to protect transaction data                commercial activity do occur 
                       or other sensitive and confidential        from time to time. When these 
                       information from being breached            happen the same tools are 
                       or compromised. In addition,               used to block, diagnose and 
                       e-commerce websites are often              manage the attacks and then 
                       attacked through compromised               new rules added to prevent 
                       credentials, including those               ongoing impact. 
                       obtained through phishing                  The Group has adopted a cloud-first 
                       and credential stuffing.                   model, this ensures data typically 
                       If any of these breaches of                remains at its source, is 
                       security should occur, the                 managed based on usage, and 
                       reputation of the Group could              transmission and duplication 
                       be damaged, customers could                of data is therefore minimised 
                       develop the perception that                across the Group. 
                       the Group's platforms are                  The Group uses tokenisation 
                       not secure, its business may               for all payment types and 
                       suffer, it could be required               thus never holds nor transmits 
                       to expend significant capital              payment data. 
                       and other resources to alleviate           Group staff have enforced 
                       problems caused by such breaches,          two-step authentication and 
                       and it could be exposed to                 a robust policy is in place 
                       a risk of loss, litigation                 to ensure removal of leavers 
                       or regulatory action and possible          and that staff have appropriate 
                       liability.                                 access to systems based on 
                                                                  role and experience. 
                     -----------------------------------------  -------------------------------------- 
 10. Regulatory       There is a risk that the Group             The Policies that govern GDPR 
  compliance           fails to comply with regulatory            have been embedded into the 
                       requirements or to respond                 employee contract, handbook 
                       to changes in regulations,                 and working practices of the 
                       including GDPR.                            Group. In summary the Group 
                       The Group stores some personally           requires that user consent 
                       identifiable information of                and data is given based only 
                       its customers, employees and               on the need to provide the 
                       other stakeholders and is                  core business services and 
                       subject to data protection                 that all other usage of data 
                       and privacy regulations such               is expressly linked to consent 
                       as the General Data Protection             for that purpose only. 
                       Regulation (Eu) 2016/679 (the 
                       "GDPR"), which forms part 
                       of domestic law pursuant to 
                       the Data Protection, Privacy 
                       and Electronic Communications 
                       (Amendments etc) (Eu Exit) 
                       Regulations 2019. 
                       The Group has policies and 
                       procedures in place in relation 
                       to data protection but there 
                       can be no guarantees that 
                       even strict compliance with 
                       such policies and procedures 
                       will completely eliminate 
                       all risk in this regard. 
                       Any perceived or actual failure 
                       by the Group, including its 
                       third-party service providers, 
                       to protect confidential data 
                       or any material non-compliance 
                       with privacy or data protection 
                       or other consumer protection 
                       laws or regulations may harm 
                       the Group's reputation and 
                       credibility, adversely affect 
                       revenue, reduce its ability 
                       to attract and retain customers 
                       and consumers, result in litigation 
                       or other actions being brought 
                       against the Group and the 
                       imposition of significant 
                       fines and, as a result, could 
                       3have a material adverse effect 
                       on the Group's business, financial 
                       condition, results of operations 
                       and prospects. 
                     -----------------------------------------  -------------------------------------- 
 

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July 19, 2022 02:00 ET (06:00 GMT)

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