TIDMJOUL
RNS Number : 3743H
Joules Group plc
03 August 2021
Joules Group plc
('Joules' or the 'Group')
Annual Results for the 52-week period ended 30 May 2021
('the Period' or 'FY21')
Strong performance underpinned by continued digital growth, the
strength of the Joules brand, and increasing diversification of
revenue streams
FY21 performance:
-- Group revenue increased by 4.3% to GBP199.0 million (FY20:
GBP190.8m) with strong e-commerce sales growth and the contribution
from Garden Trading(1) , more than offsetting the impact of
enforced store closures, the cancellation of country shows across
the UK and the impact of the pandemic on the Group's wholesale
customers.
- E-commerce sales increased by 48% to GBP122.0 million (FY20:
GBP82.7m). Excluding the acquisition of Garden Trading(2) ,
e-commerce sales increased by 43%. This growth was led by sales
through the Group's own websites(3) . E-commerce represented 77% of
the Group's retail revenue during the Period (FY20: 56%).
- Overall store and shows sales were GBP36.6 million in the year
(FY20: GBP63.2m). This performance reflects the forced closure of
non-essential retail stores, and cancellation of shows and events
as a result of COVID-19. In the Period, our stores were closed for
approximately six months of the Period compared with two months in
the prior year.
- Wholesale revenue in the Period, including Garden Trading(2) ,
was GBP35.3 million, a 17% reduction year-on-year (FY20: GBP42.7m),
reflecting the ongoing impact of COVID-19 on many of the Group's
wholesale partners both in the UK and internationally.
- Other revenue more than doubled to GBP5.1 million (FY20:
GBP2.2m). This reflects the strong growth of our Friends of Joules
digital marketplace and strong performance from several of our
licensed product categories and partnerships.
-- PBT(4) before exceptional costs was GBP6.1 million (FY20: loss of GBP3.9m).
-- Exceptional costs in the Period totalled GBP4.2 million
(FY20: GBP21.0m) including a GBP2.9 million (FY20: GBP20.5 million)
non-cash impairment charge, GBP0.6 million (FY20: nil) Garden
Trading acquisition costs and GBP0.7 million (FY20: GBP0.5m)
restructuring costs.
-- Statutory profit before tax was GBP2.0 million (FY20: loss of GBP24.8m).
-- Statutory profit after tax was GBP0.9 million (FY20: loss of 20.3m).
-- Group gross margin was 49.0%, down 1.7%pts on the prior year,
impacted by a lower proportion of higher margin store sales,
increased freight costs and increased duty and transportation cost
for deliveries into EU markets following Brexit.
-- Basic earnings per share was 0.82 pence (FY20: loss of 21.61 pence).
-- 1.7 million active customers(5) (FY20: 1.41m) and record
brand awareness and brand health(6) metrics achieved during the
final quarter of the year.
-- Net cash(7) of GBP4.1 million (FY20: GBP4.5m).
Nick Jones, Chief Executive Officer of Joules, commented:
"It is safe to say that FY21 was characterised by truly
unprecedented trading conditions. Against this backdrop, the Group
delivered strong strategic progress, including growing our digital
proposition, increasing our active customer base, and further
diversifying as a leading lifestyle platform with the successful
acquisition of Garden Trading and the continued expansion of
Friends of Joules.
At the centre of our growth strategy remains the strong Joules
brand. During the year we continued to deliver on our brand's clear
mission and purpose - to brighten our customers' lives and conduct
business in a responsible way. As more and more consumers
increasingly valued their leisure time spent outdoors and time
doing the things they enjoy with the people they love, our brand
has become increasingly relevant to a greater number of customers,
reflected by brand health metrics reaching all-time highs.
The Group's strategic progress would not have been possible
without the hard work, flexibility and, above all, dedication of
our outstanding team. I am incredibly proud of, and grateful for,
the commitment shown by our people, from our head office teams to
those on the front line in our stores, during this challenging
period.
As we move into the new financial year, the continued success
and growth of Friends of Joules and our strengthened position in
the home, garden and outdoor sector means that the Group now offers
significantly more products and categories than ever before,
therefore providing customers with greater choice and more reasons
to shop with us. As a result of the strength of the Joules brand
and the increasing diversification of the Group's digital-led
business model, we believe that the Group is very well positioned
to continue to deliver its ambitious growth plans."
Reconciliation to statutory profit/loss before tax:
GBPmillion FY21(8) FY20 (restated)(9)
PBT/(LBT) - before exceptional
costs (4) 6.1 (3.9)
Exceptional costs (4.2) (21.0)
Statutory profit/(loss) before
tax 2.0 (24.8)
-------------------------------- -------- -------------------
(1) On 9 February 2021 the Group acquired 100% of the issued
share capital, and obtained control of, The Garden Trading Company
Limited (company number 2854160). The Garden Trading Company
Limited is a digitally focused retailer of home and garden
products. See Note 2 of the Consolidated Financial Statements.
(2) Garden Trading e-commerce revenue in the period since
acquisition to 30 May 2021 was GBP4.3 million, and wholesale
revenue was GBP4.4 million.
(3) joules.com, joulesusa.com, tomjoule.de and the Joules ebay
store
(4) PBT/(LBT) - before exceptional costs is a non-GAAP measure
provided to facilitate comparison across periods, it is stated
prior to exceptional costs that are primarily related to non-cash
asset impairments in the current
and previous periods. See Note 3 of the Consolidated Financial Statements.
(5) Customers registered on our database who have transacted in
the last 12 months.
(6) Brand Awareness and Brand Health are measured as part of an
independent YouGov consumer survey.
(7) 'Net cash' represents gross cash & cash equivalents less
total borrowings. See Note 12 of the Consolidated Financial
Statements.
(8) This year, we are reporting on the 52 weeks ended 30 May
2021 compared to 53 weeks to 31 May 2020 in the prior year. To
provide a comparison with last year's 53-week period, the unaudited
contribution of the additional week in last year's results was
approximately 1% of revenue and profit.
(9) For further details of the prior period restatement, refer
to the Financial Review section of this report, and Note 1 of the
Consolidated Financial Statements.
Enquiries:
Joules Group plc Tel: +44 (0) 1858
435 255
Nick Jones, CEO
Jon Dargie, Interim CFO
Hudson Sandler (Financial Tel: +44 (0) 20 7796
PR) 4133
Alex Brennan
Lucy Wollam
Peel Hunt LLP, Nominated Tel: +44 (0) 20 7418
Advisor and Joint Broker 8900
George Sellar
Andrew Clark
Liberum Capital Limited, Tel: +44 (0) 20 3100
Joint Broker 2000
John Fishley
Edward Thomas
Joules - a premium lifestyle group with an authentic British
heritage
Joules is a British lifestyle Group comprising the Joules brand,
the fast-growing Friends of Joules digital marketplace, and Garden
Trading, a leading digital-led brand in the home, garden and
outdoor category.
The Joules brand is a premium lifestyle brand with an authentic
heritage and values of family, fun and joy in the countryside.
Joules creates exceptional products that brighten the lives of its
customers, delivered through leading digital platforms and
supported by enticing experiences and stores that are situated in
desirable locations relevant to the Joules customer's
lifestyle.
The Joules story began in 1989, when Tom Joule started selling
clothing on a stand at a country show in Leicestershire. Today, the
business designs and sells Joules branded clothing, footwear and
accessories for women, men and children as well as collections of
homeware, toiletries, lifestyle and pet product ranges that are
carefully designed and developed through selected licensing
partnerships. Each collection comprises Joules' distinctive use of
humour, colour and unique prints, each of which is hand-drawn by
the brand's talented in-house print design team at its headquarters
in Market Harborough, Leicestershire.
The Joules brand caters to its 1.7 million active customers
through its own digital platform, its retail stores in the UK and
at country shows and events. Joules extends its brand reach through
well-established third-party relationships - concessions, online
marketplaces and traditional wholesale - in the UK and
internationally.
Joules' distinctive design-led products are complemented by an
increasingly broad customer offer provided through its digital
marketplace Friends of Joules. The Friend of Joules platform
enables third party brands to offer curated, complementary products
to the Joules customer base, enhancing Joules' digital platform
with thousands of products from hundreds of creative businesses to
give customers everything they could ever need for a contemporary
country lifestyle.
In 2021, the Group increased its presence across complementary
lifestyle categories, including the important and fast-growing
home, garden & outdoor category, through the acquisition of
leading digital home and garden retailer The Garden Trading Company
Limited. Similarly inspired by the British countryside, Garden
Trading designs and sells distinctive products through its own
e-commerce platform and wholesale partnerships with more than 1,000
stockists across the UK.
www.joules.com
www.gardentrading.co.uk
www.joulesgroup.com
CHAIRMAN'S STATEMENT
INTRODUCTION
In my Chairman's Statement in the Group's FY20 Annual Report,
which was published during the first wave of the coronavirus
pandemic, I outlined Joules' initial responses to the unprecedented
challenges facing the retail sector. I also expressed my confidence
that the relevance of the Joules brand, the flexibility of our
business model, and the strength of the Group's financial position
meant that Joules was well positioned to withstand the pressures of
the pandemic and emerge an even stronger brand and business. Whilst
we are not through the pandemic yet, and significant levels of
uncertainty persist, the Group's performance and progress over the
past 12 months has only strengthened my confidence in these
convictions.
I am incredibly proud of how the business has adapted in the
face of this most testing of circumstances over the last 18 months.
During this period, the Group has evolved significantly into a
digital led, increasingly diversified lifestyle Group. Whilst the
Joules brand continues to sit at the centre of the Group, we now
operate a second, very exciting brand in Garden Trading, and our
Friends of Joules digital marketplace means that we now sell more
than 400 other carefully curated brands to our growing customer
base, thereby replicating the experience of a bustling market town
through the Group's digital channels. This strategic progress and
performance during the year is a great testament to the skill,
decisiveness, and hard work of our outstanding management team, as
well as the forward-looking investments made over many years in the
Group's people, product offering, infrastructure, and
technology.
FY21 PERFORMANCE OVERVIEW
FY21 Group revenue of GBP199.0 million (FY20: GBP190.8 million)
and PBT before exceptional costs of GBP6.1 million were ahead of
the Board's initial expectations (see Note 4 of the Consolidated
Financial Statements). This pleasing set of results primarily
reflects the strong performance of the Group's digital proposition
whilst the store estate was closed for approximately six months of
the year, and the Group's growing active customer numbers. Joules
is an increasingly digital brand, with 77% of retail revenues
generated from digital channels in the year. The Group's strong
online proposition continues to be supported and complemented by a
portfolio of attractively located stores, as well as relationships
with selected retail and wholesale partners both in the UK and
internationally.
Joules' active customer base, a key metric for the Group,
continued to grow and now stands at nearly 1.7 million customers
(excluding Garden Trading). This increase reflects the relevance of
the brand and its products, effective digital marketing investment,
and enhanced levels of brand awareness and engagement.
E-commerce sales during FY21 (the 'Period') increased by 48%
against the prior year. This growth reflected a 47% increase in
customer traffic to the Joules websites as well as improved
customer conversion trends. The strong digital performance
continued the momentum delivered in the final quarter of FY20 and
was made possible by the Group's strategic investment in its
technology platform, which includes the fast-growing Friends of
Joules digital marketplace, and enhancement of fulfilment
capabilities over recent years.
In addition to successfully driving growth through both the
Joules platform and our digital and retail partnerships, the Group
further strengthened and diversified its digital proposition and
product offer through the acquisition of The Garden Trading Company
Limited ('Garden Trading') in February 2021. Garden Trading designs
and sells distinctive home, garden and outdoor products through its
own digital platform and through more than 1,000 stockists across
the UK. Both businesses enjoy a close cultural alignment and the
acquisition strengthens Joules' position in the fast-growing home
and garden category.
The impact of the pandemic on the Group's performance was most
profoundly felt across the store, wholesale and shows channels.
Joules stores were closed for approximately half of the 52-week
Period, and, when open, experienced lower footfall levels than the
prior year largely due to physical distancing practices. This was a
similar story for many of our wholesale partners in the UK and in
our targeted international markets of Germany and the US. All major
country shows and events that the business usually attends during
the year were also cancelled. The Group was able to mitigate the
impact by increasing its digital sales, careful cost management,
and utilising support schemes such as the UK Government's
Coronavirus Job Retention Scheme (c.GBP4.6 million of claims in the
Period) and business rates relief (c.GBP2.3 million of rates relief
in the Period). In addition, the Board is very grateful for the
flexibility and support of other stakeholders including employees,
landlords and other key suppliers including Clipper in the UK
distribution centre, stock suppliers across our supply base and
many other key partners, during the year.
The Group has maintained robust financial discipline through the
Period with a strong focus on cash, liquidity and cost control,
whilst also maintaining investment in the areas that the Board
believe will drive growth over the coming years. The Group had net
cash of GBP4.1 million at the Period end (FY20: GBP4.5 million). In
April 2021, the Group extended the term of its financing facilities
with Barclays Bank PLC through to September 2024, taking the
opportunity to convert the arrangement to an 'ESG - Sustainability'
facility linked to the achievement of specific sustainability
targets, providing further confidence in the financial position of
the Group alongside focus and importance of the 'Responsibly
Joules' strategy.
The Financial Review provides more detail on the Group's
financial performance during the year.
DIVID
As a result of the challenges impacting the Period and the
continued increased levels of uncertainty facing many consumer
sectors, the Board has determined that it would not be appropriate
to declare a dividend for the Period. The Board will continue to
review the financial position of the Group within the context of
the external environment and intends to recommence dividend
payments when it is financially prudent to do so.
BOARD OF DIRECTORS
Marc Dench, the Group's Chief Financial Officer ('CFO'), stepped
down from his position on the Board on 11 May 2021 following more
than five years with the Group. Marc made a significant
contribution to the success of the business since its IPO, helping
to drive the Group's transition to the digital-led brand it is
today. He also played a critical role over the past 12 months in
helping Joules to navigate the impact of the COVID-19 pandemic. On
behalf of the Board, I would like to place on record our sincere
thanks to Marc for his immense skill and leadership during his time
with the Group. We wish him every success in the future.
In April 2021 we were delighted to announce the appointment of
Caroline York as Marc's successor following a thorough search
process. Caroline joined Joules on 26 July 2021 from
Moneysupermarket Group Plc, the FTSE250 price comparison business,
where she was Finance Director. Prior to Moneysupermarket, Caroline
held finance leadership positions at Heathrow and BAA and before
that, held roles at Atos, KPMG and PwC. Caroline's extensive
experience in senior finance roles at strong consumer brands and
digital-led businesses, as well as property-related businesses,
made her the stand-out candidate for the role and the Board is
delighted to welcome her to the business.
In the period between Marc standing down from the Board and
Caroline joining the Board, the Group appointed Jon Dargie, the
Group's Finance Controller, as Interim CFO. During this period, Jon
reported directly to the Joules Board.
In our FY20 Annual Results we announced that the role of Tom
Joule, Founder and Chief Brand Officer, would be evolving with a
reduced working pattern and a primary focus on supporting some of
the Group's business development initiatives, such as the
establishment of Friends of Joules and acquisition of Garden
Trading. During the Period, Friends of Joules has grown
significantly, and the initial integration of Garden Trading into
the Group has been completed successfully. The Group today
announces that, effective from September 2021, Tom's role will
reduce to primarily focus on his responsibilities as a
Non-Executive Director of the Group. In addition to his Board
responsibilities, Tom will continue to provide an advisory role in
relation to some of the Group's business development initiatives,
with a total anticipated time commitment of approximately one day
per week.
OUTLOOK
The Group has entered FY22 in a strong position with an
increased and growing active customer base and brand health metrics
for Joules at all-time highs. Since the start of the new financial
year, the Group has traded in line with the Board's
expectations.
Our Retail channel, comprising e-commerce, stores, and shows,
has continued to perform well reflecting demand for the Joules
brand and the attractive locations of our stores. The Group's home,
garden and outdoor ranges - mainly sold under the Garden Trading
brand - have performed well and demonstrate the increasing
diversification of the Group's revenues.
Wholesale revenue, as anticipated, is lower than pre-pandemic
levels. The Board expects wholesale activity to return to more
normal levels over the course of the next 12-18 months.
Country shows and events are restarting gradually, and we expect
to be back to a normal calendar of events in the coming months.
We look forward with optimism as normality returns to the
markets and channels in which we operate. However, we remain
vigilant of the potential for further external challenges including
possible disruption to international freight over the coming
financial year, and the ongoing impact of the pandemic.
Joules is a very strong, differentiated, and highly relevant
business that the Board believes is well-positioned to meet
consumers' evolving priorities and shopping preferences. In
addition, the Group has a robust financial position, well-invested
operations, and a clear strategy to continue to expand and grow
customer numbers both in the UK and priority international
markets.
Over the last 18 months the Group has broadened its product
offer, accelerated its digital commerce capability, and scaled
several new attractive revenue streams - including Friends of
Joules, product licensing and the home, garden and outdoor
category. From a channel, product and income perspective, the Group
is now more flexible and diversified than ever.
As a result, the Board remains confident in the Group's ability
to continue to adapt and react swiftly to what will remain dynamic
trading conditions over the coming months and to continue to
deliver the brand's exciting, long-term growth.
UNIQUE BRAND AND FLEXIBLE, DIGITALLY-LED BUSINESS MODEL
OUR BUSINESS MODEL
Joules is a British lifestyle Group. At the centre of our
business is the Joules brand. We distribute Joules-branded products
to customers seamlessly across multiple channels, enabling
customers to engage and shop with the brand wherever, whenever, and
however they choose. O ur digital platform is supported by well
located, enticing stores that enrich the brand, as well as selected
retail and wholesale partnerships in the UK and internationally.
This flexible and integrated approach balances the brand's exposure
to any single route to market in what is set to become an even more
dynamic, competitive, and increasingly digital-led retail
landscape.
The Group also works with selected licence partners, who are
specialists in certain product categories, in order to take the
Joules brand's distinctive signature prints and colours into new
product categories that are relevant to our customers' lifestyles,
such as toiletries, eyewear and homeware. A number of these
successful licensing partnerships are now in their fourth year,
reflecting the appeal of the Joules brand across non-core lifestyle
categories.
The Group also operates a fast-growing digital marketplace,
called Friends of Joules, which aims to bring the experience of a
bustling market town to consumers on their digital devices. Through
Friends of Joules, the Group offers thousands of products to the
Group's customer base from a carefully curated selection of more
than 400 third-party brands that offer complementary products to
those offered by the Joules brand.
Following the acquisition of The Garden Trading Company Limited
in February 2021, the Group also now operates the Garden Trading
brand. Garden Trading is a fast-growing and digital brand in the
attractive home, garden and outdoor category that is highly
complementary to the Joules brand. We see significant potential to
further develop and grow this category under the Garden Trading
brand over the coming years. The acquisition has further
strengthened the Group's digital presence and broadened its product
offer for consumers.
THE JOULES BRAND
The cornerstone of the Group's success and development is the
Joules brand, which stands for family, fun and time-off together.
We take inspiration from nature and the changing British seasons to
reflect and support our customers' lifestyles. Come rain or shine,
we add colour to woodland walks, picnics on the beach, cosy nights
in and journeys to school. Joules' aim is to brighten its
customers' lives with the joy of the countryside.
A core element of the Joules brand is our Responsibly Joules
ethos that is central to everything we do. From the day Joules
started more than 30 years ago with nothing more than a table in a
field, we have always been conscious of our impact on the
environment, the wildlife within it, the people we work with, and
the communities where we operate. We are proud to champion
sustainability and fight for the environment that inspires us.
OUR PRODUCTS
The Joules brand offers unique design-led clothing and
accessories that reflect our customers' lifestyles come rain or
shine. Joules-branded products span womenswear, menswear, footwear,
accessories, childrenswear, homeware and gifting. Our designs are
distinctive in their signature use of colour and prints that are
hand-drawn by our in-house team.
We recognise that Joules-branded products and collections must
always have a clear purpose. This means being design rather than
fashion led, sourcing responsibly, and taking an innovative
approach to make sure that our core products surprise and delight
customers through their design detail and diligence on quality.
During the year, the Group significantly expanded the product
offer available to customers by expanding the number of third party
brands sold on the Friends of Joules marketplace and through the
acquisition of Garden Trading, whose products cover the home,
garden, outdoor and lighting categories. The Group aims to ensure
that all products, whether Joules-branded, sold by a carefully
selected partner on Friends of Joules or designed and developed by
Garden Trading, all share common lifestyle values, design
credentials, quality and attention to detail.
CEO'S STRATEGIC REVIEW
INTRODUCTION
It is safe to say that FY21 was characterised by trading
conditions unlike anything Joules has encountered in its more than
30-year history. Reflecting the impact of the coronavirus pandemic
on the lives of consumers, the level of disruption and pace of
change in the retail sector over the past 12 months has been truly
unprecedented. I am delighted to be able to report that, against
this dynamic backdrop, Joules has been able to deliver a very solid
financial performance and strong strategic progress. This outcome
reflects, firstly, the strength and relevance of the Joules brand
to an increasing number of customers and, secondly, the increasing
importance of our digital proposition both to customers and within
our business model.
Before going into the details of the Group's strategic progress
during FY21, I would like to take this opportunity to briefly
summarise some of what I believe to be the key 'headlines' for
Joules during what was such a testing but ultimately
transformational year:
The Joules brand has gone from strength to strength...
During the year we continued to deliver on our brand's clear
mission and purpose - to brighten our customers' lives and conduct
business in a responsible way. As more and more consumers
increasingly valued their leisure time spent outdoors and time
doing the things they love with the people they love, our brand has
become increasingly relevant to a greater number of customers. Our
brand awareness and brand health metrics clearly demonstrate our
strong position and continued progress [1] .
Diversified attractive revenue model...
We now offer significantly more products across more categories
allowing us to rapidly adapt our digital merchandising to meet
changing consumer demands and lifestyle needs. We now provide our
customers with more choice and more reasons to visit or return to
the Joules website and Joules stores. Expanding the product offer
through third party brands on Friends of Joules and licensed ranges
such as the Joules sofa collection with DFS allows us to leverage
the creativity, supply chain and distribution capabilities of third
parties to expand the Joules brand.
Joules is an increasingly digital-led brand...
Driven by enhanced digital marketing capabilities, improvements
to the online and mobile experience and the positive impact of our
Friends of Joules digital marketplace. With 77% of retail sales
made online in the Period whilst stores were closed, Joules is an
increasingly digital-led brand. This reflects the market-wide
increase in e-commerce penetration, which has been accelerated by
enforced closure of stores for approximately six months of the
year.
However, stores continue to play an important role in our 'Total
Retail' segment growth...
Despite the growth in digital sales and widely publicised impact
of the pandemic on stores and footfall, we continue to believe in
the value of our stores which are predominantly in attractive local
high street and lifestyle locations. When stores were able to
remain open; they demonstrated their value in driving both sales,
new customers and brand awareness. With the appropriate cost base
and flexibility, we believe that stores will continue to play an
important role in our ongoing strategy to develop as a leading
lifestyle brand. During the Period, excluding concessions and
franchises, the number of Joules stores has increased from 128 to
133 and total selling space has increased from 182,000 sqft to
197,000 sqft.
Friends of Joules continues to grow ahead of expectations...
During the Period the Friends of Joules digital marketplace
continued to scale-up and demonstrate its value to both our
business and our customers. The marketplace, which now sells more
than 11,000 products - that are highly complementary to Joules'
core categories - from over 400 carefully curated sellers, is
increasingly bringing the experience of a bustling market town to
consumers through their digital devices.
Garden Trading acquisition further strengthens the Group...
The acquisition of The Garden Trading Company Limited ('Garden
Trading') in February 2021, provides the Group with a strong
position in the complementary and attractive home, garden and
outdoor category. Garden Trading and Joules target the same
customer base and are closely aligned on their brand values, design
approach and selling model, with strong digital first, retail
proposition supported by third party wholesale relationships.
Even against a challenging trading backdrop, we have continued
to invest in our long-term growth...
We have continued to invest in our digital and fulfilment
infrastructure to support our long-term growth plans. During the
Period we increased the capacity of our UK distribution centre by
100,000 square feet to support the Group's anticipated e-commerce
growth over the medium term. We also completed the construction and
fit-out of our new head office, The Joules Barn, which is a modern,
flexible and collaborative space that is truly fit for
post-COVID-19 working patterns and I believe will be a really
important driver of our growth in the coming years.
The Group's strategic progress and performance would not have
been possible without the hard work, flexibility and, above all,
dedication of our outstanding team...
The talent and dedication of the Joules team has once again been
highlighted in a year characterised by disruption to the ways we
have been able to work together and interact. I am incredibly proud
of, and grateful for, the commitment shown by our people, from our
head office teams to those on the front line in our stores, during
this challenging period.
RESPONDING TO THE COVID-19 PANDEMIC
The trading conditions in the Period were heavily influenced by
the impact of the COVID-19 pandemic on the lives of consumers.
Before going any further, it is right to acknowledge the tragic
impact that COVID-19 has had on individuals and families across the
world, and I would like to extend my deepest sympathy to those in
the Joules community who have been affected.
I am proud of how Joules responded and adapted to the disruption
caused by the pandemic. This disruption was most profoundly felt
during the early stages of the financial year when we operated
during and in the immediate aftermath of the first UK-wide national
lockdown, and for large parts of the second half of the year when
different parts of the UK were faced with varying levels and
durations of lockdown restrictions.
The Group was able to mitigate the impact by increasing its
digital sales, careful cost management, and by utilising support
schemes such as the UK Government's Coronavirus Job Retention
Scheme through which GBP4.6 million of claims were made during the
Period and business rates relief which provided GBP2.3 million of
relief during the year. In addition, the Board remains very
grateful for the flexibility and support from other stakeholders,
including landlords, employees and other key suppliers including
Clipper Logistics in the UK distribution centre, stock suppliers
across our supply base and many other key partners.
NAVIGATING THE COVID-19 IMPACT
JUNE 2020 - OCTOBER 2020 DECEMBER 2020 MAY 2021
SEPTEMBER 2020 - DECEMBER - APRIL 2021
2020
------------------------ ------------------------ ------------------------ -----------------
IMPACT Continued to UK Government All UK stores Stores open
ON OUR satisfy customer imposes tiered and wholesale - with physical
BUSINESS demand through levels of restrictions partners stores distancing
our UK e-commerce impacting our closed from measures.
website, albeit ability to mid-December
with constrained keep open stores during the
warehouse capacity in different peak Christmas
due to physical parts of the trading season
distancing UK at different as all countries
restrictions. times. in the UK enter
UK stores and Lower store national lockdowns.
all UK wholesale footfall results Non-essential
partner stores from increases retail stores
closed until in COVID-19 re-open across
15 June 2020. cases. the UK from
Phased re-opening A four-week mid-April,
of stores from national lockdown with England
15 June 2020 imposed in reopen from
with all stores England during 12 April.
open by early November resulting
August. in the closure
Additional of all Joules
operational stores and
costs as we those of our
made stores UK wholesale
as safe as partners for
possible for the important
employees and Black Friday
customers. and pre-Christmas
Re-opened stores trading periods.
perform better
than expectations
despite lower
year on year
footfall.
All country
shows and events
cancelled.
Wholesale sales
impacted by
slower recovery
of the wholesale
channel.
------------------------ ------------------------ ------------------------ -----------------
In total, stores trading hours were approximately 50%
of their typical annual trading time. Partner stores
similarly impacted by closures and Government restrictions.
Increased digital demand as e-commerce penetration
grew across the retail market.
-----------------------------------------------------------------------------------------------
HOW WE Created an Continued investment Acquisition Stores open
ADAPTED additional in the Friends of Garden Trading, - with physical
AND RESPONDED 100,000sqft of Joules digital a digitally distancing
of capacity marketplace led retailer measures.
at our UK Distribution provided customers of home and
Centre to support with a broader garden products
the Group's online offer inspired by
anticipated during the the British
e-commerce important Christmas countryside
growth. gifting season. and lifestyle
Introduced trends, supporting
safeguarding the Group's
measures as strategy to
stores re-opened grow its customer
including managing base, broaden
staffing levels its product
to allow for offer and strengthen
physical distancing, its digital
limiting the platform.
number of customers New partnership
in store at to open a total
any one time, of six Joules
Perspex screens stores (5 open
at points of at year-end)
sale, providing in Center Parcs
PPE for our villages across
employees, the UK and
and enhancing Ireland from
hygiene measures. April, aligning
two outdoor
loving, family-focused
lifestyle brands.
------------------------ ------------------------ ------------------------ -----------------
Always prioritising the health, safety, and wellbeing
of the Joules community and all our stakeholders.
Additional investment in digital marketing and the
online proposition in order to drive digital growth
and capture consumer demand.
Continued cash and cost base management, including
head office costs and lease renegotiations, as well
as utilisation of several of the UK Government's support
initiatives including rates relief for stores (GBP2.3
million) and the Coronavirus Job Retention Scheme for
furloughed employees (GBP4.6 million).
Flexible and seamless remote working leveraging the
IT investments made in recent years.
Continuing to support our local communities. Profits
from our specially curated 'Rainbow Edit' collection
comprising a range of products featuring colourful
splashes of bright rainbows and rainbow colours raised
more than GBP105,000 for NHS Charities Together Urgent
COVID-19 Appeal during the year.
-----------------------------------------------------------------------------------------------
STRATEGIC PROGRESS
The sudden impact of the pandemic on the lives of consumers
accelerated pre-existing structural changes in consumer behaviour,
including significantly increasing e-commerce penetration across
the retail sector. Against this backdrop, in our FY21 Interim
announcement we outlined the pillars of our refocused strategy for
the long-term growth and development of Joules as a premium
lifestyle brand in the UK and internationally.
Strategic KPIs
Online percentage of Number of stores(1) Total selling space(1)
Retail FY17: 105 ('000 sqft)
FY17: 34.8% FY18: 119 FY17: 132
FY18: 38.4% FY19: 125 FY18: 159
FY19: 49.5% FY20: 128 FY19: 175
FY20: 56.6% FY21: 133 FY20: 182
FY21: 76.9% FY21: 197
International as percentage Active customer numbers
of total revenue ('000)(2)
FY17: 11.5% FY17: 991
FY18: 13.1% FY18: 1,230
FY19: 16.1% FY19: 1,394
FY20: 15.5% FY20: 1,428
FY21: 12.6% FY21: 1,670
----------------------- ----------------------
(1) Joules retail stores only, excludes concessions and
franchise stores; 33 concessions operated at May 2021 (33 at May
2020 and 2019; five at May 2018 and previous years) and three
franchises.
(2) Customers registered on our database who have transacted in
the last 12 months. FY19 and prior years restated to reflect
enhanced customer database matching processes.
OUR STRONG AND DISTINCTIVE BRAND
The golden thread that runs through each pillar of our growth
strategy remains the careful development of our strong, distinctive
and highly relevant brand. I believe that this relevance will only
grow stronger over the coming years as we expect consumers to feel
increasingly loyal and connected to brands that share their
personal values. It is for this reason that our Responsibly Joules
ethos is more important than ever. We continue to work hard to make
sure that we conduct business the right way, and we are committed
to fighting for the environment that inspires us.
During the year we made further progress against our
sustainability priorities including removing all virgin plastics
from our packaging and advancing against our target to source only
sustainable materials including cotton, leather, rubber, denim and
synthetics by 2022 . Underlining the importance of, and focus on,
our Responsibly Joules priorities, we converted our financing
facilities with Barclays Bank PLC to an 'ESG - Sustainability'
facility with the financing costs linked to the achievement of
sustainability targets.
During the year brand awareness increased by 2pts to 48%.
Facebook and Instagram social media followers also increased by
96,000 to 906,000 and brand health was at record levels up 0.6pts
to 11.1 (the brand health metric runs on scale from -100 to +100).
Brand Awareness and Brand Health are measured as part of an
independent YouGov consumer survey. This strong progress in part
reflected highly efficient digital marketing, the desirable and
visible high street and lifestyle locations of the Group's stores,
and greater consumer awareness of our community, sustainability,
and charitable activities.
By leveraging the strength and growing relevance of the
distinctive Joules brand, the Group is focused on four key
strategic drivers that the Board believes will underpin long-term,
sustainable growth:
1. GROW OUR ACTIVE CUSTOMER BASE
The Group continues to focus on, firstly, growing its active
global digital customer base and secondly, increasing those
customers' frequency of interaction and spend with the brand.
During the year, total active customers continued to grow,
totalling 1.7 million at the Period-end (FY20: 1.4 million) with
1.3 million of these active customers being digital customers
(FY20: 0.9 million). These encouraging metrics reflect continued
targeted and effective digital marketing investment, data-led
customer communications and offers, and the positive impact of our
attractive store portfolio on driving brand awareness. In addition,
the significantly broadened product offering through our Friends of
Joules digital marketplace (see below) continues to drive both
customer acquisition and lifetime value by providing increased
shopping opportunities with Joules.
Despite this strong growth in customer numbers and customer
value, we continue to see significant further headroom to grow and
estimate there is an addressable UK market of up to 10 million
customers. In addition, we remain excited about the medium to
long-term brand growth and customer acquisition opportunities
within our target international markets, which we aim to deliver
through the continued development of our capital-light digital and
wholesale presence.
To support our brand growth and customer acquisition plans we
will continue to increase our data-led digital marketing to target
and efficiently acquire new digital customers. We will also focus
on deepening existing and developing new digital retail
partnerships and selectively growing our store estate in attractive
lifestyle locations. A very exciting example of our store strategy
was the partnership we announced in March 2021 to open Joules
stores in the six Center Parcs locations in the UK and Republic of
Ireland in time for the Summer 2021 holiday season, 5 of these
stores were open by 30 May 2021.
2. BROADENING THE PRODUCT OFFER
By broadening our product offer, we enable more customers to
live more of their lives in the Joules way. We continue to see
significant growth opportunities for Joules through expanding the
ranges of products we sell to both existing and new customers,
thereby encouraging customers to increase the proportion of their
'lifestyle spend' with Joules.
We remain focused on broadening our distinctive core product
ranges, increasing our men's and kids collections, and extending
into related product categories such as home, outdoor and garden
through a combination of differentiated in-house design, curated
brands available through our new Garden Trading brand plus Friends
of Joules, and carefully selected licensing partnerships.
During the Period, Friends of Joules continued to expand and is
increasingly bringing the experience of a bustling market town to
consumers through their digital devices. The platform now offers
over 11,000 products from more than 400 sellers across product
categories including home, outdoor and garden, gifting, pet and
clothing. In addition, following the acquisition of Garden Trading,
we have added an additional 1,500 new home, garden, and outdoor
lines to the Group's offering.
Our licensed product categories have continued to expand and
perform well with a particularly strong performances by the Joules
sofa range in partnership with DFS and pet collection in
collaboration with Rosewood, as well as the continued development
of our successful partnership with Boots which saw the launch of a
children's range of Joules toiletries and gifting products.
3. STRENGTHENING THE DIGITAL PLATFORM
We continue to invest in the Joules digital platform so that it
offers customers the complete Joules experience.
During the year, gross demand on the Joules digital platform
increased by 48%, with website traffic to joules.com increasing by
47% year on year and the conversion rate also improving by 0.4%pts
to 4.4%. These positive trends were supported by the continued
expansion of Friends of Joules, effective digital marketing
investment, the growth in the active customer base, and continued
investments in our e-commerce and mobile proposition, including
enhancing site merchandising, product filtering and improving the
payment journey for customers by adding various new payment
options.
4. LEVERAGE THIRD PARTY PARTNERSHIPS
In addition to growing the Joules brand through our own retail
channels, we continue to see significant opportunities to grow the
brand both in the UK and internationally through selected
third-party digital and physical retail partners. These third-party
relationships provide the opportunity to extend the reach of the
Joules brand to a broader customer base utilising the retail and
fulfilment platforms of our partners. Our systems and
infrastructure have been developed to support a range of
third-party models including the more traditional wholesale and
retail concession models as well as the emerging marketplace,
drop-ship and 'fulfilled by' models.
We have strong relationships with around 40 larger digital or
multi-site retailers globally and a further 2,000 smaller
specialist or independent retailers.
During the year we developed several new digitally focused
third-party partnerships including with Marks & Spencer with a
curated selection of Joules womenswear products available via the
marksandspencer.com e-commerce platform from April 2021.
Internationally we expanded our partnership with Zalando in Europe
and commenced working with Target in the US on a dropship,
marketplace model.
In August 2021 Rimal Patel will join the business in the role of
Wholesale & Partnerships Director. Rimal was most recently
Online Director at Tesco PLC and before that held senior roles at
John Lewis and ShopDirect. Rimal will be responsible for
strengthening and driving Joules' partnerships both in the UK and
target international markets.
STRATEGIC PROGRESS SUMMARY
STRONG DISTINCTIVE GROW THE BROADEN THE STRENGTHEN LEVERAGE THIRD
BRAND ACTIVE CUSTOMER PRODUCT OFFER THE DIGITAL PARTY PARTNERSHIPS
BASE PLATFORM
The careful We aim to, We aim to We aim to develop
development firstly, broaden and We aim to opportunities
of our strong, grow our expand the continually to efficiently
distinctive, active customer product offer enhance the grow the brand
and highly base and, available Joules digital both in the
relevant brand secondly, to both existing platform so UK and
remains central increase and new customers, that it captures internationally
to all pillars those customers' thereby encouraging and offers through carefully
of our growth frequency customers customers selected
strategy. of interaction to spend a the complete third-party
and spend greater proportion Joules experience. digital and
with the of their 'lifestyle physical retail
brand. spend' with partners.
Joules.
-------------------- ------------------ -------------------- -------------------- -------------------
HIGHLIGHTS Brand awareness Total active Friends of Gross demand New digitally
AND KPIs increased customers Joules continued on the Joules focused
by 2.0%pt grew by 17% to expand digital platform partnership
to 48%. to 1.7m. to now offer increased with Marks
Facebook and Digital active >11,000 products by 48%. & Spencer to
Instagram customers from over Website traffic sell selected
social media g rew by 400 sellers to joules.com womenswear
followers 50% to 1.3m. (FY20: 7,000 increased products on
increased Garden Trading products from by 47% year marksand
by 96k to 100k active 200 sellers). on year. spencer.com.
906k. customers. Additional Joules.com Expanded our
Continued 1,500 new conversion partnership
progress against home, garden, rate also with Zalando
Responsibly and outdoor improving in Europe.
Joules lines to the by 0.4%pts
sustainability Group's offering to 4.4%.
commitments. following
Center Parcs acquisition
partnership. of Garden
More than Trading.
GBP105,000 DFS sales
raised for growth greater
the NHS Charities than 100%
Together Urgent yoy with strong
COVID-19 Appeal online growth
during the led by the
year. continued
appeal of
the Joules
sofa range.
-------------------- ------------------ -------------------- -------------------- -------------------
INFRASTRUCTURE AND ORGANISATIONAL DESIGN
Shortly after the end of the Period we completed the
construction and fit-out of our new head office in Market
Harborough, called The Joules Barn. The opening of The Joules Barn
represents a vitally important development in our journey and will
enable Joules to be an even more collaborative and creative
business whilst maximising the benefits of more flexible working
patterns that have developed since the outbreak of the
pandemic.
We have also continued to invest in our fulfilment
infrastructure to support our long-term growth plans. D uring the
first half of the year, we created an additional 100,000 square
feet of space at our UK distribution centre which included the
completion of a new mezzanine level and the occupation of an
adjoining warehouse to support the Group's anticipated e-commerce
growth over the medium term.
In the second half of the Period the Group completed a
re-organisation of structures across the Group's head office
functions, which had commenced in FY20, as part of the 'Joules
Blueprint' business strategy to review organisational design and
introduce clarity around roles and responsibilities.
GARDEN TRADING
The acquisition of Garden Trading in February 2021 was an
important milestone for the Group. The acquisition has provided the
Group with a strong position in the important and fast-growing
home, garden and outdoor market with a brand and team that is
closely aligned with the Joules core values customer base and
business model. Further detail on the acquisition of Garden Trading
is provided in Note 2 of the Consolidated Financial Statements.
The acquisition was driven by a clear strategic rationale
helping to progress all pillars of Joules Growth strategy:
-- Grow active customer base: Garden Trading has a fast-growing
active customer base, now at over 100,000. The home, outdoor and
garden category is highly relevant to the wider Joules customer
base.
-- Strengthen digital platform: Over half of Garden Trading's
sales are direct to consumers via its web platform and through
digital marketplaces including Friends of Joules.
-- Broaden product offer: Garden Trading brings over 1,500
distinctive, design-led products across home, garden, lighting, and
outdoor categories. We see opportunities to cross-market to the
wider Joules customer base to drive growth in these categories.
-- Leverage third parties: Strong wholesale relationships in UK
and Europe have been central to Garden Trading since it started in
business. We see opportunities to leverage mutual relationships and
to introduce Garden Trading to several of Joules' existing
third-party partners in the UK and internationally.
We are delighted with the performance of Garden Trading over the
first few months since the acquisition and the transition to Garden
Trading operating as part of the Joules Group has been successful
with all planned support functions and activities now fully
aligned. Looking forward, we see significant potential to grow the
home, garden and outdoor category under the Garden Trading brand,
leveraging Joules resources and capabilities to support this
growth.
THE JOULES COMMUNITY
The skill, talent, and dedication of the Joules team during FY21
in the face of such a unique and unprecedented set of challenges
has been nothing short of amazing. I would like to thank all my
colleagues for their hard work during the year.
We have also continued to receive fantastic support from our
suppliers, landlords, business partners, and customers. I would
like to take this opportunity to thank everyone across the Joules
community for their ongoing support for our business and brand.
FINANCIAL REVIEW
Our FY21 financial year has been overshadowed by the ongoing
impact of the COVID-19 global pandemic, with enforced retail store
closures across the UK and Europe, remote working for all
colleagues and ongoing disruption to global freight markets.
Against this backdrop the Group has delivered a strong financial
performance, leveraging historic investments to support significant
growth through our already well-established e-commerce channels.
Our strong financial position has allowed us to invest in our
growth strategy, including driving strong growth of our Friends of
Joules digital marketplace platform and the acquisition in February
2021 of Garden Trading, a leading digitally focussed outdoor, home
and garden brand. As a result, we move into the new financial year
with a business model now driven by predominantly digital revenue
streams that leverage our brand and platform position, through a
broader and more diversified product offer.
The performance in the year has demonstrated how we leverage our
two 'special ingredients' - the Joules brand and our lifestyle
products - to deliver sales through our digital platform, which
comprises: the front-end web-site; warehouse and fulfilment; and,
customer insight and digital marketing capability, all of which are
areas that we have invested in over recent years.
COVID-19 - IMPACT ON THE GROUP'S FINANCIAL POSITION AND RESULTS
FOR THE PERIOD
The impact of COVID-19 in the Period and the actions taken to
reduce costs, preserve cash and strengthen the Group's financial
position is summarised below with more in the relevant section of
this Financial Review.
Impact on business operations and sales channels
- Stores were closed for more than half of their potential
trading hours. When open, stores traded at approximately 24% below
the same period in FY19 with reduced footfall being partially
offset by higher conversion rates
- No significant country shows, or events were attended in the year
- Wholesale dispatches were particularly low in the first
quarter as our wholesale customers globally just started to re-open
during the Period. Sales momentum improved through the year,
notwithstanding the impact of further lockdowns in the UK and
EU
- Gross margins impacted by lower proportion of store sales -
with store sales generating a higher gross margin than e-commerce,
and an increased level of markdown sales in Q1 and Q4 in the stores
channel due to clearing through stock positions held prior to going
into lockdown.
Operating costs
- Lower store sales resulted in lower variable costs, including
turnover rents, merchant fees, certain distribution costs,
utilities, travel and expenses
- The Government's Coronavirus Job Retention Scheme ('CJRS')
subsidised a substantial proportion of payroll costs for store
colleagues, and some head office colleagues, that were furloughed
whilst stores were closed. Approximately GBP4.6 million
contribution to payroll costs was received in the Period
- Business rates relief, of approximately GBP2.3 million, was received across the year
- All non -furloughed colleagues agreed to voluntary pay
reductions of up to 20% of their salary that continued through the
first quarter. Directors agreed to additional voluntary pay
reductions
- Many of the Group's landlords either waived or reduced rent
for the time that stores were unable to trade. The benefit from
reduced rents is reflected within the IFRS16 (Leases)
accounting.
Actions taken to preserve cash and enhance the Group's financial
position and liquidity
- Inventory purchase commitments and phasing of deliveries were
actively managed - in collaboration with our suppliers
- Rent deferral arrangements were agreed with many of the Group's landlords
- Lease renegotiations to reduce rent levels, increase lease
flexibility and/or move to turnover based rent models continued to
progress through the Period.
Financial position and liquidity
At 30 May 2021 the Group had net cash of GBP4.1 million (FY20:
GBP4.5m), comprising cash of GBP18.0 million and total borrowings
(excluding lease liabilities) of GBP13.9 million. The Group had
total liquidity headroom of GBP38.1 million at 30 May 2021,
comprising cash of GBP18.0 million and GBP20.1 million of undrawn
committed financing facilities.
In April 2021, the Group extended the term of its GBP25 million
revolving credit facility (RCF) and GBP9.5 million term loan with
Barclays Bank PLC, taking the opportunity to convert the RCF
arrangement to an 'ESG - Sustainability' facility linked to the
achievement of certain sustainability targets, providing further
confidence in the financial position of the Group alongside focus
on, and importance of, the Responsibly Joules strategy. Both
facilities now expire in September 2024.
The Directors have concluded that it is appropriate to prepare
the financial statements on the going concern basis. Further detail
on the financial position, liquidity and going concern assessment
is provided later within this Financial Review and Note 1 of the
Consolidated Financial Statements.
ACQUISITION OF GARDEN TRADING
On 9 February 2021 the Group announced the acquisition of The
Garden Trading Company Limited ("Garden Trading"), a digitally led
retailer of home and garden products inspired by the British
countryside and lifestyle trends.
Total consideration for the acquisition was up to GBP12.5
million (on a cash free, debt free basis subject to a normalised
level of working capital), with GBP9 million upfront consideration
consisting of GBP4.5 million cash and GBP4.5 million of Joules
Group plc ordinary shares (2.83 million new Joules ordinary shares
of 1 pence each), and up to GBP3.5 million deferred consideration
(of which at least GBP3.0 million will be paid in cash and the rest
either in cash or ordinary shares, at the Group's discretion),
subject to Garden Trading meeting certain targets over the period
to 30 November 2021.
Garden Trading's results have been consolidated as part of the
Group since acquisition with its results being reported across the
Retail and Wholesale segments. Further detail on the acquisition of
Garden Trading is provided in Note 2 of the Consolidated Financial
Statements.
GROUP RESULTS
GBPmillion Restated
52 weeks 53 weeks
ended May ended May
2021 2020
Revenue 199.0 190.8
Gross profit 97.5 96.8
----------------------------------------------- ----------- -----------
Operating expenses (72.1) (79.8)
Depreciation & amortisation* (16.0) (19.5)
Share-based compensation (1.7) 0.4
----------------------------------------------- ----------- -----------
Administrative expenses (89.8) (98.9)
----------- -----------
Operating profit/(loss) - before exceptional
costs 7.7 (2.1)
Finance costs (1.6) (1.8)
----------- -----------
Profit/(loss) before tax - before exceptional
costs 6.1 (3.9)
Gross margin % 49.0% 50.7%
Reconciliation to statutory results
----------------------------------------------- ----------- -----------
Operating profit/(loss) - before exceptional
costs 7.7 (2.1)
Exceptional costs (4.2) (21.0)
Operating profit/(loss) 3.6 (23.0)
Net finance costs (1.6) (1.8)
Statutory profit/(loss) before tax 2.0 (24.8)
EBITDA reconciliation
----------------------------------------------- ----------- -----------
Operating profit/(loss) - before exceptional
costs 7.7 (2.1)
Depreciation & amortisation 16.0 19.5
EBITDA - before exceptional costs 23.7 17.4
*Depreciation of Right-of-Use asset was GBP8.0 million (FY20:
12.6 million)
Group revenue increased by 4.3% to GBP199.0 million from
GBP190.8 million last year, with strong growth in Joules'
e-commerce and the contribution from Garden Trading, more than
offsetting the impact of enforced store closures, the cancellation
of country shows across the UK and the impact of the pandemic on
the Group's wholesale customers. This year, we are reporting on the
52 weeks ended 30 May 2021 compared to 53 weeks to 31 May 2020 in
the prior year. To provide a comparison with last year's 53-week
period, the unaudited contribution of the additional week in last
year's results was approximately 1% of revenue and profit.
Group gross margin of 49.0% was 1.7%pts lower than the prior
year. Gross margin was impacted by several headwinds over the
Period:
- lower proportion of store sales in the Retail segment with
stores closed for more than half of the Period and lower stores
margin rate when open due to higher markdown sales in stores in Q1
and Q4 as stores cleared through pre-lockdown stock positions.
Historically stores deliver a higher gross margin rate than other
retail channels
- Increased freight costs as the result of disruption in global
freight markets impacting inbound deliveries through the final
quarter of the Period
- Increased duty and transportation costs for deliveries into EU markets following Brexit.
PBT before exceptional costs was GBP 6.1 million against a loss
of GBP(3.9) million in the prior period. The strong sales
performance of our digital platform (e-commerce and Friends of
Joules) and licensed product ranges, together with furlough scheme
(CJRS) contributions, business rates relief and continued focus on
managing costs, more than offset the impact of lost revenue from
the enforced closures of our own stores and those of many of our
wholesale partners.
Statutory PBT was GBP2.0 million against a Statutory loss before
tax of GBP24.8 million last year. Exceptional costs of GBP4.2
million (FY20: GBP21.0m) were incurred in the Period, primarily in
relation to non-cash impairments of store lease right of use
assets.
Channel review - REVENUE and margin
Period ended May 2021 May 2020
GBPmillion 52 weeks 53 weeks Variance
%
--------------------- ---------- ---------- ----------
E-commerce 122.0 82.7 48%
Stores 35.1 59.6 (41)%
Shows 1.5 3.6 (59)%
--------------------- ---------- ---------- ----------
Retail 158.6 145.9 9%
Wholesale 35.3 42.7 (17)%
Other 5.1 2.2 130%
---------- ---------- ----------
Group revenue 199.0 190.8 4%
Memo: International 25.0 29.5 (15)%
Gross margin % 49.0% 50.7%
--------------------- ---------- ---------- ----------
Retail 52.3% 56.9%
Wholesale 26.8% 27.1%
--------------------- ---------- ---------- ----------
Retail
'Total Retail' revenue of GBP158.6 million was 8.7% above the
prior year (FY20: GBP145.9m) with strong e-commerce sales growth
more than offsetting the impact of enforced store closures and the
cancellation of country shows and events that the Group normally
attends.
Joules retail revenue segment comprises:
- E-commerce: the sale of Joules and Garden Trading branded
products through the Group's own websites and via carefully
selected third-party websites including Next, John Lewis, Zalando.
Note, third-party Friends of Joules products sold through the
Joules website are reported within the 'Other' revenue segment
based on the net commission received
- Stores: the sale of Joules branded products through the
Group's own retail stores and a small number of concessions with
John Lewis for Joules womenswear
- Country shows & events: Joules has retail presence at
events such as Badminton, Burghley and Carfest
E-commerce
Total e-commerce sales increased by 48% to GBP122.0 million
(FY20: GBP82.7m). Excluding Garden Trading, e-commerce sales
increased by 43%. This growth was led by sales through the Group's
own websites (joules.com, joulesusa.com, tomjoule.de and the Joules
ebay store). E-commerce represented 77% of the Group's retail
revenue during the Period (FY20: 56%).
Traffic to the Joules website was up by more than 47% and
conversion rate also improved. This performance reflects the
market-wide trend towards online shopping, as well as the
Group's:
- customer insight and digital marketing capability - to attract
new customers to the brand and to provide compelling content and
offers to existing customers. Digital active customers, those who
have transacted online, increased to 1.3 million in the Period
(FY20: 0.9 million), making up more than two-thirds of our total
active customer base
- ongoing improvements to the online customer experience -
including enhancements to site navigation, search and check-out
experience
- increasing range and breadth of products available on the
Joules website, including more than 11,000 products from 3(rd)
party sellers via the Friends of Joules digital marketplace. Gross
platform demand (which includes the sale of Joules products and the
gross sales value from Friends of Joules) increased by nearly 50%
in the Period
- investment in warehousing and fulfilment capability over recent years.
Garden Trading's retail revenue, which is all e-commerce, for
the post-acquisition period was GBP4.3 million, this represents
proforma growth of over 100% on the equivalent prior year period.
This performance was a result of increased awareness of the brand,
a growing active customer base - now at over 100,000, an expanded
product collection and increased market demand for the home, garden
and outdoor category.
Stores
Overall store sales were GBP35.1 million in the year (FY20:
GBP59.6m). This result reflects the forced closure of non-essential
retail stores. In the current year, our stores were closed for more
than half of the year compared with two months in the prior
year.
When allowed to open, stores traded at approximately 24% below
the same period in FY19 and experienced reduced footfall against
historic levels, in part the result of social distancing measures,
the impact of which was partly offset by higher conversion
rates.
Wholesale
Wholesale revenue in the Period was GBP35.3 million, a 17%
reduction year-on-year (FY20: GBP42.7m), reflecting the ongoing
impact of COVID-19 on many of the Group's wholesale partners both
in the UK and internationally.
In the UK, wholesale revenue, excluding Garden Trading, was
GBP15.2 million (FY20: GBP21.2m) with an approximately 40%
reduction in Autumn/Winter 2020 which was particularly impacted by
COVID-19, and an improved trend in Spring/Summer 2021 which was in
line with the prior equivalent season. Garden Trading wholesale
revenue, for the post-acquisition period, was GBP4.4 million.
Internationally, our wholesale sales were GBP15.8 million (FY20:
GBP21.5m). COVID-19 impacted all markets in the first quarter where
we proactively cancelled or reduced a significant proportion of our
early Autumn/Winter 20 deliveries across all markets. Despatches to
Germany, along with other European markets, have continued to be
impacted by lockdown measures and further impacted in the second
half of the year by Brexit which has resulted in shipping and
customs clearance delays.
Other revenue
Other revenue consists of royalties from the sale of licensed
products sold within third-party partner channels and the
commission received on the sale of Friends of Joules digital
marketplace products.
Other revenue more than doubled to GBP5.1 million (FY20:
GBP2.2m). This reflects the strong growth of our Friends of Joules
digital marketplace, contributing GBP2.0 million to other revenue
(FY20: GBP0.4 million), and strong performance from several of our
licensed product categories and partners.
Friends of Joules now has over 11,000 products, across 293
categories, from over 400 third party sellers. These products are
merchandised alongside Joules products on the Joules websites and
promoted to Joules' growing active customer.
International
Total international revenue, which includes revenue in
international markets across retail and wholesale channels,
decreased by 15.2% to GBP25.0 million (FY20: GBP29.5 million) and
now comprises 12.6% of the Group's total revenue (FY20: 15.5%).
Wholesale sales were impacted by COVID-19 across all markets for
the first quarter and in European markets through most of the year
with national and regional lockdowns. European markets were further
impacted by Brexit in the second half with disruption to delivery
times.
Notwithstanding the specific challenges in the current Period,
the Joules brand continues to resonate with customers in our target
international markets. E-commerce sales continued to grow in the US
and Germany, despite having to close our German market website for
a five-week period to avoid the risk of disruption to customer
orders in the initial weeks following Brexit.
ADMINISTRATIVE EXPENSES
Total administrative expenses before exceptional costs decreased
by 10.13% to GBP89.8 million (FY20: GBP98.9m).
Period ended May 2021 May 2020
GBPmillion 52 weeks 53 weeks
Operating expenses 72.1 79.8
---------- ----------
Depreciation & amortisation* 16.0 19.5
Share-based compensation 1.7 (0.4)
---------- ----------
Administrative expenses - before
exceptional costs 89.8 98.9
---------- ----------
Exceptional costs 4.2 21.0
---------- ----------
Total Administrative expenses 93.9 119.9
---------- ----------
* Depreciation of Right-of-Use asset was GBP8.0 million (FY20:
12.6 million)
Operating expenses
Operating expenses decreased by 9.7% to GBP72.1 million (FY20:
GBP79.8m). The movement in the Period reflected support received
from the Government via the Job Retention Scheme (GBP4.6 million)
and rates rebates (GBP2.3 million), as well as lower direct sales
variable costs and the Group's ongoing cost management.
Sales costs which primarily relate to commissions paid to third
party retail partners and wholesale sales agents, decreased by 8.2%
to GBP11.2 million (FY20: GBP12.2m), in line with the lower
third-party sales experienced in the Period.
Marketing expenditure was up by 22% to GBP11.3 million (FY20:
GBP9.3m). Investment in digital and social marketing was increased
to drive customer acquisition and digital sales, which was partly
offset by the reduction in marketing expenditure in other
channels
Store costs decreased by 55% to GBP8.1 million (FY20: GBP17.9m).
Underlying store costs were mitigated by business rates relief and
the payments received from the Coronavirus Job Retention Scheme
(JRS) when store colleagues were furloughed.
Store costs exclude rent expenditure which is accounted for
under IFRS16 (Leases) with the exception of turnover only store
rent and short-term leases of GBP0.4 million (FY20: GBP0.3m).
Distribution costs increased by 35% to GBP12.4 million (FY20:
GBP9.2m). The increase in distribution costs is due to the increase
in e-commerce sales and the resulting increase in variable
warehouse related costs.
Head office costs decreased by 6.7% to GBP29.1 million (FY20:
GBP31.2m) as the result of continued cost management activities,
JRS income for furloughed colleagues and the constraints of the
global pandemic reducing travel and related costs.
Depreciation and amortisation
Depreciation and amortisation reduced by GBP3.4 million to
GBP16.0 million (FY20: GBP19.5m), with lower Right-of-use asset
depreciation more than offsetting an increase in underlying
depreciation and amortisation.
Underlying depreciation and amortisation increased to GBP8.0
million (FY20: GBP6.8m) the increase being primarily due to higher
amortisation following the completion of a number of technology
initiatives in the prior financial year, including further
developments to our digital platform, the launch of the Friends of
Joules digital marketplace and roll-out of a new digitally
integrated store point of sales solution.
Right-of-use asset depreciation decreased by GBP4.6 million to
GBP8.0 million (FY20: GBP12.6m). The decrease was the result of a
reduction in the Right-of-use asset following impairment
write-downs in the prior financial period and the renegotiation of
several leases in the period which resulted in reductions in
underlying lease costs and several leases falling outside of the
scope of IFRS16. This was partly offset by a lease extension for
our UK warehouse.
Share-based compensation
Share-based compensation was GBP1.7 million in the Period (FY20:
GBP0.4m income).
In the current Period, the Executive Directors and several
senior executives, waived options outstanding under the Long Term
Incentive Plans (LTIPs) due to vest following the three-year
periods ending FY21 and FY22, reducing the number of shares under
option and the share based compensation provision. Several new
share plan arrangements were established in the Period, including a
new LTIP for the three-year period to FY23 and an All Employee
Share Plan.
Share based compensation in each period can fluctuate based on
projected performance outcomes against the LTIP targets, the share
price at reporting date and movement in the charge required for
National Insurance Contributions.
EXCEPTIONAL ADMINISTRATIVE EXPENSE
Period ended GBPmillion May 21 May 20
Right-of-use asset - impairment 1.8 16.2
Property, plant & equipment and intangible
assets - impairment 1.1 4.3
------- -------------------------
Non-cash exceptional 2.9 20.5
Acquisition costs 0.6 nil
Restructuring costs 0.7 0.5
------- -------------------------
Other exceptional costs 1.3 0.5
------- -------------------------
Total exceptional costs 4.2 21.0
A total exceptional expense of GBP4.2 million (FY20: GBP21.0m)
has been booked by the Group in the Period as detailed below and in
the Notes to the Condensed Consolidated Financial Statements.
The Group regularly conducts a review of its assets to identify
if there are any impairments to the carrying value of the assets.
Following this review at the Period end, a non-cash exceptional
impairment charge of GBP2.9 million has been recognised (FY20:
GBP20.5m), which is net of prior year impairment charge reversals
of GBP0.8 million (FY20: nil), the majority of which relates to the
Group's stores. The stores with impairment reversals were written
back to their recoverable amount after a thorough review of
forecast performance on a store-by-store basis to determine which
impairment reversals were appropriate to recognise.
The COVID-19 pandemic and the resulting enforced closure of the
Group's retail stores and anticipated lower footfall to retail
stores when re-opened, results in lower cash flow forecasts for
stores and a resulting impairment to the Right-of-use asset and
fixed assets of certain stores.
In the second half of the year the Group incurred further
exceptional costs of GBP1.3 million, of which GBP0.6 million were
professional fees related to the acquisition of Garden Trading and
GBP0.7 million were restructuring costs (FY20: GBP0.5m). The
restructuring costs related to a re-organisation of structures
across the Group's head office functions which commenced in FY20
and was completed in the Period as part of the 'Joules Blueprint'
business strategy to review organisational design and introduce
clarity around roles and responsibilities.
FINANCE COSTS
Net finance costs were GBP1.6 million (FY20: GBP1.8 million).
Net finance costs consist of GBP0.4 million interest and facility
charges on the Group's revolving credit facility and term loan with
Barclays Bank PLC (FY20: GBP0.4 million) and GBP1.2 million
interest on lease liabilities (FY20: GBP1.4 million).
TAXATION
The Group tax charge for the Period was GBP1.1 million (FY20:
GBP4.6 million credit). The effective tax rate for the Period was
78.1% (FY20: 17.8%), which was significantly higher than the
applicable UK corporation tax rate due to the impact of
recalculating the deferred tax liability on Garden Trading
intangibles (following the UK tax rate being increased from 19% to
25% from April 2023), plus non-deductible expenditure (including
GBP0.6m of Garden Trading acquisition costs), Share Based
Compensation charges and a prior year deferred tax charge, mostly
arising on fixed asset timing differences.
CASH FLOW
Free cash flow, prior to the capital expenditure on our new head
office development and the acquisition consideration for Garden
Trading, was GBP11.1 million inflow in the period (FY20: GBP7.3
million outflow). Net cash flow after the capital expenditure on
the new head office, the acquisition consideration for Garden
Trading and the repayment of borrowings was GBP7.0 million outflow
in the Period (FY20: GBP10.1 million outflow).
The improvement against the comparable period reflects higher
EBITDA for the trading reasons detailed above and the benefit of
the Government's COVID-19 support measures; the receipt of
corporation tax overpaid on account in the prior year; deferral of
a proportion of lease rental payments in agreement with landlords;
and, continued robust working capital management.
GBPmillion FY21 FY20
EBITDA (before exceptional
costs) 23.7 17.4
Share-based compensation 1.7 (0.4)
Lease repayments - IFRS 16 (11.3) (12.3)
Cash exceptional costs (1.3) (0.5)
Net working capital - change 4.3 (2.4)
------- -------
Operating free cashflow 17.1 1.8
Interest paid - borrowings (0.3) (0.4)
Interest paid - lease liability (1.2) (1.4)
Tax received / (paid) 3.0 (0.9)
------- -------
Cash from Operating activities 18.6 (0.9)
Capital expenditure - core (7.5) (6.4)
------- -------
Free cash flow (core capex) 11.1 (7.3)
Capital expenditure - new
Head Office (6.1) (7.3)
Acquisition of Garden Trading (4.2) -
------- -------
Free cash flow 0.8 (14.6)
Net cash from financing (7.8) 24.7
Net cash flow (7.0) 10.1
Memo: Total capital expenditure (13.6) (13.7)
Net cash 4.1 4.5
Capital expenditure
Core capital expenditure in the year was GBP7.5 million (FY20:
GBP6.4m). Major areas of capital expenditure included a capacity
upgrade programme at our UK warehouse, alongside developments to
the Joules website and other core technology platforms.
The development of our new head office, The Joules Barn was
completed in June 2021. During the Period, capital expenditure on
the new head office was GBP6.1million (FY20: GBP7.3m).
Inventory
Group Inventory at the end of the Period was GBP47.5 million
(FY19: GBP35.3m). The increase in the Period is due in part to the
acquisition of Garden Trading as well as an increased holding of
current and future season inventory, with last year impacted by
actions taken to rephase stock levels due to the closure of the
Group's stores during the UK's initial lockdown.
DIVID
Given the impact of the global pandemic on the Group and the
continued uncertain outlook, the Board has not declared a dividend
in respect of the current financial period (FY20: GBPnil). The
Board will continue to review the financial position of the Group
and intends to recommence dividend payments when it is considered
financially appropriate to do so.
NET CASH AND LIQUIDITY
Net cash at the end of the Period was GBP4.1 million (FY20:
GBP4.5 million) representing cash of GBP18.0 million (FY20: GBP26.2
million) and borrowings of GBP13.9 million (FY20: GBP21.7
million).
The Group's total liquidity headroom at 30 May 2021 was GBP38.1
million (FY20: GBP52.5m), comprising GBP18.0 million cash balances
(FY20: GBP26.2m) and GBP20.1 million undrawn committed financing
facilities (FY20: GBP26.3m). The decrease in liquidity headroom is
driven by the Group not seeking an extension to its temporary 12
month, GBP15 million revolving credit facility with Barclays Bank
PLC (which was put in place in April 2020 and expired in April
2021), and the investment in Garden Trading during the Period.
Lease liability (IFRS 16)
The Group's total lease liability at 30 May 2021 was GBP39.8
million, a reduction of GBP6.9 million since the year ended 31 May
2020.
The repayment of lease liabilities of GBP11.3 million in the
Period was partly offset by lease additions of GBP4.3 million,
primarily relating to a lease extension for the Group's UK
distribution centre, the renegotiation of certain store leases on
more favourable terms and the addition of the lease for Garden
Trading's warehouse and showroom.
Lease liability by
type:
GBPmillion 30 May 2021 31 May 2020 Increase / (decrease)
Store leases 31.8 37.7 (5.9)
Commercial property
leases 7.4 8.3 (0.9)
Other leases 0.6 0.7 (0.1)
------------ ------------ ----------------------
Total liability 39.8 46.7 (6.9)
FINANCING FACILITIES
At the end of the Period the Group had total available
facilities of GBP34.0 million of which GBP13.9 million was
drawn.
Facility Available Facility Drawn Facility Maturity
GBPmillion May 2021 May 2021
Revolving Credit Facility
('RCF') 25.0 5.1 September 2024
Term Loan 9.0 8.8 September 2024
------------------- ---------------
Total facilities / borrowings 34.0 13.9
The Group has a GBP25 million revolving credit facility provided
by Barclays Bank PLC ('Barclays') to fund seasonal working capital
requirements. In April 2021, the Group agreed an extension of this
facility with Barclays, extending the maturity date from July 2022
to September 2024.
In April 2020, the Group established an additional short-term
revolving credit facility of GBP15 million with Barclays, to
provide additional financial headroom over the year to March 2021.
This facility has not been renewed by the Group.
The development of the Group's new head office, which is now
complete, is part funded through a GBP9.0 million loan from
Barclays. The loan is repayable by way of quarterly payments of
GBP264,000 and a final bullet payment in September 2024.
EARNINGS PER SHARE
Statutory basic earnings per share for the Period were 0.82
pence (FY20: loss per share 21.61 pence). The weighted number of
ordinary shares in issue for the Period was 109 million, an
increase of 15 million ordinary shares compared to the prior
period. The increase in ordinary shares follows the equity placing
completed in April 2020 and the share consideration element of the
Garden Trading acquisition in February 2021.
BREXIT
The Group was well prepared for the additional operational and
administrative requirements that came into effect at the end of the
transitional arrangement with the EU on 1 January 2021.
Notwithstanding this preparation, the Group's sales to EU
customers, wholesale and consumers, were impacted by logistics
disruption and higher costs to serve, including higher courier
costs, duty and other taxes. The total impact to profit in the
Period is estimated at GBP0.8 to GBP1.0 million against the
comparable period
After several months of trading under the new arrangements, the
logistics challenges are starting to normalise, but the increased
costs are anticipated to only partly revert to historic levels. The
Group will continue to evaluate and implement options to mitigate
the adverse impact including a potential increase in selling prices
and structural changes to the Group's logistics.
GOING CONCERN AND VIABILITY STATEMENT - IMPACT OF COVID-19
As for many businesses in the retail sector, the Group has
continued to be significantly impacted by COVID-19 during the
Period. The impact and management's response is set out in further
detail within the CEO's report and the Financial Review.
Despite the easing of the UK's lockdown and the re-opening of
non-essential retail in mid-April 2021, the retail sector continues
to face significant uncertainties, including short-term and
potentially more fundamental long-term changes in consumer
behaviour as well as the potential for ongoing operational
disruption. Given these uncertainties, the Directors have
undertaken a comprehensive assessment to consider the going concern
and longer-term viability of the Group and Company. In making their
assessment the Directors have considered the following:
-- The Group's financial position, as at the date of this
report, and its committed borrowing facilities available for the
time period under consideration
-- The support from the Group's shareholders and bank, including
the successful equity placing that was completed in the early
stages of the UK lockdown during the prior period and the financing
facility extension that was also completed in April 2021
-- Alternative sources of financing, including sale &
leaseback of freehold property and asset financing that might
reasonably be assumed to be available to the Group - noting that
any financing from these sources has not been included within the
forecasts that support the going concern assessment
-- Financial commitments, including capital commitments, lease
commitments, stock purchases and other
non-variable/non-discretionary costs. In respect of property
leases, the Directors note the relatively short lease commitments,
of less than three years on average, that the Group has across its
store portfolio together with recent and on-going progress on
renewing leases on favourable terms
-- The extent of potential Government support initiatives
including business rates relief and the Coronavirus Job Retention
Scheme (CJRS)
-- Strength of brand, reflected in active customer growth, brand
awareness and brand health metrics - as detailed more fully in the
Strategic Review
-- The flexibility and agility of the Group's business model, as
described in the Strategic Review, noting that over two thirds of
the Group's retail sales are via e-commerce and that the Group has
diversified sources of revenue, operating across several channels
and geographic markets, with owned and third-party channels
including wholesale and marketplaces. Newer income streams of brand
licensing and the Group's Friends of Joules digital marketplace and
from Garden Trading following the acquisition in February 2021
provide additional comfort on the strength of the brand and
diversity of income channels
The Directors have also considered the trading performance of
the Group's stores as they have re-opened following the easing of
the UK's lockdown restrictions on 12 April 2021, as well as the
performance of the Group's e-commerce channel, which has continued
to exceed management's expectations during the Period.
The Directors have reviewed management's business plan forecasts
that cover the period to 26 May 2024, being the Group's strategic
plan horizon. The forecasts have been produced on the following
basis:
-- Base plan - a gradual sales recovery post the end of the UK's
third lockdown in April 2021, continuing the trend experienced
since the UK's lockdown restrictions were eased in mid-April 2021,
reflecting management's estimates for the speed and extent of
recovery across its different sales channels and markets. It
reflects stores being open throughout the period under review
initially trading significantly below the comparative pre-COVID-19
period, improving to approximately 80% of pre-COVID-19 sales levels
by the end of FY22, with modest growth thereafter. Third-party
wholesale channels are assumed to follow a similar trajectory. The
Group's e-commerce sales are forecast to grow at double-digit
levels reflecting performance over recent years and experienced
during the UK's latest lockdown in January to March 2021.
-- Downside scenario - the 'Base plan' adjusted to reflect a
further UK lockdown for three months during October to December
2021 with all non-essential retail closed during the Group's key
trading period, followed by a much slower recovery of the Group's
stores channel with total store revenues only achieving
approximately 60% of the pre-COVID-19 levels by the end of FY24.
E-commerce sales growth is assumed to be at half of the 'Base plan'
levels and wholesale sales are assumed to reduce significantly
during FY22 compared to the 'Base plan'.
Within each forecast, management have reflected financial
commitments and the impact of realised or anticipated cost savings
from discretionary and variable costs. No Government support or
subsidies, other than those announced and committed at the date of
this report, are included.
The Directors have also stress tested the forecast to consider
situations under which the Company would have insufficient
liquidity under its current secured borrowing facilities and/or it
would not meet its banking covenant tests. One such 'Stress test
scenario' is that of an even further extended potential COVID-19
related lockdown in the UK for up to six months, with a material
disruption to retail store operations during the full peak
Autumn/Winter 2021 trading season resulting in significantly
reduced store channel revenue and lower receipts from the Group's
wholesale channels. The Stress test scenario assumes e-commerce
revenue growth in line with the 'Downside scenario' noting that
loyal customers would no longer be able to access the brand via the
store environment as demonstrated during the previous UK lockdowns,
plus ongoing income from Garden Trading, brand licensing and
digital marketplace activities which was in excess of GBP25 million
in FY21. The Stress test scenario assumes that the Group would not
make any cost savings other than variable sales costs during the
period and does not assume any further cost mitigation actions
which would be available to the Group. No additional Government
support or subsidies to offset costs or support cash flow are
assumed in this scenario.
The Directors believe, with reference to the considerations
noted above, that, firstly the likelihood of this situation arising
in its most extreme form is remote and, secondly, that they
anticipate that the Group would be able to adapt and respond to
mitigate the impacts and continue to trade and meet its obligations
through the period of consideration.
GOING CONCERN
The Base plan and Downside scenario forecasts indicate that the
Group will remain within its available committed borrowing
facilities and in compliance with covenants throughout the
forthcoming 12-month period. Under the Downside scenario, the Group
has more than GBP20 million available liquidity headroom
through-out the period under consideration and has EBITDA headroom
of GBP2.7 million against its May 2022 year end covenant test and
headroom of GBP5.6 million at its first covenant test in the period
at the end of November 2021.
The Group would also remain within its borrowing facilities and
comply with covenants under the Stress test through this
period.
Following consideration of these forecasts and having made
appropriate enquiries, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence until at least 12 months after the approval of the
Financial Statements. Therefore, the Directors continue to adopt
the going concern basis of accounting in preparing the Consolidated
Financial Statements.
VIABILITY STATEMENT
The Directors have considered the Group's prospects and
viability over a three-year period to 26 May 2024. This three-year
period is considered appropriate as i) this is the Group's longer
term strategic planning period and ii) the Group's GBP25 million
revolving credit facility with Barclays Bank PLC, has recently been
extended out to September 2024 which covers the three-year period
of the review.
As set out in detail in the "Going concern and viability
statement - impact of COVID-19" section above, the Directors have
produced and reviewed forecasts which consider the impact of
further UK lockdowns (of both 3- and 6-month periods), slow
recovery thereafter and no additional Government support or
subsidies.
Under the Base plan and the Downside scenarios, outlined in more
detail above, the Group will remain within its available committed
borrowing facilities and in compliance with covenants throughout
the forecast period.
Based on this assessment, the Directors have a reasonable
expectation that the Group will continue in operation and meet all
its liabilities as they fall during the period up to 26 May
2024.
PRINCIPAL RISKS AND UNCERTAINTIES
Set out below are the principal risks and uncertainties that the
Directors consider could impact the business. The Board regularly
reviews the potential risks facing the Group and the controls in
place to mitigate any potential adverse impacts. The Board also
recognises that the nature and scope of risks can change and that
there may be other risks to which the Group is exposed and so the
list is not intended to be exhaustive.
The Corporate Governance Report includes an overview of our
approach to risk management and internal control systems and
processes.
EXTERNAL RISKS
External risks reflect those risks where we are unable to
influence the likelihood of the risk arising and therefore focus is
on minimising the impact should the risk arise.
Risk and impact Mitigating factors
============================================================ ===============================================================
Global / regional pandemic (i.e.
COVID-19) Our response to mitigate the immediate
As the current global pandemic and longer-term impacts of COVID-19
COVID-19 has shown, the implications are detailed within the CEO's Report
of such an event are extreme, and Financial Review.
sudden and are challenging to As evidenced by COVID-19, mitigation
mitigate. The impacts of a global of the impacts of a global pandemic
(or regional) pandemic include: is very challenging. To navigate
- Supply chain disruption - supplier the challenges and mitigate the
factory closures and freight disruption potential adverse impacts on the
- Customer demand reduction - Group, the following have been
general consumer mobility restrictions well established across the business:
exacerbated by enforced store - Business Continuity task force,
closures and/or in-store restrictions with delegated decision-making
- Supplier impact - increased authority, established to rapidly
risk of failure of key suppliers respond to and manage through crisis
- Employee - health and wellbeing situations
implications plus restrictions - Well invested, modern IT infrastructure
on ability to undertake day to to support remote and agile working
day operations - Ongoing investment in the Group's
- Management decision making digital platforms and warehouse
- potential to be impacted if fulfilment capabilities to ensure
several members of the senior customer demand and delivery proposition
leadership team were to become are met
incapacitated. - Ongoing geographic diversification
of supplier base and enhanced supplier
due diligence
- Short lease terms across store
portfolio mitigating adverse financial
impact of customer demand reduction
- Outsourced UK distribution centre
operations to Clipper Logistics
plc providing access to their disaster
recovery capability and capacity
===============================================================
Economy
The majority of the Group's revenue As a premium lifestyle brand with
is generated from sales in the a strong e-commerce channel, a
UK to UK customers. A deterioration geographically disperse retail
in the UK economy may adversely store portfolio and long-standing
impact consumer confidence and wholesale customer accounts, the
spending on discretionary items. Directors consider that the UK
A reduction in consumer expenditure business would be less affected
could materially and adversely by a reduction in consumer expenditure
affect the Group's financial condition, than many other clothing retailers.
operations and business prospects. In addition, the property portfolio
Any significant change in inflation has short lease terms, providing
rates in the UK economy could relative flexibility to close or
further impact on consumer expenditure relocate stores should this become
and increase the economic risk. necessary.
COVID-19 is also increasing the
likelihood and impact of this
risk.
===============================================================
Competitor actions
New competitors, existing clothing Joules differentiates from competitors
retailers or lifestyle brands through its strong brand and products
may target our segment of the that are known for their quality,
market. Existing competitors may details, colour and prints. Our
increase their level of discounting large customer database allows
or promotions and/or expand their the Group to communicate effectively
presence in new channels. These with customers, developing customer
actions could adversely impact engagement and loyalty.
our sales and profits. The expansion of the Group's product
and category offer and the diversification
of revenue sources, with new income
streams from the Group's Friends
of Joules market place, Joules
branded licence arrangements and
following the acquisition of Garden
Trading in the Period, help to
mitigate this risk.
===============================================================
Foreign Exchange
The Group purchases the majority The Group's Treasury Policy sets
of its product inventory from out the parameters and procedures
overseas and is therefore exposed relating to foreign currency hedging.
to foreign currency risk, primarily We currently seek to hedge a material
the US Dollar. proportion of forecasted US Dollar
Without mitigation, input costs requirement 12-24 months ahead
may fluctuate in the short term, using forward contracts.
creating uncertainty as to profits The Group's US wholesale business
and cash flows. generates US Dollar cash flows
Brexit has increased volatility which provide a degree of natural
in this area that may be sustained hedging.
or worsen going forward.
===============================================================
Regulatory and Political
New regulations or compliance The Group has processes in place
requirements may be introduced to monitor and report to the Board
from time to time. These may have on new regulations and compliance
a material impact on the cost requirements that could have an
base or operational complexity impact on the business. The impact
of the business. Non-compliance of any new regulation is evaluated
with the regulation could result and reflected in the Group's financial
in financial penalties. forecasts and planning.
Recent and on-going US/China trade The Group is seeking to diversify
negotiations with the threat of its supplier base to help mitigate
additional US tariffs on China this risk.
manufactured products, as well
as the continuing uncertainty
surrounding Brexit, have increased
the risk and uncertainty in this
area.
=============================================================
Brexit
The exit of the UK from the EU The Group has a Brexit 'task force'
has added complexity across many that was originally established
areas of the Group's operations to undertake contingency planning
that impacted on our ability to for a potential "no deal" Brexit.
get products to customers in a The Brexit task force has continued
timely manner and on product profit to monitor the impact on the Group
margins. now that the UK has left the EU
Specific risk areas that are associated and has been managing the immediate
with the UK's exit from the EU challenges on the Group's operations
include: whilst also seeking to optimise
the Group's future structure and
* Political uncertainty: The level of economic and trading relationships with EU partners.
consumer uncertainty has increased due to the UK's
exit from the EU. Mitigating steps taken:
* Political uncertainty: The Directors and Brexit task
force continue to monitor the impact of on-going
* Changes in customs duty and VAT regimes: Goods being changes.
imported to and exported from the EU are subject to a
different duty and VAT regime, which results in
increased costs to the Group. Additional paperwork * Changes in customs duty and VAT regimes: An
and administration are also required in order to move assessment of the Group's operations was undertaken
product in to and out of both the UK and the EU. to identify changes required and any additional
costs. Paperwork (e.g. commercial invoices) has been
automated to improve efficiency where possible.
* Supply chain costs and delays: Brexit, combined with
the impact of the COVID-19 pandemic, has had a
significant impact on global supply chains resulting This area is under on-going review
in both disruption and significant cost increases to improve efficiency of the Group's
associated with the inbound and outbound movements of operations.
goods.
* Supply chain delays:
* Employment of EU nationals: EU nationals living in
the UK no longer have automatic rights to remain The business has achieved Authorised
working in the UK. This could restrict the Group's Economic Operator status and has
ability to retain and recruit appropriate talent. implemented Customs bonded status
for the Group's main UK distribution
centre which assist in mitigating
* Foreign exchange fluctuations: The Group's exposure the adverse duty impacts and supply
to fluctuations in foreign exchange rates, in chain delays.
particular the strength of Sterling relative to the This area is under on-going review
US Dollar, is increased as a result of the impact of to improve efficiency of the Group's
Brexit. operations.
* Employment of EU nationals: All EU nationals working
for the Group have been consulted on the implications
* Regulation and compliance: The regulatory regime of Brexit and support continues to be provided with
applicable to the manufacture and sale of products applying for settled status.
may increase in complexity if the UK adopts a
different framework from the current EU based
legislation. * Foreign exchange fluctuations: As noted above the
Group seeks to hedge a material proportion of
forecasted US Dollar requirement 12-24 months ahead
using forward contracts.
* Regulation and compliance: On-going legal advice is
being taken in this area to ensure continued
compliance with relevant UK and EU regulations.
===============================================================
INTERNAL RISKS
Internal risks reflect those where we can influence the
likelihood of the risk arising and the impact should the risk
arise.
Risk and Impact Mitigating factors
========================================= ================================================
Brand and reputation
The strength of our brand and Brand and reputation are monitored
its reputation are very important closely by senior management and
to the success of the Group. the Board. The Group's public relations
Failure to protect and manage are actively managed and customer
this could reduce the confidence feedback, both direct and indirect,
and trust that customers place is carefully monitored.
in the business, which could We carefully consider each new trade
have a detrimental impact on customer with whom we do business
sales, profits and business prospects. and monitor on an ongoing basis.
Our brand may be undermined or We actively monitor for potential
damaged by our actions or those IP infringements and have a process
of our partners or through infringement to determine the appropriate course
of our intellectual property of action to protect our brand and
(IP). IP vigorously.
================================================
Product sourcing
The Group's products are predominantly The Group has a policy and process
manufactured overseas. Failure for the selection of new suppliers.
to carry out sufficient due diligence This includes a review of compliance
and to act in the event of any with laws and regulations and that
negative findings, especially suppliers meet generally accepted
in relation to ethical or quality standards of good practice. In addition,
related issues, could adversely suppliers are required to sign up
impact our brand and reputation. to the Joules code of conduct.
The Group operates a programme of
ethical audits across the product
supply base supported by a third-party
agency.
================================================
Design
As with all clothing and lifestyle Joules has a long established in-house
brands there is a risk that our creative and design team who have
offer will not satisfy the needs a high level of awareness and understanding
of our customers or that we fail of our target customer segment.
to correctly identify trends A large proportion of our product
that are important to our customer range is anchored in classic products
base. These outcomes may result that are evolved season to season.
in lower sales, excess inventories Early feedback from our trade customers
and/or higher markdowns. can allow us to further refine our
product range ahead of significant
purchase commitments.
================================================
Key management
Our business performance is linked The Group's remuneration policy,
to the performance of our people which includes a long-term incentive
and to the leadership of key scheme and performance-related pay,
individuals. The loss of a key is designed to attract and retain
individual whether at management key management. The Group operates
level or within a specialist learning and development programmes
skill set could have a detrimental to increase the opportunities for
effect on our operations and, internal succession.
in some cases, the creative vision
for the brand.
================================================
IT security and systems availability
Non-availability of the Group's A business continuity plan exists
IT systems, including the e-commerce to minimise the impact of a loss
websites, for a prolonged period, of key systems and to recover the
could result in business disruption, use of the system and associated
loss of sales and reputational data.
damage. A regular assessment of vulnerability
Malicious attacks, data breaches to malicious attacks is performed
or viruses could lead to business and any weaknesses rectified. All
interruption and reputational Group employees are made aware of
damage. the Group's IT security policies
and we deploy a suite of tools (including
email filtering and antivirus software)
to protect against such events.
==============================================
Supply chain
The disruption to any material The Group outsourced its UK DC operations
element of the Group's supply to Clipper Logistics plc (Clipper)
chain, in particular the UK central in the prior period, this provides
distribution centre (DC), could access to Clippers business continuity
impact sales and impact on our arrangements in the event of the
ability to supply our consumers, loss of the UK distribution centre.
stores and wholesale customers. In addition, the Group maintains
insurance cover at an appropriate
level to protect against the impact
of such an interruption.
==============================================
Garden Trading acquisition and
integration At the same time as undertaking
During the Period the Group acquired extensive financial, legal and operational
100% of the share capital of due diligence prior to the acquisition,
The Garden Trading Company Limited. the Group also established an integration
Significant financial investment project team that has continued
has been made in the acquisition to be focussed post acquisition
and the successful integration on delivering a successful transition
and development of the Garden of Garden Trading into the Joules
Trading business will be key Group.
for the delivery of the Group's The Directors are working closely
overall strategy. with the management team at Garden
Trading to monitor the current and
future trading performance of the
business.
================================================
CONSOLIDATED INCOME STATEMENT
JOULES GROUP PLC
Restated
52 weeks 53 weeks
ended ended
30 May 31 May
Note 2021 2020
GBP'000 GBP'000
REVENUE 4 199,007 190,808
Cost of sales 4 (101,505) (93,997)
GROSS PROFIT 97,502 96,811
Other administrative expenses 4 (88,126) (99,273)
Share-based compensation 15 (1,653) 371
Exceptional administrative
expenses 3 (4,162) (20,950)
Total administrative expenses (93,941) (119,852)
OPERATING PROFIT/(LOSS) 3,561 (23,041)
Finance costs 6 (1,583) (1,774)
PROFIT/(LOSS) BEFORE TAX 1,978 (24,815)
Income tax (expense)/credit 7 (1,085) 4,539
PROFIT/(LOSS) FOR THE PERIOD 893 (20,276)
Basic earnings/(loss) per
share (pence) 14 0.82 (21.61)
Diluted earnings/(loss)
per share (pence) 14 0.81 (21.61)
Note on prior year restatement: For further details of prior
year balances, refer to Note 1 - Significant Accounting
Policies.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
JOULES GROUP PLC
Restated
53 weeks
52 weeks ended
ended 31
30 May May
2021 2020
GBP'000 GBP'000
PROFIT/(LOSS) FOR THE PERIOD 893 (20,276)
Items that may be reclassified subsequently
to profit or loss:
Net loss arising on changes in fair
value of hedging instruments entered
into for cash flow hedges (4,286) (2,425)
Gains arising during the period on
deferred tax on cash flow hedges 753 472
Gains/(losses) arising during the
period on deferred tax on share options 123 (177)
Net foreign exchange (loss)/gain difference
on translation of foreign operations (1,900) 732
TOTAL COMPREHENSIVE (LOSS) FOR THE PERIOD (4,417) (21,674)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
JOULES GROUP PLC
Restated
Note 30 May 2021 31 May 2020
GBP'000 GBP'000
NON-CURRENT ASSETS
Goodwill 2 5,531 -
Intangibles 9 25,566 20,507
Property, plant and equipment 8 27,737 20,547
Right-of-use-assets 10 28,287 32,523
Derivative financial instruments - 383
Deferred tax 908 3,034
TOTAL NON-CURRENT ASSETS 88,029 76,994
CURRENT ASSETS
Inventories 46,624 32,938
Right-of-return asset 925 2,364
Trade and other receivables 14,996 9,226
Current corporation tax receivable - 2,099
Cash and cash equivalents 12 17,997 26,243
Derivative financial instruments - 928
Asset held for sale 4,800 -
TOTAL CURRENT ASSETS 85,342 73,798
TOTAL ASSETS 173,371 150,792
CURRENT LIABILITIES
Trade and other payables 58,750 31,678
Lease liabilities 10 9,360 11,047
Current corporation tax payable 520 -
Borrowings 11 6,196 12,924
Provisions 2,940 2,368
Right of return provision 2,026 5,129
Asset held for sale - lease
liability 2,400 -
Derivative financial instruments 3,129 -
Other financial liabilities
- contingent consideration 5,646 -
TOTAL CURRENT LIABILITIES 90,967 63,146
NON-CURRENT LIABILITIES
Borrowings 11 7,724 8,780
Lease liabilities 10 30,451 35,635
Derivative financial instruments - 473
TOTAL NON-CURRENT LIABILITIES 38,175 44,888
TOTAL LIABILITIES 129,142 108,034
NET ASSETS 44,229 42,758
EQUITIES
Share capital 1,116 1,081
Hedging reserve (2,804) 999
Translation reserve (650) 1,250
EBT reserve (769) (769)
Merger reserve (125,807) (125,807)
Retained earnings 141,818 139,496
Share premium 26,508 26,508
Other reserve 4,817 -
TOTAL EQUITY 44,229 42,758
Note on prior year restatement: For further details of prior
year balances, refer to Note 1 -Significant Accounting
Policies.
These financial statements of Joules Group plc (Company
Registration Number 10164829) were approved by the Board of
Directors and authorised for issue on 2 August 2021 and were signed
on behalf of the Board of Directors by:
NICHOLAS JONES
Chief Executive Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
JOULES GROUP PLC
Merger Other Hedging Translation EBT Share Share Retained Total
reserve Reserve reserve reserve reserve capital premium earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 26
May 2019 (125,807) - 2,631 518 (322) 878 11,410 162,085 51,393
Loss for the
period - - - - - - - (20,276) (20,276)
Other
comprehensive
income/(loss)
for the period - - (1,953) 732 - - - (177) (1,398)
Total
Comprehensive
income for the
period - - (1,953) 732 - - - (20,453) (21,674)
Basis
adjustment
to hedged
inventory - - 321 - - - - - 321
EBT share
purchases
and
commitments - - - - (1,171) - - - (1,171)
Share-based
compensation
options
satisfied
through the
EBT reserve 724 (349) 375
Dividends
issued
(Note 16) - - - - - - - (1,202) (1,202)
Shares issued - - - - - 203 15,098 - 15,301
Debit to equity
for
equity-settled
share-based
compensation
excl. NI - - - - - - - (267) (267)
Debit to equity
for cash paid
on net-settled
withheld
share-based
compensation - - - - - - - (318) (318)
Restated Balance
at 31 May 2020 (125,807) - 999 1,250 (769) 1,081 26,508 139,496 42,758
Profit for the
period - - - - - - - 893 893
Other
comprehensive
(expense) for
the period - - (4,286) (1,900) - - - - (6,186)
Gains arising
during the
period
on deferred
tax on cash
flow hedges - - 753 - - - - - 753
Gains arising
during the
period
on deferred
tax on share
options - - - - - - - 123 123
Total
Comprehensive
(loss) for the
period - - (3,533) (1,900) - - - 1,016 (4,417)
On acquisition
of subsidiary - 4,817 - - - - - - 4,817
Basis
adjustment
to hedged
inventory - - (270) - - - - - (270)
Shares issued - - - - - 35 - - 35
Credit to
equity
for
equity-settled
share-based
compensation
excl. NI - - - - - - - 1,306 1,306
Balance at 30
May 2021 (125,807) 4,817 (2,804) (650) (769) 1,116 26,508 141,818 44,229
Note: For further details on the restatement and prior year
balances, refer to Note 1 - Significant Accounting Policies.
CONSOLIDATED CASH FLOW STATEMENT
JOULES GROUP PLC
Restated
52 weeks 53 weeks
ended 30 ended
May 31 May
Note 2021 2020
GBP'000 GBP'000
Cash generated from operations
Profit/(loss) for the period 893 (20,276)
Adjustments for:
Depreciation of property, plant and
equipment 8 2,583 3,018
Depreciation of right-of use assets 10 7,995 12,645
Amortisation 9 5,432 3,803
Exceptional administrative expenses
- impairment 3 2,896 20,446
Share-based compensation 15 1,653 (371)
Finance cost expense 6 1,583 1,774
Income tax expense/(credit) 7 1,085 (4,640)
Operating cash flows before movements
in working capital 24,120 16,500
(Increase)/decrease in inventory and
right of return asset (10,065) 624
(Increase)/decrease in receivables (3,708) 8,537
Increase/(decrease) in payables and
right of return provision 18,078 (11,573)
Cash generated by operations 28,425 14,088
Bank interest paid (340) (366)
Interest paid on lease liabilities 10 (1,243) (1,408)
Tax refunded/(paid) 2,989 (931)
Net cash from operating activities 29,831 11,383
Cash flow from investing activities
Purchase of property, plant and equipment
and intangible assets 8/9 (13,562) (13,686)
Acquisition of subsidiary 2 (4,156) -
Net cash from investing activities (17,718) (13,686)
Cash flow from financing activities
Purchase of EBT shares - (1,171)
Issue of shares - 15,570
Capital element of lease repayments 10 (11,299) (12,306)
Repayment of borrowings 12 (7,784) (348)
Proceeds from borrowings 12 - 11,850
Dividend paid 16 - (1,202)
Net cash from financing activities (19,083) 12,393
Net (decrease)/increase in cash and
cash equivalents 12 (6,970) 10,090
Cash and cash equivalents at beginning
of period 26,243 16,013
Effect of foreign exchange rate changes (1,276) 140
Cash and cash equivalents at end of
period 12 17,997 26,243
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION OF PRELIMINARY ANNOUNCEMENT
The preliminary consolidated financial information for the 52
weeks ended 30 May 2021 was approved by the Directors on 2 August
2021.
This preliminary consolidated financial information has been
prepared in accordance with the principles of International
Financial Reporting Standards ('IFRS') as adopted by the EU and has
been prepared on a going concern basis. The preliminary
consolidated financial information does not constitute statutory
consolidated financial statements for the 52 weeks ended 30 May
2021 as defined in section 434 of the Companies Act 2006 but is
derived from those financial statements.
The Annual Report and Group Financial Statements for the 52
weeks ended 30 May 2021 are the sixth for Joules Group plc and were
approved by the Board of Directors on 2 August 2021. The report of
the auditor on those Group Financial Statements was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statement under section 498 of the Companies Act 2006. The
Annual Report and Group Financial Statements for the 52 weeks ended
30 May 2021 will be filed with the Registrar in due course. The
auditors have consented to the publication of the Preliminary
Announcement.
Application of new and revised International Financial Reporting
Standards (IFRSs)
There have been no new IFRSs adopted in the current year which
have materially impacted the Group's financial statements.
Restatement of prior period Statement of Financial Position
An adjustment has been made to the prior period Income Statement
and Statement of Financial Position to exceptional administrative
expenses, right-of-use assets and related tax balances in relation
to the treatment of prior year impairment considerations. The
effect on specific financial statement line items within the
Consolidated Income Statement and Consolidated Statement of
Financial Position is as follows:
Consolidated Income Statement:
31-May-20
Reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Exceptional administrative expenses (21,480) 530 (20,950)
Income tax credit 4,640 (101) 4,539
Loss for the period (20,705) 429 (20,276)
Consolidated Statement of Financial Position:
31-May-20
Reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Right-of-use assets 31,993 530 32,523
Deferred tax asset 3,135 (101) 3,034
Retained Earnings 139,067 429 139,496
Going concern
As for many businesses in the retail sector, the Group has
continued to be significantly impacted by COVID-19 during the
Period. The impact and management's response is set out in further
detail within the CEO's report and the Financial Review.
Despite the easing of the UK's lockdown and the re-opening of
non-essential retail in mid-April 2021, the retail sector continues
to face significant uncertainties, including short-term and
potentially more fundamental long-term changes in consumer
behaviour as well as the potential for ongoing operational
disruption. Given these uncertainties, the Directors have
undertaken a comprehensive assessment to consider the going concern
and longer-term viability of the Group and Company. In making their
assessment the Directors have considered the following:
-- The Group's financial position, as at the date of this
report, and its committed borrowing facilities available for the
time period under consideration
-- The support from the Group's shareholders and bank, including
the successful equity placing that was completed in the early
stages of the UK lockdown during the prior period and the financing
facility extension that was completed in April 2021
-- Alternative sources of financing, including sale &
leaseback of freehold property and asset financing that might
reasonably be assumed to be available to the Group - noting that
any financing from these sources has not been included within the
forecasts that support the going concern assessment
-- Financial commitments, including capital commitments, lease
commitments, stock purchases and other
non-variable/non-discretionary costs. In respect of property
leases, the Directors note the relatively short lease commitments,
of less than three years on average, that the Group has across its
store portfolio together with recent and on-going progress on
renewing leases on favourable terms
-- The extent of potential Government support initiatives
including business rates relief and the Coronavirus Job Retention
Scheme (CJRS)
-- Strength of brand, reflected in active customer growth, brand
awareness and brand health metrics - as detailed more fully in the
Strategic Review
-- The flexibility and agility of the Group's business model, as
described in the Strategic Review, noting that over two thirds of
the Group's retail sales are via e-commerce and that the Group has
diversified sources of revenue, operating across several channels
and geographic markets, with owned and third-party channels
including wholesale and marketplaces. Newer income streams of brand
licensing and the Group's Friends of Joules digital marketplace and
from Garden Trading following the acquisition in February 2021
provide additional comfort on the strength of the brand and
diversity of income channels
The Directors have also considered the trading performance of
the Group's stores as they have re-opened following the easing of
the UK's lockdown restrictions on 12 April 2021, as well as the
performance of the Group's e-commerce channel, which has continued
to exceed management's expectations during the Period.
The Directors have reviewed management's business plan forecasts
that cover the period to 26 May 2024, being the Group's strategic
plan horizon. The forecasts have been produced on the following
basis:
-- Base plan - a gradual sales recovery post the end of the UK's
third lockdown in April 2021, continuing the trend experienced
since the UK's lockdown restrictions were eased in mid-April 2021,
reflecting management's estimates for the speed and extent of
recovery across its different sales channels and markets. It
reflects stores being open throughout the period under review
initially trading significantly below the comparative pre-COVID-19
period, improving to approximately 80% of pre-COVID-19 sales levels
by the end of FY22, with modest growth thereafter. Third-party
wholesale channels are assumed to follow a similar trajectory. The
Group's e-commerce sales are forecast to grow at double-digit
levels reflecting performance over recent years and experienced
during the UK's latest lockdown in January to March 2021.
-- Downside scenario - the 'Base plan' adjusted to reflect a
further UK lockdown for three months during October to December
2021 with all non-essential retail closed during the Group's key
trading period, followed by a much slower recovery of the Group's
stores channel with total store revenues only achieving
approximately 60% of the pre-COVID-19 levels by the end of FY24.
E-commerce sales growth is assumed to be at half of the 'Base plan'
levels and wholesale sales are assumed to reduce significantly
during FY22 compared to the 'Base plan'.
Within each forecast, management have reflected financial
commitments and the impact of realised or anticipated cost savings
from discretionary and variable costs. No Government support or
subsidies, other than those announced and committed at the date of
this report, are included.
The Directors have also stress tested the forecast to consider
situations under which the Company would have insufficient
liquidity under its current secured borrowing facilities and/or it
would not meet its banking covenant tests. One such 'Stress test
scenario' is that of an even further extended potential COVID-19
related lockdown in the UK for up to six months, with a material
disruption to retail store operations during the full peak
Autumn/Winter 2021 trading season resulting in significantly
reduced store channel revenue and lower receipts from the Group's
Wholesale channels. The Stress test scenario assumes e-commerce
revenue growth in line with the 'Downside scenario' noting that
loyal customers would no longer be able to access the brand via the
store environment - as demonstrated during the previous UK
lockdowns, plus ongoing income from Garden Trading, brand licensing
and digital marketplace activities. The Stress test scenario
assumes that the Group would only reduce directly related variable
sales costs during the period and does not assume any further cost
mitigation actions which would be available to the Group. No
additional Government support or subsidies to offset costs or
support cash flow are assumed in this scenario.
The Directors believe, with reference to the considerations
noted above, that, firstly the likelihood of this situation arising
in its most extreme form is remote and, secondly, that they
anticipate that the Group would be able to adapt and respond to
mitigate the impacts and continue to trade and meet its obligations
through the period of consideration.
The Base plan and Downside scenario forecasts indicate that the
Group will remain within its available committed borrowing
facilities and in compliance with covenants throughout the
forthcoming 12-month period. Under the Downside scenario, the Group
has more than GBP20 million available liquidity headroom
through-out the period under consideration and has EBITDA headroom
of GBP2.7 million against its May 2022 year end covenant test and
headroom of GBP5.6 million at its first covenant test in the period
at the end of November 2021.
The Group would also remain within its borrowing facilities and
comply with covenants under the Stress test through this
period.
Following consideration of these forecasts and having made
appropriate enquiries, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence until at least 12 months after the approval of the
Financial Statements. Therefore, the Directors continue to adopt
the going concern basis of accounting in preparing the Consolidated
Financial Statements.
Operating profit
Operating profit is presented in the Consolidated Income
Statement as a "non-GAAP measure" of performance, and is calculated
as profit before finance charges and taxation. There have been no
changes to this definition from the prior period.
Exceptional administrative expenses
Exceptional administrative expenses are those that, in
management's judgement, should be disclosed by virtue of their
nature or amount. Exceptional administrative expenses will
typically include material items that are significant in nature,
which are expected to be non-recurring and are important to users
in understanding the business.
2. ACQUISITION OF A SUBSIDIARY
On 9 February 2021 the Group acquired 100% of the issued share
capital and obtained control of The Garden Trading Company Limited.
The Garden Trading Company Limited is a digitally focused retailer
of home and garden products and qualifies as a business as defined
in IFRS 3. The Garden Trading Company Limited was acquired to
support the Group's strategy to grow its customer base, broaden its
product offer and strengthen its digital platform.
The amounts in respect of the identifiable assets acquired and
liabilities assumed are set out in the table below.
GBP'000
Financial assets 8,575
Inventory 1,997
Property, plant and equipment 371
Identifiable intangible assets 6,622
Financial liabilities (5,121)
Deferred tax liabilities (1,590)
Total identifiable assets acquired, and
liabilities assumed 10,854
Goodwill 5,531
Total consideration 16,385
--------
Satisfied by: GBP'000
Cash 5,860
Equity instrument (2,828,535 ordinary
shares of Joules Group plc) 4,879
Contingent consideration arrangement 5,646
Total consideration transferred 16,385
--------
Net cash outflow arising on acquisition: GBP'000
Cash consideration paid to date 5,489
Less: cash and cash equivalent balances
acquired (1,333)
4,156
--------
The potential undiscounted amount of all future payments that
the Group could be required to make in respect of this contingent
liability is estimated to be between GBPnil and GBP5.7million. Due
to the contingent consideration being due within one year, the
impact of discounting is considered to be insignificant.
The goodwill of GBP5.5million arising from the acquisition
consists of savings from acquiring an existing workforce, as well
as technology and contract related costs. None of the goodwill is
expected to be deductible for income tax purposes.
The fair value of the 2,828,535 ordinary shares issued as part
of the consideration paid for The Garden Trading Company Limited of
GBP4.9million was determined on the basis of multiplying the number
of shares issued by the share price at the acquisition date.
The contingent consideration arrangement consists of two
elements. The first element requires two earn-out targets being
met, and the second element is contingent on the sale of a
property. The potential undiscounted amount of all future payments
that Joules Group plc could be required to make under the
contingent consideration arrangement is between GBPnil and
GBP5.7million.
Acquisition-related costs (included in exceptional
administrative expenses) amount to GBP0.6million.
The Garden Trading Company Limited contributed GBP8.7million
revenue and GBP1.8million to the Group's profit for the period
between the date of acquisition and the reporting date.
If the acquisition of The Garden Trading Company Limited had
been completed on the first day of the financial year, Group
revenues for the year would have been GBP212.3 million and Group
profit before tax and exceptional administrative expenses would
have been GBP8.2 million.
3. EXCEPTIONAL ADMINISTRATIVE EXPENSES
The exceptional administrative expenses recognised in the period
relate to right-of use assets, property plant and equipment,
and intangible assets which are impaired, as well as other
costs associated with the acquisition of The Garden Trading
Company Limited and restructuring across the Group. The total
charge recognised in the period can be categorised as follows:
Restated
52 weeks 53 weeks
ended ended
30 May 31 May
2021 2020
GBP'000 GBP'000
Impairment of assets relating
to stores 1,989 18,795
Impairment of other fixed assets 907 1,651
Acquisition costs 589 -
Restructuring costs 677 504
4,162 20,950
Store impairments
Retail stores are subject to impairment based on whether current
or future events and conditions suggest that their recoverable
amount may be less than their carrying value.
The recoverable amount of each store is based on the higher of
the value in use and fair value less costs to dispose. As all the
Group's retail stores are leasehold, only the value in use has been
considered in each impairment assessment. Value in use is
calculated from expected future cash flows using suitable discount
rates, management assumptions and estimates on future performance.
The carrying value for each store is considered net of the carrying
value of any cash contribution received in relation to that
store.
For impairment testing purposes, the Group has determined that
each store is a separate CGU. Each CGU is tested for impairment if
any indicators of impairment have been identified.
The value in use of each CGU is calculated based on the Group's
latest budget and forecast cash flows. Cash flows are discounted
using the weighted average cost of capital ("WACC") of 14% and are
modelled for each store through to their lease expiry or break
date. No lease extensions have been assumed when forecasting.
As a result of this assessment an impairment charge of
GBP2,624,000 (2020: GBP16,187,000) and reversals of GBP840,000
(2020: GBPnil) were recognised in the period against the
right-of-use asset for the stores which are impaired. The
impairment charge relates to 31 separate CGU's (2020: 79) and
impairment reversals relate to 13 stores (2020: nil). The stores
with impairment reversals were written back to their recoverable
amount. An additional amount of GBP205,000 (2020: GBP2,608,000)
related to fixtures and fittings associated with these stores.
Store impairment charges relate to the Retail segment described in
Note 4.
Other fixed assets
An in-depth review of other fixed assets has also been performed
as part of the 'Joules Blueprint' strategy to identify any which
are not fit for purpose with new strategic pillars established.
Based on the factors set out above, the Group has recognised
GBP591,000 (2020: GBP141,000) relating to intangible fixed assets
that are impaired, and GBP316,000 (2020: GBP1,510,000) relating to
property, plant and equipment.
Acquisition costs
During the Period one-off charges of GBP589,000 were incurred
relating to acquisition costs of The Garden Trading Company
Limited. Further details on the acquisition are within Note 3.
Restructuring costs
During the Period total amounts recognised of GBP677,000 (2020:
GBP504,000) related to group restructuring costs. The restructuring
costs related to a re-organisation of structures across the Group's
head office functions which commenced in FY20 and was completed in
the Period as part of the 'Joules Blueprint' business strategy to
review organisational design and introduce clarity around roles and
responsibilities.
4. SEGMENT REPORTING
The Group has three reportable segments; Retail, Wholesale and
Other. For each of the three segments, the Group's chief operating
decision maker (the "Board") reviews internal management reports on
a monthly basis. Each segment can be summarised as follows:
-- Retail: Retail includes sales and costs relevant to stores,
e-commerce, shows and franchises.
-- Wholesale: Wholesale includes sales and costs relevant to the
sale of products to other retail businesses or distributors for
onward sale to their customer.
-- Other: Other includes income from licencing and the 'Friends
of Joules' digital marketplace, central costs and items that are
not distinguishable into the segments above.
The accounting policies of the reportable segments are the same
as described in Note 1. Information regarding the results of each
reportable segment is included below. Operating results being
earnings before exceptional administrative expenses, share-based
compensation, interest and taxation are used to measure performance
as management believes that such information is the most relevant
in evaluating the performance of certain segments relative to other
entities that operate within these industries. Performance of The
Garden Trading Company Limited has been allocated appropriately
within the Retail and Wholesale segments.
All income and expenses are allocated to reportable segments
with the exception of share-based compensation, exceptional
administrative expenses and finance costs. There are no
discontinued operations in the period.
52 WEEKSED 30 MAY 2021 Retail Wholesale Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 158,588 35,305 5,114 199,007
Cost of sales (75,656) (25,849) - (101,505)
--------- ---------- --------- ----------
GROSS PROFIT 82,932 9,456 5,114 97,502
Administration expenses (38,371) (9,319) (24,426) (72,116)
Depreciation and amortisation (9,033) (276) (6,701) (16,010)
--------- ---------- --------- ----------
OPERATING RESULT 35,528 (139) (26,013) 9,376
--------- ---------- --------- ----------
Costs unallocated to segments:
Share-based compensation
(incl. NI) (1,653)
Exceptional administrative
expenses (4,162)
Finance costs (1,583)
PROFIT BEFORE TAX 1,978
----------
Restated Retail Wholesale Other Total
53 WEEKSED 31 MAY 2020
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 145,898 42,668 2,242 190,808
Cost of sales (62,880) (31,117) - (93,997)
--------- ---------- --------- ---------
GROSS PROFIT 83,018 11,551 2,242 96,811
Administration expenses (42,423) (12,219) (25,165) (79,807)
Depreciation and amortisation (13,964) (773) (4,729) (19,466)
--------- ---------- --------- ---------
OPERATING RESULT 26,631 (1,441) (27,652) (2,462)
--------- ---------- --------- ---------
Costs unallocated to segments:
Share-based compensation (
incl. NI) 371
Exceptional administrative
expense (20,950)
Finance costs (1,774)
---------
LOSS BEFORE TAX (24,815)
---------
GEOGRAPHICAL INFORMATION
The Group's revenue from external customers and non-current
assets by geographical location is as detailed below.
UK International Total
GBP'000 GBP'000 GBP'000
52 weeks ended 30 May
2021
Revenue 174,000 25,007 199,007
Non-current assets 87,128 901 88,029
53 weeks ended 31 May
2020
Revenue 161,307 29,501 190,808
Non-current assets 75,983 1,011 76,994
5. PROFIT FOR THE YEAR
Profit before tax is stated after charging/(crediting):
52 weeks 53 weeks
ended ended
30 May 31 May
2021 2020
GBP'000 GBP'000
Cost of inventories recognised as expense 83,223 79,850
Write down of inventory in the period 1,556 682
Transportation, carriage and packaging 14,597 11,499
Property rent and service charges 1,113 792
Government business rates relief (2,251) (815)
Depreciation of property, plant and equipment 2,583 3,018
Depreciation of Right-of-use assets 7,995 12,645
Amortisation of intangible assets 5,432 3,803
Staff costs 30,522 35,311
Share-based compensation 1,653 (371)
Exceptional administrative expenses (see
Note 3) 4,162 20,950
Auditor's remuneration 52 weeks 53 weeks
ended ended
30 May 31 May
2021 2020
GBP'000 GBP'000
The analysis of auditor's remuneration
is as follows:
Audit of these financial statements 225 141
Total audit fees 225 141
Other services pursuant to legislation:
Tax advice - 8
Audit related assurance services - 5
Remuneration and share plan advisory 620
Total non-audit fees 633
Non-audit services
The general policy in respect of non-audit work by the external
auditors is that they should not be requested to carry out a
prohibited non-audit service as defined under provision 5.120 -
5.127 of the Financial Reporting Council's Ethical Standard and/or
non-audit services on any material activity of the Group where they
may, in the future, be required to give an audit opinion or act as
management, in accordance with the Audit Practices Board's Ethical
Standard for Auditors.
In certain limited areas, it is in the Group's and its
shareholders' interests to engage the external audit firm to
deliver certain services.
To protect auditor objectivity and independence management
approves each individual non-audit service. The level of non-audit
fees are monitored to ensure they do not exceed 70% of the average
annual statutory audit fees payable annually.
6. FINANCE COSTS
52 weeks 53 weeks
ended ended
30 May 31 May
2021 2020
GBP'000 GBP'000
Credit facility interest 146 258
Term loan interest 194 108
Lease liability interest 1,243 1,408
1,583 1,774
7. INCOME TAX
Restated
52 weeks 53 weeks
a) Analysis of charge in the period ended ended
30 May 31 May
2021 2020
GBP'000 GBP'000
Current tax
UK corporation tax based on the profit/loss
for the period - (3,029)
Adjustment in respect of prior periods (365) (5)
Overseas tax 37 275
Total current tax (credit) (328) (2,759)
Deferred taxation
Origination and reversal of temporary
differences 608 (1,333)
Adjustment in respect of prior periods 596 (251)
Effect of adjustment in tax rate 209 (196)
Total deferred taxation charge/(credit) 1,413 (1,780)
Tax charge/(credit) for the period (Note
7b) 1,085 (4,539)
In addition to the amount charged to the Income Statement, the
following amounts relating to tax have been recognised in other
comprehensive income.
52 weeks 53 weeks
ended 30 ended 31
May May
2021 2020
GBP'000 GBP'000
Deferred taxation
(Loss) arising during the period on deferred tax
on cash flow hedges (753) (472)
Deferred tax on unexercised share options (123) 177
Total income tax (loss) recognised in other comprehensive
income (876) (295)
b) Factors affecting the tax charge for the period
There are reconciling items between the expected tax charge and
the actual which are shown below:
Restated
52 weeks 53 weeks
ended 30 ended 31
May May
2021 2020
GBP'000 GBP'000
Profit/(loss) before taxation 1,978 (24,815)
UK corporation tax at the standard rate 19.0% 19.0%
Profit multiplied by the standard rate in the
UK 376 (4,715)
Effects of:
Expenses not deductible for tax purposes and
other permanent differences 134 725
Adjustment in respect of prior period 231 (3,285)
Difference in overseas tax rate 9 21
Effect of adjustment in deferred tax rate 212 (196)
Share-based compensation 123 (300)
Losses carried back - 3,160
R&D expenditure credits - 33
IFRS 16 practical expedient on transition adjustment - 18
Tax expense/(credit) for the period (Note 7a) 1,085 (4,539)
The current tax credit in the prior period includes a reversal
of the prior year corporation tax charge for the 52 weeks ended 26
May 2019, following a carry back of tax losses generated for the 53
weeks ended 31 May 2020.
An increase in the UK corporation rate from 19% to 25%
(effective 1 April 2023) was substantively enacted on 24 May 2021.
This will increase the company's future current tax charge
accordingly. The deferred tax asset at 30 May 2021 has been
calculated based on these rates, reflecting the expected timing of
reversal of the related temporary differences (2020: 19%).
8. PROPERTY, PLANT AND EQUIPMENT
Land & Fixtures Motor vehicles
buildings and fittings GBP'000 Total
GBP'000 GBP'000 GBP'000
Cost
At 26 May 2019 7,391 29,450 59 36,900
Additions 7,280 3,095 63 10,438
At 31 May 2020 14,671 32,545 122 47,338
Additions 6,887 3,149 - 10,036
Acquisition of subsidiary 203 168 - 371
Exchange differences - (113) - (113)
At 30 May 2021 21,761 35,749 122 57,632
Accumulated depreciation
At 26 May 2019 - 19,596 59 19,655
Charge for the period - 2,980 38 3,018
Impairment - 4,118 - 4,118
At 31 May 2020 - 26,694 97 26,791
Charge for the period 16 2,560 7 2,583
Impairment - 521 - 521
At 30 May 2021 16 29,775 104 29,895
Net book value
At 26 May 2019 7,391 9,854 - 17,245
At 31 May 2020 14,671 5,851 25 20,547
At 30 May 2021 21,745 5,974 18 27,737
Property, Plant and Equipment
Land & buildings comprise of land, buildings and capitalised
borrowing costs in relation to the ongoing development of the site
intended for use as the Group's new head office, which is under
construction therefore is not being depreciated. The amount of
borrowing costs capitalised in the year amounted to GBP112,000
(2020: GBP112,000). The amount of expenditure recognised in the
carrying amount of land and buildings above in relation to the new
head office whilst in the course of its construction is
GBP20,813,000 (2020: GBP13,996,000). Completion of the new Head
Office for the Group took place in June 2021.
During the Period, the Group carried out a review of the
recoverable amount of property, plant and equipment. The review led
to the recognition of an impairment loss of GBP521,000 (2020:
GBP4,118,000), which was recognised within exceptional
administrative expenses in the Consolidated Income Statement.
9. INTANGIBLE ASSETS
Trademarks IT Systems
and other GBP'000 Total
intangibles GBP'000
GBP'000
Cost
At 26 May 2019 1,178 23,442 24,620
Additions 81 7,508 7,589
At 31 May 2020 1,259 30,950 32,209
Additions 44 4,395 4,439
Acquisition of subsidiary 6,622 21 6,643
At 30 May 2021 7,925 35,366 43,291
Accumulated amortisation
At 26 May 2019 397 7,361 7,758
Charge for the period 124 3,679 3,803
Impairment - 141 141
At 31 May 2020 521 11,181 11,702
Charge for the period 256 5,176 5,432
Impairment - 591 591
At 30 May 2021 777 16,948 17,725
Net book value
At 26 May 2019 781 16,081 16,862
At 31 May 2020 738 19,769 20,507
At 30 May 2021 7,148 18,418 25,566
Intangible assets
During the year, the Group carried out a review of intangible
assets as part of the 'Joules Blueprint' strategy to identify any
which are not fit for purpose with new strategic pillars
established. The review led to the recognition of an impairment
loss of GBP591,000 (2020: GBP141,000), which was recognised within
exceptional administrative expenses in the Consolidated Income
Statement.
10. LEASES
Land and Fixtures Motor
Right-of-use assets: buildings and Fittings Vehicles IT Equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 27 May
2019 57,645 199 356 646 58,666
Additions 1,381 - 131 - 1,512
Disposals (533) - - - (533)
Impairment (16,187) - - - (16,187)
Modifications 1,710 - - - 1,710
Depreciation of Right-of-use
assets (11,976) (97) (249) (323) (12,645)
----------- -------------- ---------- ------------- ---------
Restated Balance as
at 31 May 2020 31,860 102 238 323 32,523
----------- -------------- ---------- ------------- ---------
Additions 4,122 - 142 4,264
Impairment (1,784) - - - (1,784)
Modifications 1,279 - - - 1,279
Depreciation of Right-of-use
assets (7,438) (81) (139) (337) (7,995)
-----------
Balance as at 30 May
2021 28,039 21 99 128 28,287
----------- -------------- ---------- ------------- ---------
Land and Fixtures Motor
Lease liabilities: buildings and Fittings Vehicles IT Equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 27 May
2019 55,176 199 356 646 56,377
Additions 1,292 - 130 - 1,422
Disposals (521) - - - (521)
Interest expense related
to lease liabilities 1,376 3 16 13 1,408
Modifications 1,710 - - - 1,710
Repayment of lease
liabilities (including
interest) (13,020) (94) (265) (335) (13,714)
Balance as at 31 May
2020 46,013 108 237 324 46,682
----------- -------------- ---------- ------------- ---------
Additions 3,630 - - 142 3,772
Disposals (265) - - - (265)
Interest expense related
to lease liabilities 1,221 3 5 14 1,243
Modifications 921 - - - 921
Repayment of lease
liabilities (including
interest) (11,964) (27) (203) (348) (12,542)
Balance as at 30 May
2021 39,556 84 39 132 39,811
----------- -------------- ---------- ------------- ---------
An impairment charge of GBP2,624,000 (2020: GBP16,187,000) and
reversals of GBP840,000 (2020: GBPnil) were recognised in the
period against the right-of-use asset which are impaired (see Note
4 for further details).
11. BORROWINGS
Summary of borrowing arrangements
The Credit facility relates to one Revolving Credit Facility
with Barclays Bank PLC that totals GBP25.0 million, in which
amounts drawn down are generally repayable within three months. In
April 2020 an extension to the facility of GBP15 million was
provided by Barclays Bank PLC for a 12-month period, this expired
in April 2021.
In April 2021 the remaining GBP25 million facility was
renegotiated with Barclays Bank PLC and as a result the term was
extended out from July 2022 and now matures in September 2024. As
part of the April 2021 renegotiation of the RCF, the Group entered
into a new financing agreement which links the margin on the
facility with Joules' performance against three Sustainability
Performance Targets (SPTs) that are aligned with Joules' ESG focus
areas. Under the terms of the agreement, Joules will benefit from a
lower interest rate loan margin if the Group delivers on those
targets.
The term loan facility with Barclays Bank PLC is being used by
the Group to part fund the development of the Group's new head
office premises. The term loan facility is secured against the new
head office land and buildings asset and GBP8,780,000 of it was
drawn down as at the period end (2020: GBP9,044,000).
The weighted average interest rates paid during the period were
as follows:
52 weeks 53 weeks
ended ended
30 May 31 May
2021 2020
% %
Credit facility 2.4% 2.4%
Term loan 1.55% 1.9%
30 May 31 May
2021 2020
GBP'000 GBP'000
Credit facility 5,140 12,660
Term loan 8,780 9,044
13,920 21,704
Borrowings are repayable
as follows:
Credit facility
Within one year 5,140 12,660
Term loan
Within one year 1,056 264
Between one and two years 1,056 1,056
Between two and five years 6,668 7,724
8,780 9,044
Total borrowings
Within one year 6,196 12,924
Between one and two years 1,056 1,056
Between two and five years 6,668 7,724
13,920 21,704
12. ANALYSIS OF NET CASH / NET DEBT
At 31 May Cash flow Non-cash At 30 May
2020 GBP'000 changes 2021
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 26,243 (6,970) (1,276) 17,997
--------- --------- -------- ----------
Net cash per statement of cash
flows 26,243 (6,970) (1,276) 17,997
Borrowings (21,704) 7,784 - (13,920)
Net cash before lease liabilities
and contingent consideration 4,539 814 (1,276) 4,077
Lease liabilities (46,682) 12,542 (5,671) (39,811)
Contingent consideration - - (5,646) (5,646)
--------- --------- -------- ----------
Net debt after lease liabilities
and contingent consideration (42,143) 13,356 (12,593) (41,380)
--------- --------- -------- ----------
Non-cash changes relate to movements in interest on borrowings,
the retranslation of foreign currency balances at the end of the
period and lease acquisitions, disposals and modifications.
13. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
The Directors control 24,499,058 shares (2020: 30,420,923
shares) in Joules Group plc, which represents 22% (2020: 28.0%) of
the issued share capital.
14. EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing
profit attributable to ordinary equity holders by the weighted
average number of ordinary shares in issue during the period.
For the calculation of diluted earnings per share, the weighted
average number of shares in issue is further adjusted to assume
conversion of all potentially dilutive ordinary shares. The Company
has one category of potentially dilutive ordinary shares, being
management shares not yet vested.
During the 53 weeks ended 30 May 2020, diluted loss per share
was capped at the basic loss per share as the impact of dilution
cannot result in a reduction in the loss per share.
Restated
52 weeks 53 weeks
ended 30 ended 31
May May
2021 2020
Basic earnings/(loss) per share
(pence) 0.82 (21.61)
Diluted earnings/(loss) per
share (pence) 0.81 (21.61)
The calculation of basic and diluted earnings/(loss) per share
is based on the following data:
Earnings
GBP'000 GBP'000
Earnings/(loss) for the purpose of basic and 893 (20,276)
diluted earnings per share
Number of shares
Weighted number of ordinary shares for the
purpose of basic earnings per share 109,185,216 93,829,041
Potentially dilutive share awards 1,047,593 929,026
Weighted number of ordinary shares for the purpose
of diluted earnings per share 110,232,809 94,758,067
15. SHARE-BASED COMPENSATION
Summary of movement in awards
Number of shares DBP ESOP LTIP SAYE TOTAL
Outstanding at 31 May
2020 571,887 77,404 3,360,919 643,770 4,653,980
Granted during the
year 11,594 823,705 3,798,625 387,370 5,021,294
Lapsed during the year - - - (171,503) (171,503)
Cancelled during the
year - (34,159) (2,520,945) (162,329) (2,717,433)
Exercised during the
year (107,132) - (590,593) - (697,725)
Outstanding at 30 May
2021 476,349 866,950 4,048,006 697,308 6,088,613
Exercisable at 30 May
2021 51,455 46,551 57,755 24,603 180,364
As part of measures taken by the Group to preserve cash during
the COVID-19 crisis, Marc Dench, Nick Jones and the Group's
employees agreed to take a pay reduction and were granted options
on 6 April 2020 over 107,859 ordinary shares in Joules Group plc
with a value commensurate with the value of the salaries waived. In
response to shareholder feedback, during the period the Board
agreed to waive their FY20 LTIP awards in lieu of salary.
All share options were valued using the Black-Scholes model.
Expected volatility was determined by management, using comparator
volatility as a basis for share options granted in 2016, 2017,
2018, 2019 and 2020 and Joules historic volatility data for the
share options granted in 2020 and 2021. The expected life of the
options was determined based on management's best estimate. The
expected dividend yield was based on the anticipated dividend
policy of the Company over the expected life of the options. The
risk-free rate of return input into the model was a zero-coupon
government bond with a life in line with the expected life of the
options.
The fair value of the total shares issued during the period and
measured as at issue date is GBP5,942,501.
The inputs into the model were as follows:
DBP ESOP LTIP SAYE
============================ ============== ========== =========== ==========
Weighted average share GBP2.32 GBP1.71 GBP0.23 GBP2.42
price
Weighted average exercise GBP0.01 GBP1.53 GBP0.01 GBP1.95
price
No. of employees 4 18 602 108
Shares under option 715,613 1,589,002 9,314,433 1,813,440
Expected volatility 28% - 78% 28% - 71% 28% - 124% 28% - 71%
Expected life (Years) 3 3 3 3
Risk-free rate 0.08% - 0.44% 0.05% - 0.07% - 0.08% -
0.55% 0.55% 0.55%
Possibility of ceasing
employment before vesting 0% 0% 0% - 7.5% 10% - 15%
Expectations of meeting
performance criteria 100% 100% 0% - 40% 95%
Expected dividend yield 0% - 1.9% 0% - 1.9% 0% - 1.9% 0% - 1.9%
The Group recognised a net expense of GBP1,303,000 during the
year (2020: credit of GBP246,000) relating to cash settled and
equity settled share-based compensation. Including associated
employer's National Insurance contributions which in the year was
an expense of GBP350,000 (2020: GBP125,000 credit), the Group
recognised a total expense of GBP1,653,000 during the year (2020:
credit of GBP371,000).
Deferred Bonus Plan ("DBP")
The DBP operates in conjunction with the Group's annual bonus
plan. The number of ordinary shares subject to a DBP award will be
the number of shares that have a market value equal to the value of
the annual bonus deferred into a DBP award. DBP awards take the
form of nil-cost options, vest on the third anniversary of the date
on which the relevant annual bonus was determined and are normally
exercisable until the tenth anniversary of the grant date.
Executive Share Option Plan ("ESOP")
The Group operated a share option scheme during the period for
certain employees under the Executive Share Option Plan ("ESOP").
The different options vest between two years and three years and
have an exercise life between three and ten years from grant date.
All option schemes are subject to continued employment over the
vesting period.
Long Term Incentive Plan ("LTIP")
The Board approved Long Term Incentive Plan 2016 ("LTIP 2016")
allows the grant of options to executive directors and senior
management of the Group in the form of nil-cost options over
ordinary shares in Joules Group plc. The options are exercisable
three years after the date of grant subject to achieving certain
stretching targets.
The target of share option awards granted to the Executive
Directors and members of the operating board in 2018 is 80% based
on an EPS target in the final year of the relevant performance
period, being the financial year ending May 2021 and 20% of the
target is based on achieving specified international revenue
targets.
The share option awards granted to the Executive Directors,
members of the operating board and some senior managers in 2019 are
based upon achievement against four targets in the year ending May
2022: US revenue, UK digital sales, colleague engagement and
EPS.
The share option awards granted to the Executive Directors,
members of the operating board and some senior managers in FY21 are
based upon achievement against two targets, to be delivered in the
final year of the performance period (FY23). 50% of the awards will
be subject to adjusted diluted EPS, and 50% subject to the volume
weighted average price of Shares in the last 90 days of the
performance period.
For other senior management awards the target is based on the
cumulative PBT over the three years to May 2021, May 2022 and May
2023. The calculation includes an assumption that 10% of senior
managers on the scheme would cease employment before vesting.
Save As You Earn Scheme ("SAYE")
Under the terms of the SAYE scheme, the Board grants options to
purchase ordinary shares in the Company to employees who enter into
the HMRC-approved SAYE scheme for a term of three years. Options
are granted at up to 20% discount to the market price of the shares
on the day proceeding the date of offer and are exercisable for a
period of six months after completion of the SAYE contract.
16. DIVIDENDS
30 May 2021 31 May 2020
Pence GBP000 Pence GBP000
per share per share
Interim dividend paid in the financial - - - -
year
Final dividend proposed, not accrued, - - - -
payable subject to approval at AGM
Total - - - -
The Directors are not proposing a dividend this year.
[1] Brand awareness and brand health are measured as part of an
independent daily YouGov consumer survey. During the Period, brand
awareness increased by 2.0%pts to 48%, brand health was up 0.6%pts
to 11.1 (the brand health metric runs on scale from -100 to
+100).
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END
FR EXLBBFVLZBBE
(END) Dow Jones Newswires
August 03, 2021 02:00 ET (06:00 GMT)
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