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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