TIDMJOUL
RNS Number : 1288N
Joules Group plc
28 January 2021
Joules Group plc
("Joules", the "Group")
Interim Results for the 26 weeks ended 29 November 2020 (the
"Period")
Accelerating digital sales support delivery of profits ahead of
expectations for the Period
Highlights:
26 weeks ended 29 November 24 November Change
2020 2019
Group revenue GBP94.5m GBP111.6m -15.3 %
PBT before exceptional costs GBP3.7m GBP8.4m -GBP4.7m
Statutory PBT GBP1.3m GBP1.7m -GBP0.4m
Net Cash GBP15.6m GBP2.1m +GBP13.5m
- Group revenue decreased by 15.3% due to enforced closure of
non-essential retail with our own stores closed for 10 of the 26
weeks
- PBT before exceptional costs of GBP3.7 million was ahead of expectations
- E-commerce revenue on our own websites(1) grew by more than 45% in the first half
- Gross Digital Platform sales(2) that include Joules and
'Friends of Joules' sales ... increased by 55%
- Active customers(3) increased by nearly 160,000 over the last
six months ... now nearly 1.6 million
- Brand awareness(4) increased +0.9%pt on the year ... achieving record levels
- Statutory PBT after exceptional costs of GBP2.4m was down by GBP0.4 million at GBP1.3 million
- Net cash of GBP15.6 million (H1 FY20: GBP2.1m) ... ahead of expectations
- Strong e-commerce sales for 7 weeks to 3 January 2021 more
than offset impact of store closures through the Christmas trading
period with own Retail revenue up by 0.3%
- As announced separately today, Marc Dench, Chief Financial
Officer, has decided to leave the company in the coming months, to
take up a role in a different sector. Marc joined Joules as Chief
Financial Officer ahead of the Group's IPO in 2016. He has played
an important role in the Group's development over recent years into
the digitally led brand that it is today. A search process to
appoint a successor to the role is underway and the Board will make
a further announcement in due course.
Nick Jones, Chief Executive Officer, commented:
" We are pleased with the Group's performance during the first
half of the FY21 financial year with strong growth in active
customers and profits ahead of the Board's expectations. This
performance, underpinned by very strong sales growth through our
digital channels, was achieved despite challenging trading
conditions and extended periods of store closures.
"The Group's progress continues to reflect the strength of our
flexible and digital-led model, growing customer base and strong
brand as well as the talent and dedication of our teams. I would
like to take this opportunity to extend my sincere thanks to all
Joules colleagues for their hard work as well as to our customers
and partners for their continued support.
"Whilst the retail sector will continue to face near and
medium-term challenges as a result of the pandemic, I remain
confident that Joules - underpinned by the strength of our brand as
well as the Group's flexible and scalable platform - remains well
positioned to achieve its strategic objectives to grow as a leading
lifestyle brand and digital marketplace."
1. Owned e-commerce excludes sales of Joules products on third-party platforms
2. Gross Digital Platform sales is the total sales value (incl
VAT) of products sold through the Joules website - including Joules
and 'Friends of Joules' products
3. Active customer is a customer that is registered on the
Joules database and has transacted in the last 12 months
4. Brand Awareness & Brand Health metrics are from the YouGov industry panel survey
Enquiries:
Joules Group plc Tel: +44 (0) 1858 435
255
Nick Jones, CEO
Marc Dench, CFO
Hudson Sandler (Financial PR) Tel: +44 (0) 20 7796
4133
Alex Brennan
Lucy Wollam
Peel Hunt LLP, Nominated Advisor Tel: +44 (0) 20 7418
and Joint Broker 8900
George Sellar
Andrew Clark
Liberum Capital Limited, Joint Broker Tel: +44 (0) 20 3100
2000
John Fishley
Edward Thomas
Joules - a premium lifestyle brand with an authentic British
heritage
Joules is a premium lifestyle brand with an authentic heritage.
The Joules brand is about family, fun and joy in the countryside.
Joules creates and curates exceptional products that brighten the
lives of its customers, delivered through a leading digital
platform that is supported by enticing experiences and stores that
are located 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 ... with collections of
homeware, toiletries, lifestyle and pet product ranges that are
carefully designed and developed through selected licensing
partnerships.
Joules' distinctive design-led products are complemented by an
increasingly broad customer offer provided through its digital
marketplace 'Friends of Joules', enabling 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 their lifestyles.
The Joules brand caters to its 1.5 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.
Internationally, the brand has made good progress in its target
markets of the US and Germany, where the distinctive Joules brand
and products range resonate well with local customers.
International markets are served by wholesale partnerships and
dedicated Joules websites.
Joules' performance has been recognised through several awards
including:
-- Mainstream Brand of the Year - Drapers Awards 2019, 2017 and 2016
-- Best Licensed Fashion or Talent Brand Award - Brand & Lifestyle Licensing Awards 2019
-- Best Licensed Gifting Product Award - Brand & Lifestyle Licensing Award 2019
-- The Best Fashion Retailer (Mark of Excellence) - Retail Week Awards 2019 and 2018
-- Fashion Retail Business of the Year (between GBP101m-GBP500m
turnover) - Drapers Awards 2018 and 2017
www.joules.com www.joulesgroup.com
CEO STRATEGY UPDATE
INTRODUCTION
The Group is publishing this set of Interim Results for the 26
weeks ended 29 November 2020 during a period of COVID-19-related
national lockdown across the UK. At the outset of this report, on
behalf of the Board, I would like to extend my sympathies and well
wishes to those members of the Joules community who have been
affected by the virus.
I am incredibly proud of how Joules responded and adapted to the
disruption caused by the pandemic during the first half of the
financial year. This disruption was most profoundly felt during the
early stages of the Period, when we operated during and in the
immediate aftermath of the first UK-wide national lockdown, and at
the end of the Period when, from the Autumn, communities and
businesses once again faced tighter restrictions as a result of the
second wave of the virus. I would like to once again thank our
colleagues for their continued hard work, our customers for their
loyalty, and our partners for their collaboration throughout this
challenging time.
The Board is pleased with the Group's encouraging performance
during the first half of the FY21 financial year despite the
continuing highly challenging trading backdrop. The Group's
resilient results reflect the strength and increasing importance of
our digital proposition and the brand's relevance and growing
customer base as well as the skill, flexibility and dedication of
our team.
H1 RESULTS OVERVIEW
Joules' active customer base(1) , a key metric for the Group,
has continued to grow and now stands at nearly 1.6 million
customers. The increase of 160,000 active customers over the last
six months has been driven by strong growth in new digital
customers, up by 45% in the same period and whom now represent
nearly three-quarters of our customer base. This growth reflects
encouraging new customer acquisition trends during the Period
resulting from: the relevance of the brand and our products;
effective digital marketing investment; the positive impact of the
'Friends of Joules' digital marketplace; and enhanced brand
awareness and engagement - supported by the brand enhancing,
lifestyle locations of the majority of the Group's stores.
The Group's sales performance for the Period was ahead of the
Board's initial expectations as a result of very strong sales
growth achieved through Joules' digital channels, continuing the
momentum seen in the final quarter of the last financial year and
underpinned by the Group's investment in its tech platform,
including the Friends of Joules digital marketplace, and fulfilment
capabilities over recent years.
Total e-commerce sales for the Period grew by 34% against the
prior year with revenue from Joules' own e-commerce channels(2)
increasing by 45%. This reflected a 40% growth in customer traffic
to the Joules website as well as improved customer conversion
trends. As a result, e-commerce represented more than 70% of the
Group's retail revenue during the Period (H1 FY20: 51%). This
strong e-commerce performance was driven by a combination of the
Group's larger active customer base and improvements made to our
e-commerce proposition including the positive impact of the
'Friends of Joules' digital marketplace. Pleasingly, the strong
e-commerce performance was maintained through the periods that our
stores were able to reopen.
Despite strong e-commerce growth, Group revenue for the Period
of GBP94.5 million was 15.3% lower than the prior year. This
outcome reflects the impact of government enforced closures of
non-essential retail stores as well as the cancellation of country
shows across the UK. Joules' stores were, as a result, closed for
approximately 10 weeks of the 26-week Period on average and when
open, experienced lower footfall in part due to limits on the
number of people in a store at any point.
Wholesale revenue in the Period was GBP17.1 million, a 44%
reduction year-on-year, reflecting the impact of COVID-19 on the
Group's wholesale partners both in the UK and overseas. As a result
of the challenges faced by the Group's international wholesale
partners and despite strong growth through the Group's
international websites, total International sales in the Period
were down by 29% against the prior year and represented 14% of
Group sales (H1 FY20: 17%).
The Financial Review provides more detail on the financial
performance and results for the first half.
The Group's strong balance sheet - with net cash of GBP15.6
million and liquidity headroom of GBP65 million at the Period end -
has enabled us to continue to invest appropriately to underpin the
long-term growth of the Group.
STRATEGIC PROGRESS
We have a clear strategy for the long-term development of Joules
as a premium lifestyle brand in the UK and internationally. Whilst
COVID-19 headwinds are ongoing and the long-term impacts of the
pandemic on the economy and consumer behaviour remain uncertain, we
have maintained our focus on delivering against the brand's
significant, long-term growth prospects.
The cornerstone of our growth strategy is the Joules brand which
stands for family, fun and joy in the countryside. We create unique
design-led clothing, footwear and accessories that take inspiration
from nature and the changing British seasons to reflect our
customers' lifestyles, come rain or shine. Joules products stand
out with our signature uses of colour and distinctive, hand drawn
prints. We complement our own products with a curated range of
relevant and quality third-party products offered to our customer
base through our digital platform, which is supported by well
located, enticing stores that enrich our brand.
Joules' brand awareness and brand health metrics continued to
track ahead of the prior year with total brand awareness(3) of
46.5% and female brand awareness of 64.9% reflecting the Group's
effective digital marketing investment, increased visibility of our
community and charitable activities as well as a growing relevance
of the brand to consumers' lifestyles.
An important driver of the brand's growing customer relevance
stems from our Responsibly Joules values and commitments that run
through the core of 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. During the year we continued to advance our
Responsibly Joules commitments and made significant progress
against the Group's stated targets to source only sustainable
materials including cotton, leather, rubber, denim and synthetics
by 2022 . In addition, we were proud of the response to our
specially curated 'Rainbow Edit' collection comprising a range of
products featuring colourful splashes of bright rainbows and
rainbow colours, through which we have donated over GBP135,000 to
NHS Charities Together, since we launched the initiative in April
2020.
Leveraging the strength, appeal and relevance of the Joules
brand, the Group has four key strategic drivers that the Board
believes will drive long-term sustainable growth:
1. Increasing active customers
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. The
active customer base increased by 160,000 since the end of the
prior financial year and now stands at nearly 1.6 million with very
strong growth of new digital customers which now represent
three-quarters of our customer base. The growth in our active
customer base is a result of effective, insight-led digital
marketing as well as the desirable, lifestyle locations of the
Group's stores. The customer acquisition cost through the Period
remained consistent with prior year levels.
Going forward, we see significant headroom to increase the
brand's active customer base in the UK. We aim to achieve this by
increasing digital marketing leveraging data-led insights to better
target and efficiently acquire new digital customers. We will also
have more opportunity to engage with an even broader customer
demographic with the extended product offer now available through
the 'Friends of Joules' digital marketplace. Customer acquisition
activity will continue to be supported by our network of stores
which provide customers with an additional opportunity to engage
and connect with the brand.
An increased level of active customers, together with increased
visit frequency and share of our customer's lifestyle spend - both
of which are driven by the strategic pillars of 'broadening the
product offer' and 'strengthening our digital platform' - provides
significant opportunity to drive future growth of the brand.
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 by continuing to develop our
digital and wholesale presence.
2. Broadening the product offer
We see significant growth opportunities for Joules through
broadening and expanding the product offer available to both
existing and new customers, thereby encouraging them to spend a
greater 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 'Friends
of Joules' brands, and carefully selected licensing
partnerships.
During the Period the 'Friends of Joules' digital marketplace
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 7,500 products from more than 350
sellers across product categories including home, outdoor &
garden, gifting, pet and clothing.
Over the same period, our larger licensed product categories
have performed well with a particularly strong performance of the
Joules sofa range in partnership with DFS and an increased range of
Joules toiletries and gifting products in partnership with
Boots.
Our broadening product range provides our customers - existing
and new - with more opportunity to experience the Joules brand and
more reasons to visit our digital platform more frequently.
3. Strengthening the digital platform and experience
We continue to focus on enhancing the Group's digital platform
and user experience. During the Period, traffic to the Joules
website increased by more than 40% reflecting the Group's digital
marketing capabilities, the channel shift towards online as a
result of enforced store closures, and ongoing improvements made to
the Joules online experience, including the introduction of the
'Friends of Joules' digital marketplace. As a result, and despite
strong prior year comparatives, gross platform demand(4) increased
by nearly 55% in the Period, accelerating to 66% growth over the
seven weeks to 3(rd) January 2021.
During the Period we made investments to further enhance the
user experience through Joules' digital channels. These included
improving site merchandising with more relevant product listings
and enhanced product filtering, incorporating a more seamless
search functionality, and developing better overall site
navigation. We have also improved the check out and payment journey
for customers by adding new payment options such as Klarna, Apple
Pay and Google Pay. Th ese investments, alongside the enhanced
product offering, have helped to drive improved conversion
rates.
4. Growing the brand through third parties
In addition to growing the Joules brand through our own retail
channels, we continue to see significant opportunities to
efficiently 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 increase
the reach of the Joules brand to a broader customer base utilising
the retail and fulfilment platforms of our partners. We have
relationships with around 40 larger digital or multi-site retailers
globally and a further 2,000 smaller specialist or independent
retailers.
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.
INFRASTRUCTURE
We continue to make progress on the development of our new Head
Office in Market Harborough which we expect to be able to move into
during the latter part of the current financial year, subject to
COVID-19 restrictions and guidelines. The new Head Office
development layout will enable us to maximise the benefits of more
flexible working patterns that have developed since the outbreak of
the pandemic whilst also bringing all head office business
functions together under one roof for the first time. This will be
a key driver of our culture, creativity and efficiencies moving
forward.
We have continued to invest in our digital and fulfilment
infrastructure to support our long-term growth plans. During the
Period 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.
THE JOULES COMMUNITY
The talent, flexibility and, above all, dedication of the Joules
team have once again been highlighted during a period characterised
by disruption to the ways we work and interact. I am incredibly
proud of the commitment shown by our people, from our head office
teams to those on the front line in our stores, during this
challenging period. 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.
Definitions
1. Active customer is a customer that is registered on the
Joules database and has transacted in the last 12 months
2. Owned e-commerce excludes sales of Joules products on third-party platforms
3. Brand Awareness & Brand Health metrics are from the YouGov industry panel survey
4. Gross Platform Demand is the total sales price (including
VAT) of products sold through the Joules website - including Joules
and 'Friends of Joules' product
FINANCIAL REVIEW
The first half of our FY21 financial year has been overshadowed
by the ongoing impact of the COVID-19 global pandemic. The Period
started with all of our stores closed and the majority of our
colleagues working from home and we closed the Period in the same
way. Against this backdrop, the business delivered a strong
financial performance in the first half demonstrating the strength
of the Joules model: led by our relentless focus on the Joules
brand and on providing our customer base with a product proposition
that meets their lifestyle needs - through our own Joules brand
range and the increasing range of complementary 'Friends of Joules'
products. The performance in the first half has demonstrated how we
leverage these 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 areas
that we have invested in over recent years.
COVID-19 - IMPACT ON THE GROUP'S FINANCIAL POSITION AND RESULTS
FOR THE PERIOD
The financial impact of COVID-19 in the Period is summarised
below together with the actions taken to reduce costs, preserve
cash and strengthen the Group's financial position, with more
detail where appropriate, in the relevant section of the Financial
Review.
Impact on business operations and sales channels
- Stores were closed for approximately 40% of the potential
trading period in the first half. When open, stores experienced
lower footfall (in part the result of social distancing measures),
the sales impact being partially offset by higher conversion rates.
When open stores traded at approximately 80% of the prior year
level
- No country shows or events were attended in the first half
- Wholesale dispatches remained low through the first quarter as
our wholesale customers globally started to re-open but with high
overall levels of stock to sell-through. Wholesale sales momentum
improved as the first half progressed
- UK warehouse capacity upgrade was completed early in the first
half supporting the strong growth of our e-commerce sales.
Ongoing cost management actions
- Variable costs: including turnover rents; merchant fees;
certain distribution costs; utilities and travel & expenses
reduced with declining sales activity
- Government support: The Government's Coronavirus Job Retention
Scheme ('CJRS') subsidised a substantial proportion of payroll
costs for store colleagues, that were furloughed whilst stores were
closed. In addition, all non -furloughed colleagues agreed to a
voluntary pay reduction that continued through the first three
months
of the Period. Business rates relief for our retail premises continued through the first half.
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 and/or rent holidays for periods of
enforced closure 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 29 November the Group had net cash of GBP15.6 million. At 3
January 2021, following a strong Christmas trading period
(notwithstanding enforced store closures) the Group had net cash of
GBP13.4 million and liquidity headroom of GBP63.5 million.
Group results
26 weeks ended 29 November 24 November
GBPmillion 2020 2019
Revenue 94.5 111.6
Gross profit 47.4 61.2
------------------------------- ------------ ------------
Operating expenses (34.2) (41.7)
Depreciation & amortisation (4.1) (2.6)
Depreciation: Right-of-use
asset (3.8) (6.4)
Share-based compensation (0.7) (1.2)
------------------------------- ------------ ------------
Admin expenses (42.8) (51.9)
------------ ------------
Operating Profit 4.6 9.3
Net finance costs (0.9) (0.9)
------------ ------------
PBT before exceptional
costs 3.7 8.4
Gross margin % 50.2% 54.8%
Memo: EBITDA 12.5 18.3
Group revenue decreased by 15.3 % to GBP 94.5 million from GBP
111.6 million , with strong growth in e-commerce sales being more
than offset by 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.
Group gross margin of 50.2% was 4.6%pts lower than the prior
year. This decrease was due to the lower proportion of higher
margin store sales (with stores closed for a large proportion of
the Period) and a lower margin rate achieved in the stores channel
in Q1 as stores reopened through the summer months and cleared
through the spring product ranges in stock from before the first
national lockdown.
PBT before exceptional costs decreased by GBP4.7 million to
GBP3.7 million (H1 FY20: GBP8.4m). The impressive performance of
sales through our digital platform (e-commerce and 'Friends of
Joules') and licensing partners, together with continued focus on
cost base management, did not fully offset the impact of enforced
store closures and lower wholesale sales.
Statutory PBT decreased by GBP0.4 million to GBP1.3 million (H1
FY20: GBP1.7m). This includes the impact of non-cash exceptional
impairment charges of GBP2.4 million which is explained further
below.
Channel review - sales and margins
26 weeks ended 29 November 24 November Variance
GBPmillion 2020 2019 %
------------------------- ------------ ------------ ---------
E-commerce 54.8 40.9 34%
Stores 19.7 36.2 (46)%
Shows 0.8 2.7 (70)%
------------------------- ------------ ------------ ---------
Retail 75.3 79.9 (6)%
Wholesale 17.1 30.8 (44)%
Other 2.0 0.9 136%
------------ ------------ ---------
Group revenue 94.5 111.6 (15)%
Memo: Owned e-commerce* 50.6 35.0 45%
Gross margin % 50.2% 54.8%
------------------------- ------------ ------------ ---------
Retail 52.8% 60.8%
Wholesale 33.0% 38.1%
------------------------- ------------ ------------ ---------
*Owned e-commerce excludes sales of Joules products on
third-party platforms
Retail
Total retail revenue of GBP75.3 million was 5.8% lower than the
prior year (FY20: GBP79.9m) with strong e-commerce sales growth
being more than offset by the impact of the enforced store closures
and lower store sales when stores were open plus the cancellation
of country shows and events that the Group normally attends.
Joules retail segment comprises:
- E-commerce: the sale of Joules branded products through the
Group's own website and via carefully selected third-party websites
including Next, John Lewis, Zalando
- 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.
Note: Commissions received on sales on 'Friends of Joules'
digital marketplace are reported within 'Other' revenue
E-commerce
Total e-commerce sales increased by 34% to GBP54.8 million (H1
FY20: GBP40.9m). This growth was led by sales through the Group's
own website which increased by 45% in the Period.
Traffic to the Joules website was up by more than 40% and
conversion rate also improved. This performance reflects the
market-wide trend towards online shopping during lockdown, 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 with a preference for online shopping, increased by 20% to
1.0 million in the Period, 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
- investment in warehousing and fulfilment over recent years.
E-commerce represented more than 70% of the Group's retail
revenue during the Period (H1 FY20: 51%).
The 'Friends of Joules' digital marketplace has provided
customers with a broader online offer with over 10,000 products
curated from 300 third-party sellers. Overall, gross platform
demand (which includes Joules own brand e-commerce sales and the
retail sales value of 'Friends of Joules' products) increased by
nearly 55% in the Period.
Stores
The Group's stores were closed, on average, for 10 of the
26-weeks in the first half as a result of the enforced closure of
non-essential retail. When open, stores traded at 17% below the
equivalent prior year period with lower footfall levels, in part
the result of social distancing measures, being partly offset by
higher conversion rates.
Overall store sales in the Period, including the impact of the
enforced closures, were down by 46% year-on-year at GBP19.7 million
(H1 FY20: GBP36.2m).
Retail Gross margin
Retail gross margin decreased by approximately 8%pt to 52.8% in
the Period. This reduction was the result of the lower proportion
of store sales in the Period - with store sales generating a higher
gross margin than e-commerce sales and representing 30% of Retail
revenue in the first half compared to 49% last year and the higher
promotional activity during the first three months of the Period,
particularly within the stores channel due to clearing elevated
levels of spring stock as stores reopened through the summer months
within a highly competitive retail environment.
Wholesale
Wholesale revenue in the Period was GBP17.1 million, a 44%
reduction year-on-year (H1 FY20: GBP30.8m), reflecting the ongoing
impact of COVID-19 on many of the Group's wholesale partners both
in the UK and overseas.
Wholesale gross margin decreased by 5.0%pt to 33.0%. The
reduction in wholesale gross margin was the result of providing
support to several wholesale customers as they cleared through
spring inventory positions as they reopened.
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 increased by 136% to GBP2.0 million (H1 FY20:
GBP0.9m), reflecting growth across licensed product categories and
strong growth in the 'Friends of Joules' digital marketplace
sales.
International
As a result of the challenges faced by the Group's international
wholesale partners and despite continued good growth through the
Group's international websites, total International sales in the
Period were down by 29% against the prior year and represented 14%
of Group sales (H1 FY20: 17%).
ADMINISTRATIVE EXPENSES - PRE-EXCEPTIONAL COSTS
Administrative expenses before exceptional costs decreased by
17.5% to GBP42.8 million (H1 FY20: GBP51.9m).
26 weeks ended 29 November 24 November
GBPmillion 2020 2019
Operating expenses
(IFRS 16) 34.2 41.7
------------------------------- ------------ ------------
Sales 4.8 6.9
Marketing 4.9 5.2
Store costs 5.2 9.4
Distribution 5.9 5.2
Head office 13.4 14.9
------------ ------------
Depreciation & amortisation 4.1 2.6
Depreciation: Right-of-use
asset 3.8 6.4
Share-based compensation 0.7 1.2
------------ ------------
Admin expenses 42.8 51.9
------------ ------------
Operating expenses
Operating expenses decreased by 17.9% to GBP34.2 million (H1
FY20: GBP41.7m), the movement in the Period reflecting the impact
of COVID-19 as well as the benefit of 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 30% to GBP4.8 million (H1 FY20: GBP6.9m), in line with the lower
third-party sales experienced in the Period
- Marketing expenditure decreased by 6% to GBP4.9 million (H1
FY20: GBP5.2m). Increased investment in digital and social
marketing, in both the UK and international markets, was more than
offset by the reduction in marketing expenditure in other
channels
- Store costs decreased by 45% to GBP5.2 million (H1 FY20:
GBP9.4m). Store revenues decreased by 46% over the same period due
to enforced closures. Although additional costs were incurred in
stores to ensure compliance with social distancing measures and to
ensure colleague safety, the underlying store costs were mitigated
by business rates relief and the payments from the Coronavirus Job
Retention Scheme (JRS)
Note: Store costs now exclude rent expenditure which is
accounted for under IFRS 16 (Leases) with the exception of turnover
only store rent and short-term leases of GBP0.3 million (H1 FY20:
GBP0.2m)
- Distribution costs increased by 14% to GBP5.9 million (H1
FY20: GBP5.2m) due to the variable costs of fulfilling the
significant increase in our own platform e-commerce sales, up by
45% in Period
- Head office costs decreased by 10% to GBP13.4 million (H1
FY20: GBP14.9m) 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 increased by GBP1.5 million to
GBP4.1 million (H1 FY20: GBP2.6m), 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 GBP2.6 million to
GBP3.8 million (H1 FY20: GBP6.4m). The decrease was the result of a
reduction in the Right-of-use asset following impairment
write-downs in the prior financial period. This was partly offset
by a lease extension for our UK warehouse.
Share-based compensation
Share-based compensation was GBP0.7 million in the Period (H1
FY20: GBP1.2m). The lower charge reflects a reduction in the number
of Long-Term Incentive Plan shares under option following the
lapsing of the 2020 awards (with no options vesting due to
performance criteria not being met) and Executive Directors waiving
the LTIP options that would potentially have vested in 2021 and
2022.
Whilst share plan awards are now comparable between periods, the
charge in each period can fluctuate based on projected performance
outcomes, the share price at reporting date and movement in the
charge required for National Insurance Contributions.
Property lease costs
During H1 we have continued to make progress on property lease
renegotiations, towards reduced rents or turnover based leases and
more flexible lease terms. As a result, our underlying lease costs
on a cash basis decreased by GBP1.5 million against the prior
period.
Underlying lease cost
('cash basis')(*) H1 FY21 H1 FY20 Variance
GBPmillion
Store leases 4.3 5.5 (1.2)
Commercial leases 1.0 1.4 (0.4)
---------- ---------- -----------
Total 5.3 6.9 (1.5)
*Lease cost ('cash basis') represents the amounts paid or
payable in the relevant period in respect of the Group's property
leases. It excludes any rent holidays or rent waivers received in
the period.
EXCEPTIONAL IMPAIRMENT EXPENSE
A total exceptional expense of GBP2.4 million (H1 FY20: GBP6.7m)
has been booked by the Group in the Period as detailed below and in
the notes to the Condensed Consolidated Financial Statements.
26 weeks ended GBPmillion 29 November
2020
Right-of-use asset - impairment 0.9
Property, plant & equipment and intangible
assets - impairment 0.9
Non-cash exceptional 1.8
Other exceptional costs 0.6
Total exceptional cost 2.4
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 GBP1.8 million has been recognised (H1 FY20:
GBP6.7m), the majority of which relates to the Group's stores. 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 certain store
fixed assets.
In the first half, the Group completed a re-organisation of
certain structures across head office functions, this resulted in
exceptional costs of GBP0.6 million (H1 FY20: GBPnil).
NET FINANCE COSTS
Net finance costs were GBP0.9 million (H1 FY20: GBP0.9m). Net
finance costs consist of GBP0.2 million interest and facility
charges on the Group's revolving credit facility and term loan with
Barclays Bank Plc (H1 FY20: GBP0.1m) and GBP0.6 million interest on
lease liabilities (H1 FY20: GBP0.8m).
TAXATION
The tax charge for the Period was GBP0.2 million (H1 FY20:
GBP0.6m). The effective tax rate for the Period was 13.4% (H1 FY20:
35.2%). The tax charge for the Period benefitted from an adjustment
in relation to the prior financial year. Excluding the prior year
adjustment, the effective tax rate would have been 24.2%, which is
higher than statutory corporate tax rate due to expenses and
professional fees that are non-deductible for tax purposes.
CASH FLOW
Free cash flow, prior to the capital expenditure on our new Head
Office development, was GBP14.8 million in the period (H1 FY20:
GBP1.0m).
The improvement against the comparable period reflects lower
EBITDA for the trading reasons detailed above, that has been more
than offset by higher working capital inflow, benefiting from good
sell through of a reduced level of current season stock and the
deferral of a proportion of lease rental payments in agreement with
landlords. Cash flow also benefitted from the repayment of
corporation tax overpaid on account in the prior year.
Core capital expenditure in the first half was GBP2.8 million
(H1 FY20: GBP5.0m). Major areas of capital expenditure included
capacity upgrades at the UK warehouse, developments to the Joules
website and technology platforms.
The development of our new Head Office, the 'Barn', incurred
spend of GBP3.5 million in the Period (H1 FY20: GBP2.7m).
Cumulative spend on the development to the end of the Period was
GBP17 million, including GBP4.4 million for the purchase of the
land in FY18. The development is on schedule to complete in the
final quarter of the current financial year.
26 weeks ended 29 November 24 November
GBPmillion 2020 2019
EBITDA 12.5 18.3
Share-based compensation 0.7 1.2
Lease repayments - IFRS 16 (5.8) (6.3)
Cash exceptional costs (0.6) -
Net working capital - change 8.8 (4.0)
------------ ------------
Operating free cashflow 15.6 9.2
Interest paid - borrowings (0.2) (0.1)
Interest paid - lease liability (0.6) (0.8)
Tax received / (paid) 2.9 (2.2)
Capital expenditure - core (2.8) (5.0)
------------ ------------
Free cash flow (core capex) 14.8 1.0
Capital expenditure - new
Head Office (3.5) (2.7)
------------ ------------
Cash flow before financing 11.3 (1.7)
Net cash 15.6 2.1
NET CASH/(DEBT) AND LIQUIDITY
Net cash at the end of the Period was GBP15.6 million (FY20:
GBP2.1m) representing cash of GBP28.6 million (FY20: GBP14.3m) and
borrowings of GBP12.9 million (FY20: GBP12.1m). The improved net
cash position includes the net proceeds from the Group's equity
placing of GBP14.5 million in April 2020.
The Group's total liquidity headroom at 29 November 2020 was
GBP63.7 million, comprising GBP28.6 million cash balances and
GBP35.1 million undrawn committed financing facilities.
To preserve cash and improve the short-term liquidity position
in response to COVID-19, the Group agreed the deferral of certain
liabilities falling due in the final quarter of the last financial
year with HMRC and with landlords. At 29 November 2020 the total
amount deferred under these arrangements was GBP3.9 million (at 31
May 2020: GBP6.7m). The Directors anticipate that these amounts
will be repaid over the course of the following 12 months.
Lease liability (IFRS 16)
The Group's total lease liability at 29 November 2020 was
GBP44.9 million, a reduction of GBP1.8 million since the year ended
31 May 2020 and GBP8.2 million lower than 24 November 2019.
Repayment of lease liabilities of GBP6.1 million in the Period
was partly offset by lease additions of GBP4.9 million, primarily
relating to a lease extension for the Group's UK distribution
centre and the renegotiation of certain store leases on more
favourable terms.
Lease liability by
type:
GBPmillion 29 Nov 2020 31 May 2020 Increase / (decrease)
Store leases 36.1 37.7 (1.6)
Commercial property
leases 8.4 8.3 0.1
Other leases 0.4 0.7 (0.3)
------------ ------------ ----------------------
Total liability 44.9 46.7 (1.8)
DIVID
Given the impact of the global pandemic on the Group and the
continued uncertain outlook, the Board has not declared an interim
dividend (H1 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.
FINANCING FACILITIES
At the end of the Period the Group had total available
facilities of GBP48.0 million of which GBP12.9 million was
drawn.
Facility Available Facility Drawn Facility Maturity
GBPmillion 29 November 29 November
2020 2020
Revolving Credit Facility
(RCF1) 25.0 4.1 July 2022
Duty bond (linked to (1.0) -
RCF1)
Revolving Credit Facility 15.0 - April 2021
(RCF2)
Term Loan 9.0 8.8 December 2023
------------------- ---------------
Total facilities / borrowings 48.0 12.9
The Group has a GBP25 million revolving credit facility (RCF1)
provided by Barclays Bank Plc ('Barclays') to fund seasonal working
capital requirements. This facility matures in July 2022. In April
2020, the Group established an additional short-term revolving
credit facility of GBP15 million (RCF2), also with Barclays, to
provide additional financial headroom over the year to April
2021.
The development of the Group's new head office is being funded,
in part, by way of a GBP9.5 million loan from Barclays. The loan is
repayable by way of quarterly payments of GBP264,000 and a final
bullet payment in December 2023. In April 2020, the Group agreed
the deferral of the subsequent four quarterly repayments, with the
deferred amounts added to the final bullet payment.
EARNINGS PER SHARE
Statutory basic earnings per share for the Period, were 1.12
pence (H1 FY20: 1.26 pence). The weighted number of ordinary shares
in issue for the Period was 102.8 million an increase of 14 million
ordinary shares compared to the prior period. The increase in
ordinary shares follows the equity placing completed in April
2020.
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 has experienced
disruption and delays as well as higher costs on some of its
exports from the UK into certain EU markets, with Germany being
particularly impacted. The disruption is expected to reduce in time
as the courier networks and supply chain intermediaries adapt to
individual EU country import requirements.
The new trading arrangement will result in higher costs for
certain of the Group's exports to the European Union as a result of
higher duty charges, higher courier costs and increased
administrative costs. The annual impact of these increased costs is
estimated to be in the range of GBP0.8 to GBP1.0 million, which is
broadly in line with the Board's expectations. 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.
CURRENT TRADING & OUTLOOK
The Group continued to deliver a good sales performance through
its retail channels during the important Black Friday and Christmas
trading period with sales growth through Joules' digital channels
more than offsetting the decline in store sales that resulted from
the enforced closures of non-essential retail stores during parts
of November and December.
However, despite this online momentum, following the
announcement of UK-wide lockdowns at the beginning of January 2021,
all the Group's stores are currently closed and appear set to
remain that way for the immediate future. As previously confirmed
by the Group in its Trading Update dated 7 January 2021, whilst the
duration of the current restrictions on non-essential retail
remains uncertain, if they were to continue through to 1 April
2021, the potential loss in Group revenues resulting from the
closure of stores, the cancellation of country shows and disruption
to wholesale partners is estimated to be between GBP14 to GBP18
million.
As previously stated, the Board anticipates that this potential
adverse sales impact, as well as the higher cost of exports to the
EU, would be partially mitigated in the full financial year to 30
May 2021 due to the better than previously expected sales and
profit performance in the year to date, continued strong digital
sales momentum, and ongoing benefits from cost-reduction activities
including head office costs and lease renegotiations.
Notwithstanding the uncertainties caused by the Coronavirus
pandemic and the additional headwinds arising from the final Brexit
agreement on trade with the EU, the Board believes that the Group's
strong balance sheet, combined with the strength of its brand,
product proposition and digital platform (reflected in the recent
strong growth in active customers) will enable it to navigate the
current climate and emerge in a strong position.
GOING CONCERN
For the year ended 31 May 2020, the Directors undertook a
comprehensive assessment to consider the going concern and
longer-term viability of the Group and Company - given the
immediate and potential longer-term implications of the COVID-19
global pandemic - with forecasts and sensitivities through to May
2023. This assessment included the preparation of a Base case and
Downside scenario to support the conclusion that the Group can
continue as a going concern, which assumed stores initially trading
significantly below the prior year, with modest growth thereafter,
as well as e-commerce sales growing at low double-digit levels
reflecting performance over recent years and experienced since the
UK lockdown in late March 2020.
Since then, trading performance has continued to exceed the Base
plan prepared by management. To conclude on the Group's going
concern status at 29 November 2020, the Directors have prepared and
reviewed an updated Base plan, which reflects the impact of the
on-going national lockdown and resulting closure of stores in the
UK, as well as the impact from Brexit. The updated Base plan
forecast indicates that the Group will remain within its available
committed borrowing facilities and in compliance with covenants
throughout the forthcoming 12-month period, and that the current
national lockdown will not impact on the Group's ability to
continue as a going concern.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm to the best of our knowledge that:
- The condensed interim set of financial statements has been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union;
- The Interim Report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
- The Interim Report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions
and changes therein).
By order of the Board
Joules Group plc
Condensed Consolidated Income Statement
For the 26 weeks ended 29 November 2020
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended 31
29 November 24 November May
2020 2019 2020
GBP'000 GBP'000 GBP'000
Note
REVENUE 2 94,452 111,577 190,808
Cost of sales 5 (47,005) (50,378) (93,997)
GROSS PROFIT 47,447 61,199 96,811
Other administrative expenses 5 (42,115) (50,699) (99,273)
Share-based compensation 5 (703) (1,196) 371
Exceptional administrative
expenses 3 (2,416) (6,663) (21,480)
Total administrative expenses (45,234) (58,558) (120,382)
OPERATING PROFIT/(LOSS) 2,213 2,641 (23,571)
Finance costs (885) (918) (1,774)
PROFIT/(LOSS) BEFORE TAX 1,328 1,723 (25,345)
Income tax (expense)/credit 6 (177) (606) 4,640
PROFIT/(LOSS) FOR THE PERIOD 1,151 1,117 (20,705)
Basic earnings per share
(pence) 13 1.12 1.26 (22.07)
Diluted earnings per share
(pence) 13 1.11 1.25 (22.07)
Joules Group plc
Condensed Consolidated Statement of
Comprehensive Income
For the 26 weeks ended 29 November
2020
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
29 24 31
November November May
2020 2019 2020
Note GBP'000 GBP'000 GBP'000
Profit/(loss) for the period 1,151 1,117 (20,705)
Items that may be reclassified subsequently
to profit or loss:
Net (losses)/gains arising on changes
in fair value of hedging instruments
entered into for cash flow hedges 10 (2,235) (4,647) (2,425)
Gains/(losses) arising during the period
on deferred tax on cash flow hedges 10 364 894 472
Gains/(losses) arising during the period
on deferred tax on share options 48 (177) (177)
Exchange difference on translation
of foreign operations 10 (707) 297 732
TOTAL COMPREHENSIVE (EXPENSE)/INCOME FOR
THE PERIOD (1,379) (2,516) (22,103)
Joules Group plc - Condensed Audited
Consolidated Statement of Financial Unaudited Unaudited
Position
As at 29 November 2020 29 November 24 November 31 May
2020 2019 2020
Note GBP'000 GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 23,668 18,786 20,547
Intangibles 18,748 19,919 20,507
Right-of-use assets 8 31,814 50,244 31,993
Deferred tax 2,932 1,394 3,135
Derivative financial instruments 12 20 9 383
------------------ --------------------- --------------
TOTAL NON-CURRENT ASSETS 77,182 90,352 76,565
------------------ --------------------- --------------
CURRENT ASSETS
Inventories 42,704 38,438 32,938
Right of return asset 1,614 843 2,364
Trade and other receivables 12 13,471 18,924 9,226
Current tax receivable - - 2,099
Cash and cash equivalents 12 28,577 14,271 26,243
Derivative financial instruments 12 131 786 928
------------------ --------------------- --------------
TOTAL CURRENT ASSETS 86,497 73,262 73,798
------------------ --------------------- --------------
TOTAL ASSETS 163,679 163,614 150,363
------------------ --------------------- --------------
CURRENT LIABILITIES
Trade and other payables 12 56,731 41,741 31,678
Lease liabilities 8 10,485 12,184 11,047
Current tax payable 998 2,498 -
Borrowings 12 4,396 7,446 12,924
Provisions 2,465 2,242 2,368
Right of return provision 3,768 2,057 5,129
Derivative financial instruments 12 - 1,694 -
------------------ --------------------- --------------
TOTAL CURRENT LIABILITIES 78,843 69,862 63,146
------------------ --------------------- --------------
NON-CURRENT LIABILITIES
Borrowings 12 8,533 4,683 8,780
Lease liabilities 8 34,460 40,949 35,635
Derivative financial instruments 12 1,228 486 473
------------------ --------------------- --------------
TOTAL NON-CURRENT LIABILITIES 44,221 46,118 44,888
------------------ --------------------- --------------
TOTAL LIABILITIES 123,064 115,980 108,034
------------------ --------------------- --------------
NET ASSETS 40,615 47,634 42,329
================== ===================== ==============
EQUITIES
Share capital 1,085 897 1,081
Share premium 26,508 12,164 26,508
Hedging reserve 10 (1,855) (1,122) 999
Translation reserve 10 543 815 1,250
EBT Reserve 11 (769) (841) (769)
Merger reserve (125,807) (125,807) (125,807)
Retained earnings 140,910 161,528 139,067
------------------ --------------------- --------------
TOTAL EQUITY 40,615 47,634 42,329
================== ===================== ==============
These financial statements of Joules Group plc (Company Registration Number 10164829)
were approved by the Board of Directors and authorised for issue on 28 January 2021
and were signed on behalf of the Board of Directors by
MARC DENCH - Chief Financial
Officer
Joules Group plc
Unaudited Condensed Consolidated Statement of Changes in Equity
As at 29 November 2020
Merger Hedging Translation EBT Share Share Retained Total
reserve reserve reserve Reserve capital premium earnings equity
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 11,410 161,915 51,223
========== =========== ============ =============== ======== ========== ========= ==========
Impact of change
in accounting
policy
(IFRS 16) - - - - - - 170 170
========== =========== ============ =============== ======== ========== ========= ==========
Adjusted balance
at 26 May 2019 (125,807) 2,631 518 (322) 878 11,410 162,085 51,393
========== =========== ============ =============== ======== ========== ========= ==========
Profit for the
period - - - - - - 1,117 1.117
Other
comprehensive
income for the
period - (3,753) 297 - - - (177) (3,633)
---------- ----------- ------------ --------------- -------- ---------- --------- ----------
Total
comprehensive
income for the
period - (3,753) 297 - - - 940 (2,516)
EBT share
purchases - - - (1,163) - - - (1,163)
Shares issued - - - - 19 754 - 773
Share options
satisfied
through the EBT
Reserve - - - 644 - - (310) 334
Dividend issued - - - - - - (1,202) (1,202)
Debit to equity
for cash paid on
net-settled
withheld
share-based
compensation - - - - - - (318) (318)
Credit to equity
for
equity-settled
share-based
compensation - - - - - - 333 333
---------- ----------- ------------ --------------- -------- ---------- --------- ----------
Balance at 24
November
2019 (125,807) (1,122) 815 (841) 897 12,164 161,528 47,634
========== =========== ============ =============== ======== ========== ========= ==========
(Loss) for the
period - - - - - - (21,822) (21,822)
Other
comprehensive
income for the
period - 1,800 435 - - - - 2,235
---------- ----------- ------------ --------------- -------- ---------- --------- ----------
Total
comprehensive
income for the
period - 1,800 435 - - - (21,822) (19,557)
Basis adjustment
to hedged
inventory - 321 - - - - - 321
EBT share
purchases - - - (8) - - - (8)
Shares issued - - - - 184 14,344 - 14,528
Share based
payment
options
satisfied
through the EBT
Reserve - - - 80 - - (39) 41
Credit to equity
for
equity-settled
share-based
compensation - - - - - - (600) (600)
Balance at 31 May
2020 (125,807) 999 1,250 (769) 1,081 26,508 139,067 42,329
========== =========== ============ =============== ======== ========== ========= ==========
Profit for the
period - - - - - - 1,151 1,151
Other
comprehensive
income for the
period - (2,235) (707) - - - - (2,942)
Gains/(losses)
arising during
the period on
deferred
tax on cash flow
hedges - 364 - - - - - 364
Gains/(losses)
arising during
the period on
deferred
tax on share
options - - - - - - 48 48
---------- ----------- ------------ --------------- -------- ---------- --------- ----------
Total
comprehensive
income for the
period - (1,871) (707) - - - 1,199 (1,379)
Shares issued - - - - 4 - - 4
Basis adjustment
to hedged
inventory - (983) - - - - - (983)
Credit to equity
for equity-
settled
shared based
payments - - - - - - 644 644
Balance at 29
November
2020 (125,807) (1,855) 543 (769) 1,085 26,508 140,910 40,615
========== =========== ============ =============== ======== ========== ========= ==========
Joules Group plc
Consolidated Statement of Cash Flows
For the 26 weeks ended 29 November 2020 Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended 29 ended 24 ended 31
November November May
2020 2019 2020
Note GBP'000 GBP'000 GBP'000
Cash generated from operations
Profit/(loss) for the period 1,151 1,117 (20,705)
------------------ ---------- ---------------------
Adjustments for:
Depreciation of property, plant and equipment 5 1,243 1,031 3,018
Depreciation of right-of use assets 5 3,819 6,387 12,645
Amortisation 5 2,811 1,539 3,803
Impairment charge 3 1,833 6,663 20,976
Share-based compensation 5 703 1,196 (371)
Finance cost expense 885 918 1,774
Income tax expense/(credit) 6 177 606 (4,640)
Operating cash flows before movements
in working capital 12,622 19,457 16,500
------------------ ---------- ---------------------
(Increase)/decrease in inventory and right
of return asset (9,016) (3,354) 624
(Increase)/decrease in receivables (4,245) (871) 8,537
Increase/(decrease) in payables 22,053 235 (11,573)
Cash generated by operations 21,414 15,467 14,088
------------------ ---------- ---------------------
Bank interest paid (237) (140) (366)
Interest paid on lease liabilities 8 (648) (778) (1,408)
Tax received/(paid) 2,924 (2,230) (931)
Net cash from operating activities 23,453 12,319 11,383
------------------ ---------- ---------------------
Cash flow from investing activities
Purchase of property, plant and equipment
and intangible assets (6,323) (7,747) (13,686)
Net cash used in investing activities (6,323) (7,747) (13,686)
------------------ ---------- ---------------------
Cash flow from financing activities
Purchase of shares EBT - (1,163) (1,171)
Issue of shares - 333 15,570
Capital element of lease repayments 8 (5,790) (6,253) (12,306)
Repayment of borrowings (8,775) (89) (348)
Proceeds from borrowings - 2,000 11,850
Dividend paid 9 - (1,202) (1,202)
Net cash used in financing activities (14,565) (6,374) 12,393
------------------ ---------- ---------------------
Net increase/(decrease) in cash and cash
equivalents 2,565 (1,802) 10,090
------------------ ---------- ---------------------
Cash and cash equivalents at beginning
of period 26,243 16,013 16,013
Effect of foreign exchange rate changes (231) 60 140
Cash and cash equivalents at end of period 28,577 14,271 26,243
------------------ ---------- ---------------------
Notes to the condensed consolidated financial statements
For the 26 weeks ended 29 November 2020
Reporting entity
Joules Group plc is a company domiciled in the United Kingdom
limited by shares. The condensed interim financial statements of
Joules Group plc as at, and for the 26 weeks ended, 29 November
2020 comprise the Company and its subsidiaries (together referred
to as the "Group").
The Group financial statements as at, and for the 53 weeks
ended, 31 May 2020 are available on request from the Company's
registered office at Joules Group plc, 16 The Point, Rockingham
Road, Market Harborough, Leicestershire, LE16 7QU or at
www.joulesgroup.com .
1. Basis for preparation
The unaudited interim financial statements have been prepared in
accordance with the recognition and measurement requirements of
International Financial Reporting Standards (IFRS) and
interpretations issued by the International Accounting Standards
Board (IASB), adopted by the European Union.
The accounting policies adopted in the preparation of the
interim financial statements are the same as those set out in the
Group's financial statements for the 53 weeks ended 31 May 2020.
The Group has not early adopted any other standard, interpretation
or amendment that has been issued but is not effective.
This report is prepared in accordance with IAS 34. The unaudited
interim financial statements do not constitute statutory accounts
within the meaning of section 435 of the Companies Act 2006.
Statutory accounts for Joules Group plc for the year ended 31 May
2020 have been delivered to the Registrar of Companies. The
auditor's report on those accounts was unmodified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under Section 498 (2) or (3) of the Companies Act
2006.
Going concern
For the year ended 31 May 2020 financial results and as a result
of the significant uncertainties faced by the retail sector at that
time due to the COVID-19 pandemic, including changes in consumer
behaviour and the potential for ongoing operational disruption from
further national lockdowns in the UK, the Directors undertook a
comprehensive assessment to consider the going concern and
longer-term viability of the Group and Company to May 2023. This
assessment included the preparation of a Base case and Downside
scenario to support the conclusion that the group can continue as a
going concern, which assumed stores initially trading significantly
below the prior year, with modest growth thereafter, as well as
E-commerce sales growing at double-digit levels reflecting
performance over recent years and experienced since the UK lockdown
in late March 2020.
As a result of this assessment, the Directors concluded that the
Group could continue to adopt the going concern basis of
accounting. In making their assessment the Directors considered the
following:
-- The Groups financial position as at the reporting date, and
its committed borrowing facilities available for the time period of
consideration
-- The support from the Group's shareholders and bank
-- Alternative sources of financing
-- Financial commitments
-- The extent of continued Government support initiatives
-- The strength of the brand
-- The flexibility and agility of the Group's business model
Since the approval of the 31 May 2020 financial results, trading
performance has continued to exceed the Base plan prepared by
management. To conclude on the Group's going concern status at 29
November 2020, the Directors have prepared and reviewed an updated
Base plan, which reflects the impact of the on-going national
lockdown and resulting closure of stores in the UK, as well as the
operational impact from Brexit.
The updated Base plan forecast indicates that the Group will
remain within its available committed borrowing facilities and in
compliance with covenants throughout the forthcoming 12-month
period, and that the current national lockdown will not have a
significant impact on the Group's ability to continue as a going
concern.
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.
New significant accounting policies
There are several standards and interpretations issued by the
IASB that are effective for financial statements after this
reporting period. Of these new standards, amendments and
interpretations, there are none which are expected to have a
material impact on the Group's consolidated financial
statements.
Critical accounting judgements and key sources of estimation
uncertainty
Drawing up the financial statements in accordance with IFRS
requires management to make the necessary estimates and
assessments. Estimates are based on past experience and other
reasonable assessment criteria. However, actual results may differ
from these estimates and assessments will bring about an adjustment
in the value of the assets and liabilities in the next financial
year. The Directors have not considered there to be any critical
accounting judgements present.
In accordance with IAS 1 the Group is required to disclose
critical accounting judgements and key sources of estimation
uncertainty, the Directors have identified the following key
estimates:
Returns provision - rate of return
In preparing the financial statements the Directors have made
estimates with regard to the variable consideration element within
product sales as a result of returns. The Directors have used their
accumulated historical knowledge of returns to model the level of
provision required and have also taken into account the changes
made to the return policy throughout the period and the impact for
the period that stores were closed. The rate of returns expected in
relation to e-commerce sales is considered to be a source of
estimation uncertainty.
Value in use calculations
A key estimate in relation to the impairment charge recognised
for right-of-use assets, property plant and equipment and
intangible assets, is the calculation of the value in use for each
separate cash-generating unit ("CGU"). Each CGU comprises of the
right-of-use asset for each store, as well as any fixtures and
fittings associated directly to each store. The value in use is
calculated from expected future cash flows using suitable discount
rates, management assumptions and estimates on future performance.
Future cash flows include an apportionment of relevant head office
costs, and only includes direct revenues from store sales, in line
with the Management's Base Plan. The discount rate used for the
value in use calculation is considered to be a key source of
estimation uncertainty, which has been calculated at 8.5%.
IFRS 16 - Discount rate
Another estimate associated with the adoption of IFRS 16 -
Leases is the identification of the discount rate to be used to
calculate the present value of the future lease payments on which
the reported lease liability and right-of-use asset are based. For
any new lease, an interest rate might be determined at the point of
entering the lease. However, with no such information available for
existing leases, a discount rate of 2.5% has been used, derived
from existing borrowing rates.
Dilapidations provision
A key estimate associated with the transition to IFRS 16 -
Leases is the recognition of any dilapidation costs within the
right-of use asset for each lease, and a subsequent dilapidation
provision. Dilapidation costs are estimated at the commencement
date of each lease. For retail stores, the dilapidations provision
is calculated using an average cost per store based on the most
recent dilapidation costs incurred from stores exited. Estimated
dilapidation costs for other non-retail leases are based on
management's accumulated historical knowledge of buildings of
similar size and purpose. Based on the factors set out above, the
Group has recognised a dilapidations provision of GBP2,465,000 at
the end of the period. The average estimate used for each retail
store is considered to be a key source of estimation
uncertainty.
Aged inventory provision
A key estimate associated with recognising inventory at the
lower of cost and net realisable value is the calculation of the
provision for aged inventory. Management perform an assessment of
all inventory, taking into consideration current sales and forecast
sell through plans to consider the impact on the period end stock
holding. The provision for aged inventory at the period end of
GBP672,000 is calculated by providing for 100% of inventory which
is three seasons or older, between 50% and 75% of inventory two
seasons old and 25% of any remaining non-current season
inventory.
2. Revenue
An analysis of turnover by geographical market is given
below:
UK International Total
GBP'000 GBP'000 GBP'000
--------------------------------------------- -------- -------------- --------
26 weeks ended 29 November 2020 (Unaudited) 81,060 13,392 94,452
26 weeks ended 24 November 2019 (Unaudited) 92,650 18,927 111,577
53 weeks ended 31 May 2020 (Audited) 161,307 29,501 190,808
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 redundancy payments and restructuring costs. The
total charge recognised in the period can be categorised as
follows:
26 weeks ended 29 November
2020
GBP'000
Stores Head Office Total
Impairment of Property, Plant
and Equipment 92 - 92
Impairment of Intangible Assets 280 535 815
Impairment of Right-of-use assets 926 - 926
Other exceptional costs 29 554 583
Total 1,327 1,089 2,416
===================== ==================== ==================
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 of 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") 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
impairment charges of GBP926,000 and GBP92,000 were recognised in
the period against the right-of-use asset and property, plant and
equipment respectively for the stores which are impaired.
Other fixed assets
Management have also assessed whether any other fixed assets
show impairment indicators. An in-depth review of other fixed
assets has been performed to identify any which are intrinsically
associated with the current Head Office buildings, and those that
have a value in use which is below the carrying value. Based on the
factors set out above, the Group has recognised GBP815,000 relating
to other fixed assets which are impaired.
Other exceptional costs
During the year one-off charges of GBP583,000 were incurred
relating to restructuring costs.
Any amounts which become recoverable for which an amount has
been recognised as an exceptional expense will be recognised as a
gain through exceptional items in the relevant period.
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 owned
stores, e-commerce, shows, 3(rd) party concessions 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 licensing and the 'Friends
of Joules' digital marketplace, central costs and items that are
not distinguishable into 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. Segment results, being
earnings before interest, taxation and share-based payment charge,
are used to measure performance as the Board believes that such
information is the most relevant in evaluating the performance of
certain segments relative to other entities that operate within
these industries.
There are no discontinued operations in the period.
Segment Review and Results
26 weeks ended 29 November 2020 Retail Wholesale Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 75,302 17,128 2,022 94,452
Cost of sales (35,534) (11,471) - (47,005)
------------------------------------- --------- ---------- --------- ---------
GROSS PROFIT 39,768 5,657 2,022 47,447
------------------------------------- --------- ---------- --------- ---------
Administration expenses (18,701) (4,451) (11,088) (34,240)
Depreciation and amortisation (4,793) (137) (2,945) (7,875)
------------------------------------- --------- ---------- --------- ---------
OPERATING RESULT 16,274 1,069 (12,011) 5,332
------------------------------------- --------- ---------- --------- ---------
Costs unallocated to segments:
Share-based compensation (703)
Finance costs and similar charges (885)
Exceptional administrative expenses (2,416)
PROFIT BEFORE TAX 1,328
------------------------------------- --------- ---------- --------- ---------
Segment Review and Results
26 weeks ended 24 November 2019 Retail Wholesale Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 79,905 30,815 857 111,577
Cost of sales (31,290) (19,088) - (50,378)
--------------------------------------------- --------- ---------- --------- ---------
GROSS PROFIT 48,615 11,727 857 61,199
--------------------------------------------- --------- ---------- --------- ---------
Administration expenses (excl. depreciation
and amortisation) (22,529) (6,657) (12,556) (41,742)
Depreciation and amortisation (6,703) (478) (1,776) (8,957)
--------------------------------------------- --------- ---------- --------- ---------
OPERATING RESULT 19,383 4,592 (13,475) 10,500
--------------------------------------------- --------- ---------- --------- ---------
Costs unallocated to segments:
Share-based compensation (1,196)
Finance costs and similar charges (918)
Exceptional administrative expenses (6,663)
PROFIT BEFORE TAX 1,723
--------------------------------------------- --------- ---------- --------- ---------
5. Profit for the Period
Profit before tax is stated after charging/(crediting):
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
29 24 31
November November May
2020 2019 2020
GBP'000 GBP'000 GBP'000
Cost of inventories recognised as expense 39,741 43,812 79,850
Write down of inventory in the period 292 342 682
Transportation, carriage and packaging 6,114 5,490 11,499
Short term low value and variable rent
expenses 265 382 792
Depreciation of property, plant and equipment 1,243 1,031 3,018
Depreciation of Right-of-use assets 3,819 6,387 12,645
Amortisation of intangible assets 2,811 1,539 3,803
Staff costs 14,372 18,908 35,311
Share-based compensation 703 1,196 (371)
Exceptional administrative expenses 2,416 6,663 21,480
6. Tax
The Group's tax expense for the Period of GBP0.2m (November
2019: GBP0.6m) represents an effective tax rate of 13.4% compared
to 35.2% in the comparative Period. The difference between the
Group's tax rate for the Period of 13.4% and the UK statutory rate
of 19.0% relates to a prior year credit arising from additional
R&D tax relief, net of the impact of expenses not deductible
for tax purposes. The Effective Tax Rate for the Period excluding
the impact of the GBP0.1m prior year R&D credit is 24.2%.
Factors affecting the tax expense for the period are as
follows:
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended 29 ended 24 ended
November November 31 May
2020 2019 2020
GBP'000 GBP'000 GBP'000
Profit/(loss) before income tax 1,328 1,723 (25,345)
Profits multiplied by the standard rate
in the UK - 19.0% 253 327 (4,816)
Expenses not deductible for tax purposes
and other permanent differences 75 271 476
Differences in overseas tax rates (6) 8 21
Effect of adjustment in tax rate - - (196)
Adjustment in respect of prior period (145) - (125)
Total income tax expense 177 606 (4,640)
------------ ------------ ------------
7. Property, plant and equipment and intangibles
During the Period the Group made additions of GBP6.4m (November
2019: GBP8.4m) and impairments of GBP0.9m (November 2019: GBP1.4m).
During the Period the Group's capital expenditure consisted of new
stores, investment in IT systems to support e-commerce and stores,
and the ongoing development of the Group's new Head Office.
8. Leases
The movements in period ended 29 November 2020 were as
follows:
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 31 May 2020 31,330 102 238 323 31,993
----------- -------------- ---------- ------------- --------
Additions 4,875 - - - 4,875
Disposals - - - - -
Impairment (926) - - - (926)
Modifications (309) - - - (309)
Depreciation of Right-of-use
assets (3,535) (39) (84) (161) (3,819)
-----------
Balance as at 29 November
2020 31,435 63 154 162 31,814
----------- -------------- ---------- ------------- --------
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 31 May 2020 46,013 108 237 324 46,682
----------- -------------- ---------- ------------- --------
Additions 4,626 - - - 4,626
Disposals (264) - - - (264)
Interest expense related
to lease liabilities 636 2 3 7 648
Modifications (309) - - - (309)
Repayment of lease liabilities
(including interest) (6,141) (39) (90) (168) (6,438)
Balance as at 29 November
2020 44,561 71 150 163 44,945
----------- -------------- ---------- ------------- --------
9. Dividends
In the Period no dividend was paid (November 2019: GBP1,201,581)
in respect of the year ended 31 May 2020. The Board has not
declared an interim dividend for the year ending 30 May 2021.
10. Hedging and Translation reserve
Hedging Translation
reserve reserve
GBP'000 GBP'000
Balance as at 26 May 2019 2,631 518
--------------------------------------------------- -------- ------------
(Losses)/gains recognised in other comprehensive
income (4,647) 297
--------------------------------------------------- -------- ------------
Income tax relating to losses recognised in other 894 -
comprehensive income
--------------------------------------------------- -------- ------------
Balance as at 24 November 2019 (1,122) 815
--------------------------------------------------- -------- ------------
Loss arising on changes in fair value of hedging
instruments during the period 1,800 435
Basis adjustment to hedged inventory 321 -
Balance as at 31 May 2020 999 1,250
--------------------------------------------------- -------- ------------
(Losses)/Gains recognised in other comprehensive
income (2,235) (707)
Basis adjustment to hedged inventory (983) -
Deferred tax related to gains/(losses) recognised 364 -
in other comprehensive income during the period
--------------------------------------------------- -------- ------------
Balance as at 29 November 2020 (1,855) 543
--------------------------------------------------- -------- ------------
Hedging reserve
The reserve represents the cumulative gains and losses on
hedging instruments in cash flow hedges. The cumulative deferred
gain or loss on the hedging instrument is recognised in profit or
loss only when the hedge transaction impacts the profit or loss or
is included as a basis adjustment to the non-financial hedged item,
consistent with the applicable accounting policy.
Translation reserve
Exchange differences relating to the translation of the net
assets of the Group's foreign operations which relate to
subsidiaries only, from their functional currency into the Group's
presentational currency being Sterling, are recognised directly to
the translation reserve.
11. EBT Reserve
During the year ended 26 May 2019 the Group set up an Employee
Benefit Trust ("EBT"). The EBT has an independent trustee resident
in Jersey. During the Period no share options have been issued from
the EBT (2019: 248,851).
At 29 November 2020 the EBT held 291,469 (November 2019:
322,726) ordinary shares of 1p each in the Company purchased for a
total net consideration of GBP769,000 (November 2019:
GBP841,000).
The table below shows the movements in equity from EBT share
purchases during the Period:
EBT EBT
Reserve Reserve
Shares GBP'000
Balance as at 31 May 2020 291,469 769
-------------------------------------------- -------- --------
Shares purchased by EBT in the year - -
-------------------------------------------- -------- --------
Shares issued on employee option exercises - -
-------------------------------------------- -------- --------
Balance as at 29 November 2020 291,469 769
-------------------------------------------- -------- --------
12. Financial instruments
Derivative financial instruments and cash flow hedges
The Group holds derivative financial instruments to hedge its
foreign currency exposures. These derivatives, classified as cash
flow hedges, are initially recognised at fair value, and then
re-measured at fair value at the end of each reporting date.
Hedging instruments are documented at inception and effectiveness
is tested throughout their duration. Changes in the value of cash
flow hedges are recognised in other comprehensive income and any
ineffective portion is immediately recognised in the statement of
comprehensive income. If the firm commitment or forecast
transaction that is the subject of a cash flow hedge results in the
recognition of a non-financial asset or liability, then at the time
the asset is recognised, the associated gains or losses on the
derivative that had been previously recognised on other
comprehensive income are included in the initial measurement of the
asset or liability. For hedges that do not result in the
recognition of an asset or liability, amounts deferred in other
comprehensive income are recognised in the statement of
comprehensive income in the same period in which the hedged item
affects net profit.
Unaudited Unaudited Audited
as at 29 as at as at
24 31
November November May
2020 2019 2020
CATEGORIES OF FINANCIAL INSTRUMENTS GBP'000 GBP'000 GBP'000
Carrying value of financial assets
at amortised cost:
Cash and cash equivalents 28,577 14,271 26,243
Trade receivables 9,101 12,294 4,973
37,678 26,565 31,216
Cash flow hedges 131 795 1,311
TOTAL FINANCIAL ASSETS 37,809 27,360 32,527
---------- ---------- ---------
Financial liabilities held at amortised
cost:
Trade creditors (31,170) (17,537) (14,777)
Accruals (19,259) (16,016) (12,481)
Borrowings (12,929) (12,129) (21,704)
Lease liabilities (44,945) (53,133) (46,682)
(108,303) (98,815) (95,644)
Carrying value of financial liabilities
at amortised cost:
Cash flow hedges (1,228) (2,180) (473)
TOTAL FINANCIAL LIABILITIES (109,531) (100,995) (96,117)
---------- ---------- ---------
13. Earnings per share
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended 29 ended ended
24 31
November November May
2020 2019 2020
Basic earnings/(loss) per share (pence) 1.12 1.26 (22.07)
Diluted earnings/(loss) per share (pence) 1.11 1.25 (22.07)
------------ ----------- -----------
Earnings
------------ ----------- -----------
Earnings/(loss) for the purpose of basic
and diluted earnings per share (GBP'000) 1,151 1,117 (20,705)
------------ ----------- -----------
Number of shares
Weighted number of ordinary shares for
the purpose of basic earnings per share 102,780,107 88,761,101 93,829,041
------------ ----------- -----------
Potentially dilutive share awards 920,039 698,426 929,026
------------ ----------- -----------
Weighted number of ordinary shares for
the purpose of diluted earnings per
share 103,700,146 89,459,527 94,758,067
------------ ----------- -----------
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END
IR KDLFLFFLXBBQ
(END) Dow Jones Newswires
January 28, 2021 02:00 ET (07:00 GMT)
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