Superdry plc (SDRY) Superdry Plc - Preliminary Results
announcement 16-Sep-2021 / 07:00 GMT/BST Dissemination of a
Regulatory Announcement, transmitted by EQS Group. The issuer is
solely responsible for the content of this announcement.
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SuperdryPlc
("Superdry" or "the Company")
16 September 2021
Preliminary Results for the 52 weeks ending 24 April 2021
Sharpened strategy sets out key pillars of brand reset
Performance significantly impacted by Covid-19 disruption
Superdry announces its Preliminary results covering the 52-week
period from 26 April 2020 to 24 April 2021 ("FY21") and a trading
update covering the 18-week period from 25 April 2021 to 28 August
2021.
Full Year
GBPm FY21 FY20 Year-on-year
Group Revenue1,2 GBP556.1m GBP704.4m (21.1)%
Gross Margin 52.7% 53.6% (0.9)%pts
Adjusted loss before tax3 GBP(12.6)m GBP(41.8)m (69.9)%
Adjusting items3 GBP(24.1)m GBP(125.1)m (80.7)%
Statutory loss before tax GBP(36.7)m GBP(166.9)m (78.0)%
Adjusted basic loss per share3 (19.4)p (43.5)p (55.4)%
Basic loss per share (44.0)p (174.9)p (74.8)%
Net working capital3 GBP124.1m GBP147.0m (15.6)%
Net cash position3 GBP38.9m GBP36.7m 6.0%
Julian Dunkerton, Chief Executive Officer, said:
"Like most brands with a physical presence, our performance over
the past year has been impacted by the significant disruption of
Covid-19, but I am really proud of how the business has stepped up
and returned to revenue growth in Q4. Store and Wholesale revenues
are recovering well despite continued subdued footfall, and
Ecommerce margin is benefitting from our return to a full price
stance.
We have used this time effectively to accelerate our brand reset
and put the business in the best possible position for the future.
We have strengthened the team with the appointments of Shaun Wills
as CFO, Silvana Bonello as COO and Peter Sj?lander as Chairman, and
we're sharpening our strategic focus on the key areas of our brand
and product, our engagement with our customers, our operations and
on sustainability.
All of us at Superdry are driven by our goal of being the
leading listed sustainable fashion brand. There's a lot still to do
but I'm thrilled that we have been recognised for our efforts,
recently being ranked 1st in the Financial Times list of Europe's
Climate Leaders 2021, and winning Drapers' Sustainable Fashion
Awards 2021 'Positive Change Award'. Our accelerated sustainability
targets will see all our pure cotton garments produced entirely
from organic cotton by 2025, achieved through supporting 20,000
farmers in India. This initiative was recognised with my award for
Best Organic Ambassador by The Soil Association, the UK's only
organic awards.
I'm in no doubt that we're turning the corner and there's a lot
to be excited about. Trading has been encouraging since the
reopening of our stores, and we'll take a big step forward as a
brand with the opening of our global flagship store in Oxford
Street later in the Autumn. Whilst a lot remains uncertain, I'm
looking ahead to 2022 and beyond with real confidence as we deliver
our reset."
Financial overview
-- Total revenue down 21.1% to GBP556.1m, a reflection of the
significant impact from Covid-19 relateddisruption resulting in 39%
of store days lost4 in FY21 (10% in FY20).
-- Gross margin decreased by 90bps to 52.7%, with our return to
a full price trading stance online in Q4more than offset by the
focus on cash preservation driving increased online promotional
activity at the start ofthe pandemic.
-- Full year adjusted loss before tax of GBP(12.6)m (FY20:
GBP(41.8)m), with cost saving measures and governmentsupport
helping to offset trading shortfalls. FY21 includes a GBP33.8m
year-on-year benefit from reduceddepreciation, primarily due to the
FY20 impairment charge, and a GBP14.3m accounting credit due to
leasemodifications.
-- Statutory loss before tax of GBP(36.7)m (FY20: GBP(166.9)m)
includes a store impairment charge and onerousproperty related
contracts provision expense of GBP15.8m (FY20: GBP124.8m).
-- The Board has decided not to propose a final dividend for
FY21.
-- Total deferred rent in FY21 was GBP40m (inclusive of VAT), of
which GBP11m is recognised in Trade and otherPayables (non-IFRS 16
leases) and GBP24m in Lease Liabilities (IFRS 16 leases).
-- Net working capital inflow of GBP22.9m year-on-year driven by
a combination of tight control over inventoryresulting in a
decrease of GBP10.4m, receivables increased by GBP10.7m and
payables increased by GBP23.2m.
-- Liquidity has remained strong with net cash up 6.0% at
GBP38.9m, having not drawn down on our ABLfacilities at any point
during the period, owing to our continued discipline on cash
preservation.
Strategic and operational highlights
During FY21 we sharpened our strategy to deliver on our mission:
"to inspire and engage style obsessed consumers, while leaving a
positive environmental legacy". This clarity has allowed the entire
business to align behind the strategy, which will be delivered
through four key pillars.
1) Inspire through product & style
Our focus on customer segmentation, delivered through five
distinct collections, will allow us to inspire the right consumers
with the right experiences, both online and in-store.
FY21 highlights included:
-- Extending the segmentation of our range into five
collections, as well as identifying teen consumers(13-15 year olds)
as a significant opportunity. Augmenting the mainline collections,
we launched our first shortorder collection online, allowing us to
capitalise on the in-season 'tie-dye' trend.
-- During the pandemic we re-merchandised four key UK stores to
fully showcase these new ranges, drivingcomparatively stronger
trading performance in those locations versus the wider
portfolio.
-- Introduction of the Centre of Excellence innovation hub
within our creative team
2) Engage through social
We will grow the number of followers and engagement across all
our social platforms through our 'social-first' brand marketing
approach, driving demand and traffic. A clear programme of
improvements in our Ecommerce platform is focused on enhancing the
customer experience and driving online conversion.
FY21 highlights included:
-- Active customer database up 3% year-on-year, supported by
investment into brand marketing activity, suchas the recent
campaign with Neymar Jr.
-- Grew social followers by 6% year-on-year to 3.3m, with the
pace accelerating in FY22 to date.
-- Re-platforming of our Ecommerce websites to microservices
on-track for early 2022 delivery.
3) Lead through sustainability
Our ambition is to be the most sustainable listed global fashion
brand by 2030, becoming the 'Go-To' destination for sustainable
product.
FY21 highlights included:
-- Achieved 1st place in the inaugural Financial Times "Europe's
Climate Leaders 2021" survey, whichanalysed the reduction in
greenhouse gas (GHG) emissions between 2014-2019 for 300+
companies.
-- 33% of product purchased in the financial year was
sustainably sourced5, up 16%pts year-on-year, in linewith our
accelerated commitment to ensure all pure cotton items are organic
by five years to 2025.
-- In FY21 33% of all garments containing organic, recycled, and
low impact fibres including Tencel, Hemp,Yak or Linen generated
around 35% of our AW20 and SS21 revenue.
4) Make it happen
Our integrated, multi-channel operation will be delivered
through operational enablers and efficiencies across our end-to-end
supply chain, amplified by a re-energised corporate culture.
FY21 highlights included:
-- We remain committed to the high street and post year-end we
announced our exit from Regent Street and ourmove to a prime higher
footfall location on Oxford Street.
-- Won three logistics industry awards recognising our use of
robotics, which has more than trebled our pickand put-away
efficiency rates for Ecommerce returns.
-- As part of our continued lease renegotiations, we renewed 39
stores in FY21 representing an annualisedcash saving of GBP5.3m6.
In addition, there were GBP7.7m of one-off rent savings recognised
in FY21, and we aretargeting in excess of GBP10m in FY22.
Current Trading
The table below shows the revenue change on a 1- and 2-year
basis for the 18-week period ending 28 August 2021:
Revenue change (%) vs FY21 (1-year) vs FY20 (2-year)
Group revenue 1.9% (29.6)%
By channel:
Stores 33.1% (36.9)%
Ecommerce (34.4)% 8.2%
Wholesale 12.7% (35.8)%
Group revenue increased 1.9% year-on-year as Covid-related
restrictions eased, but high street footfall remained subdued,
which continue to impact our physical trading channels.
As anticipated, store revenue rebounded strongly against FY21,
with the UK (+76%) and the US (+169%), lapping temporary store
closures in the prior year. This was partially offset by the EU
which suffered from further closures at the start of the current
period (-10%).
Ecommerce sales were more modest against the extraordinary
growth we experienced in the prior year. The return to full-price
trading resulted in a less pronounced uplift during the sale
period, but did drive online gross margin up 10.5%pts
year-on-year.
Wholesale revenues have started to recover, increasing 12.7%
year on year as our partners gain more confidence in the
macroeconomic outlook. We would expect this recovery to continue as
they sell through carried forward stock and see their markets
return to normality.
Outlook
Whilst significant market uncertainty remains, we do expect a
recovery in total revenue in FY22, driven by:
-- Improving store trading from gradually improving footfall
throughout the year, although not reachinghistoric levels;
-- Strong 2-year Ecommerce growth compared to FY20, but
supressed year-on-year as we anniversary toughpromotion-driven
comparatives and some trade switches back into physical stores;
and
-- A modest, but sustainable revenue recovery in Wholesale
We expect margin to increase across all channels as we
transition towards a full price stance, supported by further mix
benefits from the switch back into stores.
We expect to generate operating leverage from reduced store
rents and payroll compared to pre-Covid levels, although we
anticipate a GBP35-45m year-on-year increase in costs due to
one-off benefits recognised in FY21, such as the return of UK
business rates, the end of furlough support, and the normalisation
of other variable and discretionary costs.
Considering the above, we don't expect a change to the adjusted
PBT market expectations for FY22.
We are continuing to focus on cash generation and working
capital efficiency in FY22. We expect to reduce inventory by a
further 2m units, which will partially offset the unwind of
deferred rent and service charges (GBP40m, inclusive of VAT), some
of which we expect to crystallise as permanent savings as we
continue to negotiate lease terms.
Recognising the structural growth opportunity in Ecommerce, as
well as the geographic and customer segmental targeting
opportunities in our Wholesale business, we expect revenue to
exceed peak historic levels in the medium term. Disciplined full
price trading, continuing rent renegotiations, and the operating
leverage from cost savings will also return the business to
historic operating profit margins.
Notes
1. Foreign currency sales are translated at the average rate for
the month in which they were made.
2. Fulfil From Store sales reallocated to Ecommerce in the
current (GBP8.3m) and prior year comparatives (GBP1.6m).
3. 'Adjusted', 'Adjusting' and 'Net Cash' are used as
alternative performance measures ('APMs'). Definition of APMs and
how they are calculated are disclosed in the financial statements
in Note 22. 'Net working capital' has been reconciled within the
CFO Review.
4. 'Lost trading days' calculated as the simple average number
of stores closed each day of the period as a percentage of total
potential trading days in the period, excludes impact of restricted
trading hours.
5. Sustainably sourced product defined as organic, low impact
and/or recycled in line with our Environmental Policy.
6. Cash annualised saving has been calculated based on the
effective date of the lease agreement.
Market Briefing
A webcast for analysts and investors will be held today starting
at 09:00, followed by a Q&A with management. The webcast will
be available to join live, but questions will be limited to
analysts. If you would like to register, please go to
https://secure.emincote.com/client/superdry/superdry009. A
recording of the event will also be available on our corporate
website shortly afterwards.
Superdry is pleased to announce the appointment of Peel Hunt LLP
as joint corporate broker to Superdry, with immediate effect.
For further information:
Superdry:
Adam Smith adamj.smith@superdry.com +44 (0) 1242 586747
Candice Johnson candice.johnson@superdry.com +44 (0) 1242 586747
Peel Hunt: +44 (0) 20 3128 8789
George Sellar
Michael Burke
Numis: +44 (0) 20 7260 1000
Luke Bordewich
Edmund van der Klugt
Media enquiries
Tim Danaher, Imran Jina superdry@brunswickgroup.com +44 (0) 207 404 5959
Notes to Editors
Our mission is "To inspire and engage style obsessed consumers,
while leaving a positive environmental legacy" through
hyper-segmentation of twelve consumer types across five
collections. We design affordable, premium quality clothing,
accessories and footwear which are sold around the world. We have a
clear strategy for delivering continued growth via a multi-channel
approach combining Stores, Ecommerce, and Wholesale.
Superdry has 231 physical stores and around 475 franchisees and
licensees. We operate in over 50 countries and have over 3,750
colleagues globally.
Cautionary Statement
This announcement contains certain forward-looking statements
with respect to the financial condition and operational results of
Superdry Plc. These statements and forecasts involve risk,
uncertainty, and assumptions because they relate to events and
depend upon circumstances that will occur in the future. There are
a number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements. These forward-looking statements are
made only as at the date of this announcement. Nothing in this
announcement should be construed as a profit forecast. Except as
required by law, Superdry Plc has no obligation to update the
forward-looking statements or to correct any inaccuracies
therein.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain. The person responsible for this announcement on
behalf of Superdry is Ruth Daniels, Group General Counsel and
Company Secretary of Superdry.
Chair's Statement
Welcome to Superdry Plc's preliminary results for FY21. I was
appointed Chair on 29 April 2021 and I am excited to work with
another global brand. During my first few months in post, I have
spent time with fellow Board members and senior colleagues at
Superdry (as far as restrictions have allowed), familiarising
myself with Superdry's business model and operations.
I would like to take this opportunity to thank former Chair,
Peter Williams, for his work with the Board and Superdry from April
2019 to April 2021. I would also like to thank all of my new
colleagues at Superdry, at our Head Office and in our stores and
locations worldwide, for their continued hard work and commitment
during this difficult and extraordinary year.
The ways in which the Covid-19 pandemic have impacted our
customers, colleagues, suppliers and operations during FY21, and
how we have responded to those challenges, have been set out in the
Covid-19 Statement. The crisis encouraged the Executive Team to
sharpen the strategy, accelerating reviews of digital platforms and
of operations across all channels, enabling Superdry to emerge from
the pandemic in a good position to drive the strategy forward. I
invite you to read about our new strategy, led by Superdry's
founder and CEO, Julian Dunkerton, and the Executive Team, in the
Chief Executive Officer's Statement. Information on our financial
results can be found in the CFO Review.
As the Executive Team starts to implement our new strategy,
there is a lot of work to be done, but there is also a lot to look
forward to.
Peter Sjölander
Chair, Superdry plc
Our response to Covid-19
Our response to Covid-19
Throughout the pandemic there has been a significant level of
uncertainty with restrictions regularly changing depending on local
Government advice. Taking decisive actions to protect the long-term
financial position of Superdry, whilst ensuring the ongoing
wellbeing, health, and safety of our colleagues and customers, has
continued to be our top priority.
We have continued to trade online throughout the lockdown
periods, sustaining operations in our distribution centres, whilst
ensuring all appropriate measures were taken to ensure the health
and safety of our staff.
During FY21, an average of 39%1 of store trading days were lost.
However, by the end of June 2021, most of our owned stores had
reopened.
Government support
As a consequence of the enforced store closures in FY21 and in
order to preserve as many jobs as possible through the peak of the
pandemic we furloughed staff across our international owned store
estate, corporate offices and distribution centres. The support we
received from applicable furlough (or similar) schemes across the
UK and EU to date totals GBP12.1m, with GBP9.2m recognised in FY21.
During the initial wave of the pandemic our Executive team took a
temporary pay cut of 20% for three months from 1 April 2020, whilst
our CEO and members of the Board took a cut of 25% for six
months.
We also benefitted from UK Business Rates relief, equivalent to
GBP15.7m in FY21 (FY20: GBP1.7m). Currently, this scheme has only
been extended for a small number of our qualifying stores and the
expected benefit in FY22 is roughly GBP5m. In addition, the
business was eligible for GBP2.5m of local government grants across
a number of markets (FY20: GBPnil).
As at FY21 year end the Group had a modest deferral of EUR1.5m
for Belgian VAT, with no other material deferrals of VAT, PAYE, or
duty across any other territories.
Cash management
Improving operational efficiency and overall liquidity has
continued to be a focus during the pandemic through reduced capex,
tight control over day-to-day spend and working collaboratively
with suppliers.
In FY21, 39 stores' leases were renegotiated representing 17% of
our portfolio. The total annualised cash benefit of the leases
negotiated in FY21 was GBP5.3m2, with an average lease length of 3
years. In addition to the underlying reductions, there were GBP7.7m
of one-off Covid related savings recognised in FY21 and we are
anticipating in excess of GBP10m in FY22. Due to the continuing
disruption from enforced closures, there was GBP40m of deferred
rent and service charges, inclusive of VAT, as at the FY21
year-end, though we are yet to conclude on the majority of these
contracts and so anticipate being able to reduce this liability
during FY22.
Inventory decreased by GBP10.4m to GBP148.3m through reduced
buys and targeted clearance activity, and we will continue to see
opportunities to reduce our working capital further in FY22 through
optimised stock management.
Given the continued unprecedented levels of uncertainty, the
Group's financial performance and the focus on cash preservation,
the Board agreed to recommend to shareholders that no final
dividend be paid in FY21.
The Group agreed a new Asset Backed Lending (ABL) facility in
August 2020 for up to GBP70m, in addition to a GBP10m overdraft. As
a consequence of the cash preservation measures and government
support detailed above, we maintained a net positive cash balance
in excess of GBP20m throughout FY21. Further detail regarding
liquidity and our borrowing facilities can be found in the CFO
Review.
Employee and customer safety
The Superdry Board and Executive team have continued to ensure
robust processes are in place to allow for swift decision making in
a rapidly changing environment. The Covid-19 Incident Management
Team, comprising of a subset of the Executive Team, has continued
to meet throughout the pandemic to manage the response to the
crisis.
When our stores reopened, we ensured availability of all
necessary cleaning equipment, hygiene products and Personal
Protective Equipment (PPE) to keep our employees and customers
safe, in line with local government guidelines.
We were an early adopter in introducing lateral flow testing. As
we started to return to Head Office in greater numbers, we offered
free home testing kits to all our employees and have implemented
rigorous social distancing and hygiene measures. Recognising the
benefits of flexible working, we made investments in new technology
for our meeting rooms and personal equipment to allow a hybrid
approach to working.
1. 'Lost trading days' calculated as the simple average number
of stores closed each day of the period as a percentage of total
potential trading days in the period, excludes impact of restricted
trading hours.
2. Cash annualised saving has been calculated based on the
effective date of the lease agreement.
Chief Executive Officer's Statement
This year has been another one full of Covid-related disruption,
but I am incredibly proud of the resilience our team has continued
to show, driving the operational and strategic progress needed to
position Superdry for success when we emerge from the pandemic.
Like other brands with a physical presence, Covid-19 has had
profound and far-reaching impacts on our performance. We lost 39%1
of our store trading days to enforced closures during FY21 (FY20:
10%), with footfall materially suppressed due to social distancing
restrictions, even during periods where we could trade. Though our
improving Ecommerce performance mitigated the worst of this impact,
Group revenue for the year was down 21%. Despite the fall in
revenue, we have improved our full year adjusted loss before tax by
70% and our statutory loss before tax by 78%, with the year-on-year
benefit from reduced depreciation, the one-off benefit from lease
modifications as well as cost saving measures and government
support helping to offset trading shortfalls. Further details on
the financial performance in FY21 can be found in the CFO
Review.
Our gross margin stepped back by 90bps as our need to react to
the pandemic and generate and preserve cash meant we had a higher
level of promotional activity than we had planned. This was
amplified by the dilutive effect of an increased mix of Ecommerce
sales during periods of store closures and beyond. We are fully
committed to returning to a full-price proposition as the economy
recovers, which will drive a recovery in the gross margin, whilst
also strengthening brand perception and protecting the integrity of
our foundation product.
We took the opportunity to sharpen our strategy this year,
despite the challenges posed by the pandemic. Our mission is to
inspire and engage style obsessed consumers, while leaving a
positive environmental legacy. This clarity has allowed the entire
business, led by our strengthened Executive team and Board, to
prioritise our efforts to achieve our four strategic objectives.
These are:
-> Inspire through PRODUCT & STYLE
-> Engage through SOCIAL
-> Lead through SUSTAINABILITY
-> All underpinned by the operational foundations to 'MAKE IT
HAPPEN'
Inspire through Product & Style
Last year we introduced consumer segmentation by style
preference, life stage, mindset, and gender. As we continue to
iterate our design and marketing approaches against this framework,
it has become clear that we have a huge opportunity with
13-15-year-old consumers, and so have extended our segmentation to
capture this market.
We launched our Autumn/Winter20 ('AW20') and Spring/Summer21
('SS21') ranges this year with full alignment to our new design
philosophy, and so far, the product is resonating well with
customers. Against the backdrop of the pandemic, we were unable to
deliver a truly branded customer experience through our stores, and
we look forward to Autumn/ Winter21 ('AW21') being the first
opportunity to showcase this across all our channels. Following
some promising early pilot results, where we saw comparatively
stronger trading in re-merchandised locations, we will continue to
roll out this approach in our stores to bring this product
segmentation to life.
This segmentation of our product offers new Wholesale
opportunities by targeting customers with specific and relevant
collections and we plan to develop new relationships, and
strengthen existing ones, over the coming year. We were encouraged
with the 29% increase for in-season orders for SS21 and AW20,
giving us confidence that the new product is resonating with our
partners and their consumers, even against the backdrop of this
challenging trading environment.
The next step in our product journey is the implementation of
short-order (limited volume runs of product) which will be
available online and in our flagship stores. This will allow us to
react much more quickly to consumer demands and trends, with a
reduced lead time of down to 12 weeks in some cases.
Engage through Social
Engaging our consumers through social media remains the core
focus of our marketing activity. In FY21 we substantially increased
the number of influencers we used, working with more than 250,
allowing us to target our campaigns and activity to the relevant
consumer segments, focusing particularly on younger consumers.
Signing Neymar Jr. to front our organic cotton underwear and
sleepwear campaign, showcasing both the brand and sustainable
product to his 156m followers, was one of our key marketing
highlights this year and this collaboration is a statement of our
intent for the future. We have already seen a positive impact from
this, with engagement rates for the first SS21 campaign achieving
record levels, and driving new followers to our own social
accounts.
We recognise the importance of digital marketing to generate
brand awareness and acknowledge that historically we have
underspent in comparison to our peer group. We are accelerating our
journey to achieve best-in-class social media engagement and used
this year to make important first steps. It has been encouraging to
see our total followers increase by 6% year-on-year to 3.3m.
As well as driving awareness and consideration among our target
consumers, this digital transformation impacts the entire customer
journey, and this prioritisation of our direct to consumer
Ecommerce channel will be the driver behind our revenue and
profitability recovery.
Lead through Sustainability
Sustainability is embedded in the culture of Superdry. We
recognise the increasing importance of reducing our environmental
impact to all our stakeholders including customers, suppliers, and
government organisations. Our ambition is to become the most
sustainable listed global fashion brand by 2030, and we have been
prioritising sustainability in every part of the business as we
pursue that goal.
This year we won the Drapers Sustainable Fashion Awards 2021
"Positive Change Award", in recognition of initiatives such as new
packaging that has a 60% lower carbon footprint, and targets for
net zero carbon emissions across our own sites and logistics by
2030. We were also ranked 1st in the Financial Times as "Europe's
Climate Leaders 2021" for having delivered a 97% reduction in our
direct greenhouse gas emissions between 2014 and 2019; an
incredible achievement given the competition.
We have improved our Carbon Disclosure Project rating from C to
B and have a clear path on how we are going to get to A. We
continue to move away from single-use plastic packaging and in
FY21, 93% of our packaging was recyclable.
Our broader sustainability initiatives include accelerated
organic cotton targets where all our pure cotton garments will be
produced entirely from organic cotton by 2025, working closely with
20,000 growers in India to convert their farms to organic farming,
adding the equivalent volume of organic cotton to the market that
we need as a brand. In recognition of these commitments, I was
thrilled to be awarded the Best Organic Cotton Ambassador by The
Soil Association in July, the UK's only organic awards.
In FY21 33% of all our garments contained organic, recycled, and
low impact fibres including tencel, hemp, yak or linen, and
generated around 35% of our AW20 and SS21 revenue.
Make it Happen
The foundation of our business starts with our people. This year
the Executive Team has been strengthened with several key hires,
including Silvana Bonello (COO), Shaun Wills (CFO) and Justin Lodge
(CMO). We also have a new Chair, Peter Sjölander, who has a hugely
relevant and successful history with Helly Hanson, as well as
experience overseeing growth and technology implementations.
We recognise the need to continuously update our core systems
and processes to maximise efficiency, improve customer experience
and ensure the business is set for future growth. The significant
investment in our technology infrastructure will be carried out
over a number of years, starting with the migration of our legacy
Ecommerce platform over to microservices technology. This will
provide us with much needed agility, better functionality to
improve our promotional mechanics and to future-proof us against
wider technology developments. We have chosen to build the platform
internally, allowing us to control the roadmap and tailor the
platform to our needs. We expect this to be ready to launch in
early 2022.
We have made great technological progress in our logistics
operation, and the team has received awards for the use of advanced
robotics which have tripled our efficiency rates for processing
Ecommerce returns. These include a CILT Award for Excellence 2020
for our Warehouse Operations, The Technology Transformation Award
from The Logistics Awards and a Supply Chain Excellence Award 2020.
We will continue to innovate in this area, rolling out automation
across our global network of fulfilment centres.
Despite the enforced stores closures, we have reduced our total
inventory by 2.3m units (14%), due to a disciplined inventory buy
and optimised use of clearance channels. This more efficient stock
management strategy will allow us to reduce our inventory further
in FY22, even with the expectation of continued headwinds as the
world recovers from the impacts of the pandemic.
The inventory reduction was a key driver in our net cash balance
ending the year up GBP2.2m at GBP38.9m and I am particularly
pleased that we did not have to use our Asset Backed Lending
('ABL') facility, maintaining a net cash balance in excess of
GBP20m throughout the period.
Rent negotiations have been another priority for the business
this year as part of our plan to return stores to profitability.
During H2 we have continued to negotiate rent relief from landlords
relating to the extended periods of enforced closures. As at the
year end, we recognised GBP7.7m of one-off rent savings and are
anticipating in excess of GBP10m in FY22. These non-recurring
credits are in addition to the underlying annualised cash lease
renewal savings of GBP5.3m agreed in FY21 from the 39 stores
renegotiated in the period. We will continue to negotiate
reductions and are not afraid to walk away if we are unable to get
the right deal, and we exited 15 stores during FY21 where the
landlord was unwilling to regear the lease to acceptable terms.
We remain committed to the high street. Post year-end we
announced our exit from Regent Street and our move to open our new
global flagship store on London's Oxford Street. The new store will
bring the brand reset to life, showcasing the five collections over
22,000 sq ft of sales space across two floors. The store will have
sustainability embedded through our product, the customer
experience and the building itself. The lower ground floor will
house Wholesale showrooms and versatile space to be used as a base
for the brand ambassador, influencer, and affiliate programmes.
During the pandemic, we have continued to make use of available
furlough, or similar, support across all territories, to retain as
many of our colleagues as possible. The support we have received is
outlined as part of our Covid-19 review. For as long as there is
uncertainty and volatility due to the pandemic, continued support
will be needed from the government to all retailers in the sector,
and we continue to strongly encourage a fundamental review of the
current business rates system in the UK.
Looking forward
We continue to make progress in turning around and evolving the
brand, despite the significant challenges we have faced as a result
of the Covid-19 pandemic. I am impressed by the dedication of our
team throughout this period and would like to thank everyone for
their unwavering hard work and enthusiasm.
Our newly articulated strategy means our people are fully
aligned with our objectives, focusing on product, social and
sustainability, underpinned by our ongoing digital transformation.
While the economic backdrop remains uncertain, it is clear to me
that there is a lot to look forward to.
1. 'Lost trading days' calculated as the simple average number
of stores closed each day of the period as a percentage of total
potential trading days in the period, excludes impact of restricted
trading hours.
2. Cash annualised saving has been calculated based on the
effective date of the lease agreement.
CFO Review
Group revenue decreased by 21%, largely driven by the forced
closure of our store estate as a result of Covid-19. Despite the
significant number of store days lost this year, the adjusted loss
before tax reduced by 70%, with cost saving measures and government
support helping to offset trading shortfalls. Whilst significant
uncertainty remains, we expect a recovery in FY22.
2021 2020* Change
GBPm GBPm %
Revenue: Stores 140.5 287.2 (51.1)%
Ecommerce 201.8 151.6 33.1%
Wholesale 213.8 265.6 (19.5)%
Group revenue 556.1 704.4 (21.1)%
Gross profit: Stores 93.6 192.5 (51.4)%
Ecommerce 117.5 90.5 29.8%
Wholesale 82.0 94.9 (13.6)%
Group profit 293.1 377.9 (22.4)%
Gross profit margin % 52.7% 53.6% (0.9)
%pts
Selling and distribution costs (258.7) (342.0) (24.4)%
Central costs (62.9) (70.1) (10.3)%
Impairment credit/(losses) on 3.8 (9.2) (141.3)
trade receivables %
Adjusted other gains and 19.3 9.1 112.1%
losses**
Adjusted operating loss** (5.4) (34.3) (84.3)%
Adjusted operating margin** (1.0)% (4.9)% (3.9)
%pts
Net finance (expense) (7.2) (7.5) (4.0)%
Adjusted loss before tax** (12.6) (41.8) (69.9)%
Adjusting items:
Unrealised (loss)/gain on financial derivatives (4.7) 1.9 (347.4)
%
IFRS2 charge - Founder Share Plan (0.5) (0.3) 66.7%
Restructuring, strategic change and other costs (1.0) (1.9) (47.4)%
Intangibles asset impairment (2.1) - 100.0%
Store asset impairment charges and reversals and onerous (15.8) (124.8) 87.3%
property related contracts provision
Total adjusting items (24.1) (125.1) (80.7)%
Loss before tax (36.7) (166.9) (78.0)%
Tax (expense)/credit 0.6 23.5 (97.4)%
Loss for the period (36.1) (143.4) (74.8)%
* Fulfil From Store ('FFS') sales reallocated to Ecommerce in
the current year (GBP8.3m) and prior year (GBP1.6m) comparatives.
The gross margin impact is GBP5.2m in the current year and GBP1.0m
in the prior year comparatives. FFS relates to sales made online,
but fulfilled from store stock.
** Adjusted operating loss, adjusted margin and adjusted loss
before tax are defined as reported results before adjusting items
as further explained in Note 22. The comparative in the prior year
was referred to as 'Exceptional'.
Group revenue decreased by GBP148.3m to GBP556.1m. This 21.1%
reduction was driven largely by the forced closure of a significant
part of our store estate as a result of Covid-19 related national
or regional lockdowns and the corresponding impact on our Wholesale
partners.
Under IFRS 8 'Operating Segments', Superdry has historically
reported the performance of Stores and Ecommerce under one segment
entitled 'Retail' (FY21 GBP342.3m; FY20 GBP438.8m). However, due to
a significant shift in consumer behaviour and a material increase
in the Ecommerce sales mix during the pandemic, the Group has
chosen to focus on these channels separately in the management of
the business with distinct reporting and decision making. The Board
has therefore taken the decision to report across three segments
for revenues and gross profit from FY21 onwards - Stores, Ecommerce
and Wholesale.
The prior year comparatives have been restated to provide the
same level of information for those three segments. The term Retail
will continue to be used to group together the Ecommerce and Stores
segments for multi-channel reporting.
Stores
Store revenue declined 51.1% to GBP140.5m in FY21. The
significant impact of the enforced store closures was felt
throughout the year, with an average of 39%1 of store trading days
lost in FY21 (FY20: 10%).
Lost store days Q1 Q2 Q3 Q4 FY
%1
FY20 -% -% -% 42% 10%
FY21 43% 4% 43% 69% 39%
YoY 43% 4% 43% 27% 29%
Even when the stores were able to trade, the high street
experienced substantially reduced footfall from social distancing
measures. There was no material change to the permanent store
footprint in FY21 with only 10 net stores closures (FY20: 7 net
closures), bringing the total owned estate to 231 stores at the
year end (FY20: 241). Post year-end we announced the exit from our
Regent Street store and our forthcoming move to a prime
high-footfall location on Oxford Street, due to open in late
2021.
Though it currently appears unlikely we will see further
widespread lockdowns in our major trading markets, we do anticipate
ongoing suppressed footfall to continue throughout FY22.
Store revenue by territory** 2021 2020* Change
GBPm GBPm
UK and Republic of Ireland 57.4 143.2 (59.9)%
Europe 64.6 107.4 (39.9)%
Rest of World 18.5 36.6 (49.5)%
Total Store revenue 140.5 287.2 (51.1)%
*Fulfil From Store ('FFS') sales reallocated to Ecommerce in the
current year (GBP8.3m) and prior year (GBP1.6m) comparatives. FFS
relates to sales made online but fulfilled from store stock.
**Please note for all channels the geographic territories have
been aligned to the internal management operational structure.
Ecommerce
Ecommerce performance, which is a combination of sales made
through our owned websites and those made online through third
parties, was strong throughout the year, up 33.1% year-on-year.
This partially offset lost Store sales, benefitting from
Covid-driven changing shopping habits, improved product and
increased digital marketing, as well as our influencer led
strategy.
Ecommerce participation as a percentage of total Retail revenue
(defined as the total of Store and Ecommerce revenue) increased
from 34.5% to 59.0% which in turn drove Ecommerce revenue as a
participation of total Group revenue from 21.5% to 36.3%.
Retail revenue 2021 2020* Change
GBPm GBPm
Stores 140.5 287.2 (51.1)%
Ecommerce 201.8 151.6 33.1%
Total Retail revenue 342.3 438.8 (22.0)%
Ecommerce revenue as a proportion of Retail revenue 59.0% 34.5% 24.5%pts
Ecommerce revenue as a proportion of Group revenue 36.3% 21.5% 14.8%pts
* Fulfil From Store ('FFS') sales reallocated to Ecommerce in
the current year (GBP8.3m) and prior year (GBP1.6m) comparatives.
FFS relates to sales made online but fulfilled from store
stock.
At the end of the year, Superdry had 21 branded websites,
translated into 13 languages (FY20: 18; 13).
Ecommerce revenue by territory** 2021 2020* Change
GBPm GBPm
UK and Republic of Ireland 109.1 69.5 57.0%
Europe 78.0 68.7 13.5%
Rest of World 14.7 13.4 9.7%
Total Ecommerce revenue 201.8 151.6 33.1%
* In the prior year all eBay sales were allocated between UK and
RoW. In FY21 eBay has been allocated to the relevant territory for
clarity. To ensure consistent comparatives, this methodology has
been applied retrospectively to FY20.
** Please note for all channels the geographic territories have
been aligned to the internal management operational structure.
Wholesale
Wholesale sales to third parties, which includes online
platforms where the partner fulfils the order, faced similar
pandemic-related market shifts as our owned channels. This led to
sales ending the year down 19.5% at GBP213.8m and higher levels of
stock carried forward.
At the end of the year, the Group had Wholesale operations in 53
countries (FY20: 61) including 448 franchise stores (FY20: 473) and
27 Superdry branded license stores (FY20: 26).
Wholesale revenue by territory** 2021 2020* Change
GBPm GBPm
UK and Republic of Ireland 31.0 41.8 (25.8)%
Europe 140.9 170.6 (17.4)%
Rest of World 41.9 53.2 (21.2)%
Total Wholesale revenue 213.8 265.6 (19.5)%
* In the prior year Russia and Ukraine were included within
Europe. In FY21 these territories have been reallocated to Rest of
World in line with the internal management structure. To ensure
consistent comparatives, this methodology has been applied
retrospectively to FY20.
** Please note for all channels the geographic territories have
been aligned to the internal management operational structure.
Gross margin
The gross margin has reduced by 90bps to 52.7%, partly driven by
the mix effect of sustained stores closures (our highest gross
margin channel) which contributed (1.4)%pts and elevated levels of
discounting whilst the business focused on cash generation during
the pandemic. These elements were partially offset by an
improvement in the Wholesale gross margin.
Encouragingly, there was positive momentum in Q4 21 as we began
to return the business to a full price trading stance, with
particular success online where the full price mix2 increased by
11%pts to 46%.
Gross margin by channel 2021 YoY Sales 2020* Change
mix change
Stores 66.6% (16%)pts 67.0% (0.4)%pts
Ecommerce 58.2% 15%pts 59.7% (1.5)%pts
Wholesale 38.4% 1%pts 35.7% 2.7%pts
Total gross margin 52.7% 53.6% (0.9)%pts
* Fulfil From Store sales have been reallocated to Ecommerce,
with an impact on margin of GBP5.2m in the current year and GBP1.0m
in the prior year comparatives.
Total operating costs
2021 2020 Change
Selling and distribution costs (258.7) (342.0) (24.4)%
Central costs (62.9) (70.1) (10.3)%
Impairment credit/(losses) on trade receivables 3.8 (9.2) (141.3)%
Other gains and losses 19.3 9.1 112.1%
Total operating costs pre-adjusting items (298.5) (412.2) (27.6)%
Total operating costs, pre-adjusting items, reduced by GBP113.7m
to GBP298.5m (FY20: GBP412.2m) and includes store, distribution,
marketing, head office, central and depreciation costs, impairment
credit/(losses) on trade receivables and other gains and losses.
The decrease was partially caused by the disruption from Covid-19
in FY21, predominantly related to the temporary closure of stores,
together with other continued cost actions taken to improve
efficiencies as we preserved cash through the pandemic. There are
some material movements in lease costs which are addressed more
fully below.
Store costs reduced substantially by GBP47.9m, as a result of
both one-off benefits and the impact of operational efficiencies.
In FY21 we received GBP7.9m of furlough support for store employees
and a further GBP2.5m of government grants, as well as a GBP15.7m
benefit from UK rates relief. We have made good progress on
recurring cost reductions in order to drive cost efficiencies, with
payroll reducing GBP11.5m year-on-year, as we optimised our store
staffing.
Distribution, marketing and head office costs decreased by
GBP21.8m. The main driver was the reduction in the Wholesale bad
debt charge, as a result of cash collections throughout FY21 being
better than initially expected at the FY20 year-end. This was
partially offset by volume-driven Ecommerce distribution costs, and
a planned investment in both brand and performance marketing in
line with the brand reset.
Depreciation and amortisation totalled GBP53.4m (FY20:
GBP87.2m). The year-on-year reduction of GBP33.8m was predominately
due to the impact of the prior year impairment of store-related
assets.
Adjusted other gains and losses (which include royalty income
and other income, largely related to lease renegotiations under
IFRS 16) were GBP19.3m (FY20: GBP9.1m), an increase of 112.1%.
Although there was a reduction in royalty income following the
decrease in Wholesale revenue, this has been more than offset by
GBP14.3m of accounting gains on termination of leases, lease breaks
or lease modifications under IFRS 16.
Adjusted other gains and losses 2021 2020 Change
Royalty income 4.2 7.2 (41.7)%
IFRS 16 lease modification and renegotiations 14.3 - 100.0%
Other income 0.8 1.9 (57.9)%
Total adjusted other gains and losses 19.3 9.1 112.1%
Central costs (GBP62.9m) includes head office costs and related
depreciation which are not attributable to any of the trading
channels, and have decreased by GBP7.2m as a consequence of cost
control activities including a reduction in professional fees and
discretionary spend.
Lease renewals
The majority of our leases meet the requirements to be accounted
for under IFRS 16 'Leases'. Where leases are turnover rent only or
expire within 12 months, they are outside of the scope of the
standard. In FY21, only GBP5.6m (FY20: GBP8.9m) is recognised
within Store costs for the gross rental charge on these leases.
In the current year we recognised a GBP7.7m credit in Store
costs within the Group Profit and Loss for one-off rent savings in
relation to 82 leases:
Lease category No. of leases One-off saving
GBPm
Leases under IFRS 16 62 4.0
Leases not recognised under IFRS 16 15 1.9
No lease payment due to Covid-related closures (not IFRS 16) 5 1.8
Total 82 7.7
We expect to continue this work and deliver similar results in
FY22, anticipating in excess of GBP10m further one-off rent
savings.
In addition to these one-off savings, we renewed 39 store leases
(FY20: 17) for an average lease commitment of three years (FY20:
three years). Primarily as a result of those renewals, the
annualised cash rental payments have reduced by a total of GBP5.3m3
(FY20: GBP1.8m).
For leases which are recognised under IFRS 16, the benefit of
the future lease modifications will be seen in the Group Profit and
Loss through a reduction in depreciation and interest payments and
in the Cash Flow Statement through a reduction in lease payments.
In some cases where the lease liability exceeds the right of use
asset, there may also be an element recognised within the other
gains and losses on modification (GBP14.3m in FY21).
Finance Costs
Net finance costs were roughly in line with the prior year at
GBP7.2m (FY20: GBP7.5m). GBP5.5m (FY20: GBP5.7m) relates to
interest expense on leases under IFRS 16.
Adjusting items
GBPm 2021 2020 Change
Adjusted loss before tax (12.6) (41.8) (69.9)%
Unrealised (loss)/gain on financial derivatives (4.7) 1.9 (347.4)%
IFRS2 charge - Founder Share Plan (0.5) (0.3) 66.7%
Restructuring, strategic change and other costs (1.0) (1.9) (47.4)%
Intangibles asset impairment (2.1) - 100.0%
Store asset impairment charges and reversals and onerous property related contracts provision (15.8) (124.8) (87.3)%
Total adjusting items (24.1) (125.1) (80.7)%
Statutory loss before tax (36.7) (166.9) (78.0)%
Adjusting items relate primarily to store asset net impairment
charges (GBP10.7m) and an onerous property related contracts
provision (GBP5.1m), totalling GBP15.8m (FY20: GBP124.8m). The net
impairment charge of GBP10.7m (FY20: GBP136.8m) has been allocated
between right-of-use assets (GBP7.4m, FY20: GBP121.2m), property,
plant and equipment (GBP3.3m, FY20: GBP15.5m) and intangibles
(GBPnil, FY20: GBP0.1m), largely due to the extended period of
forced store closures from Covid-19 restrictions and the consequent
impact on expected future footfall.
Other significant adjusting items include a GBP4.7m loss in
respect of the fair value movement in financial derivatives (FY20:
GBP1.9m gain) which has been driven by changes to the timing of
derivatives used to hedge Euro receivables and US Dollar payables
and by rate movements during the hedging period.
Further details on adjusting items can be found in note 7.
Loss before tax
Despite the significant number of store days lost this year, the
adjusted loss before tax reduced by 69.9% to GBP (12.6)m, with cost
saving measures and government support helping to offset trading
shortfalls. FY21 includes a GBP33.8m year-on-year benefit from
reduced depreciation and amortisation, primarily due to the FY20
impairment charge, and a GBP14.3m non-cash credit from lease
modifications.
In addition to the above, the statutory loss before tax, after
charging net adjusting items of GBP(24.1)m (FY20: GBP125.1m),
reduced by 78.0% to GBP(36.7)m.
Taxation in the period
Our tax credit on adjusted losses is GBP3.3m (FY20: GBP6.1m tax
credit on adjusted profit). This represents an adjusted effective
tax rate of (26.2)% (FY20: 14.6%).
Our tax charge on statutory losses is GBP0.6m (FY20: GBP23.5m
tax credit on statutory loss). This represents an effective tax
rate of 1.6% (FY20: 14.1%).
The Group's adjusted effective tax rate is lower than the
statutory rate of 19% (FY20: 19%). This is primarily due to
movements in deferred taxation recognised in respect of leases, tax
losses and the provision made for uncertain tax positions as
required by accounting standards.
The net tax credit on adjusting items totals GBP3.9m (FY20:
GBP17.3m tax credit), which arises primarily as a result of
impairments to the right-of-use asset values, and impairments to
property, plant and equipment (PPE), at the balance sheet date.
Loss after tax
After adjusting items, Group statutory loss after tax for the
year was GBP36.1m, compared to a GBP143.4m loss in FY20.
Loss per share
Reflecting the loss achieved by the Group during the year,
adjusted basic EPS is (19.4)p (FY20: EPS (43.5)p).
The adjusted performance of the business, offset by the
adjusting items outlined above, results in a reported basic EPS of
(44.0)p (FY20: EPS (174.9)p) based on a basic weighted average of
82,028,188 shares (FY20: 82,001,955 shares). The increase in the
basic weighted average number of shares is predominantly due to
31,032 5p ordinary shares being issued during the year under Buy As
You Earn schemes.
Adjusted diluted EPS is (19.4)p (FY20: EPS (43.3)p) and diluted
EPS is (44.0)p (FY20: EPS (174.1)p. These are based on a diluted
weighted average of 82,028,188 shares (FY20: 82,389,450 shares).
Due to the loss-making position of the Group at the year-end, all
potential ordinary shares are considered to be antidilutive.
Dividends
Given the ongoing uncertainty and in order to maintain
liquidity, the Board did not propose an interim dividend and has
made the decision not to recommend a final dividend for FY21.
Cash flow
There has been a continued focus on cash preservation this year
and the Group has maintained strong liquidity, ending the year with
net cash of GBP38.9m, up GBP2.2m year-on-year and having not drawn
down during the year on the ABL facility at any point.
GBPm 2021 2020
GBPm GBPm
Operating cash flow before movements in working capital 29.7 75.5
Working capital movement 20.4 12.0
Taxes 2.5 (2.2)
Net cash generated from operations 52.6 85.3
Purchase of PPE and intangible assets (13.6) (13.9)
Proceeds from disposal of assets held for sale - 2.4
Dividend payments - (3.4)
Net interest paid (7.2) (7.5)
Proceeds of issued share capital 0.1 -
Drawdown of RCF - (30.0)
Repayment of RCF - 30.0
Repayment of lease liability principal (39.9) (61.1)
Net (decrease)/increase in cash (8.0) 1.8
Other (including foreign currency movement) 10.2 (1.0)
Net cash and cash equivalents at end of period 38.9 36.7
Superdry remains a strongly cash-generative business, with net
cash generated from operations of GBP52.6m (FY20: GBP85.3m). This
has decreased year-on-year due to significant impact from the
forced store closures during the year as a result of the ongoing
disruption from Covid-19.
Movements in working capital generated a cash inflow of GBP20.4m
(FY20: GBP12.0m) driven by a decrease in inventories of GBP6.2m, a
net increase in trade and other receivables of GBP10.8m and an
increase in trade and other payables of GBP25.0m, largely due to
deferred rent arising from Covid-19 related store closures. We
expect to repay the majority of the deferred rent through FY22,
though anticipate that a proportion will crystallise as a permanent
benefit as a result of ongoing lease negotiations.
Working capital
GBPm 2021 2020 Change
GBPm GBPm
Inventories 148.3 158.7 (6.6)%
Trade and other receivables 102.3 91.6 11.7%
Trade and other payables (126.5) (103.3) 22.5%
Net working capital 124.1 147.0 (15.6)%
Inventory levels decreased by 2.3m units, 14% in FY21, despite
lower sales and enforced store closures. The average cost per unit
increased due to a higher mix of Autumn/Winter product in the stock
at year end (39% vs 35%), resulting in an overall decrease in the
inventory balance of 6.6% to GBP148.3m. We would expect this mix to
normalise as the operational disruption from Covid reduces.
The inventory balance is net of a provision of GBP9.1m (FY20:
GBP9.8m). This is after a GBP(3.8)m release of a GBP6.1m
Covid-related provision booked in FY20 against SS20 product
following better than expected recovery. This release was broadly
offset by a one-off GBP4.1m provision in relation to high-end AW20
concept product, which has proven to be unsuccessful particularly
considering the launch in a Covid-19 environment (FY20:
GBPnil).
Total trade and other receivables increased 11.7% to GBP102.3m
because of the disruptive impact on both shipments and sales to
Wholesale partners in the prior year. Although cash collections
have been ahead of internal expectations, the partner support
programmes have led to a temporary increase in debtor days from
47.5 days to 67.3 days. However, there has been a reduction in the
level of expected credit loss which is reflective of the quality in
the current debtor book.
Total trade and other payables increased by 22.5% to GBP126.5m
largely due to deferred rent for non-IFRS 16 leases of GBP11m
included within the balance and the later timing of inventory
shipments towards the end of FY21. The deferred rent for IFRS 16
leases of GBP24m is included within lease liabilities.
Net working capital decreased by 15.6% to GBP124.1m (FY20:
GBP147.0m) and as a proportion of Group revenue was 22.3% (FY20:
20.9%).
Capital expenditure
Additions in property, plant and equipment and intangible assets
totalled GBP13.8m (FY20: GBP13.7m). Capital expenditure has
remained suppressed as a result of short-term cash preservation
initiatives during Covid-19. Spend has been and will continue to be
focused on IT systems and technology as we support Ecommerce as our
channel of growth.
At 24 April 2021, the net book value of property, plant and
equipment had decreased to GBP29.4m (FY20: GBP41.7m) as a
consequence of the store impairment and depreciation charges.
During the year, GBP6.8m (FY20: GBP6.5m) of capital additions were
made, of which GBP2.3m (FY20: GBP1.6m) related to leasehold
improvements across the Group. The remaining balance of capital
additions includes furniture, fixtures, and fittings (GBP3.5m) and
computer equipment (GBP1.0m).
Intangible assets, comprising goodwill, lease premiums,
distribution agreements, trademarks, website, and computer
software, stood at GBP41.7m at the year end (FY20: GBP48.4m).
Additions in the year were GBP7.0m (FY20: GBP7.2m), comprising
mainly website and software additions.
Internal controls
In the prior year, a number of accounting and control issues
were identified in the business. In response to this a review of
the internal control environment was carried out by the Audit
Committee. External advisors (PwC) were engaged to support the
development of an improved internal controls framework, which
included mapping key risks to business processes and developing
controls to mitigate these risks. Priority was placed on delivering
material improvements for the FY21 year-end close, including
remediating balance sheet controls around inventory, accounts
payable, cash, and the month end close and review processes.
Although there has been improvement leading up to the end of
FY21, work remains and will continue through FY22. The process of
establishing a fully robust control environment remains one of our
top priorities and we are confident in the progress being made.
Outlook
Whilst significant market uncertainty remains, we do expect a
recovery in total revenue in FY22, driven by:
-- Improving store trading from gradually improving footfall
throughout the year, although not reachinghistoric levels;
-- Strong 2-year Ecommerce growth compared to FY20, but
supressed year-on-year as we anniversary toughpromotion-driven
comparatives and some trade switches back into physical stores;
and
-- A modest, but sustainable revenue recovery in Wholesale
We expect margin to increase across all channels as we
transition towards a full price stance, supported by further mix
benefits from the switch back into stores.
We expect to generate operating leverage from reduced store
rents and payroll compared to pre-Covid levels, although we
anticipate a GBP35-45m year-on-year increase in costs due to
one-off benefits recognised in FY21, such as the return of UK
business rates, the end of furlough support, and the normalisation
of other variable and discretionary costs.
We are continuing to focus on cash generation and working
capital efficiency in FY22. We expect to reduce inventory by a
further 2m units, which will partially offset the unwind of
deferred rent and service charges (GBP40m, inclusive of VAT), some
of which we expect to crystallise as permanent savings as we
continue to negotiate lease terms.
Recognising the structural growth opportunity in Ecommerce, as
well as the geographic and customer segmental targeting
opportunities in our Wholesale business, we expect revenue to
exceed peak historic levels in the medium term. Disciplined full
price trading, continuing rent renegotiations, and the operating
leverage from cost savings will also return the business to
historic operating profit margins.
Assessment of Group's prospects
The financial position of the Group, its cash flows and
liquidity position are set out in the financial statements.
Furthermore, the Group financial statements include the Group's
objectives and policies for managing its capital, its financial
risk management objectives, details of its financial instruments
and exposure to credit and liquidity risk (please refer to note
20).
Background - Impact of continuing lockdowns and social
distancing restrictions in FY21
The lasting impact of the pandemic saw unprecedented levels of
disruption throughout FY21. Following the 'initial wave' of
lockdowns, beginning March 2020 and impacting much the first
quarter of FY21, infection rates in our key markets substantially
reduced by late September 2020 and, with the majority of our owned
store estate reopening, the prevailing view at that time was that
further widespread lockdowns appeared unlikely.
However, the announcement of a second wave of lockdowns resulted
in temporary store closures in the UK and certain EU markets from
late October 2020, albeit with a brief opening period before a
further hard lockdown from January through to April 2021. Together
with the wider factors affecting open stores, such as social
distancing measures and broader economic and health concerns, the
Group saw a continued suppression of footfall in stores which was
only partially offset by Ecommerce sales.
In total, the business lost an unprecedented 39% of store
trading days in FY21 (FY20: 10%); a conservative measure which does
not reflect other impacts such as shortened trading hours,
appointment-only openings, and general operational disruptions from
the ever-changing government regulations. By the end of June 2021,
most of our owned stores had reopened although footfall remains
subdued as the economic recovery continues.
Though there is no certainty that there will not be further
lockdowns, vaccine rollouts are progressing well in many of our
core markets, and government communications reflect an increasing
pressure to re-open economies.
There are several key mitigations that the Group has undertaken
to partially offset the adverse revenue impacts of these
lockdowns:
-- As a consequence of the protracted lockdown periods in FY21,
we recognised GBP7.7m of one-off rent savingsrelating to the
disrupted periods, with at least a further GBP10m expected to be
realised in FY22. These one-off rentbenefits are in addition to the
ongoing lease renewal savings that have been achieved to date,
which we expect willcontinue to be realised as we review our store
estate.
-- In many markets, governments have extended furlough support
where store closures have been mandated.Superdry has received
GBP9.2m of furlough support in FY21, predominantly relating to
store colleagues. We have alsoclaimed GBP2.5m in government grants
for business disruption support.
-- A reduction in future stock purchases, aided by the carry
over and recoding of core product, remains ourlargest cash
mitigation. In addition to the volume of intake, we will continue
to work closely with our suppliersto manage payment terms,
particularly through our cash trough ahead of the Autumn / Winter
season.
Liquidity headroom
On 10 August 2020 the Group announced that it had completed a
refinancing of its facilities, moving from a Revolving Credit
Facility ('RCF') of GBP70m, due to expire in January 2022, to a new
Asset Backed Lending ('ABL') facility for up to GBP70m, due to
expire in January 2023, with amended covenants (detailed in the
Covenant testing section below) and the option to extend, at the
discretion of the lender, for a further 12 months.
The Group's ability to preserve and manage cash has been clearly
evidenced (and detailed in the Mitigating Actions section, below),
with the business maintaining a positive net cash balance in excess
of GBP20m throughout FY21, despite the pressures of the
pandemic.
In addition, the Group has an overdraft facility of up to GBP10m
available on a rolling annual basis, albeit as this is not
committed, it has not been considered by management as part of the
going concern or viability assessment.
Base case:
The Group's going concern assessment has been based on a
12-month financial plan (the 'Plan') derived from the latest FY22
and FY23 forecasts. Though the effects of Covid-19 on consumer
behaviour long term are yet to be fully understood, the trading
outlook for the Group has improved relative to the prior year,
which is reflected in the Plan.
In determining the Plan, management has made a number of
assumptions regarding the Group's trading performance in light of
the coronavirus pandemic. The most significant of those are:
-- All trading channels benefit from ongoing product
improvements, operational initiatives and marketingactivity to
support the brand reset which began in October 2020, the full
benefit of which is not yet realised,given the ongoing store
closures in FY21.
-- Stores trade for substantially all of FY22 following the
reopening of those European markets whichremained closed at the
start of the financial year. Trading is assumed to recover steadily
over the duration ofFY22 as stores reopen and consumer demand
returns, reflecting the macroeconomic uncertainties in FY22 and
theongoing channel shift towards online. Profitability will be
delivered through full price trading margins, therecurring benefits
of renegotiated leases and store payroll optimisation in FY21, but
with store revenues remainingbelow pre-Covid levels in FY22.
-- UK property rates are conservatively assumed to return from
April 2022 (GBP16m annualised cost), followingthe end of the
current rates relief measures announced by the government.
-- Ecommerce trading benefits from the underlying and recently
accelerated channel shift towards digitalfrom physical retailing,
together with planned investments to improve the website user
experience. However, theplan reflects a tougher comparable period
in 2021 and an element of targeted promotional activity to clear
excessstock and generate cash, with modest growth forecast in the
balance of FY22.
-- Wholesale performance begins to recover in FY22, reflecting
the latest forward order book and thecontinuation of FY21 trends
such as increased in-season orders to online partners, recovering
to pre-Covid-19levels over the medium term.
-- Gross margin rate recovers as we reduce the level of
promotional activity from FY21 and return to a fullprice stance in
FY22. Channel mix benefits will be realised as stores (our highest
margin channel) trade for theduration of the year.
-- Increased marketing spend in FY22 to reflect increased
performance marketing in the short term togetherwith longer-term
brand investment as part of the turnaround.
-- As a consequence of the impact of Covid-19 on global trade,
the Group and the Company are aware ofconstraints to the global
supply of containers for shipping goods from Asia to Europe and,
while the Group remainsconfident that the majority of goods will be
shipped, it is expected that the cost of these shipments will
increasein FY22.
Reverse stress test
Given the base case reflects both the results of the turnaround
plan, and the uncertainties surrounding forecasts due to Covid-19,
the Group has modelled a 'reverse stress test' scenario.
A reverse stress test calculates the shortfall to forecast sales
in the Plan that the Group would be able to absorb, after
implementing feasible mitigating actions, before either: a.
requiring additional sources of financing, in excess of those that
are committed; or b. breaching the lending covenants on our
committed facility.
Given the projected headroom over our covenants, and our proven
ability to manage cash, management considers the likelihood of
breaching our facilities to be remote.
This assessment is linked to a robust assessment of the
principal risks facing the Group, and the reverse stress test
reflects the potential impact of these risks being realised.
Mitigating actions
If performance deviates materially from the Base Case Plan, the
impact could result in a reduction in liquidity and/ or a longer
period of lower profitability, which in turn could risk covenant
breaches. Management has considered what plausible mitigating
actions are available to them, including:
-- a reduction in uncommitted capital expenditure;
-- a reduction in Head Office costs and discretionary spend;
and
-- reducing the purchase quantities of new season stock in line
with the lower sales projections.
Consequently, management believes that the likelihood of further
downsides in revenue, beyond those modelled in the reverse stress
test, that cannot be mitigated adequately, to be remote. However,
should the mitigating actions outlined above not be sufficient,
management would likely adapt the current store portfolio strategy
to exit a greater proportion of stores.
Covenant testing
Our facilities include an Asset Backed Lending ('ABL') Facility
for up to GBP70m, together with a GBP10m uncommitted overdraft.
Our relationship with our lending group remains strong, with
covenant resets agreed in both January and July 2021 as the
macroeconomic impact of social distancing and lockdown restrictions
continued to extend past initial expectations when the financing
was agreed in August 2020.
The amended covenants in the ABL facility are tested quarterly
and are based around the Group's adjusted EBITDAR (relative to the
Base Case Plan) until the end of Q2 22 and fixed charge (rent and
interest) cover thereafter. The covenants are tested on a 'frozen
GAAP' basis and hence accounting under IFRS 16 does not impact
them.
Under the reverse stress test, which tests for the breakeven
point against our borrowing facilities (liquidity and covenants are
tested separately), the July 2022 (Q2 23) covenant test would
breach first. However, management considers the likelihood of
experiencing revenue shortfall required to cause this breach to be
remote. The Directors are confident that under the mitigated
reverse stress test there is sufficient liquidity headroom over the
going concern period.
If this scenario was to occur, management would approach lenders
for a covenant waiver. Whilst there would be no guarantee that such
a waiver would be made available, in making their assessment
management notes that it currently has a good relationship with the
Group's lenders and has held positive discussions throughout the
year. These lenders have been made aware of all key inputs into the
Base Case Plan, as well as the implications of the short-term
disruption, and have now agreed to re-gear the covenants on two
occasions, to reflect the unforeseen duration and magnitude of the
impact from Covid-19. In addition, it should be noted that the
Group expects to be cash positive for most of the year, allowing
for the normal seasonal working capital cycle, with substantial
liquidity maintained throughout the going concern period.
Significant judgements
In using these financial forecasts for the going concern
assessment, the Group's Directors recognise that significant
judgement was required to decide what assumptions to make regarding
the impact of the coronavirus pandemic on the retail sector and
wider economy and specifically to Superdry, and the ability to
execute the turnaround plans required to recover brand health and
return the business to profitable growth. Consequently, though the
level of visibility has improved year on year, there remains more
uncertainty than would usually be the case in making the key
judgements and assumptions that underpin the financial forecasts
for the business. The Directors believe that this uncertainty is
reflected in the Base Case Plan, and trading year to date continues
to give us confidence that we are through the worst effects of the
pandemic.
The Plan does not anticipate a further, extended period of store
closures, and the likelihood of this scenario is deemed remote.
While it is conceivable that there is a further territory-wide
lockdown, key factors in making this judgement include:
-- vaccine rollouts are progressing well in many of our core
markets;
-- social distancing restrictions have been relaxed far more
significantly than in between previouslockdowns, with broader
cultural acceptance of the need for hygiene measures (e.g.
mask-wearing and handsanitising);
-- government communications reflect an increasing pressure to
re-open economies, with furlough supportcoming to an end on 30
September 2021 in the UK.
In the event that this were to happen, it could cause revenue
declines to exceed those in the reverse stress test, however, this
would likely result in corresponding government support (e.g. in
the form of furlough and rent moratorium) being available to
mitigate the worst effects, together with implementing similar cash
preservation measures as were deployed in FY21.
Summary
After considering the forecasts, sensitivities and mitigating
actions available to management and having regard to the risks and
uncertainties to which the Group is exposed, the Directors have a
reasonable expectation that the Company and the Group has adequate
resources to continue operating for the foreseeable future, and to
operate within its borrowing facilities and covenants for a period
of at least 12 months from the date of signing the financial
statements, taking into account the working capital troughs in both
FY21 and FY22. Accordingly, the financial statements continue to be
prepared on the going concern basis.
Viability
In line with the UK Corporate Governance Code, the Directors
have assessed the prospects of the Group over a longer period than
that required by the 'going concern' provision. The Directors have
assessed the viability of the Group over the five-year period
through to FY26 using the medium-term financial plan (the 'Medium
Term Plan'). This Medium Term Plan is in its early stages of
implementation (having been delayed due to the Covid-19 pandemic).
It assumes the successful execution of the turnaround strategy to
reset the brand, reversing the decline in performance which began
in FY19 and return the Group to FY18 revenues and profitability
over the medium/longer-term horizon.
The five-year viability period coincides with the Group's
strategic review period. Furthermore, beyond this period,
performance is increasingly difficult to predict, exacerbated by
the impact of Covid-19.
The viability assessment has considered the potential impact of
the principal risks on the business in particular future
performance (including the success of the brand reset and
turnaround strategy, and the broader economic recovery) and
liquidity over the Plan. In making this statement, the Directors
have considered the resilience of the Group under varying market
conditions together with the effectiveness of any mitigating
actions and the availability of financing facilities.
As already described in the statement regarding going concern,
as part of this assessment the Directors have considered an
extended reverse stress test over the viability period with similar
mitigations as under the going concern assessment, and have taken
account of the availability of the Group's ABL.
Whilst recognising the challenging retail environment will
increase the risks and costs around the future refinancing of this
facility, based on current market conditions and our proven ability
to manage cash during the pandemic, the Directors believe that
Superdry has the appropriate plans, current assets, and mitigations
in place to maximise the prospects of a successful renewal in
advance of the January 2023 ABL expiry. The viability assessment
therefore assumes that the Group renews on existing or better terms
through the duration of the viability period.
Under the reverse stress test, which tests for the breakeven
point against our borrowing facilities (liquidity and covenants are
tested separately), the July 2022 (Q2 23) covenant test would
breach first, in line with the going concern test. Given the
assumed recovery in trading post-Covid in the Medium Term Plan,
both liquidity and covenant headroom in the outer years of the plan
is higher than in FY23. The reverse stress test indicated that,
after taking account of the mitigating actions highlighted in the
going concern assessment above, the Group would be able to operate
within its funding facilities for the five-year assessment period.
However, a sustained downturn as a result of the new strategy not
turning the business around, or an unexpected failure to renew the
ABL in January 2023, would threaten the viability of the business
over this five-year assessment period.
Based on this assessment, the Directors have a reasonable
expectation that the Group will have sufficient resources to
continue in operation and meet its liabilities as they fall due
over the period to April 2026.
Notes
1. 'Lost trading days' calculated as the simple average number
of stores closed each day of the period as a percentage of total
potential trading days in the period, excludes impact of restricted
trading hours.
2. Full price sales mix relates to the proportion of retail
sales made at RRP in full priced stores and owned websites
only.
3. Cash annualised saving has been calculated based on the
effective date of the lease agreement.
Group Statement of Comprehensive Income
to the members of Superdry Plc
Adjusted* Adjusting Total Adjusted* Adjusting Total
Note 2021 items 2021 2020 items 2020
GBPm (note 7) GBPm GBPm (note 7) GBPm
GBPm GBPm
Revenue 6 556.1 - 556.1 704.4 - 704.4
Cost of sales (263.0) - (263.0) (326.5) - (326.5)
Gross profit 293.1 - 293.1 377.9 - 377.9
Selling, general and administrative expenses (321.6) (19.4) (341.0) (412.1) (127.0) (539.1)
Other gains and losses (net) 19.3 (4.7) 14.6 9.1 1.9 11.0
Impairment credit/(loss) on trade receivables 3.8 - 3.8 (9.2) - (9.2)
Operating loss (5.4) (24.1) (29.5) (34.3) (125.1) (159.4)
Finance income - - - 0.2 - 0.2
Finance expense (7.2) - (7.2) (7.7) - (7.7)
Loss before tax (12.6) (24.1) (36.7) (41.8) (125.1) (166.9)
Tax (expense)/credit 10 (3.3) 3.9 0.6 6.1 17.4 23.5
Loss for the period (15.9) (20.2) (36.1) (35.7) (107.7) (143.4)
Attributable to:
Owners of the Company (15.9) (20.2) (36.1) (35.7) (107.7) (143.4)
Other comprehensive expense net of tax:
Items that may be subsequently reclassified to
profit or loss
Currency translation differences 12.1 - 12.1 (2.5) - (2.5)
Total comprehensive expenses for the period (3.8) (20.2) (24.0) (38.2) (107.7) (145.9)
Attributable to:
Owners of the Company (3.8) (20.2) (24.0) (38.2) (107.7) (145.9)
pence pence pence pence
per share per per share per
share share
Earnings per share:
Basic 11 (19.4) (44.0) (43.5) (174.9)
Diluted 11 (19.4) (44.0) (43.3) (174.1)
* Adjusted and Adjusting Items are defined in note 22.
2021 is for the 52 weeks ended 24 April 2021 and 2020 is for the
52 weeks ended 25 April 2020.
Balance Sheet
to the members of Superdry Plc Registered number: 07063562
Group
24 April 25 April
Note 2021 2020
GBPm GBPm
ASSETS
Non-current assets
Property, plant and equipment 13 29.4 41.7
Right of use assets 17 91.1 118.0
Intangible assets 14 41.7 48.4
Investments in subsidiaries - -
Deferred tax assets 53.8 53.3
Derivative financial instruments 20 0.3 0.1
Total non-current assets 216.3 261.5
Current assets
Inventories 148.3 158.7
Trade and other receivables 102.3 91.6
Derivative financial instruments 20 2.4 2.5
Current tax receivables 4.0 6.8
Cash and bank balances 38.9 307.4
Total current assets 295.9 567.0
LIABILITIES
Current liabilities
Borrowings - 270.7
Trade and other payables 126.5 103.3
Provisions for other liabilities and charges 6.2 4.2
Derivative financial instruments 20 5.7 2.1
Lease liabilities 17 94.1 80.1
Total current liabilities 232.5 460.4
Net current assets/(liabilities) 63.4 106.6
Non-current liabilities
Trade and other payables 1.2 2.2
Provisions for other liabilities and charges 10.0 10.8
Derivative financial instruments 20 1.5 0.2
Deferred liabilities 1.1 1.4
Lease liabilities 17 175.5 240.8
Total non-current liabilities 189.3 255.4
Net assets 90.4 112.7
EQUITY
Share capital 21 4.1 4.1
Share premium 149.2 149.1
Translation reserve 6.6 (5.5)
Merger reserve (302.5) (302.5)
Retained earnings 233.0 267.5
Total equity 90.4 112.7
Group Cash Flow Statement
to the members of Superdry Plc
Group
Note 2021 2020
GBPm GBPm
Cash generated from operating activities 18 50.1 87.5
Tax receipt/(payment) 2.5 (2.2)
Net cash generated from operating activities 52.6 85.3
Cash flow from investing activities
Investments in subsidiaries - -
Purchase of property, plant and equipment (6.8) (6.4)
Purchase of intangible assets (6.8) (7.5)
Proceeds from disposal of assets held for sale - 2.4
Net cash used in investing activities (13.6) (11.5)
Cash flow from financing activities
Dividend payments 12 - (3.4)
Proceeds of issue of share capital 0.1 -
Draw down of Revolving Credit Facility - (30.0)
Repayment of Revolving Credit Facility - 30.0
Net interest paid (7.2) (7.5)
Repayment of leases - principal amount 17 (39.9) (61.1)
Net cash used in financing activities (47.0) (72.0)
Net (decrease)/increase in cash and cash equivalents 19 (8.0) 1.8
Net cash and cash equivalents/(debt) at beginning of period 19 36.7 35.9
Exchange gains/(losses) on cash and cash equivalents 10.2 (1.0)
Net cash and cash equivalents/(debt) at end of period 38.9 36.7
2021 is for the 52 weeks ended 24 April 2021 and 2020 is for the
52 weeks ended 25 April 2020.
Statement of Changes in Equity
to the members of Superdry Plc
Share Share Translation reserve Merger Retained Total
Group Note capital premium GBPm reserve earnings equity
GBPm GBPm GBPm GBPm GBPm
Balance at 27 April 2019 4.1 149.1 (3.0) (302.5) 413.1 260.8
Comprehensive expense
Loss for the period - - - - (143.4) (143.4)
Other comprehensive expense
Currency translation differences - - (2.5) - - (2.5)
Total other comprehensive expense - - (2.5) - - (2.5)
Total comprehensive expense for the period - - (2.5) - (143.4) (145.9)
Transactions with owners
Employee share award schemes 8,9 - - - - 1.2 1.2
Dividend payments 12 - - - - (3.4) (3.4)
Total transactions with owners - - - - (2.2) (2.2)
Balance at 25 April 2020 4.1 149.1 (5.5) (302.5) 267.5 112.7
Comprehensive expense
Loss for the period - - - - (36.1) (36.1)
Other comprehensive income
Currency translation differences - - 12.1 - - 12.1
Total other comprehensive income - - 12.1 - - 12.1
Total comprehensive (expense)/income for the period - - 12.1 - (36.1) (24.0)
Transactions with owners
Shares issued - 0.1 - - - 0.1
Employee share award schemes 8,9 - - - - 1.6 1.6
Dividend payments 12 - - - - - -
Total transactions with owners - 0.1 - - 1.6 1.7
Balance at 24 April 2021 4.1 149.2 6.6 (302.5) 233.0 90.4
Notes to the Group Financial Statements
1. Basis of preparation
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with IFRSs. The Group expects to
publish full financial statements that comply with IFRSs in
September 2021.
The financial information included in this preliminary
announcement does not constitute the Group's statutory accounts for
the years ended 24 April 2021 or 25 April 2020, but is derived from
those accounts.
The statutory financial statements for the year ended 24 April
2021 will be filed with the Registrar of Companies following the
2021 Annual General Meeting. The report of the auditor was
unqualified and did not draw attention to any matters by way of
emphasis and did not contain a statement under s498(2) or (3) of
the Companies Act 2006.
The financial information for the year ended 25 April 2020 is
derived from the statutory accounts for that year which have been
delivered to the Registrar of Companies. The auditors reported on
those accounts: their report was unqualified and did not contain a
statement under s498(2) or (3) of the Companies Act 2006, but did
include a section highlighting a material uncertainty that may have
cast significant doubt on the Group and Company's ability to
continue as a going concern.
2. Significant accounting policies
The accounting policies adopted are consistent with those
applied by the Group in the Annual Report for the year ended 25
April 2020.
3. Key sources of estimation uncertainty in applying the Group's
accounting policies
The preparation of the financial statements requires estimates
and assumptions to be made that affect the reported value of
assets, liabilities, revenues and expenses. The nature of
estimation means that actual outcomes could differ from
expectation.
Management consider that accounting estimates and assumptions
made in relation to the following items have a significant risk of
resulting in a material adjustment to the carrying amounts of
assets and liabilities within the next financial period.
Store impairment estimates
Store assets (as with other financial and non-financial assets)
are subject to impairment based on whether current or future events
and circumstances suggest that their recoverable amount may be less
than their carrying value. Recoverable amount is based on the
higher of the value in use and fair value less costs to dispose,
although as all the Group's owned stores are leasehold, only value
in use has been considered in the impairment assessment. Value in
use is calculated from expected future cash flows using suitable
discount rates and including management assumptions and estimates
of future performance. Store asset carrying values are inclusive of
any right of use assets following the transition to IFRS16. An
impairment charge of GBP22.8m (2020: GBP136.8m) and an impairment
reversal of GBP12.1m (2020: GBPnil) were recognised in the period
(net impairment of GBP10.7m, 2020: GBP136.8m).
For impairment testing purposes, the Group has determined that
each store is a CGU. Each CGU is tested for impairment if any
indicators of impairment have been identified. Given the decline in
store sales in the year, all 231 owned stores have been tested for
impairment in the current year.
The key estimates for the value in use calculations are those
regarding expected changes in future cash flows and the allocation
of central costs. The key assumptions used in determining store
cash flows are the growth in both sales and gross margin set out in
the medium-term plan.
The value in use of each CGU is calculated based on the Group's
latest budget and forecast cash flows, covering a five-year period
(the "medium-term financial plan"), which has regard for historic
performance, knowledge of the current market and the impact of the
Covid-19 pandemic, together with the Group's views on the
achievable growth, all of which have been reviewed and approved by
the Board. The medium-term financial plan is prepared on a 'top
down' basis and has been attributed to individual stores based on
their historic performance relative to the rest of the store
estate, as well as the store's sensitivity to the impact of the
Covid-19 pandemic. Disruption caused by the Covid-19 impact is
estimated to continue throughout FY22 with a gradual recovery of
footfall. The subsequent assumptions regarding future store sales
recovery, as outlined in the Going Concern statement, are
considered key estimates.
Cash flows beyond this five-year period as set out in the
medium-term financial plan are extrapolated using long-term growth
rates that are indicative of country-specific rates. The cash flows
are discounted using the appropriate discount rate. The cash flows
are modelled for each store through to their lease expiry date.
Lease extensions have only been assumed in the modelling where they
have been agreed with landlords.
Central costs are attributed to store CGUs where they can be
allocated on a reasonable and consistent basis, and assumptions are
required to determine the basis for allocation. In addition to
directly attributable store costs, other relevant operating costs
have been attributed to store CGUs on a reasonable and consistent
basis where possible, which include certain distribution, IT, HR
and marketing expenses, totalling 10-14% of the overall annual cost
base.
Management estimates discount rates using pre-tax rates that
reflect the current market assessment of the time value of money
and the risks specific to the CGUs. The pre-tax discount rates
range from 12.6% to 15.1% (2020: 12.2% to 14.7%) and are derived
from the Group's post-tax WACC range of 10.0% to 11.6% (2020: 9.2%
to 11.9%). Discount rates are not considered a sensitive assumption
- a 500bps change in the discount rates, which is not considered to
be reasonably possible, would result in a GBP5.7m increase or
GBP4.2m decrease in the net impairment.
Further significant costs (or credits) may be recorded in future
years dependent on the longer-term impact of Covid-19 and the
success of the Brand reset.
During the year, the Group has recognised a net impairment
charge of GBP3.3m relating to property, plant and equipment and a
net impairment charge of GBP7.4m relating to right of use assets.
These impairment charges have been recognised as part of adjusting
items within selling, general and administrative expenses. The
carrying value of property, plant and equipment (note 13), right of
use assets (note 17) and intangible assets (note 14) after the
impairment assessment is GBP162.2m.
The Group has carried out a sensitivity analysis on the
impairment tests for its owned store portfolio on an aggregated
basis for property, plant and equipment, right of use assets and
intangibles, using various reasonably possible scenarios based on
recent market movements including discount rates and a change to
the sales and margin assumptions in the medium-term financial
plan:
-- An increase of 200bps in the gross margin rate in all years
for each territory would decrease netimpairment by GBP5.9m
-- A decrease of 200bps in the gross margin rate in all years
for each territory would increase netimpairment by GBP6.1m
-- An increase of 10% in the year 1 sales growth for each
territory would decrease net impairment by GBP5.7m
-- A decrease of 10% in the year 1 sales growth for each
territory would increase net impairment by GBP5.8m
-- A 15% change in the central costs being allocated to the
store CGUs would increase net impairment byGBP3.1m
In addition, the Group has considered a range of reasonably
possible outcomes within the medium-term financial plan period. The
scenario modelled is consistent with the sensitivities applied for
the viability assessment. This would increase the net impairment
charge by GBP41.3m.
Onerous property related contracts provisions
Management has also assessed whether impaired and unprofitable
stores require an onerous provision for the property related
contracts. An onerous property related contracts provision is
recognised when the Group believes that the unavoidable costs of
meeting or exiting the property related obligations exceed the
benefits expected to be received under the lease. The property
related contracts relate primarily to service charges. Onerous
property related contracts provisions are no longer recognised on
fixed rental expenses, following the transition to IFRS 16.
The calculation of the net present value of future cash flows is
based on the same assumptions for growth rates and expected changes
to future cash flows as set out above for store impairments,
discounted at the appropriate risk adjusted rate. The costs of
exiting property related contracts as set out in the lease
agreement, either at the end of the lease or the lease break date
(whichever is shorter), have been considered in the
calculation.
The onerous property related contracts provision charge has been
recognised within adjusting items within selling, general and
administrative expenses. Further significant costs (or credits) may
be recorded in future years dependent on the longer-term impact of
Covid-19 and the success of the Brand reset.
Risk free rates are not considered a sensitive assumption - a
20% change in the risk-free rates, which is not considered to be
reasonably possible, would result in a GBP8.5m increase or GBP3.5m
decrease in the net impairment.
The Group has performed sensitivity analysis on the onerous
property related contract provisions using possible scenarios based
on recent market movements, consistent with those sensitivities
disclosed above in the 'store impairment' section:
-- An increase of 1,000bps in the margin rate in all years for
each territory would decrease the onerousproperty related contracts
charge by GBP3.5m
-- A decrease of 1,000bps in the margin rate in all years for
each territory would increase the onerousproperty related contracts
charge by GBP10.2m
-- An increase of 40% in year 1 sales growth for each territory
would decrease the onerous property relatedcontracts charge by
GBP3.7m
-- A decrease of 40% in year 1 sales growth for each territory
would increase the onerous property relatedcontracts charge by
GBP8.3m
The downside scenario modelled in the viability assessment,
would increase the onerous property related contracts charge by
GBP16.1m.
Recoverability of trade debtors
The impairment of trade and other receivables is based on
management's estimate of the ECL. These are calculated using the
Group's historical credit loss experience, with adjustments for
general economic conditions and an assessment of conditions at the
reporting date. The estimation uncertainty relates to the allowance
for expected credit losses of GBP8.6m, which includes a specific
provision and an ECL provision.
The specific provision of GBP6.0m is calculated for higher risk
trade receivables, relating to customers who have balances over
GBP30k that are at least 30 days overdue. This provision is
calculated based on a specific review of the exposure to each
customer, net of credit enhancements and taking into consideration
their payment history. There is a range of possible outcomes for
the specific provision; an indication of the maximum possible
exposure is that the specific provision of GBP6.0m covers gross
debtors of GBP10.5m.
The ECL provision of GBP2.6m is calculated for the aggregated
remaining debtors profiled by country, net of credit enhancements,
and assuming country-specific default rates. The country-specific
default rates were prepared using externally generated data which
reflects the higher credit risk of the Group's debtor book, taking
into consideration the impact of the Covid-19 pandemic. A range of
possible outcomes for the ECL provision using a range of 60-90%
insurance recoveries and 5-20% probability of default gives an ECL
provision of GBP1.0m to GBP4.8m.
Uncertain tax position
The Group is subject to tax laws in a number of jurisdictions
and given the scale of its operations, it is subject to periodic
challenges by local tax authorities on a range of tax matters. The
group's transfer pricing policies aim to allocate profits and
losses to each operating entity on an arm's length basis. In the
past two years, the group has experienced an already challenging
retail environment, exacerbated by the business disruption caused
by the global COVID-19 pandemic.
It is uncertain how different tax authorities may view the
impact of the pre-COVID challenging trading environment, and the
challenges presented by COVID on the Group's internal transfer
pricing policies.
Given this uncertainty, the group has recognised a net GBP1.3m
provision (2020: GBPnil) in respect of uncertain tax positions as
required under IAS12, with due consideration to guidance contained
within IFRIC 23. The key estimate in this provision is the possible
level of adjustment required by each jurisdiction. A range of
possible outcomes for this provision is GBPnil to GBP4m.
4. Critical judgements in applying the Group's accounting
policies
Management consider that judgements made in the process of
applying the Group's accounting policies that could have a
significant effect on the amounts recognised in the Group financial
statements are as follows:
Attributing Ecommerce sales and costs to stores
Judgement is required to determine whether Ecommerce sales (and
associated costs) could be attributed to stores for the purposes of
impairment testing when calculating the value in use of each store
CGU. The basis of such attribution is considered difficult to
determine, due to insufficient evidence to reliably estimate. For
this reason, Ecommerce sales attributable to stores have not been
calculated. The continuation of Ecommerce sales during the period
of Covid-19 enforced store closures further supports this
judgement.
Store impairment judgements
Store assets (as with other financial and non-financial assets)
are subject to impairment based on whether current or future events
and circumstances suggest that their recoverable amount may be less
than their carrying value. The impairment review involves critical
accounting judgements, in addition to the significant estimates
discussed above.
The medium-term financial plan is prepared on a 'top down' basis
and has been attributed to individual stores based on their
historic performance relative to the rest of the store estate, as
well as the store's sensitivity to the impact of the Covid-19
pandemic. Judgement is involved in this revenue and cost
attribution exercise in defining the parameters of the store
characteristics. The outcome of this exercise affects the value in
use associated with each store CGU.
Similarly, judgement is required in determining which central
costs are directly involved in the store operations and therefore
should be apportioned to each store CGU. Central costs are
attributed to store CGUs where they can be allocated on a
reasonable and consistent basis.
Judgement is also involved in defining the lease term used in
the store impairment calculations. Lease extensions have only been
assumed in the modelling where they have been agreed with
landlords.
Adjusting items
Judgements are required as to whether items are disclosed as
adjusting items, with consideration given to both quantitative and
qualitative factors. Further information about the determination of
adjusting items in financial year 2021 is in note 22.
5. New accounting pronouncements
The accounting policies set out have been applied consistently
throughout the Group and to all years presented in these
consolidated accounts except if mentioned otherwise. For the
financial year 2021, the following amendments were adopted by the
Group:
-- Amendments to References to the Conceptual Framework in IFRS
Standards.
-- Amendments to IFRS 3: Definition of a business.
-- Amendments to IAS 1 and IAS 8: Definition of Material.
The group also elected to adopt the following amendment
early:
-- Amendment to IFRS 16 Covid-19-Related Rent Concessions.
The impact of early adopting the amendment to IFRS 16 is
described below. The adoption of the other standards and
interpretations listed above has not led to any changes to the
Group's accounting policies or had any other material impact on the
financial position or performance of the Group.
IFRS 16: Covid-19-Related Rent Concessions
The Group has applied Covid-19-Related Rent Concessions, as
permitted under amended IFRS 16, issued by the IASB in May 2020.
The practical expedient is only applicable to rent concessions
provided as a direct result of the Covid-19 pandemic with no other
substantive changes to other terms and condition of the lease.
The practical expedient applies only to rent concessions
occurring as a direct consequence of Covid-19 and only if all the
following conditions are met: a. The change in lease payments
results in revised consideration for the lease that is
substantially thesame as, or less than, the consideration for the
lease immediately preceding the change. b. Any reduction in lease
payments affects only payments originally due in on or before June
30, 2021 (arent concession meets this condition if it results in
reduced lease payments on or before June 30, 2021, andincreased
lease payments that extend beyond June 30, 2021); and c. There is
no substantive change to other terms and conditions of the
lease.
Rent concessions meeting the criteria have been recognised in
the period to which they relate. Adoption of the practical
expedient has resulted in a GBP4.0m credit to the Group operating
loss.
New accounting standards in issue but not yet effective
At the date of authorisation of these financial statements, the
Group has not applied the following new and revised IFRS Standards
that have been issued but are not yet effective:
-- IFRS 17 Insurance contracts.
-- IFRS 10 and IAS 28 (amendments): Sale or Contribution of
Assets between an Investor and its Associate orJoint Venture.
-- Amendments to IAS 1: Classification of Liabilities as Current
or Non-current.
-- Amendments to IFRS 3: Reference to the Conceptual
Framework.
-- Amendments to IAS 16: Property, Plant and Equipment -
Proceeds before Intended Use.
-- Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling
a Contract; and
-- Annual Improvements to IFRS Standards 2018-2020 Cycle.
The application of these new standards and amendments are not
expected to have a material impact on the Group.
6. Segment information
Revenue is generated from the same products (clothing and
accessories) in all segments; the reporting of segments is based on
how these sales are generated. Gross profit is the measure reported
to the Group's CODM for the purpose of resource allocation and
assessment of segment performance. The Group derives its revenue
from contracts with customers for the transfer of goods and
services at a point in time.
Change in segment reporting presentation
The Group's operating segments have been modified during the
reporting period. Previously, the operating segments were defined
as Retail and Wholesale, with Stores and Ecommerce being reported
under the Retail segment. Due to an increase in the sales mix of
Ecommerce as a proportion of Retail (accelerated by Covid-19), the
Group is focusing on this as a significant channel of growth.
Consequently, the level at which the Group's CODM receives
information to make decisions has changed, and the Group is now
reporting revenue and gross profit under three operating segments -
Stores, Ecommerce and Wholesale. The term 'Retail' will be used to
define the total of the Ecommerce and Stores segments. The prior
year comparatives have been split to provide the same level of
information for the three segments.
Segmental information for the business segments of the Group for
financial years 2021 and 2020 is set out below. The 'Retail'
subtotal of the 'Stores' and 'Ecommerce' segments presented below
is considered useful additional information to the reader.
Stores Ecommerce Retail Wholesale Central costs Group
2021 2021 Subtotal 2021 2021 2021
GBPm GBPm 2021 GBPm GBPm GBPm
GBPm
Total segment revenue 140.5 201.8 342.3 389.6 - 731.9
Less: inter-segment revenue - - - (175.8) - (175.8)
Revenue from external customers 140.5 201.8 342.3 213.8 - 556.1
Gross profit 93.6 117.5 211.1 82.0 - 293.1
(Loss)/profit before tax (9.3) 40.8 (68.2) (36.7)
The segment measure of profit required to be presented under
IFRS 8 Segments is gross profit. (Loss)/profit before tax has been
presented as an additional profit measure which is considered to
provide useful information to the reader since it allows comparison
of the Group's results in FY21 with the Group's results under the
segmental structure in FY20 (where the 'Stores' and 'Ecommerce'
segments were a single 'Retail' segment). Certain costs have not
been allocated between the Stores and Ecommerce segments in
FY21.
The following additional information is considered useful to the
reader:
Adjusted* Adjusting items Reported
2021 GBPm 2021
GBPm GBPm
Revenue
Retail 342.3 - 342.3
Wholesale 213.8 - 213.8
Total revenue 556.1 - 556.1
Operating loss
Retail 15.4 (19.2) (3.8)
Wholesale 42.1 (1.3) 40.8
Central costs (62.9) (3.6) (66.5)
Total operating loss (5.4) (24.1) (29.5)
Net finance expense - Central costs (1.7) - (1.7)
Net finance expense - Retail (5.5) - (5.5)
(Loss)/profit before tax
Retail 9.9 (19.2) (9.3)
Wholesale 42.1 (1.3) 40.8
Central costs (64.6) (3.6) (68.2)
Total loss before tax (12.6) (24.1) (36.7)
* Adjusted is defined as reported results before adjusting items
and is further explained in note 22.
The net impairment losses and reversals on store assets and
onerous property related contract charges amount to GBP15.8m and
all relate to the Retail segment.
Stores Ecommerce Retail Wholesale Central costs Group
2020* 2020* Subtotal 2020 2020* 2020
GBPm GBPm 2020 GBPm GBPm GBPm
GBPm
Total segment revenue 287.2 151.6 438.8 510.9 - 949.7
Less: inter-segment revenue - - - (245.3) - (245.3)
Revenue from external customers 287.2 151.6 438.8 265.6 - 704.4
Gross profit 192.5 90.5 283.0 94.9 - 377.9
(Loss)/profit before tax (125.1) 32.1 (73.9) (166.9)
* The 2020 balances have been split out to reflect the change in
operating segments from Retail to Stores and Ecommerce.
The following additional information is considered useful to the
reader:
Adjusted* Adjusting items Reported
2020 GBPm 2020
GBPm GBPm
Revenue
Retail 438.8 - 438.8
Wholesale 265.6 - 265.6
Total revenue 704.4 - 704.4
Operating (loss)/profit
Retail 5.3 (124.8) (119.5)
Wholesale 31.4 0.7 32.1
Central costs (71.0) (1.0) (72.0)
Total operating (loss)/profit (34.3) (125.1) (159.4)
Net finance expense - Central costs (1.9) - (1.9)
Net finance expense - Retail (5.6) - (5.6)
Share of loss of investment - Central costs - - -
(Loss)/profit before tax
Retail (0.3) (124.8) (125.1)
Wholesale 31.4 0.7 32.1
Central costs (72.9) (1.0) (73.9)
Total (loss)/profit before tax (41.8) (125.1) (166.9)
* Adjusted is defined as reported results before adjusting items
and is further explained in note 22.
Revenue from external customers in the UK and the total revenue
from external customers from other countries are:
Group
2021 2020
GBPm GBPm
External revenue - UK 197.5 254.5
External revenue - Europe 283.5 346.7
External revenue - Rest of world 75.1 103.2
Total external revenue 556.1 704.4
For all channels the Geographic territories have been aligned to
the internal management operational structure. In the prior year
Russia and Ukraine were included within Europe. In 2021 these
territories have been reallocated to Rest of World in line with the
internal management structure. To ensure consistent comparatives,
this methodology has been applied retrospectively to 2020.
The total of non-current assets, other than deferred tax assets,
located in the UK is GBP68.9m (2020: GBP84.5m), and the total of
non-current assets located in other countries is GBP93.6m (2020:
GBP123.6m).
7. Adjusting items
The below adjustments are disclosed separately in the Group
statement of comprehensive income and are applied to the reported
loss before tax to arrive at the adjusted loss before tax. Further
information about the determination of adjusting items in financial
year 2021 is included in note 22.
Group
2021 2020
GBPm GBPm
Adjusting items
Unrealised (loss)/gain on financial derivatives (4.7) 1.9
Net store asset impairment charges and reversals, and onerous property related contracts provision (15.8) (124.8)
Non-store intangible asset impairments (2.1) -
Restructuring, strategic change and other costs (1.0) (1.9)
IFRS 2 charge on Founder Share Plan (note 9) (0.5) (0.3)
Total adjusting items (24.1) (125.1)
Taxation
Tax impact of adjusting items (note 10) - 0.1
Deferred tax on adjusting items 3.9 17.3
Total taxation 3.9 17.4
Total adjusting items after tax (20.2) (107.7)
Adjusting items before tax in the period totalled a charge of
GBP24.1m in the year (2020: GBP125.1m charge).
Store asset impairment charges and reversals and onerous
property related contracts provision
Comprehensive reviews have been performed in both the current
and prior reporting periods across the owned store portfolio to
identify any stores which were either unprofitable, or where the
anticipated future performance would not support the carrying value
of assets.
The prior period review, performed following the downgraded
forecast in the medium-term plan driven by Covid-19, identified
stores which were either unprofitable, at risk of becoming
unprofitable over time, or where anticipated future performance
would not support the carrying value of assets. The overall costs
charged to the 2020 Group statement of Comprehensive Income of
non-cash impairments were GBP136.8m, affecting around 177 stores.
In addition, the reassessment of the onerous property related
contracts provision resulted in a release of GBP12.0m, affecting
around 35 stores. There were no releases of impairment provisions
against specific stores in the prior year.
A subsequent review was performed in the current period,
resulting from the continuing impact of the Covid-19 pandemic on
trading performance across the store portfolio. This identified the
need for an additional charge to the Group statement of
Comprehensive Income for non-cash impairments of GBP22.8m,
affecting 125 stores. Additionally, there is a non-cash credit of
GBP12.1m in the Group statement of Comprehensive Income for the
reversal of impairments that were recognised in previous periods,
where revised future cash flow projections now support the carrying
value of 52 stores. This includes a GBP5.6m impairment reversal for
the Regent Street store. The total net impairment of GBP10.7m
affects plant property and equipment and right of use assets. A
significant level of estimation and judgement has been used to
determine the charges and reversals.
A reassessment was also performed on the onerous property
related contracts provision, resulting in a charge of GBP5.1m,
affecting around 30 stores. Onerous property related contracts
provisions are no longer recognised on rental expenses, following
the transition to IFRS 16. A significant level of estimation has
been used to determine the charges to be recognised.
Intangible asset impairments
The Group has recognised impairment charges in the period for
website and software intangible assets. A review was performed
during the period over website and software intangible assets which
are likely to be replaced or upgraded in the foreseeable future,
leading to an impairment of GBP2.1m. This is considered to be an
adjusting item due to the one-off nature of this review.
Restructuring, strategic change and other costs
Adjusting items include GBP1.4m (2020: GBPnil) resulting from
the restructuring programme announced in the FY20 Group Annual
Report. This restructuring included redundancies in order to make
the Group fit for the future. The Directors consider these to be
adjusting items due to their one-off nature.
During the prior year, the Board and the Executive Committee
reviewed the long-term business plan for the Trendy & Superdry
Holding Limited joint venture. Following discussions with the joint
venture partner and considering the challenging retail environment
due to Covid-19, both parties agreed to end the relationship. Costs
for the wind-up of the business totalling GBP1.5m were accrued for
in 2020; these were adjusting items based on the one-off nature of
this decision. A credit of GBP0.4m has been recognised in the
current year for unutilised accrued amounts.
Unrealised gain/(loss) on financial derivatives
A GBP4.7m charge has been recognised within adjusting items in
respect of the fair value movement in financial derivatives (2020:
GBP1.9m credit), which has been driven primarily by the timing of
derivatives and the strong Sterling position against the US Dollar
at the year-end, and its impact on forward currency contracts,
buying US Dollar with Sterling or selling Euro for Sterling (see
note 20 for further details).
IFRS 2 charge on Founder Share Plan
The IFRS 2 charge of GBP0.5m (2020: GBP0.3m) in respect of the
Founder Share Plan is also included within adjusting items (see
notes 9 and 22 for further details).
Tax on adjusting items
The net tax credit on adjusting items totals GBP3.9m (2020:
GBP17.4m credit). An adjusting tax credit of GBP1.4m (2020:
GBP16.7m credit) arises as a result of impairments to the right of
use assets, a GBP0.3m adjusting tax credit (2020: GBP1.5m credit)
as a result of impairments to property, plant and equipment at the
balance sheet date, and an adjusting tax credit of GBP2.2m (2020:
GBP0.8m charge) arises in connection with movements on the
derivative contracts and an updated onerous lease review.
8. Share based Long-Term Incentive Plans ("LTIP")
Share awards are granted to employees in the form of equity
settled awards and cash settled awards.
Performance Share Plan
The award of shares is made under the Superdry Performance Share
Plan ("PSP"). Shares have no value to the participant at the grant
date, but subject to the conditions of the specific scheme can
convert and give participants the right to be granted nil-cost
shares at the end of the performance period.
The vesting period of these schemes is between two and three
years. Share awards will also expire if the employee leaves the
Group prior to the exercise or vesting date subject to the
discretionary powers of the Remuneration Committee.
The movement in the number of these share awards outstanding is
as follows:
Group and Company
2021 2021 2020 2020
Number of Weighted average Number of Weighted average
shares exercise shares exercise
price price
At start of the period 1,365,690 - 684,868 -
Granted 2,158,592 - 1,026,040 -
Exercised - - - -
Forfeited (544,644) - (176,041) -
Cancelled (160,940) - (169,177) -
Total number of outstanding share awards at end 2,818,698 - 1,365,690 -
of the period
None of the share awards were exercisable at the period end date
(2020: nil).
The terms and conditions of the award of shares granted under
the PSP during the year are as follows:
Group and Company
Grant date Type of award Number of shares Vesting
period
October 2020 Restricted share award 1,491,157 3 years
October 2020 Restricted share award 667,435 2 years
In 2021, the Company changed the award mechanism under the PSP
from a scheme with market-based vesting criteria to a Restricted
Share Awards (RSA) plan with no performance or market-based vesting
criteria attached. The shares granted during the year are
restricted share based conditional awards. The fair value of the
shares awarded at the grant date during the year is GBP3.8m (2019:
GBP2.9m), determined using the modified grant-date method. Shares
awarded in previous years, which are still within their vesting
period, contain market-based vesting criteria such as diluted
earnings per share and total shareholder return performance
targets. The fair value of these awards were determined at the
grant date using a Black-Scholes pricing model.
A charge of GBP1.0m (2020: GBP0.5m) has been recorded in the
Group statement of comprehensive income during the year for schemes
under the PSP.
No share options were exercised during the period. The options
outstanding at 24 April 2021 had a weighted average remaining
contractual life of 23 months (2020: 15 months); these shares have
an exercise price of GBPnil (2020: GBPnil).
The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
Cash Based Conditional Awards
Cash-settled share-based payments were granted in the year under
the PSP. These are equivalent to the RSAs granted during the year,
but are to be settled through cash, rather than shares.
These awards have no value to the participant at the grant date,
but subject to the conditions of the specific scheme can convert
and give participants the right to a cash settlement at the end of
the performance period.
The vesting period of these schemes is two years. Cash-settled
share awards will also expire if the employee leaves the Group
prior to the exercise or vesting date subject to the discretionary
powers of the Remuneration Committee.
The terms and conditions of the award of cash-settled shares
granted under the PSP during the year are as follows:
Group and Company
Grant date Type of award Number of Vesting Fair value at grant Fair value at reporting
shares period date date
October 2020 Cash-settled restricted share 286,951 2 years 1.75 2.87
award
The movement in the number of share awards outstanding is as
follows:
Group and Company
2021 2020
Number of shares Number of shares
At start of the period - -
Granted 286,951 -
Forfeited (25,793) -
Total number of outstanding share awards at end of the period 261,158 -
None of the share awards were exercisable at the period end date
(2020: nil).
The shares granted during the year are restricted share based
conditional awards. The terms and conditions of the award specify
that the fair value at the end of the performance period will be
the lower of fair value on that date or a cap of twice the grant
price.
The fair value of the shares awarded at the grant date during
the year was GBP0.5m (2020: GBP2.9m) and has been remeasured to
GBP0.7m (2020: GBPnil) at the reporting date. The fair value of the
award is determined at the modified grant date and is remeasured at
each subsequent reporting period. The shares granted during the
year did not contain any market-based vesting criteria.
A charge of GBP0.2m (2020: GBPnil) has been recorded in the
Group statement of comprehensive income during the year for
cash-settled schemes under the PSP.
Save As You Earn
A Save As You Earn scheme is operated by the Group. No charge
(2020: no charge) has been recorded in the Group statement of
comprehensive income during the year.
Buy As You Earn
A Buy As You Earn scheme is operated by the Group which
commenced in August 2016. In the year 31,032 shares (2020: 15,540
shares) have been purchased under the scheme. The charge to the
Group statement of comprehensive income is highly immaterial and
therefore has not been accounted for.
Other schemes
Share options were issued in the current and prior years as part
of recruitment packages for certain members of senior management.
These options are subject to leavers' provisions and the exercise
period is up to two years. The charge to the Group statement of
comprehensive income in financial year 2021 for these awards is
GBP0.1m (2020: GBP0.4m).
9. Founder Share Plan
On 12 September 2017, the Founders of Superdry ("the Founders"),
Julian Dunkerton and James Holder, announced the launch of a
long-term incentive scheme, the Founder Share Plan ("FSP") under
which they agreed to share increases in their wealth with employees
of the Group. The Founders had agreed to transfer into a fund 20%
of their gain from any increase in the Group's share price over a
threshold of GBP18.
The measurement period for the FSP ran from 1 October 2017 to 30
September 2020, and as such the measurement period for the
market-based vesting criteria expired over the course of the
current year.
The gain to be transferred into the fund was to be calculated
using the market value of the shares, calculated as the average
price of a Superdry Plc share over the 20 dealing days prior to the
maturity date (30 September 2020). When calculated, the market
value of the shares on maturity did not meet the minimum threshold
of GBP18 and therefore FSP scheme did not meet the vesting
criteria.
IFRS 2 stipulates that there is no adjustment to the Group's
Statement of comprehensive income where the scheme does not vest
due to a market-based condition, and so there is no adjustment
required to recognise that the scheme will not vest.
The vesting period for the awards differed depending on the
seniority of the colleagues in question. To be eligible for the
award, employees needed to remain in employment on the vesting
date, details of which are as follows:
Share settled element - Senior management
-- 50% - 31 January 2021
-- 50% - 31 January 2022
Cash and share settled elements - All other colleagues
-- 50% - 31 January 2021
-- 50% - 31 July 2021
In accordance with IFRS 2 the FSP scheme has been accounted for
as an equity settled share-based payment scheme. The fair value of
the award is determined using a Monte Carlo pricing model.
The share-based payment charge associated with the FSP will
accrue over five financial periods in line with the original
vesting period, up until financial year 2022.
A charge of GBP0.5m (2020: GBP0.3m) has been recorded in the
Group statement of comprehensive income during the year.
The number of share awards granted in the period is nil. The
number still in issue as at 24 April 2021 is 2,651,638, although
none of these have met the vesting criteria. These options have a
nil exercise price.
10. Tax
The tax expense comprises:
Group
2021 2020
GBPm GBPm
Current tax
-- UK corporation tax charge for the period - -
-- Adjustment in respect of prior periods (0.9) (6.1)
-- Overseas tax 0.8 1.8
Adjusting tax (credit)/expense - (0.1)
Total current tax (credit)/expense (0.1) (4.4)
Deferred tax
-- Origination and reversal of temporary differences 7.9 (1.0)
-- Deferred tax asset movements in respect of tax losses (7.7) (5.8)
-- Adjustment in respect of prior periods 3.2 5.0
Adjusting tax (credit)/expense (3.9) (17.3)
Total deferred tax (credit)/expense (0.5) (19.1)
Total tax (credit)/expense (0.6) (23.5)
The tax credit on adjusted loss is GBP0.1m (2020: GBP4.4m
credit). The net tax credit on adjusting items totals GBP3.9m
(2020: GBP17.4m tax credit), which includes a prior period charge
of GBP0.4m.
An adjusting tax credit of GBP1.4m arises as a result of
impairments to the right of use asset values, a GBP0.3m adjusting
tax credit as a result of impairments to property, plant and
equipment, at the balance sheet date and an adjusting tax credit of
GBP2.2m arises in connection with movements on the derivative
contracts and an updated onerous lease review.
Factors affecting the tax expense for the period are as
follows:
Group
2021 2020
GBPm GBPm
(Loss)/profit before tax (36.7) (166.9)
(Loss)/profit multiplied by the standard rate in the UK - 19.0% (2020: 19.0%) (7.0) (31.7)
Uncertain tax position 1.3 -
Permanent differences 0.8 1.2
Overseas tax differentials (1.0) (10.9)
Deferred tax not recognised 2.4 19.6
Change in overseas tax rates - -
Effect of tax rate changes 0.2 (0.6)
Adjustment in respect of prior periods 2.7 (1.1)
Total tax (credit)/expense excluding adjusting items (0.6) (23.5)
The Group's tax credit on adjusted losses of GBP3.3m (2020:
GBP6.1m loss) represents an effective tax rate of 26.2% (2020:
14.6%) and the Group's tax credit on adjusting losses of GBP3.9m
(2020: GBP17.4m) loss represents an effective tax rate of 16.2%
(2020: 13.9%). Taken together the Group's tax credit of GBP0.6m
(2020: GBP23.5m credit) represents a total effective tax rate of
1.6% (2020: 14.1%) for the period ended 24 April 2021. The Group's
total effective tax rate of 1.6% is lower than the statutory rate
of tax of 19%.
This is primarily due to the level of overseas losses in
relation to which no tax benefit has been recognised, movements in
amounts recognised in respect of leases, and the creation of a
provision for uncertain tax positions.
Post 24 April 2021, Finance Bill 2021 substantively enacted
provisions to increase the main rate of UK corporation tax to 25%
from 01 April 2023. This was not enacted on the balance sheet date,
24 April 2021. Deferred tax balances relating to the UK as at 24
April 2021 have been measured at a rate of 19%. If we were to
restate the deferred tax assets at 24 April 2021 using the 25%
future rate, the maximum potential impact would be an increase to
the deferred tax asset recognised by c.GBP12.8m.
11. Earnings per share
Group
2021 2020
GBPm GBPm
Earnings
Loss for the period attributable to owners of the Company (36.1) (143.4)
No. No.
Number of shares at year-end 82,041,820 82,010,788
Weighted average number of ordinary shares - basic 82,028,188 82,001,955
Effect of dilutive options and contingent shares - 387,495
Weighted average number of ordinary shares - diluted 82,028,188 82,389,450
Basic earnings per share (pence) (44.0) (174.9)
Diluted earnings per share (pence) (44.0) (174.1)
Adjusted earnings per share
Group
2021 2020
GBPm GBPm
Earnings
Adjusted (loss)/profit for the period attributable to the owners of the Company (15.9) (35.7)
No. No.
Weighted average number of ordinary shares - basic 82,028,188 82,001,955
Weighted average number of ordinary shares - diluted 82,028,188 82,389,450
Adjusted basic earnings per share (pence) (19.4) (43.5)
Adjusted diluted earnings per share (pence) (19.4) (43.3)
As at 24 April 2021, 1,528,214 other share options were
outstanding that could potentially dilute basic EPS in the future
but were not included in the calculation of diluted EPS as they are
antidilutive for the periods presented. There is no dilutive effect
from the FSP scheme (note 9).
Due to the loss-making position of the Group at the year end,
all potential ordinary shares are antidilutive.
There were no share-related events after the balance sheet date
that may affect earnings per share.
12. Dividends
Group and Company
2021 2020
GBPm GBPm
Equity - ordinary shares
Interim for the 52 weeks to 24 April 2021 - nil (2020: 2.0p per share) - 1.6
Final dividend for the 52 weeks to 25 April 2020 - nil (2020: 2.2p per share) - 1.8
Total dividends paid - 3.4
Given the ongoing uncertainty and in order to maintain
liquidity, the Board did not propose an interim dividend and has
made the decision not to recommend a final dividend for 2021.
13. Property, plant and equipment
Movements in the carrying amount of property, plant and
equipment were as follows:
Group
Land and Leasehold Furniture, fixtures and Computer Total
buildings improvements fittings equipment GBPm
GBPm GBPm GBPm GBPm
52 weeks ended 24 April 2021
Cost
At 26 April 2020 5.3 213.5 66.4 30.1 315.3
Exchange differences - (2.6) (0.8) (0.3) (3.7)
Additions - 2.3 3.5 1.0 6.8
Disposals - (8.3) (2.0) (0.2) (10.5)
At 24 April 2021 5.3 204.9 67.1 30.6 307.9
Accumulated depreciation and
impairments
At 26 April 2020 1.0 190.1 55.2 27.3 273.6
Exchange differences - (2.4) (0.8) (0.3) (3.5)
Disposals - (8.2) (2.0) (0.2) (10.4)
Depreciation charge 0.1 9.5 5.1 0.8 15.5
Net impairment charges and - 2.8 0.5 - 3.3
reversals
At 24 April 2021 1.1 191.8 58.0 27.6 278.5
Net book value at 24 April 2021 4.2 13.1 9.1 3.0 29.4
The above plant, property and equipment net impairment movement
of GBP3.3m constitutes part of the total net impairment of GBP10.7m
in 2021 (2020: GBP136.8m) and relates to an impairment review
performed on store assets. This impairment has been included within
adjusting items in the year.
Group
Land and Leasehold Furniture, fixtures and Computer Total
buildings improvements fittings equipment GBPm
GBPm GBPm GBPm GBPm
52 weeks ended 25 April 2020
Cost
At 28 April 2019 5.3 212.5 63.6 27.8 309.2
Exchange differences - 2.2 0.5 0.2 2.9
Additions - 1.6 2.7 2.2 6.5
Disposals - (2.8) (0.4) (0.1) (3.3)
Reclassified as held for sale - - - - -
At 25 April 2020 5.3 213.5 66.4 30.1 315.3
Accumulated depreciation and
impairments
At 28 April 2019 0.5 164.7 46.3 23.6 235.1
Exchange differences - 1.6 0.4 0.2 2.2
Depreciation charge 0.1 13.3 6.7 3.4 23.5
Net impairment charges and 0.4 13.1 2.2 0.2 15.9
reversals
Disposals - (2.6) (0.4) (0.1) (3.1)
At 25 April 2020 1.0 190.1 55.2 27.3 273.6
Net book value at 25 April 2020 4.3 23.4 11.2 2.8 41.7
Of the above impairment of GBP15.9m, GBP15.5m constitutes part
of the total impairment of GBP136.8m in 2020 and relates to an
impairment review performed on retail store assets, for further
details on this please see note 2. This impairment has been
included within adjusting expenses in the year. The remaining
GBP0.4m relates to impairment of land during the year as a result
of a revaluation triggered by the land sale in 2019. This land
impairment has been included within adjusted expenses in the year
as the disposal was undertaken through the normal course of
business.
14. Intangible assets
Group
Trademarks Website and software Lease Distribution agreements Goodwill Total
GBPm GBPm premiums GBPm GBPm GBPm
GBPm
52 weeks ended 24 April 2021
Cost
At 26 April 2020 4.3 54.2 14.3 15.7 21.5 110.0
Exchange differences - - - (0.8) - (0.8)
Additions 1.0 6.0 - - - 7.0
Disposals - - (0.1) - - (0.1)
At 24 April 2021 5.3 60.2 14.2 14.9 21.5 116.1
Accumulated amortisation
At 26 April 2020 2.9 31.1 14.3 13.3 - 61.6
Exchange differences - - - (0.2) - (0.2)
Amortisation charge 0.4 10.3 - 0.3 - 11.0
Impairment charges - 2.1 - - - 2.1
Disposals - - (0.1) - - (0.1)
At 24 April 2021 3.3 43.5 14.2 13.4 - 74.4
Net book value at 24 April 2021 2.0 16.7 - 1.5 21.5 41.7
The above impairment charge of GBP2.1m relates to an impairment
review performed on website and software assets. This impairment
has been included within adjusting items in the year.
Group
Trademarks Website and software Lease Distribution agreements Goodwill Total
GBPm GBPm premiums GBPm GBPm GBPm
GBPm
52 weeks ended 25 April 2020
Cost
At 28 April 2019 3.8 47.5 15.9 15.4 21.2 103.8
Reclassified under transition to IFRS - - (1.6) - - (1.6)
16
Exchange differences - - - 0.3 0.3 0.6
Additions 0.5 6.7 - - - 7.2
At 25 April 2020 4.3 54.2 14.3 15.7 21.5 110.0
Accumulated amortisation
At 28 April 2019 2.5 23.4 13.9 12.5 - 52.3
Exchange differences - - - 0.2 - 0.2
Amortisation charge 0.4 7.7 - 0.6 - 8.7
Impairments - - 0.4 - - 0.4
At 25 April 2020 2.9 31.1 14.3 13.3 - 61.6
Net book value at 25 April 2020 1.4 23.1 - 2.4 21.5 48.4
Amortisation of intangible assets is included within selling,
general and administrative expenses in the Group statement of
comprehensive income.
Impairment of goodwill
Goodwill of GBP21.5m is split between the Group's operating
segments as GBP14.3m for Wholesale, GBP4.7m for Ecommerce and
GBP2.5m for Stores.
The operating segments of the Group were revised during the
reporting period, as disclosed in note 6. The goodwill balance at
25 April 2020 of GBP21.5m was previously split into GBP14.3m for
Wholesale and GBP7.2m for Retail; this is equivalent to GBP14.3m
for Wholesale, GBP3.6m for Ecommerce and GBP3.6m for Stores under
the revised reporting structure. The reallocation within the
affected unit was performed using a relative value approach.
An impairment test is a comparison of the carrying value of
assets of a business or cash generating unit ("CGU") to their
recoverable amount. The Group monitors goodwill for impairment at a
segmental level. Wholesale and Ecommerce are defined as individual
CGUs, and the Stores segment is a group of CGUs. These segments
represent the lowest level within the Group at which goodwill is
monitored for internal management purposes.
The recoverable amount is estimated based on using a value in
use model using discounted cash flows. Where the recoverable amount
is less than the carrying value, an impairment results. The Group's
medium-term plan has been used as the basis for this
calculation.
Store assets have been impaired in the current year, where each
store is assessed as an individual CGU. Goodwill is monitored at a
total Stores segment level, not at an individual store level, and
instead includes individually profitable stores in the assessment.
Additionally, the cash flows in the goodwill impairment analysis
are included over a ten-year period, compared to the lease expiry
period in the store impairment assessment.
Key assumptions
In determining the recoverable amount, it is necessary to make a
series of assumptions to estimate the present value of future cash
flows. In each case, these key assumptions have been made by
management reflecting historical performance and are consistent
with relevant external sources of information.
Discount rates
Management estimates discount rates using pre-tax rates that
reflect the current market assessment of the time value of money
and the risks specific to the CGUs. The pre-tax discount rate of
11.6% (2020: 10.1%) is derived from the Group's post-tax weighted
average cost of capital of 10.9% (2020: 9.8%).
Operating cash flows
The key assumptions within the forecast operating cash flows
include the growth rates in both sales and gross profit margins,
changes in the operating cost base and the level of capital
expenditure, as set out in the medium-term financial plan.
Judgement is also required in determining an appropriate allocation
of central costs. Central costs have been allocated where there is
a reasonable and consistent basis for apportionment.
Long-term growth rates
To forecast beyond the Group's medium-term plan, long-term
average growth rates ranging from 0% to 2.0% (2020: 2.2%) have been
used. The recoverable amount of each subsidiary is calculated in
reference to the value over the medium-term financial plan period,
extrapolated for an additional 5 years at the long-term growth rate
of 2.0% (2020: additional 5 years at 2.1%).
Goodwill sensitivity analysis
The results of the Group's impairment tests are dependent on
estimates made by management, particularly in relation to the key
assumptions described above. A sensitivity analysis as to potential
changes in key assumptions has been performed, using a version of
the medium-term financial plan adjusted for the reverse stress test
scenario referred to in the Viability Statement in the CFO Review.
The present values of the future cash flows of the Stores,
Ecommerce and Wholesale CGUs are significant and are insensitive to
any reasonably possible changes to key assumptions.
15. Balances and transactions with related parties
Transactions with Directors
Other than in respect of arrangements set out below and in
relation to the employment of Directors, there is no material
indebtedness owed to or by the Company or the Group to any employee
or any other person or entity considered to be a related party.
During the reporting period, the Group has spent GBP0.1m (2020:
GBP0.1m) on travel and subsistence through companies in which
Julian Dunkerton has a personal investment. The balance outstanding
at 24 April 2021 was GBPnil (2020: GBPnil). This expenditure
includes the provision of corporate travel, hotel and catering
services supplied on an arm's-length basis. These interests have
been disclosed and authorised by the Board.
In addition, the Group occupies two properties owned by J M
Dunkerton SIPP pension fund whose beneficiary and member trustee is
Julian Dunkerton. The properties are rented to the Group at a rate
that is not on an arm's-length basis. Rental charges for these
properties during the year were GBP0.1m (2020: GBP0.1m). The
balance outstanding at 24 April 2021 was GBPnil (2020: GBPnil).
16. Capital expenditure commitments
Group
2021 2020
GBPm GBPm
Property, plant and equipment - -
Contingent liabilities
The Company is party to an unlimited cross guarantee over all
liabilities of the Group. The value of this amount is deemed not
practical to disclose.
The Group has contractual agreements with third party wholesale
agents which include a right for the wholesale agent to be
indemnified when the contract is terminated. These future indemnity
amounts are held as contingent liabilities until the contract is
terminated, at which point they are held as provisions or accruals.
The value of future obligations for contracts which have not yet
been terminated (and have no defined end date) is GBP3.4m.
17. Leases
Right of use asset
Group
52 weeks ended 24 April 2021 Right of use
asset
GBPm
Cost
At 25 April 2020 344.2
Additions 17.0
Disposals (7.7)
Lease modifications (7.6)
Exchange rate difference (2.5)
At 24 April 2021 343.4
Group
Accumulated depreciation
Right of use asset
GBPm
At 25 April 2020 226.2
Depreciation charge 27.3
Disposals (7.5)
Net impairment charges and reversals 7.4
Exchange rate difference (1.1)
At 24 April 2021 252.3
Net balance sheet amount at 24 April 2021 91.1
The above right of use asset net impairment movement of GBP7.4m
constitutes part of the total net impairment of GBP10.7m in 2021
(2020: GBP136.8m) and relates to an impairment review performed on
store assets with the remaining GBP3.3m relating to property, plant
and equipment. This impairment has been included within adjusting
items in the year.
The carrying amount of the right of use asset is split between
motor vehicles of GBP0.2m (2020: GBP0.4m) and property of GBP89.9m
(2020: GBP117.6m).
Group
52 weeks ended 25 April 2020 Right of use
asset
GBPm
Cost
At 28 April 2019 -
Recognition of cost of transition 335.7
Additions 7.7
Disposals (2.0)
Lease modifications (0.6)
Exchange rate difference 3.4
At 25 April 2020 344.2
Group
Accumulated depreciation
Right of use asset
GBPm
At 28 April 2019 -
Recognition of impairment at transition 48.4
Depreciation charge 55.0
Disposals -
Net impairment charges and reversals 122.8
At 25 April 2020 226.2
Net balance sheet amount on 25 April 2020 118.0
Items in the Group statement of comprehensive income not
impacted by IFRS 16 are:
Group
2021 2020
GBPm GBPm
Lease expense relating to short-term assets 4.3 5.1
The expense of variable lease payments not included in the lease liabilities 1.3 3.8
The above lease expenses are gross of onerous property related
contracts provision, capital contribution releases and rent-free
releases.
Lease liability
Lease liabilities are calculated by discounting fixed lease
payments using the incremental borrowing rate at the lease
inception date determined with reference to the geographical
location and length of the lease. The discount rates applied to
leases range between 0.3% and 8.5% (2020: 0.1% to 8.5%).
Group
Analysed as: 2021 2020
GBPm GBPm
Current lease liability 94.1 80.1
Non-current lease liability 175.5 240.8
Total lease liability 269.6 320.9
The remaining contractual maturities of the lease liabilities,
which are gross and undiscounted, are as follows:
Group
2021 2020
GBPm GBPm
Less than one year 94.1 84.4
One to two years 54.3 65.2
Two to three years 43.8 55.7
Three to four years 36.7 45.1
Four to five years 25.5 37.8
More than five years 24.4 51.8
Total undiscounted lease liability 278.8 340.0
Reconciliation of liabilities to cash flow arising from
financing activities:
Group
2021 2020
GBPm GBPm
Opening lease liability 320.9 -
Recognition of lease liability on transition - 372.1
Payment of lease liability (45.4) (66.8)
Present value of Covid-19 rent concessions and deferrals (4.2) -
Increase due to lease additions and modifications 18.0 7.8
Decrease due to lease disposals and modifications (21.3) (2.3)
Interest expense 5.5 5.7
Foreign exchange differences (3.9) 4.4
Closing lease liability 269.6 320.9
All movements in the table above are non-cash movements except
for payment of lease liability and interest expense which are cash
movements.
18. Note to the cash flow statement
Reconciliation of operating profit to cash generated from
operations
Group
Note 2021 2020
GBPm GBPm
Operating loss (29.5) (159.4)
Adjusted for:
-- Loss/(gain) on derivatives 4.7 (1.9)
-- Depreciation of property, plant and equipment and right of use 13,17 42.4 78.5
assets
-- Amortisation of intangible assets 14 11.0 8.7
-- Impairment of property, plant and equipment, right of use assets 12.8 139.1
and intangible assets
-- Loss on disposal of property, plant and equipment 0.1 0.3
-- Lease modifications 17 (14.3) -
(4.0) - (1.6) -
-- IFRS 16 Covid-19 rent concessions -
-- Increase/(decrease) in onerous property related contracts 4.6
provision (net of releases on exited stores) (12.0)
-- Increase/(decrease) in other provisions 1.6 -
-- Release of lease incentives (0.3)
(0.1)
-- Employee share award schemes 8 1.1 0.9
-- IFRS 2 charge - FSP 9 0.5 0.3
-- Foreign exchange losses 0.5
(1.9)
-- Write down of inventory 2.3 7.7
-- Net impairment (credit)/loss of trade receivables (3.8)
15.3
Operating cash flow before movements in working capital 29.7
75.5
Changes in working capital:
-- Decrease/(increase) in inventories 6.2 21.6
-- (Increase)/decrease in trade and other receivables (10.8)
14.6
-- Increase/(decrease) in trade and other payables and
provisions 25.0 (24.2)
Cash generated from/(used in) operating activities 50.1 87.5
Group cash flows arising from adjusting items are GBP1.4m (2020:
GBPnil).
19. Net cash/(debt)
Analysis of net cash/(debt)
Group
2020 Cash flow Non-cash changes 2021
GBPm GBPm GBPm GBPm
Cash and bank balances 307.4 (278.7) 10.2 38.9
Overdraft (270.7) 270.7 - -
Net cash/(debt) 36.7 (8.0) 10.2 38.9
Non-cash changes relate to exchange gains on cash and cash
equivalents. Interest of GBPnil (2020: GBP0.2m) has been incurred
in respect of short-term facilities.
The position outlined above is not inclusive of financing
liabilities in relation to IFRS 16. Financing liabilities comprise
overdrafts and lease liabilities, and the reconciliation from
opening to closing financing liabilities is disclosed in the table
above for overdrafts, and in note 17 for lease liabilities.
See note 22 for an explanation of the use of Net cash/debt.
20. Financial risk management
The Company's and Group's activities expose it to a variety of
financial risks, including market risk (including foreign currency
risk and cash flow interest rate risk), credit risk and liquidity
risk. The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance. The
Group uses derivative financial instruments to hedge certain
foreign exchange exposures.
Credit risk - Group accounts
Credit risk is managed on a Group basis through a shared service
centre based in Cheltenham. Credit risk arises from cash and cash
equivalents, as well as credit exposures to Wholesale and to a
lesser extent Store and Ecommerce customers, including outstanding
receivables and committed transactions. For Wholesale customers,
management assesses the credit quality of the customer, considering
its financial position, past experience and other factors. The
Group mitigates risk in certain markets or with customers
considered higher risk with payments in advance and bank
guarantees, as well as adopting credit insurance where appropriate.
The Group regularly monitors its exposure to bad debts in order to
minimise risk of associated losses.
The Group is party to banking agreements that include a legal
right of offset which enables the overdraft balances to be settled
net with cash balances (2021 overdrafts: GBPnil, 2020 overdrafts:
GBP270.7m). These balances have been excluded from contractual cash
flows.
Sales to Store and Ecommerce customers are settled in cash, by
major credit cards, or other online payment providers. Credit risk
from cash and cash equivalents is managed via banking with
well-established banks with a strong credit rating.
Impairment of financial assets
From 25 April 2018, the Group applied the IFRS 9 simplified
approach in measuring expected credit losses ("ECL"). The Group's
financial assets subject to the ECL model are primarily trade
receivables.
A loss allowance is recognised based on ECL. The amount of ECL
is updated at each reporting date to reflect changes in credit risk
since initial recognition.
The expected credit losses on these financial assets are
estimated using a provision matrix based on the Group's historical
credit loss experience, adjusted for factors that are specific to
the debtors, general economic conditions and an assessment of both
the current as well as the forecast direction of conditions at the
reporting date. None of the trade receivables that have been
written off are subject to enforcement activities.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument
has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial
instrument at the reporting date with the risk of a default
occurring on the financial instrument at the date of initial
recognition. In making this assessment, the Group considers both
quantitative and qualitative information that is reasonable and
supportable, including historical experience and forward-looking
information that is available without undue cost or effort.
Forward-looking information considered includes the prospects of
the industries in which the Group's debtors operate, obtained from
economic expert reports, financial analysts, governmental bodies,
relevant think-tanks and other similar organisations, as well as
consideration of various external sources of actual and forecast
economic information that relate to the Group's core
operations.
In particular, the following information is considered when
assessing whether credit risk has increased significantly since
initial recognition:
-- an actual or expected significant deterioration in the
financial instrument's external (if available) orinternal credit
rating.
-- significant deterioration in external market indicators of
credit risk for a particular financialinstrument, e.g., a
significant increase in the credit spread, the credit default swap
prices for the debtor, orthe length of time or the extent to which
the fair value of a financial asset has been less than its
amortisedcost.
-- existing or forecast adverse changes in business, financial
or economic conditions that are expected tocause a significant
decrease in the debtor's ability to meet its debt obligations.
-- an actual or expected significant deterioration in the
operating results of the debtor.
-- significant increases in credit risk on other financial
instruments of the same debtor; and
-- an actual or expected significant adverse change in the
regulatory, economic, or technologicalenvironment of the debtor
that results in a significant decrease in the debtor's ability to
meet its debtobligations.
Irrespective of the outcome of the above assessment, the Group
presumes that the credit risk on a financial asset has increased
significantly since initial recognition when contractual payments
are more than 30 days past due, unless the Group has reasonable and
supportable information that demonstrates otherwise.
Despite the foregoing, the Group assumes that the credit risk on
a financial instrument has not increased significantly since
initial recognition if the financial instrument is determined to
have low credit risk at the reporting date. A financial instrument
is determined to have low credit risk if: 1. the financial
instrument has a low risk of default. 2. the debtor has a strong
capacity to meet its contractual cash flow obligations in the near
term; and 3. adverse changes in economic and business conditions in
the longer term may, but will not necessarily,reduce the ability of
the borrower to fulfil its contractual cash flow obligations.
The maximum exposure to credit risk is equal to the carrying
value of the derivatives, cash and trade and other receivables.
Measurement and recognition of expected credit losses
The measurement of ECL is a function of the probability of
default, loss given default and the exposure at default. The
assessment of the probability of default and loss given default is
based on historical data adjusted by forward-looking information.
The exposure at default is represented by the asset's gross
carrying value, less specific insurance held, at the reporting
date.
The ECL is estimated as the difference between all contractual
cash flows that are due to the Group in accordance with the
contract and all the cash flows that the Group expects to receive.
The Group recognises an impairment gain or loss in profit for all
financial instruments with a corresponding adjustment to their
carrying amount through a loss account.
Foreign currency risk
The Group's foreign currency exposure arises from:
-- transactions (sales/purchases) denominated in foreign
currencies.
-- monetary items (mainly cash receivables and borrowings)
denominated in foreign currencies.
-- investments in foreign operations, whose net assets are
exposed to foreign currency translation.
The Group is mainly exposed to US Dollar and Euro currency
risks. The exposure to foreign exchange risk within each company is
monitored and managed at Group level. The Group's policy on foreign
currency risk is to economic hedge a portion of foreign exchange
risk associated with forecast overseas transactions, and
transactions and monetary items denominated in foreign
currencies.
The Group's approach is to hedge the risk of changes in the
relevant spot exchange rate. The Group uses forward contracts to
hedge foreign exchange risk. As at 24 April 2021 and 25 April 2020,
the Group had entered a number of foreign exchange forward
contracts to hedge part of the aforementioned translation risk. Any
remaining amount remains unhedged.
Forward exchange contracts have not been formally designated as
hedges and consequently no hedge accounting has been applied.
Forward exchange contracts are carried at fair value. Currency
exposure arising from the net assets of the Group's foreign
operations are not hedged.
On 24 April 2021, if the currency had weakened/strengthened by
10% against both the US Dollar and Euro with all other variables
held constant, profit for the period would have been GBP13.8m
(2020: GBP29.9m) higher/lower, mainly as a result of foreign
exchange gains/losses on translation of US Dollar/Euro trade
receivables, cash and cash equivalents, and trade payables. The
figure of 10% used for sensitivity analysis has been chosen because
it represents a range of reasonably probable fluctuations in
exchange rates.
The Group's foreign currency exposure is as follows:
Group
2021 2021 2020 2020
US Dollar Euro US Dollar Euro
GBPm GBPm GBPm GBPm
Financial assets
Trade receivables 2.5 40.5 1.4 46.4
Cash and cash equivalents 3.5 20.1 21.6 74.7
Financial assets exposure 6.0 60.6 23.0 121.1
Financial liabilities
Trade payables (8.3) (11.1) (11.2) (11.8)
Lease liabilities (29.7) (116.3) (47.2) (159.0)
Overdrafts - - (86.4) (127.0)
Financial liabilities exposure (38.0) (127.4) (144.8) (297.8)
Net exposure (32.0) (66.8) (121.8) (176.7)
Cash flow interest rate risk
The Group has financial assets and liabilities which are exposed
to changes in market interest rates. Changes in interest rates
impact primarily on deposits, loans and borrowings by changing
their future cash flows (variable rate). Management does not
currently have a formal policy of determining how much of the
Group's exposure should be at fixed or variable rates and the Group
does not use hedging instruments to minimise its exposure. However,
at the time of taking out new loans or borrowings, management uses
its judgement to determine whether it believes that a fixed or
variable rate would be more favourable for the Group over the
expected period until maturity. Sensitivity analysis has not been
provided due to the low level of loans and borrowings within the
Group.
Liquidity risk
Cash flow forecasting is performed on a Group basis by the
monitoring of rolling forecasts of the Group's liquidity
requirements to ensure that it has sufficient cash to meet
operational needs.
The Group is party to banking agreements that include a legal
right of offset which enables the overdraft balances to be settled
net with cash balances (2021: GBPnil overdraft, 2020: GBP270.7m
overdraft). These balances have been excluded from contractual cash
flows.
Following Covid-19, the Group is closely managing cash flows
through reduced capital expenditure, tight control over day-to-day
spend and working collaboratively with suppliers. Government
support has been utilised where available, including furlough
schemes, with additional details found in note 23. There is
additionally a focus on improving operational efficiency through
reducing stock levels, and on overall liquidity.
During the year the Group entered a new financing facility with
existing lenders, HSBC and BNPP in the form of a new Asset Backed
Lending Facility ("ABL Facility") which is for up to GBP70m, with a
term until January 2023. The ABL Facility can be extended by up to
1 year, at the request of the Group and the agreement of the
lenders.
Maturity of undiscounted financial liabilities (excluding
derivatives)
The expected maturity of undiscounted financial liabilities is
as follows:
2021 2020
GBPm GBPm
In one year or less 105.0 352.7
In two to five years 1.2 1.8
The above balances relate to trade payables, other payables,
accruals and overdrafts. See note 17 for analysis of undiscounted
lease liabilities.
Valuation hierarchy
The table below shows the financial instruments carried at fair
value by valuation method:
Group
Level 1 Level 2 2021 Level 1 Level 2 2020
GBPm GBPm Level 3 GBPm GBPm Level 3
GBPm GBPm
Assets
Derivative financial instruments
-- forward foreign exchange contracts - 2.7 - - 2.6 -
Liabilities
Derivative financial instruments
-- forward foreign exchange contracts - (7.2) - - (2.3) -
The level 2 forward foreign exchange valuations are derived from
mark-to-market valuations based on observable market data as at the
close of business on 24 April 2021.
The notional principal amount of the outstanding outright FX
contracts as at 24 April 2021 was GBP103.0m (2020: GBP245.2m).
There are no structured forward foreign exchange contracts in place
as at 24 April 2021 (2020: Structured forward foreign exchange
contracts in place to sell up to EUR 96m (GBP87.4m)).
Derivative financial instruments
There is a master netting agreement in place in relation to
derivatives. All cash flows will occur within 24 months. All
derivative financial instruments are carried at fair value as
assets when the fair value is positive and as liabilities when the
fair value is negative.
The table below analyses the Group's and Company's derivative
financial instruments. The amounts disclosed in the table are the
carrying balances of the assets and liabilities as at the balance
sheet date.
Group
2021 2020
GBPm GBPm
Forward foreign exchange contracts - current 2.4 2.5
Forward foreign exchange contracts - non-current 0.3 0.1
Total derivative financial assets 2.7 2.6
Forward foreign exchange contracts - current 5.7 2.1
Forward foreign exchange contracts - non-current 1.5 0.2
Total derivative financial liabilities 7.2 2.3
All financial derivative instruments are due within 24
months.
The full fair value of a derivative is classified as a
non-current asset or liability where the remaining maturity of the
derivative is more than 12 months and as a current asset or
liability, if the maturity of the derivative is less than 12
months.
Capital risk management
The Group's objectives when managing capital are to safeguard
its ability to continue as a going concern in order to provide
returns for shareholders, and benefits for other stakeholders, and
to maintain an optimal capital structure to reduce the cost of
capital. The Group is not subject to any externally imposed capital
requirements. The Group's strategy remains unchanged from financial
year 2020.
Consistent with others in the industry, the Group monitors
capital based on the gearing ratio. This ratio is calculated as net
debt divided by total capital employed. Net debt is defined in note
22. Total capital employed is calculated as "equity" as shown in
the consolidated balance sheet plus net debt. The Group is in a net
cash position on 24 April 2021.
The Board has put in place a distribution policy which considers
the degree of maintainability of the Group's profit streams as well
as the requirement to maintain a certain level of cash resources
for working capital and capital investment purposes. If
appropriate, the Board will recommend an ordinary dividend broadly
reflecting the profits in the relevant period. In addition, the
Board will consider and, if appropriate, recommend the payment of a
supplemental dividend alongside the final ordinary dividend. The
value of any such supplemental dividend will vary depending on the
performance of the Group and the Group's anticipated working
capital and capital investment requirements through the cycle. It
is intended that, in normal circumstances, the value of the
ordinary dividends declared in respect of any year are covered at
least three times by adjusted profit after tax (see note 22 for
definition). Considering the current economic climate and
consistent with the FY20 decision, the Board did not propose an
interim dividend and has made the decision not to recommend a final
dividend for FY21.
The capital structure is as follows:
Group
2021 2020
GBPm GBPm
Equity 90.4 112.7
Cash and cash equivalents 38.9 307.4
Overdraft - (270.7)
Net cash and cash equivalents 38.9 36.7
Group
Assets at Assets at
fair Financial fair
value assets at Total value Financial assets at Total
through amortised 2021 through amortised cost 2020
profit or cost GBPm profit or 2020 GBPm
loss 2021 loss GBPm
2021 GBPm 2020
GBPm GBPm
Trade and other receivables excluding - 84.7 84.7 - 88.5 88.5
non-financial assets
Derivative financial instruments 2.7 - 2.7 2.6 - 2.6
Cash and cash equivalents - 38.9 38.9 - 307.4 307.4
Financial instruments - assets 2.7 123.6 126.3 2.6 395.9 398.5
Group
Liabilities
Liabilities at fair Other financial at fair Other financial
value through profit liabilities at Total value liabilities at Total
or loss amortised cost 2021 through amortised cost 2020
2021 2021 GBPm profit or 2020 GBPm
GBPm GBPm loss GBPm
2020
GBPm
Derivative financial 7.2 - 7.2 2.3 - 2.3
instruments
Lease liabilities - 269.6 269.6 - 320.9 320.9
Overdrafts - - - - 270.7 270.7
Trade and other payables
excluding non-financial - 106.2 106.2 - 83.8 83.8
liabilities
Financial instruments - 7.2 375.8 383.0 2.3 675.4 677.7
liabilities
21. Share capital
Authorised, allotted and fully paid 5p shares
Value of
Group and Company Number of shares shares
(GBPm)
24 April 2021 82,041,820 4.1
25 April 2020 82,010,788 4.1
31,032 ordinary shares of 5p were authorised, allotted and
issued in the period under the Superdry Share Based Long-Term
Incentive Plans, Buy As You Earn and Save As You Earn schemes.
22. Alternative performance measures
Introduction
The Directors assess the performance of the Group using a
variety of performance measures, some are IFRS, and some are
adjusted and therefore termed "non-GAAP" measures or "Alternative
Performance Measures" ("APMs"). The rationale for using adjusted
measures is explained below. The Directors principally discuss the
Group's results on an adjusted basis. Results on an adjusted basis
are presented before adjusting items.
The APMs used in the preliminary results are adjusted operating
profit and margin, adjusted (loss)/profit before tax, adjusted tax
expense and adjusted effective tax rate, adjusted earnings per
share and net cash/debt.
Like-for-like ("LFL") has been removed as an APM in the current
year as it is no longer considered relevant as a key measure of
performance due to the disruption caused from Covid-19 related
store closures.
A reconciliation from these non-GAAP measures to the nearest
measure prepared in accordance with IFRS is presented below. The
APMs we use may not be directly comparable with similarly titled
measures used by other companies. There have been no changes in
definitions from the prior period.
Adjusting items
The Group's statement of comprehensive income and segmental
analysis separately identify adjusted results before adjusting
items. The adjusted results are not intended to be a replacement
for the IFRS results. The Directors believe that presentation of
the Group's results in this way provides stakeholders with
additional helpful analysis of the Group's financial performance.
This presentation is consistent with the way that financial
performance is measured by management and reported to the Board and
the Executive Committee. It is also consistent with the way that
management is incentivised.
In determining whether events or transactions are treated as
adjusting items, management considers quantitative as well as
qualitative factors such as the frequency or predictability of
occurrence. Adjusting items are identified by virtue of their size,
nature or incidence.
Examples of charges or credits meeting the above definition, and
which have been presented as adjusting items in the current and/or
prior years include:
-- Acquisitions/disposals of significant businesses and
investments (including related to the jointventure);
-- Impact on deferred tax assets/liabilities for changes in tax
rates.
-- Business restructuring programmes.
-- Derecognition of deferred tax assets.
-- Asset impairment charges and onerous property related
contracts provision.
-- The movement in the fair value of unrealised financial
derivatives; and
-- IFRS 2 charges in respect of Founder Share Plan ("FSP").
If other items meet the criteria, which are applied consistently
from year to year, they are also treated as adjusting other
items.
In previous reporting periods "Adjusting items" were described
as "Exceptional and other items"
Adjusting items in this period
The following items have been included within "adjusting items"
for the period ended 24 April 2021:
Fair value re-measurement of foreign exchange contracts -
financial years 2021 and 2020
The fair value of unrealised financial derivatives is reviewed
at the end of each reporting period and unrealised losses/gains are
recognised in the Group statement of comprehensive income.
The Directors consider unrealised losses/gains to be adjusting
items due to both their size and nature. The size of the movement
on the fair value of the contracts is dependent on the spot foreign
exchange rate at the balance sheet date and an assessment of future
foreign exchange volatility applied to the relevant contract
currencies, as such the size of the movements can be substantial.
The unrealised foreign exchange contracts have been entered into in
order to achieve an economic hedge against future payments and
receipts and are not a reflection of historical performance.
Restructuring, strategic change and other costs - financial
years 2021 and 2020
Adjusting items include costs resulting from the restructuring
programme announced in the FY20 Group Annual Report. The Directors
consider these to be adjusting due to their size and their one-off
nature.
During the prior year, the Board and Executive Committee
reviewed the long-term business plan for the Trendy & Superdry
Holding Limited joint venture. Following discussions with the joint
venture partner and considering the challenging retail environment
due to Covid-19, both parties agreed to end the relationship. Costs
for the wind-up of the business totalling GBP1.5m were accrued for;
these are adjusting items based on the one-off nature of this
decision. A credit of GBP0.4m has been recognised in the current
year for unutilised accrual amounts.
Store asset impairment and onerous property related contracts
provision - financial years 2021 and 2020
A store asset impairment and onerous property related contracts
provision review was performed during the year across the Group's
store portfolio. An adjusting net impairment charge of GBP10.7m of
fixed assets, intangible assets and right of use assets has been
made on the basis that the recoverable amount is less than the
carrying value. In addition, an onerous property related contracts
provision of GBP5.1m has been charged
A similar exercise was performed in financial year 2020 across
all store assets, resulting in a fixed asset impairment of
GBP136.8m and an onerous property related contracts provision
release of GBP12.0m.
The Directors consider the store impairment and onerous property
related contracts provision to be an adjusting item due to the
materiality of the charge.
Founder Share Plan ("FSP") - IFRS 2 charge - financial years
2021 and 2020
While there are no cost or cash implications for the Group, the
Founder Share Plan ("FSP") falls within the scope of IFRS 2. The
Group has included the IFRS 2 charge and related deferred tax
movement in relation to the FSP within adjusting items for the
current and subsequent periods.
The Directors consider the plan to be one-off in nature and
unusual in that the share awards are being funded exclusively by
the Founders. The full-year charge for FY21 and FY22 has been
estimated between GBP0.2m - GBP0.5m each period. While the charge
is spread over a few financial years, the plan is a one-time
scheme. Accordingly, the IFRS 2 charge in respect of the FSP is an
adjusting item due to the size, nature and incidence of the scheme.
There are no known recent examples within quoted companies of
incentive arrangements operating in a similar way to the FSP. While
unusual in terms of size, the plan is also unusual regarding its
treatment in what is essentially a personal arrangement, with no
net cost or cash and minimal administrative burden to the Company.
There are no other adjustments anticipated in respect of the scheme
other than the IFRS 2 charge.
Therefore, the Directors consider the charge to be significant
in terms of its potential influence on the readers' interpretation
of the Group's financial performance. See note 9 for further
details of the FSP.
Intangible asset impairments - financial year 2021
The Group has recognised impairment charges in the period for
website and software intangible assets. A review was performed
during the period over website and software intangible assets which
are likely to be replaced or upgraded in the foreseeable future,
leading to an impairment of GBP2.1m.
The Directors consider the website and software intangible asset
impairment to be an adjusting item due to the one-off nature of the
review. It is the Group's policy to present asset impairment
charges as adjusting items.
Adjusted operating profit and margin
In the opinion of the Directors, adjusted operating profit and
margin are measures which seek to reflect the performance of the
Group that will contribute to long-term sustainable profitable
growth. The Directors focus on the trends in adjusted operating
profit and margins, and they are key internal management metrics in
assessing the Group's performance. As such, they exclude the impact
of adjusting items. In previous reporting periods "Adjusted
operating profit and margin" was described as "Underlying operating
profit and margin." Although the Group is currently making an
operating loss, adjusted operating profit and margin remain key
metrics monitored by management given the Group's intention to
return to profitability.
A reconciliation from operating profit, the most directly
comparable IFRS measure, to the adjusted operating profit and
margin, is set out below.
2021 2020
GBPm GBPm
Reported revenue 556.1 704.4
Operating loss (29.5) (159.4)
Adjusting items 24.1 125.1
Adjusted operating (loss)/profit (5.4) (34.3)
2021 2020
GBPm GBPm
Operating margin (5.3)% (22.6)%
Adjusted operating margin (1.0)% (4.9)%
Adjusted (loss)/profit before tax
In the opinion of the Directors, adjusted (loss)/profit before
tax is a measure which seeks to reflect the performance of the
Group that will contribute to long-term sustainable profitable
growth. As such, adjusted (loss)/ profit before tax excludes the
impact of adjusting items. The Directors consider this to be an
important measure of Group performance and is consistent with how
the business performance is reported to and assessed by the Board
and the Executive Committee.
This is a measure used within the Group's incentive plans.
In previous reporting periods "Adjusted (loss)/profit before
tax" was described as "Underlying (loss)/profit before tax."
A reconciliation from loss before tax, the most directly
comparable IFRS measure, to the adjusted loss before tax, is set
out below.
2021 2020
GBPm GBPm
Loss before tax (36.7) (166.9)
Adjusting items 24.1 125.1
Adjusted loss before tax (12.6) (41.8)
Adjusted tax expense and adjusted effective tax rate
In the opinion of the Directors, adjusted tax expense is the
total tax charge for the Group excluding the tax impact of
adjusting items. Correspondingly, the adjusted effective tax rate
is the adjusted tax expense divided by the adjusted (loss)/profit
before tax.
These measures are an indicator of the ongoing tax rate of the
Group.
In previous reporting periods "Adjusted tax expense and adjusted
effective tax rate" was described as "Underlying tax expense and
underlying effective tax rate."
A reconciliation from tax expense, the most directly comparable
IFRS measures, to the adjusted tax expense, is set out below:
2021 2020
GBPm GBPm
Adjusted loss before tax (12.6) (41.8)
Tax credit/(expense) 0.6 23.5
Adjusting items - current tax - (0.1)
Adjusting items - deferred tax (3.9) (17.3)
Adjusted tax credit/(expense) (3.3) 6.1
Adjusted effective tax rate 26.2% (14.6)%
Net cash/(debt)
In the opinion of the Directors, net cash/debt is a useful
measure to monitor the overall cash position of the Group. It is
the total of all short and long-term loans and borrowings, less
cash and cash equivalents. This position is exclusive of financial
liabilities in relation to IFRS 16.
Adjusted EPS
In the opinion of the Directors, adjusted earnings per share is
calculated using basic earnings, adjusted to exclude adjusting
items net of current and deferred tax. See note 11 for the Group's
adjusted EPS.
In previous reporting periods "Adjusted EPS" was described as
"Underlying EPS."
23. Government assistance
The Group received government support within the UK and EU
territories during the current and prior years in response to the
Covid-19 pandemic. This included: deferring tax payments; obtaining
reductions in business rates from the UK government; seeking
compensation for lost revenue and subsidies to cover fixed costs;
and placing staff on furlough during the periods of store
closures.
Furlough support across all territories of GBP9.2m was
recognised in the year (2020: GBP2.9m), through the UK's
Coronavirus Job Retention Scheme (CJRS) and equivalent schemes in
other countries. A provision of GBP1.6m has been recognised to
cover any existing furlough related clawbacks.
The business rates reductions from the UK government totalled
GBP15.7m (2020: GBP1.7m).
Lost revenue and subsidy support in the UK and other territories
of GBP2.5m has been recognised in the year (2020: GBPnil).
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attached
to them and that the grants will be received.
Government grants are recognised in profit or loss on a
systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to
compensate. The value is netted off against costs in selling,
general and administrative expenses.
24. Post balance sheet events
There are no events that are material in value or nature that
constitute disclosure as post balance sheet events.
25. Principal Risks & Uncertainties
The principal risks and uncertainties identified by the Board
are as follows:
-- Damage may occur to the Superdry brand or the brand may lose
its resonance
-- Failure to set a commercial product strategy that is aligned
to brand position, market dynamics andconsumer aspiration.
-- Compromise of our key technological or physical assets may
significantly impede our ability to trade,particularly during the
peak trading period from November to January.
-- Elevated stock levels represent a risk in terms of shortfall
in cash flow and additional storage costs.
-- Poor performance across our global, omni-channel
proposition.
-- Significant control failure leads to financial loss,
heightened risk of fraud and error, increased auditfees and prior
year adjustments.
-- Risk of an information security breach causing data and/or
systems compromise. This could impact ourability to trade, lead to
regulatory scrutiny and fines and cause damage to the brand.
-- Loss of key colleagues or the inability to attract, develop
and retain talent.
-- Risk of significant changes in currency exchange rates.
-- Inadequate cash management to respond to the cyclical nature
of the Group's revenue and expenditure andpoints within the year
when there are significant outflows of cash - the timing of which
can change.
-- The revised strategy is not implemented effectively,
impacting the success of the business and erodingcorporate and
investor sentiment.
-- Failure to deliver on our growth aspirations in the Group's
key future development markets, leadingcausing distraction and poor
returns.
-- Failure to meet environmental regulatory requirements and
stakeholder expectations adversely impact ourbrand.
-- Failure by suppliers to adhere to our Ethical Trading Code of
Practice erodes our reputation as aresponsible brand.
-----------------------------------------------------------------------------------------------------------------------
ISIN: GB00B60BD277
Category Code: FR
TIDM: SDRY
LEI Code: 213800GAQMT2WL7BW361
OAM Categories: 1.1. Annual financial and audit reports
3.1. Additional regulated information required to be disclosed under the laws of a Member State
Sequence No.: 122269
EQS News ID: 1233762
End of Announcement EQS News Service
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