TIDMDOCS
RNS Number : 1717C
Dr. Martens PLC
17 June 2021
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17 June 2021
Dr. Martens plc
Preliminary results for the year ended 31 March 2021
BRAND CUSTODIAN MINDSET DELIVERING STRONG RESULTS
"I am pleased to be reporting our first results as a publicly
listed company. The pandemic presented challenges to our operations
and ways of working, and our priority throughout was to keep our
people and consumers safe. I am very proud of the resilience,
dedication and agility of our teams across the globe. This hard
work, together with the investments we continued to make in our
brand, resulted in revenue up 15% and EBITDA(1) up 22%.
"Our DOCS strategy is delivering strong results. We continue to
prioritise selling directly to our consumers, and, with retail
severely impacted by Covid-19 restrictions, we focused our efforts
on a step-change in ecommerce, achieving revenue growth of 73%,
representing 30% of total mix. The investments and improvements we
made in our supply chain in recent years, along with our
multi-country sourcing model and close supplier relationships
allowed us to quickly react to a rapidly changing environment,
ensuring minimal disruption and maintaining good availability
throughout.
"Our product durability and timeless design are rooted in a
sustainable, long-term approach, and our brand custodian philosophy
continues to guide the decisions we take. This underpins the
financial guidance we laid out at the time of the IPO which is
unchanged. Whilst the global trading environment remains uncertain,
the strength of our iconic global brand means we look to the future
with confidence." Kenny Wilson, Chief Executive Officer
GBPm FY21 FY20 % change % change
Actual CC(4)
Revenue 773.0 672.2 15% 16%
EBITDA(1) 224.2 184.5 22% 22%
Adjusted(1) PBT 151.4 113.0 34%
PBT(2) 70.9 101.0 (30%)
Profit After Tax(2) 35.7 74.8 (52%)
Adjusted(1) Diluted
EPS(3) (p) 11.6 8.6 35%
Diluted EPS (p)(2) 3.6 7.5 (52%)
Operating cash flow(1) 234.1 142.0 65%
(1) Before exceptional items of GBP80.5m (FY20: GBP12.0m). See
pages 75 to 76 for alternative performance measures
(2) After exceptionals of GBP80.5m which relate to the IPO
(3) Normalised Adjusted EPS, excluding legacy funding costs of
preference shares, was 14.5p in FY21, as described on page 76
(4) Constant currency applies the same exchange rate to the FY21
and FY20 non-GBP results, based on FY21 budgeted rates
-- Strong growth across all regions. As we expected, revenue
grew 17% in both EMEA and Americas, and 7% in APAC. In APAC we saw
slower growth in Japan, our largest country in the region, due to
the higher physical retail mix which was significantly impacted by
Covid-19. China revenue grew by 46%
-- DTC mix 43%, down 2%pts driven by:
o Ecommerce revenue up 73%, to 30% mix (up 10%pts)
o Retail impacted by Covid-19 store closures and restrictions,
with revenue down 40% and mix at 13%, down 12%pts
-- Gross margin grew 1.2%pts to 60.9%, predominantly due to
faster delivery of supply chain efficiencies
-- EBITDA(1) margin grew by 1.6%pts to 29.0%, driven by gross margin performance
-- Continued investment in our brand and business, including
increasing our headcount by over 250 people, and opening 18 new
stores and a third-party distribution centre (DC) in New Jersey
USA
-- Building on the extensive work to date, we are today
announcing the launch of a set of ambitious sustainability targets,
including net zero by 2030 and, without compromising quality, all
footwear made from sustainable materials by 2040
FY22 and Medium-term financial outlook
The guidance set out at the time of the IPO remains unchanged,
for both FY22 and over the medium-term. In FY22 we expect high
teens revenue growth year on year, as we lap the Covid-19 impact
experienced in FY21. From FY23 and over the medium-term we
anticipate mid-teens revenue growth. We are targeting ecommerce to
grow to 40% mix, with total DTC, including retail, of 60% mix. Our
medium-term target of a 30% EBITDA(1) margin is also unchanged. We
expect to begin paying a dividend in FY22. Further guidance is
provided on page 8. Trading since the year end has been in line
with our expectations. We will provide an update on our Q1 trading
performance on 29 July 2021.
Enquiries
Investors and analysts
Bethany Barnes, Director of Investor Relations +44 7825 187465 bethany.barnes@drmartens.com
Media
Finsbury Glover Hering
Rollo Head, James Leviton +44 20 7251 3801
Gill Hammond, Director of Communications +44 7384 214248
Presentation of results
An on-demand results presentation webcast will be available from
7am today and can be accessed at https://brrmedia.news/qdhmcq
A live Q&A webcast for investors and analysts will follow at
9:30am BST today. The webcast can be accessed at
https://brrmedia.news/npczwj
Both the presentation and Q&A session will also be available
on our corporate website.
About Dr. Martens
Dr. Martens is an iconic British brand founded in 1960 in
Northamptonshire. Originally produced for workers looking for
tough, durable boots, the brand was quickly adopted by diverse
youth subcultures and associated musical movements. Dr. Martens
have since transcended their working-class roots while still
celebrating their proud heritage and, six decades later, "Docs" or
"DMs" are worn by people around the world who use them as a symbol
of empowerment and their own individual attitude.
The Company successfully listed on the main market of the London
Stock Exchange on 29 January 2021 (DOCS.L) and is a constituent of
the FTSE 250 index.
CEO review
Performance summary
This has been an unprecedented year, with the global backdrop of
Covid-19 requiring us to rapidly adapt our ways of working. Our
successful IPO in January represented a major milestone in the
Brand's history. The strong results achieved during the year are
down to the hard work and dedication of all of our people across
the globe, and we thank each and every one of our team for their
commitment and passion.
The Group delivered revenue of GBP773.0m, up 15% on the prior
year, at the top end of the guidance range set at the time of IPO,
which is testament to the strength of the brand and its deep
affection with consumers globally. This performance was
significantly driven by ecommerce, where revenue was up 73% to
represent 30% of mix. The strong ecommerce result was due to the
improvements we have made in our online proposition over recent
years, increased investment in digital marketing, together with the
shift in consumer spending from retail to ecommerce. Over the
medium-term, we expect our focus on this channel, along with the
structural shift in consumer shopping behaviour, to continue to
increase the relative importance of ecommerce to our business.
Retail is an important and profitable channel for us, to
showcase the brand and product, and support ecommerce. During the
year our retail performance was significantly impacted by Covid-19.
We saw store closures and restrictions through the year in EMEA and
Japan, together with store closures in the USA in the first
quarter. Despite Covid-19, we opened 18 new own stores globally,
taking our total own-store estate to 135. FY21 retail revenue was
GBP99.7m, down 40%.
Wholesale allows us to reach more consumers in more places
globally, and our strategy here is to have fewer, deeper wholesale
relationships with quality partners who understand and appreciate
our brand. Over the medium-term we expect wholesale revenues to
grow in absolute terms but become a smaller part of our Group
revenue in percentage terms. In FY21 wholesale revenues were
GBP437.9m, up 18%, driven by strong performance from pure play
etail customers globally, together with robust trading from USA
customers.
At a regional level, revenues increased by 17% in both EMEA and
Americas, and 7% in APAC. In EMEA we saw the strongest performance
in Germany, following the highly successful conversion to a
directly operated business in the prior year. In the Americas we
saw good growth in both USA ecommerce and wholesale channels.
As anticipated, our APAC performance was significantly impacted
by Covid-19 store closures in Japan, which is our largest market in
the region and one that is also particularly weighted towards the
retail segment. In China, where we continue to establish our brand
and lay the foundations for the future, we had a good performance,
with revenue up 46%.
FY21 EBITDA(1) was GBP224.2m, up 22%, with an EBITDA(1) margin
of 29.0%, up 1.6%pts. This strong performance was mainly driven by
improved gross margin due to the faster delivery of supply chain
efficiencies, together with the deferral of c.GBP5m of
discretionary spend into the first half of FY22 which was delayed
due to Covid-19. These factors more than offset first time
operating costs from becoming a listed business in the second
half.
Group PBT before exceptional items(1) was GBP151.4m, up 34%. We
incurred GBP80.5m of exceptional costs related to our IPO, which
included the cost of a bonus for all of GBP49.1m, including
employer's NI of GBP7.1m. This resulted in Group PBT of GBP70.9m,
down 30%. Profit after tax was GBP35.7m, down 52%, due to the
exceptional costs. Adjusted diluted earnings per share were 11.6p,
up 35%. If legacy funding costs of preference shares are also
excluded, the normalised adjusted diluted earnings per share is
14.5p, compared to 11.8p on the same basis in FY20. Operating cash
flow (1) after capex was strong at GBP234.1m, with conversion of
104%, ahead of our expectations. As at 31 March 2021 we had cash of
GBP113.6m and undrawn facilities of GBP195.4m.
Showing resilience through Covid-19
Throughout the pandemic we focused on keeping our people and
consumers safe and staying true to our long-term custodian mindset.
Our people have been united by the brand's strong ethos, our
inclusive and supportive culture, our spirit of resilience and our
clear strategy.
The first impact of Covid-19 was felt in February 2020 in our
APAC region, and the business was able to draw on the learnings
from this region to help focus resource for the rest of our global
operations as the pandemic took hold. We saw lower sales early on
in the majority of our Asian markets, although, aside from in
Japan, stores remained open (albeit with restrictions) and we also
saw the positive shift to ecommerce. This early view from APAC
helped us focus and realign resource quickly to drive this channel
in both EMEA and Americas.
At the start of the Covid-19 pandemic we quickly and prudently
adopted a cash protection approach. We temporarily extended certain
payment terms with key suppliers, whilst not cancelling any orders.
With our wholesale customers we ensured proactive communication and
cooperation to collect outstanding monies and realign orders taken
and, in certain, limited circumstances we agreed extended payment
terms. We also deferred certain capital expenditure related
projects, cancelled non-digital discretionary spend, temporarily
paused recruitment and secured an incremental GBP70m working
capital facility. Whilst we initially applied for UK government
furlough support, once it became apparent trading was resilient and
cash flow robust, we repaid the GBP1.3m received.
Ensuring our people were safe, informed and supported has been a
key priority throughout. New videoconferencing technology was
rolled out to the whole organisation. The leadership team increased
the frequency and types of internal communication, including weekly
global town hall meetings. With the majority of our people working
remotely, we worked hard to look after their wellbeing. The Culture
teams organised many initiatives for our people through which they
could socialise virtually and keep the brand's culture alive.
Our people were redeployed towards the online business, with
some teams temporarily transferred to support ecommerce, customer
services and social media teams, and tight health and safety
measures were put in place in the distribution centres to ensure
that product could continue to be shipped in a timely manner to
consumers, whilst ensuring the wellbeing of our employees.
The growth in ecommerce was due to a variety of actions. We
continued to invest in digital marketing throughout the period. Our
localised approach meant we were able to pick up a significant
amount of business lost from stores being closed or trading at
sub-optimal capacity, and inventory was redeployed to ecommerce.
Across wholesale, we saw strong growth from pure play "etail"
customers together with the online sites of our traditional retail
customers.
The DOCS strategy
Across the entire organisation we act as brand custodians,
focused on protecting and enhancing the brand and the business for
future generations. This long-term view guides everything we do and
ensures that we make the right decisions and investments for the
future.
Our strategy has four pillars, 'DOCS', which are:
-- D - Direct-to-consumer acceleration. We aim to fuel growth
through ecommerce, supported by stores as profitable brand beacons.
By focusing on DTC we can control brand engagement with our
consumers and ensure the best possible environment to showcase our
products, both digitally and physically.
-- O - Operational excellence. We are investing and improving
our operational and IT infrastructure to enable growth and unlock
value. Our supply chain and IT teams are the backbone of our
business, and we strive to ensure our future capacity requirements
are met to support our growth.
-- C - Consumer connection. We are focused on creating deeper
connections with more consumers, using insights to develop
effective marketing strategies aimed at increasing engagement and
broadening the Group's consumer base. Our sustainability strategy
is a key element of our consumer connection, and we continue to
accelerate our journey here.
-- S - Sustainable global growth. This means growing our
business in the right way. We focus predominantly on seven core
markets: UK, France, Germany, Italy, USA, Japan and China, as these
have the biggest headroom for growth over the medium-term.
Executing against our strategy
Our focus on ecommerce was particularly pleasing with revenue
growth of 73%, increasing mix by 10%pts to 30% of revenue. Due to
the Covid-19 pandemic, retail declined to 13% of mix, a decrease of
12%pts. This resulted in an overall decline in DTC mix of 2%pts to
43%.
Over recent years we have significantly invested in our digital
capability, enhanced our digital platforms and materially expanded
our teams, both centrally and our local regional trading teams. The
combination of our improved capabilities, together with the
transition of sales from retail, drove ecommerce revenue up 73% to
30% of revenue, with a strong performance across all our websites
and geographies.
The increased content on our localised websites drove longer
browsing and dwell time on site, and an improvement in conversion
rates. Driven by our regional trading teams we prioritised
marketing spend into digital, redeployed inventory to maintain good
availability and reformatted our own DCs' pick capacity to improve
speed and dispatch.
We opened 18 own stores during the year, including our first
store in Rome, six new stores in USA, four in both Germany and
France and three in APAC.
Our supply chain performance was strong, with the work to
diversify and manage risk undertaken over the past few years
meaning we could quickly react to a rapidly changing global
backdrop, global port disruptions, container shortages, as well as
Covid-19 impacts.
We have delivered our target supply chain efficiencies faster
than anticipated, due to a combination of savings from higher
volumes, our work on cross cost comparison and lower input costs on
certain key components. These savings have been achieved with no
change in quality, durability or manufacturing process.
Our distribution centres performed strongly, with good product
availability, and we opened a new third-party run DC in New Jersey
in June to support the growth in our Americas business.
Communicating directly with our consumers remains a key
priority. During the year we continued to invest in our social
community, building our teams and content, driving engagement rates
more than double our competitive set. We now have almost 5 million
Facebook followers and 4 million Instagram followers across all our
regional platforms, a double-digit increase year on year.
With the music industry unable to operate as before, we took the
stage to our social media channels and live streamed over twenty
gigs to our audience through Instagram across the year. We engaged
our social media communities to respond to the #DMsChallenge by
setting them weekly challenges to stay motivated through lockdown.
This generated over 4,000 pieces of user generated content. We
designed an augmented reality (AR) lens to connect with our social
media audiences and educate on our key Icons. The lens activity
reached 2.3 million people, with 16-24-year-olds driving the
highest volume of engagement. Finally, in March 2021 we launched on
TikTok, with our performance on the platform so far significantly
ahead of our expectations.
As part of continuing to invest in and evolve our business, the
coming months will see some changes to our Leadership Team. We are
pleased to announce that Sue Gannon joins us from Netflix as Chief
HR Officer in the coming weeks. Darren Campbell, Chief Product and
Marketing Officer, has decided to leave the business to pursue
charity work, and we are delighted that he will become a Trustee of
the Dr. Martens Foundation. We had already decided to split
Darren's role, and the recruitment for both CPO and CMO are
underway. Additionally, after three years building our digital
capabilities, Sean O'Neill, Chief Digital Officer, will be leaving
later this year. Both Sean and Darren will leave behind
exceptionally talented teams and will stay with the business as
necessary to ensure a smooth transition.
Sustainability
We have always strived to improve our ways of working, and our
people and consumers increasingly demand this too. Two of our key
principles are product durability and timeless design, and these
are rooted in a sustainable, long-term approach. We have close
supplier relationships with a relatively small number of suppliers,
which we have developed over the last few decades. In 2019 we
launched our first sustainability strategy and in recent years we
have invested in expanding our sustainability and CSR teams and
accelerating our pace of change. This has enabled us to improve our
data capture and processes, particularly in the areas of supply
chain, and social and environmental impact. However, there always
remains more work to do and we are incredibly ambitious.
During the past year we are proud to have:
-- Sourced more than 98% of our leather from Leather Working Group medal rated tanneries
-- Started incorporating 50% post-consumer recycled plastic in
our Airwair heel loops and other synthetic components
-- Despite Covid-19, independently audited physically more than
90% of our Tier 1 finished product suppliers, all of which
surpassed our required CSR audit criteria
-- Created a dedicated Diversity, Equity and Inclusion team to
accelerate our agenda in this area
We also completed a gap and materiality analysis to
comprehensively understand our most significant impacts on the
environment and priority action areas. Using the outputs of this we
have developed ambitious sustainability targets that give a clear
direction for what we need to achieve. We recognise that at present
the technology required to achieve some of these targets is not yet
available, and we are looking to partner with innovators in this
space. Over the coming year, we will build detailed sustainability
roadmaps, metrics and KPIs to achieve these targets.
In our upcoming annual report we will provide further details on
our sustainability performance and approach. We are pleased to
announce our key sustainability targets today, which are:
-- By 2028, 100% of packaging made from recycled or other
sustainably sourced material. By the same year, ensure that zero
waste goes to landfill across the value chain
-- By 2030, achieve net zero and remove fossil-based chemicals from our products
-- By 2040, 100% of products sold have a sustainable end of life
option and, without compromising quality, all footwear made from
sustainable materials
Our full sustainability report, containing all our
sustainability targets and disclosures, will be published as part
of our upcoming Annual Report.
At Dr. Martens we have always cared about doing the right thing,
making products that last and taking a long-term approach.
Product and brand
Our product strategy is rooted in our Originals, anchored within
the 'big three' of the 1460 boot, the 1461 shoe and the 2976
Chelsea Boot. Our originals category grew revenue broadly in line
with Group revenue, to account for 57% of total revenue during the
year. The DNA of our originals category drives the rest of our
product offering; this ensures we do not deviate from our brand
essence.
We continue to see strong growth in our Fusion category, led by
the Jadon and the Sinclair. Our Sandals collection is a relatively
new part of our business and continues to perform strongly, with
revenue growth of 54% and we continue to expand and develop our
offering here to drive an all-year round brand offer. Kids, where
we operate a mini-me strategy from Originals, also saw good growth,
albeit it was impacted by retail closures given higher propensity
to buy through retail channels. We saw a decline in revenue from
our Casual category, as expected, as we reposition our range here
to further enhance our product positioning.
A key benefit of our product strategy and approach is that the
majority of our product is continuity - this means that it
continues season after season and isn't marked down. We therefore
operate with a low markdown percentage, only using markdowns to
clear seasonal stock.
Our collaborations serve to create newness and buzz for our
consumers, and further strengthen our global relationships with
artists, musicians and designers. Across calendar 2020 we
celebrated the 60(th) anniversary of the 1460 boot, with "1460
remastered", a series of twelve design collaborations with friends
of the brand, including Raf Simons, Yohji Yamamoto, Marc Jacobs and
A-Cold-Wall. We also ran other collaborations with broad appeal
through the year, celebrating our relationship with music through
our Black Sabbath collaboration, Art through Basquiat and Keith
Haring and cultural brands such as Hello Kitty and X-Girl. In March
2021 we were proud to launch our first ever collaboration in
sandals, with Japanese brand Suicoke.
Our brand is at the heart of everything we do and we continued
to invest in our marketing functions, both at a Group and regional
level. When the pandemic started to take effect we focused our
spend towards digital performance marketing, adding in out of home
spend as markets reopened. Our 'unpolished' campaign spotlighted
our three icons 1460 boot, 1461 shoe and 2976 chelsea boot, and
three of our biggest Fusion stars, the 1460 Bex, Jadon and
Sinclair.
Across our three regions we further invested in sales and
marketing capability for our "Amp" wholesale level of distribution
- this being our highest level of wholesale accounts that enable
the brand to drive deeper connections with informed consumers.
Guidance
The guidance set out at the time of the IPO is unchanged. In
FY22 we expect high teens revenue growth year on year, as we lap
the Covid-19 impact experienced in FY21. From FY23 and over the
medium-term we anticipate mid-teens revenue growth. We are
targeting a 60% DTC mix over the medium-term, with ecommerce
growing to at least 40% mix of Group. Our medium-term target of a
30% EBITDA(1) margin is also unchanged.
For FY22 specifically, we anticipate:
-- New own store openings of 20 to 25 stores
-- Depreciation and amortisation of GBP42m to GBP44m, including the impact of IFRS16
-- Net finance costs of GBP15m to GBP17m
-- Underlying tax rate of c.21%
-- Capital expenditure of between 3.0% and 3.5% of revenue
-- Year-end leverage of around 1x, including IFSR16 leases
-- We expect to pay our first dividend for the first half of
FY22 in January 2022 with a one-third, two-third split of dividend
payments across the fiscal year. We continue to plan to target a
progressive dividend with a payout ratio of between 25% to 35% of
net income (profit after tax).
For the first half of FY22 specifically, we anticipate:
-- An increase in operating costs including c.GBP5m of
discretionary spend which was deferred through FY21 due to the
pandemic
-- The annualisation of PLC and LTIP costs, representing a c.GBP5m headwind in the first half
-- A cash outflow of c.GBP100m, due to normal seasonal
fluctuations in the timing of shipments and payments
CFO Review
During the year, the financial position of the Group improved -
revenue grew 15% to GBP773.0m (FY20: GBP672.2m) and EBITDA(1) grew
22% to GBP224.2m (FY20: GBP184.5m).
The year was overshadowed by Covid-19 and the Group proved
itself to be very resilient to its negative impacts. This was,
primarily due to brand and product strength, the global nature of
our operations, our multi-channel distribution model and in
particular the focus on ecommerce - which grew by 73% to represent
30% revenue mix (FY20: 20% revenue mix).
The year also saw the Group move from private ownership to list
on the premium segment of the London Stock Exchange on 29 January
2021. In addition, as part of this process, the Group repaid all
legacy financing arrangements funded by a new loan of GBP300.0m and
existing cash. The new debt is bullet repayment in nature with a
5-year term. The Group also secured a working capital facility of
GBP200.0m with a 5-year term. At 31 March 2021 the Group had cash
of GBP113.6m and undrawn available facilities of GBP195.4m.
Results - at a glance
GBPm FY21 FY20 % change % change
Actual CC(5)
Revenue: Ecommerce 235.4 136.4 73% 73%
Retail 99.7 165.2 -40% -40%
DTC 335.1 301.6 11% 11%
Wholesale(4) 437.9 370.6 18% 20%
773.0 672.2 15% 16%
Gross margin 470.5 401.5 17% 18%
EBITDA(1,2) 224.2 184.5 22% 22%
Operating profit before
exceptionals 193.0 154.5 25%
Operating
profit 112.5 142.5 -21%
Key statistics: Pairs sold (m) 12.7 11.1 14%
No. of stores(3) 135 122 11%
DTC mix % 43% 45% -2.0%pts
Gross margin
% 60.9% 59.7% +1.2%pts
EBITDA %(1,2) 29.0% 27.4% +1.6%pts
(1) EBITDA - Earnings before exchange gains/losses, finance
income/expense, income tax, depreciation, and amortisation.
(2) Before exceptional items of GBP80.5m (FY20: GBP12.0m).
(3) Own stores on streets and malls operated under arm's length
leasehold arrangements.
(4) Wholesale revenue including distributor customers.
(5) Constant currency applies the same exchange rate to the FY21
and FY20 non-GBP results, based on FY21 budgeted rates.
Total revenues grew by 15% from GBP672.2m to GBP773.0m with very
strong growth from ecommerce. The key driver of growth was volume
with 14% more pairs of boots and shoes sold at 12.7m pairs (FY20:
11.1m pairs).
-- Ecommerce revenue was particularly strong, as consumers
shifted online due to store closures/social distancing restrictions
and also our focus of resources on this channel early when Covid-19
first became apparent. As a result ecommerce experienced a
step-change and grew by 73% to GBP235.4m (FY20: GBP136.4m) to
represent 30% of revenue (up 10%pts from FY20 mix of 20%) with very
strong growth driven by localised trading teams across all own
websites in all geographies.
-- Retail revenue, impacted by Covid-19 store closures and
restrictions, declined by 40% to GBP99.7m (FY20: GBP165.2m) with
revenue mix reducing to 13% (down 12%pts from FY20 mix of 25%).
Despite this decline, we understand the importance of this channel
in supporting ecommerce and brand awareness with profitable brand
beacons and we opened 18 new own stores in the year (and closed 5)
to end the year with 135 own stores.
-- Wholesale revenue grew by 18% to GBP437.9m (FY20: GBP370.6m)
and to a degree benefitted from the trend to digital (with growth
mainly pure play "etail" accounts as well as own websites from
traditional accounts). In addition, the first full year of trading
in Germany (following its conversion from third party distributor
basis to directly operated basis) was particularly strong.
Gross margins improved by 1.2%pts to 60.9% (FY20: 59.7%) mainly
due to faster delivery of supply chain efficiencies (in part volume
efficiency, part cross cost comparison and part lower input costs
on certain key components) which generated 1.1%pts of improved
gross margin. The negative margin impact from the reduction in
direct to consumer (DTC) mix and inflation was offset by targeted
price increases in the year.
The supply chain target of 5% of revenues has now been achieved,
a lot earlier than anticipated. Looking forward, we anticipate
broadly offsetting raw material headwinds from SS22 and increasing
freight and container costs with incremental future savings.
EBITDA(1) grew by 22% to GBP224.2m (FY20: GBP184.5m) and was
mainly due to volume. EBITDA(1) margin improved by 1.6%pts to 29.0%
(FY20: 27.4%) as follows:
EBITDA(1)
Margin %
FY20 27.4%
Gross margin +1.2pts
PLC/LTIP costs -0.4pts
Operational leverage +0.8pts
FY21 29.0%
The improvement in gross margin has been previously described
with margin dilution from PLC/LTIP costs representing new ongoing
costs in relation to being a 'listed' company (described later) and
were offset by lower discretionary spend due to Covid-19 of GBP5m
and also by operational leverage from the cost base increasing at a
slower rate than revenue growth. Whilst some Covid-19 related
savings will reverse and normalise in FY22, our medium term target
of 30% EBITDA(1) margin remains unchanged.
Operating profit (before exceptionals) was GBP193.0m (FY20:
GBP154.5m) and was up 25% with operating profit of GBP112.5m (FY20:
GBP142.5m) down 21%, summarised below:
GBPm FY21 FY20 % change
Revenue 773.0 672.2 15%
Gross margin 470.5 401.5 17%
Operating expenses (246.3) (217.0) (14%)
EBITDA (1,2) 224.2 184.5 22%
Depreciation and amortisation (35.0) (29.5) (19%)
Foreign exchange gains/(losses) 3.8 (0.5) Na
Operating profit before exceptionals 193.0 154.5 25%
Exceptional items (80.5) (12.0) Na
Operating profit 112.5 142.5 (21%)
Gross margin % 60.9% 59.7% +1.2%pts
EBITDA %(1,2) 29.0% 27.4% +1.6%pts
Operating profit margin -
before exceptionals 25.0% 23.0% +2.0%pts
Operating profit margin 14.6% 21.2% -6.6%pts
(1) EBITDA - Earnings before exchange gains/losses, finance
income/expense, income tax, depreciation, and amortisation.
(2) Before exceptional items of GBP80.5m (FY20: GBP12.0m).
Pre-exceptional operating expenses increased by 14% to GBP246.3m
(FY20: GBP217.0m) as follows:
GBPm FY21 FY20 % change
Staff costs: Underlying 106.7 99.8 7%
PLC/LTIP 2.9 - -
109.6 99.8 10%
Other operating
expenses 136.7 117.2 17%
246.3 217.0 14%
% revenue: Staff 14.2% 14.9% -0.7%pts
Other 17.7% 17.4% +0.3%pts
Total 31.9% 32.3% -0.4%pts
Included in staff costs was GBP2.9m in relation to PLC related
costs, including the first LTIP grant of GBP0.7m made on 9 February
(which is expected to annualise to a cost of GBP4.9m) and
incremental headcount in relation to our new Independent NED's and
the strengthening of Group Finance and Legal/Company Secretary
functions which occurred across the second half. Other operating
costs increased by 17% and was mainly due to increased marketing
spend (up 34%), before this increase, other operating expenses
increased by 9% and were mainly volume related in nature. The
increase in marketing spend was in line with our plans at +0.5%pts
of revenue and we expect to continue to increase our investment in
this area, particularly in digital marketing.
Exceptional costs in the year were GBP80.5m (FY20: GBP12.0m) and
all related to the IPO which took place on 29 January 2021. The
main cost was in relation to an all employee "IPO bonus" of
GBP49.1m, which was in part funded by shares held by EBT (and sold
at IPO date) and also cash held by the EBT totalling GBP42.0m. Also
included within this charge (of GBP49.1m) was an employer's
national insurance charge in relation to the cash payment of
GBP7.1m. In addition, the Group incurred an IFRS2 share based
payment charge in relation to the IPO of GBP10.8m (which was
non-cash and further described in note 7 of the financial report).
The balance of GBP20.6m was advisory fees and charges including an
element of unclaimable VAT. In the prior year exceptionals of
GBP12.0m included consulting fees in relation to the Company's
exploration and diligence associated with an exercise to review
strategic options of GBP7.3m, charge in relation to the
implementation of a new IT system (Microsoft Dynamics 365 in
America's region) of GBP2.2m, costs for legal obligations and
litigation of GBP1.9m with the balance mainly legal costs.
The Directors consider EBITDA(1) before exceptionals as the most
appropriate indicator of the underlying performance of the
Group.
Region analysis: (excluding exceptional items)
The results can be further analysed by region as follows:
GBPm FY21 FY20 % change
Revenue: EMEA 335.6 287.9 17%
Americas 295.8 252.2 17%
APAC 141.6 132.1 7%
773.0 672.2 15%
EBITDA(1,2) : EMEA 115.3 92.4 25%
Americas 91.9 75.4 22%
APAC 39.7 35.5 12%
Support costs(3) (22.7) (18.8) (21%)
224.2 184.5 22%
EBITDA(1,2) margin
by region: EMEA 34.4% 32.1% +2.3%pts
Americas 31.1% 29.9% +1.2%pts
APAC 28.0% 26.9% +1.1%pts
Total 29.0% 27.4% +1.6%pts
(1) EBITDA - Earnings before exchange gains/losses, finance
income/expense, income tax, depreciation, and amortisation.
(2) Before exceptional items of GBP80.5m (FY20: GBP12.0m).
(3) Support costs represent group related support costs not
directly attributable to each regions operations and including
Group Finance, Legal, Group HR, Global Brand and Design, Directors
and other group only related costs and expenses.
EMEA
EMEA revenue grew by 17% to GBP335.6m (FY20: GBP287.9m).
Ecommerce was particularly strong with retail negative (due to
store closures and social distancing restrictions which continued
throughout the year). During the year we opened 9 new stores with 4
in France (to 11 stores), 4 in Germany (to 10 stores) and also our
first store in Italy (Rome) and closed 3 stores in UK by exercising
lease break clauses. Germany had a particularly strong year
(following a highly successful conversion to a directly controlled
market in the prior year) and grew revenue by 56% to become our
second largest market in the region after the UK. The region has
two main DC's, in the UK and the Netherlands, and, as a result,
Brexit has not had a material impact on our operations or results.
EBITDA(1) was up 25% to GBP115.3m (FY20: GBP92.4m).
Americas
The Americas region grew revenue by 17% to GBP295.8m (FY20:
GBP252.2m). Our own stores were closed during April to early July
and broadly traded throughout the remainder of the financial year
at 25% to 50% capacity. In addition, a number of traditional
wholesale accounts were open all year (with capacity restrictions)
and, as a result the impact of Covid-19 restrictions was not as
negative an impact as in EMEA or APAC. Ecommerce was very strong,
and we also went live with a new Hispanic website. We had good
wholesale growth, but retail was negative. During the year we
opened 6 new stores with 2 in Texas (in Dallas and Houston), 3 in
and around LA (including Abbot Kinney Boulevard) and 1 store in
Chicago. One store was closed at the end of its lease term.
EBITDA(1) was up 22% to GBP91.9m (FY20: GBP75.4m).
APAC
Total revenue across the region was up 7% to GBP141.6m (FY20:
GBP132.1m) with the region particularly impacted by strict social
distancing restrictions. China had steady growth from both
ecommerce and distributor revenues growing by 46% and during the
year we opened a net 35 mono branded franchise stores to trade from
85 stores at year end. Japan, which is currently our largest market
in the region, experienced marginal revenue growth with
exceptionally strong ecommerce growth offset by negative retail
revenue and negative wholesale revenue due to strict social
distancing/store closure rules (particularly in and around Tokyo).
South Korea and Hong Kong were broadly flat with very good
ecommerce offset by weak retail and negative trading across most SE
Asia distributor markets.
EBITDA(1) was up by 12% to GBP39.7m (FY20: GBP35.5m) with growth
in part impacted by continuing infrastructure build to support our
long-term ambitions in China (during the year we expanded our
Shanghai based team from 7 to 25 people) and also further
investment in Japan to underpin future DTC growth.
Support costs
Support costs were up 21% to GBP22.7m (FY20: GBP18.8m) which was
mainly due to PLC/LTIP costs incurred across second half of
GBP2.9m, excluding these costs support costs were up 5%.
Retail development
During the year, we opened 18 (FY20: 16) new own retail stores
(via arm's length leasehold arrangements) as follows:
31 March Opened Closed 31 March
2020 2021
EMEA: UK 37 - (3) 34
Germany 6 4 - 10
France 7 4 - 11
Italy - 1 - 1
Other 12 - - 12
62 9 (3) 68
Americas 29 6 (1) 34
APAC: Japan 21 1 - 22
South Korea 4 1 - 5
Hong Kong 6 1 (1) 6
31 3 (1) 33
Total 122 18 (5) 135
The Group also trades from 49 (FY20: 52) concession counters in
department stores in South Korea and a further 203 mono branded
franchise stores around the world with 85 in China (FY20: 50), 32
in Japan (FY20: 33), 11 across Australia and New Zealand (FY20: 5),
50 across other South East Asia countries and the balance mainly
South America.
Leases
The Group operates its own retail stores via arm's length
leasehold arrangements (apart from two stores that are freehold)
and also leases two warehouses and its offices. At 31 March 2021,
the average lease term remaining across all property related leases
to end of term was 4.3 years (FY20: 4.7 years), and only 2.9 years
(FY20: 3.3 years) to tenant only break. The annual rent commitment
was GBP22.7m (FY20: GBP21.5m) and undiscounted total lease
commitment was GBP97.0m (FY20: GBP100.5m), reducing to GBP65.1m
(FY20: GBP70.0m) to lease break.
At 31 March 2021 under IFRS 16 accounting rules the Group has
ROU assets of GBP77.4m (FY20: GBP82.0m) and lease liabilities of
GBP84.8m (FY20: GBP88.4m). As described in the Viability and Going
Concern statements, we reviewed all stores for impairment and
concluded three stores had future cash flows lower than the ROU
asset, and accordingly expensed a GBP1.1m impairment charge to the
Consolidated Statement of Profit or Loss.
Earnings
The following table analyses the results for the year from
operating profit to profit before tax.
GBPm FY21 FY20
Operating profit 112.5 142.5
Net interest cost on bank debt (6.5) (5.3)
106.0 137.2
Non-cash interest on preference shares (28.5) (31.5)
Unamortised loan costs (2.9) (0.8)
Interest on lease liabilities (non-cash) (3.7) (3.9)
Profit before tax 70.9 101.0
Tax (35.2) (26.2)
Earnings 35.7 74.8
The Group made operating profit of GBP106.0m after interest
costs on bank debt (FY20: GBP137.2m). On 29 January the Group
refinanced its operations with new bank debt of GBP300.0m and a
working capital facility of GBP200.0m. The term debt is for 5 years
with bullet repayment on 2 February 2026 and average interest cost
of 2.75% depending on the net leverage of the Group at each
reporting period and the EURIBOR rate. Included within net interest
on bank debt (above) of GBP6.5m is interest costs post refinancing
of GBP1.2m with the balance being interest costs on previous
funding arrangements. The unamortised loan issue costs of GBP2.9m
include GBP0.2m in relation to the new financing arrangements
(annualised cost of GBP1.2m) with the balance relating to the
write-off of all issue costs on prior financing arrangements.
The Group made a profit before tax of GBP70.9m (FY20: GBP101.0m)
with profit after tax of GBP35.7m (FY20: (GBP74.8m).
The tax charge was GBP35.2m (FY20: GBP26.2m) with an effective
tax rate of 49.6% which is higher than the UK corporate tax rate of
19.0% and mainly due to non-deductibility of certain expenses and
exceptional items and also geographical mix of profits at different
tax rates as follows:
%
UK effective tax rate 19.0%
Non-UK tax mix 1.4pts
IFRS 2 accounting 1.9pts
Interest on preference shares 4.3pts
Certain exceptionals/Other 23.0pts
Reported tax rate 49.6%
On 3 March 2021, the 2021 UK budget announced an increase to the
corporation tax rate from 19.0% to 25.0% effective from April 2023.
This was substantively enacted on the 24 May 2021. The increase in
rate would have been approximately GBP0.2m. We make a significant
contribution to the public finances in all our markets and take
seriously our responsibility to the wider society through the
payment of taxes and other government revenue-raising mechanisms.
In FY21 we paid GBP137m, either directly or indirectly to various
governments.
Earnings per share was 3.6p (FY20: 7.5p) and adjusted earnings
per share (excluding exceptional items of GBP80.5m) was 11.6p
(FY20: EPS 8.6p; exceptional items GBP12.0m). For future
comparability purposes, we have also calculated a normalised
adjusted EPS figure of 14.5p (FY20: 11.8p), which excludes
exceptional items (as described in adjusted EPS) together with
legacy financing costs of preference shares, which were fully
repaid at IPO (FY21: GBP28.5m; FY20: GBP31.5m). The total number of
shares are detailed in note 23 in the financial statements. The
following table summarises these EPS figures:
FY21 FY20 % change
pence pence
Earnings per share Basic 3.6 7.5 -52%
Diluted 3.6 7.5 -52%
Add back exceptionals per
share 8.0 1.1
Adjusted earnings per share Basic 11.6 8.6 35%
Diluted 11.6 8.6 35%
Add back legacy financing
per share 2.9 3.2
Normalised adjusted Basic 14.5 11.8 23%
earnings per share Diluted 14.5 11.8 23%
The Group has not declared nor paid a dividend in the year.
Operating cash flow - before exceptionals is summarised
below:
GBPm FY21 FY20
EBITDA (1,2) 224.2 184.5
Change in net working capital(3) 28.5 (20.6)
Capital expenditure (18.6) (21.9)
Operating cash flow 234.1 142.0
Operating cash conversion 104% 77%
(1) EBITDA - Earnings before exchange gains/losses, finance
income/expense, income tax, depreciation, and amortisation.
(2) Before exceptional items of GBP80.5m (FY20: GBP12.0m).
(3) Working capital per the consolidated statement of cash
flows, less exceptionals of GBP6.1m offset by GBP0.7m of IFRS2
accounting.
Operating cash flow was particularly strong in the year at 104%
mainly due to timing of inventory purchases and resulting payments
normalisation, together with stronger trade debtors collection at
42 days (FY20: 61 days).
Capex was GBP18.6m (FY20: GBP21.9m) and represented 2.4% of
revenue (FY20: 3.3%) and was lower than prior year mainly due a
pause on certain larger IT related projects as a result of Covid-19
cash protection plans (including implementation of Microsoft
Dynamics D365 into APAC, which has now been re-started). Spend of
GBP18.6m included GBP7.7m on new stores (FY20: GBP6.8m) and IT and
ecommerce spend of GBP7.9m (FY20: GBP9.2m).
Net cash flow after interest and exceptionals
Net cash flow after interest costs and exceptionals is
summarised below:
GBPm FY21
Operating cash flow(3) 234.1
Net interest paid(1) (7.4)
Payment of lease liabilities (23.8)
Taxation (33.1)
Free cash flow(3) before exceptional
items 169.8
Proceeds from new bank borrowings 300.0
Exceptional items(2) (27.0)
Preference shares redeemed (341.4)
Net bank borrowings and facility
repayments (92.7)
Net cash flow 8.7
Opening cash 117.2
Net foreign exchange (12.3)
Closing cash 113.6
(1) Finance expense per the consolidated statement of cash flow,
GBP12.8m, less exceptional cost of GBP5.4m of fees paid in relation
to the new financing arrangements of GBP300.0m.
(2) All exceptionals paid were in relation to the IPO and
refinancing event. Included within this amount is cash received
from the EBT (from sale of share at the IPO date) of GBP42.0m which
was used to part fund an all employee "IPO bonus".
(3) Operating cash flow and free cash flow are Alternative
Performance Measures defined in the Glossary on pages 75 and
76.
Funding
The Group is funded by cash, bank debt and equity with the
refinancing event that took place in the year, previously
described. Further details on the capital structure and debt are
given in note 18 of the financial statements.
The new financing arrangements, as is normal, have a gearing
covenant test, with the first test being on 30 September 2021 and
subsequent tests every 6 months. The gearing test is calculated
with a full 12 months of EBITDA(1) (before exceptionals) with net
debt being inclusive of IFRS16 lease liabilities. At 31 March 2021
the Group had gearing of 1.15 times calculated below:
GBPm
EBITDA(1) 224.2 (A)
Bank debt(2) (287.5)
Cash 113.6
Net bank debt (173.9)
Lease liabilities (84.8)
Net financing (258.7) (B)
Gearing ratio (times, B/A) 1.15x
(2) Excluding unamortised fees of GBP5.9m
The Group borrowed EUR337.5m on 29 January 2021 (equivalent to
GBP300.0m at that date) with the value now at GBP287.5m due to
exchange rate movements. The borrowings were in Euros to reflect
the excess Euros the Group generates from trading in continental
Europe to fund interest costs (with US dollar generated broadly
funding US dollar purchase of inventory and GBP generated broadly
funding GBP related costs).
Pensions
Airwair International Limited (a subsidiary of the Group),
operates a defined benefit pension scheme in the UK, which was
closed to new members in 2002, and provides both pensions in
retirement and death benefits to members. At the most recent
triennial valuation date (June 2019), on an actuarial funding
valuation basis as agreed with the Trustees, the scheme had assets
with a value of GBP65.4m and estimated future liabilities of
(technical provisions) of GBP60.6m, resulting in a surplus of
GBP4.8m.
A detailed description of all pension commitments including the
IAS 19 accounting valuation (which is prepared on a different
valuation basis of liabilities to the actuarial funding valuation
basis, the latter being used to agree with the pension trustees
whether cash attributions are or are not required to be made and
the former being purely for accounting purposes) is given in note
29 of the financial statements. The surplus under the scheme is not
recognised as an asset benefiting the Group on the balance sheet on
the basis that the Group is unlikely to derive any economic
benefits from that surplus.
The Group also operates a defined contribution scheme for its
employees and during the year the Group contributions to this
scheme were GBP5.8m (FY20: GBP4.8m). At 31 March 2021 this scheme
had assets of GBP15.5m (31 March 2020: GBP9.8m).
Balance sheet
The balance sheet is summarised below:
GBPm 31 March 31 March
2021 2020
Freeholds 6.1 6.0
Right-of-use assets 77.4 82.0
Other fixed assets 46.6 43.2
Working capital 25.5 69.6
Deferred tax 7.2 7.4
Operating net assets 162.8 208.2
Goodwill 240.7 240.7
Cash 113.6 117.2
Bank debt(1) (281.6) (94.3)
Lease liabilities (84.8) (88.4)
Preference shares - (312.9)
Net assets 150.7 70.5
(1) Bank debt net of GBP5.9m unamortised debt issue costs
The working capital balance of GBP25.5m (FY20: GBP69.6m)
predominantly reflects inventory of GBP101.5m (FY20: GBP90.0m),
trade and other receivables of GBP59.4m (FY20: GBP68.2m), trade and
other payables of GBP133.0m (FY20: GBP88.9m) and other items
(derivatives, tax, and provisions). The reduction in working
capital was mainly increased creditors, resulting from a
normalisation of inventory purchases compared to the prior
year.
Equity of GBP150.7m at 31 March 2021 can be analysed as
follows:
GBPm
Share capital 10.0
Hedging reserve (0.1)
Merger reserve (1,400.0)
Non-UK translation reserve 2.7
Retained earnings 1,538.1
150.7
Included in retained earnings is Dr. Martens plc (the Company)
distributable reserves of GBP1,385.0m.
Viability assessment
In accordance with the UK Corporate Governance Code, the
Directors have assessed the viability of the Group over a three
year period to 31 March 2024, which is longer than the 15 month
outlook adopted in the going concern basis of accounting (as
described on note 2 of the financial statements). As part of this
assessment, the Directors have analysed the prospects of the Group
by reference to its current financial position, recent trading
trends and momentum (in particular the resilient trading
performance in the last financial year during Covid-19), it's
forecasts and financial projections, strategy, economic model and
the principle risks and mitigating factors, and also those arising
from Covid-19 described on page 4.
Over the last three years, the Group has grown revenue by
GBP318.6m to GBP773.0m representing CAGR% growth of 19% and grown
EBITDA(1) to GBP224.2m (from GBP85.0m), representing a CAGR% growth
rate (excluding IFRS16 accounting in latter two years) of 33%. The
assessment is described in more detail below.
Group Planning Process
Our normal planning process consists of a rigorous review of the
DOCS strategy (described on pages 4 to 5) by the Leadership Team on
an annual basis, following which an updated long-term financial
plan is derived and reviewed with the Board. Before the beginning
of a new financial year a detailed, bottom up budget is prepared
with thorough review and discussion between each region President
and CEO, CFO & COO, and presentation and discussion with the
Board. We monitor our performance through the financial year
against this budget and prior year actual performance with formal
re-forecast processes conducted as required. The key assumptions
considered in all reviews are:
-- trading performance by channel,
-- trading performance by product and geography, expenditure plans, and
-- cash generation.
We also consider projected liquidity, balance sheet strength and
potential impact on shareholder returns.
Assessment Period
The Directors have assessed the viability of the Group over a
three year period to March 2024, as this aligns to our internal
planning cycle. The planning for this three year period is assessed
by month and includes well thought through investments, plans and
actions.
Trading Outlook
The immediate outlook for the year as a whole is likely to be
volatile and 'bumpy' and closely linked to vaccination progress,
easing of social restrictions and economies normalising and
evolving to whatever a post Covid-19 normality might be. Whilst all
our core markets have begun vaccination programmes, the pace of
these has varied significantly by country. At the time of writing
the UK and USA look likely to have the majority of their
populations vaccinated by mid-summer with Continental Europe
probably later in the autumn and Asia maybe not majoritively
vaccinated until the end of the calendar year. In addition, new
variants may complicate and delay our pathway to new normality.
Further, we need to see how consumers will react post Covid-19
with an upside scenario from potential pent up demand maybe driving
economic activity, further fuelled in the US with stimulus payments
versus a downside scenarios of increased unemployment and lower
spending power. At the time of writing the outcome remains
uncertain both globally and by geography.
Our central planning assumptions are:
-- the trend towards ecommerce to continue, though probably at a
slower pace than during the financial year ended March 2021,
-- stores not fully returning to pre Covid-19 levels of
profitability across the period under review,
-- our core markets to continue to be negatively impacted by
some form of social restrictions through the first year and then
slowly recover but we do not plan for a speedy recovery to pre
Covid-19 level of economic activity across the period under
review.
These conservative central assumptions form the base case for
our FY22 budget, Viability statement assessments, Going Concern
statement and store impairment analysis.
We have modelled the impact on one severe but plausible scenario
represented by revenue growth at 10% pts lower than the base plan
across all channels and geographies.
Under this scenario we did not model any mitigating actions
(including dividend payments). The outputs of this scenarios is
described below.
Assessment of Viability
Viability has been assessed by:
-- Where appropriate and practical, we assessed the impact of a
number of risks (which also describes likelihood of occurrence)
crystalising and subsequent impact on trading, cashflows and
covenant compliance. The main risks assessed are given below and
the Group continues to have satisfactory liquidity and covenant
headroom under each risk modelled:
-- the impact of a large distribution centre being out of action
for a period of around 6 months (being the estimated time to set up
a new third party operation),
-- the impact of a large third party factory being out of
operation for a period of around 6 months (being the estimated time
to divert production capacity to other factories),
-- websites out of action for a period (here we assessed an
average day lost at peak trading as if much longer it would be
likely a significant proportion of revenue would be transferred to
our own stores and wholesale stores and websites).
-- 'Top-down' sensitivity and stress testing, which included a
review of the cashflow projections and covenant compliance under a
severe but plausible scenario in relation to the downside scenario
described above. Experience through the year to March 2021
indicated minimal wholesale bad debt risk, and minimal margin risk
with the principle risk being lower revenue. In the scenario
modelled, the Group continues to have satisfactory liquidity and
covenant headroom throughout the period under review.
-- A series of reverse stress tests were also carried out to
determine what could 'break' covenant compliance estimates and
liquidity on an annual and three year cumulative basis before
mitigating actions. To model these reverse stress tests we
calculated the impact on revenue of zero covenant headroom at end
year 1 and end year 3 and also impact of zero liquidity on these
dates. Under all reverse stress tests modelled, we did not model
any mitigating actions (including dividend payments) and then
assessed the resulting revenues calculated and likelihood of
occurring. We assessed the likelihood of occurrence to be
remote.
We will continue to monitor the effects of Covid-19 on our Group
and the economies of the countries where we operate and we plan to
maintain maximum flexibility to react, on a market by market basis,
taking into consideration the various national and local government
regulations and policies as events unfold.
Statement
Based on the analysis, the Directors have a reasonable
expectation that the Group will continue in operation and meet its
liabilities as they fall due over the three-year period of this
assessment.
Consolidated Statement of Profit or Loss
For the year ended 31 March 2021
Total 2021 Total
GBPm 2020
Notes GBPm
Revenue 3 773.0 672.2
Cost of sales (302.5) (270.7)
Gross profit 470.5 401.5
Selling and administrative expenses 4 (358.0) (259.0)
Operating profit 112.5 142.5
EBITDA 3224.2 184.5
Exceptional items 4(80.5) (12.0)
EBITDA (post exceptional
items) 143.7 172.5
Depreciation, amortisation
and foreign exchange gains/(losses) 4(31.2) (30.0)
Operating profit 4 112.5 142.5
Finance expense(1) 8 (41.6) (41.5)
Profit before tax 70.9 101.0
Tax expense 9 (35.2) (26.2)
Profit for the year 35.7 74.8
2021 2020
(Restated(2)
)
Earnings per share
Basic 10 3.6p 7.5p
Diluted 10 3.6p 7.5p
Adjusted earnings per share
Basic 10 11.6p 8.6p
Diluted 10 11.6p 8.6p
(1) Finance expense includes non-cash interest on preference
shares of GBP28.5m (FY20: GBP31.5m) and on 28 January 2021 all
preference shares were redeemed in full.
(2) Following a reorganisation of the Group and share dilution
on IPO, the Group has applied IAS33 to restate earnings per share
to reflect the sub-divis io n of shares during the year but where
there has been no inflow of resources due to shares being issued to
existing shareholders for no consideration.
The results for the years presented above are derived from
continuing operations and are entirely attributable to the owners
of the Parent company.
Consolidated Statement of Comprehensive income
For the year ended 31 March 2021
Total Total
2021 2020
Notes GBPm GBPm
Profit for the year 35.7 74.8
Other comprehensive(expense)/income
Items that may subsequently be reclassified
to profit or loss
Currency translation differences (7.4) 2.7
Cash flow hedges (1.6) 1.4
(9.0) 4.1
Items that will not be reclassified to profit
or loss
Re-measurement of post-employment benefit obligations 29 - -
Tax relating to post-employment benefit obligations 29 - -
- -
Total comprehensive income for the year 26.7 78.9
Consolidated Balance Sheet As at 31 March
2021
Total 2021 Total
Notes GBPm 2020
GBPm
Non-current assets
Intangible assets 12 260.8 257.2
Property, plant and equipment 13 32.6 32.7
Right-of-use assets 13 77.4 82.0
Deferred tax assets 22 7.2 7.4
Pension fund surplus 29 - -
378.0 379.3
Current assets
Inventories 14 101.5 90.0
Trade and other receivables 15 59.4 68.2
Income tax assets - 0.3
Derivatives and other financial assets 20 0.3 1.5
Cash and cash equivalents 16 113.6 117.2
274.8 277.2
Total assets 652.8 656.5
Current liabilities
Trade and other payables 17 (133.0) (88.9)
Borrowings - Bank 1 18 - (20.0)
- Lease liabilities 18 (18.2) (21.8)
Income tax payable (1.1) -
(152.3) (130.7)
Non-current liabilities
Borrowings - Bank 1 18 (281.6) (74.3)
- Redeemable preference shares 18 - (312.9)
- Lease liabilities 18 (66.6) (66.6)
Provisions 19 (1.6) (1.5)
(349.8) (455.3)
Total liabilities (502.1) (586.0)
Net assets 150.7 70.5
Equity attributable to the owners of the
parent
Share capital 23 10.0 -
Hedging reserve 24 (0.1) 1.5
Capital redemption reserve 24 - (165.8)
Merger reserve 24 (1,400.0) -
Non-UK currency translation reserve 24 2.7 10.1
Retained earnings 24 1,538.1 224.7
Total equity 150.7 70.5
1 Included in bank debt is GBP5.9m of unamortised
fees (FY20: GBP0.5m).
The notes on pages 27 to 72 are an integral
part of these financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 March 2021
Foreign
Capital Capital exchange
Share Hedging reserve redemption Merger translation Retained
-
capital reserve own shares reserve reserve reserve earnings Total
1 equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 April 2019 - 0.1 - (186.0) - 7.4 170.1 (8.4)
Comprehensive income
Profit for the
year - - - - - - 74.8 74.8
Other comprehensive
income - 1.4 - - - 2.7 - 4.1
Total comprehensive
income for the
year - 1.4 - - - 2.7 74.8 78.9
Capital redemption
reserve distributions - - - 20.2 - - (20.2) -
At 31 March 2020 - 1.5 - (165.8) - 10.1 224.7 70.5
Comprehensive income -
Profit for the
year - - - - - - 35.7 35.7
Other comprehensive
expense - (1.6) - - - (7.4) - (9.0)
Total comprehensive
income for the
year - (1.6) - - - (7.4) 35.7 26.7
Own shares and
other equity
transactions - - (0.9) - - - 1.2 0.3
Share issues during
the period - - 0.3 - - - 3.6 3.9
Own shares sold
in the year - - 0.6 - - - 37.2 37.8
Shares issued 23 - - - - - - - -
Share for share
exchange 23 1,400.0 - - - (1,400.0) - - -
Capital reduction 23 (1,390.0) - - - - - 1,390.0 -
Capital redemption
reserve distributions 23 - - - 165.8 - - (165.8) -
Share based payments 25 - - - - - - 11.5 11.5
At 31 March 2021 10.0 (0.1) - - (1,400.0) 2.7 1,538.1 150.7
(1) Included within retained earnings Dr. Martens plc (the
Company) has distributable reserves of GBP1,385.0m.
For further information on the nature of each reserve, please
refer to note 24.
The notes on pages 27 to 72 are an integral part of these
financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 March 2021
Notes 2021 2020
GBPm GBPm
Profit after taxation 35.7 74.8
Add back: income tax expense 35.2 26.2
finance expense 41.6 41.5
Operating profit 112.5 142.5
Depreciation and amortisation 35.0 29.5
Net foreign exchange rate (losses)/gains (3.8) 0.9
Share-based payments 25, 26 11.5 -
Restricted cash 4.2 -
Increase in inventories (18.1) (36.1)
Decrease/(increase) in trade and other
receivables 0.8 (16.6)
Increase in trade and other payables 51.2 35.7
Change in working capital 33.9 (17.0)
Cash flows from operating activities
Cash generated from operations 193.3 155.9
Taxation paid (33.1) (34.5)
Cash generated from operating activities 160.2 121.4
Cash flows from investing activities
Additions to intangible assets 12 (8.2) (8.4)
Additions to property, plant and equipment 13 (10.4) (13.5)
Cash used in investing activities (18.6) (21.9)
Cash flows from financing activities
Finance expense(1) (12.8) (5.4)
Payment of lease liabilities 28 (23.8) (20.4)
Proceeds from new bank borrowings 18 300.0 -
Net bank borrowings and facility (repayments)/drawdowns 18 (92.7) 16.8
Preference share repayments 18 (341.4) (35.0)
Sale of shares from EBT 37.8 -
Cash used in financing activities (132.9) (44.0)
Net increase in cash and cash equivalents 8.7 55.5
Cash and cash equivalents at beginning
of year 117.2 58.4
Effect of exchange on cash held (12.3) 3.3
Cash and cash equivalents at end of year 16 113.6 117.2
(1) Included in finance expense in the current year are fees
paid of GBP5.4m in relation to the new financing arrangements of
GBP300.0m.
The notes on pages 27 to 73 are an integral part of these
financial statements.
Consolidated non-GAAP Statement of Cash Flows
For the year ended 31 March 2021
Notes 2021 2020
GBPm GBPm
EBITDA(1) 3 224.2 184.5
Change in net working capital 28.5 (20.6)
Capital expenditure 12,13 (18.6) (21.9)
Operating cash flow(3) 234.1 142.0
Net interest paid (7.4) (5.4)
Payment of lease liabilities 28 (23.8) (20.4)
Taxation (33.1) (34.5)
Free cash flow(3) before exceptional items 169.8 81.7
Proceeds from new bank borrowings 18 300.0 -
Exceptional items (2) 4 (27.0) (8.0)
Preference share redemption 18 (341.4) (35.0)
Net bank borrowing and facility repayments 18 (92.7) 16.8
Net cash flow 8.7 55.5
Opening cash 16 117.2 58.4
Net cash foreign exchange (12.3) 3.3
Closing cash 16 113.6 117.2
(1) EBITDA - Earnings before exchange gains/losses, finance
income/expense, income tax, depreciation, and amortisation.
(2) All exceptionals paid were in relation to the IPO and
refinancing event. Included within this amount is cash received
from the EBT (from sale of share at the IPO date) of GBP 42 .0 m
which was used to part fund an all employee "IPO bonus" and GBP 5.4
m of fees paid in relation to the new financing arrangements of GBP
300 .0 m.
(3) Operating cash flow and free cash flow are Alternative
Performance Measures defined in the Glossary on pages 210 and
211.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
The preliminary results were authorised for issue by the Board
of Directors on 16 June 2021. The financial information set out
herein does not constitute the Group's statutory consolidated
financial statements for the years ended 31 March 2021 or 2020, but
is derived from those accounts. Statutory consolidated financial
statements for 2021 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. Statutory
consolidated financial accounts for the previous holding company
Doc Topco Limited for 2020 are filed at Companies House. The
auditors have reported on those accounts; their report was
unqualified and did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
1. General information
Dr. Martens plc (formerly Dr. Martens Limited) (the "Company")
was incorporated in England and Wales on 19 October 2020 as
Ampholdco Limited, a private company limited by shares in the
United Kingdom, renamed Dr. Martens Limited on 22 December 2020 and
re-registered as a public company limited by shares and renamed Dr.
Martens plc on 22 January 2021 with its registered office situated
in England and Wales. As of 18 December 2020, the Company's
registered office is: 28 Jamestown Road, Camden, London NW1 7BY.
Prior to this date the registered office was Cobbs Lane, Wollaston,
Northamptonshire, NN29 7SW.
Following the Group reorganisation described below, the
principal activity of the Company and its subsidiaries (together
referred to as the "Group") is the design, development,
procurement, marketing, selling and distribution of footwear, under
the Dr. Martens brand. On 29 January 2021, the entire issued share
capital of the Company was admitted to the premium listing segment
of the Official List of the Financial Conduct Authority and to
trading on the London Stock Exchange's Main Market for listed
securities.
2. Accounting policies
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to the years presented, unless otherwise
stated. Amounts are presented in GBP and to the nearest million
pounds (to one decimal place) unless otherwise noted.
2.1. Group reorganisation
On 14 December 2020, the Company acquired the entire
shareholding of Doc Topco Limited by way of a share for share
exchange. The insertion of the Company on top of the existing Doc
Topco Limited group does not constitute a business combination
under IFRS 3 'Business Combinations' and instead has been accounted
for as a common control transaction. Merger accounting has been
used to account for this transaction. Further details can be found
in note 23.
Under merger accounting principles, the assets and liabilities
of the subsidiaries are consolidated at book value in the Group
financial statements and the consolidated reserves of the Group
have been adjusted to reflect the statutory share capital of the
Company with the difference presented as the merger reserve.
These consolidated financial statements of the Group are the
first set of financial statements for the newly formed Group and
the prior period has been presented as a continuation of the former
Doc Topco Limited Group on a consistent basis as if the Group
reorganisation had taken place at the start of the earliest period
presented.
The prior period comparatives are those of the former Doc Topco
Limited Group since no substantive economic changes have
occurred.
2.2. Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No. 1606/2002 as it applies in the European Union.
The financial statements comply with IFRS as issued by the
International Accounting Standards Board (IASB). The Group's
consolidated financial statements have been prepared on a going
concern basis under the historical cost convention, except for
derivative financial instruments and pension scheme assets that
have been measured at fair value.
Certain amounts in the Statement of Profit or Loss and the
Balance Sheet have been grouped together for clarity, with their
breakdown being shown in the notes to the financial statements. The
distinction presented in the Balance Sheet between current and
non-current entries has been made on the basis of whether the
assets and liabilities fall due within one year or more.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.3. Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 March 2021
and 31 March 2020. Control is achieved when the Group has rights to
variable returns from its involvement with the investee and the
ability to use its power over the investee to affect the amount of
the investor's returns. Specifically, the Group controls an
investee if, and only if, the Group has:
-- power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
-- exposure, or rights, to variable returns from its involvement with the investee; and
-- the ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- the contractual arrangement(s) with the other vote holders of the investee;
-- rights arising from other contractual arrangements; and
-- the Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of Other Comprehensive Income
are attributed to the equity holders of the parent of the Group and
to the non-controlling interests, even if this results in the
non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies in line with the Group's accounting
policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises
the related assets (including goodwill), liabilities, non -
controlling interest and other components of equity, while any
resultant gain or loss is recognised in profit or loss. Any
investment retained is recognised at fair value.
2.4. Adoption of new and revised standards
The Group has applied the following standards, amendments and
interpretations for the first time for the annual reporting period
commencing 1 April 2020:
-- Interest Rate Benchmark Reform - Phase 1 (Amendments to IFRS 9, IAS 39 and IFRS 7).
-- Definition of a Business - (Amendments to IFRS 3).
-- Definition of Material - (Amendments to IAS 1 and IAS 8).
-- Amendments to References to the Conceptual Framework in IFRS Standards.
The amendments listed above did not have any impact on the
amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
New standards and interpretations not yet applied
At the date of authorisation of these financial statements,
there were no standards and interpretations relevant to the Group
that are in issue but not yet effective.
Other standards and interpretations or amendments thereto which
have been issued, but are not yet effective, are not expected to
have a material impact on the Group's consolidated financial
statements.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.5. Non-UK currency
The consolidated financial statements are presented in GBP,
which is the Group's functional and presentational currency. The
Group includes non-UK entities whose functional currencies are not
Sterling. On consolidation, the assets and liabilities of the Group
entities that have a functional currency different from the
presentation currency are translated into Sterling at the closing
rate at the date of that Balance Sheet. Income and expenses for
each Statement of Profit or Loss are translated at average exchange
rates for the period. Exchange differences are recognised in other
comprehensive income.
The functional currency of each company in the Group is that of
the primary economic environment in which the entity operates.
Monetary assets and liabilities denominated in non-UK currencies
are translated into GBP at the rates of exchange ruling at the
period end. Transactions in non-UK currencies are recorded at the
rate ruling at the date of the transaction. All differences are
taken to the Statement of Comprehensive Income.
2.6. Going concern
The financial statements have been prepared on a going concern
basis. The Directors' assessment is based on detailed trading and
cash flow forecasts, including forecast liquidity and covenant
compliance. The period of management's assessment is from the date
of the signing of the financial statements to 30 September 2022 and
the going concern basis is dependent on the Group maintaining
adequate levels of resources to operate during the period.
The Directors also considered the Group funding arrangements at
31 March 2021 with cash of GBP113.6m, available undrawn facilities
of GBP195.4m and bullet debt repayment of GBP300.0m not due until
2026.
The financial year to 31 March 2021 was dominated by Covid-19
and it is highly likely the majority of the going concern period
will also be impacted by Covid-19 albeit to a lesser extent but
reliant upon vaccination pace and vaccinations success in our core
markets. The impact of Covid-19 on the Group during the year to 31
March 2021 is described page 4 (Covid-19 - Resilience through the
pandemic).
The Directors prepare their detailed forecasts and plans for the
assessment period taking into account their experiences of trading
through the financial year to March 2021, including the impact of
Covid-19 on profitability, cashflow and covenant compliance.
Trading in the year also identified that payments from wholesale
customers remained strong throughout with no material increase in
bad debts. Our distribution centres (DC) remained operational
throughout the period while operating with appropriate social
distancing. In addition we opened a second DC in the US such that
both EMEA and Americas have dual functionality to pick orders from
either DC further reducing the risk of picking and dispatching
orders.
The Directors remain vigilant and continue to monitor the
effects of Covid-19 in all our core markets and across ecommerce,
retail and wholesale channels in these markets and will react
appropriately to further developments and associated risks.
As part of the going concern assessment, management have
modelled, and the Directors have reviewed a number of different
scenarios including a severe but plausible downside scenario
described in the Viability Statement set out on pages 18 to 20 with
no planned cost or working capital mitigation (including the
payment of dividends). Given the backdrop of Covid-19 and continued
global economic uncertainty the principal risk for modelling
purposes relates to the achievement of planned growth in revenue
and accordingly we have sensitised our revenue assumptions versus
our base case plan. To date we have had minimal experience of bad
debts, lower margins or restricted supply.
In the scenarios modelled, the Group continues to have
satisfactory liquidity and covenant headroom throughout the period
under review.
In addition, we have also modelled a reverse stress test where
we calculated the impact on revenue off setting covenant headroom
to zero and also zero liquidity (with methodology described in
viability statement) and assessed the likelihood of occurrence to
be remote.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.6. Going concern (continued)
Should a more extreme downside scenario occur then mitigating
actions could be taken including, (but not limited to) cancellation
of pay awards, reduction in planned marketing spend, potential
extension of payment terms with factories, and delay/cancellation
of IT related capex and reduced future dividend payments. A more
extreme downside scenario is not considered plausible.
In adopting the going concern basis for preparing the financial
statements, the Directors have considered the business activities
as well as the principal risks and uncertainties faced by the
business. Based on the Group trading and cashflow forecasts, the
Directors are satisfied that the Group will maintain an adequate
level of resources to be able to continue to operate during the
period under review.
2.7. Employee Benefit Trust (EBT)
Under accounting standard IFRS 10 Consolidated Financial
Statements, control for accounting purposes has a different test
threshold than under a legal basis. The Group operated an EBT for
the benefit of its employees and, during the year, sold shares at
market value to certain individuals. The EBT was consolidated on
the basis the parent company has control thus, the assets and
liabilities of the EBT were included on the Group Balance Sheet and
shares held by the EBT in the Company were presented as a deduction
from equity. The cash received was defined as restricted cash as
the Company had no access, recourse or direction of that cash but
was required to consolidate as restricted cash.
2.8. Revenue
The Group's revenue arises from the sale of products to
customers. Contracts with customers generally have one performance
obligation. The Group has concluded that the revenue from the sale
of products should be recognised at a point in time when control of
the goods is transferred to the customer, which is dependent on the
revenue channel. Revenue is recognised at the invoiced price less
any associated discounts.
Control is passed to the customer on the following basis under
each of the revenue channels as follows: -
-- ecommerce channel: upon receipt of the goods by the customer;
-- retail channel: upon completion of the transaction; and
-- wholesale channel: upon delivery of the goods or upon
dispatch to customer if the customer takes responsibility for
delivery.
The payment terms across each of these revenue channels varies.
The payments for retail are received at the transfer of control.
Ecommerce payments are mainly received in advance of transfer of
control by less than one week as there is a timing difference
between receipt of cash on order and receipt of goods by the
customer. Wholesale customers pay on terms generally between 30 and
60 days.
Provisions for returned goods are calculated based on future
expected levels of returns for each channel, assessed across a
variety of factors such as historical trends, economic factors and
other measures. The Group performed the five-step model on each of
these elements, identifying the contracts, the performance
obligations and the transaction price and then allocating this to
determine the timing of revenue recognition. The revenue channels
that have been separately assessed are as follows:
-- retail revenue;
-- ecommerce revenue, including delivery charge income; and
-- wholesale revenue.
Some contracts for the sale of goods provide customers with a
right of return and rebates. Under IFRS 15, this gives rise to
variable consideration.
Rights of return
When a contract provides a customer with a right to return,
under IFRS 15, the consideration is variable because the contract
allows the customer to return the product. The Group uses the
expected value method to estimate the goods that will be returned
and recognise a refund liability and an asset for the goods to be
recovered.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.8 Revenue (continued)
Rebates
Under IFRS 15, rebates give rise to variable consideration. To
estimate this the Group applies the 'most likely amount'
method.
2.9. Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received, and all attached
conditions will be complied with. When the grant relates to an
expense item, it is recognised as an expense on a systematic basis
over the periods of the related costs and for which it is intended
to compensate. When the grant relates to an asset, it is recognised
as income in equal amounts over the expected useful life of the
related asset.
During the year, the Group received government grants of GBP1.9m
of which GBPnil related to the UK. The Group received and
subsequently repaid the UK furlough monies of GBP1.3m in the early
part of the pandemic. The repayment is presented net of the grants
received.
2.10. Finance expenses
Finance expenses consist of interest payable on various forms of
debt and are recognised in the Statement of Profit or Loss under
the effective interest rate method.
2.11. Exceptional costs
Exceptional costs consist of material non-recurring items and
items arising outside of the normal trading of the Group.
2.12. Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax movement recognised. The tax currently payable is
based on taxable profit. Taxable profit differs from net profit as
reported in the Statement of Profit or Loss because it excludes
items of income or expense that are taxable or deductible in other
periods and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated by
using tax rates that have been enacted or substantively enacted by
the end of each reporting period.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the historical financial information and the corresponding tax
bases used in the computation of taxable profit and is accounted
for using the Balance Sheet liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction which affects neither the tax able profit nor the
accounting profit. Deferred tax liabilities are recognised for
taxable temporary differences arising in investments in
subsidiaries except where the Group is able to control the reversal
of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. The carrying
amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply to the
period when the asset is realised, or the liability is settled.
Deferred tax is charged or credited in the Statement of Profit or
Loss, except when it relates to items credited or charged directly
to equity, in which case the deferred tax is also dealt with in
equity. Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income
taxes levied by the same taxation authority, and the Group intends
to settle its current tax assets and liabilities on a net
basis.
2.13. Dividends
Final dividends are recorded in the financial statements in the
period in which they are approved by the Company's shareholders.
Interim dividends are recorded in the period in which they are
approved and paid.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.14. Intangible assets
Goodwill
Business combinations are accounted for by applying the
acquisition method. Goodwill acquired represents the excess of the
fair value of the consideration over the fair value of the
identifiable net assets acquired.
After initial recognition, positive goodwill is measured at cost
less any accumulated impairment losses. At the date of acquisition,
the goodwill is allocated to cash generating units, usually at
business segment level or statutory company level as the case may
be, for the purpose of impairment testing and is tested at least
annually for impairment. If any such indication exists, the assets'
recoverable amount is estimated. For good will, the recoverable
amount is estimated at each year-end date and whenever there is an
indication of impairment. On subsequent disposal or termination of
a business acquired, the profit or loss on termination is
calculated after charging the carrying value of any related
goodwill. Negative goodwill is recognised directly in the Statement
of Profit or Loss.
Software
Software is carried at cost less accumulated amortisation and
any provision for impairment. Cost includes the original purchase
price of the asset and the development costs incurred attributable
to bringing the asset to its working condition for intended use.
Additional costs in relation to the software are capitalised only
so far as they fulfil the criteria of being separable intangible
assets. These assets are considered to have finite useful lives and
are amortised on a straight- line basis over the expected useful
economic life of each of the assets, which is considered to be
three to seven years. The carrying value of intangible assets is
reviewed for impairment whenever events or changes in circumstances
indicate the carrying value may not be recoverable.
2.15. Property, plant and equipment
Property, plant and equipment is carried at cost less
accumulated depreciation and provision for impairment. Depreciation
is calculated to write down the cost of the assets less estimated
residual value over its expected useful life as follows:
- Freehold properties 2% straight line method
- Leasehold land and buildings 2% straight line method or over
the life of the lease
- Plant and machinery 15% straight line method
- Office and computer equipment 20% and 331/3% straight line
method
Any gain or loss arising on the de-recognition of the asset
(calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is included in the Statement of
Profit or Loss in the period that the asset is derecognised.
2.16. Impairment
The carrying amounts of the Group's assets are reviewed at each
year-end date to determine whether there is any indication of
impairment. If any such indication exists, the assets' recoverable
amount is estimated. For goodwill and intangible assets that have
an indefinite useful life and intangible assets that are not yet
available for use, the recoverable amount is estimated at each
year-end date and whenever there is an indication of impairment. An
impairment loss is recognised whenever the carrying amount of an
asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the Statement of Profit or Loss
in those expense categories consistent with the function of the
impaired asset.
2.17. Lease accounting
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach
for all leases, except for short -term leases and leases of
low-value assets. As part of the measurement approach the discount
rate applied varies by both property type and geography. The Group
recognises lease liabilities to make lease payments and
right-of-use assets representing the right to use the underlying
assets.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
i) Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over the shorter of
the lease term and the estimated useful lives of the assets, as
follows:
-- Leasehold buildings - 3 to 15 years
If ownership of the leased asset transfers to the Group at the
end of the lease term or the cost reflects the exercise of a
purchase option, depreciation is calculated using the estimated
useful life of the asset. The right-of-use assets are also subject
to impairment. Refer to the accounting policies in the Impairment
of non-financial assets section.
ii) Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option to
terminate.
Variable lease payments that do not depend on an index or a rate
are recognised as expenses (unless they are incurred to produce
inventories) in the period in which the event or condition that
triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the interest charge and reduced
for the lease payments made. In addition, the carrying amount of
lease liabilities is remeasured if there is a modification, a
change in the lease term, a change in the lease payments (e.g.
changes to future payments resulting from a change in an index or
rate used to determine such lease payments) or a change in the
assessment of an option to purchase the underlying asset.
The Group's lease liabilities are included in interest-bearing
loans and borrowings (note 18).
iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e. those leases
that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the
lease of low-value assets recognition exemption to leases of office
equipment that are considered to be low value. Lease payments on
short-term leases and leases of low-value assets are recognised as
an expense on a straight-line basis over the lease term.
iv) Covid-19-related rent concessions
On 28 May 2020, the IASB issued Covid-19-Related Rent
Concessions - Amendment to IFRS 16 Leases. The amendments provide
an optional relief to lessees from applying IFRS 16 guidance on
lease modification accounting for rent concessions arising as a
direct consequence of the Covid-19 pandemic.
The Group has elected to apply the practical expedient which
allows accounts for any qualifying change in lease payments
resulting from the Covid-19-related rent concession to be treated
the same way it would account for the change under IFRS 16 if the
change were not a lease modification.
During the year ended 31 March 2021, the Group received GBP0.7m
of rent concessions from landlords, which have been offset against
operating expenses.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.18. Inventories
Inventories are stated at the lower of cost and net realisable
value. Inventories are valued at weighted average cost, including
freight to warehouse and duty. Net realisable value is based on
estimated selling price less any costs expected to be incurred to
completion or disposal.
2.19. Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the Consolidated Balance Sheet if there
is a currently enforceable legal right to offset the recognised
amounts and there is an intention to settle on a net basis, to
realise the assets, and to settle the liabilities
simultaneously.
2.20. Financial assets
Trade receivables are measured at amortised cost.
Trade and other receivables
Trade receivables are classified under IFRS 9 and measured at
amortised cost using the effective interest rate method. The Group
recognises an allowance for expected credit losses (ECLs) for all
debt instruments not held at FVPL. The most significant financial
assets of the Group are its trade receivables, which are referred
to as "customer and other receivables". ECLs are based on the
difference between the contractual cash flows due in accordance
with the contract and all the cash flows that the Group expects to
receive, discounted at an approximation of the original effective
interest rate.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on demand
deposits, and other short -term, highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
2.21. Financial liabilities
The Company classifies all of its financial liabilities as
liabilities at amortised cost.
Initial recognition
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities. Equity instruments issued by the Group are
recorded at the proceeds received, net of direct issue costs.
Details of the Group's equity are included in note 23.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the Statement of
Profit or Loss.
Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the course of ordinary business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities. Trade payables are recognised
initially at fair value and subsequently held at amortised cost
using the effective interest rate method.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.22. Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred, and subsequently carried at amortised
cost using the effective interest rate method so that any
difference between the proceeds (net of transaction costs) and the
redemption value is recognised in the Statement of Profit or Loss
over the period of the borrowings. Details of the Group's
borrowings are included in note 18.
Borrowing costs
The Group expenses borrowing costs in the period the costs are
incurred. Where borrowing costs are attributable to the
acquisition, construction or production of a qualifying asset, such
costs are capitalised as part of the specific asset and amortised
over the estimated useful life of the asset. Details of the Group's
borrowings are included in note 18.
2.23. Pension arrangements
The Group provides pension benefits which include both defined
benefit and defined contribution arrangements.
Defined contribution pension schemes
For defined contribution schemes the amount charged to the
Statement of Profit or Loss represents the contributions payable to
the plans in the accounting period. Differences between
contributions payable in the period and contributions actually paid
are shown as either accruals or prepayments in the Balance
Sheet.
Defined benefit pension scheme
The Group operates a defined benefit pension scheme, which
requires contributions to be made to separately administered funds.
The UK defined benefit scheme was closed to new members on 6 April
2002, from which time membership of a defined contribution plan was
available. It was then closed to all future accrual for all
existing members on 31 January 2006. No asset is recognised in the
Balance Sheet in respect of defined benefit pension plans due to
the uncertainty over future obligations. The defined benefit
obligation is calculated annually by independent actuaries using
the projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high -quality
corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension obligation. The
value of a net pension benefit asset is restricted to the sum of
any unrecognised past service costs and the present value of any
amount the Group expects to recover by way of refunds from the plan
or reductions in future contributions. Past-service costs are
recognised immediately in income. The net interest cost is
calculated by applying the discount rate to the net balance of the
defined benefit obligation and the fair value of plan assets. This
cost is included in employee benefit expense in the Statement of
Profit or Loss. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to equity in other comprehensive income in the period in
which they arise.
2.24. Derivative financial instruments and hedging activities
The Group uses derivative financial instruments, foreign
exchange forward contracts, to hedge its non-UK currency risks.
Such derivative financial instruments are initially recognised at
fair value on the date a derivative contract is entered into and
are subsequently re-measured at fair value. The method of
recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged.
Assets and liabilities held at fair value are categorised into
levels that have been defined as follows:
1. quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
2. inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2). The fair value of hedges are calculated using quoted prices in
relevant exchanges at the end of the reporting period. Where such
prices are not available, the Group uses valuation models to
determine the fair values based on relevant factors, including
trade price quotations, time value and volatility factors and
dealer quotations for similar currencies traded in different
markets and geographical areas, existing at the end of the
reporting period; and
3. inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
2.24. Derivative financial instruments and hedging activities (continued)
Derivative financial instruments consist of foreign exchange
forward contracts, which are categorised within Level 2.
Trading derivatives are classified as a current asset or
liability. The full fair value of a hedging derivative is
classified as a non-current asset or liability if the remaining
maturity of the hedged item is more than 12 months and as a current
asset or liability if the maturity of the hedged item is less than
12 months. Foreign exchange forward contracts are recorded as a
current asset and liability.
2.25. Share-based payments
The Group provides benefits to certain employees (including
Executive Directors) in the form of a share-based payment
transactions, whereby employees render services as consideration in
exchange for equity instruments ("equity-settled
transactions").
The cost of equity-settled transactions is measured by reference
to the fair value of the equity instruments at the date on which
they are granted and is recognised as an expense over the vesting
period, which ends on the date the relevant employee becomes fully
entitled to the award
The fair value is calculated using an appropriate option pricing
model and takes into account the impact of any market performance
conditions. The impact of non-market performance conditions is not
considered in determining the fair value at the date of grant.
Vesting conditions which relate to non-market conditions are
allowed for in the assumptions used for the number of options
expected to vest. The level of vesting is reviewed at each balance
sheet date and the charge adjusted to reflect actual and estimated
levels of vesting.
The cost of share-based payment transactions is recognised as an
expense over the vesting period of the awards, with a corresponding
increase in equity.
Further details of share-based awards granted in the year can be
found in notes 25 and 26.
2.26. Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
2.27. Alternative Performance Measures (APMs)
Management exercises judgement in determining the adjustments to
apply to IFRS measurements in order to derive suitable APMs. As set
out on pages 75 to 76 of the glossary, APMs are used as management
believes these measures provide additional useful information on
the underlying trends, performance and position of the Group. These
measures are used for performance analysis. The APMs are not
defined by IFRS and therefore may not be directly comparable with
other companies' APMs. These measures are not intended to be a
substitute for, or superior to, IFRS measurements.
2.28. Significant judgements and estimates
The preparation of the Group's financial statements in
conforming with IFRS requires management to make judgements,
estimates and assumptions that effect the application of policies
and reported amounts in the financial statements. These judgements
and estimates are based on management's best knowledge of the
relevant facts and circumstances. However, the nature of estimation
means that actual outcomes could differ from those estimates.
Information about such judgements and estimation is contained in
the accounting policies and/ or notes to the financial statements
and the key areas are summarised below:
Key judgements
The following judgements have had the most significant effect on
amounts recognised in the financial statements:
Provisions for expected credit losses of trade receivables
Expected credit losses are calculated based on a combination of
factors, including the ageing of the receivable balances,
historical experience of groupings customer segments that have
similar loss patterns, current credit status of the customer and
forward-looking information such as current economic
conditions.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2.28. Significant judgements and estimates (continued)
Key judgements (continued)
Determining the lease term of contracts with renewal and
termination options - Group as lessee
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
The Group has several lease contracts that include extension and
termination options. The Group applies judgement in evaluating
whether it is reasonably certain whether or not to exercise the
option to renew or terminate the lease. That is, it considers all
relevant factors that create an economic incentive for it to
exercise either the renewal or termination. After the commencement
date, the Group reassesses the lease term if there is a significant
event or change in circumstances that is within its control and
affects its ability to exercise or not to exercise the option to
renew or to terminate (e.g. construction of significant leasehold
improvements or significant customisation to the leased asset).
The Group included the renewal period as part of the lease term
for leases of plant and machinery with shorter non- cancellable
periods (i.e. three to five years). The Group typically exercises
its option to renew for these leases because there will be a
significant negative effect on production if a replacement asset is
not readily available. The renewal periods for leases of leasehold
property with longer non-cancellable periods (i.e. 10 to 15 years)
are not included as part of the lease term as these are not
reasonably certain to be exercised. Furthermore, the periods
covered by termination options are included as part of the lease
term only when they are reasonably certain not to be exercised.
Inventory provisions
Inventory provisioning requires significant judgement on which
inventory lines should be class ed as obsolete. Inventory age,
historic sales patterns and trading forecasts are used when
classifying inventory lines to be provided against.
Corporation tax
There is significant judgement involved in determining the
Group's corporation tax provision. There are transactions and
calculations for which the ultimate tax determination is uncertain.
The Group recognises liabilities for anticipated tax issues based
on estimates of whether additional taxes will be due. Where the
final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the
current and deferred tax assets and liabilities in the period in
which the determination is made. Management judgement is required
to determine the amount of deferred tax assets that can be
recognised, based upon the likely timing and level of future
taxable profits together with an assessment of the effect of future
tax planning strategies (see notes 9 and 22).
Key sources of estimation uncertainty and assumptions
The following estimates are dependent upon assumptions which
could change in the next financial year and have a material effect
on the carrying amount of assets and liabilities recognised at the
Balance Sheet date:
Carrying value of non-financial assets
The Group assesses at each reporting date, whether there is an
indication that an asset may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the
Group estimates the asset's recoverable amount. An asset's
recoverable amount is the higher of an asset's or cash generating
unit (CGU) fair value less costs of disposal and its value in use.
The recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When
the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre -tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. In determining fair value less
costs of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly traded
companies or other available fair value indicators.
Determining the carrying value of an asset or CGU requires the
use of estimates of future cash flows and discount rates in order
to calculate the present value of the cash flows. For details see
notes 12 and 13.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
2. Accounting policies (continued)
Key sources of estimation uncertainty and assumptions
(continued)
Retirement benefit liabilities
Determining the fair value of the defined benefit pension
scheme, which relates to the pension of the Group, requires
assumptions to be made by management and the Group's independent
qualified actuary around the actuarial valuations of the scheme's
assets and liabilities. For details see note 29.
Leases - estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in
the lease; therefore, it uses its incremental borrowing rate (IBR)
to measure lease liabilities. The IBR is the rate of interest that
the Group would have to pay to borrow over a similar term, and with
a similar security, the funds necessary to obtain an asset of a
similar value to the right- of-use asset in a similar economic
environment. The IBR therefore reflects what the Group "would have
to pay", which requires estimation when no observable rates are
available (such as for subsidiaries that do not enter into
financing transactions) or when they need to be adjusted to reflect
the terms and conditions of the lease (for example, when leases are
not in the subsidiary's functional currency). The Group estimates
the IBR using observable inputs (such as market interest rates)
when available and is required to make certain entity-specific
estimates (such as the subsidiary's stand-alone credit rating). The
IBR is reassessed when there is a reassessment of the lease
liability or a lease modification.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
3. Segmental Analysis
IFRS 8 'Operating Segments' requires operating segments to be
determined by the Group's internal reporting to the Chief Operating
Decision Maker (CODM). The CODM has been determined to be both the
CEO and CFO, who receive information on this basis of the Group's
revenue in key geographical regions based on the Group's management
and internal reporting structure. The CODM assesses the performance
of geographical segments based on a measure of revenue and
EBITDA(1) . To increase transparency the Group also includes
additional voluntary disclosure analysis of global revenue within
different operating channels. Included within EMEA is revenue
attributable to Airwair International Limited, the principal UK
trading subsidiary of Dr. Martens plc, with revenue from wholesale
and export customers, and Americas revenue is fully attributable to
USA, including export revenue to certain South America markets, and
APAC revenue is mainly attributable to China and Japan.
2021 2020
GBPm GBPm
Revenue by geographical market
EMEA 335.6 287.9
Americas 295.8 252.2
APAC 141.6 132.1
Total revenue 773.0 672.2
2021 2020
GBPm GBPm
EBITDA by geographical market
EMEA 115.3 92.4
Americas 91.9 75.4
APAC 39.7 35.5
Support costs (22.7) (18.8)
EBITDA 224.2 184.5
Exceptional items (note 4) (80.5) (12.0)
EBITDA (post exceptional items) 143.7 172.5
Depreciation and amortisation (13.5) (11.6)
Depreciation of right-of-use assets(1) (21.5) (17.9)
Foreign exchange gains/(losses) 3.8 (0.5)
Depreciation, amortisation & foreign exchange
gains/(losses) (31.2) (30.0)
Operating profit 112.5 142.5
1 Includes impairment charge of GBP1.1m recognised
on right-o f-us e assets in relation to two stores
(see note 13).
2021 2020
GBPm GBPm
Revenue by channel
Ecommerce 235.4 136.4
Retail 99.7 165.2
Total DTC revenue 335.1 301.6
Wholesale 437.9 370.6
Total revenue 773.0 672.2
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
3. Segmental Analysis (continued)
2021 2020
GBPm GBPm
Non-current assets
EMEA(1) 85.5 80.4
Americas 34.6 36.4
APAC 10.0 14.4
Group(2) 240.7 240.7
Allocated non-current assets 370.8 371.9
Deferred tax (unallocated) 7.2 7.4
Total non-current assets 378.0 379.3
1 Included in the EMEA non-current assets
is GBP52.0m (FY20: GBP55.9m) in relation to
the UK market.
2 Included in the Gro up non-current assets
is GBP240.7m (FY20: GBP240.7m) in relation
to goodwill.
4. Expenses analysis
Operating profit is stated after charging: Notes 2021 2020
GBPm GBPm
Selling and administrative expenses
Staff costs 6 109.6 99.8
Operating costs 136.7 117.2
246.3 217.0
Amortisation 12 4.5 3.2
Depreciation 13 9.0 8.4
Depreciation of right-of-use assets 13 21.5 17.9
Foreign exchange (gains)/losses (3.8) 0.5
Depreciation, amortisation & foreign exchange
(gains)/losses 31.2 30.0
Exceptional items 80.5 12.0
111.7 42.0
Total selling and administrative expenses 358.0 259.0
Exceptional costs in the year were GBP80.5m (FY20: GBP12.0m) and
all related to the IPO which took place on 29 January 2021. The
main cost was in relation to an all employee "IPO bonus" of GBP
49.1m which was in part funded by shares held by EBT (and sold at
IPO date) and also cash held by the EBT totalling GBP42.0m. Also
included within this charge (of GBP49.1m) was an employer's
national insurance charge in relation to the cash payment of
GBP7.1m. In addition, the Group incurred an IFRS2 share based
payment charge in relation to the IPO of GBP10.8m (which was
non-cash and further described in note 7). The balance of GBP20.6m
was advisory fees and charges including an element of unclaimable
VAT. In the prior year exceptionals of GBP12.0m included consulting
fees in relation to the Company' s exploration and diligence
associated with an exercise to review strategic options of GBP7.3m,
charge in relation to the implementation of a new IT system
(Microsoft Dynamics 365 in America's region) of GBP2.2m, costs for
legal obligations and litigation of GBP1.9m with the balance mainly
legal costs.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
5. Auditor's remuneration
2021 2020
GBPm GBPm
Fees payable to the Company's auditor for
the audit of the parent 0.5 0.3
company and consolidated financial statements
Fees payable to the Company's auditor for
other services:
The audit of the Company's subsidiaries 0.6 0.6
Other services 0.1 0.1
1.2 1.0
Fees payable to the Company's auditor for other services:
Other services - exceptional items related to the IPO 2.4 -
3.6 1.0
6. Staff costs
The monthly number of employees (including Directors) employed
by the Group during the year was:
FTE(1) Average(2)
As at 31 March 2021 For year ended 31 March 2021
2021 2020 2021 2020
No. No. No. No.
EMEA 703 607 1,125 1,032
Americas 446 397 575 548
APAC 356 268 382 371
Global support functions 392 334 351 337
1,897 1,606 2,433 2,288
(1) FTE (Full Time Equivalent) is calculated by dividing the
employee's contracted hours by the Company's standard full time
contract hours.
(2) Average is the average actual employees of the Group during
the year.
The aggregate payroll costs were as follows: 2021 2020
GBPm GBPm
Wages and salaries 94.1 87.5
Social security costs 8.0 6.7
Share-based payments - LTIPs 0.7 -
Pension costs 5.8 4.8
Other post-employment benefits 1.0 0.8
109.6 99.8
Exceptionals:
IPO bonus for all employees 49.1 -
IFRS 2 accounting (non-cash) - see note 7 10.8 -
169.5 99.8
7. Directors' remuneration
The remuneration of Executive Directors of
the Company is set out below: 2021 2020
GBPm GBPm
Salaries and benefits 2.5 1.9
Pension costs 0.1 -
2.6 1.9
Exceptionals:
IFRS2 (non-cash) 10.8 -
13.4 1.9
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
7. Directors' remuneration (continued)
The Group listed on the London Stock Exchange on 29 January
2021. Prior to admission it was a private company which operated a
customary private equity remuneration model and post listing a
"listed" remuneration policy and practice were implemented. The
remuneration policy post 29 January 2021 (and currently applicable)
is fully described in the Remuneration Report.
The figures in the table above represent a full 12 month period
to 31 March 2021 and are a mixture of two distinct ownership
structures and remuneration practices, which can be analysed
further as follows:
2021
Pre IPO(1) Post IPO(2) Total
GBPm GBPm GBPm
Salaries and benefits(3) 2.3 0.2 2.5
Pension costs 0.1 - 0.1
2.4 0.2 2.6
Exceptionals:
IFRS2 (non-cash)(4) 10.8 - 10.8
13.2 0.2 13.4
(1) From 1 April 2020 to 28 January 2021.
(2) From 29 January 2021 to 3(t) March 2021.
(3) Salaries and benefits are inclusive of normal bonus payments
paid in the financial year to March 2021. The Remuneration Report
is inclusive of the bonus accrual for the two month period post IPO
of GBP 0.8m for performance in FY21 which is not included in this
table.
(4) In relation to the period prior to admission and under a
private equity remuneration structure the Company operated an EBT
to warehouse shares for the benefit of employees. On admission the
shares in the EBT were sold (as described on page 185 of the
Prospectus) and in recognition of the contribution made by all
employees of the Group to the success and continuing progress made
by the business, and conditional on admission, the EBT distributed
the net proceeds of shares it held together with cash that it held
to make a cash payment to each employee of the Group. As part of
this, following legal advice, immediately prior to admission,
shares were transferred to the Executive Directors and, following
accounting rules, these shares fell under IFRS 2 accounting
requirements resulting in a non-cash accounting charge of GBP10.8m
which, being in relation to the transaction, has been charged to
exceptional items.
The remuneration of the highest paid Director was:
2021 2020
GBPm GBPm
Salaries and benefits 1.3 1.0
Pension costs - -
1.3 1.0
Exceptionals:
IFRS2 (non-cash) 6.2 -
7.5 1.0
2021
Pre IPO(1) Post IPO(2) Total
GBPm GBPm GBPm
Salaries and benefits(3) 1.2 0.1 1.3
Pension costs - - -
1.2 0.1 1.3
Exceptionals:
IFRS2 (non-cash)(4) 6.2 - 6.2
7.4 0.1 7.5
(1) From 1 April 2020 to 28 January 2021.
(2) From 29 January 2021 to 31 March 2021.
(3) Salaries and benefits are inclusive of normal bonus payments
paid in the financial year to March 2021. The Remuneration Report
is inclusive of the bonus accrual for the two month period post IPO
of GBP0.2m for performance in FY21 which is not included in this
table.
(4) Refer to note 4 above.
The highest paid Director is not entitled to receive benefits
under the defined benefits pension scheme. No retirement benefits
are accruing to Directors under a defined contribution scheme
(FY20: GBPnil). Further details on Directors' remuneration can be
found in the Remuneration Report.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
8. Finance expense
2021 2020
GBPm GBPm
Bank debt - net (cash) 6.5 5.3
Preference interest (non-cash) 28.5 31.5
Interest on lease liabilities (non-cash) 3.7 3.9
Amortisation loan issue costs - New
funding (non-cash) 0.2 -
Amortisation loan issue costs - Old
funding (non-cash) 2.7 0.8
Total financing expense 41.6 41.5
On 29 January 2021 the Company refinanced its operations with
new bank debt of GBP300.0m and a working capital facility of
GBP200.0m. The term debt is for five years with bullet repayment on
2 February 2026 and interest cost of
GBP1.6m. The funds were used to repay in full all legacy,
pre-IPO financing arrangements including previous bank funding
arrangements and all preference shares.
9. Taxation
2021 2020
GBPm GBPm
Current tax
Current tax on UK profit for the year 29.6 21.4
Adjustment in respect of prior years (1.0) -
Current tax on overseas profits for the
year 6.4 6.2
35.0 27.6
Deferred tax
Origination and reversal of temporary differences (1.0) (1.5)
Adjustment in respect of prior years 1.2 0.1
0.2 (1.4)
Total tax expense in the Statement of Profit
or Loss 35.2 26.2
Other Comprehensive Income
Current tax on UK profit for the year - -
Total tax expense in the Statement of Comprehensive
Income 35.2 26.2
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
9. Taxation (continued)
2021 2020
GBPm GBPm
Factors affecting the tax expense for the year:
Profit before tax 70.9 101.0
Profit before tax multiplied by standard rate
of UK corporation tax of 19% (FY20: 19%) 13.5 19.2
Effects of:
Non-deductible expenses(1) 21.2 6.0
Temporary differences not provided for (0.2) (0.3)
Adjustments in respect of prior periods 0.2 0.1
Effect of change in tax rate (0.2) 0.4
Intangibles capitalised allowable for tax purposes (0.6) -
Non-UK tax 1.4 0.9
Other adjustments (0.1) (0.1)
Total tax expense 35.2 26.2
(1) No n-deductible expenses relate to the dis allowable amount
of the preference share interest of GBP28.5m and exceptional items
of GBP80.5m.
The tax charge for the year was GBP35.2m with an effective tax
rate of 49.6% which is higher than the UK corporate tax of 19.0%
and mainly due to non-deductibility of certain expenses and also
geographical mix of profits at different tax rates.
Factors that may affect future tax charges
On 3 March 2021, the 2021 UK Budget announced an increase to the
corporation tax rate from 19% to 25% effective from April 2023.
This was substantively enacted on 24 May 2021.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
10. Earnings per share
The calculation of basic earnings per share is based on the
profit attributable to ordinary shareholders of the parent company
divided by the weighted average number of ordinary shares in issue
during the year.
Diluted earnings per share is calculated by dividing the profit
for the year attributable to ordinary equity holders of the parent
company by the weighted average number of ordinary shares in issue
during the year plus the weighted average number of ordinary shares
that would be issued on the conversion of all dilutive potential
ordinary shares into ordinary shares.
2021 2020
GBPm GBPm
Profit after tax 35.7 74.8
Exceptional items (note 4) 80.5 12.0
Tax on exceptional items - (1.0)
Adjusted(1) profit after tax 116.2 85.8
2021 2020
No. No.
(Restated(2)
)
Weighted average number of shares for calculating
basic earnings per share (millions) 1,000.0 1,000.0
Potentially dilutive share awards 0.4 -
Weighted average number of shares for calculating
diluted earnings per share (millions) 1,000.4 1,000.0
2021 2020
(Restated(2)
)
Earnings per share
Basic earnings per share 3.6p 7.5p
Diluted earnings per share 3.6p 7.5p
Adjusted(1) earnings per share
Adjusted(1) basic earnings per share 11.6p 8.6p
Adjusted(1) diluted earnings per share 11.6p 8.6p
(1) Adjusted earnings per share is calculated on adjusted profit
after tax, being profit after tax before exceptional items.
(2) Following a reorganisation of the Group on IPO, the Group
has applied IAS 33; earnings per share have been restated to
reflect the sub-division of shares in the year ended 31 March
2021.
11. Dividends
The Company has not declared nor paid a dividend for the
year.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
12. Intangible fixed assets
Software Goodwill Total
GBPm GBPm GBPm
Cost
At 1 April 2019 16.6 240.7 257.3
Additions 8.4 - 8.4
Foreign exchange 0.2 - 0.2
At 31 March 2020 25.2 240.7 265.9
Additions 8.2 - 8.2
Disposals (0.9) - (0.9)
Reclassifications to tangible
fixed assets 0.3 - 0.3
Foreign exchange (0.5) - (0.5)
At 31 March 2021 32.3 240.7 273.0
Accumulated amortisation
At 1 April 2019 5.5 - 5.5
Charge for the year 3.2 - 3.2
At 31 March 2020 8.7 - 8.7
Charge for the year 4.5 - 4.5
Disposals (0.9) - (0.9)
Reclassifications to tangible
fixed assets 0.2 - 0.2
Foreign exchange (0.3) - (0.3)
At 31 March 2021 12.2 - 12.2
Net book value
At 31 March 2021 20.1 240.7 260.8
At 31 March 2020 16.5 240.7 257.2
Impairment assessment
The Group tests whether goodwill has suffered any impairment on
an annual basis. The recoverable amount of a cash generating unit
(CGU) is determined based on value-in-use calculations which
requires the use of assumptions. The calculations use cash flow
forecasts based on financial budgets approved by management
covering a five-year period. Where the recoverable amount is less
than the carrying value, an impairment results.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
12. Intangible fixed assets (continued)
For the purposes of carrying out impairment tests, the Group's
total goodwill has been allocated to a number of CGUs and each of
these CGUs has been separately assessed and tested. The CGUs were
agreed by the Directors as the geographical regions in which the
Group operates. These regions are the lowest level at which
goodwill is monitored and represent identifiable operating
segments.
The aggregate carrying amount of goodwill allocated
to each CGU was as follows:
2021 2020
GBPm 66.6 GBPm
EMEA 66.6
Americas 114.1 114.1
APAC 60.0 60.0
240.7 240.7
All CGUs were tested for impairment. No charge was made in the
current year (FY20: GBPnil).
Significant judgements, assumptions and estimates
All CGUs' recoverable amounts are measured using value in use.
At each period end, detailed forecasts for the following five years
have been used, which are based on approved annual budgets and
strategic projections representing the best estimate of future
performance. Management considers forecasting over this period to
appropriately reflect the business cycle of the CGUs.
There have been no changes to the composition of the Group's
CGUs during the period.
In determining the value in use of CGUs 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 past experience and are consistent with
relevant external sources of information.
Operating cash flows
The main assumptions within forecast operating cash flow include
the achievement of future growth in ecommerce, retail and wholesale
channels, sales prices and volumes (including reference to specific
customer relationships and product lines), raw material input
costs, the cost structure of each CGU, the impact of non-UK
currency rates upon selling price and cost relationships and the
levels of capital expenditure required to support each sales
channel.
Pre-tax risk adjusted discount rates
This rate reflects the specific risks relating to each segment
and considers the countries and regions they operate in. This has
been considered and for the Group has been calculated to be
approximately 9%. Pre-tax risk adjusted discount rates are derived
from risk-free rates based upon long-term government bonds in the
territories and averaged for the Group.
Long-term growth rates
To forecast beyond the detailed cash flows into perpetuity, a
long-term average growth rate has been used. In each case rates up
to 1.4% have been used, in line with geographical forecasts
included within industry reports.
Goodwill sensitivity analysis
The results of the Group's impairment tests are dependent upon
estimates and judgements made by management, particularly in
relation to the key assumptions described above. Sensitivity
analysis to potential changes in key assumptions has therefore been
reviewed and there are no reasonably possible changes to key
assumptions that would cause the carrying amount for any CGU to
exceed its recoverable amount.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
13. Property, plant and equipment
Freehold Leasehold Plant Office Motor vehicles
property and equipment GBPm Total
GBPm improvements machinery GBPm GBPm
Cost or valuation GBPm GBPm
At 1 April 2019 6.9 34.3 2.4 3.9 0.1 47.6
Additions - 10.4 1.1 2.0 - 13.5
Disposals(1) (0.2) (2.8) (0.1) (0.7) - (3.8)
Foreign exchange 0.2 1.7 0.1 - - 2.0
At 31 March 2020 6.9 43.6 3.5 5.2 0.1 59.3
Additions 0.4 7.9 0.7 1.4 - 10.4
Disposals(2) - (0.5) - (0.9) - (1.4)
Reclassifications
between
asset class - (0.5) - 0.5 - -
Reclassifications
to
intangible fixed
assets - (0.3) - - - (0.3)
Foreign exchange (0.5) (2.6) - (0.1) - (3.2)
At 31 March 2021 6.8 47.6 4.2 6.1 0.1 64.8
Depreciation and
impairment
At 1 April 2019 0.8 16.0 1.2 2.6 0.1 20.7
Charge for the
year 0.1 5.7 0.5 1.5 - 7.8
Impairment(3) - 0.6 - - - 0.6
Eliminated on
disposal(1) (0.2) (2.8) (0.1) (0.7) - (3.8)
Foreign exchange 0.2 0.9 - 0.2 - 1.3
At 31 March 2020 0.9 20.4 1.6 3.6 0.1 26.6
Charge for the
year 0.1 7.0 0.7 1.2 - 9.0
Eliminated on
disposal(2) - (0.5) - (0.9) - (1.4)
Reclassifications
between
asset class - (0.4) - 0.4 - -
Reclassifications
to
intangible fixed
assets - (0.2) - - - (0.2)
Foreign exchange (0.3) (1.4) - (0.1) - (1.8)
At 31 March 2021 0.7 24.9 2.3 4.2 0.1 32.2
Net book value
At 31 March 2021 6.1 22.7 1.9 1.9 - 32.6
At 31 March 2020 6.0 23.2 1.9 1.6 - 32.7
1 Disposals represent assets that had a GBPnil net book value
and were therefore written off during the year.
2 The Group carried out a physical verification of assets during
the year and identified assets with a total net book value that
were no longer in physical existence but remained on the assets
register. These assets were therefore written off during the year
to GBPnil net book value.
3 An impairment exists when the carrying value of an asset
exceeds its recoverable amount, which is the higher of its fair
value less costs of disposal and its value in use. During the year
an impairment of GBPnil (FY20: GBP0.6m) was recognised for certain
re ta il store assets where the
carrying amount of the asset exceeded its value in use over the
next five years. The remaining value in use for the above impaired
assets was deemed to be GBPnil (FY20: GBPnil).
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
13. Property, plant and equipment (continued)
Set out below are the carrying amounts of right-of-use assets
recognised and the movements during the year:
Leasehold
GBPm
Cost or valuation
At 1 April 2019 -
Adoption of IFRS 16 80.6
Additions 18.8
Modification of leases(1) 0.5
At 31 March 2020 99.9
Additions 23.0
Modification of leases(1) (2.2)
Foreign exchange (3.9)
At 31 March 2021 116.8
Depreciation and impairment
At 1 April 2019
Charge for the year 17.9
At 31 March 2020 17.9
Charge for the year 20.4
Impairment(2) 1.1
At 31 March 2021 39.4
Net book value
At 31 March 2021 77.4
At 31 March 2020 82.0
(1) Lease modifications in the year relate to measurement
adjustments for rent reviews and stores that have
exercised lease breaks.
(2) During the year, impairment charges of GBP1.1m were
recognised on right-of-use assets in relation to two stores which
have future cash flows lower than the value of the right-of-use
assets and one closed store that the Group still held a leas e o n
(FY20: GBPnil).
Impairment of property, plant and equipment and right-of-use
assets
For impairment testing purposes, the Group has determined that
each retail store is a separate CGU. Each CGU is tested for
impairment at the balance sheet date if any indicators of
impairment have been identified.
Significant judgements, assumptions and estimates
All CGUs' recoverable amounts are measured using value in use.
At each reporting period end, detailed forecasts for the following
five years have been used, which are based on approved annual
budgets and strategic projections representing the best estimate of
future performance. Management considers forecasting over this
period to appropriately reflect the business cycle of the CGUs.
There have been no changes to the composition of the Group's
CGUs during the periods.
In determining the value in use of CGUs 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 past experience and are consistent with
relevant external sources of information.
Operating cash flows
The main assumptions within forecast operating cash flow include
the achievement of future growth in the retail channel, sales
prices and volumes, raw material input costs, the cost structure of
each CGU, the impact of non-UK currency rates upon selling price
and cost relationships and the levels of maintenance capital
expenditure required to support each sales channel.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
13. Property, plant and equipment (continued)
Pre-tax risk adjusted discount rates
This rate reflects the specific risks relating to each segment
and considers the countries and regions they operate in. This has
been considered and for the Group has been calculated to be
approximately 9% for all periods. Pre-tax risk adjusted discount
rates are derived from risk-free rates based upon long-term
government bonds in the territories and averaged for the Group.
Sensitivity analysis
The results of the Group's impairment tests are dependent upon
estimates and judgements made by management, particularly in
relation to the key assumptions of the Group. The cash flow
projections include assumptions on store performance throughout the
remaining contractual lease term. In particular, the retail revenue
recovery profile in the budget for 2021/22 represent sources of
significant estimation uncertainty. The projections for future
years include conservative retail revenue recovery and build in
sensitivity of lower revenue recovery profiles compared to expected
GDP rates on a regional basis (in line with CGUs).
We have concluded no material reasonable possible changes in
assumptions will result in an impairment and therefore no
sensitivity analysis has been disclosed.
14. Inventories
2021 2020
GBPm GBPm
Raw materials 1.3 0.7
Finished goods 100.2 89.3
Inventories net of provision 101.5 90.0
Inventory provision 3.9 2.8
Inventory written off to Consolidated Statement
of Profit or Loss 1.5 1.5
15. Trade and other receivables 2021 2020
GBPm GBPm
Trade receivables 52.0 57.8
Less: allowance for expected credit losses (1.3) (2.3)
Trade receivables - net 50.7 55.5
Other receivables 5.3 9.2
56.0 64.7
Prepayments and accrued income 3.4 3.5
59.4 68.2
All trade and other receivables are expected to be recovered
within 12 months of the year-end date. The fair value of trade and
other receivables is the same as the carrying values shown above.
The carrying value of trade receivables represents the maximum
exposure to credit risk.
For some trade receivables the Group may obtain security in the
form of guarantees, insurances, mortgages or letters of credit
which can be called upon if the counterparty is in default under
the terms. As at 31 March 2021 the amount of collateral held was
GBP0.6m (FY20: GBP0.9m).
As at 31 March 2021 trade receivables of GBP0.5m (FY20: GBP2.7m)
were due over 90 days. Trade receivables are reviewed on a
line-by-line basis with consideration given to specific
circumstances and credit history when calculating the provision.
The ageing analysis of these receivables is as follows:
2021 2020
GBPm GBPm
Over 90 days 0.5 2.7
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
15. Trade and other receivables (continued)
As at 31 March 2021 trade receivables were carried net of
expected credit losses (previously referred to as bad debt
provisions) of GBP1.3m (FY20: GBP2.3m). The individually impaired
receivables relate mainly to accounts which are outside the normal
credit terms. The ageing analysis of these receivables is as
follows:
2021 2020
GBPm GBPm
Up to 60 days 1.0 0.3
60 to 90 days - -
Over 90 days 0.3 2.0
1.3 2.3
2021 2020
GBPm 2.3 GBPm
At 1 April 0.8
Change in provision for expected credit
losses (1.0) 1.5
At 31 March 1.3 2.3
Debtors days 42 61
The carrying amount of the Group's trade and other receivables
is denominated in the following currencies:
2021 2020
GBPm GBPm
UK Sterling 3.0 3.8
Euro 9.6 5.2
US Dollar 29.1 33.4
Japanese Yen 2.8 6.5
Other currencies 6.2 6.6
50.7 55.5
16. Cash and cash equivalents
2021 2020
GBPm 113.6 GBPm
Cash and cash equivalents 117.2
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
17. Trade and other payables 2021 2020
GBPm GBPm
Current
Trade payables 52.6 33.4
Taxes and social security costs 5.3 3.8
Other payables 5.3 5.4
Bank interest and finance charges 1.3 0.1
64.5 42.7
Accruals and deferred income 68.5 46.2
133.0 88.9
All trade and other payables are expected to be settled within
12 months of the year-end date. The fair value of trade and other
payables is the same as the carrying values shown above.
At 31 March 2021, other payables consisted of GBP4.4m (FY20:
GBP5.4m) in relation to employment related payables.
18. Borrowings 2021 2020
GBPm GBPm
Current
RCF loans - 10.7
Bank overdraft - 9.3
Facilities drawn - 20.0
Lease liabilities (note 28) 18.2 21.8
Total current interest bearing loans
and borrowings 18.2 41.8
Non-current
Bank loans (including unamortised fees) 281.6 74.3
Lease liabilities (note 28) 66.6 66.6
Redeemable preference 'A' shares
- 54.0
'B' shares - 258.9
Total redeemable preference shares - 312.9
Total non-current 348.2 453.8
Total borrowings 366.4 495.6
Split of above (excluding lease liabilities):
Facilities drawn - 20.0
Non-current bank loans 281.6 74.3
Net bank borrowings (including unamortised
fees) 281.6 94.3
Add back unamortised fees 5.9 0.5
Total gross bank borrowings 287.5 94.8
On 29 January 2021, the Group entered into a New Facilities
Agreement, comprising a new term B loan facility of
EUR337.5m (equivalent to GBP300.0m at that date) and a new
multi-currency revolving credit facility of GBP200.0m. These new
facilities have a maturity date of 2 February 2026. Following this
the Company immediately repaid all legacy financing arrangements in
full including GBP341.4m of preference shares and bank debt of
GBP92.7m. The Group value of debt at 31 March 2021 (excluding
unamortised fees) of GBP287.5m is GBP12.5m lower than the amount
borrowed on 29 January 2021 due to exchange rate movement.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
18. Borrowings (continued)
The carrying value of the Group's total borrowings (excluding
lease liabilities) is denominated in the following currencies:
2021 2020
GBPm GBPm
RCF loans - 10.7
Bank overdraft - 9.3
Facilities drawn - 20.0
UK GBP - 27.0
Total GBP bank loans - 47.0
Euro 287.5 21.8
Hong Kong Dollar - 13.3
Japanese Yen - 12.7
Total Bank loans 287.5 74.8
Total Bank loans and facilities 287.5 94.8
UK GBP - A Preference Shares - 54.0
- B Preference Shares - 258.9
Redeemable preference shares - 312.9
Total Borrowings 287.5 407.7
Memo: total UK GBP - 359.9
Loan repayments will occur as follows:
B Loan (Euro)
Year to 31 March GBPm
2026 (February 2026) 287.5
Total 287.5
Interest is chargeable on the loan at
the following rate:
2021 Base rate Margin
GBPm %
Bank loan B (Euro) 287.5 EURIBOR 2.75
Total loans before unamortised fees 287.5
These shares were unsecured and have
been fully repaid:
2021 2020
GBPm GBPm
Redeemable preference 'A' shares - 54.0
Redeemable preference 'B' shares - 258.9
- 312.9
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
18. Borrowings (continued)
Bank loans
2021 2020
GBPm GBPm
Revolving credit facility utilisation
RCF loans - 10.7
Bank overdraft - 9.3
Guarantees 2.6 2.2
Foreign exchange hedging contracts 2.0 0.2
Total utilised facility 4.6 22.4
Available facility (unutilised) 195.4 12.6
Total revolving facility 200.0 35.0
% %
Interest rate charged on unutilised facility 0.88 1.40
The bank loans are secured by a fixed and floating
charge over all assets of the Group.
On 29 January 2021, the Group entered into a new GBP200.0m
multi-currency revolving credit facility available until 2 February
2026.
Fair value measurement
The fair value of the items classified as loans and borrowings
is shown above. The book and fair values of borrowings are deemed
to be approximately equal.
Redeemable preference shares
Interest charged during the year on preference shares which were
redeemed in full in the year is as follows:
2021 2020
GBPm 2.7 GBPm
Redeemable preference 'A' shares 3.1
Redeemable preference 'B' shares 25.8 28.4
28.5 31.5
The preference share interest accrues and was payable on
redemption of the preference shares on 28 January 2021. Movements
in bank loans and preference shares were as follows:
Cash flows Foreign Non-cash
1 April Repayment Repayment New exchange capitalised 31 March
2020 loans of capital of interest movement interest 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Bank loans (B
and C) 74.8 - (72.7) - (2.1) - -
Bank loans (new
B) - 300.0 - - (12.5) - 287.5
Bank loans 74.8 300.0 (72.7) - (14.6) - 287.5
Preference shares 312.9 - (165.8) (175.6) - 28.5 -
Total borrowings 387.7 300.0 (238.5) (175.6) (14.6) 28.5 287.5
Cash flows Foreign Non-cash
1 April Repayment Repayment exchange capitalised 31 March
2019 New loans of capital movement interest 2020
GBPm of interest GBPm GBPm GBPm
GBPm GBPm GBPm
Bank loans 75.6 - (3.2) - 2.4 - 74.8
Preference shares 316.4 - (20.2) (14.8) - 31.5 312.9
Total borrowings 392.0 - (23.4) (14.8) 2.4 31.5 387.7
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
19. Provisions
Other Property
provisions provisions Total
GBPm GBPm GBPm
At 1 April 2020 - 1.5 1.5
Arising during the year 0.1 - 0.1
At 31 March 2021 0.1 1.5 1.6
The property provisions relate to the estimated repair and
restatement costs for retail stores at the end of the lease. The
provisions are not discounted for the time value of money as this
is not considered materially different from the current cost.
20. Derivative assets and liabilities
Assets
2021 2020
GBPm GBPm
Foreign exchange forward contracts 0.3 1.5
The Group does not have any derivative liabilities as at 31
March 2021 or 31 March 2020.
Assets and liabilities held at fair value are categorised into
levels that have been defined as follows:
-- quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
-- inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2); and
-- inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
Derivative financial instruments consist of foreign exchange
forward contracts, which are categorised within Level 2. Trading
derivatives are classified as a current asset or liability. The
full fair value of a hedging derivative is classified as a
non-current asset or liability if the remaining maturity of the
hedged item is more than 12 months and as a current asset or
liability if the maturity of the hedged item is less than 12
months. All the foreign exchange forward contracts mature before 31
March 2022; therefore, these have been recorded as a current asset
and liability.
Non-UK exchange forward contracts derivatives
The Group has entered into a number of non-UK exchange forward
contracts to cover the non-UK exchange risk associated with
merchandise purchases in US Dollar and fix Sterling price points
and Euro price points using low risk treasury instruments.
At the Balance Sheet date foreign exchange contracts were
entered into to cover circa 67% of the UK and Continental Europe
inventory purchases for the Spring/Summer 2021 and Autumn/Winter
2021 seasons with a target range of between 70% and 80%. The
average hedge rate of GBP/US Dollar is $1.3734 and average rate
hedged of Euro/US Dollar is $1.2152.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
20. Derivative assets and liabilities (continued)
The following table represents the nominal amounts of
derivatives in a continued hedge relationship as at each Balance
Sheet date:
2021 2020
Average exchange rate
Cash flow hedges: sell GBP buy US Dollar 1.3734 1.3030
Cash flow hedges: sell EUR buy US Dollar 1.2152 1.1266
Nominal amounts $m $m
Cash flow hedges: sell GBP buy US Dollar
Less than a year 33.0 39.0
More than a year but less than two years - -
Cash flow hedges: sell EUR buy US Dollar
Less than a year 20.0 4.0
More than a year but less than two years - -
21. Financial instruments
IFRS 13 requires the classification of financial instruments
measured at fair value to be determined by reference to the source
of inputs used to derive fair value. The fair values of all
financial instruments in both years are equal to their carrying
values, with the exception of derivatives which are considered to
be at Level 2 and are disclosed separately below. The fair value
hierarchy has been defined in note 20.
31 March 2021
Fair value
through
other
Receivables comprehensive
at income Total
amortised cost
GBPm GBPm GBPm
Assets as per Balance Sheet
Trade and other receivables excluding
prepayments and accrued income 56.0 - 56.0
Derivative financial instruments - 0.3 0.3
Cash and cash equivalents 113.6 - 113.6
169.6 0.3 169.9
Fair value
through
Liabilities other
at comprehensive
amortised cost income Total
GBPm GBPm GBPm
Liabilities as per Balance Sheet
Bank debt (excluding unamortised
fees) 287.5 - 287.5
Lease liabilities - Current 18.2 - 18.2
- Non-current 66.6 - 66.6
Trade and other payables excluding
non-financial liabilities 133.0 - 133.0
505.3 - 505.3
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
Financial instruments (continued)
31 March 2020
Fair value through other
Receivables comprehensive
at amortised income Total
cost
GBPm GBPm GBPm
Assets as per Balance Sheet
Trade and other receivables excluding
prepayments and accrued income 64.7 - 64.7
Derivative financial instruments - 1.5 1.5
Cash and cash equivalents 117.2 - 117.2
181.9 1.5 183.4
Fair value
through
Liabilities other
at comprehensive
amortised cost income Total
GBPm GBPm GBPm
Liabilities as per Balance Sheet
Bank debt (excluding unamortised
fees) 94.8 - 94.8
Lease liabilities - Current 21.8 - 21.8
- Non-current 66.6 - 66.6
Preference shares 312.9 - 312.9
Trade and other payables excluding
non-financial liabilities 42.7 - 42.7
538.8 - 538.8
Group Financial Risk Factors
The Group's activities expose it to a wide variety of financial
risks: liquidity risk, credit risk and market risk (including
currency risk, fair value interest rate risk and cash flows
interest rate risk). The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to
minimise the potential adverse effects on the Group's financial
performance. The Group uses derivative financial instruments to
hedge certain risk exposures.
Risk management is carried out by a central Finance and Treasury
department under policies approved by the Board of Directors. Group
Finance and Treasury identifies, evaluates and hedges financial
risks in close co-operation with the Group's operating units. The
Board agrees written principles for overall risk management as well
as written policies covering specific areas such as foreign
exchange risk, interest rate risk, credit risk, use of derivative
financial instruments and non-derivative financial instruments and
investment of excess liquidity.
Liquidity risk
Cash flow forecasting is regularly performed in the operating
entities of the Group and aggregated by Group Finance. Treasury
monitors rolling forecasts of the Group's liquidity requirements to
ensure that it has sufficient c ash to meet operational needs while
maintaining sufficient headroom in its undrawn committed borrowing
facilities at all times so that the Group does not breach borrowing
limits or covenants on any of its borrowing facilities. Surplus
cash held by operating entities over and above balances required
for working capital are transferred to treasury. Treasury invests
surplus cash in interest bearing accounts, choosing instruments
with sufficient liquidity to provide headroom as determined by the
above-mentioned forecasts.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
21. Financial instruments (continued)
The table below sets out the contractual maturities
(representing undiscounted contractual cash flows) of loans,
borrowings and other financial liabilities:
At 31 March 2021
Up to Between Between More than
3 months 3 & 1 & 5 Total
GBPm 12 months 5 years years GBPm
GBPm GBPm GBPm
Bank loans - Principal - - 287.5 - 287.5
- Interest 2.0 6.0 30.7 - 38.7
Total bank loans 2.0 6.0 318.2 - 326.2
Lease liability 4.0 14.1 48.3 18.4 84.8
Trade and other payables
excluding non-financial
liabilities 64.5 - - - 64.5
70.5 20.1 366.5 18.4 475.5
At 31 March 2020
Up to Between Between More than
3 months 3 & 1 & 5 Total
GBPm 12 months 5 years years GBPm
GBPm GBPm GBPm
Bank loans - Principal - - 74.8 - 74.8
- Interest - 4.6 4.7 - 9.3
Total bank loans - 4.6 79.5 - 84.1
RCF loan - 10.7 - - 10.7
Bank overdraft 9.3 - - - 9.3
Redeemable preference shares - - - 312.9 312.9
Lease liability 5.5 16.3 48.8 17.8 88.4
Trade and other payables
excluding non-financial
liabilities 42.7 - - - 42.7
57.5 31.6 128.3 330.7 548.1
Credit risk
Credit risk is managed on a Group basis, except for credit risk
relating to accounts receivable balances. Each local entity is
responsible for managing and analysing the credit risk of their new
customers before standard payment and delivery terms and conditions
are offered. Credit risk arises from cash and cash equivalents,
derivative financial instruments and deposits with banks and
financial institutions, as well as credit exposures to wholesale
and retail customers, including outstanding receivables and
committed transactions. For banks and financial institutions only
independently rated parties with a minimum rating of "A" are
accepted. Treasury policies in place do not allow concentration of
risk with individual counterparties and do not allow significant
treasury exposures with counterparties which are rated below
investment grade.
For wholesale customers, risk control assesses the credit
quality of the customer, taking into account its financial
position, past experience and other factors. Individual risk limits
are regularly monitored. Sales to wholesale customers are settled
primarily by bank transfer and retail customers are settled in cash
or by major debit/credit cards. The Group has no significant
concentration of credit risk as exposure is spread over a large
number of customers.
Market Risk
Non-UK exchange risk
The Group operates internationally and is exposed to non-UK
exchange risk arising from the various currency exposures,
primarily with respect to the US Dollar and the Euro. Non-UK
exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign
operations. Non-UK exchange risk arises when future commercial
transactions or recognised assets and liabilities are denominated
in a currency that is not the entity's functional currency.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
21. Financial instruments (continued)
The Group purchases the vast majority of its inventory from
factories in Asia which are paid in US Dollars. Approximately 80%
to 85% of revenue is earned in currencies other than Pounds
Sterling. In addition, the Group has certain investments in foreign
operations whose net assets are exposed to non-UK currency
translation risk.
Cash flow and fair value interest rate risk
The Group's interest rate risk arises from GBP and non-GBP
borrowings. Borrowings issued at variable rates expose the Group to
cash flow interest rate risk which is partially offset by cash held
at variable rates. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk. During 2021 and 2020, the
Group's borrowings were denominated in Sterling, Euros, Hong Kong
Dollars and Japanese Yen. Following the refinancing on 29 January
2021, the Group borrowings were denominated in Euros.
At 31 March 2021 if interest rates on bank borrowings had been
50 basis points higher or lower with all other variables held
constant, the calculated pre-tax profit for the year would change
by GBP0.6m (FY20: GBP0.2m).
Capital risk
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns while maximising
the return to stakeholders through the optimisation of the debt and
equity balances. The Group's overall strategy remains consistent
with that from the past few years.
The capital structure of the Group consists of net debt
disclosed in note 18 and equity attributable to equity holders of
the parent, comprising issued share capital, reserves and retained
earnings as disclosed in notes 23 and 24 and the Consolidated
Statement of Changes in Equity. The Group's Board of Directors
reviews the capital structure on an annual basis. The Group is not
subject to any externally imposed capital requirement.
Non-UK currency risk
The Group has analysed the impact of a movement in exchange rate
of the major non -GBP currencies on its pre-tax profits (all other
exchange rates remaining unchanged) as follows:
10% Appreciation 2021 2020
Currency GBPm GBPm
US Dollar 1.5 (0.5)
Euro 12.6 8.5
Yen 3.1 3.0
Note the US Dollar movement is lower as the Group earns US
Dollars from its US business and purchases all inventory (UK
factory apart) in US Dollar which nearly offset against each other.
In addition to the above, a 10% appreciation on the Euro rate would
impact annualised bank loan interest by GBP0.9m under the terms of
the new loan agreement.
22. Deferred taxation
The analysis of deferred tax assets and liabilities is as
follows:
Deferred tax assets
2021 2020
GBPm GBPm
Deferred tax asset to be recovered after more than 12 months 7.2 7.4
The gross movement on the deferred income tax is as follows:
2021 2020
GBPm GBPm
Deferred tax asset to be recovered after more than 12 months (0.2) 1.4
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
22. Deferred taxation (continued)
The deferred tax asset provided in the financial statements is
supported by budgets and trading forecasts and relates to the
following temporary differences:
-- temporary differences are the differences between the
carrying amount of an asset/liability and its tax base that
eventually will reverse and mainly comprise amounts for unrealised
profits in intra -group transactions and expenses; and
-- trade losses expected to be utilised in future periods, some
of which were not recognised in previous periods.
The movement in deferred income tax assets and liabilities
during the year is as follows:
Deferred tax assets Accelerated
capital Temporary
allowances differences Tax losses Total
GBPm GBPm GBPm GBPm
At 1 April 2019 (0.1) 5.9 0.2 6.0
Statement of Profit or Loss (charge)/credit (0.1) 1.5 - 1.4
At 31 March 2020 (0.2) 7.4 0.2 7.4
Statement of Profit or Loss (charge)/credit (0.4) 0.2 - (0.2)
At 31 March 2021 (0.6) 7.6 0.2 7.2
Deferred taxation not provided
in the financial statements: 2021 2020
GBPm GBPm
Tax losses 7.3 7.2
Accelerated capital allowances - 0.1
7.3 7.3
The deferred tax asset has been remeasured, and the 31 March
2021 year-end balance calculated using the rate at which the
relevant asset is expected to reverse.
23. Share capital
During the year, the Company carried out a reorganisation of its
share capital to facilitate a listing to the premium segment of the
official list of its Financial Conduct Authority and to trade on
the London Stock Exchange Main Market for listed securities. This
is described as follows:
2021 2021 2020 2020
No. GBP No. GBP
Authorised, called up
and fully paid
Ordinary shares of GBP0.01
each 1,000,000,100 10,000,001 - -
A ordinary shares of
GBP0.001 each - - 1,500,000 1,500
B ordinary shares of
GBP0.001 each - - 8,500,001 8,500
C ordinary shares of
GBP1,500 each - - 3 4,500
1,000,000,100 10,000,001 10,000,004 14,500
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
23. Share capital (continued)
The movements in the ordinary share capital during were as
the year ended 31 March 2021 follows: Share capital
Shares GBPm
No.
As at 31 March 2020 10,000,004 -
Issued on incorporation of Dr. Martens plc 1 -
Further shares issued 139 -
Share consolidation (139) -
Share for share exchange:
Doc Topco Limited (10,000,004) -
Dr. Martens plc 10,000,003 1,400.0
Share cancellation (3) -
Capital reduction - (1,390.0)
Sub-division of shares (1 for 100 split) 990,000,099 -
As at 31 March 2021 1,000,000,100 10.0
The movements in the preference share capital during the year
ended 31 March 2021 were as follows:
A shares of B shares
GBP0.00001 each (FY20: of
GBP0.0001 GBP0.00001
Preference shares each) each (FY20: Total
GBP0.0001
each)
No. No. No.
As at 1 April 2019 42,208,205 143,779,938 185,988,143
Redemptions (4,581,939) (15,608,123) (20,190,062)
As at 31 March 2020 37,626,266 128,171,815 165,798,081
Redemptions (37,626,266) (128,171,815) (165,798,081)
As at 31 March 2021 - - -
A shares of B shares
GBP0.00001 each (FY20: of
GBP0.0001 GBP0.00001
each) each (FY20: Total
GBP0.0001
each)
GBPm GBPm GBPm
As at 1 April 2019 57.2 259.2 316.4
Redemptions (6.3) (28.7) (35.0)
Coupon accrued 3.1 28.4 31.5
As at 31 March 2020 54.0 258.9 312.9
Redemptions (56.7) (284.7) (341.4)
Coupon accrued 2.7 25.8 28.5
As at 31 March 2021 - - -
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
23. Share capital (continued)
Transactions in the year
On incorporation on 19 October 2020, Dr. Martens plc (the
"Company") issued one ordinary share with a nominal value of GBP1
each for a cash consideration of GBP1.00 to Ingrelux S.a.r.l.
On 14 December 2020, the Company issued a further 139 ordinary
shares of GBP1 each for a total cash consideration of
GBP139 to Ingrelux S.a.r.l. On the same day the entire issued
share capital of 140 ordinary shares of GBP1 each was consolidated
into one ordinary share of GBP140 and that one ordinary share was
converted into one B ordinary share of
GBP140.
On 14 December 2020 following the reorganisation of the
incorporation share, the Company acquired 100% of the beneficial
title to ordinary shares and preference shares of Doc Topco Limited
for a total fair value of GBP1,737 m by way of a share for share
exchange by issuing the following shares to the shareholders of Doc
Topco Limited:
-- 1,500,000 A ordinary shares of GBP140 each, 8,500,000 B
ordinary shares of GBP140 each and three C ordinary shares of
GBP1,500 each for a total fair value of GBP1,400.0m; and
-- 37,626,266 A preference shares of GBP1.50 each and
128,171,815 B preference shares of GBP2.19 each for a total fair
value of GBP337.1m.
As the Company issued equity shares to acquire 100% of the
shares of Doc Topco Limited (i.e. acquiring both the ordinary and
preference shares as part of a single arrangement), the provisions
of merger relief set out in Section 612 of the Companies Act 2006
(CA2006) are applied. Where merger relief is applied, the Company
is prohibited from recording share premium on the transaction.
The existing one B ordinary share formed part of the
consideration received by Ingrelux S.a.r.l. in exchange for its
shares in Doc Topco Limited and therefore the existing one B
ordinary share was considered fully paid up following the share for
share exchange. Legal title to the shares in Doc Topco Limited was
transferred to the Company on 23 December 2020.
On 17 December 2020, the entire three C ordinary shares of
GBP1,500.00 each were cancelled and the Company owed a debt to the
shareholders for a total of GBP4,500 for those shares.
On 17 December 2020, the Company reduced the nominal value of
both the ordinary shares and preference shares as follows:
-- A and B ordinary shares' nominal value was reduced from
GBP140 each to GBP1 each. This reduced the share capital by
GBP1,390.0m and this is transferred to retained earnings; and
-- A and B preference shares' nominal value was reduced from
GBP1.50 each and GBP2.19 each respectively to
GBP0.00001 each. The reduction resulted in GBP337.1m to retained
earnings and equivalent debit to equity that has been presented
within retained earnings.
On 22 January 2021, the Company was re-registered as a public
limited company under the Companies Act 2006.
On 28 January 2021, all of the 37,626,266 A preference shares of
GBP0.00001 each and all of the 128,171,815 B preference shares of
GBP0.00001 each were redeemed. All of the 1,500,000 A ordinary
shares of GBP1 each and all of the 8,500,001 B ordinary shares of
GBP1 each were converted into 10,000,001 ordinary shares of GBP1
each. The entire issued ordinary share capital of 10,000,001 shares
of GBP1 each was sub-divided into 1,000,000,100 ordinary shares of
GBP0.01 each.
On 3 February 2021, the entire issued ordinary share capital of
1,000,000,100 shares was admitted to the premium listing segment of
the Official List of the Financial Conduct Authority and to trading
on the London Stock Exchange's Main Market for listed
securities.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
24. Reserves
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share capital Nominal value of subscribed shares.
Hedging reserve Represents the movements in fair value on designated
hedging instruments.
Capital reserve - This reserve relates to shares held by an independently
own shares managed EBT and shares held by the Company as
"treasury shares". The shares held by the EBT
were held in order to satisfy share grants to
key management personnel. At 31 March 2021 the
Company held 0 ordinary 'A' shares (FY20: 120,000)
and 0 ordinary 'C' shares (FY20: 1).
Capital redemption A non-distributable reserve into which amounts
reserve are transferred following the redemption or purchase
of own shares. The reserve was created in order
to ensure sufficient distributable reserves were
available for the purpose of redeeming preference
shares in the year.
Merger reserve The difference between the nominal value of shares
acquired by Dr. Martens plc (the parent company)
in the share for share exchange with Doc Topco
Limited and the nominal value of shares issued
to acquire them.
Non-UK currency translation Includes translation gains or losses on translation
reserve of non-UK subsidiaries' financial statements
from the functional currencies to the presentational
currency.
Retained earnings Retained earnings represent the profits of the
Group made in current and preceding
years, net of distributions and equity-settled
share-based awards. Included in retained earnings
are distributable reserves.
25. EBT
The Group had an Employee Benefit Trust (EBT), Doc Topco Limited
Employee Benefit Trust, for the purpose of facilitating the holding
of shares in Doc Topco Limited (previously the parent company of
the Group) for the benefit of employees of the Group. The assets of
the employee share trust were held by a separate trust, of which
the Directors consider that Doc Topco Limited had control for
accounting purposes. Immediately prior to admission to the London
Stock Exchange, shares were transferred to the Executive Directors,
in their positions as employees for past services at GBPnil cost
and therefore the distribution falls within the definition of
equity-settled share-based payment under IFRS 2 Share-Based
Payments and there are no vesting conditions attached to these
shares and they vest immediately on distribution to the CFO/CEO.
The fair value of the shares at the date of transfer was GBP3.70
per share resulting in a share-based payment charge of GBP10.8m. In
addition, the EBT sold 10,570,300 shares at IPO date generating
cash of GBP37.8m and, in conjunction with GBP4.2m of cash held by
the EBT from previous shares sold, funded a GBP42.0m "IPO bonus" to
all employees of the Group.
The following table illustrates the number and weighted average
exercise prices (WAEP) of, and movements in, share options during
the year:
2021
EBT
No. WAEP
Outstanding at the beginning of the -
year
Granted 2,929,700 GBP0.00
Vested (2,929,700) GBP0.00
Forfeited - -
Outstanding at the end of the year - -
Weighted average contractual life remaining - -
(years)
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
25. EBT (continued)
Fair value measurement
The following table lists the inputs to the model used for the
plan for the year ended 31 March 2021:
2021 EBT
Date of grant (1) 29/01/2021
Share price (pence) 425
Fair value at grant date (pence) 358
Exercise price (pence) 0
Dividend yield (%) Nil
Expected volatility (%) 0.00%
Risk-free interest rate (%) 0.00%
Expected life (years) 0 years
Model used na
(1) On 23 January 2021 the Trustees issued the Letter of Wishes to the Executive Directors
26. Share-based payments
Post IPO listing on 29 January 2021, the Group approved the
award of shares to Executive Directors and other senior executives
under a new equity-settled Long Term Incentive Plan (LTIP) - the
Performance Scheme Plan (PSP) for the Executive Directors and
Leadership Team (LT) and the Restricted Scheme Plan (RSP) for LT
direct reports. The LTIP is a discretionary share plan under which
awards are approved and granted at the discretion of the
Remuneration Committee.
Long Term Incentive Plan - Performance Scheme Plan (PSP)
Shortly following admission to the London Stock Exchange,
conditional awards of share options were granted to the Executive
Directors and the other senior managers on 9 February 2021. These
awards are capable of vesting over the period from admission to the
2024 results announcement, subject to the achievement of
performance conditions and continued service. The performance
conditions attached to the awards are Total Shareholder Return
(TSR), which is a market-based performance condition, and EPS
growth, which is a non-market-based performance condition. The fair
value of the TSR element of the performance conditions is
calculated and fixed at the date of grant using a Stochastic
options pricing model. The fair value of the EPS element of the
performance conditions is reviewed at each balance sheet date and
adjusted through the number of options expected to vest.
The awards will generally vest to participants at the end of the
vesting period subject to good and bad leaver provisions. There are
no cash settlement alternatives and the Group accounts for the PSP
as an equity-settled plan.
Long Term Incentive Plan - Restricted Scheme Plan (RSP)
Shortly following admission to the London Stock Exchange,
service conditional awards of shares under the RSP were granted to
certain employees of the Group on 9 February 2021. The awards vest
in two tranches, with 50% vesting 18 months following the grant
date and 50% vesting after 36 months following the grant date. The
members of the RSP must be employed by the Group at the end of the
vesting or service period for each tranche. If employees leave the
Group after the first 50% tranche has vested but before the second
50% tranche is due to vest, the second tranche will lapse.
The fair value of restricted awards is the face value of the
awards at the date of grant.
There are no cash settlement alternatives. The Group accounts
for the restricted shares as an equity -settled plan.
Full details on the performance conditions for all the LTIP
awards can be found in the Remuneration Report.
2021 2020
GBPm GBPm
Expense arising from equity-settled share-based
payments - LTIP 0.7 -
Total expense arising from share-based
payment transactions 0.7 -
There were no cancellations or modifications to the awards
during the year.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
26. Share-based payments (continued)
Movements during the year
The following table illustrates the number and weighted average
exercise prices (WAEP) of, and movements in, share options during
the year:
2021
LTIP
No. WAEP
Outstanding at the beginning of the - -
year
Granted 2,665,803 -
Vested - -
Forfeited - -
Outstanding at the end of the year 2,665,803 -
Weighted average contractual life remaining 2.9 -
(years)
Fair value measurement
The following table lists the inputs to the models used for the
three plans for the year ended 31 March 2021:
2021
LTIP
PSP RSP
Date of grant 09/02/2021 09/02/2021
Share price (pence) 513 513
Fair value at grant date (pence) 439 513
Exercise price (pence) 0 0
Dividend yield (%) Nil Nil
Expected volatility (%) 50.59% 0.00%
Risk-free interest rate (%) 0.03% 0.00%
Expected life (years) 3.3 years 1.5 -
3.0 years
Model used Monte Carlo na
Volatility
For determining expected volatility, IFRS 2 requires the fair
value to take into account historical volatility over the expected
term. As Dr. Martens plc is a newly-listed entity it does not have
sufficient information on historical volatility, it computes
volatility for the longest period for which trading activity is
available. It also considered the historical volatility of similar
entities in the same industry for the equivalent period of their
listed share price history.
Employer Payroll Taxes
Employer payroll taxes are being accrued, where applicable, at
local rate, which management expects to be the prevailing rate when
the awards are exercised, based on the share price of the reporting
date. The total employer payroll taxes for the year relating to all
the awards was GBP0.1m.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
27. Financial commitments and contingencies
Total future minimum lease payments (not discounted) under
non-cancellable lease rentals are payable as follows:
2021 2020
GBPm GBPm
Not later than one year 22.7 21.5
Later than one year and not later than
five years 54.3 56.5
Later than five years 20.0 22.5
97.0 100.5
The financial commitments note has been prepared on the basis
that the lease commitments will continue to the end of the lease
term and these lease breaks will not be exercised. The future
minimum lease payments to the lease break are GBP65.1m (FY20:
GBP70.0m).
Contingent liabilities exist in the form of a duty deferment
guarantee to HMRC for a maximum amount of GBP 0.9m (FY20: GBP0.9m)
and rent guarantees to various landlords of GBP1.7m (FY20:
GBP1.3m).
28. Leases
Set out below are the carrying amounts of lease liabilities
(included under interest -bearing loans and borrowings) and the
movements during the year:
2021 2020
GBPm GBPm
At 1 April 2020 88.4 85.3
Additions and remeasurement 20.4 19.6
Interest 3.7 3.9
Payments (23.8) (20.4)
Foreign exchange (3.9) -
At 31 March 2021 84.8 88.4
Current (note 18) 18.2 21.8
Non-current (note 18) 66.6 66.6
The following amounts were recognised in the
Statement of Profit or Loss:
2021 2020
GBPm 21.5 GBPm
Depreciation expense of right-of-use assets 17.9
Interest expense on lease liabilities 3.7 3.9
Expenses relating to short-term leases (included
in cost of sales) 0.8 1.4
Variable lease payments (included in cost of
sales) 0.7 1.8
Total operating expenses recognised in profit 1.5 3.2
Total amount recognised in profit 26.7 25.0
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
29. Pensions
Defined contribution scheme
The Group operates a defined contribution pension scheme for its
employees. The Group's contributions to this scheme were GBP5.8m
for the year ended 31 March 2021 (FY20: GBP4.8m) and at 31 March
2021 GBP0.9m (FY20: GBP0.4m) remained payable to the pension
fund.
Defined benefit scheme
Airwair International Limited operates a pension arrangement
called the Dr. Martens Airwair Group Pension Plan (the Plan). The
Plan has a defined benefit section that provides benefits based on
final salary and length of service on retirement, leaving service
or death. The defined benefit section closed to new members on 6
April 2002 and closed to future accrual with effect from 31 January
2006. The Plan also has a defined contribution section that
provides money purchase benefits to some current and former
employees.
The Plan is managed by a board of Trustees appointed in part by
Airwair International Limited and in part from elections by members
of the Plan. The Trustees have responsibility for obtaining
valuations of the fund, administering benefit payments and
investing the Plan's assets. The Trustees delegate some of these
functions to their professional advisers where appropriate.
The defined benefit section of the Plan is subject to the
Statutory Funding Objective under the Pensions Act 2004. A
valuation of the Plan is carried out at least once every three
years to determine whether the Statutory Funding Objective is met.
The last valuation was carried out at 30 June 2019 which confirmed
that the Plan had sufficient assets to meet the Statutory Funding
Objective. The next valuation is due at 30 June 2022. The Statutory
Funding Objective does not currently impact on the recognition of
the Plan in these accounts.
During the year, no discretionary benefits were awarded. Other
than the past service cost arising from the recent GMP equalisation
judgement, there were no Plan amendments, settlements or
curtailments during the period.
The weighted average duration of the defined benefit obligation
is approximately 17 years (FY20: 16 years).
Key risks
The defined benefit section of the Plan exposes Airwair
International Limited to a number of risks:
-- Investment risk. The Plan holds investments in asset classes,
such as equities, which have volatile market values and while these
assets are expected to provide the real returns over the long-term,
the short-term volatility can cause additional funding to be
required if a deficit emerges.
-- Interest rate risk. The value of the Plan's liabilities is
assessed using market yields on high quality corporate bonds to
discount the liabilities. As the Plan holds assets such as
equities, the value of the assets and liabilities may not move in
the same way. The Plan holds derivatives to manage a proportion of
the interest rate risk.
-- Inflation risk. A significant proportion of the benefits
under the Plan are linked to inflation. Although the Plan's assets
are expected to provide a good hedge against inflation over the
long term, movements in inflation expectations over the short-term
could lead to a deficit emerging. The Plan holds some derivatives
to hedge a proportion of the potential changes in the value of the
liabilities due to changes in market inflation expectations.
-- Mortality risk. In the event that members live longer than
assumed, a deficit will emerge in the Plan.
Although the Lloyds Banking Group Pensions Trustees Limited v.
Lloyds Bank PLC (and others) court judgement on 26 October 2018
(and the subsequent court judgement on 20 November 2020) provided
some clarity in respect of GMP equalisation and the obligations
that this places on schemes, the actual impact of equalising the
Plan's GMPs remains uncertain. An approximate allowance has been
made in the disclosures for the impact of GMP equalisation.
The effect of the judgement regarding the equalisation of GMP
benefits for past transfers has been accounted for as a past
service costs during the period. There were no other plan
amendments, curtailments or settlements during the period.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
29. Pensions (continued)
Effect of the Plan on Company's future cash flows
Airwair International Limited is required to agree a Schedule of
Contributions with the Trustees of the Plan following a valuation,
which must be carried out at least once every three years.
Following the valuation of the Plan at 30 June 2019, a Schedule of
Contributions was agreed under which Airwair International Limited
was not required to make any contributions to the defined benefit
section of the Plan (other than payments in respect of
administrative expenses). Accordingly, Airwair International
Limited does not expect to contribute to the defined benefit
section of the Plan, although it will continue to contribute to the
defined contribution section in line with the Schedule of
Contributions. The next valuation of the Plan is due as at 30 June
2022. If this reveals a deficit then Airwair International Limited
may be required to pay contributions to the Plan to repair the
deficit over time.
The amounts recognised in the Balance Sheet
are determined as follows:
Amounts recognised in the Balance Sheet 2021 2020
GBPm 67.8 GBPm 63.4
Fair value of assets - defined benefit section
- defined contribution section 15.5 9.8
Fair value of plan assets 83.3 73.2
Present value of funded obligations - defined
benefit section (59.0) (50.7)
- defined contribution section (15.5) (9.8)
Present value of funded obligations - total (74.5) (60.5)
Surplus of funded plans 8.8 12.7
Impact of asset ceiling (8.8) (12.7)
Net pension asset - -
Although the Plan has a surplus, this is not recognised on the
grounds that Airwair International Limited is unlikely to derive
any future economic benefits from the surplus.
A reconciliation of the net defined benefit
asset over the year is given below:
2021 2020
GBPm GBPm
Net defined benefit asset at beginning of year - -
Total defined benefit charge in the Statement - -
of Profit or Loss
Remeasurements losses in Other Comprehensive - -
Income (OCI)
Employer's contributions - -
Net defined benefit asset at end of the year - -
The amount charged to the Statement of Profit or Loss and
Statement of Other Comprehensive Income in respect of the defined
benefit section of the Plan was GBPnil (FY20: GBPnil). Costs in
respect of the defined contribution section of the Plan, and other
defined contribution arrangements operated by Airwair International
Limited, are allowed for separately.
The remeasurements in respect of the defined benefit section of
the Plan, to be shown in Other Comprehensive Income, are shown
below:
2021 2020
GBPm GBPm
(Gains)/losses on defined benefit assets
in excess of interest (5.1) 1.7
Experience gains on defined benefit obligation - 0.3
Losses/(gains) from changes to demographic
assumptions 0.3 (0.8)
Losses/(gains) from changes of financial
assumptions 9.0 (4.0)
Change in effect of asset ceiling (4.2) 2.8
Total remeasurements to be shown in the - -
OCI
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
29. Pensions (continued)
The change in assets over the year was:
2021 2020
GBPm 73.2 GBPm 75.1
At 1 April
Interest on defined benefit assets 1.4 1.5
Return on defined benefit section assets
less interest 5.1 (1.7)
Benefits paid from the defined benefit section (2.1) (2.2)
Increase in defined contribution section
assets 5.7 0.5
At 31 March 83.3 73.2
The change in the funded obligations over
the year was:
2021 2020
GBPm 60.5 GBPm 65.5
At 1 April
Past service cost - -
Interest cost on defined benefit obligation 1.1 1.3
Experience loss on defined benefit obligation - 0.2
Changes to demographic assumptions 0.3 (0.8)
Changes to financial assumptions 9.0 (4.0)
Benefits paid from the defined benefit section (2.1) (2.2)
Increase in defined contribution section
assets 5.7 0.5
At 31 March 74.5 60.5
The change in the effect of the asset ceiling
over the year is as follows:
2021 2020
GBPm 12.7 GBPm 9.6
At 1 April
Net interest charge on asset ceiling 0.3 0.2
Changes in the effect of the asset ceiling
excluding interest (4.2) 2.9
At 31 March 8.8 12.7
A breakdown of the assets is set out below, split between those
assets that have a quoted market value in an active market and
those that do not. The assets do not include any investment in
shares of Airwair International Limited.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
29. Pensions (continued)
2021 2020
GBPm GBPm
Assets with a quoted market value in an
active market:
Cash and other
Domestic 0.2 -
0.2 -
Assets without a quoted market value in
an active market:
Equities and property Domestic 1.1 0.2
Foreign 19.4 10.9
20.5 11.1
Fixed interest bonds
Unspecified 7.2 9.6
7.2 9.6
Index linked gilts
Domestic 34.6 35.1
Foreign - -
34.6 35.1
Alternatives
Unspecified 5.8 6.8
5.8 6.8
Insured annuities
Domestic 1.5 1.4
1.5 1.4
Cash and other
Domestic 2.6 2.7
Foreign - 0.2
Unspecified (4.6) (3.5)
(2.0) (0.6)
Defined contribution section assets
Unspecified 15.5 9.8
15.5 9.8
Fair value of plan assets 83.3 73.2
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
29. Pensions (continued)
A full actuarial valuation was carried out at 30 June 2019. The
results of that valuation were updated to 31 March 2021 by a
qualified independent actuary. The principal assumptions selected
by Airwair International Limited and used by the actuary to
calculate the Plan's defined benefit obligation were:
2021 2020
Discount rate 2.0% 2.3%
Inflation assumption (RPI) 3.3% 2.5%
Inflation assumption (CPI) 2.5% 1.7%
LPI pension increases subject
to 5% cap 3.2% 2.5%
Revaluation in deferment 2.5% 1.7%
100% (males) and
102% (females) of 100% (males)
S3PA and 102%
Post retirement mortality assumption
Tax free cash
tables, with allowance
for future improvements in line with CMI_2019, 1.00%
long-term rate
Members are assumed to take 50% of the maximum tax free cash
(females) of S3PA tables, with allowance for future improvements
in line with CMI_2018, 1.00% long-
term rate
Members are assumed to
take 50% of the maximum tax free cash
Proportion married at retirement or earlier death 70% 70%
Assumed life expectancies on retirement at age 65 are:
Retiring today:
Retiring in 20 years' time:
Male 21.8 21.7
The key sensitivities of the defined benefit obligation to the
actuarial assumptions are shown below:
Approximate (decrease)/ increase to the defined benefit
obligation
2021 2020
GBPm GBPm
Discount rate
Plus 0.5% (FY20: plus 0.5%) (4.7) (3.8)
Minus 0.5% 5.3 4.3
Rate of inflation
Plus 0.5% (FY20: plus 0.5%) 4.3 3.6
Minus 0.5% (4.6) (3.3)
Life expectancy
Plus 1.0 year (FY20: plus
1.0 year) 2.8 2.6
Minus 1.0 year (2.7) (2.5)
The sensitivity illustrations set out above are approximate.
They show the likely effect of an assumption being adjusted whilst
all other assumptions remain the same. Only the impact on the
liability value (i.e. the defined benefit obligation) is considered
- in particular:
-- no allowance is made for any changes to the value of the
Plan's invested assets in scenarios where interest rates or market
inflation expectations change; and
-- no allowance is made for changes in the value of the annuity
policies held by the Plan, which is calculated using the same
actuarial assumptions as for the Plan's defined benefit
obligation.
Such changes to the asset values would be likely to partially
offset the changes in the defined benefit obligation.
The net Balance Sheet and Statement of Profit or Loss are not
sensitive to the actuarial assumptions used at the current time,
due to the effect of the asset ceiling.
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 March 2021
30. Related party transactions
Transactions with related parties
Transactions between the Company and its wholly owned
subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note. A
list of investments in subsidiary undertakings can be found in note
12 to the Parent Company Financial Statements.
Prior to admission to the London Stock Exchange on 29 January
2021, the Group was backed by funds advised by Permira Holdings
Limited and its subsidiary entities. Permira Holdings Limited was
related to the Company due to common control; IngreLux S.a.r.l (the
Group's ultimate controlling parent party) is controlled by Permira
V Fund, which is itself controlled by Permira Holdings Limited.
2021 2020
GBP'000 GBP'000
Permira Holdings Limited(1)
Amount incurred - 51
Amount outstanding at year end - 28
Alter Domus(2)
Amount incurred 6 -
Amount outstanding at year end 6 -
TeamViewer(2)
Amount incurred 6 -
Amount outstanding at year end - -
1 Permira Holdings Limited is related to the Group as it is a
majority shareholder and has significant influence over the Group.
In prior year, Permira Holdings Limited was related to the Group
due to common control, IngreLux S.a.r.l. is controlled by Permira V
Fund which is itself controlled by Permira Holdings Limited.
2 Alter Domus and TeamViewer are related to the Group as they
are under the common control of Permira V Fund, which is itself
controlled by Permira Holdings Limited.
During the year, as part of the business reorganisation prior to
listing, shares were issued to IngreLux S.a.r.l as detailed in note
23. Additionally, all of the C ordinary shares of GBP1,500 each
were cancelled and repaid to the shareholders, including senior
management.
During the prior year, the Group traded with W M Griggs 1989
Settlement Trust, of which Mr S W Griggs is a trustee and held an
interest in the preference shares. The rent and service charges
below were in relation to a property on which the lease expired in
February 2019. The costs in the year relate to the part year period
to the ending of this lease and there will be no further costs.
2021 2020
GBP'000 GBP'000
Rent and service charges paid to W M Griggs 1989 Settlement
Trust - 4
Key management personnel compensation
The compensation of key management (including follows:
Executive Directors) for the year was as
2021 2020
GBP'000 GBP'000
Salaries and benefits 26,623 6,367
Exceptionals: IFRS 2 (non-cash) 10,786 -
Pensions 201 92
Amounts owed by management - 1,197
This includes the Directors of all Group companies.
Five-year financial summary (unaudited)
For the year ended 31 March 2021
FY21 FY20 FY19(5) FY18(5) FY17(5) CAGR%
GBPm GBPm GBPm GBPm GBPm %
Revenue:
Ecommerce 235.4 136.4 72.7 43.6 32.4 49%
Retail 99.7 165.2 126.7 97.1 78.9 5%
DTC 335.1 301.6 199.4 140.7 111.3 25%
Wholesale 4 437.9 370.6 255.0 207.9 179.3 20%
773.0 672.2 454.4 348.6 290.6 22%
Gross margin 470.5 401.5 260.5 186.0 148.7 26%
EBITDA(1,2) 224.2 184.5 85.0 50.0 37.5 43%
Operating
profit before
exceptionals 189.2 154.5 73.2 42.0 32.6 42%
Operating
profit 112.5 142.5 68.0 40.2 31.0 29%
Key
statistics:
Pairs sold (m) 12.7 11.1 8.3 6.9 6.0
No. of stores
(3) 135 122 109 94 71
DTC mix % 43% 45% 44% 40% 38%
Gross margin % 60.9% 59.7% 57.3% 53.4% 51.2%
EBITDA(1,2) % 29.0% 27.4% 18.7% 14.3% 12.9%
Revenue by
region:
EMEA 335.6 287.9 195.1 149.6 113.7 24%
Americas 295.8 252.2 161.1 117.4 106.0 23%
APAC 141.6 132.1 98.2 81.6 70.9 15%
773.0 672.2 454.4 348.6 290.6 22%
Revenue mix:
EMEA % 44% 43% 43% 43% 40%
Americas % 38% 37% 35% 34% 36%
APAC % 18% 20% 22% 23% 24%
(1) EBITDA - earnings before exchange gains/losses, finance
income/expense, income tax, depreciation and amortisation.
(2) Before exceptional items of GBP80.5m (FY20: GBP12.0m).
(3) Own stores on streets and malls operated under arm's length
leasehold arrangements.
(4) Wholesale revenue including distributor customers.
(5) From 1 April 2019, control of distributor revenue in
relation to the Australia market was transferred from the EMEA
geographic market to the APAC geographic market. The prior years
have been restated to reflect comparable information for all
periods presented. This has had no net profit impact on the
Group.
Two-year financial summary (unaudited)
For the year ended 31 March 2021
H1 H2 FY
FY21 FY20 Growth FY21 FY20 Growth FY21 FY20 Growth
GBPm GBPm % GBPm GBPm % GBPm GBPm %
Revenue:
Ecommerce 75.3 38.0 98% 160.1 98.4 63% 235.4 136.4 73%
Retail 34.3 64.5 -47% 65.4 100.7 -35% 99.7 165.2 -40%
DTC 109.6 102.5 7% 225.5 199.1 13% 335.1 301.6 11%
Wholesale
4 208.6 166.2 26% 229.3 204.4 12% 437.9 370.6 18%
318.2 268.7 18% 454.8 403.5 13% 773.0 672.2 15%
Gross margin 186.3 155.2 20% 284.2 246.3 16% 470.5 401.5 17%
EBITDA 1,2 86.3 66.6 30% 137.9 117.9 17% 224.2 184.5 22%
Operating
profit 67.8 51.1 33% 125.2 103.4 21% 193.0 154.5 25%
before
exceptionals
Operating
profit 64.8 47.4 37% 47.7 95.1 -50% 112.5 142.5 -21%
Key
statistics:
Pairs sold
(m) 5.6 4.8 17% 7.1 6.3 13% 12.7 11.1 14%
No. of stores
3 130 110 18% 135 122 11% 135 122 11%
DTC mix % 34% 38% -4pts 50% 49% +1pts 43% 45% -2pts
Gross margin
% 58.5% 57.8% +0.7pts 62.7% 61.0% +1.7pts 60.9% 59.7% +1.2pts
EBITDA(1,2)
% 27.1% 24.8% +2.3pts 30.3% 29.2% +1.1pts 29.0% 27.4% +1.6pts
Revenue by
region:
EMEA 159.6 123.3 29% 176.0 164.6 7% 335.6 287.9 17%
Americas 102.6 97.0 6% 193.2 155.2 24% 295.8 252.2 17%
APAC 56.0 48.4 16% 85.6 83.7 2% 141.6 132.1 7%
318.2 268.7 18% 454.8 403.5 13% 773.0 672.2 15%
Revenue mix:
EMEA % 50% 46% +4pts 39% 41% -2pts 44% 43% +1pt
Americas
% 32% 36% -4pts 42% 38% +4pts 38% 37% +1pt
APAC % 18% 18% - 19% 21% -2pts 18% 20% -2pts
(1) EBITDA - earnings before exchange gains/losses, finance
income/expense, income tax, depreciation and amortisation.
(2) Before exceptional items of GBP3.0m for H1 and GBP77.5m for
H2 (FY20: GBP12.0m).
(3) Own stores on streets and malls operated under arm's length
leasehold arrangements.
(4) Wholesale revenue including distributor customers.
Glossary
For the year ended 31 March 2021
Alternative Performance Measures (APMs) and other non-statutory
measures
The Group tracks a number of performance measures (KPIs)
including Alternative Performance Measures (APMs) in managing its
business, which are not defined or specified under the requirements
of IFRS because they exclude amounts that are included in, or
include amounts that are excluded from, the most directly
comparable measures calculated and presented in accordance with
IFRS or are calculated using financial measures that are not
calculated in accordance with IFRS.
The Group believes that these APMs, which are not considered to
be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance
of the business. These APMs are consistent with how the business
performance is planned and reported within the internal management
reporting to the Board.
These APMs should be viewed as supplemental to, but not as a
substitute for, measures presented in the consolidated financial
statements relating to the Group, which are prepared in accordance
with IFRS. The Group believes that these APMs are useful indicators
of its performance. However, they may not be comparable with
similarly titled measures reported by other companies due to
differences in the way they are calculated.
Metric Definition Rationale APM KPI
Revenue Revenue per financial Helps evaluate growth No Yes
statements trends, establish budgets
and assess
operational performance
and efficiencies
Revenue by geographical Revenue per Group's geographical Helps evaluate growth No Yes
market segments trends, establish budgets
and assess
Revenue: EMEA operational performance
and efficiencies
Revenue: Americas
Revenue: APAC
Revenue by channel Helps evaluate growth No Yes
trends, establish budgets
and assess
operational performance
and efficiencies
Revenue: ecommerce Revenue from Group's ecommerce
platforms
Revenue: retail Revenue from Group's own
stores (including concessions)
Revenue: DTC Revenue from the Group's
direct-to-consumer (DTC)
channel
(= ecommerce plus retail
revenue)
Revenue: wholesale Revenue from the Group's
business-to-business channel
revenue to wholesale customers,
distributors and franchisees
Gross margin Revenue less cost of sales Helps evaluate growth Yes Yes
(raw materials and consumables) trends, establish budgets
and assess operational
Cost of sales is disclosed performance and efficiencies
in the consolidated Statement
of Profit or Loss
Gross margin Gross margin divided by Helps evaluate growth Yes Yes
% revenue trends, establish budgets
and assess
operational performance
and efficiencies
Operating profit Profit for the year excluding Operating profit is Yes Yes
financing and tax a key profit measure
that showcases
the level of profits
a company achieves once
it deducts all the costs
of running its core
business operation
EBITDA Profit/(loss) for the EBITDA is used as key Yes Yes
year before income tax profit measure because
expense, financing expense, it shows the results
foreign exchange losses, of normal, core operations
depreciation of right exclusive of income
of use assets, depreciation, or charges that are
amortisation and exceptional not considered to represent
items the underlying operational
Exceptional items are performance
material items that are
considered exceptional
in nature by virtue of
their size and/or incidence
EBITDA % EBITDA divided by revenue Helps evaluate growth Yes Yes
trends, establish budgets
and assess
operational performance
and efficiencies
EBITDA (post EBITDA less change in Operating cash flow Yes Yes
exceptional net working capital and is used as a trading
items) capital expenditure cash generation measure
because it shows the
results of normal, core
operations exclusive
of income or charges
that are not considered
to represent the underlying
operational
performance
Adjusted profit Statutory profit before Adjusted profit before Yes Yes
before tax tax adjusted to exclude tax is used as a measure
exceptionals to represent the results
for the business excluding
exceptional
items
Glossary (continued)
For the year ended 31 March 2021
KPIs including APMs (continued)
Metric Definition Rationale APM KPI
Operating cash EBITDA less change in Operating cash flow Yes Yes
flow net working capital and is used as a trading
capital expenditure cash generation measure
because it shows the
results of normal, core
operations exclusive
of income or charges
that are not considered
to represent the underlying
operational performance
Operating cash Operating cash flow divided Used to evaluate the Yes Yes
flow conversion by EBITDA efficiency of a company's
operations and its ability
to employ its earnings
toward repayment of
debt, capital expenditure
and working capital
requirements
Free cash flow Operating cash flow less Free cash flow is used Yes Yes
cash outflows for exceptional as a net cash flow measure
items, net interest paid, for the group before
taxation, lease liabilities changes in the debt/capital
and net cash foreign exchange structure
Consolidated Movement in cash flows To aid the understanding Yes No
non-GAAP Statement from EBITDA of the reader of the
of Cash Flows accounts of how the
Group's cash and cash
equivalents changed
during the period, including
cash inflows and outflows
in the period
Earnings per IFRS measure This indicates how much No Yes
share money a company makes
for each share of its
The calculation of earnings stock, and is a widely
Basic earnings per ordinary share is used metric to estimate
per share based on earnings after company value
tax and the weighted average A high EPS indicates
number of ordinary shares greater value because
Diluted earnings in issue during the period/year investors will pay more
per share Calculated by dividing for a company's shares
the profit attributable if they think the company Yes Yes
to ordinary equity holders has higher profits relative
of the parent by the weighted to its share price
Adjusted EPS average number of ordinary Used to gauge the quality
shares in issue during of EPS if all convertible
the period/year plus the securities were excluded
weighted average number
of ordinary shares that
would have been issued This metric enables
on conversion of all dilutive the profitability of
potential ordinary shares the Group and its ability
into ordinary shares to return funds to shareholders
EPS calculated using earnings to be evaluated consistently
before taking into account year on year, and against
exceptional items other businesses.
Normalised Adjusted EPS calculated using earnings Reconciliation of EPS Yes Yes
EPS before taking into account from the Remuneration
exceptional items and Committee Report
preference share interest
Ecommerce mic Ecommerce revenue as a Helps evaluate progress No Yes
% percentage of total revenue towards strategic objectives
DTC mix % DTC revenue as a percentage Helps evaluate progress No Yes
of total revenue towards strategic objectives
No. of stores Number of "own" stores Helps evaluate progress No Yes
open in the Group towards strategic objectives
Pairs Pairs of footwear sold Used to show volumes No Yes
during a period and grow this in the
Group
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END
FR GPUMPQUPGPWQ
(END) Dow Jones Newswires
June 17, 2021 02:00 ET (06:00 GMT)
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