Earnings Release • Apr 24, 2019
Earnings Release
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National Storage Mechanism | Additional information
RNS Number : 8649W
boohoo group plc
24 April 2019
For Immediate Release 24 April 2019
The information contained within this announcement is deemed by the company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
boohoo group plc - final results for the year ended 28 February 2019
Strong growth and solid profitability
| 2019 | 2018 | Change | |
| £ million | £ million | ||
| Revenue | 856.9 | 579.8 | +48% |
| Gross profit | 469.0 | 306.4 | +53% |
| Gross margin | 54.7% | 52.8% | +190bps |
| Adjusted EBITDA(1) | 84.5 | 56.9 | +49% |
| % of revenue | 9.9% | 9.8% | +10bps |
| Adjusted EBIT(2) | 75.1 | 50.4 | +49% |
| % of revenue | 8.8% | 8.7% | +10bps |
| Adjusted profit before tax(3) | 76.3 | 51.0 | +49% |
| Profit before tax | 59.9 | 43.3 | +38% |
| Adjusted diluted earnings per share(4) | 4.15p | 3.23p | +29% |
| Diluted earnings per share | 3.22p | 2.71p | +19% |
| Net cash(5) at year end | 190.7 | 133.0 | +£57.7 million |
Financial Highlights
Group
· Revenue £856.9 million, up 48% (47% CER(6))
· Strong revenue growth across all geographies with UK up 37% and international up 64%
· Gross margin increased to 54.7% (2018: 52.8%)
· Adjusted EBITDA £84.5 million, 9.9% of revenue (2018: £56.9 million, 9.8%)
· Adjusted profit before tax £76.3 million (2018: £51.0 million)
· Strong balance sheet with net cash of £190.7 million (2018: £133.0 million), with robust operating cash flow of £111.9 million (2018: £76.2 million)
boohoo
· Revenue £434.6 million up 16% (15% CER)
· Gross margin 52.9%, up 170bps
PrettyLittleThing
· Revenue £374.4 million up 107% (107% CER)
· Gross margin 56.6% up 140bps
Nasty Gal
· Revenue £47.9 million up 96% (100% CER)
· Gross margin 56.7% down 290bps
Operational Highlights
Group
· Burnley distribution centre extension build and fit-out completed, with automation live in April 2019
· PrettyLittleThing's distribution centre successfully relocated to a larger facility in Sheffield
boohoo
· 7.0 million active customers(7), up 9% on prior year
· Strong international growth, now 44% of total revenue
· Significant investments in customer service improving the customer proposition
PrettyLittleThing
· 5.0 million active customers, up 70% on prior year
· Customer proposition resonating with consumers, driving growth and increasing market share
· High profile celebrity associations driving traffic and international expansion, exceptionally well in the US
Nasty Gal
· 0.9 million active customers, up 122% on prior year
· Extensive product range now comprises over 8,000 lines
· Strong growth in US home market and international appeal and revenue growing rapidly
Outlook and guidance
Trading in the first few weeks of the financial year has been encouraging. Group revenue growth for the financial year is expected to be 25% to 30% with an adjusted EBITDA margin of around 10% and capital expenditure in the region of £50 to £60 million. This guidance includes the adoption of IFRS 16, which is expected to increase EBITDA by £4 to £5 million and be broadly neutral at a Profit Before Tax level.
Looking beyond the current year, we will continue to make investments across the group as part of our vision to lead the global fashion e-commerce market. Whilst this will require continued investments in people and infrastructure, we believe that the benefits of our multi-brand platform will continue to generate economies of scale, allowing us to target sales growth of 25% per annum, with an adjusted EBITDA margin of around 10% over the medium term.
John Lyttle, CEO, commented:
"I am very excited to have joined the boohoo Group at this key stage of its growth, with the group's disruptive and proven business model having delivered yet another excellent set of financial and operational results. In my short time within the business, I am delighted to have been able to meet a number of hugely talented people and have already been able to see many parts of the business. This has confirmed my belief and optimism that the group's investments into its brands and infrastructure have allowed it to develop a scalable multi-brand platform that is well-positioned to disrupt, gain market share and capitalise on what is a truly global opportunity."
Investor and analyst meeting
A meeting for analysts will be held today at the office of Buchanan, 107 Cheapside, London, EC2V 6DN commencing 9.30am (UK time).
A live audio webcast will be available at 9.30am via the following link:
http://webcasting.buchanan.uk.com/broadcast/5c6bc25be6e1d92d38f4ed2d
A replay will subsequently be available from 12 noon via the same link.
| Enquiries | |
| boohoo group plc | |
| Neil Catto, Chief Financial Officer | Tel: +44 (0)161 233 2050 |
| Alistair Davies, Investor Relations | Tel: +44 (0)161 233 2050 |
| Clara Melia, Investor Relations | Tel: +44 (0)20 3289 5520 |
| Zeus Capital - Nominated adviser and joint broker | |
| Nick Cowles/Andrew Jones (Corporate Finance) | Tel: +44 (0)161 831 1512 |
| John Goold/Benjamin Robertson (Corporate Broking) | Tel: +44 (0)20 3829 5000 |
| Jefferies Hoare Govett - Joint broker | |
| Nick Adams/Max Jones | Tel: +44 (0)20 7029 8000 |
| Buchanan - Financial PR adviser | [email protected] |
| Richard Oldworth/Sophie Wills/Maddie Seacombe | Tel: +44 (0)20 7466 5000 |
Notes:
(1) Adjusted EBITDA is calculated as profit before tax, interest, depreciation, amortisation, share-based payment charges and exceptional items.
(2) Adjusted EBIT is calculated as profit before tax, interest, share-based payment charges, amortisation of acquired PrettyLittleThing and Nasty Gal intangible assets and exceptional items.
(3) Adjusted profit before tax is calculated as profit before tax, excluding share-based payment charges, amortisation of acquired PrettyLittleThing and Nasty Gal intangible assets and exceptional items.
(4) Adjusted diluted earnings per share is calculated as diluted earnings per share, adding back amortisation of acquired PrettyLittleThing and Nasty Gal intangible assets, share-based payment charges and exceptional items.
(5) Net cash is cash less borrowings.
(6) CER designates Constant Exchange Rate translation of foreign currency revenue, which gives a truer indication of the performance in international markets by removing year-to-year exchange rate movements when local currency sales are converted to sterling.
(7) Active customers defined as having shopped in the last year.
About boohoo group plc
"Leading the fashion eCommerce market"
Founded in Manchester in 2006, boohoo is an inclusive and innovative brand targeting young, value-orientated customers. For 13 years, boohoo has been pushing boundaries to bring its customers up-to-date and inspirational fashion, 24/7. boohoo has grown rapidly in the UK and internationally, expanding its offering with range extensions into menswear, through boohooMAN, and now has over seven million active customers.
In early 2017 the group extended its customer offering through the acquisitions of the vibrant fashion brand PrettyLittleThing, and free-thinking brand Nasty Gal and in March 2019 acquired the Miss Pap brand. United by a shared customer value proposition, our brands design, source, market and sell great quality clothes, shoes and accessories at unbeatable prices. This investment proposition has helped us grow from a single brand, into a major multi-brand online retailer, leading the fashion eCommerce market for 16 to 30-year-olds around the world. Today the boohoo group has 13 million customer accounts across all its brands around the world.
Cautionary Statement
Certain statements included or incorporated by reference within this announcement may constitute "forward-looking statements" in respect of the group's operations, performance, prospects and/or financial condition. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words and words of similar meaning as "anticipates", "aims", "due", "could", "may", "will", "should", "expects", "believes", "intends", "plans", "potential", "targets", "goal" or "estimates". By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. No responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast. This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares or other securities of the Company. Past performance cannot be relied upon as a guide to future performance and persons needing advice should consult an independent financial adviser. Statements in this announcement reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this announcement shall be governed by English law. Nothing in this announcement shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.
Review of the business
"Another outstanding year from all our brands across all regions."
Overview
| 2019 | 2018 | Change | |
| £000 | £000 | ||
| Revenue | 856,920 | 579,800 | +48% |
| Gross profit | 468,994 | 306,355 | +53% |
| Gross margin | 54.7% | 52.8% | +190bps |
| EBITDA | 72,601 | 53,663 | +35% |
| % of revenue | 8.5% | 9.3% | -80bps |
| Profit before tax | 59,856 | 43,313 | +38% |
| Diluted earnings per share | 3.22p | 2.71p | +19% |
| Net cash(1) at year end | 190,726 | 133,047 | +£57.7m |
| Underlying: | |||
| Adjusted EBITDA(2) | 84,546 | 56,932 | +49% |
| % of revenue | 9.9% | 9.8% | +10bps |
| Adjusted EBIT(3) | 75,074 | 50,403 | +49% |
| % of revenue | 8.8% | 8.7% | +10bps |
| Adjusted profit before tax(4) | 76,250 | 51,031 | +49% |
| Adjusted diluted earnings per share(5) | 4.15p | 3.23p | +29% |
(1) Net cash is cash less borrowings.
(2) Adjusted EBITDA is calculated as profit before tax, interest, depreciation, amortisation, share-based payment charges and exceptional items.
(3) Adjusted EBIT is calculated as profit before tax, interest, share-based payment charges, amortisation of acquired PrettyLittleThing and Nasty Gal intangible assets and exceptional items.
(4) Adjusted profit before tax is calculated as profit before tax, excluding share-based payment charges and amortisation of acquired intangible assets and exceptional items.
(5) Adjusted diluted earnings per share is calculated as diluted earnings per share, adding back amortisation of acquired intangibles, share-based payment charges and exceptional items.
Group revenue for the year increased by 48% (47% CER) to £856.9 million (2018: £579.8 million). Revenue growth across all territories and brands was strong.
Adjusted EBITDA was £84.5 million (2018: £56.9 million), an increase of 49%, with improved gross margin across the group leading to an adjusted EBITDA margin of 9.9% (2018: 9.8%). Adjusted profit before tax was £76.3 million (2018: £51.0 million), an increase of 49%. Profit before tax was £59.9 million (2018: £43.3 million), an increase of 38%. Adjusted diluted earnings per share was 4.15p, up 29% on the prior year. Diluted earnings per share rose to 3.22p, an increase of 19% (2018: 2.71p).
The group has performed exceptionally well during the year. Revenues have increased across all our brands in all regions. Our focus on key international markets has been highly successful, producing growth of 64% and increasing international revenues to 43% of total revenue. PrettyLittleThing continues to perform exceptionally well, with a growth rate of 107%. Market share is increasing, driven by the customer proposition of great fashion at unbeatable prices, supported by an engaging social media presence and successful celebrity endorsements. Gross margins have improved as a result of stronger sell through, tighter control on stock cover and refinement of the customer proposition. Substantial investments have been completed to secure warehouse capacity for growth and improve the future efficiency of the Burnley warehouse with automation.
Cash flow generation was strong, with free cash flow up 118% to £65.1 million. Capital expenditure was £46.9 million as we invest in our infrastructure ahead of our growth curve. Our net cash balance at the period end increased to £190.7 million (2018: £133.0 million).
Distribution centres
During the year, the Burnley distribution centre extension build and fit-out was completed. Automation went live in April 2019, which will greatly improve picking efficiency and reduce costs in the financial year 2020 and beyond. We opened new welfare facilities to all Burnley employees and provided a bus service to the distribution centre from nearby towns. PrettyLittleThing's ("PLT") distribution centre relocation to Sheffield was completed successfully during July and August, with a low level of disruption to operations. Costs associated with this relocation are considered exceptional and amounted to £6.7 million. The addition of the Sheffield facility greatly increases our sales capacity, will help underpin PLT's infrastructure needs and adds further operational flexibility for the group. We continue to invest in our infrastructure, with our operations at Burnley and Sheffield representing significant stepping stones as we build towards creating a distribution network capable of generating £3 billion of net sales globally.
boohoo (including boohooMAN)
Performance
Revenue for the year increased to £434.6 million, up 16% on the previous year, with growth in all our key focus markets.
International growth continues to be strong and we are continuing to gain market share in the UK. Gross margin increased by 170bps to 52.9%, driven by improved stock control and refinement of the customer proposition.
Product
Our comprehensive size range offerings, the breadth of the product range and continuous fresh introductions have continued to drive growth. Hundreds of new styles are added daily and the very latest fashions appear within days or weeks of trends being spotted by our fashion experts and offered to our customers at affordable prices. boohooMAN has performed strongly with an extensive product range and increasing customer reach.
Marketing
Marketing activity included several high profile celebrity campaigns: Zendaya, Stefflon Don, French Montana, Dele Alli and Paris Hilton headed the cast and were instrumental in driving increased brand awareness. Other marketing activities continued using a successful formula of a mix of media, including social media influencers, reality TV ambassadors, bloggers, TV, outdoor, email, student events and digital acquisition channels. Our social media presence continues to grow and we now have 5.9 million followers on Instagram, 2.9 million Facebook fans and 0.5 million followers on Twitter.
Customer interaction
Active customer numbers over the last 12 months increased by 9% to 7.0 million. Conversion rate to sale decreased from 4.3% to 3.9% of sessions, when measured on website statistics alone. Order frequency increased 0.3%, with customers placing an order with us, on average, 2.14 times in 12 months, whilst the number of items per basket decreased 1% to 3.04.
Refinements to the customer proposition included free returns, next day delivery, shortened delivery times and more overseas collection points. The cut-off time for next day delivery in the UK is 11pm and SMS messaging for delivery status has been introduced. We are trialling artificial intelligence in customer contact response. We have 17 country-specific websites and have plans to introduce more foreign language websites optimised for local criteria, in line with our aim to attain best-in-class customer service.
Technology
The principal technology projects completed include new payment solutions and more country returns portals, which give more returns flexibility and enable us to refund customers immediately after the courier collects their parcel. We have also introduced social logins for UK customers.
The website and app are subject to continuous improvement in content, functionality, personalisation and ease of use. During the year we added visual search to the website, which enables customers to search for similar items either from a photograph they have uploaded or from an image on the website. Our app has been downloaded by nearly two million customers, generating a considerable growth in the number of visits.
PrettyLittleThing
Performance
PrettyLittleThing ("PLT") has had an enormously successful year, with revenues increasing by 107% to £374.4 million. All territories delivered strong growth and significant increases in market share and it is clear that there is both the demand and potential for this to continue. The relocation of the distribution centre to Sheffield in the summer was executed extremely well, with a low level of disruption to the business during the move. Exceptional costs associated with the move amounted to £6.7 million. Gross margin has increased 140bps to 56.6%, with stronger sell-through and refinements to the customer proposition.
Product
Renowned for having the latest and most relevant celebrity looks, PLT offers over 20,500 styles at affordable prices to its customers. PLT's "shape" ranges, which include Petite, Tall, Shape and Plus, have proved very popular in the year and have driven growth. Highly successful celebrity collaborations in the year included those with Model Hailey Baldwin, UK Radio presenter Maya Jama, American Hip-Hop stylist Karl Kani and US model Ashley Graham. The Karl Kani collaboration launched in January 2019 included PLT's first ever unisex product range.
Marketing
The PLT brand is promoted through a global multi-channel marketing approach which seeks to engage with customers across the world. Celebrity collaborations are supported by an influencer network which seeks to leverage the power of social media to engage with our customers, giving us a combined reach of over 350 million impressions globally. The PLT 'Royalty' programme, which has shown significant growth in the year, gives customers in the UK and Ireland free unlimited next day delivery and seeks to generate increased customer loyalty to the PLT brand. Brand awareness is also supported by more traditional marketing approaches such as PLT's sponsorship of the E! entertainment channel in the UK, Ireland, France and Australia, which directly appeals to PLT's target market, as well as out-of-home advertising including the now iconic fleet of PLT taxis operating in major cities throughout the UK.
Customer interaction
We support eight country-specific websites and have plans for further foreign language sites next year, following the success of the French language site, introduced in the previous financial year. For the UK market, we offer a wide range of free return options. We have also introduced new returns options in international markets, accelerating the point of refund to enhance the customer experience. Customers have the option of using a virtual customer service assistant for frequently asked questions, which greatly reduces response wait time as well as cutting costs.
Active customer numbers over the last 12 months increased by 70% to 5.0 million. Conversion rate to sale decreased from 3.7% to 3.3% of sessions, when measured on website statistics alone. Order frequency increased 12%, with customers placing an order with us, on average, 2.84 times in 12 months, whilst the number of items per basket increased 12% to 2.72. We have 1.9 million followers on Facebook, 0.3 million followers on Twitter, 10.5 million Instagram followers, as well as a presence on several other social media channels.
Technology
Investment in technology is paramount to PLT's success and we have a programme of work across our services and customer-facing applications. The separation of systems with our micro-service architecture has allowed our platform to be more adaptable to cope with the business's pace of change and the continuing growth of our customers' order volumes and website traffic. Through the global reach of the Cloud, we can roll out new services worldwide so they are hosted as close as possible to our customers and built in a way we can ensure high performance. This agility will allow us to continue to invest at pace, delivering new experiences and innovation to our customers.
Key highlights for this year have been the introduction of a new automated chatbot which provides customers with instant assistance on a number of contact categories. New payment methods have been launched, with further payment options planned for the coming financial year. Our iOS and android apps have been developed throughout the year to improve the customer experience and conversion rates.
Nasty Gal
Performance
Revenue growth has been strong across all territories with a growth rate of 96%, increasing revenue to £47.9 million. In the brand's principal market, the USA where the brand originated, growth has been very strong. The next largest market is the UK, where brand awareness has increased substantially and growth has been exceptionally high. Gross margin was 56.7%, a reduction on the previous year but in line with our proposition strategy.
Product
The product range has increased substantially to over 8,000 styles and targets price points higher than those of boohoo. The brand has its roots in Los Angeles and portrays a distinctive look for the confident girl who likes to express her personality through the clothes she wears. The appeal of the brand extends outside of the USA, as rapidly increasing sales in the UK have proven.
Marketing
The marketing strategy has focussed on building and extending the number of bloggers and influencers and staging key media events to re-engage customer interest and promote brand loyalty. Key influencers engaged during the year included Taylor le Shae and Emma Louise Connelly.
Customer interaction
Nasty Gal operates through six country and regional websites and Android and iOS apps in the UK, US and the Australian markets.
On social media we have 3.6 million followers on Instagram, 1.3 million Facebook likes and 0.2 million followers on Twitter.
From strength to strength
Financial review
"The group has achieved a strong performance with revenues and profits increasing in all territories."
Group revenue by brand
| 2019 | 2018 | Change | Change | |
| £000 | £000 | CER | ||
| boohoo | 434,565 | 374,115 | +16% | +15% |
| PrettyLittleThing | 374,445 | 181,269 | +107% | +107% |
| Nasty Gal | 47,910 | 24,416 | +96% | +100% |
| 856,920 | 579,800 | +48% | +47% |
Group revenue by geographical market
| 2019 | 2018 | Change | Change | |
| £000 | £000 | CER | ||
| UK | 488,199 | 355,614 | +37% | +37% |
| Rest of Europe | 115,124 | 66,281 | +74% | +67% |
| USA | 166,262 | 92,690 | +79% | +81% |
| Rest of world | 87,335 | 65,215 | +34% | +30% |
| 856,920 | 579,800 | +48% | +47% |
KPIs
boohoo
| 2019 | 2018 | Change | |
| Active customers(1) | 7.0 million | 6.4 million | +9% |
| Number of orders | 14.9 million | 13.6 million | +10% |
| Order frequency(2) | 2.14 | 2.13 | +0.3% |
| Conversion rate to sale (3) | 3.9% | 4.3% | -36bps |
| Average order value(4) | £41.38 | £39.25 | +5% |
| Number of items per basket | 3.04 | 3.06 | -1% |
PrettyLittleThing
| 2019 | 2018 | Change | |
| Active customers(1) | 5.0 million | 3.0 million | +70% |
| Number of orders | 14.3 million | 7.5 million | +89% |
| Order frequency(2) | 2.84 | 2.55 | +11.7% |
| Conversion rate to sale (3) | 3.3% | 3.7% | -47bps |
| Average order value(4) | £40.41 | £36.05 | +12% |
| Number of items per basket | 2.72 | 2.43 | +12% |
Nasty Gal
| 2019 | 2018 | Change | |
| Active customers(1) | 0.9 million | 0.4 million | +122% |
| Number of orders | 1.3 million | 0.6 million | +128% |
| Order frequency(2) | 1.41 | 1.37 | +2.9% |
| Conversion rate to sale (3) | 2.5% | 1.7% | +71bps |
| Average order value(4) | £49.83 | £52.82 | -6% |
| Number of items per basket | 3.15 | 2.89 | +9% |
(1) Defined as having shopped in the last 12 months
(2) Defined as number of orders in last 12 months divided by number of active customers
(3) Defined as the percentage of orders taken to internet sessions
(4) Calculated as gross sales including sales tax divided by the number of orders
Consolidated income statement
| 2019 | 2018 | Change | |
| £000 | £000 | ||
| Revenue | 856,920 | 579,800 | +48% |
| Cost of sales | (387,926) | (273,445) | +42% |
| Gross profit | 468,994 | 306,355 | +53% |
| Gross margin | 54.7% | 52.8% | +190bps |
| Operating costs | (384,687) | (249,582) | |
| Other income | 239 | 159 | |
| Adjusted EBITDA | 84,546 | 56,932 | +49% |
| Adjusted EBITDA margin % | 9.9% | 9.8% | +10bps |
| Depreciation | (6,972) | (3,997) | |
| Amortisation of other intangible assets | (2,500) | (2,532) | |
| Adjusted EBIT | 75,074 | 50,403 | +49% |
| Adjusted EBIT margin % | 8.8% | 8.7% | +10bps |
| Adjusting items: | |||
| Amortisation of acquired PrettyLittleThing and Nasty Gal intangible assets | (4,449) | (4,449) | |
| Equity-settled share-based payment charges | (5,278) | (3,269) | |
| Exceptional items - warehouse relocation | (6,667) | - | |
| Operating profit | 58,680 | 42,685 | +37% |
| Finance income | 1,320 | 774 | |
| Finance expense | (144) | (146) | |
| Profit before tax | 59,856 | 43,313 | +38% |
| Tax | (12,397) | (7,313) | |
| Profit after tax for the year | 47,459 | 36,000 | +32% |
| Diluted earnings per share | 3.22p | 2.71p | +19% |
| Adjusted profit after tax for the year | 60,803 | 42,310 | +44% |
| Amortisation of acquired PrettyLittleThing and Nasty Gal intangible assets | (4,449) | (4,449) | |
| Share-based payment charges | (5,278) | (3,269) | |
| Exceptional items - warehouse relocation | (6,667) | - | |
| Adjustment for tax | 3,050 | 1,408 | |
| Profit after tax for the year | 47,459 | 36,000 | |
| Adjusted profit for the period attributable to shareholders of the company | 48,781 | 37,610 | +30% |
| Adjusted diluted earnings per share | 4.15p | 3.23p | +29% |
Gross margin increased from 52.8% to 54.7%, due to improvements in the customer proposition, tighter stock control and reduced clearance.
Operating costs comprise distribution costs and administrative expenses excluding depreciation and amortisation and have increased by 180bps on revenue. The distribution cost element excluding depreciation and exceptional item has increased with revenue growth and increased on the prior year as a percentage of revenue by 146bps due to the higher proportion of international shipments. The administrative expense element, which includes marketing expenses, but excluding the exceptional item, share-based payment charges, depreciation, amortisation and amortisation of acquired intangibles, has risen due to the combination of revenue growth and the building of our infrastructure to support the future business expansion and increased by a small margin of 37bps on the prior year percentage of revenue.
Adjusted EBITDA, which is not a statutory measure, represents earnings before interest, tax, depreciation, amortisation, non-cash share-based payments charges and exceptional items. It provides a useful measure of the underlying profitability of the business. Adjusted EBITDA increased by 49% from £56.9 million to £84.5 million and, as a percentage of revenue, increased from 9.8% to 9.9%.
Adjusted profit after tax, as with Adjusted EBITDA, provides another more consistent measure of the underlying profitability of the business by removing non-cash amortisation of intangible assets relating to the acquisition of PrettyLittleThing and Nasty Gal (being their trademarks and customer lists), share-based payment charges and exceptional items.
Taxation
The effective rate of tax for the year was 20.7% (2018: 16.9%), which is higher (2018: lower) than the blended UK statutory rate of tax for the year of 19.0% (2018: 19.1%), due to expenditure not deductible for tax purposes, the increase this year being principally depreciation on buildings and fit-out.
Consolidated statement of financial position
| 2019 | 2018 | ||
| £000 | £000 | ||
| Intangible assets | 27,165 | 30,877 | |
| Property, plant and equipment | 108,498 | 71,994 | |
| Financial assets | 3,756 | 2,445 | |
| Deferred tax asset | 4,034 | 6,479 | |
| Non-current assets | 143,453 | 111,795 | |
| Working capital | (64,969) | (30,923) | |
| Net financial assets | 4,047 | 5,466 | |
| Cash and cash equivalents | 197,872 | 142,575 | |
| Interest-bearing loans and borrowings | (7,146) | (9,528) | |
| Deferred tax liability | (2,102) | (2,101) | |
| Net current tax liability | (753) | (4,505) | |
| Net assets | 270,402 | 212,779 |
Working capital has reduced primarily due to an increase in payables and accruals relating to our increased trading activity.
Intangible and fixed asset additions
| 2019 | 2018 | ||
| £000 | £000 | ||
| Purchased intangible and fixed assets | |||
| Intangible assets | |||
| Patents and licences | 307 | 9 | |
| Software | 2,930 | 2,403 | |
| 3,237 | 2,412 | ||
| Tangible fixed assets | |||
| Distribution centres | 36,678 | 33,753 | |
| Offices, office equipment, fixtures and fit-outs | 6,837 | 9,991 | |
| Motor vehicles | 115 | 228 | |
| 43,630 | 43,972 | ||
| Total intangible and fixed asset additions | 46,867 | 46,384 |
Liquidity and financial resources
Operating cash flow was £111.9 million compared to £76.2 million in the previous year and free cash flow was £65.1 million compared to £29.9 million in the previous financial year. Capital expenditure was £46.9 million, which includes a £36.7 million investment in our distribution centres to support projected growth in trade. The closing cash balance for the group was £197.9 million and the net cash balance £190.7 million.
| Consolidated cash flow statement | |||
| 2019 | 2018 | ||
| £000 | £000 | ||
| Profit for the year | 47,459 | 36,000 | |
| Depreciation charges and amortisation | 13,921 | 10,978 | |
| Share-based payments charge | 5,278 | 3,269 | |
| Loss on sale of fixed assets | 24 | - | |
| Tax expense | 12,397 | 7,313 | |
| Finance income | (1,320) | (774) | |
| Finance expense | 144 | 146 | |
| Increase in inventories | (18,558) | (14,078) | |
| Increase in trade and other receivables | (4,935) | (5,393) | |
| Increase in trade and other payables | 57,513 | 38,780 | |
| Operating cash flow | 111,923 | 76,241 | |
| Capital expenditure and intangible asset purchases | (46,867) | (46,384) | |
| Free cash flow | 65,056 | 29,857 | |
| Net proceeds from the issue of ordinary shares | 3,653 | 51,531 | |
| Purchase of own shares by EBT | (1,833) | - | |
| Proceeds from the sale of fixed assets | 59 | - | |
| Finance income received | 1,249 | 612 | |
| Finance expense paid | (144) | (146) | |
| Tax paid | (10,361) | (7,227) | |
| Repayment of borrowings | (2,382) | (2,382) | |
| Net cash flow | 55,297 | 72,245 | |
| Cash and cash equivalents at beginning of year | 142,575 | 70,330 | |
| Cash and cash equivalents at end of year | 197,872 | 142,575 | |
Trends and factors likely to affect future performance
The market for online fashion is forecast to continue to grow and, along with the increasing use of the internet globally, provides a favourable backdrop for the group with much opportunity for further growth. Customers throughout the world are seeking a wide choice of quality products at value prices lower than those available on the high street with the convenience of home delivery. The group's target market has a high propensity to spend on fashion and the market is resilient to external macroeconomic factors.
Outlook
The continued strong growth of our brands across all geographic regions is highly encouraging. Our proven strategy offering the latest fashion at unbeatable prices, supported by excellent customer service continues to resonate with consumers globally. Investments in our proposition and technology ensure we remain innovative and live up to our customers' expectations.
Our extended Burnley distribution centre now has a significant element of automation, which will enhance productivity and improve efficiency. Following the addition of the Sheffield facility for PrettyLittleThing, our distribution centres in Burnley and Sheffield represent significant stepping stones as we build towards creating a distribution network capable of generating £3 billion of net sales globally.
Trading in the first few weeks of the financial year has been encouraging. Group revenue growth for the financial year is expected to be 25% to 30% with an adjusted EBITDA margin of around 10% and capital expenditure in the region of £50 to £60 million. This guidance includes the adoption of IFRS 16, which is expected to increase EBITDA by £4 to £5 million and be broadly neutral at a Profit Before Tax level.
Looking beyond the current year, we will continue to make investments across the group as part of our vision to lead the global fashion e-commerce market. Whilst this will require continued investments in people and infrastructure, we believe that the benefits of our multi-brand platform will continue to generate economies of scale, allowing us to target sales growth of 25% per annum, with an adjusted EBITDA margin of around 10% over the medium term.
Consolidated statement of comprehensive income
for the year ended 28 February 2019
| Note | 2019 | 2018 | ||
| £000 | £000 | |||
| Revenue | 2 | 856,920 | 579,800 | |
| Cost of sales | (387,926) | (273,445) | ||
| Gross profit | 468,994 | 306,355 | ||
| Distribution costs | (207,083) | (126,757) | ||
| Exceptional distribution costs | (6,162) | - | ||
| Other distribution costs | (200,921) | (126,757) | ||
| Administrative expenses | (203,470) | (137,072) | ||
| Exceptional administrative expenses | (505) | - | ||
| Amortisation of acquired intangibles | (4,449) | (4,449) | ||
| Other administrative expenses | (198,516) | (132,623) | ||
| Other income | 3 | 239 | 159 | |
| Operating profit | 58,680 | 42,685 | ||
| Finance income | 4 | 1,320 | 774 | |
| Finance expense | (144) | (146) | ||
| Profit before tax | 6 | 59,856 | 43,313 | |
| Taxation | 10 | (12,397) | (7,313) | |
| Profit for the year | 47,459 | 36,000 | ||
| Profit for the year attributable to: | ||||
| Owners of the parent company | 37,772 | 31,652 | ||
| Non-controlling interests | 9,687 | 4,348 | ||
| 47,459 | 36,000 | |||
| Total other comprehensive income for the year | ||||
| (Gain)/loss reclassified to profit and loss during the year | (2,337) | 6,516 | ||
| Fair value gain on cash flow hedges during the year | 2,229 | 12,981 | ||
| Total comprehensive income for the year | 47,351 | 55,497 | ||
| Total comprehensive income attributable to: | ||||
| Equity attributable to owners of the parent company | 37,664 | 51,149 | ||
| Non-controlling interests | 9,687 | 4,348 | ||
| 47,351 | 55,497 | |||
| Earnings per share | 7 | |||
| Basic | 3.27p | 2.78p | ||
| Diluted | 3.22p | 2.71p |
Consolidated statement of financial position
at 28 February 2019
| Note | 2019 | 2018 | ||
| £000 | £000 | |||
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 11 | 27,165 | 30,877 | |
| Property, plant and equipment | 12 | 108,498 | 71,994 | |
| Financial assets | 3,756 | 2,445 | ||
| Deferred tax | 14 | 4,034 | 6,479 | |
| 143,453 | 111,795 | |||
| Current assets | ||||
| Inventories | 15 | 66,806 | 48,248 | |
| Trade and other receivables | 16 | 22,576 | 17,499 | |
| Financial assets | 5,883 | 6,770 | ||
| Current tax receivable | 3,186 | - | ||
| Cash and cash equivalents | 17 | 197,872 | 142,575 | |
| Total current assets | 296,323 | 215,092 | ||
| Total assets | 439,776 | 326,887 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | 18 | (154,351) | (96,670) | |
| Interest-bearing loans and borrowings | 19 | (2,382) | (2,382) | |
| Financial liabilities | (1,421) | (837) | ||
| Current tax liability | (3,939) | (4,505) | ||
| Total current liabilities | (162,093) | (104,394) | ||
| Non-current liabilities | ||||
| Interest-bearing loans and borrowings | 19 | (4,764) | (7,146) | |
| Financial liabilities | (415) | (467) | ||
| Deferred tax | 14 | (2,102) | (2,101) | |
| Total liabilities | (166,501) | (114,108) | ||
| Net assets | 270,402 | 212,779 | ||
| Equity | ||||
| Share capital | 20 | 11,631 | 11,496 | |
| Share premium | 606,086 | 602,578 | ||
| Capital redemption reserve | 100 | 100 | ||
| Hedging reserve | 7,803 | 7,911 | ||
| EBT reserve | (2,174) | (351) | ||
| Translation reserve | - | 168 | ||
| Reconstruction reserve | (515,282) | (515,282) | ||
| Non-controlling interest | 19,064 | 8,761 | ||
| Retained earnings | 143,174 | 97,398 | ||
| Total equity | 270,402 | 212,779 |
Consolidated statement of changes in equity
| Share capital | Share premium | Capital redemption reserve | Hedging reserve | EBT reserve | Translation reserve | Reconstruction reserve | Non-controlling interest | Retained earnings | Total equity | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| Balance at 28 February 2017 | 11,233 | 551,720 | 100 | (11,586) | (761) | 5 | (515,282) | 3,978 | 61,089 | 100,496 |
| Profit for the year | - | - | - | - | - | - | - | 4,348 | 31,652 | 36,000 |
| Other comprehensive income: | ||||||||||
| Loss reclassified to profit and loss in revenue | - | - | - | 6,516 | - | - | - | - | - | 6,516 |
| Fair value gain on cash flow hedges during the year | - | - | - | 12,981 | - | - | - | - | - | 12,981 |
| Total comprehensive income for the year | - | - | - | 19,497 | - | - | - | 4,348 | 31,652 | 55,497 |
| Issue of shares | 263 | 50,858 | - | - | 410 | - | - | - | - | 51,531 |
| Share-based payments credit | - | - | - | - | - | - | - | 435 | 2,834 | 3,269 |
| Excess deferred tax on share-based payments | - | - | - | - | - | - | - | - | 1,823 | 1,823 |
| Translation of foreign operations | - | - | - | - | - | 163 | - | - | - | 163 |
| Balance at 28 February 2018 | 11,496 | 602,578 | 100 | 7,911 | (351) | 168 | (515,282) | 8,761 | 97,398 | 212,779 |
| Profit for the year | - | - | - | - | - | - | - | 9,687 | 37,772 | 47,459 |
| Other comprehensive income/(expense): | ||||||||||
| Gain reclassified to profit and loss in revenue | - | - | - | (2,337) | - | - | - | - | - | (2,337) |
| Fair value gain on cash flow hedges during the year | - | - | - | 2,229 | - | - | - | - | - | 2,229 |
| Total comprehensive income for the year | - | - | - | (108) | - | - | - | 9,687 | 37,772 | 47,351 |
| Issue of shares | 135 | 3,508 | - | - | (1,823) | - | - | - | - | 1,820 |
| Share-based payments credit | - | - | - | - | - | - | - | 616 | 4,662 | 5,278 |
| Excess deferred tax on share-based payments | - | - | - | - | - | - | - | - | 3,342 | 3,342 |
| Translation of foreign operations | - | - | - | - | - | (168) | - | - | - | (168) |
| Balance at 28 February 2019 | 11,631 | 606,086 | 100 | 7,803 | (2,174) | - | (515,282) | 19,064 | 143,174 | 270,402 |
Consolidated cash flow statement
for the year ended 28 February 2019
| Note | 2019 | 2018 | ||
| £000 | £000 | |||
| Cash flows from operating activities | ||||
| Profit for the year | 47,459 | 36,000 | ||
| Adjustments for: | ||||
| Share-based payments charge | 5,278 | 3,269 | ||
| Depreciation charges and amortisation | 13,921 | 10,978 | ||
| Loss on sale of fixed assets | 24 | - | ||
| Finance income | (1,320) | (774) | ||
| Finance expense | 144 | 146 | ||
| Tax expense | 12,397 | 7,313 | ||
| 77,903 | 56,932 | |||
| Increase in inventories | 15 | (18,558) | (14,078) | |
| Increase in trade and other receivables | 16 | (4,935) | (5,393) | |
| Increase in trade and other payables | 18 | 57,513 | 38,780 | |
| Cash generated from operations | 111,923 | 76,241 | ||
| Tax paid | (10,361) | (7,227) | ||
| Net cash generated from operating activities | 101,562 | 69,014 | ||
| Cash flows from investing activities | ||||
| Acquisition of intangible assets | 11 | (3,237) | (2,412) | |
| Acquisition of property, plant and equipment | 12 | (43,630) | (43,972) | |
| Proceeds from the sale of fixed assets | 59 | - | ||
| Finance income received | 1,249 | 612 | ||
| Net cash used in investing activities | (45,559) | (45,772) | ||
| Cash flows from financing activities | ||||
| Proceeds from the issue of ordinary shares | 3,653 | 52,281 | ||
| Share issue costs written off to share premium | - | (750) | ||
| Purchase of own shares by EBT | (1,833) | - | ||
| Finance expense paid | (144) | (146) | ||
| Repayment of borrowings | (2,382) | (2,382) | ||
| Net cash (used in)/generated from financing activities | (706) | 49,003 | ||
| Increase in cash and cash equivalents | 55,297 | 72,245 | ||
| Cash and cash equivalents at beginning of year | 142,575 | 70,330 | ||
| Cash and cash equivalents at end of year | 197,872 | 142,575 |
Notes to the financial statements
(forming part of the financial statements)
1 Accounting policies
General information
boohoo group plc is a public limited company incorporated and domiciled in Jersey and listed on the Alternative Investment Market (AIM) of the London Stock Exchange. Its registered office address is: 12 Castle Street, St Helier, Jersey, JE2 3RT. The company was incorporated on 19 November 2013 and changed its name from boohoo.com plc to boohoo group plc on 10 July 2018.
Basis of preparation
This condensed consolidated financial information for the year ended 28 February 2019 has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards as adopted by the European Union ("Adopted IFRSs"), IFRS IC Interpretations and the Companies (Jersey) Law 1991.
The financial information contained in this preliminary announcement for the years ended 28 February 2019 and 28 February 2018 does not comprise the group's statutory financial statements within the meaning of Companies (Jersey) Law 1991. Statutory accounts for the year ended 28 February 2019 will be filed with the Jersey Companies Registry in due course. The auditors' report on the statutory accounts for each of the years ended 28 February 2019 and 28 February 2018 is unqualified, does not draw attention to any matters by way of emphasis and does not contain any statement under any matters that are required to be reported by exception under Companies (Jersey) Law 1991.
Standards, amendments and interpretations to standards that are effective and have been adopted by the group and/or company.
IFRS 9, "Financial instruments" (effective 1 January 2018). It has been determined that all existing effective hedging instruments continued to qualify for hedge accounting under IFRS 9. The adoption of the standard has therefore had no effect on the financial statements. Changes to the classification, impairment and measurement of financial assets and liabilities have been considered and it has been concluded these changes do not impact the group.
IFRS 15, "Revenue from contracts with customers" (effective 1 January 2018). Revenue is recognised in the financial statements when the customer receives the goods ordered. Revenue from the purchase of annual delivery services is spread over the period of the service. The adoption of the standard has therefore had no impact on existing revenue recognition policies.
Going concern
The directors have reviewed the group's forecast and projections, including assumptions concerning capital expenditure and expenditure commitments and their impact on cash flows, and have a reasonable expectation that the group has adequate financial resources to continue its operations for the foreseeable future. For this reason they have continued to adopt the going concern basis in preparing the financial statements.
In preparing the preliminary announcement, the directors have also made reasonable and prudent judgements and estimates and prepared the preliminary announcement on the going concern basis. The preliminary announcement and management report contained herein give a true and fair view of the assets, liabilities, financial position and profit and loss of the group.
2 Segmental analysis
IFRS 8, "Operating Segments", requires operating segments to be determined based on the group's internal reporting to the chief operating decision maker. The chief operating decision maker is considered to be the executive board, which has determined that the primary segmental reporting format of the group for 2019 is by business unit. This is based on the group's management and internal reporting structure, i.e. boohoo including boohooMAN, PrettyLittleThing ("PLT") and Nasty Gal.
The executive board assesses the performance of each segment based on revenue and gross profit after distribution expenses and before administrative expenses.
| Year ended 28 February 2019 | ||||||
| boohoo | PLT | Nasty Gal | Total | |||
| £000 | £000 | £000 | £000 | |||
| Revenue | 434,565 | 374,445 | 47,910 | 856,920 | ||
| Cost of sales | (204,474) | (162,687) | (20,765) | (387,926) | ||
| Gross profit | 230,091 | 211,758 | 27,145 | 468,994 | ||
| Distribution costs | (98,901) | (90,000) | (12,020) | (200,921) | ||
| Exceptional distribution costs | - | (6,162) | - | (6,162) | ||
| Segment result | 131,190 | 115,596 | 15,125 | 261,911 | ||
| Administrative expenses - other | - | - | - | (198,516) | ||
| Exceptional administrative expenses | - | - | - | (505) | ||
| Amortisation of acquired intangibles | - | - | - | (4,449) | ||
| Other income | - | - | - | 239 | ||
| Operating profit | - | - | - | 58,680 | ||
| Finance income | - | - | - | 1,320 | ||
| Finance expense | - | - | - | (144) | ||
| Profit before tax | - | - | - | 59,856 | ||
| Year ended 28 February 2018 | ||||||
| boohoo | PLT | Nasty Gal | Total | |||
| £000 | £000 | £000 | £000 | |||
| Revenue | 374,115 | 181,269 | 24,416 | 579,800 | ||
| Cost of sales | (182,394) | (81,175) | (9,876) | (273,445) | ||
| Gross profit | 191,721 | 100,094 | 14,540 | 306,355 | ||
| Distribution costs | (80,417) | (40,661) | (5,679) | (126,757) | ||
| Segment result | 111,304 | 59,433 | 8,861 | 179,598 | ||
| Administrative expenses - other | - | - | - | (132,623) | ||
| Amortisation of acquired intangibles | - | - | - | (4,449) | ||
| Other income | - | - | - | 159 | ||
| Operating profit | - | - | - | 42,685 | ||
| Finance income | - | - | - | 774 | ||
| Finance expense | - | - | - | (146) | ||
| Profit before tax | - | - | - | 43,313 |
Revenue by geographic region
| 2019 | 2018 | ||
| £000 | £000 | ||
| UK | 488,199 | 355,614 | |
| Rest of Europe | 115,124 | 66,281 | |
| USA | 166,262 | 92,690 | |
| Rest of world | 87,335 | 65,215 | |
| 856,920 | 579,800 |
3 Other income
| 2019 | 2018 | ||
| £000 | £000 | ||
| Property rental income | 239 | 159 |
4 Finance income and expense
| 2019 | 2018 | ||
| £000 | £000 | ||
| Finance income: Bank interest received | 1,320 | 774 | |
| Finance expense: Loan interest paid | (144) | (146) |
5 Auditors' remuneration
| 2019 | 2018 | |
| £000 | £000 | |
| Audit of these financial statements | 10 | 10 |
| Disclosure below based on amounts receivable in respect of services to the group | ||
| Amounts receivable by auditors and their associates in respect of: | ||
| Audit of financial statements of subsidiaries pursuant to legislation | 138 | 120 |
| Other services relating to taxation | 96 | 104 |
| Other advisory services | 81 | 52 |
| 325 | 286 |
6 Profit before tax
| Profit before tax is stated after charging: | 2019 | 2018 |
| £000 | £000 | |
| Operating lease rentals for buildings | 2,235 | 1,509 |
| Equity-settled share-based payment charges | 5,278 | 3,269 |
| Exceptional items - warehouse relocation | 6,667 | - |
| Depreciation of property, plant and equipment | 6,972 | 3,997 |
| Amortisation of intangible assets | 2,500 | 2,532 |
| Amortisation of acquired intangible assets | 4,449 | 4,449 |
The exceptional items relate to the additional costs of relocation of all the inventory held by PrettyLittleThing to a third-party managed warehouse in July 2018.
7 Earnings per share
Basic earnings per share is calculated by dividing profit after tax attributable to members of the holding company by the weighted average number of shares in issue during the year. Own shares held by the Employee Benefit Trust are eliminated from the weighted average number of shares. Diluted earnings per share is calculated by dividing the profit after tax attributable to members of the holding company by the weighted average number of shares in issue during the year, adjusted for potentially dilutive share options.
| 2019 | 2018 | ||
| Weighted average shares in issue for basic earnings per share | 1,154,130,568 | 1,138,722,751 | |
| Dilutive share options | 20,304,294 | 27,108,839 | |
| Weighted average shares in issue for diluted earnings per share | 1,174,434,862 | 1,165,831,590 | |
| Earnings (£000) | 37,772 | 31,652 | |
| Basic earnings per share | 3.27p | 2.78p | |
| Diluted earnings per share | 3.22p | 2.71p | |
| Earnings (£000) | 37,772 | 31,652 | |
| Adjusting items: | |||
| Amortisation of intangible assets arising on acquisitions | 4,449 | 4,449 | |
| Share-based payment charges | 5,278 | 3,269 | |
| Exceptional items - warehouse relocation | 6,667 | - | |
| Adjustment for tax | (3,050) | (1,408) | |
| Adjustment for non-controlling interest | (2,335) | (352) | |
| Adjusted earnings | 48,781 | 37,610 | |
| Adjusted basic earnings per share | 4.23p | 3.30p | |
| Adjusted diluted earnings per share | 4.15p | 3.23p | |
Adjusted earnings and adjusted earnings per share gives a more consistent measure of the underlying performance of the business excluding non-cash accounting charges relating to the amortisation of intangible assets valued upon acquisitions, non-cash share-based payment charges and other exceptional items.
8 Staff numbers and costs
The average monthly number of persons employed by the group (including directors) during the year, analysed by category, was as follows:
| Number of employees | ||
| 2019 | 2018 | |
| Administration | 1,303 | 955 |
| Distribution | 885 | 1,220 |
| 2,188 | 2,175 |
The aggregate payroll costs of these persons were as follows:
| 2019 | 2018 | |
| £000 | £000 | |
| Wages and salaries | 62,505 | 49,510 |
| Social security costs | 6,419 | 5,553 |
| Post-employment benefits | 1,123 | 647 |
| Equity-settled share-based payment charges | 5,278 | 3,269 |
| 75,325 | 58,979 |
9 Directors' and key management compensation
| 2019 | 2018 | |
| £000 | £000 | |
| Short-term employee benefits | 10,616 | 5,856 |
| Post-employment benefits | 217 | 131 |
| Equity-settled share-based payment charges | 907 | 454 |
| 11,740 | 6,441 |
Directors' and key management compensation comprises the group directors and executive committee members.
10 Taxation
| 2019 | 2018 | |
| £000 | £000 | |
| Analysis of charge in year | ||
| Current tax on income for the year | 12,411 | 9,294 |
| Adjustments in respect of prior year taxes | (54) | (1,323) |
| Deferred taxation | 40 | (658) |
| Tax on profit on ordinary activities | 12,397 | 7,313 |
| The total tax charge differs from the amount computed by applying the blended UK rate of 19.0% for the year (2018: 19.08%) to profit before tax as a result of the following: | ||
| Profit on ordinary activities before tax | 59,856 | 43,313 |
| Profit before tax multiplied by the standard rate of corporation tax of the UK of 19.0% (2018: 19.08%) | 11,373 | 8,273 |
| Effects of: | ||
| Expenses not deductible for tax purposes | 454 | 375 |
| Adjustments in respect of prior year taxes | (54) | (1,323) |
| Overseas tax differentials | 5 | 9 |
| Depreciation in excess of/(less than) capital allowances | 619 | (21) |
| Tax on profit on ordinary activities | 12,397 | 7,313 |
| Tax recognised in the statement of changes in equity | ||
| Deferred tax credit on movement in tax base of share options | 3,342 | 1,823 |
No current tax was recognised in other comprehensive income (2018: £nil).
A change to reduce the main rate of corporation tax to 17% from 1 April 2020 was announced in the Chancellor's budget on 16 March 2016. Changes to reduce the UK corporation tax rate to 17% from 1 April 2020 were substantively enacted on 15 September 2016. The prior year tax adjustment is in respect of tax incentives for research and development expenditure.
11 Intangible assets
| Patents and licences | Trademarks | Customer lists | Computer software | Total | |
| £000 | £000 | £000 | £000 | £000 | |
| Cost | |||||
| Balance at 1 March 2017 | 310 | 25,070 | 5,826 | 9,208 | 40,414 |
| Additions | 9 | - | - | 2,403 | 2,412 |
| Disposals | - | - | - | (567) | (567) |
| Balance at 28 February 2018 | 319 | 25,070 | 5,826 | 11,044 | 42,259 |
| Additions | 307 | - | - | 2,930 | 3,237 |
| Disposals | - | - | - | (2,096) | (2,096) |
| Balance at 28 February 2019 | 626 | 25,070 | 5,826 | 11,878 | 43,400 |
| Accumulated amortisation | |||||
| Balance at 1 March 2017 | 180 | 167 | 267 | 4,354 | 4,968 |
| Amortisation for year | 31 | 2,507 | 1,942 | 2,501 | 6,981 |
| Disposals | - | - | - | (567) | (567) |
| Balance at 28 February 2018 | 211 | 2,674 | 2,209 | 6,288 | 11,382 |
| Amortisation for year | 74 | 2,507 | 1,942 | 2,426 | 6,949 |
| Disposals | - | - | - | (2,096) | (2,096) |
| Balance at 28 February 2019 | 285 | 5,181 | 4,151 | 6,618 | 16,235 |
| Net book value | |||||
| At 29 February 2017 | 130 | 24,903 | 5,559 | 4,854 | 35,446 |
| At 28 February 2018 | 108 | 22,396 | 3,617 | 4,756 | 30,877 |
| At 28 February 2019 | 341 | 19,889 | 1,675 | 5,260 | 27,165 |
Within the statement of comprehensive income, amortisation of acquired intangible assets (trademarks and customer lists) of £4,449,000 (2018: £4,449,000) is shown separately. The amount of amortisation included in distribution costs is £648,000 (2018: £629,000) and in administrative expenses is £1,852,000 (2018: £1,903,000).
12 Property, plant and equipment
| Short leasehold | Fixtures and fittings | Computer equipment | Motor vehicles | Land & buildings | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Cost | ||||||
| Balance at 1 March 2017 | 1,121 | 15,605 | 2,484 | 285 | 17,896 | 37,391 |
| Additions | 1,156 | 19,911 | 1,593 | 228 | 21,084 | 43,972 |
| Disposals | (54) | (72) | (540) | (74) | - | (740) |
| Balance at 28 February 2018 | 2,223 | 35,444 | 3,537 | 439 | 38,980 | 80,623 |
| Additions | 3,896 | 36,775 | 1,575 | 115 | 1,269 | 43,630 |
| Exchange differences | - | - | - | - | (73) | (73) |
| Disposals | (94) | (375) | (592) | (123) | - | (1,184) |
| Balance at 28 February 2019 | 6,025 | 71,844 | 4,520 | 431 | 40,176 | 122,996 |
| Accumulated depreciation | ||||||
| Balance at 1 March 2017 | 437 | 2,702 | 1,511 | 122 | 600 | 5,372 |
| Depreciation charge for the year | 328 | 2,463 | 763 | 85 | 358 | 3,997 |
| Disposals | (54) | (72) | (540) | (74) | - | (740) |
| Balance at 28 February 2018 | 711 | 5,093 | 1,734 | 133 | 958 | 8,629 |
| Depreciation charge for the year | 566 | 4,646 | 1,144 | 127 | 489 | 6,972 |
| Exchange differences | - | - | - | - | (2) | (2) |
| Disposals | (94) | (364) | (592) | (51) | - | (1,101) |
| Balance at 28 February 2019 | 1,183 | 9,375 | 2,286 | 209 | 1,445 | 14,498 |
| Net book value | ||||||
| At 28 February 2017 | 684 | 12,903 | 973 | 163 | 17,296 | 32,019 |
| At 28 February 2018 | 1,512 | 30,351 | 1,803 | 306 | 38,022 | 71,994 |
| At 28 February 2019 | 4,842 | 62,469 | 2,234 | 222 | 38,731 | 108,498 |
The amounts of depreciation included in the statement of comprehensive income in distribution costs is £4,003,000 (2018: £2,440,000) and in administrative expenses is £2,969,000 (2018: £1,557,000). Depreciation of the automation equipment contained in the £37 million of additions to fixtures and fittings will commence in April 2019 when the assets are entered into service.
13 Investments
The subsidiaries held and consolidated in these financial statements are set out below:
| Name of company | Principal activity | Country of incorporation | Address | Percentage ownership |
| ABK Limited | Holding company | Jersey | 12 Castle St, St Helier, Jersey | 100% |
| boohoo.com UK Limited | Trading company | UK | 49-51 Dale St, Manchester | 100% |
| Boo Who Limited | Dormant company | UK | 49-51 Dale St, Manchester | 100% |
| boohoo.com USA Limited | Dormant company | UK | 49-51 Dale St, Manchester | 100% |
| boohoo.com USA Inc | Marketing office | USA | 3 West 13th Street, New York | 100% |
| boohoo.com Australia Pty Ltd | Marketing office | Australia | 468 St Kilda Road, Melbourne | 100% |
| boohoo France SAS | Marketing office | France | 15, rue Bachaumont, Paris | 100% |
| PrettyLittleThing.com Limited | Internet fashion retail | UK | Wellington Mill, Pollard Street East, Manchester | 66% |
| 21Three Clothing Company Limited | Dormant company | UK | Wellington Mill, Pollard Street East, Manchester | 66% |
| PrettyLittleThing.com USA Inc | Marketing office | USA | 1209 Orange Street, Delaware | 66% |
| Nasty Gal.com Limited | Trading company | UK | 49-51 Dale St, Manchester | 100% |
| Nasty Gal.com USA Inc | Marketing office | USA | 6600 W Sunset Boulevard, Los Angeles | 100% |
| Shanghai Wasabi Frog Boohoo Ltd | Dormant company | China | 49-51 Dale St, Manchester | 100% |
14 Deferred tax
Assets
| Depreciation in excess of capital allowances | Share-based payments | Total | |
| £000 | £000 | £000 | |
| Asset at 1 March 2017 | 232 | 4,262 | 4,494 |
| Recognised in statement of comprehensive income | (72) | 234 | 162 |
| Credit in equity | - | 1,823 | 1,823 |
| Asset at 28 February 2018 | 160 | 6,319 | 6,479 |
| Recognised in statement of comprehensive income | (73) | 32 | (41) |
| Debit in equity | - | (2,404) | (2,404) |
| Asset at 28 February 2019 | 87 | 3,947 | 4,034 |
Liabilities
| Capital allowances in excess of depreciation | Business combinations | Total | |
| £000 | £000 | £000 | |
| Liability at 28 February 2017 | - | (2,597) | (2,597) |
| Recognised in statement of comprehensive income | - | 496 | 496 |
| Liability at 28 February 2018 | - | (2,101) | (2,101) |
| Recognised in statement of comprehensive income | (495) | 494 | (1) |
| Liability at 28 February 2019 | (495) | (1,607) | (2,102) |
Recognition of the deferred tax assets is based upon the expected generation of future taxable profits. The deferred tax asset is expected to be recovered in more than one year's time and the deferred tax liability will reverse in more than one year's time as the intangible assets are amortised.
| 2019 | 2018 | |
| £000 | £000 | |
| Finished goods | 66,806 | 48,248 |
The value of inventories included within cost of sales for the year was £393,766,000 (2018: £270,032,000). An impairment provision of £5,181,000 (2018: £4,150,000) was charged to the statement of comprehensive income. There were no write-backs of prior period provisions during the year.
| 2019 | 2018 | |
| £000 | £000 | |
| Trade receivables | 14,201 | 13,381 |
| Prepayments | 5,126 | 3,658 |
| Accrued income | 386 | 460 |
| Taxes and social security receivable | 2,863 | - |
| 22,576 | 17,499 |
Trade receivables represent amounts due from wholesale customers and advance payments to suppliers.
The fair value of trade and other receivables is not materially different from the carrying value.
The provision for impairment of receivables is charged to administrative expenses in the statement of comprehensive income. The maturing profile of unsecured trade receivables and the provisions for impairment are as follows:
| 2019 | 2018 | |
| £000 | £000 | |
| Due within 30 days | 7,943 | 7,411 |
| Provision for impairment | - | (26) |
| Due in 31 to 90 days | 7,972 | 6,304 |
| Provision for impairment | (1,714) | (596) |
| Past due | 295 | 339 |
| Provision for impairment | (295) | (51) |
| Total amounts due and past due | 16,210 | 14,054 |
| Total provision for impairment | (2,009) | (673) |
| 14,201 | 13,381 |
| 2019 | 2018 | |
| £000 | £000 | |
| At start of year | 142,575 | 70,330 |
| Net movement during year | 55,350 | 72,638 |
| Effect of exchange rates | (53) | (393) |
| At end of year | 197,872 | 142,575 |
| 2019 | 2018 | |
| £000 | £000 | |
| Trade payables | 33,930 | 34,203 |
| Amounts owed to related party undertakings | - | 31 |
| Other creditors | 1,730 | 1,084 |
| Accruals | 81,930 | 41,378 |
| Provision for liabilities | 18,912 | 9,021 |
| Deferred income | 8,453 | 5,556 |
| Taxes and social security payable | 9,396 | 5,397 |
| 154,351 | 96,670 |
The fair value of trade payables is not materially different from the carrying value.
The provision for liabilities comprises:
| Dilapidations | Returns | Total | |
| £000 | £000 | £000 | |
| Provision at 1 March 2018 | 750 | 8,271 | 9,021 |
| Movements in provision charged/(credited) to income statement: | |||
| Release of provision from prior year | - | (8,271) | (8,271) |
| Increase in provision in current year | 800 | 17,362 | 18,162 |
| Provision at 28 February 2019 | 1,550 | 17,362 | 18,912 |
This note provides information about the contractual terms of the group's interest-bearing loans and borrowings, which are measured at amortised cost.
| 2019 | 2018 | |
| £000 | £000 | |
| Non-current liabilities | ||
| Secured bank loans | 4,764 | 7,146 |
| Current liabilities | ||
| Current portion of secured bank loans | 2,382 | 2,382 |
Terms and debt repayment schedule
| Nominal | |||||||
| interest | Year of | 2019 | 2018 | ||||
| Currency | rate | maturity | £000 | £000 | |||
| Secured bank loan | GB£ | LIBOR + 0.95% | 2022 | 7,146 | 9,528 |
The loan is repayable in instalments over the five years to 2022. The loan is secured by a debenture comprising fixed and floating charges over all the assets and undertakings of boohoo.com UK Limited of £131.7 million (2018: £99.4 million), including all present and future freehold property, book and other debts, chattels and goodwill, both present and future.
Movement in financial liabilities
| 2019 | 2018 | |
| £000 | £000 | |
| Opening balance | 9,528 | 11,910 |
| Interest accrued | 144 | 146 |
| Interest paid | (144) | (146) |
| Capital paid | (2,382) | (2,382) |
| Closing balance | 7,146 | 9,528 |
| 2019 | 2018 | |
| £000 | £000 | |
| 1,163,143,830 authorised and fully paid ordinary shares of 1p each (2018: 1,149,574,495) |
11,631 | 11,496 |
During the year, a total of 13,574,314 shares were issued under the share incentive plans (2018: 3,451,205). On 27 February 2019, 31,223 (2018: 35,224) new ordinary shares were issued to non-executive directors as part of their annual remuneration.
The directors do not recommend the payment of a dividend so that cash is retained in the group for capital expenditure projects that are required for the rapid growth and efficiency improvements of the business and for suitable business acquisitions (2018: £nil).
21 Capital commitments
Capital expenditure contracted for at the end of the reporting year but not yet incurred is as follows:
| 2019 | 2018 | |
| £000 | £000 | |
| Property, plant and equipment | - | 27,999 |
22 Operating Leases
The group has lease agreements in respect of property, plant and equipment, for which the payments extend over a number of years. The totals of future minimum lease payments under non-cancellable operating leases due in each period are:
| 2019 | 2018 | |
| £000 | £000 | |
| Within one year | 1,966 | 1,028 |
| Within two to five years | 4,032 | 3,066 |
| In more than five years | 261 | 792 |
| 6,259 | 4,886 |
23 Contingent liabilities
From time to time, the group can be subject to various legal proceedings and claims that arise in the ordinary course of business which may include cases relating to the group's brand and trading name. All such cases brought against the group are robustly defended and a liability is recorded only when it is probable that the case will result in a future economic outflow and that the outflow can be reliably measured.
As at 28 February 2019, there are no pending claims or proceedings against the group which are expected to have a material adverse effect on its liquidity or operations.
Appendix - prior period revenues by region
Revenue by period for the year to 28 February 2019 (FY19)
| £'000 | 4m to 31 December | 2m to 28 February | 12m to 28 February | |||||||||
| FY19 | FY18 | yoy % | yoy % CER | FY19 | FY18 | yoy % | yoy % CER |
FY19 | FY18 | yoy % | yoy % CER |
|
| Total | 328,231 | 228,215 | 44% | 43% | 133,375 | 88,710 | 50% | 50% | 856,920 | 579,800 | 48% | 47% |
| Revenue by region | ||||||||||||
| UK | 179,952 | 135,642 | 33% | 33% | 74,185 | 56,592 | 31% | 31% | 488,199 | 355,614 | 37% | 37% |
| ROE | 44,431 | 28,232 | 57% | 54% | 19,443 | 10,258 | 90% | 86% | 115,124 | 66,281 | 74% | 67% |
| USA | 70,427 | 39,618 | 78% | 80% | 27,664 | 13,475 | 105% | 101% | 166,262 | 92,690 | 79% | 81% |
| ROW | 33,421 | 24,723 | 35% | 32% | 12,083 | 8,385 | 44% | 44% | 87,335 | 65,215 | 34% | 30% |
| £'000 | 3m to 31 May | 3m to 31 August | 6m to 31 August | |||||||||
| FY19 | FY18 | yoy % | yoy % CER | FY19 | FY18 | yoy % | yoy % CER |
FY19 | FY18 | yoy % | yoy % CER |
|
| Total | 183,561 | 120,077 | 53% | 52% | 211,748 | 142,798 | 48% | 47% | 395,309 | 262,875 | 50% | 49% |
| Revenue by region | ||||||||||||
| UK | 110,738 | 74,532 | 49% | 49% | 123,319 | 88,849 | 39% | 39% | 234,057 | 163,381 | 43% | 43% |
| ROE | 22,257 | 12,220 | 82% | 71% | 28,993 | 15,571 | 86% | 73% | 51,250 | 27,791 | 84% | 72% |
| USA | 31,389 | 17,906 | 75% | 78% | 36,782 | 21,690 | 70% | 71% | 68,171 | 39,596 | 72% | 74% |
| ROW | 19,177 | 15,419 | 24% | 22% | 22,654 | 16,688 | 36% | 31% | 41,831 | 32,107 | 30% | 27% |
Revenue by period for the year to 28 February 2018 (FY18)
| £'000 | 4m to 31 December | 2m to 28 February | 12m to 28 February | |||||||||
| FY18 | FY17 | yoy % | yoy % CER | FY18 | FY17 | yoy % | yoy % CER |
FY18 | FY17 | yoy % | yoy % CER |
|
| Total | 228,215 | 114,294 | 100% | 93% | 88,710 | 53,025 | 67% | 65% | 579,800 | 294,635 | 97% | 92% |
| Revenue by region | ||||||||||||
| UK | 135,642 | 65,465 | 107% | 107% | 56,592 | 34,820 | 63% | 63% | 355,614 | 181,981 | 95% | 95% |
| ROE | 28,232 | 13,963 | 102% | 76% | 10,258 | 6,059 | 69% | 54% | 66,281 | 34,735 | 91% | 73% |
| USA | 39,618 | 19,299 | 105% | 102% | 13,475 | 5,910 | 128% | 133% | 92,690 | 40,435 | 129% | 122% |
| ROW | 24,723 | 15,567 | 59% | 46% | 8,385 | 6,236 | 34% | 29% | 65,215 | 37,484 | 74% | 64% |
| £'000 | 3m to 31 May | 3m to 31 August | 6m to 31 August | |||||||||
| FY18 | FY17 | yoy % | yoy % CER | FY18 | FY17 | yoy % | yoy % CER |
FY18 | FY17 | yoy % | yoy % CER |
|
| Total | 120,077 | 58,222 | 106% | 98% | 142,798 | 69,094 | 107% | 104% | 262,875 | 127,316 | 106% | 101% |
| Revenue by region | ||||||||||||
| UK | 74,532 | 37,396 | 99% | 99% | 88,849 | 44,300 | 101% | 101% | 163,381 | 81,696 | 100% | 100% |
| ROE | 12,220 | 6,938 | 76% | 61% | 15,571 | 7,775 | 100% | 92% | 27,791 | 14,713 | 89% | 77% |
| USA | 17,906 | 6,385 | 180% | 155% | 21,690 | 8,841 | 145% | 136% | 39,596 | 15,226 | 160% | 145% |
| ROW | 15,419 | 7,503 | 105% | 80% | 16,688 | 8,178 | 104% | 98% | 32,107 | 15,681 | 105% | 89% |
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
END
FR EAXLDAFDNEFF
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