TIDMASC
RNS Number : 3829D
ASOS PLC
19 October 2022
19 October 2022
ASOS Plc
Global Online Fashion Destination
Final Results for the year to 31 August 2022
Driving Change, Now
-- The UK, ASOS' core operation, delivered good performance (+7%)
despite the weakening consumer environment. This has been supported
by a curated offer and differentiated visual language, leading
to a growth in active customer base ahead of the Company average
(+5%) and a further increase in Premier customers (+6%), resulting
in an increase in average order frequency (+5%)
-- Strong Topshop performance (+105%) reinforcing revenue growth
in the UK, US and EU and driving margin expansion
-- New CEO now in place with a diagnostic of the issues ASOS faces
including: international operations that have lagged expectations
on ROIC, particularly in the US; a need to review and renew
the customer acquisition and commercial model; a supply chain
operation which has become inefficient in the face of supply
chain disruption and macroeconomic challenges; the need to
better leverage data and digital improvements to successfully
engage the customer; and the need to strengthen the leadership
team and refresh the company culture
-- Over the next 12 months, ASOS will deliver on four actions
targeted at improving its ability to navigate the existing
uncertainty, focused on: renewing its commercial model and
improving inventory management; simplifying and reducing its
cost profile; ensuring a robust and flexible balance sheet;
and reinforcing the leadership team and refreshing the culture
-- In parallel, management is focused on creating a business capable
of generating long-term sustainable growth for investors and
a comprehensive review is underway of ASOS' capital allocation.
This includes a review of the operating model, marketing investment,
capital and resource allocation and its deployment across geographies,
customer acquisition channels and digital and data capabilities
-- To navigate the continued macroeconomic volatility, ASOS has
agreed additional financial flexibility through the renegotiation
of core banking covenants, with cash and committed facilities
of over GBP650m at year end
-- Under the new commercial model, ASOS expects a non-cash stock
write-off of GBP100m - GBP130m in FY23, which will increase
flexibility within the logistics operations and reduce costs
-- Eugenia Ulasewicz and Luke Jensen, Non-Executive Directors,
have decided not to seek re-election at the Company's next
AGM
Unaudited summary financial results
Year to Year to CCY(2) CCY
GBPm(1) 31 31 Change change change
August August excluding
2022 2021 Russia
(3)
---------------------------- ------------------- ------------------- -------------------- ------------------ ---------------------
Group
revenues(4) 3,936.5 3,910.5 1% 2% 4%
Gross margin 43.6% 45 .4% (180bps)
Operating
(loss)/profit (9.8) 190.1 (105%)
Operating
(loss)/profit
margin (0.2%) 4.9% (510bps)
Adjusted EBIT(5) 44.1 206.6 (79%)
Adjusted EBIT
margin
(5) 1.1% 5.3 % (420bps)
Adjusted profit
before
tax(5) 22.0 193.6 (89%)
Reported
(loss)/profit
before tax (31.9) 177 .1 (118%)
Diluted
(loss)/earnings
per share(6) (30.9p) 128.5p (124%)
Net
(debt)/cash(5) (152.9) 199 .5
---------------------------- ------------------- ------------------- -------------------- ------------------ ---------------------
(1) All numbers subject to rounding throughout this document,
(2) Co nstant currency is calculated to take account of hedged rate
movements on hedged sales and spot rate movements on unhedged
sales. Any reference to total or retail sales throughout the
document is on a constant currency basis, (3) Calculation of
metrics, or movements in metrics, on an ex-Russia basis involves
the removal of Russia from H2 FY21 performance. This adjustment
allows year-on-year comparisons to be made on a like-for-like basis
following the decision to suspend trade in Russia on 2 March 2022,
(4) Includes retail sales and income from other services, (5)
Definitions of the adjusted performance measures used above and
throughout this document can be found in Note 11, page 29 of the
Condensed Financial Statements, (6) Diluted earnings per share for
the year to 31 August 2021 has been restated. The previously
disclosed number was 125.5p, and further information on the change
can be found in Note 3, page 24 of the Condensed Financial
Statements
Jos é Antonio Ramos Calamonte, Chief Executive Officer said:
"ASOS is a strong business with a compelling brand, customer
offer and fashion credibility, with dedicated and passionate
employees. Against the backdrop of an incredibly challenging
economic environment, this unique combination has enabled our
business to deliver a resilient performance this financial year in
the UK - but I know we as a Company can achieve far more.
"Today, I have set out a clear change agenda to strengthen ASOS
over the next 12 months and reorient our business towards the
future. This includes a number of decisive, short-term operational
measures to simplify the business, alongside steps to unlock
longer-term sustainable growth by improving our speed to market,
reinforcing our focus on fashion, strengthening our top team and
leveraging data and digital developments to better engage
customers.
"On the basis of the actions I have set out today, the team and
I will work resolutely to emerge from these turbulent times as a
more resilient and agile business - all the time guided by our
purpose, to give our customers the confidence to be whoever they
want to be."
CEO Review
I am honoured to hold the role of CEO at ASOS. This is a
business with c.26 million customers, c.GBP4bn revenue, a market
leading position in the UK and enormous potential. In the UK, ASOS
is a strong business with a high contribution margin, supported by
a fully automated and efficient warehouse footprint. Brand
awareness is strong and we have built a highly relevant and locally
tailored product offer that resonates strongly with our 8.9m UK
consumers, of which 1.9m are Premier customers. On average, our UK
customers shop every second month on the ASOS platform, with
Premier customers shopping more than double that frequency.
Outside the UK, however, I see a significant need to improve the
way we operate to unlock the opportunity of our global reach. In
recent years, the quest for growth has resulted in ASOS becoming
excessively capital intensive, too complex and overstretched
globally, which has resulted in a lack of meaningful growth and
scale in its key international markets of the US, France and
Germany. While the international business makes a positive
contribution and there are pockets of strength in key territories,
we are disappointed in our performance, given the extent of our
historical capital investment, particularly in the US. This
investment in a large, multi-region supply chain network has
increased cost and complexity, not fully offset by delivery
incomes. With this in mind, we will revisit our approach to
resource and capital allocation to ensure a focused approach.
ASOS has historically underinvested in marketing relative to
peers with (i) allocation across markets not effectively
prioritised or managed effectively to ensure a return on
investment; and (ii) more than 80% of marketing investment focused
on performance marketing, leaving insufficient spend focused on
driving longer-term brand awareness. As a result of this, customer
acquisition has slowed in FY22, whilst the cost to acquire a new
customer has increased. We have also become increasingly reliant on
the use of markdown and promotions as a tool to attract customers,
resulting in reduced newness for customers which has contributed to
the erosion of gross margin in recent years. The implementation of
the new commercial model and structure will enable ASOS to operate
a shorter buying cycle, enhancing speed to market and improving
curation, and result in a change in stockholding requirements going
forward.
In this tough economic environment, ASOS will continue to build
on its core strengths - the ASOS brand, the carefully curated range
of Partner Brands on offer, its strong fashion credibility and
market leading position in the UK. ASOS is a fashion destination,
and we will double down on our commitment to fashion to succeed in
the current environment.
We are taking firm action now to accelerate the changes needed
to address these issues and will take the opportunity to develop a
stronger organisation, built on four key principles: simplicity;
speed to market; operational excellence; and flexibility and
resilience. In doing so, we will emerge well-positioned to drive
profitable growth over the longer term.
Over the next 12 months we are focused on delivering key
operational improvements and disciplined capital allocation through
four key actions:
-- Renewed commercial model : Following the completion of the
Commercial reorganisation in FY22, changes in ASOS' approach to
merchandising and buying will be accelerated in support of a more
competitive proposition and tighter stock cover. This will result
in:
o a shorter buying cycle with enhanced speed to market that
enables a more relevant and better curated customer offer
o a more flexible approach to stock that utilises ASOS' Partner
Fulfils capability to reduce stock held in our fulfilment centres
and ensure more near-shore sourcing using a "Test and React"
model
o a differentiated approach to stock clearance, introducing more
off-site routes to clear product earlier in its lifecycle which
will, in turn, reduce markdown and increase the proportion of
full-price sales
-- Stronger order economics and a lighter cost profile: After
years of high growth, the operating model has become inefficient.
ASOS will take action to improve order economics and ensure a
sustainable level of profitability in all markets, whilst focusing
efforts on key markets. We will coordinate this effort with a clear
focus on optimising our cost base, improving supply chain
efficiencies, and eliminating excess costs through increased
controls.
-- Robust, flexible balance sheet: Our future investment will be
aligned with capacity requirements to ensure a more efficient
allocation of capital, while planned strategic investment in
technology will be maintained in support of an improved customer
experience. In addition, ASOS has sufficient headroom on its
facilities, ensuring flexibility in the short term.
-- Enabled by a reinforced leadership team and refreshed
culture: Simplifying decision-making processes to encourage a
culture of innovation and creativity across the business, while
reinforcing the senior leadership team with strategic key
hires.
Progress against these changes will be evidenced by gross margin
expansion, increased stock turn , faster speed to market and more
effective capital deployment.
In parallel, management is focused on creating a business
capable of generating long-term sustainable growth for investors
and there is a comprehensive review underway of ASOS' capital
allocation. This includes a review of our operating model,
marketing investment, capital and resource allocation and its
deployment across geographies, customer acquisition channels and
digital and data capabilities.
We will do all of this whilst remaining committed to Fashion
with Integrity and to providing the best possible experience for
our customers, but with the knowledge that these commitments are
best delivered by a sustainable, profitable business with the
ability to invest accordingly.
FY23 Outlook
Trading has remained volatile into the start of FY23, with
September 2022 trading showing a slight improvement relative to
August 2022. Against the backdrop of significant volatility in the
macroeconomic environment, it is very difficult to predict consumer
demand patterns for the upcoming year. Within the UK, ASOS expects
a decline in the apparel market over the next 12 months but remains
confident in its ability to take share against that backdrop.
As a consequence of moving to the new commercial model, ASOS
will right-size its stock portfolio in the first half resulting in
a non-cash write-off of GBP100m - GBP130m. Given the exceptional
nature of the write-off, it will be treated as an adjusting item.
ASOS will begin to operate with lower stock levels in the second
half due to the lead time on orders and deliveries. In addition to
this, ASOS expects c.GBP40m of adjusting items relating to the
change programme, and Topshop Brand amortisation.
ASOS has reviewed its capital expenditure for FY23 and taken
action to reduce spend appropriately, while still ensuring its
long-term competitiveness. As a result, ASOS is reviewing the
phasing of its automation projects in Atlanta and Lichfield to
better align with expected capacity requirements. ASOS will,
however, continue with purposeful technology investments in
customer experience and digital improvements.
Taken together, over the next 12 months, ASOS expects:
-- The combination of lower freight costs (c.100bps), the
measures taken in support of the new commercial model and a lighter
cost structure to more than offset the impact of both inflationary
headwinds in ASOS' cost base and expected cost of elevated return
rates over the next 12 months
-- H1 loss driven by the usual profit phasing and exacerbated by
elevated markdown to clear stock resulting from the change in
commercial model, with the contractual freight rate decline
year-on-year and cost mitigations expected to mostly benefit the
second half
-- Capex of GBP175m - GBP200m, below the previously guided
GBP200m - GBP250m mid-term range
-- An expected free cash flow in the range of (GBP100m) - GBP0m,
with the business expected to return to cash generation in the
second half as the new commercial model begins to have a positive
impact on gross margin and working capital, and the cost reduction
impacts accelerate
-- To navigate the continued macroeconomic volatility, ASOS has
agreed additional financial flexibility through the renegotiation
of core banking covenants, with cash and committed facilities of
over GBP650m at year end
In conclusion, ASOS is fully focused on creating long-term
sustainable growth, and is confident that these short-term
operational measures, combined with a longer-term focus on creating
a more digitally based organisation, with a more efficient
operating model, a reinvented customer acquisition dynamic, and a
global footprint that optimises capital allocation, will enable it
to deliver on its strategic ambitions.
FY22 Financial Overview
All revenue growth figures are stated at constant currency
unless otherwise indicated.
ASOS delivered total sales growth of 4% (1) (1% on a reported
revenue basis (2) ) with an adjusted profit before tax ('PBT') of
GBP22.0m (adjusted PBT margin of 0.6%), in line with guidance. The
reported loss of GBP31.9m is stated after GBP53.9m of adjusting
items. Adjusted earnings before interest and tax ('EBIT') were
GBP44.1m representing an adjusted EBIT margin of 1.1%, a 420bps
decline year-on-year.
The second half of the year proved more challenging than
expected. While ASOS had expected an acceleration in revenue growth
against weaker comparatives, inflationary pressures on consumers
increased markedly as the year progressed, and impacted consumers'
confidence and discretionary income. As a result, growth in the
second half was lower than had been anticipated. The Company also
saw an increase in return rates through the year, rising above
pre-pandemic levels from May onwards. Together, these led to higher
inventory levels across all fulfilment centres, further exacerbated
by the immediate withdrawal from Russia on 2 March 2022.
ASOS delivered revenue growth in the UK and US of 7% and 10%
respectively. Growth in Europe of 2%, while Rest of World ('RoW')
declined by 9% (3) . Active customers (4) have grown by 2% from
25.3m at the end of FY21 to 25.7m at the end of FY22, however,
growth in active customers slowed in the second half as customer
acquisition became more challenging.
Gross margin reduced by 180bps, in line with guidance. The
reduction reflected the anticipated contractually higher sea
freight rates year-on-year, along with the full-year impact of
increased promotional activity. This was partially offset by lower
markdown costs in the second half year-on-year, along with
improvements in buying margins and the benefit of mid-single digit
price increases across ASOS brands for both Spring/Summer and
Autumn/Winter collections.
ASOS increased its UK and RoW capacity during the year, bringing
the Lichfield fulfilment centre online in August 2021. This gave
rise to an anticipated increase in shipping and warehouse costs
given the ensuing manual fulfilment costs and split orders.
Furthermore, FY22 was marked by significant inflationary pressures
across labour, freight and delivery costs, with the impact on
profitability exacerbated by elevated inventory levels and an
increase in return rates across the year. ASOS was able to
partially mitigate these cost headwinds by reducing planned
marketing investment, in addition to securing continued cost and
operational efficiencies. As a result of these actions, ASOS
delivered c.GBP120m in cost mitigation to largely offset cost
escalations through Lean programme efficiencies, payment
optimisation and returns process optimisation.
Cash outflow of GBP339.8m reflects primarily the working capital
outflow associated with an increase in inventory driven by (i) a
marked slowdown in demand driven by global economic uncertainty;
(ii) the timing impact of FY21 stock that was only received in FY22
as a result of supply chain delays; (iii) the impact of increased
returns; and (iv) the early receipt of FY23 stock in FY22. Capital
expenditure totalled GBP182.9m in support of the planned automation
programmes at Lichfield and Atlanta; technology investments into
digital platforms, business systems and infrastructure in support
of the development of the marketplace integration platform required
for Partner Fulfils; continued optimisation of the customer
experience in support of new features and improvement in
conversion; and investments in support of ASOS' progress against
its data strategy.
1 Total revenue growth CCY excluding Russia of 4% (+2% CCY
including Russia)
2 1% reported revenue growth including Russia
3 RoW declined by 9% CCY excluding Russia and by 20% CCY
including Russia
4 Active customers grew by 0.4m year-on-year to 25.7m excluding
Russian active customers (flat at 26.4m including Russian active
customers)
FY22 Performance by Market
UK
Revenue growth in the first half, despite a period of tough
prior year comparatives, continued into the second half with strong
seasonal demand for summer products in the early part of the
Spring/Summer season. Consumer behaviour, however, underwent a
marked change from April 2022 when consumers faced accelerating
inflation and pressure on disposable incomes and reduced demand for
transitional product at the start of the Autumn/Winter season. This
effect on consumer behaviour became most apparent via the impact on
return rates, as these increased from May 2022 to levels close to
pre-pandemic.
Despite this, the UK delivered good revenue growth for the year
of 7% to GBP1,762.8m. Whilst overall online penetration stepped
back year-on-year, ASOS continued to grow its share of the adult
online apparel market by 140bps to 10.1% in FY22. Demand also
shifted into occasion wear, supporting average selling price
('ASP') growth. ASOS delivered growth in active customers of 5%
along with increasing orders, visits, conversion and average order
frequency; however, average basket value ('ABV') and average units
per basket ('ABS') declined in the period driven primarily by the
step up in return rates and increased levels of markdown.
EU
ASOS growth of 2% in Europe to GBP1,170.0m as the region became
increasingly exposed to higher energy costs and inflationary
pressures. Growth did, however, accelerate in P4 to 9% as the
Company cycled a period of softer comparatives. Customers in
Germany appeared most exposed to the cost-of-living pressures, with
consumer demand in France also impacted throughout much of the year
driven by a shift back to physical stores. This change in customer
behaviour was once again most apparent in the step up in return
rates from April to above pre-pandemic levels, as Northern European
territories increasingly leveraged Buy Now Pay Later payment
methods and country mix shifted in favour of territories with
higher return rates.
Despite the slowdown in consumer demand, ASOS held visits share
in Germany. ASOS observed a step back in ABV and ABS resulting from
the step up in return rates, but delivered growth in orders,
visits, conversion, average order frequency and ASP in the
region.
US
The US delivered revenue growth of 10% for the year to
GBP531.4m, supported by Topshop and Topman growth, the expansion of
wholesale and a more locally relevant offer. Customer acquisition
slowed in the US in the second half as ASOS paused its broad reach
marketing campaign in response to current economic conditions and
visits growth stepped back year-on-year. However, the number of
Premier customers grew by 19%, driven by the optimisation of the
Premier offer, as the proposition remains central to increasing
customer engagement and driving loyalty.
A shift into dresses supported growth in ASP and ABV, and ASOS
also observed a 20bps uplift in conversion. However, orders and ABS
stepped back.
Rest of World
Rest of World declined by 9% to GBP472.3m (1) . This segment was
particularly hard hit by the continued delivery disruptions in the
first part of the year,but saw improved performance in the second
half in Australia and Saudi Arabia as air traffic resumed
supporting accelerated delivery propositions.
ASOS observed growth in ASP alongside flat conversion; however,
ABV, ABS, active customers, orders and visits stepped back (2)
.
[1] RoW declined by 9% CCY excluding Russia and by 20% CCY
including Russia
(2) RoW KPIs quoted on an excluding Russia basis
FY22 Operational highlights
Despite a highly volatile and difficult macroeconomic backdrop
in the second half of the year, ASOS has made progress in key
operational areas which will underpin performance in the medium
term. These areas of progress are outlined as follows:
1. Gaining flexibility through Partner Fulfils
In support of future margin expansion, ASOS has successfully
launched Partner Fulfils in the UK in partnership with Adidas and
Reebok, now accounting for 11% of Adidas total UK sales and 10% of
Reebok total UK sales through the ASOS platform. This programme now
consists of both a "depth model", whereby product that is out of
stock at an ASOS fulfilment centre is fulfilled directly to ASOS'
consumers via Adidas or Reebok, and a "width model", whereby
product that is incremental to the current range offered by ASOS is
fulfilled directly by the partner brands. In September 2022,
Partner Fulfils has been further expanded to Europe in partnership
with Adidas and Reebok across Germany, France, Spain and Italy.
2. Further development of the Premier programme, the platform to grow loyal consumers
ASOS set out the importance of its Premier offer in driving
increased customer loyalty and improved customer economics at its
Capital Markets Day ('CMD') in November 2021. ASOS optimised
pricing in 10 markets outside the UK to offer a more tailored local
Premier proposition which supported 12% growth in the global
Premier customer base, with average order frequency of Premier
customers c.3.5x more than an average ASOS customer. This is key to
driving increased customer loyalty and engagement.
3. Accelerating ASOS' data infrastructure and capabilities
A key inhibitor to ASOS' progress is the need for a stronger
data organisation and improved data science capability. In the
first half, ASOS completed a full data strategy plan focused on:
developing a larger data product team; improving data governance to
drive more value, enhancing the data architecture for future
scalability and growing the Company's data science capability.
Whilst ASOS has made some progress in the second half, by expanding
the data science and engineering teams and evolving its data
architecture to support future growth and complexity, there remains
more to be done in this space to truly transform ASOS into a
digital organisation.
4. Topshop growth shows the potential of ASOS' own brands
Within the ASOS brands portfolio the Topshop brands have
contributed to both revenue growth and gross margin expansion
across all key territories 18 months on from the acquisition.
Topshop brands posted strong sales growth of 105% year-on-year in
FY22, with growth of more than 200% in the US supported by the
wholesale partnership with Nordstrom. Topshop and Topman are now
available online and in store in more than 100 locations in the US
and Canada, also as a result of the Nordstrom partnership. At the
group level, Topshop jeans are now the leading womenswear jeans
brand on site, and the Topshop brands have also exhibited strong
growth in the dresses category.
On 29 September 2022, ASOS launched the next chapter for Topshop
and Topman. The new product collection marks the first season
conceived and created entirely under ASOS ownership. To ensure a
future-facing approach, ASOS has introduced the following: (i) a
digital-first approach with a dedicated storefront, a first for
ASOS; (ii) greater inclusivity through the launch of Topshop Curve,
the first time the brand will be available from sizes 16 to 28; and
(iii) a global approach through the continuation of the partnership
with Nordstrom.
5. ASOS collaborations show the value of its platform to Partner Brands
ASOS continues to offer a unique proposition to partner brands,
enabling them to access new consumers and occasions. In the second
half, ASOS has continued to partner in new ways to showcase
relevant products to consumers. ASOS partnered with Netflix to
deliver Reclaimed Vintage x Stranger Things, which launched on site
to coincide with the release of season four of the hit Netflix
series. The range was searched over 50,000 times and was a sell-out
with 10,000 units sold. It resonated particularly strongly with
ASOS' female customers, who made up 87% of purchases with nearly
half of those under the age of 25.
Within the sportswear category, ASOS collaborated with Nike to
create a campaign highlighting best-in-class Nike footwear styled
with a curated edit of ASOS Design, Topshop and Collusion clothing.
This leveraged ASOS' in-house creative and studio functions along
with the ASOS Media Group to elevate the product through
fashion-led campaigns, demonstrating ASOS' unique offer to its
partner brands. This campaign led to an uplift in Nike campaign
line sales by 124% in the first week.
6. ASOS X Nordstrom, a new growth formula for US
In July 2021, ASOS announced its strategic partnership with
Nordstrom aimed primarily at building brand awareness and
engagement in North America. ASOS Design has now launched in 14
stores in the US, with an expanded collection available on
Nordstrom.com, alongside the launch of a Click & Collect option
in Nordstrom stores for orders placed on ASOS.com. This was further
supported by the launch of two retail concept stores earlier in the
year at The Grove in Los Angeles featuring the Nordstrom I ASOS
Glass Box and the Nordstrom I ASOS Pop Up at The Grove aimed at
building awareness for the ASOS brand.
Board Changes
Non-executive director, Eugenia Ulasewicz, has decided not to
seek re-election at the Company's next AGM and accordingly will
step down from the Board at the conclusion of the Company's AGM
which is expected to be held on 11 January 2023.
Non-executive director, Luke Jensen, has decided not to seek
re-election and will be stepping down from the board at the end of
his term on 31 October 2022.
Jørgen Lindemann, Chair of ASOS, said:
"On behalf of the Board, I would like to thank Eugenia and Luke
for their significant contribution to ASOS and we wish them well
for the future."
José Antonio Ramos Calamonte
Chief Executive Officer
The conclusion of negotiations with the Company's banking
syndicate regarding a covenant amendment on its Revolving Credit
Facility constitutes Inside Information.
The person responsible for arranging the release of this
announcement on behalf of ASOS is Anna Suchopar, General Counsel
and Company Secretary.
Investor and analyst meeting:
There will be a webcast for investors and analysts that will
take place at 9.00am, 19 October 2022. To access live please dial
+44 (0) 20 3695 0088 and use Meeting ID: 871 1643 5214 and
passcode: 554693 . A live stream of the event will be available
here
https://webcasting.brrmedia.co.uk/broadcast/616062f14e29f55a941918d7
A recording of this webcast will be available on the ASOS Plc
investor centre website after the event:
http://www.asosplc.com/investors.aspx
For further information:
ASOS Plc Tel: 020 7756 1000
José Antonio Ramos Calamonte, Chief
Executive Officer
Mathew Dunn, Chief Operating Officer &
Chief Financial Officer
Katy Mecklenburgh, Director of Group Finance
Taryn Rosekilly, Director of Investor Relations
Website: www.asosplc.com/investors
Headland Consultancy Tel: 020 3805 4822
Susanna Voyle / Stephen Malthouse
JPMorgan Cazenove Tel: 020 7742 4000
Bill Hutchings / Will Vanderspar
Numis Securities Tel: 020 7260 1000
Alex Ham / Jonathan Wilcox / Tom Jacob
Berenberg Tel: 020 3207 7800
Michelle Wilson / Richard Bootle
Forward looking statements:
This announcement may include statements that are, or may be
deemed to be, "forward-looking statements" (including words such as
"believe", "expect", "estimate", "intend", "anticipate" and words
of similar meaning). By their nature, forward-looking statements
involve risk and uncertainty since they relate to future events and
circumstances, and actual results may, and often do, differ
materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save
as required by applicable law, the Company undertakes no obligation
to publicly revise any forward-looking statements in this
announcement, whether following any change in its expectations or
to reflect events or circumstances after the date of this
announcement.
Background note
ASOS is a destination for fashion-loving 20-somethings around
the world, with a purpose to give its customers the confidence to
be whoever they want to be. Through its market-leading app and
mobile/desktop web experience, available in ten languages and in
over 200 markets, ASOS customers can shop a curated edit of nearly
70,000 products, sourced from nearly 900 of the best global and
local partner brands and its mix of fashion-led own-brand labels -
ASOS Design, ASOS Edition, ASOS 4505, Collusion, Reclaimed Vintage,
Topshop, Topman, Miss Selfridge and HIIT. ASOS aims to give all its
customers a truly frictionless experience, with an ever-greater
number of different payment methods and hundreds of local
deliveries and return options, including Next-Day Delivery and
Same-Day Delivery, dispatched from state-of-the-art fulfilment
centres in the UK, US and Germany.
Financial review
All revenue growth figures are stated at constant currency
throughout this document unless otherwise indicated.
Overview
Year to 31 August 2022
UK EU US RoW(1) Total
GBPm GBPm GBPm GBPm GBPm
Retail sales(2) 1,703.3 1,142.6 472.7 454.0 3,772.6
Income from other
services(3) 59.5 27.4 58.7 18.3 163.9
Total revenue 1,762.8 1,170.0 531.4 472.3 3,936.5
Cost of sales (2,219.0)
----------------
Gross profit 1,717.5
Distribution
expenses (523.7)
Administrative
expenses (1,224.2)
Other income 20.6
----------------
Operating loss (9.8)
Finance income 0.9
Finance expense (23.0)
----------------
Loss before tax (31.9)
================
Adjusted Performance Measures(4)
Operating loss (9.8)
Adjusting items(5) 53.9
Adjusted EBIT 44.1
Net finance expense (22.1)
Adjusted profit before tax 22.0
---------------------------------------------- -------
1 Rest of World
2 Retail sales are internet sales recorded net of an appropriate
deduction for actual and expected returns, relevant vouchers and
sales taxes
3 Income from other services comprises of delivery receipt payments,
marketing services, commission on partner-fulfilled sales and
revenue from wholesale sales
4 The adjusted performance measures used by ASOS are defined and
explained on page 29
5 Adjusting items for the year to 31 August 2022 are shown on
page 12. Further detail on these items is on pages 29-31
KPIs excluding Russia(1) Year to 31 Year to 31 Change
Au gust 2022 August 2021
----------------------------- -------------- ------------- -------
Active customers(2) (m) 25.7 25.3 2%
Average basket value(3) GBP37.85 GBP39.52 (4%)
Average basket value CCY(4) GBP38.22 GBP39.52 (3%)
Average order frequency(5) 3.88 3.70 5%
Total shipped orders (m) 99.7 93.7 6%
Total visits (m) 3,019.8 2,976.3 1%
Conversion(6) 3.3% 3.1% 20bps
Mobile device visits 87.9% 85.9% 200bps
----------------------------- -------------- ------------- -------
(1) Calculation of metrics, or movements in metrics, on an ex-Russia
basis involves the removal of Russia from H2 FY21 performance.
This adjustment allows year-on-year comparisons to be made on
a like-for-like basis following the decision to suspend trade
in Russia on 2 March 2022. The exception to this is visits, where
we have also excluded any visits from Russia in H2 FY22, in addition
to H2 FY21, (2) Defined as having shopped in the last 12 months
as at 31 August, (3) Average basket value is defined as net retail
sales divided by shipped orders, (4) Average basket value is defined
as net retail sales divided by shipped orders, calculated on a
constant currency basis, (5) Calculated as last 12 months' total
shipped orders divided by active customers, (6) Calculated as
total shipped orders divided by total visits
KPIs including Russia Year to 31 Year to 31 Change
August 2022 August 2021
-------------------------- ---------------------------------- ------------------------------ ------------------
Active customers(1) (m) 26.4 26.4 0%
Average basket value(2) GBP37.85 GBP39.75 (5%)
Average basket value
CC(3) GBP38.21 GBP39.75 (4%)
Average order
frequency(4) 3.78 3.61 5%
Total shipped orders (m) 99.7 95.2 5%
Total visits(5) (m) 3,030.5 3,102.7 (2%)
Conversion(6) 3.3% 3.1% 20bps
Mobile device visits(7) 87.9% 86.0% 190bps
-------------------------- ---------------------------------- ------------------------------ ------------------
(1) Defined as having shopped in the last 12 months as at 31
August, (2) Average basket value is defined as net retail sales
divided by shipped orders, (3) Average basket value is defined as
net retail sales divided by shipped orders, calculated on a
constant currency basis, (4) Calculated as last 12 months' total
shipped orders divided by active customers, (5) FY21 restated
visits, previously reported at 3,091.8m (6) Calculated as total
shipped orders divided by total visits, (7) FY21 restated mobile
device visits, previously reported at 83.2%
Total sales grew 4% (1) , against a challenging backdrop in
FY22. Since ASOS' last update in June 2022, trading weakened in
August as customers faced increased cost-of-living challenges and
delayed spend on Autumn/Winter categories. ASOS delivered sales
growth of 7% in the UK, reflecting good performance against a
challenging backdrop. The US grew by 10% supported by the expansion
of wholesale, which annualised in P3, and a more locally relevant
consumer offer. The EU grew by 2%, with stronger growth in P4 (+9%)
as it cycled a period of weaker comparatives, however, overall
performance for the year remained muted as return rates trended
higher than pre-pandemic levels in some territories. ROW declined
by 9% (2) as it continued to be impacted by poor delivery
propositions in the first half and increased local competition,
however ASOS noted an improvement in H2 as delivery disruptions
eased and ASOS was able to return to more normalised delivery
propositions.
Active customers grew by 2% (3) , reflecting a slowdown in
customer acquisition in the second half. Visits increased by 1% (4)
and the increase in orders and frequency was reflective of
increased consumer engagement and more intentional purchasing. ABV
stepped back by 3% (5) as return rate increases year-on-year were
only partly offset by increased prices and a mix back into higher
price point product categories.
Gross margin reduced by 180bps, in line with guidance. The
reduction reflected the anticipated contractually higher sea
freight rates year-on-year, along with the full-year impact of
increased promotional activity. This was partially offset by lower
markdown costs in the second half year-on-year, along with
improvements in buying margins and the benefit of mid-single digit
price increases across ASOS brands for both Spring/Summer and
Autumn/Winter collections.
ASOS delivered adjusted profit before tax of GBP22.0m, in line
with the lower end of guidance, a reduction of 89% year-on-year.
Adjusting items for the year totalled GBP53.9m and comprised of:
(i) GBP25.4m costs incurred in relation to accelerating the ASOS
strategy through the change programme, (ii) GBP5.7m relating to
ASOS' transition to a Main Market listing, (iii) GBP18.5m for a
non-cash impairment charge relating to the right-of-use asset and
associated fixtures and fittings at ASOS' Leavesden office because
of the decision to vacate and sublet unused space to third parties,
(iv) (GBP6.4m) relating to the release of a provision for costs
relating to the Topshop acquisition, (v) GBP10.7m relating to the
amortisation of acquired intangible assets. Taking these adjusting
items into account, ASOS delivered a reported loss before tax of
GBP31.9m. Further detail on each of these items can be found on
pages 29-31.
Also included within adjusted profit before tax for the year is
the net impact of Russia, which had an estimated negative GBP14m
impact on profit versus ASOS' original expectations for the year.
This impact arose due to the immediate decision to suspend sales on
2 March 2022, amounting to c.2% of sales, and from additional costs
incurred to clear through the resulting excess stock and fulfilment
centre inefficiencies. Also included in the net loss of GBP14m was
a gain of GBP19.3m, recognised as other operating income, from
closing out RUB hedges no longer required.
[1] Total sales grew 4% CCY excluding Russia, 2% CCY including
Russia and 1% on a reported basis including Russia
2 RoW decline by 9% CCY excluding Russia ( -20% CCY including
Russia)
3 Active customers grew by 0.4m to 25.7m excluding Russian
active customers (flat at 26.4m including Russian active
customers)
4 Group Visits increased by 1% excluding Russia in FY22 and
declined 2% including Russia
5 Group ABV declined 3% on a constant currency basis excluding
Russia and declined 4% on a constant currency basis including
Russia
UK performance
UK KPIs Year to 31 August
2022
Total Sales +7%
------------------
Visits +7%
------------------
Orders +10%
------------------
Conversion 20bps
------------------
ABV -3%
------------------
Active Customers 8.9m (+5%)
------------------
ASOS delivered sales growth of 7% in the UK.
Performance of the Topshop brands remained strong throughout the
year, delivering strong sales growth year-on-year despite
annualising the acquisition in February 2021, reflecting the
resonance of the brand with ASOS' customers.
Active customers grew to 8.9m, an increase of 5% versus FY21,
whilst Premier customers also grew 6% driven in part by successful
Premier Days held in October 2021 and February 2022. This has
supported increased order frequency in the UK by 5% which, along
with increased visits, orders, and conversion, continues to show
the ability of ASOS to attract, retain, and engage customers in its
home market.
ABV decreased by 3% due to increased levels of markdown,
reflecting both the clearance activity carried out in H1 to
sell-through late arriving Spring/Summer '21 stock and investments
in promotion in H2, and a higher return rate (now in line with
pre-pandemic levels since May), which was driven by the shift out
of lockdown categories and back into occasion wear.
EU performance
EU Year
KPIs to
31
August
2022
Total -1%
Sales (+2%
CCY)
--------
Visits +2%
--------
Orders +7%
--------
Conversion 10bps
--------
ABV -7%
--------
ABV
(CCY)
1 -4%
--------
Active 10.9m
Customers (+5%)
--------
1 ABV (CCY) is calculated as constant currency net retail sales
/ shipped orders
EU delivered sales growth of 2%, supported by improved
performance in P4 as ASOS cycled a period of softer
comparatives.
On a territory basis, trading in Germany and France were
impacted by territory-specific factors which weighed on consumer
demand and spending power. In Germany the impact of the energy
crisis and government measures to address this appear to have
impacted consumer confidence in H2, whilst in France the shift from
online back to the high-street has been stronger than in other
territories. Despite this, ASOS' visits share has remained
relatively consistent in these territories, whilst sales
performance was stronger in other EU markets.
Active customers continued to grow by 5%, despite the
deterioration in consumer confidence and spending power, while
Premier customer numbers also increased by 33% following the
re-launch of the proposition in key EU territories in late-summer
2021.
ABV declined by 4% (1) on the year, which reflected higher
markdown in H1 and increased return rates across the year,
particularly in H2. This was partly offset by customers mixing into
higher priced items and pricing increases which drove up ASPs.
US performance
US KPIs Year to 31 August
2022
Total Sales +14% (+10% CCY)
------------------
Visits -8%
------------------
Orders -1%
------------------
Conversion 20bps
------------------
ABV +8%
------------------
ABV (CCY) 1 +4%
------------------
Active Customers 3.4m (-1%)
------------------
1 ABV (CCY) is calculated as constant currency net retail sales
/ shipped orders
Total US sales grew by 10% year-on-year, supported by triple
digit Topshop growth, the expansion of wholesale and a more locally
relevant US offer. The US saw increased demand for occasion wear
supported by the exclusive range of ASOS Design dresses designed
for the US consumer. These factors combined to drive a 4% (2)
increase in ABV versus FY21, as customers shopped higher price
point items, whilst return rates remained well below pre-pandemic
levels.
Conversion increased 20bps year-on-year, despite both orders and
visits falling, while Premier customers increased by 19%. In the US
online apparel market, ASOS has maintained share, despite delaying
the marketing investments planned to drive increased awareness in
the US due to the weaker consumer outlook. This, along with more
intense competition in the market, has adversely impacted new
customer acquisition.
RoW performance
RoW KPIs Year to 31 August 2022 Year to 31 August
excluding Russia (1) 2022 including Russia
Total Sales -11% (-9% CCY) -22% (-20% CCY)
----------------------- -----------------------
Visits -6% -23%
----------------------- -----------------------
Orders -8% -22%
----------------------- -----------------------
Conversion Flat Flat
----------------------- -----------------------
ABV -3% -2%
----------------------- -----------------------
ABV (CCY)(2) -1% +1%
----------------------- -----------------------
Active Customers 2.5m (-14%) 3.2m (-20%)
----------------------- -----------------------
1 Calculation of metrics, or movements in metrics, on an
ex-Russia basis involves the removal of Russia from H2 FY21
performance. This adjustment allows year-on-year comparisons to be
made on a like-for-like basis following the decision to suspend
trade in Russia on 2 March 2022
2 ABV (CCY) is calculated as constant currency net retail sales
/ shipped orders
RoW total sales fell by 9% versus last year (3) . This reflects
a slight improvement in the second half as delivery propositions
improved post-pandemic. To assess year-on-year performance on a
like-for-like basis the KPIs quoted in this section all exclude
Russia (calculated by removing Russia from the comparatives for H2
FY21).
On a territory basis, performance in Australia improved in H2,
and particularly in P4, as Premier was reactivated and the delivery
proposition returned to normal after the pandemic. There were also
more positive signs in Saudi Arabia with both new customers and
visits increasing in P4.
Active customers declined by 14% year-on-year as new customer
acquisition remained challenging with a less competitive
proposition relative to local players, as well as lower targeted
investment in RoW.
[1] EU ABV decline of -4% CCY (-7% on a reported basis)
2 US ABV increase of +4% CCY (+8% on a reported basis)
3 RoW decline by 9% CCY excluding Russia ( -20% CCY including
Russia)
Gross margin
Gross margin was down 180bps year-on-year, mainly driven by
increased markdown and elevated freight costs.
The increase in markdown was primarily concentrated in H1, as
the clearance activity which started in P4 FY21 to sell-through
late arriving Spring/Summer '21 stock continued into the
Autumn/Winter season and investments were made during peak in
response to competitor's offers. This improved in H2 as a period of
heavier discounting in the prior year was cycled, generating a
small improvement year-on-year. Freight and duty costs were
elevated throughout the year with an adverse impact of 180bps,
driven by higher rates in the market due to reduced supply and
ASOS' decision to use air freight to accelerate intake for peak.
This improved in H2 as ASOS' contracted ocean freight rates were
favourable against those available in the market, albeit higher
year-on-year. This allowed greater control of costs in H2, as well
as the ability to allocate volume in a more cost-efficient way
across intake lanes.
These increases were partially offset by mid-single digit price
increases across ASOS brands, as well as improvements in buying
margin and the growth of Topshop (which has a higher retail gross
margin) as an in-house brand for the whole year. Whilst helping to
offset the cost pressure in gross margin, action on pricing was
also taken to mitigate the inflation seen elsewhere in the
P&L.
Gross profit also benefitted from favourable breakage rates on
historic gift cards and gift vouchers issued for out of policy
returns. Updated redemption rates of these vouchers have shown that
these are being redeemed in lower quantities than initially
expected, and this has therefore led to a benefit of GBP7.5m being
recognised as revenue in FY22.
Operating expenses
Year to 31 Year to 31 % of
GBPm August 2022 % of sales August 2021 sales Change
Distribution costs (523.7) 13.3% (509.5) 13.0% (3%)
Warehousing (427.0) 10.8% (356.4) 9.1% (20%)
Marketing (223.5) 5.7% (200.9) 5.1% (11%)
Other operating costs (380.7) 9.7% (376.6) 9.6% (1%)
Depreciation and
amortisation (139.1) 3.5% (129.5) 3.3% (7%)
Total operating
costs (excl. adjusting
items) (1,694.0) 43.0% (1,572.9) 40.2% (8%)
-------------------------- ------------- ----------- ------------- -------- -------
Adjusting items (53.9) 1.4% (13.4) 0.4% (302%)
-------------------------- ------------- ----------- ------------- -------- -------
Total operating
costs (1,747.9) 44.4% (1,586.3) 40.6% (10%)
-------------------------- ------------- ----------- ------------- -------- -------
Operating costs excluding adjusting items increased 8%
year-on-year and by 280bps as a percentage of sales, reflecting
inflationary pressures, adverse return rates and investment in
marketing.
Distribution costs have increased by 30bps year-on-year, largely
due to the increased return rate but partially mitigated by
successful supplier negotiations and the continuation of a flexible
carrier strategy which has reduced the use of higher cost lanes. A
further impact on distribution costs has arisen from the launch of
the Lichfield fulfilment centre and an increase in 'split-orders',
where a parcel is shipped from both Lichfield and Barnsley to
fulfil a single order. Whilst benefitting the customer proposition
by ensuring maximum stock availability, it has increased the costs
required to fulfil such orders.
Warehouse costs have increased due to increased labour inflation
across all sites. This is expected to be a structural change within
the market. Further adverse impacts on warehouse costs during the
year have been driven by the launch of Lichfield as a manual
facility and higher stock levels. The impact from Lichfield arises
because some units that were previously despatched from Barnsley,
which is highly automated, are now fulfilled from Lichfield at a
lower level of efficiency. ASOS has continued to take action to
mitigate inflationary pressures through improvement and
simplification of the supply chain network in FY22, notably the
closure of Swiebodzin to enhance the efficiency of the EU returns
network, as well as savings realised under the Lean programme which
has been deployed across the fulfilment centres.
At the start of the year, it was anticipated that marketing
costs would rise by 100bps for FY22. The actual increase of 60bps,
to 5.7%, reflects initial investments being made in broad reach and
product marketing, which were deployed on a test and learn basis
during the year. Further investment was initially planned for H2
but was postponed by the Company as the economic environment
worsened and consumer sentiment deteriorated. Spend on performance
marketing was also slightly up year-on-year, as investments were
made to capture demand; however, the impact of this overall
increase was limited by allocation of spend to more efficient
channels.
Other operating costs, excluding adjusting items, were broadly
flat year-on-year due to increased operating leverage, as well as
benefits derived from operational excellence initiatives across
areas such as customer care, payments, and returns.
Depreciation and amortisation costs as a percentage of sales
were up 20bps year-on-year, excluding the amortisation on acquired
intangibles. This was driven by the annualisation of depreciation
relating to the Truly Global Retail system, which went live in
March 2021, and the launch of the Lichfield fulfilment centre in
August 2021. This increase was partially offset by a revision of
the useful economic lives of automation and technology assets to
bring these into line with ASOS' business plans and industry
standards, which reduced the charge for the year by GBP11.5m.
Other operating income
Other operating income was GBP20.6m for the year, up from GBPnil
in FY21. This includes GBP1.2m of income received following the
decision during the year to sublet part of ASOS' site at Leavesden,
and a GBP19.3m gain from closing out RUB hedges, which were no
longer required following the decision to suspend trade in Russia
on 2 March 2022.
Interest
Net interest costs were GBP22.1m in the period, an increase of
GBP9.1m year-on-year mainly driven by interest
costs incurred on the convertible bond issued in April 2021, as
well the annualisation of interest due on the loan from Nordstrom,
which started accruing from July 2021.
Taxation
The reported effective tax rate (ETR) is 3.4%, based on the
reported loss before tax of GBP31.9m. The rate has moved from the
prior year comparative of 27.5%, which was based on a profit before
tax of GBP177.1m, and from the HY forecast of 22.0%, based on a
forecasted profit. The movement from profitability to making a
relatively small loss, means the expected adjustments have had a
greater absolute impact, and reduced rather than increased the ETR.
The impact of the enacted April 2023 rate change on fixed asset
movements, together with a higher adjustment for share-based
payments due to the fall in share price during the year, have been
the other drivers of the ETR movement.
Earnings per share
Both basic and diluted loss per share were (30.9p), falling by
124% versus last year (FY21: basic and diluted earnings per share
of 128.9p and 128.5p (1) ). This was driven by a reported loss
before tax of GBP31.9m, down from reported profit before tax of
GBP177.1m last year. The potentially convertible shares related to
both the convertible bond and ASOS' employee share schemes have
been excluded from the calculation of diluted loss per share as
they are anti-dilutive for the year ended 31 August 2022.
[1] Diluted earnings per share for the year to 31 August 2021
has been restated. The previously disclosed number was 125.5p, and
further information on the change can be found in Note 3, page 24
of the Condensed Financial Statements
Cash flow
There was a cash outflow for the year of GBP339.8m, and ASOS
ended the year with a net debt position of GBP152.9m. This was
mainly driven by a working capital outflow of GBP272.7m and CAPEX
investment of GBP182.9m, offsetting EBITDA of GBP140.0m.
The working capital outflow reflects the higher year-on-year
inventory position as ASOS ended the year with stock of GBP1,078.4m
(FY21: GBP807.1m) resulting from ((i) a marked slowdown in demand
driven by global economic uncertainty; (ii) the timing impact of
FY21 stock that was only received in FY22 as a result of supply
chain delays; (iii) the impact of increased returns; and (iv) the
early receipt of FY23 stock in FY22.
Capital expenditure totalled GBP182.9m in support of the planned
automation programmes at Lichfield and Atlanta; technology
investments into digital platforms, business systems and
infrastructure in support of the development of the marketplace
integration platform required for Partner Fulfils; continued
optimisation of the customer experience in support of new features
and improvement in conversion; and investments in support of ASOS'
progress against its data strategy.
Mathew Dunn
Chief Operating Office & Chief Financial Officer
Consolidated UNAUDITED Statement of Total Comprehensive
Income
For the year to 31 August 2022
Year to Year to
31 August 2022 31 August 2021
(unaudited) (audited)
GBPm GBPm
Revenue 3,936.5 3,910.5
Cost of sales (2,219.0) (2,134.1)
-------------------------- ----------------- ----------------
Gross profit 1,717.5 1,776.4
Distribution expenses (523.7) (509.5)
Administrative expenses (1,224.2) (1,076.8)
Other income 20.6 -
Operating (loss)/profit (9.8) 190.1
Finance income 0.9 0.2
Finance expense (23.0) (13.2)
(Loss)/Profit before tax (31.9) 177.1
Analysed as:
Adjusted profit before tax (note 11) 22.0 193.6
Adjusting items (note 11) (53.9) (16.5)
-------------------------------------------- ------- -------
(Loss)/Profit before tax (31.9) 177.1
---------------------------------------- ------- -------
Income tax expense 1.1 (48.7)
----------------------------------------- -------- -------
(Loss)/Profit for the year (30.8) 128.4
----------------------------------------- -------- -------
(Loss)/Profit for the year attributable
to owners of the parent company (30.8) 128.4
----------------------------------------- -------- -------
Net translation movements offset
in reserves 0.3 (0.5)
Net fair value gains on derivative
financial instruments 9.7 38.4
Income tax relating to these items (3.9) (8.1)
----------------------------------------- -------- -------
Other comprehensive income for
the year (1) 6.1 29.8
----------------------------------------- -------- -------
Total comprehensive (loss)/income
for the year attributable to owners
of the parent company(2) (24.7) 158.2
----------------------------------------- -------- -------
(Loss)/Earnings per share (Note
3)
Basic per share (30.9p) 128.9p
Diluted per share (restated - refer
to note 3) (30.9p) 128.5p
----------------------------------------- -------- -------
(1) All items of other comprehensive income will ultimately be
reclassified to profit or loss
(2) The results for the year shown are derived completely from
continuing activities
Consolidated UNAUDITED Statement of Changes in EquitY
For the year to 31 August 2022
Called Employee Equity
up Benefit on
share Share Trust Hedging Translation convertible Retained Total
capital premium reserve(1) reserve reserve debt earnings(2) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
At 1 September
2021 3.5 245.7 2.1 14.3 (2.4) 58.9 711.9 1,034.0
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Loss for the
year - - - - - - (30.8) (30.8)
Other
comprehensive
income/(loss)
for the year - - - 6.4 (0.3) - - 6.1
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Total
comprehensive
income/(loss)
for the year - - - 6.4 (0.3) - (30.8) (24.7)
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Cash flow
hedges
gains and
losses
transferred
to
inventory - - - 5.5 - - - 5.5
Share-based
payments
charge - - - - - - 0.8 0.8
Tax relating
to share
option
scheme - - - - - - (0.7) (0.7)
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Balance as at
31 August
2022 3.5 245.7 2.1 26.2 (2.7) 58.9 681.2 1,014.9
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
At 1 September
2020 3.5 245.7 2.0 (15.8) (2.1) - 577.0 810.3
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Profit for the
year - - - - - - 128.4 128.4
Other
comprehensive
income/(loss)
for the year - - - 30.1 (0.3) - - 29.8
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Total
comprehensive
income/(loss)
for the year - - - 30.1 (0.3) - 128.4 158.2
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Issue of
convertible
bond - - - - - 58.9 - 58.9
Recognition of
gross
obligation
to purchase
own
shares - - - - - - (2.8) (2.8)
Net cash
received
on exercise
of
shares from
Employee
Benefit Trust - - 0.1 - - - - 0.1
Share-based
payments
charge - - - - - - 9.4 9.4
Tax relating
to
share option
scheme - - - - - - (0.1) (0.1)
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
Balance as at
31 August
2021 3.5 245.7 2.1 14.3 (2.4) 58.9 711.9 1,034.0
--------------- --------- --------- ----------- ---------- ------------- ------------- ------------- ---------
(1) Employee Benefit Trust and Link Trust
(2) Retained earnings includes the share-based payments
reserve
Consolidated UNAUDITED Statement of Financial PositioN
As at 31 August 2022
At At
31 August 31 August
2022 2021
(unaudited) (audited)
GBPm GBPm
----------------------------------------------- -------------- -----------
Non-current assets
Goodwill 35.2 33.1
Other intangible assets 648.7 619.1
Property, plant and equipment 732.0 659.2
Derivative financial asset 27.0 13.4
----------------------------------------------- --------------
1,442.9 1,324.8
----------------------------------------------- -------------- -----------
Current assets
Inventories 1,078.4 807.1
Trade and other receivables 88.2 57.7
Derivative financial asset 41.4 23.5
Cash and cash equivalents 323.0 662.7
Current tax asset 23.0 8.7
----------------------------------------------- --------------
1,554.0 1,559.7
----------------------------------------------- -------------- -----------
Current liabilities
Trade and other payables (993.3) (956.1)
Borrowings (1.4) (3.8)
Lease liabilities (24.3) (23.9)
Derivative financial liability (21.0) (14.2)
(1,040.0) (998.0)
----------------------------------------------- -------------- -----------
Net current assets 514.0 561.7
----------------------------------------------- -------------- -----------
Non-current liabilities
Lease liabilities (355.8) (305.0)
Deferred tax liability (58.2) (41.3)
Provisions (41.9) (43.2)
Derivative financial liability (11.6) (3.6)
Borrowings (474.5) (459.4)
----------------------------------------------- -------------- -----------
(942.0) (852.5)
----------------------------------------------- -------------- -----------
Net assets 1,014.9 1,034.0
----------------------------------------------- -------------- -----------
Equity attributable to owners of the parent
Called up share capital 3.5 3.5
Share premium 245.7 245.7
Employee Benefit Trust reserve 2.1 2.1
Hedging reserve 26.2 14.3
Translation reserve (2.7) (2.4)
Equity on convertible debt 58.9 58.9
Retained earnings 681.2 711.9
----------------------------------------------- -------------- -----------
Total equity 1,014.9 1,034.0
----------------------------------------------- -------------- -----------
Consolidated UNAUDITED Statement of Cash Flows
For the year to 31 August 2022
Year to Year to
31 August 31 August
2022 2021
(unaudited) (audited)
GBPm GBPm
----------------------------------------------- -------------- -----------
Operating (loss)/profit (9.8) 190.1
Adjusted for:
Depreciation of property, plant and equipment 61.0 61.1
Amortisation of other intangible assets 88.8 74.4
Impairment of assets 19.2 0.1
Increase in inventories (258.7) (226.7)
(Increase)/decrease in trade and other
receivables (34.2) 1.9
Increase in trade and other payables 20.2 150.6
Settlement of contingent consideration (6.0)
in relation to employee benefits -
Share-based payments charge 0.6 7.6
Other non-cash items (4.9) (7.0)
Income tax received/(paid) 3.4 (37.0)
----------------------------------------------- -------------- -----------
Net cash (used)/generated from operating
activities (120.4) 215.1
Investing activities
Payments to acquire intangible assets (109.2) (102.0)
Payments to acquire property, plant and
equipment (73.7) (55.1)
Payments to acquire assets in a business
combination - (286.4)
Dividends received - 0.1
Interest received 0.9 0.2
----------------------------------------------- -------------- -----------
Net cash used in investing activities (182.0) (443.2)
Financing activities
Proceeds from borrowings - 21.9
Proceeds from convertible bond issue, net
of transaction costs - 491.0
Repayment of principal portion of lease
liabilities (26.3) (23.9)
Net cash inflow relating to Employee Benefit
Trust - 0.1
Interest paid (11.1) (5.7)
----------------------------------------------- -------------- -----------
Net cash (used in)/generated from financing
activities (37.4) 483.4
----------------------------------------------- -------------- -----------
Net (decrease)/increase in cash and cash
equivalents (339.8) 255.3
----------------------------------------------- -------------- -----------
Opening cash and cash equivalents 662.7 407.5
Effect of exchange rates on cash and cash
equivalents 0.1 (0.1)
----------------------------------------------- -------------- -----------
Closing cash and cash equivalents 323.0 662.7
----------------------------------------------- -------------- -----------
UNAUDITED Notes to the financial information
For the year to 31 August 2022
1. Preparation of the consolidated financial information
a) General information
ASOS Plc (the Company) and its subsidiaries (together, the
Group) is a global fashion retailer. The Group sells products
across the world and has websites targeting the UK, US, Australia,
France, Germany, Spain, Italy, Sweden, the Netherlands, Denmark and
Poland. The Company is a public limited company which is listed on
the London Stock Exchange and is incorporated and domiciled in the
UK as at 31 August 2022. The address of its registered office is
Greater London House, Hampstead Road, London NW1 7FB.
b) Basis of preparation
The condensed consolidated financial statements transitioned to
UK-adopted International Financial Reporting Standards (IFRS) for
financial periods beginning after 1 January 2021. This change
constitutes a change in accounting framework. However, there is no
impact on recognition, measurement or disclosure in the period
reported as a result of the change in framework. The consolidated
financial statements have also been prepared in accordance with
IFRS Interpretations Committee (IFRIC) in conformity with the
requirements of Companies Act 2006 and the Listing rules as
applicable to companies reporting under those standards. As at the
reporting date, these are the standards, subsequent amendments and
related interpretations issued and adopted by the International
Accounting Standards Board (IASB).
Within the consolidated statement of total comprehensive income
the Group presents net fair value movements on financial
instruments, which includes the fair value movements on effective
cash flow hedges, offset by amounts subsequently reclassified. In
accordance with IFRS 9 'Financial Instruments', cash flow hedge
gains and losses in relation to inventory purchases are recognised
as part of the cost of inventory, and therefore the carrying value
of inventory is adjusted for the accumulated gains or losses
recognised directly in other comprehensive income (a basis
adjustment), and then recognised in the income statement when the
inventory is sold.
This basis adjustment is not part of other comprehensive income.
The Group has therefore shown the inventory basis adjustments as a
separate line within the statement of changes in equity.
Comparative period amounts have not been adjusted on the grounds of
materiality.
The financial information contained within this preliminary
announcement for the years to 31 August 2022 and 31 August 2021
does not comprise statutory financial statements within the meaning
of section 434 of the Companies Act 2006. Statutory accounts for
the year to 31 August 2021 have been filed with the Registrar of
Companies and those for the year to 31 August 2022 will be filed
following the Company's annual general meeting. The auditors have
reported on the 2021 accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under section 498 (2)
or (3) of the Companies Act 2006.
c) Going concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for a period of at least 12
months from the date of approval of the financial statements, and
therefore continue to adopt the going concern basis in preparing
the financial statements. To support this assessment, detailed cash
flow forecasts were prepared for the 18 month period to February
2024.
Preparation of the consolidated financial information
(continued)
In assessing the Group's going concern position, the Directors
have considered the Group's detailed budgeting and forecasting
process which considers the Group's financial performance, position
and cash flows over the going concern period (the base case). These
cash flow forecasts represent the Directors' best estimate of
trading performance and cost implications in the market based on
current agreements, market experience and consumer demand
expectations. In conjunction with this, the Directors considered
the Group's business activities and principal risks, reviewing the
Group's cash flows, liquidity positions and borrowing facilities
for the going concern period. The review included the recent
amendment to the Group's Revolving Credit Facility agreement that
was obtained in October 2022 - further detail is included within
note 10, which generates additional operational flexibility in the
going concern period. At 31 August 2022, the Group had an undrawn
Revolving credit facility ("RCF") of GBP350 million which matures
in July 2024 and GBP500 million convertible bonds with a maturity
of April 2026. Net debt at the balance sheet date was GBP152.9m
comprising debt of GBP475.9m and net cash of GBP323.0m.
The Group has also considered various severe but plausible
downside scenarios comprising of, but not limited to, the following
assumptions:
-- Sales growth reduction;
-- Gross margin reduction;
-- Potential working capital cash shocks; and
-- Closure of the Group's Barnsley fulfilment center due to a major incident
The above downside scenarios include assumed reductions in the
projected like-for-like sales growth during the period under review
of between 2.5% and 7%, and gross margin reductions of between 1%
to 2%. Should the Group see such significant events unfold it has
several mitigating actions it can implement to manage its liquidity
risk such as deferring capital investment spend and further cost
management to maintain a sufficient level of liquidity headroom
during the going concern period.
Reverse stress tests have also been performed on both the
Group's revenue and gross margin to see how far these would need to
decline to cause a liquidity event. Such results would have to see
over a 15% decline in sales over the base case, or a decline in
gross margin from the base case of between 3% and 8%. Both are
considered remote based on results of previous significant economic
shock events, particularly on the basis that the Group is
annualising the softer market growth and global supply chain crisis
experienced this year.
In assessing the group's ability to continue as a going concern
the directors have considered climate change risks. The forecast
cashflows incorporates cashflows to address these risks, including
those associated with the Group's Net Zero commitment.
Based on the above, the Directors considered it appropriate to
adopt the going concern basis of accounting in the preparation of
the Group's annual financial statements.
2. Segmental analysis
The Chief Operating Decision Maker has been determined to be the
Executive Committee which receives information on revenue and
associated metrics of the Group in key geographical territories.
Management monitors and makes decisions considering the entire
Group. The Group has reviewed its assessment of reportable segments
under IFRS 8, "Operating Segments" and concluded that the Group
continues to have one reportable segment.
The following sets out the Group's revenue in the key geographic
markets in which customers are located:
Year to 31 August 2022 (unaudited)
UK EU US RoW(1) Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- ------ ------- ----------
Retail sales 1,703.3 1,142.6 472.7 454.0 3,772.6
Income from other services (2) 59.5 27.4 58.7 18.3 163.9
Total revenues 1,762.8 1,170.0 531.4 472.3 3,936.5
Cost of sales (2,219.0)
----------
Gross profit 1,717.5
Distribution expenses (523.7)
Administrative expenses (1,224.2)
Other income(3) 20.6
----------
Operating loss (9.8)
Finance income 0.9
Finance expense (23.0)
----------
Loss before tax (31.9)
----------
1 Rest of World
2 Income from other services comprises of delivery receipt
payments, marketing services, commission on partner-fulfilled sales
and revenue from wholesale sales
3 Other income includes a GBP19.3m gain recognised following the
cancellation of foreign exchange derivatives to hedge exposures to
Russian Rubles following the Group's decision to withdraw from
Russia during the year.
Year to 31 August 2021 (audited)
UK EU US RoW(1) Total
GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- -------- ------ ------- ----------
Retail sales 1,595.7 1,156.5 442.0 589.6 3,783.8
Income from other services (2) 56.3 28.8 24.2 17.4 126.7
Total revenues 1,652.0 1,185.3 466.2 607.0 3,910.5
Cost of sales (2,134.1)
----------
Gross profit 1,776.4
Distribution expenses (509.5)
Administrative expenses (1,076.8)
----------
Operating profit 190.1
Finance income 0.2
Finance expense (13.2)
----------
Profit before tax 177.1
----------
1 Rest of World
2 Income from other services comprises of delivery receipt
payments, marketing services, and revenue from wholesale sales
The income recognition for delivery receipts, commissions on
partner-fulfilled sales and wholesale revenue are in line with that
of retail sales and linked to dispatch / delivery to customers.
Income from marketing services is recognised in line with the terms
and conditions of each contract and for premier subscription income
this is recognised over the course of the subscription. The value
recognised in the year ended 31 August 2022 for marketing services
is GBP13.1m (2021: GBP11.8m) and from premier subscription
customers is GBP24.6m (2021: GBP20.9m).
Due to the nature of its activities, the Group is not reliant on
any individual major customers. The total amount of non-current
assets (excluding derivatives and goodwill) located in the UK is
GBP1,006.7m (2021: GBP994.1m), EU (Germany): GBP188.8m (2021:
GBP193.6m), US: GBP185.2m (2021: GBP90.6m), and RoW: GBPnil (2021:
GBPnil).
3. Earnings per Share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares in issue during the period. Own
shares held by the Employee Benefit Trust and Link Trust are
eliminated from the weighted average number of ordinary shares.
Diluted earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares in issue during the period,
adjusted for the effects of potentially dilutive ordinary
shares.
Year to Year to
31 August 31 August
2022 2021
(unaudited) (audited)
GBPm GBPm
----------------------------------------------------- -------------- -----------
Weighted average share capital
Weighted average shares in issue for basic earnings
per share (no. of shares) 99,696,028 99,590,828
Weighted average effect of dilutive options (no.
of shares)(1) - 341,014
Weighted average effect of convertible bond (no. - -
of shares)(1,2)
----------------------------------------------------- -------------- -----------
Weighted average shares in issue for diluted
earnings per share (no. of shares) 99,696,028 99,931,842
----------------------------------------------------- -------------- -----------
Earnings (GBPm)
Earnings attributable to owners of the parent
company for basic earnings per share (30.8) 128.4
Interest expense on convertible bonds(1,2) - -
----------------------------------------------------- -------------- -----------
Diluted earnings attributable to owners of the
parent company for diluted earnings per share (30.8) 128.4
----------------------------------------------------- -------------- -----------
Basic (loss)/earnings per share (30.9p) 128.9p
Diluted (loss)/earnings per share(2) (30.9p) 128.5p
----------------------------------------------------- -------------- -----------
1 Dilutive shares and interest not included where their effect
is anti-dilutive
2 The prior year weighted average number of dilutive shares and
interest relating to the convertible bond have been amended. This
has the effect of increasing the diluted earnings per share by 3.0
pence per share. This is as a result of applying a more accurate
calculation to the relevant shares where their effect is
anti-dilutive.
4. Reconciliation of cash and cash equivalents
Year to Year
to
31 August 31 August
2022 2021
(unaudited) (audited)
GBPm GBPm
------------------------------------------------------- -------------- -----------
Net movement in cash and cash equivalents (339.8) 255.3
Opening cash and cash equivalents 662.7 407.5
Effect of exchange rates on cash and cash equivalents 0.1 (0.1)
------------------------------------------------------- -------------- -----------
Closing cash and cash equivalents 323.0 662.7
------------------------------------------------------- -------------- -----------
Cash and cash equivalents includes short-term deposits with
banks and other financial institutions, with an initial maturity of
three months or less, and cash in transit (CIT) balance of GBP32.3m
(2021: GBP34.2m). The CIT balance includes uncleared credit card
receipts due within 72 hours of GBP11.7m (2021: GBP10.1m).
Included within cash and cash equivalents is GBP0.8m (2021:
GBPnil) of cash collected on behalf of partners of the Direct to
Consumer fulfilment proposition 'Partner Fulfils'. ASOS Payments UK
Limited and the Group are entitled to interest amounts earnt on the
deposits, amounts are held in a segregated bank account and are
settled on a monthly basis.
5. Borrowings
Borrowings 31 August 31 August
2022 2021
(unaudited) (audited)
GBPm GBPm
------------- -------------- -----------
Current (1.4) (3.8)
Non-current (474.5) (459.4)
------------- -------------- -----------
(475.9) (463.2)
------------- -------------- -----------
On 16 April 2021 the Group issued GBP500m of convertible bonds.
The unsecured instruments pay a coupon of 0.75% until April 2026,
or the conversion date, if earlier. The initial conversion price
was set at GBP79.65 per share. In accordance with IAS 32 'Financial
Instruments: Presentation', the equity and debt components of the
bonds are accounted for separately and the fair value of the debt
component has been determined using the market interest rate for an
equivalent non-convertible bond, deemed to be 3.4%. As a result,
GBP440.1m was recognised as a liability in the balance sheet on
issue and the remainder of the proceeds, GBP59.9m, which represents
the equity component, was credited to reserves. The difference
between the fair value of the liability and the principal value is
being amortised through the income statement from the date of
issue. Issue costs of GBP9.0m were allocated between equity and
debt and the element relating to the debt component is being
amortised over the life of the bonds. The issue costs apportioned
to equity of GBP1.0m have not been amortised. The carrying value of
the liability portion as at 31 August 2022 is GBP451.0m (2021:
GBP438.2m), with GBP3.8m being the annual coupon payable within 12
months (2021: GBP3.8m).
On 12 July 2021 the Group announced a strategic partnership with
Nordstrom, a US-based multi-channel retailer, to drive growth in
North America. As part of this venture, Nordstrom purchased a
minority interest in ASOS Holdings Limited which holds the Topshop,
Topman, Miss Selfridge and HIIT brands in exchange for GBP10 as
well as providing a GBP21.9m loan. The loan attracts interest at a
market rate of 6.5% per annum. The carrying value of the debt at 31
August 2022 is GBP22.0m (2021: GBP22.2m). As part of this agreement
a written put option was provided to Nordstrom over their shares in
ASOS Holdings Limited. The resulting liability is GBP3.0m as at 31
August 2022 (2021: GBP2.8m).
At the year-end, the Group had in place a GBP350m Revolving
Credit Facility (RCF), of which GBPnil was drawn down (2021:
GBPnil). On 8 September 2022 the Group drew down GBP250.0m of the
RCF. Subsequently, in October 2022, the Group successfully
renegotiated the terms of the revolving credit facility - refer to
note 10 for further information.
The table below analyses the Group's borrowings into relevant
maturity groupings based on the remaining period at the balance
sheet date to the contractual maturity date. The amounts disclosed
in the table are the contractual undiscounted amounts.
<1 1 to 2 to 3 to 4 to >5
year 2 years 3 years 4 years 5 years years
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------ --------- --------- --------- --------- -------
Convertible bond 3.8 3.8 3.8 503.8 - -
Nordstrom loan - - - - - 21.9
Obligation to repurchase - 4.9 - - - -
own shares
-------------------------- ------ --------- --------- --------- --------- -------
3.8 8.7 3.8 503.8 - 21.9
-------------------------- ------ --------- --------- --------- --------- -------
6. Contingent liabilities
From time to time, the Group is subject to various legal
proceedings and claims that arise in the ordinary course of
business, which due to the fast-growing nature of the Group and its
ecommerce base, may concern the Group's brand and trading name or
its product designs. 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
which can be reliably measured.
At 31 August 2022, the Group had contingent liabilities of
GBPnil (2021: GBP6.4m).
7. Financial instruments
There are no changes to the categories of financial instruments
held by the Group.
Year to Year to
31 31 August
2021
August 2022 (audited)
(unaudited) GBPm
GBPm
-------------------------------------------------- -------------- -----------
Financial assets
Derivative assets used for hedging at fair value 68.4 36.9
Amortised cost(1) 72.9 49.2
Cash and cash equivalents 323.0 662.7
-------------------------------------------------- -------------- -----------
Financial liabilities
Derivative liabilities used for hedging at fair
value (32.6) (17.8)
Lease liabilities (380.1) (328.9)
Amortised cost(2,3) (1,406.8) (1,334.3)
-------------------------------------------------- -------------- -----------
(1) Financial assets at amortised cost include trade and other
receivables but exclude prepayments.
(2) Financial liabilities at amortised cost include overdrafts,
borrowings, accruals, other payables and trade payables but exclude
deferred income and other liabilities that do not meet the
definition of a financial liability.
(3) The prior year balance for financial liabilities measured at
amortised cost has been amended to exclude certain balances
totalling GBP128.0m that do not meet the definition of a financial
liability.
The Group operates internationally and is therefore exposed to
foreign currency transaction risk, primarily on sales denominated
in Euros, US dollars, and Australian Dollars. The Group's policy is
to mitigate foreign currency transaction exposures where possible
and the Group uses financial instruments in the form of forward
foreign exchange contracts to hedge future highly probable foreign
currency cash flows.
These forward foreign exchange contracts are classified above as
derivative financial instruments and are classified as Level 2
financial instruments under IFRS 13, "Fair Value Measurement." They
have been fair valued at 31 August 2022 with reference to forward
exchange rates that are quoted in an active market, with the
resulting value discounted back to present value. The majority of
forward foreign exchange contracts were assessed to be highly
effective during the year ended 31 August 2022. During the year,
cash flow hedges in relation to the Group's exposure to Russian
Rubles were cancelled following the Group's decision to cease
trading in Russia on 2 March 2022. Gains of GBP19.3m were
recognised in other income. All derivative financial liabilities at
31 August 2022 mature within three years based on the related
contractual arrangements.
8. Business combination (unaudited)
On 4 February 2021, the Group acquired the trade and assets of a
number of businesses from the administrators of Arcadia Group
limited. The businesses were purchased out of administration for a
total consideration of GBP292.4m. In accordance with IFRS 3
'Business combinations' the acquisition accounting has now been
finalised and resulted in an increase in goodwill of GBP2.1m.
Purchase consideration GBPm
------------------------------ ------
Cash paid 264.8
Contingent consideration 27.6
Total purchase consideration 292.4
------------------------------ ------
8. Business combination (unaudited) continued
The fair value of assets and liabilities acquired was GBP258.3m.
This includes GBP219.4m in relation to the Topshop, Topman, Miss
Selfridge and HIIT brands and GBP38.9m of other net assets. The
fair value of assets acquired was less than the fair value of the
consideration by GBP34.1m, which has been recognised as goodwill.
The goodwill is attributable to the workforce, the high
profitability of the acquired business and expected synergies. It
will not be deductible for tax purposes.
The assets and liabilities recognised as a result of the
acquisition at 4 February 2021 are as follows:
Fair value of net assets acquired Adjustment to
Restated provisional As previously
At 4 February 2021 (final) figures reported
GBPm GBPm GBPm
------------------------------------ ----------- -------------- --------------
Intangible assets(1) 243.8 - 243.8
Inventories 25.5 (2.1) 27.6
Total assets acquired 269.3 (2.1) 271.4
Contingent liability (6.4) - (6.4)
Deferred tax liability (4.6) - (4.6)
Total liabilities acquired (11.0) - (11.0)
------------------------------------ ----------- -------------- --------------
Net identifiable assets acquired
at fair value 258.3 (2.1) 260.4
------------------------------------ ----------- -------------- --------------
Goodwill arising on acquisition 34.1 2.1 32.0
Purchase consideration transferred 292.4 - 292.4
1 Intangible assets include brands of GBP219.4m relating to Topshop,
Topman, Miss Selfridge and HIIT and reflects their fair value at
the acquisition date. They are estimated to have a useful economic
life of between 10 and 30 years. Also acquired were wholesale customer
relationships with a fair value of GBP24.4m which are estimated to
have a useful economic life of 8 years.
a) Acquisition-related costs
Acquisition-related costs of GBP2.0m were incurred and were
included in administrative expenses in the statement of profit or
loss and in operating cash flows in the statement of cash flows for
the year ended 31 August 2021.
b) Contingent consideration
The contingent consideration arrangements primarily relate to
amounts ASOS.com Limited agreed to pay to the Arcadia
administrators in relation to qualifying inventory totalling
GBP21.6m upon collection. The remainder related Arcadia employee
retention payments. As at 31 August 2022 the consideration amounts
have been settled in full.
c) Contingent liability
As at 31 August 2021, a contingent liability of GBP6.4m had been
recognised in relation to employee and other liabilities. The
Group's assessment of the fair value of these liabilities
represented the probability adjusted possible outcome. As at 31
August 2022 the risk has fully expired and the provision has been
released as an adjusted item.
9. Related parties
The Group's related party transactions are with the Employee
Benefit Trust, Link Trust, key management personnel and other
related parties. There have been no material changes to the Group's
related party transactions during the year to 31 August 2022.
10. Post balance sheet events
Change to Group operating model
After the balance sheet date, in October 2022, the Board
approved changes to the Group's commercial model. The updated model
aims to operate a shorter buying cycle with an accelerated speed to
market, facilitating an enhanced customer proposition that offers
new products, more regularly. To achieve this, it is planned to
introduce more off-site clearance routes that will enable the Group
to clear inventory earlier in its life-cycle than previously,
therefore reducing the overall breadth of inventory held in
fulfilment centres, which in turn will reduce the volume that is
currently sold on promotion via the ASOS site.
To transition to the new model, a reshaping of the inventory
portfolio is required, and as a result additional inventory
provisions in the range of GBP100 million to GBP130 million are
expected to be recognised in the next financial year. Of this,
between GBP95 million and GBP120 million is in relation to
inventory currently held on the Group's balance sheet which will
now be sold through alternative clearance channels, rather than
through the website. The remainder relates to committed inventory
spend which will be recognised as inventory in the next financial
year, that will also be predominantly sold through off-site
clearance channels as a result of the new model.
It has been considered whether any adjustments are required to
the current year financial statements. Whilst the proposal was both
formed and approved after the balance sheet date, the Group has
specifically considered whether the change in operating model
indicates that inventory held at the year-end requires further
write-downs to net realisable value in order to sell. The
anticipated write-downs next year only arise out of the decision to
sell or dispose of inventory through other channels to facilitate
an enhanced customer offer. Absent the change in model, it would be
sold through ASOS.com, for which the existing year-end provisions
are appropriate. The Group has therefore concluded that the
approved change does not provide evidence for conditions that
existed at the balance sheet date.
It was also considered whether the change is an indication that
the Group's non-current assets may require impairment. Whilst a
reduction in stock levels held at fulfilment centres is
anticipated, the overall cash flow of the Group is expected to
improve, primarily through improved margin through lower ongoing
mark-downs as well as improved working capital in the longer term
through reduced stockholding. Furthermore, whilst any future
decisions to exit warehouses could potentially result in further
impairment charges, no decisions in relation to this have been
made. It is therefore concluded that the updated commercial model
does not provide indication that the Group's non-current assets are
impaired at the year-end.
As the programme will support future underlying profit
improvement, it was considered whether it is appropriate to report
these costs within adjusted profit. Whilst they arise from changes
in the Group's trading operations, they comprise a major business
change, they can be separately identified, are material in size and
are not reflective of ordinary in-year trading activity. The costs
will therefore be presented as adjusting items in the next
financial year and excluded from adjusted profit before tax.
Changes to Group funding
Post the balance sheet date, the Group has agreed an amendment
to its GBP350m revolving credit facility (RCF), with existing
financial covenants ceasing to apply until February 2024, and
providing the Group with much enhanced flexibility. A new minimum
liquidity covenant will apply until the maturity of the RCF. As
part of this amendment, the Group's bank lenders have agreed an
accordion option to increase the RCF to circa GBP400m, allowing the
incorporation of newly committed ancillary facilities. The
amendment also provides for additional reporting disclosures and
security by way of fixed and floating charges over certain Group
assets.
11. Alternative performance measures (APMs)
In the reporting of financial information, the Directors use
various APMs. These APMs should be considered in addition to, and
are not intended to be a substitute for, IFRS measurements. As they
are not defined by International Financial Reporting Standards,
they may not be directly comparable with other companies' APMs.
The Directors believe that these APMs provide additional useful
information for understanding the financial performance and health
of the Group. They are also used to enhance the comparability of
information between reporting periods (such as adjusted profit) by
adjusting for non-recurring or uncontrollable factors which affect
IFRS measures, to aid users in understanding the Group's
performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive setting
purposes. The APMs that the Group has focused on in the period are
defined and reconciled below. All of the APMs relate to the current
period's results and comparative periods.
Performance Closest Definition How ASOS use this measure
measure IFRS measure
---------------- --------------- ----------------------- -------------------------------------------------------
Retail Revenue Internet sales A measure of the Group's trading
sales recorded net of performance focusing on the sale
an appropriate of products to end customers. Used
deduction for by management to monitor overall
actual and expected performance across markets, and
returns, relevant the basis of key internal KPIs such
vouchers and sales as ABV.
taxes.
Retail sales exclude A reconciliation of this measure
income from delivery is included within note 2.
receipt payments,
marketing services,
commission on
partner-fulfilled
sales and revenue
from wholesale
sales.
---------------- --------------- ----------------------- -------------------------------------------------------
Adjusted Operating Profit before A measure of the Group's profitability
EBIT (loss)/profit tax, interest, for the period, excluding the impact
and the adjusting of any transactions outside of the
items defined ordinary course of business and
below. Adjusted not considered part of ASOS' usual
EBIT margin is cost base. This measure is also
the Adjusted EBIT one of ASOS' medium term targets,
divided by total as set out at the CMD on 10 November
sales. 2021.
A reconciliation of this measure
is included below.
---------------- --------------- ----------------------- -------------------------------------------------------
Adjusted (Loss)/profit Profit before A measure of the Group's underlying
profit before tax and the adjusting profitability for the period, excluding
before tax items defined the impact of any transactions outside
tax below. of the ordinary course of business
and not considered to be part of
ASOS' usual cost base. Used by management
to monitor the performance of the
business each month.
A reconciliation of this measure
is included below.
---------------- --------------- ----------------------- -------------------------------------------------------
Net cash/(debt) No direct Cash and cash A measure of the Group's liquidity.
equivalent equivalents less
any borrowings This is reconciled as follows:
drawn down at Year to Year
period-end, but 31 to 31
excluding outstanding August
lease liabilities. 2021
August GBPm
2022
(unaudited)
GBPm
--------------------------- -------------- --------
Cash and cash equivalents 323.0 662.7
Borrowings (475.9) (463.2)
Lease liabilities (380.1) (328.9)
--------------------------- -------------- --------
Net borrowings (533.0) (129.4)
Add-back lease
liabilities 380.1 328.9
--------------------------- -------------- --------
Group net debt (152.9) 199.5
--------------------------- -------------- --------
---------------- --------------- ----------------------- -------------------------------------------------------
11. Alternative performance measures (APMs) continued
Adjusted profit measures
In order to provide shareholders with additional insight into
the year-on-year performance of the business, an adjusted measure
of profit is provided to supplement the reported IFRS numbers, and
reflects how the business measures performance internally.
Determining which items are to be adjusted requires judgement,
in which the Group considers items which are significant either by
virtue of their size and/or nature, the inclusion of which could
distort comparability between periods. The same assessment is
applied consistently to any reversals of prior adjusting items.
Adjusted profit before tax (and similarly adjusted EBIT) is not an
IFRS measure and therefore not directly comparable to other
companies.
More details on each are included further below.
Year to Year to
31 August 31 August
2022 2021
GBPm GBPm
-------------------------------------------- ----------- -----------
Operating (loss)/profit (9.8) 190.1
-------------------------------------------- ----------- -----------
Adjusting items:
ASOS Re-imagined 25.4 -
Main Market transition costs 5.7 -
Impairment of Leavesden site assets 18.5 -
Employee and other liabilities relating to (6.4) -
Topshop acquisition
Amortisation of acquired intangible assets 10.7 6.0
One-off acquisition and integration costs - 10.5
-------------------------------------------- ----------- -----------
Total adjusting items 53.9 16.5
Adjusted EBIT 44.1 206.6
-------------------------------------------- ----------- -----------
Adjusted EBIT margin(1) 1.1% 5.3%
Net finance expenses (22.1) (13.0)
-------------------------------------------- ----------- -----------
Adjusted profit before tax 22.0 193.6
-------------------------------------------- ----------- -----------
1 Calculated as adjusted operating profit of GBP44.1m (2021:
GBP206.6m) divided by Group revenue of GBP3,936.5m (2021:
GBP3,910.5m)
ASOS Reimagined
A multi-year programme which will enable the business to
accelerate delivery of the strategy and medium term plan set out at
the Capital Markets Day held on 10 November 2021. The programme
will fundamentally change how ASOS operates and will drive the
business towards its goal of becoming the number one destination
for fashion-loving 20-somethings. Over the course of FY22, 'ASOS
Reimagined' has been broken down into seven key transformation
themes which will be responsible for making progress against three
priority areas;
(i) leveraging ASOS' platform and capabilities to improve the core customer proposition,
(ii) amplifying ASOS' winning offer of own-brand and partner brands, and
(iii) more effectively targeting ASOS' approach to international expansion.
In FY22, which was the first year of 'ASOS Reimagined', total
costs of GBP25.4m were incurred, largely to equip ASOS with the
appropriate structures and capabilities to deliver the programme.
This is broadly in line with the guidance issued at interim results
on 12th April 2022, and mainly relates to spend on external
consultants
11. Alternative performance measures (APMs) continued
and contractors to support the launch of specific Transformation
initiatives and processes, and costs associated with the
restructuring of the ASOS exec.
Main Market transition costs
ASOS' transition to the Main Market of the London Stock
Exchange, which was completed on 22 February 2022.
Impairment of Leavesden site assets
A non-cash impairment charge relating to the right-of-use assets
and associated fixtures and fittings at part of the ASOS' Leavesden
office. This is required under IAS 36 'Impairment of Assets' as a
result of the decision to vacate and sublet part of the building to
3rd parties.
Employee and other liabilities relating to Topshop
acquisition
The release of a contingent liability relating to employee and
other costs, which was originally recognised as part of the Topshop
acquisition in February 2021.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets is adjusted for as
the acquisition the amortisation relates to was outside
business-as-usual operations for ASOS. These assets would not
normally be recognised outside of a business combination, therefore
the associated unwind is adjusted.
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END
FR UKOVRUUURARA
(END) Dow Jones Newswires
October 19, 2022 02:00 ET (06:00 GMT)
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