TIDMASC
RNS Number : 0259G
ASOS PLC
10 November 2022
10 November 2022
ASOS Plc
(the "Company")
Annual Report & Accounts and Notice of Annual General
Meeting
ASOS Plc announces that it has today published its Annual Report
and Accounts 2022. In addition, the Company announces that its
Notice of Annual General Meeting (the "Notice") has been sent to
shareholders. The Annual General Meeting will be held at 12.00 noon
on Wednesday 11 January 2023 at the Company's registered office at
Greater London House, Hampstead Road, London, NW1 7FB.
In accordance with Listing Rule 9.6.1R, copies of the following
documents have been submitted to the Financial Conduct Authority's
National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
-- Annual Report and Accounts 2022;
-- Notice of Annual General Meeting; and
-- Notice of Availability.
Copies of the Annual Report and Accounts 2022 and the Notice are
also available on the Company's website at
https://www.asosplc.com/investor-relations/
A condensed set of the Company's audited financial statements
for the year ended 31 August 2022 are set out as an appendix to
this announcement along with certain information as required under
DTR 6.3.5R, extracted from the Company's Annual Report and Accounts
2022.
For further information:
ASOS Plc Tel: 020 7756 1000
José Antonio Ramos Calamonte, Chief
Executive Officer
Katy Mecklenburgh, Director of Group Finance
Taryn Rosekilly, Director of Investor Relations
Katja Hall, Director of Corporate Affairs
Website: www.asosplc.com/investors
LEI: 213800H8DBB8JSKDW630
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
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 app and mobile/desktop web
experience, available in ten languages and in over 200 markets,
ASOS customers can shop a curated edit of over 100,000 products,
sourced from nearly 900 global and local third-party brands
alongside a 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 of its customers a
truly frictionless experience, with an ever-greater number of
different payment methods and hundreds of local delivery 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.
APPIX
ASOS Plc
Final Results for the year to 31 August 2022
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.
José Antonio Ramos Calamonte
Chief Executive Officer
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.
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 26
5 Adjusting items for the year to 31 August 2022 are shown on
page 12. Further detail on these items is on pages 26-28
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 26-28.
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.
1 EU ABV decline of -4% CCY (-7% on a reported basis)
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%(1)
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.
1 US ABV increase of +4% CCY (+8% on a reported basis)
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(1) . 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 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 21
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.
Consolidated Statement of Total Comprehensive Income
For the year to 31 August 2022
Year to Year to
31 August 2022 31 August 2021
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 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 Statement of Financial PositioN
As at 31 August 2022
At At
31 August 31 August
2022 2021
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 Statement of Cash Flows
For the year to 31 August 2022
Year to Year to
31 August 31 August
2022 2021
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
----------------------------------------------- ----------- -----------
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 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
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
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
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. The
full, unweighted number of potentially dilutive shares in relation
to the convertible bond of 6,277,464 were included in error, and
should have been nil as the effect was anti-dilutive in the prior
year. Similarly, no interest should have been included due to being
anti-dilutive (GBP4.9m was included in the prior year). This has
the effect of increasing the diluted earnings per share by 3.0
pence per share, from 125.5p to 128.5p.
4. Reconciliation of cash and cash equivalents
Year to Year
31 August to
2022 31 August
GBPm 2021
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
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
August 2022 2021
GBPm GBPm
-------------------------------------------------- ------------- -----------
Financial assets
Derivative assets used for hedging at fair value 68.4 36.9
Amortised cost 63.4 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 (1,356.8) (1,299.7)
-------------------------------------------------- ------------- -----------
Financial instruments amortised cost exclude prepayments,
deferred income and any amounts in relation to taxation. The prior
year balance for financial liabilities measured at amortised cost
has been amended to exclude certain balances totalling GBP162.6m
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
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 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 Year
period-end, but to 31 to 31
excluding outstanding August August
lease liabilities. 2022 2021
GBPm 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.
Directors' Responsibility Statement
Statement of Directors' Responsibilities in respect of the
Financial Statements
The Directors are responsible for preparing the Annual Report
and Accounts and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group and the Company financial statements in
accordance with UK-adopted international accounting standards.
Under Company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group's and Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
Company and enable them to ensure that the financial statements and
the Directors' Remuneration Report comply with the Companies Act
2006.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and Accounts and
accounts, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group's and Company's position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed in
the Governance Report confirm that, to the best of their
knowledge:
-- the Group and Company financial statements, which have been
prepared in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities and
financial position of the Group and Company, and of the loss of the
Group; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each Director in office at the date the
Directors' Report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Group's and Company's auditors are
unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group's and Company's
auditors are aware of that information.
Anna Suchopar
Company Secretary
Principal risks
As a global company, our principal risks and opportunities are
created through the complex nature of our operation, scale and
ambition, and we know that emerging risks can change quickly and
can be heavily influenced by the macroeconomic environment. This
year has certainly demonstrated how quickly the risk landscape can
evolve.
Russia's invasion of Ukraine and the subsequent ongoing war has
impacted supply chains, people and operations worldwide. The
knock-on effect on geopolitical and global financial instability,
inflation, energy shortages and the resulting impact on cost of
living is already impacting our people, customers and partners. In
addition, whilst many government prescribed restrictions have been
lifted, we continue to feel the impact of the COVID-19 pandemic
through elevated supply chain costs and shifts in the employment
market including talent availability, a competitive recruitment
market and wage inflation.
Combined with changing expectations regarding ways of working
(particularly location and flexibility) it is harder to find and
retain the right talent. As we navigate these uncertainties and
changes, we continue to scan the horizon to ensure that we identify
emerging risks as soon as possible and react early where needed to
either mitigate or take advantage of opportunities.
Risk description How we manage the risk
Macroeconomic changes We continue to monitor the many
Specific macroeconomic and and variable macroeconomic risks,
geopolitical changes and uncertainty resulting customer behaviours and
can influence our business market dynamics to put into place
by impacting our ability to mitigating measures to prepare
trade across borders, influencing for any further volatility, including:
customer behaviours, diminishing -- The Executive Committee and
our customer proposition, and, Operating Board continue to monitor,
ultimately, impacting our financial model and assess the potential
performance. outcomes and supply and demand
The Russian invasion of Ukraine, impact of recession, inflation,
ongoing challenges from the geopolitical events (including
COVID-19 pandemic, and Brexit COVID-19, Brexit and Russian invasion
are all being felt. We are of Ukraine) and cost-of-living
currently facing political increases.
unrest and instability, significant -- We have a diverse, multifaceted
inflation which is causing sourcing and supply chain involving
a cost-of-living crisis and multiple suppliers and locations
the associated risks of recession to minimise an over-reliance on
and labour availability in an
our supply chain remains challenging. individual country and/or supplier
We have already seen the increase or brand, and so we can use our
in cost-of-living impacting extensive network in the event
ASOSers and our customers. of capacity or capability changes.
Customer purchasing behaviour -- Further strengthening our balance
has changed, with returns increasing sheet to improve resilience.
as customers have less disposable
income. Inflation is seen right
through the supply chain and
globally we are facing into
potential energy rationing
this coming winter.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Supply chain disruption -- Monitoring & Forecasting - we
Global or local supply chain continuously monitor demand and
disruption and/or crises (caused availability to adjust intake accordingly.
by events such as political -- We have multiple delivery methods,
unrest and global pandemic) routes, ports and carrier strategies
cause issues in our inbound to minimise risk of disruptions.
(e.g. supplier or carrier failures) -- Continuously evolving Supply
or outbound (e.g. carrier or Chain Business Continuity strategies
fulfilment centre disruptions) and plans to respond to incidents
supply chain, which impacts and we have fed in the lessons
our ability to deliver what learnt from the COVID-19 pandemic.
our customers want, when they -- Creation of additional storage
want it. solutions to accommodate any anticipated
The Russian invasion of Ukraine stock build caused by disruptions
and our decision to cease trading to supply chain.
in Russia has impacted our -- Automation of our fulfilment
supply chain through increasing centres to increase throughput
our inventory holding in Europe capacity and productivity.
as well as causing significant -- Ongoing relationship management
inflation in our cost with carriers and suppliers to
base. The impact of Brexit ensure early warnings of disruption
and the COVID-19 pandemic is and to agree mitigation actions.
still felt in our operations, -- Driving process improvements
for example, we continue to on stock visibility with our new
face disruption and congestion Global Supply Chain Management
in US ports and have ongoing Partner, improving lead time and
labour availability challenges. cost.
Whilst continuing to be challenging, -- Enhancing our contracts with
we have learnt significant carriers to drive clearer terms
lessons about how to strengthen and requirements.
the resilience of our supply -- Designing and building our own
chain and continue to evolve inbound visibility platform for
this every year. launch in FY23.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Transformation projects fail -- An Executive-led governance
to deliver required outcome structure is in place to oversee
We are going through several the transformation. A Design Authority
transformational changes to reviews proposed changes to assess
ensure the business continues integrity of design and viability
to be successful as it evolves of business case, with final business
and grows. New technology, case approval granted by an Investment
systems and processes are essential Board.
enablers to continuing to evolve -- ASOS' Transformation Management
at pace. At the same time, Office (TMO) has been established
delivering transformation is to drive and monitor transformation
complex and can cause disruption programmes, including managing
in the business as changes transformation risks.
are implemented. This can lead -- The Transformation Portfolio
to increased cost and lost is organised into Transformation
opportunities. Transformation Themes, with each Theme responsible
success is reliant on the right for a set of transformation workstreams.
capability and capacity to Each Theme has an assigned responsible
deliver the changes and can lead and
be dependent on internal and Executive Sponsor. The Theme Lead
external inputs. Issues with and Executive Sponsor oversee and
access to capability and capacity, manage progress, risks, dependencies
or the execution of dependencies and impacts.
can cause delays and risk failure -- Internal and/or external assurance
to deliver outcomes or adapt review exercises are used to validate
to the change. This can lead progress and project readiness
to business disruption and including delivery gates and programme
duplication, which can cause health checks.
challenges in achieving strategic -- Regular updates on progress
objectives. and key issues and risks for the
The focus this year has been major programmes are provided to
on progressing core initiatives the ASOS Plc Board and Audit Committee.
alongside further evaluation This is enabled by detailed programme
and prioritisation of strategic management from the TMO.
initiatives given the economic -- Strategic Transformation objectives
environment, leveraging internal are embedded into the Executive
and external opportunities. team's individual objectives.
Whilst delivery confidence
has increased with delivery
plans further solidified, ambition
levels have also increased
for the coming years. The prioritisation
of our transformation workstreams
for FY23 will balance achievability
with ambition and will focus
on four actions targeted at
improving ASOS' ability to
navigate the existing uncertainty
renewing its commercial model
and improving inventory management
to increase flexibility within
logistics operations; simplifying
and reducing its cost profile;
ensuring a robust and flexible
balance sheet;
and reinforcing the leadership
team and refreshing the culture.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Data breach -- Our Data Protection Officer
As an online retailer, we use (DPO) is an independent role and
data for several different can audit any information store
reasons, including to process used by ASOS or its contracted
orders, receive payment and third parties.
engage with our customers on -- The Data Protection team works
a regular basis. With c.26.4 across the business to make sure
million active customers worldwide, we have visibility of the collection,
we work with a variety of third-party use and reuse of data and any new
suppliers, and employ thousands projects that require customer
of ASOSers - with that comes or employee data, while also putting
a lot of responsibility to in place the right training and
protect the integrity of data awareness. Our Chief Information
being used and processed, and Security Officer (CISO) and DPO
it means that we will always work together to ensure key data
be a target for cyber threats. risk areas are prioritised and
Deliberate theft or accidental effective remediation
loss of confidential ASOS or or mitigation is put in place.
customer data, due to inadequate -- Security controls and processes
technical controls, employee are assessed and updated continuously.
breach, targeted attack, or The Cyber Security team continuously
error, could cause reputational monitor for any internal or external
damage, regulatory non-compliance signs of confidential data loss.
and lead to significant financial -- Data and security requirements
penalties, and a loss of employee are embedded within our Procurement
or customer confidence. and Legal processes.
As an area of constant focus, -- Data protection training is
we continue to drive improvements provided to ASOS employees on an
and this year we have: annual basis and awareness campaigns
-- Completed a Data Privacy are rolled out on a more regular
Key Controls internal audit. basis (e.g. Phishing tests).
-- Conducted a separate data
protection maturity benchmarking
exercise and are developing
a roadmap to future-proof the
Data Protection function, to
support our broader business
activities and enhance our
privacy programme.
-- Run a data breach ransomware
business continuity scenario
exercise with the Executive
team, with learnings fed back
and
developed into a full response
plan.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Foreign exchange rate exposure -- We have evolved our foreign
We are a UK-based global online exchange risk management policy,
retailer selling products to so it remains robust and appropriate
customers across the world as our business operating model
in many different currencies. grows in complexity and our penetration
Global growth and the growing of international markets grows.
number of customers shopping -- Our foreign exchange risk management
with us from international policy considers emerging macroeconomic
markets will continue to give risks, which could give rise to
rise to foreign exchange risk heightened volatility in foreign
exposures through both foreign exchange markets.
currency denominated income -- We have increased the level
and expenses, given our reporting of rigour in our financial planning
currency is Pound Sterling. and forecasting, including strengthening
These foreign exchange risk our lead indicators, which helps
exposures could have an adverse protect us against any adverse
impact on our profitability. movements in foreign
Our foreign exchange risk exposures exchange rates.
have remained broadly consistent -- We continue to preserve profitability
with the prior financial year, through capitalising upon natural
with the reduction in exposure hedges where they are present and
to the Russian Rouble, from supplementing them with the use
our exit of the Russian market, of foreign exchange hedging instruments
offset by growth in other international in line with
markets. However, we expect our foreign exchange risk management
volatility in foreign exchange policy.
markets to be elevated over
the next 12 months.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Sustainability and climate -- Working with partners to conduct
change specific climate risk assessments
The topic of sustainability to better understand risks and
and the impact we have on the impacts to the business.
planet is being talked about -- Development of our FWI strategy,
more and more. Our Fashion covering targets for Net Zero,
with Integrity (FWI) Circularity, Diversity, Equity
programme has been central & Inclusion (DEI), and Transparency.
to our operations for many -- Reducing emissions through efficiency
years now. However, we know and carbon reduction projects,
that there is always more that in support of Net Zero goals.
we need to do in this area -- Materials sourcing strategy
to meet our own expectations and proactive engagement with suppliers.
and those of our stakeholders, -- Further improving our systems
to make sure ASOS remains viable and processes to accurately measure
in the future. our environmental impact and reduce
We face both risks related it.
to the transition to a lower-carbon
economy and the physical impacts
of climate change, through
our operation and supply chain.
This includes changes in technology,
market risks and how the Company's
response to climate change
affects its reputation. Physical
risks can be event driven (acute)
or longer-term shifts (chronic)
in climate patterns.
This year we have conducted
a full analysis, in line with
Task Force on Climate-related
Financial Disclosures (TCFD)
requirements, to
understand our transition and
physical risks and their impacts
in more detail. This can be
found in the TCFD Report on
page 36 of the Annual Report
and Accounts 2022. In addition,
our new FWI strategy and commitments
have been communicated to the
market and we have stood up
a Board-level ESG Committee
and associated working groups
at a senior leadership level
to continue to drive progress
in this space. Assurance work
on carbon emissions has also
taken place to add further
robustness to ASOS data, more
information can be found on
page 36 of the Annual Report
and Accounts 2022.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Cyber security incidents -- Our cyber strategy lays out
The cyber security landscape our security and fraud prevention
is continuously evolving, with plan along with roadmaps for delivery
threats becoming more sophisticated, of ongoing enhancements.
aggressive and more frequent. -- Our Cyber Security team implements
Our Cyber Security team continues and monitors security tools and
to improve our security policies, controls to ensure effectiveness
procedures and security capabilities, and efficiency of our security
to reduce risks related to and fraud prevention operations.
confidential data loss, malware -- We continue to seek out and
infections, ransomware, phishing work with independent third-party
attempts, DDoS attacks and security specialists that provide
insecure third-party software. periodic penetration and red team
In response to the Russian tests.
invasion of Ukraine, the latest -- Multi-factor authentication
guidance from the National across our business increases our
Cyber Security Centre was reviewed protection against phishing and
and a series of improvements malware attacks, while cyber awareness
were implemented. In August campaigns keep ASOSers aware of
2022, a new CISO was appointed cyber security.
to continue driving and maturing -- We monitor the evolving threat
a robust strategic approach and adapt our controls and processes
to security across ASOS. accordingly.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
E-commerce market dynamics -- Market and Pricing Strategy
and impact on our business to evolve our business model and
Our customers are experiencing to achieve our 10-year vision and
an increasingly global and three-year plan, and to maintain
competitive e-commerce environment, our growth trajectory.
including large scale multi-brand -- Continue to drive the uniqueness
marketplaces, competitive fast of our product offering via exclusive
fashion 20-something brands products and ranges only available
and e-commerce disruptors changing on ASOS.com.
the way in which customers -- Leveraging our fashion credibility
shop. Failure to evolve our for 20-somethings, focusing on
business model, improve our relevance through continuous reinvention
product offer, and be top of and disruption. Delivered
mind for our audience in an through style edits, exclusive
increasingly competitive environment, products from brands, and at the
could result in us losing opportunity same time, continuing to expand
and market share. our diverse and inclusive products,
Throughout this year we have including sustainable and modest
revisited, refined and prioritised ranges.
our strategy, aiming to stay -- Continuous revision of our capital
on top of market dynamic risks, allocation and tight cost control
make the to ensure we adapt our operations
most of opportunities identified and investments to the evolution
and prioritise investments of the markets, ensuring we invest
in the right places. Our customers in customer experience to retain
have been hit hard by the cost-of-living and grow our relevance to customers.
increases (as already discussed -- Use of technology and data to
in the Macroeconomic risk) be more targeted and strategic
and are demonstrating reduced in how we gain new customers and
disposable income and more maximise the loyalty and lifetime
choiceful shopping. New customer value of existing customers through
acquisition remains a top priority. making our customer experience
frictionless and inspiring.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Key third-party technology -- In August 2022, ASOS completed
service provider failure the migration of our last remaining
We rely on different technical systems out of our third-party-managed
services and systems throughout datacentre into Azure enabling
the customer journey, from us to fully leverage the resiliency
website to fulfilment, to the available in the cloud and significantly
product itself. reducing our risk profile.
This means that failure of -- In FY22 a dedicated Service
systems and services due to Governance function has been created
a lack of resilience, system within Technology demonstrating
or service provider over-reliance our ongoing investment in service
or a lack of continuity and supplier relationship
disaster recovery planning management.
may disrupt our operations -- Our Reliability Engineering
and overall business. Any failure practice regularly review the service
in day-to-day operations can providers critical to our customer
impact how we journey to ensure they have the
process or fulfil customer necessary level of resiliency in
orders, potentially resulting place.
in reduced customer proposition, -- All new suppliers go through
lost opportunity and lost customer a rigorous selection and onboarding
confidence. process and our Procurement team
monitors supplier performance on
an ongoing basis.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Ethical trade issues -- We have developed a series of
One of the key risks in our policies and guidelines based on
supply chain is of illegal the Ethical Trading Initiative
or unethical practices, particularly base code and ILO Fundamental Conventions,
the violation of labour rights which suppliers are contractually
and of workers safety caused obliged to agree to as part of
by a lack of systems, processes, the onboarding process.
or resources to monitor traceability -- We monitor compliance with our
and transparency. At ASOS, ethical trade policies and requirements
we believe that it is our responsibility through our industry leading audit
to ensure that those who are programme. This includes an Unapproved
working in our supply chain Subcontracting Policy to ensure
have a safe we have full visibility of our
working environment where human supply chain in tiers 1-3.
rights are respected and protected. -- The ASOS Code of Integrity (issued
Our stakeholders, including to all stock suppliers) includes
customers, want to be confident a link to the ASOS Whistleblowing
about where their products tool.
come from and want to be reassured -- Our in-country Ethical Trade
those workers and the environment teams and third-party auditors
are not harmed in this process. monitor our supply chain and support
Global regulatory scrutiny mitigation/remediation where we
and increasing progress towards do identify risks/issues.
mandatory legislation in this -- Our Garment Technology teams
area require us to be even check that the products we receive
more diligent from our suppliers meet our quality
when monitoring risks in our standards and expectations before
supply chain with a clear focus they go on our website.
on prevention. This is now -- In-country compliance testing
recognised and assessed within and quality control facilities,
the Principal with enhanced testing and reporting
Risk: Failure to comply with capabilities to identify issues
legislation or regulation (see at source.
next row). -- We have global partnerships
The current geopolitical unrest with NGOs such as Anti-Slavery
and macroeconomic challenges International, and the trade union
mean that we are facing increased IndustriALL Global Union, as well
risk of unauthorised subcontracting as in-country partnerships with
in factories due to cost inflation, local independent workers rights
we will work closely with our organisations. We work with these
supply chain to monitor and organisations to ensure we are
manage this risk. In June 2022, proactive in identifying and remediating
we relaunched our revised audit issues within our supply chain.
methodology aligning with our
FWI strategy to ensure we meet
our external obligations on
human rights due diligence.
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Failure to comply with legislation -- Tax risk reviews, liaising with
or regulation local tax authorities and quarterly
Strategic expansion into new internal tax co-ordination meeting
business sectors creates new with the Tax Governance Committee.
regulatory and governance complexities, -- ASOS Payments UK, as a FCA authorised
as do unanticipated or increasingly electronic money institution in
difficult regulatory changes, the UK, has established the essential
policies or penalties, such regulatory governance and compliance
as a new tax, controls are in place to meet our
in the countries where we operate. responsibilities in line with the
Corporate governance reform, requirements of the electronic
product and consumer protection money licence. This has included
regulations, and the rapidly a dedicated individual responsible
developing climate and environmental for maintaining the regulatory
regulations increase our risk compliance and anti-money laundering
exposure. Robust processes compliance controls of ASOS Payments
are required to identify and UK and ongoing horizon scanning
monitor these changes and model for regulatory changes.
their impacts, with resources -- In November 2021, we stood up
needed to respond appropriately the Governance Working Group, a
and in a timely manner. These cross-functional group of senior
developments could lead to leaders from across the business
increased operating costs or designed to ensure that ASOS is
other financial impacts, including disciplined in its governance.
the potential for fines, litigation, -- Horizon-scanning and mapping
business disruption and reputational and managing wider governance risks
damage if such risks are not and performance.
adequately mitigated.
We are seeing an increased
complexity in this area due
to external factors and new
regulation on the horizon,
such as UK SOX, increasing
requirements within consumer,
financial and potential climate
change regulations as well
as internal factors such as
the authorisation of ASOS Payments
UK as an electronic money institution
and stepping
up to premium listing. A new
Head of Compliance role was
established and joined the
business in September 2022.
In July 2022,
the Competition and Markets
Authority announced that it
had opened an investigation
into certain fashion retailers,
including ASOS, following the
publication of the Green Claims
Code. ASOS is co-operating
with the investigation, which
is ongoing (see FWI report
in the Annual Report for more
information).
--------------------------------------------
Risk description How we manage the risk
--------------------------------------------
Inability to attract and retain -- Assessment of the capability
talent that we have and require.
The loss of talent or inability -- Workforce planning and always
to attract new talent with on sourcing for talent covering
the relevant capabilities and both current and future talent.
calibre leading to sustained -- Work on and amplify our employer
increased workloads. Against proposition around DEI, reward,
this backdrop we are also seeing culture and dynamic working.
changing norms in ways of working -- Continue to manage employee
- an increased desire for flexibility sentiment through engagement surveys
in location both home and abroad and Vibe plans and engaging with
and significant cost of living our employee groups.
inflation, which are all contributing
to a decline in our employee
proposition. Significant changes
in leadership combined with
the amount of organisational
development ongoing may cause
short-term uncertainty and
a potential spike in attrition.
This could impact our ability
to successfully achieve our
objectives and could impact
key business areas for a significant
period.
The market for talent is candidate
focused and pay inflation continues
to grow rapidly across the
board. Our ability to compete
with the pay
inflation required to acquire
new and retain existing talent
in key skill areas is becoming
more challenging. Key FY22
leadership appointments included
ASOS' new CEO and Chair, who
are focused on defining the
Company's new leadership team
to deliver the ASOS Reimagined
strategy and next phase of
the Company's growth.
--------------------------------------------
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November 10, 2022 08:03 ET (13:03 GMT)
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