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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