TIDMASC
RNS Number : 9478R
ASOS PLC
01 November 2023
1 November 2023
ASOS plc
Global Online Fashion Destination
Final results for the period to 3 September 2023
Turnaround on-track, delivering on "Driving Change" objectives
and readying for a profitable return to growth in FY25
Summary financial results
GBPm(1) Period to Year ended CCY change
3 Sep 31 Aug 2022 Change (adjusted, LfL)(2,3,4)
2023 (FY23) (FY22)
--------------------------- ------------- ------------- --------- ------------------------
Headline measures
Adjusted group revenue(5) 3,538.0 3,936.5 (11%)
Adjusted gross margin(5) 44.2% 43.6% 60bps
Adjusted EBITDA(5) 124.5 183.9 (59.4)
Adjusted EBIT(5) (29.0) 44.1 (73.1)
Adjusted EBIT margin(5) (0.8%) 1.1% (190bps)
Adjusted (loss)/profit
before tax(5) (70.3) 22.0 (92.3)
Net debt(5) (319.5) (152.9) (166.6)
Free cash outflow(5,6) (213.0) (339.8) 126.8
Statutory measures
Group revenue 3,549.5 3,936.5 (10%)
Gross margin 41.1% 43.6% (250bps)
Operating Loss (248.5) (9.8) (238.7)
Loss before tax (296.7) (31.9) (264.8)
--------------------------- ------------- ------------- --------- ------------------------
Strategic update and results summary
-- FY23 in-line with guidance provided in our P4 trading update,
with H2 adjusted EBIT up more than 100% year-on-year ('YoY') and
FY23 free cashflow(6) up more than GBP125m YoY despite double-digit
revenue decline, reflecting material improvements to core
profitability and strong inventory management.
-- Executed on Driving Change agenda priorities: reduced stock
levels by c.30%, increased profit per order(7) by over 30%,
refinanced the balance sheet bringing stability with the removal of
profit-based covenants, and refreshed the leadership team to bring
new energy and expertise.
-- Significant operational progress: 84% of the c.GBP1.1bn stock
carried forward cleared through in the year, stock operating under
the new commercial model in H2 delivered stronger sell-through,
Test & React pilot for high-fashion product produced c.500
options with lead times of c.two weeks, Partner Fulfils scaled to
33 brands across six markets, and technology now in place to
accelerate the rollout and provide ASOS Fulfilment Services on
Direct to Consumer product.
-- With strong foundations in place, FY24 will prioritise a
shift 'Back to Fashion', leveraging ASOS' strengths to offer the
best and most relevant product, styled the ASOS way, with an
exciting and seamless customer experience geared around fashion and
excitement. This will be supported by GBP30m incremental investment
into marketing while maintaining an obsession with operational
excellence and disciplined capital allocation.
-- Final cleansing of stock over FY24 will remain a drag on
sales growth and profitability through the year. Expect to exit
FY24 with majority of stock operating on the new commercial model
and inventory restored to pre-COVID levels, Test & React scaled
to over 10% of own brand, and 200% growth in Partner Fulfils.
-- Anticipate sales decline of 5% to 15% in FY24, with positive
adjusted EBITDA and material cash generation driven by stock
sell-through, further reducing net debt. In FY25, we expect to
return to growth with EBITDA margin around pre-COVID levels.
José Antonio Ramos Calamonte, Chief Executive Officer said:
"FY23 was a year of good progress for ASOS in a very challenging
environment and I am proud of what the business has achieved. We
have reduced our stock balance by c.30%, significantly improved the
core profitability of the business, strengthened our balance sheet,
and refreshed our leadership team. Encouragingly, stock that was
brought in under our new commercial model over the summer months
has performed strongly and this gives us the confidence to
accelerate the rollout of our new processes. As such, we are taking
decisive action in FY24 to clear stock brought in under our old
model while substantially improving our speed to market and
investing in our brand, reminding our customers what we're really
about: fashion."
CEO Review
Where were we a year ago?
In my first CEO review 12 months ago, I explained that we had
more stock than we'd like, which had eroded our profitability and
destabilised our balance sheet; and that some of our customers,
brands or activities were simply unprofitable. While external
factors had amplified the situation, our focus on growth without
due consideration for the cost had contributed significantly and
our high level of stock was exacerbated by poor operating practices
- we were too slow and inefficient. We launched our Driving Change
agenda, framed internally as a two-step plan. Firstly 'Back to
Basics', which involved reducing our stock levels, transitioning to
a new commercial model; improving profitability; refreshing our
leadership team with the energy and talent required to turn things
around; and refinancing our balance sheet. This first stage was
ultimately about bringing stability and laying solid foundations.
Our next step, 'Back to Fashion', is focused on regaining the
hearts and minds of our target consumer, accelerating towards our
new commercial model, and retaining a disciplined approach to
profitability and cash generation.
What have we achieved over the last 12 months?
In FY23 we have refinanced our balance sheet and removed
profit-based covenants, providing the flexibility to take the right
decisions in the long-term interests of the business, and also
returned to cash generation in the second half of the year.
Operationally, we comprehensively re-defined our commercial model
to align with best-in-class fashion principles: focusing on speed
and flexibility of intake with better planning; incentivising
sell-through in-season; and clearing stock as-we-go to maintain a
healthier stock profile.
We have begun to embed an intense focus on speed and operational
excellence throughout our organisation and successfully piloted our
best-in-class Test & React model for our highest fashion
product, which moves from design to site within two weeks. To
increase speed and flexibility with our partner brands, we invested
in new technology infrastructure that will enable the rollout of
ASOS Fulfilment Services ('AFS') to support our stockless Direct to
Consumer ('DTC') model, Partner Fulfils. We empowered a Central
Merchandise Planning team with greater control and oversight over
forecasting and managing our stock. We sold through 84% of the
GBP1.1bn of inventory brought forward from FY22 (GBP130m or 13ppt
of which was through the write-off of our oldest stock), reduced
intake levels to better align with demand, began to operate Spring
Summer ('SS') intake on the new commercial model, and ended the
year with a cleaner stock position and c.30% less stock (ahead of
our c.20% guidance).
As part of the profit focus under our Driving Change agenda, we
delivered the c.GBP300m of profit improvement and cost saving
measures designed to mitigate the inflationary and returns rate
headwinds and improve core order profitability by over 30%, by
exiting or correcting unprofitable brands, customers, and
activities. The cost savings are particularly evident in our
outbound supply chain with distribution costs as a percentage of
sales improving by 120bps due to measures including the
discontinuation of UK split orders and favourable negotiations with
carriers. We did this while bedding in a new leadership team
committed to establishing a culture of operational excellence.
Our progress has been the result of a huge effort by ASOSers, a
transformation of our mindset, and a resilience to keep pushing
when our results aren't yet reflective of our actions. While some
of these initiatives inevitably led to lower customer acquisition
and higher levels of churn, the customers that remain are more
profitable and therefore sustainable.
Where are we going?
ASOS has over 23m active customers globally, c.GBP3.5bn in
revenues, and a highly successful collection of own brands
operating at scale. We have an enviably strong position from which
to build our future. We have churned unprofitable brands,
activities, and customers, many of the latter picked up over the
pandemic, but we remain c.30% bigger than FY19, with c.4m
additional active customers. In FY24 we will accelerate our plans
to transition to our new commercial model, prioritising near-term
cash generation and the long-term interests of the business over
short-term revenue growth and profitability. The benefits of our
new model will become clearly visible in our profitability and
growth in FY25 and beyond.
While fashion has always been a fiercely competitive industry, I
am very clear on what makes ASOS unique and why we have the right
to win market share with a profitable and cash generative model.
ASOS is structurally set up to win again by putting speed at the
heart of its culture and operations. By obsessively focusing on
cultivating our strengths, we can offer an exciting proposition to
consumers while also generating attractive returns for our
shareholders. This stems from five strategic priorities:
1. Best & most relevant product
We must offer our customers the best assortment - the most
exciting fashion from the most relevant brands for fashion-loving
20-somethings, perfectly blended with a set of our own unique
brands that can only be found at ASOS. Our own brands are already a
key differentiator, with more than two-thirds of our global
customer base having purchased an own brand item in the last twelve
months, and they are a great customer acquisition tool, with 55% of
new customer orders containing an own brand product. The
combination of exclusive and relevant own brands with the curation
of the most exciting and additive product from partner brands is
our critical competitive advantage. This is where we must strive
for leadership, invest our energy, and focus our innovation. As a
pure-play online retailer, without the volume demands of stocking a
global store estate, we can move faster with less risk, but we have
not been maximising this competitive advantage. We will move faster
in everything we do, work more closely with our brand partners, and
obsess over bringing the most relevant fashion product to
consumers.
2. Destination for style
ASOS is the only place where brands can show their potential in
a perfectly blended fashion context, and the only place where
consumers can experience their favourite brands with our
differentiated visual language, creating an inspirational, rather
than transactional, customer experience. This is a core competitive
advantage and where we must continue to differentiate. Our in-house
studio shoots all our product, creating a distinct visual identity.
This not only drives better engagement with our customers but is
critical to our relationships with brand partners, who see a huge
opportunity to reach a different customer segment than is often
their core. This approach is not new: it has always been a core
part of the ASOS proposition. But we will make improvements to our
customer experience to translate this critical differentiator more
directly into economic benefits.
3. A customer journey created around fashion and excitement
Our target market is fashion-loving 20-somethings. This
tightly-defined market segment means we can authentically offer our
customers an exciting, engaging, and relevant fashion experience,
connecting with them at the earliest stage of their fashion journey
and providing inspiration, not just a transaction. Their fashion
journey does not begin with performance marketing and promotions -
by relying on these activities to drive sales, we can miss the key
stages in a customer's journey and risk losing them to peers. Our
ability to inspire is a significant competitive advantage, but we
must bring that to life for our customers however we engage with
them. As we improve our product and double-down on our unique
style, we must reignite our brand heat and remind consumers we are
first and foremost about fashion, not convenience or discounting.
It is our ambition to restore our share of voice and show up at
every stage in the customer journey - from discovery to purchase
through to loyalty and advocacy. We will build stronger
relationships with our best customers and turn them into advocates
for our brand.
4. Competitive convenience
Convenience remains a key reason to shop online and we do not
overlook its role in our future growth, but we will not look to
convenience as a core differentiator. We must always offer a
seamless experience, easy to shop, with a competitive delivery
proposition, returns policy, and methods of payment. We keep
ourselves at the level of our best competitors in this area and
will be a fast follower of innovation. We made changes to our
proposition over the last year to reflect this, yet we continue to
offer delivery within two days to 95% of our customers globally. We
also go beyond many peers in our commitment to free returns in core
geographies. In some geographies, we have recently introduced paid
returns after 14 days, encouraging quicker returns and increasing
the likelihood of the product being resold at full price, thus
aligning the incentives of our customers with our own interests. We
will constantly reassess whether we are investing into the areas
that matter most to our customers.
5. Disciplined capital allocation
Our unique value proposition has a flywheel effect on our
financials, supporting higher average basket value, stronger full
price sell-through, lower returns rates, reduced churn, and faster
stock turn, ultimately improving our profitability and cash
generation and providing the resources to drive our growth. This is
underpinned by operational excellence and efficient capital
allocation, allowing us to invest behind our strengths in a
disciplined way, relentlessly removing waste to invest into
opportunity. We remain committed to our international model, with
every region making a positive variable profit contribution in
FY23, and we see long-term growth potential in all our core
markets. Our core markets (UK, Germany, France, US), are already -
or have the potential to be - large and profitable. Accordingly, we
will invest our resources significantly into these markets, with
dedicated marketing, localised assortment and a best-in-class
convenience proposition supported by local infrastructure (i.e.,
distribution centres). Outside of our core markets, we will
typically use central marketing and assortment, leverage adjacent
infrastructure, and consider wholesale of our own brand to build
brand awareness and supplement our scale. We will constantly
reassess the classification of our markets and adapt our approach
where necessary to maximise the return on our investment over the
mid-term.
Priorities for the year ahead
In FY24 we will focus on delivering three things to develop our
competitive advantage:
1. More relevant product through disciplined stock management and an obsession with speed
Managing our stock to optimise value creation
We have significantly intensified our focus on stock management
as a critical enabler of our plan to bring the newest and most
compelling assortment to our customers. Optimising our stock
position and fully transitioning to our new commercial model
requires three elements:
(i) Eliminating old stock, turning it into cash:
From FY18 to FY22, our stock levels doubled and so too did our
discounts, significantly eroding our gross margin and with it our
profitability. While external factors amplified the situation, our
stock build-up really was driven by poor operating practices - we
were too slow and inefficient and held stock for too long,
believing we had limitless "shelf space" and in the knowledge that
we could eventually sell the stock profitably. We have made good
progress over the last 12 months, clearing 84% of the GBP1.1bn of
stock carried forward into the year, GBP130m of which was through a
write-off of our oldest stock and clearance off-site. We reduced
total inventory by 30%, ahead of the c.20% guided at the beginning
of the year. But we must finish the job over the course of the
coming months. Over FY24, we will clear the remaining c.16% of FY22
stock left over, together with that carried forward from FY23. Our
remaining FY23 stock relates predominantly to the Autumn Winter
('AW') season, for which intake was ordered under our old
commercial model.
(ii) A more disciplined, flexible stock purchasing model:
We must also increase the accuracy and flexibility of our
purchasing to improve the quality of available product and reduce
older stock carried forward in the future. We have put in place
more rigorous planning of stock purchasing, with oversight from a
central merchandising team, and we are significantly increasing our
speed to market and the flexibility of our intake. By reducing the
time from design to site, we have better data to support our
purchasing decisions. For our highest fashion product developed
under our Test & React model, we can test the demand for a
product before committing in significant depth. For our partner
brands, we are rolling out Partner Fulfils and AFS alongside our
wholesale model to increase flexibility for both parties and
maximise the availability of the most exciting product while
balancing inventory risk. Given the more than 6-month average lead
time on product, orders for AW22 were placed before the rollout of
our new strategy and as such, intake remained high over H1 FY23. We
were able to adapt intake for SS23 but mainly by reducing width,
not depth, which negatively impacted sales over H2 FY23. As we move
through FY24 we will benefit from cleaner intake with reduced
depth, more accurately reflecting expected stock turn under our new
commercial model. Through FY25 we will increasingly benefit from
our improving speed and flexibility.
(iii) In-season stock management:
Under our new commercial model, we manage our high-fashion stock
in-season, to guarantee that we reach the end of the season with
the minimum level of stock unsold, and hence our future operations
will not be "polluted" with old stock. This releases cash to invest
in new stock, removes detractors from the site, and creates space
for newness. This is supported by: improvements to our sourcing,
enabling investment into the price and quality of our product; our
more disciplined and flexible purchasing (above); and increased
fashion-led marketing to drive the right traffic to our site. We
will tackle non-performing stock immediately, which leads to a
better realised price as discounting closer to the season requires
shallower markdown. Ultimately, we focus on new, in-season,
full-price product and underscore our value as a reliable source of
fashion. This benefits both customers and the partner brands on our
platform, creating a virtuous cycle of better relationships with
more relevant brands and access to better product. That is
precisely what we started to do in SS23. The average age of stock
in our October mid-season sale is just 13 weeks, compared to 44
weeks in FY22. This reflects both our progress on clearing through
older stock in the last twelve months, as well as our new approach
of
clearing high-fashion stock close to the end of the season, thus
reducing the amount of product carried forward to SS24.
Obsession with speed
Our obsession with speed is key to unlocking more relevant
product across both our own brands and our partner brands. Through
our very successful pilot, we have now launched c.500 Test &
React options going from design to site in around two weeks. To
date, we have seen this stock turning three times quicker than our
business-as-usual own brand product despite engaging in no
promotional activity, while generating a gross margin several
percentage points higher than our own brand average. Promisingly,
the Test & React options launched to date are resonating
particularly strongly with our youngest customers and getting
substantial organic influencer pick-up on social media. At present,
Test & React makes up less than 1% of own brand sales but
scaling this up to over 10% of own brand by the end of FY24 and
c.30% in the medium term will bring more exciting product, have a
meaningful impact on our gross margin, and support a cleaner stock
profile.
Test & React
vs. BAU
Average cover c.6 weeks shorter
------------------
Average discount 15ppts shallower
depth
------------------
Gross basket >GBP50 higher
value
------------------
Average customer 2.5 years younger
age
------------------
Our refreshed commercial leadership team will also bring new
ways of working with our brand partners, further strengthening
relationships with strategic brands, collaborating on product and
marketing campaigns, sharing data and insights, and strengthening
our back-end processes to accelerate on-boarding of new product and
new brands. Our flexible fulfilment model, encompassing Partner
Fulfils and AFS, is an important tool, giving access to both
additional product and better availability from highly relevant
brands. Over the course of FY23, we have scaled our Partner Fulfils
offer to 33 brands in six markets and invested in our technology
and team to support twice the number of brands in double the number
of markets in FY24 as well as launching AFS.
Better sourcing
We will also offer better, more relevant product by improving
our sourcing. Simply by sourcing from the right locations,
simplifying our processes, and consolidating our supplier base we
see a 2 to 3ppt intake margin opportunity over the mid-term, which
brings benefits not just in terms of own brand pricing, but also
quality, speed, and corporate responsibility standards in our
supply chain. In H2 FY23 we have already achieved a c.2 ppt YoY
increase in intake margin on ASOS Design Womenswear, where our
changes are furthest progressed. This has enabled investment into
lower prices, ensuring our own-brand product is competitive both in
terms of price and quality.
2. Strengthen our relationship with consumers
ASOS pioneered the use of cultural marketing, content marketing
and organic social media to build engagement and relevance with
young fashion lovers. In recent years, exacerbated by our stock
build-up, ASOS customer experience and engagement has too often
centred around discounting or convenience, not fashion and brand
storytelling. Over time, ASOS has become overly focused on
promotion and performance marketing and we must re-focus on
building higher quality customer engagement centred around fashion
inspiration and excitement. Customers will love ASOS because we
have the best and most relevant product, because we are a
destination for style, because we offer a customer experience
geared around fashion and excitement and, but not only, because of
the convenience of our offer. We must bring that to life in our
communication, in our products, and in all our experiences. We will
do this by re-igniting our brand, growing appeal amongst our target
audience by being present with our fashion message in the earlier
stages of the customer journey, and by focusing every interaction
with our customers on fashion.
In FY24, we will invest a greater proportion of our marketing
budget into re-igniting our brand, making ASOS famous for fashion
again. This will include a GBP30m incremental investment focusing
on the UK market. We will iterate our plans throughout the year as
we understand what resonates most with our target customer.
Starting in November, we will:
i) Launch a UK brand marketing campaign, "ASOS Your Way," giving
the consumer a richer sense of what ASOS stands for, collaborating
with crowd-sourced creators, with 40 million impressions within 12
days.
ii) Run experiential guerrilla marketing activities on a regular
pulse including the launch of a London pop-up in November.
iii) Build an always-on influencer programme spanning micro to
mega influencers with a combined reach of over 50 million, with the
aim of increasing our earned media value (the equivalent value of
media a brand receives from creators without paying).
iv) Develop ambassador relationships, working with those
ambassadors and collaborators who will authentically strengthen our
credentials as a destination for style.
v) Significantly enhance our social media presence.
The benefits of brand marketing are lagging. Within 3-6 months
we expect to see greater share of voice on social and increased
brand search and over H2, we will start to see increased visits,
improved conversion, new active customers, greater order frequency,
and a halo effect of stronger returns on performance marketing.
In FY23, customer churn has increased, in part due to actions we
have taken to improve the core profitability of the business,
including changes designed to improve the behaviours of some of our
least profitable customers. Overall, these changes have been
successful: profit per order increased by approximately one-third.
In some cases, these changes have resulted in us losing very
unprofitable customers whose behaviours we are unable to improve,
which is an accepted part of the strategy. However, some of our
country-level profitability initiatives will have inadvertently
caused us to churn higher quality, or 'not-yet-profitable'
customers, and our approach in FY24 and beyond must be to better
connect with our most fashion-engaged customers, thus improving
retention.
Our retention strategy includes elements such as improved
customer experience, customer care, and personalisation of customer
communications. Premier is also a critical tool for improving the
customer experience of our most loyal and most valuable customers,
driving an increase in UK average customer value of c.75% compared
to the rest of our base. At present, our Premier offer is focused
on an enhanced delivery proposition, but there is a significant
opportunity to enrich our offer, driving lifetime value and
preventing early churn amongst our highest quality customers. We
will reinvigorate Premier to increase its appeal based on fashion
rather than just convenience, including for example exclusive
access to events (including the upcoming London pop-up), early
access to promotions, and free gifts including Face & Body
samples.
3. We will reduce our costs to serve, remove waste and improve our use of data
While we begin to look again towards growth, we will retain our
focus on operational excellence, simplifying all our processes and
removing wasted time and cost to reinvest into productive
commercial activities. One aspect of this is better prioritisation,
ensuring we are allocating resource to projects that will generate
a return. As such this FY24 priority is as much about saying 'no'
as it is improving the way we operate.
Under our new commercial model, we will operate with less stock
going forward. Having already reduced stock levels by c.30% over
the last 12 months, we have a further c.16% reduction planned for
FY24. In this context, post the year-end, we have reviewed our
capacity requirements and started a process to mothball our second
UK fulfilment centre in Lichfield in late FY24 following the
completion of our automation work. The decision to open and
automate Lichfield was taken in 2019 without the ability to break
the contract. Mothballing the site provides an annual cost saving
of c.GBP20m and provides the flexibility to either sell the
facility or re-open it, depending on our capacity needs (see note
17 for further details).
A key focus area for waste in FY24 is returns. While we continue
to believe that free returns are a core part of our customer
proposition, there are good returns and bad returns. Good returns
help acquire new customers, increase basket size, and are an
integral part of a profitable customer lifetime. Bad returns are
from unprofitable customers, serial returners, or for an
unnecessary cause - for example, poor quality or inaccurate sizing.
We will constantly strive to eliminate bad returns through: closer
scrutiny of returns data to identify high returning products,
brands, or materials; corrective action to improve the size, fit,
and quality of our products; and AI forecasting to drive better
decision-making.
Our culture of operational excellence will be aided by increased
access to an improved use of data throughout our organisation and
we continue to innovate in this area. We continue to develop our
data science and machine learning capabilities which we deploy both
across our business areas and to improve the customer experience.
In addition, this year we have started to explore how generative AI
can support our business - we have early access to Microsoft's AI
and Copilot capabilities. Having already rolled out GitHub Copilot
to support software engineering, we will soon be piloting 300
business users with Microsoft 365 Copilot which will support our
internal productivity. We are also collaborating with Microsoft on
developing use cases for generative AI.
Outlook & guidance
Over FY23, we improved our core profitability, delivering
c.GBP300m of benefits under the Driving Change agenda; made good
progress on improving our stock profile; gained confidence in our
operational initiatives including our new commercial model, Test
& React, and Partner Fulfils; and laid strong foundations for
the years ahead.
Our mid-term priorities are leveraging our strengths: to offer
the best & most relevant product; be a destination for style;
build a customer journey created around fashion and excitement; and
offer competitive convenience. These things will drive our economic
model, delivering stronger order economics and delivering better
customer lifetime value.
In FY25 we expect to deliver revenue growth and return EBITDA
margin to around pre-COVID levels (c.6%). In the medium-term we
have confidence in our ability to return to double-digit growth;
steadily improve gross margin back towards c.50%; maintain EBITDA
sustainably ahead of capex, interest, tax, and leases; reduce capex
to 3-4% of sales; and deliver inventory of c.100 days.
FY24 is about taking the necessary action to get us to that
path. We expect the annualisation of Driving Change agenda profit
initiatives to broadly mitigate the impacts of fixed cost
deleverage from our expected revenue decline.
However, our priorities of accelerating towards our new
commercial model and strengthening our relationship with consumers
require investment in the near term. These investments are
twofold:
i) Incremental marketing investment of c.GBP30m (c.1% increase
in our operating cost ratio) into re-igniting our brand, making
ASOS famous for fashion again.
ii) The discounting of stock carried forward to exit the year
with a clean stock position. We may use off-site clearance
channels, sacrificing margin to limit cannibalisation.
As such, our expectations for FY24 are:
o Sales decline of 5 to 15%, with P4 FY23 trends (i.e., high
double-digit declines) continuing through the first half of FY24
and a return to growth in the final quarter of FY24.
o Adjusted EBITDA positive.
o Stock back to pre-COVID levels (c.GBP600m as previously
communicated).
o Capex of c.GBP130m.
o Positive cash generation, reducing our net debt position.
The mothball of our second UK fulfilment centre in Lichfield
will result in the remaining GBP45m automation spend, usually
classified as capital expenditure, being recorded as an adjusting
item in the FY24 income statement.
ASOS has ended FY23 a smaller but more resilient business and
remains one of the leading players in online 20-something fashion.
While the market has evolved and our model has adapted accordingly,
we mustn't lose sight of our core purpose. Our strength in the past
came from our relentless focus on bringing the most exciting
fashion to consumers with a focus on inspiration and style. By
doubling down on that winning formula and evolving our culture to
place speed at the heart of everything we do, we can win again.
ASOS will next update the market with a post-close H1 trading
update in March 2023, followed by a full H1 results update in April
2023.
José Antonio Ramos Calamonte
Chief Executive Officer
Notes
(1) All numbers subject to rounding throughout this
document.
(2) Constant currency is calculated to take account of hedged
rate movements on hedged sales and spot rate movements on unhedged
sales.
(3) Calculation of metrics, or movements in metrics, on an
ex-Russia basis involves the removal of Russia from FY22
performance. This adjustment allows YoY 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 ASOS
has also excluded any visits from Russia in FY23, in addition to
FY22.
(4) Like-for-like sales are adjusted to remove the benefit of
the additional three days of trading in P4 FY23 (1 June to 3
September 2023) vs. P4 FY22 (1 June to 31 August 2022) and the
additional three days of trading in FY23 (1 September 2022 to 3
September 2023) vs. FY22 (1 September 2021 to 31 August 2023). The
impact of the additional days is c.3% at group level in P4 FY23 and
c.1% in FY23.
(5) The alternative performance measures used by ASOS are
explained and defined and reconciled to statutory measures on page
38-40.
(6) Free cash flow is net cash generated from operating
activities, less payments to acquire intangible and tangible
assets, payment of the principal portion of lease liabilities and
net finance expenses.
(7) Profit per order is calculated as variable contribution
divided by billed orders.
Financial review
All revenue growth figures are stated at constant currency
('CCY') throughout this document unless otherwise indicated.
Period to 3 September 2023
UK EU US RoW(1) Total Adjusting Total
reported items(2) adjusted
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- -------- --------- ------- ------- ---------- ---------- ----------
Retail sales(3) 1,494.6 1,127.3 443.6 322.7 3,388.2 (11.5) 3,376.7
Revenue from other
services(4) 59.8 29.4 57.5 14.6 161.3 - 161.3
Total revenue 1,554.4 1,156.7 501.1 337.3 3,549.5 (11.5) 3,538.0
Cost of sales (2,090.5) 115.9 (1,974.6)
---------- ---------- ----------
Gross profit 1,459.0 104.4 1,563.4
Distribution expenses (429.7) - (429.7)
Administrative expenses (1,279.8) 115.1 (1,164.7)
Other income 2.0 - 2.0
---------- ---------- ----------
Operating loss (248.5) 219.5 (29.0)
Finance income 5.0 - 5.0
Finance expense (53.2) 6.9 (46.3)
---------- ---------- ----------
Loss before tax (296.7) 226.4 (70.3)
---------- ---------- ----------
Overview
ASOS realised an adjusted loss before tax of GBP70.3m,
reflecting a challenging market backdrop characterised by weak
consumer sentiment and high inflation; alongside delivery of the
Driving Change agenda, which included wide-ranging actions to
improve the business's profitability and increased financing costs,
including those associated with the refinancing announced in May
2023. Within this, profitability improved substantially in the
second half of the year as the initiatives under the Driving Change
agenda began to yield benefits and the impact of an increasing
returns rate first seen in May 2022 was annualised.
The reported loss before tax of GBP296.7m includes the impact of
adjusting items totalling GBP226.4m. These included the stock-write
off programme announced at the start of the year (GBP133.2m),
property related costs resulting from a reduction in the business's
head office and warehouse footprint (GBP60.7m) and consultancy and
restructuring costs (GBP31.0m), as well as amortisation relating to
the Topshop brands (GBP10.7m) and immaterial items relating to
prior years GBP9.2m. The total cash outflow relating to adjusting
items in the period was GBP53.4m of which GBP30.8m related to
refinancing fees. Further detail on each of these items can be
found in note 3 on pages 25-28.
To simplify our processes and make our reporting more efficient
we have aligned our internal and external reporting periods.
Previously our external reporting was on a twelve-month basis from
1 September to 31 August, whereas internally the weekly nature of
our trading is captured in either a 52-week or 53-week year. As
such, FY23 ran from 1 September 2022 to 3 September 2023 and
therefore included an additional three trading days compared to
FY22 (1 September 2021 to 31 August 2022). The impact of this on
group sales growth was c.1% for FY23 and c.3% for P4 (1 June 2023
to 3 September 2023), with like-for-like sales growth disclosed in
the P4 Trading Statement issued on 26 September 2023. The
associated profit and cash flow impact was immaterial. FY24 will be
a 52-week period to 1 September 2024.
Revenue
FY23 total sales declined by -11%(5) (-10% on a reported basis)
year-on-year ('YoY'), with the decline accelerating to -15% (-12%
on a reported basis) in the second half of the year from -7% (-8%
reported) in the first half.
Across the year the group's top-line sales performance has been
impacted by a combination of market and company-specific factors.
From a market perspective, there have been three major headwinds:
weak consumer sentiment based on cost-of-living concerns; the
apparel market underperforming relative to total retail; and gains
in online penetration during the pandemic reverting to a more
normalised long-term trajectory as consumers return to stores. All
these headwinds have particularly impacted younger
consumers.(6)
The second half of the year was also more affected by deliberate
profitability actions taken under the Driving Change agenda, which
were introduced from January onwards, as well as a trough in new,
fashion-led product entering the business during July and August as
action taken to reduce intake coincided with usual seasonal
factors.
KPIs excluding Russia(7) Period to 3 Year ended Change
September 2023 31 August 2022
------------------------------ ---------------- ---------------- --------
Active customers(8) (m) 23.3 25.7 (9%)
Average basket value(9) GBP40.33 GBP37.59 7%
Average basket value CCY(10) GBP39.65 GBP37.59 5%
Average order frequency(11) 3.59 3.83 (6%)
Total shipped orders (m) 83.7 98.3 (15%)
Total visits (m) 2,661.3 2,896.2 (8%)
Conversion(12) 3.1% 3.4% (30bps)
------------------------------ ---------------- ---------------- --------
Active customers declined -9% YoY as we continued to churn lower
quality customers acquired during the pandemic and employed more
discipline in our marketing approach in response to weaker demand.
Our profitability actions also included remedial action to improve
profitability among loss-making customer segments, driving higher
levels of churn. Premier customers declined -11% YoY, reflecting
increases to subscription prices and the introduction or increase
of minimum order thresholds for free delivery. Average basket value
('ABV') increased by 5%, as pricing increases more than offset the
markdown investment used to clear aged inventory. Accordingly,
profit per order is over 30% higher(13) .
Both visits and conversion stepped back YoY, as customers made
more considered purchases.
Performance by market
UK
UK KPIs Period to 3 September 2023
Total Sales -12% (-13% LfL)
---------------------------
Visits -10%
---------------------------
Orders -17%
---------------------------
Conversion -40bps
---------------------------
ABV +5%
---------------------------
Active Customers 8.1m (-9%)
---------------------------
Sales in the UK declined by -13% against a difficult consumer
backdrop characterised by high inflation and weak sentiment,
particularly among the younger ASOS demographic(6) , and
deteriorated further in the summer months as challenging weather
conditions impacted the wider apparel sector. These factors
favoured lower price points and resulted in aggressive discounting
in the market as competitors acted to clear excess inventory. The
step up in online penetration witnessed during the pandemic
continued to reverse, albeit remaining above pre-pandemic
levels(14) .
Sales in the period were also impacted by planned profitability
actions, including a demand-based approach to deploying marketing
spend, pricing changes and fine-tuning the delivery proposition.
The price of a Premier subscription was increased in November 2022
but subsequently reversed in May 2023 due to a larger than expected
impact on Premier sign-ups. Active customers in the UK were down
-9%, also reflecting market conditions as well as measures taken by
the business to improve its profitability. These included
initiatives designed to minimise the impact of loss-making
customers which in some instances resulted in elevated (but
intentional) churn, including of certain Premier customer
segments.
An increase in average selling price ('ASP') underpinned an ABV
increase of 5% to partially offset the impact of fewer orders
(-17%), which may also reflect proposition changes designed to
encourage our customers to consolidate purchases into fewer, larger
orders and hence minimise delivery and returns processing costs.
Meanwhile visits (-10%) and conversion (-40bps) reflect more
considered purchasing behaviour in a cost-of-living crisis
alongside restraint on marketing spend in a weak demand
environment.
EU
EU KPIs Period to 3 September
2023
Total Sales -1% (-4% CCY)
----------------------
Visits -6%
----------------------
Orders -9%
----------------------
Conversion -10bps
----------------------
ABV +9%
----------------------
ABV (CCY) +7%
----------------------
Active Customers 10.1m (-7%)
----------------------
Sales in the EU were more resilient than other regions, down -4%
CCY as ABV growth (7% CCY) partially offset lower order volumes
(-9%). In addition to price increases, ABV benefitted from a
stronger performance in AW categories (which are higher ASP)
relative to SS. As in the UK, visits and conversion were both back
(-6% and -10bps respectively) due to a combination of business
specific and market factors.
On a country level, the Netherlands and Southern Europe
continued to outperform while Scandinavia and Rest of Europe
countries were weaker in response to the more aggressive
profitability measures being implemented. Our core European
geographies of France and Germany traded below the EU average but
broadly in line with the local markets.
US
US KPIs Period to 3 September
2023
Total Sales -6% (-14% CCY)
----------------------
Visits -5%
----------------------
Orders -17%
----------------------
Conversion -40bps
----------------------
ABV +13%
----------------------
ABV (CCY) +4%
----------------------
Active Customers 2.9m (-12%)
----------------------
Total US sales fell by -14% CCY, reflecting challenges in visits
(-5%) and conversion (-40bps), with all three metrics deteriorating
in response to wide-ranging actions to improve the region's
profitability from January onwards. A -17% decline in orders was
not offset by the 4% CCY increase in ABV, and active customers were
also back -12% reflecting discipline on paid media spend in a
weaker demand environment. Wholesale performed well relative to the
rest of the segment.
Rest of World
RoW KPIs Period to 3 September Period to 3 September
2023 excluding Russia(7) 2023 including Russia
Total Sales -15% (-16% CCY) -29% (-30% CCY)
-------------------------- -----------------------
Visits -15% -37%
-------------------------- -----------------------
Orders -23% -38%
-------------------------- -----------------------
Conversion -20bps Flat
-------------------------- -----------------------
ABV +11% +14%
-------------------------- -----------------------
ABV (CCY) +10% +12%
-------------------------- -----------------------
Active Customers 2.2m (-17%) 2.2m (-35%)
-------------------------- -----------------------
Rest of World ('RoW') sales fell by -16% CCY and excluding
Russia from the base period, reflecting widespread profitability
measures outside our core geographies from January onwards. As in
other regions, RoW was impacted by price increases and changes to
the delivery proposition including price increases and changes to
thresholds, resulting in higher ABV (10% CCY) but fewer orders
(-23%), with active customers (-17%), visits (-15%) and conversion
(-20bps) back as marketing investment was rebased. From a country
perspective, Middle East and North Africa ('MENA') performed well
while Australia and Asia Pacific ('APAC') were more
challenging.
Gross margin
Adjusted gross margin(2) rose 60bps YoY to 44.2% with margin
expansion in the second half of the year largely driven by pricing
and freight but partially offset by trading activity including
higher levels of discounting as the clearance of older inventory
was prioritised in a promotional apparel market during the final
months of the year.
Reported gross margin was 41.1% (-250bps YoY), with the key
difference versus adjusted gross margin being the impact of the
stock write-off programme of GBP118.5m(2) announced to facilitate
the transition to the new commercial operating model alongside FY22
results.
Operating expenses
Period to 3 September 2023 Year ended 31 August 2022 Change
% of in GBP
GBPm % of sales sales value
----------------------------- --------------------------- ----------- -------------------------- ------- --------
Distribution costs (429.7) 12.1% (15) (523.7) 13.3% 18%
Warehousing (416.4) 11.8% (15) (427.0) 10.8% 2%
Marketing (195.0) 5.5% (15) (223.5) 5.7% 13%
Other operating costs (400.4) 11.3% (15) (380.7) 9.7% (5%)
Depreciation and
amortisation (152.9) 4.3% (15) (139.1) 3.5% (10%)
----------------------------- --------------------------- ----------- -------------------------- ------- --------
Total operating costs (excl.
adjusting items) (1,594.4) 45.1% (15) (1,694.0) 43.0% 6%
----------------------------- --------------------------- ----------- -------------------------- ------- --------
Adjusting items(2) (115.1) 3.2% (53.9) 1.4% (114%)
----------------------------- --------------------------- ----------- -------------------------- ------- --------
Total operating costs (1,709.5) 48.1% (1,747.9) 44.4% 2%
----------------------------- --------------------------- ----------- -------------------------- ------- --------
Total operating costs excluding adjusting items decreased by -6%
YoY, with an 18% reduction in distribution costs and a 13% fall in
marketing spend contributing to the improvement. However, the
deleverage resulting from reduced volume caused adjusted operating
costs as a percentage of sales to increase by 210bps despite strong
control of fixed costs.
Distribution costs at 12.1% of sales decreased by 120bps YoY as
the impact of stronger basket economics, simplification of our
network and successful supplier negotiations offset higher fuel
charges. The reduced number of orders in the year (-15%) resulted
in lower outbound delivery costs. Cost saving measures under the
Driving Change agenda included the simplification of our UK network
through the discontinuation of "split orders", fulfilling
individual customer orders from one stock pool and negating double
carrier costs. Rate negotiations with certain regional suppliers
combined with a scaling back of our delivery proposition in some
markets reduced distribution cost per parcel. These benefits have
more than offset the headwinds from higher fuel charges.
Warehouse costs as a percentage of sales increased by 100bps YoY
to 11.8% due to inflation across labour, consumables, and utilities
in all fulfilment centres. This increase was weighted to the first
half the year (+210bps to 12.4% in H1), as higher stock levels
caused inefficiencies in our warehouses at the start of FY23. As
inventory reduced in the second half of the year, ancillary and
offsite storage locations were closed while changes were made to
simplify our UK returns network and drive improvements in pick and
pack efficiency. As a result, warehouse costs were 30bps lower YoY
in H2.
Marketing costs decreased by 13% YoY and fell 20bps to 5.5% of
sales as spend on performance marketing was optimised to deliver
the greatest return on investment. This included a more dynamic
approach, scaling back marketing spend in response to softer demand
and instead investing in discounting to drive sales in a highly
promotional market. Spend was optimised within different channels
and geographies generating efficiencies, which helped to offset
some of the elevated customer acquisition costs experienced in
H1.
Other operating costs increased 160bps YoY as a percentage of
sales (excluding adjusting items). The annualised payroll cost at
the start of the year was much higher than the average for FY22 as
the annual pay rise compounded higher entry headcount, in part due
to new headcount added across FY22 and a higher level of vacancies
in FY22. This was partly mitigated by headcount reduction and
tighter control of vacancies through the year, such that by the end
of the financial year headcount was on average 11% lower YoY.
Contractual increases in third party technology services and
overhead costs (including electricity, insurance, rates, and waste
management costs) have also contributed to the overall increase,
however these have been partly offset by rationalisation across our
central cost base as part of the Driving Change agenda.
Across the P&L, and in line with targets that were set
earlier in the year, profit improvement and cost mitigation
measures have delivered c.GBP300m of benefits in FY23, mitigating
headwinds from inflation and an increasing returns rate. These
include the pricing increases and sourcing improvements that have
impacted gross profit, as well as actions taken to rationalise the
supply chain network and reduce overhead costs. Initiatives were
also launched to minimise the impact of unprofitable geographies,
customers, and brands on our platform, including reversing
historical over-investment in our convenience proposition, changing
the way we service specific customer segments, and refining our
approach to branded promotion. These changes have initially reduced
customer numbers and sales, but ultimately support ASOS' ambition
to deliver sustainably profitable and cash generative growth in the
medium-term.
Depreciation and amortisation costs (excluding adjusting items)
as a percentage of sales increased by 80bps YoY. The increase in
depreciation and amortisation relates to growth in intangible
assets including data services, operations systems and improvements
to web and payments platforms.
Interest
ASOS incurred a finance expense (excluding adjusting items) of
GBP46.3m compared to GBP23.0m in FY22. This reflected an increase
in the level of drawn borrowings, rising interest rates (SONIA at
5.2% at the end of the year from 1.7% at the start) and a higher
margin payable post the May 2023 refinancing (see Net Debt,
Refinancing and Liquidity section below).
Fees in relation to the covenant waiver, either ineligible for
capitalisation or written off once the Revolving Credit Facility
('RCF') was replaced by the new Bantry Bay Capital Limited ('Bantry
Bay') refinancing, have been treated as adjusting items.
Finance income of GBP5.0m includes interest earned on deposits
at financial institutions. A higher level of return in FY23
compared to the GBP0.9m in FY22 reflected a higher average cash
balance and a rising global interest rate environment.
Taxation
The reported effective tax rate is 24.8% based on the reported
loss before tax of GBP296.7m. This loss creates a deferred tax
asset, recognised at 25%. This is broadly in line with the HY23
effective tax rate of 25%.
Earnings per share
Both basic and diluted loss per share were 213.0p (FY22: basic
and diluted loss per share of 30.9p). The higher loss was a
function of a higher reported loss before tax of GBP296.7m (FY22:
GBP31.9m last year) partially offset by more shares in issue
following the equity raise in May 2023. 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 period ended 3
September 2023.
Free cash flow
Period to 3 Year ended 31
GBPm September 2023 August 2022
------------------------------------------ ---------------- --------------
Operating cash flow 16.4 (120.4)
Purchase of property, plant & equipment
and intangible assets (177.9) (182.9)
Payment of lease liabilities (principal) (22.4) (26.3)
Interest received 4.5 0.9
Interest paid (33.6) (11.1)
------------------------------------------ ---------------- --------------
Free cash flow (before financing) (213.0) (339.8)
Issuance of equity 77.6 -
Proceeds from borrowings 200.0 -
Repayment of borrowings (1.7) -
Refinancing fees (30.8) -
------------------------------------------ ----------------
Cash flow 32.1 (339.8)
------------------------------------------ ---------------- --------------
There was a free cash outflow(16) (before items relating to
financing) of GBP213.0m for the year, including a cash inflow of
GBP45.8m in H2 FY23 after a GBP258.8m outflow in the first half of
the year.
The inflow from adjusted EBITDA of GBP124.5m and closing
inventory being GBP180.4m lower year-on-year (excluding the impact
of the one-off stock write-off) was more than offset by adverse
working capital movements due to a decrease in trade and other
payables. This was largely due to lower intake receipts and
operating costs in the second half of the year.
Cash was also used to fund a capital investment of GBP177.9m,
including committed spend in relation to the delayed automation
projects in Lichfield and Atlanta, and technology projects
including in support of the Partner Fulfils expansion. Finally,
interest and refinancing costs increased due to the drawdown of the
group's previous RCF in September 2022 (the 'Old RCF') and the
utilisation of the GBP200m term loan from Bantry Bay ('Term Loan')
during the year, with a small offset from interest income as
surplus cash was invested as interest rates increased.
Refinancing fees in the year totalled GBP30.8m relating firstly
to a waiver of the covenants applicable to the Old RCF in October
2022, then the subsequent amendment and extension of the Old RCF in
May 2023 (prior to announcement of the Bantry Bay refinancing).
Together with interest payable on the new refinancing of GBP8.0m,
consultancy spend of GBP1.2m and the accelerated payment of
interest on the Old RCF, the incremental cash cost of refinancing
in the year was GBP45.5m.
Net debt, Refinancing and Liquidity
Period to 3 Year ended 31
GBPm September 2023 August 2022
---------------------------------------- ---------------- --------------
Convertible bond (fair value of debt
component) 464.4 451.0
Term loan 184.8 -
Nordstrom loan 20.4 22.0
Put option liability 3.2 2.9
---------------- --------------
Borrowings 672.8 475.9
Cash & cash equivalents (353.3) (323.0)
Net debt (excluding lease liabilities) 319.5 152.9
---------------- --------------
Excluding lease liabilities, the business started the year with
borrowings of GBP475.9m and net debt of GBP152.9m after cash and
cash equivalents of GBP323.0m. On 8 September 2022, GBP250m was
drawn under the GBP350m Old RCF. Following the May 2023 refinancing
with specialist lender Bantry Bay the Old RCF was repaid in full
using the new Term Loan with the balance funded from the proceeds
from the issuance of equity. The Term Loan is stated net of
directly attributable unamortised refinancing costs.
Cash and undrawn facilities totalled GBP428.3m at year-end
(FY22: GBP673.0m) and included cash and cash equivalents of
GBP353.3m (FY22: GBP323.0m) and the undrawn new RCF provided as
part of the Bantry Bay refinancing of GBP75.0m (FY22: undrawn Old
RCF of GBP350.0m).
Sean Glithero
Interim Chief Financial Officer
Notes
(1) Rest of World
(2) The adjusting items and the alternative performance measures
used by ASOS are explained and defined in note 3 and on pages 38-40
respectively.
(3) Retail sales are internet sales recorded net of an
appropriate deduction for actual and expected returns, relevant
vouchers, discounts and sales taxes.
(4) Income from other services comprises of delivery receipt
payments, marketing services, commission on partner-fulfilled sales
and revenue from wholesale sales.
(5) Total adjusted sales, on a CCY basis, excluding Russia from
H1 FY22, and removing the impact of the 3 extra trading days in
FY23.
(6) Kantar Total Market | Spend YoY % Change | Online | Total
Adultwear | 24 & 52 w/e 20th August 2023 vs LY
(7) Calculation of metrics, or movements in metrics, on an
ex-Russia basis involves the removal of Russia from FY22
performance. This adjustment allows YoY 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 ASOS
have also excluded any visits from Russia in FY23, in addition to
FY22.
(8) Active customers defined as having shopped in the last 12
financial months.
(9) Average basket value is defined as adjusted net retail sales
divided by shipped orders.
(10) Average basket value CCY is calculated as adjusted constant
currency net retail sales divided by shipped orders.
(11) Average order frequency is calculated as total shipped
orders divided by active customers.
(12) Conversion is calculated as total shipped orders divided by
total visits.
(13) Profit per order is calculated as variable contribution
divided by billed orders.
(14) BRC-KPMG Retail Sales Monitor for August 2023.
(15) As a percentage of adjusted revenue.
(16) Free cash flow is net cash generated from operating
activities, less payments to acquire intangible and tangible
assets, payment of the principal portion of lease liabilities and
net finance expenses.
Investor and analyst meeting:
The group will be hosting an in-person presentation for analysts
at 9.30am at ASOS HQ, Greater London House, NW1 7FB. A live webcast
will also be available, and a recording of the presentation will be
uploaded to the ASOS investor relations website afterwards.
To access live please dial +44 330 088 5830 and use Meeting ID:
868 8702 0931 and passcode: 474916. A live stream of the event will
be available here .
A recording of this webcast will be available on the ASOS Plc
investor centre website after the event:
https://www.asosplc.com/investor-relations/
For further information:
Investors:
Holly Cassell, ASOS Head of Investor Relations Tel: 020 7756 1000
Media:
Jonathan Sibun / Will Palfreyman, Teneo Tel: 020 7353 4200
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 nine languages and in over 200 markets,
ASOS customers can shop a curated edit of nearly 50,000 products,
sourced from nearly 900 global and local third-party brands
alongside a mix of fashion-led own brand labels - including ASOS
Design, ASOS Edition, ASOS 4505, Collusion, Reclaimed Vintage,
Topshop, Topman, and Miss Selfridge. ASOS aims to give all its
customers a truly frictionless experience, with an ever-greater
number of different payment methods and hundreds of local
deliveries and return options, including Next-Day Delivery and
Same-Day Delivery, dispatched from state-of-the-art fulfilment
centres in the UK, US, and Germany.
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, ASOS plc 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.
Consolidated Income Statement
For the financial period 1 September 2022 to 3 September
2023
1 September 2022 to Year ended 31 August
3 September 2023 2022
----------------------------------- -----------------------------------
Adjusted Adjusting Total Adjusted Adjusting Total
items items
(Note
3)
Note (Note
3)
GBPm GBPm GBPm GBPm GBPm GBPm
----- ---------- -----------
Revenue 3,538.0 11.5 3,549.5 3,936.5 - 3,936.5
Cost of sales (1,974.6) (115.9) (2,090.5) (2,219.0) - (2,219.0)
----------------------------- ----- ---------- ---------- ----------- ---------- ---------- -----------
Gross profit 1,563.4 (104.4) 1,459.0 1,717.5 - 1,717.5
Distribution expenses (429.7) - (429.7) (523.7) - (523.7)
Administrative expenses (1,164.7) (115.1) (1,279.8) (1,170.3) (53.9) (1,224.2)
Other income 2.0 - 2.0 20.6 - 20.6
-----
Operating (loss)/profit (29.0) (219.5) (248.5) 44.1 (53.9) (9.8)
Finance income 5 5.0 - 5.0 0.9 - 0.9
Finance expense 5 (46.3) (6.9) (53.2) (23.0) - (23.0)
-----
(Loss)/Profit before
tax (70.3) (226.4) (296.7) 22.0 (53.9) (31.9)
Income tax credit/(expense) 6 17.4 56.2 73.6 (5.3) 6.4 1.1
----------------------------- ----- ---------- ---------- ----------- ---------- ---------- -----------
(Loss)/Profit for
the financial period (52.9) (170.2) (223.1) 16.7 (47.5) (30.8)
----------------------------- ----- ---------- ---------- ----------- ---------- ---------- -----------
(Loss) per share pence pence
per share per share
----------------------------- ----------------- ---------- ----------- ---------- ---------- -----------
Basic per share 7 (213.0) (30.9)
Diluted per share 7 (213.0) (30.9)
----------------------------- ----- ---------- ---------- ----------- ---------- ---------- -----------
Consolidated Statement of Comprehensive Income
For the financial period 1 September 2022 to 3 September
2023
1 September
2022 to Year ended
3 September 31 August
2023 2022
GBPm GBPm
--------------------------------------------- ----------------- -----------
Loss for the financial period (223.1) (30.8)
----------------------------------------------- ----------------- -----------
Items that will not be reclassified
to Group income statement
Net fair value (losses)/gains on cash
flow hedges (60.1) 51.2
Tax on items that will not be reclassified 9.7 (13.4)
----------------------------------------------- ----------------- -----------
(50.4) 37.8
Items that may be subsequently reclassified
to Group income statement
Net translation movements offset in
reserves (0.3) 0.3
Net fair value gains/(losses) on cash
flow hedges 30.5 (25.9)
Fair value movements reclassified from
cash flow hedge reserve to Group income
statement 1.7 (15.6)
Tax on items that may be reclassified (7.7) 9.5
----------------------------------------------- ----------------- -----------
24.2 (31.7)
--------------------------------------------- ----------------- -----------
Other comprehensive (loss)/income
for the period (26.2) 6.1
----------------------------------------------- ----------------- -----------
Total comprehensive loss for the period
attributable to owners of the parent
company (249.3) (24.7)
----------------------------------------------- ------------- -----------
Consolidated Balance Sheet
As at 3 September 2023
Note 3 September 2023 31 August
2022
---------------------------------- -----
GBPm GBPm
---------------------------------- ----- ----------------- ----------
Non-current assets
Goodwill and other intangible
assets 8 700.5 683.9
Property, plant and equipment 9 362.6 351.7
Right-of-use assets 10 295.2 380.3
Investment Properties 10.9 -
Derivative financial assets 4.1 27.0
Deferred tax assets 17.8 -
---------------------------------- ----- -----------------
1,391.1 1,442.9
---------------------------------- ----- ----------------- ----------
Current assets
Inventories 768.0 1,078.4
Trade and other receivables 81.4 88.2
Derivative financial assets 22.4 41.4
Cash and cash equivalents 11 353.3 323.0
Current tax assets 9.4 23.0
---------------------------------- ----- -----------------
1,234.5 1,554.0
---------------------------------- ----- ----------------- ----------
Current liabilities
Trade and other payables 12 (680.4) (993.3)
Borrowings 13 (1.5) (1.4)
Lease liabilities 10 (25.3) (24.3)
Derivative financial liabilities (6.0) (21.0)
Provisions 14 (2.0) -
(715.2) (1,040.0)
---------------------------------- ----- ----------------- ----------
Net current assets 519.3 514.0
---------------------------------- ----- ----------------- ----------
Non-current liabilities
Borrowings 13 (671.3) (474.5)
Lease liabilities 10 (303.7) (355.8)
Deferred tax liabilities - (58.2)
Derivative financial liabilities (0.5) (11.6)
Provisions 14 (68.2) (41.9)
(1,043.7) (942.0)
---------------------------------- ----- ----------------- ----------
Net assets 866.7 1,014.9
---------------------------------- ----- ----------------- ----------
Equity attributable to
owners of the parent
Called up share capital 4.2 3.5
Share premium 322.6 245.7
Other reserves 73.1 82.4
Retained earnings 466.8 683.3
Total equity 866.7 1,014.9
---------------------------------- ----- ----------------- ----------
Consolidated Statement of Changes in Equity
For the financial period 1 September 2022 to 3 September
2023
Called Share Other Retained Total
up share premium reserves earnings equity
capital
GBPm GBPm GBPm GBPm GBPm
At 1 September 2022 3.5 245.7 82.4 683.3 1,014.9
--------------------------------------- ---------- --------- ---------- ---------- --------
Loss for the period - - - (223.1) (223.1)
Other comprehensive loss for
the period - - (26.2) - (26.2)
--------------------------------------- ---------- --------- ---------- ---------- --------
Total comprehensive loss
for the period - - (26.2) (223.1) (249.3)
--------------------------------------- ---------- --------- ---------- ---------- --------
Cash flow hedges gains and
losses transferred to non-financial
assets - - 16.9 - 16.9
Share issue 0.7 76.9 - - 77.6
Share-based payments charge - - - 6.4 6.4
Tax relating to share option
scheme - - - 0.2 0.2
--------------------------------------- ---------- --------- ---------- ---------- --------
Balance as at 3 September
2023 4.2 322.6 73.1 466.8 866.7
--------------------------------------- ---------- --------- ---------- ---------- --------
At 1 September 2021 3.5 245.7 70.8 714.0 1,034.0
--------------------------------------- ---------- --------- ---------- ---------- --------
Loss for the year - - - (30.8) (30.8)
Other comprehensive income
for the year - - 6.1 - 6.1
--------------------------------------- ---------- --------- ---------- ---------- --------
Total comprehensive income/(loss)
for the year - - 6.1 (30.8) (24.7)
--------------------------------------- ---------- --------- ---------- ---------- --------
Cash flow hedges gains and
losses transferred to non-financial
assets - - 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 82.4 683.3 1,014.9
--------------------------------------- ---------- --------- ---------- ---------- --------
Retained earnings includes the share-based payments reserve, and
employee benefit trust reserve.
Consolidated Cash Flow Statement
For the financial period 1 September 2022 to 3 September
2023
1 September Year to
2022 to 3 September 31 August
2023 2022
GBPm GBPm
------------------------------------------- ---------------------- -----------
Operating loss (248.5) (9.8)
Adjusted for:
Depreciation of property, plant and
equipment, right-of-use assets and
investment property 67.8 61.0
Amortisation of other intangible assets 104.7 88.8
Impairment charges on non-financial
assets 32.1 19.2
Share-based payments charge 5.2 0.6
Other non-cash items 1.8 (4.9)
Settlement of contingent consideration
in relation to employee benefits - (6.0)
Decrease/(increase) in inventories 310.4 (258.7)
Decrease/(increase) in trade and other
receivables 12.7 (34.2)
(Decrease)/increase in trade and other
payables (304.9) 21.5
Increase/(decrease) in provisions 16.8 (1.3)
-------------------------------------------- ---------------------- -----------
Cash used in operating activities (1.9) (123.8)
Net income tax received 18.3 3.4
-------------------------------------------- ---------------------- -----------
Net cash generated from/(used in)
operating activities 16.4 (120.4)
Investing activities
Purchase of other intangible assets (136.2) (109.2)
Purchase of property, plant and equipment (41.7) (73.7)
Interest received 4.5 0.9
-------------------------------------------- ---------------------- -----------
Net cash used in investing activities (173.4) (182.0)
Financing activities
Proceeds from issue of ordinary shares 77.6 -
Proceeds from borrowings 200.0 -
Drawdown of revolving credit facility 250.0 -
Repayment of borrowings (251.7) -
Refinancing fees (30.8) -
Repayment of principal portion of
lease liabilities (22.4) (26.3)
Interest paid (33.6) (11.1)
-------------------------------------------- ---------------------- -----------
Net cash generated from/(used in)
financing activities 189.1 (37.4)
-------------------------------------------- ---------------------- -----------
Net increase/(decrease) in cash and
cash equivalents 32.1 (339.8)
-------------------------------------------- ---------------------- -----------
Opening cash and cash equivalents 323.0 662.7
Effect of exchange rates on cash and
cash equivalents (1.8) 0.1
-------------------------------------------- ---------------------- -----------
Closing cash and cash equivalents 353.3 323.0
-------------------------------------------- ---------------------- -----------
1 GENERAL INFORMATION
The financial information contained within this preliminary
announcement for the periods from 1 September 2022 to 3 September
2023 and 1 September 2021 to 31 August 2022 do not comprise
statutory financial statements within the meaning of section 434 of
the Companies Act 2006. Statutory accounts for the year to 31
August 2022 have been filed with the Registrar of Companies and
those for the period to 3 September 2023 will be filed following
the Company's annual general meeting. The auditors have reported on
the 2023 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.
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 countries that include
the UK, US, Australia, France, Germany, Spain, Italy, Sweden, the
Netherlands, Denmark and Poland. The Company is a public limited
company whose shares are publicly traded on the London Stock
Exchange. The Company is incorporated and domiciled in the UK and
the address of its registered office is Greater London House,
Hampstead Road, London NW1 7FB.
The financial period represents the period from 1 September 2022
to 3 September 2023 (prior financial year: the year ended 31 August
2022). This does not constitute a change in accounting reference
date. The Group will present results on a 52 or 53 week period in
future periods to align with internal reporting timelines. The
financial information comprises the results of the Company and its
subsidiaries.
2 SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATES
2.1 Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK-adopted International Financial Reporting
Standards (IFRS) and with the requirements of the Companies Act
2006 and the Listing rules as applicable to companies reporting
under those standards.
The financial statements have been prepared under the historical
cost basis of accounting, excluding derivative financial
instruments which are held at fair value. The financial statements
are presented in sterling and all values are rounded to the nearest
million pounds except where otherwise indicated.
2.2 Changes in presentation
Other comprehensive income
Other comprehensive income is now disclosed as a separate
statement from the consolidated income statement.
Consolidated balance sheet
The presentation of the consolidated balance sheet has been
updated as follows:
-- Goodwill and other intangible assets are now disclosed as one line item
-- Right-of-use assets are now presented separately from property, plant and equipment
-- The employee benefit trust reserve which was previously
disclosed separately is now reported within retained earnings
-- The cash flow hedge reserve, convertible bond reserve and
translation reserve are grouped and presented as Other Reserves in
the consolidated balance sheet, and within the consolidated
statement of changes in equity
The comparatives have also been updated to reflect these
changes.
Consolidated cash flow statement
The presentation of the consolidated cashflow statement has been
updated so that movements in provisions are shown separately. These
were previously included within movements in trade and other
payables. Comparatives have been updated.
2.3 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
2025.
In assessing the Group's going concern position, the Directors
have considered the Group's detailed budgeting and forecasting
process which reflects 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 continued availability of existing
borrowings, principally related to the new Bantry Bay debt facility
and issued convertible bonds, details of which can be found in Note
13. At 3 September 2023, the Group was fully drawn on the GBP200m
term loan with Bantry Bay, and had an undrawn Revolving credit
facility ("RCF") of GBP75m, with a maturity of April 2026, along
with GBP500m convertible bonds with a maturity of April 2026. The
only covenant the Group is subject to under the debt facilities is
a minimum liquidity covenant of GBP90m, based on available cash and
cash equivalents and amounts undrawn under the RCF, which is the
primary test within the going concern assessment.
Key assumptions- forecasting business cashflows
The assessment of the Group's going concern position required
significant management judgement, including in determining the key
assumptions that have the greatest impact on forecasts of future
business performance and the range of reasonably possible outcomes
of those assumptions. The economic environment has remained
challenging throughout FY23 with cost of living pressures
continuing to impact customer spending and sentiment. It is not
known how long this will continue to directly impact the business
and consumer behaviour, nor the impact that a changed economy will
have on consumers over the going concern period. For the purposes
of the Group's going concern assessment, the Directors have
therefore made assumptions on the likely future cash flows in the
uncertain macro environment. The assumptions considered include the
continued transition to the Group's new operating model and
subsequent working capital improvements, as well as a marginal
improvement in the macro trading environment, with the online
fashion market assumed to return to growth on an aggregated basis
across the Group's key territories. The base case assumes the
market backdrop within the initial going concern period is to
remain challenging, resulting in assumed year-on-year Group sales
declines in FY24 of between (5)% and (15)%, returning to
year-on-year double digit sales growth and subsequent market share
gains by the end of the assessment period. The base case also
assumes modest year-on-year improvements in adjusted gross margin
during FY24, with up to c.300bps growth vs FY23 towards the end of
the assessment period.
Aligned to the Group's principal risks, the Directors have also
considered various severe but plausible downside scenarios against
the base case, comprising of the following assumptions:
-- Sales growth reduction;
-- Gross margin reduction;
-- Potential working capital cash impacts.
The downside scenarios are considered and mapped by half, with
the greater degree of assumption-based improvements and subsequent
volatility in the outer periods commanding more severe downside
sensitivities. Sensitivities mapped against the base case within
the downside case are highlighted below:
Downside vs base case H1 FY24 H2 FY24 H1 FY25
Sales (5)% (10)% (15)%
--------- --------- ---------
Gross Margin (140)bps (250)bps (220)bps
--------- --------- ---------
Working Capital impact (average) GBP(76)m GBP(84)m GBP(73)m
--------- --------- ---------
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, deferring or
reducing stock intake to match the sales reduction, and
implementing further cost management to maintain a sufficient level
of liquidity headroom during the going concern period. The combined
impact of the above downside scenarios and mitigations does not
trigger a minimum liquidity breach at any point in the going
concern period, and offers suitable headroom above the threshold
referred to in the Bantry Bay debt facility.
Reverse stress tests have also been performed on both the
Group's revenue and gross margin. The tests under consideration
hold all metrics in line with the downside case highlighted above,
analysing how far the stress metric would need to decline against
the base case to cause a liquidity event. Such results would have
to see a minimum of c.30% decline in sales over the base case, or a
decline in gross margin from the base case of c.650bps across the
entire assessment period. Both are considered remote based on
results of previous significant economic events and recent trading
performance, particularly on the basis that the Group is
annualising the challenging market conditions experienced in
FY23.
In assessing the group's ability to continue as a going concern
the directors have considered climate change risks. Transitional
risk outcomes are expected to manifest in the short to medium term
(2025 to 2030). As the going concern assessment covers the 18
months to February 2025 (i.e. the very beginning of the TCFD
transitional risk period) it is not considered that climate-related
risks result in any material uncertainties affecting the Group's
ability to continue as a going concern.
Based on the above, the Directors have concluded that, on the
basis of there being liquidity headroom under both the base case
and downside scenarios, and the consideration that the reverse
stress test scenario is remote, it is appropriate to adopt the
going concern basis of accounting in the preparation of the Group's
annual financial statements, with no material uncertainty to
disclose.
2.5 Amendments to published standards
The Group has considered the following amendments to published
standards that are effective for the Group for the financial period
beginning 1 September 2022 and concluded that they are either not
relevant to the Group or that they do not have a significant impact
on the Group's financial statements other than disclosures.
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
-- Annual Improvements to IFRS Standards 2018-2020
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
-- Reference to the Conceptual Framework (Amendments to IFRS 3)
The following standards and revisions will be effective for
future periods:
-- IFRS 17 'Insurance Contracts'
-- Amendments to IAS 1 'Presentation of Financial Statements'
and IFRS Practice Statement 2 'Making Materiality Judgements' on
the disclosure of accounting policies
-- Amendments to IAS 1 'Presentation of Financial Statements' on
the classification of liabilities as current or non-current
-- Amendments to IAS 1 'Presentation of Financial Statements' on
non-current liabilities with covenants
-- Amendments to IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors' on the definition of accounting
estimates
-- Amendments to IAS 12 'Income Taxes' on Deferred Tax Related
to Assets and Liabilities Arising from a Single Transaction
-- Amendments to IFRS 16 'Leases' on Lease Liability in a Sale and Leaseback
-- Amendments to IFRS 10 'Consolidated Financial Statements' and
IAS 28 'Investments in Associates and Joint Ventures' on the sale
or contribution of assets between an investor and its associate or
joint venture
The Group has considered the impact of the remaining above
standards and revisions and have concluded that they will not have
a significant impact on the Group's financial statements.
2.6 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 on pages 38 to 40. All of the APMs relate to
the current period's results and comparative periods.
3 ADJUSTED PROFIT BEFORE TAX
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. Adjusted
items are those which are significant either by virtue of their
size and/or nature, the inclusion of which could distort
comparability between periods. The assessment is made both on an
individual basis and, if of a similar type, in aggregate.
The consolidated income statement is presented in a columnar
format to enable users of the financial statements to see the
Group's performance before adjusting items, the adjusting items,
and the statutory total on a line-by-line basis. An analysis of the
adjusting items included in the consolidated income statement,
together with the impact of these items on the consolidated cash
flow statement, is disclosed below.
1 September 2022 to Revenue Cost Administrative Finance Total Tax Total
3 September 2023 of sales expenses expenses adjustments
before
tax
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- ---------- --------------- ---------- ------ --------
Driving change agenda
Commercial operating
model change 11.5 (130.0) (14.7) - (133.2) 33.2 (100.0)
Property-related costs - - (60.2) (0.5) (60.7) 15.2 (45.5)
Other strategic initiatives - - (24.6) (6.4) (31.0) 7.4 (23.6)
Amortisation of acquisition
intangibles - - (10.7) - (10.7) 2.7 (8.0)
Other items - 14.1 (4.9) - 9.2 (2.3) 6.9
11.5 (115.9) (115.1) (6.9) (226.4) 56.2 (170.2)
-------------------------------- -------- ---------- --------------- ---------- --------
Year to 31 August 2022 Revenue Cost Administrative Finance Total Tax Total
of sales expenses expenses adjustments
before
tax
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- -------- ---------- --------------- ---------- ------ --------
ASOS Reimagined - - (25.4) - (25.4) 4.8 (20.6)
Main Market transition
costs - - (5.7) - (5.7) (1.1) (6.8)
Impairment of Leavesden
assets - - (18.5) - (18.5) 2.3 (16.2)
Employee and other liabilities
relating to acquisition
of Arcadia brands - - 6.4 - 6.4 (1.2) 5.2
Amortisation of acquired
intangible assets - - (10.7) - (10.7) 1.6 (9.1)
-------------------------------- -------- ---------- --------------- ----------
- - (53.9) - (53.9) 6.4 (47.5)
-------------------------------- -------- ---------- --------------- ---------- --------
Driving change agenda
In October 2022, ASOS' new CEO delivered an assessment of the
business's strengths and weaknesses and launched the Driving Change
agenda to return ASOS to profitability and cash generation. This
strategy centred around four pillars:
a. A renewed commercial model: A new approach to buying,
merchandising, managing and clearing stock designed to increase
flexibility and improve stock turn, increasing full price sales and
generating cash.
b. Stronger order economics and a lighter cost profile: Actions
to improve order profitability in all markets while reducing costs
in all parts of the business.
c. Robust, flexible balance sheet: Ensuring sufficient
flexibility in the Group's balance sheet to successfully execute
its strategy while aligning investment with capacity requirements
to ensure a more efficient allocation of capital.
d. Enabled by a reinforced leadership team and refreshed
culture: Reinforcing the Senior Leadership team with strategic
hires while embedding a more innovative culture at all levels.
Various items of income and expenditure have been incurred
during the period in relation to this, as outlined below.
Commercial operating model
A key focus for ASOS in FY23 has been the introduction of the
new commercial operating model which was approved by the Board
during the current financial period. The new model involves a more
disciplined approach to intake, increased speed to market and
clearing product more quickly to reduce the Group's inventory
requirement, increase full price sales and hence gross margin, and
improve customer engagement. To unlock these benefits, the Group
must also clear old stock acquired under its previous ways of
working. As such and in addition to clearance via its own platform,
ASOS is utilising offsite clearance routes to support its
transition to the new model.
To transition to the new model, a reshaping of the inventory
portfolio has been required, and as a result additional costs have
been recognised totalling GBP133.2m. This comprises losses on stock
cleared during the period, net of income received of GBP11.5m, as
well as provisions for stock (either held as at FY22 or committed
to purchase as at FY22) that will be sold through alternative
clearance channels (i.e. not via the ASOS website).
Extraction and relevant holding costs totalling GBP14.7m have
also been incurred.
Property related costs
During the period it was agreed to vacate a number of
Group-occupied sites, including office and warehouse space. As a
result, costs of GBP60.7m have been incurred, comprising the
following:
1 September 2022 to 3 September 2023 GBPm
------------------------------------------------- -------
Impairment of property, plant and equipment (a) (5.6)
Impairment of intangible assets (a) (1.7)
Impairment of right of use assets (a) (20.0)
Impairment of investment property (a) (1.3)
Accelerated depreciation (b) (7.6)
Exit provisions (c) (18.3)
Other closure costs (d) (6.2)
------------------------------------------------- -------
(60.7)
------------------------------------------------- -------
a) Impairment of assets for sites vacated during the financial
period. The related assets have been written off in full.
b) The remaining useful economic lives of corresponding sites
have been reassessed to align with closure dates, resulting in an
acceleration in depreciation of these assets. The existing
depreciation of these assets (depreciation that would have been
recognised absent of a closure decision) is recognised within
adjusted profit, whereas accelerated depreciation above this is
recognised outside of adjusted profit.
c) Exit provisions relate to onerous contract costs on leased
sites that have been identified for closure. Upon initial
recognition of exit provisions, management uses its best estimates
of the relevant costs to be incurred as well as expected closure
dates. This excludes business rates on leased property which are
recognised in the period they are incurred. Whilst the properties
remain vacant, ongoing expenses relating to lease interest, onerous
provision unwinds and business rates will be reported outside
adjusted profit given they do not relate to operational sites of
the Group.
d) Relates to negotiated exit costs to vacate certain leased sites ahead of the lease end date.
Other strategic initiatives
Other priorities for FY23 communicated at the FY22 results
included: (i) stronger order economics and a lighter cost profile,
(ii) a robust, flexible balance sheet, and, (iii) a reinforced
leadership team and refreshed culture. ASOS has progressed with
each of these priorities during the period, with costs of GBP31.0m
incurred and excluded from adjusted profit. These predominantly
relate to external consultancy costs to support the launch of the
programme and the identification of initiatives (GBP8.9m),
severance costs (GBP7.7m), costs incurred associated with the
revolving credit facility covenant waiver and subsequent
refinancing during the year (GBP8.1m - refer to Note 13 for more
detail) and other business restructuring costs (GBP6.3m). The
Driving Change agenda has replaced the Group's ASOS Reimagined
programme that commenced in the prior year.
Costs incurred last year in relation to ASOS Reimagined totalled
GBP25.4m, bringing cumulative change agenda costs incurred to date
to GBP250.3m (including the commercial model change and property
initiatives), of which GBP63.0m is cash.
Amortisation of acquired intangible assets
Amortisation of acquired intangible assets is adjusted for as
acquisitions are outside business-as-usual operations for ASOS.
These assets would not normally be recognised outside of a business
combination, therefore the associated amortisation is adjusted.
Other items
During the period, the Group corrected in-aggregate and
individually immaterial items relating to prior years totalling
GBP9.2m.
Prior year adjusting items
Items recognised outside adjusted profit in the prior year
relate to:
-- ASOS Reimagined - A multi-year programme to 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.
This has subsequently been replaced by the Group's Driving Change
agenda.
-- 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 assets - A non-cash impairment charge
relating to the right-of-use assets and associated fixtures and
fittings at part of ASOS' Leavesden office.
-- Employee and other liabilities relating to Arcadia
acquisition - The release of a contingent liability relating to
employee and other costs, which was originally recognised as part
of the Arcadia acquisition in February 2021.
Classification as adjusting items
Given a number of the costs incurred as part of the above
programmes facilitate future ongoing cost savings, it was
considered whether it was appropriate to report these costs within
adjusted profit/(loss). Whilst they arise from changes in the
Group's underlying operations, they can be separately identified,
are significant in size/nature and their inclusion within adjusted
profit/(loss) does not facilitate meaningful comparison between
financial periods. Furthermore, the costs incurred arise as a
result of implementing changes for the future to evolve and reshape
the business and are therefore not reflective of ordinary, in-year
trading activity, and for areas being closed or restructured, these
operations no longer relate to the Group's trading operations.
Exclusion from adjusted profit/(loss) is therefore considered
appropriate.
Cash flow impact of adjusting items
The total cash flow impact of adjusting items is as follows:
1 September Year to 31
2022 to 3 August 2022
September
2023
---------------------------------------------
GBPm GBPm
--------------------------------------------- ------------ -------------
Commercial operating model change 3.5 -
Other strategic initiatives (including ASOS
Reimagined) (56.9) (12.5)
Main Market transition costs - (5.7)
Total adjusting items within cash flow (53.4) (18.2)
--------------------------------------------- ------------ -------------
Other strategic initiatives includes GBP30.8m fees paid in
relation to refinancing included within cash flows from financing
activities, as detailed in Note 13.
An additional property initiative was approved after the balance
sheet date for which costs are expected next year that will be
excluded from adjusted profit. Refer to Note 17 for additional
information.
4 SEGMENTAL ANALYSIS
IFRS 8 'Operating Segments' requires operating segments to be
identified on the basis of internal reporting on components of the
Group that are regularly reviewed by the chief operating
decision-maker to allocate resources to the segments and to assess
their performance.
The Chief Operating Decision Maker has been determined to be the
Management Committee (renamed from the Executive Committee as part
of the Group's Driving Change agenda). It is the Management
Committee that reviews the Group's internal reporting in order to
assess performance and allocate resources across the business. In
doing so, the Management Committee reviews performance across the
Group via a number of sources, comprising regular monthly
management accounts, and ad hoc analysis that provides deep dives
into different areas, including territory, brands and revenue
streams.
In determining the Group's operating segments, management has
considered the level of information which is regularly reviewed by
the Management Committee. Information regularly reviewed by the
Management Committee is at a consolidated Group level only, with
some disaggregated revenue information and associated metrics
provided for the geographical territories of the UK, the US, Europe
and the Rest of the World. However, decisions on resource
allocation are not made based on this information. Such decisions
are made on ad hoc analysis, separately provided to the Management
Committee, and does not constitute information that is either
regularly provided to, nor reviewed by, the Management Committee.
As a result, it has been concluded that the Group has only one
operating segment (the Group level).
Information by Geographical territory is included below in line
with the entity-wide disclosure requirements of IFRS 8 "Operating
Segments".
1 September 2022 to 3 September 2023
UK EU US Rest Total
of world
----------------------------
GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- ------ ---------- ----------
Retail sales 1,494.6 1,127.3 443.6 322.7 3,388.2
Income from other services 59.8 29.4 57.5 14.6 161.3
Total revenue 1,554.4 1,156.7 501.1 337.3 3,549.5
Cost of sales (2,090.5)
Gross profit 1,459.0
Distribution expenses (429.7)
Administrative expenses (1,279.8)
Other income 2.0
Operating loss (248.5)
Finance income 5.0
Finance expense (53.2)
Loss before tax (296.7)
---------------------------- -------- -------- ------ ---------- ----------
Non-current assets(1) 994.1 177.9 162.0 - 1,334.0
---------------------------- -------- -------- ------ ---------- ----------
Year to 31 August 2022
UK EU US Rest Total
of world
----------------------------
GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- ------ ---------- ----------
Retail sales 1,703.3 1,142.6 472.7 454.0 3,772.6
Income from other services 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)
---------------------------- -------- -------- ------ ---------- ----------
Non-current assets(1) 1,006.7 188.8 185.2 - 1,380.7
---------------------------- -------- -------- ------ ---------- ----------
(1) Non-current assets above exclude goodwill, derivative
financial assets and deferred tax assets.
The above presentation is consistent with the analysis provided
to the chief operating decision maker within the monthly management
accounts.
Due to the nature of its activities, the Group is not reliant on
any individual major customers.
5 FINANCE INCOME AND EXPENSES
1 September 2022 to Year ended
3 September 2023 31 August
2022
GBPm GBPm
---------------------------------- --------------------- -----------
Finance income 5.0 0.9
----------------------------------- -------------------- -----------
Interest on convertible bond and
other borrowings (50.8) (19.5)
IFRS 16 lease interest (5.6) (5.4)
Provisions - unwind of discount (1.6) (0.2)
Interest capitalised 4.8 2.1
----------------------------------- -------------------- -----------
Total finance expense (53.2) (23.0)
----------------------------------- -------------------- -----------
6 TAXATION
1 September 2022 Year to 31
to August 2023
3 September 2023
---------------------------------------------------
GBPm GBPm
--------------------------------------------------- ------------------ -------------
Current year UK tax - (11.8)
Current year overseas tax 3.4 0.9
Adjustment in respect of prior year corporation
tax (4.1) (3.0)
Total current tax credit (0.7) (13.9)
Origination and reversal of temporary differences (73.2) 11.2
Adjustment from changes in tax rates (0.1) 0.2
Adjustment in respect of prior years 0.4 1.4
Total deferred tax (credit)/charge (72.9) 12.8
Total income tax credit in income statement (73.6) (1.1)
--------------------------------------------------- ------------------ -------------
Analysed as:
Tax on adjusted profit (17.4) 5.3
Tax on items excluded from adjusted profit (56.2) (6.4)
Total income tax credit in income statement (73.6) (1.1)
--------------------------------------------------- ------------------ -------------
Effective tax rate 24.8% 3.4%
--------------------------------------------------- ------------------ -------------
7 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent company ASOS Plc 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 excluded 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,
excluding own shares held, adjusted for the effects of potentially
dilutive ordinary shares. The dilutive impact is calculated as the
weighted average of all potentially dilutive ordinary shares. These
represent share options granted by the Group, including
performance-based options, where the scheme to date performance is
deemed to have been earned. It also includes the number of shares
that would be issued if all convertible bonds are assumed to be
converted unless the convertible instrument is out-of-the-money and
not expected to convert. All operations are continuing for the
periods presented.
1 September Year to 31
2022 to 3 September August 2022
2023
------------------------------------------------ --------------------- -------------
Weighted average share capital
Weighted average shares in issue for basic
earnings per share (no. of shares) 104,729,376 99,696,028
Weighted average effect of dilutive options - -
(no. of shares)(1)
Weighted average effect of convertible bond - -
(no. of shares)(2)
Weighted average shares in issue for diluted
earnings per share (no. of shares) 104,729,376 99,696,028
------------------------------------------------ --------------------- -------------
Loss after tax for the financial period (GBPm)
Loss attributable to owners of the parent
company for basic earnings per share (223.1) (30.8)
Interest expense on convertible bonds(1) - -
Diluted loss attributable to owners of the
parent company for diluted loss per share (223.1) (30.8)
------------------------------------------------ --------------------- -------------
Basic loss per share (pence per share) (213.0) (30.9)
Diluted loss per share (pence per share) (213.0) (30.9)
------------------------------------------------ --------------------- -------------
(1) Dilutive shares and interest not included where their effect
is anti-dilutive
(2) The impact of convertible bonds on the weighted average
share capital has been excluded as it is not assumed they will be
exercised
8 GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill Brands Customer Domain Software Assets Total
relationships names under construction
--------------------------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
Cost
As at 1 September
2022 35.5 219.4 24.4 0.2 752.4 3.6 1,035.5
Additions - - - - 109.4 17.1 126.5
Transfers - - - - 1.7 (1.7) -
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
As at 3 September
2023 35.5 219.4 24.4 0.2 863.5 19.0 1,162.0
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
Accumulated amortisation
and impairment
As at 1 September
2022 0.3 12.0 4.7 - 334.6 - 351.6
Amortisation expense - 7.8 3.1 - 93.8 - 104.7
Impairment charge
for the period - - - - 3.1 2.1 5.2
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
As at 3 September
2023 0.3 19.8 7.8 - 431.5 2.1 461.5
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
Net book value
at 3 September 2023 35.2 199.6 16.6 0.2 432.0 16.9 700.5
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
Cost
As at 1 September
2021 33.4 219.4 24.4 0.2 636.8 0.8 915.0
Additions 2.1 - - - 114.6 3.8 120.5
Transfers - - - - 1.0 (1.0) -
As at 31 August
2022 35.5 219.4 24.4 0.2 752.4 3.6 1,035.5
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
Accumulated amortisation
and impairment
As at 1 September
2021 0.3 4.3 1.7 - 256.5 - 262.8
Amortisation expense - 7.7 3.0 - 78.1 - 88.8
As at 31 August
2022 0.3 12.0 4.7 - 334.6 - 351.6
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
Net book value at
31 August 2022 35.2 207.4 19.7 0.2 417.8 3.6 683.9
-------------------------- --------- ------- --------------- ------- --------- -------------------- --------
Intangible assets under construction relates to spend on
software-based projects, including the enhancement of the Group's
mobile apps/website, and other software. No individual projects are
material in value.
9 PROPERTY, PLANT AND EQUIPMENT
Fixtures, Computer Assets under Total
fittings, hardware construction
plant and
machinery
----------------------------------
GBPm GBPm GBPm GBPm
---------------------------------- ----------- ---------- -------------- ------
Cost
As at 1 September 2022 408.5 41.1 65.4 515.0
Additions 1.1 0.6 46.2 47.9
Transfers 1.1 1.3 (2.4) -
As at 3 September 2023 410.7 43.0 109.2 562.9
---------------------------------- ----------- ---------- -------------- ------
Accumulated depreciation and
impairment
As at 1 September 2022 134.8 26.0 2.5 163.3
Charge for the period 25.4 6.0 - 31.4
Impairment charge for the period 5.2 0.1 0.3 5.6
---------------------------------- -----------
As at 3 September 2023 165.4 32.1 2.8 200.3
---------------------------------- ----------- ---------- -------------- ------
Net book value at 3 September
2023 245.3 10.9 106.4 362.6
---------------------------------- ----------- ---------- -------------- ------
Cost
As at 1 September 2021 386.2 34.4 16.1 436.7
Additions 21.5 6.7 50.1 78.3
Transfers 0.8 - (0.8) -
----------------------------------
As at 31 August 2022 408.5 41.1 65.4 515.0
---------------------------------- ----------- ---------- -------------- ------
Accumulated depreciation and
impairment
As at 1 September 2021 101.9 20.8 - 122.7
Charge for the year 25.5 5.2 - 30.7
Impairment charge for the year 7.4 - 2.5 9.9
----------------------------------
As at 31 August 2022 134.8 26.0 2.5 163.3
---------------------------------- ----------- ---------- -------------- ------
Net book value at 31 August
2022 273.7 15.1 62.9 351.7
---------------------------------- ----------- ---------- -------------- ------
Significant assets under construction as at 3 September 2023
consisted primarily of amounts spent to automate the Atlanta
fulfilment centre totalling GBP58.0m (2022: GBP41.5m) and the
Lichfield fulfilment centre GBP46.8m (2022: GBP16.2m).
10 LEASES
Right-of-use assets
Set out below are the carrying amounts of right-of-use assets
recognised and the movements during the period. Right-of-use assets
comprise entirely leases for land and buildings.
1 September Year to 31
2022 to 3 September August 2022
2023
----------------------------------
GBPm GBPm
---------------------------------- --------------------- -------------
At the beginning of the period 380.3 345.2
Modifications (9.6) 69.2
Impairment charge (20.0) (9.3)
Depreciation charge (35.9) (30.3)
Transfers to investment property (12.8) -
Foreign exchange differences (6.8) 5.5
---------------------------------- --------------------- -------------
At the end of the period 295.2 380.3
---------------------------------- --------------------- -------------
The Group presents additions to right-of-use assets in line with
the disclosure requirements of IFRS 16 'Leases'. In doing so,
modifications above includes the impact of lease terminations,
modifications and reassessments, and changes to dilapidation
estimates.
Right-of-use assets totalling GBP12.8m were transferred to
investment property during the year and relate to sites the Group
sublets, or that are currently vacant with the intention of
subletting.
Lease liabilities
Set out below are the carrying amounts of lease liabilities and
the movements during the period:
1 September Year to
2022 to 31 August
3 September 2022
2023
--------------------------------
GBPm GBPm
-------------------------------- ------------- -----------
At the beginning of the period 380.1 328.9
Modifications (21.1) 71.3
Payments (28.0) (31.7)
Interest expense 5.6 5.4
Foreign exchange differences (7.6) 6.2
At the end of the period 329.0 380.1
-------------------------------- ------------- -----------
Current 25.3 24.3
Non-current 303.7 355.8
-------------------------------- ------------- -----------
Total 329.0 380.1
-------------------------------- ------------- -----------
11 CASH AND CASH EQUIVALENTS
As at 3 September As at 31
2023 August 2022
------------------------------------
GBPm GBPm
------------------------------------ ------------------ -------------
Cash in hand and bank balances 85.6 137.5
Money market fund investments 142.7 145.5
Deposits at financial institutions 125.0 40.0
------------------------------------ ------------------ -------------
Closing cash and cash equivalents 353.3 323.0
------------------------------------ ------------------ -------------
Cash and cash equivalents includes uncleared payment provider
receipts of GBP63.3m, which are typically due within 3 business
days (2022: GBP51.2m).
Included within cash and cash equivalents is GBP4.1m (2022:
GBP0.8m) 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 earned on
the deposits and amounts are held in a segregated bank account that
is settled on a monthly basis.
12 TRADE AND OTHER PAYABLES
As at 3 September As at 31
2023 August 2022
------------------------------
GBPm GBPm
------------------------------ ------------------ -------------
Trade payables 71.3 94.0
Other payables 174.7 255.6
Accruals 238.7 401.8
Returns provision 108.2 147.2
Deferred revenue 52.1 54.4
Taxation and social security 35.4 40.3
------------------------------ ------------------ -------------
680.4 993.3
------------------------------ ------------------ -------------
Trade and other payables have been presented in more detail than
previously in order to provide more useful information to users of
the financial statements. In doing so, the allocation between some
categories has changed. Prior periods have been represented where
relevant. The reduction in total trade and other payables is
predominantly as a result of lower intake receipts and operating
costs in the second half of the year as the Group transitions to
its new commercial operating model.
13 BORROWINGS
As at 3 September As at 31 August
2023 2022
----------------------
GBPm GBPm
---------------------- ------------------ ----------------
Convertible bond 464.4 451.0
Term Loan 184.8 -
Nordstrom loan 20.4 22.0
Put option liability 3.2 2.9
Total 672.8 475.9
---------------------- ------------------ ----------------
Current 1.5 1.4
Non-current 671.3 474.5
---------------------- ------------------ ----------------
Total 672.8 475.9
---------------------- ------------------ ----------------
Convertible bonds
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. The fair value of the debt component
was 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. Issue costs of GBP9.0m were
allocated between equity (GBP1.0m) and debt (GBP8.0m).
Term loan
In May 2023, the Group entered into a GBP200m senior term loan
and a GBP75m super senior revolving facility (the "New RCF")
(together the "New Facilities") with specialist lender Bantry Bay
Capital Limited through to April 2026, with the optionality to
further extend to May 2028 subject to meeting lender requirements.
The New Facilities have replaced the previous GBP350m revolving
credit facility (the "Old RCF") which was due to expire in November
2024 following the amendment and extension announced alongside the
Company's interim results on 10 May 2023. Fees totalling GBP21.7m
were incurred, of which GBP15.8m was applied to the term loan, with
the remainder relating to the New RCF and capitalised within
prepayments.
Both the senior term loan and New RCF (when drawn) bear interest
at a margin above SONIA. The New RCF incurs commitment fees at a
market rate.
The New Facilities are subject only to a minimum liquidity
covenant defined as cash and cash equivalents plus amounts undrawn
under the New RCF. The New Facilities carry a fixed and floating
charge over all assets of the following chargors in the Group -
ASOS Plc, ASOS.com Limited, ASOS Intermediate Holdings Limited,
Mornington & Co (No. 1) Limited and Mornington & Co (No. 2)
Limited.
Nordstrom Loan
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 resulting liability is GBP20.4m
as at 3 September 2023 (2022: GBP22.0m), this is following a
partial repayment of the loan totalling GBP1.7m (2022: GBPnil)
being made in the period. As part of this agreement a written put
option was provided to Nordstrom over their shares in ASOS Holdings
Limited, valued at GBP3.2m as at 3 September 2023.
Refinancing fees included in cash flow
Refinancing fees included in the cash flow statement total
GBP30.8m, and are reconciled to their location in the financial
statements as follows:
Income statement Balance sheet
Administrative Finance costs Borrowings Prepayments
expenses
------------------------------ ----- --------------- ---------------------- ----------- ------------
Fee description Cash Outside Outside Within
adjusted adjusted adjusted
profit profit profit
------------------------------
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ----- --------------- ---------- ---------- ----------- ------------
Fees incurred in relation
to covenant waiver exercise
in October 2022 7.1 1.7 4.0 1.4 - -
Extension fees incurred
in May 2023 for old RCF 2.0 - 2.0 - - -
Refinancing fees for New
Facilities 21.7 - - - 15.8 5.9
Total 30.8 1.7 6.0 1.4 15.8 5.9
------------------------------ --------------- ---------- ----------- ------------
Other non-cash (write off - - 0.4 - - -
of previously capitalised
fees)
Total 30.8 1.7 6.4 1.4 15.8 5.9
------------------------------ --------------- ---------- ----------- ------------
14 PROVISIONS
Dilapidations Onerous Total
occupancy
----------------------------------
GBPm GBPm GBPm
---------------------------------- --------------- ------------ -------
As at 1 September 2022 41.9 - 41.9
Recognised 11.2 18.3 29.5
Utilised - (1.8) (1.8)
Unwinding of discount 1.3 0.3 1.6
Exchange differences (1.0) - (1.0)
----------------------------------
As at 3 September 2023 53.4 16.8 70.2
---------------------------------- --------------- ------------ -------
Current - 2.0 2.0
Non-current 53.4 14.8 68.2
----------------------------------
As at 3 September 2023 53.4 16.8 70.2
---------------------------------- --------------- ------------ -------
As at 1 September 2021 43.2 - 43.2
Recognised 10.8 - 10.8
Effects of movements in discount
rates (13.2) - (13.2)
Unwinding of discount 0.2 - 0.2
Exchange differences 0.9 - 0.9
----------------------------------
As at 31 August 2022 41.9 - 41.9
---------------------------------- --------------- ------------ -------
Current - - -
Non-current 41.9 - 41.9
---------------------------------- --------------- ------------ -------
As at 31 August 2022 41.9 - 41.9
---------------------------------- --------------- ------------ -------
Dilapidations are recognised where there is a present obligation
to repair and restore leased properties to their preoccupancy state
at the end of the lease term.
Where the Group no longer operates from a leased property,
onerous property contract provisions are recognised for the least
net cost of exiting from the contract. The amounts provided are
based on the Group's best estimates of the likely committed
outflows and site closure dates. These provisions do not include
rent in accordance with IFRS 16, however do include unavoidable
costs related to the lease such as service charges and
insurance.
15 NET DEBT RECONCILIATION
Group net debt comprises cash and cash equivalents less any
borrowings drawn down at period-end (including accrued interest),
but excluding outstanding lease liabilities.
Lease Borrowings Cash and cash Total
liabilities equivalents
-------------------------------
GBPm GBPm GBPm GBPm
------------------------------- ------------- ----------- -------------- --------
As at 1 September 2022 (380.1) (475.9) 323.0 (533.0)
------------------------------- ------------- ----------- -------------- --------
Cash flow movements 28.0 (154.5) 27.6 (98.9)
Cash flow excluding interest 22.4 (198.3) 32.1 (143.8)
Net interest paid/(received) 5.6 28.0 (4.5) 29.1
Financing fees paid - 15.8 - 15.8
------------------------------- ------------- ----------- -------------- --------
Non-cash movements 23.1 (42.4) 2.7 (16.6)
Movement in lease liabilities 21.1 - - 21.1
Foreign exchange impacts 7.6 - (1.8) 5.8
Accrued interest (5.6) (42.4) 4.5 (43.5)
------------------------------- ------------- ----------- -------------- --------
As at 3 September 2023 (329.0) (672.8) 353.3 (648.5)
Net debt (excluding leases) (319.5)
------------------------------- ------------- ----------- -------------- --------
As at 1 September 2021 (328.9) (463.2) 662.7 (129.4)
------------------------------- ------------- ----------- -------------- --------
Cash flow movements 31.7 5.7 (340.7) (303.3)
Cash flow excluding interest 26.3 - (339.8) (313.5)
Net interest paid/(received) 5.4 5.7 (0.9) 10.2
------------------------------- ------------- ----------- -------------- --------
Non-cash movements (82.9) (18.4) 1.0 (100.3)
Movement in lease liabilities (71.3) - - (71.3)
Foreign exchange impacts (6.2) - 0.1 (6.1)
Accrued interest (5.4) (18.4) 0.9 (22.9)
------------------------------- ------------- ----------- -------------- --------
As at 31 August 2022 (380.1) (475.9) 323.0 (533.0)
Net debt (excluding leases) (152.9)
------------------------------- ------------- ----------- -------------- --------
16 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.
The Group is currently party to legal proceedings in overseas
territories. These proceedings are in their very early stages and
the Group is robustly defending them. Given the early stages, the
Group cannot make any assessment of the likelihood nor quantum of
any outcome. No provision has therefore been recognised on the
Group's balance sheet.
The Group is currently party to a voluntary disclosure made to
an overseas tax authority in relation to potentially overclaimed
VAT. Suppliers to the Group have historically charged VAT on
services which should possibly have been charged without VAT. If it
is concluded that VAT should not have been charged, ASOS will be
required to either repay circa GBP90m to the related tax authority
and reclaim said amounts from the suppliers or reach multi-party,
non-cash agreements between the tax authority, the suppliers and
ASOS. At this time it is unclear whether VAT should or should not
have been charged, with facts supporting both views. The correct
position will ultimately be determined by the relevant tax
authorities, and as a result the Group considers there to be only a
possible risk that a payment will be required. The Group is
actively working with the suppliers and tax authorities to conclude
and notes that in either scenario the tax authority concerned has
not suffered a loss of tax revenue as amounts claimed by ASOS have
been matched by payments made by suppliers.
17 POST BALANCE SHEET EVENTS
After the balance sheet date, on 6 October 2023, the Board
approved the commencement of a process to either sell or mothball
the Lichfield fulfilment centre, following completion of the
automation project in late FY24. At the year-end, the site was in
use and will remain as such until the automation work
completes.
At the year-end, assets held in relation to Lichfield totalled
circa GBP110m, as well as lease liabilities of circa GBP30m. Costs
to complete the automation are estimated at GBP45m. As a result of
the decision, an impairment of the existing assets is likely to be
required, which together with committed future automation spend,
will be recognised directly within administrative expenses, and
outside adjusted profit. Any impairments are ultimately dependent
on future decisions regarding the site, which include
recommissioning the site, leaving vacant, or securing the sale of
the related equipment and assigning the lease.
ALTERNATIVE PERFORMANCE MEASURES (APMs)
The Group uses the below non-IFRS performance measures to allow
shareholders to better understand underlying financial performance
and position. These should not be seen as substitutes for IFRS
measures of performance and may not allow a direct comparison to
other companies.
Performance Closest Definition How ASOS uses this measure
measure IFRS
measure
-------------- ---------- ----------------------- -----------------------------------------------------------------
Revenue None ASOS calculates This measure is presented as a means of
growth constant currency eliminating the effects of exchange rate
at constant (CCY) growth fluctuations on the period-on-period reported
currency by adjusting results.
the current year
reported revenue
number for the
impact of year-on-
year changes
in the hedge
rate on hedged
sales and year-on-year
spot rate movements
on unhedged sales.
The current period
also adjusts
for the impact
of the three
additional trading
days in FY23.
This provides
revenue growth
on a like-for-like
basis vs. last
year, giving
users of the
accounts a better
view of underlying
sales performance
that is not impacted
by exchange rate
fluctuations.
-----------------------
1 September Year to Growth
2022 to 31 August
3 September 2022
2023
-----------------------
GBPm GBPm %
------------------------ ------------- ------------- ---------
Adjusted Revenue(1) 3,448.0 3,859.7 (11)%
Impact of foreign 101.5 - -
exchange translation,
non-underlying
Jobber income and
LFL financial periods
Excluding Russia - 76.8 -
---------
Group revenue 3,549.5 3,936.5 (10)%
-------------------------------------------------------------------------- ------------- ------------- ---------
1 Adjusted revenue, stated on a constant
currency basis, excluding Russia from H1
FY22, and removing the impact of the 3
extra trading days in FY23.
Year to Year to Growth
31 August 31 August
2022 2021
GBPm GBPm %
------------------------ ------------- ------------- ---------
Revenue at constant
currency 3,972.7 3,910.5 2%
Impact of foreign (36.2) - -
exchange translation
------------------------ ------------- ------------- ---------
Group revenue 3,936.5 3,910.5 1%
-------------------------------------------------------------------------- ------------- ------------- ---------
Retail Revenue Internet sales A measure of the Group's trading performance
sales recorded net focusing on the sale of products to end
of an appropriate customers. Used by management to monitor
deduction for overall performance across markets, and
actual and expected the basis of key internal KPIs such as
returns, relevant ABV.
vouchers, discounts
and sales taxes.
-------------- ----------
Retail sales A reconciliation of this measure is included
exclude income in Note 4.
from delivery
receipt payments,
marketing services,
commission on
partner-fulfilled
sales and revenue
from wholesale
sales.
-------------- ---------- ----------------------- -----------------------------------------------------------------
Adjusted Revenue Revenue excluding A measure of the Group's revenue and gross
revenue the impact of profitability, excluding the impact of
adjusting items. any adjusting items.
Adjusted None
gross Gross profit
margin divided by revenue
and excluding
the impact of
adjusting items.
Reconciliation is shown below:
1 September Year
2022 to to 31
3 September August
2023 2022
------------------------ -------------
GBPm GBPm
------------------------ ------------- ------------- ---------
Revenue 3,549.5 3,936.5
Adjusting items (11.5) -
------------------------ ------------- ------------- ---------
Adjusted revenue 3,538.0 3,936.5
-------------------------------------------------------------------------- ------------- ------------- ---------
Gross profit 1,459.0 1,717.5
Adjusting items 104.4 -
------------------------ ------------- ------------- ---------
Adjusted gross
profit 1,563.4 1,717.5
-------------------------------------------------------------------------- ------------- ------------- ---------
Gross margin 41.1% 43.6%
-------------------------------------------------------------------------- ------------- ------------- ---------
Adjusted gross
margin % 44.2% 43.6%
-------------------------------------------------------------------------- ------------- ------------- ---------
Performance Closest Definition How ASOS uses this measure
measure IFRS measure
---------------- ---------------- ------------------------- ---------------------------------------------------------------
Adjusted Operating Profit before A measure of the Group's underlying profitability
EBIT (loss)/profit tax, interest, for the period, excluding the impact of
and any adjusting any transactions outside of the ordinary
items excluded course of business and not considered to
from adjusted be part of ASOS' usual cost base. Used
(Loss)/profit profit before by management to monitor the performance
Adjusted before tax (see below). of the business each month.
(loss)/profit tax
before Adjusted (loss)/profit
tax before tax excludes
items recognised
in reported
profit or loss
before tax which,
if included,
could distort
comparability
between periods.
In determining
which items
to exclude,
the Group considers
items which
are significant
either by virtue
of their size
and/or nature,
or that are
non-recurring.
1 September Year
2022 to to 31
3 September August
2023 2022
GBPm GBPm
---------------------------- ------------------ -------------
Operating loss (248.5) (9.8)
Adjusting items excluding
finance costs (Note 3) 219.5 53.9
Adjusted EBIT (29.0) 44.1
---------------------------------------------------------------------------------------- ------------------ -------------
Net finance costs (Note
5) (48.2) (22.1)
Add back adjusting finance 6.9 -
costs (Note 3)
Adjusted (loss)/profit
before tax (70.3) 22.0
---------------------------------------------------------------------------------------- ------------------ -------------
Group revenue 3,549.5 3,936.5
Adjusting items (11.5) -
---------------------------- ------------------ -------------
Adjusted Group revenue 3,538.0 3,936.5
---------------------------------------------------------------------------------------- ------------------ -------------
Adjusted EBIT margin (0.8)% 1.1%
---------------------------------------------------------------------------------------- ------------------ -------------
Details of adjusting items are included
within Note 3.
Adjusted No direct Adjusted EBIT EBITDA is used to review the Group's profit
EBITDA equivalent above, adjusted generation and the sustainability of ongoing
for depreciation, capital reinvestment and finance costs.
amortisation 1 September Year to
and impairments. 2022 to 31 August
3 September 2022
2023
GBPm GBPm
---------------------------- ------------- -----------
Adjusted EBIT (above) (29.0) 44.1
Add back depreciation
and amortisation (per
cash flow) 172.5 149.8
Add back impairment
(per cash flow) 32.1 19.2
Less depreciation
and amortisation excluded
from adjusted profit(1) (19.6) (10.7)
Less impairment excluded
from adjusted profit(2) (31.5) (18.5)
Adjusted EBITDA 124.5 183.9
---------------------------- ------------- -----------
1 Comprises GBP18.3m within property initiatives,
and GBP1.3m within the commercial operating
model change
2 Comprises GBP28.6m within property initiatives,
and GBP2.9m within strategic initiatives
---------------- ---------------- ------------------------- ---------------------------------------------------------------
Performance Closest Definition How ASOS uses this measure
measure IFRS measure
----------------- --------------- ------------------------
Net cash/(debt) No direct Cash and cash A measure of the Group's liquidity.
equivalent equivalents
less the carrying
value of borrowings
(including
accrued interest)
drawn down
at period-end,
but excluding
outstanding
lease liabilities.
Information is included in Note 15. A reconciliation
is included below:
1 September Year to
2022 to 31 August
3 September 2022
2023
----------------------------
GBPm GBPm
---------------------------- ------------- -----------
Cash and cash equivalents 353.3 323.0
Borrowings (672.8) (475.9)
Lease liabilities (329.0) (380.1)
--------------------------------------------------------------------------------------- ------------- -----------
Net borrowings (648.5) (533.0)
Add-back lease liabilities 329.0 380.1
--------------------------------------------------------------------------------------- ------------- -----------
Group net debt (319.5) (152.9)
--------------------------------------------------------------------------------------- ------------- -----------
Free cash No direct Free cash flow A measure of the cash generated by the
flow equivalent is net cash Group outside cash flows relating to M&A
generated from and financing transactions, which allows
operating activities, management to better assess the cash being
less payments generated by the business.
to acquire
intangible
and tangible
assets, payment
of the principal
portion of
lease liabilities
and net finance
expenses.
A reconciliation to the Group cash flow
is shown below:
1 September Year to
2022 to 31 August
3 September 2022
2023
GBPm GBPm
---------------------------- ------------- -----------
Cash used generated from/(used
in) operations (per cash
flow) 16.4 (120.4)
Purchase of tangible and
intangible assets (177.9) (182.9)
Repayment of principal
portion of lease liabilities (22.4) (26.3)
Net interest paid (29.1) (10.2)
Free cash flow (213.0) (339.8)
--------------------------------------------------------------------------------------- ------------- -----------
Appendix 1 - Total sales growth by period in sterling, including
Russia
Period to 3 September 2023
2022/23
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% FY YOY%
------- ----- ----- ----- --------
UK total sales 591.3 (8%) 212.4 (15%) 370.3 (14%) 380.4 (13%) 1,554.4 (12%)
EU total sales 417.3 7% 169.3 (10%) 283.5 (4%) 286.6 (4%) 1,156.7 (1%)
US total sales 198.1 15% 71.1 (11%) 121.2 (15%) 110.7 (19%) 501.1 (6%)
ROW total sales 129.8 (30%) 51.3 (45%) 83.9 (13%) 72.3 (26%) 337.3 (29%)
Total sales(3) 1,336.5 (4%) 504.1 (17%) 858.9 (11%) 850.0 (12%) 3,549.5 (10%)
------- ----- ----- ----- --------
Year ended 31 August 2022
GBPm P1(1) YOY% P2(1) YOY% P3(1) YOY% P4(1) YOY% 2021/22 YOY%
------- ----- ------- ----- --------
UK total sales 645.2 13% 250.3 (2%) 431.8 4% 435.5 6% 1,762.8 7%
EU total sales 390.2 (3%) 187.2 (3%) 294.0 (5%) 298.6 6% 1,170.0 (1%)
US total sales 172.6 7% 80.1 13% 141.9 21% 136.8 18% 531.4 14%
ROW total sales 185.1 (20%) 93.4 1% 96.4(2) (33%) 97.4 (30%) 472.3 (22%)
964.1
Total sales(3) 1,393.1 2% 611.0 -% (2) (2%) 968.3 2% 3,936.5 1%
------- ----- ------- ----- --------
Year ended 31 August 2021
GBPm P1(1) YOY% P2(1) YOY% P3(1,4) YOY% P4(1,4) YOY% 2020/21 YOY%
------- ----- ------- ------- --------
UK total sales 571.3 35% 254.5 46% 415.9 85% 410.3 5% 1,652.0 36%
EU total sales 400.6 18% 193.8 22% 310.1 33% 280.8 (6%) 1,185.3 15%
US total sales 161.7 12% 71.2 8% 117.5 25% 115.8 4% 466.2 12%
ROW total sales 230.5 16% 92.3 1% 144.5 2% 139.7 (19%) 607.0 1%
Total sales(3) 1,364.1 23% 611.8 25% 988.0 43% 946.6 (3%) 3,910.5 20%
------- ----- ------- ------- --------
(1) Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: three months to 31 May
P4: three months to 31 August at year-end 2021 and 2022, period
to 3 September in 2023
(2) In the tables above RoW and Group total sales for P3 have
been restated. This restatement relates to the removal of the
GBP19.3m gain on RUB hedges, which was reported as revenue at P3
but subsequently reallocated to other income at year-end 2022.
(3) Includes retail sales, wholesale and income from other
services comprising delivery receipt payments, marketing services
and commission on partner-fulfilled sales.
(4) P3 is restated to reflect only March, April, and May. P4 has
been restated to include June.
Appendix 2 - Total sales growth by period at constant currency,
including Russia
Period to 3 September 2023
P1 (1) P2 (1) P3 (1) P4 (1) 2022/23
GBPm YOY% YOY% YOY% YOY% YOY%
UK total sales (8%) (15%) (14%) (13%) (12%)
EU total sales 6% (12%) (7%) (4%) (3%)
US total sales (2%) (20%) (20%) (16%) (13%)
ROW total sales (31%) (46%) (14%) (25%) (30%)
Total sales(3) (6%) (20%) (13%) (12%) (11%)
Year ended 31 August 2022
P1 (1) P2 (1) P3 (1) P4 (1) 2021/22
GBPm YOY% YOY% YOY% YOY% YOY%
UK total sales 13% (2%) 4% 6% 7%
EU total sales 2% 1% (2%) 9% 2%
US total sales 11% 12% 15% 4% 10%
ROW total sales (15%) 2% (33%)(2) (31%) (20%)
Total sales(3) 5% 1% (2%) (2) 1% 2%
Year ended 31 August 2021
P1 (1) P2 (1) P3 (1,4) P4 (1,4) 2020/21
GBPm YOY% YOY% YOY% YOY% YOY%
UK total sales 35% 46% 85% 5% 36%
EU total sales 17% 20% 34% (7%) 15%
US total sales 16% 13% 40% 15% 21%
ROW total sales 20% 9% 10% (14%) 6%
Total sales(3) 24% 26% 47% (1%) 22%
(1) Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: three months to 31 May
P4: three months to 31 August at year-end 2021 and 2022, period
to 3 September in 2023
(2) In the tables above RoW and Group total sales for P3 have
been restated. This restatement relates to the removal of the
GBP19.3m gain on RUB hedges, which was reported as revenue at P3
but subsequently reallocated to other income at year-end 2022.
(3) Includes retail sales, wholesale and income from other
services comprising delivery receipt payments, marketing services
and commission on partner-fulfilled sales.
(4) P3 is restated to reflect only March, April, and May. P4 has
been restated to include June.
Appendix 3 - Total adjusted(1) sales growth by period at
constant currency, excluding Russia
Period to 3 September 2023
2022/23
P1 (2) P2 (2) P3 (2) P4 (2,5) (5)
GBPm YOY% YOY% YOY% YOY% YOY%
UK total sales (9%) (15%) (15%) (16%) (13%)
EU total sales 6% (12%) (8%) (7%) (4%)
US total sales (2%) (20%) (21%) (19%) (14%)
ROW total sales(4) (10%) (16%) (14%) (28%) (16%)
Total sales(3) (4%) (15%) (14%) (15%) (11%)
Year ended 31 August 2022
P1 (2) P2 (2) P3 (2) P4 (2) 2021/22
GBPm YOY% YOY% YOY% YOY% YOY%
UK total sales 13% (2%) 4% 6% 7%
EU total sales 2% 1% (2%) 9% 2%
US total sales 11% 12% 15% 4% 10%
ROW total sales(4) (7%)(6) (4%)
Total sales(3) 2% (6) 6%
(1) Adjusted sales are reported sales excluding non-underlying
items
(2) Periods are as follows:
P1: four months to 31 December
P2: two months to 28/29 February
P3: three months to 31 May
P4: three months to 31 August at year-end 2021 and 2022, period
to 3 September at 2023
(3) Includes retail sales, wholesale and income from other
services comprising delivery receipt payments, marketing services
and commission on partner-fulfilled sales.
(4) Calculation of metrics, or movements in metrics, on an
ex-Russia basis involves the removal of Russia from H1 FY22
performance following the decision to suspend trade in Russia on 2
March 2022.
(5) LFL growth calculated by removing the impact of the 3 extra
trading days in FY23
(6) In the tables above RoW and Group total sales for P3 have
been restated. This restatement relates to the removal of the
GBP19.3m gain on RUB hedges, which was reported as revenue at P3
but subsequently reallocated to other income at year-end 2022.
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END
FR DBBDGDDXDGXB
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November 01, 2023 03:00 ET (07:00 GMT)
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