TIDMFRAS
RNS Number : 6287H
Frasers Group PLC
05 August 2021
Frasers Group
5 August 2021
Preliminary Results for the period ended 25 April 2021
52 weeks 52 weeks Change
ended ended (%)
25 April 26 April
2021 2020
----------------------------------- ---------- ---------- --------
GBPm GBPm
Group revenue 3,625.3 3,957.4 (8.4)
UK Sports Retail 1,968.5 2,203.3 (10.7)
Premium Lifestyle 735.6 722.0 1.9
European Retail 615.2 697.7 (11.8)
Rest of World Retail 152.7 174.2 (12.3)
Wholesale & licensing 153.3 160.2 (4.3)
Group gross margin (%) 42.2 42.0
Reported EBITDA 536.5 551.0 (2.6)
Underlying EBITDA (2) 390.8 302.1 29.4
Reported profit before tax 8.5 143.5 (94.1)
Underlying profit before tax
(PBT) (2) 5.8 117.4 (95.1)
Reported profit after tax (78.0) 101.0 (177.2)
Reported basic earnings per share (16.5)p 18.5p (189.2)
Underlying basic earnings per
share (EPS) (2) (17.0)p 16.2p (204.9)
Underlying free cash flow (3) 427.8 263.1 62.6
Net debt (4) 248.9 366.0 32.0
-- Group revenue decreased by 8.4%
-- Excluding acquisitions and on a currency neutral basis,
revenue decreased by 11.4% (5)
-- UK Sports Retail revenue decreased by 10.7%, largely due the
temporary store closures caused by the Covid-19 pandemic, offset by
growth in our online business and pent up demand on reopening
stores
-- Excluding acquisitions, revenue decreased by 14.6% (5) ,
largely caused by temporary store closures caused by the Covid-19
pandemic
-- UK Sports Retail like-for-like gross contribution was down
13.4% (1)
-- Premium Lifestyle revenue increased by 1.9% largely due to
growth in our online business, and new store openings
-- Excluding acquisitions, revenue increased by 1.4% (5)
-- Premium Lifestyle like-for-like gross contribution was down
2.8% (1)
-- European Retail revenue decreased by 11.8%, largely due the
temporary store closures caused by the Covid-19 pandemic
-- Excluding acquisitions and on a currency neutral basis,
revenue decreased by 20.5% (5) , largely caused by temporary store
closures due to the Covid-19 pandemic.
-- European Retail like-for-like gross contribution was down
15.0% (1)
-- Group gross margin increased to 42.2% from 42.0%
-- Group reported EBITDA decreased by 2.6% to GBP536.5m compared
to GBP551.0m in the prior period
-- Group underlying EBITDA (2) increased by 29.4% to GBP390.8m
compared to GBP302.1m in the prior period
-- Excluding acquisitions and on a currency neutral basis,
underlying EBITDA increased 16.9% (5)
-- Underlying free cash flow (pre-capex) increased to GBP427.8m
compared to GBP263.1m in the prior period (3)
-- Reported profit before tax was GBP8.5m, down 94.1% from a profit of GBP143.5m
-- Underlying profit before tax(2) decreased by 95.1% to GBP5.8m from GBP117.4m
-- Reported basic earnings per share fell by 189.2% to a loss of 16.5p, from a profit of 18.5p
-- Underlying basic earnings per share (2) decreased by 204.9%
to a loss 17p from a profit of 16.2p (2)
-- Reported profit after tax (2) was a loss of GBP78.0m down 177.2% from a profit of GBP101.0m
-- Net debt decreased to GBP248.9m (GBP366.0m at 26 April 2020)(4 ()
(1) Figure is on a 52-week currency neutral basis and with a
consistent year on year inventory provision used.
(2) Underlying EBITDA, underlying profit before taxation and
underlying EPS exclude the effects of IFRS 16, realised foreign
exchange gains / losses in selling and administration costs,
exceptional costs, and the profit / loss on disposal of
subsidiaries, strategic investments and properties. Further detail
on this calculation can be found in the financial review, in note 2
and the glossary.
(3) Underlying free cash flow is defined as operating cash flow
after working capital and pre IFRS 16, made up of underlying EBITDA
plus realised foreign exchange gains and losses, less corporation
tax paid. Further detail on this calculation can be found in the
financial review.
(4) Net debt is borrowings (excluding IFRS 16 lease liabilities)
less cash and cash equivalents held. Further detail can be found in
note 12.
(5) A reconciliation of excluding acquisitions and currency
neutral performance measures can be found in the glossary.
Mission Statement
To serve our consumers with the world's best sports, premium and
luxury brands.
Outlook
The Group is continuing to invest in its physical and digital
elevation strategy and our omni-channel offering is growing in
strength. Our stores in the UK have reopened above expectations and
our online channel continues to significantly outperform
pre-Covid-19 periods. None the less, management remains of the view
that there is a high risk of future Covid-19 pandemic restrictions,
likely to be over this Winter and maybe beyond.
The board of Frasers Group has continued to consider the
probable return of restrictions during FY22, including within its
accounting judgements and estimates for FY21. As the effects of the
Covid-19 pandemic continue to cause future uncertainty, including
the Delta variant surge we are currently seeing, the board of
Frasers Group considers it cannot currently confirm with enough
material accuracy what the outcome for FY22 will look like.
Based on this we will not be giving a projection to the market
for FY22 performance. Any projections produced by third parties
such as research analysts are not produced on behalf of Frasers
Group plc and Frasers Group plc takes no responsibility for such
projections. As a result prospective investors and other market
participants should not treat, and Frasers Group plc does not
intend to treat, the financial projections produced by third
parties as indicative of the market expectations of Frasers Group
plc's future financial performance. We specifically note that we
are under no obligation to correct estimates made by financial
analysts or to inform the market should we come to believe that our
actual performance will differ from those estimates.
We will review the current situation again at the half year and
depending on whether there is more certainty on further
restrictions or not we may be able to give guidance at that
point.
Frasers Group plc T: 0344 245 9200
Mike Ashley, Chief Executive FGPR@frasers.group
STRATEGIC REPORT
Chair's Statement
INTRODUCTION
The Covid-19 pandemic continues to be a significant challenge
for the country, the retail industry and for Frasers Group. Our
stores were closed again in November 2020, followed by a
significant closure in the week before Christmas which then led to
the third lockdown in January 2021. These lockdowns resulted in
virtually all of our UK stores being closed for approximately six
months in FY21. Our European stores were also impacted by closures
although the impact was not as punitive as it was for the UK
business.
I am proud of how our colleagues have battled through these very
difficult times to help us achieve a solid set of financial results
on an underlying EBITDA basis. We are a resilient business but the
Covid-19 pandemic has resulted in some significant non-cash
accounting impairments to our asset base. Our RNS announcements in
February and April 2021 gave warning of the situation and
consequently we have to report an overall profit before tax of
GBP8.5m down from GBP143.5m in FY20.
We appreciate the Government support with the furlough scheme
and business rates relief. We are predominantly a bricks and mortar
business and this support has enabled us to keep stores open that
otherwise might have been closed, particularly loss making House of
Fraser stores, saving many jobs. We must caution however that the
return to pre Covid-19 business rates will present a threat to a
number of these stores. There must be a change to the outdated
business rates system for us to justify the survival of some of
these House of Fraser stores.
We are looking to take on a number of ex-Debenhams stores across
the country but the excessive business rates make the viability of
these investments, and the jobs that could be created, less likely.
Again, we ask for clarity from the Government and for a new and
appropriate policy on business rates.
ELEVATION WITHOUT LIMITS
We continue to invest in all areas of the business to support
our elevation strategy. Our flagship Sports Direct store on Oxford
Street re-opened in June 2021 at a cost of approximately GBP10m to
the Group and we have received overwhelming endorsements from our
customers and our brand partners such as Nike and Adidas.
Our Flannels business continues to go from strength to strength
since we took full ownership during 2017 and has revenue CAGR from
the end of FY18 to FY21 of approximately 40%. We have an ambition
to reach approximately GBP2 billion in gross turnover by the end of
FY26, with a forecast split of 60% from physical stores and 40%
from online channels.
We will continue to invest across the portfolio of our retail
fascias, always pushing the boundaries and thinking without limits.
Our investment in our digital capability, including on platforms
and people, will continue as will investment in automation in our
warehouse to support our bricks and clicks fulfilment
capabilities.
The Elevation No Limits strategy is working and we are fully
supported by our third-party brands as elevation is complimenting
their own strategies.
RESULTS
We do not hesitate to remind our stakeholders of our key
accounting principles, namely being conservative, consistent, and
simple. It is with this in mind that we present our financial
results for FY21 in a period of uncertainty, with in our opinion,
the effects of the pandemic far from over, and a probable risk of
further restrictions.
Our results highlights are:
-- Underlying EBITDA increased to GBP390.8m (FY20: GBP302.1m)
-- Revenue decreased to GBP3,625.3m (FY20: GBP3,957.4m)
-- Profit before tax GBP8.5m (FY20: GBP143.5m)
-- Net debt of GBP248.9m (FY20: GBP366.0m)
More underlying detail is given throughout the Annual Report and
Accounts. The highlights and explanations of these by segment is
set out in note 2.
OUR PEOPLE
Our people are our finest resource and we are committed to
treating all of our colleagues with dignity and respect. Throughout
the pandemic we have kept colleagues engaged with regular update
videos and a provision for help and wellbeing support where people
needed it. Frasers Group colleagues are talented, loyal and
resilient. I have been very impressed how they have found creative
ways of working through the challenges of the pandemic with
undiminished enthusiasm. The Board are very appreciative of the
efforts of our colleagues during these challenging times.
The Board is really pleased that The Fearless 1000 share scheme
was unanimously voted through at the AGM in October 2020 and is now
up and running. The Board is receiving regular updates and progress
reports and we are comfortable it is running as intended. The aim
of the scheme is to pay out significant bonuses in the form of
shares if the share price stays above GBP10 for 30 consecutive
trading days. This could see 10 colleagues receiving shares worth
GBP1m each if the share price is at GBP10 at the vesting dates. One
thousand of our Fearless colleagues, who live and breathe our
values of thinking without limits, not hesitating and owning it,
will be eligible to receive share bonuses ranging from GBP50k right
up to GBP1m if the share price is at GBP10 at the vesting dates.
There is also a cash bonus scheme which runs concurrently with the
share scheme which will pay out bonuses for those eligible
colleagues who do not qualify for the Fearless 1000.
The Frasers Group Elevation Programme was introduced in
September 2020 to attract highly talented people to Frasers Group.
The quality of the recruits from the initial intake has been strong
and they have impressed people across all levels of the
organisation including the Board. We are looking to run this
programme again in September 2021 with a new intake of talent and
our assessment centres are now up and running. Our objective is to
populate the organisation with high calibre, high potential, well
trained people who we intend to be the future leaders of the
Company.
ACQUISITIONS AND STRATEGIC INVESTMENTS
During the year we increased our investments in Hugo Boss and
Mulberry and we also acquired the DW Sports and Fitness business.
These investments are consistent with our strategic objectives and
align with our elevation strategy.
As at period end, we held approximately 16.4% directly and
indirectly in Hugo Boss. We consider this strategic investment in
Hugo Boss to be very successful. We have strengthened our
relationship with the company and have regular and constructive
dialogue with the senior executive team. We have noted press
speculation about a potential acquisition of Hugo Boss and stated
we had no intention to bid in our RNS of 26 May 2021.
We held approximately 36.8% of Mulberry Group plc at the year
end. We believe this is an iconic British brand and hope that
together we can build a mutually beneficial partnership going
forward.
We acquired certain assets of DW Sports Limited from
administration for a cash consideration of GBP37m. The transaction
complements the existing gym and fitness club portfolio within the
Group and is consistent with the Group's elevation strategy.
Frasers Group looks forward to elevating the gym and fitness assets
and is also pleased to have saved a number of jobs. Further detail
on the trade and assets acquired can be found in note 13.
We consider a combination of both organic and acquisitive growth
will assist in the ongoing delivery and success of our Elevation
Strategy and we will continue to look at potential opportunities
across a range of categories to complement and enhance our Group
offering, in the UK, Europe and beyond if appropriate.
ENVIRONMENTAL, SOCIAL & GOVERNANCE
We are proud of the successes we have had with our
sustainability agenda to date. For instance the majority of our
waste from our Shirebrook delivery centre is recycled and we are
targeting zero waste to landfill from Shirebrook in the next few
years. Excluding acquisitions during the year, our stores and gyms
are operating on 100% renewable power and we are targeting a
reduction of 10% power usage in our stores over the next few years.
Sustainability will continue to play a key role in our future
processes and procedures led by our Sustainability Steering Group
which is executive sponsored by our Chief Financial Officer.
We are proud to invest in local communities and to support a key
facet of British life, the high street. We provide jobs for over
20,000 people in the U.K. alone and during the pandemic we have
done our utmost to retain and support as many colleagues as
possible with very few redundancies.
During the year we have given approximately GBP25m in discounts
to NHS staff as we reopened in June 2020 in gratitude to the
unbelievable job they have done during the Covid-19 pandemic.
Our workers representative Cally Price is a shining example of
good corporate governance and we thoroughly recommend the
appointment of such a position across the boardrooms of corporate
Britain. Cally brings colleague queries and concerns directly to
the boardroom for action by the Board. Cally takes a very active
part in every Board meeting, which she attends in full, and her
vote counts for as much in a Board vote as mine or the executive
team. Alongside Cally, the rest of our Non-executive Directors
bring their own knowledge and experience to their roles in helping
to ensure we do the right thing by our stakeholders.
THE BOARD
We recently went through an independent review of the Board
which is a mandatory obligation once every three years. We are very
happy with the findings and will act on the recommendations.
We will continue to look at the construction of the Board
ensuring we have the appropriate blend of skills and experience. We
consider diversity, and energetic and passionate individuals to be
priorities as we look to strengthen the Board in the future.
Due to the success of the Worker's Representative Board role we
have decided to extend the tenure of Cally Price for a further few
years and she will be proposed for re-election at the 2021 AGM.
DIVID AND SHARE BUYBACK
Our share buy back programme has continued which is a
demonstration of our confidence in the Company and the strategy for
future growth. Further details can be found in Note 14.
No final dividend will be payable in relation to FY21 as we
intend to make further investments in the business to support the
elevation strategy.
OUTLOOK
The Covid-19 pandemic continues to create uncertainty and we
must be prepared for more lockdowns in the future. There must be
concerns about the stability of some retailers as Government
support schemes come to an end, yet there still seems to be very
little tangible long-term action being taken by the Government to
save the high street. Notwithstanding the probable risk of further
lockdowns, which are considered and do impact our property
accounting estimates, Frasers Group is confident in our long-term
strategy which we believe will help us to get through this
difficult period.
We will continue on the path of elevation and to invest in our
talented and loyal colleagues. Our business is built on rock solid
foundations and we believe we are well set for some promising times
in the future.
David Daly
Non-executive Chair
5 August 2021
Chief Executive's Report And Business Review
KEY PERFORMANCE INDICATORS
The Board manages the Group's performance by reviewing a number
of key performance indicators (KPIs). The KPIs are discussed in
this Chief Executive's Report and Business Review, the Financial
Review, the Environment section and the "Our People" section. The
table below summarises the Group's KPIs.
52 weeks ended 52 weeks ended 52 weeks ended
25 April 2021 26 April 2020 28 April 2019
Group revenue GBP3,625.3m GBP3,957.4m GBP3,701.9m
Underlying EBITDA (1) GBP390.8m GBP302.1m GBP287.8m
----------------------------- ------------------------- ------------------------- -------------------------
Group gross margin 42.2% 42.0% 42.8%
----------------------------- ------------------------- ------------------------- -------------------------
Underlying basic earnings
per share (2) (17.0p) 16.2p 17.6p
----------------------------- ------------------------- ------------------------- -------------------------
Underlying free cash flow 427.8 GBP263.1m GBP273.3m
(3)
----------------------------- ------------------------- ------------------------- -------------------------
Net debt (4) GBP248.9m GBP366.0m GBP378.5m
----------------------------- ------------------------- ------------------------- -------------------------
NON-FINANCIAL KPIs
----------------------------- ------------------------- ------------------------- -------------------------
Number of retail stores
(5) 1,547 1,534 968
----------------------------- ------------------------- ------------------------- -------------------------
Workforce turnover 28.9% 28.6% 23.0%
----------------------------- ------------------------- ------------------------- -------------------------
Packaging recycling (6) 11,164 tonnes 12,358 tonnes 12,807 tonnes
----------------------------- ------------------------- ------------------------- -------------------------
(1) The method for calculating underlying EBITDA is set out the
Glossary.
(2) The method for calculating underlying basic earnings per
share is set out in the Glossary.
(3) Underlying free cash flow is defined as operating cash flow
after working capital and pre IFRS 16, made up of underlying EBITDA
plus realised foreign exchange gains and losses, less corporation
tax paid. Further detail on this calculation can be found in the
Financial Review.
(4) The method for calculating Net debt is set out in the
Financial Review.
(5) Excluding associates and stores in the Baltic states that
trade under fascias other than SPORTLAND or SPORTSDIRECT.com. and
other niche fascias. Includes GAME and Sofa.com concessions.
(6) Cardboard and plastic recycling.
The Directors believe that underlying EBITDA, underlying basic
EPS and underlying free cash flow provide further useful
information for shareholders on the underlying performance of the
business in addition to the reported numbers and are consistent
with how business performance has been measured internally. They
are not recognised profit measures under IFRS and may not be
directly comparable with "adjusted" performance measures used by
other companies. See Glossary for further information on the
Group's Alternative Performance Measures.
Management will, from FY22, change our main reporting KPI from
underlying EBITDA to adjusted profit before tax (PBT). From FY22,
the Group will therefore no longer report underlying EBITDA.
Adjusted PBT is reported profit before tax less the effects of
exceptional items, unhedged foreign exchange (FX), gains and losses
on strategic investments and share scheme charges. Management has
taken this decision for the following reasons:
- With the continued significant investment in and roll out of
our elevation strategy on both the physical and digital fronts, the
importance of depreciation and amortisation to both the Board and
our stakeholders in terms of assessing performance has grown.
- Our understanding from a number of financial sectors,
including the banking sector, is that IFRS16 is becoming an
increasingly important consideration.
- With this new measure, we are trying to align with the
Financial Reporting Council's thematic standpoint with regard to
'alternative performance measures' as far as possible, whilst
retaining a degree of interpretation given that factors outside of
our control, such as FX and strategic investments movements which
are exceptionally difficult to forecast, particularly months in
advance.
Adjusted PBT for the 52 weeks ended 25 April 2021 was a loss of
GBP53.7m. See Glossary for reconciliation to reported PBT.
Group Revenue
The Board considers that this measurement is a key indicator of
the Group's growth.
Underlying EBITDA
Underlying EBITDA shows how well the Group is managing its
trading and operational efficiency and therefore the overall
trading performance of the Group.
Group Gross Margin
The Board considers that this measurement is a key indicator of
the Group's trading profitability.
Underlying Basic Earnings Per Share (EPS)
Underlying basic EPS is a measure of adjusted total shareholder
return and ultimately an indicator to our shareholders of the
success of our elevation strategy.
Underlying Free Cash Flow
Underlying free cash flow is considered an important indicator
for the Business of the cash available for investment in the
elevation strategy.
Net Debt
Net debt is an indicator of both the Group's investment in the
elevation strategy and its covenant headroom which is a key
component of the Group's going concern considerations.
Number Of Retail Stores
The Board considers that this measure is an indicator of the
Group's growth. The Group's elevation strategy is replacing older
stores and often this can result in the closure of two or three
stores to be replaced by one larger new generation store.
Workforce Turnover
The Board considers that this measure is a key indicator of the
contentment of our people. For more details
refer to the retention section of the "Our People" section of this report.
Packaging Recycling
The Board considers that this measurement is a key indicator of
our impact and commitment to the best
environmental practices. For more details refer to the environment section of this report.
Performance Overview
Group revenue decreased by 8.4% to GBP3,625.3m in the year. UK
Sports Retail decreased by 10.7% to GBP1,968.5m, Premium Lifestyle
revenue increased by 1.9% and European Retail decreased by 11.8% to
GBP615.2m. Rest of World Retail revenue was GBP152.7m, down 12.3%
and revenue in the Wholesale & Licensing division decreased by
4.3%.
Group gross margin in the year was consistent with the prior
year with a small increase of 20 basis points from 42.0% to 42.2%.
UK Sports Retail margin increased 110 basis points to 42.1% (FY20:
41.0%) largely due to the continually improving product mix.
Premium Lifestyle's gross margin decreased by 340 basis points from
48.3% to 44.9% largely due to a reduction in concession sales
within House of Fraser as a percentage of total sales which have a
higher gross margin. European Retail gross margin increased 60
basis points from 38.4% to 39.0% largely due to the continually
improving product mix. Rest of World Retail margin decreased 250
basis points from 44.4% to 41.9%, largely due to the lower margin
rate in the US business which makes up a larger proportion of the
segment in FY21. Wholesale & Licensing gross margin increased
310 basis points to 44.0% (FY20: 40.9%), largely due to UK
wholesale.
Group operating costs decreased by 15.7% to GBP1,140.0m (FY20:
GBP1,353.0m), largely driven by savings in store costs during the
lockdowns as a result of the Covid-19 pandemic, Government support
schemes such as CJRS (Coronavirus Job Retention Scheme) and
business rates relief particularly in House of Fraser. The amount
received by the Group in the period in regard to the CJRS (or
equivalent where received in non-UK territories) was approx.
GBP80m. The amount of business rates relief received by the Group
in the period (or equivalent where received in non-UK territories)
was approx. GBP97.5m. See the Financial Review for a reconciliation
of Group operating costs to selling, distribution and
administrative expenses.
As a result, Group underlying EBITDA for the year was up 29.4%
to GBP390.8m (FY20: GBP302.1m). Excluding acquisitions and on a
currency neutral basis, underlying EBITDA increased 16.9%. UK
Sports Retail underlying EBITDA was GBP279.2m up from GBP227.4m in
FY20, while Premium Lifestyle underlying EBITDA was GBP53.9m, up
from GBP4.5m in FY20. European Retail underlying EBITDA was
GBP4.1m, down from GBP51.8m in FY20. Rest of World Retail
underlying EBITDA was GBP25.6m, up from a loss of GBP6.8m in FY20
and Wholesale & Licensing underlying EBITDA increased to
GBP28.0m from GBP25.2m.
There were property related impairments in the period totalling
GBP317.0m (FY20: GBP122.6m), including GBP168.2m in relation to
right of use assets (FY20: GBP97.8m), GBP84.4m in relation to
freehold land and buildings (FY20: GBPnil), GBP63.8m of other
property, plant and equipment (FY20: GBP24.8m) and GBP0.6m of
investment properties (FY20: GBPnil). Property related impairments
have been recognised following a re-assessment of future expected
cash flows largely driven by anticipated future lockdowns as a
result of the Covid-19 pandemic, the change in consumer behaviour
in moving from physical to online shopping, the impact of
Direct-To-Consumer and increasing costs as a result of Brexit.
Further details including sensitivity analysis is included within
Note 1.
Depreciation and amortisation charges have increased by 11.3% to
GBP307.5m (FY20: GBP276.3m) largely due to an increase in freehold
land and buildings depreciation, following the change in useful
economic life estimate in the period. See the accounting policies
within the Annual Report and Accounts for further details.
Group underlying profit before tax (1) decreased to GBP5.8m
(FY20: GBP117.4m), largely due to the effects of the Covid-19
pandemic including the closure of retail stores, the associated
provisioning and impairment and depreciation and amortisation
charges. Underlying basic EPS for the year decreased by 204.9% to a
loss of 17.0p (FY20: profit of 16.2p).
Within other comprehensive income, the Group's hedging contracts
decreased by GBP16.5m (FY20: decreased by GBP18.7m) as a result of
the fair value movements in the period. With regard to the Group's
long-term financial assets, fair value movements have resulted in a
gain of GBP77.3m (FY20: loss of GBP19.7m) in the period.
The Group generated free cash flow during the year of GBP427.8m,
up from GBP263.1m in the prior period. Net debt decreased by
GBP117.1m to GBP248.9m at period end. Spend on acquisitions and
capex, including Wigan Robin Retail Park and warehouse automation,
was offset by continued strong cash generation in the core
business. Net debt currently stands at 0.5 times reported EBITDA
(FY20: 0.7 times).
(1) U nderlying profit before taxation excludes the effects of
IFRS 16, realised foreign exchange gains / losses in selling and
administration costs, exceptional items, and the profit / loss on
disposal of subsidiaries, strategic investments and properties.
REVIEW BY BUSINESS SEGMENT
UK SPORTS RETAIL
The UK Sports Retail segment includes all of the Group's sports
retail and USC store operations in the UK (including Northern
Ireland), all of the Group's sports online businesses (excluding
Bob's Stores, Eastern Mountain Sports, Baltics and Malaysia), the
Group's gyms, Evans Cycles, GAME UK stores and online operations
and the Group's Shirebrook campus operations. UK Sports Retail is
the main driver of the Group and accounts for 54.3% (FY20: 55.7%)
of Group revenue.
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
UK Sports Retail Revenue 1,968.5 2,203.3
-------------------------- -------------- --------------
Cost of Sales (1,139.2) (1,300.1)
-------------------------- -------------- --------------
Gross Profit 829.3 903.2
-------------------------- -------------- --------------
Gross Margin % 42.1 41.0
-------------------------- -------------- --------------
Revenue decreased 10.7% to GBP1,968.5m. Excluding acquisitions,
revenue fell 14.6%. This was largely due to the temporary store
closures in the UK caused by the Covid-19 pandemic, partially
offset by growth in our online business and pent up demand on store
reopening.
UK Sports Retail gross margin increased to 42.1% (FY20: 41.0%),
largely due to the continually improving product mix. Excluding
acquisitions gross margin increased to 45.0% (FY20: 43.5%).
Operating expenses decreased by 16.8% to GBP548.7m largely
driven by savings in store costs during the store closure periods
as a result of the Covid-19 pandemic. Excluding acquisitions,
operating expenses decreased by 20.2% largely driven by savings in
store costs and Government support schemes during lockdowns as a
result of the Covid-19 pandemic.
Underlying EBITDA for UK Sports Retail was GBP279.2m (FY20:
GBP227.4m), an increase of 22.8% for the year, largely due to the
strong reopening of stores after lockdowns, growth in our online
business and improved operating efficiencies.
UK SPORTS RETAIL STORE PORTFOLIO(1)
25 April 2021 26 April 2020
England 394 367
------------------ ------------ ------------
Scotland 39 37
------------------ ------------ ------------
Wales 31 28
------------------ ------------ ------------
Northern Ireland 21 17
------------------ ------------ ------------
Isle of Man 1 1
------------------ ------------ ------------
USC 25 27
------------------ ------------ ------------
Evans Cycles 48 50
------------------ ------------ ------------
GAME UK (2) 247 242
------------------ ------------ ------------
Total 806 769
------------------ ------------ ------------
Opened 93 25
------------------ ------------ ------------
Closed (98) (53)
------------------ ------------ ------------
Acquired 42 256
------------------ ------------ ------------
Area (sq.ft.) approx. 6.5m approx. 6.3m
------------------ ------------ ------------
(1) Table excludes the Group's standalone Gyms.
(2) The GAME UK store numbers include 71 concessions (FY20: 3)
operating within Sports Direct fascia stores and does not include
BELONG arenas.
PREMIUM LIFESTYLE
Premium Lifestyle consists of Flannels, Cruise, van mildert,
House of Fraser, Jack Wills and Sofa.com fascia stores and
corresponding web sales.
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Gross Transaction Value (GTV) (1) 788.1 903.1
------------------------------------ ------------------ -------------------
Revenue 735.6 722.0
------------------------------------ ------------------ -------------------
Cost of sales (405.3) (373.4)
------------------------------------ ------------------ -------------------
Gross Profit 330.3 348.6
------------------------------------ ------------------ -------------------
Gross Margin % 44.9 48.3
------------------------------------ ------------------ -------------------
(1) GTV being gross sales net of VAT, discounts and returns and
gross sales where the Group acts as agent.
Premium Lifestyle sales increased by 1.9% to GBP735.6m (FY20:
GBP722.0m), mostly due to new Flannels stores and increased web
sales. Excluding acquisitions, sales increased 1.4%. The Premium
Lifestyle gross margin for the year decreased by 340 basis points
to 44.9% (FY20: 48.3%) largely due a reduction in concession sales
within House of Fraser as a percentage of total sales which have a
higher gross margin.
Premium Lifestyle operating costs decreased by 20.1% to
GBP275.1m (FY20: GBP344.1m) largely driven by savings in store
costs during the store closure periods as a result of the Covid-19
pandemic and Government support schemes such as business rates
relief particularly in House of Fraser. As a result, underlying
EBITDA improved from GBP4.5m in FY20 to GBP53.9m in the year,
largely due to Flannels store openings, growth in our online
business, continued operating efficiencies and business rates
relief particularly in House of Fraser.
PREMIUM LIFESTYLE STORE PORTFOLIO
25 April 2021 26 April 2020
Flannels 41 37
------------------------------ ----------------- -----------------
Cruise 5 5
------------------------------ ----------------- -----------------
van mildert 1 1
------------------------------ ----------------- -----------------
Jack Wills 60 67
------------------------------ ----------------- -----------------
House of Fraser / Frasers 43 48
------------------------------ ----------------- -----------------
Sofa.com (1) 24 21
------------------------------ ----------------- -----------------
18Montrose 3 -
------------------------------ ----------------- -----------------
Garment Quarter 1 -
------------------------------ ----------------- -----------------
Psyche 1 -
------------------------------ ----------------- -----------------
179 179
------------------------------ ----------------- -----------------
Opened 12 10
------------------------------ ----------------- -----------------
Acquired 5 117
------------------------------ ----------------- -----------------
Closed (17) (42)
------------------------------ ----------------- -----------------
Area (sq.ft.) approx. 4.2m approx. 4.5m
------------------------------ ----------------- -----------------
(1) Sofa.com store numbers include 17 concessions (FY20: 12
concessions) operating within House of Fraser fascia stores.
EUROPEAN RETAIL
The European Retail division includes the Group's sports retail
store management and operations in Europe, including the Group's
European distribution centres in Belgium and Austria, stores and
corresponding web business in the Baltic regions and GAME Spain
stores and corresponding web business.
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
European Retail Revenue 615.2 697.7
------------------------- -------------- --------------
Cost of Sales (375.5) ( 429.8)
------------------------- -------------- --------------
Gross Profit 239.7 267.9
------------------------- -------------- --------------
Gross Profit % 39.0 38.4
------------------------- -------------- --------------
Revenue decreased 11.8% to GBP615.2m. On a currency neutral
basis and excluding acquisitions, European Retail revenue decreased
by 20.5% largely due to the temporary store closures caused by the
Covid-19 pandemic.
European Retail gross margin increased to 39.0% (FY20: 38.4%)
largely due to the continually improving product mix. Excluding
acquisitions and on a currency neutral basis, margin is up 100
basis points to 46.3%.
Operating expenses increased by 10.2% to GBP238.1m (FY20:
GBP216.1m). Excluding acquisitions and on a currency neutral basis
operating costs increased by 9.3% largely due to property related
provisions including prior year releases as a result of disposals.
As a result, underlying EBITDA decreased 92.1% to GBP4.1m.
All of the following stores are operated by companies wholly
owned by the Group, except Estonia, Latvia and Lithuania where the
Group owns 60.0%.
EUROPEAN STORE PORTFOLIO (1)
25 April 2021 26 April 2020
GAME Spain 236 261
------------------------- ------------- -------------
Republic of Ireland (2) 39 35
------------------------- ------------- -------------
Belgium 34 35
------------------------- ------------- -------------
Estonia (1) 21 25
------------------------- ------------- -------------
Austria 20 22
------------------------- ------------- -------------
Portugal 20 21
------------------------- ------------- -------------
Latvia (1) 17 18
------------------------- ------------- -------------
Lithuania (1) 18 18
------------------------- ------------- -------------
Poland 14 16
------------------------- ------------- -------------
Slovenia 13 14
------------------------- ------------- -------------
Czech Republic 12 12
------------------------- ------------- -------------
Hungary 8 8
------------------------- ------------- -------------
Cyprus 6 6
------------------------- ------------- -------------
Holland 5 5
------------------------- ------------- -------------
Slovakia 5 5
------------------------- ------------- -------------
France 4 4
------------------------- ------------- -------------
Germany 2 2
------------------------- ------------- -------------
Luxembourg 2 2
------------------------- ------------- -------------
Spain 9 1
------------------------- ------------- -------------
Iceland 1 1
------------------------- ------------- -------------
Total 486 511
------------------------- ------------- -------------
Opened 13 11
------------------------- ------------- -------------
Closed (38) (14)
------------------------- ------------- -------------
Acquired - 265
------------------------- ------------- -------------
Area (sq.ft.) approx. 3.6m approx. 4.0m
------------------------- ------------- -------------
(1) Includes only stores with SPORTSDIRECT.com and SPORTLAND fascias
(2) Excluding Heatons fascia stores
REST OF WORLD RETAIL
Rest of World Retail includes sports stores in Malaysia trading
under the SPORTS DIRECT fascia, retail stores in the US trading
under Bob's Stores and Eastern Mountain Sports and their online
businesses. In Malaysia the Group has 33 stores which are 51.0%
owned by the Group.
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Rest of World Revenue 152.7 174.2
-------------------------- ------------------ ------------------
Cost of sales (88.7) (96.9)
-------------------------- ------------------ ------------------
Gross Profit 64.0 77.3
-------------------------- ------------------ ------------------
Gross Margin % 41.9 44.4
-------------------------- ------------------ ------------------
Rest of World Retail sales were GBP152.7m for the year. Gross
margin was 41.9%, down from 44.4% in the prior year, largely due to
the lower margin rate in the US business which makes up a larger
proportion of the segment in FY21. Underlying EBITDA was GBP25.6m,
from a loss of GBP6.8m in FY20. This was largely due to operating
efficiencies in the US business.
REST OF WORLD STORE PORTFOLIO
25 April 2021 26 April 2020
Malaysia 33 31
---------------------------- ----------------- -----------------
Bob's Stores 22 24
---------------------------- ----------------- -----------------
Eastern Mountain Sports 21 20
---------------------------- ----------------- -----------------
76 75
---------------------------- ----------------- -----------------
Area (sq.ft.) approx. 1.3m approx. 1.3m
---------------------------- ----------------- -----------------
WHOLESALE & LICENSING
The portfolio of Group brands includes a wide variety of
world-famous sport and lifestyle brands. The Group's Sports Retail
division sells products under these brands in its stores, and the
Wholesale & Licensing division sells the brands through its
wholesale and licensing activities. The Wholesale & Licensing
division continues to sponsor a variety of prestigious events and
retains a variety of globally recognised celebrities and sporting
professionals as brand ambassadors.
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Wholesale 131.5 134.4
----------------- -------------- --------------
Licensing 21.8 25.8
----------------- -------------- --------------
Total Revenue 153.3 160.2
----------------- -------------- --------------
Cost of Sales (85.8) (94.7)
----------------- -------------- --------------
Gross Profit 67.5 65.5
----------------- -------------- --------------
Gross Margin % 44.1 40.9
----------------- -------------- --------------
Wholesale & Licensing total revenue decreased by 4.3% to
GBP153.3m (FY20: GBP160.2m).
Wholesale revenues were down 2.2% to GBP131.5m (FY20:
GBP134.4m), due to reductions in UK wholesale activity offset by an
increase in the US. Total gross margin increased by 320 basis
points to 44.1% (FY20: 40.9%). Wholesale gross margins increased
430 basis points to 33.6% (FY20: 29.5%), largely due to UK
wholesale.
Licensing revenues in the year were down 15.5% to GBP21.8m
(FY20: GBP25.8m).
Operating costs decreased by 2.2% to GBP39.4m (FY20: GBP40.3m).
As a result, underlying EBITDA increased by 11.1% to GBP28.0m
(FY20: GBP25.2m).
PROPERTY REVIEW
The store elevation program remains a key focus point for the
Group across all fascias and territories. For Sports Direct, the
new stores continue to push boundaries as demonstrated by the
opening of the new Portsmouth Sports Direct store incorporating a
USC, Evans and Game, as well as Belong gaming arena. Further to
this, shortly after financial year end the newly refurbished
London, Oxford Street flagship opened featuring world class design
incorporating new activation spaces, technology and features
including a first in kind bra fitting studio. In Europe, the
portfolio of six Toys R Us properties acquired during FY20 in Spain
have now been developed launching as elevated Sports Direct stores
in the same format as the UK.
A significant milestone for the Group was delivering the new
Frasers concept with the opening of Frasers Wolverhampton, another
example of the continued store elevation programme. The opening of
such stores demonstrates the Group's commitment to physical retail
and ability to create genuine retail destinations.
Flannels remains an important fascia for the Group. The key
focus has been the development of the Regional Flagship concept
introducing new categories for the fascia such as beauty, food
& beverage and active. Terms have been agreed to launch this
new concept at Meadowhall Shopping Centre which is set to open in
the coming financial year. Further sites for this concept are also
due to open at Fosse Park in Leicester and Liverpool city
centre.
Another notable event in FY21 was the acquisition of 42 DW
Stores. The acquisition enhanced the Group's gym and UK Sports
Retail estate. A refurbishment and rebranding exercised commenced
shortly after acquisition and will continue into the coming
financial year.
The primary objective for the estate continues to be the
transition to turnover based rents. The Group is highly acquisitive
across fascias and with co-operative landlords can offer a
portfolio of new store deals providing a variety of retail
offerings. The Group is prepared to sign long term leases for those
landlords willing to co-invest in the elevated store concepts.
With leasehold activity across the Group expected to increase
over the coming year, the same is likely to apply with freehold
acquisitions as we capitalise on favourable market conditions
coupled with the Group's growing requirement for retail space.
Store Portfolio - UK Retail
Sports Stores in the UK (including Northern Ireland):
-- The Group is currently operating from 394 stores in England,
39 in Scotland, 31 in Wales and 21 in Northern Ireland. There were
14 openings and 20 closures for Sports Direct fascia stores over
the period. 42 stores were acquired as part of the acquisition of
DW Sports comprising a number of 'combined' sites with retail and
leisure. Six of the store closures were sites acquired as part of
this acquisition where agreements could not be reached with
landlords resulting in 33 'combined' and 3 stand-alone Sports
Direct stores as additions in the period. 13 of the remaining 14
closures occurred due to relocations into elevated multi-fascia
stores.
-- Noteworthy openings include Portsmouth, Birmingham Fort,
Scunthorpe and Wrexham where existing Sports Direct stores were
closed to relocate into an elevated multi-format store.
-- All new store openings include a USC lifestyle offering as
part of the elevated store model across all formats. As mentioned
previously, both a GAME and Evans Cycles concept has been developed
to form part of the elevated Sports Direct format in selected
locations. Over the coming financial period there will be a push
towards more multi-fascia store openings incorporating each of
these fascias.
Evans Cycles:
-- There are currently 48 Evans Cycle stores operating, a
reduction of two stores over the period. During FY21 the Evans
Cycles concept was first introduced as a store-in-store area in our
latest Portsmouth multi-fascia store alongside Sports Direct, USC,
Game & Belong. This concept will continue to be developed to
roll out into selected future store openings.
Game UK:
-- Over the period, the relocation programme moving Game into
selected Sports Direct stores was accelerated. Coupled with the new
Sports Direct store openings featuring an area for Game, the
overall number of stores for the UK estate increased to 247 having
closed 67 and opening 72 (net increase of 5 stores).
-- The Belong gaming arenas are building their presence across
the UK featuring in a number of the new Sports Direct openings such
as Portsmouth.
Store Portfolio - Premium Lifestyle
Flannels, Cruise And Van Mildert:
-- Across Flannels, Cruise and van mildert during FY21 there
were 6 openings and 2 closures, resulting in a net increase of 4
stores. Combining these fascias, the total estate amounts to 47
stores.
-- Key openings for Flannels include Rushden Lakes, Kingston
Upon Thames and Wolverhampton. The Glasgow Cruise store was also
extensively refurbished and expanded.
-- A major area of development has been the Flannels Regional
Flagship concept, incorporating new categories such as beauty, food
& beverage and active. The first regional flagship to open will
be Flannels Meadowhall which will extend to approximately 55,000
sqft with further locations to follow over the coming financial
year including Fosse Park in Leicester and Liverpool city
centre.
House of Fraser:
-- At the end of FY21 there were 43 House of Fraser stores
trading, a net decrease of 5 stores after 6 closures and 1
opening.
-- A key highlight was the delivery of the new 'Frasers' store
concept at Wolverhampton. This new store showcases the elevated
format and what can be provided upon agreeing appropriate new long
term lease deals.
-- Much of the estate continues to remain on short term flexible
leases. Whilst negotiations are ongoing to transition stores to
long term leases it is anticipated that there will be further
closures, particularly as business rates come back into effect in
FY22.
-- However following the demise of major high street retail
chains we envisage new location opportunities to come to fruition
over the coming financial period, albeit again punitive business
rates at many of these locations put the viability of doing these
lease deals in doubt.
Jack Wills:
-- Over FY21 there were 7 store closures and no openings
reducing the estate to 60 stores. We continue to negotiate with
landlords to move to long term leases.
-- A new store concept is under development with the ambition to
open in new key markets across the UK. The new concept is intended
to be finalised over FY22.
Forecast Openings UK FY22:
-- Over FY21, despite the challenges faced relating to the
Covid-19 pandemic the Group continued the elevated store roll out
programme. For the coming financial year the Group's ambition is to
increase the new store activity across fascias, with a particular
focus on Sports Direct and Flannels. Key new stores include the new
Flannels Regional Flagships along with new Sports Direct flagships
such as Birmingham city centre. However, it should be noted that
program risk remains relating to factors linked to the Covid-19
pandemic.
Store Portfolio - European Retail:
Republic Of Ireland (ROI):
-- Over FY21 the remaining Heatons store conversions to include Sports Direct were completed.
-- There was one opening in the year, with 39 stores at the
period end. Shortly after the year end a new store in Galway
opened, a first for the Group in that market.
-- The intention for the coming financial year is to increase
the store estate across ROI, this has been bolstered by the
increasing number of new location opportunities now being
presented. In certain locations other Group fascias not currently
trading in the ROI are being considered.
Continental Europe:
-- The Group continues to operate sports stores in 18 countries in continental Europe:
-- 211 Sports retail stores in Europe, excluding Republic of
Ireland (plus 26 non-core, speciality and outlets).
-- Total sq.ft. of approximately 2.7m of all sports fascias in
Europe (including Sportland, Lillywhites, Sportsworld etc).
-- Closed 25 GAME stores in Spain during the period as part of
rationalising the estate and removing duplication finishing the
period on 236 stores.
-- Twelve openings in four different countries, three of which were relocations.
-- 10 closures in seven different countries with a mixture of
closing non-performing stores and closures linked to relocations.
The 1 Austrian store closure was due to a sale of our freehold
property in Salzburg.
-- During the period 8 Sports Direct stores incorporating a USC
were opened during the period totalling 117,165 sq ft of retail
space. 5 of these were freeholds purchased in FY20 that have been
refurbished and opened as elevated Sports Direct stores. A further
freehold store opened in Malaga shortly after FY21.
-- As is the case in the UK, the Group is firmly committed to
the rollout of elevated stores across Europe. Due to the
accelerated shift to online experienced across Europe due to the
effects of the Covid-19 pandemic and a number of retailers reducing
their portfolio size. The Group believes it can capitalise on these
market conditions to efficiently expand our physical estate,
focusing on capital city and flagship opportunities.
Store Portfolio - Rest of The World:
-- 33 stores in Malaysia with three openings and one closure in
FY21. The closure was a Tesco based store leaving us with three as
we continue to relocate our stores to higher performance
locations.
-- The Malaysian elevation and expansion drive continues, with 2
new elevated stores opened in the period. We now have a total of
seven elevated stores in the region in line with UK standards and
four stores with a USC retail area.
-- As a major milestone our flagship ASEAN HQ opened in FY21 in
the Sunway Pyramid shopping centre with the adjoining retail store
opening shortly.
-- 43 stores in the USA, following two closures and one opening in FY21.
Freehold / Long Leasehold Property:
-- Over FY21 a total of 14 properties were acquired across the
UK totalling GBP84.3m. The most significant purchase was Robin
Retail Park in Wigan for GBP41.8m. No properties were acquired in
Europe or RoW.
-- Disposal of property assets continues to be standard practice
for the Group. During the period 4 disposals completed in the UK
and 3 disposals completed in the EU.
-- For the upcoming financial period it is anticipated that
there will be an increase in acquisition activity as we capitalise
on favourable market conditions coupled with the groups growing
requirement for retail space. Disposals will continue as has been
the case in previous financial years.
Mike Ashley
Chief Executive
5 August 2021
FINANCIAL REVIEW
The Financial Statements for the Group for the 52 weeks ended 25
April 2021 are presented in accordance with International Financial
Reporting Standards (IFRS ).
SUMMARY OF RESULTS
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Revenue 3,625.3 3,957.4
------------------------------ --------------- ---------------
Reported EBITDA 536.5 551.0
------------------------------ --------------- ---------------
Underlying EBITDA 390.8 302.1
------------------------------ --------------- ---------------
Reported profit before tax 8.5 143.5
------------------------------ --------------- ---------------
Underlying profit before tax 5.8 117.4
------------------------------ --------------- ---------------
Earnings per share (EPS) Pence per share Pence per share
------------------------------ --------------- ---------------
Reported basic EPS (16.5) 18.5
------------------------------ --------------- ---------------
Underlying basic EPS (17.0) 16.2
------------------------------ --------------- ---------------
EBITDA is earnings before investment income and investment
costs, finance income and finance costs, tax, depreciation,
amortisation and impairment. It includes the Group's share of
losses from associated undertakings and joint ventures. Underlying
EBITDA is calculated as EBITDA before the effects of IFRS 16,
realised foreign exchange gains / losses in selling and
administration costs, profit / loss on disposal of subsidiaries,
strategic investments and properties.
GROUP OPERATING COSTS
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Group operating costs 1,140.0 1,353.0
---------------------------------------------------- ------------------ ------------------
Depreciation and amortisation 225.4 145.3
---------------------------------------------------- ------------------ ------------------
Intangible impairment - 5.9
---------------------------------------------------- ------------------ ------------------
IFRS 16 depreciation 82.1 122.6
---------------------------------------------------- ------------------ ------------------
IFRS 16 disposal and modification/remeasurement
of lease liabilities (27.7) (9.7)
---------------------------------------------------- ------------------ ------------------
IFRS 16 reversal of rent expense (127.3) (137.5)
---------------------------------------------------- ------------------ ------------------
IFRS 16 reversal of onerous lease provision (36.6) (35.5)
---------------------------------------------------- ------------------ ------------------
Realised FX loss/(gain) 26.3 (34.9)
---------------------------------------------------- ------------------ ------------------
Operating income 36.8 32.5
---------------------------------------------------- ------------------ ------------------
Selling, distribution and administration
costs 1,319.0 1,441.7
---------------------------------------------------- ------------------ ------------------
Group operating costs for the purposes of management
reporting:
i. Excludes depreciation, amortisation and impairments of
property, plant and equipment, intangible assets and realised FX
gains and losses; and
ii. Includes other operating income.
FOREIGN EXCHANGE AND TREASURY
The Group reports its results in GBP but trades internationally
and is therefore exposed to currency fluctuations on currency cash
flows in various ways. These include purchasing inventory from
overseas suppliers, making sales in currencies other than GBP and
holding overseas assets in other currencies. The Board mitigate the
cash flow risks associated with these fluctuations with the careful
use of currency hedging using forward contracts and other
derivative financial instruments.
The Group uses forward contracts that qualify for hedge
accounting in two main ways - to hedge highly probable EUR
salesincome
and USD inventory purchases. This introduces a level of
certainty into the Group's planning and forecasting
process. Management
has reviewed detailed forecasts and the growth assumptions
within them and is satisfied that the forecasts meet the criteria
as being highly probable forecast transactions.
As at 25 April 2021 and as detailed in note 29c of the Annual
Report and Accounts the Group had the following forward contracts
that qualified for hedge accounting under IFRS 9 Financial
Instruments, meaning that fluctuations in the value of the
contracts before maturity are recognised in the Hedging Reserve
through Other Comprehensive Income. After maturity, the sales and
purchases are then valued at the hedge rate.
Currency Hedging against Currency value Timing Rates
USD / GBP USD inventory USD 720m FY22 - FY23 1.36 - 1.41
purchases
------------ ------------------ ---------------- ------------- -------------
USD / EUR USD inventory USD 120m FY22, FY24 1.21 - 1.31
purchases
------------ ------------------ ---------------- ------------- -------------
EUR / GBP Euro sales EUR 240m FY23 0.99
------------ ------------------ ---------------- ------------- -------------
The Group also uses currency options, swaps and spots for more
flexibility against cash flows that are less than highly probable
and therefore do not qualify for hedge accounting under IFRS9
Financial Instruments. The fair value movements before maturity are
recognised in the Income Statement.
The Group has the following currency options and unhedged
forwards:
Currency Expected use Currency value Timing Rates
EUR / GBP Euro sales EUR 380m FY23 0.99
------------ --------------- ---------------- -------- -------
The Group is proactive in managing its currency requirements.
The Treasury team works closely with senior management to
understand the Group's plans and forecasts, and discusses and
understands appropriate financial products with various financial
institutions, including those within the Group Revolving Credit
Facility (RCF). This information is then used to implement suitable
currency products to align with the Group's strategy.
Regular reviews of the hedging performance are performed by the
Treasury team alongside senior management to ensure the continued
appropriateness of the currency hedging in place, and where
suitable, either implementing additional strategies and / or
restructure existing approaches in conjunction with our financial
institution partners.
Given the potential impact of commodity prices on raw material
costs, the Group may hedge certain input costs, including cotton,
crude oil and electricity.
TAXATION
The effective tax rate on profit before tax in FY21 was 1017.6%
(FY20: 29.6%). This reflects the impact of the increase in property
impairments and disallowable depreciation.
EARNINGS
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020 Change (%)
Reported EPS (Basic) (16.5) 18.5 (189.2)
----------------------------- -------------------- --------------- --------------
Underlying EPS (Basic) (1) (17.0) 16.2 (204.9)
----------------------------- -------------------- --------------- --------------
Weighted average number of
shares (actual) 501,955,281 505,826,890
----------------------------- -------------------- --------------- --------------
Basic earnings per share (EPS) is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the financial
period. Shares held in Treasury and the Employee Benefit Trust are
excluded from this figure.
(1) The underlying basic EPS reflects the underlying performance
of the business compared with the prior period and is calculated
using the weighted average number of shares. It is not a recognised
profit measure under IFRS and may not be directly comparable with
"adjusted" performance measures used by other companies. Further
details can be found in the Glossary.
DIVIDS
The Board has decided not to pay a final dividend in relation to
FY21 (FY20 GBPnil). The Board remains of the opinion that it is in
the best interests of the Group and its shareholders to preserve
financial flexibility and facilitate future investments and other
growth opportunities. The payment of dividends remains under
review.
CAPITAL EXPITURE
During the period, gross capital expenditure (excluding IFRS 16)
amounted to GBP219.4m (FY20: GBP323.5m), which included GBP84.3m on
freehold properties (FY20: GBP177.2m) and GBP48.5m on warehouse
automation (FY20: GBP31.1m).
STRATEGIC INVESTMENTS
The Group continues to hold various strategic investments as
detailed in Note 11. In addition the Group also holds indirect
strategic investments within contracts for difference and
options.
The fair values of the contracts for difference and options are
recognised in Derivative Financial Assets or Liabilities on the
Group Balance Sheet, with the movement in fair value recorded in
the Income Statement.
ACQUISITIONS
On 22 August 2020, the Group acquired the trade and assets of DW
Sports for cash consideration of GBP37.0m which is deemed to be the
fair value of the consideration. The acquisition complements the
Group's existing gym and fitness club portfolio and is consistent
with the Group's elevation strategy. Goodwill represents the
premium associated with advantageous site locations, potential
growth opportunities offered by economies of scale, and the
assembled workforce. The fair value adjustment to property, plant
and equipment relates to the management's assessment of the price
that would be paid for the acquired assets in an orderly
transaction between market participants at the acquisition date.
The leases were acquired under short-term licences and therefore no
right-of-use asset or lease liability has been recognised on
acquisition.
During the year the Group acquired the entire share capital of
Psyche Holdings Limited, the entire share capital of GRMNT Limited,
and the trade and assets of 18 Montrose for consideration of
GBP2.7m. These acquisitions will provide increased product
offerings in the 'Premium Lifestyle' division. The fair value
adjustment to property, plant and equipment relates to the
recognition of right-of-use assets and lease liabilities.
RELATED PARTIES
MM Prop Consultancy Limited, a company owned and controlled by
Michael Murray, who is a member of key management personnel as per
IAS 24, continues to provide property consultancy services to the
Group. MM Prop Consultancy Limited is primarily tasked with finding
and negotiating the acquisition of new sites in the UK, Europe and
Rest of the World for both our larger format stores and our
combined retail and gym units. It also provides advice to the
Company's in-house property team in relation to existing sites in
the UK, Europe and Rest of the World.
In the year all properties are assessed. Those that are
considered by the Group's independent Non-executive Directors to
have completed development and be eligible for review at the
year-end are assessed and if required valued by an independent
valuer who confirms the value created by MM Prop Consultancy
Limited. The Group's independent Non-executive Directors then
review and agree the value created and have full discretion to
approve a payment to MM Prop Consultancy Limited of up to 25% of
the value created. There is a current pipeline of properties that
may be eligible to be assessed both positively and negatively by
the Group's Non-executive Directors in future years.
In the current year GBP2.5m has been accrued based on 25% of the
value created on two properties where the gain has crystallised
through contract exchange or completion of sale (FY20 - GBPnil
provided and GBPnil paid, MM Prop Consultancy Limited was last paid
in relation to FY19). This is payable to MM Prop Consultancy
Limited and agreed by the independent Non-Executive Directors.
During the period the Group entered into an agreement with M.P.M
Elevation Limited, a company owned and controlled by Michael Murray
in relation to elevation strategy services. M.P.M Elevation Limited
will be paid an annual fee of GBP0.1m in relation to the provision
of the elevation strategy services.
Other related parties are disclosed in note 34 of the Annual
Report and Accounts.
CASH FLOW AND NET DEBT
Net debt decreased by GBP117.1m from GBP366.0m at 26 April 2020
to GBP248.9m at 25 April 2021. Interest on bank loans and
overdrafts decreased to GBP11.2m (FY20: GBP17.8m) largely due to
reduced usage of the RCF in the period.
The analysis of net debt at 25 April 2021 and at 26 April 2020
was as follows:
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Cash and cash equivalents 457.0 534.0
--------------------------- ------------- -------------
Borrowings (705.9) (900.0)
--------------------------- ------------- -------------
Net debt (248.9) (366.0)
--------------------------- ------------- -------------
The Group's Working Capital Facility is GBP913.5m (FY20:
GBP913.5m). It is available until November 2021 and is not secured
against any of the Group's assets. GBP847.5m of t he facility is
due to expire in November 2022.
The Group continues to operate well within its banking covenants
and the Board remains comfortable with the Group's available
headroom. Note: due to the timing of payroll and supplier payments,
net debt at calendar period end 30 April 2021 was approximately
GBP350.0m (FY20: approximately GBP408.0m).
CASH FLOW
The total movement was follows:
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (1) (GBP'm) (1)
Underlying EBITDA 390.8 302.1
------------------------------------------- -------------- --------------
Realised FX (gain) loss (26.3) 34.8
------------------------------------------- -------------- --------------
Taxes paid (59.3) (48.5)
------------------------------------------- -------------- --------------
Movement in inventory 99.3 (120.8)
------------------------------------------- -------------- --------------
Working capital and other 23.3 95.5
------------------------------------------- -------------- --------------
Underlying free cash flow after working
capital 427.8 263.1
------------------------------------------- -------------- --------------
Invested in:
------------------------------------------- -------------- --------------
Purchase of own shares (4.3) (43.9)
------------------------------------------- -------------- --------------
Dividend paid to non-controlling interest (0.9) -
------------------------------------------- -------------- --------------
Purchase of subsidiaries, net of cash
acquired (39.4) (7.3)
------------------------------------------- -------------- --------------
Purchase of listed investments (113.3) (24.8)
------------------------------------------- -------------- --------------
Purchase of intangibles (1.0) -
------------------------------------------- -------------- --------------
Purchase of associates - (5.6)
------------------------------------------- -------------- --------------
Proceeds on disposal of investments and
derivatives 55.1 4.9
------------------------------------------- -------------- --------------
Proceeds on disposal of intangibles 7.5 -
------------------------------------------- -------------- --------------
Net capital expenditure (198.8) (170.9)
------------------------------------------- -------------- --------------
Exchange movement on cash balances (5.3) 5.0
------------------------------------------- -------------- --------------
Investment income received 0.5 0.5
------------------------------------------- -------------- --------------
Finance income received less finance
costs paid (10.8) (8.5)
------------------------------------------- -------------- --------------
Decrease in net debt 117.1 12.5
------------------------------------------- -------------- --------------
(1) This table excludes the impact of IFRS16.
BALANCE SHEET
Significant balance sheet items are shown below:
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Property, plant and equipment 915.2 1,041.9
------------------------------ ------------- -------------
Right of use assets 249.7 305.7
------------------------------ ------------- -------------
Long-term financial assets 263.3 83.8
------------------------------ ------------- -------------
Inventory 1,096.6 1,198.3
------------------------------ ------------- -------------
Trade and other receivables 546.5 414.2
------------------------------ ------------- -------------
Provisions (361.2) (336.0)
------------------------------ ------------- -------------
Trade and other payables (646.3) (602.5)
------------------------------ ------------- -------------
Lease liabilities (722.7) (624.1)
------------------------------ ------------- -------------
The majority of the decrease in property, plant and equipment
relates to the impairments of freehold land and building and plant
and equipment due to the Covid-19 pandemic and factors such as
changes in consumer behaviour.
IFRS 16 right of use assets have decreased largely due to
impairments. Lease liabilities have increased largely due to
remeasurements during the period.
Long-term financial assets have increased during the period due
to the additions of Hugo Boss AG and Mulberry Group plc.
Inventory has decreased largely due to a reduction in
inventories held within the Rest of World segment.
Receivables includes a GBP118.3m reimbursement asset in relation
to the Group's ongoing non-UK tax enquiries (FY20: GBP118.3m) and
GBP131.0m relating to deposits in respect of derivative financial
instruments (FY20: GBP71.3m) with the increase mainly relating to
Hugo Boss.
Provisions have increased mainly due to an increase in property
provisions as a result of the Covid-19 pandemic.
Payables have increased largely due to rent payments under
negotiation as a result of the Covid-19 pandemic.
COMPANY BALANCE SHEET
Significant balance sheet items are shown below:
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Investments 1,494.9 1,235.8
-------------------------------------- ------------- -------------
Debtors 166.6 86.8
-------------------------------------- ------------- -------------
Creditors: amounts falling due within
one year (609.0) (901.5)
-------------------------------------- ------------- -------------
Investments relates to investments in subsidiaries and long-term
financial assets. The majority of the increase relates to additions
due to a reorganisation of our US businesses and purchases of
physical shares in Mulberry Group plc and Hugo Boss AG.
The majority of the movement in debtors relates to an increase
in collateral to cover margin requirements for derivative
transactions held with counterparties.
Creditors relates to amounts owed to Group undertakings, the
decrease relates to subsidiary dividends declared during the
period.
Chris Wootton
Chief Financial Officer
5 August 2021
CONSOLIDATED INCOME STATEMENT
For the 52 weeks ended 25 April 2021
52 weeks ended 52 weeks ended
Note 25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Revenue 2 3,625.3 3,957.4
Cost of sales (2,094.5) (2,294.8)
--------------- ---------------
Gross profit 1,530.8 1,662.6
--------------- ---------------
Selling, distribution and administrative expenses (1,319.0) (1,441.7)
Other operating income 36.8 32.5
Property related impairments (1) 10 (317.0) (122.6)
Exceptional items 3 (1.6) (13.1)
Profit on sale of properties 9.7 54.2
--------------- ---------------
Operating (loss)/profit 2 (60.3) 171.9
--------------- ---------------
Investment income 4 103.7 15.2
Investment costs 5 (7.7) (49.8)
Finance income 6 9.0 31.0
Finance cost 7 (36.2) (29.3)
Share of loss of associated undertakings - (15.9)
Fair value gain on step acquisition - 20.4
--------------- ---------------
Profit before taxation 8.5 143.5
--------------- ---------------
Taxation 8 (86.5) (42.5)
--------------- ---------------
(Loss)/profit for the period 2 (78.0) 101.0
--------------- ---------------
ATTRIBUTABLE TO:
Equity holders of the Group (83.0) 93.8
Non-controlling interests 5.0 7.2
--------------- ---------------
(Loss)/profit for the period 2 (78.0) 101.0
--------------- ---------------
EARNING PER SHARE ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Pence per share Pence per share
Basic earnings per share 9 (16.5) 18.5
Diluted earnings per share 9 (16.5) 18.5
(1) Property related impairments of GBP317.0m have been
separately presented for the year ended 25 April 2021. The prior
year comparative of GBP122.6m which was previously included within
Selling, distribution and administrative expenses in the FY20
Annual Report has been represented to be comparable.
The Consolidated Income Statement has been prepared on the basis
that all operations are continuing.
The accompanying accounting policies and notes form part of
these financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 25 April 2021
52 weeks ended 52 weeks ended
Note 25 April 2021 26 April 2020
(GBP'm) (GBP'm)
(Loss)/profit for the period 2 (78.0) 101.0
OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Fair value movement on long-term financial assets 77.3 (19.7)
ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Exchange differences on translation of foreign operations (49.1) 9.8
Fair value movement on hedged contracts - recognised in the period 0.4 16.4
Fair value movement on hedged contracts - ineffectiveness - 0.2
Fair value movement on hedged contracts - reclassified and reported in sales (2.8) (1.7)
Fair value movement on hedged contracts - reclassified and reported in cost
of sales (17.1) (37.4)
Fair value movement on hedged contracts - taxation taken to reserves 3.0 3.8
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD, NET OF TAX 11.7 (28.6)
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD (66.3) 72.4
ATTRIBUTABLE TO:
Equity holders of the group (71.3) 65.2
Non-controlling interest 5.0 7.2
(66.3) 72.4
The accompanying accounting policies and notes form part of
these financial statements.
CONSOLIDATED BALANCE SHEET
At 25 April 2021
Note 25 April 2021 26 April 2020
(GBP'm) (GBP'm)
ASSETS - NON CURRENT
Property, plant and equipment 10 1,164.9 1,347.6
Investment properties 14.1 18.9
Intangible assets 120.5 143.4
Long-term financial assets 263.3 83.8
Deferred tax assets 66.8 49.9
1,629.6 1,643.6
ASSETS - CURRENT
Inventories 1,096.6 1,198.3
Trade and other receivables 546.5 414.2
Derivative financial assets 55.4 78.1
Cash and cash equivalents 457.0 534.0
2,155.5 2,224.6
TOTAL ASSETS 3,785.1 3,868.2
EQUITY
Share capital 64.1 64.1
Share premium 874.3 874.3
Treasury shares reserve (295.7) (295.7)
Permanent contribution to capital 0.1 0.1
Capital redemption reserve 8.0 8.0
Foreign currency translation reserve 28.8 77.9
Reverse combination reserve (987.3) (987.3)
Own share reserve (66.7) (67.0)
Hedging reserve 11.5 28.0
Share based payment reserve 1.3 -
Retained earnings 1,554.5 1,564.9
Issued capital and reserves attributable to owners of the parent 1,192.9 1,267.3
Non-controlling interests 18.1 13.0
TOTAL EQUITY 1,211.0 1,280.3
LIABILITIES - NON CURRENT
Lease liability 12 534.2 476.2
Borrowings 12 705.9 900.0
Retirement benefit obligations 1.9 1.9
Deferred tax liabilities 27.0 25.6
Provisions 361.2 336.0
1,630.2 1,739.7
LIABILITIES - CURRENT
Derivative financial liability 19.2 44.2
Trade and other payables 646.3 602.5
Lease liability 12 188.5 147.9
Current tax liabilities 89.9 53.6
943.9 848.2
TOTAL LIABILITIES 2,574.1 2,587.9
TOTAL EQUITY AND LIABILITIES 3,785.1 3,868.2
The accompanying accounting policies and notes form part of
these Financial Statements. The Financial Statements were approved
by the Board on 5 August 2021 and were signed on its behalf by:
Chris Wootton
Chief Financial Officer
Company number: 06035106
CONSOLIDATED CASH FLOW STATEMENT
For the 52 weeks ended 25 April 2021
52 weeks ended 52 weeks ended
Note 25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Cash inflows from operating activities 578.3 425.2
Income taxes paid (59.3) (48.5)
Net cash inflows from operating activities 519.0 376.7
Proceeds on disposal of property, plant and equipment and investment
property 20.6 152.6
Proceeds on disposal of intangibles assets 7.5 -
Proceeds on disposal of listed investments and derivatives 55.1 4.9
Purchase of associates - (5.6)
Purchase of subsidiaries, net of cash acquired 13 (39.4) (7.3)
Purchase of property, plant and equipment (219.4) (323.5)
Purchase of intangible assets (1.0) -
Purchase of listed investments (113.3) (24.8)
Investment income received 0.5 0.5
Finance income received 9.0 9.8
Net cash outflows from investing activities (280.4) (193.4)
Lease payments (78.0) (113.6)
Finance costs paid (31.6) (18.3)
Borrowings drawn down 12 1,128.1 510.0
Borrowings repaid 12 (1,323.6) (436.5)
Dividends paid to non-controlling interests (0.9) -
Purchase of own shares (4.3) (43.9)
Net cash outflows from financing activities (310.3) (102.3)
Net (decrease)/increase in cash and cash equivalents including overdrafts (71.7) 81.0
Exchange movement on cash balances (5.3) 5.0
Cash and cash equivalents including overdrafts at beginning of period 534.0 448.0
Cash and cash equivalents including overdrafts at the period end 457.0 534.0
The accompanying accounting policies and notes form part of
these Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 25 April 2021
Share Share Treasury Share Foreign Own Retained Other(2) Total Non-controlling Total
capital premium(1) shares scheme currency share earnings attributable interests
reserve translation reserve to owners of
parent
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
At 29 April 2019 64.1 874.3 (281.7) - 68.1 (67.2) 1,490.8 (932.5) 1,215.9 5.8 1,221.7
Purchase of own
shares - - (44.0) - - 0.2 - - (43.8) - (43.8)
Reversal of FY19
fair valuation
of share
buyback
contractual
obligation - - 30.0 - - - - - 30.0 - 30.0
Transactions
with owners in
their capacity
as owners - - (14.0) - - 0.2 - - (13.8) - (13.8)
Profit for the
financial
period - - - - - - 93.8 93.8 7.2 101.0
OTHER
COMPREHENSIVE
INCOME
Cash flow hedges
- recognised in
the period - - - - - - - 16.4 16.4 - 16.4
Cash flow hedges
-
ineffectiveness - - - - - - - 0.2 0.2 - 0.2
Cash flow hedges
- reclassified
and reported in
sales - - - - - - - (1.7) (1.7) - (1.7)
Cash flow hedges
- reclassified
and reported in
cost of sales - - - - - - - (37.4) (37.4) - (37.4)
Cash flow hedges
- taxation - - - - - - - 3.8 3.8 - 3.8
Fair value
adjustment in
respect of long
term financial
assets -
recognised - - - - - - (19.7) - (19.7) - (19.7)
Translation
differences -
Group - - - - 9.8 - - - 9.8 - 9.8
Total
comprehensive
income for the
period - - - - 9.8 - 74.1 (18.7) 65.2 7.2 72.4
At 26 April 2020 64.1 874.3 (295.7) - 77.9 (67.0) 1,564.9 (951.2) 1,267.3 13.0 1,280.3
Acquisitions
(note 13) - - - - - - - - - 1.0 1.0
Share scheme - - - 1.3 - 0.3 (4.7) - (3.1) - (3.1)
Dividends paid
to
non-controlling
interests - - - - - - - - - (0.9) (0.9)
Transactions
with owners in
their capacity
as owners - - - 1.3 - 0.3 (4.7) - (3.1) 0.1 (3.0)
(Loss)/profit
for the
financial
period - - - - - - (83.0) - (83.0) 5.0 (78.0)
OTHER
COMPREHENSIVE
INCOME
Cashflow hedges
- recognised in
the period - - - - - - - 0.4 0.4 - 0.4
Cashflow hedges
- reclassified
and reported in
sales - - - - - - - (2.8) (2.8) - (2.8)
Cashflow hedges
- reclassified
and reported in
cost of sales - - - - - - - (17.1) (17.1) - (17.1)
Cashflow hedges
- taxation - - - - - - - 3.0 3.0 - 3.0
Fair value
adjustment in
respect of
long-term
financial
assets -
recognised - - - - - - 77.3 - 77.3 - 77.3
Translation
differences -
Group - - - - (49.1) - - - (49.1) - (49.1)
Total
comprehensive
loss for the
period - - - - (49.1) - (5.7) (16.5) (71.3) 5.0 (66.3)
At 25 April 2021 64.1 874.3 (295.7) 1.3 28.8 (66.7) 1,554.5 (967.7) 1,192.9 18.1 1,211.0
(1) The share premium account is used to record the excess
proceeds over nominal value on the issue of shares.
(2) Other reserves comprises permanent contribution to capital,
capital redemption reserve, reverse combination reserve and the
hedging reserve. All movements in the period related to the hedging
reserve (note 25 of the Annual Report and Accounts).
The accompanying accounting policies and notes form part of
these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
For the 52 weeks ended 25 April 2021
1. ACCOUNTING POLICIES
Frasers Group Plc (Company number: 06035106) is a company
incorporated and domiciled in the United Kingdom, its shares are
listed on the London Stock Exchange. The registered office is Unit
A, Brook Park East, Shirebrook NG20 8RY. The principle activities
and structure of the group can be found in the 'Our Business'
section of the Annual Report.
These Condensed Consolidated Financial Statements of Frasers
Group plc (the "Company") and its subsidiaries (together the
"Group") have been prepared in accordance with International
Accounting Standards in conformity with the requirements of the
Companies Act 2006 and in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The comparative
figures for the financial year ended 26 April 2020 have been
extracted from the Group's statutory accounts for that financial
year. The Group Financial Statements for the period ended 25 April
2021 were approved by the Board on 5 August 2021.
The financial information, which comprises the Consolidated
Income Statement, Consolidated Statement of Comprehensive Income,
Consolidated Balance Sheet, Consolidated Cash Flow Statement,
Consolidated Statement of Changes in Equity and related notes, do
not constitute full statutory accounts within the meaning of s435
(1) and (2) of the Companies Act 2006. The auditor has reported on
the Group's statutory accounts for each of the periods ended 26
April 2020 and 25 April 2021 which do not contain any statement
under s498 of the Companies Act 2006, were unqualified and did not
contain any matters which the auditor drew attention to by way of
emphasis of matter without qualifying their report. The statutory
accounts for the year ended 26 April 2020 have been delivered to
the Registrar of Companies and the statutory accounts for the year
ended 25 April 2021 will be delivered in due course.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chief Executive's Report and Business
Review.
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the Financial
Review. In addition, the Financial Statements include the Group's
objectives, policies and processes for managing its capital, its
financial risk management objectives, details of its financial
instruments and hedging activities, and its exposures to credit
risk and liquidity risk.
The Group still trades profitably, is highly cash generative and
has considerable financial resources. The Group is able to operate
within its banking facilities and covenants, which run until
November 2022, and is well placed to take advantage of strategic
opportunities as they arise. As a consequence, the Directors
believe that the Group is able to manage its business risks
successfully despite the continued uncertain economic outlook.
Management have assessed the level of trading to date since the
impacts of Covid-19 and has forecast and projected a conservative
base case and also a number of even more conservative scenarios
taking into account a potential further wave and associated
lockdowns over winter, Government support, foreign exchange
exposure and cost saving initiatives. These forecasts and
projections show that the Group will be able to operate within the
level of the current facility and its covenant requirements (being
interest cover and net debt to EBITDA ratios). Management also have
a number of mitigating actions which could be taken if required
such as putting on hold discretionary spend, realising certain
assets on the Balance Sheet and paying down the Revolving Credit
Facility. See the Viability Statement for further details.
Having thoroughly reviewed the Group's performance and having
made suitable enquiries, the Directors are confident that the Group
has adequate resources to remain in operational existence for at
least 12 months from the date of these Financial Statements.
Trading would need to fall significantly below levels observed
during the pandemic to require mitigating actions or a relaxation
of covenants. On this basis, the Directors continue to adopt the
going concern basis for the preparation of the Annual Report and
Financial Statements which is a period of at least twelve months
from the date of approval of these Financial Statements.
New Accounting Standards, Interpretations And Amendments Adopted
By The Group
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not
effective. The Group applies for the first time the following new
standards:
-- Definition of Material - Amendments to IAS 1 and IAS 8
-- Definition of a Business - Amendments to IFRS 3
-- Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
-- Covid-19 Related Rent Concessions - Amendments to IFRS 16
-- Amendments to References to the Conceptual Framework in IFRS Standards
By adopting the above, there has been no material impact on the
Financial Statements.
International Financial Reporting Standards ("Standards") In
Issue But Not Yet Effective
At the date of authorisation of these consolidated Financial
Statements, there are no standards in issue from the International
Accounting Standards Board ("IASB") or International Financial
Reporting Interpretations Committee ("IFRIC") which are effective
for annual accounting periods beginning on or after 26 April 2021
that will have a significant impact on these Financial
Statements.
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The critical accounting estimates and judgements made by the
Group regarding the future or other key sources of estimation,
uncertainty and judgement that may have a significant risk of
giving rise to a material adjustment to the carrying values of
assets and liabilities within the next financial period are:
Key Judgements
Determining Related Party Relationships
Management determines whether a related party relationship
exists by assessing the nature of the relationship by reference to
the requirements of IAS 24, Related Party Disclosures. This is in
order to determine whether significant influence exists as a result
of control, shared directors or parent companies, or close family
relationships. The level at which one party may be expected to
influence the other is also considered for transactions involving
close family relationships.
Control And Significant Influence Over Certain Entities
Under IAS 28 Investments in Associates and Joint Ventures if an
entity holds 20% or more of the voting power of the investee, it is
presumed that the entity has significant influence, unless it can
clearly demonstrate that this is not the case. During the period
the Group has held greater than 20% of the voting rights of Studio
Retail Group Plc, French Connection Group Plc (sold during the
period) and Mulberry Group Plc, whereby management consider that
the Group does not have significant influence over these entities
for combinations of the following reasons:
-- The Group does not have any representation on the board of
directors of the investee other than a Frasers Group representative
having an observer role on the board of Studio Retail Group Plc.
Management have reviewed the terms of the observer arrangement and
have concluded that this does not give them the right to
participate in or influence the financial or operating decisions of
Studio Retail Group Plc. Studio Retail Group Plc can terminate this
arrangement at any time, and can determine which parts of the Board
meetings the representative can be present at and what information
they are given access to. It should be noted the Frasers Group
representative did not attend any board meetings in full or part
during the reporting period;
-- There is no participation in decision making and strategic
processes, including participation in decisions about dividends or
other distributions;
-- There have been no material transactions between the entity and these investee companies;
-- There has been no interchange of managerial personnel;
-- No non-public essential technical management information is provided to the investee
In assessing the level of control that management have over
certain entities, management will consider the various aspects that
allow management to influence decision making. This includes the
level of share ownership, board membership, the level of investment
and funding and the ability of the Group to influence operational
and strategic decisions and effect its returns through the exercise
of such influence. If management were to consider that the Group
does have significant influence over these entities then the equity
method of accounting would be used and the percentage shareholding
(disclosed in note 11) multiplied by the results of the investee in
the period (as disclosed in note 34 of the Annual Report and
Accounts) would be recognised in profit or loss.
The Group holds 49% of the share capital of Four (Holdings)
Limited which is accounted for using the equity method. The Group
does not have any representation on the board of directors and no
participation in decision about relevant activities such as
establishing operating and capital decisions, including budgets,
appointing or remunerating key management personnel or service
providers and terminating their services or employment. However, in
prior periods the Group has provided Four (Holdings) Limited with a
significant loan. At the reporting date, the amount owed by Four
(Holdings) Limited for this loan totalled GBP60.0m (GBP21.6m net of
amounts recognised in respect of loss allowance). The Group is
satisfied that the existence of these transactions provides
evidence that the entity has significant influence over the
investee but in the absence of any other rights, in isolation it is
insufficient to meet the control criteria of IFRS 10, as the Group
does not have power over Four (Holdings) Limited and therefore Four
(Holdings) Limited is not equity accounted.
Cash Flow Hedging
The Group uses a range of forward and option contracts that are
entered into at the same time, they are in contemplation with one
another and have the same counterparty. A judgement is made in
determining whether there is an economic need or substantive
business purpose for structuring the transactions separately that
could not also have been accomplished in a single transaction.
Management are of the view that there is a substantive distinct
business purpose for entering into the options and a strategy for
managing the options independently of the forward contracts. The
forward and options contracts are therefore not viewed as one
instrument and hedge accounting for the forwards is permitted.
Under IFRS 9 in order to achieve cash flow hedge accounting,
forecast transactions (primarily Euro denominated sales and USD
denominated purchases) must be considered to be highly probable.
The hedge must be expected to be highly effective in achieving
offsetting changes in cash flows attributable to the hedged risk.
The forecast transaction that is the subject of the hedge must be
highly probable and must present an exposure to variations in cash
flows that could ultimately affect profit or loss. Management have
reviewed the detailed forecasts and growth assumptions within them,
and are satisfied that forecasts in which the cash flow hedge
accounting has been based meet the criteria per IFRS 9 as being
highly probable forecast transactions. Should the forecast levels
not pass the highly probable test, any cumulative fair value gains
and losses in relation to either the entire or the ineffective
portion of the hedged instrument would be taken to the Income
Statement.
Management considers various factors when determining whether a
forecast transaction is highly probable. These factors include
detailed sales forecasts by channel, geographical area and
seasonality, conditions in target markets and the impact of
expansion in new areas. Management also consider any change in
alternative customer sales channels that could impact on the hedged
transaction.
If the forecast transactions were determined to be not highly
probable and all hedge accounting was discontinued, the Hedging
reserve of GBP11.5m would be shown in Finance Income.
Key Estimates
Provision For Obsolete, Slow Moving Or Defective Inventories
The Directors have applied their knowledge and experience of the
retail industry in determining the level and rates of provisioning
required in calculating the appropriate inventory carrying values.
Specific estimates and judgements applied in relation to assessing
the level of inventory provisions required are considered in
relation to the following areas:
a. Continuity inventory
b. Seasonal inventory lines - specifically seasons that have now finished
c. Third party versus own brand inventory
d. Ageing of inventory
e. Sports Retail or Premium Lifestyle
f. Local economic conditions
g. Divisional specific factors
h. Increased cost of inventory and lower margins with the devaluation of the Pound
i. Over-stock and out of season inventory as a result of Covid-19
Provision estimates are forward looking and are formed using a
combination of factors including historical experience,
management's knowledge of the industry, group discounting, sales
pricing protocols and the overall assessment made by management of
the risks in relation to inventory. Management use a number of
internally generated reports to monitor and continually re-assess
the adequacy and accuracy of the inventory provision. The
additional cost of repricing inventory and handling charges in
relation to relocating inventory (tunnelling) are considered in
arriving at the appropriate percentage provision. The assessment
involves significant estimation uncertainty, therefore in order to
check that the assumptions applied remain valid, management
produces a range of outcomes and the provision is set within this
range.
Key assumptions used to create the estimates are:
-- Discounting - Based on historical experience and managements
anticipated future discounting including the impact of Covid-19
-- Tunnelling - Cost of handling stock for reworking and repacking
-- Repricing - Labour cost associated with repricing units of stock
-- Shrinkage - Stock lost through damage and theft
Total Group inventory provision at 25 April 2021 is 16.6% (FY20:
15.7%). A 1% change in the total provision would impact underlying
EBITDA by approx. GBP13.2m (FY20: GBP14.2m). Management do not
consider it appropriate to disclose sensitivities for key
assumptions in isolation as in practice changes in one assumption
would lead to an offset in another.
Property Related Provisions
Property related estimates and judgements are continually
evaluated and are based on historical experience, external advice
and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Dilapidations
The Group provides for its legal responsibility for dilapidation
costs following advice from chartered surveyors and previous
experience of exit costs (including strip out costs and
professional fees). Management use a reference estimate of
GBP100,000 (FY20: GBP100,000) for large leasehold stores, GBP50,000
(FY20: GBP50,000) for smaller leasehold stores (GBP25,000 per store
for Game UK and Game Spain stores) and $/EUR50,000 (FY20:
$/EUR50,000) for non-UK stores. Management do not consider these
costs to be capital in nature and therefore dilapidations are not
capitalised, except for in relation to the sale and leaseback of
Shirebrook in the prior period in which a material dilapidations
provision was capitalised.
A 10% increase in dilapidation cost per store would result in an
approx. GBP8.0m reduction in underlying EBITDA.
Other Provisions
Provisions are made for items where the Group has identified a
present legal or constructive obligation arising as a result of a
past event, it is probable that an outflow of resources will be
required to settle the obligation and a reliable estimate can be
made of the amount of the obligation.
Legal and regulatory provisions relate to management's best
estimates of provisions required for legal and regulatory claims
and ongoing non-UK tax enquiries. Other provisions relate to
management's best estimates of provisions required for
restructuring, employment and commercial. Where applicable these
are inclusive of any estimated penalties, interest and legal costs.
See note 28 of the Annual Report and Accounts.
In relation to the non-UK tax enquiries management have made a
judgement to consider all claims collectively, applying the
following key estimates to the gross amounts (excluding
re-imbursement assets):
-- 10% penalty (FY20: 10%). A 5% increase to 15% would result in
approx. GBP6.5m increase in the provision (FY20: approx.
GBP7.0m).
-- 3% interest on the liability (FY20: 3%). A 1% increase to 4%
would result in approx. GBP11.5m increase in the provision (FY20:
approx. GBP10.0m).
Management are satisfied that the judgement to consider all
claims collectively is the only reasonable approach because they
are all dependant on the outcome of a court ruling on the
interpretation of the non-UK tax enquiries. Management are
satisfied that with regard to timing a reasonable range of outcomes
are all greater than one year and so are satisfied with including
the provisions as non-current.
Other Receivables And Amounts Owed By Related Parties
Other receivables and amounts owed by related parties are stated
net of provision for any impairment. Management have applied
estimates in assessing the recoverability of working capital and
loan advances made to investee companies. Matters considered
include the relevant financial strength of the underlying investee
company to repay the loans, the repayment period and underlying
terms of the monies advanced, forecast performance of the
underlying borrower, and where relevant, the Group's intentions for
the companies to which monies have been advanced.
IFRS 16
The key areas of judgement in relation to property leases
recognised under IFRS 16 are below:
-- IFRS 16 defines the lease term as the non-cancellable period
of a lease together with the options to extend or terminate a
lease, if the lessee were reasonably certain to exercise that
option. The Group will assess the likelihood of extending lease
contracts beyond the break date by taking into account current
economic and market conditions, current trading performance,
forecast profitability and the level of capital investment in the
property.
-- IFRS 16 states that the lease payments shall be discounted
using the lessee's incremental borrowing rate where the rate
implicit in the lease cannot be readily determined. Accordingly,
all lease payments have been discounted using the incremental
borrowing rate (IBR). The IBR has been determined by using a
synthetic credit rating for the Group which is used to obtain
market data on debt instruments for companies with the same credit
rating, this is split by currency to represent each of the
geographical areas the Group operates within and adjusted for the
lease term.
The weighted average discount rates based on incremental
borrowing rates used throughout the period across the Group's lease
portfolio are shown below. The discount rate for each lease is
dependent on lease start date, term and location.
Lease Term UK Europe Rest of
World
Up to 5 years 1.4% - 1.8% 0.3% - 0.8% 1.5% -
3.3%
------------ ------------ --------
Greater than 5 years and up to 10 2.0% - 2.2% 0.5% - 1.2% 2.5% -
years 3.5%
------------ ------------ --------
Greater than 10 years and up to 2.2% - 2.5% 0.8% - 1.4% 2.9% -
20 years 3.7%
------------ ------------ --------
Greater than 20 years 2.5% - 2.8% 1.1% - 1.7% 3.5% -
3.8%
------------ ------------ --------
-- The right of use asset will be reviewed for impairment at
each reporting period in line with IAS 36 impairment to review
whether the carrying amount exceeds its recoverable amount. For
impairment testing purposes the Group has determined that each
store is a separate CGU. The recoverable amount is calculated based
on the Group's latest forecast cash flows which are then
extrapolated to cover the period to the break date of the lease
taking into account historic performance and knowledge of the
current market, together with the Group's views on future
profitability of each CGU. The key assumptions in the calculations
are the sales growth rates, gross margin rates, changes in the
operating cost base and the pre-tax discount rate derived from the
Group's weighted average cost of capital using the capital asset
pricing model, the inputs of which include a risk-free rate, equity
risk premium and a risk adjustment (Beta). Given the number of
assumptions used the assessment involves significant estimation
uncertainty. The assumptions used are consistent with those
disclosed in the Freehold Land and Buildings and Long-term
leasehold section below. Impairments in the period have been
recognised for the amount of GBP174.9m, being GBP168.2m against the
right-of-use asset (GBP114.1m UK Sports Retail segment, GBP20.5m
Premium Lifestyle segment, GBP31.0m European Retail segment, and
GBP2.6m Rest of the World Retail segment) and GBP6.7m against plant
and equipment (GBP2.6m UK Sports Retail segment, GBP0.5m Premium
Lifestyle segment, GBP3.6m European Retail segment). The
impairments were due to the ongoing impact of Covid-19 and the
challenges in the retail sector on the forecast cash flows of the
CGU.
The key assumptions, which are equally applicable to each CGU,
in the cash flow projections used to support the carrying amount of
the right of use asset are consistent with the cashflow projections
for the Freehold land and Buildings impairment assessment.
A sensitivity analysis has been performed in respect of sales
and margin as these are considered to be the most sensitive of the
key assumptions. With regard to the sales assumption below we have
performed a sensitivity for both no lockdown in year 1 and a
lockdown which lasts four months compared to two months:
Forecast: Impact of change in Impairment increase
assumption: / (decrease) GBPm
Sales year 1 - No lockdown 15% - improvement (23.9)
---------------------- --------------------
Sales year 1 - 4 months
lockdown 15% - reduction 63.5
---------------------- --------------------
Existing Gross Margin year
1 >40% 100bps - improvement (4.6)
---------------------- --------------------
Existing Gross Margin year
1 >40% 100bps - reduction 5.3
---------------------- --------------------
Freehold Land and Buildings and Long-term leasehold
Freehold land and buildings and long-term leasehold assets are
assessed at each reporting period for whether there is any
indication of impairment in line with IAS 36 impairment.
An asset is impaired when the carrying amount exceeds its
recoverable amount. IAS 36 defines recoverable amount as the higher
of an asset's or cash-generating unit's fair value less costs of
disposal and its value in use, the Group has determined that each
store is a separate CGU. Impairments in the period have been
recognised in the amount of GBP117.9m (FY20: GBPnil) due to the
ongoing impact of Covid-19 and the challenges in the retail sector
on the forecast cash flows of the CGU. This is split GBP84.4m
against freehold land and buildings (GBP68.7m UK Sports Retail
segment and GBP15.7m European Retail segment), GBP3.9m against
long-term leasehold (GBP2.9m UK Sports Retail segment and GBP1.0m
European Retail segment), GBP29.0m plant & equipment (GBP15.1m
UK Sports Retail segment, GBP8.8m Premium Lifestyle segment,
GBP5.1m European Retail segment), and GBP0.6m investment property
(all UK Sports Retail segment).
Value In Use (VIU)
The value in use is calculated based on five year cash flow
projections. These are formulated by using the Group ' s forecast
cash flows of each individual CGU excluding any Covid-19 impact,
taking into account historic performance of the CGU, and then
adjusting for the Group ' s current views on future profitability
of each CGU as a result of Covid-19 and knowledge of the current
market. The key assumptions in the calculations are the sales
growth rates, gross margin rates, changes in the operating cost
base and the pre-tax discount rate derived from the Group's
weighted average cost of capital using the capital asset pricing
model, the inputs of which include a risk-free rate, equity risk
premium and a risk adjustment (Beta). Given the number of
assumptions used the assessment involves significant estimation
uncertainty.
The key assumptions, which are equally applicable to each CGU,
in the cash flow projections used to support the carrying amount of
the freehold land and buildings were as follows:
Key assumptions Year 1 Year 2 Year 3 Year 4 Year 5
--------------------------- ---------- ---------- ---------- ---------- ----------
Sales decline -15% -5% -4% -3% -2%
---------- ---------- ---------- ---------- ----------
Existing gross margin -100bps -175bps -150bps -125bps -100bps
> 40%
---------- ---------- ---------- ---------- ----------
Operating costs increase
per annum 3% 3% 3% 3% 3%
---------- ---------- ---------- ---------- ----------
Discount rate 6% 6% 6% 6% 6%
---------- ---------- ---------- ---------- ----------
Terminal growth rate
of 2%
----------------------------------------------------------
A sensitivity analysis has been performed in respect of sales
and margin as these are considered to be the most sensitive of the
key assumptions. With regard to the sales assumption below we have
performed a sensitivity for both no lockdown in year 1 and a
lockdown which lasts four months compared to two months:
Forecast: Impact of: Impairment increase
/ (decrease) GBPm
Sales year 1 - No lockdown 15% - improvement (53.3)
---------------------- --------------------
Sales year 1 - 4 months
lockdown 15% - reduction 57.6
---------------------- --------------------
Existing Gross Margin year
1 >40% 100bps - improvement (7.4)
---------------------- --------------------
Existing Gross Margin year
1 >40% 100bps - reduction 9.3
---------------------- --------------------
Fair value less costs of disposal
For those CGUs where the value in use is less than the carrying
value of the asset, the fair value less costs of disposal has been
determined using both external and internal market valuations. This
fair value is deemed to fall in to Level 3 of the fair value
hierarchy as per IFRS 13. The property portfolio consists of
vacant, Frasers Group occupied and third party tenanted units, one
property can include all three types. The following valuation
methodology has been adopted for each:
Scenario Valuation methodology Key assumptions
Vacant units Estimated Rental Value (ERV) and Void period and rent free band
suitable reversionary yield applied - two bands applied depending
to on circumstances:
reflect the market to generate * 1 year void, 2 years rent free; or
a net capital value. A deduction
to the
capital value generated is then * 2 years void, 3 years rent free.
made based on the void period with
applicable rates payable for the
unit and rent free incentive . Yield bands - ranging from 7%
- 15%
--------------- --------------------------------------- -------------------------------------------
Frasers Group Will be assumed the unit is vacant Void period and rent free band
occupied given there is no legally binding - two bands applied depending
Inter-company agreement in place. on circumstances:
Therefore a void and rent free * 1 year void, 2 years rent free; or
incentive period assumed, the cost
amount then deducted from the
capital value generated by the * 2 years void, 3 years rent free.
ERV and reversionary yield. Although
we
consider the commercial reality Yield bands - ranging from 7%
is that fair value less costs to - 15%
sell will be
higher than vacant possession this
very conservative assumption is
in
line with both technical accounting
rules and that of our management
experts.
--------------- --------------------------------------- -------------------------------------------
Third party An ERV is applied using a percentage ERV bands applied to passing rent
tenanted band on the passing rent. An - ranging from 0% to -50%.
appropriate reversionary yield Yield bands - ranging from 6.5%
is applied reflecting the risk - 15%
of tenant and
renewal to generate a capital value.
This will also provide a net initial
yield based off the current passing
rent.
--------------- --------------------------------------- -------------------------------------------
A 10% increase in the market valuation amounts used in the
impairment calculations would result in a decrease in impairment of
GBP7.5m.
The total recoverable amount of the assets that were impaired at
the period end was GBP170.0m, with GBP87.0m of this being based on
their fair value less costs of disposal and GBP83.0m being based on
their value in use.
Key Estimates In Relation To Alternative Performance
Measures
The Directors believe that underlying EBITDA, underlying Profit
before tax and underlying basic EPS provide further useful
information for shareholders on the underlying performance of the
Business in addition to the reported numbers and are consistent
with how business performance is measured internally. They are not
recognised profit measures under IFRS and may not be directly
comparable with "adjusted" profit measures used by other
companies.
EBITDA is earnings before investment income, finance income and
finance costs, tax, depreciation, amortisation and impairment. It
includes the Group's share of losses from associated undertakings
and joint ventures. Underlying EBITDA excludes the impact of IFRS
16, foreign exchange gains/losses in selling and administration
costs, exceptional costs, and the profit / loss on disposal of
subsidiaries, strategic investments and properties. Underlying
EBITDA also excludes fair value adjustments on step
acquisitions.
Management will from FY22 change our main reporting KPI from
Underlying EBITDA to Adjusted PBT. Thus from FY22 the Group will no
longer report Underlying EBITDA. Adjusted PBT is Reported Profit
Before Tax less the effects of unhedged FX, exceptional items, and
gains and losses on strategic investments. Management have taken
this decision for the following reasons:
-- With the continued significant investment in and roll out of
our elevation strategy on both the physical and digital fronts, the
importance of depreciation and amortisation to both the Board and
our stakeholders in terms of assessing performance has grown.
-- Our understanding from a number of financial sectors
including the banking sector is that IFRS16 is becoming an
increasingly important consideration, including on covenants in
many new financing arrangements.
-- With this new measure being introduced we are trying to align
with the Financial Reporting Council's thematic standpoint with
regard to 'alternative performance measures' as far as possible
whilst retaining a degree of interpretation given factors outside
of our control, such as FX and strategic investments movements
which are exceptionally difficult to forecast, particularly months
in advance.
--
The following are further key estimates used with regard to the
alternative performance measures used by the group.
Onerous lease provision
Provisions for onerous lease contracts are recognised when the
unavoidable costs of meeting lease obligations exceed the economic
benefits expected to be received over the term of the lease. Where
an onerous lease has been identified, the property, plant and
equipment associated to that store are also reviewed for
impairment.
Management use store EBITDA in order to determine whether an
onerous lease exists. Specific assumptions, which involve the use
of estimates and involve significant estimation uncertainty, that
are used to determine the appropriate level of provision are
consistent with the cashflow projections for the Freehold land and
Buildings assessment except for the following:
-- Discount rate 2% (FY20: 2%) across the Group
-- Operating costs increase 3% (FY20: 3%) across the Group
-- Store profitability includes 100% contribution towards central overheads
-- Assumed get out cap of 10 years (FY20: 10 years), being the
maximum period for total unavoidable costs
-- Planned store closures, relocations and re-brandings
A sensitivity analysis has been performed in respect of sales
and margin as these are considered to be the most sensitive of the
key assumptions. With regard to the sales assumption below we have
performed a sensitivity for both no lockdown in year 1 and a
lockdown which lasts four months compared to two months:
Forecast: Impact of: Provision increase /
(decrease) GBPm
Sales year 1 - No lockdown 15% - improvement (104.4)
---------------------- ---------------------
Sales year 1 - 4 months
lockdown 15% - reduction 151.0
---------------------- ---------------------
Existing Gross Margin year
1 >40% 100bps - improvement (12.6)
---------------------- ---------------------
Existing Gross Margin year
1 >40% 100bps - reduction 12.5
---------------------- ---------------------
Further information on the basis of the estimation of
provisioning for dilapidations and onerous lease contracts is
detailed in the provisions accounting policy and note 28 in the
Annual Report and Accounts.
Impairments of plant and equipment and short-term leasehold
improvements of GBP24.2m have also been recognised as a result of
identified onerous lease contracts (GBP6.4m UK Sports Retail
segment, GBP2.7m Premium Lifestyle segment, GBP15.1m European
Retail segment).
2. SEGMENTAL ANALYSIS
Management has determined to present its segmental disclosures
consistently with the presentation in the 2020 Annual Report.
Management considers operationally that the UK Retail divisions (UK
Sports Retail and Premium Lifestyle) are run as one business unit
in terms of allocating resources, inventory management and
assessing performance. Under IFRS 8 we have not at this reporting
date met the required criteria with enough certainty to aggregate
these operating segments. We will continually keep this under
review at subsequent reporting dates. We continue to monitor the
impacts of Covid-19, Brexit, and the continued uncertainties this
has brought relating to the political and economic environments,
and market and currency volatility in the countries we operate in.
European countries have been identified as operating segments and
have been aggregated into a single operating segment as permitted
under IFRS 8. The decision to aggregate these segments was based on
the fact that they each have similar economic characteristics,
similar long-term financial performance expectations, and are
similar in each of the following respects:
-- The nature of the products;
-- The type or class of customer for the products; and
-- The methods used to distribute the products.
In accordance with paragraph 12 of IFRS 8 the Group's operating
segments have been aggregated into the following reportable
segments:
1) UK Retail:
i) UK Sports Retail - includes core sports retail store
operations in the UK, plus all the Group's sports retail online
business (excluding Bob's Stores, Eastern Mountain Sports, Malaysia
and Baltics), the gyms, the Group's Shirebrook campus operations,
GAME UK stores and online operations, and retail store operations
in Northern Ireland.
ii) Premium Lifestyle - includes the results of the premium
retail businesses Flannels, Cruise, Van Mildert, Jack Wills, House
of Fraser and Sofa.com along with related websites.
2) European Retail - includes all the Group's sports retail
stores, management and operations in Europe including the Group's
European Distribution Centres in Belgium and Austria, as well as
GAME Spain stores and Baltics online.
3) Rest of World Retail - includes the results of US based
retail activities, Asia based retail activities, along with their
e-commerce offerings.
4) Wholesale & Licensing - includes the results of the
Group's portfolio of internationally recognised brands such as
Everlast, Karrimor, Lonsdale and Slazenger.
It is management's current intention to run the Group as four
operating segments being UK Retail (including UK Sports Retail and
Premium Lifestyle), European Retail, Rest of World Retail and
Wholesale & Licensing. Management is satisfied that the UK
Sports Retail and Premium Lifestyle will meet the criteria
permitted under IFRS 8 to aggregate as one segment in due
course.
Segmental information for the 52 weeks ended 25 April 2021:
UK Rest of Wholesale
UK Premium Retail European World Total & Group
Sports Lifestyle Total Retail Retail Retail Licensing Eliminations Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Sales to
external
customers 1,968.5 735.6 2,704.1 615.2 152.7 3,472.0 153.3 - 3,625.3
Sales to other
segments - - - - - - 95.4 (95.4) -
Revenue 1,968.5 735.6 2,704.1 615.2 152.7 3,472.0 248.7 (95.4) 3,625.3
Gross profit 829.3 330.3 1,159.6 239.7 64.0 1,463.3 67.5 - 1,530.8
Operating
profit/(loss)
before
foreign
exchange,
exceptional
items,
disposal of
properties
and IFRS 16 29.7 22.0 51.7 (68.6) 19.6 2.7 20.2 - 22.9
Exceptional
items (4.4) (1.6) (6.0) (3.1) - (9.1) - - (9.1)
Profit on
disposal of
intangible
assets 7.5 - 7.5 - - 7.5 - - 7.5
Profit on sale
of properties 1.0 - 1.0 8.8 (0.1) 9.7 - - 9.7
Foreign
exchange
realised (20.2) (0.2) (20.4) 0.8 (1.4) (21.0) (5.3) - (26.3)
IFRS 16
adjustment (71.9) 1.7 (70.2) 8.7 (3.5) (65.0) - - (65.0)
Operating
(loss)/profit (58.3) 21.9 (36.4) (53.4) 14.6 (75.2) 14.9 - (60.3)
Investment
income 103.7
Investment
costs (7.7)
Finance income 9.0
Finance costs (36.2)
Profit before
taxation 8.5
Taxation (86.5)
Loss for the
period (78.0)
Other segment items included in the income statement for the 52
weeks ended 25 April 2021:
UK Rest of Wholesale
UK Premium Retail European World Total & Group
Sports Lifestyle Total Retail Retail Retail Licensing Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Property, plant & equipment
depreciation 153.8 20.4 174.2 35.3 5.7 215.2 1.2 216.4
Property, plant & equipment
impairment 95.6 12.0 107.6 40.6 - 148.2 - 148.2
IFRS 16 ROU depreciation 51.5 6.4 57.9 21.9 2.3 82.1 - 82.1
IFRS 16 ROU impairment 114.1 20.5 134.6 31.0 2.6 168.2 - 168.2
Investment property
depreciation 1.9 - 1.9 - - 1.9 - 1.9
Investment property
impairment 0.6 - 0.6 - - 0.6 - 0.6
IFRS 16 disposal and
modification/remeasurement
of lease liabilities (20.0) (5.6) (25.6) (1.4) (0.7) (27.7) - (27.7)
Intangible amortisation - - - 0.5 - 0.5 6.6 7.1
Intangible impairment 3.7 2.3 6.0 3.1 - 9.1 - 9.1
Information regarding segment assets and liabilities as at 25
April 2021 and capital expenditure for the 52 weeks then ended:
Rest
Of Wholesale
Premium UK Retail European World Total & Group
UK Sports Lifestyle Total Retail Retail Retail Licensing Eliminations Total
Total assets 3,535.2 438.7 3,973.9 670.8 158.6 4,803.3 344.7 (1,362.9) 3,785.1
Total
liabilities (2,357.8) (499.6) (2,857.4) (857.0) (95.1) (3,809.5) (127.5) 1,362.9 (2,574.1)
Tangible
asset
additions 174.6 21.9 196.5 17.4 3.0 216.9 2.5 - 219.4
Right of use
asset
additions 77.5 14.1 91.6 24.3 2.4 118.3 0.5 - 118.8
Intangible
assets
acquired 3.7 2.3 6.0 - - 6.0 1.0 - 7.0
Segmental information for the 52 weeks ended 26 April 2020:
UK Rest Of Wholesale
UK Premium Retail European World Total & Group
Sports Lifestyle Total Retail Retail Retail Licensing Eliminations Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Sales to
external
customers 2,203.3 722.0 2,925.3 697.7 174.2 3,797.2 160.2 - 3,957.4
Sales to
other
segments - - - - - - 17.8 (17.8) -
Revenue 2,203.3 722.0 2,925.3 697.7 174.2 3,797.2 178.0 (17.8) 3,957.4
Gross profit 903.2 348.6 1,251.8 267.9 77.4 1,597.1 65.5 - 1,662.6
Operating
profit /
(loss)
before
foreign
exchange,
exceptional
items and
IFRS 16 145.6 (18.0) 127.6 14.5 (11.6) 130.5 11.4 - 141.9
Exceptional
items (2.7) (6.9) (9.6) (3.5) - (13.1) - - (13.1)
Profit on
sale of
properties 33.2 - 33.2 21.0 - 54.2 - - 54.2
Foreign
exchange
realised 29.5 1.4 30.9 4.1 0.4 35.4 (0.5) - 34.9
IFRS 16
adjustments 2.3 (9.7) (7.4) (46.5) 7.9 (46.0) - - (46.0)
Operating
profit /
(loss) 207.9 (33.2) 174.7 (10.4) (3.3) 161.0 10.9 - 171.9
Investment
income 15.2
Investment
costs (49.8)
Finance
income 31.0
Finance cost (29.3)
Share of loss
of
associated
undertakings (15.9)
Fair value
gain on step
acquisition 20.4
Profit before
taxation 143.5
Taxation (42.5)
Profit for
the period 101.0
Sales to other segments are priced at cost plus a 10%
mark-up.
Other segment items included in the income statement for the 52
weeks ended 26 April 2020:
UK Rest Of Wholesale
Premium Retail European World Total & Group
UK Sports Lifestyle Total Retail Retail Retail Licensing Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Depreciation 98.5 20.7 119.2 39.4 4.8 163.4 1.4 164.8
IFRS 16 ROU
depreciation/Impairment 113.1 16.1 129.2 77.0 13.3 219.5 - 219.5
IFRS 16 disposal of
lease liabilities (2.7) (0.2) (2.9) (6.4) (0.4) (9.7) - (9.7)
Exceptional Impairment 2.7 6.9 9.6 3.5 - 13.1 - 13.1
Amortisation/Impairment 2.1 2.0 4.1 3.9 - 8.0 12.4 20.4
Information regarding segment assets and liabilities as at 26
April 2020 and capital expenditure for the 52 weeks then ended:
Rest Of Wholesale
Premium UK Retail European World Total & Group
UK Sports Lifestyle Total Retail Retail Retail Licensing Eliminations Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Total assets 3,324.9 474.7 3,799.6 455.9 128.6 4,384.1 344.3 (860.2) 3,868.2
Total
liabilities (1,986.8) (556.1) (2,542.9) (627.0) (195.1) (3,365.0) (83.1) 860.2 (2,587.9)
Tangible
asset
additions 236.8 25.4 262.2 48.7 12.5 323.5 - - 323.5
Right of use
asset
additions 50.6 22.9 73.5 25.5 2.2 101.2 - - 101.2
Intangible
assets
acquired 2.7 8.9 11.6 3.1 - 14.7 - - 14.7
Geographic Information
Segmental information for the 52 weeks ended 25 April 2021:
UK Europe USA Asia Eliminations Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Segmental revenue from external customers 2,721.7 646.2 213.7 43.7 - 3,625.3
Total capital expenditure 196.5 17.4 3.2 2.3 - 219.4
Non-current segment assets * 1,052.3 114.9 127.7 4.6 - 1,299.5
Total segmental assets 4,264.7 589.2 256.2 37.9 (1,362.9) 3,785.1
*Excludes deferred tax and financial instruments.
Segmental information for the 52 weeks ended 26 April 2020:
UK Non-UK US Asia Eliminations Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Segmental revenue from external customers 2,951.0 722.3 235.2 48.9 - 3,957.4
Total capital expenditure 262.5 56.8 1.9 2.3 - 323.5
Non-current segmental assets * 1,172.6 113.1 210.4 13.8 - 1,509.9
Total segmental assets 3,861.1 473.3 354.5 39.5 (860.2) 3,868.2
*Excludes deferred tax and financial instruments.
Material non-current segmental assets - by a non-UK country:
USA Belgium Austria Estonia Ireland Spain
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
FY21 127.7 46.8 22.4 - 12.9 39.9
FY20 173.8 41.2 30.3 24.2 52.9 36.7
Material segmental revenue from external customers - by a non-UK
country:
USA Belgium Austria Estonia Ireland Spain
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
FY21 213.7 93.1 42.1 96.7 95.4 208.1
FY20 235.2 95.5 55.2 103.1 147.3 184.1
Note the Group has no individual customer which accounts for
more than 10% of revenue in the current or prior period.
The following table reconciles the reported operating profit to
the underlying EBITDA as it has been one of the main measures used
by the Chief Operating Decision Maker when reviewing performance
during the period:
Reconciliation of operating (loss)/profit to underlying EBITDA
for the 52 week period ended 25 April 2021:
UK UK Rest of Wholesale
Sports Premium Retail European World Retail & Group
Retail Lifestyle Total Retail Retail Total Licensing Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Operating (loss) / profit (58.3) 21.9 (36.4) (53.4) 14.6 (75.2) 14.9 (60.3)
IFRS 16 disposal and
modification/remeasurement
of lease liabilities (20.0) (5.6) (25.6) (1.4) (0.7) (27.7) - (27.7)
IFRS 16 ROU depreciation 51.5 6.4 57.9 21.9 2.3 82.1 - 82.1
IFRS 16 ROU impairment 114.1 20.5 134.6 31.0 2.6 168.2 - 168.2
PPE depreciation (including
investment property) 155.7 20.4 176.1 35.3 5.7 217.1 1.2 218.3
PPE impairment (including
investment property) 96.2 12.0 108.2 40.6 - 148.8 - 148.8
Intangible amortisation - - - 0.5 - 0.5 6.6 7.1
Reported EBITDA 339.2 75.6 414.8 74.5 24.5 513.8 22.7 536.5
(Profit)/loss on sale of
properties (1.0) - (1.0) (8.8) 0.1 (9.7) - (9.7)
Exceptional items (3.1) 1.6 (1.5) 3.1 - 1.6 - 1.6
IFRS 16 adjustments (1) (76.1) (23.5) (99.6) (63.9) (0.4) (163.9) - (163.9)
Realised FX loss / (gain) 20.2 0.2 20.4 (0.8) 1.4 21.0 5.3 26.3
Underlying EBITDA 279.2 53.9 333.1 4.1 25.6 362.8 28.0 390.8
(1) Relates to the reversal of IFRS 16 rent and onerous lease
provisions.
Reconciliation of operating profit to underlying EBITDA for the
52 week period ended 26 April 2020:
UK Rest Of Wholesale
Premium Retail European World Total & Group
UK Sports Lifestyle Total Retail Retail Retail Licensing Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
Operating profit /
(loss) 207.9 (33.2) 174.7 (10.4) (3.3) 161.0 10.9 171.9
IFRS 16 Disposal of
lease liability (2.7) (0.3) (3.0) (6.4) (0.4) (9.8) - (9.8)
IFRS 16 ROU
depreciation/impairment 113.1 16.1 129.2 77.0 13.3 219.5 - 219.5
IFRS 16 PPE impairment 3.2 - 3.2 6.0 - 9.2 - 9.2
Depreciation 95.3 20.6 115.9 33.5 4.8 154.2 1.4 155.6
Amortisation/impairment 2.1 2.0 4.1 3.9 - 8.0 12.5 20.5
Share of loss of
associated undertakings (15.9) - (15.9) - - (15.9) - (15.9)
Reported EBITDA 403.0 5.2 408.2 103.6 14.4 526.2 24.8 551.0
Profit on sale of
properties (33.2) - (33.2) (21.0) - (54.2) - (54.2)
Exceptional items 2.7 6.9 9.6 3.5 - 13.1 - 13.1
IFRS 16 adjustments (1) (115.9) (6.1) (122.0) (30.1) (20.8) (172.9) - (172.9)
Realised FX (gain) /
loss (29.2) (1.5) (30.7) (4.2) (0.4) (35.3) 0.4 (34.9)
Underlying EBITDA 227.4 4.5 231.9 51.8 (6.8) 276.9 25.2 302.1
(1) Relates to the reversal of IFRS 16 rent and onerous lease
provisions.
3. EXCEPTIONAL ITEMS
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Impairments (9.1) (13.1)
Profit on disposal of intangible assets 7.5 -
--------------- ---------------
(1.6) (13.1)
The impairment in both the current and prior year relates to
goodwill, whereby the discounted present value of future cash flows
do not support the full value of the assets. The profit on disposal
of intangible assets relates to the sale of certain IP relating to
the BELONG business.
.
4. INVESTMENT INCOME
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Profit on disposal of financial assets and equity derivative financial instruments 27.4 7.4
Premium received on derivative financial instruments 20.6 -
Fair value gain on equity derivative financial instruments 55.2 7.3
Dividend income 0.5 0.5
103.7 15.2
The profit on disposal of financial assets mainly relates to
Hugo Boss contracts for difference. The fair value gain on equity
derivative financial instruments mainly relates to Hugo Boss
options and contracts for difference. The premium received on
derivative financial instruments mainly relates to Hugo Boss
options.
5. INVESTMENT COSTS
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Loss on disposal of financial assets and equity derivative financial instruments - 14.0
Fair value loss on equity derivative financial instruments 7.7 35.8
7.7 49.8
The fair value loss on equity derivatives in the current period
mainly relates to movements in contracts for difference.
The loss on disposal recognised in the prior period mainly
relates to the sale of equity derivatives. The fair value loss on
equity derivatives in the prior period mainly relates to Hugo Boss
options and commodities.
6. FINANCE INCOME
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Bank interest receivable 3.5 1.6
Other finance income 5.5 8.1
Fair value adjustment to derivative financial instruments - 21.3
9.0 31.0
The fair value adjustment to derivative financial instruments
relates to differences between the fair value of forward foreign
currency contracts and written options that were not designated for
hedge accounting from one period end to the next. Other finance
income largely relates to premiums received on option contracts
.
7. FINANCE COSTS
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Interest on bank loans and overdrafts 11.1 17.9
Other interest 8.6 0.4
Interest on retirement benefit obligations 0.1 0.1
IFRS 16 lease interest 11.8 10.9
Fair value adjustment to derivative financial instruments 4.6 -
36.2 29.3
The fair value adjustment to derivative financial instruments
relates to differences between the fair value of forward foreign
currency contracts and written options that were not designated for
hedge accounting from one period end to the next.
8. TAXATION
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
------------------------------------------------------------------- --------------- ---------------
Current tax 83.2 57.2
--------------- ---------------
Adjustment in respect to prior periods 13.6 3.9
--------------- ---------------
Total current tax 96.8 61.1
--------------- ---------------
Deferred tax (10.1) (25.8)
--------------- ---------------
Adjustment in respect of prior periods (0.2) 7.2
--------------- ---------------
Total deferred tax (10.3) (18.6)
--------------- ---------------
86.5 42.5
--------------- ---------------
Profit before taxation 8.5 143.5
--------------- ---------------
Taxation at the standard rate of tax in the UK of 19% (2020: 19%) 1.6 27.3
--------------- ---------------
Non-taxable income (3.9) (22.4)
--------------- ---------------
Expenses not deductible for tax purposes 77.0 19.0
--------------- ---------------
Other tax adjustments (1.6) 9.6
--------------- ---------------
Adjustments in respect of prior periods - current tax 13.6 3.9
--------------- ---------------
Adjustments in respect of prior periods - deferred tax (0.2) 7.2
--------------- ---------------
Changes in deferred tax rate - (2.1)
--------------- ---------------
86.5 42.5
--------------- ---------------
Non-taxable income largely relates to profits on property
disposal due to differences between capital allowances and
depreciation. Expenses not deductible for tax purposes relate to
non-qualifying depreciation, impairments, and fair valuation of
investments.
9. EARNINGS PER SHARE FROM TOTAL AND CONTINUING OPERATIONS
ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders of the parent by the weighted
average number of ordinary shares outstanding during the year.
For diluted earnings per share, the weighted average number of
shares, 501,955,281 (FY20: 505,826,890), is adjusted to assume
conversion of all dilutive potential ordinary shares under the
Group's share schemes, being 88,605 (FY20: 1,239,075), to give the
diluted weighted average number of shares of 502,043,886 (FY20:
507,065,965). However, as there is a loss for the period ended 25
April 2021, the effect of potentially dilutive ordinary shares is
anti-dilutive, and therefore the weighted average number of shares
for the Diluted EPS calculation has been kept the same as for the
Basic EPS calculation for the current period.
Basic And Diluted Earnings Per Share
Basic and Diluted EPS 2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
Basic Diluted Basic Diluted
(Loss)/profit for the period (83.0) (83.0) 93.8 93.8
Number in thousands Number in thousands
Weighted average number of shares 501,955 501,955 505,827 507,066
Pence per share Pence per share
Earnings per share (16.5) (16.5) 18.5 18.5
Underlying Earnings Per Share
The underlying earnings per share reflects the underlying
performance of the business compared with the prior period and is
calculated by dividing underlying earnings by the weighted average
number of shares for the period. Underlying earnings is used by
management as a measure of profitability within the Group.
Underlying earnings is defined as (loss)/profit for the period
attributable to equity holders of the parent for each financial
period but excluding the post-tax effect of certain non-trading
items. Tax has been calculated with reference to the effective rate
of tax for the Group.
The Directors believe that the underlying earnings before
exceptional items and underlying earnings per share measures
provide additional useful information for shareholders on the
underlying performance of the business and are consistent with how
business performance is measured internally. Underlying earnings is
not a recognised profit measure under IFRS and may not be directly
comparable with "adjusted" profit measures used by other companies
.
52 Weeks Ended 52 Weeks Ended
25 April 2021 25 April 2021 26 April 2020 26 April 2020
(GBP'm) (GBP'm) (GBP'm) (GBP'm)
Basic Diluted Basic Diluted
(Loss)/profit for the period (83.0) (83.0) 93.8 93.8
Post tax adjustment to (loss)/profit
for the period for the following
items:
Realised loss/(gain) on forward foreign
exchange contracts 19.7 19.7 (26.1) (26.1)
Fair value adjustment to forward foreign
exchange contracts 3.4 3.4 (16.0) (16.0)
Fair value gain on step acquisition - - (20.4) (20.4)
Fair value adjustment to derivative
financial instruments (47.5) (47.5) 26.9 26.9
Dividend income and profit on disposal of
financial assets and equity derivative
financial
instruments (48.5) (48.5) 7.7 7.7
Profit on disposal of properties (9.7) (9.7) (54.2) (54.2)
Impairment of goodwill 9.1 9.1 13.1 13.1
Profit on disposal of intangible assets (5.6) (5.6) - -
IFRS 16 adjustments 76.8 76.8 56.9 56.9
-------------------------------------------- -------------- -------------- -------------- --------------
Underlying (loss)/profit for the period (85.3) (85.3) 81.7 81.7
-------------------------------------------- -------------- -------------- -------------- --------------
Number in thousands Number in thousands
Shares in issue at the period end 501,955 501,955 505,827 507,066
Pence per share Pence per share
Earnings per share (17.0) (17.0) 16.2 16.1
-------------------------------------------- -------------- -------------- -------------- --------------
10. PROPERTY, PLANT AND EQUIPMENT
Right of use Freehold Land Long-term Short-term Plant and Total (GBP'm)
asset (GBP'm) and Buildings Leasehold Leasehold equipment
(GBP'm) (GBP'm) improvements (GBP'm)
(GBP'm)
COST
At 28 April 2019 - 747.3 68.0 133.7 623.8 1,572.8
Recognised on
adoption of IFRS
16 422.5 - - - - 422.5
Acquisitions 18.8 25.4 0.5 - 6.1 50.8
Additions 101.2 177.2 2.2 15.4 128.7 424.7
Eliminated on
disposals (20.9) (33.5) (0.3) (16.7) (21.8) (93.2)
Reclassifications
/ Remeasurements
(1) 2.8 - - - 33.0 35.8
Exchange
differences - 2.5 0.2 (0.8) 2.8 4.7
At 26 April 2020 524.4 918.9 70.6 131.6 772.6 2,418.1
Acquisitions (see
note 13) 2.1 0.5 - - 29.0 31.6
Additions 118.8 84.3 4.3 2.0 128.8 338.2
Eliminated on
disposals (48.1) (16.5) (0.7) (6.0) (57.4) (128.7)
Reclassifications
/ Remeasurements
(3) 76.4 (79.4) 79.2 0.1 8.7 85.0
Exchange
differences (4.5) (2.4) (0.1) (0.3) (2.9) (10.2)
At 25 April 2021 669.1 905.4 153.3 127.4 878.8 2,734.0
ACCUMULATED
DEPRECIATION AND
IMPAIRMENT
At 28 April 2019 - (132.8) (14.2) (117.7) (484.9) (749.6)
Recognised on
adoption of IFRS
16 - - - - (6.2) (6.2)
Charge for the
period (2) (219.6) (47.8) (2.5) (7.0) (104.2) (381.1)
Eliminated on
disposals - 27.8 0.1 10.0 24.8 62.7
Exchange
differences 0.9 (0.5) (0.1) 0.8 2.6 3.7
At 26 April 2020 (218.7) (153.3) (16.7) (113.9) (567.9) (1,070.5)
Charge for the
period (82.1) (74.5) (11.6) (11.5) (118.8) (298.5)
Impairment (168.2) (84.4) (3.9) (0.1) (59.8) (316.4)
Eliminated on
disposals 47.5 11.2 0.3 6.7 54.4 120.1
Reclassifications
/ Remeasurements
(3) - 18.1 (17.9) - (8.8) (8.6)
Exchange
differences 2.1 0.2 0.1 0.1 2.3 4.8
At 25 April 2021 (419.4) (282.7) (49.7) (118.7) (698.6) (1,569.1)
NET BOOK VALUE
At 25 April 2021 249.7 622.7 103.6 8.7 180.2 1,164.9
At 26 April 2020 305.7 765.6 53.9 17.7 204.7 1,347.6
At 28 April 2019 - 614.5 53.8 16.0 138.9 823.2
(1) The GBP33.0m was reclassified due to Shirebrook warehouse
plant and equipment not forming part of the final sale and
leaseback completed during the prior year.
(2) In the prior period there is no separate disclosure of
impairment from depreciation in respect of the property, plant and
equipment. Total impairment in FY20 was GBP122.6m of which GBP97.8m
related to the Right-of-use assets.
(3) In the current period a number of properties were identified
that were previously classified within Freehold Land and Buildings
but management believe it to be more appropriate to classify within
Long-term Leasehold. These have therefore been adjusted in the
period as reclassifications.
Note 1 provides further detail on the property related
impairments (relating to ROU assets, freehold land and buildings
and onerous lease provisions).
Leases
The Group adopted IFRS 16 on 29 April 2019. The Group only has
property leases within the scope of IFRS 16, including retail
stores, offices and warehouses. Leases are largely for a period
between 1 - 15 years typically with break clauses. It is
management's intention to continue to enter into turnover linked
leases in the future.
The Group presents right-of-use assets that do not meet the
definition of investment property in 'property, plant and
equipment', the same line item as it presents underlying assets of
the same nature that it owns. The carrying amount and movements in
the period can be seen in the table above.
Lease liabilities are presented separately within the
Consolidated Balance Sheet. The maturity analysis of lease
liabilities is show in note 29e of the Annual Report and Accounts.
Interest expense on the lease liability is presented as a component
of finance costs as per note 7 . Cash payments for the principal
portion and the interest portion of the lease liability are
presented in the Consolidated Cash Flow Statement with further
details given in note 12.
The Group is party to a number of leases that are classed as
short term leases and with variable lease payments. These are
typically property leases on turnover based rents. Note 8 of the
Annual Report and Accounts discloses variable lease payments and
short term and low value lease expenses incurred in the period .
Cash flows in the period relating to variable lease payments, short
term lease payments, and leases for low value assets were approx.
GBP24m (FY20: approx. GBP72m). It is expected that future cash
flows will not be materially different to the FY20 cash flows.
Leases to which the Group is committed but have not yet
commenced at period end are not considered to be material.
11. LONG-TERM FINANCIAL ASSETS
The Group is not looking to make gains through increases in
market prices of its long-term financial assets, therefore on
initial application of IFRS 9 the Group made the irrevocable
election to account for long term financial assets at fair value
through other comprehensive income (FVOCI). The election has been
made on an instrument-by-instrument basis, only qualifying dividend
income is recognised in profit and loss, changes in fair value are
recognised within OCI and never reclassified to profit and loss,
even if the asset is impaired, sold or otherwise derecognised. The
majority of long-term financial assets are recognised in the UK
Sports segment.
The fair value of the long-term financial assets is based on bid
quoted market prices at the balance sheet date or where market
prices are not available, at management's estimate of fair
value.
The following table shows the aggregate movement in the Group's
financial assets during the period:
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
At beginning of period 83.8 84.6
Additions 113.3 24.8
Disposals (7.0) (5.9)
Amounts recognised through other comprehensive income 77.3 (19.7)
Exchange differences (4.1) -
263.3 83.8
Included within long-term financial assets at the period ended
25 April 2021 are the following direct interests held by the
group:
-- 36.8% (FY20: 12.5%) interest in Mulberry Group plc
-- 35.6% (FY20: 36.9%) interest in Studio Retail Group plc
-- 5.1% (FY20: 0.2%) interest in Hugo Boss AG
-- Various other interests, none of which represent more than
5.0% of the voting power of the investee
During the period the Group sold its 26.1% interest in French
Connection Group plc due to it no longer being considered part of
the Group's long-term strategy. The fair value at the date of
derecognition was GBP2.6m with the GBP1.7m gain on disposal being
recognised in investment income.
The following table shows the fair value of each of the Group's
long-term financial assets (all listed):
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Mulberry Group plc 52.0 14.6
Studio Retail Group plc 89.7 61.2
Hugo Boss AG 118.7 2.4
French Connection Group plc - 1.6
Other 2.9 4.0
At end of period 263.3 83.8
These holdings have been assessed under IFRS 9 Financial
Instruments and categorised as long-term financial assets, as the
Group does not consider them to be associates and therefore, they
are not accounted for on an equity basis, see note 1.
Our strategic investments are intended to allow us to develop
relationships and commercial partnerships with the relevant
retailers and assist in building relationships with key suppliers
and brands.
12. BORROWINGS
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
---------------------- -------------- --------------
CURRENT:
Lease liabilities 188.5 147.9
-------------- --------------
NON-CURRENT:
Bank and other loans 705.9 900.0
-------------- --------------
Lease liabilities 534.2 476.2
-------------- --------------
Total 1,428.6 1,524.1
-------------- --------------
An analysis of the Group's total borrowings other than bank
overdrafts is as follows:
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Borrowings - sterling 705.9 900.0
As at period end, loans are at a rate of interest of 1.3% (FY20:
1.3%) over the interbank rate of the country within which the
borrowing entity resides.
Reconciliation Of Liabilities Arising From Financing
Activities
The changes in the Group's liabilities arising from financing
activities can be classified as follows:
Non-current borrowings Current borrowings Share buy backs Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm)
------------------------------------------ ----------------------- ------------------- ---------------- ----------
At 28 April 2019 826.5 - 30.0 856.5
----------------------- ------------------- ---------------- ----------
Cash-flows:
----------------------- ------------------- ---------------- ----------
- Borrowings drawn down 510.0 - - 510.0
----------------------- ------------------- ---------------- ----------
- Borrowings repaid (436.5) - - (436.5)
----------------------- ------------------- ---------------- ----------
- Share buy back - - (43.9) (43.9)
----------------------- ------------------- ---------------- ----------
Lease liability:
----------------------- ------------------- ---------------- ----------
- IFRS 16 Lease Liabilities 459.8 136.3 - 596.1
----------------------- ------------------- ---------------- ----------
- IFRS 16 Lease Liabilities -
Acquisitions 16.4 11.6 - 28.0
----------------------- ------------------- ---------------- ----------
Non-cash movements:
----------------------- ------------------- ---------------- ----------
- Share buy back - - 13.9 13.9
----------------------- ------------------- ---------------- ----------
At 26 April 2020 1,376.2 147.9 - 1,524.1
----------------------- ------------------- ---------------- ----------
Cash-flows:
----------------------- ------------------- ---------------- ----------
- Borrowings drawn down 1,128.1 - - 1,128.1
----------------------- ------------------- ---------------- ----------
- Borrowings repaid (1,322.2) - - (1,322.2)
----------------------- ------------------- ---------------- ----------
Lease liability:
----------------------- ------------------- ---------------- ----------
- IFRS 16 Lease Liabilities - cash-flows - (78.0) - (78.0)
----------------------- ------------------- ---------------- ----------
- IFRS 16 Lease Liabilities -
modifications/remeasurements, transfers
from non-current to
current, and foreign exchange
adjustments (40.3) 98.1 - 57.8
----------------------- ------------------- ---------------- ----------
- IFRS 16 Lease Liabilities - new leases 98.3 20.5 - 118.8
----------------------- ------------------- ---------------- ----------
At 25 April 2021 1,240.1 188.5 - 1,428.6
----------------------- ------------------- ---------------- ----------
The acquired borrowings (note 13) of GBP1.4m were repaid in full
during the period.
The Group's Working Capital Facility is at GBP913.5m (FY20:
GBP913.5m) available until November 2021 and is not secured against
any of the Group's assets. During FY19 the Group enacted an
extension option for a further year to November 2022 for
GBP847.5m.
The Group continues to operate comfortably within its banking
facilities and covenants. The carrying amounts and fair value of
the borrowings are not materially different.
Reconciliation of Net Debt:
25 April 2021 26 April 2020
(GBP'm) (GBP'm)
Borrowings (1,428.6) (1,524.1)
Add back:
- Lease liabilities 722.7 624.1
Cash and cash equivalents 457.0 534.0
Net Debt (248.9) (366.0)
13. ACQUISITIONS
i. On 22 August 2020, the Group acquired the trade and assets of
DW Sports for cash consideration of GBP37.0m which is deemed to be
the fair value of the consideration. The acquisition complements
the Group's existing gym and fitness club portfolio and is
consistent with the Group's elevation strategy. Goodwill represents
the premium associated with advantageous site locations, potential
growth opportunities offered by economies of scale, and the
assembled workforce. The fair value adjustment to property, plant
and equipment relates to management's assessment of the price that
would be paid for the acquired assets in an orderly transaction
between market participants at the acquisition date. The leases
were acquired under short-term licences and therefore no
right-of-use asset or lease liability has been recognised on
acquisition.
ii. During the year the Group acquired the entire share capital
of Psyche Holdings Limited, the entire share capital of GRMNT
Limited, and the trade and assets of 18 Montrose (51% owned) for
consideration of GBP2.7m. These acquisitions will provide increased
product offerings in the 'Premium Lifestyle' division. The fair
value adjustment to property, plant and equipment relates to the
recognition of right-of-use assets and lease liabilities.
The asset and liability values at acquisition are detailed
below. We have reviewed the fair value of the assets and
liabilities acquired. The following table summarises the fair
values of consideration paid:
DW Sports Other
------------------------------- --------
(GBP'm) (GBP'm)
-------------------- -------- --------
Cash consideration 37.0 2.7
---------------------- -------- --------
DW Sports Other
------------------- --------------------------------------------- ---------------------------------------------
Book Value Fair Value Fair Value Book Value Fair Value Fair Value
Adjustment Adjustment
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
(GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm) (GBP'm)
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Property, plant and
equipment 71.1 (42.1) 29.0 1.1 1.5 2.6
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Intangible assets 2.9 (2.9) - - - -
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Inventories 3.1 0.9 4.0 5.2 0.7 5.9
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Cash and cash
equivalents - - - 0.3 - 0.3
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Borrowings - - - (1.4) - (1.4)
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Working capital 0.3 - 0.3 (0.8) - (0.8)
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Lease liability - - - - (2.1) (2.1)
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Goodwill - 3.7 3.7 - 2.3 2.3
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Bargain purchase - - - - (3.1) (3.1)
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Non-controlling
interests - - - - (1.0) (1.0)
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
Net assets acquired 77.4 (40.4) 37.0 4.4 (1.7) 2.7
-------------------- ----------- ------------------- ----------- ----------- ------------------- -----------
The bargain purchase of GBP3.1m from the Other acquisitions has
been recognised within cost of sales within the period. The
Goodwill arising on all acquisitions of GBP6.0m has been impaired
to GBPnil as at period end with the impairment being recognised in
Exceptional Items, see note 3.
Since the date of control, the following amounts have been
included within the Group's Financial Statements for the
period:
Acquisitions (GBPm) DW Sports Other Total
--------------------------
(GBP'm) (GBP'm) (GBP'm)
--------------------------
Revenue 12.9 3.5 16.4
-------------------------- ---------- -------- --------
Operating (Loss)/profit (15.2) 0.3 (14.9)
-------------------------- ---------- -------- --------
(Loss)/profit before tax (15.2) 0.3 (14.9)
-------------------------- ---------- -------- --------
Had the acquisitions been included from the start of the period
the following amounts would have been included within the Group's
Financial Statements for the period:
Acquisitions (GBPm) DW Sports Other Total
---------------------
(GBP'm) (GBP'm) (GBP'm)
---------------------
Revenue 16.0 8.3 24.3
--------------------- ---------- -------- --------
Operating loss (14.7) (0.2) (14.9)
--------------------- ---------- -------- --------
Loss before tax (14.7) (0.1) (14.8)
--------------------- ---------- -------- --------
There were no contingent liabilities acquired as a result of the
above transaction.
14. POST BALANCE SHEET EVENTS
On 4 May 2021 the Group commenced a share buyback programme with
the aggregate purchase price of all shares acquired under the
programme to be no greater than GBP60m and the maximum number of
shares to be purchased of 10m ordinary shares with a nominal value
of 10p each. The purpose of the programme was to reduce the share
capital of the Company. 3,895,835 ordinary shares of 10p each for
consideration of GBP22,429,985 were acquired through this
programme.
On 21 June 2021 the Group commenced an irrevocable
non-discretionary share buyback programme to purchase the Group's
shares during the closed period which commenced 21 June 2021 and
ends on the day of reporting full year FY21 results. The aggregate
purchase price of all shares acquired under the programme were no
greater than GBP60m and the maximum number of shares to be
purchased were 10m ordinary shares with a nominal value of 10p
each. The purpose of the programme was to reduce the share capital
of the Company. In total to date 2,024,127 ordinary shares of 10p
each for consideration of GBP11,937,385 have been acquired through
this programme.
The board of Frasers is now in discussions with regards to
transitioning the CEO role from Mike Ashley to Michael Murray over
the course of FY22. It is currently proposed that Michael Murray
will assume the role of CEO on 1 May 2022. A reward and
remuneration package is now under consideration on the assumption
Michael Murray will assume the CEO role. Any reward and
remuneration package will be subject to any requisite shareholder
approval.
The group's elevation strategy is transforming the business and
receiving positive feedback from consumers and our brand partners,
especially on projects such as the new Oxford Street Sports Direct
which opened in June 2021.
The board consider it appropriate that Michael leads us forward
on this increasingly successful elevation journey.
Should Michael Murray assume the CEO role, Mike Ashley would
step down from the CEO role at the same time but would remain on
the board as an executive director.
14. GLOSSARY
ALTERNATIVE PERFORMANCE MEASURES
Reconciliation of excluding acquisitions and currency neutral
performance measures:
Premium Rest Of World Wholesale &
UK Retail Lifestyle European Retail Retail Licensing Group Total
Revenue
FY21 Reported 1,968.5 735.6 615.2 152.7 153.3 3,625.3
Adjustments for
acquisitions
and currency
neutral (307.4) (83.9) (202.5) - - (593.8)
FY21 Excluding
acquisitions
and currency
neutral 1,661.1 651.7 412.7 152.7 153.3 3,031.5
FY20 Reported 2,203.3 722.0 697.7 174.2 160.2 3,957.4
Adjustments for
acquisitions
and currency
neutral (257.7) (79.2) (178.9) (11.2) (7.3) (534.3)
FY20 Excluding
acquisitions
and currency
neutral 1,945.6 642.8 518.8 163.0 152.9 3,423.1
% Variance (14.6%) 1.4% (20.5%) (6.3%) 0.3% (11.4%)
Underlying EBITDA
FY21 Reported 279.2 53.9 4.1 25.6 28.0 390.8
Adjustments for
acquisitions
and currency
neutral 0.4 (13.8) (7.4) - - (20.8)
FY21 Excluding
acquisitions
and currency
neutral 279.6 40.1 (3.3) 25.6 28.0 370.0
FY20 Reported 227.4 4.5 51.8 (6.8) 25.2 302.1
Adjustments for
acquisitions
and currency
neutral 6.1 3.9 5.0 0.2 (0.7) 14.5
FY20 Excluding
acquisitions
and currency
neutral 233.5 8.4 56.8 (6.6) 24.5 316.6
% Variance 19.7% 377.4% (105.8%) (487.9%) 14.3% 16.9%
Movement in provisions pre-IFRS 16:
Legal and regulatory Property related Other Total
(GBP'm) (GBP'm) (GBP'm) (GBP'm)
At 29 April 2019 234.0 198.5 8.0 440.5
Amounts provided 13.0 111.2 - 124.2
Amounts utilised / reversed (21.6) (70.8) (5.3) (97.7)
Acquisitions - 10.6 - 10.6
At 26 April 2020 225.4 249.5 2.7 477.6
Amounts provided 7.4 118.2 - 125.6
Amounts utilised / reversed (17.0) (45.8) (1.4) (64.2)
At 25 April 2021 215.8 321.9 1.3 539.0
During the period, onerous lease provisions (Pre-IFRS 16) were
recognised due to an ongoing management review of the Group's store
profile and strategy including current and anticipated freehold
acquisitions, resulting in overall additional onerous provisions of
GBP71.9m (FY20: GBP26.9m) in the period, with reference to the
Groups alternative performance measures .
Reconciliation of underlying performance measures (EBITDA and
PBT):
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
EBITDA (GBP'm) PBT (GBP'm) EBITDA (GBP'm) PBT (GBP'm)
OPERATING (LOSS) / PROFIT (60.3) - 171.9 -
Depreciation of property, plant and equipment and
investment properties (excluding right-of-use
asset) 218.3 - 130.8 -
Impairment of property, plant and equipment and
investment properties (excluding right-of-use
asset) 148.8 - 24.8 -
Amortisation of intangible assets 7.1 - 14.5 -
Impairment of intangible assets (non-exceptional) - - 5.9 -
IFRS 16 right-of-use asset depreciation 82.1 - 122.6 -
IFRS 16 right-of-use asset impairment 168.2 - 106.1 -
IFRS 16 disposal and modification/remeasurement
of lease liabilities (27.7) - (9.7) -
536.5 - 566.9 -
Share of (loss) / profit and impairments of
associates - - (15.9) -
REPORTED 536.5 8.5 551.0 143.5
Exceptional items 1.6 1.6 13.1 13.1
1.6 1.6 13.1 13.1
IFRS 16 Reversal of rent expense (127.3) (127.3) (137.5) (137.5)
IFRS 16 Reversal of onerous lease provision (36.6) (36.6) (35.5) (35.5)
IFRS 16 right-of-use asset depreciation - 82.1 - 122.6
IFRS 16 right-of-use asset impairment - 168.2 - 106.1
IFRS 16 disposal and modification/remeasurement
of lease liabilities - (27.7) - (9.7)
Interest Payable - IFRS 16 - 11.8 - 10.9
(163.9) 70.5 (173.0) 56.9
Profit on sale of properties:
Profit on sale of properties - pre-IFRS 16 basis (9.7) (9.7) (109.3) (109.3)
IFRS 16 sale and leaseback - adjustment to
post-IFRS 16 basis - - 55.1 55.1
(9.7) (9.7) (54.2) (54.2)
(Profit) / loss on disposal of financial
instruments - (48.5) - 7.7
Realised FX loss / (gain) 26.3 26.3 (34.8) (34.8)
Fair value adjustment on equity derivatives - (47.5) - 26.9
Fair value adjustment on foreign currency
contracts - 4.6 - (21.3)
Fair value gain on step acquisition - - - (20.4)
UNDERLYING 390.8 5.8 302.1 117.4
Reconciliation of Adjusted Profit/(loss) before Tax performance
measure:
52 weeks ended 52 weeks ended
25 April 2021 26 April 2020
PBT (GBP'm) PBT (GBP'm)
REPORTED 8.5 143.5
Exceptional items 1.6 13.1
Fair value gain on step acquisition - (20.4)
Fair value adjustment to foreign currency contracts 4.6 (21.3)
Net investment (income) / costs (96.0) 34.6
Realised FX loss / (gain) 26.3 (34.8)
Share scheme 1.3 -
ADJUSTED (53.7) 114.7
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FR PIMBTMTAMTPB
(END) Dow Jones Newswires
August 05, 2021 02:00 ET (06:00 GMT)
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