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(“Superdry” or “the Company”) Full Year Results for the 52-week period ended
“The good news is that despite the external turbulence, the brand is in sound health and has momentum. Stores and Ecommerce delivered a strong sales performance, and I’m excited by our collections for the Autumn/Winter 23 season. While Wholesale remains very challenging, I believe the new team in place will recover this business in the medium-term. I’m really excited by our new partnership in “I’d like to thank all our team for their commitment during a period of change for the business. The start to the new year has been tough, not helped by unseasonal weather and highly promotional markets, and I’m not expecting the consumer environment to become any easier soon. However, the actions we have taken and continue to take to ensure the health of the business, give me more confidence as we look into the future.” FY 23 Financial overview
Q1 Trading Update (13 weeks from
Group revenue was down 18.4% over the period but in terms of overall performance, we are performing broadly in line with our expectations as full-price trading and the cost efficiency programme are driving margin improvement.
First quarter Store revenue declined by 3.7% when compared with the same period last year, largely on account of the unseasonable weather, and a later start to our end-of-season sale.
Ecommerce sales declined by 12.6%, also impacted by the later start to sale, as well as a profit-focused reduction in spend on digital marketing. In total, our Retail segment was down 6.6%.
Wholesale revenue is down 50.3% during the period, which is partly a result of year-on-year timing differences. Adjusting for these, the underlying performance is closer to 30% down which is more in line with expectations and reflects changes including the decision to exit our US wholesale operation.
Wholesale production and distribution has long lead times, and it will take some time for the impact of the new leadership in this area and the reversion to an agency model in some major European markets, to be seen in the sales performance.
Outlook
The consumer retail market continues to remain challenging and unpredictable. The extreme weather events across the
For the full year, we don’t expect to see significant revenue growth as we focus on cost savings and margin improvement. The
Notes
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Notes to Editors Our mission is “To be the #1 Premium Sustainable Style Destination” through our distinct collections, defined by consumer style choices. We design affordable, premium quality clothing, accessories and footwear which are sold around the world. We have a clear strategy for delivering continued growth via a multi-channel approach combining Stores, Ecommerce, and Wholesale.
Cautionary Statement This announcement contains certain forward-looking statements with respect to the financial condition and operational results of
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of
Chair’s Statement
The past 12 months have been a period of exceptional transformation and development for the Superdry brand, the Company, our colleagues around the world and the Leadership team. With both progress and setbacks, we have continued to execute on our turnaround programme in a challenging trading environment and remain committed to our overarching mission of being the #1 Premium Sustainable Style Destination.
Whilst there have been some positive developments over the course of the year, such as some of the encouraging trends seen within our Stores and Ecommerce channels, the notable underperformance of our Wholesale division resulted in pressure on our cashflow, profitability and liquidity. Wholesale is an extremely important and productive channel to market as it requires lower levels of capital investment to support growth, however its performance continues to lag the rest of the Group. This was especially the case in mainland
To that end, during the year, we commenced several strategic actions that were necessary to improve our liquidity that completed in
We also announced a strategic deal for the sale of the Superdry brand rights in certain territories in the
As a result of the brand rights sale and equity raise, we were able to add much needed capital to the balance sheet, totalling approximately
We believe that these actions will allow Julian and his team greater flexibility in the execution of our ongoing turnaround programme.
Board Appointment
In May, we welcomed
More recently,
Auditor Appointment
During the year, we began working with our new auditors,
Dividend
Given the uncertain macro-economic outlook and the need to maintain liquidity, the Board continues to believe it is prudent not to recommend a dividend. In addition, under the terms of our recent loan facility, the Company is restricted from paying dividends to shareholders without prior permission from Bantry Bay. At the end of the reporting period, there are no distributable reserves.
Thank You Superdry
In a year that has presented many challenges for the Group, I would like to end with a thank you to all the colleagues who have worked so hard on the continued delivery of our turnaround programme. It has not been an easy year, and their hard work and dedication is very much appreciated.
Peter Sjölander Chairman,
CEO Review
The past year has been exceptionally challenging due to the prevailing market conditions, but it has also seen exciting developments in our brand and business. As a company, Executive Team and Board, we have worked together to reinvigorate the brand, creating new styles and attracting new customers, while at the same time reducing business complexity and inefficiency. We have done all this whilst navigating a challenging trading environment, a cost-of-living crisis and with the delayed recovery of our Wholesale business putting pressure on our liquidity.
The journey to returning
With COVID now firmly behind us, we were happy to invite and host over 200 of our global wholesale and buying partners from around the world to
Despite the progress on our collection, we have not delivered the sales growth we had hoped for, with results falling well below expectations. This led to challenges with liquidity and the need to shore up our balance sheet, giving us back the flexibility needed to run the business for success. I have worked with our team to address the immediate concerns, including underwriting our 20% equity raise, to support continued operations and facilitate our cost-saving programme. Additionally, we secured the sale of our trademark in certain APAC countries to Cowell Fashion Company, a new international partner based in
We continue to stand by the strategy introduced in the FY21 Annual Report, with style and sustainability encompassing everything we do. Our mission, ‘To be the #1 Premium Sustainable Style Destination’, remains the same, and we continue to deliver this via our four strategic objectives:
Inspire Through Product
When I returned to
The first area we addressed on my return was our winter jackets range. Having done the work on improving our collection, we have been rewarded with results, with our best-ever sales season for winter coats in AW22.
At the core of our range is our Original & Vintage product. We have worked hard to refresh this collection and revisit what it is that brings our customers back again, and again. Starting with block, we find the shapes and fits that are current, whilst also ensuring our range has a taste of something new. We then look at fabric, ensuring everything we make is of a high quality and with a great feel, but delivered at a reasonable price. Finally, we look at the how to use branding, where we have a graphics archive of over 4,000 options. In every garment we make, we consider how and where to place our branding, with either subtle internal branding for our more discerning customer, or a bolder splash of colour, for those who prefer it.
As mentioned, with our first GSM since the pandemic in Spring 2023, we were able to display our new collection for SS24 and I am very pleased to say that we have a lot of exciting new styles and products to come to the market. Most encouraging was the feedback from our global partners, which was very positive. We look forward to continuing our journey of bringing the brand forward, with a renewed confidence and the styles to go with it, as we share it with the world.
Engage Through Social
Our social media channels continue to be a key area of focus for us, both as a platform for recruiting new customers to the brand but also as a runway for our latest styles and enticing our current customers back to our physical and online stores. We work across all major social media channels, from our largest community on Facebook, to our fastest growing on
We have continued to build on our fastest growing channel,
Building on this success, we are now exploring social commerce opportunities via
We have also had great success with our recent Athletic Essentials campaign on Instagram. Levels of engagement with our campaign content for these items have been particularly encouraging, most notably with Gen Z. This demonstrates a clear interest in the new range, especially with the under-25 female audience - a target demographic - as the product continues to resonate well with both new and existing followers.
Lead Through Sustainability
Sustainability is transforming
Our journey, captured at the start of this year in our Better Choices Better Future campaign, is progressing well. This transformation represents a shift in mindset across the brand. Each team owns their part of the strategy, thus amplifying the scale of change.
I am pleased to see the increasing share of recycled materials used across the range. Making recycled options the norm has been supported by fully recycled padding in all jackets last year, and 100% of swimwear collections are now from fully recycled materials. Recycled cotton is also increasingly being used alongside our organic cotton options and we are using our own waste cotton in our sweat ranges, converting over 100,000 individual garments into fully recycled fabrics sourced from our own waste in this year alone.
Organic cotton and the health of our soils remains at the heart of our product strategy, with around 12,500 farmers this year completing their training to convert to organic practices. With 62% of the volume bought converted to low-impact, organic or recycled materials (3% off our 2025 target), we are further ahead than I thought we would be at this stage and proud of it. I would like to thank my colleagues, our investors, suppliers, and partners for their continued support.
I am particularly proud of the strides we have made this year in our climate disclosure, our increasing use of recycled materials and our organic cotton farmer conversion programme. This progress is evidenced by reaching the CDP ‘A List’ for climate disclosure, putting us among the top 1.5% of businesses reporting. This further demonstrates how far we have come over recent years, having started at a ‘C’ in 2019. We also appeared for a second time as leader in the Financial Times Europe Climate Leaders as number one for progress amongst British based fashion brands.
Make It Happen
Underneath is our ambition to build a better, more agile business that is less complex and delivers better results. We have done a lot this year across the organisation. First, we reorganised the Executive Team to bring Wholesale under the leadership of
We have completely revisited our Wholesale strategy to address the weak performance and taken a number of actions. The biggest change has been a return to an agency model, which is where we work with leading local entrepreneurs with a vested interest in ensuring the brand succeeds in their territory. Outside of the
Building on the move back to agency, we are also moving our Wholesale and Ecommerce teams towards a better alignment and a unified approach with some of our biggest customers. For an increasing number of our key Wholesale customers, their online presence is large and growing, and so we are working to provide better facilitation of sales via our Partner Programme, whilst helping them move towards the
As Peter mentions in his Chair’s Statement, we have also taken decisive action this year to improve liquidity, with the impact landing in FY24. The combined cash raised from both the rights sale in
CEO,
Financial Review
Reflections On 2023
The past twelve months have presented a challenging environment for the
As a result of the weaker trading environment and a lagged recovery from Wholesale, the Group found itself significantly cash constrained. Whilst Peter and Julian have both touched on the recapitalisation efforts made in the year, I would like to provide some additional colour on the decisions we have taken that have been critical in improving the Group’s liquidity position.
Firstly, in
Furthermore, and as formally approved by shareholders in
In addition, since the financial year end, we announced in August that we have unlocked a further
The steps we have taken over the course of the year to improve our liquidity have been complemented by actions taken internally to reduce costs and drive efficiencies. We have identified initial cost savings of around
However, with regards to profitability, we cannot ignore what has obviously been a difficult year for the Group with the statutory loss after tax of
Store sales showed signs of recovery from the period of COVID disruption, with strong peak holiday sales and growth of nearly 15% over the course of the year. Following the Christmas holidays, what is traditionally a slower trading period was exacerbated by the emerging cost-of-living crisis and falling real wages, resulting in slower sales than expected across all territories towards the end of our fiscal year.
Our Ecommerce business delivered excellent sales from our AW22 collection, particularly across third-party partner sites, and this continued through to what was our best ever Black Friday event. Trading remained robust throughout the holiday period but saw a similar slow-down in the new year. The launch of the SS23 collections also then saw a slow start across both Retail channels due to the unseasonably wet spring experienced across
Our Wholesale performance has lagged our own channel performance as our partners have largely found it more difficult to recover from the pandemic and continue to remain cautious on stock levels and liquidity. This has led to lower in-season orders and an overall decline across the segment year-on-year. We have also lost a small number of partners as the cost-of-living crisis affects smaller businesses.
The net result for the Group is an adjusted loss before tax of
As part of the ongoing balance sheet control improvements, which form part of the finance turnaround programme, we have identified several necessary adjustments which impact both this year and prior years. These legacy issues are now fully identified, and we have taken steps to address them and to put in place permanent fixes. They largely relate to the processes for the assessment of the recoverability of Ecommerce debtors and for review of store impairment calculations. A one off prior year correction of
We are also recognising net impairment charges of
Finally, we have also recognised a tax charge of
This has been a challenging year for
Finally, I would like to thank all my colleagues at
Business Performance
Group revenue increased 2.1% year-on-year to
Store sales increased 14.7% year-on-year to
During FY23, gross margin decreased 3.2 percentage points year-on-year to 52.8%. This was mainly a result of our stock reduction programme, which has focused on clearing remaining old stock and reducing the working capital needs of the business. Stock levels have reduced from nearly 19m units at the end of FY19 to under 10m units as at FY23 and our work here remains ongoing. The margin dilution was also impacted by the higher mix of third-party sales within our Ecommerce channel, where commission charges are included in the margin, as well as deferred price increases within the Wholesale business.
Our adjusted loss before tax of
* Adjusted operating (loss)/profit, adjusted operating margin and adjusted (loss)/profit before tax are defined as reported results before adjusting items as further explained in Note 24.
Retail Revenue
Retail Revenue comprises sales across our Stores and Ecommerce channels.
Stores
Store revenue had a strong year, increasing 14.7% on the same period last year to
Mainland
We closed 12 stores in the year and opened 7 new stores in the
Ecommerce
Ecommerce revenue is a combination of sales made through our owned websites and those made online through third parties. Whilst we have seen a shift back to physical trading, our Ecommerce platforms have continued to perform robustly with particularly strong performance across third party channels, driving the year-on-year increase of 14.3% to
Third party channels include partner programme revenue, where
Wholesale
Wholesale performance continues to lag the rest of the Group as our partners, particularly across mainland
Nevertheless, performance in the
It is also worth noting that Wholesale has also been impacted by our growing third-party partner programme. This is particularly the case in mainland
Gross Margin
As a result of the aged stock clearance exercise, the increased mix of third-party online sales and deferred price increases in Wholesale, total gross margin has decreased by 3.2 percentage points year-on-year to 52.8%. Whilst we remain committed to our return to full price trading, the margin continues to be impacted by our ongoing strategic initiative to reduce the historic stock base and our efforts in this area remain ongoing.
Total Operating Costs
Total operating costs increased 9.6% to
Selling and distribution costs increased to
Central Costs are down 5.8% to
As announced in
Other gains were higher in FY23 at
Adjusted Profit / Loss Before Tax
Our finance expense in the year was
Adjusting Items
As part of the ongoing effort to improve our balance sheet control environment and strengthen our finance processes and systems, we have identified several adjustments which impact both this year, and prior years.
In respect of the prior financial year, we are making an adjustment of
Further to the above, we are also taking additional charges for impairment and Onerous property related contract provision against our store estate. Given the volatility observed in trading and continued cost of living crisis there are clear indicators of impairment. Significant movements in our internal forecasts for store performance mean that at FY23, 141 stores or 66% of the estate, have an impairment against them, with a net impairment charge of
Additionally, a
As a result, the statutory loss before tax is
Taxation
The tax charge for the year is
The tax charge largely arises as a consequence of the reduction in the recognised deferred tax asset from
The remaining
(Loss) / Profit after tax
Group statutory loss after tax for the year was
(Loss) / Profit per Share
Reflecting the loss made by the Group during the year, Adjusted Basic EPS is (111.8)p per share (FY22: 36.0p).
Reported basic EPS is (181.3)p (FY22: 27.4p) based on a basic weighted average of 81,668,940 shares (FY22: 81,879,072 shares).
Dividends
Given the uncertain macro-economic outlook and the need to maintain liquidity the board continues to believe it is not prudent to recommend dividends in the near-term.
In addition, under the terms of our recent loan facility, the Company is restricted from declaring, making or paying dividends to shareholders without prior permission from Bantry Bay, which cannot be unreasonably withheld.
At the end of the reporting period, there are no distributable reserves.
Cash Flow
Cash and liquidity management remains a critical priority for the business and the steps we have taken throughout the year have supported the Group in alleviating challenging liquidity constraints. Nevertheless, the end of pandemic-related support, as well as the challenging trading and macro-economic environment have resulted in a drawdown of
Net cash and cash equivalents were
Working Capital
Inventory units have decreased by another 2.8m units, or 22.0%, to 9.9m units at the end of FY23 as we continue with our targeted clearance activity of older stock. We are committed to reducing this further into next year through our focused reduction of the option count for each seasonal buy. In line with the reduction in units, our inventory value decreased during the period to
Balance Sheet
Non-current assets were
This was driven by a reduction in the value of Group property, plant and equipment, which had a carrying value of
Current assets reduced from
Current liabilities rose in the period to
Non-current liabilities were
Our retained earnings reduced 58.6% in the year, from
Investment In Subsidiaries and Intercompany Debtor Impairment
In the year the company has recognised an IFRS 9 loan loss allowance on intercompany receivables of
Assessment of The Group Prospects
Going concern
The financial position of the Group, its cash flows and liquidity position are set out in the financial statements. Furthermore, the Group financial statements include the Group’s objectives and policies for managing its capital, its financial risk management objectives, details of its financial instruments and exposure to credit and liquidity risk (please refer to note 22).
Background and context
Like many businesses in the retail sector, the Group has been through a period of unprecedented challenges over recent years. The global pandemic resulted in the enforced closure of stores, with many trading days lost. Despite a resurgence of store visits in many European countries following vaccination programmes and the lifting or easing of restrictions in the Group’s key markets, footfall has still not recovered to pre-pandemic levels.
The Russian invasion of
In response to the challenging macroeconomic conditions and to partially offset the adverse impacts above, there are several key mitigations that the Group has undertaken:
Borrowing Facilities
In
At the year-end
In
In
In
Base case
The Group’s going concern assessment covers the 12-month period from the date of approval of the financial statements, derived from the latest FY24 and FY25 forecasts in the Group’s medium term financial plan (the ‘Plan’). Given the downgraded profits as mentioned above as well as the continued impact of the cost-of-living crisis which continues to impact the wider retail sector and the Group, our trading outlook has been adjusted to reflect these uncertainties which were updated and board approved in
In assessing the Group’s going concern status the Directors considered the base case (with the assumptions outlined above) and a reasonably possible downside scenario involving a reduction in revenue combined with lower achieved cost savings, which includes a requirement for additional financing in line with our working capital cycle without any mitigating actions.
Reverse Stress Test
Given the base case reflects the results of the turnaround plan and due to the current macroeconomic uncertainties already discussed, there is uncertainty around the Group achieving its targets and therefore a scenario has been modelled that assumes a reduction in the sales plan and not achieving the full scope of the cost out programme. These have been modelled as a reverse stress test. The reverse stress test models the decline in sales and the reduction in cost savings that the Group would be able to absorb before requiring additional sources of financing in excess of those that are committed.
The reverse stress test scenario shows that, without any mitigating factors or contingency, a reasonably feasible downside scenario in sales and missing the cost savings would require funding in excess of our available facility at certain points in the year. A 2.6% deterioration in trading coupled with a 2.6% increase across the entirety of the Group’s cost base would result in a breach of facility limits. The facility availability is dependent on the position of receivables and inventory at each reporting month-end. However, the Group continues to manage its cash flow and is considering further options to improve liquidity along the lines of those already delivered to mitigate any potential shortfall.
This assessment is linked to a robust assessment of the principal risks facing the Group, and the reverse stress test reflects the potential impact of these risks being realised.
Summary
The financial statements continue to be prepared on the going concern basis. This conclusion is based on the Group’s current forecasts, sensitivities and mitigating actions available. With the continued challenges in the macro environment, coupled with the headroom on the ABL facility, the Directors note that until key mitigations can be actioned with certainty, there exists a material uncertainty related to Going Concern. This may cast significant doubt over the Group’s ability to continue as a going concern until said mitigations result in cost savings sufficient to increase headroom over the ABL facility and therefore, the Group may not be able to realise its assets and discharge its liabilities in the normal course of business.
The material uncertainty related to Going Concern arises due to:
After considering the forecasts, sensitivities and mitigating actions available to Group management and having regard to the risks and uncertainties to which the Group is exposed (including the material uncertainty referred to above), the Group directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and operate within its borrowing facilities and covenants for the period 12 months from date of signature. Accordingly, the financial statements continue to be prepared on the going concern basis.
Viability Statement In line with the The viability assessment has considered the potential impact of the principal risks on the business, in particular future performance (including the success of the brand reset and turnaround strategy, and the broader economic recovery) and liquidity over the duration of the Plan. In making this statement, the Directors have considered the resilience of the Group under various market conditions, together with the effectiveness of any mitigating actions and the availability of financing facilities. The assessment has been made, at the date of signing these accounts, with reference to:
In the short term, the viability of the Group is impacted by the limited headroom over its financing facilities given the uncertain macro-economic environment and the execution of the cost out programme, discussed in the Going Concern section. The Group is expected to return to profitability over the course of the Plan, stabilise the liquidity position and return to cash generation. Based on this assessment, the Directors have a reasonable expectation that the Group will have sufficient resources to continue in operation and meet its liabilities as they fall due over the period to
Financial Information Group Statement of Comprehensive Income to the members of
* Adjusted and adjusting items are defined in note 7. ** The comparative period to *** During the current financial year, the Group reclassified
2023 is for the 52 weeks ended
Financial Information Balance Sheet to the members of
* The balance sheets at
Financial Information Group Cash Flow Statement to the members of
* Cash and cash equivalents includes bank overdrafts 2023 is for the 52 weeks ended
Financial Information Statements of Changes in Equity to the members of
* The comparative periods to
Notes to the Financial Information 1. Basis of preparation General information The Company is a public company limited by shares incorporated in the a) Basis of preparation While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs in The financial information included in this preliminary announcement does not constitute the Group's statutory accounts for the 52 weeks ended The financial information for the 53 weeks ended The statutory financial statements for the 52 weeks ended 2. Significant accounting policies The accounting policies adopted are consistent with those applied by the Group in the Annual Report for the year ended Going Concern The financial position of the Group, its cash flows and liquidity position are set out in the financial statements. Furthermore, the Group financial statements include the Group’s objectives and policies for managing its capital, its financial risk management objectives, details of its financial instruments and exposure to credit and liquidity risk (please refer to note 33). Background and context Like many businesses in the retail sector, the Group has been through a period of unprecedented challenges over recent years. The global pandemic resulted in the enforced closure of stores, with many trading days lost. Despite a resurgence of store visits in many European countries following vaccination programmes and the lifting or easing of restrictions in the Group’s key markets, footfall has still not recovered to pre-pandemic levels. The Russian invasion of
Borrowing Facilities In At the year-end In In In Base case The Group’s going concern assessment covers the 12-month period from the date of approval of the financial statements, derived from the latest FY24 and FY25 forecasts in the Group’s medium term financial plan (the ‘Plan’). Given the downgraded profits as mentioned above as well as the continued impact of the cost-of-living crisis which continues to impact the wider retail sector and the Group, our trading outlook has been adjusted to reflect these uncertainties which were updated, and board approved in
In assessing the Group’s going concern status the Directors considered the base case (with the assumptions outlined above) and a reasonably possible downside scenario involving a reduction in revenue combined with lower achieved cost savings, which includes a requirement for additional financing in line with our working capital cycle without any mitigating actions. Reverse Stress Test Given the base case reflects the results of the turnaround plan and due to the current macroeconomic uncertainties already discussed, there is uncertainty around the Group achieving its targets and therefore a scenario has been modelled that assumes a reduction in the sales plan and not achieving the full scope of the cost out programme. These have been modelled as a reverse stress test. The reverse stress test models the decline in sales and the reduction in cost savings that the Group would be able to absorb before requiring additional sources of financing in excess of those that are committed. The reverse stress test scenario shows that, without any mitigating factors or contingency, a reasonably feasible downside scenario in sales and missing the cost savings would require funding in excess of our available facility at certain points in the year. A 2.6% deterioration in trading coupled with a 2.6% increase across the entirety of the Group’s cost base would result in a breach of facility limits. The facility availability is dependent on the position of receivables and inventory at each reporting month-end. However, the Group continues to manage its cash flow and is considering further options to improve liquidity along the lines of those already delivered to mitigate any potential shortfall. This assessment is linked to a robust assessment of the principal risks facing the Group, and the reverse stress test reflects the potential impact of these risks being realised. Summary The financial statements continue to be prepared on the going concern basis. This conclusion is based on the Group’s current forecasts, sensitivities and mitigating actions available. With the continued challenges in the macro environment, coupled with the headroom on the ABL facility, the Directors note that until key mitigations can be actioned with certainty, there exists a material uncertainty related to Going Concern. This may cast significant doubt over the Group’s ability to continue as a going concern until said mitigations result in cost savings sufficient to increase headroom over the ABL facility and therefore, the Group may not be able to realise its assets and discharge its liabilities in the normal course of business.
After considering the forecasts, sensitivities and mitigating actions available to Group management and having regard to the risks and uncertainties to which the Group is exposed (including the material uncertainty referred to above), the Group directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and operate within its borrowing facilities and covenants for the period 12 months from date of signature. Accordingly, the financial statements continue to be prepared on the going concern basis. 3. Key sources of estimation uncertainty in applying the Group’s accounting policies The preparation of the financial information requires judgements, estimates and assumptions to be made that affect the reported value of assets, liabilities, revenues, and expenses. The nature of estimation and judgement means that actual outcomes could differ from expectation. Management consider that accounting estimates and assumptions made in relation to the following items have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial period. Medium-term financial plan The Group’s store asset impairment review and assessment for onerous property related contract provisions, the goodwill impairment review and deferred tax recoverability assessment, together with the impairment review of the Company’s investments and intercompany receivables, are all dependent on forecast future cash flows to assess value in use and recoverability. As a basis for these assessments, the Group prepare a medium-term financial plan, which includes the Budget and future cash flows over a five-year period. The plan has regard to historic performance, knowledge of the current market and the impact of current macroeconomic conditions, together with the Group’s views on the achievable growth, all of which have been reviewed and approved by the Board. The medium-term plan approved by the Board includes key assumptions and estimates for revenue growth, gross margin and costs. The level of uncertainty in the Group forecasts has been exacerbated by external factors such as input price inflation and the squeeze on consumer budgets, largely driven by rising inflation. The forecasts are also dependent on the success of the brand reset. The plan also includes assumptions on cost optimisation and efficiency. As required within IAS36, future cash flows or cost savings, derived from restructuring or future expenditure on enhancements, cannot be included in the impairment calculations unless committed by the end of the financial year. The majority of cost savings recognised within the plan arise from activities to improve operational efficiency. Any cost reduction included in the plan that arise from changes to the Group operating model are the result of projects previously approved and initiated. The cash flow forecasts used in the impairment assessments are subject to the success of the cost optimisation programs initiated and are in progress. The plan does not include the impact of costs or benefits arising from future expenditure on enhancements to the operating model. The impact of changes to the medium-term plan on the impairment reviews are reviewed below. Store impairment estimates Store assets (as with other financial and non-financial assets) are subject to impairment based on whether current or future events and circumstances suggest that their recoverable amount may be less than their carrying value. Recoverable amount is based on the higher of the value in use and fair value less costs to dispose, although as all the Group’s owned stores are leasehold, only value in use has been considered in the impairment assessment. Value in use is calculated from expected future cash flows using suitable discount rates and including management assumptions and estimates of future performance. An impairment charge of For impairment testing purposes, the Group has determined that each store is a Cash Generating Unit (CGU). Each CGU is tested for impairment if any indicators of impairment have been identified. All 213 (2022: All 220) owned stores have been tested for impairment in the current year. The key estimates for the value in use calculations are those regarding expected changes in future cash flows and the allocation of central costs. The key assumptions used in determining store cash flows are the growth in both sales and gross margin set out in the medium-term plan, as well as operational savings and cost efficiencies identified across the Group and incorporated into forecast cash flows. The value in use of each CGU is calculated based on the Group’s Board approved medium-term financial plan. The medium-term financial plan is prepared and has been attributed to individual stores based on their historic performance. Store revenues in the medium-term financial plan for each CGU are planned at a LFL% between -5% - 0% reflecting continued channel shift to ecommerce and continued lower footfall on the high street. Margin is expected to improve by between 0.3% - 1% in each year of the plan as a result of range refinement, discount stance and deflation of supply costs. Long term store revenue growth rates outside of the scope of the plan are at 0% LFL. Cash flows beyond this five-year period as set out in the medium-term financial plan are extrapolated using long-term growth rates that are indicative of country-specific rates. The cash flows are discounted using the appropriate discount rate. The cash flows are modelled for each store through to their lease expiry date. Lease extensions have only been assumed in the modelling where they have been agreed with landlords. Central costs are attributed to store CGUs where they can be allocated on a reasonable and consistent basis, and assumptions are required to determine the basis for allocation. In addition to directly attributable store costs, other relevant operating costs have been attributed to store CGUs on a reasonable and consistent basis where possible, which include certain distribution, IT, HR and marketing expenses, totalling 10-15% of the overall annual cost base. Costs are expected to grow between 0% and 5% in each year of the plan – reflecting inflation countered by the Group’s cost out programme. Cost not included in the store asset impairment assessment are; those specifically associated to the ecommerce and wholesale channels, corporate overheads and other central costs that cannot be allocated on a reasonable and consistent basis. Costs outside of the scope of the medium-term plan are assumed to grow at a rate of 2% per annum. Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the CGUs. The pre-tax discount rates range from 13.2% to 19.8% (2022: 11.35% to 17.7%) and are derived from the Group’s post-tax WACC range of 11.9% to 16.7% (2022: 11.1% to 13.8%). A 500bps change in the discount rates would result in a During the year, the Group has recognised an impairment charge of Attributing Ecommerce sales and costs to stores Judgement is required to determine whether Ecommerce sales (and associated costs) could be attributed to stores for the purposes of impairment testing when calculating the value in use of each store CGU. The basis of such attribution is considered difficult to determine, due to insufficient evidence to reliably estimate. For this reason, Ecommerce sales attributable to stores have not been calculated. Store impairment judgements Store assets (as with other financial and non-financial assets) are subject to impairment based on whether current or future events and circumstances suggest that their recoverable amount may be less than their carrying value. The impairment review involves critical accounting judgements, in addition to the significant estimates discussed above. Judgement is required in determining which central costs are directly involved in the store operations and therefore should be apportioned to each store CGU. Central costs are attributed to store CGUs where they can be allocated on a reasonable and consistent basis. Judgement is also involved in defining the lease term used in the store impairment calculations. Lease extensions have only been assumed in the modelling where they have been agreed with landlords. See note 7 for further details. Sensitivity analysis The Group has carried out a sensitivity analysis on the impairment tests for its owned store portfolio on an aggregated basis for property, plant and equipment, right-of-use assets and intangibles, using various reasonably possible scenarios based on recent market movements including discount rates and a change to the sales and margin assumptions in the medium-term financial plan:
Onerous property related contracts provision Management has also assessed whether impaired and unprofitable stores require an onerous provision for the property related contracts. An onerous property related contracts provision is recognised when the Group believes that the unavoidable costs of meeting or exiting the property related obligations exceed the benefits expected to be received under the lease. The property related contracts relate primarily to service charges. The calculation of the net present value of future cash flows is based on the same assumptions for growth rates and expected changes to future cash flows as set out above for store impairments, discounted at the appropriate risk adjusted rate. The costs of exiting property related contracts as set out in the lease agreement, either at the end of the lease or the lease break date (whichever is shorter), have been considered in the calculation. Based on the factors set out above, the Group has reassessed the onerous property related contract provision as being The onerous property related contracts provision charge of A 500bps increase/decrease in the risk-free rates would result in a The Group has performed sensitivity analysis on the onerous property related contract provisions using reasonably possible scenarios based on recent market movements, consistent with those sensitivities disclosed above in the ‘store impairment’ section:
Valuation of An impairment test is undertaken at a segmental level each year to compare the carrying value of assets of a business or cash generating unit (CGU) including goodwill to their recoverable amount. The recoverable amount is estimated based on using a value in use model using discounted cash flows derived from the medium-term plan, which includes extensions to leases for profitable stores through the plan, and which is extended out to 10 years based on long term growth rates and adjusting for working capital. The present values of the future cash flows of the Ecommerce and Wholesale CGUs are significant and are not sensitive to changes in the assumptions. The recoverable amount of the stores CGU is 4. Critical judgements in applying the Group’s accounting policies Management consider that judgements made in the process of applying the Group’s accounting policies that could have a significant effect on the amounts recognised in the Group financial statements are as follows: Going concern The financial statements continue to be prepared on the going concern basis. This conclusion is based on the Group’s current forecasts, sensitivities and mitigating actions available to management, having regard to the risks and uncertainties to which the Group is exposed including the material uncertainty detailed in Note 2. The Group directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and operate within its borrowing facilities and covenants for the period 12 months from date of signature. Inventory provision Provision is made for stock items where the net realisable value is estimated to be lower than cost. Net realisable value is based on the age and season of the stock held and calculated using the Group’s historical sales experience and assumptions regarding future selling prices. The provision for aged inventory is calculated by providing on a graduated basis for stock over 3 years old. Management also provides against specific stock balances which are deemed slow-moving or which may be sold at a loss through clearance. The estimation uncertainty relates to the total provision of Recoverability of trade debtors The impairment of trade and other receivables is based on management’s estimate of the ECL. These are calculated using the Group’s historical credit loss experience, with adjustments for general economic conditions and an assessment of conditions at the reporting date. The estimation uncertainty relates to the allowance for expected credit losses of The specific provision of The ECL provision of Foreign exchange translation on intragroup balances Foreign exchange gains/losses on intragroup balances denominated in currencies other than sterling are recognised in profit and loss. Judgement is required in determining whether the intragroup balances represent a net investment in foreign operations. Where the intragroup balances are considered a net investment in foreign operations, the exchange gain/loss is recognised in other comprehensive income. During FY23 the conclusion has been reached that intercompany loans from the Under the Group’s transfer pricing policy, foreign subsidiaries are guaranteed a set profit margin (as limited risk distributors). Management’s intention is to use future profits generated by foreign subsidiaries to settle foreign denominated intragroup balances. Accordingly gains/losses on all other foreign denominated intragroup balances are recognised in profit and loss. Adjusting items Judgements are required as to whether items are disclosed as adjusting items, with consideration given to both quantitative and qualitative factors. Adjusting items are identified by virtue of their size, nature or incidence. Further information about the determination of adjusting items in financial year 2023 is in note 7 and 24. Deferred Tax Asset Deferred tax assets are recognised on balance sheet temporary differences to the extent that it is considered probable that they will reverse against taxable profits in future periods. The forecasting of suitable profits against which to offset these temporary differences involve critical accounting judgements and significant estimates. Given recent trading performance and the environment in which the Group continues to operate, the Group have assessed deferred tax assets to the extent deferred tax assets can be offset by deferred tax liabilities. The forecasting for deferred tax asset recognition purposes takes into account the current transfer pricing operating model and has been adjusted to take into account local tax laws which impact the reversal of underlying temporary differences, most materially, restrictions on the rate at which brought forward tax losses may be offset against current period profits in each jurisdiction. Deferred tax assets have been calculated in respect of individual companies to the extent deferred tax assets may be offset against deferred tax liabilities in those subsidiaries. In prior years, the Group used forecasts for a 10-year period to determine recoverability of deferred tax assets arising on tax losses. As a result of the revision to the Group’s outlook and material uncertainty, a significant reduction in the quantum of recognised deferred tax assets has arisen, reducing the net deferred tax asset to £nil (2022: 5. New accounting pronouncements The accounting policies set out have been applied consistently throughout the Group and to all years presented in this financial information except if mentioned otherwise. The Group adopted the following amendments to IFRS for the financial year 2023, none of which had a material impact:
At the date of authorisation of this financial information, the Group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective:
These amendments have been endorsed by the 6. Segment information Revenue is generated from the same products (clothing and accessories) in all segments; the reporting of segments is based on how these sales are generated. The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2. Gross profit is the measure reported to the Group’s CODM for the purpose of resource allocation and assessment of segment performance. The Group derives its revenue from contracts with customers for the transfer of goods and services being recognised at a point in time. Segmental information for the business segments of the Group for financial years 2023 and 2022 is set out below. The ‘Retail’ subtotal of the ‘Stores’ and ‘Ecommerce’ segments presented below is considered useful additional information to the reader.
The segment measure of profit required to be presented under IFRS 8 Segments is gross profit. Profit/(loss) before tax has been presented as an additional profit measure which is considered to provide useful information to the reader. Certain costs have not been allocated between the Stores and Ecommerce segments. Both the current and prior year there is no single customer that comprises in excess 10% of the turnover balance.
The following additional information is considered useful to the reader:
* Adjusted is defined as reported results before adjusting items and is further explained in note 24. The net impairment losses and reversals on store assets and onerous property related contract charges amount to
* The comparative period to
The following additional information is considered useful to the reader:
* Adjusted is defined as reported results before adjusting items and is further explained in note 24. ** The comparative period to Revenue from external customers in the
The total of non-current assets, other than deferred tax assets, located in the 7. Adjusting items The below adjustments are disclosed separately in the Group statement of comprehensive income and are applied to the reported (loss)/profit before tax to arrive at the adjusted profit before tax. Further information about the determination of adjusting items in financial year 2023 is included in note 24.
Adjusting items before tax in the period totalled a net charge of Store asset impairment charges and reversals and onerous property related contracts provision Comprehensive reviews have been performed in both the current and prior reporting periods across the owned store portfolio to identify any stores which were either unprofitable, or where the anticipated future performance would not support the carrying value of assets. An impairment review has also been performed as of A reassessment was also performed on the onerous property related contracts provision, resulting in a charge of In the prior year, a store asset impairment review was performed in the context of the COVID-19 pandemic on trading performance across the store portfolio. As a result of the prior year review, a charge to the Group statement of comprehensive income for non-cash impairments of Restructuring, strategic change and other costs Adjusting items in 2023 included Unrealised (loss)/gain on financial derivatives A IFRS 2 charge on Founder Share Plan In the prior year a credit of Tax on adjusting items The net tax charge on adjusting items totals £nil (2022: 8. Share-based Long-Term Incentive Plans (LTIP) Share awards are granted to employees in the form of equity-settled awards and cash-settled awards. Performance Share Plan The award of shares is made under the Superdry Performance Share Plan (PSP). Shares have no value to the participant at the grant date, but subject to the conditions of the specific scheme can convert and give participants the right to be granted nil-cost shares at the end of the performance period. The vesting period of these schemes is between two and three years. Share awards will also expire if the employee leaves the Group prior to the exercise or vesting date subject to the discretionary powers of the Remuneration Committee.
The movement in the number of these share awards outstanding is as follows:
None of the share awards were exercisable at the period end date (2022: nil). No options expired during the periods covered by the above table. The terms and conditions of the award of shares granted under the PSP are as follows:
In 2021, the Company changed the award mechanism under the PSP from a scheme with market-based vesting criteria to a Restricted Share Awards (RSA) plan with no performance or market-based vesting criteria attached. The shares granted during the year are restricted share-based conditional awards. The fair value of the shares awarded at the grant date during the year is A charge of No share options were exercised during the period. The options outstanding at The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Cash-based conditional awards Cash-settled share-based payments were granted in the year under the PSP. These are equivalent to the RSAs granted during the year, but are to be settled through cash, rather than shares. These awards have no value to the participant at the grant date, but subject to the conditions of the specific scheme can convert and give participants the right to a cash settlement at the end of the performance period. The vesting period of these schemes is two years. Cash-settled share awards will also expire if the employee leaves the Group prior to the exercise or vesting date subject to the discretionary powers of the Remuneration Committee.
The terms and conditions of the award of cash-settled shares awarded under the PSP are as follows:
The movement in the number of share awards outstanding is as follows:
One of the share awards was exercisable at the period end date (2022: nil). The shares granted during the year are restricted share-based conditional awards. The terms and conditions of the award specify that the fair value at the end of the performance period will be the lower of fair value on that date or a cap of twice the grant price. The fair value of the shares awarded at the grant date during the year was A charge of £nil (2022: Save As You Earn A Save As You Earn scheme is operated by the Group. A charge of £nil (2022: Buy As You Earn A Buy As You Earn scheme is operated by the Group which commenced in Other schemes Share options were issued in the current and prior years as part of recruitment packages for certain members of senior management. These options are subject to leavers’ provisions and the exercise period is up to two years. The charge to the Group statement of comprehensive income in financial year 2023 for these awards is 9. Founder Share Plan On The measurement period for the FSP ran from The gain to be transferred into the fund was to be calculated using the market value of the shares, calculated as the average price of a IFRS 2 stipulates that there is no adjustment to the Group’s statement of comprehensive income where the scheme does not vest due to a market-based condition, and so there is no adjustment required to recognise that the scheme will not vest. The vesting period for the awards differed depending on the seniority of the colleagues in question. To be eligible for the award, employees needed to remain in employment on the vesting date, details of which were as follows: Share-settled element – Senior management 50% – 50% – Cash and share-settled elements – All other colleagues 50% – 50% – In accordance with IFRS 2 the FSP scheme has been accounted for as an equity-settled share-based payment scheme. The fair value of the award is determined using a The share-based payment charge associated with the FSP has accrued over five financial periods in line with the original vesting period, up until financial year 2022. A credit of £nil (2022: The number of share awards granted in the period is nil. The scheme ended in 10. Tax expense The tax expense comprises:
The tax charge on the adjusted loss is
Factors affecting the tax expense for the period are as follows:
* The comparative period to The Group has a tax charge on adjusted losses of 11. Earnings per share
*The number of shares at the year-end excludes shares held by the ** The comparative period to
Adjusted earnings per share Adjusted earnings are used by management to review and improve sustainable profitability. Adjusting items are disclosed separately in the Group statement of comprehensive income and are applied to the Statutory profit or loss before tax to arrive at the adjusted result.
* The comparative period to The weighted average number of shares is stated after the deduction of On
* The comparative period to
12. Dividends
Given the continued uncertainty in the trading environment and in order to maintain liquidity, the Board did not propose an interim dividend and has made the decision not to recommend a final dividend for 2023. In addition, under the terms of our recent loan facility, the Company is restricted from declaring, making or paying dividends to shareholders without prior permission from Bantry Bay, which cannot be unreasonably withheld. At the end of the reporting period, there are no distributable reserves. 13. Property, plant and equipment Movements in the carrying amount of property, plant and equipment were as follows:
The above property, plant and equipment net impairment movement of
* The comparative period to The above property, plant and equipment net impairment movement of 14. Intangible assets
* The comparative period to Impairment of goodwill An impairment test is a comparison of the carrying value of assets of a business or cash generating unit (CGU) to their recoverable amount. The Group monitors goodwill for impairment at a segmental level. Wholesale and Ecommerce are defined as individual CGUs, and the Stores segment is a group of CGUs. These segments represent the lowest level within the Group at which goodwill is monitored for internal management purposes. The recoverable amount is estimated based on using a value in use model using discounted cash flows. Where the recoverable amount is less than the carrying value, an impairment results. The Group’s medium-term plan has been used as the basis for this calculation extended to include cashflows over a 10-year period. This period has been chosen for this assessment as this closely aligns with the Group’s enterprise value. As identified in note 7, store assets have been impaired in the current year, where each store is assessed as an individual CGU. Key assumptions In determining the recoverable amount, it is necessary to make a series of assumptions to estimate the present value of future cash flows. In each case, these key assumptions have been made by management reflecting historical performance and are consistent with relevant external sources of information. Discount rates Management estimates discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the CGUs. The pre-tax discount rate of 14.4% (2022: 14.3%) is derived from the Group’s post-tax weighted average cost of capital of 12.8% (2022: 12.4%). Operating cash flows The key assumptions within the forecast operating cash flows include the growth rates in both sales and gross profit margins. This is especially dependent upon assumptions around the ability of the Group to pass increased input costs onto consumers. Key assumptions also include changes in the operating cost base in light of current inflationary pressure and operating efficiencies included in the plan, the extension of leases on profitable stores through the plan, and the level of capital expenditure, as set out in the medium-term financial plan. Judgement is also required in determining an appropriate allocation of central costs. Central costs have been allocated where there is a reasonable and consistent basis for apportionment. Growth rates The recoverable amount of each segment is calculated in reference to the value over the medium-term financial plan period, extrapolated for an additional five years at the long-term growth rate of 0.0% to 2.0% (2022: additional five years at 0.0% to 2.0%). The results of the Group’s impairment tests are dependent on estimates made by management, particularly in relation to the key assumptions described above. The principal assumptions on which the impairment tests were performed are detailed above. A sensitivity analysis as to potential changes in key assumptions has been performed. Impact of change in key assumptions The recoverable amounts of the future cash flows of the Ecommerce and Wholesale CGUs are significant, and management believes there were no reasonably possible or foreseeable changes in the key assumptions that would cause the difference between the carrying value and the recoverable amount to be materially reduced to warrant further review and disclosure. The recoverable amount of the stores CGU is Result of the impairment tests Management considers that no charge for impairment should be reported in the 2023 consolidated financial statements (2022: £nil) based on the impairment and sensitivity analysis tests undertaken. 15. Balances and transactions with related parties Transactions with Directors Other than in respect of arrangements set out below and in relation to the employment of Directors, details of which are provided in the Directors’ Remuneration Report, there is no material indebtedness owed to or by the Company or the Group to any employee or any other person or entity considered to be a related party. There are no exceptional amounts outstanding that related to transactions with related parties at the reporting date (2022: During the reporting period, the Group has spent In addition, the Group occupies two properties owned by J M Dunkerton SIPP pension fund whose beneficiary and member trustee is An assessment has been performed for the FY23 year end to determine whether these transactions have been undertaken at arms’ length. It was identified that the rent charged for the head office properties owned by the pension fund is at a rate considered to be below market rent. The combined annual rent for both properties is currently charged at 16. Deferred tax assets and liabilities The movement on the Group deferred tax account is as shown below:
* This asset has only been recognised in jurisdictions where the criteria for recognition of deferred tax assets referenced below have been met. ** In the table above, the “Leases” category relates to deferred tax assets arising from temporary differences on leases. The Group’s IFRS 16 right-of-use assets and lease liabilities are not reflected in the statutory accounts of its subsidiaries, which report under applicable local GAAPs, since they arise only on conversion of its subsidiaries’ accounts from local GAAP to IFRS. Under these applicable local GAAPs, which are used as the basis for the profits assessed by the local tax authorities, the tax base for the Group’s leases is typically nil.
The Group has a net recognised deferred tax asset of £Nil at the balance sheet date. On a gross basis, a deferred tax asset of There are unrecognised deferred tax assets (DTAs) of In the Group’s financial statements, the majority of IFRS 16 right-of-use assets arise in respect of store leases. In many cases the value of these right-of-use assets has been reduced due to the recognition of impairment charges, such that the carrying value of the lease liabilities exceeds the carrying value of the right-of-use assets, resulting in a net lease liability in the Group financial statements. The difference between the carrying value of this net lease liability recognised in the Group financial statements and the tax base of the leases gives rise to a temporary difference, on which a deferred tax asset has been recognised in prior years but not recognised in 2023. The value of net deferred tax assets recognised per jurisdiction is set out below:
Uncertain tax position The Group is subject to tax laws in a number of jurisdictions and given the scale of its operations, it is subject to periodic challenges by local tax authorities on a range of tax matters. The Group’s transfer pricing policies aim to allocate profits and losses to each operating entity on an arm’s length basis. It is uncertain how different tax authorities may view the impact of the pre-COVID challenging trading environment, and the challenges presented by COVID on the Group’s internal transfer pricing policies. Given this uncertainty, the Group has recognised the following provisions in respect of uncertain tax positions as required under IAS12, with due consideration to guidance contained within IFRIC23.
17. Borrowings
The Group has a multi-currency notional cash pool with In The usage and undrawn balances under the Asset Backed Loan facility are shown below:
At the financial year-end, the Group had fully drawn down on the ABL facility but was holding gross cash in hand and in the bank of £58.2m. The revised facility is operationally less complex to manage and as such has no financial covenants. It has operational covenants: a debt turns, a dilution percentage with regards to notified debt and an inventory turn. These covenants are calculated monthly when preparing the eligible inventory and receivables borrowing base. On 7 August 2023 the Group agreed a secondary lending facility of up to £25m with Cash and overdraft balances have been disclosed gross in line with the requirements of IAS32: Financial instruments: Presentation. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. 18. Contingencies and commitments Contingent liabilities The Company is party to an unlimited cross guarantee over all liabilities of the Group. DKH Ltd have issued a debenture in favour of The Group has contractual agreements with third party wholesale agents which include a right for the wholesale agent to be indemnified when the contract is terminated. These future indemnity amounts are held as contingent liabilities until the contract is terminated, at which point they are held as provisions or accruals. The value of future obligations for contracts which have not yet been terminated (and have no defined end date) is £3.2m (2022: £3.4m).
19. Leases Right-of-use asset
The above right-of-use asset net impairment movement of £37.6m (2022: £14.4m) constitutes part of the total net impairment of £41.0m in 2023 (2022: £16.8m) and relates to an impairment review performed on store assets with the remaining £3.4m (2022: £2.4m) relating to property, plant and equipment. For further details on this please see notes 3 and 7. This impairment has been included within adjusting items in the current and prior year. The carrying amount of the right-of-use asset is split between motor vehicles of £nil (2022: £0.1m) and property of £48.5m (2022: £80.1m).
*Additions are from new stores, extension or remeasurement of leases e.g. CPI changes.
Items in the Group statement of comprehensive income not impacted by IFRS 16 are:
The above lease expenses are gross of onerous property related contracts provision, capital contribution releases and rent-free lease. Lease liability Lease liabilities are calculated by discounting fixed lease payments using the incremental borrowing rate at the lease inception date determined with reference to the geographical location and length of the lease. The discount rates applied to leases range between 4.7% and 9.0% (2022: 0.3% to 8.5%).
The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Reconciliation of liabilities to cash flow arising from leases:
All movements in the table above are non-cash movements except for payment of lease liability (which includes both interest and principal), which are cash movements. For a reconciliation of liabilities to cash flow arising from other financing activities (excluding leases), refer to note 21. 20. Note to the cash flow statement Reconciliation of operating profit to cash generated from operations
* The comparative period to 30 April 2022 has been restated to correct certain misstatements, see note 26. Group cash flows arising from adjusting items are £nil (2022: £nil). 21. Net cash/(debt)
Non-cash changes relates to exchange gains on cash and cash equivalents. Interest of £nil (2022: £nil) has been incurred in respect of short-term facilities.
A reconciliation of movements of liabilities to cash flows arising from financing activities excluding lease liability is included below:
22. Financial risk management The Company’s and Group’s activities expose it to a variety of financial risks, including market risk (including foreign currency risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain foreign exchange exposures. Credit risk – Group accounts Credit risk is managed on a Group basis through a shared service centre based in The Group is party to banking agreements that include a legal right of offset which enables the overdraft balances to be settled net with cash balances (2023 overdrafts: £35.8m, 2022 overdrafts: £3.1m). These balances have been excluded from contractual cash flows. Sales to Store and Ecommerce customers are settled in cash, by major credit cards, or other online payment providers. Credit risk from cash and cash equivalents is managed via banking with well-established banks with a strong credit rating. Impairment of financial assets The Group’s financial assets subject to the ECL model are primarily trade receivables. A loss allowance is recognised based on ECL. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date. None of the trade receivables that have been written off are subject to enforcement activities. Significant increase in credit risk In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. Forward-looking information considered includes the prospects of the industries in which the Group’s debtors operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant think-tanks and other similar organisations, as well as consideration of various external sources of actual and forecast economic information that relate to the Group’s core operations. In particular, the following information is considered when assessing whether credit risk has increased significantly since initial recognition:
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable information that demonstrates otherwise. Despite the foregoing, the Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:
The maximum exposure to credit risk is equal to the carrying value of the derivatives, cash and trade and other receivables. Measurement and recognition of expected credit losses The measurement of ECL is a function of the probability of default, loss given default and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information. The exposure at default is represented by the asset’s gross carrying value, less specific insurance held, at the reporting date. The ECL is estimated as the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive. The Group recognises an impairment gain or loss in profit for all financial instruments with a corresponding adjustment to their carrying amount through a loss account. Foreign currency risk The Group’s foreign currency exposure arises from:
The Group is mainly exposed to US Dollar and Euro currency risks. The exposure to foreign exchange risk within each company is monitored and managed at Group level. The Group’s policy on foreign currency risk is to economic hedge a portion of foreign exchange risk associated with forecast overseas transactions, and transactions and monetary items denominated in foreign currencies. The Group’s approach is to hedge the risk of changes in the relevant spot exchange rate. The Group uses forward contracts to hedge foreign exchange risk. As at 29 April 2023 and 30 April 2022, the Group had entered into a number of foreign exchange forward contracts to hedge part of the aforementioned translation risk. Any remaining amount remains unhedged. Forward exchange contracts have not been formally designated as hedges and consequently no hedge accounting has been applied. Forward exchange contracts are carried at fair value. Currency exposure arising from the net assets of the Group’s foreign operations are not hedged. On 29 April 2023, if the currency had weakened or strengthened by 20% against both the US Dollar and Euro with all other variables held constant, profit for the period would have been £19.6m (2022: £17m) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US Dollar/Euro trade receivables, cash and cash equivalents, and trade payables. The figure of 20% used for sensitivity analysis has been chosen because it represents a range of reasonably probable fluctuations in exchange rates. The Group’s foreign currency exposure is as follows:
Cash flow interest rate risk The Group has financial assets and liabilities which are exposed to changes in market interest rates. Changes in interest rates impact primarily on deposits, loans and borrowings by changing their future cash flows (variable rate). Management does not currently have a formal policy of determining how much of the Group’s exposure should be at fixed or variable rates and the Group does not use hedging instruments to minimise its exposure. However, at the time of taking out new loans or borrowings, management uses its judgement to determine whether it believes that a fixed or variable rate would be more favourable for the Group over the expected period until maturity. If base interest rates had been 1% higher or lower during FY23, the net interest charge would have increased or decreased by £0.4m. Liquidity risk Cash flow forecasting is performed on a Group basis by the monitoring of rolling forecasts of the Group’s liquidity requirements to ensure that it has sufficient cash to meet operational needs. The Group is party to banking agreements that include a legal right of offset which enables the overdraft balances to be settled net with cash balances (2023: £35.8m overdraft, 2022: £3.1m overdraft). These balances have been excluded from contractual cash flows. In light of the external challenges currently faced by the Group, which include input price inflation, the impact of high inflation on consumer spending and the longer-term impact of COVID-19 on consumer behaviour, the Group is closely managing cash flows through reduced capital expenditure and tight control over day-to-day spend. There additionally continues to be a focus on improving operational efficiency through reducing stock levels and through achieving cost savings. In December 2022, Maturity of undiscounted financial liabilities (excluding derivatives) The expected maturity of undiscounted financial liabilities is as follows:
The above balances relate to trade payables, other payables, accruals and overdrafts. See note 19 for analysis of undiscounted lease liabilities.
Valuation hierarchy The table below shows the financial instruments carried at fair value by valuation method:
The level 2 forward foreign exchange valuations are derived from mark-to-market valuations based on observable market data as at the close of business on 29 April 2023 and 30 April 2022. The notional principal amount of the outstanding outright FX contracts as at 29 April 2023 was £59.7m (2022: £105.4m). Derivative financial instruments There is a master netting agreement in place in relation to derivatives. All cash flows will occur within 24 months (2022: 24 months). All derivative financial instruments are carried at fair value as assets when the fair value is positive and as liabilities when the fair value is negative. The table below analyses the Group’s and Company’s derivative financial instruments. The amounts disclosed in the table are the carrying balances of the assets and liabilities as at the balance sheet date.
The full fair value of a derivative is classified as a non-current asset or liability where the remaining maturity of the derivative is more than 12 months and as a current asset or liability if the maturity of the derivative is less than 12 months. The fair value of derivatives at 25 August 2023 is £0.7m. Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders, and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. The Group is not subject to any externally imposed capital requirements. The Group’s strategy remains unchanged from financial year 2022. Consistent with others in the industry, the Group monitors capital based on the gearing ratio. This ratio is calculated as net debt divided by total capital employed. Net debt is defined in note 24. Total capital employed is calculated as “equity” as shown in the consolidated balance sheet plus net debt. The Group is in a net debt position on 29 April 2023 (2022: net debt position). The Board has put in place a distribution policy which considers the degree of maintainability of the Group’s profit streams as well as the requirement to maintain a certain level of cash resources for working capital and capital investment purposes. If appropriate, the Board will recommend an ordinary dividend broadly reflecting the profits in the relevant period. In addition, the Board will consider and, if appropriate, recommend the payment of a supplemental dividend alongside the final ordinary dividend. The value of any such supplemental dividend will vary depending on the performance of the Group and the Group’s anticipated working capital and capital investment requirements through the cycle. It is intended that, in normal circumstances, the value of the ordinary dividends declared in respect of any year are covered at least three times by adjusted profit after tax (see note 24 for definition). Considering the current economic climate and consistent with the FY22 decision, the Board did not propose an interim dividend and has made the decision not to recommend a final dividend for FY23. In addition, under the terms of our recent loan facility, the Company is restricted from declaring, making or paying dividends to shareholders without prior permission from Bantry Bay, which cannot be unreasonably withheld.
Capital structure
* The Group balance sheet at 30 April 2022 has been restated to correct certain misstatements, see note 26.
Financial instruments: Assets
Financial instruments: Liabilities
23. Share capital Authorised, allotted and fully paid 5p shares
72,760 ordinary shares of 5p were authorised, allotted and issued in the period under the The number of shares stated above includes all Employees Share Option Plan (ESOP)
During the year, the Supergroup Plc employee benefit trust issued 714,948 of Superdry Plc’s shares in order to settle current obligations under the Group’s share-based incentive schemes. The employee benefit trust has been consolidated in the Group and Company financial statements, with the shares recognised in a separate ESOP reserve. 24. Alternative performance measures Introduction The Directors assess the performance of the Group using a variety of performance measures, some are IFRS, and some are adjusted and therefore termed ‘‘non-GAAP’’ measures or “alternative performance measures” (APMs). The rationale for using adjusted measures is explained below. The Directors principally discuss the Group’s results on an adjusted basis. Results on an adjusted basis are presented before adjusting items. The APMs used in this report are adjusted operating profit and margin, adjusted profit/(loss) before tax, adjusted tax expense and adjusted effective tax rate, adjusted earnings per share and net cash/debt. A reconciliation from these non-GAAP measures to the nearest measure prepared in accordance with IFRS is presented below. The APMs we use may not be directly comparable with similarly titled measures used by other companies. There have been no changes in definitions from the prior period. Adjusting items The Group’s statement of comprehensive income and segmental analysis separately identify adjusted results before adjusting items. The adjusted results are not intended to be a replacement for the IFRS results. The Directors believe that presentation of the Group’s results in this way provides stakeholders with additional helpful analysis of the Group’s financial performance. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee. It is also consistent with the way that management is incentivised. In determining whether events or transactions are treated as adjusting items, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Adjusting items are identified by virtue of their size, nature or incidence. Examples of charges or credits meeting the above definition and which have been presented as adjusting items in the current and/or prior years include:
If other items meet the criteria, which are applied consistently from year to year, they are also treated as adjusting other items. Adjusting items in this period The following items have been included within ‘‘Adjusting items’’ for the period ended 29 April 2023: Fair value remeasurement of foreign exchange contracts – financial years 2023 and 2022 The fair value of unrealised financial derivatives is reviewed at the end of each reporting period and unrealised losses/gains are recognised in the Group statement of comprehensive income. The Directors consider unrealised losses/gains to be adjusting items due to both their size and nature. The size of the movement on the fair value of the contracts is dependent on the spot foreign exchange rate at the balance sheet date and an assessment of future foreign exchange volatility applied to the relevant contract currencies, as such the size of the movements can be substantial. The unrealised foreign exchange contracts have been entered into in order to achieve an economic hedge against future payments and receipts and are not a reflection of historical performance. Restructuring, strategic change and other costs – financial year 2023 The Group has undertaken a number of restructuring activities during FY23, resulting in the reduction of staff. The costs of redundancy, together with the legal and advisor costs associated with the restructure projects have been classified as adjusting items. Store asset impairment and onerous property related contracts provision – financial years 2023 and 2022 A store asset impairment and onerous property related contracts provision review was performed during the year across the Group’s store portfolio. An adjusting net impairment charge of £41.0m of property, plant and equipment, intangible assets and right-of-use assets has been made on the basis that the recoverable amount is less than the carrying value. In addition, an onerous property contract charge of £2.7m has been recognised. A similar exercise was performed in financial year 2022 across all store assets, resulting in a property, plant and equipment, intangible assets and right-of-use assets impairment of £16.8m and an onerous property related contracts provision charge of £1.5m. The Directors consider the store impairment and onerous property related contracts provision to be an adjusting item due to the materiality of the charge. See notes 3 and 7 for further details. Founder Share Plan (FSP) – IFRS 2 charge – financial years 2023 and 2022 While there are no cost or cash implications for the Group, the Founder Share Plan (FSP) falls within the scope of IFRS 2. The Group has included the IFRS 2 charge and related deferred tax movement in relation to the FSP within adjusting items for the prior period. The Directors consider the plan to be one-off in nature and unusual in that the share awards are being funded exclusively by the Founders. While the charge is spread over a few financial years, the plan is a one-time scheme. Accordingly, the IFRS 2 charge in respect of the FSP is an adjusting item due to the size, nature and incidence of the scheme. There are no known recent examples within quoted companies of incentive arrangements operating in a similar way to the FSP. While unusual in terms of size, the plan is also unusual regarding its treatment in what is essentially a personal arrangement, with no net cost or cash and minimal administrative burden to the Company. There are no other adjustments anticipated in respect of the scheme other than the IFRS 2 charge. Therefore, the Directors consider the charge to be significant in terms of its potential influence on the readers’ interpretation of the Group’s financial performance. The scheme ended in January 2022, with none of the vesting criteria met. Accordingly, no further expense or credit will be recognised in profit and loss in respect of the scheme in future periods. See note 9 for further details of the FSP. Adjusted operating (loss)/profit and margin In the opinion of the Directors, adjusted operating profit and margin are measures which seek to reflect the performance of the Group that will contribute to long-term sustainable profitable growth. The Directors focus on the trends in adjusted operating profit and margins, and they are key internal management metrics in assessing the Group’s performance. As such, they exclude the impact of adjusting items. A reconciliation from operating profit, the most directly comparable IFRS measure, to the adjusted operating profit and margin is set out below.
* The comparative period to 30 April 2022 has been restated to correct certain misstatements, see note 26. Adjusted (loss)/profit before tax In the opinion of the Directors, adjusted (loss)/profit before tax is a measure which seeks to reflect the performance of the Group that will contribute to long-term sustainable profitable growth. As such, adjusted (loss)/profit before tax excludes the impact of adjusting items. The Directors consider this to be an important measure of Group performance and is consistent with how the business performance is reported to and assessed by the Board and the Executive Committee. A reconciliation from (loss)/profit before tax, the most directly comparable IFRS measure, to the adjusted (loss)/profit before tax is set out below.
* The comparative period to 30 April 2022 has been restated to correct certain misstatements, see note 26. Adjusted tax expense and adjusted effective tax rate In the opinion of the Directors, adjusted tax expense is the total tax charge for the Group excluding the tax impact of adjusting items. Correspondingly, the adjusted effective tax rate is the adjusted tax (expense)/credit divided by the adjusted (loss)/profit before tax. These measures are an indicator of the ongoing tax rate of the Group. A reconciliation from tax expense, the most directly comparable IFRS measures, to the adjusted tax expense is set out below:
* The comparative period to 30 April 2022 has been restated to correct certain misstatements, see note 26. Net cash/(debt) In the opinion of the Directors, net cash/debt is a useful measure to monitor the overall cash position of the Group. It is the total of all short and long-term loans and borrowings, less cash and cash equivalents. See note 21 for the Group’s net cash/(debt) position. This position is exclusive of financial liabilities in relation to IFRS 16. Adjusted EPS In the opinion of the Directors, adjusted earnings per share is calculated using basic earnings, adjusted to exclude adjusting items net of current and deferred tax. See note 11 for the Group’s adjusted EPS. 25. Government assistance The Group received government support within the Furlough support across all territories of £1.2m was recognised in the year (2022: £0.3m), through the UK’s Coronavirus Job Retention Scheme (CJRS) and equivalent schemes in other countries. A provision of £0.4m (2022: £1.6m) has been recognised to cover any existing furlough related clawbacks. The business rates reductions from the Lost revenue and subsidy support in the Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. The value is netted off against costs in selling, general and administrative expenses. 26. Prior-year adjustments The financial statements for the prior financial year have been restated to incorporate the impact of misstatements to balances at the year-end and in the brought forward balance sheet position at the end of FY21. The misstatements impact the values of Other receivables, Property, plant and equipment and Intangible assets.
During the current financial year, the Company have undertaken a full review of the realisability of debtor balances. Following this review, it has been established that the Other receivables balance has been overstated in the prior year and earlier periods due to historically inconsistent information flows and manual data management for our E-commerce debtor balances, resulting in charges that have not been recognised in the Group statement of comprehensive income and incorrect foreign exchange calculations. The adjustments impact the prior year balance sheet, reducing the Other receivables balance by £4.9m, comprising an additional charge of £1.5m to profit and loss for FY22 and a reduction of £3.4m to the brought forward retained earnings at the end of FY21.
In addition, it has been established that on disposal of impaired assets, the gross value of the assets, accumulated amortisation and associated impairments have not been correctly removed from the prior year balance sheet. As a result, property plant and equipment and intangible assets in the prior year have been restated to correctly remove the gross assets and associated amortisation disposed, and to reflect the removal of the associated impairments on disposed properties. At the end of FY22, these adjustments have increased property, plant and equipment by £1.0m and intangible assets by £0.2m, with a corresponding credit to selling, general and administrative expenses.
The following tables summarise the impact of the adjustments on the consolidated financial statements for the 53 weeks ended 30 April 2022:
Group Statement of Comprehensive Income
* During the current financial year, the Group reclassified £12.0m of realised gains/(losses) on FX contracts and unrealised gains on FX from selling, general and administrative expense to Other gains and losses (net). This reclassification more appropriately reflects selling, general and administrative expenses. Prior financial year comparatives of £12.0m have been restated to align to the current financial year approach, as noted at the foot of the Group Statement of Comprehensive income.
Balance Sheet
There is no impact on the consolidated cash flow statement for the period ended 30 April 2022. Due to unrecognised tax losses, there is also no impact on current or deferred tax. 27. Post balance sheet events Sale of intellectual property for certain On 22 March 2023, the Group announced that it had entered into an agreement with Cowell Fashion Company Ltd to dispose of its intellectual property assets in certain countries within the The Agreement means Cowell will own and use the Superdry brand in key APAC markets. As at 29 April 2023, the carrying value of the assets disposed of in the transaction was £nil. Equity raise On 2 May 2023, the Company announced the successful completion of an equity raise, raising gross proceeds of approximately £12.0m through a Placing and separate Retail Offer. In aggregate, the Equity Raise comprised 15,700,000 New Ordinary Shares, representing approximately 19.1 per cent of the Company’s issued share capital at that date. The placing of 14,489,642 shares raised gross proceeds of approximately £11.1m at an issue price of 76.3 pence per share and retail investors have subscribed for a total of 1,210,358 shares at the issue price, raising gross proceeds of approximately £0.9m. Secondary Lending Facility On 7 August 2023 the Group agreed a secondary lending facility of up to £25m with 28. Principal Risks & Uncertainties The principal risks and uncertainties identified by the Board are as follows:
Dissemination of a Regulatory Announcement that contains inside information in accordance with the Market Abuse Regulation (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. |
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| ISIN: | GB00B60BD277 |
| Category Code: | FR |
| TIDM: | SDRY |
| LEI Code: | 213800GAQMT2WL7BW361 |
| Sequence No.: | 268544 |
| EQS News ID: | 1716605 |
| End of Announcement | EQS News Service |
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