TIDMASC
RNS Number : 1181J
ASOS PLC
07 April 2020
7 April 2020
ASOS plc
Global Online Fashion Destination
Interim Results for the six months to 29 February 2020
ASOS delivers record half year performance
Current trading impacted by COVID-19: actions taken to protect
the short term and position ASOS for long-term growth
Summary financial results
Six months Six months CCY(2)
GBPm(1) to 29 to 28 Change Change
February February
2020 2019
------------------------ ----------------------- ------------------------ -------------------- -------------------
Group
revenues(3) 1,596.8 1,314.5 21% 21%
Retail sales 1,551.4 1,281.3 21% 21%
UK retail sales 577.1 481.5 20% 20%
International retail
sales 974.3 799.8 22% 22%
Gross profit 750.0 639.9 17%
Retail
gross
margin 45.4% 47.4% (200bps)
Gross
margin 47.0% 48.7% (170bps)
Profit
before
tax(4) 30.1 4.0 653%
Diluted
earnings
per share 27.5p 3.6p 664%
Net debt (163.6) (37.9) (332%)
------------------------ ----------------------- ------------------------ -------------------- -------------------
(1) All numbers subject to rounding throughout this document,
(2) Co nstant currency is calculated to take account of hedged rate
movements on hedged sales and spot rate movements on unhedged
sales, (3) Includes retail sales, delivery receipts and third-party
revenues, (4) Profit before tax for H120 includes impact of IFRS
16
HY Results summary
-- Retail sales up 21% - strong trading from peak period continuing through the half
o UK sales growth +20%, EU +21%, US +25% ROW +20%
-- Improving underlying cash generation; EBITDA margin restored
ahead of HY18 levels (H120 excluding IFRS 16 impact: 4.9%, H119:
2.8%, H118: 4.7%)
-- Record H1 PBT of GBP30.1m, reflecting strong trading and good
progress reducing non-strategic costs
-- Total orders placed of 41.1m, +19% year on year; robust
operational performance across all distribution centres
-- Net debt of GBP163.6m reflecting seasonal peak
Good progress against FY20 Priorities
-- Three new appointments to executive team; new leaders for brand, strategy and people
-- Progress ahead of expectations in reducing non-strategic
costs, further future opportunities identified
-- Revitalised product and presentation has underpinned strong trading
-- Full promotional calendar and upweighted social
communications has driven strong customer acquisition and
retention
COVID-19 has had a significant impact since the end of H1
-- Demand has been significantly impacted since containment
measures introduced; group sales down c.20%-25% in most recent
three weeks of trading
-- Most markets following pattern of demand shock before impact partially moderates
-- Disruption to product sourcing from China is minimal; closely monitoring European sourcing
Action taken to support our people, customers and our
business
-- Priority is health and wellbeing of our people and customers
-- All warehouses remain operational, but at lower capacity with
effective social distancing measures in place
-- Head office staff working from home where possible, but continuing to support our customers
-- Discretionary costs and capex reduced; intake aligned to demand profile
-- Appropriate use of government support including payment
deferrals and job retention schemes where available
-- Stress testing of scenarios indicates we have sufficient
liquidity under our existing GBP350m RCF
Additional financing announced to further protect our business
and position us for long-term growth
-- Finalising discussions to secure a GBP60-80m 12-month
extension to RCF with covenant adjustments to ensure additional
operational flexibility through the crisis;
-- Proposed placing of up to c.18.8% of issued share capital to
protect against a prolonged downturn and to position business for
long-term growth
Nick Beighton, CEO, commented:
"ASOS had a strong start to the year, making significant
progress against the priorities we set out and delivering a better
than anticipated first-half performance, driven by the operational
improvements we are making to the business.
Along with other businesses, we have been significantly impacted
by the COVID-19 outbreak. Our first priority was to quickly put in
place the necessary measures to ensure the health and wellbeing of
our people. I have been extremely impressed with the pace of change
and the flexibility our teams have shown in adopting these new ways
of working. I'd like to thank them all for the way they have
responded.
Since then, we have been focused on keeping our business
delivering for customers whilst implementing a series of actions to
mitigate the sales impact we have been experiencing. At the same
time we have been working to strengthen our financial position,
including reaching agreement with our lenders to provide us with
additional short-term financial flexibility.
The ASOS business model provides us with significant resilience
and we are encouraged to have seen, across our markets, that where
consumers are in lockdown, ASOS continues to be an important part
of their lives. We have a global platform with the capacity and
capability to drive our future growth as demand returns and against
that backdrop we are looking to raise incremental equity capital to
ensure we have sufficient resources to capitalise on the future
whatever it may hold.
The COVID crisis is clearly going to continue to be tough for
everyone and the short-term outlook remains highly uncertain, but
the measures we have taken ensure we are able to be clearly
focussed on making sure that ASOS emerges as a stronger and better
business.
Investor and analyst meeting:
There will be a webcast for investors and analysts that will
take place at 8.30am, 8 April 2020. To access live please join the
following link https://event-webcast.com/JEu8FOkrqyaUAjZz . The
webcast will be available both live and following the meeting at
www.asosplc.com .
For further information:
ASOS plc Tel: 020 7756 1000
Nick Beighton, Chief Executive Officer
Mat Dunn, Chief Financial Officer
Alison Lygo, Director of Investor Relations
& Treasury
Website: www.asosplc.com/investors
Headland Consultancy Tel: 020 3805 4822
Susanna Voyle / Stephen Malthouse / Fay
Rajaratnam
JPMorgan Cazenove Tel: 020 7742 4000
Michael Wentworth-Stanley / Bill Hutchings
/ Christopher Wood
Numis Securities Tel: 020 7260 1000
Alex Ham / Luke Bordewich
Forward looking statements:
This announcement may include statements that are, or may be
deemed to be, "forward-looking statements" (including words such as
"believe", "expect", "estimate", "intend", "anticipate" and words
of similar meaning). By their nature, forward-looking statements
involve risk and uncertainty since they relate to future events and
circumstances, and actual results may, and often do, differ
materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with
respect to future events as at the date of this announcement. Save
as required by applicable law, the Company undertakes no obligation
to publicly revise any forward-looking statements in this
announcement, whether following any change in its expectations or
to reflect events or circumstances after the date of this
announcement.
Background note
ASOS is an online retailer for fashion-loving 20-somethings
around the world, with a purpose to give its customers the
confidence to be whoever they want to be. Through its
market-leading app and mobile/desktop web experience, available in
ten languages and in over 200 markets, ASOS customers can shop a
curated edit of 85,000 products, sourced from 850 of the best
global and local third-party brands and its mix of fashion-led
in-house labels - ASOS Design, ASOS Edition, ASOS 4505 and
Collusion. ASOS aims to give all of its customers a truly
frictionless experience, with an ever-greater number of different
payment methods and hundreds of local deliveries and returns
options, including Next-Day and Same-Day Delivery, dispatched from
state-of-the-art fulfilment centres in the UK, US and Germany.
ASOS's websites attracted 215.4m visits during February 2020
(February 2019(1) : 170.9m) and as at 29 February 2020 had 22.3m
active customers(2) (28 February 2019: 19.2m), of which 6.8m were
located in the UK and 15.5m were located in international
territories (28 February 2019: 6.2m in the UK and 13.0m
internationally).
(1) Restated visits , previously reported number 171.6m, (2)
Defined as having shopped in the last twelve months as at 29/28
February
ASOS plc ("the Group")
Global Online Fashion Destination
Interim Results for the six months to 29 February 2020
Overview of first-half performance
ASOS recorded a strong performance over the first half of the
year. Our financial performance was ahead of our expectations; our
operational performance remained robust and we made good progress
against the six priorities we set out for the year.
Total sales grew by 21% to GBP1,597m as the strong momentum
experienced over the peak period continued into January and
February. A better than anticipated performance through the
clearance period, combined with healthy growth in the active
customer base, led to strong sales growth. Gross margin decreased
by 170bps reflecting the cost of US duty and freight and some
investment to support customer acquisition. PBT of GBP30.1m, our
strongest ever H1 performance, not only reflected better than
expected progress in reducing non-strategic costs, but also
favourable underlying trading dynamics including higher Average
Basket Values. Accordingly, EBITDA margin was restored ahead of
HY18 levels further demonstrating the improving cash generation
profile of the business. Our financial results were further
underpinned by the progress we have made in enhancing our
performance management processes and improving our operational and
financial controls. The HY profit includes c.GBP19m (H1 2019: c.
GBP24m) of transition costs. GBP5.8m of this was associated with
ongoing restructuring within the business, and the remaining
reduction year on year was largely due to improving efficiency in
both our Euro and US Hubs. Operationally, all of our warehouses
stepped up to handle record volumes without disruption.
COVID-19 update and planning
COVID-19 has had a profound impact on people, societies and of
course businesses and ASOS is no exception. At the start of the
outbreak, our initial focus was around the supply of product
sourced in China. This has since returned to normal operating
levels and we don't expect a material impact on our stock. We
continue to monitor the European supply chain closely. At the time
of writing, whilst we have seen some suppliers temporarily close
and some capacity lost from those who remain open, the majority are
operational and able to supply the product we need.
It is clear, however, that consumer demand in this uncertain
environment is by far the biggest uncertainty facing our business.
With most of our key territories in lockdown, we understand a
little bit more about the demand impacts from the pandemic each
day.
It remains too early to determine the extent of the impact on
consumer demand, or to be clear on how long these conditions will
persist, however, we have seen a clear impact on visitor traffic
and conversion. And, although not completely transferable to other
markets who are at different levels of development in terms of
e-commerce, Italy has given a good indication to how other
territories may perform. Our experience in Italy has shown an
initial demand shock as consumers adjust to the reality of lockdown
and prioritise spending elsewhere. Sales declines in the first week
were driven by reductions in both traffic and conversion. Following
this, we have seen the impact partially moderating, with traffic to
ASOS.com particularly starting to improve. However, overall
performance is still below our pre-COVID expectations. Whilst it is
still early, we have seen similar trends in other markets that are
following the same trajectory as Italy. What remains uncertain is
the impact of an extended period of restrictions on consumers
attitude to shopping and any reaction to a sustained period of
economic contraction. We will continue to monitor these trends
across key markets.
Notwithstanding overall demand being suppressed, we have found
consumers respond positively to promotional activity. This activity
has been supportive of new customer acquisition through the
disruption and we foresee the possibility of new customer
acquisition opportunities given the necessity of channel shift.
Whilst continuing to trade to support the longevity of our
business for all stakeholders, the wellbeing of ASOSers remains our
primary concern. We have taken significant precautionary measures
across our offices and warehousing facilities, both to protect our
colleagues' health and to minimise operational disruption. We have
put in place appropriate contingencies and operational plans to
ensure operational disruption is minimised if a case develops in
any of our facilities. This includes plans in the event that one of
our warehouses is required to shut for either a short or more
extended period. However, with many operational impacts resulting
from the COVID-19 situation it is impossible to guarantee that we
will not experience operational impacts which may constrain our
ability to service our market in full.
ASOS is uniquely designed to be an inspirational, relevant and
engaging platform for the world's fashion focussed 20-somethings.
That remains relevant even in this time of crisis. We continue to
see consumers choosing to spend time on our platform and choosing
us to meet their fashion needs even in such difficult and different
circumstances. Our broad range of product categories has allowed us
to cater to changing fashion needs with loungewear, beauty and
lingerie having all shown strong growth year on year as customers
mix out of dresses and tailoring. Our platforms and channels
continue to see strong levels of engagement, supported by the
launch of a new content franchise focused on #AtHomeWithASOS and
live events including fitness sessions, beauty regimes and DJ sets
with content creators, Insiders and influencers. We have had over
3.3m video views across Instagram Grid & IGTV between 12-25(th)
March, representing growth of over 100% in comparison to the
previous weeks.
Whilst this is a difficult time for everyone, we have confidence
that our business is well set for the future following the actions
we have taken. We have a global platform and the capacity and
capability to drive our future growth. We have demonstrated through
our H1 performance that our model is strong and resonates with
consumers. In the short term, the outbreak of COVID-19 will
undoubtedly have an impact on our financial performance. However,
our model provides us with significant flexibility to weather the
challenges ahead and to emerge as a strong and agile business. We
continue to monitor closely the impact of the COVID-19 outbreak,
ensuring that we look after customers and colleagues and take any
additional steps required.
Stress testing and liquidity for COVID-19
Uncertainty around the scale, timing and impact of the
coronavirus pandemic means it is impossible with any degree of
precision to determine the impact on our performance particularly
in the second half of the financial year. As a result we have
analysed a broad range of potential scenarios, including the
potential for trading to stay at current levels for an extended
period, the possibility for temporary warehouse closures and the
risk of longer duration recessionary impacts. We have modelled each
of them in detail, including the offsetting impact of extending the
mitigating actions we have already begun.
Whilst it is impossible to be precise as to all the impacts, we
have stress tested our liquidity under these scenarios and are
comfortable that with mitigating actions there is sufficient
liquidity within our existing GBP350m facility. This is supported
by the fact that we have a largely variable cost base, which allows
the scale of the business to be altered on a 6-12 week time frame.
In addition to this, we have already begun to take decisive action
on rightsizing our intake, managing our stock risk profile and
identifying a number of cash and cost mitigation measures across
the business to support our ability to respond to these
uncertainties. This includes the deferral of a number of capex
projects, including Truly Global Retail (TGR), which will now be
postponed until FY21.
However, given the high level of uncertainty, as precaution
against even more severe outcomes, we are taking action to ensure
maximum flexibility and headroom is available to us. We are in the
final stages of putting in place an extension to our RCF facility
of GBP60-80m, alongside the agreement from our lenders to adjust
our net debt to EBITDA covenant test for the next 12 months. In
addition to this, we have begun the process to confirm our
eligibility and begin access to the Covid Corporate Financing
Facility, launched by the Bank of England. These two sources of
incremental debt funding provide additional headroom to deal with
extensive disruption and associated working capital requirements
ensuring we can continue to support our business, our employees and
our partners.
Beyond this, we have today announced a placing to secure further
equity capital via means of a placing, up to c.18.8% of issued
share capital. The net proceeds from the Placing, combined with the
extension to current banking facilities, will be used to provide
sufficient liquidity and flexibility to manage the business through
and beyond the period of expected and continuing disruption. These
arrangements if completed would:
- put sufficient financing in place to weather no improvement in
current trading for at least 18 months;
- enable ASOS to emerge from the current crisis in a stronger
financial position to continue to invest in the growth of the
business and to work supportively with our long-standing supplier
base to mutual advantage as the industry recovers from the
pandemic; and
- avoid necessitating decisions being made for short-term
liquidity or cash management reasons that may cause detriment to
ASOS' long term prospects, and give us the flexibility to
restructure the business in the case of a prolonged downturn.
Progress against FY20 priorities
Whilst COVID-19 will clearly impact our short-term actions, our
focus so far and for the remainder of the year remains unchanged -
consistent execution and delivery against our six key FY20
priorities, as we build a business fit for the next stage of growth
and global opportunity.
As we set out at our full-year results in October, we have
identified six priorities for the year to help us deliver on the
opportunity we have to be one of the few truly global leaders in
retail. We have continued to make good progress against these in
the first half of the year and, whilst there remains much to be
done, we are already seeing early benefits.
Strengthen organisational capabilities
Strengthening the depth and breadth of our senior management
team was a key priority to ensure that we are well set for the next
phase of growth. Robert Birge joined us in early December in the
newly created Chief Growth Officer role, taking end to end
ownership for the customer journey, from engagement and acquisition
through to customer care. In March we announced the appointment of
Jo Butler as Chief People Officer who will be key in supporting the
transformation of our organisational design and people strategy.
Patrik Silén will join us as Chief Strategy Officer later this year
and brings a wealth of experience from his time at McKinsey.
We are pleased with the additional experience and capabilities
these new hires represent for our organisation and are confident in
the strength of the team we have built for the next stage of our
global growth.
Further increase product choice, availability and newness
Our priority for the first half of the year was regaining
customer momentum, and restoring the ASOS experience in the
customers eyes, with regard to the best fashion choice, was a key
part of this. Our analysis of FY19 performance reiterated the
importance of availability and newness in our offer. We, therefore,
backed our first half trading with good availability, which
undoubtedly contributed to our strong sales growth across the first
half. We increased our newness by 13% in H1 which is a key part of
the ASOS customer appeal, demonstrated by our 'New In' page being
the most visited category on site. Our focus is now on maintaining
consistency in availability and newness, and therefore the customer
experience, as we begin to annualise the improvements we made after
P1 last year.
ASOS Design stepped up 1% in the mix year on year, as we had
great success with key trends in blazers, embellished dresses and
strong prints across womenswear and logomania, utility, high necks
and plush fabrications across menswear. In addition, Collusion now
represents 1% of our total mix, and continues to grow well year on
year, resonating particularly well with our younger customers. ASOS
4505 continues to gain momentum and had a strong AW season, sales
were up 67% YoY with our bold and fashion forward Ski range landing
particularly well with customers.
We added over 100 new brands to our platform in the first half,
with highlights including Topshop and Berghaus. Within the US we
were pleased with the improvements in product width and have begun
trialling flexible fulfilment from our European warehouses to
further broaden the range of brands available to our US
customers.
Our priorities for the second half will now reflect balancing
appropriate levels of availability, newness and choice with
uncertain levels of consumer demand across many of our key markets.
Our supply chain remains flexible, with most ASOS Design product on
lead times of 4-12 weeks, which will allow us to remain agile in
the face of changing levels of consumer demand.
Continue to improve presentation and social media engagement
Our inspirational product presentation and social media
engagement remain at the heart of the ASOS customer appeal. We have
surpassed 10m followers on Instagram and see great levels of
engagement through the channel. We demonstrated our ability to
resonate in key trading moments over the Black Friday period.
During this time, we generated 1.2bn potential organic impressions,
landing considerably ahead of many of our peers. From 7am on the
Thursday ahead of Black Friday #ASOSBlackFriday was trending
worldwide driven by a surprise and delight activation that got
customers talking about their purchases increasing impressions of
our product.
We had great success with product collaborations and style edits
with carefully selected influencers across the half. Highlights
were a second collection from Ovie from Love Island, Delilah Bell
and Emily Shak. We saw great engagement with the associated content
with wide reaching organic impressions and great uplifts on the
associated product.
Optimise approach to customer acquisition and retention
We were pleased with the customer momentum we achieved through
the key acquisition period of the year. We added 2.0m to our active
customer base taking it to 22.3m and visits of 1.3bn represented
strong growth, up 22% year on year. Our focus from here is as much
on engagement and retention of customers as it is on new customer
acquisition as we work to further drive loyalty and frequency
across our customer base.
During the period, we rebalanced some of our investment towards
promotional activity, with a focus on designing promotional
mechanics that resonate with our younger target market. Our data
supports that customers we acquire or reactivate via promotional
activity are on average of higher value and more likely to shop
with ASOS again. During the half, relevant, targeted promotional
activity was supportive of driving both visits and full price sales
within the basket.
A step back in our rate of marketing investment year on year was
driven by the rebalancing of investment towards promo, removal of
non-working marketing spend and greater efficiencies in our direct
marketing spend. We have insourced a larger portion of our PPC
spend, increased the use of smart bidding and implemented a more
structured approach to testing marketing activity.
November saw our first trial of out of home awareness activity
in the US, utilising billboard space in Times Square alongside
targeted subway route posters for the journeys our target customers
travel most. This campaign alongside the introduction of always on
'New Customer' codes on our US sites supported pleasing new
customer acquisition in the territory.
The implementation of GDPR drove large scale change in the way
we communicate with our customers. This year we have reviewed and
refreshed all our lifecycle customer communications, implementing
more push notifications and contacts for re-engaging with customers
who drop out during the purchase funnel to good success.
Leverage benefits from transformational investments to drive
efficiency and enhance customer propositions
Having invested heavily into the platform and foundations of the
business over the last few years, both in terms of physical
infrastructure and technology, our focus for this year is to begin
to leverage the benefits of these investments.
The transformational investments in warehousing, automating and
doubling capacity at our Euro Hub and opening a new US fulfilment
centre, gave us the ability to fully participate in the peak period
free from capacity constraints. All our warehouses stepped up to
handle record volumes, without disruption.
The Euro Hub delivered significant improvements in both pick and
pack rates in the first half. Towards the end of the half, the pack
KPI was in line with our Barnsley warehouse and we expect to see
further improvements in our pick rate across the second half. This
not only generated cost efficiency, reflected in the reduction of
year on year transition costs, but also allowed improvements to our
EU proposition. Our Standard Delivery promise has been reduced by
one day and we have also gone live with 1 hour delivery slots in
Germany.
Turning to the US Hub in Atlanta, operations were robust
throughout the first half and it handled its first peak trading
period without disruption. Whilst the facility represents a cost
drag in comparison to Barnsley due to manual operations, it has
allowed us to open a true Next Day Delivery (NDD) proposition
across the US. NDD is now available to over 90% of US consumers,
and it increased steadily as a share of mix through the half.
Whilst it remains a customer paid proposition for the majority of
the US, we have experimented with inclusion in ASOS Premier and
free NDD basket thresholds during the half and expect to roll out
enhancements later this year.
Steady progress continued across the first half with our TGR
programme. TGR is a key component in supporting our global growth
ambitions. It will enable better, faster decision making and
improves our ability to give customers the best choice of product
at the right price and to trade as a truly global retailer. Given
the current backdrop and impact of COVID-19, we are reviewing the
timing of a phased implementation and are planning to defer
implementation until FY21.
Remove non-strategic cost
We have increased focus on our deployment of all cost and
investment across the business, as well as the processes we use to
manage our operational and financial performance. In the first half
we have made good early progress, with the cost savings to date
ahead of our initial expectations. This has been supported by
favourable basket metrics which have been enhanced by a number of
actions we have taken, including the adjustment of thresholds for
certain types of delivery and the consolidation of orders where
possible. In addition to cost savings, our priority has been to
strengthen financial discipline to ensure we are taking the right
decisions consistently across the business. We have made good
progress, but we continue to see this as a medium-term opportunity
as we work to embed these behaviours in our culture and ensure
investment is allocated towards those areas that drive an
appropriate return.
The first half saw increasing efficiency in our staff costs as
we rationalised processes and management structures across the
organisation and removed resource investment from non-strategic
areas such as the ASOS Magazine. This saving was partially offset
by the restructuring costs associated with making these
changes.
We drove increasing efficiency from our marketing cost spend in
the first half reflecting improvements in our use of performance
marketing investment tools, including Google smart bidding, more
rigorous customer segmentation and Facebook retargeting. Removal of
non-working marketing spend also drove cost savings year on
year.
Analysis of investment and efficiencies across our warehousing
and fulfilment costs drove further savings year on year. Refining
delivery thresholds has driven incremental savings and ensured we
are investing in propositions in line with our strategic priorities
and generating an appropriate return. This has been supportive of
ABV in a number of territories, which in turn has driven
efficiencies ahead of expectations. Our distribution costs also
benefitted from local distribution in the US which have broadly
offset additional costs incurred in gross margin for freight and
duty. In our warehouses we drove further efficiencies by improving
input and output KPIs associated with the capex investments made in
FY19.
The work that has been done so far is part of a longer term
objective to further improve operating margins going forward. In
the second half we have more work to do on realising cost
efficiencies and we will also begin work to set ourselves up to
progress longer term cost restructuring and margin realisation.
Performance by market
UK
In the UK, our most mature market, the first half performance
surpassed our expectations, particularly through the traditional
clearance period in January and February. Traffic was consistently
strong, up 18% in the half, and our active customer base was up 10%
year on year, driven by both new customer acquisition and
reactivations. This was reflective of the improvements we made
across product, presentation and customer engagement during the
half. We evolved our trading stance to ensure we were reflecting
developments in what resonates and stimulates demand and
engagement. This was successfully executed throughout the half but
with most pleasing results seen during the Black Friday period
where we gained market share year on year. Further to this, we
continued to develop our UK payment proposition in line with the
way customers are increasingly keen to pay with the introduction of
two new instalment payment methods. 'Klarna Pay in 3' and 'Clearpay
Pay in 4' were added in December and were supportive of new
customer growth and ABV. Overall this performance translated into
good growth in frequency +6%, and ABV +6% as the increase in items
per basket was also aided by a small overall increase in ASP.
EU
Performance within Europe was much improved this half at +21% as
last year's warehouse transition and stock availability issues were
resolved ahead of peak period. During the first half we focussed on
acquiring and reactivating customers which was supported by a more
dynamic promotional trading calendar. Greater use of smart bidding
also helped drive traffic +26% and in the acquisition of new
customers ahead of Black Friday. Our EU active customer base
increased by 0.9m in the first six months of the year. Conversion
stepped back slightly -10bps reflecting a mix shift towards mobile
web, which has a higher mix of new visitors, with lower initial
conversion rates.
Turning to individual country performance, France and Germany
responded particularly well to our trading stance around Black
Friday, showing great growth year on year following a disappointing
performance through the peak period last year. We made investment
in the half into better availability in dresses, which was
particularly supportive of performance in Germany where they
typically over index in that category. Poland and Denmark saw the
launch of local language sites at the start of the year delivering
localised merchandising for customers and allowing us to optimise
performance marketing channels. We have seen a step up in visits
and new customer growth since the launch and are pleased with
progress in these countries.
US
The US delivered strong sales growth of +25% as we moved beyond
the warehouse transitional issues last year impacting fulfilment
and stock availability. We made good progress with our product
width in the region, focus there continues and we are making good
progress on extending the width of our Face + Body offering.
Sneaker brands performed particularly well on US sites in the half
reflecting our expansion of branded product. Our total active
customer base increased to 3.1m in the period with particular
support from new customer growth. Customer KPIs for the region
showed encouraging progress, with healthy growth in traffic,
orders, conversion and ABV.
US customers responded well to the trial of our first targeted
out of home awareness campaign in November which drove incremental
sales. This, alongside a number of proposition enhancements
including wider reaching NDD, improved order cut off times, Next
Day Click & Collect and Klarna Pay in 4 were supportive of our
performance in the region during the half.
ROW
ROW retail sales grew by 20%, supported by a stronger year on
year trading stance, particularly over Black Friday following the
exclusion of some territories in the prior year. We continue to see
really strong growth in the MENA region, supported by great growth
in traffic and a rapidly increasing active customer base. We rolled
out our ASOS Premier proposition to Saudi Arabia and UAE in the
period to a good initial uptake and increased ABV and
frequency.
Russia continued to grow solidly during the period. Changes we
have made to the rhythm in our trading calendar are attracting
younger customers, which is positive, but work remains to ensure we
drive the right behaviours in terms of frequency.
Despite the bushfires in Australia we saw good growth in the
country during the half. Afterpay continued to perform well in the
region taking an increasing share of the mix and driving more
considered and high value purchases from our customers.
We saw softer trade in APAC, driven by disruption in Hong Kong
and Singapore. ASOS Premier launched into these two territories in
March and we hope to see an improvement in performance across the
remainder of the year.
Outlook
Whilst there remains significant uncertainty around the extent
and duration of the impact of the COVID-19 pandemic, we believe we
are well positioned as a business to navigate the challenges and
emerge from the crisis as a stronger, more resilient business well
positioned to capture future growth opportunities.
The first half clearly demonstrated the progress we have made in
our performance management processes and improvements in our
operational and financial controls. This enhanced financial and
operational grip will serve us well as we navigate and trade
through an uncertain and changeable backdrop.
The additional liquidity headroom we have secured positions us
well to cope with the expected short-term disruption as well as any
further unforeseen short-term challenges. The actions we have taken
to recapitalise our balance sheet position ASOS well for the long
term and ensure we continue to progress towards capturing the
substantial global opportunity ahead. We remain confident in the
strength and appeal of our customer proposition and retain a clear
focus on what differentiates ASOS. This, backed by the global
warehouse and technology capabilities we have built, means we are
confident we will exit this period of subdued demand in a position
of strength to become one of a few truly global leaders in
retail.
Nick Beighton Mathew Dunn
Chief Executive Officer Chief Financial Officer
Financial review
Overview
Six months to 29 February 2020
UK EU US RoW Total
GBPm GBPm GBPm GBPm GBPm
Retail sales 577.1 488.1 202.6 283.6 1,551.4
Delivery receipts 15.8 11.4 7.1 6.9 41.2
Third party revenues 4.1 - 0.1 - 4.2
Total revenue 597.0 499.5 209.8 290.5 1,596.8
Cost of sales (846.8)
----------------
Gross profit 750.0
Distribution expenses (223.5)
Administrative expenses (491.9)
----------------
Operating profit 34.6
Net finance expense (4.5)
----------------
Profit before tax 30.1
================
Six months Six months Change
to 29 February to 28 February
2020 2019
--------------------------------- ---------------- ---------------- --------
Active customers(1) (m) 22.3 19.2 16%
Average basket value (including
VAT) GBP73.44 GBP70.70 4%
Average units per basket 3.05 2.90 5%
Average selling price per unit
(including VAT) GBP24.12 GBP24.42 (1%)
Average order frequency(2) 3.54 3.55 0%
Total orders (m) 41.1 34.4 19%
Total visits(3) (m) 1,333.9 1,091.8 22%
Conversion(4) 3.1% 3.2% -10bps
Mobile device visits 85.2% 80.5% +470bps
--------------------------------- ---------------- ---------------- --------
(1) Defined as having shopped in the last twelve months as at
29/28 February, (2) Calculated as last twelve months' total orders
divided by active customers, (3) Restated visits, previously
reported number 1,085.4m, (4) Calculated as total orders divided
by total visits
Total orders in the first half were 41.1m, an increase of 19% on
the previous year with visits to the site growing by 22%.
Conversion stepped back 10bps, primarily reflecting a mix shift
towards mobile web, which has a higher mix of new visitors, with a
lower initial conversion rate. Our active customer base grew 16% to
22.3m with good new customer acquisition as well as a reduction in
churn.
ABV across the group increased 4% in H1 2020 and was up year on
year in all territories. This was driven by the actions we have
taken to drive higher average units per basket partly offset by
slightly lower group ASP. The US was the primary driver of the
decline in ASP as we continued to trade through a greater
proportion of markdown stock held in the US warehouse following
transition to this site last year.
Gross profit increased 17% but gross margin declined 170bps
versus the prior year. The majority of this decline was driven by
increased freight and duty costs associated with fulfilment from
our US warehouse. The incremental cost in gross margin is broadly
offset by a decline in delivery costs due to local fulfilment. This
change to the shape of the P&L will fully annualise in April
2020. Further to this we saw an adverse FX impact, driven by
strengthening of the Euro year on year from November onwards,
(offset below gross margin) and an impact from the planned
investment into customer acquisition through promotional activity.
These impacts were partially offset by improved buying margin.
Profit before tax increased 653% to GBP30.1m after transition
costs of c.GBP19m, of which GBP5.8m was associated with the ongoing
restructuring within the organisation. The remaining transition
costs primarily reflect inefficiency in our Euro Hub operations
following the implementation of automation and mechanisation in
April last year. This impact reduced in comparison to H2 2019 as
labour cost efficiency improved once automation became embedded.
Year on year, dual running costs from the US Hub have also dropped
away following warehouse go live in February last year.
Profit before tax was also impacted by an increase in finance
costs as we drew down from our credit facility and transitioned to
IFRS 16 (See IFRS 16 note on page 13).
UK performance
UK Six
KPIs months
to
29
February
2020
Retail
Sales +20%
Visits +18%
Orders +18%
Conversion +10bps
ABV +6%
Active 6.8m
Customers (+10%)
UK retail sales were +20% in the period, despite an increasingly
competitive market. We saw strong participation through Black
Friday and the traditional clearance period, which was aided by
prolonged cold weather. Our total UK customer base grew 10% year on
year to 6.8m. We continued to add new customers to the base, but
also saw positive trends in reactivation and churn, reflecting the
improvements made to engagement and product across the
business.
ABV was up 6% in the half driven by an increase in items per
basket alongside a small increase in ASP. Sneaker brands, with an
on average higher ASP, performed well in the mix during the
half.
EU performance
EU Six
KPIs months
to
29
February
2020
Retail +21%
Sales (+22%
CC)
Visits +26%
Orders +21%
Conversion -10bps
ABV +1%
Active 8.7m
Customers (+18%)
EU retail sales grew 21% (22% in constant currency), as
operational challenges following Euro Hub automation were resolved
before the peak period and stock availability was restored. Traffic
growth was strong at +26% and ahead of orders growth of 21% as
conversion stepped back 10bps due to a greater mix of mobile web
visitors with lower initial conversion.
Active customer growth of 18% year on year represents good
progress on rebuilding customer momentum following disruption
associated with warehouse transition last year. Reactivation of
customers has been a key focus, and we utilised promotional levers
to drive the reactivation and acquisition of new customers.
US performance
US Six
KPIs months
to
29
February
2020
Retail +25%
Sales (+24%
CC)
Visits +16%
Orders +21%
Conversion +20bps
ABV +2%
Active 3.1m
Customers (+19%)
US retail sales grew by 25% (24% in constant currency)
representing a significant acceleration from FY19 supported by
improvements in delivery proposition and more favourable basket
economics. The US entered the half with a greater mix of markdown
stock, which weighed on ASP. The mix has improved back towards the
group average and accordingly the drag lessened through the period.
Total active customer base grew 19% to 3.1m.
ROW performance
ROW Six
KPIs months
to
29
February
2020
Retail +20%
Sales (+20%
CC)
Visits +24%
Orders +19%
Conversion Flat
ABV +6%
Active 3.7m
Customers (+23%)
ROW retail sales grew by 20% (20% in constant currency) mainly
driven by strong participation during Black Friday. P2 levels were
softer than P1 due to non like for like promo events and a
temporary softness in Australia driven by the unfortunate bushfire
events. Despite visits growing ahead of orders, we have seen flat
conversion. ABV increased 6% driven by an increase in items per
basket and a higher trainer sales mix.
Gross margin
Group gross margin decreased by 170bps. The largest driver of
this decline was increased freight and duty costs associated with
fulfilling from our US warehouse (offset in delivery costs). Beyond
this we increased our planned investment year on year into
promotional activity to drive customer acquisition. FX drove a
further adverse impact due to strengthening of the Euro year on
year (offset below gross profit). These were partially offset by an
improvement in buying margin. Retail gross margin declined 200bps
year on year with the differential vs group gross margin being
driven by an increase in customer paid delivery services as well as
an increase in revenue from premier subscriptions.
Operating expenses
Six months Six months
to 29 February to 28 February
GBPm 2020 % of sales 2019 % of sales Change
Distribution costs (223.5) 14.0% (204.9) 15.6% (9%)
Warehousing (161.3) 10.1% (144.2) 11.0% (12%)
Marketing (69.3) 4.3% (64.4) 4.9% (8%)
Other operating costs (203.9) 12.8% (189.5) 14.3% (8%)
Depreciation and amortisation (57.4) 3.6% (32.4) 2.5% (77%)
------------------------------- ---------------- ----------- ---------------- ----------- -------
Total operating costs (715.4) 44.8% (635.4) 48.3% (13%)
------------------------------- ---------------- ----------- ---------------- ----------- -------
Operating expenses increased 13% to GBP0.7bn but total operating
costs decreased 350bps as a percentage of sales, reflecting our
priority of removing non-strategic cost. The year on year reduction
in distribution costs was principally driven by the change to local
fulfilment for the US market from our US warehouse. The improvement
in warehousing costs was driven by increasing efficiency from Euro
Hub automation, improving basket metrics as well as IFRS 16
transition (see IFRS 16 note on page 13). Our US warehouse
continues to represent a cost drag year on year, with US orders now
being processed on a manual basis from this facility rather than
our automated UK warehouse. Payroll costs, within other operating
costs, improved materially as a percent of sales driven by ongoing
work to improve the efficiency of our operational structure.
Marketing costs also decreased by 60bps as a percentage of sales as
we drove greater efficiency on our investment, particularly through
smart bidding, and removed non-working marketing spend including
the ASOS Magazine.
This decrease was partially offset by higher depreciation costs
following the cycle of elevated capital investment in
transformation over the last three years and the transition to IFRS
16.
Interest
Interest costs rose to GBP4.5m in the year as we transitioned to
IFRS 16 and also incurred costs from drawing down on our credit
facility which supported our working capital cycle and capital
investment in the period.
IFRS 16 Impact
Six months Six months
to 29 February to 29 February
2020 (incl % of IFRS 2020 (excl % of
GBPm IFRS 16) sales 16 Impact IFRS 16) sales Change
Warehousing (161.3) 10.1% 6.8 (168.1) 10.5% 40bps
Other operating
costs (203.9) 12.8% 6.7 (210.6) 13.2% 40bps
Depreciation and
amortisation (57.4) 3.6% (11.6) (45.8) 2.9% (70bps)
Finance expense (4.5) 0.3% (2.5) (2.0) 0.2% (10bps)
PBT 30.1 1.9% (0.6) 30.7 1.9% (0bps)
Taxation (7.0) 0.1 (7.1)
------------------ ---------------- ------- ----------- ---------------- ------- --------
Profit after tax 23.1 (0.5) 23.6
------------------ ---------------- ------- ----------- ---------------- ------- --------
Diluted EPS 27.5p (0.6p) 28.1p
------------------ ---------------- ------- ----------- ---------------- ------- --------
During the first half we implemented IFRS 16, as required from
the International Financial Reporting Standards. As we adopted the
simplified transition approach we have not restated any
comparatives. To enable a YoY comparison we have demonstrated above
the impact that this has in our current period profit. Although it
has no impact on the H1 2020 PBT margin, it has decreased H1 2020
warehousing costs (mainly warehousing leases) by 40bps, other
operating costs (mainly office leases) by 40bps whilst increasing
H1 2020 depreciation by 70bps and net finance expense by 10bps.
Taxation
The effective tax rate decreased by 170bps to 23.3% (H1 2019:
25.0%). This arose mainly from a one-off permanent difference on
share based payments which was driven by the increase in the share
price year on year, and an increase in profit before tax, meaning
permanently disallowable items in the tax calculation had a smaller
impact. In addition, the decrease was also due to a drop in the
corporate tax rate from 19% to 17%.
Earnings per share
Basic and diluted earnings per share increased by 667% to 27.6p
and by 664% to 27.5p respectively (H1 2019: 3.6p and 3.6p). This
was driven by the increase in profit before tax during the
period.
Cash flow
There was a GBP73.1m increase in net debt in the period,
compared with a GBP80.6m increase in net debt in the previous
half-year. The cash outflow in the period reflects our typical
working capital cycle and investment into stock availability.
Working capital investment was GBP92.3m in the half including the
principal portion of lease liabilities of GBP10.0m. EBITDA was
GBP92.0m, an increase of GBP55.1m vs previous half. Capital
expenditure of GBP70.6m is seen in cash capital expenditure of
GBP69.6m and a capital creditor increase of GBP1.0m associated with
our H1 2020 investment.
Consolidated UNAUDITED Statement of Total Comprehensive
Income
Interim Results for the six months to 29 February 2020
Six months Six months Year to
to to
29 February 28 February 31 August
2020 2019 2019 (audited)
(unaudited) (unaudited)
GBPm GBPm GBPm
Revenue 1,596.8 1,314.5 2,733.5
Cost of sales (846.8) (674.6) (1,399.2)
------------------------------------ ------------------------------ -------------- -----------------
Gross profit 750.0 639.9 1,334.3
Distribution expenses (223.5) (204.9) (415.6)
Administrative expenses (491.9) (430.5) (883.6)
Operating profit 34.6 4.5 35.1
Finance income 0.2 - -
Finance expense (4.7) (0.5) (2.0)
Profit before tax 30.1 4.0 33.1
Income tax expense (7.0) (1.0) (8.5)
------------------------------------ ------------------------------ -------------- -----------------
Profit for the period 23.1 3.0 24.6
------------------------------------ ------------------------------ -------------- -----------------
Profit for the period attributable
to owners of the parent company 23.1 3.0 24.6
------------------------------------ ------------------------------ -------------- -----------------
Net translation movements offset
in reserves (0.4) 0.5 (0.8)
Net fair value gains/(losses)
on derivative financial assets 62.3 36.9 (14.9)
Income tax relating to these items (9.5) (7.3) 2.8
------------------------------------ ------------------------------ -------------- -----------------
Other comprehensive income for
the period (1) 52.4 30.1 (12.9)
------------------------------------ ------------------------------ -------------- -----------------
Total comprehensive income for
the period attributable to owners
of the parent company 75.5 33.1 11.7
------------------------------------ ------------------------------ -------------- -----------------
Earnings per share (Note 4)
Basic 27.6p 3.6p 29.4p
Diluted 27.5p 3.6p 29.4p
------------------------------------ ------------------------------ -------------- -----------------
(1) All items of other comprehensive income will subsequently be
reclassified to profit or loss
Consolidated UNAUDITED Statement of Changes in EquitY
Interim Results for the six months to 29 February 2020
Employee
Called Benefit
up share Share Retained Trust reserve Hedging Translation Total
capital premium earnings(1) (EBT) (2) reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 September
2019 2.9 6.9 449.5 1.3 (4.8) (2.2) 453.6
Profit for the
period - - 23.1 - - - 23.1
Other
comprehensive
income/(loss)
for
the period - - - - 52.8 (0.4) 52.4
----------- --------------------- ------------ ------------------ ---------- ---------------- --------
Total
comprehensive
income/(loss)
for
the period - - 23.1 - 52.8 (0.4) 75.5
Net cash
received
on exercise
of shares
from EBT(2) - - - 0.7 - - 0.7
Share-based
payments
charge - - 4.0 - - - 4.0
Tax relating
to share
option scheme - - (0.4) - - - (0.4)
----------- --------------------- ------------ ------------------ ---------- ---------------- --------
Balance as at
29 February
2020 2.9 6.9 476.2 2.0 48.0 (2.6) 533.4
=========== ===================== ============ ================== ========== ================ ========
Employee
Called Benefit
up share Share Retained Trust reserve Hedging Translation Total
capital premium earnings(1) (EBT)(2) reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 September
2018 2.9 6.9 422.1 1.0 7.5 (1.6) 438.8
Profit for the
period - - 3.0 - - - 3.0
Other
comprehensive
income for the
period - - - - 29.7 0.4 30.1
---------- ----------- ------------- --------------- --------- ------------ --------
Total
comprehensive
income for the
period - - 3.0 - 29.7 0.4 33.1
Net cash received
on
exercise of
shares
from EBT(2) - - - 0.4 - - 0.4
Transfer of shares
from EBT(2) on exercise - - 0.1 (0.1) - - -
Share-based
payments
charge - - 0.8 - - - 0.8
Tax relating to
share
option scheme - - (0.1) - - - (0.1)
---------- ----------- ------------- --------------- --------- ------------ --------
Balance as at 28
February
2019 2.9 6.9 425.9 1.3 37.2 (1.2) 473.0
========== =========== ============= =============== ========= ============ ========
(1) Retained earnings includes the share-based payments
reserve
(2) Employee Benefit Trust and Link Trust
Employee
Benefit
Trust
Called reserve
up share Share Retained (EBT) Hedging Translation Total
capital premium earnings(1) (2) reserve reserve equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 September 2018 2.9 6.9 422.1 1.0 7.5 (1.6) 438.8
Profit for the year - - 24.6 - - - 24.6
Other comprehensive
loss for the year - - - - (12.3) (0.6) (12.9)
---------- ----------- ------------- --------- --------- ------------ --------
Total comprehensive
income/(loss) for the
year - - 24.6 - (12.3) (0.6) 11.7
Net cash received on
exercise of shares
from EBT(2) - - - 0.3 - - 0.3
Share-based payments
charge - - 3.4 - - - 3.4
Tax relating to share
option scheme - - (0.6) - - - (0.6)
---------- ----------- ------------- --------- --------- ------------ --------
Balance as at 31 August
2019 2.9 6.9 449.5 1.3 (4.8) (2.2) 453.6
========== =========== ============= ========= ========= ============ ========
(1) Retained earnings includes the share-based payments
reserve
(2) Employee Benefit Trust and Link Trust
Consolidated UNAUDITED Statement of Financial PositioN
Interim Results for the six months to 29 February 2020
At At At
29 February 28 February 31 August
2020 2019 2019 (audited)
(unaudited) (unaudited)
GBPm GBPm GBPm
Non-current assets
Goodwill 1.1 1.1 1.1
Other intangible assets 339.7 290.8 325.1
Property, plant and equipment 640.1 278.5 296.0
Derivative financial assets 31.1 18.3 0.1
1,012.0 588.7 622.3
------------------ ------------- -----------------
Current assets
Inventories 581.6 443.3 536.8
Trade and other receivables 84.0 48.8 72.8
Derivative financial assets 40.6 37.2 11.0
Cash and cash equivalents 8.9 22.1 -
Current tax asset 1.8 0.4 2.6
------------------
716.9 551.8 623.2
------------------ ------------- -----------------
Current liabilities
Trade and other payables (660.3) (582.6) (669.0)
Bank overdraft - - (15.5)
Borrowings (172.5) (60.0) (75.0)
Lease liabilities (23.2) - -
Derivative financial liabilities (11.0) (8.1) (12.7)
(867.0) (650.7) (772.2)
------------------ ------------- -----------------
Net current liabilities (150.1) (98.9) (149.0)
------------------
Non-current liabilities
Lease liabilities (299.4) - -
Deferred tax liability (24.2) (16.0) (12.6)
Derivative financial liabilities (4.9) (0.8) (7.1)
------------------
(328.5) (16.8) (19.7)
------------------ ------------- -----------------
Net assets 533.4 473.0 453.6
================== ============= =================
Equity attributable to owners
of the parent
Called up share capital 2.9 2.9 2.9
Share premium 6.9 6.9 6.9
Employee Benefit Trust reserve(1) 2.0 1.3 1.3
Hedging reserve 48.0 37.2 (4.8)
Translation reserve (2.6) (1.2) (2.2)
Retained earnings 476.2 425.9 449.5
------------------ ------------- -----------------
Total equity 533.4 473.0 453.6
================== ============= =================
(1) Employee Benefit Trust and Link Trust
Consolidated UNAUDITED Statement of Cash Flows
Interim Results for the six months to 29 February 2020
Six months Six months Year to
to to
29 February 28 February 31 August
2020 2019 2019 (audited)
(unaudited) (unaudited)
GBPm GBPm GBPm
Operating profit 34.6 4.5 35.1
-------------------- ------------- ------------------
Adjusted for:
Depreciation of property, plant
and equipment 27.4 11.9 25.3
Amortisation of intangible assets 30.0 20.5 46.0
Fixed asset impairment 0.6 - 1.4
Increase in inventories (44.8) (35.7) (129.2)
Increase in trade and other receivables (16.3) (6.2) (30.2)
(Decrease)/increase in trade
and other payables (21.2) 49.9 143.3
Share based payments charge 3.3 0.5 2.5
Other non-cash items (0.5) (1.4) 0.7
Income tax paid (3.9) (3.7) (5.2)
-------------------- ------------- ----------------------
Net cash inflow from operating
activities 9.2 40.3 89.7
Investing activities
Payments to acquire other intangible
assets (43.9) (66.3) (124.9)
Payments to acquire property,
plant and equipment (25.7) (54.1) (96.7)
Finance income 0.2 - -
Net cash used in investing activities (69.4) (120.4) (221.6)
Financing activities
Net cash inflow relating to EBT(1) 0.7 0.4 0.3
Proceeds from borrowings 97.5 60.0 75.0
Principal portion of lease liabilities (10.0) - -
Finance Expense (3.3) (0.6) (1.4)
Net cash generated from financing
activities 84.9 59.8 73.9
Net increase/(decrease) in cash
and cash equivalents 24.7 (20.3) (58.0)
==================== ============= ==================
Opening cash and cash equivalents (15.5) 42.7 42.7
Effect of exchange rates on cash
and cash equivalents (0.3) (0.3) (0.2)
-------------------- ------------- ------------------
Closing cash and cash equivalents 8.9 22.1 (15.5)
==================== ============= ==================
(1) Employee Benefit Trust and Link Trust
Notes to the financial information
Interim Results for the six months to 29 February 2020
1. Preparation of the consolidated financial information
a) General information
ASOS Plc ('the Company') and its subsidiaries (together, 'the
Group') is a global fashion retailer. The Group sells products
across the world and has websites targeting the UK, US, Australia,
France, Germany, Spain, Italy, the Netherlands, Russia, Sweden,
Denmark and Poland. The Company is a public limited company which
is listed on the Alternative Investment Market (AIM) and is
incorporated and domiciled in the UK. The address of its registered
office is Greater London House, Hampstead Road, London, NW1
7FB.
The interim financial statements have been reviewed, not
audited, and were approved by the Board of Directors on
7 April 2020.
b) Basis of preparation
The interim financial statements for the six months ended 29
February 2020 have been prepared in accordance with IAS 34,
"Interim Financial Reporting" as adopted by the European Union and
the AIM Rules for Companies. The interim financial statements
should be read in conjunction with the Group's Annual Report and
Accounts for the year ended 31 August 2019, which was prepared in
accordance with IFRSs as adopted by the European Union.
The interim financial statements have been reviewed, not
audited, and do not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006. The Annual Report
and Accounts for the year ended 31 August 2019 have been filed with
the Registrar of Companies. The auditors' report on those accounts
was unqualified, did not include a reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying the report and did not contain statements under s498 of
the Companies Act 2006.
The Group's business activities together with the factors that
are likely to affect its future developments, performance and
position are set out on pages 4 to 9. The Financial Review on pages
10 to 13 describes the Group's financial position and cash
flows.
COVID-19 is having a profound impact on people, societies and
businesses globally, including countries in which ASOS operates.
The Group considers this outbreak to be a non-adjusting balance
sheet event as at 29 February 2020. Prior to this date, the primary
concern was supply from China, however the Group's supply has since
returned to normal operating levels and there has been no material
impact. Sales to China are not material to the Group. While there
was a possibility of decline in demand elsewhere in the world, as
at 29 February it was far from clear how significant this would be
for an online retailer such as ASOS, in particular in some of its
primary markets where the level of disruption anticipated as at the
end of February 2020 was significantly lower than is currently
being experienced. The Group will continue to monitor closely the
impact of the COVID-19 outbreak, and apply guidance issued by the
World Health Organization and local governments appropriately. As
always, the safety of our customers and colleagues remains
paramount.
Going concern
The Directors have reviewed current performance and cash flow
forecasts, and are satisfied that the Group's forecasts and
projections, taking account of potential changes in trading
performance, show that the Group will be able to operate within the
level of its available facilities for the foreseeable future.
Although we are learning more about the impact of COVID-19, it is
not practicable to quantify the potential financial impact of the
outbreak on the Group's performance after the balance sheet date.
The Group has conducted extensive stress-testing given the impact
COVID-19 is currently having on customer demand, none of which have
resulted in a change to the assessment of the Group as a going
concern. The Directors have therefore continued to adopt the going
concern basis in preparing the Group's financial statements.
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge, the
interim financial statements have been prepared in accordance with
IAS 34 "Interim Financial Reporting" as adopted by the European
Union a nd the AIM Rules for Companies , and that the interim
management report includes a fair review of the information
required.
Accounting policies
The interim financial statements have been prepared in
accordance with the accounting policies set out in the Annual
Report and Accounts for the year ended 31 August 2019, with the
exception of the new accounting standards that were adopted during
the period. These are:
IFRS 16
The group has adopted IFRS 16, "Leases", effective for
accounting periods commencing 1 January 2019 and applied the
simplified transition approach with the practical expedients for
short term and low value asset leases. Comparatives have not been
restated and opening retained earnings have not been impacted, as a
result of the transition approach.
The right-of-use assets have been measured at an amount equal to
the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that lease recognised in the
statement of financial position immediately before the date of
initial application. The value of the lease liabilities represents
the total cash commitments under each of the operating leases. The
present value of the lease liabilities is discounted at ASOS'
potential borrowing cost for a long-term liability and will be
reviewed periodically.
The lease liability brought onto the balance sheet at transition
is GBP332.9m, and the right-of-use asset GBP346.0m. A GBP36.6m
dilapidation provision has also been recognised separately,
discounted using the same discount rate as the lease liability.
There was an existing dilapidations provision of GBP5.5m held on
the balance sheet for the year ended 31 August 2019 hence a
GBP31.1m movement has been included in the table below showing the
impact across the opening balance sheet:
1 September
2019
GBPm
------------------------------------------------------------------------------------
Non-current assets
Right-of-use assets - property, plant & equipment
Current assets 346.0
Prepayments (4.9)
Current liabilities
Financial liabilities - lease liabilities (23.2)
Accruals 22.9
Non-current liabilities
Financial liabilities - lease liabilities (309.7)
Dilapidation provision (31.1)
---------------------------------------------------------------- ------------------
Total movement in retained earnings at 1 September 2019 -
---------------------------------------------------------------- ------------------
Reconciliation of the lease liabilities at 1 September GBPm
2019 to the operating lease commitments at 31 August
2019:
----------------------
Operating lease commitments disclosed at 31 August 2019 under
IAS17 388.9
Adjustments as a result of changes in management assumptions
on exercising an option to terminate a lease and reflecting
individual components of a contract (20.4)
Discounted using the group's incremental borrowing
rate at the date of initial application (35.1)
Short-term leases excluded from lease liability (0.5)
---------------------------------------------------------------- ----------------------
Additional lease liability recognised as at 1 September
2019 332.9
---------------------------------------------------------------- --------------------------
The effect in the first half year has resulted in EBITDA
increasing by GBP13.5m, depreciation increasing by GBP11.6m,
therefore EBIT increasing by GBP1.9m. Finance costs have increased
by GBP2.5m and therefore profit before tax reduced by GBP0.6m.
Within the cash flow statement, while there is no additional
impact on cash flows, there are changes in the classification of
cash flows, with GBP10.0m of lease payments classified as financing
cash flows and GBP2.6m as interest payments.
From 1(st) September 2019 the Group's lease policy is summarised
as follows:
A right-of-use asset and lease liability is recognised at the
lease commencement date. The right-of-use asset is initially
recognised at cost, comprising the initial amount of the lease
liability plus any initial direct cost incurred. An adjustment is
made for the reclassification of prepaid lease expenses,
dilapidation accruals less any lease incentives received. The
right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the asset or the end of the lease
term.
The lease liability is initially measured as the present value
of the lease payments at the commencement date, discounted using
the incremental borrowing rate. The lease liability is measured at
amortised cost using the effective interest method and a subsequent
finance charge recognised on the finance lease liability. A finance
charge on the dilapidation provision is also recognised using the
same effective borrowing rate. The finance lease liability is
re-measured when there is a change in future lease payments arising
from a change in an index or a rate or a change in the Group's
assessment of whether it will exercise an extension or termination
option. When the lease liability is re-measured, a corresponding
adjustment is made to the right-of-use asset.
ASOS' activities as a lessor are not currently material.
2. Principal risks and uncertainties
The Board considers the principal risks and uncertainties which
could impact the Group over the remaining six months of the
financial year to 31 August 2020 to be unchanged, other than in
relation to COVID-19, from those set out in the Annual Report and
Accounts for the year ended 31 August 2019, summarised as
follows:
-- Operational risks, including:
- Transformation projects are delayed or fail to deliver,
- Increasing our operating model complexity,
- Understanding local market context, globally, and
- Ethical trade or sourcing issues in our supply chain
-- Market risks, including:
- Geopolitical uncertainty, including Brexit,
- Shift in e-commerce market dynamics,
- Cyber threat and data security,
- Key third party supplier or service provider failure and business continuity, and
- Foreign exchange movement
These are set out in detail on pages 32 to 37 of the Group's
Annual Report and Accounts for the year ended 31 August 2019, a
copy of which is available on the Group's website, www.asosplc.com.
Information on financial risk management is also detailed on pages
95 to 99 of the Annual Report.
In addition to the above, COVID-19 is having a profound impact
on people, societies and businesses globally, including countries
in which ASOS operates. As the situation continues to rapidly
evolve, the Group will continue to monitor closely its impact and
apply guidance issued by the World Health Organization and local
governments.
3. Segmental analysis
IFRS 8 'Operating Segments' requires operating segments to be
determined based on the Group's internal reporting to the Chief
Operating Decision Maker. The Chief Operating Decision Maker has
been determined to be the Executive Board who receives information
on the basis of the Group's operations in key geographical
territories, based on the Group's management and internal reporting
structure. The Executive Board assesses the performance of each
segment based on revenue and KPIs reflecting territory and customer
performance.
Six months to 29 February 2020 (unaudited)
UK EU US RoW Total
GBPm GBPm GBPm GBPm GBPm
Retail sales 577.1 488.1 202.6 283.6 1,551.4
Delivery receipts 15.8 11.4 7.1 6.9 41.2
Third party revenues 4.1 - 0.1 - 4.2
Total revenue 597.0 499.5 209.8 290.5 1,596.8
Cost of sales (846.8)
----------------
Gross profit 750.0
Distribution expenses (223.5)
Administrative expenses (491.9)
----------------
Operating profit 34.6
Net finance expense (4.5)
----------------
Profit before tax 30.1
================
Six months to 28 February 2019 (unaudited)
UK EU US RoW Total
GBPm GBPm GBPm GBPm GBPm
Retail sales 481.5 402.2 161.6 236.0 1,281.3
Delivery receipts 12.8 7.5 5.3 3.9 29.5
Third party revenues 3.6 0.1 - - 3.7
Total revenue 497.9 409.8 166.9 239.9 1,314.5
Cost of sales (674.6)
----------------
Gross profit 639.9
Distribution expenses (204.9)
Administrative expenses (430.5)
----------------
Operating profit 4.5
Net finance expense (0.5)
----------------
Profit before tax 4.0
================
Year to 31 August 2019 (audited)
UK EU US RoW Total
GBPm GBPm GBPm GBPm GBPm
Retail sales 993.4 825.7 341.2 497.4 2,657.7
Delivery receipts 27.4 17.5 12.1 9.4 66.4
Third party revenues 9.0 0.3 0.1 - 9.4
Total revenue 1,029.8 843.5 353.4 506.8 2,733.5
Cost of sales (1,399.2)
------------------
Gross profit 1,334.3
Distribution expenses (415.6)
Administrative expenses (883.6)
------------------
Operating profit 35.1
Net finance expense (2.0)
------------------
Profit before tax 33.1
==================
Due to the nature of its activities, the Group is not reliant on
any individual major customers. No analysis of the assets and
liabilities of each operating segment is provided to the Chief
Operating Decision Maker in the monthly management accounts.
Therefore, no measure of segment assets or liabilities is disclosed
in this note. The total amount of non-current assets located in the
UK is GBP681.8m (31 August 2019: GBP463.4m), EU: GBP210.5m (31
August 2019: GBP113.0m), US: GBP87.5m (31 August 2019: GBP44.7m)
and RoW: GBPnil (31 August 2019: GBPnil).
4. Earnings per Share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares in issue during the period. Own
shares held by the Employee Benefit Trust and Link Trust are
eliminated from the weighted average number of ordinary shares.
Diluted earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares in issue during the period,
adjusted for the effects of potentially dilutive share options.
Six months Six months Year to
to to
29 February 28 February 31 August
2020 2019 (unaudited) 2019 (audited)
(unaudited)
No. of shares No. of shares No. of shares
Weighted average share capital
Weighted average shares in issue for
basic earnings per share 83,625,962 83,522,184 83,565,283
Weighted average effect of dilutive
options 249,987 267,700 159,117
-------------- ------------------- -----------------
Weighted average shares in issue for
diluted earnings per share 83,875,949 83,789,884 83,724,400
============== =================== =================
Earnings (GBPm)
Earnings attributable to owners of
the parent 23.1 3.0 24.6
================= =============== ================
Basic earnings per share: 27.6p 3.6p 29.4p
Diluted earnings per share: 27.5p 3.6p 29.4p
================= =============== ================
5. Capital expenditure and commitments
During the period, the Group capitalised intangible assets of
GBP44.9m and property, plant and equipment of GBP25.7m. Disposals
were GBPnil. At the period end capital commitments contracted, but
not provided for by the Group, amounted to GBP44.7m.
6. Reconciliation of cash and cash equivalents
(a) Cash and cash equivalents /(bank overdraft)
Six months Six months Year to
to 29 February to 28 February 31 August
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
Net movement in cash and cash equivalents 24.7 (20.3) (58.0)
Opening cash and cash equivalents (15.5) 42.7 42.7
Effect of exchange rates on cash
and cash equivalents (0.3) (0.3) (0.2)
-------------------- ------------------ ----------------
Closing cash and cash equivalents 8.9 22.1 (15.5)
==================== ================== ================
(b) Borrowings
The Group has in place a GBP350.0m RCF available until July
2022. At 29 February 2020 the Group had drawn down GBP172.5m of the
RCF. Please refer to the 'Stress Testing and Liquidity for
COVID-19' section on page 5 for updates to this facility since 29
February 2020.
7. Contingent liabilities
From time to time, the Group is subject to various legal
proceedings and claims that arise in the ordinary course of
business, which due to the fast-growing nature of the Group and its
ecommerce base, may concern the Group's brand and trading name or
its product designs. All such cases brought against the Group are
robustly defended and a liability is recorded only when it is
probable that the case will result in a future economic outflow
which can be reliably measured.
At 29 February 2020, there were no pending claims or proceedings
against the Group which were expected to have a material adverse
effect on its liquidity or operations. The Group had contingent
liabilities of GBP21.2m (H1 2019: GBP19.9m) in relation to supplier
standby letters of credit, rent deposit deeds and other bank
guarantees. The likelihood of a cash outflow in relation to these
contingent liabilities is considered to be low.
8. Financial instruments
Six months Six months Year to
to 29 February to 28 February 31 August
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
Financial assets
Derivative assets used for hedging
at fair value 71.7 55.5 11.1
Amortised cost(1) 76.1 54.1 51.2
Financial liabilities
Derivative liabilities used for
hedging at fair value (15.9) (8.9) (19.8)
Lease liabilities (322.6) - -
Amortised cost(2) (832.8) (633.1) (750.4)
================== ================== ================
(1) Included in financial assets at amortised cost are trade and
other receivables and cash and cash equivalents, and excludes
prepayments
(2) Included in financial liabilities at amortised cost are
trade payables, accruals, borrowings and other payables
The Group operates internationally and is therefore exposed to
foreign currency transaction risk, primarily on sales denominated
in US dollars and Euros. The Group's policy is to mitigate foreign
currency transaction exposures where possible and the Group uses
financial instruments in the form of forward foreign exchange
contracts to hedge future highly probable foreign currency cash
flows.
These forward foreign exchange contracts are classified above as
derivative financial liabilities and are classified as Level 2
financial instruments under IFRS 13, "Fair Value Measurement." They
have been fair valued at 29 February 2020 with reference to forward
exchange rates that are quoted in an active market, with the
resulting value discounted back to present value. All forward
foreign exchange contracts were assessed to be highly effective
during the period to 29 February 2020 and a net unrealised gain of
GBP62.3m (H1 2019: gain of GBP36.9m) was recognised in equity. All
derivative financial liabilities at 29 February 2020 mature within
three years based on the related contractual arrangements.
9. Related parties
The Group's related party transactions are with the Employee
Benefit Trust, Link Trust, key management personnel and other
related parties as disclosed in the Group's Annual Report and
Accounts for the year ended 31 August 2019. There have been no
material changes to the Group's related party transactions during
the six months to 29 February 2020.
Independent review report to ASOS Plc
Report on the interim financial statements
Our conclusion
We have reviewed ASOS Plc's interim financial statements (the
"interim financial statements") in the interim results of ASOS Plc
for the 6 month period ended 29 February 2020. Based on our review,
nothing has come to our attention that causes us to believe that
the interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the AIM Rules for Companies.
What we have reviewed
The interim financial statements comprise:
-- the consolidated unaudited statement of financial position as at 29 February 2020;
-- the consolidated unaudited statement of total comprehensive
income for the period then ended;
-- the consolidated unaudited statement of cash flows for the period then ended;
-- the consolidated unaudited statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the AIM Rules for Companies.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim results in
accordance with the AIM Rules for Companies which require that the
financial information must be presented and prepared in a form
consistent with that which will be adopted in the company's annual
financial statements.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the AIM
Rules for Companies and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Watford
7 April 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BUGDSCXGDGGR
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