TIDMASC
RNS Number : 9867B
ASOS PLC
14 October 2020
14 October 2020
ASOS plc
Global Online Fashion Destination
Final Results for the year to 31 August 2020
Strong FY20 operational and financial performance
Well positioned to progress as one of the few truly global
leaders in fashion retail
Summary financial results
Year to Year to CCY(2)
GBPm(1) 31 August 31 August Change Change
2020 2019
--------------------------- ---------------------- ---------------------- -------------------- -------------------
Group
revenues(3) 3,263.5 2,733.5 19% 19%
Retail sales 3,171.0 2,657.7 19% 19%
UK retail sales 1,175.9 993.4 18% 18%
International retail
sales 1,995.1 1,664.3 20% 19%
Gross profit 1,547.4 1,334.3 16%
Retail gross
margin 45.9% 47.4% (150bps)
Gross margin 47.4% 48.8% (140bps)
Profit before
tax 142.1 33.1 329%
Diluted
earnings per
share 125.6p 29.4p 327%
Net
cash/(debt)(4) 407.5 (90.5)
--------------------------- ---------------------- ---------------------- -------------------- -------------------
(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) Net cash/(debt) is the cash and cash equivalents less
borrowings
Results Summary
-- Strong sales growth group-wide; UK +18%, EU +22%, US +18%, ROW +18%
-- Active customer base up 3.1m to 23.4m demonstrating momentum
in customer acquisition and high levels of engagement
-- PBT of GBP142.1m reflecting underlying improvements in
profitability and net Covid-19 tailwind (c.GBP45m with incremental
costs offset by favourable return rates)
-- Cash generation of GBP258.6m driven by strong operational
performance and favourable working capital due to later peak stock
build (c.GBP89m benefit which will be re-phased into FY21)
-- Solid P4 performance in context of normalising customer
returns rates and continued reduced demand for occasion wear;
growth of 15% on underlying basis adjusting for Covid-19 returns
behaviour
Strategic & Operational Highlights
-- Delivered against FY20 priorities to strengthen our foundations for future growth
-- Operational agility and resilience demonstrated across
warehousing and supply chain despite the significant challenges
presented by Covid-19
-- Strong product performance across the year with a dynamic
reshaping of offer in the second half to match customer demand in
lockdown categories; continued opportunity to further develop ASOS
brands and offer in Face + Body and activewear
-- Substantial removal of non-strategic cost (c.GBP50m) drove
sustainable improvements to profitability this year; confident of
further progress
Outlook
-- Positioned to capture the global opportunity despite
significant short-term uncertainty through continued development of
the ASOS brands, the ASOS platform and the ASOS customer
experience
-- Continue to improve the capability, resilience and agility of our business
-- Well-set for peak trading; warehousing capacity operating at
normal levels whilst maintaining social distancing and greater
diversity planned into product mix
-- Solid start to the year but retaining caution on outlook for
consumer demand whilst economic prospects and lifestyles of
20-somethings remain disrupted
-- Continued investment in technology and infrastructure
including new fulfilment centre to support continued strong UK
growth and deliver capacity well ahead of planned requirements for
peak FY23
-- Expecting to deliver continued improvement in underlying profit (excl. Covid-19 tailwind)
Nick Beighton, CEO, commented:
"After a record first half which saw us make progress in
addressing the performance issues of the previous financial year,
the second half will always be defined by our response to Covid-19.
I am proud of the way ASOS met this challenge head on, putting our
duty to act as a responsible business at the heart of our approach
and working to balance our performance in that context. As well as
protecting staff, suppliers and customers, we've driven efficiency
and have emerged a stronger, more resilient and agile business
whilst delivering strong profit and cash generation.
I am pleased by the improvements we have made this year but
there is still more for us to do to continue our progress. Whilst
life for our 20-something customers is unlikely to return to normal
for quite some time, ASOS will continue to engage, respond and
adapt as one of the few truly global leaders in online fashion
retail."
Investor and analyst meeting:
There will be a webcast for investors and analysts that will
take place at 8.30am, 14 October 2020. To access live please join
the following link
https://asos.register-me.uk/full-year-results-2020 or dial +44 20
3787 4277, and use conference call ID: 325 893 558# . 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, Investor Relations
Website: www.asosplc.com/investors
Headland Consultancy Tel: 020 3805 4822
Susanna Voyle / Stephen Malthouse / Fay
Rajaratnam
JPMorgan Cazenove Tel: 020 7742 4000
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 233.4m visits during August 2020
(August 2019: 187.4m) and as at 31 August 2020 had 23.4m active
customers(1) (31 August 2019: 20.3m), of which 7.1m were located in
the UK and 16.3m were located in international territories (31
August 2019: 6.4m in the UK and 13.9m internationally).
(1) Defined as having shopped in the last 12 months as at 31
August
ASOS plc ("the Group")
Global Online Fashion Destination
Final Results for the year to 31 August 2020
Overview
ASOS delivered a strong performance across the year as we
navigated the unprecedented challenges that arose as a result of
the Coronavirus-19 pandemic ("Covid-19"). Total sales grew by 19%
to GBP3,263.5m and profit before tax increased to GBP142.1m, an
increase of GBP109.0m on the previous year. We entered this
financial year with a clear focus on rebuilding momentum and
executing consistently. Last October, we set out the key priorities
to help us achieve this; restoring the strength of our customer
facing offer and ensuring we had the right internal capabilities
and financial strength to continue pursuing our global growth
ambitions. Notwithstanding the backdrop, we made solid progress
against each of the priorities which has strengthened the
foundations of our business. There is still a lot more work for us
to do but we are pleased with the improvements we have made this
year.
This progress, combined with an increased operational grip and
more rigorous performance management, enabled us to steer the
business through the challenges caused by the pandemic. The
business showed great agility, adapting to significant operational
change, disruption across our supply chain, a dramatic shift in
consumer demand and an uncertain and fast changing landscape. From
our perspective, Covid-19 initially presented itself as a challenge
to product supply as suppliers managed lockdown constraints and
freight was disrupted. As we moved into April, the challenge we
faced shifted to uncertain demand. Whilst demand for certain types
of product, particularly occasion and formal-wear, remained
constrained, we saw strong growth in casualwear and other lockdown
relevant products. However, this polarisation in demand in turn
drove further supply constraints exacerbated by the reduction in
product produced globally this year given the restrictions most
businesses are operating under.
Throughout this period, our primary focus was on continuing to
do the right thing - ensuring the health and safety of people
across our operations, our customers and our wider supply chain.
Initially we had to restrict our business to protect our people and
give us the space to reshape every element of how we work to ensure
that we were able to slowly increase our capacity in a Covid-19
secure manner. The amount of change we undertook to reshape every
element of our business was unprecedented - we learnt much and many
of the processes we developed are and will remain the way we do
business. As we progressed we were increasingly able to capitalise
on opportunities for customer acquisition and growth as they
arose.
As these results demonstrate, we have emerged from this
financial year as a stronger, more resilient and agile business,
having progressed with our priorities as planned, but also having
taken many learnings from the challenges and disruption the
pandemic has presented. This positions us well as we consider the
uncertain landscape ahead. We continue to foresee headwinds to
consumer demand, which will not abate until lifestyles and
financial stability normalise for our 20-something customer and we
expect the disruption to global product supply will be felt into
2021. However, we have built greater diversity into our product mix
and have proven how operationally flexible our business can be.
This gives us confidence that we will be able to navigate the year
ahead and continue to progress as one of the few truly global
leaders in fashion retail. To help us achieve our ambition to be a
truly global fashion retailer, we have set out today our clear
focus on continuing to develop the three key strategic pillars of
our model: the ASOS brands, the ASOS platform and the ASOS customer
experience. All of which will be underpinned by an increasingly
efficient, effective and sustainable operating model.
Financial Performance
The business has delivered an exceptionally strong financial
performance this year including record levels of profit and cash
generation. EBIT increased GBP116.0m to GBP151.1m and equated to a
margin of 4.6%, up 330bps year on year. Whilst this strong growth
in profit was assisted by unusually low customer returns rates
through lockdown, a strong operational grip, greater discipline
around investment, the removal of non-strategic cost and leverage
from the transformational investments we have made are driving
sustainable underlying profit growth.
Covid-19 had a substantial impact on the shape of the P&L
this financial year. We experienced material incremental costs from
disruption, however the mitigating action taken across the
business, combined with the significant reduction in returns rates,
generated a profit tailwind for the business this year of
c.GBP45m.
The incremental Covid-19 costs we incurred were primarily driven
by: the increased safety measures we implemented in our warehouse
operations (which increased support costs and reduced
efficiencies); higher airfreight rates; and additional customer
facing investment to stimulate demand on 'going out' product.
However, these were more than offset by two main cost benefits that
we would not expect to repeat. Warehouse and distribution costs
benefited from a significant reduction in returns rates, as
customers mixed into lower returns rate categories and exhibited
more deliberate purchasing behaviour, which drove lower processing
costs through our network. Secondly, we reduced our marketing spend
significantly in P3 to avoid stimulating demand we could not
service as we managed capacity restrictions in our warehouses,
implemented for social distancing purposes.
Beyond this, we made good progress in removing non-strategic
costs across the business and saw substantial improvements in
efficiency from the transformational investments we have made in
automation, more detail of which can be found in this statement
under our corresponding key priorities.
We closed the financial year in a strong net cash position of
GBP407.5m, up from a net debt position of GBP90.5m at the start of
the year. This inflow has been driven by a combination of the
proactive capital raise we undertook in April (net cash proceeds of
GBP239.4m), a significant increase in EBITDA and improved working
capital discipline. In addition, the year end position has been
enhanced by a later than usual stock build for peak trading due to
Covid-19, which is phased into the first half of FY21. Excluding
this tailwind of c.GBP89m, we expect to be cash generative in the
year ahead.
Capital expenditure of GBP115.6m was invested this year across
our technology platforms and warehouse infrastructure. This was
lower than our initial expectations as we delayed implementation of
our TGR programme due to lockdown restrictions, which will be
rephased into FY21. We plan to invest GBP170m-GBP180m in capital
expenditure in FY21. This includes the conclusion of the GBP5m
investment we made to ensure our warehouses go well beyond
government guidelines with respect to Covid-19 secure sites. We
will also commence investment into our fourth fulfilment centre.
Leveraging learnings from the recent investments we have made,
investment work will begin this year to allow for a gradual ramp up
ahead of the capacity requirements for peak in FY23. This
incremental capacity will be situated in the UK and will support
the continuing high growth we have seen in our home market and,
also allows for maximum flexibility and resilience to service
demand across our global network. We have learnt a lot from our
recent investment programme and are confident that the
implementation timeframe, as well as our ability to bring the
centre on-stream in a measured way to enhance the capacity we
already have around the Group, should help in the implementation of
this project.
Strengthening Organisational Capabilities
We have made good progress this year in building out the breadth
and depth of experience in our executive team. During the year,
three new executives have joined the business, Robert Birge as
Chief Growth Officer, Jo Butler as Chief People Officer and Patrik
Silén as Chief Strategy Officer. We will announce our fourth and
final appointment to our new executive team shortly. The Chief
Commercial Officer, will take end-to-end ownership of product, from
design and buying through to presentation. This new executive team
will allow us to drive greater end-to-end ownership and
accountability of product and customers as well as ensuring we have
the right capabilities as ASOS continues to grow in terms of scale
and complexity. We have also reshaped our organisation beyond the
executive team building new structures, processes and ways of
working. This has enabled us to improve our operational execution
whilst managing significant organisational change and building out
our strategic framework to support our future growth ambitions. As
we look forward there is still much for us to do to improve our
organisation but we have made significant progress this year and
have set the foundations for the future.
Removing Non-Strategic Cost
As we set out this year, we had identified a multi-year
opportunity to drive greater efficiency across our business
allowing us to maximise the benefit of our investment whilst making
sure we do that at minimum cost. This opportunity is apparent in
many areas across the business, from the way we invest into the
customer experience and the return generated from marketing, to the
way our teams are structured and our commercial partner agreements.
Whilst the opportunity is potentially significant, this has been a
new challenge for us and we were rightly cautious about how long it
would take to capture this opportunity. However, our progress in
removing c.GBP50m of non-strategic costs has exceeded our initial
expectations this year, owing to the tenacity and adaptability of
our people, alongside the greater rigour instilled in our financial
discipline and operational performance management processes. We
further leveraged the opportunity presented by the disruption and
operational change required by Covid-19 to test and further
understand the return associated with spend in a number of areas
and took action accordingly. Looking forward, there is further
opportunity but having taken these large initial steps it will be
more challenging to access the next set of efficiencies. We are
clear what they are and what it will take, but remain cautious
about our rate and speed of progress. However, we are confident
that this opportunity will support continuing improvements in
profitability as well as allowing for disciplined reinvestment into
the business.
Further Increasing Product Choice, Availability &
Newness
We started the year well, backing our first half trading plan
with good availability and a 13% year on year increase in newness.
This resonated well with customers and was reflected in our strong
first half sales performance. The shape of customer demand, and
hence what resonated as the most relevant product, shifted
dramatically from March onwards as Covid-19 related lockdowns
impacted customers' lifestyle and shopping habits. Product designed
for 'going out', especially dresses, have always been central to
our product offer and a point of customer differentiation. Whilst
demand for 'going out' product has been severely impacted by
lifestyle restrictions, the strength of our brand here remains a
strategic advantage for us in the medium-term and we have
maintained our resource levels in this area. We have adapted our
product mix to match this shift in 20-something lifestyle,
increasing our mix of casualwear, activewear and Face + Body, but
will not lose focus on our core 20-something fashion audience and
the 'going out' product customers love ASOS for.
This year, we have continued to build momentum with our 13
strong family of ASOS brands, a business that delivered sales of
over GBP1bn in the year. Collusion and ASOS 4505 both delivered
great growth this year, supported by how well the product resonated
with customers through lockdown. ASOS 4505 grew 89%, whilst
Collusion grew 44% and firmly established itself as a top 10 brand
on site.
ASOS Luxe and Dark Future were launched as we developed further
choice for our 'glam girl' and 'alpha male' customer segments. Both
brands had good success with initial launch ranges, but we have
taken the opportunity over the summer to further develop customer
engagement, increasing choice in the range and backing the brands
with influencer led campaigns.
September saw us launch our 'ASOS Must Haves', key trend pieces
of the season at market leading price points to ensure we are
competitively positioned with our younger customers. The initial
collection resonated well, with a focus on logos, pastels, utility
and checks, and two further collections will launch in the coming
months.
Face + Body and activewear are two strategic categories that we
have entered in a meaningful way within the last few years. Both of
these categories have seen extremely strong customer demand through
lockdown and we have capitalised on the opportunity to accelerate
our ambitions in these categories.
We have approached our Face + Body category through a different
lens and in a way that resonates with our 20-something customer,
differentiating our positioning and authority within the market. We
have consistently grown our offering of the most relevant brands
over the last two years, highlights from the brands added this year
include Charlotte Tilbury and Urban Decay. Whilst Face + Body
compliments our core fashion offering well, customer shopping
behaviour and expectations from this category differ and we have
therefore built out a team of specialists to support our plans to
triple our sales over the next three years.
Sportswear is a huge market globally, and we see clear
opportunity to continue increasing our share in this category.
Growth has been particularly strong this year driven by lockdown,
up c.50%, and we believe our focus on curating and presenting the
best edit of sports lifestyle and activewear product for our
20-something customer, from the most globally relevant sports
brands, will further support our penetration in this category.
Continuing To Improve Presentation & Social Media
Engagement
This year we made consistent progress on further improving our
product presentation and social media engagement, with a particular
focus on developing video content that feels native and organic to
app channels. The year had started well ahead of peak trading and
we maintained this momentum through the second half by successfully
pivoting our content to reflect the realities of lockdown
lifestyles for our customers. This translated into over 79m
engagements across social channels during the year, with over 200m
video views and over 275m story views.
We have continued to experiment with different social media
channels this year, developing the most engaging content and
ensuring our presence is strong on the platforms most relevant to
our customers. Our first major TikTok campaign, "AySauceChallenge",
used a combination of ASOS and creator commissioned content to
drive ASOS brand recognition and awareness to great success. The
challenge hashtag generated over 1.6bn views, and made ASOS the
only European fashion brand to break a billion views over the
campaign period in 2020. We have also begun to experiment with
content on Twitch, the live streaming platform for gamers, and are
excited by the prospects for reaching our target customers on new
and different channels.
Highlights from our influencer collaborations this year have
included Lottie Tomlinson and Wes Nelson fronting the first drop of
our 'ASOS Must Haves' collection, a campaign which generated
engaging content for multiple channels and saw over 8.7m video
views. Sarah Ashcroft and Luke Trotman acted as ambassadors for our
latest ASOS Luxe and Dark Future collections. The content produced
here resonated extremely well with the influencer led activity
generating over 10m engagements with a social reach of almost
34m.
Optimising Approach To Customer Acquisition & Retention
We built strong customer momentum through the year increasing
our active customer base by 3.1m to 23.4m. This momentum has been
supported by the improvements we have made in restoring our
compelling customer proposition, across our product, presentation,
social media content and dynamic trading stance, but it has been
amplified by progress in refining our approach to the allocation of
consumer-facing investment.
We have deployed a more scientific approach to testing to deepen
our understanding of customer behaviour and to ensure we are
driving the right return from all investment. During the year we
have experimented with geo-targeting, prospecting, retargeting, new
social media channels and deepened our understanding of PPC. This
drove efficiency through our marketing spend, and a clearer
understanding of the incrementality generated by investment through
different channels allowing us to redirect our investment as
appropriate. We continue to view our promotional calendar and
activations as an effective mechanism for customer acquisition,
retention and to maximise the frequency with which customers engage
with ASOS. We adopted a more dynamic approach this year - with
shorter, sharper, more targeted events. This has allowed us to
improve the return on these events, drive incremental traffic from
our existing consumers, as well as increased levels of customer
acquisition.
Looking forward, we will continue with further experimentation
and a data-led approach to ensure we are continually optimising and
building greater agility into the way we deploy spend.
Leveraging Benefits From Transformational Investments To Drive
Efficiency And Enhance Customer Propositions
Logistics
Covid-19 caused significant disruption to operations and
efficiency across our network as we re-engineered our processes and
made structural changes to ensure our warehouses were compliant
with best practice social distancing requirements. Perspex
shielding was built to separate the 680 pack benches across our
facilities, additional sheltered space was created outside to
facilitate break times, sanitation and temperature checking
equipment was installed as well as regulating the way staff
entered, exited and moved during their shift across site. This was
delivered whilst continuing to keep our warehouses operational,
although it did require a significant reduction in capacity as we
implemented this magnitude of change. We have nearly concluded an
incremental GBP5m of investment this year to ensure that our
warehouses are compliant with best practice social distancing on a
permanent basis. This includes improving ventilation, increasing
turnstiles and structural changes to support the one way systems in
place.
On an underlying basis we have driven a significant step change
in warehouse efficiency, most notably through the pick and pack
KPIs in Euro Hub following implementation of automation last year.
Pick units per man hour improved by 57% whilst pack improved by
14%. We also saw further efficiency in both our UK and US hubs
which drove improvements in our network wide KPIs. This efficiency
has enabled us to keep investing into our delivery proposition.
Next day delivery is now available to over 99% of US customers and
we reduced our Canadian standard delivery proposition from 14 to 6
days. Evening next day delivery is available with a midnight cut
off across urban Germany and we were able to support the addition
of many other customer delivery options including further pick up
drop off points and more specific delivery windows.
This year will see commencement of investment into our fourth
fulfilment centre, based in the UK to further support growth in our
home market, but also provide flexibility for fulfilment globally.
This facility will be operational in the next financial year but
allows for a gradual ramp up and testing ahead of the capacity
requirement for peak trade in 2023.
Tech
Investment in our technology platforms has been central to
delivery of an ever improving ASOS customer experience. Whilst we
delayed implementation of our TGR programme to FY21, to ensure we
were not taking undue execution risk through lockdown, progress has
continued across all our platforms despite the disruption and
uncertainty in outlook Covid-19 created.
Multiple releases across the year supported in driving and
enhancing efficiency through our outbound delivery and returns
operations. Highlights include rollout of paperless online returns
to the UK, US and Germany, logic and functionality to support
parcel consolidation and development of flexible fulfilment across
our network of warehouses. Flexible fulfilment unlocks the ability
to service customers with brands and product from across our
warehouse network if not available in the regional warehouse.
This October saw the release of customer product reviews on
site, which should support in customer engagement and also unlocks
greater potential for strategic growth in Face + Body. Further
payment methods have been rolled out across the UK, US, Germany and
Australia and we have made changes to optimise our payment
acquiring, improving our transaction costs and our local acceptance
rates. We have also delivered further domain consolidation to
enhance our SEO and improved our page speed downloads across the
core customer journey to help support conversion.
Performance by Market
UK
Retail sales grew by 18% to GBP1,175.9m during the year as we
continued to take share in our home market. The customer facing
improvements we made in product and customer engagement have
resonated well and proven the appeal of the ASOS proposition. We
now have over 7m active customers in the UK and saw growth of over
30% in Premier subscriptions this year. UK customers showed a
pronounced shift towards more deliberate purchasing during
lockdown, and when adjusting for this change in underlying returns
rate, we delivered consistent sales growth across this year despite
the reduction in demand for the 'going out' product we are best
known for.
EU
We delivered a consistently strong performance across the course
of the year as we rebuilt customer momentum following disruption
from the go-live of our Euro Hub warehouse automation last year.
Retail sales growth for the year was 22% as our active customer
base grew 18%. This year our EU customers saw a much-improved stock
pool with greater choice and availability and benefited from a more
dynamic trading stance. The enhancements to delivery proposition
unlocked by automation have also supported performance in this
region, as we have rolled out later cut off times across standard
and next day delivery in France and in Germany where our delivery
proposition is now industry-leading. France performed particularly
well during lockdown with lower relative online penetration
generating further opportunity for customer acquisition during the
year.
Our model is resonating well with fashion focused 20-somethings
in Europe, and we have taken share through the year. We are
targeting further improvements to continue enhancing our
competitive positioning and customer proposition including
investment into localised pricing on ASOS Design.
US
Performance in the US started the year well and reflected the
improvements we made to the stock profile in our Atlanta warehouse.
We added 0.3m customers in the first half and sales growth of 25%
was supported by better conversion and strong order growth.
Performance in the second half slowed as this region experienced
the most severe disruption from Covid-19. We saw a significant
reduction in consumer demand, and recovery did not come through at
the same speed as we saw in other markets. This has been driven by
a combination of market and ASOS specific factors. The US
20-something consumer has not benefited from the same support
measures for financial security as European consumers, and the
degree to which consumer lifestyles have normalised also remains
behind Europe. In addition to this, we have also experienced
challenges with our stock pool in the US. The reduction in
commercial flights inhibited our ability to airfreight product into
the US at a time when this developing stock pool still requires
distribution from our other facilities. Whilst our product offer is
much enhanced, we still have further opportunity to build out our
localised stock offer, branded relationships and in-country
sourcing, which will continue to be a focus in FY21.
Rest of World
Retail sales in our ROW territory grew 18% in the year. This
region is still fulfilled from our UK Hub in Barnsley and the
global restrictions on airfreight caused significant disruption to
our proposition for these countries. We managed the impact through
changes to delivery thresholds to ensure we balanced basket
profitability with the customer experience. The changes we made to
thresholds supported growth in our ABV in the region through an
increase in items per basket. Australia pleasingly grew at over 20%
this year despite the disruption from bush fires and the challenges
we experienced with fulfilment owing to airfreight restrictions.
The MENA region continued to perform extremely well during the
year, with Saudi Arabia the standout country growing over 50%.
Growth was supported by a more locally relevant promotional
calendar as well as strong activity through Ramadan which resonated
well. Within Russia performance was more constrained driven by a
challenging promotional environment. However, our core proposition
continues to resonate and we grew our active customer base by 28%,
which was ahead of our sales growth.
Strategic Focus and Execution
Our vision is to become the number one destination for
fashion-loving 20-somethings worldwide and we began our journey
towards becoming a truly global retailer some years ago. Initially
this was through building a strong product portfolio for global
markets. More recently we have deployed fulfilment centres in the
US and Europe, to enhance our proposition and set the physical
foundations for the next stage of the journey. We have made good
progress and have learnt a lot. This year we needed to build on our
physical infrastructure to ensure we had the right processes and
ways of working appropriate for a business of global scale and
complexity. The focus on our six key priorities in this financial
year has allowed us to do this and ensure we have the right
capabilities and financial strength for us to begin the next phase
of our growth.
We know that to make our vision a reality we need to meet all
the fashion needs of 20-somethings in a way that inspires, excites
and engages. The next stage of our journey will require us to
continue building towards becoming a truly global retailer
supported by three key strategic pillars:
-- Further develop the range of unique design only we offer to
grow the ASOS brands which are already a GBP1bn business
-- Develop the ASOS platform, enhancing our category breadth and
flexibility to ensure we have more of the products 20-somethings
want whenever they want it
-- Improve the ASOS customer experience to make it more
inspiring, exciting, personalised and friction free
These will be enabled by an efficient, effective and sustainable
model.
These pillars and priorities will serve us well for the next
stage of growth, providing the strategic framework as our
initiatives evolve each year.
In the current fiscal year, we will take a further leap forward
in becoming a truly global retailer with the deployment of our TGR
programme - which will give us the enhanced buying, merchandising,
planning and stock management capabilities we need to underpin our
global growth aspirations. These capabilities will enable our
retail teams to deliver a more consistent product experience to our
consumers across the globe.
Within the ASOS brands, our focus for the year will be to
continue to enhance the range of our core ASOS Design product
whilst we further develop our ranges in Dark Future, ASOS Luxe,
Collusion and ASOS 4505. We will also launch a new brand, AsYou, at
a typically lower price point which will stay true to our ethos and
design-led approach. This will take time to build out but will
broaden our appeal to a wider range of consumers and meet a gap in
our portfolio for lower-priced fashion-forward product.
The priorities for the ASOS platform will be to further enhance
the customer offer broadening its appeal in the strategic growth
categories of activewear and Face + Body. We made much progress in
FY20 but there is much more opportunity for us to build these
categories. We will also start to use a more flexible approach to
fulfilment, increasing both range and availability by giving
consumers access to product from across the ASOS warehouse network.
We will begin this, starting in the US in the first half of the
year. This will start to enhance our offering and we will work with
key brand partners to build the capability to deliver to our
consumers directly from their warehouses in the coming years.
In terms of the ASOS customer experience, we will continue to
improve the range and flexibility of our customer offer, giving
them a compelling reason to shop with us more frequently by making
our offer more differentiated by geography and consumer type. We
will also enhance our on-site experience, with the recently
introduced customer reviews capability being the first enhancement.
We will also continue to develop our payment and delivery
propositions, particularly in Europe and the US. As part of this,
we will look to leverage the warehouse investments we have already
made, looking to push cut-off times later as we build scale and
increasing the range of ways consumers can receive and return
products.
With the top team now in place and much work done to develop our
core processes and ways of working, our focus will shift to
building out the depth of our organisational capabilities whilst
looking for further efficiencies across our business. This will
involve a particular focus on enhancing our geographical
capabilities, building out our category teams and improving our
sourcing capabilities, whilst enhancing our consumer interaction by
a broader range of marketing skills. Results will not be immediate,
but we are confident that we will continue to evolve our model to
make it more global and with a greater range and depth of subject
matter expertise.
This level of change will require a more robust model for
delivering strategic change at ASOS and we are building a newly
formed cross-functional team to coordinate change and projects
across the business. This will support in driving alignment and
momentum on the many initiatives we have in-flight and to support
our next stage of growth.
Outlook
Looking ahead, we remain well positioned to capture the global
opportunity through the continued development of the ASOS brands,
the ASOS platform and the ASOS customer experience. We have
demonstrated and enhanced our operational flexibility this year,
and are emerging a stronger, more resilient and agile business.
However, whilst we are well positioned for peak trading and the
year ahead, we are cautious on the outlook for consumer demand, and
will remain so until lifestyles and financial stability for our
20-something customers start to normalise. Timelines for
containment of the virus and a vaccine still look uncertain and a
number of our major territories are facing into the prospect of a
second wave of cases and increasing lockdown measures. It is clear
that a normal pattern of social events is not going to resume in
the short term so whilst we have confidence in our ability to
continue growing our market share globally, we are cognisant of the
economic impact this crisis is having on our 20-something customers
and the pressure on their disposable incomes.
The rigorous performance management and operational grip
demonstrated over the last 12 months gives us confidence in our
ability to navigate the uncertain year ahead. Excluding the
favourable Covid-19 related cost and cash impacts experienced this
year, we expect to continue to grow our profitability whilst
sustaining positive cash generation. However, we remain conscious
of the potential financial consequences associated with Brexit and
whilst we are comfortable with our business readiness and the
precautions taken, the scale and nature of the impact remains
outside of our control. Despite the uncertainty ahead, the
operational rigour and flexibility proven in our model and the
strong customer momentum we have built will support our progression
as one of the few truly global leaders in fashion retail.
Nick Beighton Mathew Dunn
Chief Executive Officer Chief Financial Officer
Financial review
Overview
Year to 31 August 2020
UK EU US RoW Total
GBPm GBPm GBPm GBPm GBPm
Retail sales 1,175.9 1,005.3 401.9 587.9 3,171.0
Delivery receipts 32.1 24.9 13.3 16.0 86.3
Third party revenues 6.1 - 0.1 - 6.2
Total revenue 1,214.1 1,030.2 415.3 603.9 3,263.5
Cost of sales (1,716.1)
Gross profit 1,547.4
Distribution expenses (444.6)
Administrative
expenses (951.7)
Operating profit 151.1
Net finance expense (9.0)
Profit before tax 142.1
Year to 31 Year to 31 Change
August 2020 August 2019
-------------------------------- ---------------------------------- ------------------------------ ------------------
Active customers(1) (m) 23.4 20.3 15%
Average basket value (including
VAT) GBP71.92 GBP71.29 1%
Average units per basket 3.18 3.05 4%
Average selling price per unit
(including VAT) GBP22.63 GBP23.34 (3%)
Average order frequency(2) 3.43 3.56 (4%)
Total orders (m) 80.2 72.3 11%
Total visits (m) 2,691.2 2,266.5 19%
Conversion(3) 3.0% 3.2% -20bps
Mobile device visits 85.5% 81.9% +360bps
Net Promoter Score(4) -2 -4
-------------------------------- ---------------------------------- ------------------------------ ------------------
(1) Defined as having shopped in the last 12 months as at 31
August (2) Calculated as last 12 months' total orders divided by
active customers (3) Calculated as total orders divided by total
visits (4) Net Promotor Score is based on a customer pulse survey
and this represents the movement in the average score in the
12-month period ended 31 August
Retail sales grew 19% on the previous year as we navigated the
many ways Covid-19 impacted the business. Following a strong first
half we saw a strong initial impact from the pandemic and
associated lockdown restrictions but as we progressed through the
second half, we saw improvements in underlying demand, as well as
the continuation of a beneficial returns profile.
This changing dynamic is perhaps best reflected in the
relationship between visits and orders. Visits grew 19% on the
previous year whilst orders increased 11% to 80.2m, reflecting a
shift to more deliberate purchasing through Covid-19 lockdown,
which impacted conversion on-site but had a lower associated
returns profile. Whilst ABV improved 1% on the year, ABV declined
in the second half as customers mixed into lower ASP product
categories such as loungewear. The reduction in ABV in the second
half was partially mitigated by changes in delivery thresholds
following significant increases in airfreight costs following
Covid-19.
Our active customer base grew by 3.1m to 23.4m active customers,
up 15% from the previous year. We saw particularly strong growth in
the EU as we focused on rebuilding customer momentum following
disruption in the prior year. Equally as pleasing, ROW active
customer base grew by 18% on the year, underpinned by strong growth
in Russia and Australia.
Profit before tax increased by 329% to GBP142.1m. A significant
proportion of this increase is due, as previously mentioned, to the
focus on removing non-strategic costs from the business. This was
the single biggest underlying driver of improved profitability on
the year. Alongside this we have annualised efficiency benefits
from Euro Hub automation, reversing a significant proportion of the
transition costs experienced in prior years, partially offset by a
full year of fixed costs and manual operations in Atlanta.
To truly understand our profit delivery, particularly in H2, two
more impacts are especially relevant. Firstly, without remedial
action, both a reduction in sales volume post lockdown as well as
new incremental costs as a result of Covid-19, would have
significantly impacted profitability in the second half. We pivoted
quickly to mitigate potential profit drags and realised savings in
occupancy, payroll costs and through our supply chain. Secondly, it
is more efficient to deliver sales growth from fewer orders and
fewer associated returns as we saw during the pandemic. Where we
saw intentional purchasing post lockdown, the impact this had on
the profile of returns and sales provided a one-off profit benefit
which more than offset other one-off Covid-19 cost drags resulting
in a net positive impact of c.GBP45m. Although return rates trended
back towards expectation at the end of the period, the impact on
the second half of the year was significant.
UK performance
UK KPIs Year to 31 August 2020
Retail Sales +18%
Visits +17%
Orders +10%
Conversion -30bps
ABV Flat
Active Customers 7.1m (+11%)
UK retail sales grew 18% in the year, particularly pleasing in
light of the prolonged Covid-19 demand impact, demonstrating the
resilience of our model, appeal of our proposition and ability to
pivot in response to changing demand. Our performance was supported
by improvements in product, presentation and social media
engagement which were key focus areas this year. We have grown the
total UK customer base to over 7m, up 11% on the year.
ABV remained flat on the year, with the pronounced skew towards
lower ASP lockdown category mix in the second half offsetting the
ABV growth achieved in the first half.
EU performance
EU KPIs Year to 31 August 2020
Retail Sales +22% (22% CC)
Visits +20%
Orders +14%
Conversion -20bps
ABV (1%)
Active Customers 9.2m (+18%)
EU retail sales grew 22% (22% in constant currency) and
represented a consistent improvement in performance following last
year's warehouse disruption and stock availability issues. The
improved delivery proposition and a more dynamic trading stance
unlocked by automation supported this strong sales performance. EU
also saw a less pronounced l ockdown impact on customer behaviour
and purchasing behaviour began to return to more normal levels
ahead of the UK and US.
Active customer growth of 18%, with 1.4m customers added to the
base, demonstrates the progress made in rebuilding customer
momentum. New customer acquisition was particularly strong in the
second half, notably across territories with lower levels of online
penetration including Italy and France, with 'Lockdown' product a
particular appeal for these new customers. Traffic growth was
strong at 20% and ahead of orders growth of 14% as conversion
stepped back 20bps due to a greater mix of mobile web visitors with
lower initial conversion.
US performance
US KPIs Year to 31 August 2020
Retail Sales +18% (16% CC)
Visits +19%
Orders +9%
Conversion -20bps
ABV (2%)
Active Customers 3.2m (+14%)
US retail sales grew by 18% (16% in constant currency). We made
a strong start to the year in the first half, with growth of 25%
supported by better stock availability driving stronger order
growth and conversion. Performance slowed in the second half as we
experienced significant disruption from Covid-19. This was
reflective of a divergent approach to lockdown restrictions in the
US and the higher mix of occasion wear ASOS has in this market. The
reduction in available airfreight also disrupted stock availability
in the US in the second half.
Despite the challenges experienced, the US total active customer
base grew at 14% in the year to 3.2m, with particularly strong new
customer growth. Traffic growth of 19% was particularly pleasing,
with the growth rate improving into the second half driven in part
by increased performance marketing activity and a positive customer
response to the launch of customer acquisition initiatives
including increased student discount activity.
ROW performance
ROW KPIs Year to 31 August 2020
Retail Sales +18% (18% CC)
Visits +19%
Orders +5%
Conversion -20bps
ABV +12%
Active Customers 3.9m (+18%)
ROW retail sales grew by 18% (18% in constant currency) with
particularly strong growth in Australia and the Middle East.
Performance was underpinned by a positive response to changes in
the rhythm of the trading calendar, more targeted promotional
activity and a quicker return towards a more normalised product mix
in the wake of Covid-19. Increased participation in Black Friday
year on year and a great response to Ramadan events in the Middle
East were particularly pleasing.
ABV increased 12% driven mainly by action taken to protect
basket economics in response to a significant increase in
airfreight costs, which drove a notable increase in items per
basket. This also drove the reduction in conversion as customers
placed larger more considered orders. Active customer growth of 18%
was pleasing, driven by strong new customer acquisition.
Gross margin
Gross margin reduced by 140bps in the year driven by three
principal factors: increased freight and duty costs reflecting the
go-live in our US warehouse impacting the first part of the year
(which is largely offset by savings in delivery costs), changes in
product mix as customer demand shifted away from occasion wear into
more casual product categories during lockdown and finally our
planned investment into promotional activity to stimulate demand
for occasion product during lockdown. These were partially offset
by a significant improvement in our underlying buying margin.
Operating expenses
Year to Year to 31
31 August August 2019
GBPm 2020 % of sales % of sales Change
Distribution costs (444.6) 13.6% (415.6) 15.2% (7%)
Warehousing (313.5) 9.6% (301.4) 11.0% (4%)
Marketing (119.4) 3.7% (121.8) 4.4% 2%
Other operating costs (401.4) 12.3% (389.1) 14.3% (3%)
Depreciation and
amortisation (117.4) 3.6% (71.3) 2.6% (65%)
----------------------- ----------- ----------- ------------- ----------- -------
Total operating costs (1,396.3) 42.8% (1,299.2) 47.5% (7%)
----------------------- ----------- ----------- ------------- ----------- -------
Operating expenses increased 7% to GBP1.4bn and total operating
costs decreased by 470bps as a percentage of sales. 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
and the benefit from lower returns rates driving lower return
parcel volumes. The improvement in warehousing costs was driven by
a reduction in returned items to be processed as well as increasing
efficiency from Euro Hub automation and the IFRS 16 transition (see
IFRS 16 note on page 13). These were partly offset by inefficiency
due to capacity restrictions implemented during the lockdown
period. Our US warehouse also 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
percentage of sales driven by ongoing work to improve the
efficiency of our operational structure. Marketing costs also
decreased by 70bps as a percentage of sales as we drove greater
efficiency during the first half and reduced performance marketing
spend in the third quarter to ensure we weren't stimulating demand
we couldn't effectively service whilst our warehouses worked at
reduced capacity due to social distancing.
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
Net interest costs rose to GBP9.0m 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
Year to 31 Year to 31
August 2020 August 2020
(incl IFRS % of IFRS (excl IFRS % of
GBPm 16) sales 16 Impact 16) sales Change
------------------ ------------- ------- ----------- ------------- ------- --------
Warehousing (313.5) 9.6% 14.1 (327.6) 10.0% 40bps
Other operating
costs (401.4) 12.3% 13.5 (414.9) 12.7% 40bps
Depreciation and
amortisation (117.4) 3.6% (25.0) (92.4) 2.8% (80bps)
Finance expense (9.0) 0.2% (5.0) (4.0) 0.2% (0bps)
PBT 142.1 4.4% (2.4) 144.5 4.4% (0bps)
Taxation (28.8) 0.5 (29.3)
------------------ ------------- ------- ----------- ------------- ------- --------
Profit after tax 113.3 (1.9) 115.2
------------------ ------------- ------- ----------- ------------- ------- --------
Diluted EPS 125.6p (2.2p) 127.8p
------------------ ------------- ------- ----------- ------------- ------- --------
During the year we implemented IFRS 16, as required by
International Financial Reporting Standards. As we adopted the
simplified transition approach we have not restated any
comparatives. To enable a year on year comparison we have
demonstrated above the impact that this has on our current year
profit; warehousing costs (mainly warehousing leases) reduced by
40bps, other operating costs (mainly office leases) by 40bps,
offset by increased depreciation of 80bps resulting in a marginal
reduction to overall profitability.
Taxation
The effective tax rate reduced by 540bps to 20.3% (2019: 25.7%),
where FY19 one-off impacts were not repeated. Going forward, ASOS
expects the effective tax rate to continue to be approximately
100bps higher than the prevailing rate of UK corporation tax due to
permanently disallowable items.
Earnings per share
Basic and diluted earnings per share increased by 330% to 126.3p
and by 327% to 125.6p respectively (2019: 29.4p and 29.4p). This
was driven by the increase in profit before tax during the
year.
Cash flow
There was a GBP498.0m increase in net cash (cash and cash
equivalents less borrowings) in the year, including the net cash
proceeds associated with the equity placing in April 2020 of
GBP239.4m. This compares with a GBP133.2m increase in net debt in
the previous year. The cash inflow in the year, excluding the
equity raise, was driven by EBITDA of GBP268.5m and an improvement
in working capital of GBP140.3m. Of this working capital inflow we
benefited from Covid-19 related supply chain impacts causing the
peak stock build to be later than usual. Capital expenditure of
GBP115.6m is seen in cash capital expenditure of GBP116.6m and a
capital creditor decrease of GBP1.0m associated with our FY20
investment.
Consolidated Statement of Total Comprehensive Income
For the year to 31 August 2020
Year to Year to
31 August 2020 31 August 2019
GBPm GBPm
Revenue 3,263.5 2,733.5
Cost of sales (1,716.1) (1,399.2)
------------------------------------- ---------------- ----------------
Gross profit 1,547.4 1,334.3
Distribution expenses (444.6) (415.6)
Administrative expenses (951.7) (883.6)
Operating profit 151.1 35.1
Finance income 0.5 -
Finance expense (9.5) (2.0)
Profit before tax 142.1 33.1
Income tax expense (28.8) (8.5)
------------------------------------- ---------------- ----------------
Profit for the year 113.3 24.6
------------------------------------- ---------------- ----------------
Profit for the year attributable
to owners of the parent company 113.3 24.6
------------------------------------- ---------------- ----------------
Net translation movements offset
in reserves 0.1 (0.8)
Net fair value losses on derivative
financial instruments (13.9) (14.9)
Income tax relating to these items 2.9 2.8
------------------------------------- ---------------- ----------------
Other comprehensive income for
the year (1) (10.9) (12.9)
------------------------------------- ---------------- ----------------
Total comprehensive income for
the year attributable to owners
of the parent company 102.4 11.7
------------------------------------- ---------------- ----------------
Earnings per share (Note 3)
Basic 126.3p 29.4p
Diluted 125.6p 29.4p
------------------------------------- ---------------- ----------------
(1) All items of other comprehensive income will subsequently be
reclassified to profit or loss
Consolidated Statement of Changes in EquitY
For the year to 31 August 2020
Called Employee
up Benefit
share Share Retained Trust Hedging Translation Total
capital premium earnings(1) reserve(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 year - - 113.3 - - - 113.3
Other comprehensive
loss
for the year - - - - (11.0) 0.1 (10.9)
------------------------- ---------- ---------- -------------- ------------ ---------- -------------- ---------
Total comprehensive
income/(loss) for
the year - - 113.3 - (11.0) 0.1 102.4
------------------------- ---------- ---------- -------------- ------------ ---------- -------------- ---------
Proceeds from share
issue, net of
transaction
costs 0.6 238.8 - - - - 239.4
Net cash received
on exercise of shares
from Employee Benefit
Trust - - - 0.7 - - 0.7
Share-based payments
charge - - 12.9 - - - 12.9
Tax relating to share
option scheme - - 1.3 - - - 1.3
------------------------- ---------- ---------- -------------- ------------ ---------- -------------- ---------
Balance as at 31
August 2020 3.5 245.7 577.0 2.0 (15.8) (2.1) 810.3
------------------------- ---------- ---------- -------------- ------------ ---------- -------------- ---------
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 Employee Benefit
Trust - - - 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 Statement of Financial PositioN
At 31 August 2020
At At
31 August 31 August
2020 2019
GBPm GBPm
----------- -----------
Non-current assets
Goodwill 1.1 1.1
Other intangible assets 346.9 325.1
Property, plant and equipment 616.8 296.0
Derivative financial asset 4.8 0.1
969.6 622.3
----------- -----------
Current assets
Inventories 532.4 536.8
Trade and other receivables 60.3 72.8
Derivative financial asset 19.6 11.0
Cash and cash equivalents 407.5 -
Current tax asset - 2.6
1,019.8 623.2
----------- -----------
Current liabilities
Trade and other payables (806.1) (669.0)
Bank overdraft - (15.5)
Borrowings - (75.0)
Lease liabilities (22.3) -
Derivative financial liability (25.4) (12.7)
Current tax liability (0.3) -
----------- -----------
(854.1) (772.2)
----------- -----------
Net current assets/(liabilities) 165.7 (149.0)
----------- -----------
Non-current liabilities
Lease liabilities (290.8) -
Deferred tax liability (11.4) (12.6)
Derivative financial liability (22.8) (7.1)
----------- -----------
(325.0) (19.7)
----------- -----------
Net assets 810.3 453.6
----------- -----------
Equity attributable to owners of the parent
Called up share capital 3.5 2.9
Share premium 245.7 6.9
Employee Benefit Trust reserve 2.0 1.3
Hedging reserve (15.8) (4.8)
Translation reserve (2.1) (2.2)
Retained earnings 577.0 449.5
----------- -----------
Total equity 810.3 453.6
----------- -----------
Consolidated Statement of Cash Flows
For the year to 31 August 2020
Year to Year to
31 August 31 August
2020 2019
GBPm GBPm
----------------------------------------------- ----------- -----------
Operating profit 151.1 35.1
Adjusted for:
Depreciation of property, plant and equipment 57.4 25.3
Amortisation of other intangible assets 60.0 46.0
Impairment of assets 4.1 1.4
Decrease/(increase) in inventories 4.4 (129.2)
Decrease/(increase) in trade and other
receivables 6.5 (30.2)
Increase in trade and other payables 129.4 143.3
Share-based payments charge 10.9 2.5
Other non-cash items - 0.7
Income tax paid (20.5) (5.2)
----------------------------------------------- ----------- -----------
Net cash generated from operating activities 403.3 89.7
Investing activities
Payments to acquire other intangible assets (88.4) (124.9)
Payments to acquire property, plant and
equipment (28.2) (96.7)
Finance income 0.5 -
----------------------------------------------- ----------- -----------
Net cash used in investing activities (116.1) (221.6)
Financing activities
Proceeds from share issue, net of transaction
costs 239.4 -
(Repayment of)/proceeds from borrowings (75.0) 75.0
Principal portion of lease liabilities (21.4) -
Net cash inflow relating to Employee Benefit
Trust 0.7 0.3
Finance expense (8.0) (1.4)
----------------------------------------------- ----------- -----------
Net cash generated from financing activities 135.7 73.9
----------------------------------------------- ----------- -----------
Net increase/(decrease) in cash and cash
equivalents 422.9 (58.0)
----------------------------------------------- ----------- -----------
Opening cash and cash equivalents (15.5) 42.7
Effect of exchange rates on cash and cash
equivalents 0.1 (0.2)
----------------------------------------------- ----------- -----------
Closing cash and cash equivalents 407.5 (15.5)
----------------------------------------------- ----------- -----------
Notes to the financial information
For the year to 31 August 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, Sweden, the Netherlands, Denmark,
Poland and Russia. 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.
b) Basis of preparation
The condensed consolidated financial statements for the year to
31 August 2020 have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRS Interpretations
Committee (IFRS IC) interpretations, as adopted by the European
Union (EU), and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. As at the reporting
date, these are the standards, subsequent amendments and related
interpretations issued and adopted by the International Accounting
Standards Board (IASB) that have been endorsed by the EU.
The financial information contained within this preliminary
announcement for the years to 31 August 2020 and 31 August 2019
does not comprise statutory financial statements within the meaning
of section 434 of the Companies Act 2006. Statutory accounts for
the year to 31 August 2019 have been filed with the Registrar of
Companies and those for the year to 31 August 2020 will be filed
following the Company's annual general meeting. The auditors'
report on the statutory accounts for each of the years to 31 August
2020 and 31 August 2019 is unqualified, does not draw attention to
any matters by way of emphasis, and does not contain any statement
under section 498 of the Companies Act 2006.
Going concern and viability
The directors have a reasonable expectation that the Group have
adequate resources to continue in operational existence for the
foreseeable future. The going concern basis of accounting has
therefore been adopted in preparing the financial statements. The
directors have also assessed the prospects of the Company and the
Group over a three-year period to 31 August 2023, and have a
reasonable expectation that the Company and the Group will be able
to continue in operation and meet its liabilities as they fall due
over the three-year period under review.
The Group has conducted extensive stress-testing given the
impacts of Covid-19 on customer demand and behaviours, 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.
Accounting policies
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 Group enters into leases for property, plant and equipment.
The Group's lease portfolio is principally comprised of property
leases of land and buildings in relation to ASOS fulfilment centres
and office space. The leases typically run for terms between 7 and
20 years and may include break clauses or options to renew beyond
the non-cancellable periods. The majority of the Group's lease
payments are subject to market review, usually every 5-6 years, and
some lease agreements include rental payments contingent on
turnover or economic indices. These contingent lease payments are
excluded from the calculation of lease liabilities under IFRS
16.
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 GBP339.3m, and the right of use asset is GBP352.1m. A GBP36.2m
dilapidation provision has also been recognised separately,
discounted using the same discount rate as the lease liability.
There was an existing dilapidations provision of GBP5.4m held on
the balance sheet for the year ended 31 August 2019, hence a
GBP30.8m movement has been included in the table below showing the
impact across the opening Statement of Financial Position:
1 September
2019
GBPm
Non-current assets
Right-of-use assets - property, plant & equipment
Current assets 352.1
Prepayments (5.0)
Current liabilities
Financial liabilities - lease liabilities (22.1)
Accruals 23.0
Non-current liabilities
Financial liabilities - lease liabilities (317.2)
Dilapidation provision (30.8)
--------------------------------------------------------- --------------
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 (12.7)
Discounted using the group's incremental borrowing
rate at the date of initial application (36.4)
Short-term leases excluded from lease liability (0.5)
---------------------------------------------------------------- --------
Lease liability recognised as at 1 September 2019 339.3
---------------------------------------------------------------- --------
The effect of these changes has resulted in EBITDA increasing by
GBP27.6m and depreciation increasing by GBP25.0m; therefore EBIT
has increased by GBP2.6m for the year ended 31 August 2020. Net
finance costs have increased by GBP5.0m and therefore profit before
tax reduced by GBP2.4m.
Within the cash flow statement, while there is no additional
impact on cash flows, there are changes in the classification of
cash flows, with GBP21.4m of lease payments classified as financing
cash flows and GBP5.0m as interest payments.
From 1st 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.
All other accounting policies applied are consistent with those
adopted and disclosed in the Group financial statements for the
year to 31 August 2019.
2. 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 Committee which 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 Committee assesses the
performance of each segment based on revenue and KPIs reflecting
territory and customer performance.
Year to 31 August 2020
UK EU US RoW(1) Total
GBPm GBPm GBPm GBPm GBPm
--------- -------- ------- ------- ----------
Retail sales 1,175.9 1,005.3 401.9 587.9 3,171.0
--------- -------- ------- ------- ----------
Delivery receipts 32.1 24.9 13.3 16.0 86.3
--------- -------- ------- ------- ----------
Third-party revenues 6.1 - 0.1 - 6.2
--------- -------- ------- ------- ----------
Total revenues 1,214.1 1,030.2 415.3 603.9 3,263.5
--------- -------- ------- ------- ----------
Cost of sales (1,716.1)
--------- -------- ------- ------- ----------
Gross profit 1,547.4
--------- -------- ------- ------- ----------
Distribution expenses (444.6)
--------- -------- ------- ------- ----------
Administrative expenses (951.7)
--------- -------- ------- ------- ----------
Operating profit 151.1
--------- -------- ------- ------- ----------
Finance income 0.5
--------- -------- ------- ------- ----------
Finance expense (9.5)
--------- -------- ------- ------- ----------
Profit before tax 142.1
--------- -------- ------- ------- ----------
Year to 31 August 2019
-------------------------------------------------
UK EU US RoW(1) 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 revenues 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
--------- -------- ------- ------- ----------
Finance expense (2.0)
--------- -------- ------- ------- ----------
Profit before tax 33.1
--------- -------- ------- ------- ----------
(1) Rest of World
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. No measure of segmental assets or
liabilities is therefore disclosed in this note.
The total amount of non-current assets located in the UK is
GBP679.6m (2019: GBP463.4m), EU: GBP204.0m (2019: GBP113.0m), US:
GBP80.1m (2019: GBP44.7m), and RoW: GBPnil (2019: GBPnil).
3. Earnings per Share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares in issue during the period. Own
shares held by the Employee Benefit Trust and Link Trust are
eliminated from the weighted average number of ordinary shares.
Diluted earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares in issue during the period,
adjusted for the effects of potentially dilutive share options.
Year to Year to
31 August 31 August
2020 2019
GBPm GBPm
------------------------------------------------------- ----------- -----------
Weighted average share capital
Weighted average shares in issue for basic earnings
per share (no. of shares) 89,697,034 83,565,283
Weighted average effect of dilutive options (no.
of shares) 443,417 159,117
------------------------------------------------------- ----------- -----------
Weighted average shares in issue for diluted earnings
per share (no. of shares) 90,140,451 83,724,400
------------------------------------------------------- ----------- -----------
Earnings (GBPm)
Earnings attributable to owners of the parent company 113.3 24.6
------------------------------------------------------- ----------- -----------
Basic earnings per share 126.3p 29.4p
Diluted earnings per share 125.6p 29.4p
------------------------------------------------------- ----------- -----------
4. Reconciliation of cash and cash equivalents
(a) Cash and cash equivalents
Year to Year
31 August to
2020 31 August
GBPm 2019
GBPm
------------------------------------------------------- ----------- -----------
Net movement in cash and cash equivalents 422.9 (58.0)
Opening cash and cash equivalents (15.5) 42.7
Effect of exchange rates on cash and cash equivalents 0.1 (0.2)
------------------------------------------------------- ----------- -----------
Closing cash and cash equivalents 407.5 (15.5)
------------------------------------------------------- ----------- -----------
Cash and cash equivalents comprise highly liquid funds which the
Group can access without restriction.
(b) Borrowings
The Group has in place a GBP350m Revolving Credit Facility (RCF)
available until July 2023 (with a one-year extension to July 2024
applicable subject to the agreement of all parties). At 31 August
2020 the Group had drawn down GBPnil (2019: GBP75.0m) of the
RCF.
During the year, the Group also issued commercial paper to the
value of GBP100.0m, as part of the government-backed Covid
Corporate Financing Facility (CCFF). This was fully repaid on 28
August 2020.
5. 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
e-commerce base, may concern the Group's brand and trading name or
its product designs. All such cases brought against the Group are
robustly defended and a liability is recorded only when it is
probable that the case will result in a future economic outflow
which can be reliably measured.
At 31 August 2020, the Group had contingent liabilities of
GBP21.6m (2019: GBP21.6m) in relation to supplier standby letters
of credit, rent deposit deeds and other bank guarantees. On 10
September 2020 the Group extended a supplier standby letter of
credit by GBP8.9m bringing the total to GBP30.5m. The likelihood of
cash outflow in relation to these contingent liabilities is
considered to be low.
6. Financial instruments
There are no changes to the categories of financial instruments
held by the Group.
Year to 31 Year to
August 2020 31 August
GBPm 2019
GBPm
-------------------------------------------------- ------------- -----------
Financial assets
Derivative assets used for hedging at fair value 24.4 11.1
Amortised cost(1) 457.7 51.2
-------------------------------------------------- ------------- -----------
Financial liabilities
Derivative liabilities used for hedging at fair
value (48.2) (19.8)
Lease liabilities (313.1) -
Amortised cost(2) (794.4) (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 Euros, US dollars, Australian Dollars and Russian Roubles. 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 31 August 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 year ended 31 August 2020 and a net unrealised loss of
GBP13.9m (2019: loss of GBP14.9m) was recognised in equity. All
derivative financial liabilities at 31 August 2020 mature within
three years based on the related contractual arrangements.
7. Related parties
The Group's related party transactions are with the Employee
Benefit Trust, Link Trust, key management personnel and other
related parties. There have been no material changes to the Group's
related party transactions during the year to 31 August 2020.
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October 14, 2020 02:00 ET (06:00 GMT)
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