TIDMASC
RNS Number : 6805V
ASOS PLC
10 April 2019
10 April 2019
ASOS plc
Global Online Fashion Destination
Interim Results for the six months to 28 February 2019
Summary financial results
Six months Six months CCY(2)
GBPm(1) to to Change Change
28 February 28 February
2019 2018
------------------------ ----------------------- ------------------------ -------------------- -------------------
Group
revenues(3) 1,314.5 1,158.1 14% 12%
Retail sales 1,281.3 1,131.3 13% 11%
UK retail sales 481.5 414.5 16% 16%
International retail
sales 799.8 716.8 12% 9%
Gross profit 639.9 569.4 12%
Retail
gross
margin 47.4% 48.0% (60bps)
Gross
margin 48.7% 49.2% (50bps)
Profit
before tax 4.0 29.9 (87%)
Diluted
earnings
per share 3.6p 29.2p (88%)
Net
(debt)/cash (37.9) 37.7 (201%)
------------------------ ----------------------- ------------------------ -------------------- -------------------
(1) All numbers subject to rounding throughout this document,
(2) Constant currency is calculated to take account of hedged rate
movements on hedged sales and spot rate movements on unhedged
sales, (3) Includes retail sales, delivery receipts and third-party
revenues
Results summary
-- Total sales grew at +14%
-- UK sales rose by +16%, and international sales by +12%
-- ASOS Design +5%, now annualising c.GBP1 billion; 3(rd) party
brand revenues +18%,
-- Retail gross margin down 60bps
-- PBT GBP4m, after c.GBP24m (H118: c.GBP11m) temporary transition
costs
-- Customer engagement: active customers(4) +16%, average basket
value -2%, order frequency(5) +4%
-- Total orders placed 34.4m, +15% year on year
-- US Hub operations stabilised
-- Net debt position of GBP37.9m, enhanced RCF facility of GBP220m
Guidance
-- No change to FY19 reported sales, EBIT guidance; c.15% and c.2%
EBIT margin respectively
-- No change to FY19 capex c.GBP200m, guiding to c.GBP150m in FY20
-- Year end net debt of c.GBP50m, returning to free cash flow positive
in FY20
Nick Beighton, CEO, commented:
"We grew sales by 14% despite a more competitive market. ASOS is
capable of a lot more. We have identified a number of things we can
do better and are taking action accordingly. We are confident of an
improved performance in the second half and are not changing our
guidance for the year.
We are nearing the end of a major capex programme. Whilst this
has inevitably involved significant disruption and transition
costs, the global capability it now provides us gives us increased
confidence in our ability to continue to capture market share
whilst restoring profitability and accelerating free cash flow
generation.
Global online fashion is a growing, GBP220bn+ market. We now
have the tech platform, the infrastructure, a constant conversation
with our growing customer base who love our own great product and
the constantly evolving edit of brands we present to them. We
believe that ultimately there will only be a handful of companies
with truly global scale in this market. We are determined that ASOS
will be one of them"
(4) Defined as having shopped in the last twelve months as at 28
February, (5) Calculated as last twelve months' total orders
divided by active customers
Investor and analyst meeting:
There will be a meeting for analysts that will take place at
9.30am today, 10 April 2019, at Numis Securities, 10 Paternoster
Row, London EC4M 7LT. Photo ID and security checks will be required
so please ensure prompt arrival. A webcast of the meeting will be
available both live and following the meeting at www.asosplc.com.
Please register your attendance in advance with Tom Berger at
Instinctif Partners on either 020 7457 2834 or
tom.berger@instinctif.com.
For further information:
ASOS plc Tel: 020 7756 1000
Nick Beighton, Chief Executive Officer
Greg Feehely, Director of Investor Relations
Alison Lygo, Investor Relations Manager
Website: www.asosplc.com/investors
Instinctif Partners Tel: 020 7457 2020
Matthew Smallwood / Justine Warren /
Tom Berger
JPMorgan Cazenove Tel: 020 7742 4000
Michael Wentworth-Stanley / Bill Hutchings
/ Caroline Thomlinson
Numis Securities Tel: 020 7260 1000
Alex Ham / Luke Bordewich / Tom Ballard
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 on ASOS
ASOS is a global fashion destination for 20-somethings, selling
all the freshest styles complemented by exclusive content, making
ASOS.com the hub of a thriving fashion community and giving our
audience the confidence to be whoever they want to be. ASOS sells
over 85,000 branded and ASOS Brand products through localised app
and mobile/desktop web experiences, delivering from fulfilment
centres in the UK, US and Europe. ASOS curates a mix of our
in-house designed labels, ASOS DESIGN, ASOS EDITION, ASOS WHITE,
ASOS 4505 and Collusion with global and local brands sold through
our own channels to deliver a locally relevant offer. Our
ground-breaking propositions help bring our amazing products to
almost every country in the world and we serve customers globally
with increasingly tailored local experiences: relevant languages,
payment methods and delivery and return options. You can currently
shop ASOS in over 200 markets, in eight languages, using an ever
greater number of different payment methods, with hundreds of local
deliveries and returns options from pick up and drop off networks
to Next-Day Delivery. We aim to give all our global customers a
truly frictionless experience.
ASOS's websites attracted 171.6m visits during February 2019
(February 2018(1) : 148.0m) and as at 28 February 2019 had 19.2m
active customers(2) (28 February 2018: 16.5m), of which 6.2m were
located in the UK and 13.0m were located in international
territories (28 February 2018: 5.5m in the UK and 11.0m
internationally).
(1) Restated visits, previously reported number 156.9 million,
(2) Defined as having shopped in the last twelve months as at 28
February
ASOS plc ("the Group")
Global Online Fashion Destination
Interim Results for the six months to 28 February 2019
Overview
ASOS achieved total sales growth of 14% to GBP1,314.5m (H1 2018:
GBP1,158.1m) and retail sales growth of 13% to GBP1,281.3m (H1
2018: GBP1,131.3m). Retail gross margin decreased by 60bps to 47.4%
(H1 2018: 48.0%). Total operating costs to revenue increased by
170bps to 48.3% (H1 2018: 46.6%) of which 90bps related to
transition costs largely relating to our new warehouse capacity.
Consequently, reported profit before tax fell by 87% to GBP4.0m (H1
2018: GBP29.9m).
Our performance across H1 has been disappointing and we are
capable of achieving more. Whilst delivered against a challenging
market backdrop, our performance was undoubtedly impacted by the
large scale transformational projects we have been undertaking and
some of the choices we made on short term pricing, marketing and
inventory to manage the business through this period. These
decisions, combined with disruption from the scale and pace of
change, temporarily compromised our customer proposition, notably
"newness", the competitiveness of our product and our engagement
with our customers. We have already taken corrective action to
address these issues and are also taking a broader look at how to
better serve our customers and strengthen the ASOS proposition. We
are confident of delivering a stronger performance in the second
half.
We are nearing the end of this record period of investment in
both our technology platforms and our logistical infrastructure,
the benefits of which will begin to be realised in the second half
and increasingly thereafter. Capital expenditure was GBP103.2m
during the period (H1 2018: GBP107.7m). Work has continued at pace
in our Euro Hub distribution centre to raise its efficiency levels
towards those we achieve at our UK Hub in Barnsley. We have
provided additional disclosure on our technology investment,
splitting our investments between "lights on", efficiency,
transformation and growth in the section on Technology.
We are now through the peak of this heavy investment phase:
capital expenditure guidance for the current year is maintained at
c.GBP200m (FY18: GBP242m) and will reduce further to c.GBP150m in
the next financial year. The investments we are making,
particularly in the EU and US, will improve our capability,
customer experience and productivity. As we conclude the current
phase of investment we will have even stronger, more efficient and
better localised operational capabilities within our three key
markets - the UK, Europe and the US - positioning us well for the
next stage of our growth.
Net debt at the end of the period was GBP37.9m, within our
enhanced RCF facility of GBP220m. We retain a significant liquidity
buffer and remain confident of returning to a free cash flow
position in FY20 as our current period of intense capital
expenditure comes to a close.
Whilst we focus on improving and sustaining the level of our top
line growth and free cash flow generation, we are also determined
to restore profitability. We can achieve this through efficiencies
across delivery, staffing and warehousing in each of our three key
locations as current temporary transition costs fall away,
underpinning our long term goal of reducing warehouse costs to c.8%
of revenue.
The opportunity for ASOS in global online 20-something fashion
remains as attractive as ever and we remain as determined to
capture it. Our overarching strategy is unchanged, and our
management team is energised and focussed on the tasks we have
identified to put ASOS back on its growth track. These include
restoring our product newness, realigning our creative
presentation, reducing prices in a number of key territories,
restoring Search Engine Optimisation ("SEO") and an upweighted and
refreshed marketing strategy. To give our investors and other
stakeholders a better insight into the actions we are taking, this
statement is more detailed than usual.
Financial summary
Retail gross margin fell 60bps in the half with the substantial
decline of -160bps in Q1 due to the high level of discounting and
promotional activity across the market being partially offset by
stronger performance of +40bps for Q2. We retain our unchanged FY
guidance of c.-150bps. This reflects the recent US warehouse launch
(and the subsequent freight and duty cost that this will entail) as
well as the recently deployed EU price investments to ensure our
products are more competitive and retain some further flexibility
to invest deeper if appropriate.
The operating expenses to sales ratio increased by 170bps to
48.3%. The main elements of deleverage were within our warehousing
and depreciation cost lines. As noted above, 90bps of this movement
was down to temporary transition costs and 30bps was due to rising
depreciation tracking accelerated Capex over recent periods.
In H2 and thereafter we anticipate leverage across warehousing,
distribution and staff cost lines to offset a lower gross margin
and the increase in depreciation. Warehouse costs will reduce as a
% of sales as the Euro Hub transition costs begin to drop away as
automation goes live in this facility. Relative distribution costs
will be lower than both H1 19 and FY18 as the benefits of shipping
US orders from our US warehouse begins to flow through. Finally, we
will see leverage in our staffing and payroll costs.
Performance by market
The UK had a strong six months delivering sales growth of +16%
which has been underpinned by improving behaviour from existing
customers. Order growth was 20% from a 4% increase in traffic,
supported by an 11% increase in frequency and a 70bps increase in
conversion. Active customer growth was strong at +13% year on year,
driven by the strong customer acquisition in H2 18. The rate of
acquisition was behind our expectations in the first half of this
year. This was felt primarily in slower acquisition of younger
customers which we are actively working to improve through our
product, presentation and engagement which we deal with in more
detail under Product. Nevertheless, we once again continued to grow
market share in our home market.
EU sales grew 10% in constant currency, behind our initial
plans, largely due to weakness in the German and French markets.
The performance of the other EU countries was more encouraging at
+22%. A planned reduction in marketing in H2 18 to manage demand
(see more detail below) impacted both traffic and customer
acquisition. EU active customers increased by 17% to 7.4m year on
year, however we added 0.3m customers in H1, compared to 0.6m in H1
18. Performance in this segment was also impacted by pricing,
evidenced by a 10bps reduction in conversion and a 4% decline in
frequency. We are now picking up the pace of our marketing activity
and have lowered pricing in some of our key European territories.
We retain the flexibility within gross margin to invest further if
required.
Within the US, constant currency sales growth was behind plan at
4% (Q1: +11%, Q2: -3%). As our Atlanta warehouse went fully online
in early February, demand far exceeded our expectations (billed
sales increased c.80% over the first three day period) and the
warehouse was not staffed to cope. More detail can be found under
Logistics. Whilst encouraging for the longer term, this caused a
significant short-term despatch back log which we have now cleared.
These delayed shipments will be recognised in H2 and US trading is
now restabilising.
ROW sales grew 9% in constant currency with a much improved
trajectory in Q2 with particularly strong performances in Russia
and the Middle East. Russia benefited from the rephasing of cyber
week activity into Q2 driving sales growth of +50% in the quarter
to become our fifth largest sales country. Visits growth was strong
during the half and promotional activity in the period drove
encouraging levels of new customer acquisition.
Customers & Brand
During H1 visits were 1,085.4m, up 11% on H1 2018 whilst orders
were up 15%. Active customers increased to 19.2m, up 16% year on
year. However, active customer growth in the first half slowed with
0.8m active customers added in the first half compared with 1.1m in
the prior year. France and Germany were the primary cause of this
with first half active customer growth slowing from +9% to +2%.
Whilst improvements in conversion and frequency have partially
offset slower customer acquisition, growth in both active customers
and traffic has been behind our plans. There have been a number of
contributing factors, which we are currently addressing as detailed
below.
We reduced performance marketing in the second half of FY18 to
manage down demand and protect profitability whilst the Euro Hub
was operating on a manual basis. However, the impact has been felt
to a greater extent than anticipated into the current financial
year, with softness in organic traffic and new customer growth,
primarily through Direct and SEO. There has been a clear
correlation with awareness and consideration, we have seen declines
across several of our key markets, most notably in France and
Germany. This, in conjunction with a more competitive environment
and a softer market has contributed to lower organic new customer
acquisition and has weighed on our top line performance
overall.
In response to this we have not only restored but begun to
upweight our digital marketing activity. This has begun to improve
new customer acquisition and has gone some way to offsetting the
softness in organic acquisition. Organic customer acquisition via
our brand channels remains a priority for us and we have renewed
our focus on activity to drive reach, traffic and awareness amongst
our target audience. This has begun with our recent ASOS Design
campaign which focussed on increasing awareness of our exclusive
and limited runs of ASOS Design product. This will continue during
the year with our Summer of Festivals programme in the US, which
will be a six month campaign driven by influencer activations at a
series of top music festivals across the US. It will include ASOS
as the exclusive retail sponsor of the Life is Beautiful festival
in Las Vegas and will kick off with a launch party in Los Angeles
in April. This represents some of our refreshed strategy around
influencer engagement, where we will significantly upweight our
activity year on year.
Traffic was further impacted by some instability in SEO
performance, which led to a decline in Search Engine Ranking
Positions ("SERPs"). This was caused by multiple customer
navigation changes to our websites and our release of 200 local web
experiences, which whilst strategically the right thing to do, had
an impact on SEO rankings in the short term. We have been working
hard to rectify this and are now seeing early signs of recovery in
our key SERPs.
Our student and premier programmes continue to build loyal
customers. In the UK we saw a shift from (the now closed) A-List to
Premier and we now have 1.3m Premier customers, up 26% year on
year.
Instagram, Facebook, and YouTube continue to be valuable
platforms of engagement with our target audience, with new features
such as longer form Instagram TV providing increased visibility and
engagement. These platforms will all continue to roll-out advanced
shopping features which we will continue to test in partnership
with them.
We saw a 2% decline in Average Basket Value in H1 year on year,
driven mainly by average selling price (-3%) which reflects the
growth in lower price point high street brands and the elevated
promotional environment. As the promotional environment eased
through the half the underlying trend improved moving from -6% in
Q1 to -1% in Q2.
Across H1, we continued to see growth in frequency, up 4% year
on year, as the UK and US showed healthy increases. Combined with
broadly flat items per basket (+1%) this demonstrates the strength
of the ASOS offer rather than a shift towards smaller, more
frequent orders. The increase in frequency also reflects the role
existing customers have had in underpinning our sales growth in H1.
We saw a reduction in churn across all territories and a
corresponding increase in average lifetime value.
Challenges in H1 aside, ASOS has built a very strong brand with
great customer engagement. We have 19.2 million active customers
and 23 million social media followers globally. Our market leading
apps are actively installed on over 16.9 million devices across the
world and our platforms were visited over 2 billion times over the
course of the last year.
Product
Within overall retail sales growth of 13% in H1, third party
brand ("3PB") performance was +18% whilst ASOS Design had a more
challenging season, trading +5% year on year. Within this, Menswear
(+1%) was more challenging than Womenswear (+7%) and as a result,
the ASOS Design mix reduced to 36%, down 3% year on year. The ASOS
Design mix excludes Collusion and our venture brands, which would
add a further c.2% to the mix. We have looked closely at this
weaker performance in ASOS Design and there are a number of areas
where we have already taken action, particularly with regard to
restoring the level of newness, refreshing our presentation and
reviewing our price points.
We continue to see encouraging performance from our category
development. Collusion has been the most successful brand launch
ever on ASOS, selling 1.5m units in H1 and firmly establishing
itself as a top 10 brand with full price sell through above the
group average. Within the UK Collusion is the most searched brand
on ASOS. Globally our Face + Body category continued to grow
strongly, +47% year on year, albeit from a low base. We launched 30
new brands in this category during the half including 4 from Estee
Lauder group as Tommy Hilfiger, Aveda, Estee Lauder and Kilian
launched. From a standing start 18 months ago, this category has
reached annual sales of c.GBP60m, gaining us traction in a
multi-billion-pound market giving us high hopes for both the
category and further launches in the future. ASOS 4505 continued to
perform well within our Activewear category, with sales in the
period up almost 100% compared to H2 18 having launched in early
2018.
Considering product in more detail, a few of our categories
performed behind our expectations in the first half and we are now
clear on where some ranges were not quite right. Menswear
performance across tailoring, accessories and footwear was soft but
we had success with key trends including oversized tops and animal
prints. In womenswear, 'Going Out' was softer than planned and we
continue to see a decline in lace and embellished dresses. Overall,
evening dresses, accessories and swimwear were disappointing.
However, performance in day dresses, casual bottoms, skirts and
jersey tops was strong and with full price sell through up over 25%
in some categories. Slower sales of cold weather product,
reflecting the unseasonably warm autumn winter in Europe, was also
unhelpful with the category trading down 5% and against a very
strong prior year comparison.
We have already taken action to strengthen our product ranges,
we have increased trading into shorter lead time sourcing, allowing
for an even faster fashion response. We have reviewed how our
product is presented and reshot across both customer segments and
key trends (Neon, Safari, Utility) and are already seeing strong
uplifts as a result.
Within 3PB, high street brands continue to perform well (+36%)
whilst premium brand performance slowed year on year. We
continually review and update our branded portfolio to ensure it
remains exciting and relevant. Over the half we exited over 280
brands and added over 190 new ones. Some more established premium
brands don't currently appeal to our 20-something customers and we
have exited these, onboarding others that resonate better. This has
impacted Average Selling Price and hence our Average Basket Value,
something we believe should improve with the onboarding during H2
of several exciting new brands such as Opening Ceremony and
Margiela MM6. We have also secured a mix of smaller, fresher
up-and-coming brands alongside more established brands such as
&Other Stories, which will be going live across this spring
summer and into autumn winter, as we continue to focus on
sharpening the relevance of our product offering.
During H1 we also reviewed our approach to the presentation of
our product both on site and on social channels, alongside the
velocity of our conversations with customers. We are currently
working to improve our creative representation to ensure our look
and feel strikes the correct balance between being inspirational
and at the same time accessible to all our customers. We have
identified that some of our creative content had drifted too far
from our mainstream fashion loving audience and we are restoring a
focus on presenting product in the fun and glamourous way many of
our customers want to see it styled. We are super aware of the
value our customers place on breadth of offer and choice from ASOS
and delivering this is a day to day priority around the
business.
Our retail strategy in H1 had prioritised availability at the
expense of breadth, increasing average line buy to ensure
availability in all sizes across our growing warehouse footprint as
we transitioned to our new US Hub and continued to build inventory
at Euro Hub. We also prioritised maximising full price sell-through
and entering spring summer with a clean stock position. As a
result, we presented our customers with a reduction in choice.
Intake options were down slightly year on year as the available SKU
count reduced to 85,000 from 87,000 which had a greater than
expected impact on demand.
We have already moved to address this and intake for spring
summer is planned to be up year on year ahead of the intake growth
we saw in the first half with a particular focus on ASOS Design.
Our retail strategy is focussed on increasing both the range of
options and the frequency of drops across the season to restore the
consistent levels of newness that excite our customers.
As a part of our change in clearance strategy we took a more
localised territory approach to sale launch which resulted in an
improved finish to the period, generating a higher full price mix
alongside tighter stock across all warehouses. We believe we are
entering spring summer in a stronger position, with a cleaner stock
profile, enhanced newness, a renewed focus on ASOS design and what
appeals to our 20 something fashion loving customer.
The ASOS Design brand is now a c.GBP1 billion p.a. business,
supported by a strong internal design team of over 100.
Additionally, we have built strong relationships with over 800
brands and counting, globally. More want to engage with us. We have
built the facilities and the capabilities in London to style and
shoot over 5,000 new items of product every week. We have worked
relentlessly to scale our capacity efficiently within production
without compromising on presenting our product in beautiful ways
that really inspire our fashion loving customers.
Logistics
FY19 is the culmination of several years of transformational
change for ASOS as we develop our logistics infrastructure and
expand our global reach, whilst driving warehouse efficiency and
reducing delivery costs through greater levels of local
fulfilment.
USA
During February we made the 'web to warehouse' switch to our
Atlanta facility, which pointed the US website solely to this
warehouse and the US specific stock pool that had been built up
over the course of the half for the first time. Following this
switch, we saw a dramatic spike in US conversion, increasing from
3% to 4% vs. the prior week accompanied by a significant increase
in traffic which exceeded our forecasts. This drove a corresponding
increase in billed sales of almost 80% YoY over the initial three
day period. The surge in traffic and demand surpassed our forecasts
as we had not increased marketing activity or altered the customer
proposition at this stage. Customers and shopping ads were seeing
improved availability and new brands in the US segregated stock
pool and we had underestimated the impact this would have.
We therefore had not staffed Atlanta adequately to cope (869
staff prior to launch) with this level of demand and a substantial
backlog of orders built very quickly. As a result, the delivery
proposition had to be extended, initially adding 2 days to service
promises and subsequently further extending to plus 4 days.
In order to help clear the backlog of orders, the US website was
pointed back to Barnsley before local fulfilment from Atlanta could
be gradually stepped back up. The issues experienced within our US
warehouse were caused by staffing levels rather than systems. Staff
levels at the facility have been nearly doubled (to 1,532) and
during the week commencing 25 March we restored our service
delivery promise and full local fulfilment from Atlanta. We
acknowledge we have disappointed a number of our customers and we
have acted fast to rebuild their trust via targeted outreach.
Having restored operations, we are now looking to make customer
facing improvements in proposition. During H2 we will begin to
deploy clustering in the US for delivery propositions. This will
allow us to tailor delivery based on customer location and for the
first time, offering next day delivery to some of our customers.
Looking forward, we see a substantial opportunity ahead of us in
the US.
Continental Europe
Testing of automation continues to progress well at our Euro Hub
warehouse at Berlin in advance of planned go live later this
month.
Automation go live will raise the throughput speed in this
warehouse closer to levels achieved at our Barnsley distribution
centre, in turn allowing us to improve our next day delivery
ordering cut off times across Germany. Next day delivery is already
available to customers across the EU and is a competitive
proposition to our customers. The increase in throughput speed will
therefore allow greater volume to be routed via road freight,
generating further delivery cost efficiencies alongside the
reduction in labour cost per unit.
UK and ROW
Within our UK and ROW facilities, Barnsley continued to operate
very efficiently, comfortably handling the step up in despatch
volumes over peak. Maximum achieved daily output from the facility
increased by another 10% year on year. Focus at this site is now on
driving further efficiencies and maximising throughput. As part of
this, H1 saw the installation of a dynamic buffer, representing a
further step in warehouse automation. This technology predicts
demand throughout the day, having these items picked and brought
closer to the packing bench in advance, further reducing processing
time as well as generating efficiencies in re-picking items from
returns.
Dealing with returns, our new facility in Doncaster is now fully
operational as a UK and ROW facing site, increasing processing
capability alongside the existing Selby operation. ASOS now has 7
sites processing returns across 5 different countries. A new
returns processing system is currently being implemented across our
facilities which will improve productivity by c.10% and remove the
requirement for additional returns facilities in the medium
term.
Following completion of the current investment programme, we
will have built world class automated facilities to our own
specific needs in three regions to support sales growth for the
next two to three years. From here we will focus on optimising
efficiency across the global warehouse footprint we have built.
We have the capacity to despatch nearly 10 million units a week
as well as the capacity to process over 3.5 million returns a week.
We are servicing over 60,000 pick-up drop-off ("PUDO") locations
globally and have built relationships with over 35 carriers
shipping to over 230 territories. The power and reach of our
infrastructure gives us confidence in our ability to achieve our
growth ambitions.
Technology
Technology investment totalled GBP55.1m during the half (H1
2018: GBP57.1m). Our technology teams have delivered a wide range
of projects across "lights on", efficiency, transformation and
growth.
Investment in "lights on" capex covers spend on initiatives
required to support our business day to day, but are not
specifically targeted at driving additional incremental growth
alone. Within H1 this totalled 15% of the spend and covered
upgrades to our finance system, infrastructure and security.
17% of our technology spend was directed at improving efficiency
across the business, with the majority directed towards logistics.
We developed the new software that will improve processing and
efficiency within our returns facilities which we are now rolling
out across all locations and we have added new carrier management
software for outbound operations which gives us greater commercial
and operational flexibility into the future.
Transformation accounted for 26% of H1 spend, the majority of
which was on our Truly Global Retail (TGR) programme and our major
Supply Chain programmes. TGR covers the implementation of an
entirely new buying and merchandising system. This multi-year
project is critical to the next stage of our growth and our ability
to trade as a global retailer from different locations, in foreign
currencies whilst optimising our stock management across multiple
warehouses. TGR will also improve efficiencies across our retail
teams through the removal of manual processes. Our tech team also
worked on our Supply Chain including the integration of our central
systems with the warehouse management systems in our Atlanta
warehouse. We are also continuing work on the integration and
testing of the new warehouse management systems and automation in
our Euro Hub facility.
Growth and customer experience focussed developments represented
42% of Tech capex spend which was split across our e-commerce and
data platforms including product, sizing, recommendations and
personalisation. Highlights include the roll-out of improved fit
analytics to our apps, further development of recommendations on
product and category pages, bag abandonment and back in stock
notifications, and the new 'Boards' feature for saved items in our
app. This allows customers to curate their own saved items in any
way they choose, with suggestions for outfits or occasions. This
development has landed very well with customers with 3 million
boards already created and now averaging 130k new boards a week,
driving improved levels of customer engagement.
Growth through international specific investment saw the
roll-out of gift vouchers in all our currencies to sit alongside
our GBP offering, as well as four new currencies and two new
payment methods in Australia and Russia. US sales tax at check-out
also went live in February, providing the functionality to pass
sales tax on to customers as appropriate on a state by state
basis.
Looking forward into H2, the capex split will be broadly
consistent and highlights from Tech's growth initiatives will
include progress on Polish and Danish local language websites which
we plan to switch on early next financial year, premier renewal
improvements, greater visibility and communications to our
customers of order and refund status, changes in our refund
policies, delivery promise clustering by region plus a new payment
method for our US customers and a number of customer
journey/conversion optimisation opportunities which we are
testing.
The state of the art technology platform we have built over the
past five years delivers micro-service architecture with fully
native mobile experience in android and iOS apps. The platform
allows for significantly greater transaction volume at enhanced
levels of stability, capable of handling anticipated future peak
volumes. A critical benefit of the new platform is the increased
ability to deliver technical change and innovation at pace: it is
capable of delivering many more customer enhancements, new payment
methods, new language sites and stronger customer engagement. ASOS
currently has 10 country specific websites and apps with localised
experiences in 200 territories. The technology platform we have
built and will continue to extend is a potent tool in our
determination to be one of the world's leading online fashion
retailers.
People
At the end of February 2019, ASOS employed 4,767 people, year on
year growth of 11% and up 9% since the end of FY18. Of the 490
heads added year on year, over half of these were within customer
care following the continuation of our ongoing programme to
insource local language customer care. Since the end of August
2018, headcount within head office is broadly flat.
We are pleased to confirm that Mathew Dunn will formally assume
his role and join the PLC Board on 23 April and we look forward to
welcoming both Mat's experience and fresh perspectives to the
Company.
We recognise that with the considerable growth of the past
years, we need to keep scaling our senior management bench
strength. We appointed Mark Holland as Chief Operating Officer in
December 2018 and expect to further strengthen our management
team.
Capex & cash flow
In allocating capital across ASOS, investments are selected to
support the growth trajectory of the business and generate a
superior return, either from an efficiency cost saving perspective
or in unlocking future growth potential. We invested GBP103m in
capex during the period, a reduction of c.GBP5m on H1 last year,
with two thirds of capex deployed into transformational projects
such as TGR and Euro hub automation, with the balance in physical
infrastructure, technology and our head office upgrade.
Our investment in Euro Hub automation will increase sales
throughput and capacity and is also a key driver of operational
efficiency, significantly reducing the logistics cost of European
orders and delivering a return on investment well above our cost of
capital. Completion of Euro Hub automation, the opening of our US
hub and subsequent automation will bring the current phase of our
infrastructure investment programme to a conclusion. We do not
foresee further significant new infrastructure capital investment
in the near future.
We employ a number of metrics to measure "pay back" when
planning technology investment, such as expected improvement to key
customer metrics like conversion, basket size or net promoter
scores. For customer facing technology investments such as new
language websites, payment methods or back in stock notifications,
we review the actual return on investment and improvement to
related KPIs. Supply chain investments such as in-house development
of returns processing or carrier management software are assessed
on clear operational cost savings. For other enabling capex such as
transitioning technology to the cloud or security we consider this
the essential cost of securing our business resilience.
We are confident in the benefits that will flow from the
investments we are currently making and that they are positioning
ASOS well for the next stage of growth. Whilst our FY19 guidance
for c.GBP200m capex spend remains unchanged, we expect capex to
reduce in absolute terms for FY20 to closer to GBP150m, as our
current major infrastructure programme draws to a close.
Turning to cash flow, due to the significant level of investment
we saw a free cash outflow in the first half with a net debt
position of GBP37.9m, down from a cash balance of GBP42.7m at prior
year end. Overall we expect this year to be the final year of
negative cash flow, with a further small cash outflow in the second
half, before returning to being free cash flow positive in
FY20.
We have a GBP220m revolving credit facility in place until the
end of this year which then remains at GBP150m from the start of
next year until May 2021. This provides more than sufficient
financial flexibility during both our peak drawdown this year and
for our medium term planning assumptions which see the group
returning free cash flow positive in FY20.
Outlook
Although our H1 performance was disappointing, a number of the
specific challenges we faced reflect the impact of our major
investment programme, the impact of which was greater than we
expected. In light of this and the tougher market backdrop, we have
taken a critical look at all operating aspects of our business. We
have learnt important lessons and are taking action accordingly.
Consequently we are confident of a stronger performance in H2 and
are leaving FY guidance unchanged.
Key actions we are taking to support an improved performance
include restoring our product newness, realigning our creative
presentation, reducing prices in a number of key territories,
restoring SEO optimisation and an upweighted and refreshed
marketing strategy.
Our Atlanta operations have returned to plan and we are
progressing with the next phase of proposition enhancements there.
Our Euro Hub automation is close to going live. Shortly we will
have three state of the art distribution centres serving our major
regions. This will generate significant improvements in both
throughput speed and cost efficiencies across our operations.
Looking to the medium term, with this phase of our capital
investment in our warehouses and transformation technology nearing
completion, we are confident in our ability to continue to capture
market share globally, allowing us to maintain top line
performance, restore EBIT margin and accelerate positive free cash
flow.
The global online apparel market is already worth over GBP220
billion p.a. with online penetration forecast to increase across
every major territory. Our determination to continue to grow our
share of this market remains undiminished. We have the tech
platform, the infrastructure, a constant conversation with our
growing customer base who love our own great product and the
constantly evolving curated edit of brands we present to them. We
believe that ultimately there will only be a handful of companies
with truly global scale in this market. We are determined that ASOS
will be one of them.
Nick Beighton
Chief Executive Officer
Financial review
Revenue
Six months to 28 February
2019 Group International
GBPm total UK EU US RoW total
-------- ------ ------ ------- ------ --------------
Retail sales 1,281.3 481.5 402.2 161.6 236.0 799.8
Growth 13% 16% 15% 8% 8% 12%
Growth at constant exchange
rate 11% 16% 10% 4% 9% 9%
Delivery receipts 29.5 12.8 7.5 5.3 3.9 16.7
Growth 23% 39% 6% 43% - 14%
Third party revenues 3.7 3.6 0.1 - - 0.1
Growth 28% 29% 100% (100%) - -
Total revenues 1,314.5 497.9 409.8 166.9 239.9 816.6
Growth 14% 17% 15% 9% 8% 12%
Growth at constant exchange
rate 12% 17% 10% 5% 9% 9%
-------- ------ ------ ------- ------ --------------
Group revenue increased 14% in the period, with retail sales
growth of 13%. This was split between the UK which grew at 16% and
international territories which grew at 12% (9% in constant
currency). International retail sales accounted for 62% (H1 2018:
63%) of total retail sales.
UK retail sales grew by 16%, continuing to outperform in our
home market. This was driven by an increase in order frequency from
the existing customer base, as well as significantly improved
conversion. ASOS retained its first place position for unique
visitors to apparel retailers in the 15-34 age range (Comscore,
February 2019).
EU retail sales grew by 15% (10% in constant currency) driven by
a challenging performance across our two largest markets of France
and Germany at 11% (7% in constant currency) as customer growth
slowed year on year, customers bought into lower priced products
and demand continued to be managed ahead of automation go-live in
the second half. However, we have seen a more encouraging
performance across the remaining EU countries, particularly those
in which we have recently launched more localised experiences such
as local websites in Sweden and Netherlands and a new Rest of
Europe website, which grew in total at 22% (16% in constant
currency).
US retail sales grew by 8% (4% in constant currency) which fell
short of expectations in the period. As our Atlanta warehouse went
fully online, demand exceeded expectations causing a significant
short-term despatch backlog. Whilst disappointing in the short
term, this is an encouraging sign for future growth as conversion
improved once we were able to sell US brands to our US customers
including Nike, New Balance and Polo Ralph Lauren.
RoW retail sales grew by 8% (9% in constant currency), despite a
tough trading performance in the first quarter of -3% (-2% in
constant currency) as we reduced our promotional activity. This was
largely recovered by a strong second quarter +20% (21% in constant
currency) with Russia now becoming our fifth largest country.
Launch of local currencies in Israel, Saudi Arabia and United Arab
Emirates as well as new payment methods in Australia (Afterpay) and
Russia (Yandex) were some of the key proposition improvements in
the period.
Delivery receipts increased by 23%, more than retail sales
growth, as customers took advantage of paid faster shipping options
such as next day delivery. The number of premier customers
increased by 26% to 1.3m.
Customer engagement
ASOS has seen an increase in active customers(1) , finishing
February with 19.2m, up 16% on last year. The average basket value
has decreased by 2% mainly due to increased promotional activity
which reduced the average selling price by 3%, partly offset by a
higher average basket size of 1%.
Six months Six months Change
to 28 February to 28 February
2019 2018
--------------------------------- ---------------- ---------------- --------
Active customers(1) (m) 19.2 16.5 16%
Average basket value (including
VAT) GBP70.70 GBP72.35 (2%)
Average units per basket 2.90 2.86 1%
Average selling price per unit
(including VAT) GBP24.42 GBP25.28 (3%)
Average order frequency(2) 3.55 3.41 4%
Total orders (m) 34.4 29.9 15%
Total visits (m)(3) 1,085.4 980.9 11%
Conversion(4) 3.2% 3.0% +20bps
Mobile device visits 80.5% 76.0% +450bps
--------------------------------- ---------------- ---------------- --------
(1) Defined as having shopped during the last twelve months as
at 28 February, (2) Calculated as last twelve months' total orders
divided by active customers, (3) Restated visits, previously
reported number 1,005.0 million, (4) Calculated as total orders
divided by total visits
Gross profitability
Six months to 28 February
2019 Group International
total UK EU US RoW total
-------- ------- -------- --------- --------------
Gross profit (GBPm) 639.9 216.0 207.4 97.5 119.0 423.9
Growth 12% 14% 20% 9% 3% 12%
Retail gross margin 47.4% 41.5% 49.7% 57.1% 48.8% 50.9%
Growth (60bps) (150bps) 210bps (60bps) (240bps) 10bps
Gross margin 48.7% 43.4% 50.6% 58.4% 49.6% 51.9%
Growth (50bps) (120bps) 190bps (40bps) (250bps) 10bps
-------- --------- ------- -------- --------- --------------
Group retail gross margin decreased by 60bps to 47.4% versus
last year (H1 2018: 48.0%) due to slower growth in the US which
operates at a higher margin rate, and a continued increase in
branded sales mix. Gross margin of 48.7%
(H1 2018: 49.2%) was up 10bps on retail gross margin as
customers mixed into paid faster shipping options.
Operating expenses
The Group increased its investment in operating resources by 18%
to GBP635.4m, with the total operating costs to revenue ratio
increasing by 170bps to 48.3% (H1 2018: 46.6%).
Six months Six months Change
to 28 February to 28 February in %
2019 2018 of sales
GBPm % of sales % of sales (bps)
Distribution costs (204.9) 15.6% (178.5) 15.4% (20bps)
Payroll and staff costs(1) (103.9) 7.9% (92.8) 8.0% 10bps
Warehousing (144.2) 11.0% (113.5) 9.8% (120bps)
Marketing (64.4) 4.9% (57.3) 5.0% 10bps
Production (3.1) 0.2% (3.6) 0.3% 10bps
Technology costs (29.1) 2.2% (21.3) 1.8% (40bps)
Other operating costs (53.4) 4.0% (47.8) 4.1% 10bps
Depreciation and amortisation (32.4) 2.5% (24.9) 2.2% (30bps)
------------------------------- ---------------- ----------- ---------------- ----------- ----------
Total operating costs (635.4) 48.3% (539.7) 46.6% (170bps)
------------------------------- ---------------- ----------- ---------------- ----------- ----------
(1) Inclusive of non-cash share-based payment charges
Distribution costs increased by 20bps to 15.6% of sales as
customers mixed into more express delivery options, offsetting the
increase in Delivery Receipts.
Payroll and staff costs decreased by 10bps to 7.9% of sales as
headcount grew at a slower rate than sales.
Warehousing costs increased by 120bps to 11.0% of sales due to
higher transitional costs as we build out our supply chain
capacity, as well as increased fulfilment mix from Euro hub and US
Atlanta hub which are manual operations.
Marketing costs decreased by 10bps to 4.9% of sales as a result
of marketing campaign phasing.
Technology costs increased by 40bps to 2.2% of sales as we
introduced new customer experience capabilities.
Other operating costs decreased by 10bps to 4.0% of sales and
included a one-off rebate of GBP3.1m in the period.
Depreciation and amortisation increased by 30bps to 2.5% of
sales in line with increased capital expenditure investment over
recent periods.
Income statement
The Group generated profit before tax of GBP4.0m, down 87%
compared to last year due to gross margin deterioration of 50bps
and a 170bps investment in operating costs.
Six months to Six months to
GBPm 28 February 2019 28 February 2018
------------------------------ ------------------ ------------------
Revenue 1,314.5 1,158.1
Cost of sales (674.6) (588.7)
------------------------------ ------------------ ------------------
Gross profit 639.9 569.4
Distribution expenses (204.9) (178.5)
Administrative expenses (430.5) (361.2)
Operating profit 4.5 29.7
Net finance (expense)/income (0.5) 0.2
Profit before tax 4.0 29.9
Income tax expense (1.0) (5.4)
------------------------------ ------------------ ------------------
Profit after tax 3.0 24.5
------------------------------ ------------------ ------------------
Effective tax rate 25.0% 18.1%
------------------------------ ------------------ ------------------
Taxation
The effective tax rate increased by 690bps to 25.0% (H1 2018:
18.1%). This arose mainly due to the relative growth of
depreciation not qualifying for capital allowances giving rise to
an increased permanent disallowable given the reduction in profit.
Additionally, the decrease in the share price since the December
2018 trading statement substantially reduced the deferred tax asset
for share based payments and increased related permanent
disallowables.
Earnings per share
Basic and diluted earnings per share decreased by 88% to 3.6p
and 3.6p respectively (H1 2018: 29.4p and 29.2p). This was driven
by the decrease in profit after tax during the period.
Statement of financial position
The Group's financial position remains solid with movements
reflecting the current accelerated level of investment. The
increase in net assets of GBP34.2m to GBP473.0m during the period
(31 August 2018: GBP438.8m) was largely seen in higher capital
expenditure. As capital expenditure exceeded EBITDA during the
period, the net cash position at 31 August 2018 moved to a net debt
position of GBP37.9m, after taking into account the drawdown from
the facility of GBP60.0m (detailed more fully on page 14).
There was an improvement of GBP39.4m in the fair value of the
net position of outstanding forward contracts since
31 August 2018 as exchange rates relating to the outstanding
forward contracts, as at 28 February 2019, have improved on average
from the rates that existed when the contracts were entered into.
The deferred tax movement of GBP7.8m is due to the increase in the
net derivative financial asset position as at 28 February 2019. The
summary statement of financial position is shown below:
At At
GBPm 28 February 2019 31 August 2018
-------------------------------------- ------------------ ----------------
Goodwill and other intangible assets 291.9 258.0
Property, plant and equipment 278.5 241.6
Derivative financial assets 18.3 3.8
Non-current assets 588.7 503.4
-------------------------------------- ------------------ ----------------
Inventories 443.3 407.6
Net current payables (533.8) (507.1)
Net (debt)/cash (37.9) 42.7
Derivative financial assets 28.3 3.4
Current tax asset/(liability) 0.4 (3.0)
Deferred tax liability (16.0) (8.2)
Net assets 473.0 438.8
-------------------------------------- ------------------ ----------------
Statement of cash flows
The Group's cash position decreased from GBP42.7m at 31 August
2018 to a net debt position of GBP37.9m(1) . This decrease was the
result of capital expenditure cash outflow of GBP120.4m, partly
offset by EBITDA of GBP36.9m and favourable working capital of
GBP8.0m.
GBPm Six months to 28 February 2019 Six months to 28 February 2018
---------------------------------------------------- ------------------------------- -------------------------------
Operating profit 4.5 29.7
Depreciation and amortisation 32.4 24.9
Losses on disposal of assets - 0.4
Investment write off - 0.1
Working capital 8.0 (82.5)
Share-based payments charge 0.5 4.8
Other non-cash items (1.4) 1.3
Tax paid (3.7) (6.5)
Cash inflow/(outflow) from operating activities 40.3 (27.8)
Capital expenditure (120.4) (95.4)
Net finance (expense paid)/income received (0.6) 0.2
Net cash inflow relating to Employee Benefit
Trust(2) 0.4 0.9
Proceeds from borrowings 60.0 -
Total cash outflow (20.3) (122.1)
Opening cash and cash equivalents 42.7 160.3
Effect of exchange rates on cash and cash
equivalents (0.3) (0.5)
---------------------------------------------------- ------------------------------- -------------------------------
Closing cash and cash equivalents 22.1 37.7
---------------------------------------------------- ------------------------------- -------------------------------
(1) The net debt position of GBP37.9m is the cash balance of
GBP22.1m less the drawdown from the facility of GBP60.0m
(2) Employee Benefit Trust and Link Trust
Fixed asset additions
Six months Six months
to 28 February to 28 February
GBPm 2019 2018
----------------------------- ---------------- ----------------
Technology 55.1 57.1
Warehouse 35.0 41.9
Office fixtures and fit out 13.1 8.7
Total 103.2 107.7
----------------------------- ---------------- ----------------
ASOS continues to invest in warehousing and technology
infrastructure to support future growth ambitions. Technology spend
was allocated to TGR (our global retail planning system) as well as
continued investment in innovation and capability through our
technology platforms. Our warehouse additions were mostly Euro hub
automation. The office fixtures and fit out spend was mainly on our
Camden Head Office refurbishment. The capital expenditure outflow
of GBP120.4m is driven by the increased investment activity of
GBP103.2m and the usual capital creditors payments phasing.
Consolidated UNAUDITED Statement of Total Comprehensive
Income
Interim Results for the six months to 28 February 2019
Six months Six months Year to
to to
28 February 28 February 31 August
2019 2018 2018 (audited)
(unaudited) (unaudited)
GBPm GBPm GBPm
Revenue 1,314.5 1,158.1 2,417.3
Cost of sales (674.6) (588.7) (1,180.2)
------------------------------------ -------------- -------------- -----------------
Gross profit 639.9 569.4 1,237.1
Distribution expenses (204.9) (178.5) (380.8)
Administrative expenses (430.5) (361.2) (754.4)
Operating profit 4.5 29.7 101.9
Finance income - 0.2 0.3
Finance expense (0.5) - (0.2)
Profit before tax 4.0 29.9 102.0
Income tax expense (1.0) (5.4) (19.6)
------------------------------------ -------------- -------------- -----------------
Profit for the period 3.0 24.5 82.4
------------------------------------ -------------- -------------- -----------------
Profit for the period attributable
to owners of the parent company 3.0 24.5 82.4
------------------------------------ -------------- -------------- -----------------
Net translation movements offset
in reserves 0.5 1.1 0.3
Net fair value gains on derivative
financial assets 36.9 67.8 67.7
Income tax relating to these items (7.3) (13.2) (12.8)
------------------------------------ -------------- -------------- -----------------
Other comprehensive income for
the period(1) 30.1 55.7 55.2
------------------------------------ -------------- -------------- -----------------
Total comprehensive income for
the period attributable to owners
of the parent company 33.1 80.2 137.6
------------------------------------ -------------- -------------- -----------------
Earnings per share (Note 4)
Basic 3.6p 29.4p 98.9p
Diluted 3.6p 29.2p 98.0p
------------------------------------ -------------- -------------- -----------------
(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 28 February 2019
Employee
Called Benefit
up 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 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
========== =========== ============= ============ ========= ============ ========
Employee
Called Benefit
up 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 2017 2.9 6.9 327.2 (0.6) (47.5) (1.8) 287.1
Profit for the
period - - 24.5 - - - 24.5
Other comprehensive
income for the
period - - - - 54.9 0.8 55.7
---------- ----------- ------------- ------------ --------- ------------ --------
Total comprehensive
income for the
period - - 24.5 - 54.9 0.8 80.2
Net cash received
on exercise of
shares
from EBT(2) - - - 0.9 - - 0.9
Share-based payments
charge - - 4.8 - - - 4.8
Tax relating to
share
option scheme - - 1.0 - - - 1.0
Balance as at 28
February
2018 2.9 6.9 357.5 0.3 7.4 (1.0) 374.0
========== =========== ============= ============ ========= ============ ========
(1) Retained earnings includes the share-based payments
reserve
(2) Employee Benefit Trust and Link Trust
Employee
Called Benefit
up 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 2017 2.9 6.9 327.2 (0.6) (47.5) (1.8) 287.1
Profit for the year - - 82.4 - - - 82.4
Other comprehensive
income for the year - - - - 55.0 0.2 55.2
---------- ----------- ------------- ------------ --------- ------------ --------
Total comprehensive
income for the year - - 82.4 - 55.0 0.2 137.6
Net cash received
on exercise of
shares
from EBT(2) - - - 1.7 - - 1.7
Transfer of shares
from EBT(2) on exercise - - 0.1 (0.1) - - -
Share-based payments
charge - - 10.4 - - - 10.4
Tax relating to
share
option scheme - - 2.0 - - - 2.0
Balance as at 31
August
2018 2.9 6.9 422.1 1.0 7.5 (1.6) 438.8
========== =========== ============= ============ ========= ============ ========
(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 28 February 2019
At At At
28 February 28 February 31 August
2019 2018 2018 (audited)
(unaudited) (unaudited)
GBPm GBPm GBPm
Non-current assets
Goodwill 1.1 1.1 1.1
Other intangible assets 290.8 204.4 256.9
Property, plant and equipment 278.5 192.3 241.6
Derivative financial assets 18.3 8.0 3.8
588.7 405.8 503.4
------------- ------------- -----------------
Current assets
Inventories 443.3 370.0 407.6
Trade and other receivables 48.8 25.2 42.6
Derivative financial assets 37.2 12.5 10.7
Cash and cash equivalents 22.1 37.7 42.7
Current tax asset 0.4 - -
-------------
551.8 445.4 503.6
------------- ------------- -----------------
Current liabilities
Trade and other payables (582.6) (457.4) (549.7)
Borrowings (60.0) - -
Derivative financial liabilities (8.1) (12.4) (5.3)
Current tax liability - (2.3) (3.0)
Deferred tax liability - (3.9) -
-------------
(650.7) (476.0) (558.0)
------------- ------------- -----------------
Net current liabilities (98.9) (30.6) (54.4)
-------------
Non-current liabilities
Deferred tax liability (16.0) - (8.2)
Derivative financial liabilities (0.8) (1.2) (2.0)
-------------
(16.8) (1.2) (10.2)
------------- ------------- -----------------
Net assets 473.0 374.0 438.8
============= ============= =================
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 1.3 0.3 1.0
Hedging reserve 37.2 7.4 7.5
Translation reserve (1.2) (1.0) (1.6)
Retained earnings 425.9 357.5 422.1
------------- ------------- -----------------
Total equity 473.0 374.0 438.8
============= ============= =================
Consolidated UNAUDITED Statement of Cash Flows
Interim Results for the six months to 28 February 2019
Six months Six months Year to
to to
28 February 28 February 31 August
2019 2018 2018 (audited)
(unaudited) (unaudited)
GBPm GBPm GBPm
Operating profit 4.5 29.7 101.9
------------- ------------- -----------------
Adjusted for:
Depreciation of property, plant
and equipment 11.9 7.8 17.0
Amortisation of intangible assets 20.5 17.1 37.6
Loss on disposal of non-current
assets - 0.4 0.8
Investment write off - 0.1 -
Fixed asset impairment - - 2.7
Increase in inventories (35.7) (46.7) (84.3)
(Increase)/decrease in trade
and other receivables (6.2) 3.5 (14.0)
Increase/(decrease) in trade
and other payables 49.9 (39.3) 35.9
Share based payments charge 0.5 4.8 8.9
Other non-cash items (1.4) 1.3 0.5
Income tax paid (3.7) (6.5) (13.1)
------------- ------------- -----------------
Net cash inflow/(outflow) from
operating activities 40.3 (27.8) 93.9
Investing activities
Payments to acquire other intangible
assets (66.3) (48.8) (107.4)
Payments to acquire property,
plant and equipment (54.1) (46.6) (105.6)
Finance income - 0.2 0.3
Net cash used in investing activities (120.4) (95.2) (212.7)
Financing activities
Net cash inflow relating to EBT(1) 0.4 0.9 1.7
Finance expense (0.6) - (0.2)
Proceeds from borrowings 60.0 - -
Net cash generated from financing
activities 59.8 0.9 1.5
Net decrease in cash and cash
equivalents (20.3) (122.1) (117.3)
============= ============= =================
Opening cash and cash equivalents 42.7 160.3 160.3
Effect of exchange rates on cash
and cash equivalents (0.3) (0.5) (0.3)
------------- ------------- -----------------
Closing cash and cash equivalents 22.1 37.7 42.7
============= ============= =================
(1) Employee Benefit Trust and Link Trust
Notes to the financial information
Interim Results for the six months to 28 February 2019
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, and Sweden.
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
9 April 2019.
b) Basis of preparation
The interim financial statements for the six months ended 28
February 2019 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 2018, 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 2018 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 3 to 9. The Financial Review on pages
10 to 14 describes the Group's financial position and cash
flows.
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. 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 and 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 2018, with the
exception of the new accounting standards that were adopted during
the period. These are:
-- IFRS 9 'Financial Instruments' replaced IAS 39 'Financial
Instruments Recognition and Measurement'. The standard is effective
for accounting periods beginning on or after 1 January 2018 and was
therefore implemented with effect from 1 September 2018. The Group
has completed an assessment of IFRS 9 and adoption has not had a
material impact on the results or financial position of the Group.
Additional disclosures required under the new standard will be made
in the annual report and financial statements for the year ending
31 August 2019.
-- IFRS 15 'Revenue from Contracts with Customers' is effective
for periods beginning on or after 1 January 2018 and therefore has
been implemented with effect from 1 September 2018. The core
principle of the standard is to ensure that an entity recognises
revenue once it has fulfilled its performance obligations, which
are met through transferring control of a product or service to a
customer, at an amount that reflects the consideration to which the
entity expects to be entitled.
It has been concluded that the adoption of IFRS 15 does not have
a material impact on revenue recognition for any of the Group's
revenue streams. Therefore, no adjustment for first time adoption
has been made to either comparative figures or opening reserves in
the statement of financial position.
In addition, taxes on income in the interim periods are accrued
using the tax rate that would be applicable to the expected total
annual earnings.
Changes to accounting standards
Changes to IFRS which have been issued, but that are not yet
effective, have been disclosed in the Group's Annual Report and
Accounts for the year ended 31 August 2018.
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 2019 to be unchanged from those set out
in the Annual Report and Accounts for the year ended 31 August
2018, summarised as follows:
-- Market risks, including:
- disruption to marketing dynamics as we face increasing
competition from a variety of e-commerce players and new challenges
arising out of the current geopolitical uncertainty,
- operating with an insufficiently global mindset as we
structure our increasingly international business,
- poorly engaging digital experience and failure to adhere to
product quality or ethical trading standards, leading to a damaged
reputation among customers, and
- failure or inability to support and protect our brand, trademarks and domain names
-- Financial risks, including managing exposure to changes in foreign exchange rates
-- Technological and infrastructure risks including the threat
from cyber-crime to both the security of customer data and the
business as a whole, transformation projects failing to deliver
their intended positive outcomes smoothly and on time and
disruption to our business-critical operations caused either
by:
- failure on a suppliers' part or from an over dependency on one supplier, or
- due to warehouse issues or from insufficient warehouse capacity
-- People risks, including preserving our entrepreneurial culture as we continue to grow
These are set out in detail on pages 48 to 56 of the Group's
Annual Report and Accounts for the year ended 31 August 2018, a
copy of which is available on the Group's website, www.asosplc.com.
Information on financial risk management is also detailed on pages
112 to 115 of the Annual Report.
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 receive 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 gross profit after distribution
expenses, which excludes administrative expenses.
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 (281.9) (202.4) (69.4) (120.9) (674.6)
---------------- ---------------- --------------- ---------------- ----------------
Gross profit 216.0 207.4 97.5 119.0 639.9
Distribution
expenses (57.9) (63.0) (39.7) (44.3) (204.9)
---------------- ---------------- --------------- ---------------- ----------------
Segment result 158.1 144.4 57.8 74.7 435.0
Administrative
expenses (430.5)
----------------
Operating profit 4.5
Finance expense (0.5)
----------------
Profit before tax 4.0
================
Six months to 28 February 2018 (unaudited)
UK EU US RoW Total
GBPm GBPm GBPm GBPm GBPm
Retail sales 414.5 349.1 149.0 218.7 1,131.3
Delivery receipts 9.2 7.1 3.7 3.9 23.9
Third party revenues 2.8 - 0.1 - 2.9
Total revenue 426.5 356.2 152.8 222.6 1,158.1
Cost of sales (236.2) (182.8) (63.0) (106.7) (588.7)
---------------- ---------------- --------------- ---------------- ----------------
Gross profit 190.3 173.4 89.8 115.9 569.4
Distribution
expenses (50.6) (47.8) (37.9) (42.2) (178.5)
---------------- ---------------- --------------- ---------------- ----------------
Segment result 139.7 125.6 51.9 73.7 390.9
Administrative
expenses (361.2)
----------------
Operating profit 29.7
Finance income 0.2
----------------
Profit before tax 29.9
================
Year to 31 August 2018 (audited)
UK EU US RoW Total
GBPm GBPm GBPm GBPm GBPm
Retail sales 861.3 739.1 311.6 443.2 2,355.2
Delivery receipts 22.3 15.3 9.0 7.8 54.4
Third party
revenues 7.4 0.1 0.2 - 7.7
Total revenue 891.0 754.5 320.8 451.0 2,417.3
Cost of sales (479.9) (363.6) (127.9) (208.8) (1,180.2)
---------------- ---------------- ---------------- ---------------- ------------------
Gross profit 411.1 390.9 192.9 242.2 1,237.1
Distribution
expenses (108.0) (104.9) (79.6) (88.3) (380.8)
---------------- ---------------- ---------------- ---------------- ------------------
Segment result 303.1 286.0 113.3 153.9 856.3
Administrative
expenses (754.4)
------------------
Operating profit 101.9
Finance income 0.3
Finance expense (0.2)
------------------
Profit before tax 102.0
==================
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 GBP413.4m (31 August 2018: GBP380.8m), EU: GBP110.2m (31
August 2018: GBP75.2m), US: GBP45.7m (31 August 2018: GBP42.5m) and
RoW: GBPnil (31 August 2018: 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
28 February 28 February 31 August
2019 2018 (unaudited) 2018 (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 83,522,184 83,243,758 83,290,514
Weighted average effect of dilutive
options 267,700 658,025 781,491
-------------- ------------------- -----------------
Weighted average shares in issue for
diluted earnings per share 83,789,884 83,901,783 84,072,005
============== =================== =================
Earnings (GBPm)
Underlying earnings attributable to
owners of the parent 3.0 24.5 82.4
========= ================ ================
Basic earnings per share: 3.6p 29.4p 98.9p
Diluted earnings per share: 3.6p 29.2p 98.0p
========= ================ ================
5. Capital expenditure and commitments
During the period, the Group capitalised property, plant and
equipment of GBP48.8m and intangible assets of GBP54.4m. Disposals
were GBPnil. At the period end capital commitments contracted, but
not provided for by the Group, amounted to GBP40.4m.
6. Reconciliation of cash and cash equivalents
Six months Six months Year to
to 28 February to 28 February 31 August
2019 (unaudited) 2018 (unaudited) 2018 (audited)
GBPm GBPm GBPm
Net movement in cash and cash equivalents (20.3) (122.1) (117.3)
Opening cash and cash equivalents 42.7 160.3 160.3
Effect of exchange rates on cash
and cash equivalents (0.3) (0.5) (0.3)
------------------ ------------------ ----------------
Closing cash and cash equivalents 22.1 37.7 42.7
================== ================== ================
During the period, the Group extended its Revolving Credit
Facility ("RCF") by GBP70.0m to GBP220.0m, effective for the period
to 31 August 2019 and thereafter at GBP150.0m until 24 May 2021. As
at 28 February, the Group had drawn down GBP60.0m from the
facility.
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 28 February 2019, 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 GBP19.9m (H1 2018: GBP18.1m) 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 28 February to 28 February 31 August
2019 (unaudited) 2018 (unaudited) 2018 (audited)
GBPm GBPm GBPm
Financial assets
Derivative assets used for hedging
at fair value 55.5 20.5 14.5
Amortised cost(1) 54.1 49.6 70.8
Financial liabilities
Derivative liabilities used for
hedging at fair value (8.9) (13.6) (7.3)
Amortised cost(2) (633.1) (444.8) (537.5)
================== ================== ================
(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 28 February 2019 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 28 February 2019 and a net unrealised gain of
GBP36.9m (H1 2018: gain of GBP67.8m) was recognised in equity. All
derivative financial liabilities at 28 February 2019 mature within
two 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 2018. There have been no
material changes to the Group's related party transactions during
the six months to 28 February 2019.
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 six month period ended 28 February 2019. 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 28 February 2019;
-- 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
St Albans
10 April 2019
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 SSAFMUFUSEDL
(END) Dow Jones Newswires
April 10, 2019 02:00 ET (06:00 GMT)
Asos (LSE:ASC)
Historical Stock Chart
From Apr 2024 to May 2024
Asos (LSE:ASC)
Historical Stock Chart
From May 2023 to May 2024