TIDMQUIZ
RNS Number : 7487B
Quiz PLC
11 June 2019
11 June 2019
QUIZ plc
("QUIZ" or the "Group")
Preliminary Results
For the year ended 31 March 2019
Sales growth across all channels despite challenging trading
conditions
QUIZ, the omni-channel fast fashion brand, is pleased to
announce its unaudited preliminary results for the year ended 31
March 2019 ("FY 2019").
Financial highlights:
FY 2019 FY 2018 Year-on-year
Group Revenue GBP130.8m GBP116.4m 12%
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Underlying(1) EBITDA GBP4.6m GBP12.5m -63%
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EBITDA GBP4.2m GBP11.5m -65%
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Underlying(1) Profit Before
Tax GBP0.6m GBP9.6m -94%
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Profit Before Tax GBP0.2m GBP8.5m -97%
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Underlying Basic EPS (pence)(2) 0.33 6.33 - 95%
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Dividend per share (pence) 1.20
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Net cash at period end GBP7.5m GBP9.2m
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-- Group revenue increased 12% year on year reflecting strong
across all channels:
* Online revenue increased 34% year on year to GBP41.0m
(FY 2018: GBP30.6m)
* International sales increased 8% to GBP22.9m (FY
2018: GBPGBP21.2m)
* Revenue from UK stores and concessions increased 4%
to GBP66.9m (FY 2018: GBP66.4m)
-- Group Gross margin at 60.7% (FY 2018: 63.0%)
-- Healthy net cash position of GBP7.5m at the year-end (FY
2018: GBP9.2m)
Operational highlights:
-- Online sales represented 31.4% of Group revenue (FY 2018:
GBP26.3%)
-- Active online customer base increased 56% to 576,000 (FY
2018: 370,000)
-- During the year, QUIZ opened three new standalone stores
and 25 new concessions, and closed two standalone stores
and one concession
-- Continued investment in online propositions with launch
of QUIZ VIP delivery pass, partnership with Klarna and
investment in an Emarsys platform to improve payment options
and enhance customer personalisation
-- Continued expansion of the range with successful launches
of QUIZMAN, Swimwear and Petite ranges
-- Gross cost savings of GBP2-3 million targeted in the medium
term
Tarak Ramzan, Founder and Chief Executive Officer,
commented:
"Despite the challenges faced by the Group during the Period,
QUIZ's focus has remained as strong as ever on delivering great
products at outstanding value, thereby strengthening our brand's
positive reputation amongst a growing customer base. As a result,
we have continued to achieve sales growth across our omnichannel
model both in the UK and internationally.
"As announced in March, the Board and senior management team
have carefully reflected on our business, strategy and prospects to
ensure that we are able to navigate what remains a volatile trading
environment and restore profitable growth. We have concluded this
review process with sharpened focused and a clearer vision of what
is required to ensure that QUIZ succeeds in a dynamic retail sector
and achieves its strategic objectives.
"The QUIZ brand continues to gain momentum with a growing
customer base. Whilst trading conditions have remained challenging
in the year to date, the Board remains confident that underpinned
by our flexible business model and an increasing online focus, the
Group can return to sustainable profitable growth."
Analyst meeting:
A meeting for sell-side analysts will be held at the offices of
Hudson Sandler LLP, 25 Charterhouse Square, London EC1M 6AE on 11
June 2019, commencing at 9.00am.
Enquiries:
QUIZ plc Via Hudson Sandler
Tarak Ramzan, Chief Executive
Officer
Gerry Sweeney, Chief Financial
Officer
Sheraz Ramzan, Chief Commercial
Officer
Panmure Gordon
(Nominated Adviser and Sole Broker)
Ben Thorne / Alina Vaskina / Joanna
Langley (Corporate Finance)
Erik Anderson (Corporate Broking) +44 (0) 207 886 2500
Hudson Sandler LLP (Public Relations) +44 (0) 207 796 4133
Alex Brennan / Nelly Akpaka quiz@hudsonsandler.com
Notes:
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
About QUIZ:
QUIZ is an omni-channel fast fashion brand, specialising in
occasion wear and dressy casual wear. QUIZ delivers a distinct
proposition that empowers its fashion forward customers to stand
out from the crowd.
QUIZ's buying and design teams constantly develop its own
product lines, ensuring the latest glamorous looks at value prices.
This fast, flexible supply chain, together with the winning formula
of style, quality, value and speed-to-market has enabled QUIZ to
grow rapidly into an international brand with more than 300
standalone stores, concessions, franchise stores, wholesale
partners and international online partners in 22 countries. The
Group currently operates 73 standalone stores and 174 concessions
in the UK.
QUIZ operates through an omni-channel, fast fashion business
model, which encompasses online sales, standalone stores,
concessions, international franchises and wholesale
arrangements.
To download images please visit:
http://www.quizgroup.co.uk/media-download-centre/
For further information:
https://www.quizclothing.co.uk/
http://www.quizgroup.co.uk/
CHAIRMAN'S STATEMENT
Introduction
During the year, the UK retail sector continued to be impacted
by an accumulation of widely reported macro-economic and structural
factors. QUIZ has not been immune to the exceptionally challenging
retail environment which has had an impact on the Group's financial
performance for the year.
Despite the trading challenges, QUIZ achieved sales growth
across each of the Group's distribution channels: online,
international, and stores and concessions.
However, as previously reported in March 2019, this sales growth
was behind the Board's initial expectations for the year. As a
result, there was a requirement to apply increased discounts to
clear excess stock, particularly during the second half of the
year, resulting in a greater proportion of lower margin sales than
previously anticipated. These factors, coupled with the impact of
investments made over the past 18 months in our team and
infrastructure to support anticipated revenue growth as well as
increased costs associated with obtaining and servicing online
customers, resulted in a disappointing decline in full year
profits.
Financial Results and Dividend
Group revenue of GBP130.9 million was 12% higher than the
previous year's GBP116.4 million. However, a decline in the gross
margin generated in combination with increased operating costs
resulted in underlying Group profit before tax of GBP0.6 million
(FY 2018: GBP9.6 million). Profit before tax reflecting
non-underlying costs was GBP0.2 million (2018: GBP8.5 million).
The Group retains a solid balance sheet with cash less
borrowings at the Period end amounting to GBP7.5 million (2018: net
cash of GBP9.2 million). Net cash flow before dividend payments of
GBP1.5 million and repayment of borrowings of GBP0.3 million are
essentially neutral.
Given the decline in profits in the current year and further to
the Business Review undertaken in recent months, the Board consider
that it is appropriate to suspend dividend payments in order to
restore profitability and support the growth of the business. As a
result, the Board does not recommend the payment of a final
dividend.
Business Review
The retail environment in the UK is continuing to experience an
unprecedented pace of change with a combination of consumers
continuing to spend more online and lower high-street footfall
creating structural challenges for retailers across the UK high
street. At the same time, the UK consumer has faced - and continues
to face - extreme levels of macro-economic and political
uncertainty which is impacting on consumer confidence.
As announced during March 2019, in light of the challenges faced
by the Group and the lower than previously anticipated profit
outcome for the year, the Board embarked upon a review of all
aspects of the business to ensure that QUIZ remains well positioned
to achieve its potential.
As a Board and senior management team we have reflected honestly
on what has and has not worked well for the business over the past
twelve months; what changes we need to make to ensure that we
return to profitable growth; and how to best position the Group for
long-term success.
In the longer term the rapidly changing retail environment
requires the business to be flexible and to maximise sales where
profitable growth can be achieved. Our omni-channel distribution
model provides the necessary flexibility however, moving forward,
this will have an even sharper focus on capturing the significant
online opportunities available to QUIZ. This will be complemented
by the active management of stores, which have an average lease
length of 26 months, and concessions, which can be exited at short
notice.
The Board has agreed that, whilst the business, brand and
strategy remain fundamentally robust, some changes need to be made
to the way we operate.
In terms of restoring profitability actions have been identified
to eliminate, where practical, loss making activities and to target
cost reductions across the business. Short term measures identified
include:
-- the termination of some third-party online contracts which,
whilst contributing to sales growth, negatively impacted the
profitability of the business;
-- a reduction in our exposure to UK department stores;
-- active management of the store estate as leases come up for renewal;
-- Re-aligning the product offering to our core customer demographic;
-- a greater focus on cost control with targeted cost savings
having been implemented or identified.
The Board continues to believe that the Group's growth strategy
remains valid and relevant and our aim remains to continue to
develop sales and expand the QUIZ brand across the Group's
omni-channel distribution model.
With these changes, as well as a meticulous and unwavering focus
on operational execution, we are confident that profitable growth
will be restored.
Outlook and Current Trading
We firmly believe that the QUIZ brand continues to have strong
customer appeal and that the Group's omni-channel business model
remains relevant and key to our long-term success. As a business,
we are highly responsive to new trends and our proven, fast supply
chain remains a major asset to ensure that QUIZ can succeed in a
competitive market and deliver sustainable growth.
The foremost priority for the Group is to restore profitability.
Going forward, a major focus will be on stabilising the UK's
trading performance in what will remain - during the foreseeable
future at least - a difficult and dynamic retail environment.
As has been widely reported the trading conditions on the UK
high street have remained challenging since we issued our trading
update in March. In the two months to 31 May, sales were consistent
year on year. Excluding sales from trading relationships that have
terminated in the year sales increased by 4%. Encouragingly, we
have continued to see online sales growing on our QUIZ websites,
albeit at more modest levels than experienced in the previous year.
In this period, the growth through our online and international
business was offset by a weaker performance through our UK stores
and concessions where we continue to see suppressed consumer
spending.
The QUIZ brand has strong appeal, we have a clear customer focus
and our collections remain highly relevant for shoppers today. This
is evidenced by our increasing active customer numbers and social
media engagement. Underpinned by these attributes, as well as the
flexibility of our model and the passion and dedication of our
teams, we remain confident that QUIZ can mitigate and manage the
near-term challenges and achieve its long-term potential as a
leading international fashion brand.
Peter Cowgill
Non-Executive Chairman
CHIEF EXECUTIVE'S STRATEGIC REPORT
Introduction
Despite the challenges faced by the Group during the Period,
QUIZ's focus has remained firmly on delivering great products at
outstanding value, which has continued to strengthen our brand's
positive reputation amongst a growing customer base. As a result,
we have continued to achieve sales growth across our omnichannel
model both in the UK and internationally:
Year to Year to Share Share
31 March 31 March Year-on-year of revenue of revenue
2019 2018 growth 2019 2018
Online GBP41.0m GBP30.6m + 34% 31.4% 26.3%
International GBP23.0m GBP21.2m + 8% 17.5% 18.2%
UK stores and concessions GBP66.9m GBP64.6m + 4% 51.1% 55.5%
Total GBP130.9m GBP116.4m + 12%
Despite this, as described in the Chairman's Statement, the
Group's profit outcome for the year has fallen below our
expectations. As a result, since March, the Board and senior
management team have carefully reviewed on our business, strategy
and prospects to ensure that we are able to navigate what remains a
volatile and dynamic UK trading environment and restore profitable
growth. We have examined and analysed in detail QUIZ's strengths
and unique attributes, the challenges we face, and the areas where
we need to adapt and improve to ensure the brand continues to
succeed and grow profitably.
Addressing four pressing challenges:
The business review identified four pressing challenges for the
Group to manage and overcome:
A decline in footfall and spend in our UK store and concession
estate
Volatile spending and suppressed consumer confidence in
combination with a rapidly-growing proportion of overall retail
spend online have contributed to several high-profile casualties on
the UK high-street, including some of QUIZ's trading partners. The
performance of QUIZ's store estate has also been impacted by lower
customer footfall.
Whilst the QUIZ board continues to believe that stores and
concessions will play an important role in the Group's strategy
moving forward, we have taken the strategic decision to reduce
exposure to UK department stores. At 31 March 2019, the brand
operated 168 concessions across the UK. We anticipate this reducing
by approximately 20 in the year ahead. A number of these closures
have been executed and they will continue during the year. Further
to a decline in sales in the current year the concessions that are
generating little return or operating at a loss have been
identified for closure and will be exited inexpensively after
serving the appropriate notice period.
At the same time, the Group intends to actively manage its
portfolio of 73 stores as leases come up for renewal. The average
lease length across our estate is currently 26 months, with 33
store leases either subject to short notice to terminate the lease
or subject to a lease due to expire over the next 24 months. We are
focussed on ensuring returns can be generated from each store and
if rental costs and business rates are at a level where this is at
risk, we will exit stores as their leases expire.
In addition, with increasing online activity and omni-channel
investment we can further utilise our store network for online
collections, returns and improving stock availability across the
estate.
The Group also intends to undertake initiatives to promote
footfall into stores including trialling the introduction of new
product categories in store.
The decline in gross margin
As a result of lower than anticipated sales during the year, the
business undertook additional promotional activity in order to
clear stock, resulting in lower gross margins.
Improvements in this area will come through a combination of
improved sourcing, targeted price increases and managing stock
allocations and purchases to reduce the amount of stock subject to
markdowns.
Right-sizing our cost base
Since the Group's IPO in July 2017, we have invested
meaningfully in our infrastructure and team to support our
anticipated growth. Our revenue has not grown sufficiently to
compensate for these increased costs and operating costs as a
proportion of revenue have increased by 5.5% from 54.7% to 60.2% in
the last 12 months
This level of costs is too high and inhibits our return to
profitability. We have systematically reviewed costs and have
targeted reductions across the business.
Optimising the omni-channel model
Whilst our online revenues have grown in the last year the costs
required to serve this customer base have come under pressure. As
the online market has increased the costs associated with customer
acquisition have risen. In addition, the return rates from
customers have gradually increased over time creating additional
handling and delivery costs that need to be recovered.
In addressing the cost of customer acquisition, we are firstly
introducing a number of actions to maximise the value of our
existing customer business. These include the introduction of the
QVIP delivery pass to improve order frequency, the introduction of
a buy now pay later option to increase the average transaction
value and an increased focus on targeting and re-engaging previous
customers.
After testing different media formats last year, we are now
refining marketing activities to concentrate on those with the
highest Return on Investment.
We have identified various cost savings opportunities which will
reduce distribution costs as a proportion of online sales in the
year ahead.
Further to the initiatives regarding the right-sizing of our
cost base and the optimisation of the omni-channel model the Board
have targeted gross cost savings of between GBP2-3 million in the
medium term.
Leveraging our key strengths:
The business review process provided an important opportunity to
reflect on the Group's unique attributes that have made QUIZ the
strong, international brand it is today. These strengths underpin
the Board's strong confidence in QUIZ's ability to compete and
succeed in the dynamic retail environment:
We have a strong and growing brand
QUIZ is a distinctive fashion brand which, over many years, has
developed a specialisation in occasion wear and dressy casual wear
for women. QUIZ's core business continues to deliver a distinct
proposition that empowers fashion forward females to stand out from
the crowd.
We firmly believe that the QUIZ brand has a clear,
differentiated position in the market and continues to resonate
with a broad age range of customers. Online active customers
increased by 56% in the year to 576,000 reflecting the appeal and
growing awareness of the brand. The brand's social media engagement
continues to increase significantly from the prior year with 44%
and 18% increases in our Instagram and Facebook audiences
respectively.
The strengths of our brand continue to enable QUIZ to expand
into new product categories. At the end of the financial year, we
launched our first ever swimwear range, which has been received
well by customers. In addition, subsequent to the end of the
financial year we have launched our Petite range which has received
an positive initial reaction.
Our fast and flexible supply chain remains a key competitive
advantage
The business has a well invested infrastructure and a proven
successful supply chain. In an environment where customers seek to
quickly replicate the latest looks seen on social media, the
catwalk or television, our supply chain and ability to offer some
products for sale in store and online in as little as two to three
weeks from the point of order is a key strength for QUIZ.
QUIZ continues to introduce new products each week as trends
emerge throughout the season and we have the ability to rapidly
react to customer demand whilst in season in order to give the
customer more of what they want. The Board believes this will be an
increasingly important ingredient for success as customers have
ever greater choice of where, when and how to shop.
QUIZ's online sales continue to experience very healthy
growth
Sales growth through QUIZ's online channels remains very healthy
reflecting: increased awareness of our brand driven by effective
marketing; the strength of our products and collections; increased
online traffic; and improved online conversion rates. The continued
good growth in online sales - in particular through QUIZ's own
websites - remains central to the Board's confidence in the Group's
long-term growth prospects.
In FY 2019, online sales increased by 34% year on year and now
represented 31% of QUIZ's Group revenue (2018: 26%). This was
supported by very strong sales growth of 54% through QUIZ's own
online channels.
The brand continues to have significant international
potential
We continue to see a positive reaction to the QUIZ brand across
International markets. Our mix of casual and occasion wear can be
tailored for each market and our flexible approach as to our route
to market has been beneficial.
Whilst each of these markets has its own challenges, we have
grown revenue by 8% in the last year and these sales represent 18%
of QUIZ's Group revenue (2018: 18%). We continue to identify
opportunities to extend our sales through low-risk, low-cost
International expansion.
We continue to be recognised as an industry leader
We were delighted to be named International Fashion Retailer of
the Year at the Drapers Awards 2018. The judges awarded QUIZ the
accolade due to its successful international financial performance,
omni-channel business model, international growth strategy and
understanding of its markets, coupled with a strong product offer
that resonates with our customers. During the period, we were also
shortlisted for Fashion Retailer of the Year at the Evening Express
Retailer 2018 awards, International Growth Retailer of the Year at
Retail Week Awards 2019 and Fashion Retail Business of the Year
(GBP101million to GBP500m turnover) and Best Use of Influencer
campaign at The Drapers Awards 2018.
Strategy to delivery long-term profitable growth:
Business model
QUIZ distributes its brand through three main channels: retail
(stores and concessions); online; and international (which includes
wholesale and franchise agreements). We operate stores and
concessions across the UK, Europe, North America and Asia, and
localised e-commerce sites in the UK, Spain and USA. We also have
an e-commerce business with some of our concession partners.
QUIZ's buying, design and merchandising teams work closely
together and routinely monitor emerging trends each season.
Together, they constantly develop QUIZ's own product lines ensuring
that the Company delivers the latest glamorous looks at value for
money prices. As a result of this reactive model and the Company's
flexible and fast supply chain, QUIZ is able to adapt quickly to
new trends and is able to have its products in its stores,
concessions and online within four weeks from the point of order.
Focusing on very short lead times, QUIZ's "test and repeat" supply
chain is able to introduce new products within weeks of identifying
trends, and to promptly reorder successful lines to meet customer
demands.
The Group's omni-channel growth strategy remains focused on
delivering progress across each of the following three pillars:
Continued online expansion
Accelerating growth in our online channel is the priority for
the Group. Areas of focus include: launching further websites in
targeted international markets, and expanding the brand's online
presence through carefully selected third parties. In addition, the
Group intends to continue to extend the product offering online to
drive sales growth, with recent successful examples including the
introduction of a Petite collection and Swimwear range as well as
numerous celebrity collaborations throughout the Period.
Sales through selected third-party websites remain an important
pillar important for generating revenues and expanding the
awareness of the QUIZ brand. During the Period, we terminated
arrangements with two of our third-party website partners which,
whilst contributing to sales growth, were negatively impacting the
business and our resources. During the year, the Group introduced
two new third-party online partners in the United Kingdom who are
sourcing product from the Group on a wholesale basis.
During the period, we invested in a new CRM system to drive
better personalisation, content and incentives to each customer
which in turn maximises conversions and margins.
Post period end, we have launched our new exclusive delivery
pass, QVIP which offers customers unlimited free delivery and
collect in store for a small annual fee. We believe that this is an
important step in our journey to help better serve our customers
and increase customer engagement.
We have also launched a trial for the use of Klarna, a 'buy now,
pay later' payment platform technology to make it even easier for
our customers to pay for goods.
International expansion
We continue to review opportunities for further international
growth by expanding in existing markets as well as extending into
new territories. QUIZ's international footprint currently extends
across 125locations in 22 countries on four continents. The Board
believes that international expansion continues to offer a
significant opportunity for the QUIZ brand with our omni-channel
model allowing a flexible approach to market entry dependent the
dynamics of that market.
Awareness of QUIZ internationally continued to strengthen during
FY 2019. This resulted in an 8% increase in international revenue
to GBP23.0 million (FY 2018: GBP21.2 million), now representing 18%
of Group revenue (FY 2018: 18%).
Our stores and concessions in Ireland and Spain performed in
line with expectations during the period with revenues increasing
by GBP0.9 million. Our performance in Spain has steadily
strengthened during the year and we will continue to assess QUIZ's
growth opportunities in the Spanish market as we move forward.
Sales in the USA increased during the year and contributed to the
GBP0.9 million uplift in franchise sales. We continue to review the
potential for QUIZ in the North American market.
UK stores and concessions
Whilst acknowledging the challenging and dynamic retail
environment in the UK, we continue to believe UK stores and
concessions will make a profitable contribution for QUIZ going
forward. Sales from UK stores and concessions were up 4% during the
year, demonstrating the quality of our store estate, the strength
of our product range and growing awareness and appeal of the QUIZ
brand.
During the year the Group opened three new standalone stores and
twenty-five new concessions. As part of the Group's active
management of its retail portfolio, we closed two standalone stores
and one concession. Average total retail square footage increased
by 9% to 210,000 sq. ft. during the year (FY 2018: 193,000 sq.
ft.).
Further to opening new stores in Romford and Arndale subsequent
to the year-end, QUIZ currently operates 73 stores in the UK and
the Board believes that there is the potential for further stores
in high footfall locations. The Group will continue to prioritise
the opening of stores to accommodate a broader product range with
every new store being carefully evaluated against strict return on
investment criteria.
At the end of the financial year, QUIZ operated 168 concessions
in the UK. As outlined earlier in this Strategic Review, the Board
has taken the strategic decision to reduce exposure to UK
department stores reflecting the trading challenges faced by some
of our trading partners. We anticipate this reducing QUIZ's
concession presence by approximately 20 concessions during the
current year.
Post period end, Debenhams, one of QUIZ's concession partners,
named the 22 of the 50 stores it has earmarked for closure. QUIZ is
present in ten of the affected stores. The annual turnover from
these concessions is less than GBP2million per annum. We note that
these stores are likely to be open for most if not all of FY
2020.
Marketing investment
Underpinning the growth and expansion of the QUIZ brand is the
Group's approach to targeted and returns driven marketing
investment. During the year, total marketing investment increased
by 83% to GBP4.6m (FY 2018: GBP2.5m) supporting growth in brand
awareness. This increase in investment was focussed on digital and
social marketing to generate new customers for all sales channels,
as well as increasing shopping frequencies and basket sizes.
Marketing investment as a proportion of Group sales was 3.6%.
During the Period, QUIZ launched numerous targeted marketing
campaigns. We partnered twice with The Only Way is Essex (TOWIE) to
create its first ever male and female capsule collections in
collaboration with TOWIE's very own Chloe Lewis, Lauren Pope and
Dan Edgar. The partnership saw a number of the cast wearing QUIZ
fashion pieces in scenes for broadcast along with outfits promoted
across the casts and shows social channels. In the summer, we
launched a special honeymoon capsule collection with Love Island's
soon to be newlyweds, Olivia Buckland and Alex Bowen.
These campaigns blend offline and online advertising targeted
towards our key customer demographics. Looking ahead we will be
unwavering in our focus to ensure all campaigns provide return on
investment and that we are continually refreshing our offering and
brand relevance.
Post period end, we launched our first collaboration with TV
star Samantha Faiers which has yielded a positive initial reaction.
The 37-piece seasonal collection channels Samantha's glamorous
style with a selection of on-trend outfits that are fitting for any
summer occasion.
Strategic KPIs
2019 2018 Change
Active customers 576,000 370,000 +56%
Online sales as a % of turnover 31.4% 26.3% +5.1%
International outlets serviced 125 78 +47
UK retail space - square
footage 210,000 193,000 +9%
Our Team
I would like to take this opportunity to thank each of my
colleagues who have worked extremely hard during what has been a
challenging year. They have retained an unwavering focus on
customers despite the difficult trading environment and I am very
thankful for their outstanding dedication, skill and passion.
Tarak Ramzan
Chief Executive Officer
FINANCIAL & BUSINESS REVIEW
Basis of Preparation
To provide comparability across reporting periods, the results
within this Financial Review are presented on an "underlying"
basis, adjusting for the GBP0.4 million bad debt provision arising
from the House of Fraser Administration in the current year and the
GBP1.0 million cost of admission to AIM and the Group
reorganisation prior to admission ("non-underlying costs"). A
reconciliation between underlying and reported results is provided
at the end of this Financial Review.
Group Overview
Group revenue of GBP130.9 million was 12% higher than the
previous year's GBP116.4 million.
Further to a decline in the gross margin generated and increased
operating costs, underlying operating profits were restricted to
GBP0.6 million (2018: GBP9.6 million). Including the non-underlying
costs, operating profits were GBP0.2 million (2018: GBP8.6
million).
Financial KPIs
2019 2018 Change
Underlying revenue GBP130.9m GBP116.4m + 12.4%
Gross margin 60.7% 63.0% - 2.3%
Adjusted EBITDA % (1) 3.5% 10.7% - 7.2%
Cash from operating activities
(2) GBP7.2m GBP9.1.m - GBP1.9m
1. Excludes the GBP0.4 million bad debt provision arising from
the House of Fraser Administration in the current year and the
GBP1.0 million cost of admission to AIM and the Group
reorganisation prior to admission
2. Excludes the items noted in 1. and the prior year excludes
settlement GBP1.3m owed from related parties subsequent to the
IPO
Underlying EBITDA generated declined by 63% to GBP4.6 million
(2018: GBP12.5 million) which represented an EBITDA margin of 3.5%
(2018: 10.7%). Including the non-underlying costs, EBITDA was
GBP4.2 million (2018: GBP11.5 million).
Underlying Group profit before tax ('PBT') was GBP0.6 million
(FY 2018: GBP9.6 million). Profit before tax reflecting
non-underlying costs was GBP0.2 million (2018: GBP8.5 million).
Further to this, the underlying earnings per share declined 95%
to 0.33 pence (2018: 6.33 pence). Earnings per share reflecting
non-underlying costs was 0.09 pence (2018: 5.49 pence).
Cash less borrowings at the period end amounted to GBP7.5
million (2018: net cash of GBP9.2 million). The most significant
cash flows in the year related to the GBP6.8m of operating cash
flow generated in the year and GBP6.1 million of capital
expenditure incurred during the year.
Revenue
Group revenue increased by 12% to GBP130.9 million from GBP116.4
million in FY 2018, with growth being recorded across all three of
our revenue channels, as shown below:
Year to Year to Share Share
31 March 31 March Year-on-year of revenue of revenue
2019 2018 growth 2019 2018
Online GBP41.0m GBP30.6m + 34% 31.4% 26.3%
International GBP23.0m GBP21.2m + 8% 17.5% 18.2%
UK stores and concessions GBP66.9m GBP64.6m + 4% 51.1% 55.5%
Total GBP130.9m GBP116.4m + 12%
Online
The 34% growth in online revenues to GBP41.0 million was
primarily driven by strong growth on the QUIZ websites, which
recorded a revenue increase of 58% in the year. This growth
reflects a 56% uplift in the number of active customers at 31 March
2019 to 576,000 (2018: 370,000). Our increased marketing activity
in the year helped drive website traffic up 43% year on year,
primarily driven by mobile.
Growth recorded through third-party websites was lower than
sales achieved through our own websites which is partially
reflective of our decision to exit two of the five third-party
websites we previously engaged with.
International
International sales include revenue from QUIZ standalone stores
and concessions in the Republic of Ireland, standalone stores in
Spain and franchises in 20 countries.
We have continued to see a positive response to the QUIZ brand
across different markets with revenues increasing 8% to GBP23.0
million (2018: GBP21.2 million). Of the GBP1.8 million uplift in
sales, GBP0.9 million was generated from our international
franchise partners and the balance reflect increased revenues from
our stores and concessions in Ireland and Spain.
UK stores and concessions
Sales in the Group's UK standalone stores and concessions
increased 4% to GBP66.9 million (2018: GBP64.6 million).
During the year three new stores were opened and two stores were
closed. In addition, twenty-five new concessions were opened with
one being closed. The majority of the concessions opened were in
Outfit stores and are typically generating lower revenues than our
average concession and are not staffed by QUIZ employees. Further
to these changes, total selling space across the stores and
concessions increased by 9% from 193,000 sq. ft. to 210,000 sq. ft.
over the period.
Sales growth in UK stores and concessions was driven by the
additional sales space introduced in the in current and prior year
which compensated for the like-for-like performance.
Gross Margin
Gross margin at 60.7% was 2.3% lower than the prior year. Whilst
the decline was partially attributable to the change in the revenue
mix experienced during the year, it was primarily driven by the
increased level of discounting undertaken during the year.
We remain focussed on efficient sourcing and product selection
to minimise the need for discounted prices to improve the gross
margin recorded.
Underlying Operating Costs
Underlying operating costs increased by 24% in 2019 from
GBP63.7million to GBP78.8 million. These costs represented 60.2% of
revenue (2018: 54.7%).
Underlying administrative costs increased by 29% to GBP54.8
million (2018: GBP42.4 million).
Total employment costs, including agency costs, have risen by
GBP4.4 million or 22% to GBP24.3 million (2018: GBP19.9 million)
which reflects the increased resource to service the additional
revenue as well as the continued investment in our central
functions to support future growth.
The increase in administrative costs also reflects the increase
in marketing spend in the year to GBP4.7 million (2018: GBP2.5
million). This spend was focussed on digital and social marketing
to generate new customers for all sales channels, as well as
increasing shopping frequencies and basket sizes. This is
complemented by offline advertising activity such as tube and bus
campaigns.
Distribution costs increased 13% to GBP24.1 million (2018:
GBP21.4 million). These costs reflect (i) the cost of carriage to
stores, concessions and franchises as well as online customers and
(ii) commission paid to third parties who sell product on behalf of
QUIZ. The uplift in these costs primarily reflects higher carriage
costs being incurred to service the additional online revenues.
Depreciation and amortisation increased by 39% from GBP2.9
million to GBP4.0 million. This reflects the continued investment
in the business including spend in our distribution centre in the
current and previous year, continued spend on IT and software and
the continued rollout of new stores. In addition, the charge
reflects the write down of assets in concessions which have been
identified for closure in the current year.
Non-underlying Operating Costs
Non-underlying operating expenses totalled GBP0.4 million (2018:
GBP1.0 million). In the current year, the cost relates to the bad
debt provision arising from the Administration of House of Fraser.
The prior year GBP1.0 million cost related to that year's IPO
transaction and the Group restructuring undertaken prior to it.
Finance Costs
There are limited finance costs incurred by the Group. Interest
costs are largely limited to the costs relating to the remaining
term loans which were drawn down prior to the IPO to fund capital
projects.
Taxation
The reported tax rate in the current is 48.1% (2018: 20.2%).
Given the small level of profitability recorded the limited amount
of expenses which are disallowable for tax purposes has a larger
impact on the effective rate recorded.
The Group's effective tax rate in future years is expected to be
broadly in line with the statutory rate.
Earnings per Share
Basic earnings per share for 2019 were 0.09 pence per share
(2018: 5.49 pence).
The underlying basic earnings per share for 2019, which is
calculated using the underlying profit before tax less tax at the
effective statutory rate, were 0.33 pence (2018: 6.33 pence)
Dividends
During the financial year a dividend of 0.8p per share was paid
in September 2018 and 0.4p per share paid in March 2019.
Given the decline in profits in the current year and further to
the Business Review undertaken in recent months the Board consider
that it is appropriate to suspend dividend payments to preserve
cash whilst it restores its profitability and to support the growth
of the business. As a result, do not recommend the payment of a
final dividend.
Cash Flow and Cash Position
Net cash at the period end amounted to GBP7.5 million (2018: net
cash of GBP9.2 million).
Net cash flow from operating activities was GBP6.8 million
(2018: GBP9.4 million), a reduction of GBP2.6 million.
Whilst underlying EBITDA generated in the year declined GBP7.9
million, working capital movements improved by GBP4.4 million
relative to the previous year.
Receivables increased by GBP2.8 million in the year. However,
this was offset by a GBP0.3 million reduction to inventory of
GBP14.5 million and a GBP5.0 million increase in trade and other
payables.
We have continued to invest in the business with GBP1.2 million
spent on intangible assets and GBP4.9 million on property, plant
and equipment. The increase in intangible assets reflects additions
to computer software as we invest in our IT systems and websites.
The spend on property, plant and equipment includes GBP2.4 million
on new stores and refurbishments in the UK and GBP1.1 million on
extending our distribution facility. Investment also included
computer equipment of GBP0.5 million and software of GBP1.2
million.
There were GBP0.3 million of borrowings repaid in 2019 (2018:
GBP1.2 million). This reflects the repayment of term loans
previously drawn down to fund capital expenditure.
The continued strong cash position provides a solid base to
support our plans for future growth and to improve the performance
of the business.
Reconciliation of Underlying and Reported (IFRS) Results
In establishing the underlying operating profit, the costs
adjusted include the GBP0.4 million bad debt provision arising from
the Administration of House of Fraser and, in the prior year, a
GBP1.0 million cost related to that year's IPO transaction and the
Group restructuring undertaken prior to it.
A reconciliation between Underlying and Reported results is
provided below:
2019 2018
Underlying Bad debt Reported Underlying IPO costs Reported
Revenue 130,898 - 130,898 116,430 - 116,430
Gross profit 79,400 - 79,400 73,329 - 73,329
Other operating
costs (78,820) (369) (79,189) (63,720) (1,037) (64,757)
----------- --------- --------- ----------- ---------- ---------
Operating profit 580 (369) 211 9,609 (1,037) 8,572
Finance costs
(net) 5 - 5 (23) - (23)
----------- --------- --------- ----------- ---------- ---------
Profit before
tax 585 (369) 216 9,586 (1,037) 8,549
=========== ========= ========= =========== ========== =========
Operating profit 580 (369) 211 9,609 (1,037) 8,572
Dep'n and amortisation 4,012 - 4,012 2,892 - 2,892
----------- --------- --------- ----------- ---------- ---------
EBITDA 4,592 (369) 4,223 12,501 (1,037) 11,464
=========== ========= ========= =========== ========== =========
QUIZ plc
Consolidated statement of comprehensive income
Year ended 31 March 2019
2019 2018
Notes GBP000 GBP000
----------------------------------------- ----- -------- --------
Continuing operations
Revenue 3 130,898 116,430
Cost of sales (51,498) (43,101)
----------------------------------------- ----- -------- --------
Gross profit 79,400 73,329
----------------------------------------- ----- -------- --------
Recurring administrative costs (54,760) (42,366)
Non-recurring administrative costs 4 (369) (1,037)
----------------------------------------- ----- -------- --------
Total administrative costs (55,129) (43,403)
Distribution costs (24,066) (21,369)
Other operating income 6 15
----------------------------------------- ----- -------- --------
Total operating costs 6 (79,189) (64,757)
----------------------------------------- ----- -------- --------
Operating profit 211 8,572
Finance income 7 36 30
Finance costs 7 (31) (53)
Profit before income tax 216 8,549
Income tax charge 8 (104) (1,724)
----------------------------------------- ----- -------- --------
Profit for the year 112 6,825
----------------------------------------- ----- -------- --------
Other comprehensive income:
Foreign currency translation differences
- foreign operations (46) 47
----------------------------------------- ----- -------- --------
Profit and total comprehensive income
for the year attributable to owners
of the parent 66 6,872
----------------------------------------- ----- -------- --------
Profit per share:
Basic earnings per share 9 0.09p 5.49p
Diluted earnings per share 9 0.09p 5.49p
----------------------------------------- ----- -------- --------
All of the above income is attributable to the shareholders of
the Company.
QUIZ plc
Consolidated statement of financial position
As at 31 March 2019
31 March 31 March
2019 2018
Notes GBP000 GBP000
--------------------------------- ----- -------- --------
Assets
Non-current assets
Property, plant and equipment 11 15,983 14,793
Intangible assets 12 8,230 7,289
Total non-current assets 24,213 22,082
--------------------------------- ----- -------- --------
Current assets
Inventories 13 14,453 14,717
Trade and other receivables 14 12,552 9,774
Cash and cash equivalents 22 7,555 9,883
--------------------------------- ----- -------- --------
Total current assets 34,560 34,374
--------------------------------- ----- -------- --------
Liabilities
Current liabilities
Trade and other payables 15 (17,099) (12,090)
Loans and borrowings 16 (40) (641)
Derivative financial liabilities 17 (5) (5)
Corporation tax payable (452) (1,127)
--------------------------------- ----- -------- --------
Total current liabilities (17,596) (13,863)
--------------------------------- ----- -------- --------
Non-current liabilities
Loans and borrowings 16 - (41)
Deferred tax liabilities 18 (378) (412)
--------------------------------- ----- -------- --------
Total non-current liabilities (378) (453)
--------------------------------- ----- -------- --------
Net assets 40,799 42,140
--------------------------------- ----- -------- --------
Equity
Called-up share capital 20 373 373
Share premium 20 10,315 10,315
Merger reserve 20 915 915
Retained earnings 20 29,196 30,537
--------------------------------- ----- -------- --------
Total equity 40,799 42,140
--------------------------------- ----- -------- --------
QUIZ plc
Consolidated statement of changes in equity
Year ended 31 March 2019
Share Share Merger Retained
capital premium reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2017 1,454 - - 23,471 24,925
Impact of Group reconstruction (1,095) - 915 - (180)
New shares issued (net of expenses) 20 20 10,315 - - 10,335
Shares cancelled on conversion
of shares (6) - - - (6)
Credit arising on conversion
of shares - - - 6 6
Profit and total comprehensive
income for the year - - - 6,872 6,872
Share-based payments charge - - - 188 188
------------------------------------ ----- -------- -------- -------- --------- -------
At 31 March 2018 373 10,315 915 30,537 42,140
Profit and total comprehensive
income for the year - - - 66 66
Share-based payments charge - - - 84 84
Dividends paid 10 - - - (1,491) (1,491)
At 31 March 2019 373 10,315 915 29,196 40,799
------------------------------------ ----- -------- -------- -------- --------- -------
QUIZ plc
Consolidated cash flow statement
Year ended 31 March 2019
Year ended Year ended
31 March 31 March
2019 2018
Notes GBP000 GBP000
-------------------------------------------- ----- ------------ ----------
Cash flows from operating activities
Cash generated by operations
Operating profit 211 8,572
Depreciation of tangible assets 3,767 2,761
Amortisation of intangible assets 245 130
Share-based payment charges 84 188
Exchange movement (29) 37
Decrease/(increase) in inventories 264 (5,405)
(Increase)/decrease in receivables (2,779) 959
Increase in payables 5,012 2,358
Decrease in provisions - (162)
-------------------------------------------- ----- ------------ ----------
Net cash from operating activities 6,775 9,438
Interest paid (31) (63)
Income taxes paid (814) (2,023)
-------------------------------------------- ----- ------------ ----------
Net cash generated by operating activities 5,930 7,352
-------------------------------------------- ----- ------------ ----------
Cash flows from investing activities
Payments to acquire intangible assets (1,186) (903)
Payments to acquire property, plant
and equipment (4,957) (5,435)
Payments to facilitate Group reconstruction - (180)
Interest received 36 30
-------------------------------------------- ----- ------------ ----------
Net cash used in investing activities (6,107) (6,488)
-------------------------------------------- ----- ------------ ----------
Cash flows from financing activities
Repayment of borrowings (254) (1,231)
Net proceeds from share issue - 10,335
Dividends paid (1,491) -
-------------------------------------------- ----- ------------ ----------
Net cash (used in)/generated by financing
activities (1,745) 9,104
-------------------------------------------- ----- ------------ ----------
Net (decrease)/increase in cash and
cash equivalents (1,922) 9,968
Cash and cash equivalents at beginning
of year 9,495 (484)
Effect of foreign exchange rates (18) 11
-------------------------------------------- ----- ------------ ----------
Cash and cash equivalents at end of
year 22 7,555 9,495
-------------------------------------------- ----- ------------ ----------
Notes to the Group financial statements
Year ended 31 March 2019
1 Significant accounting policies
General information
Quiz Plc (the 'parent company') is a public limited company,
incorporated and domiciled in Jersey. It is listed on AIM. The
registered office of the Company is 61 Hydepark Street, Glasgow, G3
8BQ.
Basis of preparation
These financial statements for the year ended 31 March 2019 have
been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union ("Adopted IFRS"), IFRS
IC interpretations and the Companies (Jersey) Law 1991.
These are presented in Pounds Sterling because that is the
currency of the primary economic environment in which the Group
operates. Monetary amounts in these financial statements are
rounded to the nearest thousand. Foreign operations are included in
accordance with the policies set out below.
The annual financial statements have been prepared on the
historical cost basis, except for certain financial assets and
liabilities which are carried at fair value.
The preparation of financial statements in conformity with
International Financial Reporting Standards adopted by the European
Union requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reported year. Although these estimates are based on
management's best knowledge of current events and actions, actual
results ultimately may differ from those estimates.
The financial information contained in this preliminary
announcement for the years ended 28 February 2019 and 28 February
2018 does not comprise the group's statutory financial statements
within the meaning of Companies (Jersey) Law 1991. The financial
information for the year ended 31 March 2019 is extracted from the
Group financial statements of which the audit is substantially
complete. Statutory accounts for the year ended 28 February 2019
will be filed with the Jersey Companies Registry in due course. The
accounting policies are consistent with those disclosed in the
Groups audited financial statements for the year ended 31 March
2018 other than the application of new accounting standards noted
below.
Initial application of IFRS 9 Financial Instruments
The Group has applied IFRS 9 Financial Instruments for the first
time in the year ended 31 March 2019. IFRS 9 replaces IAS 39
Financial Instruments: Recognition and measurement.
As a result of the adoption of IFRS 9 the Group has adopted
consequential changes to IAS 1 Presentation of Financial
Statements. In addition, the Group has applied the consequential
amendments to IFRS 7 Financial Instruments: Disclosure to the
current year only.
The classification of financial assets under IFRS 9 is based on
whether the contractual cash flows of the instrument are solely
payments of principal and interest, and whether the business model
is to collect those contractual cash flows and/or sell the
financial assets. All the Group's financial assets were previously
classified as loans and receivables under IAS 39 and are classified
as assets at amortised cost under IFRS 9.
The only change in measurement of financial assets on
application of IFRS 9 arises from impairment of financial assets.
IFRS 9 requires impairments of financial assets to be assessed
using an 'expected loss' model.
Currently the Group have recognised impairment loss on an
individual basis, based on various indicators, such as significant
financial difficulty or expected bankruptcy. The amount of the
provision as at 31 March 2019 is GBP506,000.
Using the expected loss model the Group calculated a provision
of GBP77,000. As a result, the adjustment required on transition to
IFRS 9 is not considered to be material for the current year
financial statements.
The application of IFRS 9 has not changed the measurement of the
Group's financial liabilities or the Group's accounting policies
for the recognition or derecognition of financial instruments.
Initial application of IFRS 15 Revenue from Contracts with
Customers
The Group has applied IFRS 15 Revenue from Contracts with
Customers for the first time in the year ended 31 March 2019.
In accordance with the transition provisions in IFRS 15, the
Group has adopted the new rules retrospectively with the cumulative
effect of initially applying the standard recognised at the date of
the initial application. The impact of the adoption as at 1 April
2018 was to recognise and record a refund liability in relation to
online sales. The amount of provision calculated as at 31 March
2018 was GBP200,000. No adjustment is required as at 1 April 2018.
As at 31 March 2019, the amount of provision calculated is
GBP280,000 with a revenue element deemed not to be material.
Therefore, the impact on the transition to IFRS 15 on Quiz's
revenue recognised at 1 April 2018 and 31 March 2019 is deemed not
material and a transition adjustment is not required.
There has been no impact on earnings per share due to reflecting
the impact of the new standard as at 1 April 2018. There has been
no impact on accounting for costs and the Group statement of cash
flows.
Going concern
The Directors have prepared trading and cash flow forecasts for
a year of one year from the date of approval of these financial
statements. The Directors have a reasonable expectation that the
Group has adequate cash headroom. Accordingly, the financial
statements of the Group have been prepared on a going concern basis
in accordance with International Financial Reporting Standards as
adopted by the European Union ("Adopted IFRS"), IFRS IC
interpretations and the Companies (Jersey) Law 1991.
2 New accounting pronouncements
The financial statements have been prepared in accordance with
accounting policies that are consistent with those applied above.
The following new or revised standards or interpretations apply to
accounting years beginning after 1 April 2018:
Effective for accounting
years commencing
New or revised standards or interpretations on or after
----------------------------------------------------- ------------------------
IFRS 16 Leases 1 January 2019
Annual improvements to IFRS 2015 - 2017 cycle 1 January 2019
Amendments to IFRS 3 Business Combinations (issued 1 January 2020
on 22 October 2018)
Amendments to IAS 1 and IAS 8: Definition of Material 1 January 2020
(issued on 31 October 2018)
----------------------------------------------------- ------------------------
Title of IFRS 16 Leases
standard
Nature of IFRS 16 was issued in January 2016. It will result in almost
change all leases being recognised on the balance sheet by lessees,
as the distinction between operating and finance leases is
removed. Under the new standard, an asset (the right to use
the leased item) and a financial liability to pay rentals
are recognised. The only exceptions are short-term and low-value
leases.
Impact The management has reviewed all of the Group's leasing arrangements
over the last year in light of the new lease accounting rules
in IFRS 16. The standard will affect primarily the accounting
for the Group's operating leases.
As at the reporting date, the Group has non-cancellable operating
lease commitments of GBP23,248,000, see note 23. Of these
commitments, approximately GBP400,000 relate to short-term
leases which will both be recognised on a straight-line basis
as expense in profit or loss.
For the remaining lease commitments the group expects to
recognise right-of-use assets of approximately GBP23,100,000
on 1 April 2019, lease liabilities of GBP23,200,000 (after
adjustments for prepayments and accrued lease payments recognised
as at 31 March 2019). Net current assets will be GBP5,000,000
lower due to the presentation of a portion of the liability
as a current liability.
Mandatory The Group will apply the standard from 1 April 2019. The
application group intends to apply the simplified transition approach
date/ Date and will not restate comparative amounts for the year prior
of adoption to first adoption. Right-of-use assets for property leases
by group will be measured on transition as if the new rules had always
been applied. All other right-of-use assets will be measured
at the amount of the lease liability on adoption (adjusted
for any prepaid or accrued lease expenses).
3 Revenue
An analysis of revenue by geographical destination is as
follows:
2019 2018
GBP000 GBP000
-------------------------- ------- -------
Online 41,018 30,641
International 22,978 21,218
UK stores and concessions 66,902 64,571
-------------------------- ------- -------
130,898 116,430
-------------------------- ------- -------
2019 2018
GBP000 GBP000
------------------ ------- -------
United Kingdom 105,486 92,894
Rest of the world 25,412 23,536
------------------ ------- -------
130,898 116,430
------------------ ------- -------
As at 31 March 2019 non-current assets in the United Kingdom
were GBP22,486,000 (FY 2018: GBP19,959,000) with GBP1,727,000 (FY
2018: GBP2,123,000) located in the rest of the world.
4 Non-recurring administrative costs
The non-recurring costs of GBP0.4 million in the year ended 31
March 2019 related to the write-off of debt arising from the
administration of House of Fraser.
Non-recurring administrative costs in the year ended 31 March
2018 of GBP1.0 million related to Placing and Admission to AIM by
the Company and the Group reorganisation undertaken in preparation
of this process.
5 Employee benefit expenses
Employment costs and average monthly number of employees
(including Directors) during the year were as follows:
2019 2018
GBP000 GBP000
---------------------- ------ ------
Wages and salaries 18,735 16,045
Social security costs 1,360 1,155
Other pension costs 305 128
Agency costs 3,887 2,552
---------------------- ------ ------
24,287 19,880
---------------------- ------ ------
No. No.
--------------- ----- -----
Retail 1,422 1,305
Distribution 45 30
Administration 188 140
--------------- ----- -----
1,655 1,475
--------------- ----- -----
Included above is GBP687,000 in respect of Directors'
remuneration (FY 2018: GBP515,000).
6 Operating profit
Operating profit is stated after charging:
2019 2018
GBP000 GBP000
--------------------------------------------- ------- -------
Cost of inventories recognised as an expense 51,498 43,101
Distribution costs 24,066 21,369
Employment costs 24,287 19,880
Depreciation 3,767 2,761
Amortisation 245 130
Operating lease payments 6,982 5,831
Non-recurring administrative costs 369 1,037
Share-based payment charges 84 188
Other expenses 19,389 13,561
--------------------------------------------- ------- -------
130,687 107,858
--------------------------------------------- ------- -------
Included in the above are the costs associated with the
following services provided by the Company's auditors:
2019 2018
GBP000 GBP000
---------------------------------------------------- ------ ------
Audit services
Audit of the Company and the consolidated financial
statements 11 10
Audit of the Company's subsidiaries 39 35
---------------------------------------------------- ------ ------
Total audit fees 50 45
Fees relating to the Admission to AIM - 140
Fees relating to accounts preparation services 5 -
Fees relating to financial reporting advisory
services 4 -
All other services 18 11
---------------------------------------------------- ------ ------
Total fees payable to the Company's auditors 77 196
---------------------------------------------------- ------ ------
7 Finance income and expense
2019 2018
GBP000 GBP000
-------------------------- ------ ------
Interest on cash deposits 36 13
Other interest - 17
-------------------------- ------ ------
Finance income 36 30
-------------------------- ------ ------
2019 2018
GBP000 GBP000
--------------------------------- ------ ------
Interest on loans and overdrafts 18 37
Other interest 13 16
--------------------------------- ------ ------
Finance expense 31 53
--------------------------------- ------ ------
8 Income tax
2019 2018
GBP000 GBP000
------------------------------------------------ ------ ------
UK corporation tax - current year 262 1,814
UK corporation tax - prior year (33) (65)
Foreign tax (18) 137
Deferred tax - current year (141) (117)
Deferred tax - effect of adjustment in tax rate - (53)
Deferred tax - prior year 34 8
------------------------------------------------ ------ ------
Tax on profit on ordinary activities 104 1,724
------------------------------------------------ ------ ------
Reconciliation of effective tax rate
Profit on ordinary activities before taxation 216 8,549
------------------------------------------------ ------ ------
Profit on ordinary activities multiplied by
standard rate of UK corporation tax of 19% (FY
2018: 19%) 41 1,624
Expenses not deductible for tax purposes 70 314
Excess of depreciation over capital allowances 14 -
Effect of adjustment in tax rate - (53)
Adjustments to previous years (5) (84)
Foreign tax adjustments (16) (77)
------------------------------------------------ ------ ------
104 1,724
------------------------------------------------ ------ ------
The UK corporation tax rate will reduce to 17% (effective 1
April 2020), as enacted on 15 September 2016. This will reduce the
Group's future current tax charge accordingly.
9 Earnings per share
2019 2018
Number of shares: No. No.
----------------------------------- ----------- -----------
Weighted number of ordinary shares
outstanding 124,230,905 124,230,905
Effect of dilutive options 39,002 93,127
----------------------------------- ----------- -----------
Weighted number of ordinary shares
outstanding - diluted 124,269,907 124,324,032
----------------------------------- ----------- -----------
Earnings: GBP000 GBP000
------------------------- ------ ------
Profit basic and diluted 112 6,825
Profit adjusted 412 7,862
------------------------- ------ ------
Earnings per share: Pence Pence
------------------------------------ ----- -----
Basic earnings per share 0.09 5.49
Adjusted earnings per share 0.33 6.33
Diluted earnings per share 0.09 5.49
Adjusted diluted earnings per share 0.33 6.32
------------------------------------ ----- -----
The adjusted profit after tax for 2019 and adjusted earnings per
share are shown before non-recurring costs (net of tax) of GBP0.4
million (FY 2018: GBP1.0 million) and share-based payment charges
of GBP0.1 million (FY 2018: GBP0.2 million). The Directors believe
that the adjusted profit after tax and the adjusted earnings per
share measures provide additional useful information for
shareholders on the underlying performance of the business. These
measures are consistent with how underlying business performance is
measured internally. The adjusted profit after tax measure is not a
recognised profit measure under IFRS and may not be directly
comparable with adjusted profit measures used by other
companies.
10 Dividends
2019 2018
GBP000 GBP000
--------------- ------ ------
Dividends paid 1,491 -
--------------- ------ ------
In September 2019, a dividend of 0.8p per share was paid by the
Group, amounting to a dividend paid of GBP994,000. In March 2019,
an interim dividend of 0.4p per share was paid by the Group,
amounting to a dividend paid of GBP497,000. No further dividends in
respect of 2019 are proposed.
11 Property, plant and equipment
Fixtures,
fittings
Leasehold Motor Computer and
property vehicles equipment equipment Total
GBP000 GBP000 GBP000 GBP000 GBP000
----------------- --------- --------- ---------- ---------- -------
Cost
At 1 April 2018 1,378 120 1,674 21,633 24,805
Additions 162 42 493 4,260 4,957
Disposals (40) - (279) (3,364) (3,683)
----------------- --------- --------- ---------- ---------- -------
At 31 March 2019 1,500 162 1,888 22,529 26,079
----------------- --------- --------- ---------- ---------- -------
Depreciation
At 1 April 2018 505 68 648 8,791 10,012
Charge 231 32 288 3,216 3,767
Disposals (40) - (279) (3,364) (3,683)
----------------- --------- --------- ---------- ---------- -------
At 31 March 2019 696 100 657 8,643 10,096
----------------- --------- --------- ---------- ---------- -------
Net book value
At 31 March 2019 804 62 1,231 13,886 15,983
----------------- --------- --------- ---------- ---------- -------
At 31 March 2018 873 52 1,026 12,842 14,793
----------------- --------- --------- ---------- ---------- -------
12 Intangibles
Computer
Goodwill software Trademarks Total
GBP000 GBP000 GBP000 GBP000
----------------- -------- --------- ---------- ------
Cost
At 1 April 2018 6,175 1,371 165 7,711
Additions - 1,186 - 1,186
At 31 March 2019 6,175 2,557 165 8,897
----------------- -------- --------- ---------- ------
Amortisation
At 1 April 2018 - 410 12 422
Charge - 229 16 245
At 31 March 2019 - 639 28 667
----------------- -------- --------- ---------- ------
Net book value
At 31 March 2019 6,175 1,918 137 8,230
----------------- -------- --------- ---------- ------
At 31 March 2018 6,175 961 153 7,289
----------------- -------- --------- ---------- ------
The goodwill arose when Shoar (Holdings) Limited acquired the
entire share capital of Tarak Retail Limited in 2012 and reflects
the difference between the fair value of the consideration
transferred and the fair value of assets and liabilities purchased.
Goodwill is assessed for impairment by comparing the carrying value
to value-in-use calculations. Value in use have been estimated
using cash flow projections based on detailed budgets and forecasts
over the period of five years, with a growth rate of -4% (FY 2018:
2%) and a discount rate of 10% (FY 2018: 10%) applied, being the
Directors' estimate of the Group's cost of capital, with no
terminal value. The budgets and forecasts are based on historical
data and the past experience of the Directors as well as the future
plans of the business. The Directors do not consider goodwill to be
impaired.
13 Inventories
2019 2018
GBP000 GBP000
------------------------------------ ------ ------
Finished goods and goods for resale 14,453 14,717
------------------------------------ ------ ------
There is no material difference between the balance sheet value
of stocks and their replacement cost.
14 Trade and other receivables
2019 2018
GBP000 GBP000
-------------------------------- ------ ------
Trade receivables - gross 7,366 6,701
Allowance for doubtful debts (506) (340)
-------------------------------- ------ ------
Trade receivables - net 6,860 6,361
Other receivables 1,884 584
Prepayments and accrued income 3,806 2,829
Amounts owed by related parties 2 -
-------------------------------- ------ ------
12,552 9,774
-------------------------------- ------ ------
The Directors consider that the fair value of trade and other
receivables is not materially different from the carrying
value.
15 Trade and other payables
2019 2018
GBP000 GBP000
-------------------------------------- ------ ------
Trade payables 9,657 7,479
Other taxes and social security costs 2,263 394
Accruals 3,983 3,094
Deferred income 586 578
Other payables 561 500
Amounts due to related parties 49 45
-------------------------------------- ------ ------
17,099 12,090
-------------------------------------- ------ ------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The Directors
consider that the fair value of trade and other payables is not
materially different from the carrying value.
Included within other payables at the year end date was a
balance of GBP40,000 (FY 2018: GBPNil) owed to the Group's pension
scheme.
16 Loans and borrowings
2019 2018
GBP000 GBP000
---------------- ------ ------
Bank loans 40 294
Bank overdrafts - 388
40 682
---------------- ------ ------
Current 40 641
Non-current - 41
---------------- ------ ------
40 682
---------------- ------ ------
Bank loans, overdrafts and other credit facilities are secured
by an unlimited multilateral and cross-company guarantee given by
Kast Retail Limited and Tarak International Limited and also by a
limited guarantee given by, and by a floating charge over the
assets of, Kast Retail Limited and Tarak International Limited. The
bank also holds a right of set-offs between Kast Retail Limited and
Tarak International Limited. All entities included in the guarantee
are wholly owned subsidiaries in the Group.
In addition, bank overdrafts and other credit facilities are
secured by a bond and floating charge from Tarak Retail Limited
over the whole of its property and undertakings.
Bank overdrafts are annual facilities, subject to review at
various dates during 2019 and 2020 and are repayable on demand.
Borrowings are denominated and repaid in Pounds Sterling, have
contractual interest rates that are either fixed rates or variable
rates linked to LIBOR that are not leveraged, and do not contain
conditional returns or repayment provisions other than to protect
the lender against credit deterioration or changes in relevant
legislation or taxation.
17 Derivative financial instruments
2019 2018
GBP000 GBP000
------------------------- ------ ------
Foreign currency options 5 5
------------------------- ------ ------
Forward foreign exchange contracts are used to hedge exposure to
fluctuations in foreign exchange rates that arise in the normal
course of the Group's business.
As at 31 March 2019, the Group had commitments to buy the
equivalent of GBP4,800,000 of Chinese Renminbi (FY 2018: 2,550,000)
and sell the equivalent of GBP3,369,299 of Euros (FY 2018:
GBP1,140,000).
18 Deferred tax
The following is an analysis of the deferred tax liabilities,
net of deferred tax assets:
2019 2018
GBP000 GBP000
-------------------------------------------- ------ ------
Accelerated capital allowances
Balance brought forward 464 574
Credit to income statement (34) (112)
Effect of foreign exchange rates - 2
-------------------------------------------- ------ ------
Balance at end of year 430 464
-------------------------------------------- ------ ------
Other short-term timing differences
Balance brought forward (52) -
Credit to income statement - (52)
-------------------------------------------- ------ ------
Balance at end of year (52) (52)
-------------------------------------------- ------ ------
Total deferred tax liability at end of year 378 412
-------------------------------------------- ------ ------
There is no unprovided deferred tax in the current year for the
Group (FY 2018: GBPNil).
19 Financial instruments
The following table shows the carrying amounts and fair values
of financial assets and liabilities. All financial liabilities are
measured at amortised cost. The derivative liability, which is
measured at fair value, is level 2 in the fair value hierarchy as
disclosed in note 17.
2019 2018
GBP000 GBP000
----------------------------------------- -------- --------
Category of financial instruments
Carrying value of financial assets:
Cash and cash equivalents 7,555 9,883
Trade and other receivables 8,746 6,945
----------------------------------------- -------- --------
Total financial assets 16,301 16,828
----------------------------------------- -------- --------
Carrying value of financial liabilities:
Trade and other payables (14,250) (11,118)
Bank and other borrowings (40) (682)
----------------------------------------- -------- --------
Total financial liabilities (14,290) (11,800)
----------------------------------------- -------- --------
The fair value and carrying value of financial instruments have
been assessed and there is deemed to be no material differences
between fair value and carrying value.
The cash and cash equivalents are held with bank and financial
institution counterparties, which are rated P-1 and A-1, based on
Moody's ratings.
20 Share capital and reserves
2019 2018
GBP000 GBP000
---------------------------------------------- ------ ------
Share capital - allotted, called up and fully
paid
124,230,905 ordinary shares of 0.3 pence each
(FY 2018: 124,230,905) 373 373
---------------------------------------------- ------ ------
Share premium 10,315 10,315
---------------------------------------------- ------ ------
Share capital
On 28 July 2017 the Company was admitted to trading on AIM. On
this date the Company issued 6,583,851 ordinary shares of 0.3 pence
each with a nominal value of GBP19,752.
Prior to this date the Company had issued 117,647,054 ordinary
shares of 0.3 pence each with a nominal value of GBP352,941 in
relation to the incorporation of the Company and the purchase of
its subsidiaries, Kast Retail Limited, Tarak International Limited
and Shoar (Holdings) Limited.
As a result of these transactions the issued share capital at 31
March 2018 comprised 124,230,905 ordinary shares of 0.3 pence each
with a nominal value of GBP372,693.
Share premium
The share premium reserve contains the premium arising on the
issue of equity shares, net of issue expenses incurred by the
Company. The 6,583,851 ordinary shares of 0.3 pence each with a
nominal value of GBP19,752 on 28 July 2017 were issued at a price
of 161 pence per share giving rise to share premium of
GBP10,315,248 (net of expenses).
Merger reserve
The merger reserve arose on the purchase of the subsidiaries,
Kast Retail Limited, Tarak International Limited and Shoar
(Holdings) Limited. The merger reserve represents the difference
between the cost value of the shares acquired less the cost value
of the shares issued for the purchase of each company and the stamp
duty payable in respect of these transactions.
Retained earnings
The movement on retained earnings is as set out in the statement
of changes in equity. Retained earnings represent cumulative
profits or losses, net of dividends and other adjustments.
21 Share-based payments
The movement in awards during the year was:
CSOP ESOP Warrants Total
------------------------ -------- ------- -------- ---------
Opening balance 568,093 323,601 186,335 1,078,029
Granted during the year 52,320 112,777 - 165,097
Lapsed during the year (25,307) - - (25,307)
------------------------ -------- ------- -------- ---------
Closing balance 595,106 436,378 186,335 1,217,819
------------------------ -------- ------- -------- ---------
All share options were valued using the Black-Scholes model.
Expected volatility was determined by management, using comparator
volatility as a basis. The expected life of the options was
determined based on management's best estimate. The expected
dividend yield was based on the anticipated dividend policy of the
Company over the expected life of the options. The risk-free rate
of return input into the model was a zero-coupon government bond
with a life in line with the expected life of the options.
The inputs to the model were as follows:
CSOP
and ESOP
------------------------------------------------- ---------
Weighted average share price 189.9p
Weighted average exercise price 188.3p
No. of employees 19
Shares under option 150,224
Expected volatility 35.3%
Expected life (years) 4
Risk-free rate 0.3%
Possibility of ceasing employment before vesting 10%
Expectations of meeting performance criteria 100%
Expected dividend yield 2.0%
------------------------------------------------- ---------
The Group recognised a total expense of GBP84,000 during the
year (FY 2018: GBP188,000) relating to equity-settled share-based
payments, including employer's National Insurance contributions of
GBP13,000 (FY 2018: GBP26,000).
Company Share Option Plan ("CSOP")
The Group operated a share option scheme during the year for
certain employees under the CSOP, which allows tax advantaged
options to be granted over the Company's shares to selected
employees of the Group. The different options vest after three
years and have an exercise life between three and ten years from
grant date. The exercise of the options is subject to continued
employment over the vesting year.
Executive Share Option Plan ("ESOP")
The Group operated a share option scheme during the year for
certain employees under the ESOP, which allows non-tax advantaged
options to be granted over the Company's shares to selected
employees of the Group. The different options vest after three
years and have an exercise life between three and ten years from
grant date. The exercise of the options is subject to continued
employment over the vesting year.
Warrants
The Company entered into a Warrant Instrument with its Chairman,
Peter Cowgill, dated 18 July 2017, pursuant to which Peter Cowgill
may subscribe for up to 186,335 ordinary shares exercisable in
whole or in part at a subscription price equal to 80.5 pence. The
warrants are exercisable until the earlier of (i) their full
exercise, (ii) Peter Cowgill ceasing to be a Director, or (iii) a
takeover of the Company. At the year end, no warrant instruments
had yet been exercised.
22 Cash and cash equivalents
2019 2018
GBP000 GBP000
--------------- ------- ------
Cash 8,774 9,883
Bank overdraft (1,219) (388)
--------------- ------- ------
7,555 9,495
--------------- ------- ------
23 Financial commitments
Capital commitments
The Group has capital commitments of GBP250,000 at 31 March 2019
(FY 2018: GBP391,000) which were not provided for in the financial
statements.
Operating leases
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments under non-cancellable leases
which fall due as follows:
2019 2018
GBP000 GBP000
------------------------ ------ ------
Within one year 7,780 6,620
From two to five years 15,249 13,545
In more than five years 219 1,205
------------------------ ------ ------
23,248 21,370
------------------------ ------ ------
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
FR KMGMVMGLGLZZ
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June 11, 2019 02:01 ET (06:01 GMT)
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