Superdry Plc – Announcement of preliminary results -6-
The majority of our leases meet the accounting requirements under IFRS 16 “Leases”. When the leases relate only to turnover or expire within 12 months, they fall outside the scope of the standard. In FY21, only £ 5.6m (FY20: £ 8.9m) is recognized in store costs for the gross rental charges of these leases.
During the current year we have recognized a credit of £ 7.7 million in store costs within the Profit and Loss Group for one-off rental savings compared to 82 leases:
Lease category No. of leases One-off saving GBPm Leases under IFRS 16 62 4.0 Leases not recognised under IFRS 16 15 1.9 No lease payment due to Covid-related closures (not IFRS 16) 5 1.8 Total 82 7.7
We plan to continue this work and achieve similar results in FY22, anticipating more than £ 10million in additional rent savings.
In addition to these one-time savings, we renewed 39 store leases (FY20: 17) for an average lease commitment of three years (FY20: three years). Mainly as a result of these renewals, the annualized cash lease payments have been reduced by a total of 5.3 m3 GBP (FY20: 1.8 million GBP).
For leases that are recognized under IFRS 16, the benefit of future modifications to leases will be recognized in the Group’s income via a reduction in amortization and interest payments and in the cash flow statement via a reduction. lease payments. In some cases where the lease liability exceeds the right to use the asset, there may also be an item recognized in other modification gains and losses (£ 14.3 million in FY21 ).
Net finance charges were roughly in line with the previous year at £ 7.2million (FY20: £ 7.5million). £ 5.5m (EF20: £ 5.7m) relates to interest expense on leases under IFRS 16.
GBPm 2021 2020 Change Adjusted loss before tax (12.6) (41.8) (69.9)% Unrealised (loss)/gain on financial derivatives (4.7) 1.9 (347.4)% IFRS2 charge - Founder Share Plan (0.5) (0.3) 66.7% Restructuring, strategic change and other costs (1.0) (1.9) (47.4)% Intangibles asset impairment (2.1) - 100.0% Store asset impairment charges and reversals and onerous property related contracts provision (15.8) (124.8) (87.3)% Total adjusting items (24.1) (125.1) (80.7)% Statutory loss before tax (36.7) (166.9) (78.0)%
The adjustment items mainly relate to net impairment charges on store assets (£ 10.7 million) and a provision for onerous property contracts (£ 5.1 million), for a total of £ 15.8 million. sterling (FY20: £ 124.8 million). The net impairment charge of GBP 10.7 million (EF20: GBP 136.8 million) was allocated between user rights (GBP 7.4 million, FY20: GBP 121.2 million), tangible assets (£ 3.3m, FY20: £ 15 0.5m) and intangible assets (nil GBP, FY20: £ 0.1m), largely due to the prolonged period of forced store closures due to Covid-19 restrictions and the resulting impact on expected future attendance.
Other significant adjustment items include a loss of £ 4.7 million related to the change in fair value of financial derivatives (year 20: gain of £ 1.9 million) which was caused by changes in the timing of derivatives used to hedge euro receivables and US dollar debts and rate changes during the hedging period.
Further details on the adjustment items can be found in Note 7.
Loss before tax
Despite the significant number of lost store days this year, the adjusted pre-tax loss declined 69.9% to (12.6) million pounds, with cost-cutting measures and government support helping to offset the losses. trade deficits. FY21 includes a year-over-year profit of £ 33.8million from reduced amortizations, primarily due to the FY20 impairment charge, and a non-cash credit of 14 , £ 3 million from lease modifications.
In addition to the above, the statutory loss before tax, after deducting net adjustment items of (24.1) million GBP (FY20: 125.1 million GBP), was reduced by 78.0% to ( 36.7) million GBP.
Taxation in the period
Our adjusted loss tax credit is £ 3.3 million (FY20: £ 6.1 million adjusted profit tax credit). This represents an adjusted effective tax rate of (26.2)% (FY20: 14.6%).
Our statutory loss tax charge is £ 0.6 million (FY20: £ 23.5 million statutory loss tax credit). This represents an effective tax rate of 1.6% (FY20: 14.1%).
The Group’s adjusted effective tax rate is lower than the statutory rate of 19% (FY20: 19%). This is mainly due to movements in deferred taxes recognized under rental contracts, tax losses and the provision made for uncertain tax positions as required by accounting standards.
The net tax credit on adjusting items amounts to £ 3.9 million (FY20: tax credit of £ 17.3 million), which mainly results from write-downs of rights of use assets and impairment of tangible fixed assets (PPE) at the balance sheet date.
After adjusting the items, the Group’s statutory loss after tax for the year amounted to £ 36.1 million, compared to a loss of £ 143.4 million during FY20.
Loss per share
Reflecting the loss realized by the Group during the year, the adjusted basic EPS is (19.4) p (FY20: EPS (43.5) p).
The adjusted business performance, offset by the adjusting items described above, results in a reported core EPS of (44.0) p (FY20: EPS (174.9) p) based on an average weighted basis of 82,028,188 shares (FY20: 82,001,955 shares). The increase in the weighted average number of basic shares is mainly due to the 31,032 ordinary 5p shares issued during the year as part of the Buy As You Earn programs.
Adjusted diluted BPA is (19.4) p (FY20: BPA (43.3) p) and diluted BPA is (44.0) p (FY20: BPA (174.1) p. They are based on a weighted diluted average of 82,028,188 shares (FY20: 82,389,450 shares) Due to the Group’s loss-making position at the end of the financial year, all potential ordinary shares are considered anti-dilutive.
In view of the persistent uncertainty and in order to maintain liquidity, the Board did not propose an interim dividend and took the decision not to recommend a final dividend for fiscal year 21.
The focus was on preserving cash this year and the Group maintained strong liquidity, ending the year with net cash of £ 38.9million, up £ 2.2million from one year to the next and not having drawn during the year on the ABL installation at any point.
GBPm 2021 2020 GBPm GBPm Operating cash flow before movements in working capital 29.7 75.5 Working capital movement 20.4 12.0 Taxes 2.5 (2.2) Net cash generated from operations 52.6 85.3 Purchase of PPE and intangible assets (13.6) (13.9) Proceeds from disposal of assets held for sale - 2.4 Dividend payments - (3.4) Net interest paid (7.2) (7.5) Proceeds of issued share capital 0.1 - Drawdown of RCF - (30.0) Repayment of RCF - 30.0 Repayment of lease liability principal (39.9) (61.1) Net (decrease)/increase in cash (8.0) 1.8 Other (including foreign currency movement) 10.2 (1.0) Net cash and cash equivalents at end of period 38.9 36.7
Superdry remains a strong cash-generating business, with net cash generated from operations of £ 52.6 million (FY20: £ 85.3 million). This decreased year over year due to the significant impact of forced store closings during the year due to the continued disruption of Covid-19.
The working capital movements generated a cash inflow of £ 20.4million (FY20: £ 12.0million) due to a decrease in inventories of £ 6.2million, d ” a net increase in trade and other receivables of £ 10.8 million and an increase in trade and other payables of £ 25.0 million, mainly due to deferred rents resulting from store closures related to Covid-19. We plan to repay the majority of the deferred rent through FY22, but anticipate that some will crystallize as a permanent benefit as a result of ongoing lease negotiations.
GBPm 2021 2020 Change GBPm GBPm Inventories 148.3 158.7 (6.6)% Trade and other receivables 102.3 91.6 11.7% Trade and other payables (126.5) (103.3) 22.5% Net working capital 124.1 147.0 (15.6)%
Inventory levels were down 2.3 million units, 14% in FY21, despite lower sales and forced store closings. Average cost per unit increased due to a higher mix of Fall / Winter products in inventory at the end of the year (39% vs. 35%) resulting in an overall decrease in inventory balance of 6.6 % to £ 148.3million. We expect this mix to normalize as the operational disruption from Covid decreases.
The inventory balance is net of a provision of £ 9.1 million (FY20: £ 9.8 million). This is after a £ (3.8 )million release of a £ 6.1million Covid-related provision recorded in FY2020 against the SS20 product after a better-than-expected recovery. This exit was largely offset by a one-time provision of £ 4.1million relating to the premium AW20 concept product, which proved unsuccessful, particularly given the launch in a Covid-19 environment (FY20: GBPnil ).
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