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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Joules Group Plc | LSE:JOUL | London | Ordinary Share | GB00BZ059357 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 9.22 | 9.40 | 9.60 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMJOUL
RNS Number : 6509V
Joules Group plc
25 July 2018
Joules Group plc
('Joules' or the 'Group')
Annual Results for the 52 weeks ended 27 May 2018
Continued expansion of the Joules brand within the UK and international markets
Highlights:
Hot Features
Premium
2018 2017 Change
52 weeks 52 weeks
Group Revenue GBP185.9m GBP157.0m 18.4%
- Constant currency 18.8%
Underlying(1) Profit Before GBP13.0m GBP10.1m 28.5%
Tax
Underlying EBITDA(2) GBP21.1m GBP16.9m 24.4%
Basic underlying EPS 11.8p 9.2p 28.5%
-- Revenue increased by 18.4% to GBP185.9 million - up 18.8% in constant currency to GBP186.0 million
-- Underlying(1) Profit Before Tax increased by 28.5% to GBP13.0 million -- Statutory PBT increased by 25.6% to GBP11.2 million -- Underlying EBITDA(2) increased by 24.4% to GBP21.1 million
-- Underlying basic EPS increased by 28.5% to 11.8 pence, with statutory basic EPS up by 36.0% to 9.9 pence
-- Gross margin increased by 25 basis points to 55.7% -- Active(3) customers increased by 23.4% to 1.15 million
-- International revenue increased by 35.7% (40.4% constant currency) - now representing 13.1% of Group revenue
-- Final dividend of 1.3 pence per share proposed
Colin Porter, Chief Executive Officer, commented:
"It has been another strong year of growth for the Joules brand, with our continued expansion within the UK and international markets enabling the Group to a profit performance ahead of initial expectations. This performance is testament to the strength and appeal of the Joules brand, our unique product offer and our growing and loyal customer base. We have made excellent progress against our strategy of expanding the brand both at home and abroad, and the Board remains confident that this momentum will continue in FY19."
1. Underlying excludes exceptional items, primarily related to the costs of admission to AIM and the expense of share based compensation awards.
2. EBITDA is a non-GAAP measure, a reconciliation to operating profit is provided in the Financial Review.
3. Active customer is a customer registered on our database who has made a transaction in the last 12 months.
Reconciliation to statutory profit before tax:
GBPMILLION FY18 FY17 Underlying profit before tax 13.0 10.1 IPO transaction costs - (0.3) Share based compensation (1.8) (0.8) Statutory profit before tax 11.2 8.9 -------------------------- ------ ------
Enquiries:
Joules Group plc Tel: +44 (0) 1858 435 255
Colin Porter, CEO
Marc Dench, CFO
Hudson Sandler LLP (Financial PR) Tel: +44 (0) 20 7796 4133
Alex Brennan
Lucy Wollam
Peel Hunt LLP, Nominated Advisor Tel: +44 (0) 20 7418 8900 Dan Webster
George Sellar
Liberum Capital Limited Tel: +44 (0) 20 3100 2000 John Fishley
Joshua Hughes
Joules - 'a premium lifestyle brand with an authentic British heritage'
Established in Britain by Tom Joule nearly three decades ago, Joules is a premium lifestyle brand with an authentic heritage.
A true multi-channel lifestyle brand, Joules carefully designs clothing, footwear and accessories for women, men and children, as well as an expanding range of homewares, toiletries and eyewear collections, with personality to match those of its customers' colourful and uplifting outlooks, available through its own retail stores, online, rural shows and events and wholesale channels.
Quality, Britishness, family values, colour and humour make Joules stand out from the crowd. This approach, along with an unwavering attention to detail, and drive to surprise and delight its customers with unexpected product details, has been central to the brand's success and expansion and remains at the heart of everything Joules creates.
www.joules.com | www.joulesgroup.com
Joules Fast Facts
* Joules is an international brand, available in the UK,
USA, Germany, France and other European markets
* Joules operates 123* stores in the UK and ROI across
a range of location types, has a significant online
business, and a well-established wholesale business
with more than 1,500 stockists worldwide including
John Lewis, Dillard's, Next Label and Nordstrom
* Joules' talented in-house print design team lovingly
hand-draw all of the prints you see within its
collections each season
* Joules is proud of its British heritage and still has
strong roots in Market Harborough, the site of its
first shop and head office - since day one
* Colin Porter joined as COO in 2011 and became CEO in
September 2015, with Tom Joule focusing on the
creative side of the business in his capacity as
Chief Brand Officer
* Joules won Fashion Retail Business of the Year
(between GBP101m-GBP500m turnover) at the Drapers
Awards 2017 and previously won Mainstream Brand of
the Year at the 2016 Drapers awards.
* Joules received a Mark of Excellence within The Best
Fashion Retailer category at the Retail Week Awards
2018
* Figures are stated as at 27 May 2018
CHAIRMAN'S STATEMENT
INTRODUCTION
I am very pleased to update the Group's stakeholders on what has been another outstanding year of progress. We have continued to expand Joules as a premium lifestyle brand across distribution channels, product categories and geographic markets and, I am delighted to say, delivered a profit performance for the year that exceeded the Board's initial expectations.
Group revenues increased by 18.4% year on year, reflecting strong growth across both our Retail and Wholesale segments. This momentum, in combination with improved Group Gross margin and disciplined cost management, has resulted in a 28.5% increase in underlying profit before tax (with statutory profit before tax up 25.6%). This very pleasing outcome reflects the strength and appeal of the Joules brand and the quality of product offering as well as our loyal and growing customer base.
STRATEGIC PROGRESS
The Group has a clear growth strategy which Colin Porter expands upon in the Chief Executive's review of this Annual Report. This focused strategy is built on four key pillars: increasing customer value; expanding brand sales in the UK market through appropriate channels; developing the brand in targeted international markets, primarily the US and Germany; and expanding the product range into new areas that are appropriate for Joules.
At the core of this growth strategy, and indeed everything we do, is our much-loved and special brand. The Joules brand is strong, distinctive and offers a unique product proposition that supports our customers' lifestyles. We continue to nurture and develop the brand by ensuring that our entire proposition continually meets and exceeds our loyal customers' expectations for the quality and values that collectively make Joules stand out from the crowd.
The Group's resolute attention to carefully nurturing the brand has never been more important. The retail landscape is changing globally as technology provides customers with new ways to buy their favourite products. We are investing in and developing the channels through which we engage with our customers to ensure that their experience is as great online, on social media or through one of our partners as it is in our own stores.
FINANCIAL RESULTS & DIVID
Group revenue of GBP185.9 million increased by 18.4% compared to the prior period (FY17: GBP157.0m). This reflects strong growth in both the Retail and Wholesale segments. Joules delivered growth across all product categories with a strong performance in the core Womenswear category - with outerwear, dresses and tops continuing to prove particularly popular with our customers. Further development of our Accessories, Footwear and Childrenswear categories also contributed to the strong revenue growth.
On a geographic basis, UK sales increased 16.2% and international sales increased 40.4% on a constant currency basis, now representing 13.1% of Group revenue (FY17: 11.5%).
Underlying profit before tax increased by 28.5%, and basic underlying EPS was 11.8 pence per share (FY17: 9.2 pence). Statutory profit before tax increased by 25.6% and statutory EPS was 9.9 pence per share (FY17: 7.3 pence).
The Board has proposed a final dividend of 1.3 pence per share, which, if approved at the shareholders AGM, will take the dividend for the full year to 2.0 pence per share (FY17: 1.8 pence).
The Strategic Report and Financial Review that follow provide a more in-depth analysis of the trading performance and financial results of the Group.
BOARD CHANGES
As announced on 18 May 2018, I will step down as Non-Executive Chairman of Joules on 31 July 2018, having completed more than five years in the role. It has been a great pleasure to chair the Joules Board throughout a period of such strong growth and transformation, including our successful IPO in 2016. I am confident that Joules is in a tremendous position to continue to deliver its growth strategy and look forward to following the brand's journey as it goes from strength to strength.
The Group has identified and secured a fantastic replacement Non-Executive Chairman in Ian Filby. Ian has extensive public company and retail experience and I am sure he will contribute a huge amount to the Board over the coming years.
OUR TEAM
The creativity, energy and talent of our entire team remains critical to driving the business forward. I would like to take this opportunity to thank all colleagues across the world for their outstanding efforts throughout the year, and indeed throughout my entire time with Joules. The passion and dedication of our team, from management in head office through to our stores and those in other markets, creates a true competitive advantage for our business.
OUTLOOK
The brand has strong momentum and we have seen good growth in the first few weeks of our new financial year with positive early feedback on our Spring/Summer 2019 ranges from our wholesale customers.
The challenges facing the wider UK retail sector are well documented. The shift towards online shopping in combination with sector discounting, cost and consumer spending pressures is making life incredibly challenging for some retail businesses.
However, Joules is a distinctive brand with a strong connection with its customers and we have a flexible business model and multiple routes to market supported by a well invested infrastructure and a committed and enterprising team. I therefore believe that Joules remains very well positioned to continue to grow and flourish in the UK and internationally despite the uncertain and changing nature of the retail sector.
CHIEF EXECUTIVE'S STRATEGIC REPORT
I am very pleased with the strategic progress achieved by the Group in FY18 as the brand continued to grow across distribution channels and product categories both in the UK and internationally. Our performance continues to reflect the strength of the Joules brand, the appeal of our products and our flexible multi-channel business model.
THE JOULES BRAND
Joules is a brand with authentic heritage and strong brand values that underpin the Group's exciting growth potential. Ever since Tom Joule established the brand nearly three decades ago, Joules has been committed to surprising and delighting its growing community of customers with a sense of fun and quirky Britishness.
Maintaining and developing a strong brand that has real affinity and connection with its customers has never been more important than when market conditions are challenging across the retail sector. During the year, we have taken steps to invest further in the development of the Joules brand to reinforce what it stands for and ensure consistency of how it is conveyed across all customer touch points.
"Contemporary country loving" is at the heart of the Joules brand and provides the vision we all work towards. Our in-house creative team take inspiration from nature and the changing British seasons to design clothing that enables our customers' lifestyles, come rain or shine. We stand out with our unique use of colour and print - all of which are hand drawn by our in-house team - as well as unexpected details. The Joules brand is all about connecting with life's happy feelings and embracing quality time, doing the things we love with the people who matter.
We were pleased that the brand's continued success was recognised at the 2017 Drapers Awards where the business won Fashion Retail Business of the Year (between GBP101m-GBP500m turnover), as well as at this year's Retail Week Awards, where Joules received a Mark of Excellence within The Best Fashion Retailer category, demonstrating an industry-wide recognition of our distinctive brand, quality products and outstanding customer engagement. What's most important is what our customers say about our brand, so we are very proud of our 9.3/10 Trust Pilot rating from more than 2,000 customer reviews.
OUR BUSINESS MODEL - A TRULY MULTI-CHANNEL LIFESTYLE BRAND
Joules was established as a multi-channel brand with a vision of being available to our customers whenever and wherever they choose to spend their time. We distribute the brand through what we call our "Total Retail" platform, which provides a fully Joules-branded customer experience across our portfolio of stores and concessions; our fast-growing e-commerce platform; country shows and events; and, more recently, across a range of selected online marketplaces. In addition, and to further support our goal of ensuring the brand is present wherever our customers spend their time, we have a large network of wholesale customers in the UK and internationally. The Joules brand is also increasingly available through the retail channels of our brand licence partners.
This flexible and adaptable approach to distributing the brand enables our customers to engage with Joules in a way, and at a time, that works for them, and means that the Group is not reliant on any single route to market. This is reflected in the Group's balanced revenue mix across these complementary distribution channels.
OUR GROWTH STRATEGY
We have a clear strategy for the long-term development of Joules as a premium lifestyle brand, both in the UK and internationally. This strategy is built on the following key pillars and is continuously underpinned by our distinctive brand, unique products and unwavering customer focus. This strategy is delivered by our exceptional team of people and supported by well-invested systems and infrastructure.
1. INCREASING CUSTOMER VALUE
For Joules, 'Customer Value' means increasing our base of active customers and their frequency of interaction with and spend with the brand. Our goal is for customers who are actively engaging with and amplifying our brand, to ultimately choose to allocate more of their clothing, footwear and accessories spend on our unique Joules products. This is achieved through delivering relevant, consistent and increasingly tailored, cross-channel experiences and communications, for both new and existing customers.
2. DRIVE TOTAL UK BRAND SALES
As a multi-channel brand, we seek to grow total UK brand sales within our target customer segments by increasing the availability and accessibility of our products across existing and emerging distribution channels. Our goal is to make it easy for our customers to discover, be inspired by, purchase, receive and, if necessary, return or exchange, our products. We achieve this by being located where our customers choose to spend their time. Our priorities are:
- TOTAL RETAIL
Our Joules branded retail proposition spans stores & concessions, e-commerce and online marketplaces. The in-store and e-commerce proposition are increasingly converging and the development of these channels as part of an integrated and consistent, customer focused, proposition is central to our growth strategy and reflected in our infrastructure investments.
E-commerce - is a fast-growing and evolving channel. We expect to continue to increase the mix of e-commerce sales as a proportion of our total retail sales through ongoing enhancements to our e-commerce platform, the customer proposition and our customer relationship management capability.
Stores & concessions - there is further potential for the brand to increase its physical retail space in the UK and ROI. This will be achieved through selective openings of new stores in attractive locations, opening concessions with carefully selected partners, and selected relocations of existing stores to larger sites that better reflect our brand and product range. Concession openings can include the conversion of existing wholesale accounts where there is an opportunity to improve the brand presence and customer experience.
Marketplaces - we will leverage our wholesale capabilities and relationships to support emerging new retail channels such as online marketplaces and 'fulfilled by' models that offer new routes to reach our target customer base in the UK and internationally.
- WHOLESALE
We broaden the reach of the Joules brand through selected wholesale partners that are closely aligned with our brand values and product categories - including specialist independents, department stores and online retailers.
3. INTERNATIONAL EXPANSION
The Joules brand and products resonate well in international markets. We develop international markets via a wholesale model supported by e-commerce, leveraging our investment in our central creative and design functions, supply chain and infrastructure. Our priority markets are the US and Germany, where our brand and products are resonating well with our growing customer following.
4. PRODUCT EXTENSION
The Joules product offer extends to meet many of the lifestyle needs of our customers. Joules has had success extending the product offer within existing categories and into new categories; we will continue to expand into new product categories that are appropriate for the development of the Joules brand both organically and by working with carefully selected licence partners.
STRATEGIC PRIORITIES AND DEVELOPMENTS IN FY18 KPIs
Increasing customer value Active customer
* Active customer numbers passed one million in the numbers(1)
year with continued growth in new customers and FY14: 529,000
increased retention and reactivation of the existing FY15: 621,000
base FY16: 824,000
FY17: 931,000
FY18:1,149,000
* 17 customer events held in stores through the year
* Trust Pilot rating 9.3/10 - over 2,000 responses
* Over 475,000 Facebook followers and over 160,000
Instagram followers with high levels of monthly
engagement
----------------
Drive total UK brand sales Number of
* E-commerce now over 38% of retail sales stores
FY14: 80
FY15: 91
* 15 net new stores opened during the period FY16: 97
FY17: 108
FY18: 123
* Six stores relocated
Total selling
space (Sq
* John Lewis womenswear to be converted from wholesale Ft)
to retail-concession model for the Autumn/Winter 18 FY14: 84,500
season FY15: 100,000
FY16: 111,000
FY17: 135,100
* Continued strong wholesale growth within both larger FY18: 163,400
and independent accounts
* Strong growth in Spring/Summer 2018 order book
----------------
International expansion International
* In the US, Dillard's department store launched Joules as % of total
Womenswear in 100 stores from Spring/Summer 2018 revenue
FY14: 5.8%
FY15: 9.1%
* Completed transition of US independent stockist FY16: 10.1%
accounts from third-party distributor to in-house FY17: 11.5%
management FY18: 13.1%
* Germany wholesale continues to grow through
independent accounts
* Dedicated US and German websites delivered very
strong e-commerce sales growth with increased
marketing support
* Significantly improved International wholesale Gross
margin
----------------
Product extension
* Launch of Joules sofa collections in partnership with
DFS. Extended from initial 10 DFS stores to 40 stores
and online
* New colourful umbrella range launched in partnership
with Fulton
* Continued expansion of women's footwear category and
product development within childrenswear and
accessories
* Licensing revenue growth of 82%
----------------
Key Performance Indicators
Our KPIs have been selected based on their link to the successful delivery of our strategy. They are monitored by the Board on a regular basis.
Strategic KPIs:
- Revenue by channel - delivering balanced growth across our core-sales channels
- Group Gross margin - maintaining overall product level profitability whilst developing the different channels to market
- Underlying EBITDA margin - how we are effectively leveraging our cost base and infrastructure
- Return on Capital Employed ('ROCE') - how we are managing working capital and growth capital investments
Revenue by channel(3) GBPM
Retail - Stores & Retail - E-commerce Wholesale
Concessions FY14: GBP23.9m FY14: GBP26.9m
FY14: GBP39.3m FY15: GBP25.8m(2) FY15: GBP31.6m(2)
FY15: GBP52.4m(2) FY16: GBP30.1m FY16: GBP37.2m
FY16: GBP58.2m FY17: GBP38.9m FY17: GBP44.7m
FY17: GBP68.3m FY18: GBP49.8m FY18: GBP55.5m
FY18: GBP75.0m
Group Gross margin Underlying EBITDA Return on Capital
FY14: 55.0% margin - ROCE
FY15: 53.3% FY14: 9.5% FY14: 30.0%
FY16: 53.5% FY15: 9.0% FY15: 27.3%
FY17: 55.4% FY16: 10.3% FY16: 32.5%
FY18: 55.7% FY17: 10.8% FY17: 32.2%
FY18: 11.3% FY18: 31.5%
(1) Active customer defined as a customer who is registered on our database and has transacted within the last 12 months.
(2) FY15 was a 53-week period.
(3) Revenue by channel excludes Shows and Licensing.
(4) Return on Capital employed ('ROCE') is calculated as Underlying Operating Profit after Tax divided by Average Capital employed (Capital employed defined as Underlying Net Assets adjusted for excess cash balances). FY14 and FY15 restated for consistency.
BUSINESS REVIEW
RETAIL: MULTI-CHANNEL PROGRESS
Retail revenue, which includes stores and concessions, e-commerce and shows, continued to increase impressively, up by 15.9% during the year to GBP129.7m (FY17: GBP111.9m). This reflected growth from stores and very strong e-commerce growth, with e-commerce revenue increasing by 28.0% to represent 38.4% of total retail revenue (FY17: 34.8%).
The Group's store coverage across the UK and ROI increased to 123 stores at the end of the Period (FY17: 108 stores), with 17 new openings and two closures (15 net new stores). We also relocated six stores in the year (FY17: 3), typically this was to larger sites that better reflect our brand and product range. This expansion increased our total selling space to 163,400 square feet (FY17: 135,100 square feet) at the Period end. The average payback on new stores, opened for more than one year, continues to be well within our appraisal threshold of 24 months, and all but two of our stores deliver a positive profit contribution, with plans in place to achieve positive contribution in the two marginally negative contribution stores.
The new openings were spread across our different store location types, reflecting the breadth of appeal of the Joules brand, including:
- Lifestyle: Abersoch, Ambleside, Holt (2(nd) store), Salcombe (2(nd) store), Lyme Regis, St Ives (2(nd) store), Alnwick
- Local - Nantwich - Metro - Oxford, Peterborough, Southampton - High Street - Bracknell, Ipswich, Perth, Salisbury - Regional Shopping Centre - Rushden Lakes - Premium Outlet - Gloucester Quays
Our UK store presence continues to play an important role in building brand awareness and driving new customer acquisition and retention. In FY19, we anticipate opening 29 concessions, as we transition our existing wholesale partnership with John Lewis to a retail concession model for the womenswear category, and around six new stores.
E-commerce continued to achieve strong growth, increasing by 28.0% to represent 38.4% of total retail sales (FY17: 34.8%). We have continued to invest in our e-commerce platform including enhancements to digital content, payment and delivery propositions, as well as in targeted customer marketing which has helped us to grow visitor numbers and improve conversion rates. Mobile is now the most important e-commerce channel for our customers, with traffic from a mobile device (including tablets) representing around three quarters of total traffic.
Our 'Total Retail' approach allows us to adapt to meet evolving customer expectations and behaviours - this includes offering an increasingly seamless in-store/on line experience including services such as Click & Collect and Order-in-Store fulfilment options, seamless in-store returns and exchanges for e-commerce orders and consistent cross-channel communications and promotions.
WHOLESALE: UK AND INTERNATIONAL EXPANSION
Wholesale continued to deliver strong revenue growth, up by 24.1% to GBP55.5m (FY17: GBP44.7m). This reflects the differentiation and appeal of the Joules brand amongst wholesale customers both in the UK and our target international markets of the US and Germany.
In the UK, we continued to see good growth in both our 'house account' channel (which consists of multi-site retailers and large online players) and from the 'field account' channel, where we have over 500 independent stockists. The house account channel saw growth with existing customers and from new customers as we continue to develop new partnerships across lifestyle sectors. During FY19 our existing wholesale activity with John Lewis womenswear and with Next Label will be transitioned to the retail concession model.
INTERNATIONAL
Total international sales increased by 40.4% (in constant currency) to GBP24.6m (FY17: GBP17.5m), now representing 13.1% of total Group revenue (FY17: 11.5%). Strong international wholesale growth was supported by good performance in our international e-commerce activity where an increase in digital marketing drove strong revenue growth across both our US and German websites.
In the US, we continued to progress with our proven expansion strategy which consists of extending our brand presence with new wholesale partners as well as expanding our category penetration and developing new categories with existing partners. During the year we expanded our presence in leading department stores with Nordstrom increasing the range of Joules products in response to their customers' appetite and demand for the brand. In addition, Dillard's launched Joules womenswear across 100 of their stores for the Spring/Summer 2018 season following the launch of childrenswear in Dillard's in the Autumn/Winter 2016 season. We are pleased with the customer reactions and the brand's momentum so far and we see significant further potential for Joules across the US market.
During the year, we also took the important step of bringing the management of our US independent stockist accounts in-house, to be managed by our New York-based sales and marketing team rather than through a third-party distributor. The transition completed in the second half of the year and we anticipate future benefits of having full control over the long-term growth of the brand within the US.
In Germany we continued to perform in line with expectations and have good momentum, particularly within the independent stockist channels.
DEVELOPMENT AS A LIFESTYLE BRAND
Joules delivered sales growth across all product categories with a particularly good performance in the core Womenswear category - outerwear. This includes our colourful "Right as Rain" ranges, which proved particularly popular with our customers, as did our core jersey top ranges.
Our famous, colourful and functional wellington boot ranges continued to be well received by our customers, whilst our broader footwear range was also expanded in the year, following positive customer feedback and demand, with our Chelsea Boot range featuring new colourways and embroidered styles, as well as a new slipper collection and expanded summer sandal range.
Our accessories offer continued to develop in the year, with notable successes including handbags, purses and hats.
We will continue to expand our product offer into core categories where the brand is relevant to our customer base. In the year we saw developments within women's nightwear and knitwear and in our baby category with an increased range of baby outfits, hats and socks.
We will also build the brand through entering new product categories that are relevant to our customers' lifestyles by partnering, typically on a licence basis, with carefully selected businesses that align with Joules' values. In December 2017 we launched the Joules sofa range in partnership with DFS. Working closely with DFS, we created four sofa collections, all of which showcase elements of Joules' unique prints, design features and colour. Following a positive customer response to the range in the initial 10 stores, the collections were rolled out to 40 DFS stores and online via the DFS website.
We also expanded the brand through a partnership with Fulton for Joules umbrellas and further expanded the Joules-branded toiletries and gift range in Boots.
CUSTOMER COMMUNITY
Joules has a loyal and highly engaged customer community. Active customers - customers registered on our database who have purchased in the last twelve months - increased by 23.4% over the year, to stand at 1.15 million (FY17: 931,000). This growth was supported by effective new customer acquisition activity, both in-store and through digital marketing, as well as improved retention of existing customers. Our average customer acquisition cost remained in line with that of the prior year.
Our customers engage with, and amplify, our distinctive brand across their social media platforms. Our Facebook and Instagram followers both increased in the year - to more than 475,000 and 160,000 followers respectively - with both platforms having high levels of monthly engagement.
We ran several brand relevant campaigns during the year including a 'Design a Lunchbox' competition, which was launched during the September back to school period and gave our customers the opportunity to win a family holiday. The winning print was also applied to product that was available to buy online. Our social media and digital campaigns have also worked well internationally. In the US our launch of womenswear at Dillard's department stores was supported by a range of social media activity including a "win a Joules Mini" competition, that reached nearly 300,000 people.
The year also saw us increasing our focus to 'surprise and delight' our most valuable customers including exclusive offers and invitations to in-store events, such as our very successful Christmas wreath making evenings.
INVESTING IN LONG TERM GROWTH
The Group's strategy and focus is aimed towards the long term and sustainable development of the Joules brand. We continue to invest in our e-commerce proposition, stores, infrastructure, systems and people to deliver this.
In the second half of the year, we completed the implementation and migration to our new group-wide ERP system, Microsoft Dynamics AX. We anticipate that, following a period of transition, this investment will bring benefits including enhanced stock management across channels, process efficiencies and simplification of the IT environment over the coming years.
At the beginning of the financial year we acquired the freehold for a new head office premises located very close to our existing head office in Market Harborough. The site includes an existing office building and development land to support future growth. The design phase for the new head office facility is now complete and we anticipate that work will start on the development early in the second half of FY19. This important investment will further strengthen our brand values and culture and create a more flexible, modern working environment for our head office teams.
PEOPLE
The creativity, skill and commitment of the Joules team are key to the brand's continued success and I would like to take this opportunity to thank all colleagues across the Group for their hard work throughout the year. We remain committed to investing in the skills and development of our people across the business, with the aim of making our customers' experiences with Joules the very best they can be.
In May 2018 the Company announced that Neil McCausland will step down as Non-Executive Chairman of Joules on 31 July 2018 having completed more than five years of service on the Board. Neil has made a fantastic contribution to Joules' development and he leaves the business in great health and with multiple growth opportunities ahead.
At the same time, we look forward to welcoming Ian Filby into the role of Non-Executive Chairman from 1 August 2018. Ian is a highly respected retail executive and I am delighted that he is joining Joules.
FINANCIAL REVIEW
PROFIT BEFORE TAX - UNDERLYING AND STATUTORY
Underlying profit before tax ('PBT') was GBP13.0 million for the 52 weeks to 27 May 2018, an increase of 28.5% on the prior period (FY17: GBP10.1m). Statutory PBT including share-based compensation and exceptional IPO transaction costs was GBP11.2 million (FY17: GBP8.9m), an increase of 25.6%.
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION & AMORTISATION - UNDERLYING ('EBITDA')
Underlying EBITDA increased by 24.4% to GBP21.1 million (FY17: GBP16.9m) and the underlying EBITDA margin increased by 55 basis points from 10.8% to 11.3%.
UNDERLYING AND STATUTORY RESULTS
Certain items have been excluded from the underlying results reported in the front section of this Annual Report. In the Period these solely relate to non-cash share-based compensation plan expense. The prior period also included IPO transaction costs. These adjustments are intended to provide the reader with a more meaningful year-on-year comparison.
Executive and employee share-based compensation plans were established at the time of the IPO, in May 2016. In accordance with IFRS 2, the non-cash expense related to awards under the share plans is accounted for within administrative expenses over the period until the shares are exercised, typically assumed as three years. The first awards under these plans were made in FY17 and the second awards were made in FY18. As the share plan award cycle matures over the first three years, the related expense is anticipated to increase each year. At maturity, the annual share-based compensation charge is anticipated to be approximately GBP2.0 million per year on achieving target performance, rising to approximately GBP2.8 million per year on achieving maximum performance. During this maturity phase of the new share plans, the expense is treated as 'non-underlying'.
Further detail on the share plans is contained within the Directors' Remuneration Report and the Consolidated Financial Statements.
A reconciliation between Underlying and Statutory (GAAP) results is provided below.
52 WEEKSED 27 MAY 52 WEEKSED 28 MAY 2017
2018
--------------------------------------- ---------------------------------------------------
GBPMILLION Underlying Share based Statutory Underlying Share IPO costs Statutory
compensation based
compensation
Revenue 185.9 185.9 157.0 157.0
Gross profit 103.5 103.5 87.1 87.1
Admin expenses (90.2) (1.8) (92.0) (76.7) (0.8) (0.3) (77.9)
----------- -------------- ---------- ----------- -------------- ---------- ----------
Operating
profit 13.3 (1.8) (11.5) 10.3 (0.8) (0.3) 9.2
Net Finance
costs (0.3) (0.3) (0.2) (0.2)
----------- -------------- ---------- ----------- -------------- ---------- ----------
Profit before
tax 13.0 (1.8) 11.2 10.1 (0.8) (0.3) 8.9
Operating
profit 13.3 10.3
Depreciation
& amortisation 7.8 6.6
EBITDA 21.1 16.9
----------------- ----------- -------------- ---------- ----------- -------------- ---------- ----------
REVENUE
Group revenue increased by 18.4% to GBP185.9 million from GBP157.0 million in FY17 (up 18.8% on a constant currency basis), with Retail revenue increasing by 15.9% to GBP129.7 million (FY17: GBP111.9m) and Wholesale revenue increasing by 24.1% to GBP55.5 million (FY17: GBP44.7m) (up 25.8% on a constant currency basis). Sales in international markets, which are predominantly wholesale, increased by 35.7% (40.4% on a constant currency basis) and now represent 13.1% of Group revenues (FY17: 11.5%).
Retail - Stores & Concessions
Store revenue at GBP75.0 million increased by 9.8% in the year. During the year we opened 17 new stores and closed two stores, resulting in an increase in owned store numbers from 108 to 123. We also relocated six stores during the year, to increase selling space or improve location. We had three franchise stores at the end of FY18 (FY17: 3).
Retail - E-commerce
E-commerce revenue at GBP49.8 million increased by 28.0% and represented 38.4% of total Retail revenue (FY17: 34.8%). The e-commerce channel continued to benefit from higher visitor numbers and improved conversion which was supported by our ongoing new customer acquisition and retention activity as well as enhancements to the customer experience and e-commerce platform.
Wholesale
Wholesale revenue at GBP55.5 million increased by 24.1% (25.8% on a constant currency basis). Good revenue growth was seen in the UK and in international markets, and across both larger 'house account' and smaller 'field account' customers. In the US, we successfully completed the transition for independent stockists from the third-party distributor to an in-house distribution model during the second half of the Period.
Licensing
Although still a relatively small contribution to Group revenue, revenue from licensing activity increased by 81.7% in the year to GBP0.7 million. The increase follows the successful launch of the Joules sofa range in partnership with DFS and an increased focus on existing brand licence partnerships that include toiletries, bedding and eyewear.
GROSS MARGIN
Gross margin at 55.7% was 25 basis points higher than the prior year. The Retail segment Gross margin improved by 20 basis points, despite a challenging UK retail sector environment, as a result of a disciplined approach to promotional activity and our strong product offering. Gross margin in the Wholesale segment improved by 130 basis points with improvements in the US wholesale channel more than offsetting its dilutive impact to the overall segment and Group Gross margin. US Gross margins benefitted from a favourable product mix, with a higher proportion of clothing sales, and the initial benefit of transitioning the independent stockist channel to an in-house distribution model in the second half of the Period.
ADMINISTRATIVE EXPENSES - UNDERLYING
Underlying administrative expenses increased by 17.6% from GBP76.7 million to GBP90.2 million and now represent 48.5% of revenue (FY17: 48.9%).
Sales & Marketing costs increased by 21.4% in the year to GBP13.7 million. During the year we increased marketing investment to support the growth of our US wholesale business and to increase customer acquisition and digital marketing in the UK and our target international markets, the results of which are reflected in the strong e-commerce channel performance and our active customer numbers at the year-end which increased by 23.4% to 1.15 million.
Store costs increased by 22.9% in the year to GBP30.4 million. This increase was ahead of the growth of store revenues, reflecting the increases in National Living Wage and the 2017 Business Rates revaluation as well as the higher than typical number of new store openings and relocations in the year.
Distribution costs increased by 22.2% in the year to GBP6.9 million, this increase is in line with volume growth.
Head office costs increased by 10.6% in the year to GBP31.5 million. We continue to invest in support of the areas of strategic growth including further expansion of our US wholesale team and showroom based in New York and the creative and design teams based at our head office in the UK. During the year we saw the benefit from historic investments in head office functions and teams.
Depreciation and amortisation increased to GBP7.8 million (FY17: GBP6.6m), the increase mainly being due to our new store opening and relocation programme and IT investments in the current and prior period.
The total rental expense, including service charges, for the period was GBP13.4 million (FY17: GBP11.7m) with the increase due to new store openings and rent reviews in the Period.
Business rates expense increased from GBP3.7 million to GBP4.8 million in the year, reflecting the growth in store numbers and the impact of the Business Rates revaluation undertaken at the end of the prior year.
ADMINISTRATIVE EXPENSES - NON-UNDERLYING
Non-underlying administrative expenses totalled GBP1.8 million (FY17: GBP1.2m). In the year, this all related to non-cash share-based compensation expense of GBP1.8 million (FY16: GBP0.8m). In the prior year, exceptional IPO transaction costs of GBP0.3 million were also incurred.
Share-based compensation plans are accounted for in accordance with IFRS 2, with the total fair value of each share plan award being amortised to administrative expenses over the period between grant of the award and the expected exercise date, typically three years. FY18 includes the expense for the first and second cycle of the Group's share plans. The share plans are detailed more fully in the Directors' Remuneration Report and the fair value calculation and annual expense within the Consolidated Financial Statements.
NET FINANCE COSTS
Net finance costs of GBP0.3 million (FY17: GBP0.2m) related to interest and facility charges on the Group's revolving credit facility and term loan with Barclays Bank Plc.
TAXATION
The tax charge for the period was GBP2.6 million (FY17: GBP2.6m). The effective tax rate for the Period was 22.9% (FY17: 28.8%).
The effective tax rate was higher than the applicable UK corporation tax rate of 19.8% for the period, due to the impact of non-deductible expenses including certain professional fees and non-deductible expenses incurred in the fit-out and refurbishment of new and relocated stores. The FY17 effective tax rate was further impacted by non-deductible fees in relation to the IPO.
EARNINGS PER SHARE
Statutory basic earnings per share for the period were 9.9 pence per share (FY17: 7.3 pence per share). Statutory diluted earnings per share for the period were 9.7 pence per share (FY17: 7.2 pence per share).
On an underlying, pro forma basis the FY18 basic earnings per share were 11.8 pence (FY17: 9.2 pence).
To facilitate meaningful comparison of earnings per share, earnings are adjusted for the non-underlying items detailed above, to reflect a consistent tax rate across the periods and on the basis of a consistent number of shares in issue.
Underlying, pro forma FY18 FY17 EPS PBT - Underlying GBPm 13.0 10.1 Tax rate 20.0% 20.0% Tax - underlying GBPm (2.6) (2.0) Earnings - Underlying GBPm 10.4 8.1 Shares (million) 87.5 87.5 Underlying Basic EPS - Pence 11.8 9.2 Shares - diluted (million) 88.5 88.5 Underlying diluted EPS - Pence 11.7 9.1
DIVID
The Board is recommending a final dividend of 1.3 pence per share in respect of FY18 (FY17: 1.2 pence per share). This brings the total dividend for FY18 to 2.0 pence per share (FY17: 1.8 pence per share). Following approval by shareholders at the AGM on 27 September 2018, the dividend is expected to be paid on 15 November 2018 to shareholders on the register at 26 October 2018.
CASH FLOW AND NET CASH/(DEBT)
Free cash flow, excluding expenditure on our new head office development, was GBP0.1 million in the Period (FY17: GBP3.7m). Growth in the Group's EBITDA was offset by a higher net working capital outflow of GBP5.9 million (FY17: GBP1.0m outflow) and higher core capital expenditure of GBP12.5 million (FY17: GBP10.7m), as explained below.
The Group ended the period with net cash of GBPnil (FY17: GBP6.3m), a decrease of GBP6.3 million in the period.
GBPMILLION FY18 FY17
EBITDA 21.1 16.9
Exceptional items - IPO
fees - (0.3)
Net working capital cash
flow (5.9) (1.0)
------- -------
Operating cash flow 15.1 15.6
Interest - net (0.3) (0.2)
Tax paid (2.2) (1.0)
Capital expenditure -
core (12.5) (10.7)
------- -------
Free cash flow (core
capex) 0.1 3.7
Capital expenditure - (4.7) -
new Head Office
------- -------
Cash flow before financing (4.6) 3.7
INVENTORY
Inventory at year end, including inbound goods-in-transit, was GBP32.8 million (FY17: GBP21.2m). The increase in inventory reflects the growth of the business in the UK and internationally, and the timing of seasonal stock deliveries relative to the prior year.
CAPITAL EXPITURE
Investment in property, plant, equipment and intangible assets totalled GBP17.3 million in FY18 (FY17: GBP10.7m). The increase in the year was due to a higher number of new store openings and relocations, the completion of our Microsoft Dynamics AX ERP implementation and the acquisition of the site for our new head office development.
At the start of the year we acquired the freehold interest in a plot of land and an existing office facility for GBP4.5 million. This site will be the location for our new head office facility. After a period of development including construction of a new building and refurbishment of the existing building we anticipate that the capital expenditure on this development will be in the range of GBP16 million to GBP18 million over the next two to three years.
BORROWINGS
Group borrowings were GBP8.5 million at the year-end (FY17: GBP0.6m). During the year, the Group entered into a five-year term loan agreement with Barclays Bank Plc for GBP3.5 million (the Term Loan) to part fund the acquisition of the site for development of our new head office facility in Market Harborough.
The Group has a GBP25 million revolving credit facility provided by Barclays Bank Plc to fund seasonal working capital requirements (the RCF). This facility matures in July 2021.
At the year-end the total Group borrowings comprised the RCF GBP5.0 million (FY17: GBPnil); the Term Loan GBP3.2 million (FY17: GBPnil), and legacy asset finance loans GBP0.3 million (FY17: GBP0.6m).
PRINCIPAL RISKS AND UNCERTAINTIES
Set out below are the principal risks and uncertainties that the Directors consider could impact the business. The Board regularly reviews the potential risks facing the Group and the controls in place to mitigate any potential adverse impacts. The Board also recognises that the nature and scope of risks can change and that there may be other risks to which the Group is exposed and so the list is not intended to be exhaustive.
The Corporate Governance Report includes an overview of our approach to risk management and internal control systems and processes.
EXTERNAL RISKS
External risks reflect those risks where we are unable to influence the likelihood of the risk arising and therefore focus is on minimising the impact should the risk arise.
Risk and impact Mitigating factors
========================================= =============================================
Economy
The majority of the Group's revenue As a premium lifestyle brand with
is generated from sales in the a geographically disperse retail
UK to UK customers. A deterioration store portfolio, a strong e-commerce
in the UK economy may adversely channel and long-standing wholesale
impact consumer confidence and customer accounts, the Directors
spending on discretionary items. consider that the UK business would
A reduction in consumer expenditure be less affected by a reduction
could materially and adversely in consumer expenditure than many
affect the Group's financial condition, other clothing retailers.
operations and business prospects. In addition, the property portfolio
BREXIT has increased the likelihood has short lease terms, providing
and potential impact of this risk. relative flexibility to close or
relocate stores should it become
necessary.
=============================================
Brexit
The anticipated exit of the UK A Brexit 'task force' has been
from the EU in March 2019 adds established to monitor and evaluate
complexity and uncertainty across the potential impacts of different
many areas of the Group's operations scenarios and to implement mitigations.
that could impact on; our ability An option for a EU based distribution
to get products to customers in arrangement has been established
a timely manner and; on product to mitigate potential supply chain
profit margins. disruption and adverse duty impacts.
Specific risks impacted are highlighted The lack of clarity on the nature
in this table. and timing of the post-Brexit arrangements
make it challenging to plan mitigation
strategies effectively.
=============================================
Competitor actions
New competitors or existing clothing Joules differentiates from competitors
retailers or lifestyle brands through its strong brand and products
may target our segment of the that are known for their quality,
market. Existing competitors may details, colour and prints. Our
increase their level of discounting large customer database allows
or promotions and/or expand their the Group to communicate effectively
presence in new channels. These with customers, developing customer
actions could adversely impact engagement and loyalty.
our sales and profits.
=============================================
Foreign Exchange
The Group purchases the majority The Group's Treasury Policy sets
of its product stock from overseas out the parameters and procedures
and is therefore exposed to foreign relating to foreign currency hedging.
currency risk, primarily the US We currently seek to hedge a material
Dollar. proportion of forecasted US Dollar
Without mitigation, input costs requirement 12-24 months ahead
may fluctuate in the short term, using forward contracts.
creating uncertainty as to profits The Group's US wholesale business
and cash flows. generates US Dollar cash flows
Brexit has increased volatility which provide a degree of natural
in this area that may be sustained hedging.
or worsen going forward.
=============================================
Regulatory and Political
New regulations or compliance The Group has processes in place
requirements may be introduced to monitor and report to the Board
from time to time. These may have on new regulations and compliance
a material impact on the cost requirements that could have an
base or operational complexity impact on the business. The impact
of the business. Non-compliance of any new regulation is evaluated
with the regulation could result and reflected in the Group's financial
in financial penalties. forecasts and planning.
Brexit has increased uncertainty
in this area. In relation to GDPR, the Board
The General Data Protection Regulation established a steering group, 12
(GDPR) is a specific example of months ahead of the implementation
a new, complex regulation with date, to identify any compliance
significant financial penalties gaps and monitor progress to achieve
for non-compliance. compliance by the deadline.
=============================================
INTERNAL RISKS
Internal risks reflect those where we can influence the likelihood of the risk arising and the impact should the risk arise.
Risk and Impact Mitigating factors
======================================== ==============================================
Brand and reputation
The strength of our brand and Brand and reputation are monitored
its reputation are very important closely by senior management and
to the success of the Group. the Board. The Group's public relations
Failure to protect and manage are actively managed and customer
this could reduce the confidence feedback, both direct and indirect,
and trust that customers place is carefully monitored.
in the business, which could have We carefully consider each new
a detrimental impact on sales, trade customer with whom we do
profits and business prospects. business and monitor on an ongoing
Our brand may be undermined or basis.
damaged by our actions or those We actively monitor for potential
of our wholesale partners or through IP infringements and have a process
infringement of our intellectual to determine the appropriate course
property (IP). of action to protect our brand
and IP vigorously.
==============================================
Product sourcing
The Group's products are predominantly The Group has a policy and process
manufactured overseas. Failure for the selection of new suppliers.
to carry out sufficient due diligence This includes a review of compliance
and to act in the event of any with laws and regulations and that
negative findings, especially suppliers meet generally accepted
in relation to ethical or quality standards of good practice. In
related issues, could adversely addition, suppliers are required
impact our brand and reputation. to sign up to the Joules code of
conduct.
The Group operates a programme
of ethical audits across the product
supply base supported by a third-party
agency.
==============================================
Design
As with all clothing and lifestyle Joules has a long established in-house
brands there is a risk that our creative and design team who have
offer will not satisfy the needs a high level of awareness and understanding
of our customers or that we fail of our target customer segment.
to correctly identify trends that A large proportion of our product
are important to our customer range is anchored in classic products
base. These outcomes may result that are evolved season to season.
in lower sales, excess inventories Early feedback from our trade customers
and/or higher markdowns. can allow us to further refine
our product range ahead of significant
purchase commitments.
==============================================
Key management
Our performance is linked to the The Group's remuneration policy,
performance of our people and which includes a long-term incentive
to the leadership of key individuals. scheme and performance-related
The loss of a key individual whether pay, is designed to attract and
at management level or within retain key management. The Group
a specialist skill set could have operates learning and development
a detrimental effect on our operations initiatives to increase the opportunities
and, in some cases, the creative for internal succession.
vision for the brand.
==============================================
ERP system
In the second half of FY18 we The implementation was planned
went live across the Group with over a two year period with the
a new IT platform, Microsoft Dynamics first phase going live in November
AX. With any system and process 2015. A dedicated programme team
change of this scale, there is with significant experience of
a risk that it could result in our processes and ERP implementation
business disruption. led the implementation and a business
wide training programme. This team
has remained in place post-implementation,
reporting regularly to the Group's
senior management.
==============================================
IT security and systems availability
Non-availability of the Group's A business continuity plan exists
IT systems, including the website, to minimise the impact of a loss
for a prolonged period could result of key systems and to recover the
in business disruption, loss of use of the system and associated
sales and reputational damage. data.
Malicious attacks, data breaches A regular assessment of vulnerability
or viruses could lead to business to malicious attacks is performed
interruption and reputational and any weaknesses rectified. All
damage. Group employees are made aware
of the Group's IT security policies
and we deploy a suite of tools
(email filtering, antivirus etc.)
to protect against such events.
==============================================
Supply chain
The disruption to any material The business continuity plan includes
element of the Group's supply an established procedure in the
chain, in particular the UK central event of the loss of the UK distribution
distribution centre, could impact centre. In addition, the Group
sales and impact on our ability maintains insurance cover at an
to supply our wholesale customers, appropriate level to protect against
stores and consumers. the impact of such an interruption.
==============================================
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
JOULES GROUP PLC
52 weeks 52 weeks
ended ended 28
27 May May
2018 2017
GBP'000 GBP'000
REVENUE 185,933 157,032
Cost of sales (82,403) (69,981)
GROSS PROFIT 103,530 87,051
Administrative expenses (90,226) (76,729)
Share based payments (1,766) (829)
Non-recurring administrative
expenses - (341)
Total administrative expenses (91,992) (77,899)
OPERATING PROFIT 11,538 9,152
Finance costs (348) (241)
PROFIT BEFORE TAX 11,190 8,911
Income tax expense (2,564) (2,568)
PROFIT FOR THE PERIOD 8,626 6,343
Basic earnings per share
(pence) 9.86 7.25
Diluted earnings per share
(pence) 9.74 7.22
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
JOULES GROUP PLC
52 weeks 52 weeks
ended ended
27 28
May May
2018 2017
GBP'000 GBP'000
Profit for the period 8,626 6,343
Items that will not be reclassified subsequently
to profit or loss:
Net loss arising on changes in fair
value of hedging instruments entered
into for cash flow hedges (308) (640)
Gains arising during the period
on deferred tax on cash flow hedges 31 112
Other comprehensive income for the period (277) (528)
Items that may be reclassified subsequently
to profit or loss:
Exchange difference on translation
of foreign operations 422 11
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 8,771 5,826
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
JOULES GROUP PLC
27 May 28 May
2018 2017
GBP'000 GBP'000
NON-CURRENT ASSETS
Property, plant and equipment 18,049 11,646
Intangibles 12,614 9,499
Deferred tax 1,148 612
Derivative financial instruments 428 117
TOTAL NON-CURRENT ASSETS 32,239 21,874
CURRENT ASSETS
Inventories 32,795 21,194
Trade and other receivables 16,456 14,013
Cash and cash equivalents 8,571 6,964
Derivative financial instruments 910 1,228
TOTAL CURRENT ASSETS 58,732 43,399
TOTAL ASSETS 90,971 65,273
CURRENT LIABILITIES
Trade and other payables 40,008 32,256
Current corporation tax
payable 1,355 1,018
Borrowings 5,559 333
Provisions 1,031 636
Derivative financial instruments 1,680 951
TOTAL CURRENT LIABILITIES 49,633 35,194
NON-CURRENT LIABILITIES
Borrowings 2,972 294
Derivative financial instruments - 551
TOTAL NON-CURRENT LIABILITIES 2,972 845
TOTAL LIABILITIES 52,605 36,039
NET ASSETS 38,366 29,234
EQUITIES
Share capital 875 875
Hedging reserve (277) (139)
Translation reserve 361 (61)
Merger reserve (125,807) (125,807)
Retained earnings 151,804 142,956
Share premium 11,410 11,410
TOTAL EQUITY 38,366 29,234
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
JOULES GROUP PLC
Merger Hedging Translation Share Share Retained Total
reserve reserve reserve capital premium earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 29 May
2016 (125,807) 389 (72) 875 11,410 136,224 23,019
Profit for the period - - - - - 6,343 6,343
Other comprehensive
income for the period - (528) 11 - - - (517)
---------- --------- -------------- ---------- --------- ---------- ---------
Total Comprehensive
income for the period - (528) 11 - - 6,343 5,826
Dividends Issued - - - - - (525) (525)
Shares issued - - - - - - -
Credit to equity
for equity-settled
share based payments
excl. NI - - - - - 737 737
Gains arising during
the period on deferred
tax on share based
payments - - - - - 177 177
Balance at 28 May
2017 (125,807) (139) (61) 875 11,410 142,956 29,234
Profit for the period - - - - - 8,626 8,626
Other comprehensive
income for the period - (277) 422 - - - 145
---------- --------- -------------- ---------- --------- ---------- ---------
Total Comprehensive
income for the period - (277) 422 - - 8,626 8,771
Basis adjustment
to hedged inventory - 139 - - - - 139
Dividends Issued - - - - - (1,663) (1,663)
Shares issued - - - - - - -
Credit to equity
for equity-settled
share based payments
excl. NI - - - - - 1,595 1,595
Gains arising during
the period on deferred
tax on share based
payments - - - - - 290 290
Balance at 27 May
2018 (125,807) (277) 361 875 11,410 151,804 38,366
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
JOULES GROUP PLC
52 weeks 52 weeks
ended 27 ended
May 28 May
2018 2017
GBP'000 GBP'000
Cash generated from operations
Profit for the period 8,626 6,343
Adjustments for:
Depreciation 6,360 4,920
Amortisation 1,453 1,688
Share based payments 1,766 829
Finance expense 348 241
Tax expense 2,564 2,568
Operating cash flows before movements
in working capital 21,117 16,589
Increase in inventory (including settlement
of derivatives) (11,601) (1,941)
Increase in receivables (2,443) (3,157)
Increase in payables 8,105 4,108
Cash generated by operations 15,178 15,599
Interest paid (308) (241)
Tax paid (2,227) (997)
Net cash from operating activities 12,643 14,361
Cash flow from investing activities
Purchase of property, plant and equipment
and intangible assets (17,228) (10,700)
Net cash from investing activities (17,228) (10,700)
Cash flow from financing activities
Repayment of borrowings (596) (5,461)
Proceeds from borrowings 8,500 -
Dividend paid (1,663) (525)
Net cash from financing activities 6,241 (5,986)
Net increase/(decrease) in cash and cash
equivalents 1,656 (2,325)
Cash and cash equivalents at beginning
of period 6,964 9,278
Effect of foreign exchange rate changes (49) 11
Cash and cash equivalents at end of period 8,571 6,964
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION OF PRELIMINARY ANNOUNCEMENT
The preliminary consolidated financial information for the 52 weeks ended 27 May 2018 was approved by the Directors on 24 July 2018.
This preliminary consolidated financial information has been prepared in accordance with the principles of International Financial Reporting Standards ('IFRS') and has been prepared on a going concern basis. The preliminary consolidated financial information does not constitute statutory consolidated financial statements for the 52 weeks ended 27 May 2018 as defined in section 434 of the Companies Act 2006.
The Annual Report and Group Financial Statements for the 52 weeks ended 27 May 2018 are the third for Joules Group plc and were approved by the Board of Directors on 24 July 2018. The report of the auditor on those Group Financial Statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The Annual Report and Group Financial Statements for the 52 weeks ended 27 May 2018 will be filed with the Registrar in due course.
Going concern
The Directors have prepared a detailed forecast with a supporting business plan for the foreseeable future. The forecast indicates that the Group will remain in compliance with covenants throughout the forecast period. As such, the Directors have a reasonable expectation the Company and Group will have adequate resources to continue in operational existence for the foreseeable future. As such, they continue to prepare the financial statements on the basis of going concern.
2. SEGMENT REPORTING
The Group has three reportable segments; Retail, Wholesale and Other. For each of the three segments, the Group's chief operating decision maker (the "Board") reviews internal management reports on a monthly basis. Each segment can be summarised as follows:
-- Retail: Retail includes sales and costs relevant to stores, concessions, e-commerce, shows and franchises.
-- Wholesale: Wholesale includes sales and costs relevant to the sale of products to other retail businesses
or distributors for onward sale to their customer.
-- Other: Other includes income from licencing, central costs and items that are not distinguishable into the
segments above.
Information regarding the results of each reportable segment is included below. Segment results before non-recurring costs, being underlying earnings before interest, taxation, depreciation and amortisation, are used to measure performance as management believes that such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within these industries.
There are no discontinued operations in the period.
Segment review and results
52 WEEKSED 27 MAY 2018 Retail Wholesale Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 129,680 55,528 725 185,933
Cost of sales (48,636) (33,767) - (82,403)
--------- ---------- --------- ---------
GROSS PROFIT 81,044 21,761 725 103,530
Administration expenses (46,586) (10,334) (25,493) (82,413)
--------- ---------- --------- ---------
SEGMENT RESULT 34,458 11,427 (24,768) 21,117
--------- ---------- --------- ---------
RECONCILIATION OF SEGMENT RESULT TO PROFIT BEFORE TAX
Segment result 34,458 11,427 (24,768) 21,117
Depreciation and amortisation (4,656) (410) (2,747) (7,813)
Share based payments (incl. NI) (1,766)
Non-recurring costs -
Finance costs (348)
PROFIT BEFORE TAX 11,190
=========
52 WEEKSED 28 MAY 2017 Retail Wholesale Other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 111,884 44,749 399 157,032
Cost of sales (42,389) (27,592) - (69,981)
--------- ---------- --------- ---------
GROSS PROFIT 69,495 17,157 399 87,051
Administration expenses (39,171) (8,246) (22,704) (70,121)
--------- ---------- --------- ---------
SEGMENT RESULT 30,324 8,911 (22,305) 16,930
--------- ---------- --------- ---------
RECONCILIATION OF SEGMENT RESULT
TO PROFIT BEFORE TAX
Segment result 30,324 8,911 (22,305) 16,930
Depreciation and amortisation (3,901) (364) (2,344) (6,609)
Share based payments (incl. NI) (828)
Non-recurring costs (341)
Finance costs (241)
PROFIT BEFORE TAX 8,911
=========
GEOGRAPHICAL INFORMATION
The Group's revenue from external customers by geographical location is as detailed below.
UK International Total
GBP'000 GBP'000 GBP'000
52 weeks ended 27 May 2018
Revenue 161,499 24,434 185,933
Non-current assets 31,361 878 32,239
52 weeks ended 28 May 2017
Revenue 139,030 18,002 157,032
Non-current assets 21,654 220 21,874
3. PROFIT FOR THE YEAR
Profit (before tax) is stated after charging:
52 Weeks 52 Weeks
ended 27 ended 28
May May
2018 2017
GBP'000 GBP'000
Cost of inventories recognised as expense 69,794 61,851
Staff costs 34,937 29,775
Property rent and service charges 13,534 11,658
Transportation, carriage and packaging 10,110 8,354
Depreciation of property, plant and equipment 6,360 4,920
Amortisation of intangible assets 1,453 1,688
Impairment loss recognised on trade receivables - 240
Net foreign exchange gains (796) (247)
Write down of inventory in the period 150 126
Other expenses 38,853 29,515
174,395 147,880
========= =========
Other expenses include non-recurring items of GBPnil for 52 weeks to 28 May 2018 (2017: GBP341,000) which have been disclosed separately on the face of the income statement in order to summarise the underlying results. The non-recurring costs in the prior period of GBP341,000 relate to IPO transaction costs. Neither 'underlying profit or loss' nor 'non-recurring items' are defined by IFRS, however, the Directors believe that the disclosures presented in this manner provide a clear presentation of the financial performance of the Group. Amortisation of intangible assets is included within administrative expenses in the income statement.
Auditors remuneration 52 weeks 52 weeks
ended ended
27 May 28 May
2018 2017
GBP'000 GBP'000
The analysis of auditor's remuneration
is as follows:
Audit of these financial statements 8 6
Audit of financial statements of subsidiaries
of the Company 90 74
Total audit fees 98 80
Other services pursuant to legislation:
Tax compliance 2 27
Tax advice 13 32
Audit related assurance services 4 13
Remuneration and share plan advisory 22 54
Other Services 5 -
Total non-audit fees 46 126
4. FINANCE COSTS
52 weeks 52 weeks
ended 27 ended 28
May May
2018 2017
GBP'000 GBP'000
Bank loan interest 254 176
Term loan interest 56 -
Finance lease interest 38 65
348 241
5. INCOME TAX
52 weeks 52 weeks
ended 27 ended 28
a) Analysis of charge in the May May
period 2018 2017
GBP'000 GBP'000
Current tax
UK corporation tax based on
the profit
for the period 3,090 2,563
Adjustment in respect of prior
periods (39) (347)
Overseas tax 17 21
Total current tax charge 3,068 2,237
Deferred taxation
Adjustment in respect of prior
periods (148) 366
Deferred tax on share based
payments (290) (113)
Movement in fixed asset timing
differences (89) (50)
Movement on disallowable provision 23 113
Effect of adjustment in tax
rate - 15
Total deferred taxation charge (504) 331
Tax charge for the period (note
5b) 2,564 2,568
In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised in other comprehensive income.
52 weeks 52 weeks
ended 27 ended 28
May May
2018 2017
GBP'000 GBP'000
Deferred taxation
Gains arising during the period on deferred tax
on cash flow hedges 32 112
Total income tax gain recognised in other comprehensive
income 32 112
5. INCOME TAX (Continued)
b) Factors affecting the tax charge for the period
There are reconciling items between the expected tax charge and the actual which are shown below:
52 weeks 52 weeks
ended 27 ended 28
May May
2018 2017
GBP'000 GBP'000
Profit before taxation 11,190 8,911
UK corporation tax at the standard rate 19.0% 19.8%
Profit multiplied by the standard rate in the
UK 2,126 1,767
Effects of:
Expenses not deductible for tax purposes and
other permanent differences 216 399
IPO expenses not deductible for tax purposes - 60
Depreciation and amortisation on non-qualifying
assets 347 287
Difference in overseas tax rate 17 21
Effect of adjustment in tax rate 45 15
Adjustment in respect of prior period (current
tax) (39) (347)
Adjustment in respect of prior period (deferred
tax) (148) 366
Tax expense for the period (note 5a) 2,564 2,568
The Finance Act 2015 included provisions to reduce the rate of UK corporation tax to 19% with effect from 1 April 2017. The Finance Act 2016 included provisions to further reduce the rate of UK corporation tax to 17% with effect from 1 April 2020. Deferred taxation is measured at tax rates that are expected to apply in the periods in which temporary timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Accordingly the rate used to calculate deferred tax assets and liabilities is the effective rate at the date the deferred tax is expected to be realised.
The UK corporation tax at the standard rate for the year is therefore 19.0% (2017: 19.8%).
6. PROFIT PROPERTY, PLANT AND EQUIPMENT
Leasehold
Land & improve-ments Fixtures Motor
buildings GBP'000 and fittings vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 29 May 2016 - 100 22,780 126 23,006
Additions - 5,415 - 5,415
Disposals - - - - -
At 28 May 2017 - 100 28,195 126 28,421
Additions 4,715 - 8,437 - 13,152
Disposals - (100) (7,233) (33) (7,366)
Transfers - - (1,318) - (1,318)
At 27 May 2018 4,715 - 28,081 93 32,889
Accumulated depreciation
At 29 May 2016 - 69 11,675 111 11,855
Charge for the period - 8 4,906 6 4,920
Disposals - - - - -
At 28 May 2017 - 77 16,581 117 16,775
Charge for the period - 23 6,331 6 6,360
Disposals - (100) (7,233) (33) (7,366)
Transfers - - (929) - (929)
At 27 May 2018 - - 14,750 90 14,840
Net book value
At 29 May 2016 - 31 11,105 15 11,151
At 28 May 2017 - 23 11,614 9 11,646
At 27 May 2018 4,715 - 13,331 3 18,049
Property, Plant and Equipment
During the Period the Directors conducted a detailed review of the Group's fixed assets. As a result of this review GBP7,366,000 of Leasehold improvements, Fixtures and fittings and Motor vehicles of nil book value items which were no longer in existence or in use as at the balance sheet date were identified, these were recorded as a disposal in the Period.
Transfers in the Period relate to capital expenditure with regard to the new ERP System which was previously recorded within Plant, Property and Equipment being reclassified to Intangible Assets - IT Systems expenditure.
Land & buildings additions relates to the acquisition of the freehold interest in the site intended for use as the Group's new head office following a period of refurbishment. The Term loan detailed in note 8 is secured against the Land & buildings.
7. INTANGIBLE ASSETS
IT Systems Total
GBP'000 GBP'000
Cost
At 29 May 2016 7,753 7,753
Additions 5,284 5,284
Disposals - -
At 28 May 2017 13,037 13,037
Additions 4,179 4,179
Disposals (1,111) (1,111)
Transfers 1,318 1,318
At 27 May 2018 17,423 17,423
Accumulated amortisation
At 29 May 2016 1,850 1,850
Charge for the period 1,688 1,688
Disposals - -
Impairment - -
At 28 May 2017 3,538 3,538
Charge for the period 1,453 1,453
Disposals (1,111) (1,111)
Impairment - -
Transfers 929 929
At 27 May 2018 4,809 4,809
Net book value
At 29 May 2016 5,903 5,903
At 28 May 2017 9,499 9,499
At 27 May 2018 12,614 12,614
Intangible assets
During the Period the Directors conducted a detailed review of the Group's intangible fixed assets. As a result of this review GBP1,111,000 of nil book value items which were no longer in existence or in use as at the balance sheet date were identified, these were recorded as a disposal in the Period.
Transfers in the Period relate to capital expenditure with regard to the new ERP System which was previously recorded within Plant, Property and Equipment being reclassified to Intangible Assets - IT Systems expenditure.
8. BORROWINGS
27 May 28 May
2018 2017
GBP'000 GBP'000
Bank loan 5,000 -
Term loan 3,237 -
Finance leases 294 627
8,531 627
Borrowings are repayable as
follows:
Bank loan
Within one year 5,000 -
Term loan
Within one year 350 -
Between one and two years 350 -
Between two and five years 2,537 -
3,237 -
Finance leases
Within one year 209 333
Between one and two years 85 210
Between two and five years - 84
294 627
Total borrowings
Within one year 5,559 333
Between one and two years 435 210
Between two and five years 2,537 84
8,531 627
8. BORROWINGS (Continued)
Summary of borrowing arrangements
The Bank loan is a GBP25 million Revolving Credit Facility in which amounts drawn down are generally repayable within three months. The facility matures in July 2021 following an amendment and extension that was completed in July 2017.
The Term loan is a GBP3.5 million 5 year loan facility arranged with Barclays Bank PLC, secured against the new head office land and buildings asset.
The Finance leases are secured against the assets to which they relate. the present value of minimum lease payments is equal to the liability. Interest is paid at varying rates above base rate.
The weighted average interest rates paid during the Period were as follows:
52 weeks 52 weeks
ended ended
27 May 28 May
2018 2017
% %
Finance leases 7.3 7.7
Term loan 1.8 -
Bank loan 2.0 2.1
9. FINANCIAL COMMITMENTS
Operating lease commitments
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
Land & Buildings 27 May 28 May
2018 2017
GBP'000 GBP'000
Lease payments:
Not later than 1 year 11,107 10,394
Later than 1 year and not later than 5
years 34,818 34,669
Later than 5 years 18,929 20,061
64,854 65,124
Other 27 May 28 May
2018 2017
GBP'000 GBP'000
Lease payments:
Not later than 1 year 742 483
Later than 1 year and not later than 5
years 1,566 772
Later than 5 years 105 151
2,413 1,406
10. ANALAYSIS OF NET CASH/(DEBT)
At 28 May Non-cash Net At 27 May
2017 changes Cash flow 2018
GBP'000 GBP000 GBP'000 GBP'000
Cash at bank and in hand 6,964 (49) 1,656 8,571
Bank loan - - (5,000) (5,000)
Term loan - - (3,150) (3,150)
Finance leases (627) - 246 (381)
Total liabilities from financing
activities (627) - (7,904) (8,531)
Total 6,337 (49) (6,248) 40
11. RELATED PARTY TRANSACTIONS
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation.
The Directors control 30,112,305 shares (2017: 31,171,782 shares) in Joules Group plc, which represents 34.4% (2017: 35.6%) of the issued share capital.
12. EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the Period.
For the calculation of diluted earnings per share, the weighted average number of shares in issue is further adjusted to assume conversion of all potentially dilutive ordinary shares. The Company has one category of potentially dilutive ordinary shares, being management shares not yet vested.
52 weeks 52 weeks
ended 27 ended 28
May May
2018 2017
Basic earnings per share (pence) 9.86 7.25
Diluted earnings per share (pence) 9.74 7.22
The calculation of basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purpose of basic and diluted
earnings per share 8,626 6,343
Number of shares
Weighted number of ordinary shares for the purpose
of
basic earnings per share 87,503,058 87,500,690
Potentially dilutive share awards 1,014,761 294,295
Weighted number of ordinary shares for the purpose
of
diluted earnings per share 88,517,819 87,794,985
13. SHARE BASED PAYMENTS
Summary of movement in awards
Number of shares DBP ESOP LTIP SAYE TOTAL
Outstanding at 28 May
2017 132,132 582,907 1,896,938 339,753 2,951,730
Granted during the year 158,587 - 900,303 373,987 1,432,877
Lapsed during the year - - (544,147) (64,928) (609,075)
Exercised during the
year - - - (2,368) (2,368)
Outstanding at 27 May
2018 290,719 582,907 2,253,094 646,444 3,773,164
------------------------- -------- -------- ---------- --------- ----------
Exercisable at 27 May
2018 - 582,907 - - 582,907
------------------------- -------- -------- ---------- --------- ----------
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 fair value of the total shares issued during the Period, and measured as at issue date is GBP3,874,000.
The inputs into the model were as follows:
DBP ESOP LTIP SAYE
------------------------------------- -------- -------- ----------
Weighted average share price 2.84 2.51 2.76 2.87
Weighted average exercise price 0.01 1.62 0.01 1.82
No. of employees 1 10 86 222
Shares under option 290,719 582,907 2,253,094 646,444
Expected volatility 28.0% 28.0% 28.0% 28.0%
Expected life (Years) 3 3-10 3 3
Risk-free rate 0.08% 0.06% 0.08% 0.08%
Possibility of ceasing employment
before vesting 0% 0% 0%-10% 10%
Expectations of meeting performance
criteria 100% 100% 60%-100% 100%
Expected dividend yields 1.9% 1.9% 1.9% 1.9%
The Group recognised a net expense of GBP1,595,000 during the year (2017: GBP737,000) relating to equity settled share-based payments. Including associated employer's National Insurance contributions of GBP171,000 (2017: GBP92,000) the Group recognised a total expense of GBP1,766,000 during the year (2017: GBP829,000).
Deferred Bonus Plan ("DBP")
The DBP operates in conjunction with the Group's annual bonus plan. The number of ordinary shares subject to a DBP award will be such number of shares as has a market value equal to the value of the annual bonus deferred into a DBP award. DBP awards take the form of nil-cost options, vest on the third anniversary of the date on which the relevant annual bonus was determined and are normally exercisable until the tenth anniversary of the grant date.
Executive Share Option Plan ("ESOP")
The Group operated a share option scheme during the Period for certain employees under the Executive Share Option Plan ("ESOP"). The different options vest between two years and three years and have an exercise life between three and ten years from grant date. All option schemes are subject to continued employment over the vesting period.
Long Term Incentive Plan ("LTIP")
The Board approved Long Term Incentive Plan 2016 ("LTIP 2016") allows the grant of options to executive directors and senior management of the Group in the form of nil-cost options over ordinary shares in Joules Group plc. The options are exercisable three years after the date of grant subject to achieving certain stretching targets. For the Executive directors and members of the operating board, the target is based on an EPS target in the final year of the relevant performance period, being the financial years ending May 2019 and May 2020 for grants made to date. For other senior management awards the target is based on the cumulative PBT over the three years to May 2019 and May 2020 for the grants made to date. The calculation includes an assumption that 10% of senior managers on the scheme would cease employment before vesting.
Save As You Earn Scheme ("SAYE")
Under the terms of the SAYE scheme, the Board grants options to purchase ordinary shares in the Company to employees who enter into the HMRC-approved SAYE scheme for a term of three years. Options are granted at up to 20% discount to the market price of the shares on the day proceeding the date of offer and are exercisable for a period of six months after completion of the SAYE contract.
14. DIVIDENDS
27 May 2018 28 May 2017
Pence GBP000 Pence GBP000
per share per share
Interim dividend paid in the financial year 0.7 612 0.6 525
Approved paid after the financial year 1.2 1,050
Final dividend proposed, not accrued, payable
subject to approval at AGM 1.3 1,138
Total 2.0 1,750 1.8 1,575
The Directors are proposing a final dividend of 1.30 pence per share with a total value of GBP1,137,540 (2017: 1.20 pence per share with a total value of GBP1,050,008). This dividend has not been accrued in the consolidated statement of financial position and will be put for approval at the AGM on 27 September 2018.
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 KZLFLVDFZBBZ
(END) Dow Jones Newswires
July 25, 2018 02:01 ET (06:01 GMT)
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