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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Koovs Plc | LSE:KOOV | London | Ordinary Share | GB00BHB22S55 | 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% | 2.90 | 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
TIDMKOOV
RNS Number : 7544F
Koovs PLC
17 July 2019
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 ("MAR"). Upon the publication of this announcement, this inside information is now considered to be in the public domain.
17 July 2019
Koovs plc
("Koovs", the "Company" or the "Group")
Trading Update for FY 2020 & Preliminary results for the year ended 31 March 2019
104% improvement in FY 2020 Q1 trading year on year
Koovs plc (AIM: KOOV), the Western fashion experts for online Indian consumers, provides a Trading Update for FY 2020 and announces its Preliminary Results for the year ended 31 March 2019 (the "Year"). We set out below (A) highlights from our Preliminary Announcement and Trading Update for FY 2020; and (B) our Preliminary Announcement.
(A) Highlights and Trading Update for FY 2020
The Board is pleased to report that the recovery experienced in the final three months of the last financial year has continued into the first three months of the current financial year with Gross Order Value up 104% ahead of the same period last year at GBP4.82m. This, coupled with the Future Lifestyle Fashion Limited ("FLFL") subscription agreement secured at an average price of 15 pence per share, ensures the business is well positioned to deliver on its growth strategy.
Lord Waheed Alli, Chairman of Koovs, commented: "Koovs is firmly back on track evidenced by the 104% growth experienced in Q1 trading. We are excited about the rest of the year, as we continue to invest in both marketing and our product range."
Financial Highlights FY2019
Hot Features
Premium
-- Gross Order Value ("GOV") stood at GBP12.8m (FY 2018: GBP14.8m)
-- Net Sales were GBP7.5m (FY 2018: GBP9.6m)
-- Adjusted EBITDA loss* reduced to GBP12.9m (FY 2018: GBP13.9m)
-- Trading margin increased to 18% (FY2018: 14%)
-- Web traffic 75.9m (FY 2018: 65.9m)
-- Conversion rate 1.1% (FY 2018: 1.4%)
-- Total of GBP22.1m new funds raised during the period
Operational Highlights FY2019
-- Strategic partnership initiated with FLFL -- Technical services contract signed with FLFL -- 4 year media for equity deal with HT Media
Post Year End
-- Subscription agreement with FLFL to invest additional GBP10.5m -- Q1 FY2020 GOV increased by 104% to GBP4.82m (Q1 FY19: GBP2.36m) -- Q1 FY2020 Trading margin increased to 21% -- Q1 FY2020 Web traffic growing strongly, up 148% to 26.35m (Q1 2019: 10.6m) -- Q1 FY2020 Conversion rates recovering to 1.3%
Current Trading
Current trading is in line and on target to deliver market expectations for FY2020.
Mary Turner, Koovs' Chief Executive Officer, added: "Building on the success in the last three months of FY2019 we expect to return to significant full year growth in FY2020 with a focus on securing a continued improvement in trading margins. The recent funding secured from FLFL will fuel our ability to continue to invest in marketing to increase traffic levels, together with an expansion in our product offering, designed to lift conversion rates."
Future Market Communications
In order to continue to build the depth of investors' understanding of the business, the Board intends to provide the market with quarterly trading updates over the next 12 months to the end of 2020; these updates will be in addition to the regulatory requirement to report, inter alia, its interim and full year results.
*Loss before interest, tax, depreciation, amortisation and non-cash share-based payment charges.
(B) Preliminary announcement - results for the year ended 31 March 2019
Financial Highlights
-- Revenue increased to INR590m/GBP6.4m (FY 2018: INR543m/GBP6.4m) -- Adjusted EBITDA loss* at INR1,183m/GBP12.9m (FY 2018: INR1,183m/GBP13.9m) -- Gross loss reduced to INR49m/GBP0.5m (FY 2018: INR147m/GBP1.7m) -- EPS loss reduced to 5.3p (FY 2018: loss of 8.3p) -- Total of GBP22.1m new funds raised during the period
Operational Highlights FY2019
-- Strategic partnership initiated with FLFL -- Technical services contract signed with FLFL -- 4-year media for equity deal with HT Media
The Group's annual report and accounts will be posted to Shareholders in the coming days, and will be available shortly on the Group's website.
*Loss before interest, tax, depreciation, amortisation and non-cash share-based payment charges.
For further information please contact:
Koovs plc
Mary Turner / Robert Pursell
Tel: +44 (0) 20 7151 0170
Strand Hanson Limited (Nominated & Financial Adviser)
James Harris / Ritchie Balmer / Georgia Langoulant
Tel: +44 (0) 20 7409 3494
Whitman Howard Limited (Corporate Broker)
Nick Lovering (Corporate) / Mark Murphy (Institutional Sales)
Tel: +44 (0) 20 7659 1234
Media enquiries and publication images:
Newgate Communications
Adam Lloyd / Fiona Norman
Tel: +44 (0)20 3757 6880
Koovs@newgatecomms.com
The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No.596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.
Notes to Editors:
About Koovs
-- Koovs is a UK business that has built KOOVS.COM into India's leading online western fashion destination. Koovs' fashion brands are designed and developed in London exclusively for the young Indian fashion market where two thirds of the population are under the age of 35. It has 2.7m online social followers.
-- The tremendous potential of the Indian fashion market has been further underlined by the Strategic Partnership with Future Lifestyle Fashions Limited (FLFL) which is part of Future Group - one of India's leading retail businesses and one of the top 10 fashion apparel companies in the world.
-- Koovs' proprietary online technology platform powers KOOVS.COM and is a proven market-leading success in India's rapidly expanding e-commerce market. The capability and scalability of the platform has been recognised by FLFL which has contracted Koovs to build and maintain the online platform for its Brand Factory retail format. For more information, please visit www.koovs.com and follow us on Facebook, LinkedIn, Twitter @mykoovs and Instagram @koovsfashion.
CHAIRMAN'S STATEMENT FOR THE YEAR TO 31 MARCH 2019
Dear Shareholders,
The last two years have been especially challenging for Koovs. The disruptions in India caused by demonetisation and the introduction of the Indian Goods and Sales Tax (GST) in July 2017 were a significant brake on Koovs online retail activity levels throughout FY18 and into the first half of FY19. Despite a good recovery in Gross Order Value (GOV) and trading margin in the second half of the year, the results for FY19 have reflected these regulatory challenges.
In response to these challenges, the Board performed a review of the Group's operations in FY18 to identify medium-term objectives to support our future growth plans. As a result, the Board took the decision to reset the Group's objectives, targets and five-year plan for growth with a view to securing new investment to fund the plan.
In many respects and despite the disruptions in India, FY19 has been an encouraging year for Koovs: it has seen new funds of GBP22m (excluding the cost of funds raised of GBP1m) successfully injected into the business with commitments for a further GBP23m; the strategic relationships with both Future Lifestyle Fashions Limited ("FLFL") and HT Media Limited ("HT Media"); the Technical Services contract signed with FLFL and the recovery in GOV and trading margin in the second half of the year. With the green shoots of recovery firmly established, there is a clear opportunity to capitalise on the platform we have built to deliver positive growth in shareholder value over the coming years.
Successful fundraising puts Koovs back on track
We secured funding from key strategic and institutional investors: FLFL, part of Future Group, one of India's largest retail groups, and HT Media, owner of the Hindustan Times and one of India's largest and most influential media companies. The funding has put Koovs back on track and we are now able to focus our efforts on the day-to-day operations and deliver on our strategy by resuming our growth plan over the coming years. We are delighted by the support we have received from investors who share our vision.
Strategic relationships
The strategic relationship with FLFL represents a transformational deal for Koovs. Since the end of FY19 FLFL have invested a further GBP3.7m and have subscribed for an additional investment of GBP6.8m. The relationship is expected to deliver synergies across the value chain from manufacturing and distribution to market reach, marketing and customer engagement. Current projects underway include:
-- Provision of technical services (in FY19 and FY20) to Brand Factory including an ongoing maintenance contract (FY20);
-- Koovs concessions opened in three Central stores in Delhi over the period. We are now rolling out this
-- concession model to another five stores in Bangalore (two stores), Hyderabad, Pune and Noida;
-- Studio Services agreement to use Koovs studio facilities to shoot catalogue images and videos for up to 1,000 products per month; and
-- An agreement to sell a curated selection of FLFL products on the Koovs online platform.
The strategic relationship with HT Media gives Koovs the option to acquire an additional three GBP6.0m tranches of media from HT Media. Each of these tranches, if called by Koovs, will be funded by HT Media investing a further GBP4.3m per tranche in the Group. The agreement will give the Group premium exposure with which to further build the Koovs brand and will provide the business with an important platform to support future growth in the world's fastest growing economy.
Technology Platform delivers new opportunities for growth
Koovs proprietary online technology platform powers Koovs.com and is considered a market-leading success in India's rapidly expanding e-commerce market. The capability and scalability of the platform has been recognised by FLFL which has contracted Koovs to build and maintain the online platform for its Brand Factory retail format. Under the terms of the contract, Koovs received one-off fees of $1.05m and $0.35m respectively for the development and integration of the Brand Factory online platform and an ongoing maintenance fee for an initial term of 24 months. ($1.05m revenue has been recognised in FY19, $0.35m will be recognised in FY20 and maintenance revenue will be recognised in FY20).
Leading customer engagement and market recovery
During FY19, the retail market in India was recovering from the impact of demonetisation and adoption of GST. As a result, many online retailers and marketplaces discounted deeply to drive sales and clear legacy stocks. In this climate, I am pleased that Koovs purposefully followed a different strategy to focus on driving higher value sales, operational efficiency and customer satisfaction rather than volume, supporting our position as an exciting, aspirational and trusted brand.
Bearing in mind this continued challenging environment experienced in the first half of FY19, our primary focus was to conserve cash by reducing marketing and stock levels, with management's time primarily spent securing new funding to support Koovs growth. Despite this, we were able to maintain our brand awareness, increase customer engagement through our social media channels, and deliver market-leading customer satisfaction, which the Board strongly believes demonstrate the resilience and strength of the Koovs brand.
Our strategy to drive higher sales value has paid off and I am pleased to report a positive increase in trading margin from 14% to 18%. We have also continued to deliver a fantastic service for our customers, being named for the second year running by Forrester Research as the No.1 online retailer for customer experience in India. Our marketing strategy to focus on social media, exclusive content and smart partnerships with Indian celebrities has proved highly cost effective and has established Koovs as the leader in customer engagement - with 2.6m social media followers, more than three times the engagement of our nearest competitor.
The Group was able to rebuild stock levels in the second half of the year and resume its marketing activities which delivered encouraging signs of recovery with Gross Order Value ("GOV"- value of orders placed) increasing to GBP8.0m, 65% ahead of the first half, delivering total GOV of GBP12.8m for FY19.
Outlook
Koovs is now back on track, and I am extremely excited about the Company's growth prospects for the years ahead. I would like to take this opportunity to thank all our colleagues in the UK and India for their continuing hard work, dedication and enthusiasm.
Waheed Alli
Chairman
16 July 2019
STRATEGIC REPORT
THE MARKET
'India is coming online at an unprecedented rate' Google, Year in Search - India 2018
India has continued to impress with its digital expansion. Already the second largest country globally of internet users with 560m people connected and penetration at 40%, according to Google's Year in Search Report India is coming online at an unprecedented rate, adding an average of 40 million new users a year.
According to Bain & company
'India is at a critical stage in its digital journey, with substantial growth potential in usage and transactions.'
Demographically India's penetration is 55% in urban areas v 15 % in rural with 33% male and 22% female. With significant potential for growth, India's online transactors are spending
$224 per person per year, which is 1/10th of China's ($1862). In fact, 68% of those buying products online are under 35 with 90% of transactions currently from the urban pocket.
Google highlights three key trends:
'Bharat is going online - Fastest Growth is now in Non-Metros'
Where growth has so far been primarily driven by adoption in the top cities, the fastest growth is now being seen in non-metro areas and this is being driven by smartphone adoption, says Google. This marks a step change in online adoption in India and is a significant opportunity for further ecommerce reach and growth.
Redseer Research also highlights online fashion growth for Tier2+ city consumers with growth of 66% in Q1 2019 calendar year and spend expected to reach $10bn run rate by the end of 2019. This would be a landmark indeed, putting the online fashion market within touching distance of 10% share of overall fashion spend.
'Online video is a great success story in India - expected to reach 500m users in 2020'
Driven by smartphones, where the average smartphone user is viewing over 36 minute of online video a day, 'Video is already shaping how customers gather information and how they shop.'
In fact, India now tops the world in hours spent on video streaming apps spending 47bn hours a year, ahead of Brazil at 22bn hours - App Annie's 'State of Mobile 2019 Report'.
Mobile - a critical enabler - Mobile data use in India has now reached 8Gb per month - equivalent to that of mature mobile markets according to Bain, with major network operator Reliance Jio stating that their 280m customers use on average 10Gb of data a month.
'Omnichannel shopping - the growing confluence of online & offline'
Online and offline are now converging to provide a great customer environment. 55% of customers say they have used online video while shopping in store. This is a great indicator for retailers who are investing in digital marketing to get market advantage and embracing the blended online-offline world.
Online Fashion Growth
Fashion remains a dynamic and fast-growing category. While online retail is growing at 27% CAGR, apparel online is growing even faster at 30% CAGR and is forecast to reach $14.7bn in 2022. In this space Koovs addressable market for online Western fashion is expected to achieve $6.8bn in the same timeframe. (Hardman & Co 2018)
Strategy
Our goal is to be the No.1 online western fashion destination in India.
Our Strategy is to build the Koovs business by:
-- Amplifying the Koovs Brand; -- Expanding our Product Range; -- Engaging our audience through Content; -- Extending our Reach; and -- Maximising Technology to empower our customers and give Koovs a competitive advantage.
This strategy has already delivered a strong and unique position in the Indian market where Koovs is building on our reputation as the brand that is: Famous for Fashion, offering Great Choice & Affordable Style, benchmarked as No. 1 for Customer Experience, noted for 1(st) Class Content & Social Media Engagement, with a seamless Mobile-First Technology experience.
For the second year running, in November 2018 Koovs was named No.1 in India for customer experience in online retail by Forrester Research, ahead of Amazon and Flipkart. We were voted one of Asia's Most Trusted Brands by IBC Corporation's Asia Awards in August 2018, and with 2.6m social followers, we remain the recognised leader for engagement, winning the prestigious SAMMIE award for Best Social Media Brand in Fashion Apparel also in August 2018.
FY19 Objectives
Our objectives during FY19 were to conserve cash and to secure new funding that would support Koovs growth. In H1 FY19, we successfully secured GBP22m of funds with commitments for a further GBP23m to deliver on the Group's ambitions to achieve scalable growth over the coming years.
During the year, the Board has demonstrated its experience and expertise, taking the decisions necessary to protect the Koovs brand and to conserve resources during a period of turmoil caused by demonetisation and the implementation of Goods and Services Tax (GST); this included reducing marketing costs and stock levels. In this climate, Koovs purposefully followed a strategy to focus on driving higher value sales, operational efficiency and retain its premium position. As a result, and despite a challenging retail environment, Koovs GOV stood at GBP12.8m and trading margins increased from 14% to 18% for FY19. Revenues increased from GBP6.35m to GBP6.43m, a 9% increase at a constant exchange rate, with a reduction in gross loss from GBP1.72m to GBP0.53m. We were also able to maintain brand awareness, increase customer engagement through our social media channels, and deliver market-leading customer satisfaction, demonstrating the resilience and strength of Koovs, as well as supporting our position as an exciting, aspirational and trusted brand.
Strategic Investment
The calibre of the new strategic partnerships with both FLFL and HT Media, over the period, is testament to the strength our brand has in India. The new funding has put Koovs back on track, allowing management to refocus its efforts on the day-to-day operations and resume its growth plan over the coming years.
HT Media, one of India's largest media companies and owner of the Hindustan Times - announced their media-for- equity investment on 22 August 2018, worth up to GBP17.1m over four years, of which GBP4.3m was invested in FY19.
FLFL, part of Future Group, one of India's largest retail groups, invested GBP5.8m in July 2018 and subscribed for a further GBP10.5m in FY20 (of which GBP3.7m has already been received).
Our relationship with FLFL was further strengthened following the appointment of Avni Kishore Kumar Biyani, a director of FLFL, as Non-Executive Director of Koovs with effect from 1 January 2019.
The strategic partnership with FLFL represents a rewarding deal for Koovs and is expected to deliver synergies across the value chain from manufacturing and distribution to market reach, marketing and customer engagement.
In addition to the strategic investments, directors and other investors invested a further GBP12m in July 2018.
Developing Strategic Synergies with FLFL
Since completing the first stage of FLFL's investment in Koovs, both companies have moved quickly to leverage synergies and opportunities for both businesses.
In October 2018, Koovs was able to launch its first physical retail spaces with Koovs Private Label concessions in three of FLFL's Central department stores in New Delhi. We now have a further five stores scheduled in Bangalore (2 stores), Hyderabad, Pune and Noida in H2 FY20.
At the same time, Koovs has been integrating high profile global brands like Lee Cooper and Converse, licenced exclusively to FLFL in India and signature house brands, including Cover Story and Indigo Nation, to enhance the brand offering on Koovs.com while retaining a strong trading margin.
In return, Koovs is already providing technical and marketing services to FLFL, with a $1.4m technical services contract to build and support (for a period of 24 months) FLFL's first ecommerce platform, based on Koovs proven and market-leading microservices platform, for the Brand Factory retail format. We also signed an agreement in December 2018 to hire the use of Koovs Studio Services for fashion photography and video for up to 1,000 products a month.
Having made significant progress already, Koovs and FLFL will continue to develop new opportunities and maximise synergies to benefit both businesses.
Strategic Highlights
Brand - Famous for Fashion
In FY19, we have continued to build and amplify the Koovs brand and brand position as Famous for Fashion with India's youth.
While H1 FY19's marketing spend was significantly reduced due to cash conservation, highly targeted digital and social marketing maintained high brand visibility with our target audience. By
promoting the Koovs app extensively through our digital campaigns and a new execution of the highly successful 'Step into Koovs' campaign, Koovs is recognised as the brand offering a seamless mobile customer experience and a lifestyle choice to enjoy fashion and life on the go.
Koovs was named one of Asia's Most Trusted Brands by IBC Corporation's Asia Awards in August 2018 and was rated No. 1 for Customer Experience for the second year running by Forrester in November 2018 and noted for 1st Class Content & Social Engagement, we have also further advanced our position as the Fashion Authority by providing exclusive, rich, relevant and current fashion editorial to inform, inspire and encourage customers to wear the latest trends with confidence.
As a result of our successful fundraising, in August 2018 Koovs also signed a strategic four-year media for equity deal with existing investor HT Media, which ensures we can continue to build the Koovs brand strategically and cost effectively through HT Media's key channels over the next four years.
Following the HT Media deal and with the new transformational investment by FLFL announced in July 2018, Koovs is already maximising opportunities for the brand, launching the Koovs Private Label in FLFL's Central retail department stores.
Products - Great Choice & Affordable Style
Design authenticity and exclusivity are key to Koovs position as the authority in affordable western fashion. Koovs exclusive Private Label continues to be the flagship brand on Koovs.com, leading
in prominence and generating 42% of sales.
In a market characterised by deep discounting, Koovs decision to protect the brand and retain premium quality and price, has helped to deliver a significantly improved trading margin of 18%, an increase of 29% on the 14% delivered in FY18. In H2 FY19, after successfully securing new funding and post cash conserve, product range expansion was resumed, boosting Q4 FY19 Gross Order Value by 67% to GBP4.4m.
On Koovs.com, the curated range of famous brands represents 58% of sales, with many lines exclusive to us. The choice of brands has been further enhanced with the addition of some of FLFL's premium licenced global brands such as Converse and Lee Cooper, as well
as FLFL's own leading brands, Cover Story and Indigo Nation.
Designer Collaborations
Kunal Rawal X Koovs, our third statement menswear designer collaboration, was launched in November 2018. The collection featured the young, versatile and highly wearable combination of traditional long-line silhouettes with contemporary streetwear that has proved very popular with Rawal's celebrity Bollywood clients.
Most recently in FY20, Koovs has also launched two new high profile collaborations as the Style Partner for blockbuster young, rom-com Student of the Year 2 in May 2019 and a stunning new designer collaboration, Shivan & Narresh X Koovs featuring the duo's acclaimed exotic, print inspired designs.
Content - 1(st) Class Editorial & Social Media
Creating the right content and two-way engagement is essential to convince customers our brand is credible and relevant to them.
With social media followers reaching 2.6m and visits to Koovs.com showing year on year growth of 133% in Q4, editorial content and social media campaigns have been more successful than ever in FY19. Across the year, eight campaign reached a total of 425m people, engaging with 12.5m motivated social fans.
Seven established and up and coming Bollywood stars Taapsee Pannu, Huma, Ahaan and Alanna Panday, Diana Penty, Akhil Akkinen and Rakul Preet Kaur brought their personal style to our Koovs collections with fashion diaries from London, Rome and Dubai. #KoovsLondonDiaries alone reached 92m audience, engaging with 3.7m and we also had our most successful ever User Generated Campaign (UGC) - #everystreeturcatwalk delivered 102m reach and 2.9m engagement. As a result, Koovs social media excellence was recognised in August 2018 with a prestigious SAMMIE award for Best Social Media Brand in Fashion Apparel.
May 2019 New Movie Collaboration
Our most recent collaboration in FY20 as the Styling Partner with blockbuster rom-com film Student of the Year 2, with three of Bollywood's hottest young stars - Tiger Shroff, Tara Sutaria and Ananya Panday has featured across Koovs social channels.
Extend Reach - To New Customers & Retail Spaces
In collaboration with our strategic partner and investor FLFL, Koovs Private Label launched retail concessions in FLFL's Central department stores. Three concessions were opened in Delhi stores commencing in October 2018 with an additional five new stores in Bangalore (2), Pune, Hyderabad and Noida due to open in H2 FY20. This move not only takes the Koovs brand into physical retail for the first time, it also gives our customers more options in how they can choose to browse, shop and interact with our brand.
Mobile-First, Market-Leading Technology
Koovs target young customer in India is technology savvy and an avid smartphone user, living life on the go. With over 75% of traffic and transactions delivered via our app and mobile site, our technology strategy continues to deliver on customer engagement and satisfaction with the Koovs App now a prominent part of our marketing campaigns.
Koovs Platform
The Koovs market leading microservices platform was chosen by our investor and India's largest retail operator FLFL to provide the technology platform for its first move into ecommerce with the Brand Factory retail format. The deal, announced in March 2019, represents a $1.4m Technical Services Contract and proves our potential to license Koovs platform and technology expertise.
Trading Performance & KPIs
Trading Performance
For the first seven months of the year trading was impacted as stock levels and marketing were reduced to ensure the Group had the cash runway required to secure funding. With funding received and the Group back on track, the final quarter of the year has produced excellent results, with further improvements in trading margin and Gross Order Value up 67% to INR405m / GBP4.4m compared to the previous year. Group revenues, including the sales of Technical and other services increased by 9% from INR543m / GBP6.4m to INR 590m / GBP6.4m. Whilst the impact of the first seven months of trading has caused an overall decline in GOV, Net Sales and Conversion, the performance in Q4 together with improvements made during the year to products, technology and supply chain have increased the full year trading margin by 7% from INR114m to INR123m. This improvement in underlying margins along with the acceleration of sales and traffic in Q4 provide a strong platform for the return to full year growth.
Key performance indicators
The Group supplies branded fashion garments and accessories for exclusive distribution through the Koovs.com website including international fashion brands, iconic British high street brands and Koovs Private Label product designed by a talented team based in London.
We monitor the Group's performance in a number of ways including assessing the performance of Koovs.com, which, although it is operated by Marble E-retail Private Limited ("Marble"), an independently owned and managed company, reflects the performance of the products and marketing managed by the Group.
Over the past year, compared with the previous year, we have achieved the following:
Year ended Year ended
Definition March 2019 March 2018 Movement
Gross order
value* Value of orders placed INR1,178m/GBP12.8m INR1,259m/GBP14.8m -6%/-13%
Gross order value less
Net sales* returns, less tax INR691m/GBP7.5m INR817m/GBP9.6m -15%/-21%
Visits to the
site* Website traffic 75.9m 65.9m -+15%
% of website visits
Conversion*(1) that place an order 1.1% 1.4% -17%
Trading margin* See note below INR123m/GBP1.3m INR114m/GBP1.3m +7%/+0%
Trading margin Trading margin as %
%* of net sales 18% 14% +28%
Wholesale revenue of
Revenue Koovs plc INR590m/GBP6.4m INR543m/GBP6.4m +9%/+0%
Loss before interest,
tax, depreciation, amortisation
Adjusted EBITDA and non-cash share-based
Loss payment charges INR1,183m/GBP12.9m INR1,183m/GBP13.9m +0%/+7%
Loss before
tax Reported loss INR1,423m/GBP15.5m INR1,312m/GBP15.3m -8%/-2%
*in relation to the Koovs.com website and non-IFRS measures.
Note: The Group gross margin reported in these financial statements
is the margin generated on sales of product to Marble, the operator
of the Koovs.com website. Due to foreign direct investment rules
Koovs India cannot currently ship directly to the end consumer. Trading
margin is the implied gross margin that would be reported in the
Group's accounts if Koovs India were able to ship products directly
to the end consumer, and is a key performance indicator of the Group.
(1) Conversion rates have increased to 1.3% in Q1 FY20
To assist UK-based readers of the financial statements, translations into GBP (GBP) have be supplied on a memorandum basis to allow a clear understanding of the results and financial position of the business. The memorandum information has not been audited and does not form part of the financial reporting of the Group representing, as they do, simple translations of the Rupee information.
Outlook
The Indian consumer market presents a huge opportunity as the fastest growing major world economy in a digitally-driven democracy. The ecommerce market is still in its early stages and is considered the last big world retail market to move online. The opportunity for growth is significant with major global players like Amazon, Walmart, eBay and Facebook investing in India. Recent forecasts show the ecommerce market growing from $24bn in 2017 to $84bn in 2021 and $200bn in 2026. Online fashion is expected to grow from a $4bn market in 2017 to a $15bn market by 2022.
Koovs is an established brand with award-winning customer experience and is well positioned to take the lead in growing the online western fashion category, becoming the western fashion experts for online Indian consumers.
This is already evidenced by the success of our social media campaigns with 2.6m social followers and the highest levels of content engagement in the industry.
Building on the success in the last three months of FY19 we expect to return to significant full year growth in FY20 with a focus on securing continued improvement in trading margins. The recently secured funding will provide investment in marketing to increase traffic levels, and an expansion of the product offering, lifting conversion rates.
Current trading is in line and on target to deliver market expectations for FY20.
Finance Review
The financial results of the Koovs plc Group in this report cover the year ended 31 March 2019.
The Group's principal activity is that of supplying branded fashion garments and accessories for sale by a third party through a branded website principally in the Republic of India.
Financial results
Revenue and gross loss
The Group achieved revenue of INR589.9m/GBP6,427k (2018: INR543.2m/GBP6,350k) during the year from the wholesale of fashion garments and accessories, and the provision of technical and studio services. Gross loss on this revenue was an improvement on previous years at INR48.8m/GBP532k (2018: INR147.0m/GBP1,718k).
Operating expenses
Operating expenses comprise the costs of the design and merchandising team in the UK, the creative, content, marketing and IT teams in India, infrastructure costs, marketing expenditure and corporate costs. Altogether this amounted to INR1,232.7m/GBP13,431k (2018: INR1,100.0m/GBP12,857k) to give an operating loss of INR1,281.5m/GBP13,963k (2018: INR1,247.0m/GBP14,575k). This includes non-cash share-based payment expenses of INR85.3m/GBP930k (2018: INR52.9m/GBP619k), amortisation and depreciation of INR12.9m/GBP141k (2018: INR11.3m/GBP132k).
Financial income and expense
Financial income comprises of interest receivable in India and amounted to INR25.8m/GBP281k (2018: INR18.8m/GBP220k) and financial expense arises mainly from accrued interest payable on the convertible loan notes and amounted to INR167.4m/GBP1,824k (2018: INR84m/GBP982k). This gave a loss before tax of INR1,423.1m/GBP15,506k (2018: INR1,312.2m/GBP15,337k).
Taxation
Due to the losses generated in the period, and the likelihood that it will be some time before tax losses can be utilised, no deferred tax has been accounted for and therefore there is no tax charge or credit in the current or prior period.
Loss for the period
The loss for the period was INR1,423.1m/GBP15,506k (2018: INR1,312.2m/GBP15,337k). The Indian ecommerce market is still in an early stage and is expected to grow significantly over the coming years. The current scale of the business means that manufacturing volumes are too low to generate a gross profit leading to an overall loss.
Basic earnings per share
Earnings per share amounted to a loss of 4.9 rupees/5.3 pence per share based on the loss attributable to equity holders of INR1,423.1m/GBP15,506k and weighted shares in issue of 293,165,252. The loss per share in the previous period was 7.5 rupees/ 8.3 pence based on the weighted shares in issue of 175,383,691.
Cash flow and funds
Operating Activities
During the year to 31 March 2019 the Group utilised INR1,443.6m/GBP15,729k (2018: INR1,191.2m/GBP13,922k) in operations mainly funding the operating losses of INR1,423.1m/GBP15,506k. This included an increase in working capital of INR256.5m/GBP2,846k for the prepayment of media assets related to the investment by HT Media, excluding which the cash utilised in the year would be INR1,187.1m/GBP12,883k.
Investing activities utilised INR199.0m/GBP2,168k as funds raised were deposited in fixed term accounts to maximise financial income. Financing activities in the year, primarily through the issue of equity, raised INR1,884.7m/GBP20,534k.
As a result of these movements, the net increase in cash and cash equivalents was INR242.1m/GBP2,637k (2018: net decrease of INR146.8m/GBP1,715k). The closing net cash and cash equivalents was INR310.7m/GBP3,447k (2018: INR34.5m/GBP404k). Taken along with the bank deposits the Group had access to INR747.2m/GBP8,289k (2018: INR252.9m/GBP2,766k) at the end of the financial period.
Financial position
At the end of the financial period the net assets of the Group amounted to INR1,331.8m/GBP14,776k (2018: INR716.2m/GBP7,837k). This included INR621.2m/GBP6,892k of goodwill arising from the acquisition of Koovs India. Indian Goods and Services Tax (GST) legislation and its application allow any unutilised input credits to be carried forward for an indefinite period and on a transferable basis. As such, to the extent this legislation remains as enacted and applied, any unutilised GST input credits are recognised as an asset in full in the consolidated statement of financial position.
Principal risks and uncertainties
There are a number of market and business risks that could affect the Company and the Group. We set out below the Group's view of the main risks which, should any materialise, could materially adversely affect the Group's business, financial condition and returns to shareholders. Further risks and uncertainties which are not presently known to the Directors at the date of this document, or that the Directors currently deem less significant, may also have an adverse effect on the business, financial condition or results of the Group.
Funding
The Group's business plan envisages a period of investment in marketing and product in order to grow the business to significant scale and through to profitability.
During the financial year total funding of GBP22m has been raised. GBP12.0m from investors and directors; GBP5.8m through a strategic investment from FLFL, part of Future Group, a major retailer in the Indian market; and GBP4.3m through a media for equity deal from HT Media Ltd, part of the Hindustan Times group of companies, a major media company in India. On 7 May 2019 FLFL signed a subscription agreement to invest further GBP10.5m in two tranches, the details of which are given below. HT Media Ltd have conditionally agreed to provide an additional GBP12.9m of equity for media to be drawn down in three tranches when required by the Company.
It should be noted that since 31 March 2019, the Group has received GBP3.7m of the GBP10.5m further strategic investment from FLFL ("First Tranche"). An additional investment from FLFL of GBP6.8m, the ("Second Tranche"), for 24,010,937 compulsorily convertible preference shares instrument (CCPSs) has also been subscribed for subject to receipts of fund, which is expected in several stages within the calendar year. These are convertible on the first anniversary of issue (or at the option of FLFL at an earlier date) into 24,010,938 new Ordinary Shares. The implied investment price is approximately 28.36p per new Ordinary Share, which when combined with the investment into the "First Tranche" implies a blended investment price by FLFL for the full investment of approximately GBP10.5m at 15p per new Ordinary Share. This investment was conditional on the directors receiving the authority from shareholders to issue the CCPS, and this authority was granted at the EGM held on 25 June 2019.
The Board is confident that any additional funding required beyond that referred to above will be secured in due course.
Market and Economic Risks
Economic outlook
The Group's revenue is dependent on the sales by Koovs India to Marble which, in turn, is dependent on the retail sales Marble achieves, so the Group is sensitive to the impacts of the general economic climate in India and on the population's propensity to spend on fashion clothing and accessories. Global economic factors may impact the costs of inputs such as cotton and fuel and the Group's ability to pass on such cost increases may be limited. The Board monitors projections for the Indian economy on a regular basis and amends plans based on the expected growth.
Market and competition
The retail fashion industry and market are subject to changing customer tastes. The Group's performance is dependent upon effectively predicting and quickly responding to changing consumer demands and translating market trends into saleable merchandise. Internet fashion retailing is global and highly competitive. Any failure by Koovs.com to compete effectively with bricks and mortar retailers and other internet retailers may affect the Group's revenue. The Group uses third parties to provide assessments of the developments of fashion in the global markets and designers attend international trade shows to provide direction and inspiration.
Suppliers
The Group make arrangements with manufacturers for the supply of products designed by the Group. The ability to source products promptly at competitive prices and of an appropriate quality is key to the success of the business and while there is a broad range of potential suppliers and well-developed competition in the market, the Group is dependent on being able to find appropriate manufacturing capability for its products in order to meet delivery, quality and price expectations. The Group uses a broad range of suppliers within the Indian market and also internationally and ensures that there is no concentration of supply. The employment of experienced sourcing experts ensures access to a broad range of manufacturing capability.
Foreign country and political risk
Most of the Group's personnel, operations and other assets including Koovs India's warehouse, all inventory and computer servers are located in India and, consequently, the Group is subject to changes in regulations or market conditions in that country. With the majority of operations located in India, local management maintain close monitoring of local developments and amend plans as necessary.
Financial risks
Interest rate risk
The Group's exposure to interest rate risk arises from the fluctuations in the 3 month sterling LIBOR rate impacting the interest payable on the Convertible Loan Notes, and rate of interest income or charges on cash and cash equivalent balances. In the period under review, the Group has operated in a net cash position. UK interest rates continue to be very low and therefore the potential adverse interest rate risk in the UK is very low. Interest rates in India are in the region of 7.0% and the majority of the Group's cash is held in Indian Rupees in India. There is therefore a potential adverse interest rate risk affecting the interest income generated in India. No interest rate hedging is in place. The bank deposits are made for a variety of tenures to balance liquidity and security of interest generation.
Currency risk
The Group operates in the United Kingdom and India. Following the acquisition of Koovs India, all revenues and the majority of costs are denominated in Indian Rupees. However, around 30% of the Group's overheads are incurred in Sterling and therefore the Group results are susceptible to fluctuations as a result of changes in exchange rates. No foreign currency hedging is in place to mitigate this risk.
Credit and customer risk
The Group's revenues arise predominately from invoices for goods to a single customer. As Marble is currently the only channel through which Koovs India's products are sold to consumers, the Group's revenue is dependent upon the relationship with Marble and upon the success of Marble in servicing its customers, delivering products as promised, recovering payment from its customers and maintaining high levels of customer service. The Group has considered the credit risk associated with the customer and has assessed the credit worthiness of the customer to be good. The Group minimises the risk through a requirement for prompt, monthly payment of invoices issued to which the customer is committed and has demonstrated consistent adherence.
Liquidity risk
Liquidity risk is managed through the assessment of short, medium and long-term cash flow forecasts to ensure the adequacy of funding in order to meet the Group's working capital requirements. Where a shortfall in funding is identified the Group will look to meet this shortfall though a variety of funding options including but not limited to the issuing of new equity and convertible debt.
Other risks
Technological risks
The Group is dependent on its IT infrastructure and any system performance issues (for example system or infrastructure failure, damage or denial of access) could seriously affect our ability to trade. The infrastructure has been designed specifically for robustness, flexibility and scalability and these objectives form a core part of the IT development strategy.
Warehouse disruption
Any disruption to the Group's warehousing facility due to physical property damage, breakdown in warehouse systems, capacity shortages or poor logistics management could lead to significant operational difficulties in order fulfilment, which may have a consequent adverse effect on the Group's business. The Group has recruited an experienced logistics manager to oversee these operations.
Intellectual property and content liability
The business of the Group carries with it the risk of intellectual property right infringement. The Group may need to engage in litigation to enforce its intellectual property rights, or to protect itself from third party claims. Our designers are professionally trained to ensure that intellectual property rights are appropriately handled. Competitors' products are regularly monitored and any infringement brought to managements' attention.
Key personnel
The Group depends on the services of its key technical, marketing and management personnel. The Group personnel structure is being developed as the business grows to provide appropriate quality, depth of experience and succession planning.
On behalf of the Board of Directors.
Waheed Alli Robert Pursell Director Director 16 July 2019 16 July 2019
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
for the YEAR to 31 March 2019
MEMORANDUM
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2019 2018 2019 2018
Notes INRm INRm GBP000 GBP000
3 Revenue 589.9 543.2 6,427 6,350
Cost of sales (638.7) (690.2) (6,959) (8,068)
Gross loss (48.8) (147.0) (532) (1,718)
Operating expenses (1,232.7) (1,100.0) (13,431) (12,857)
4 Operating loss (1,281.5) (1,247.0) (13,963) (14,575)
Finance income 25.8 18.8 281 220
Finance expense (167.4) (84.0) (1,824) (982)
Loss for the year before tax (1,423.1) (1,312.2) (15,506) (15,337)
Tax expense - - - -
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Loss attributable to:
Equity holders of the Company (1,423.1) (1,312.2) (15,506) (15,337)
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Loss per share
5 Basic and diluted loss per share INR(4.9) INR(7.5) (5.3)p (8.3) p
All results relate to continuing operations.
Consolidated Statement of COMPREHENSIVE INCOME
FOR THE YEAR TO 31 March 2019
MEMORANDUM
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2019 2018 2019 2018
INRm INRm GBP000 GBP000
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Other comprehensive profit or loss
Items that may be reclassified to
Income Statement
in subsequent periods:
Currency translation differences
from operations
denominated in currencies other
than Rupee -
equity holders of the parent, net
of tax 44.1 (30.5) 480 (356)
Other comprehensive profit or (loss),
net of tax 44.1 (30.5) 480 (356)
Total comprehensive loss for the
year (1,379.0) (1,342.7) (15,026) (15,693)
Total comprehensive loss attributable
to:
Equity holders of the Company (1,379.0) (1,342.7) (15,026) (15,693)
Total income and expense recognised
in the year (1,379.0) (1,342.7) (15,026) (15,693)
All results relate to continuing operations.
Consolidated Statement of Financial Position
AT 31 March 2019
Company ndeg 08166410
MEMORANDUM
31 March 31 March 31 March 31 March
2019 2018 2019 2018
Notes INRm INRm GBP000 GBP000
Non-current assets
Intangible assets 626.4 627.5 6,950 6,866
Property, plant and equipment 22.9 23.8 254 260
Non-current financial assets 8.0 6.8 88 75
Total non-current assets 657.3 658.1 7,292 7,201
Current assets
Inventories 213.1 140.3 2,364 1,536
Trade receivables, other
receivables,
prepayments and other assets 1,037.0 632.7 11,506 6,922
6 Bank deposits 428.5 211.5 4,754 2,314
6 Cash and cash equivalents 338.0 86.8 3,750 949
Total current assets 2,016.6 1,071.3 22,374 11,721
Total assets 2,673.9 1,729.4 29,666 18,922
Non-current liabilities
Loans and Borrowings - (708.2) - (7,748)
Other Long-term liabilities (9.3) (7.9) (103) (86)
Total non-current liabilities (9.3) (716.1) (103) (7,834)
Current liabilities
Short-term borrowings (27.3) (52.2) (303) (572)
Loans and Borrowings (849.0) - (9,419) -
Trade and other payables (456.5) (244.9) (5,065) (2,680)
----- -------------------------------- --------------- ------------------- --------------------- ----------------
Total current liabilities (1,332.8) (297.1) (14,787) (3,252)
Total liabilities (1,342.1) (1,013.2) (14,890) (11,085)
NET ASSETS 1,331.8 716.2 14,776 7,837
Capital and reserves
Equity share capital 332.6 168.0 3,690 1,838
Share premium reserve 7,942.8 6,196.6 88,127 67,799
Convertible debt option reserve 180.5 180.5 2,003 1,975
Other reserves 139.0 11.2 1,543 123
Retained earnings (7,263.1) (5,840.1) (80,587) (63,898)
TOTAL EQUITY 1,331.8 716.2 14,776 7,837
Consolidated Statement of Changes in Equity
FOR THE YEAR TO 31 MARCH 2019
Attributable to the equity holders of
the Parent
Convertible Share
Equity Share debt based Currency Total
share premium option payment translation other Retained Total
capital reserve reserve reserve reserve reserves earnings Total equity
INRm INRm INRm INRm INRm INRm INRm INRm INRm
At 31 March
2017 168.0 6,196.6 - 38.9 (46.8) (7.9) (4,527.8) 1,828.8 1,828.8
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
Loss for the
year - - - - - - (1,312.2) (1,312.2) (1,312.2)
Other
comprehensive
loss - - - - (30.5) (30.5) - (30.5) (30.5)
Total
comprehensive
loss - - - - - (30.5) (1,312.2) (1,342.7) (1,342.7)
Share based
payments
reserve - - - 49.5 - 49.5 - 49.5 49.5
Convertible
debt
option
reserve - - 180.5 - - - - 180.5 180.5
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
At 31 March
2018 168.0 6,196.6 180.5 88.4 (77.3) 11.1 (5,840.0) 716.2 716.2
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
Loss for the
year - - - - - - (1,423.1) (1,423.1) (1,423.1)
Other
comprehensive
profit - - - - 44.1 44.1 - 44.1 44.1
Total
comprehensive
profit or
(loss) - - - - - 44.1 (1,423.1) (1,379.0) (1,379.0)
Equity issue 164.6 1,840.5 - - - - - 2,005.1 2,005.1
Cost of equity
issue - (94.3) - - - - - (94.3) (94.3)
Share based
payments
reserve - - - 83.8 - 83.8 - 83.8 83.8
At 31 March
2019 332.6 7,942.8 180.5 172.2 (33.2) 139.0 (7,263.1) 1,331.8 1,331.8
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
MEMORANDUM GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
At 31 March
2019 3,690 88,127 2,003 1,911 (368) 1,543 (80,587) 14,776 14,776
-------------- --------- --------- ----------- -------- ------------ ---------- --------- --------- ---------
CONSOLIDATED STATEMENT of cash flows
for the YEAR to 31 March 2019
MEMORANDUM
Year to Year to Year to Year to
31 March 31 March 31 March 31 March
2019 2018 2019 2018
Notes INRm INRm GBP000 GBP000
Operating activities
Loss for the year (1,423.1) (1,312.2) (15,506) (15,337)
Adjustments to reconcile loss
for the year
to net cash flow from operating
activities
Depreciation and amortisation 12.9 11.3 141 132
Share based payment 85.3 52.9 930 619
Bad debt expense 5.1 13.6 55 159
Interest income and finance
expense 141.6 65.2 1,543 762
Working capital adjustments:
(Increase)/decrease in inventories (72.7) 47.6 (792) 556
(Increase)/decrease in trade
and other receivables (404.3) 78.1 (4,405) 913
Increase/(decrease) in trade
and other payables 211.6 (147.7) 2,305 (1,726)
----- ---------------------------------- --------- --------- --------- ----------
Net cash outflow from operating
activities (1,443.6) (1,191.2) (15,729) (13,922)
----- ---------------------------------- --------- --------- --------- ----------
Investing activities
Withdrawals/(deposits): original
maturity greater than 12m 1.4 (3.8) 15 (44)
(Deposits)/withdrawals: original
maturity less than 12m (217.0) 234.0 (2,364) 2,735
Purchase of non-current assets (9.2) (19.9) (100) (233)
Interest income received 25.8 18.8 281 220
----- ---------------------------------- --------- --------- --------- ----------
Net cash flow generated (used
in)/from investing activities (199.0) 229.1 (2,168) 2,678
----- ---------------------------------- --------- --------- --------- ----------
Financing activities
Proceeds from issue of shares 2,005.1 - 21,845 -
Costs of share issues (94.3) - (1,027) -
Proceeds from issue Convertible
Loan Notes - 813.4 - 9,507
(Repayment)/increase of short-term
borrowings (24.9) 3.5 (271) 41
Interest and finance expense (1.2) (1.6) (13) (19)
----- ---------------------------------- --------- --------- --------- ----------
Net cash flow generated from
financing activities 1,884.7 815.3 20,534 9,529
----- ---------------------------------- --------- --------- --------- ----------
Net increase/(decrease) in cash
and cash
equivalents 242.1 (146.8) 2,637 (1,715)
Cash and cash equivalents at
6 start of period 34.5 151.8 404 1,774
Exchange differences 34.1 29.5 406 345
----- ---------------------------------- --------- --------- --------- ----------
Cash and cash equivalents at
6 end of period 310.7 34.5 3,447 404
----- ---------------------------------- --------- --------- --------- ----------
NOTES TO FINANCIAL INFORMATION
1. Accounting basis
The financial information set out in this document does not constitute the Company's statutory accounts for the years ended 31 March 2018 or 31 March 2019. Statutory accounts for the years ended 31 March 2018 and 31 March 2019, which were approved by the directors on 16 July 2019, have been reported on by the Independent Auditors. The Independent Auditor's report on the Annual Report and Financial Statements for years ended 31 March 2018 and 31 March 2019 were unqualified and did not for both years contain a statement under 498(2) or 498(3) of the Companies Act 2006 , but for the year ended 31 March 2019 drew attention to a matter by way of emphasis, over going concern.
The statutory accounts for the year ended 31 March 2019 will be delivered to the Registrar of Companies in due course and will be posted to shareholders shortly, and thereafter will be available from the Company's registered office at Fourth Floor York House, 23 Kingsway, London, United Kingdom, WC2B 6UJ and from the Company's website http://www.koovs.com/corporate/financial-reports.
The financial information set out in these results has been prepared using the recognition and measurement principles of International Accounting Standards, and International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 March 2018, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2018. New standards impacting the Group that have be adopted in the annual financial statements for the year ended 31 December 2018 are IFRS 9 Financial Instruments and IFRS 15 Revenue from contracts with customers. Other new standards, amendments and interpretations to existing standards, which have been adopted by the Group have not been listed, since they have no material impact on the financial statements.
2. Going Concern
The financial statements have been prepared on the assumption that the business is a going concern. The Directors have reviewed the Company's and the Group's going concern position taking account its current business activities, budgeted performance and the factors likely to affect its future development, set out in the Annual Report, and including the Group's objectives, policies and processes for managing its working capital, its financial risk management objectives and its exposure to credit and liquidity risks. The Group made a loss for the year of INR1,423million (approximately GBP15,506k), had Net Current Assets at the period end of INR 683.8 million (approximately GBP7,587k) and a Net Cash Outflows from Operating Activities of INR 1,444 million (approximately GBP15,729k). The Group meets its day to day working capital requirements through existing cash resources and had on hand cash, cash equivalents and short-term deposits at the balance sheet date of INR 747 million (2018: INR235 million) and as of the end of June 2019 the Group had INR 607 million (approximately GBP6,922k).
The Directors have reviewed the Group's cash flow forecasts covering a period of at least 12 months from the date of approval of the financial statements, which foresees that the Group will be able to meet its liabilities as they fall due. However, the success of the business remains reliant on the Group achieving an adequate level of sales, driven by an appropriate level of marketing spend. During the next 12 months the forecast level of costs will be unlikely to be covered by the gross profit generated from sales. As such there is a risk that the Group's working capital may prove insufficient to cover such operating activities. In such circumstances, the Group could be obliged to seek additional funding through a placement of shares or source other funding. In the absence of additional funding the Group has the ability to reduce costs to ensure that existing cash resources together with the funding described below are sufficient to enable the Group to meet its liabilities for a minimum of 12 months from the date of this report.
Furthermore, The Group is also dependent on the Group's convertible loan notes not being redeemed, without being replaced by an alternative form of funding - either fresh debt or equity. The terms of this instrument, are set out in Note 19 to the FY18 financial statements, noting that they have recently been extended, until February 2021. As the majority holder of the notes, the Chairman of the Group, in addition now has the right to demand repayment at any time during this term. Whilst not legally binding, the directors have received confirmation from the Chairman that he does not intend to seek their repayment for at least 12 months from the approval of the financial statements.
It should be noted that since 31 March 2019, the Group has raised GBP3.7m (approximately INR333.5m) of strategic investment from Future Lifestyle Fashions Limited (FLFL). Furthermore, an additional investment from FLFL of GBP6.8m (approximately INR612.9m), the "Second Tranche" has also been subscribed for subject to receipt of funds, which is expected to occur in several stages within the calendar year. This investment was conditional on the directors receiving the authority from shareholders to issue the CCPS, and this authority was granted at the EGM held on 25th June 2019.
The directors have concluded that the circumstances set forth above represent a material uncertainty, which may cast significant doubt about the Company's ability to continue as going concern. However, they believe that taken as a whole, the factors described above enable the Company to continue as a going concern for the foreseeable future.
3. Revenue
Revenue recognised in the Income Statement is analysed as follows:
MEMORANDUM
2019 2018 2019 2018
Revenue streams INRm INRm GBP000 GBP000
Sale of fashion garments 505.9 543.2 5,512 6,350
Technical Services 73.9 - 805 -
Concession sales 5.7 - 62 -
Studio Services 4.4 - 48 -
Total 589.9 543.2 6,427 6,350
------------------------- ------------ --------------- -------------------- ----------------------
MEMORANDUM
Primary geographical markets 2019 2018 2019 2018
INRm INRm GBP000 GBP000
India 588.2 512.5 6,409 5,990
UK 1.7 30.7 18 360
------------------------------ ------ ------ -------- --------
Total 589.9 543.2 6,427 6,350
------------------------------ ------ ------ -------- --------
MEMORANDUM
Timing of revenue recognition 2019 2018 2019 2018
INRm INRm GBP000 GBP000
Goods transferred at point in
time 511.6 543.2 5,574 6,350
Services transferred at a point
in time 78.3 - 853 -
--------------------------------- ------ ------ -------- --------
Total 589.9 543.2 6,427 6,350
--------------------------------- ------ ------ -------- --------
The Group's main operation was that of supplying fashion garments at wholesale to third parties.
Operating segments
INR504.2m/GBP5,494k (2018: INR512.5m/GBP6,409) of the Group's revenue is generated by Koovs India through its operations with Marble Pvt.Ltd as a supplier of branded fashion products. INR84m/GBP915k (2018: INR NIL/GBPNIL) of the Group's revenue is generated by Koovs India through the agreement with FLFL; providing, developing, hosting and maintaining an online platform for FLFL's Brand Factory retail format ("Technical Service").
The chief operating decision maker is the Chief Executive Officer who makes resource allocation decisions based on financial statements and operating reports for the entire Group. The Group therefore represents a single cash generating unit and a single operating segment.
4. Operating loss
Operating loss is stated after charging:
MEMORANDUM
2019 2018 2019 2018
INRm INRm GBP000 GBP000
Auditor's remuneration Parent 6.7 7.0 73 82
Auditor's remuneration Subsidiary 2.2 2.3 25 26
Operating lease payments 36.8 27.5 401 322
Depreciation expense 10.2 10.5 110 124
Amortisation expense 2.9 0.7 32 8
Staff costs 372.0 337.2 4,053 3,941
Net foreign currency exchange loss - 0.3 - 3
Marketing cost 563.5 667.4 6,140 7,797
Inventory provision charge - 8.8 - 103
------- -------
All operating expenses are administrative by nature.
5. Earnings per share
Diluted earnings per share is calculated by dividing the earnings attributable to the owners of the Parent Company by the weighted average number of ordinary shares in issue during the period, adjusted for the effects of potentially dilutive share options. The effect of the share options in issue is anti-dilutive and therefore no adjustment has been made to the weighted average shares in issue for diluted earnings per share.
2019 2018
Weighted average shares in issue for basic earnings
per share 293,165,252 175,383,691
Effect of dilutive options - -
Weighted average shares in issue for diluted earnings
per share 293,165,252 175,383,691
Earnings attributable to the owners of the Parent
(INRm) (1,423.1) (1,312.2)
Basic and diluted loss per share - Rupees (4.9) (7.5)
Basic and diluted loss per share - Pence (5.3) (8.3)
6. Cash and bank deposits
MEMORANDUM
2019 2018 2019 2018
Group INRm INRm GBP000 GBP000
Current assets:
Bank deposits with an original
maturity of more than
12 months 1.0 1.0 11 11
Bank deposits with an original
maturity of not more than
12 months 427.5 210.5 4,743 2,303
Cash at bank and in hand 338.0 86.8 3,750 949
Total 766.5 298.3 8,504 3,263
Non-current assets:
Security deposits 8.0 6.8 88 75
Bank overdrafts (27.3) (52.2) (303) (572)
Total cash and bank deposits 747.2 252.9 8,289 2,766
2019 2018 2019 2018
Cash and cash equivalents INRm INRm GBP000 GBP000
Cash at bank and in hand 338.0 86.8 3,750 949
Bank overdrafts (27.3) (52.2) (303) (572)
Total 310.7 34.6 3,447 377
7. Events after the reporting date
On the 7 May 2019 Future Lifestyle Fashions Limited signed a subscription agreement to invest GBP10.5m to provide further funding for the Group business plan. This investment consists of two tranches.
The "First Tranche" was for GBP3.7m for 45,839,063 new Ordinary Shares, and these shares were issued by the directors and admitted to AIM on the 30 May 2019.
The "Second Tranche" consists of 24,010,937 compulsorily convertible preference shares instrument (CCPSs). These are convertible on the first anniversary of issue (or at the option of FLFL at an earlier date) into 24,010,938 new Ordinary Shares. The implied investment price is approximately 28.36p per new Ordinary Share, which when combined with the investment into the "First Tranche" shares implies a blended investment price by FLFL for the full investment of approximately GBP10.5m of 15p per new Ordinary Share. This investment was conditional on the directors receiving the authority from shareholders to issue the CCPS, and this authority was granted the EGM held on 25 June 2019.
On the 16 July 2019 the term of the convertible loan notes was extended from 24 months to 42 months, now ending in February 2021. During this extended period the noteholders, subject to investor majority consent, have the right to serve the company with a redemption notice at their discretion.
8. Cautionary Statement
Koovs plc has made forward-looking statements in this press release, including statements about the market for and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties and business strategies. These statements about future events are subject to risks and uncertainties that could cause Koovs plc's actual results to differ materially from those that might be inferred from the forward-looking statements, Koovs plc can make no assurance that any forward-looking statements will prove correct.
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 FMGMNLVDGLZM
(END) Dow Jones Newswires
July 17, 2019 02:00 ET (06:00 GMT)
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