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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Moss Bros Group Plc | LSE:MOSB | London | Ordinary Share | GB0006056104 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 21.60 | 21.80 | 22.00 | 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
TIDMMOSB
RNS Number : 3317N
Moss Bros Group PLC
24 September 2019
For Immediate Release 24 September 2019
Half Year Results for the 26 weeks ended 27 July 2019
Stores Return to Like-for-Like Growth
Moss Bros Group PLC ("the Group"), the 'first choice for men's tailoring', today announces its half yearly results, covering the period from 27 January 2019 to 27 July 2019.
Financial Headlines
-- Total Group revenue, excluding VAT, of GBP65.4m, 1.4% up on the previous year. -- Like-for-like* retail sales up 2.9%. Store like-for-like sales up 0.6%.
-- Online sales across all platforms grew 20% vs HY1 last year. Online sales from all channels now represents 15.0% of total sales (HY1 2018 12.7%).
-- Like for like* hire sales, which represent only 10.7% of total sales in the half (HY1 2018 12.3%) on a cash taken basis were 14.7% lower.
-- Retail gross margin at 55.8% was -0.7% lower for the half year versus HY1 2018, impacted by channel mix.
-- EBITDA*** for the first half was GBP11.4m after IFRS 16 impact and GBP3.1m before IFRS 16 impact (HY1 2018 GBP3.7m) as detailed in note 9.
-- Adjusted profit before adoption of IFRS 16 and before tax was just above breakeven, -GBP0.2m lower than the same period in the prior year (HY1 2018 GBP0.2m).
-- Loss before tax of GBP2.7m (HY1 2018 loss GBP1.7m) after IFRS 16 impact of -GBP1.1m and after adjusting items of -GBP1.6m as detailed in note 6.
-- The Group has adopted the new IFRS 16 accounting standard effective 27 January 2019 the full effect of which, including the negative GBP1.1m impact on first half profitability noted above, is detailed in note 2.4 (a).
-- Careful cash management delivered a positive cash balance of GBP18.2m at the end of the half (HY1 2018 GBP15.2m), reflecting the strong cash flow generation of the business.
-- Given the ongoing volatile trading environment, the Board is not recommending an interim dividend payment, continuing to give the business maximum flexibility for investment, whilst retaining a strong debt free balance sheet (2018/19 interim dividend 1.5 pence). Dividend Policy will be reviewed throughout the year, considering the overall yield, balanced against the wider investment needs of the business.
Operational Commentary
-- Ongoing investment in product, new customer acquisition and in-store experience has delivered positive results across our retail offering in a market which continues to be extremely challenging.
-- Positive retail like-for-like performance from our physical store estate is encouraging and has been delivered in spite of continued declining footfall. The Group remains active with landlords to ensure we align store occupancy costs with the lower footfall.
-- E-Commerce performance and product distribution via third party marketplaces continues to grow, increasing in importance within our sales mix and broadening the exposure of Moss branded products.
-- The 'Tailor Me' custom tailoring service continued to grow strongly, with order numbers taken during the first half up +48% vs the first half last year.
-- 1 store was relocated during the half and 2 marginal stores were closed. 127 stores were trading at 27 July 2019 (28 July 2018: 130 stores).
Current trading
-- We are seeing results across the first eight weeks consistent with our full price focus and with less old season stock to clear in HY2.
-- We expect to be able to deliver full year results in line with market expectations.
-- Strong positive reaction to new season product and new technical developments; eco suit, stretch, washable suit.
-- Clear and comprehensive strategy in place - transforming the way we operate and investing in key strategic levers to drive long-term performance.
Commenting on the results and outlook, Brian Brick, Chief Executive Officer, said:
"Reflecting on our first half performance, it feels that we are gaining traction in a number of areas. The return to growth of our stores is extremely important to us and we will continue to focus on maintaining this trend. The growth which we have seen in stores is set against a backdrop of lower footfall in our stores than last year in most locations in which we operate. Our conversations with our landlords are active and ongoing to ensure that we can align our store occupancy costs with the lower footfall which we experience, whilst continuing to offer store-centric services such as Tailor Me, our custom made suiting proposition, which continues to go from strength to strength.
Our online sales continue to grow strongly as a result of increased investment in new customer acquisition to our own website www.moss.co.uk and we are also seeing positive momentum of product sold via the Next online marketplace as we expand the product options stocked via that site. Growth of online revenues remains central to our future success and has now reached 15% of our total sales.
As in previous periods, where our stores have underperformed against our expectations, we have decided to impair the carrying value of the related fixed assets, including the right-of-use assets created by the adoption of the new IFRS 16 accounting standard. We believe it is right to continue to be prudent in our assumptions, given the current trading environment, although we continue to always have a detailed action plan in place to improve performance in these stores.
We are acutely aware of the challenges which we face in our Hire business. We plan to invest in a focused way in updated product to ensure that we remain relevant in terms of product offer. We are also actively investigating what newer and fresher hire or rental services can be offered to address changing customer requirements as soon as Spring next year, whilst ensuring that we maintain our market leading position for customers not simply wishing to purchase their formalwear outright.
We have been working hard across the first half to ensure that we have a clear and comprehensive strategy with clarity, unity and focus in place across the business. We are transforming the way in which we operate to better address the needs of our core mainstream aspirational customer group, by styling individuals for 'on form' moments. We have identified and are investing in key strategic levers to drive long-term performance including: an evolution of Moss Bros brand; improving in our buying and merchandising; focusing further on www.moss.co.uk, Marketplaces and Tailor Me; improving store profitability; and managing our Hire business. Given the challenging retail marketplace in which we operate, this will take time and investment to deliver, but with our combined efforts, I am confident that we can return the business to profitable growth across the longer term.
We remain EBITDA** positive and debt free. The board's decision not to recommend payment of an interim dividend has been made in order to continue to offer the business maximum flexibility for investment, whilst retaining a strong debt free balance sheet."
*Like-for-like sales (including VAT) represents financial information for e-commerce and stores open during both the current and prior financial periods and compares 26 weeks against 26 weeks, except for stores refitted in the period, where the period closed for refit is excluded from both the current and prior financial periods. Like-for-like Hire and Tailor Me sales are calculated on cash receipts in the period, before adjustment for the movement in the level of deposits held. See note 4 for a reconciliation of like-for-like sales (including VAT) to revenue as stated in the financial statements
**EBITDA is earnings before interest, tax, depreciation, amortisation after adjusting items. See note 9 for a reconciliation of adjusted profit on ordinary activities before tax to EBITDA
For further information please contact:
Moss Bros Group Plc: 0207 447 7200
Brian Brick, Chief Executive Officer
Tony Bennett, Finance Director
Buchanan: 0207 466 5000
Charles Ryland/Vicky Hayns/Hannah Ratcliff
INTERIM MANAGEMENT REPORT
FOR THE 26 WEEKS TO 27 JULY 2019
OVERVIEW
Moss Bros Group PLC (the "Group") retails and hires formalwear and fashion products for men, predominantly in the UK, with retail sales comprising 89%, and Hire 11%, of total sales during the period. The Group retails own brand and third-party brand menswear through the Moss Bros fascia and hires formalwear under the Moss Bros Hire brand through its mainstream stores. The Group also trades through the premium Savoy Taylors Guild fascia in a small number of stores.
Sub brands of Moss London and Moss 1851 continue to deliver positive results and when combined with our premium Italian cloth ranges and our guest brands we have created an attractive customer offer across a range of fits and price points, underpinning our expertise in formalwear, under the Moss Bros master brand.
The readily accessible 'Tailor Me' customisation service is growing rapidly as we make the service 'mainstream' for our customers. It is a simplified set of bespoke options offering a custom-made suit, ready for collection within 21 days of placing an order, in many cases alongside the same fabric set available to buy or to hire.
REVIEW OF THE FIRST HALF
Adjusted profit before tax from continuing operations for the six months to 27 July 2019 and excluding the impact of the transition to IFRS 16 was just above breakeven (HY1 2018: profit GBP0.2m), resulting from reductions in achieved gross profit rate due to a combination of an increase in lower margin e-commerce and marketplace sales and a reduction in higher gross profit Hire sales.
Following the application of IFRS 16, the reported adjusted loss before tax from continuing operations for the six months to 27 July 2019 was GBP1.1m (HY1 2018 profit GBP0.2m). Reported loss before tax after adjusting items was GBP2.7m (HY1 2018: GBP1.7m loss).
Our store teams remain focused on ensuring that our customers are styled to feel 'on form' for each and every important moment in their lives, whether they choose to buy, hire or 'Tailor Me'. The Tailor Me service continues to grow in importance, with order numbers growing 48% over the first half of 2018 and the value of sales on a cash taken basis now accounting for over 6% of retail sales.
Having previously invested in footfall counting technology, all stores now have real time visibility of the key performance indicators enabling them to maximise performance of the store team and of course to better serve customers, which results in improved store profitability.
Our e-commerce channel performed strongly, underpinned by strong new customer recruitment, improving re-purchase levels, and ongoing development of our customer relationship management and reactivation techniques. Online sales via Next have grown to a level where we have confidence to extend the range offered via that channel for Autumn/Winter 2019. 15% of our turnover now comes online, mainly through our own website, but also via the Next online marketplace. We also continue to develop product for sale on a wholesale basis to ASoS.
Trading performance
Total revenue grew by 1.4% in the six months to 27 July 2019 to GBP65.4m (HY1 2018: GBP64.5m). Like for like* retail sales including e-commerce sales grew by 2.9%. Moss Bros Hire recorded a like for like* sales decrease of -14.7%. Across the Group, total like for like* sales grew 0.4% in the first half.
Retail gross margin rate was down -0.7% for the half, resulting from a combination of increases in the mix of lower margin e-commerce and third-party/platform sales versus own stores. Hire margin rates were down -1.3% as a result of the reduced volume of Hire orders taken during the half combined with the fixed depreciation charge. Overall gross margin rate was 1.0% lower at 57.5% (HY1 2018: 58.5%).
We relocated 1 store during the half in Coventry and closed two marginal stores in Bridgewater Park and Bexleyheath. Moss Bros currently trades from 127 stores (HY1 2018: 130). We will continue to invest in the store portfolio where locations are found to meet our investment criteria, with the majority of investment being targeted into less costly 'visual upgrades'. No stores were refitted during the half 27 July 2019 (HY1 2018: 3). 111 new and refitted stores now trade in the new format.
Within Hire, lounge suiting for the first time proved to be the most challenged part of our offer. Both morningwear, which was underpinned by a strong Ascot and black tie product performed better than loungewear.
Our online performance continues to grow as a result of ongoing investment in technology along with greater investment in customer acquisition and an improved focus on targeted communication with our customers. We continue to benefit from our presence on other online marketplaces, delivering a combined increase in online sales across all platforms of 20% on the previous year. Site visitor numbers continue to improve especially mobile device traffic which now contributes 44% of online sales. Overall online sales now comprise 15.0% of total Group revenue (HY1 2018: 12.7%).
We have taken a prudent view on expenditure during the first half as a result of both the ongoing cost headwinds which we face and the impact of the challenging retail environment. As a result, costs remain tightly controlled with expenditure remaining focused on areas which support our longer-term goals. Where we have delivered occupancy cost savings through landlord negotiations, these have been reinvested in digital customer acquisition channels and in store payroll hours.
*Like-for-like (including VAT) represents financial information for e-commerce and stores open during both the current and prior financial periods and compares 26 weeks against 26 weeks, except for stores refitted in the period, where the period closed for refit is excluded from both the current and prior financial periods. Like-for-like Hire and Tailor Me sales are calculated on cash receipts in the period, before adjustment for the movement in the level of deposits held. See note 4 for a reconciliation of like-for-like sales (including VAT) to revenue as stated in the financial statements.
FINANCIAL SUMMARY
A summary of the key financial results is set out in the table below.
Hot Features
Premium
Key financials 26 weeks 26 weeks
CONTINUING OPERATIONS to to 52 weeks
27 July 28 July to 26 January
2019 2018 2019
GBP'000 GBP'000 GBP'000
Revenue
Retail 58,364 56,514 114,186
Hire 7,007 7,936 14,801
---------------------------------- --------- --------- ------------ --------
Total revenue 65,371 64,450 128,987
---------------------------------- --------- --------- ------------ --------
Gross profit
Retail 32,568 31,936 62,886
Hire 4,996 5,764 11,333
---------------------------------- --------- --------- ------------ --------
Total gross profit 37,564 37,700 74,219
---------------------------------- --------- --------- ------------ --------
Gross margin %
Retail 55.8% 56.5% 55.1%
Hire 71.3% 72.6% 76.6%
---------------------------------- --------- --------- ------------ --------
Total 57.5% 58.5% 59.7%
---------------------------------- --------- --------- ------------ --------
Administrative expenses (***) (2,995) (3,233) (6,109)
Shops' selling and marketing - - -
costs (***)
Shops' selling and marketing - - -
costs classified as exceptional
Shops' selling and marketing
costs total (34,228) (34,330) (68,611)
---------------------------------- --------- --------- ------------ --------
Operating profit 341 137 (501)
---------------------------------- --------- --------- ------------ --------
Other gains and losses 51 61 14
Investment revenues 37 37 76
Interest expense (1,484) - (4)
Adjusted profit before tax (1,055) 235 (415)
---------------------------------- --------- --------- ------------ --------
Adjusting items (1,596) (1,978) (3,799)
---------------------------------- --------- --------- ------------ --------
(Loss)/Profit before taxation
and after adjusting items (2,651) (1,743) (4,214)
---------------------------------- --------- --------- ------------ --------
EBITDA (**) 11,360 3,664 6,575
---------------------------------- --------- --------- ------------ --------
** EBITDA is earnings before interest, tax, depreciation, amortisation after adjusting items. See note 9 for a reconciliation of adjusted profit on ordinary activities before tax to EBITDA
*** Administrative expenses and shops' selling and marketing costs are not analysed between Retail and Hire.
DIVID AND DIVID POLICY
The Board has decided not to recommend payment of an interim dividend in order to offer the business maximum flexibility for investment, whilst retaining a strong debt free balance sheet (HY1 2018: 1.5 pence per share). The Board will review our Dividend Policy throughout the year, considering the overall yield, balanced against the wider investment needs of the business.
FINANCIAL POSITION
Net assets as at 27 July 2019 was GBP26.4m after the impact from IFRS 16 (28 July 2018: GBP32.8m).
The close management of cash remains a focus. The cash position at 27 July 2019 was GBP18.2m (28 July 2018: GBP15.2m). Net cash inflow for the six months ended 27 July 2019 was GBP7.4m. The Group continues to meet its day-to-day working capital requirements through surplus cash balances.
Total net inventory as at 27 July 2019 was GBP16.1m (28 July 2018: GBP16.5m).
IFRS 16
IFRS 16 'Leases' came into effect for accounting periods commencing on or after 1 January 2019 and this is the first set of financial statements that incorporates the adoption of the new standard.
The main impact of the standard is to capitalise the Group's rental leases as "right-of-use assets" within non-current assets on the Consolidated Balance Sheet with corresponding lease liabilities representing the commitment to fulfil those lease obligations. The right-of-use assets are then depreciated over the life of the lease and a notional interest charge is recorded on the liability.
The standard allows for different transition options and the Group has adopted the modified retrospective approach. On adoption the Group recognised right-of-use assets of GBP70.5m and lease liabilities of GBP73.9m.
For the six-month period to 27 July 2019 reported EBITDA has increased by GBP8.2m as a result of rental costs no longer being charged to administrative expenses and shops' selling and marketing costs. Additional depreciation and interest costs of GBP7.8m and GBP1.5m respectively were recorded, giving an overall reduction in profit before tax of GBP1.1m.
Further details on the impact of IFRS 16 are given in note 2.4(a) accompanying the interim financial statements.
RELATED PARTY TRANSACTIONS
The Group had no material related party transactions other than on an arm's length basis that would reasonably be expected to influence decisions made by other users of the condensed set of financial statements. Details of all related party transactions are disclosed in the note 11.
RISKS AND UNCERTAINTIES
Details of all potential risks and uncertainties are disclosed in the note 3.
CAUTIONARY STATEMENT
This Interim Management Report ("IMR") has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. This IMR should not be relied on by any other party or for any other purpose.
This IMR contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this IMR but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
This IMR has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Moss Bros Group PLC and its subsidiary undertakings when viewed as a whole.
DIRECTORS' RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
a: the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
b: the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c: the interim management report includes a fair review of the information required by the DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
The directors are responsible for maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
Moss Bros Group PLC
8 St. John's Hill
London
SW11 1SA
By Order of the Board,
Brian Brick Tony Bennett
Chief Executive Officer Finance Director and Company Secretary
MOSS BROS GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 26 WEEKS TO 27 JULY 2019
26 weeks to 27 July 2019 26 weeks 52 weeks
to 28 July to
2018 26 January
2019
Adjusted(1) Adjusting Total Total Total
items(2)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Unaudited)
-------------
(Unaudited) (Unaudited) (Unaudited) (Audited)
--------------------------- -------------- ------------ ------------ ------------- ------------
CONTINUING OPERATIONS
Revenue 65,371 - 65,371 64,450 128,987
Cost of sales (27,807) - (27,807) (26,750) (54,768)
----------------------------- ------------ ------------ ------------ ------------- ------------
Gross profit 37,564 - 37,564 37,700 74,219
Administrative
expenses (2,995) - (2,995) (3,351) (6,227)
Shops' selling
and marketing
costs (34,228) (1,596) (35,824) (36,190) (72,292)
----------------------------- ------------ ------------ ------------ ------------- ------------
Operating profit/(loss) 341 (1,596) (1,255) (1,841) (4,300)
Other gains and
losses 51 - 51 61 14
Investment revenues 37 - 37 37 76
Interest expense (1,484) - (1,484) - (4)
----------------------------- ------------ ------------ ------------ ------------- ------------
(Loss) on ordinary
activities before
taxation (1,055) (1,596) (2,651) (1,743) (4,214)
Taxation (charge)/credit (28) 197 169 (354) 368
----------------------------- ------------ ------------ ------------ ------------- ------------
(Loss)/profit
from continuing
operations after
taxation (1,083) (1,399) (2,482) 2,097 (3,846)
(Loss) after taxation
attributable to
equity holders
of the parent (1,083) (1,399) (2,482) (2,097) (3,846)
============================= ============ ============ ============ ============= ============
Other comprehensive
income
Gain/(Loss) on
derivative designated
in cash flow hedge - (4) 3,028 1,828
relationships (4)
Amounts transferred
to inventory as - 98 (521) (84)
basis adjustment 98
Deferred tax on
cash flow hedge
relationships (3) - (3) - (80)
----------------------------- ------------ ------------ ------------ ------------- ------------
Total other comprehensive
income 91 - 91 2,507 1,664
----------------------------- ------------ ------------ ------------ ------------- ------------
Total comprehensive
income (992) (1,399) (2,391) 410 (2,182)
============================= ============ ============ ============ ============= ============
Earnings per share
Basic (1.08p) (1.39p) (2.47p) (2.09p) (3.83p)
Diluted**** - - - - -
****Diluted EPS has not been disclosed due to the Group being loss making which has a non-dilutive effect on the shares
(1) Adjusted represents results before adjusting items as defined in note 2.3 of the Interim Financial Statements
(2) Refer to note 6
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 26 WEEKS TO 27 JULY 2019
26 Weeks ended 27 Share
July 2019 premium Retained Total
(Unaudited) Share Employee
Share based benefit Hedging
capital account payments trust reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- ---------- ----------- ---------- --------- ----------- ---------
Balance at 27 January
2019 5,040 8,673 297 (318) 229 14,860 28,781
Loss for the period - - - - - (2,482) (2,482)
Other comprehensive
income:
Cash flow hedging
movement - - - - (4) - (4)
Amounts transferred
to inventory as
basis adjustment - - - - 98 - 98
Deferred tax on
cash flow hedging
relationships - - - - (3) - (3)
----------------------- --------- ---------- ----------- ---------- --------- ----------- ---------
Total comprehensive
income - - - - 91 (2,482) (2,391)
----------------------- --------- ---------- ----------- ---------- --------- ----------- ---------
Dividends paid - - - - - - -
Credit to equity
for equity settled
share-based payments - - 54 - - - 54
Movement on deferred - - - - - - -
tax on share-based
payments
Balance at 27 July
2019 5,040 8,673 351 (318) 320 12,378 26,444
======================= ========= ========== =========== ========== ========= =========== =========
26 Weeks ended 28 Share
July 2018 premium Retained Total
(Unaudited) Share Employee
Share based benefit Hedging
capital account payments trust reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- ---------- ----------- ---------- --------- ----------- ---------
Balance at 28 January
2018 5,040 8,673 177 (318) (1,435) 22,194 34,331
Loss for the period - - - - - (2,097) (2,097)
Other comprehensive
income:
Cash flow hedging
movement - - - - 2,507 - 2,507
Amounts transferred
to inventory as - - - - - - -
basis adjustment
Deferred tax on
cash flow hedging - - - - - - -
relationships
----------------------- --------- ---------- ----------- ---------- --------- ----------- ---------
Total comprehensive
income - - - - 2,507 (2,097) 410
----------------------- --------- ---------- ----------- ---------- --------- ----------- ---------
Dividends paid - - - - - (1,980) (1,980)
Credit to equity
for equity settled
share-based payments - - 47 - - - 47
Movement on deferred
tax on share-based
payments - - 41 - - - 41
Balance at 28 July
2018 5,040 8,673 265 (318) 1,072 18,117 32,849
======================= ========= ========== =========== ========== ========= =========== =========
52 Weeks ended 26 Share
January 2019 premium Total
(Audited) Share Employee Retained
Share based benefit Hedging earnings
capital account payments trust reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- ---------- ----------- ---------- --------- ----------- ---------
Balance at 27 January
2018 5,040 8,673 177 (318) (1,435) 22,194 34,331
Loss for the period - - - - - (3,846) (3,846)
Other comprehensive
income:
Cash flow hedging
movement
Amounts transferred
to inventory as - - - - 1,828 - 1,828
basis adjustment
Deferred tax on - - - - (84) - (84)
cash flow hedge
relationships - - - - (80) - (80)
------------------------ --------- ---------- ----------- ---------- --------- ----------- ---------
Total comprehensive
income - - - - 1,664 (3,846) (2,182)
------------------------ --------- ---------- ----------- ---------- --------- ----------- ---------
Dividends paid - - - - - (3,488) (3,488)
Credit to equity
for equity settled
share-based payments - - 122 - - - 122
Movement on deferred
tax on equity settled
share-based payments - - (2) - - - (2)
Balance at 26 January
2019 5,040 8,673 297 (318) 229 14,860 28,781
======================== ========= ========== =========== ========== ========= =========== =========
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 27 JULY 2019
27 July 2019 28 July 2018 26 January
2019
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
---------------------------------- ------------- ------------- -----------
Assets
Intangible assets 2,777 2,355 2,701
Property, plant and equipment 13,549 18,837 15,620
Right-of-use assets 64,266 - -
Leasehold improvements 1,340 1,349 1,288
Deferred tax assets 1,950 1,547 1,798
---------------------------------- ------------- ------------- -----------
Total non-current assets 83,882 24,088 21,407
Inventories 16,079 16,461 17,267
Trade and other receivables 2,072 4,878 4,587
Contract assets 263 197 263
Current tax assets 99 - 81
Cash and cash equivalents 18,223 15,167 10,854
Derivative financial instruments 438 1,089 417
---------------------------------- ------------- ------------- -----------
Total current assets 37,174 37,792 33,469
---------------------------------- ------------- ------------- -----------
Total assets 121,056 61,880 54,876
================================== ============= ============= ===========
Liabilities
Trade and other payables 16,407 18,601 17,106
Current Lease liability 14,485 - -
Contract Liabilities 2,980 3,070 2,230
Provisions 1,598 1,140 1,044
Current tax liability - 570 -
Total current liabilities 35,470 23,381 20,380
---------------------------------- ------------- ------------- -----------
Non-current lease liability 54,449 - -
Other payables 3,493 3,871 3,493
Provisions 95 757 1,120
Deferred tax liabilities 1,105 1,022 1,102
Total non-current liabilities 59,142 5,650 5,715
---------------------------------- ------------- ------------- -----------
Total liabilities 94,612 29,031 26,095
================================== ============= ============= ===========
Net assets 26,444 32,849 28,781
Equity
Issued capital 5,040 5,040 5,040
Share premium account 8,673 8,673 8,673
Share-based payments 351 265 297
Employee benefit trust (318) (318) (318)
Hedging reserve 320 1,072 229
Retained earnings 12,378 18,117 14,860
---------------------------------- ------------- ------------- -----------
Equity attributable to equity
holders of parent 26,444 32,849 28,781
---------------------------------- ------------- ------------- -----------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 26 WEEKS TO 27 JULY 2019
26 weeks 26 weeks 52 weeks to
to to 26 January
27 July 2019 28 July 2018 2019
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
----------------------------------------- -------------- -------------- ------------
Operating activities
(Loss)/profit after taxation (2,482) (2,097) (3,846)
Adjustments for:
Taxation charge (169) 354 (368)
Other gains and losses (51) (3) (14)
Investment revenues (37) (37) (76)
Interest expense 1,484 - 4
Amortisation of intangible assets 496 482 1,045
Impairment of tangible fixed assets
and right-of-use assets 1,064 1,227 2,171
Depreciation of property, plant
and equipment 2,651 2,984 6,017
Depreciation of right-of-use assets 7,818 - -
Loss on disposal of property, plant
and equipment 2 28 195 (Increase)/decrease in inventories 1,286 (871) (1,957) Decrease/(Increase) in receivables 396 (284) (61) Increase in payables 4,640 3,188 670 Increase/(Decrease) in provisions 554 (216) 51 Share-based payments expense 54 53 122 Taxation paid - (780) (1,003) ----------------------------------------- -------------- -------------- ------------ Net cash from operating activities 17,706 4,028 2,950 ========================================= ============== ============== ============ Investing activities Interest received 37 37 76 Interest paid - - (4) Purchase of intangible assets (571) (660) (1,570) Purchase of property, plant and equipment (762) (3,737) (4,609) Proceeds from the disposal of property, plant and equipment - 2 22 Net cash used in investing activities (1,296) (4,358) (6,085) ========================================= ============== ============== ============ Financing activities Dividends paid - (1,980) (3,488) Cash outflow for leases (9,041) - - Net cash used in financing activities (9,041) (1,980) (3,488) ========================================= ============== ============== ============ Net (decrease)/increase in cash and cash equivalents 7,369 (2,310) (6,623) Cash and cash equivalents at beginning of period 10,854 17,477 17,477 Cash and cash equivalents at end of period 18,223 15,167 10,854 ========================================= ============== ============== ============
NOTES TO THE CONDENSED SET OF CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 26 WEEKS TO 27 JULY 2019
1. GENERAL INFORMATION
The results for the 26 weeks ended 27 July 2019 and 28 July 2018 are neither audited nor reviewed by the Group's auditor.
The information for the 52 weeks ended 26 January 2019 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
2. ACCOUNTING POLICIES
2.1 BASIS OF PREPARATION
The annual financial statements of Moss Bros Group PLC are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The condensed set of consolidated financial statements included in this half-yearly report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting", as adopted by the European Union.
2.2 GOING CONCERN
The Directors are satisfied that the Group and Company have sufficient resources to continue in operation for the foreseeable future, being a period of at least 12 months from the date of approval of this half-yearly report. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly report and financial statements.
The Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current and anticipated cash resources.
2.3 ADJUSTING ITEMS
Adjusting items are those significant credits or charges which, in the opinion of the Directors, should be separately disclosed by virtue of their size and nature, to enable a full understanding of the Group's financial performance. Therefore, such items are disclosed as adjusting on the face of the statement of comprehensive income. Please see note 6 for details of adjusting items recognised in the half year ended 27 July 2019.
2.4 CHANGES IN ACCOUNTING POLICY
The same accounting policies, presentation and methods of computation are followed in this half-yearly report as applied in the Group's latest annual audited financial statements for the 52 weeks ended 26 January 2019, with the exception of IFRS 16 which has been effective for the Group from 27 January 2019.
2.4 (a) IFRS 16 'LEASES'
IFRS 16 'Leases' (as issued by the IASB in January 2016) came into effect for accounting periods commencing on or after 1 January 2019, and the Group, for the first time, adopted the standard using the modified retrospective approach. In doing so, the Group initially applied the standard at the date of initial application (the beginning of the current reporting period) of 27 January 2019.
IFRS 16 introduces new or amended requirements for the definition of a lease, lessee accounting and lessor accounting (in particular, increased disclosure requirements). Details of these new requirements as well as their impact on the Group's consolidated financial statements are described in the "Adoption of IFRS 16 'Leases' section below.
The change in accounting policy is effective for the period commencing 27 January 2019 and accounting periods hereafter.
RIGHT-OF-USE ASSETS
On commencement of a contract (or part of a contract) that gives the Group the right to use an asset for a period of time in exchange for consideration, the Group recognises a right-of-use asset and a lease liability except for low value leases and those with a term of less than 12 months.
A right-of-use asset is recognised at commencement of the lease and is initially measured at the amount of the lease liability, plus any incremental costs of obtaining the lease, any lease payments made at or before the leased asset is available for use by the Group less any lease incentives received, plus any estimate of costs to be incurred in respect of dismantling or restoring the underlying asset to its original condition.
The right-of-use asset is subsequently measured at cost less accumulated depreciation and any accumulated impairment losses. Right-of-use assets are depreciated straight line over the shorter of the period of the lease term or the remaining useful life of the underlying asset. Termination, extension and purchase options are considered in determining the appropriate remaining lease term. The right-of-use asset is depreciated from the date it is 'available for use' even if the entity does not use it until a later date.
Impairment losses are determined and accounted for in accordance with IAS 36 'Impairment of Assets'
An estimate of costs to be incurred in restoring the right-of-use asset to the condition required under the terms and conditions of the lease is recognised as part of the cost of the right-of-use asset when the Group incurs the obligation for these costs. The provision is measured at the best estimate of the expenditure required to settle the obligation.
INITIAL MEASUREMENT OF LEASE LIABILITIES
The lease liability is initially measured at the present value of the lease payments during the lease term discounted using the interest rate implicit in the lease, or the incremental borrowing rate if the interest rate implicit in the lease cannot be readily determined.
The lease term is the non-cancellable period of the lease plus extension periods that the Group is reasonably certain to exercise and termination periods that the Group is reasonably certain not to exercise.
Lease payments include fixed payments less any lease incentives receivable, variable lease payments that are dependent on an index or a rate (such as those linked to LIBOR) and any residual value guarantees. Variable lease payments are initially measured using the index or rate when the right-of-use asset is available for use.
SUBSEQUENT MEASUREMENT OF LEASE LIABILITIES
The lease liability is subsequently increased for a constant periodic rate of interest on the remaining balance of the lease liability and reduced for lease payments.
Interest on the lease liability is recognised in profit or loss, and variable lease payments not included in the measurement of the lease liability are also recognised in profit or loss in the period in which the event or condition that triggers those payments occurs.
SIGNIFICANT JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Determining the discount rate
When the interest rate implicit in the lease is not readily determinable, the Group estimates the incremental borrowing rate based on a risk-free rate adjusted for the effect of the Group's theoretical credit risk. As the Group has no external borrowings, judgement is required to compute an appropriate discount rate which was calculated based on UK Government Gilt rates of an appropriate duration and adjusted by an indicative credit premium that reflects the credit risk of the Group. This has resulted in weighted average incremental borrowing rate of 3.92% applied to portfolios of leases when these have shared similar
characteristics including location, duration and nature of the leases.
ADOPTION OF IFRS 16 'LEASES'
The Group has applied IFRS 16 'Leases' using the modified retrospective approach, and therefore comparative information has not been restated and continues to be reported under IAS 17 'Leases'. The Group has applied this approach subject to the transition provisions set out below:
-- A single discount rate has been applied to portfolios of leases with similar characteristics;
-- The right-of-use assets have not been assessed for impairment at 27 January 2019 but have been reduced by the amount of any onerous lease provisions at that date;
-- Initial direct costs have been excluded from the measurement of the right-of-use assets;
-- Hindsight has been applied in determining the lease term for contracts that contain lease extension or termination options;
-- Right-of-use assets and lease liabilities for short term leases that have a lease term of less than 12 months or a lease term ending within twelve months of the date of initial application have not be recognised.
As at the date of initial application, for all contracts, the Group assessed whether the contract is or contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group did not apply the practical expedient to reassess whether a contract is or contains a lease at the date of initial application as permitted by IFRS 16 paragraph C3. The Group identified 130 open contracts at the date of initial application that are or contain a lease.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 'Leases'. These liabilities were measured at the present value of the remaining lease payments, discounted using applicable discount rates as of 27 January 2019.
In determining the lease liability, management considered any lease extension option or break clauses that the Group is reasonably certain to exercise or not to exercise. In doing so, the Group considered all relevant factors that create an economic incentive to do so. At the date of initial application, the Group was of the view that break clauses for 2 leases would be exercised.
The impact on the half year ended 27 July 2019 is summarised below:
Capitalisation of lease liabilities and right-of-use assets
The Group has recognised lease liabilities at the date of initial application of GBP73.9m of which GBP13.8m was presented as a current liability and GBP60.1m was presented as a non-current liability.
As part of the same adjustment, GBP70.5m of right-of-use assets were recognised. GBP69.3m of these assets relate to leasehold properties and storage units, GBP0.1m related to motor-vehicles and GBP1.1m related to third party hosting arrangements. Right-of-use property assets were decreased for onerous lease provisions by GBP1.0m.
As a direct impact of the leases being capitalised, the rent expense for the 26 week period to 27 July 2019 reduced by GBP8.2m when compared to the policy under IAS 17.
Depreciation of right-of-use assets
From the date of initial application to 27 July 2019, GBP7.8m of depreciation has been recorded in respect of right-of-use assets, of which GBP7.6m related to leasehold properties and storage units, and GBP0.2 relate to third party hosting arrangements.
Finance costs and repayment of lease liabilities
From the date of initial application to 27 July 2019, notional interest of GBP1.5m has been recorded on lease liabilities. In the half year ended 27 July 2019, lease payments totalling GBP9.0m were paid.
The impact on the Consolidated Balance Sheet on adoption of IFRS16 is summarised below:
27 January 27 January
2019 2019
IFRS 16 adjustments
(IAS 17 Previous at adoption
policy) on 27 Jan 2019 (IFRS 16)
GBP'000 GBP'000 GBP'000
---------------------------- ----------------- ------------------- ----------
Right-of-use assets - 70,456 70,456
Prepayments 3,539 (2,119) 1,420
Accruals (6,646) 4,566 (2,080)
Provisions (2,163) 1,025 (1,138)
Current lease liability - (13,775) (13,775)
Non-current lease liability - (60,153) (60,153)
---------------------------- ----------------- ------------------- ----------
Net Assets 28,781 - 28,781
---------------------------- ----------------- ------------------- ----------
Total Equity 28,781 - 28,781
============================ ================= =================== ==========
At 27 July 2019 the Consolidated Balance Sheet included the following IFRS 16 amounts: a net book value of the IFRS 16 right-of-use asset of GBP65.2m, lease liabilities of GBP68.9m.
The Group's operating lease commitments of GBP84.1m at 27 January 2019 discounted at the appropriate incremental rates of borrowing equate to GBP73.9m compared to the lease liability of GBP85.9m recognised at 27 January 2019 under IAS 17. The difference is reconciled below:
GBP'000
Total operating lease commitments disclosed at 27
January 2019 under IAS 17 85,932
Recognition exemptions at 1 January 2019:
Leases with remaining lease term of less than 12
months (1,078)
Extension and termination options reasonably certain
to be exercised (1,967)
Arrangements meeting the definition of a lease under
IFRS 16 but not under IAS 17 1,203
---------
Operating lease liabilities before discounting 84,090
Discounted using incremental borrowing rate (10,163)
---------
Total lease liabilities recognised under IFRS 16
at 27 January 2019 73,928
---------
The impact on the Consolidated Statement of Comprehensive Income is summarised below:
Before adjusting After adjusting
items items
GBP'000 GBP'000
-------------------------- ---------------- ---------------
PBT under IAS 17 policy 24 (1,573)
Removal of rent expense 8,223 8,223
IFRS 16 Depreciation (7,818) (7,818)
IFRS 16 Interest expenses (1,484) (1,484)
PBT under IFRS 16 policy (1,055) (2,651)
-------------------------- ---------------- ---------------
For the half year ended 27 July 2019 there was an income statement depreciation charge of GBP7.8m relating to right-of-use assets associated with IFRS 16 leases, and an interest cost relating to the IFRS 16 lease liabilities of GBP1.5m.
Whilst the implementation of IFRS 16 is an accounting change only that does not impact cash flows, it has necessitated some re-categorisation within the cash flow statement between operating and financing activities.
3. RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The Directors have revisited and updated the principal risks and uncertainties as published in the annual report for the 52 weeks ended 26 January 2019, which are summarised below:
BUSINESS RISK TO COMPANY MITIGATION OF RISK ASSESSMENT OF
AREA CHANGE IN RISK
YEAR ON YEAR
Economy - Almost all of the We continually focus =
impact on Group's revenue is on maintaining our This risk remains
retail generated in the UK. product quality, high as the economic
A deterioration in customer service outlook remains
the strength of the and supplier relationships, uncertain and
UK economy would be which will help as consumer confidence
likely to reduce consumer us retain our competitive remains low.
demand for discretionary position and retain
items. customers.
The business has
This could materially the flexibility
and adversely affect to adjust its capital
the financial position expenditure plans,
of the Group restrict dividends
and review operational
The Group is currently expenditure to reduce
funded from its own or defer unnecessary
cash reserves and expenditure. These
any prolonged downturn measures will conserve
will impact on these cash and maintain
reserves. the strength of
our balance sheet.
Property leases
have short remaining
lives allowing flexibility
to reduce fixed
overhead costs should
the need arise.
The Group is currently
debt free and cash
generative at an
operating activity
level but considers
that it would be
able to source funding
facilities in the
event that it needed
to.
================================= ============================= =========================
The +
Omni-Channel Retailing Board The
- worldwide regularly pace
Structural is reviews of
change undergoing the structural
within unprecedented strategic change
retail structural plans within
change in the
at place retail
a for marketplace
very the continues
fast business unabated,
pace. to meaning
Maintaining ensure that
a that the
competitive they risk
edge are has
through appropriate increased
customers to commensurately.
being address
able structural
to changes
interact within
and the
transact retail
with industry.
the We
Group have
in developed
whichever our
way understanding
they of
choose, our
whether customer
in base
store during
or the
online, year
offering and
product we
choice are
and focused
availability, on
and ensuring
allowing that
multiple the
payment customer
and experience
delivery/collection which
options we
are offer
important is
in in
growing line
our with
omni-channel their
credentials. expectations..
We
increasingly
encourage
customers
to
return
to
our
stores,
where
a
more
unified
retail
experience
can
be
obtained
regardless
of
channel
of
purchase.
We
invest
where
appropriate
in
the
technology
which
supports
improvements
in
our
omni-channel
capability.
================================= ============================= =========================
BUSINESS RISK TO COMPANY MITIGATION OF RISK ASSESSMENT OF
AREA CHANGE IN RISK
YEAR ON YEAR
================================= ============================= =========================
Hire The Hire business We have a dedicated =
demands the highest operational team The risk is ongoing;
level of customer which actively seek we have successfully
service. to resolve any potential made additional
This is delivered fulfilment issues improvements to
through a highly developed ahead of delivery our Hire operations
and efficient infrastructure date. during 2019 and
which enables consistent We are continually will refine these
'delivery to promise'. refreshing and replenishing further ahead
Any disruption to our stock of hire of the 2020 Hire
this infrastructure garments to ensure season to ensure
would affect our ability that we are able that we continue
to maintain customer to fulfil all orders to deliver on
service levels which as they become due. customer promise.
may subsequently result We will ensure that
in reputational issues. our Hire product/offer
develops in line
with customer/market
expectations
We continue to strengthen
our back-end technology,
systems and processes
to ensure a robust
platform for our
operations.
================================= ============================= =========================
Supply chain A disruption to supplier We are continually =
continuity may adversely reviewing and refreshing The risk remains
affect our operation. our supplier list. level on last
Suppliers going out The diversification year and we take
of business or unable of product buying heart from the
to supply goods could across a range of successful execution
have a significant suppliers limits of the two most
impact on our ability the Group's over recent seasons
to meet demand in reliance upon any following the
store and online. individual supplier. implementation
As we increase the We have implemented of changes made
volume of garments controls which enable as a result of
sourced directly from us to identify early the challenges
supplier factories any potential deviations we faced in Spring
we must ensure that from product and 2018
the supply chain critical supply chain critical
path is closely monitored paths Whilst currency
and proactively managed Foreign currency hedging delivers
Additional uncertainty exposure, principally certainty in exchange
regarding the eventual the US Dollar, is rates available,
form that 'Brexit' hedged for 6 to hedging itself
will take means that 9 months in advance. does not mitigate
there may be delays the fall in the
to or additional costs value of the pound
suffered as a result versus the US
of the import of our dollar.
products.
================================= ============================= =========================
Brexit The key indirect risks We have reviewed =
surrounding the UK these issues in The risk remains
leaving the EU and detail and determined level on the year
particularly leaving that there may be as the amended
the EU without any some additional deadline for the
transition period costs, but these UK to leave the
or any separation are expected to EU approaches.
'deal' in place (a be limited following The level of risk
'no deal' Brexit) the Government's is compounded
are significant. publication of the as a result of
The Group acquires UK's temporary tariff the uncertainty
a significant proportion regime for 'no deal'. regarding the
of its goods from The majority of specific form
overseas, and this our products are and timing of
exposes us to the sourced from countries the UK's departure
following possible outside the EU. along with a lack
issues: We have sought to of clarity regarding
-- Increases in tariffs temporarily hold the readiness
and duties on goods greater levels of of the EU and
imported to the UK stock in the UK UK authorities
may increase our costs. by the end of October to deal with each
-- Delays at border 2019 in an effort potential eventuality
controls may lead to mitigate the
to stock shortages. effects of any delays
-- Reduction in the at UK borders.
value of Sterling The mitigation of
may lead to higher indirect risks,
costs. which remain beyond
our control, are
highly reliant on
the preparedness
of national authorities
and other businesses.
================================= ============================= =========================
BUSINESS RISK TO COMPANY MITIGATION OF RISK ASSESSMENT OF
AREA CHANGE IN RISK
YEAR ON YEAR
================================= ============================= =========================
Costs Supply chain cost Management has in +
price increases and part mitigated the The risk has increased
currency fluctuation cost price risk during the year
could have a materially as a significant as the cost headwinds
adverse effect on proportion of inventory which we face
results is direct sourced continue un-abated.
A fluctuation in currency and prices have We continually
rates could materially been agreed as a monitor the potential
affect the Group's result of competitive impacts and address
cost base and margins. tendering. these via the
A re-emergence of In addition, the actions noted
general price inflation Group operates a here.
could affect profitability treasury policy
We continue to face which hedges a significant
significant cost headwinds proportion of the
including; business foreign exchange
rates, National Living risk from such direct
Wage, Apprenticeship sourcing arrangements.
Levy and Pension auto-enrolment Management closely
costs as well as increasing monitor the effectiveness
government fossil of these arrangements.
fuel levies If general price
inflation returns
this may allow an
increase in retail
selling prices albeit
subject to market
conditions.
Ongoing review of
store profitability,
combined with shorter
lease durations
ensures that we
proactively manage
the fixed overhead
of our store estate.
Remuneration policies
are under review
to ensure we remain
competitive in the
marketplace.
================================= ============================= =========================
Cyber crime A cyber crime attack Customer bank or +
could disable the payment card details Whilst we invest
Group's key IT systems are not processed on an ongoing
and compromise data or stored in the basis in our cyber
security Group's IT systems. protection, the
Comprehensive security frequency and
measures are in severity of cybercrime
place with regular attacks against
tests carried out. companies continue
We have deployed to increase.
additional security
products to further
strengthen our protection
and invested during
2017 in technology
infrastructure to
afford us better
protection.
Development in cybercrime
and preventative
strategies are constantly
reviewed.
================================= ============================= =========================
Brand image Maintaining our store We have completed =
and brand presentation the majority of The risk remains
is important for attracting our store redevelopment the same year
customers and growing programme to both on year.
our brand modernise the look
The historical investment and feel of the
in the store estate stores and to meet
has meant that basic more routine maintenance
infrastructure is needs that had been
generally good, however, deferred for many
an ongoing programme years.
of visual/presentation We regularly consider
development is required the appropriateness
to ensure that our of our master brand
stores and our brand presentation and
remains relevant to our sub brand line
customers. up.
================================= ============================= =========================
Distribution Operating our distribution We continually review +
centre (DC) centre from one location and monitor our With new and increased
leaves the Group exposed disaster recovery operating pressures
to business catastrophes plan to ensure that on the DC through
occurring at that all business risks our multi-channel
location are adequately covered. approach, the
Any business catastrophe Our financial risk reliance and consequent
affecting our distribution of operating from exposure to risk
centre could severely one location is of the DC failing
affect the Group's mitigated through has again increased
ability to supply our comprehensive during the year.
to stores and customers. insurance cover,
however due to the
single location
of the DC, operational
mitigation beyond
fire safety and
security measures
and rigorous adoption
of good process
limit mitigation
somewhat.
================================= ============================= =========================
BUSINESS RISK TO COMPANY MITIGATION OF RISK ASSESSMENT OF
AREA CHANGE IN RISK
YEAR ON YEAR
================================= ============================= =========================
People The Group's reliance Effective recruitment =
on key management policies and people We continue to
and other personnel development means invest in our
could put pressure the Group can take people and made
on the business if full advantage of important changes
they were to leave the market opportunities within our senior
Attracting and retaining which it is presented. leadership team
high calibre people Long term incentive during 2018. We
is a key priority share awards were continue to be
and a central focus granted to senior mindful of the
in striving for excellent employees during risk within that
customer service across the year to more senior team as
the Group's business closely align their a result of no
channels. interests to those incentives being
of the Group and paid for a second
a SAYE scheme is consecutive year.
in operation. We continue to
manage Board succession
closely and have
delivered high
calibre replacements
for retiring Board
members The risk
is continually
monitored and
addressed through
a Management Talent
Review and Board
evaluation.
================================= ============================= =========================
GDPR The General Data Protection The company has =
Regulations come into a good understanding The risk remains
force in May 2018 of GDPR and has level on last
This legislation significantly executed a detailed year. We have
extends requirements plan to address invested significantly
of companies to ensure the resulting requirements. in our GDPR capability
that all personal We have strong policies and have robust
data is handled in and procedures in processes and
accordance with the place to address procedures now
new regulations. any GDPR related in place
The penalties for issues and requests .
non-compliance are and are committed We will continue
potentially severe. to maintaining our to develop our
positive response capability and
to the legislation responses to GDPR
to date. related issues
We have in place as 'real life'
company wide training scenarios arise.
programmes to highlight
the importance of
good data protection
to all employees
across the business.
================================= ============================= =========================
Key to change in Risk:
+ Risk has increased
- Risk has decreased
= No change
N New Risk
4. ALTERNATIVE PERFORMANCE MEASURES
In reporting financial information, the Group presents alternative performance measures "APMs" which are not defined or specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered a substitute for or superior to IFRS measures, provide stakeholders with additional or helpful information on the performance of the business. The APMs are consistent with how the business performance is planned and reported within the internal management reporting to the board.
The key APMs that the group uses are 'like-for-like-sales (including VAT)' and 'EBITDA'. 'Like-for-like-sales (including VAT)' is defined as 'financial information for e-commerce and stores open during both the current and prior financial periods and compares 26 weeks against 26 weeks, except for stores refitted in the period, where the period closed for refit is excluded from both the current and prior financial periods. Like-for-like Hire and Tailor Me sales are calculated on cash receipts in the period, before adjustment for the movement in the level of deposits held.'
A reconciliation of 'like for like sales' to revenue as stated in the financial statements is presented below.
EBITDA is defined as 'Earnings before interest, tax, depreciation, amortisation after adjusting items. A reconciliation to adjusted profit on ordinary activities before taxation as stated in the consolidated statement of comprehensive income is shown in note 9.
26 weeks 26 weeks
to to
27 July 28 July
2019 2018
GBPm GBPm
--------------------------------------------- -------- --------
Total like-for-like sales (including VAT) 75.7 71.0
VAT (12.6) (11.8)
--------------------------------------------- -------- --------
Total like-for-like sales (net of VAT) 63.1 59.2
--------------------------------------------- -------- --------
Non like-for-like store sales (net of VAT) 1.5 4.2
Other revenue 0.8 1.1
--------------------------------------------- -------- --------
Total revenue 65.4 64.5
--------------------------------------------- -------- --------
5. BUSINESS SEGMENTS
The majority of the Group's turnover arose in the United Kingdom, with the exception of three stores in Ireland.
IFRS 8 'Operating Segments' requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive Officer to allocate resources to the segments and to assess their performance. The Chief Executive Officer is the chief operating decision-maker.
Information reported to the Group's Chief Executive Officer for the purposes of resource allocation and assessment of segment performance is focused on the split between Mainstream Retail and Hire. This is consistent with the prior year.
Information regarding the Group's continuing operating segments is reported below. E-commerce is not identified separately as an operating segment due to increasing levels of cross-over between physical store sales and customers and e-commerce sales and customers as we pursue our strategic goal of achieving full omni-channel capability.
Only revenue and gross profit have been reported for the Group's business segments, Retail and Hire, as the main operating costs, being property, related overheads and staff, cannot be separately identified as they both use the same stores and hence operating profit is not reported to the Chief Executive Officer split by Retail and Hire. Revenue and gross profit are the measures reported to the Chief Executive Officer.
On the same basis, assets cannot be allocated between Retail and Hire, and are not reported to the Chief Executive Officer separately.
Revenues outside of the United Kingdom represent less than 4% of Group revenues.
6. ADJUSTING ITEMS
26 weeks 26 weeks 52 weeks
to to to
27 July 28 July 26 January
2019 2018 2019
GBP'000
GBP'000 GBP'000
------------------------------------------ -------- ------------ -----------
Store impairments 1,064 1,227 2,171
Reorganisation and employee-related costs 532 751 1,628
Adjustments to profit before tax 1,596 1,978 3,799
------------------------------------------ -------- ------------ -----------
Store impairments (GBP1,064,000)
The Group has performed an impairment review of intangible assets, property plant and equipment, and right-of-use assets to recognise a charge of GBP1,064,000 in relation to the impairment of store assets where the current and anticipated future performance resulting from the current challenging trading conditions does not support the carrying value of the store assets. For the half year ended 27 July 2019, a charge of GBP936,000 was recognised as part of right-of-use assets, and GBP128,000 was recognised for property plant and equipment. The Group considers that stores impairment should be treated as an adjusting item given the size and nature of the costs incurred.
Reorganisation and employee-related costs including HMRC living wage review (GBP532,000)
The charge in the period is as a result of certain elements of the transformation required within the business in order to deliver the overall business strategy, including redundancies and associated professional fees. An estimate of charge arising from a review of historic pay rates is also included.
7. TAX
The effective current tax rate on the reported profit before tax for the 26 week period to 27 July 2019 is -6.4 % (28 July 2018: -20.3%; 26 Jan 2019: -8.7%), representing the expected average annual effective current tax rate for the full year, applied to the pre-tax income of the 26 week period.
8. EARNINGS PER SHARE
Basic earnings per ordinary share is based on the weighted average of 100,499,839 (28 July 2018: 100,499,839; 29 July 2017: 100,417,250) ordinary shares in issue during the period after deducting for shares held by the Employee Benefit Trust and are calculated by reference to the loss attributable to shareholders of GBP2,482,000 (28 July 2018 : loss of 2,097,000; 26 January 2019: loss of GBP3,846,000).
Diluted EPS has not been disclosed due to the Group being loss making which has a non-dilutive effect on the shares
Basic earnings per share 26 weeks 52 weeks
to 26 weeks to
27 July to 26 January
2019 28 July 2018 2019
Pence Pence Pence
-------------------------------------- --------- -------------- ------------
Adjusted(1) basic earnings per share (1.08) 0.3 (0.59)
Impact of adjusting items(2) (1.39) (2.39) (3.24)
-------------------------------------- --------- -------------- ------------
Basic earnings per share (2.47) (2.09) (3.83)
-------------------------------------- --------- -------------- ------------
(1) Adjusted represents results before adjusting items as defined in note 2.3 of the Interim Financial Statements
(2) Refer to note 6
9. EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION ("EBITDA")
26 weeks 26 weeks
to to 26 weeks 52 weeks
26 July 26 July to to
2019 before 2019 after 27 July 27 January
IFRS 16 IFRS 16 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
(Loss) on ordinary activities
before tax (1,572) (2,651) (1,743) (4,214)
Adjusting items 1,596 1,596 1,978 3,799
------------------------------------ ------------- ------------- --------- ------------
Adjusted profit / (Loss) 24 (1,055) 235 (415)
Deduct:
Investment Revenues (37) (37) (37) (76)
Interest expense 0 1,484 0 4
Add:
Depreciation of property,
plant and equipment and leasehold
improvements 2,654 2,654 2,984 6,017
Amortisation of intangible
assets 496 496 482 1,045
Depreciation of right of
use assets - 7,818 - -
------------------------------------
EBITDA 3,137 11,360 3,664 6,575
------------------------------------ ------------- ------------- --------- ------------
10. DIVIDENDS
The directors have declared that no interim dividend (HY1 2018: 1.50 pence per share) will be payable to shareholders. The directors will review our Dividend Policy throughout the year, considering the overall yield, balanced against the wider investment needs of the business.
11. RELATED PARTY TRANSACTIONS
The Group had no material related party transactions other than on an arm's length basis, which might reasonably be expected to influence decisions made by other users of the condensed set of financial statements.
TRADING TRANSACTIONS
Berkeley Burke Trustee Company Limited is considered a related party of the Group because Brian Brick, Chief Executive Officer of Moss Bros Group plc is a beneficiary of the pension fund. On 8 December 2011, Moss Bros Group plc agreed a long- term lease with Berkeley Burke Trustee Company Limited, a pension fund and the superior landlord, for a store in Hounslow, on an arm's length basis.
AAK Limited is considered a related party of the Group because Maurice Helfgott, Senior Independent Non- Executive Director of Moss Bros Group plc, has a close relative holding a key management position with significant influence and who is a significant shareholder at AAK Limited. All transactions with AAK Limited have been on an arm's length basis. At 27 July 2019, total purchase from AAK Limited was GBPnil, including VAT, (28 July 2018: GBP200,000 including VAT).
12. SHARE-BASED PAYMENTS
In 2009/10 a new equity-settled Long Term Incentive Plan (LTIP) was approved by shareholders and an amendment to this was approved in May 2019. During the period to 27 July 2019, under the same scheme, 2,721,538 shares were awarded to senior employees on 8 April 2019. In accordance with this plan, the shares are exercisable at nil cost, subject to the satisfaction of performance conditions and the requirement for the continued employment during the vesting period. The 2019 grant has performance conditions which are split between market-based and non-market based conditions. The Monte Carlo valuation model is used for the non-market based proportion of the grant and the Black Scholes valuation model is used for the market based proportion of the grant. These grants are accounted for in accordance with IFRS 2 'Share-based Payments'.
A Save As You Earn (SAYE) scheme was approved and adopted in 2012/13 and is open to all employees to benefit from the continued growth of the business. During the period to 27 July 2019, a further grant of 1,499,809 shares was made.
The amount recorded in the income statement for share-based payments under IFRS2 in the period to 27 July 2019 is GBP54,000 (28 July 2018: GBP21,000; 26 January 2019: GBP122,000).
13. HALF-YEARLY REPORT
This half-yearly report is available on application from the Company Secretary, Moss Bros Group PLC,
8 St. John's Hill, London SW11 1SA (and on the Company's website www.mossbros.co.uk).
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR UOUORKUAKUAR
(END) Dow Jones Newswires
September 24, 2019 02:00 ET (06:00 GMT)
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