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Joules Group plc  -  JOUL   

Annual Results for the 52 weeks ended 28 May 2017

Released 07:00 26-Jul-2017

RNS Number : 1136M
Joules Group plc
26 July 2017
 

26 July 2017

Joules Group plc

('Joules' or the 'Group')

Annual Results for the 52 weeks ended 28 May 2017

Strong brand momentum continues across channels, markets and product categories

 

Highlights:

 

2017

52 weeks

2016

52 weeks

Change

 

Group Revenue

£157.0

£131.3m

19.6%

-       Constant currency

 

 

18.6%

Underlying1 EBITDA

£16.9m

£13.5m

25.3%

Underlying Profit Before Tax2

£10.1m

£7.5m

34.0%

Basic underlying EPS3

9.2p

6.9p

33.3%

 

·      Group revenue increased 19.6% to £157.0 million (18.6% constant currency)

·      Retail sales increased 19.4%           

o E-commerce sales up 29.4% - 34.8% of total retail sales

o Store sales up 17.5% - supported by 11 net new store openings

·      Wholesale sales increased 20.3% (17.6% constant currency) - reflecting the growing appeal of the Joules brand in the UK and target international markets

·      Active4 customers increased by 14% to 907,000

·      International revenue increased by 36.2% - now represents 11.5% of Group revenue

·      Final dividend of 1.2 pence per share proposed

 

Colin Porter, Chief Executive Officer, commented:

"FY17 was another very exciting year for the Group as the Joules brand continued to expand and develop across distribution channels and product categories both in the UK and internationally.

The strong progress delivered during the year was again underpinned by the Group's steadfast focus on its growing and loyal customer base, product quality and delivering engaging experiences across all channels.

The Board remains confident that the Group's momentum will continue into FY18, despite the uncertain macro-economic outlook.  This confidence is supported by the growth in our customer base, our exciting new store opening plans, a robust Autumn/Winter wholesale order-book both in the UK and internationally, and positive early feedback on our Spring/Summer 2018 ranges from wholesale customers."

This announcement contains inside information.

 

1 Underlying excludes exceptional and non-recurring items, primarily related to the cost of admission to AIM and the capital structure in place prior to admission and the expense of share based compensation awards introduced following the IPO

2 Reconciliation to Statutory profit before tax:

 

£million

FY17

FY16

Underlying profit before tax

10.1

7.5

IPO transaction costs

(0.3)

(2.7)

Shareholder loan note interest

-

(5.6)

Exceptional asset impairment

-

(0.3)

Share based compensation

(0.8)

-

Other non-recurring items

-

(0.1)

Statutory profit before tax

8.9

(1.2)

 

3 Earnings Per Share is calculated as: underlying PBT (as described above) less tax at the statutory tax rate, on a pro forma basis i.e. assuming that the number of shares in issue immediately post-IPO were in issue through the entire period.

4 Active customer is a customer registered on our database who has made a transaction in the last 12 months.  Prior periods are restated to exclude customers registered via third party websites and for data cleansing enhancements.

 

 

Enquiries:

 

Joules Group plc

Tel: +44 (0) 1858 435 255

Colin Porter, CEO

Marc Dench, CFO

 

Hudson Sandler (Financial PR)

Tel: +44 (0) 20 7796 4133

Alex Brennan

Lucy Wollam

 

Peel Hunt LLP, Nominated Advisor

Tel: +44 (0) 20 7418 8900

Dan Webster

Adrian Trimmings

George Sellar

 

Liberum Capital Limited

Tel: +44 (0) 20 3100 2000

John Fishley

Joshua Hughes

 

 

Joules - 'a premium lifestyle brand with an authentic British heritage'

 

Established in Britain by Tom Joule nearly three decades ago, Joules is a premium lifestyle brand with an authentic heritage.

 

A true multi-channel lifestyle brand, Joules carefully designs clothing, footwear and accessories for women, men and children, as well as an expanding range of homewares, toiletries and eyewear collections, with personality to match those of its customers' colourful and uplifting outlooks, available through its own retail stores, online, rural shows and events and wholesale channels.

 

Quality, Britishness, family values, colour and humour make Joules stand out from the crowd. This approach, along with an unwavering attention to detail, and drive to surprise and delight its customers with unexpected product details, remains at the heart of everything Joules creates and has been central to the brand's success and expansion.

 

 

www.joules.com  |  www.joulesgroup.com 

 

 

 

Joules Fast Facts

·     Joules is an international brand, available in the UK, USA, Germany, France and other European markets

·     Joules operates 108* stores in the UK and ROI across a range of location types, has a significant online business, and a well-established wholesale business with over 1,500 stockists worldwide including John Lewis, Next Label and Nordstrom

·     Joules' talented in-house print design team lovingly hand-draw all of the prints you see within its collections each season

·     Joules is proud of its British heritage and still has strong roots in Market Harborough, the site of its first shop and head office since day one

·     Colin Porter became CEO in September 2015, with Tom Joule focusing on the creative side of the business in his capacity as Chief Brand Officer

·     Joules won Mainstream Brand of the Year at the Drapers Awards 2016 and previously won the Drapers Best British Fashion Retailer of the Year at the 2015 awards

 

* Figures are stated as at 28 May 2017

 

 

CHAIRMAN'S STATEMENT

INTRODUCTION

I am delighted to update the Group's stakeholders on what has been another very good year for the Joules brand.  This is the Group's first full financial year as a public company and we have continued to make great progress by further expanding Joules as a premium lifestyle brand across product categories, distribution channels and geographic markets.

 

The brand's strong momentum during the year, coupled with continued cost control and margin improvement, has enabled the Group to record strong growth in profit before tax for the period.   We are very pleased with this result, which reflects the growing appeal of the Joules brand as well as the careful execution of our clear growth strategy.

 

STRATEGIC PROGRESS

Joules has a distinctive brand and unique product proposition.  These qualities, supported by our first-class team across the Group, represent our strongest competitive advantages in what is a fast-changing and challenging retail environment.

 

We remain committed to our focused growth strategy to deliver the disciplined development and expansion of the Joules brand.  At the same time we are challenging ourselves to explore new growth opportunities, find new ways to delight our customers and operate ever more efficiently.  The Chief Executive's Strategic Report provides further details on our growth strategy and the progress made during the year.

 

The internet and new consumer technologies are changing the retail environment in exciting ways and creating new opportunities for brands and retailers.  Joules now has more, and better, methods than ever before to engage and connect with its growing community of customers.  At the same time, customers' expectations of brands are changing and the requirement to provide a seamless and satisfying experience across all channels at all times has never been more important.  As a truly multi-channel brand with an innovative culture and very strong customer connection, I am confident that Joules will continue to grow, adapt and prosper in this dynamic market whilst always remaining true to its core values, and providing customers with the quality products and experiences we are known and loved for.

 

FINANCIAL RESULTS & DIVIDEND

Group revenue of £157.0 million increased by 19.6% compared to the prior period (FY16: £131.3 m).  Excluding the impact of currency, Group revenue grew by 18.6% in the period.  This reflects strong growth in both the Retail and Wholesale segments.  On a geographic basis, UK sales increased 17.8% to £139.0 million and International sales increased 36.2% to £18.0 million, now representing 11.5% of Group revenue. 

 

Underlying profit before tax increased by 34.0% to £10.1 million, and basic underlying EPS was 9.2 pence per share (FY16: 6.9 pence). 

 

The Board has proposed a final dividend of 1.2 pence per share, which if approved at the shareholder's AGM, will take the dividend for the full year to 1.8 pence per share (FY16: nil).

 

The Strategic Report and Financial Review that follow provide a more in-depth analysis of the trading performance and financial results of the Group. 

 

OUR TEAM

Central to Joules' continued success is our fantastic team of highly skilled, creative and driven people across the business. I never cease to be proud of the shared commitment to the brand and our customers which runs through the entire team at Joules, from our head office to the stores, distribution centres and across international markets.  I would like to take this opportunity to thank everyone in the Joules team across the world for their continued hard work and dedication during this outstanding year for the business.

 

THE FUTURE

We have seen good growth in the first few weeks of our new financial year and we have had positive early feedback on our Spring/Summer 2018 ranges from our wholesale customers.

 

The short to medium-term headwinds facing UK retailers are well documented.  In particular the final outcome of the UK's decision to leave the European Union remains unclear and, as a consequence, the specific macro-economic effects remain difficult to predict.  However, I believe that Joules is well placed to meet these uncertainties through a combination of the strength of its brand and products; its target customer demographic; and the substantial investment that has been made in the Group's infrastructure and supply chain.

 

We have a loyal and engaged customer base, a committed and enterprising team and a well-invested infrastructure.  These qualities make us confident of successfully delivering the Board's clear strategy for growing the Joules brand in the UK and internationally.

 

 

CHIEF EXECUTIVE OFFICER'S STRATEGIC REPORT

FY17 was another very exciting year for Joules as the brand continued to expand across distribution channels and product categories both in the UK and internationally. The strong progress delivered during the year was again underpinned by our focus on our customers and our dedication to provide quality products and engaging experiences across all channels.

THE JOULES BRAND

Ever since Tom Joule established the Joules brand nearly three decades ago, Joules has been committed to surprising and delighting its growing community of customers with a sense of quirky Britishness.  The Joules brand remains distinctive not only for its exciting use of colour, proprietary hand-drawn prints and unexpected details but also for its values that truly connect with our customers.  We aim to be an uplifting part of our customers' lives whenever they are spending quality time doing the things they love with the people who matter.

The brand's continued expansion and success was recognised at the 2016 Drapers Awards where Joules won Mainstream Brand of Year against strong competition from other leading lifestyle brands. This award represents a strong stamp of approval from the fashion industry for our brand and our talented and enterprising team. 

 

OUR BUSINESS MODEL - BORN TO BE MULTI-CHANNEL

Joules was established as a multi-channel brand. Our distribution model enables our customers to easily engage with the Joules brand and to discover our products, shop, pay and collect their purchases in the way that suits their lifestyle.

This multi-channel approach is reflected in the Group's revenue mix between our two key, complementary distribution channels: Retail (including stores, e-commerce and the country shows and events circuit) and Wholesale.  The Group has a small but growing product licencing channel which, given the strength of the Joules brand, we are confident will become increasingly important over time.

These complementary routes to market underpin our focused growth strategy. Being truly multi-channel enables the Group to expand its product offering, enter new markets efficiently and exploit further growth opportunities within existing ones while always maintaining flexibility to meet and exceed our customers' changing needs.

 

OUR GROWTH STRATEGY

We have a clear strategy for the long-term sustainable development of Joules as a premium lifestyle brand both in the UK and internationally. This strategy is built on the key pillars described below and is underpinned by our distinctive brand, unique products and customer focus.  These pillars of growth are delivered by our exceptional team of people, supported by a well-invested infrastructure and supply chain.

1.    INCREASING CUSTOMER VALUE - we intend to continue to grow our customer database, increase the number of active customers and develop the value of the average active customer through providing consistent and relevant cross-channel communication

2.    DRIVE TOTAL UK BRAND SALES - as a multi-channel brand, we seek to grow total UK brand sales within target customer segments by increasing the availability and accessibility of our products across existing and emerging distribution channels -  making it easy for our customers to discover, research, purchase and receive our products.  Our priorities are:

-      STORE ROLL-OUT - there is significant further growth potential for the brand in the UK and ROI.   We target a net 10 to 12 new stores per year in the medium-term as well as relocating  a number of existing stores to larger sites that better reflect our brand and product range

-      E-COMMERCE - e-commerce is a fast growing and rapidly evolving channel.  With ongoing enhancements to our e-commerce platform, the customer proposition and our customer management capability, we aim to increase the mix of e-commerce sales as a proportion of our total retail sales

-      WHOLESALE - we broaden the reach of the Joules brand through wholesale customers that are closely aligned with our brand values and product categories - including independents, department stores and online retailers.  Our wholesale capabilities position us well for emerging channels such as online marketplaces and 'Fulfilled by' models

3.    INTERNATIONAL EXPANSION - the Joules brand and products resonate well in international markets.  We develop international markets via a wholesale model supported by e-commerce, leveraging our investment in central creative and design functions and our infrastructure.  Our current priority markets are North America and Germany

4.     PRODUCT EXTENSION - as a premium lifestyle brand, the Joules product offer naturally extends to meet many of the lifestyle needs of our customers.  Joules has had success extending the product offer within existing categories and into new categories and we will continue to expand into new areas that are appropriate for the development of the Joules brand, both organically and through working with carefully selected licence partners

 

 

STRATEGIC PILLARS - PRIORITIES AND DEVELOPMENTS

 

CUSTOMER VALUE-

-      Maintained average customer frequency and transaction value whilst significantly growing the customer base

-      Maintained customer acquisition cost levels

-      Increased targeted customer offers and personalisation of the online proposition

-      Increased the number of store based customer events including VIP and new store opening events

-      Appointed first Chief Customer Officer in September 2016

Active customer numbers1

FY14: 509,000

FY15: 593,000

FY16: 799,000

FY17: 907,000

 

DRIVE TOTAL UK BRAND SALES

-     New stores:  opened 13 new stores and closed two stores in the year

-     Portfolio management: relocated three stores and expanded a further three stores

-     E-commerce revenue: represented 35% of total retail sales

-     E-commerce proposition: new payment options and site personalisation deployed in the year - helping drive improved conversion metrics

-     Cross-channel: 'Order in Store' roll-out completed in H1 enabling store staff to place a customer order via a tablet device, facilitating access to our full product range in all stores

-     Wholesale: Next Label converted to a 'commission' model.  Continued strong growth in the independent specialist retailer channel

Number of stores

FY14:   80

FY15:   91

FY16:   97

FY17: 108

 

Total selling space  (Sq Ft)

FY14:   84,500

FY15: 100,000

FY16: 111,000

FY17: 135,000

INTERNATIONAL EXPANSION

-      International revenue grew at 36.2% (29.6% constant currency)

-      Launched childrenswear range in 55 Dillards department stores in the US

-      Extended number of doors and product categories with Nordstrom

-      Further strengthened the team based in our New York showroom

-      Gave notice to terminate arrangement with the 3rd party distributor in the US - over 600 independent stockists to be managed in-house from Spring/Summer 2018

-      Germany field accounts increased to over 400 stockists

 

International as % of total revenue

FY14:    5.8%

FY15:   9.1%

FY16: 10.1%

FY17: 11.5%

PRODUCT EXTENSION

-      Childrenswear category further developed with specific ranges for baby and younger and older age children

-      Women's leather footwear launched with a range of Chelsea boots

 

 

KEY PERFORMANCE INDICATORS

Our KPIs have been selected based on their link to the successful delivery of our strategy. They are monitored by the Board on a regular basis.

 

FINANCIAL KPIS:

Our financial KPIs have been selected to complement our strategic KPIs and reflect our objective to deliver sales growth across channels and profit growth at a faster rate than sales growth, whilst delivering a strong return on our capital investments.  Our financial KPIs, and their rationale, are:

-      Revenue by channel - delivering balanced growth across our core sales channels

-      Group gross margin - maintaining overall product level profitability whilst developing international wholesale markets

-      EBITDA margin - how effectively we are leveraging our cost base and infrastructure

-      Return on Capital Employed ('ROCE') - how we are managing working capital and growth capital investments

 

Revenue by channel

Retail - Stores

FY14:  £39.3m

FY15:  £52.4m²

FY16:  £58.2m

FY17: £68.3m

Retail - E-commerce

FY14:  £23.9m

FY15:  £25.8m²

FY16:  £30.1m

FY17: £ 38.9m

Wholesale

FY14: £26.9m

FY15: £31.6m²

FY16: £37.2m

FY17: £44.8m

 

Group gross margin

FY14: 55.0%

FY15: 53.3%

FY16: 53.5%

FY17: 55.4%

EBITDA margin

FY14:   9.5%

FY15:   9.0%

FY16: 10.3%

FY17: 10.8%

Return on Capital - ROCE3

FY14: 23.9%

FY15: 27.3%

FY16: 31.9%

FY17: 32.2%

 

1Active customer defined as a customer who is registered on our database and has transacted within the last 12 monthsPrior periods are restated to exclude customers registered via third party websites and for data cleansing enhancements.

2FY15 was a 53 week period

3Return on Capital Employed ('ROCE') is calculated as Underlying Operating Profit after Tax divided by Average Capital Employed (Capital Employed defined as Underlying Net Assets adjusted for excess cash balances)

 

 

 

BUSINESS REVIEW

 

RETAIL: MULTI-CHANNEL PROGRESS

Retail sales, which includes stores, e-commerce and shows, grew by an impressive 19.4% during the year (19.4% in constant currency).  This reflected good growth from both stores and e-commerce, which increased by 29.4% to now represent 34.8% of total retail revenue (FY16: 32.1%).

 

The Group's store coverage across the UK and ROI continued to expand to 108 stores at the end of the period (FY16: 97).   We opened 13 stores and closed two, with 10 of the net new stores being opened during the first half of the year.  This expansion was in line with our previous guidance of 10-12 net new stores for the year. During the period we also relocated three stores and extended a further three to provide larger sites that better reflect the Joules brand proposition, showcase our product range, and enable multi-channel activities such as 'Click & Collect' and 'Order in Store'. 

 

This activity resulted in total selling space increasing to 135,000 square feet (FY16: 111,000 square feet) at the period end.  The new openings were spread across our different store location types reflecting the breadth of appeal of the Joules brand:

-      Lifestyle - Barnstaple;

-      Local - Ashbourne, Ludlow, Woodbridge and Bishops Stortford;

-      High Street - Chelmsford and Stratford-upon-Avon;

-      Metro - Leeds, Derby, Bromley and Plymouth;

-      Premium Outlet - Swindon and Bridgend. 

 

The average payback on new stores, opened for more than one year, remained at less than 12 months, and all continuing stores delivered a positive contribution.

 

The Group continued to develop its online offering following the successful relaunch of the e-commerce platform in September 2015.  In the period we added new functionality making it easier for our customers to shop and pay and continued to increase the use of personalisation.  Traffic from mobile and tablet devices continued to grow, representing over 75% of the total number of visitors and we continued to see improved conversion rates.  'Click & Collect' and 'Order in Store' - where we completed the roll-out to stores in the first half of the year - continue to prove popular with our customers and demonstrate the importance of our multi-channel model and ability to deliver an integrated and consistent experience across channels.

 

 

WHOLESALE: UK AND INTERNATIONAL EXPANSION

Wholesale revenue experienced further good growth, up by 20.3% (17.6% in constant currency) year on year to £44.8 million (FY16: £37.2m), as the Joules brand continues to resonate strongly with wholesale customers both in the UK as well as within our targeted international markets: North America and Germany. 

 

In the UK, wholesale expansion was driven through both national multi-channel retailers such as John Lewis and Next Label as well as through smaller, independent specialist retailers that have a good fit with the Joules brand.

 

Strong international wholesale growth helped to drive international sales (including international retail) up 36.2% and they now represent 11.5% of total Group revenue. This growth was underpinned by our proprietary hand-drawn prints, colour and British character as the Joules brand continues to resonate in international markets. 

 

In the US, we further expanded our presence in key department stores, with Dillards launching childrenswear for the Autumn/Winter 2016 season and Nordstrom increasing Joules' product range listings and the number of doors in response to customers' appetite for the brand.  We continue to see exciting growth opportunities for the brand in the US market and during the year we started the process to bring the management of over 600 independent stockist accounts in-house, following the termination of our agreement with the third-party distributor that had previously been serving this channel.  This new way of working will become effective from the Spring/Summer 2018 season and, under the management of our New York based sales and marketing team, will provide us with greater control over the long-term growth of the brand within the US.

 

In Germany we continued to perform in line with expectations and experienced good growth in the independent retailer segment where we now have over 400 stockists.

 

DEVELOPMENT AS A LIFESTYLE BRAND

Joules delivered sales growth across product categories with a particularly strong performance in the core womenswear category - with our distinctive and colourful "Right As Rain" outerwear and "Warm Welcome" coats and gilets all proving particularly popular with our customers.  Further development of our footwear and childrenswear categories also contributed to the strong growth.

 

We continued to progress the development of our childrenswear range from baby through to toddler, younger and older girls and boys.  Notable highlights in the year included our colourful ponchos, fun applique tops and beautifully designed dresses.  Our childrenswear range is becoming increasingly popular with our international customers.

 

Our footwear offer continued to expand with good growth from our very successful leather Chelsea boot range and an increased range of wellington boot styles and designs.

 

Whilst licencing remains a small contributor to the Group, we are focused on continuing to build the brand through careful expansion with licensed partners for home - including bedding, toiletries, and eyewear.  These product categories continue to perform well and highlight the licence income potential available to the brand where we are able to identify opportunities that appeal to our customers and align with Joules' distinctive values. 

 

CUSTOMER ENGAGEMENT

Joules has a loyal and highly engaged customer community.  Active customers, defined as customers who have purchased in the last twelve months, increased 14% against the prior year to 907,000 supported by effective marketing and CRM campaigns, and our total customer database now stands at 2.5 million.  One example of a customer campaign, was our hugely successful 'pass the parcel' competition which we ran on the Joules Facebook channel in December 2016.  The campaign encouraged potential and existing customers to unwrap a virtual present to potentially win a prize including a weekend stay at The Watergate Bay Hotel as well as Joules goodies.  Customers were able to 'pass the parcel' onto a friend through social media, attracting new prospective customers to the brand. 

 

Another notable and successful multi-channel campaign was our 'win a Joules caravan' competition that ran from February to April 2017 and attracted approximately 135,000 new and existing customers to take part and enter a prize draw to win a luxury caravan decorated externally with Joules prints and kitted out inside from the Joules homeware and bedding range.   The campaign, which attracted a lot of social media engagement, was run on Facebook, the Joules website and by pitching the caravan at several of our country shows and events. 

 

One of Joules' key competitive advantages is our very strong customer connection and their engagement with the Joules brand.  During the year we appointed our first Chief Customer Officer to help further develop our capability in this area and to increase brand awareness, customer loyalty and value across all channels.

 

PLATFORM FOR LONG TERM GROWTH

The Group's strategy and focus is aimed towards the long term and sustainable development of the Joules brand.  We continue to invest in our stores, infrastructure, systems and people to deliver this.

 

During the year we invested in our US operations by strengthening our US wholesale sales team, trade showroom and IT systems.  This has supported the development of new and existing department store accounts during the year as well as facilitating the transition of managing the independent stockist channel in-house, which we are confident will support our long term growth in the US market.

 

Phase two of our company-wide ERP replacement programme continued through the year, with migration to the Microsoft Dynamics AX ERP platform scheduled for FY18.  This represents a significant investment for the Group and will bring benefits including enhanced stock management across channels, process efficiencies and simplification of the IT environment.

 

The creativity, skill and commitment of the Joules team are key to the brand's continued success.  We continue to invest in skills and people development in all areas of the business including our customer facing colleagues and team leaders across the business.

 

Since the year-end we have completed the acquisition of the freehold for a new head office premises.  The new site, which is located very close to our existing head office in Market Harborough, includes an existing 30,000 square foot office building and development land to support future growth.  We expect to commence partial occupation towards the end of FY18 following a period of refurbishment.  This investment will further strengthen our brand values and culture and create a flexible space to support modern ways of working across our head office teams.   It is an important step to support the next phase of growth whilst solidifying our local roots and heritage.

 

FINANCIAL REVIEW

 

PROFIT BEFORE TAX - UNDERLYING AND STATUTORY

Underlying profit before tax ('PBT') was £10.1 million for the 52 weeks to 28 May 2017, an increase of 34.0% on the prior period. Statutory PBT including exceptional IPO transaction costs and share based compensation was £8.9 million (FY16: £(1.2)m).

EARNINGS BEFORE INTEREST, TAX, DEPRECIATION & AMORTISATION ('EBITDA')

Underlying EBITDA increased by 25.3% to £16.9 million (FY16: £13.5m).  The underlying EBITDA margin increased by 50 basis points from 10.3% to 10.8%.

UNDERLYING AND STATUTORY RESULTS

During the prior period there were some costs that were exceptional or non-recurring in nature.   These items related primarily to the IPO and to the capital structure that was in place prior to the IPO.   To provide a meaningful year-on-year comparison these items have been excluded from the underlying results reported in the front section of the Annual Report. 

As detailed in the IPO Admission Document, executive and employee share based compensation plans have been established with the first awards made in the current financial period.  Further detail on the plans is contained within the Directors' Remuneration Report and the Consolidated Financial Statements.  In accordance with IFRS 2, the expense related to the plans is accounted for within administrative expenses.  As the share plan cycle matures over the three years following the IPO, the related expense is treated as non-Underlying to provide meaningful year-on-year comparability.

A reconciliation between Underlying and Statutory (GAAP) results is provided below

 

 

52 Weeks ended 28 May 2017

 

52 Weeks ended 29 May 2016

£million

 

Underlying

IPO costs

Share based compensation

 

Reported

 

 

Underlying

 

IPO costs

Non-recurring

           Reported

Revenue

157.0

-

-

157.0

 

131.3

-

131.3

Gross profit

87.1

-

-

87.1

 

70.3

-

70.3

Admin expenses

(76.7)

(0.3)

(0.8)

(77.9)

 

(62.3)

(2.7)

(0.4)

(65.4)

Operating profit

10.3

(0.3)

(0.8)

9.2

 

8.0

(2.7)

(0.4)

4.8

Net finance costs

(0.2)

-

-

(0.2)

 

(0.5)

 -  

(5.6)

(6.0)

Profit before tax

10.1

(0.3)

(0.8)

8.9

 

7.5

(2.7)

(6.0)

(1.2)

 

 

 

 

 

 

 

 

 

 

Operating profit

10.3

(0.3)

(0.8)

9.2

 

8.0

(2.7)

(0.4)

4.8

Depreciation & Amortisation

6.6

 -

-

6.6

 

5.5

 -

0.4

5.9

EBITDA

16.9

(0.3)

(0.8)

15.8

 

13.5

(2.7)

(0.0)

10.7

 

 

 

REVENUE

Group revenue increased by 19.6% to £157.0 million from £131.3 million in FY16 (up 18.6% on a constant currency basis), with Retail revenue increasing by 19.4% and Wholesale revenue increasing by 20.3% (up 17.6% on a constant currency basis).   Sales in International markets, which are predominantly wholesale, increased by 36.2% (29.6% on a constant currency basis) and now represent 11.5% of Group revenues (FY16: 10.1%).

 

Retail - Stores

Store revenue at £68.3 million increased by 17.5%.  During the year we opened 13 new stores and closed two stores, resulting in an increase in store numbers from 97 to 108.  We also relocated three stores and extended a further three.  We had three franchises at the end of FY17 (FY16: 3).

 

Retail - E-commerce

E-commerce revenue at £38.9 million increased by 29.4% and was 34.8% of total Retail revenue (FY16: 32.1%).   The e-commerce channel continued to benefit from more visitors and higher conversion following the prior year re-launch of the content rich, mobile optimised website as well as from further customer facing website enhancements and ongoing new customer acquisition and retention activity.

 

Wholesale

Wholesale revenue at £44.8 million increased by 20.3% (17.6% on a constant currency basis).  Good revenue growth was seen in the UK and in international markets; and across the larger 'house account' and the smaller 'field account' customer bases.

 

GROSS MARGIN

Gross margin at 55.4% was 190 basis points higher than the prior year.  Our commercial and buying activity, supported with volume growth, enabled us to offset the impact of weaker Sterling, relative to the US Dollar, and maintain overall intake margins.  The revenue growth and gross margin improvement within our Retail segment more than offset the dilutive impact of our growing international wholesale business. Within the Retail segment, gross margin benefited from our increased focus on optimising full price sales and promotional activity. 

 

ADMINISTRATIVE EXPENSES - UNDERLYING

Underlying administrative expenses increased by 23.2% from £62.3 million to £76.7 million and were 48.9% of revenue (FY16: 47.4%).  During the year we increased investment in customer acquisition and digital marketing, the results of which are reflected in the e-commerce channel performance and our active customer numbers at the year-end.  Administration expenses in the period included the full year impact of investments made to strengthen several head office functions in the second-half of the prior year, as well as the first year of post IPO cost base.

 

The total rental expense, including service charges, for the period was £11.7 million (FY16: £9.3m) with the increase due to new store openings, an increase in the UK distribution centre rent, following a rent review at the start of FY17, the prior year relocation of our Shanghai sourcing office and New York showroom expansion.

 

Underlying depreciation and amortisation increased to £6.6 million (FY16: £5.5m) following the completion of the first phase of the Enterprise Resource Planning (ERP) programme in the prior period and the impact of our new store opening and relocation programme.

 

ADMINISTRATIVE EXPENSES - NON-UNDERLYING

Non-underlying administrative expenses totalled £1.1 million (FY16: £3.1m).   This included IPO transaction related costs of £0.3 million (FY16: £2.7m), share based compensation expense of £0.8 million (FY16: £nil) and non-recurring costs of £nil (FY16: £0.4m).

 

Share based compensation expense, accounted for in accordance with IFRS 2, includes the anticipated expense in relation to the first cycle of the Company's new share plan arrangements, including awards made under the Long Term Incentive Plan 2016, Deferred Bonus Plan and the all-employee Save as You Earn (SAYE) Scheme.  These plans are detailed more fully in the Directors' Remuneration Report and the Consolidated Financial Statements.

 

NET FINANCE COSTS - UNDERLYING

Underlying net finance costs of £0.2 million (FY16: £0.5m) related to interest and facility charges on the Group's revolving credit facility with Barclays Bank Plc.

 

NET FINANCE COSTS - NON-UNDERLYING

Non-underlying net finance costs totalled £nil (FY16: £5.6m).  The prior year figures consisted primarily of interest on shareholder loan notes of £4.7 million and amortisation of the loan note arrangement fee of £0.9 million.  The shareholder loan notes were converted to equity immediately prior to the IPO.  

 

TAXATION

The tax charge for the period was £2.6 million (FY16: £0.6m).  The effective tax rate was 28.8%.  This was higher than the applicable UK corporation tax rate of 19.8% for the period, due to the impact of non-deductible expenses including IPO costs and non-deductible amortisation and depreciation. 

 

EARNINGS PER SHARE AND DIVIDEND

Statutory basic earnings per share for the period were 7.3 pence per share (FY16: -2.0 pence per share).  Statutory diluted earnings per share for the period were 7.2 pence per share (FY16:  -2.0 pence per share).   On an underlying, pro forma basis the FY17 basic earnings per share were 9.2 pence (FY16: 6.9 pence).

 

To facilitate meaningful comparison of earnings per share the weighted average number of shares in issue has been restated on a pro forma basis to reflect the post-IPO capital structure.  The pro forma assumes that the number of shares in issue post-IPO were in issue throughout.  Earnings are adjusted for the non-underlying items detailed above and to reflect the statutory tax rate.

 

£million

FY17

FY16

PBT - Underlying

 10.1

 7.5

Statutory tax rate

19.8%

20.0%

Tax  - Underlying

 (2.0)

 (1.5)

Earnings - Underlying

8.1

 6.0

 

 

 

Shares - Pro forma (million)

 87.5

 87.5

Underlying Basis EPS - Pence

 9.2

 6.9

 

Shares Pro Forma - Diluted (million)

88.0

88.0

Underlying diluted EPS - Pence

9.2

6.8

 

 

The Board is recommending a final dividend of 1.2 pence per share in respect of FY17 (FY16: nil pence per share).  This brings the total dividend for FY17 to 1.8 pence per share (FY16: nil pence per share).  Following approval by the shareholders at the AGM on 27 September 2017, the dividend is expected to be paid on 16 November 2017 to shareholders on the register at 27 October 2017.

 

 

CASH FLOW AND CASH POSITION

Net cash flow from operating activities was £14.4 million (FY16: £16.9m) including a net working capital outflow of £0.9 million (FY16: inflow £7.1m).

 

The Group ended the period with net cash of £6.3 million (FY16: £3.2m) an improvement of £3.1 million in the period.  Gross cash was £7.0 million (FY16: £9.3m) and borrowings £0.6 million (FY16: £6.1m), which includes borrowings under the Group's revolving credit facility and asset finance loans. 

 

The Group has access to a £25 million revolving credit facility provided by Barclays Bank Plc to fund seasonal working capital requirements.  Subsequent to the year-end, this facility was extended by 14 months and now matures in July 2021.

 

INVENTORY

Inventory at year-end was £21.2 million (FY16: £19.3m).  The increase in inventory reflecting the growth in the business.

 

CAPITAL EXPENDITURE

Investment in property, plant, equipment and intangible assets totalled £10.7 million in FY17 (FY16: £7.1m).  Major areas of expenditure in the year were new store openings and relocations and investment in our core IT infrastructure including phase two of our ERP implementation programme and ongoing enhancements to our customer facing website.

 

ACQUISITION OF FREEHOLD OFFICE

Subsequent to the year-end, in July 2017, the Group completed the acquisition of freehold land and 30,000 square foot office building for £4.4 million including fees and stamp duty.  The office building is intended for use as the Group's head office following a period of refurbishment.  The acquisition was part financed through a new £3.5 million, five-year term loan facility.

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

Set out below are the principal risks and uncertainties that the Directors consider could impact the business.  The Board continually reviews the potential risks facing the Group and the controls in place to mitigate any potential adverse impacts.  The Board also recognises that the nature and scope of risks can change and that there may be other risks to which the Group is exposed and so the list is not intended to be exhaustive.

 

EXTERNAL RISKS

External risks reflect those risks where we are unable to influence the likelihood of the risk arising and therefore focus is on minimising the impact should the risk arise.

 

Risk and impact

Mitigating factors

Economy

The majority of the Group's revenue is generated from sales in the UK to UK customers.  A deterioration in the UK economy may adversely impact consumer confidence and spending on discretionary items.   A reduction in consumer expenditure could materially and adversely affect the Group's financial condition, operations and business prospects.

The expected exit of the UK from the EU has increased the likelihood and potential impact of this risk.

 

As a premium lifestyle brand with a geographically disperse retail store portfolio, a strong e-commerce channel and long standing wholesale customer accounts, the Directors consider that the UK business would be less affected by a reduction in consumer expenditure than many other clothing retailers. 

In addition, the property portfolio has short lease terms, providing relative flexibility to close or relocate stores should it become necessary.

Competitor actions

New competitors or existing clothing retailers or lifestyle brands may target our segment of the market.   Existing competitors may increase their level of discounting or promotions and/or expand their presence in new channels.   These actions could adversely impact our sales and profits.

 

Joules differentiates from competitors through its strong brand and products that are known for their quality, details, colour and prints.   Our large customer database allows the Group to communicate effectively with customers, developing customer engagement and loyalty.

Foreign Exchange

The Group purchases the majority of its product stock from overseas and is therefore exposed to foreign currency risk, primarily the US Dollar.

Without mitigation, input costs may fluctuate in the short term, creating uncertainty as to profits and cash flows.

The anticipated exit of the UK from the EU has resulted in a devaluation of GBP to the US Dollar and increased volatility.  This may be sustained or worsen going forward.

 

The Group's Treasury Policy sets out the parameters and procedures relating to foreign currency hedging.  We currently seek to hedge a material proportion of forecasted US Dollar requirement 12-24 months ahead through the use of forward contracts.

 

The Group's US wholesale business generates US Dollar income which provides a degree of natural hedging.

Regulatory and Political

New regulations or compliance requirements may be introduced from time to time.  These may have a material impact on the cost base or operational complexity of the business.    Non-compliance with the regulation could result in financial penalties.

The anticipated exit of the UK from the EU has increased uncertainty in this area.

 

The Group has processes in place to monitor and report to the Board on new regulations and compliance requirements that could have an impact on the business.  The impact of any new regulation is evaluated and reflected in the Group's financial forecasts and planning.

 

 

INTERNAL RISKS

Internal risks reflect those where we can influence the likelihood of the risk arising and the impact if the risk should arise.

 

Risk and Impact

Mitigating factors

Brand and reputation

The strength of our brand and its reputation are very important to the success of the Group.  Failure to protect and manage this could reduce the confidence and trust that customers place in the business, which could have a detrimental impact on sales, profits and business prospects.

Our brand may be undermined or damaged by our actions or those of our wholesale partners.

 

Brand and reputation are monitored closely by senior management and the Board.  The Group's public relations are actively managed and customer feedback, both direct and indirect, is carefully monitored.

We carefully consider each new trade customer with whom we do business and monitor on an ongoing basis.

Product sourcing

The Group's products are predominantly manufactured overseas.  Failure to carry out sufficient due diligence, and to act in the event of any negative findings, especially in relation to ethical or quality related issues, could adversely impact our brand and reputation.

 

The Group has a policy and process for the selection of new suppliers.  This includes a review of compliance with laws and regulations and that suppliers meet generally accepted standards of good practice.  In addition, suppliers are required to sign up to Joules' code of conduct.

The Group operates a programme of ethical audits across the product supply base supported by a third party agency.  

Design

As with all clothing and lifestyle brands there is a risk that our offer will not satisfy the needs of our customers or that we fail to correctly identify trends that are important to our customer base.  These outcomes may result in lower sales, excess inventories and/or higher markdowns.

Joules has a long established in-house creative and design team who have a high level of awareness and understanding of our target customer segment.   A large proportion of our product range is anchored in classic products that are evolved season to season.

Early feedback from our trade customers can allow us to further refine our product range ahead of significant purchase commitments. 

Key management

Our performance is linked to the performance of our people and in particular to the leadership of key individuals.  The loss of a key individual whether at management level or within a specialist skill set could have a detrimental effect on our operations and, in some cases, the creative vision for the brand.

 

The Group's remuneration policy, which includes a long term incentive scheme and performance-related pay, is designed to attract and retain key management.  The Group operates learning and development initiatives to increase the opportunities for internal succession.

ERP system

We are in the process of implementing a new IT platform, Microsoft Dynamics AX, across the Group.   With any project of this scale, there is a risk of a poorly managed implementation or take up of new systems, which could result in business disruption.

The first phase of our implementation went live in November 2015, supporting our US wholesale operations.  A dedicated programme team with significant experience of our business processes and ERP implementation has been established.  The programme team reports monthly to a steering committee comprised of Group senior management.

IT security and systems availability

Non availability of the Group's IT systems, including the website, for a prolonged period could result in business disruption, loss of sales and reputational damage.

Malicious attacks, data breaches or viruses, could lead to business interruption and reputational damage.

A Business Continuity Plan exists to minimise the impact of a loss of key systems and to recover the use of the system and associated data.

A regular assessment of vulnerability to malicious attacks is performed and any weaknesses rectified.   All Group employees are made aware of the Group's IT security policies and we deploy a suite of tools (email filtering, antivirus etc) to protect against such events.  

Supply chain

The disruption to any material element of the Group's supply chain, in particular the UK central distribution centre,  could impact sales and impact on our ability to supply our wholesale customers, stores and consumers.

 

The Business Continuity Plan includes an established procedure in the event of the loss of the UK distribution centre.  In addition the Group maintains insurance cover at an appropriate level to protect against the impact of such an interruption.

 

 

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

JOULES GROUP PLC

 

 

 

 

 

 

 

52 weeks ended 28 May

2017

£'000

52 weeks ended 29 May

2016

£'000

 

 

 

 

 

 

REVENUE

 

 

 

157,032

131,262

 

 

 

 

 

 

Cost of sales

 

 

 

(69,981)

(61,003)

 

 

 

 

 

 

GROSS PROFIT

 

 

 

87,051

70,259

 

 

 

 

 

 

Other administrative expenses

 

 

 

(76,729)

(62,296)

Share based payments

 

 

 

(829)

-

Exceptional administrative expenses

 

 

 

(341)

(3,128)

 

 

 

 

 

 

Total administrative expenses

 

 

 

(77,899)

(65,424)

 

 

 

 

 

 

OPERATING PROFIT

 

 

 

9,152

4,835

 

 

 

 

 

 

Finance costs and similar charges

 

 

 

(241)

(6,015)

 

 

 

 

 

 

PROFIT/(LOSS) BEFORE TAX

 

 

 

8,911

(1,180)

 

Income tax expense

 

 

 

 

(2,568)

 

(613)

 

 

 

 

 

 

PROFIT/(LOSS) FOR THE PERIOD

 

 

 

6,343

(1,793)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings/(loss) per share (pence)

 

 

 

7.25

(2.04)

 

 

 

 

 

 

Diluted earnings/(loss) per share (pence)

 

 

 

7.22

(2.04)

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

JOULES GROUP PLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52 weeks

ended 28

May

2017

£'000

 

 

52 weeks

ended 29

May

2016

£'000

 

Profit/(loss) for the period

 

 

6,343

(1,793)

Items that may be reclassified subsequently to profit or loss:

 

 

 

Net loss arising on changes in fair value of hedging instruments entered into for cash flow hedges

 

 

(640)

(26)

Exchange difference on translation of foreign operations

 

 

11

(48)

Gains arising during the period on deferred tax on cash flow hedges

 

 

112

15

Gains arising during the period on deferred tax on share options

 

 

177

-

 

 

 

 

 

TOTAL COMPREHENSIVE INCOME/ (EXPENSE) FOR THE PERIOD

 

 

6,003

 

(1,852)

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

JOULES GROUP PLC

 

 

 

 

 

28 May 2017

£'000

29 May 2016

£'000

NON-CURRENT ASSETS

 

 

 

 

Property, plant and equipment

 

 

11,646

11,151

Intangibles

 

 

9,499

5,903

Deferred tax

 

 

612

653

 

 

 

 

 

TOTAL NON-CURRENT ASSETS

 

 

21,757

17,707

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

Inventories

 

 

21,194

19,253

Trade and other receivables

 

 

14,013

10,856

Current corporation tax receivable

 

 

-

231

Cash and cash equivalents

 

 

6,964

9,278

Derivative financial instruments

 

 

1,345

962

 

 

 

 

 

TOTAL CURRENT ASSETS

 

 

43,516

40,580

 

 

 

 

 

TOTAL ASSETS

 

 

65,273

58,287

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Trade and other payables

 

 

32,256

27,919

Current corporation tax payable

 

 

1,018

-

Borrowings

 

 

333

5,461

Provisions

 

 

636

773

Derivative financial instruments

 

 

1,502

488

 

 

 

 

 

TOTAL CURRENT LIABILITIES

 

 

35,745

34,641

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

Borrowings

 

 

294

627

 

 

 

 

 

TOTAL LIABILITIES

 

 

36,039

35,268

 

 

 

 

 

NET ASSETS

 

 

29,234

23,019

 

 

 

 

 

EQUITIES

 

 

 

 

Share capital

 

 

875

875

Hedging reserve

 

 

(139)

389

Translation reserve

 

 

(61)

(72)

Merger reserve

 

 

(125,807)

(125,807)

Retained earnings

 

 

142,956

136,224

Share premium

 

 

11,410

11,410

 

 

 

 

 

TOTAL EQUITY

 

 

29,234

23,019

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

JOULES GROUP PLC

 

 

 

 


Merger reserve

£'000


Hedging reserve

£'000

 

Translation reserve

£'000

 

Share capital

£'000


Share premium

£'000


Retained earnings

£'000


Total

 equity

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 May 2015

(125,662)

400

(24)

91,510

-

10,302

(23,474)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

Loss for the period

-

-

-

-

-

(1,793)

(1,793)

Other comprehensive income for the period

 

-

 

(11)

 

(48)

 

-

 

-

 

-

 

(59)

Share buyback

(145)

-

-

-

-

-

(145)

Share issue

-

-

-

37,009

 

-

37,009

Share capital reduction

-

-

-

(127,715)

-

127,715

-

Share issue

-

-

-

71

11,410

-

11,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 29 May 2016

(125,807)

389

(72)

875

11,410

136,224

23,019

    

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

6,343

6,343

Other comprehensive income for the period

 

-

 

(640)

 

11

 

-

 

-

 

-

 

(629)

Gains arising during the period on deferred tax on cash flow hedges

 

 

-

 

 

112

 

 

-

 

 

-

 

 

-

 

 

-

 

 

112

Dividends Issued

-

-

-

-

-

(525)

(525)

Shares issued

-

-

-

-

-

-

-

Credit to equity for equity-settled share based payments

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

737

 

 

737

Gains arising during the period on deferred tax on share based payments

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

177

 

 

177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 28 May 2017

(125,807)

(139)

(61)

875

11,410

142,956

29,234

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

JOULES GROUP PLC

 

 

 

52 weeks ended 28 May

2017

£'000

52 weeks ended 29 May

2016

£'000

Net cash inflow from operating activities

 

 

 

Profit before interest and income taxes

 

9,152

4,835

Adjustments for:

 

 

 

Depreciation

 

4,920

4,516

Amortisation

 

1,688

1,011

Share based payments

 

829

-

Impairment of fixed assets

 

-

380

Finance expense

 

(241)

(461)

Tax paid

 

(997)

(500)

Increase in inventory

 

(1,941)

(1,601)

Increase in receivables

 

(3,157)

(700)

Increase in payables

 

4,108

9,389

 

 

 

       

Net cash from operating activities

 

14,361

16,869

 

 

 

 

Cash flow from investing activities

 

 

 

Purchase of property, plant, and equipment and intangible assets

 

(10,700)

(7,087)

 

 

 

        

Net cash used in investing activities

 

(10,700)

(7,087)

 

 

 

 

Cash flow from financing activities

 

 

 

Proceeds from new share capital subscribed

 

-

11,481

Redemption of shares

 

-

(145)

Repayment of borrowings

 

(5,461)

(13,913)

Dividend paid

 

(525)

-

 

 

 

       

Net cash used in financing activities

 

(5,986)

(2,577)

 

 

 

        

Net (decrease)/increase in cash and cash equivalents

 

(2,325)

7,205

Cash and cash equivalents at beginning of period

 

 

9,278

 

2,121

 

 

 

          

Effect of foreign exchange rate changes

 

11

(48)

Cash and cash equivalents at end of period

 

 

 

6,964

 

9,278

 

 

 

        

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PREPARATION OF PRELIMINARY ANNOUNCEMENT

The preliminary consolidated financial information for the 52 weeks ended 28 May 2017 was approved by the Directors on 25 July 2017.

This preliminary consolidated financial information has been prepared in accordance with the principles of International Financial Reporting Standards ('IFRS') and has been prepared on a going concern basis. The preliminary consolidated financial information does not constitute statutory consolidated financial statements for the 52 weeks ended 28 May 2017 as defined in section 434 of the Companies Act 2006.

The Annual Report and Group Financial Statements for the 52 weeks ended 28 May 2017 are the second for Joules Group plc and were approved by the Board of Directors on 25 July 2017. The report of the auditor on those Group Financial Statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The Annual Report and Group Financial Statements for the 52 weeks ended 28 May 2017 will be filed with the Registrar in due course.

Going concern

The Directors have prepared a detailed forecast with a supporting business plan for the foreseeable future. The forecast indicates that the Group will remain in compliance with covenants throughout the forecast period.  As such, the Directors have a reasonable expectation the Company and Group will have adequate resources to continue in operational existence for the foreseeable future. As such, they continue to prepare the financial statements on the basis of going concern.

 

2.       SEGMENT REPORTING

The Group has three reportable segments; Retail, Wholesale and Other. For each of the three segments, the Group's chief operating decision maker (the "Board") reviews internal management reports on a monthly basis. Each segment can be summarised as follows:

The accounting policies of the reportable segments are the same as described in note 1. Information regarding the results of each reportable segment is included below. Segment results before exceptional items are used to measure performance as management believes that such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within these industries.

There are no discontinued operations in the period.

 

 

 

 

 

 

 

 

 

 

Segment Review and Results

52 WEEKS ENDED 28 MAY 2017

Retail

Wholesale

Other

Total

 

£'000

£'000

£'000

£'000

Revenue

111,884

44,749

399

157,032

Cost of sales

(42,389)

(27,592)

-

(69,981)

GROSS PROFIT

69,495

17,157

399

87,051

Administration expenses

(39,171)

(8,246)

(22,704)

(70,121)

SEGMENT RESULT

30,324

8,911

(22,305)

16,930

RECONCILIATION OF SEGMENT RESULT TO PROFIT BEFORE TAX

 

 

 

 

Segment result

30,324

8,911

(22,305)

16,930

Depreciation and amortisation

(3,901)

(364)

(2,344)

(6,609)

Share based payments (incl. NI)

 

 

 

(829)

Exceptional costs

 

 

 

(341)

Net finance expense

 

 

 

(241)

PROFIT BEFORE TAX

 

 

 

8,911

 

 

 

 

 

 

52 WEEKS ENDED 29 MAY 2016

Retail

Wholesale

Other

Total

 

£'000

£'000

£'000

£'000

Revenue

93,687

37,196

379

131,262

Cost of sales

(36,616)

(24,387)

-

(61,003)

GROSS PROFIT

57,071

12,809

379

70,259

Administration expenses

(34,146)

(5,998)

(16,625)

(56,769)

SEGMENT RESULT

22,925

6,811

(16,246)

13,490

RECONCILIATION OF SEGMENT RESULT TO PROFIT BEFORE TAX

 

 

 

 

Segment result

22,925

6,811

(16,246)

13,490

Depreciation and amortisation

(3,306)

(258)

(1,963)

(5,527)

Exceptional costs

 

 

 

(3,128)

Net finance expense

 

 

 

(6,015)

LOSS BEFORE TAX

 

 

 

(1,180)

 

 

 

3.       GEOGRAPHICAL INFORMATION

The Group's revenue from external customers by geographical location is as detailed below. Predominantly all non-current assets (excluding financial instruments, deferred tax assets and other financial assets) are situated in the UK, therefore separate geographical disclosure of non-current assets is not considered necessary.

 

 

 

UK

£'000

International

£'000

Total

£'000

52 weeks ended 28 May 2017

 

139,030

18,002

157,032

52 weeks ended 29 May 2016

 

118,041

13,222

131,262

 

4.       PROFIT FOR THE YEAR

Profit (before tax) for the year is stated after charging:

 

52 Weeks

52 Weeks

 

ended 28

ended 29

 

May

May

 

2017

2016

 

£'000

£'000

 

 

 

Cost of inventories recognised as expense

61,851

51,376

Staff costs

29,683

24,953

Property rent and service charges

11,658

9,267

Transportation, carriage and packaging

8,354

6,905

Depreciation of property, plant and equipment

4,920

4,516

Amortisation of internally-generated intangible assets included in other operating expenses

1,688

1,011

Impairment of property, plant and equipment

-

380

Impairment loss recognised on trade receivables

240

16

Net foreign exchange (gains)/ losses

(247)

304

Gain on disposal of property, plant and equipment

-

(15)

Write down of inventory in the period

126

196

Other expenses

29,607

27,518

 

147,880

126,427

 

Other expenses include £341,000 for 52 weeks May 2017 (2016: £3,128,000) of exceptional items which have been disclosed separately on the face of the income statement in order to summarise the underlying results. Neither 'underlying profit or loss' nor 'exceptional items' are defined by IFRS, however, the Directors believe that the disclosures presented in this manner provide a clear presentation of the financial performance of the group.

 

Auditors' remuneration

 

 

 

52 weeks ended 28 May

2017

£'000

52 weeks ended 29 May

2016

£'000

 

 

 

 

 

 

The analysis of auditors' remuneration is as follows:

 

 

 

Audit of these financial statements

 

6

4

Audit of financial statements of subsidiaries of the Company

 

74

40

 

 

 

 

        

      

Total audit fees

 

 

 

80

44

 

 

 

 

 

     

 

Other services pursuant to legislation:

Tax compliance

 

 

 

27

66

Tax advice

 

 

 

32

74

Services relating to IPO

 

 

 

-

803

Audit related assurance services

 

 

 

13

5

Remuneration and share plan advisory

 

 

 

54

-

 

 

 

 

    

        

Total non-audit fees

 

 

 

126

948

 

 

 

 

     

     

 

5.       INTEREST PAYABLE AND SIMILAR CHARGES

 

 

 

52 weeks ended 28 May

2017

£'000

52 weeks ended 29 May

2016

£'000

 

 

 

 

 

Bank loan interest

 

 

176

378

Asset loan interest

 

 

65

83

Shareholder loan note interest

 

 

-

4,676

Amortisation of debt costs

 

 

-

878

 

 

 

 

 

 

 

 

241

6,015

 

 

 

 

 

During the prior period the Shareholder loan note debt was settled and all remaining unamortised debt costs were expensed as a part of the IPO. Amortisation of debt costs relates to fees incurred in 2013 with regard to the Shareholder loan notes, as these fees related to a debt facility they were amortised over the expected life of the facility.

 

6.       INCOME TAX

 

 

a)  Analysis of charge in the period

 

 

52 weeks ended 28 May

2017

£'000

Current tax

 

 

 

 

UK corporation tax based on the profit/(loss)

for the period

 

 

 

2,568

 

869

Adjustment in respect of prior periods

 

 

(347)

(438)

Overseas tax

 

 

16

17

 

 

 

 

 

Total current tax charge

 

 

2,237

448

 

 

 

 

 

Deferred taxation

Adjustment in respect of prior periods

 

 

 

366

 

225

Origination and reversal of timing differences

 

 

(50)

(142)

Effect of adjustment in tax rate

 

 

15

82

 

 

 

 

 

Total deferred taxation charge

 

 

331

165

 

 

 

 

 

Tax charge for the period

 

 

2,568

613

 

 

 

 

 

 

 

In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised in other comprehensive income.

 

 

52 weeks ended 28 May

2017

£'000

53 weeks

ended 29

May

2016

£'000

Deferred taxation

 

 

Gains arising during the period on deferred tax on cash flow hedges

112

15

Gains arising during the period on deferred tax on share options

177

-

 

        

        

Total income tax gain recognised in other comprehensive income

289

15

 

        

        

b)      Factors affecting the tax charge for the period  

There are reconciling items between the expected tax charge and the actual which are shown below:

 

 

52 weeks ended 28 May

2017

£'000

52 weeks ended 29 May

2016

£'000

 

 

 

 

Profit/(loss) before taxation

 

8,911

(1,180)

 

 

        

 

UK corporation tax at the standard rate

 

19.8%

 

1,767

20.0%

 

(236)

Effects of:

 

 

 

Expenses not deductible for tax

purposes and other permanent differences

 

 

399

 

73

IPO expenses not deductible for tax purposes

 

60

739

Depreciation and amortisation on non-qualifying assets

 

287

151

Difference in overseas tax rate

 

21

17

Effect of adjustment in tax rate

 

15

82

Adjustment in respect of prior period

 

19

(213)

 

 

        

        

Tax expense for the period

 

2,568

613

 

 

           

           

 

 

        

        

 

The Finance Act 2015 included provisions to reduce the rate of UK corporation tax to 19% with effect from 1 April 2017.  The Finance Act 2016 included provisions to further reduce the rate of UK corporation tax to 17% with effect from 1 April 2020.  Deferred taxation is measured at tax rates that are expected to apply in the periods in which temporary timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date.  Accordingly the rate used to calculate deferred tax assets and liabilities is the effective rate at the date the deferred tax is expected to be realised.

 

7 & 8.     PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

 

Property, Plant and Equipment

 

Intangibles

 

 

 

 

 

 

 

 

Leasehold improve-ments

£'000

 

Fixtures and fittings

£'000

 

Motor vehicles

£'000

 

 

Total

£'000

 

IT Systems

£'000

 

 

 Total

£'000

 

Cost

 

 

 

 

 

 

At 31 May 2015

155

26,761

530

27,446

5,929

5,929

Additions

-

4,589

-

4,589

2,498

2,498

Disposals

(55)

(8,570)

(404)

(9,029)

(674)

(674)

 

 

 

 

 

 

        

At 29 May 2016

100

22,780

126

23,006

7,753

7,753

 

 

 

 

 

 

 

Additions

-

5,415

-

5,415

5,284

5,284

Disposals

-

-

-

-

-

-

 

 

 

 

 

 

 

At 28 May 2017

100

28,195

126

28,421

13,037

13,037

 

 

 

 

 

 

 

Accumulated

depreciation/amortisation

 

 

 

 

 

 

At 31 May 2015

119

15,361

508

15,988

1,513

1,513

Charge for the period

5

4,504

7

4,516

1,011

1,011

Disposals

(55)

(8,570)

(404)

(9,029)

(674)

(674)

Impairment

-

380

-

380

-

-

 

 

 

 

 

 

 

At 29 May 2016

69

11,675

111

11,855

1,850

1,850

 

 

 

 

 

 

 

Charge for the period

8

4,906

6

4,920

1,688

1,688

Disposals

-

-

-

-

-

-

Impairment

-

-

-

-

-

-

 

 

 

 

 

 

 

At 28 May 2017

77

16,581

117

16,775

3,538

3,538

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 May 2015

36

11,400

22

11,458

4,416

4,416

 

 

 

 

 

 

 

At 29 May 2016

31

11,105

15

11,151

5,903

5,903

 

 

 

 

 

 

 

At 28 May 2017

23

11,614

9

11,646

9,499

9,499

 

Property, Plant and Equipment and Intangibles

During the prior period the Directors conducted a detailed review of the Group's fixed assets. As a result of this review £9,703,000 (£9,029,000 of Property, Plant and Equipment and £674,000 of Intangibles) of nil book value items which were no longer in existence or use as at the balance sheet date were identified, these were recorded as a disposal in that period.

 

  

 

9.       BORROWINGS

 

 

 

 

 

 

28 May

2017

£'000

 

29 May

2016

£'000

 

 

 

 

 

 

 

Bank loans

 

 

 

 

-

5,009

Finance loans

 

 

 

 

627

1,079

 

 

 

 

 

 

 

 

 

 

 

 

627

6,088

 

 

 

 

 

 

 

Borrowings are repayable

as follows:

 

 

 

 

 

 

Bank loans

 

 

 

 

 

 

Within one year

 

 

 

 

-

5,009

 

 

 

 

 

 

 

Finance loans

 

 

 

 

 

 

Within one year

 

 

 

 

333

452

Between one and two years

 

 

 

 

210

333

Between two and five years

 

 

 

 

84

294

 

 

 

 

 

 

 

 

 

 

 

 

627

1,079

 

 

 

 

 

 

 

 

Total borrowings

 

 

 

 

 

 

Between one and two years

 

 

 

 

210

333

Between two and five years

 

 

 

 

84

294

After five years

 

 

 

 

-

-

Financing costs capitalised

 

 

 

 

-

-

 

 

 

 

 

 

 

 

 

 

 

 

294

627

On demand or within one year

 

 

 

 

 

333

 

5,461

 

 

 

 

 

 

 

 

 

 

 

 

627

6,088

 

 

 

 

 

 

 

Summary of borrowing arrangements

The bank loan is a Revolving Credit Facility in which amounts drawn down are generally repayable within three months. The facility matures in July 2021 following an amendment and extension that was completed after the year end in July 2017. The finance loans are secured against the assets to which they relate. Interest is paid at varying rates above base rate.

The weighted average interest rates paid during the period were as follows:

 

 

 

 

52 weeks ended

28 May

2017

%

52 weeks ended

29 May

2016

%

Finance loans

 

 

 

7.7

7.4

Bank loans

 

 

 

2.1

3.0

 

 

 

 

 

 

 

 

10.     FINANCIAL COMMITMENTS

Operating lease commitments

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

 

Land & Buildings

 

 

 

 

28 May

2017

£'000

29 May

2016

£'000

Leases expiring:

 

 

 

 

 

 

Not later than 1 year

 

 

 

 

10,394

8,040

Later than 1 year and not later than 5 years

 

 

 

 

34,669

27,881

Later than 5 years

 

 

 

 

20,061

17,550

 

 

 

 

 

 

 

 

 

 

 

 

65,124

53,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

28 May

2017

£'000

29 May

2016

£'000

Leases expiring:

 

 

 

 

 

 

Not later than 1 year

 

 

 

 

483

333

Later than 1 year and not later than 5 years

 

 

 

 

772

359

Later than 5 years

 

 

 

 

151

-

 

 

 

 

 

 

 

 

 

 

 

 

1,406

692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.     RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

 

28 May 2017

£'000

29 May 2016

£'000

 

 

 

(Decrease)/ increase in cash in the period

(2,325)

7,205

Effect of foreign exchange rate changes

11

(48)

Cash flow from movement in debt

5,461

13,913

 

   

        

Change in net debt resulting from cash flows

3,147

21,070

Non cash interest on loan notes

-

(4,676)

Non cash movement on amortised deal fees of loan notes

-

(878)

Non cash settlement on loan notes

-

37,009

 

 

 

Net funds / (debt) at start of the year

3,190

(49,335)

 

      

         

Net funds at end of year

6,337

3,190

 

 

         

 

 

 

 

12.     RELATED PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

The Directors and key management control 31,171,782 shares (2016: 31,011,102 shares) in Joules Group plc, which represents 35.6% (2016: 35.4%) of the issued share capital.  In addition Directors and key management participate in share schemes.

 

13.     EARNINGS PER SHARE

Basic and diluted earnings per share are calculated by dividing profit or loss attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the period.

The weighted average number of shares in issue for the current and prior year has therefore been stated to reflect the post-IPO share capital structure, this adjustment assumes the total shares issued during the IPO were in issue throughout the whole of the previous period presented.

For the calculation of diluted earnings per share, the weighted average number of shares in issue is further adjusted to assume conversion of all potentially dilutive ordinary shares. The Company has one category of potentially dilutive ordinary shares, being management shares not yet vested.

 

 

 

52 weeks ended 28 May

2017

52 weeks ended 29 May

2016

 

 

 

 

 

Basic earnings/(loss) per share (pence)

 

7.25

(2.04)

 

 

 

 

 

Diluted earnings/(loss) per share (pence)

 

7.22

(2.04)

 

 

 

 

 

 

The calculation of basic and diluted earnings per share is based on the following data:

Earnings

 

 

 

52 weeks ended 28 May

2017

£'000

52 weeks ended 29 May

2016

£'000

Earnings/(loss) for the purpose of basic and diluted earnings per share

 

 

 

6,343

 

(1,793)

 

 

 

 

 

 

Number of shares

 

 

 

52 weeks ended 29 May

2016

52 weeks ended 29 May

2016

Weighted number of ordinary shares for the purpose of basic earnings per share

 

 

 

 

87,500,690

 

 

87,499,796

Potentially dilutive share awards

 

 

294,295

2,431

 

 

 

 

 

Weighted number of ordinary shares for the purpose of diluted earnings per share

 

 

 

 

87,794,985

 

 

87,502,227

 

 

 

 

 

 

 

 

14.     SHARE BASED PAYMENTS

Summary of movement in awards

 

 

 

 

Number of shares

ESOP

LTIP

SAYE

TOTAL

 

 

 

 

 

Outstanding at 29 May 2016

446,875

-

-

446,875

 

 

 

 

 

Granted during the year

268,164

1,896,938

377,757

2,542,859

Lapsed during the year

-

-

(37,110)

(37,110)

Exercised during the year

-

-

(894)

(894)

 

 

 

 

 

Outstanding at 28 May 2017

715,039

1,896,938

339,753

2,951,730

Exercisable at 28 May 2017

-

-

-

-

 

 

 

 

 

All share options were valued using the Black-Scholes model. Expected volatility was determined by management, using comparator volatility as a basis. The expected life of the options was determined based on management's best estimate. The expected dividend yield was based on the anticipated dividend policy of the Company over the expected life of the options. The risk free rate of return input into the model was a zero coupon government bond with a life in line with the expected life of the options.

The fair value of the total shares issued during the period, and measured as at issue date is £5,314,000.

The inputs into the model were as follows:

 

 

 

 

 

 

ESOP

LTIP

SAYE

 

 

 

 

 

 

Weighted average share price

1.83

1.77

1.67

 

Weighted average exercise price

1.32

Nil - 0.01

1.34

 

No. of employees

10

80

202

 

Shares under option

715,039

1,896,938

377,577

 

Expected volatility

28.0%

28.0%

28.0%

 

Expected life (Years)

3-10

2.8 - 3

3

 

Risk-free rate

0.06%

0.08%

0.08%

 

Possibility of ceasing employment before vesting

0%

0%-10%

10%

 

Expectations of meeting performance criteria

100%

60%-100%

100%

 

Expected dividend yields

1.9%

1.9%

1.9%

 

 

 

 

 

 

The group recognised a total expense of £829,000 during the year (2016: Nil) relating to equity-settled share-based payments, including employer's National Insurance Contributions of £92,000 (2016: Nil).

 

 

 

Executive Share Option Plan ("ESOP")

The Group operated a share option scheme during the period for certain employees under the Executive Share Option Plan ("ESOP"). The different options vest between two years and three years and have an exercise life between three and ten years from grant date. All option schemes are subject to continued employment over the vesting period.

 

 

Long Term Incentive Plan ("LTIP")

The Board approved Long Term Incentive Plan 2016 ("LTIP 2016") allows the grant of options to executive directors and senior management of the Group in the form of nil-cost options over ordinary shares in Joules Group plc.  The options are exercisable three years after the date of grant subject to achieving certain stretching targets.  For the Executive directors and members of the operating board, the target is based on an EPS target in the final year of the plan, ending May 2019.  For other senior management awards the target is based on the cumulative PBT over the three years to May 2019. The calculation includes an assumption that 10% of senior managers on the scheme would cease employment before vesting.

 

Save As You Earn Scheme ("SAYE")

Under the terms of the SAYE scheme, the Board grants options to purchase ordinary shares in the company to employees who enter into the HMRC-approved SAYE scheme for a term of three years. Options are granted at up to 20% discount to the market price of the shares on the day proceeding the date of offer and are exercisable for a period of six months after completion of the SAYE contract.

 

15.     DIVIDENDS

In the period an interim dividend of 0.60 pence per share was paid with a total value of £525,001. No dividends were declared or paid in the prior period. The Directors are proposing a final dividend of 1.20 pence per share with a total value of £1,050,008. This dividend has not been accrued in the consolidated statement of financial position and will be put for approval at the AGM on 27 September 2017. This would bring total dividends for the period to 1.80 pence per share with a total value of £1,575,009.

 


This information is provided by RNS
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Annual Results for the 52 weeks ended 28 May 2017 - RNS