boohoo group plc (LON:BOO) have today published interim results for the six months ended 31 August 2021.
- Doubled market share in the UK and US over the last two years. Total group sales +73% since 1H20
- Significantly enhanced target addressable market, with up to 500 million potential customers in key markets
- Integration and relaunch of four new brands in the first half, including Debenhams marketplace
- Increased warehousing and distribution capacity, capable of supporting over £4 billion of net sales
- £85 million of Adjusted EBITDA, down 5% vs. exceptional levels of profitability last year, and up +40% since 1H20, despite £26 million of freight and logistics cost inflation
- Record capital expenditure of £172 million in H1, putting in place the platform for future growth
- Opening a new distribution centre in North America in 2023, significantly strengthening our proposition
| 6 months to 31 August 2021(1H22) | 6 months to 31 August 2020 (1H21) | Change 2021 on 2020 | 6 months to 31 August 2019(1H20) | Change 2021 on 2019(1) | |
| £ million | £ million | £ million | |||
| Revenue | 975.9 | 816.5 | +20% | 564.9 | +73% |
| Gross profit | 533.3 | 449.2 | +19% | 306.6 | +74% |
| Gross margin | 54.6% | 55.0% | -40bps | 54.3% | +30bps |
| Adjusted EBITDA(2) | 85.1 | 89.8 | -5% | 60.8 | +40% |
| % of revenue | 8.7% | 11.0% | -230bps | 10.8% | -210bps |
| Adjusted EBIT(3) | 64.2 | 79.0 | -19% | 51.3 | +25% |
| % of revenue | 6.6% | 9.7% | -310bps | 9.1% | -250bps |
| Adjusted profit before tax(4) | 63.8 | 79.4 | -20% | 51.9 | +23% |
| Adjusted diluted earnings per share(5) | 3.84p | 4.53p | -15% | 2.91p | 32% |
| Net cash(6) at period end | 98.4 | 344.9 | -246.5m | 207.3 | -108.9m |
John Lyttle, boohoo Group CEO, commented:
“Looking back over the last 18 months the Group has delivered an excellent operational and robust financial performance, and that is a testament to all who have helped deliver this. We are delighted to have doubled our market share in key markets such as the UK and US, have significantly expanded our target addressable market through selective acquisitions and are excited about the global potential for all of our brands. In the first half of this financial year, our teams have yet again delivered: integrating four new brands, launching two new warehouses and strengthening our infrastructure in a manner that will allow our multi-brand platform to scale as planned. Entering the second half of the year, the Group is well-positioned to accelerate its growth and our confidence in the Group’s medium term targets remain unchanged. We will continue to invest across our platform, people and technology as we look to further cement our position as a leader in global fashion ecommerce.”
Summary of H1 2022 performance
The Group has made significant progress in the first half, generating strong revenue growth, and a robust EBITDA performance, all whilst heavily investing into key growth enablers such as our brands, infrastructure and platform to support the Group’s future growth ambitions.
Revenues have increased 73% vs. the corresponding period in 1H20, and grew 20% year on year in the first half. Performance in the second quarter was impacted by UK returns rates returning to pre-pandemic levels, physical stores reopening, consumer uncertainty in markets that we operate in resulting in the loss of key events and holidays, as well as continued COVID-19 related disruption across the Group’s key international markets, which has impacted international delivery timeframes.
Adjusted EBITDA at £85m, remains robust and represents an increase of 40% since 1H20. This is however slightly lower than the exceptional levels of profitability achieved in the first half of the prior financial year. Profitability was impacted by a number of cost headwinds driven by short-term factors largely relating to the pandemic and our investment as we scale our newly acquired brands. These include: increased marketing investments in key markets and our new acquisitions, two warehouse operational moves, returns rates normalising and materially higher shipping costs. COVID-19-related distribution cost increases totalled approximately £26 million in the first half, or 270 basis points of margin.
Financial highlights
· Revenue £976 million, up 20% on 1H21 (up 20% CER(7)) and up 73% on 1H20
· Avoiding comparatives against the exceptional growth in 1H21 due to the effect of the pandemic on consumer behaviour, revenue across two years from 1H20 reveals consistent high growth across geographies, with UK +81% and international +63%, including US +126%
· Adjusted EBITDA £85 million, 5% lower compared to exceptional levels of profitability achieved in the first half of the prior financial year and an increase of 40% compared to 1H20
· Adjusted EBITDA includes volume-adjusted shipping costs £26 million higher than pre-pandemic levels
· Robust balance sheet with net cash of £98 million (1H21: £345 million), healthy operating cash flow of £21 million (1H21: £147 million) and net cash outflow of £128 million, after capital expenditure of £172 million (1H21: inflow £100 million)
Operational highlights
· Relaunch of Debenhams, adding a new dimension of a digital department store to the Group’s portfolio and extending the Group’s target addressable market
· Integration and relaunch of the Dorothy Perkins, Wallis and Burton brands, complementary additions to the Group’s scalable, multi-brand platform
· Additional distribution centres in Wellingborough and Daventry in operational use, supporting the next phase of growth
· Purchase of new offices in the heart of London’s West End, housing our London-based brands
Sustainability and governance highlights
· Further progress of Agenda for Change, with publication of UK and international supplier lists and new responsible sourcing team delivering enhanced supplier audits and compliance
· Publication of the Group’s sustainability strategy and significant progress made against our 2021 goals
· More sustainable clothing ranges added across our brands
· Economic impact assessment conducted, highlighting the significant contribution we make to the UK economy, and a commitment to invest over £500 million and create in excess of 5,000 jobs over the next five years
· Announcing PLT marketplace, a resale platform launching in 2022
Demand accelerating in September
Consumer demand has been improving through August, principally in the UK but also in key overseas markets such as Ireland and France, where there has been a re-acceleration in the rate of growth. This has again improved in September, where the rate of gross sales growth has increased compared to that achieved in the second quarter of the financial year.
Full year outlook
Our expectation is for full year sales growth of 20% to 25%, implying sales growth of 20% to 30% in the second half of the financial year. As we have indicated above, we have seen a re-acceleration in the rate of growth compared to that achieved in the second quarter. Adjusted EBITDA margins are expected to remain robust, and the Group will continue to invest in its existing and new brands in order to facilitate the long-term growth opportunity. Elevated short-term cost headwinds experienced in the first half are expected to continue in H2 alongside recent freight inflation in our supply chain and wage inflation within our distribution centres. Consequently, adjusted EBITDA margins are now expected to be 9% to 9.5%, compared to 9.5% to 10% as previously guided. Reflecting ongoing investments across our technology, offices and infrastructure (including the initial phase of the international distribution centre), capex is now expected to be around £275million for the year, slightly above the top end of previous guidance of approximately £250 million.
The COVID-19 factors impacting EBITDA this financial year are expected to normalise over the medium term. Recent inflation in freight, logistics, and labour costs are expected to reduce from elevated levels in time, particularly as the Group invests in its own infrastructure through implementing more advanced automation in its existing distribution centres, global travel capacity increases and our first global distribution centre opens in North America.
Longer-term competitive positioning and opportunity to take market share unchanged
The Group expects to emerge from the pandemic in a far stronger position compared to two years ago. Reflecting significant investments in its platform, brands and people, the Group has:
· A broader portfolio of brands and a significantly larger target addressable market with 500 million potential customers in key markets
· Greater infrastructure capacity capable of supporting in excess of £4 billion of net sales, with automation investments driving future efficiencies
· Committed to opening a new distribution centre in North America, significantly strengthening our customer proposition
· Significantly improved supply chain visibility
· 19 million customers globally
· Numerous growth opportunities through our direct to consumer offer and strategic partnerships.
boohoo state they remain extremely confident in the Group’s future growth prospects, and as short-term demand uncertainty and material cost headwinds as a result of the pandemic unwind, they believe that the Group continues to be capable of executing its strategy aimed at leading the fashion ecommerce market with medium term guidance of sales growth of 25% per annum and adjusted EBITDA margin of 10% remaining unchanged.
