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boohoo.com plc

boohoo.com plc 106% group growth delivered in Q1

boohoo.com plc (LON:BOO) continues to exceed expectations said Zeus Capital today, delivering Q1 group revenue growth of some 106% to £120.1m, with standout like-for-like revenue growth of 78%. Significantly, the group has also announced plans to construct a brand new automated ‘super-site’ that will provide boohoo with an additional £2bn of net sales capacity. The c.£150m of capex required will be invested over the next three years and will be funded by a £50m equity placing alongside cash generated by the business. In our view, the £50m fund raise and continued outperformance gives boohoo enormous flexibility to grow, and when combined with the existing Burnley site, will bring group sales capacity towards £3bn, a serious statement of intent. Alongside today’s new equity placing, 3.25% of the total share capital is also being placed from existing shareholders, equating to c.£80m. We note that the sellers will be subject to a six month hard and six month soft lock up period.

* Group revenue of £120.1m for the three months to 31 May 2017 is up 106% YoY, with boohoo up 48% (44% CER) and PLT up an exceptional 305% to £30.7m. We also note that Nasty Gal contributed £2.9m of sales at 69.9% gross margin. Group gross margin of 54.2% has reduced in line with expectations (FY18E 53.5%) driven by planned investments in the customer proposition.

* KPIs continue to improve as an impressive rate demonstrating the group continues to attract new customers while retaining existing ones. The boohoo business has reported 5.2m active customers, up 24% YoY, while PLT has reported 1.6m active customers, up 146% YoY.

* Yet more upgrades to FY18 and FY19 forecasts. Our FY18 group sales estimate increases by 6.8% to £472.5m (£442.3m), implying 60.4% YoY growth which is in line with updated guidance. Our FY18 adj. EBITDA forecast increases by 8.8% to £48.4m (£44.5m). This equates to a margin of 10.2%, again in line with guidance. We also see sales upgrades in FY19 of c.7% and c.10% EBITDA, implying growth in adj. PAT of c.20%.

Year-end Feb FY18 FY18 % FY19 FY19 %
New Old Chg New Old Chg
Revenue (£m) 472.5 442.3 6.8 595.1 556.6 6.9
Revenue growth (%) 60.4 50.1 25.9 25.9
Gross Profit (£m) 252.8 235.7 7.3 314.8 293.2 7.4
Margin (%) 53.5 53.3 52.9 52.7
Adj. EBITDA (£m) 48.4 44.5 8.8 61.8 55.9 10.5
Margin (%) 10.2 10.1 10.4 10.1
Source: Zeus Capital estimates

* As a multi-branded, leading e-commerce business, boohoo continues to deliver premium growth alongside premium margin. The outperformance and increased guidance demonstrates the strengths of boohoo’s brand led model over established peers such as ASOS and Zalando who are growing at c.25% delivering single digit EBITDA margins of c.7%. We expect further outperformance as the brands continue to grow worldwide
Highlights for the three months ended 31 May 2017

£’000s 3 months to 31 May
FY18 FY17 yoy % yoy % CER
Total revenue 120,077 58,222 106% 98%
Revenue by brand
 boohoo 86,450 58,222 48% 44%
 PrettyLittleThing 30,729
 Nasty Gal 2,898

Group

· Revenue £120.1 million, up 106% (2016: £58.2 million)

· Like-for-like(1) revenue growth of 78%

· Gross margin 54.2 % (2016: 56%)

· Strong balance sheet with net cash of £74 million (2016: £61 million)

boohoo

· Revenue £86.4 million, up 48% (44% CER(2))

o UK up 41%, rest of Europe up 44% (33% CER), USA up 97% (83% CER), rest of world up 50% (34% CER)

· Gross margin 53.9%, down 230 bps, driven by planned investments in the customer proposition (retail gross margin 56.3% (2016: 57.6%))

· 5.2 million active customers(3), up 24% on prior year

PrettyLittleThing

· Revenue £30.7 million (2016: like-for-like(4) £7.6 million, up 305%)

· Gross margin 53.8% (2016: like-for-like(4) 57.3%)

· 1.6 million active customers, up 146% on prior year

Nasty Gal

· Revenue £2.9 million

· Gross margin 69.9%

Joint Chief Executives Mahmud Kamani and Carol Kane commented: “Our performance in the first quarter has been very encouraging across all brands and geographic regions. While it is early in the financial year, boohoo continues to perform well and PrettyLittleThing delivered exceptionally strong revenue growth in the first quarter as it continues to expand its young female customer base. Nasty Gal has made a promising start since we acquired the brand, with revenues growing strongly month-on-month, as we increased the product range.

Across the Group, the combination of broadening product ranges, strong brand image, competitive prices and good customer service continues to drive sales momentum, whilst the inclusion of our new brands is proving the potential of our multi-brand strategy in delivering strong Group revenue growth.

boohoo has successfully migrated the majority of its English language markets on to a new website platform, which is improving its speed and functionality. Additional office space adjacent to the Manchester head office, accommodating both Nasty Gal and boohoo functions, is on schedule for occupation in July. PrettyLittleThing has added to its people talent base with a number of new appointments to execute its growth strategy.

Warehousing

As previously announced, the construction of the second warehouse extension at our Burnley site is under way and is expected to be complete in early 2018, adding 900,000 square feet of storage to the existing 996,000 square feet. This will provide sufficient capacity for a £1 billion net sales operation.

The growth rates of the Group’s brands are accelerating the need for more warehouse capacity. Consequently, the Group announces today plans to construct a new automated super-site of over 600,000 square feet, which will provide boohoo with over £2 billion of net sales capacity, in addition to the £1 billion net sales being provided by the extended Burnley site. The land acquisition of the new site, together with the construction, will cost around £150 million over three years to FY20. As a result, the Group expects capital expenditure now to be £63 million this year (previous guidance was £34 million). Capital expenditure linked directly to the super-site is likely to be around £75 million in FY19 and around £49 million in FY20.

To enable the Group to maintain a strong cash position to be able to take advantage of investment opportunities, the Group has announced separately today an Equity Placing to raise £50 million, which together with the Group’s cash generation, will fund the Group’s capital expenditure requirements.

Outlook

As a result of very strong trading momentum in Q1, we now expect Group revenue growth for the full year to February 2018 to be around 60%(5), ahead of previous guidance of revenue growth approaching 50%. We expect Group EBITDA margins to be in line with previous guidance at around 10%.”

(1) Like-for-like revenue growth includes boohoo and PrettyLittleThing but excludes Nasty Gal.

(2) CER designates Constant Exchange Rate translation of foreign currency revenue.

(3) Active customers are defined as having shopped in the last year.

(4) PrettyLittleThing was acquired on 3 January 2017. The like-for-like comparatives represent the turnover of the company prior to acquisition.

(5) Revenue growth from the boohoo brand is expected to be 25% to 30% year on year. Revenue growth from the PrettyLittleThing brand is expected to be approximately 75% above the 12 month revenue to 28 February 2017 of £55 million. The balance of the growth to around 60% will come from the Nasty Gal brand.

Unless expressly defined in this announcement, all capitalised terms used in this announcement have the meanings stated in the announcement made on 7 June 2017 entitled “Proposed Accelerated Bookbuild to raise gross proceeds of up to £50 million.”

boohoo.com Plc also announced today that, further to the announcement made on 7 June 2017 entitled “Proposed Accelerated Bookbuild to raise gross proceeds of up to £50 million and proposed placing of existing shares”, the Bookbuild has closed and the Company has raised gross proceeds of £50 million through the successful private placing of 22,727,273 New Placing Shares at a price of 220 pence per New Placing Share, representing a discount of 0.3% to the closing middle market price on 7 June 2017.

In conjunction with the Placing, Mahmud Kamani, Rabia Kamani, and Nurez Kamani (together the “Selling Shareholders”), have conditionally agreed to sell 36,570,632 Existing Ordinary Shares at the Placing Price. The Selling Shareholders have also agreed to a 6-month lock-in and a subsequent 6-month orderly market period in respect of their remaining Existing Ordinary Shares. As a result, the Concert Party (as defined in the Notice of Annual General Meeting 2017) holds in aggregate 442,798,281 Ordinary Shares, representing 38.57% of the Enlarged Share Capital of the Company.

Application has been made for the 22,727,273 New Placing Shares to be admitted to trading on AIM at 8 a.m. on 12 June 2017 (“Admission”). Once Admission occurs, the Placing will have successfully completed.

Zeus Capital and Jefferies acted as joint bookrunners in connection with the Placing.

Background to and reasons for the Placing and use of proceeds of the Placing of New Placing Shares

As disclosed in the trading statement released yesterday, the growth rates of the Group’s brands are accelerating the need for more warehouse capacity. Consequently, the Group announced yesterday plans to construct a new automated super-site of c.600,000 sq ft, which is intended to provide boohoo with over £2 billion of net sales capacity, in addition to the estimated £1 billion net sales being provided by the extended Burnley site. The land acquisition of the new site, together with the construction, is expected to cost c.£150 million over three years to FY20.

To enable the Group to be able to maintain a strong cash position that will enable it to take advantage of investment opportunities as they arise, approximately £50 million will be raised through the Placing of New Ordinary Shares and the Group’s cash generation will fund the Group’s capital expenditure requirements.

Total Voting Rights

Following Admission, the total number of Ordinary Shares and voting rights in the Company will be 1,147,977,462. The Company does not hold any shares in treasury.

The above figure may be used by Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the FCA’s Disclosure Rules and Transparency Guidance and the articles of association of the Company.

The Notice of Annual General Meeting 2017 (the “Notice”) contains references to percentages of the total issued shares in the capital of the Company as at the latest practicable date prior to posting of the Notice, being 17 May 2017. Following Admission, the percentages referred to in the Notice will no longer reflect the current total number of issued shares in the capital of the Company due to the increase in the Company’s share capital as a result of the Placing.

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