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boohoo.com plc

Boohoo Group Revenue Strong Growth and profitability – Revenue £856.9 million, up 48%

Boohoo Group (LON: BOO) has today provided its final results for the year ended 28 February 2019.

Strong growth and solid profitability

2019

2018

Change

£ million

£ million

Revenue

856.9

579.8

+48%

Gross profit

469.0

306.4

+53%

Gross margin

54.7%

52.8%

+190bps

Adjusted EBITDA(1)

84.5

56.9

+49%

% of revenue

9.9%

9.8%

+10bps

Adjusted EBIT(2)

75.1

50.4

+49%

% of revenue

8.8%

8.7%

+10bps

Adjusted profit before tax(3)

76.3

51.0

+49%

Profit before tax

59.9

43.3

+38%

Adjusted diluted earnings per share(4)

4.15p

3.23p

+29%

Diluted earnings per share

3.22p

2.71p

+19%

Net cash(5) at year end

190.7

133.0

+£57.7 million

 

 

Financial Highlights

Group

· Revenue £856.9 million, up 48% (47% CER(6))

· Strong revenue growth across all geographies with UK up 37% and international up 64%

· Gross margin increased to 54.7% (2018: 52.8%)

· Adjusted EBITDA £84.5 million, 9.9% of revenue (2018: £56.9 million, 9.8%)

· Adjusted profit before tax £76.3 million (2018: £51.0 million)

· Strong balance sheet with net cash of £190.7 million (2018: £133.0 million), with robust operating cash flow of £111.9 million (2018: £76.2 million)

boohoo

· Revenue £434.6 million up 16% (15% CER)

· Gross margin 52.9%, up 170bps

PrettyLittleThing

· Revenue £374.4 million up 107% (107% CER)

· Gross margin 56.6% up 140bps

Nasty Gal

· Revenue £47.9 million up 96% (100% CER)

· Gross margin 56.7% down 290bps

Operational Highlights

Group

· Burnley distribution centre extension build and fit-out completed, with automation live in April 2019

· PrettyLittleThing’s distribution centre successfully relocated to a larger facility in Sheffield

boohoo

· 7.0 million active customers(7), up 9% on prior year

· Strong international growth, now 44% of total revenue

· Significant investments in customer service improving the customer proposition

PrettyLittleThing

· 5.0 million active customers, up 70% on prior year

· Customer proposition resonating with consumers, driving growth and increasing market share

· High profile celebrity associations driving traffic and international expansion, exceptionally well in the US

Nasty Gal

· 0.9 million active customers, up 122% on prior year

· Extensive product range now comprises over 8,000 lines

· Strong growth in US home market and international appeal and revenue growing rapidly

Outlook and guidance

Trading in the first few weeks of the financial year has been encouraging. Group revenue growth for the financial year is expected to be 25% to 30% with an adjusted EBITDA margin of around 10% and capital expenditure in the region of £50 to £60 million. This guidance includes the adoption of IFRS 16, which is expected to increase EBITDA by £4 to £5 million and be broadly neutral at a Profit Before Tax level.

Looking beyond the current year, we will continue to make investments across the group as part of our vision to lead the global fashion e-commerce market. Whilst this will require continued investments in people and infrastructure, we believe that the benefits of our multi-brand platform will continue to generate economies of scale, allowing us to target sales growth of 25% per annum, with an adjusted EBITDA margin of around 10% over the medium term.

John Lyttle, Boohoo Group plc CEO, commented:

“I am very excited to have joined the boohoo Group at this key stage of its growth, with the group’s disruptive and proven business model having delivered yet another excellent set of financial and operational results. In my short time within the business, I am delighted to have been able to meet a number of hugely talented people and have already been able to see many parts of the business. This has confirmed my belief and optimism that the group’s investments into its brands and infrastructure have allowed it to develop a scalable multi-brand platform that is well-positioned to disrupt, gain market share and capitalise on what is a truly global opportunity.”

Investor and analyst meeting

A meeting for analysts will be held today at the office of Buchanan, 107 Cheapside, London, EC2V 6DN commencing 9.30am (UK time).

A live audio webcast will be available at 9.30am via the following link:

http://webcasting.buchanan.uk.com/broadcast/5c6bc25be6e1d92d38f4ed2d

A replay will subsequently be available from 12 noon via the same link.

Review of the business

“Another outstanding year from all our brands across all regions.”

Overview

2019

2018

Change

£000

£000

Revenue

856,920

579,800

+48%

Gross profit

468,994

306,355

+53%

Gross margin

54.7%

52.8%

+190bps

EBITDA

72,601

53,663

+35%

% of revenue

8.5%

9.3%

-80bps

Profit before tax

59,856

43,313

+38%

Diluted earnings per share

3.22p

2.71p

+19%

Net cash(1) at year end

190,726

133,047

+£57.7m

Underlying:

   Adjusted EBITDA(2)

84,546

56,932

+49%

   % of revenue

9.9%

9.8%

+10bps

   Adjusted EBIT(3)

75,074

50,403

+49%

   % of revenue

8.8%

8.7%

+10bps

   Adjusted profit before tax(4)

76,250

51,031

+49%

   Adjusted diluted earnings per share(5)

4.15p

3.23p

+29%

(1) Net cash is cash less borrowings.

(2) Adjusted EBITDA is calculated as profit before tax, interest, depreciation, amortisation, share-based payment charges and exceptional items.

(3) Adjusted EBIT is calculated as profit before tax, interest, share-based payment charges, amortisation of acquired PrettyLittleThing and Nasty Gal intangible assets and exceptional items.

(4) Adjusted profit before tax is calculated as profit before tax, excluding share-based payment charges and amortisation of acquired intangible assets and exceptional items.

(5) Adjusted diluted earnings per share is calculated as diluted earnings per share, adding back amortisation of acquired intangibles, share-based payment charges and exceptional items.

Group revenue for the year increased by 48% (47% CER) to £856.9 million (2018: £579.8 million). Revenue growth across all territories and brands was strong.

Adjusted EBITDA was £84.5 million (2018: £56.9 million), an increase of 49%, with improved gross margin across the group leading to an adjusted EBITDA margin of 9.9% (2018: 9.8%). Adjusted profit before tax was £76.3 million (2018: £51.0 million), an increase of 49%. Profit before tax was £59.9 million (2018: £43.3 million), an increase of 38%. Adjusted diluted earnings per share was 4.15p, up 29% on the prior year. Diluted earnings per share rose to 3.22p, an increase of 19% (2018: 2.71p).

The group has performed exceptionally well during the year. Revenues have increased across all our brands in all regions. Our focus on key international markets has been highly successful, producing growth of 64% and increasing international revenues to 43% of total revenue. PrettyLittleThing continues to perform exceptionally well, with a growth rate of 107%. Market share is increasing, driven by the customer proposition of great fashion at unbeatable prices, supported by an engaging social media presence and successful celebrity endorsements. Gross margins have improved as a result of stronger sell through, tighter control on stock cover and refinement of the customer proposition. Substantial investments have been completed to secure warehouse capacity for growth and improve the future efficiency of the Burnley warehouse with automation.

Cash flow generation was strong, with free cash flow up 118% to £65.1 million. Capital expenditure was £46.9 million as we invest in our infrastructure ahead of our growth curve. Our net cash balance at the period end increased to £190.7 million (2018: £133.0 million).

Distribution centres

During the year, the Burnley distribution centre extension build and fit-out was completed. Automation went live in April 2019, which will greatly improve picking efficiency and reduce costs in the financial year 2020 and beyond. We opened new welfare facilities to all Burnley employees and provided a bus service to the distribution centre from nearby towns. PrettyLittleThing’s (“PLT”) distribution centre relocation to Sheffield was completed successfully during July and August, with a low level of disruption to operations. Costs associated with this relocation are considered exceptional and amounted to £6.7 million. The addition of the Sheffield facility greatly increases our sales capacity, will help underpin PLT’s infrastructure needs and adds further operational flexibility for the group. We continue to invest in our infrastructure, with our operations at Burnley and Sheffield representing significant stepping stones as we build towards creating a distribution network capable of generating £3 billion of net sales globally.

boohoo (including boohooMAN)

Performance

Revenue for the year increased to £434.6 million, up 16% on the previous year, with growth in all our key focus markets.

International growth continues to be strong and we are continuing to gain market share in the UK. Gross margin increased by 170bps to 52.9%, driven by improved stock control and refinement of the customer proposition.

Product

Our comprehensive size range offerings, the breadth of the product range and continuous fresh introductions have continued to drive growth. Hundreds of new styles are added daily and the very latest fashions appear within days or weeks of trends being spotted by our fashion experts and offered to our customers at affordable prices. boohooMAN has performed strongly with an extensive product range and increasing customer reach.

Marketing

Marketing activity included several high profile celebrity campaigns: Zendaya, Stefflon Don, French Montana, Dele Alli and Paris Hilton headed the cast and were instrumental in driving increased brand awareness. Other marketing activities continued using a successful formula of a mix of media, including social media influencers, reality TV ambassadors, bloggers, TV, outdoor, email, student events and digital acquisition channels. Our social media presence continues to grow and we now have 5.9 million followers on Instagram, 2.9 million Facebook fans and 0.5 million followers on Twitter.

Customer interaction

Active customer numbers over the last 12 months increased by 9% to 7.0 million. Conversion rate to sale decreased from 4.3% to 3.9% of sessions, when measured on website statistics alone. Order frequency increased 0.3%, with customers placing an order with us, on average, 2.14 times in 12 months, whilst the number of items per basket decreased 1% to 3.04.

Refinements to the customer proposition included free returns, next day delivery, shortened delivery times and more overseas collection points. The cut-off time for next day delivery in the UK is 11pm and SMS messaging for delivery status has been introduced. We are trialling artificial intelligence in customer contact response. We have 17 country-specific websites and have plans to introduce more foreign language websites optimised for local criteria, in line with our aim to attain best-in-class customer service.

Technology

The principal technology projects completed include new payment solutions and more country returns portals, which give more returns flexibility and enable us to refund customers immediately after the courier collects their parcel. We have also introduced social logins for UK customers.

The website and app are subject to continuous improvement in content, functionality, personalisation and ease of use. During the year we added visual search to the website, which enables customers to search for similar items either from a photograph they have uploaded or from an image on the website. Our app has been downloaded by nearly two million customers, generating a considerable growth in the number of visits.

PrettyLittleThing

Performance

PrettyLittleThing (“PLT”) has had an enormously successful year, with revenues increasing by 107% to £374.4 million. All territories delivered strong growth and significant increases in market share and it is clear that there is both the demand and potential for this to continue. The relocation of the distribution centre to Sheffield in the summer was executed extremely well, with a low level of disruption to the business during the move. Exceptional costs associated with the move amounted to £6.7 million. Gross margin has increased 140bps to 56.6%, with stronger sell-through and refinements to the customer proposition.

Product

Renowned for having the latest and most relevant celebrity looks, PLT offers over 20,500 styles at affordable prices to its customers. PLT’s “shape” ranges, which include Petite, Tall, Shape and Plus, have proved very popular in the year and have driven growth. Highly successful celebrity collaborations in the year included those with Model Hailey Baldwin, UK Radio presenter Maya Jama, American Hip-Hop stylist Karl Kani and US model Ashley Graham. The Karl Kani collaboration launched in January 2019 included PLT’s first ever unisex product range.

Marketing

The PLT brand is promoted through a global multi-channel marketing approach which seeks to engage with customers across the world. Celebrity collaborations are supported by an influencer network which seeks to leverage the power of social media to engage with our customers, giving us a combined reach of over 350 million impressions globally. The PLT ‘Royalty’ programme, which has shown significant growth in the year, gives customers in the UK and Ireland free unlimited next day delivery and seeks to generate increased customer loyalty to the PLT brand. Brand awareness is also supported by more traditional marketing approaches such as PLT’s sponsorship of the E! entertainment channel in the UK, Ireland, France and Australia, which directly appeals to PLT’s target market, as well as out-of-home advertising including the now iconic fleet of PLT taxis operating in major cities throughout the UK.

Customer interaction

We support eight country-specific websites and have plans for further foreign language sites next year, following the success of the French language site, introduced in the previous financial year. For the UK market, we offer a wide range of free return options. We have also introduced new returns options in international markets, accelerating the point of refund to enhance the customer experience. Customers have the option of using a virtual customer service assistant for frequently asked questions, which greatly reduces response wait time as well as cutting costs.

Active customer numbers over the last 12 months increased by 70% to 5.0 million. Conversion rate to sale decreased from 3.7% to 3.3% of sessions, when measured on website statistics alone. Order frequency increased 12%, with customers placing an order with us, on average, 2.84 times in 12 months, whilst the number of items per basket increased 12% to 2.72. We have 1.9 million followers on Facebook, 0.3 million followers on Twitter, 10.5 million Instagram followers, as well as a presence on several other social media channels.

Technology

Investment in technology is paramount to PLT’s success and we have a programme of work across our services and customer-facing applications. The separation of systems with our micro-service architecture has allowed our platform to be more adaptable to cope with the business’s pace of change and the continuing growth of our customers’ order volumes and website traffic. Through the global reach of the Cloud, we can roll out new services worldwide so they are hosted as close as possible to our customers and built in a way we can ensure high performance. This agility will allow us to continue to invest at pace, delivering new experiences and innovation to our customers.

Key highlights for this year have been the introduction of a new automated chatbot which provides customers with instant assistance on a number of contact categories. New payment methods have been launched, with further payment options planned for the coming financial year. Our iOS and android apps have been developed throughout the year to improve the customer experience and conversion rates.

Nasty Gal

Performance

Revenue growth has been strong across all territories with a growth rate of 96%, increasing revenue to £47.9 million. In the brand’s principal market, the USA where the brand originated, growth has been very strong. The next largest market is the UK, where brand awareness has increased substantially and growth has been exceptionally high. Gross margin was 56.7%, a reduction on the previous year but in line with our proposition strategy.

Product

The product range has increased substantially to over 8,000 styles and targets price points higher than those of boohoo. The brand has its roots in Los Angeles and portrays a distinctive look for the confident girl who likes to express her personality through the clothes she wears. The appeal of the brand extends outside of the USA, as rapidly increasing sales in the UK have proven.

Marketing

The marketing strategy has focussed on building and extending the number of bloggers and influencers and staging key media events to re-engage customer interest and promote brand loyalty. Key influencers engaged during the year included Taylor le Shae and Emma Louise Connelly.

Customer interaction

Nasty Gal operates through six country and regional websites and Android and iOS apps in the UK, US and the Australian markets.

On social media we have 3.6 million followers on Instagram, 1.3 million Facebook likes and 0.2 million followers on Twitter.