boohoo group plc (LON:BOO) have issued a trading statement for the four months ended 31 December 2020.
· Strong revenue growth of 40% in four months, with growth across all brands and geographies
· Significant progress made on Agenda for Change programme
· Successful integration and re-launch of Oasis and Warehouse brands onto our multi-brand platform
· Gross margin for the four months 53.0%, down 50 bps year on year
· Net cash of £386.9 million (31 August 2020: £344.9 million), providing financial flexibility to support future growth
· Close to finalising an extension of UK warehousing capacity, with a new site to open in April 2021, creating up to 1,000 jobs
Following the strong peak trading performance, Group revenue growth for the financial year to 28 February 2021 is expected to be 36% to 38%, ahead of our previous guidance of 28% to 32%.
The Group continues to expect to deliver an adjusted EBITDA margin for the year at around 10% despite COVID-19 related headwinds for distribution costs, planned gross margin investment and accelerated discretionary customer acquisition spend.
Our medium-term guidance remains for 25% sales growth per annum and a 10% adjusted EBITDA margin, reflecting the Board’s confidence in the Group’s prospects as it continues to invest to support growth and raise standards across its supply chain.
The Group has implemented operational systems designed to minimise the impact of Brexit on its customer proposition in Europe. The Group does however expect a small cost headwind, predominantly from higher distribution and administrative costs, which the Group will seek to mitigate where possible.
UK operations update
The Group is close to finalising an extension of UK warehousing capacity (“UK3”) with a new site to open in April 2021 that will support the creation of up to 1,000 jobs in the first 12 months of operation. The site is intended to be utilised by the Nasty Gal, Karen Millen, Coast, Oasis and Warehouse brands, with a transition expected over the course of the first half of the next financial year. The addition of UK3 will free up capacity within our existing network as we develop these facilities to support future expansion plans.
Update on Agenda for Change
Following the publication of the Independent Review of boohoo’s UK supply chain on 25 September 2020, the Group set out its Agenda for Change programme, which focused on a number of key areas: corporate governance; redefining our purchasing practices; raising standards across our supply chain; supporting Leicester’s workers and workers’ rights; support for suppliers; and demonstrating best practice in action.
On 26 November 2020, the Group announced the appointment of Sir Brian Leveson PC to provide independent oversight of the Agenda for Change programme, and committed to publishing progress reports. In line with the Group’s ongoing commitment to transparency, Sir Brian Leveson’s first report has today been published on the Group’s website. The report acknowledges the pace with which boohoo is making towards effecting change, while noting that recommendations remain work in progress. The report can be viewed in full on our PLC website.
The Group believes it is making excellent progress as it works to implement the Review’s recommendations as part of our Agenda for Change programme. Actions implemented to date include:
Strengthening governance and teams with key appointments
· Shaun McCabe was appointed to the Board on 17 November 2020 as an Independent Non-Executive Director and Chair of the Group’s Audit Committee and its newly constituted Risk Committee
· Significant investments into strengthening the Group’s internal Responsible Sourcing, Compliance and Sustainability teams
· Appointing KPMG as consultants to advise and monitor the implementation of the Agenda for Change programme
· The Group is also making good progress towards the appointment of an additional Independent Non-Executive Director with Environmental, Social and Governance (ESG) experience
Significantly increasing oversight of the Group’s supply chain
· An Agenda for Change committee has been established including senior members of boohoo, Sir Brian Leveson and KPMG
· The appointments of Bureau Veritas and Verisio to support the ethical audits of suppliers and sub-contractors, together with enquiry and enforcement specialists headed by former Deputy Commissioner of the Metropolitan Police Tim Godwin OBE to support Sir Brian’s independent enquiries
· A Supply Chain Compliance Committee reporting to the Board has been established, led by the Group’s Director of Responsible Sourcing
· 64 suppliers have been removed from the Group’s UK supplier list, with further investigations ongoing
· Continued progress is being made on the mapping and auditing of the Group’s tier one and tier two supply base, in the UK and internationally, led by teams from Bureau Veritas and Verisio
Demonstrating best practice in action
· Good progress is being made on boohoo’s state-of-the art manufacturing facility based in Leicester, expected to launch later this year, which will also provide a hub for community outreach
· Alternative ethical suppliers are being identified as the Group reviews its supply chain across the UK and internationally, focused on setting a new industry-wide standard for ethical supply chains
· Commitment to publish UK tier one and tier two supplier list by end of March, and global supplier list by the end of September, which will both be updated every 6 months
The Group and Sir Brian Leveson will continue to provide stakeholders with further updates on its Agenda for Change programme throughout 2021, including publication of its first Annual Sustainability Report alongside our Annual Report and Accounts.
Mahmud Kamani, Group Executive Chairman, commented:
“I’m pleased to publish Sir Brian Leveson’s first report today. I’m immensely proud of the speed with which our team has worked to effect change during such a challenging period for the Group, and it’s encouraging to see our progress acknowledged in the report. We’ve added further independent experience to the Board and its committees in the period, and I was delighted to welcome Shaun McCabe to the Board in November. I’d like to take this opportunity to thank our team for their exceptional hard work over the last few months, and to reinforce our commitment to being a leader for positive change in UK textiles manufacturing. We have lots to do still, but an exciting year lies ahead for boohoo and our multi-brand platform in 2021.”
John Lyttle, Boohoo Group CEO, commented:
“I’m delighted with the Group’s performance over the peak trading period. Our team worked exceptionally hard in 2020 as we navigated the many challenges, including the COVID-19 pandemic and the successful acquisition and integration of Oasis and Warehouse. Growth has been strong across our multi-brand platform and we have continued to grow our market share across all geographies. I’m pleased to be able to provide a further update on our Agenda for Change programme today, which demonstrates our ongoing commitment to transparency as we invest in our approach to sustainability and our supply chain for the benefit of all of the Group’s stakeholders. The Group is in an excellent position entering 2021, which we expect to be another year of progress towards our goal of leading the fashion e-commerce market globally.”