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boohoo.com plc

H1 growth of 50%, guidance raised

Boohoo Group Plc (LON:BOO) has announced another robust performance for the six months ended 31 August 2018, delivering impressive growth with profitability in line with guidance. Revenue of £395.3m is +50.4% YOY with the group achieving market share gains across its key focus territories and brands; boohoo (+14.9%), PrettyLittleThing (+132.0%) and Nasty Gal (+111.4%). The impressive top line growth delivered in the period combined with the group’s operational leverage and the benefit of its multi-brand model is reflected in the solid 200bps uplift in group gross margin to 55.3%. Adj. EBITDA of £39.6m is +42.6% YOY translating to Adj. diluted EPS of 1.39p (H1 FY18: 1.22p). Full year revenue guidance has moved higher today with growth of 38-43% now forecast (previously 35-40%), reflected in an upgrade to our forecasts. Following the acquisition of PLT and Nasty Gal, the boohoo Group consists of three fast-growing, vertically integrated brands enabling the group to generate levels of profitability well ahead of its peers. Trading on FY19 PER of 49.3x falling to 40.4x in FY20 its value looks undemanding versus its peers.

Regional performance: The group delivered market leading growth across geographies as it continues to gain market share. UK sales of £234.1m are +43.3% YOY with USA +74% to £68.2m, Europe +74% to £51.3m and the Rest of the World +27% YOY to £48.1m. International growth is being supported by investment in foreign language websites, whilst marketing offices established in Paris and Los Angeles to provide local knowledge and focal points for future marketing initiatives as the group continues to drive brand awareness worldwide.

Brand performance: boohoo sales were +14.9% to £209.0m with market share gains in all focus markets and growth accelerating to 17.6% in Q2, from 12.0% in Q1. PLT delivered outstanding revenue growth of +132.0% to £168.6m in H1 despite strong prior year comparatives and some disruption resulting from the warehouse relocation. Nasty Gal revenue of £17.7m is +111.4% YOY (H1 2018: £8.4m) with growth seen across all territories.

Operational progress: The relocation of PrettyLittleThing’s distribution centre was completed in H1, adding 0.6m Sq. Ft of warehousing capacity capable of supporting net sales of c.£0.4bn. The combined Burnley and Sheffield sites, assuming mezzanine flooring is installed, would give the group a combined 4.0m Sq. Ft of warehousing and distribution space capable of supporting c.£2.4bn in annual sales, well on the way to the group’s £3.0bn target.

Forecasts upgraded: We nudge our forecasts higher today, reflecting managements positive outlook statement and revised full year guidance. See Exhibit 12 for details.

Valuation and outlook: boohoo Group’s significant investment in distribution capacity, a new CEO with a wealth of operational experience, and a strong balance sheet with significant net cash means the business is well positioned to execute the next stage of its growth. boohoo trades on an FY19 PER of 49.3x falling to 40.4x in FY20 which looks undemanding versus its peers.

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