1^st August 2022

 

Seraphine Group plc

 

("Seraphine" or the "Company")

 

Final Results

 

Seraphine Group plc, the international digitally-led maternity and nursing wear brand, today issues its maiden Final Results for the 12 months ended 3 April 2022 (the "Period" or "FY22"), against the backdrop of an extremely challenging year for the retail sector.

 

SUMMARY FINANCIAL RESULTS
	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m	Change	CCY Change
Product revenue	44.0	34.2	28.8%	33.0%
Own digital platform	37.0	30.5	21.2%	25.2%
Digital Partners	4.4	2.4	83.2%	87.8%
Retail Stores	2.6	1.2	111.5%	118.9%
Product Gross Profit	27.8	22.5	23.6%
Product Gross Profit %	63.2%	65.9%	-2.7%
Income from Other Services	2.0	1.6
Adjusted Distribution costs(1)	(10.0)	(6.6)
Adjusted Administrative expenses(1)	(17.3)	(11.6)
Adjusted EBITDA (pre IFRS 16)(1)	2.6	6.2	-58.6%
Adjusted EBITDA (pre IFRS 16) %	5.8%	18.0%
Operating loss before exceptional items	(2.0)	(0.2)
Operating loss	(31.9)	(4.9)
Adjusted EBIT(1)	2.2	5.6	-61.5%
Adjusted PAT (post IFRS 16) (1)	1.5	4.4	-64.9%
Adjusted EPS (pence) (1)	5.0	N/A
Adjusted weighted EPS (pence) (1)	5.7
Free cashflow(1)	(0.1)	5.8
Free cashflow conversion(1)	-5.7%	94.3%	100.0%
Non Financial KPIs
Website traffic	15.6	13.8	12.7%
Conversion rate	3.0%	2.8%	20 bps
Total orders	469,409	393,117	19.4%
Average basket value	£135	£127	6.5%
Average CAC (£/order)	£16	£13	22.5%

 

(1) Refer to notes below for reconciliations to statutory figures and definitions of alternative performance measures

Pre IFRS16 as a reporting measure will not be used for FY23 financial results

 

Financial

·    Product revenue grew +33.0% on a constant currency basis to £44.0m (FY21: £34.2m), despite challenging retail environment and well reported external headwinds (Covid, supply chain disruption, weakening consumer confidence)

-      Own digital platform product revenue grew +25.2% (CCY) to £37.0m (FY21: £30.5m)

-      Digital partner product revenue grew +87.8% (CCY) to £4.4m (FY21: £2.4m)

-      Own retail store product revenue grew +118.9% (CCY) to £2.6m (FY21: £1.2m)

·    Adjusted EBITDA, below previously guided expectations due to final audit adjustments,
down -58.6% to £2.6m (FY21: £6.2m) due to a number of factors including lower than expected product revenue growth, increased supply chain costs, increased marketing costs and unexpected costs of entering new markets

·    Net debt £0.2m (FY21: net cash £0.5m) with liquidity headroom of £5.8m

 

Operational

·    Non-financial KPIs all increased, as demand continues for our differentiated product offering

-      Traffic grew +12.7% to 15.6m (FY21: 13.8m)

-      Conversion rate grew 0.2% to 3.0% (FY21: 2.8%)

-      Average basket value grew +6.3% at £135 (FY21: £127)

·    Onboarding of two new partners Zalando and Next

·    Geographic expansion continued, with the launch of the Company's own digital platform into three new markets: Canada, Switzerland and the Netherlands

·    New athleisure range launched; outerwear and occasion wear lines enhanced

·    Strengthened team and enhanced skillsets

-      Appointment of Lee Williams, formerly of French Connection and ASOS, as Chief Financial Officer

-      Executive team further bolstered with the appointment of a COO and Trading Director

·    Enhancements to the Group's finance function identified by the CFO Lee Williams

 

Post-period end

·    Spend being reallocated in response to increased marketing costs

·    New Babygro product launched with easy-change zip system; new category launch planned for Autumn

·    Evaluating the performance of our portfolio of seven physical retail stores on a store by store, market by market basis to optimise performance and value

 

Current Trading and Outlook

·    Continuing to experience significant inflation in marketing costs - having to spend 33% more to maintain prior year product revenue levels

·    Inflation driven by marketing platforms, own customer KPIs remain resilient with improving basket sizes

·    Will drive growth in the short term where we can do so profitably and react quickly to any improvement in marketing costs

·    Updating guidance to 0-15% product revenue growth, expect to remain profitable with margin improving throughout the range

·    Board remains confident on the Group's ability to maintain sufficient liquidity throughout the year

 

 

David Williams, Chief Executive Officer, commented:

"It has been a challenging year, both externally for the consumer sector as a whole and internally for the Group. We have taken decisive action to respond to these challenges. Internally, we have strengthened the team and our new CFO Lee Williams has made good progress on delivering improvements to our finance function, systems and processes. We have also been nimble in responding to external challenges, reallocating marketing spend and conducting a strategic re-pricing to optimise value.

 

"Despite these challenges, we have delivered significant product revenue growth in the Period, showing the strength of our strategy, brand and our customer proposition. Additionally, all non-financial KPIs have grown - customers are visiting our websites more and when they are, they are buying more; which illustrates the strength of Seraphine's unique products.

 

"Seraphine is a market leading maternity wear business with a strong and well-loved brand, delivering a customer proposition, globally, that improves the journey of motherhood. There is no doubt that our first year as a listed company has been challenging - but I am confident that, coupled with our strong business fundamentals, we now have the team, the structure and the functions in place to focus on delivering profitable growth."

 

 

-ENDS-

Enquiries

 

For further information, please contact:

 

Seraphine Group	via Buchanan
David N Williams, CEO
Lee Williams, CFO
Buchanan Communications	+44 (0)20 7466 5000
Helen Tarbet	+44 (0) 7872 604453
Simon Compton	+44(0) 7979 497324
Kim Looringh van Beeck	+44(0)7477 967446
	Seraphine@buchanan.uk.com

 

About Seraphine

Seraphine is an international digitally-led maternity and nursing wear brand with a diverse range of innovative maternity and nursing products serving an under-competed global market.

 

Seraphine was founded in 2002 with the vision of creating desirable clothes which women would want to wear even if they were not pregnant, and this ethos remains true to this day. The Group has over 18 years' experience designing and developing maternity and nursing wear for women from first trimester to post-partum and nursing products.

 

The Group has achieved global brand recognition through its rapidly growing digital platform, which in the year to 3 April 2022, contributed to approximately 84% of Product revenue. The Group currently exports products to customers in over 120 countries globally, with the Group's largest markets being Europe, North America and the UK.

 

 

Chair's Statement

 

The year under review - our first as a listed company - has been challenging in many ways. Throughout it all, however, Seraphine has continued to follow its purpose to be 'with mums for the journey', providing fashionable, affordable, sustainable and innovative clothing and products for expectant women and parents.

 

The world emerged from Covid straight into the challenges presented by the tragic invasion of Ukraine, together with a backdrop of unprecedented supply chain disruptions, affecting both the production and movement of goods globally.

 

Seraphine faced challenges in navigating the resulting complexities which included supply chain delays and additional costs, an increase in costs associated with cross-border transactions, shifting patterns in consumer demand and substantial inflation in customer acquisition costs which impacted profitability.  Unfortunately, we were also impacted by unforeseen duty and returns costs as we entered new markets and channels.

 

The agility of our business model and the deep relationships we have built with third parties throughout our supply chain have meant that we were able to adapt and take steps to mitigate some of the impact, however I am still disappointed with the final FY22 results which are significantly below the guidance set out at IPO. In his review, CEO David Williams sets out, in detail, the actions management have taken to strengthen the business.

 

Despite these challenges, we delivered our highest ever gross Product revenue numbers and we continued to see very encouraging international growth. In the period we launched new websites in Canada, Switzerland, and the Netherlands as well as delivering continued high growth from our successful US business.

 

Our innovative product range, international reach and strong underlying economics put us in a robust position to focus on returning the business to profitable growth. Most importantly, our product continues to be highly sought after and desired by our customers, which is the core of our success.

 

The business now has greater clarity on the headwinds it faces and has put plans in place to address these challenges. The newly strengthened management team is focused on executing its stated strategy of using in-house design expertise to deliver an innovative range of products to an expanding customer base, including in the key market of North America.   

 

On behalf of the Board, I would like to sincerely thank all our new shareholders for their support during this challenging year. The actions taken by executive management to strengthen the business, together with the investment in our team since IPO means we start our new financial year in a more resilient position to face the challenges ahead and convert the continued growth in customer demand for our products into profitable margin growth. We remain committed to delivering a business that delivers strong future returns for shareholders in a sustainable way.

 

Having reviewed the performance for the 52 weeks to 3 April 2022 and the likely headwinds in the economy for the year ahead, the Board is recommending that a final dividend should not be declared for this year. It is very much hoped that the normal dividend commitment can be restored as soon as possible.

 

Board & Governance

 

We are committed to the highest standards of corporate governance and to operating with a strong, experienced and diverse board of Directors.

 

I am very pleased with the interaction and discussions which have taken place at Board level.

 

The Board is working very well with the Executive Leadership Team of the business, fostering healthy challenge as well as proactive sharing of experience, knowledge and insight to help Seraphine achieve our strategic goals.

 

During the year we announced the appointment of Lee Williams as CFO, from French Connection Group, where he was CFO and Company Secretary, following John Bailey's decision to step down. Lee's deep experience in our sector, both at French Connection and ASOS, makes him a strong commercial and strategic CFO and he is currently very focused on making the necessary improvements to our financial management capability to strengthen our financial function going forward. Further details of this are laid out in the CEO Review.

 

In June 2021 we were pleased to welcome two additional Non-Executive Directors to the Board - Bill Ronald and Sarah Highfield - who bring a wealth of experience and skills including particular expertise in public company matters and high growth businesses. Bill will focus on remuneration, Sarah on audit and risk, to support and guide Seraphine through life as a public company. They have already been providing huge support to the executive team and to me.

 

Sustainability

 

Sustainability is at the heart of our business and we have worked throughout the year to develop an approach that aligns with our customers. A sustainable supply chain is fundamental and we continue to invest in ensuring the quality of our factories, understanding our full supply chain and pursuing initiatives such as the Better Cotton Initiative, improving our packaging and creating innovative product that can be worn throughout pregnancy and nursing, dramatically increasing the wears per garment.  The thriving second-hand marketplace for our product is testament to these actions in a market that is historically characterised as 'disposable'.  In addition, we have undertaken a significant exercise to understand our carbon footprint which will form the basis for the development of our strategy to net zero.

 

This year we have established the framework of what will become our new sustainability strategy. At the heart of the new framework are three key pillars: Product, People and Planet. Our strategy recognises the importance of managing the risks and opportunities connected to these pillars, in order to secure the long-term success of the business. We look forward to developing the measurement, management and disclosure of our ESG activities in line with best practice and to sharing further details in due course.

 

Conclusion

 

Seraphine has grown enormously since our foundation in 2002 and we are ready for the next stage of our journey, underpinned by our clear strategic goals.

 

Having taken firm steps to strengthen the business and make it fit for the future, I am satisfied that we are now better positioned to focus on driving profitable growth.

 

I would like to finish by thanking everyone at Seraphine for their expertise, professionalism and commitment.

 

 

CEO Statement

 

All commentary is for the 52 week period ending 3 April 2022 against the non-statutory comparatives of 52 weeks to 4 April 2021. Please refer to page 17 for further detail.

 

Overview

 

This is our maiden Final results following our IPO on the London Stock Exchange in July 2021. I would like to begin by thanking all our shareholders for their support during what has been a challenging year for the business.

 

In our first year as a public company, we have been materially impacted by external factors, and have also faced some internal challenges. The external factors are well known: the global supply chain crisis which emerged in the summer of 2021, the effect of increasing energy prices on warehousing and distribution costs and, more recently, the significant downturn in global consumer sentiment have all created headwinds against the execution of our growth plans. Nonetheless, I am proud that despite these setbacks we have delivered significant Product revenue growth in the period, remained Adjusted EBITDA positive, and expanded our own digital platform into three new markets - Canada, Switzerland and the Netherlands - whilst onboarding with two new partners, Zalando and Next.

 

Turning to the internal challenges. The failure to correctly calculate product revenue tax and duty costs in relation to the movement of goods into and out of new markets, or to mitigate them with appropriate registrations, resulted in an impact to profitability.

 

In light of both the external factors and internal challenges experienced we have taken significant management actions to strengthen our business as follows:

 

·    Our new CFO Lee Williams initiated a full review of the Group's finance function. This led to the recruitment of additional resources and identified areas of improvement through enhancing the Group's internal information systems and processes

·    The Company's Executive Committee has been strengthened with the appointment of Fran Pillar as COO and Seb Tarleton as Trading Director.

·    A strategic re-pricing has been implemented post period end, protecting entry level product pricing while increasing more premium items which have traditionally delivered exceptional value.

 

Strategy

 

Seraphine has a simple purpose: to be with mums for their journey. Our products support women in their changing bodies, not only with style and choice, but with innovative technical aspects that help ease the journey of motherhood. Our in-house design team remains as committed as ever to developing exciting product innovations - and the whole team remains committed to bringing these to more and more expectant and new mothers, worldwide.

 

We will continue to invest in our customer proposition by:

·    enhancing the customer experience

·    continuing to innovate our product range

·    building our international reach, particularly in the highly successful North American markets

·    strengthening our supply chain and embedding sustainability in everything we do.

 

Operating Review

 

We have delivered product revenue growth of 33.0% on a constant currency (CCY) basis (28.8% variable currency) in the period with strong growth in North America of 53.2% CCY. Growth across our European markets totalled 36.3% CCY and in our home and longest established market of the UK, we delivered double digit growth of 11.7%.

 

EBITDA was impacted by a number of factors including pressure on customer acquisition costs, increased costs of freight and distribution and unexpected costs of entering new markets - standing at £2.6m, (FY21: £6.2m) down (58.6)% YoY.

 

Own digital platform

 

The core of our business, our own digital platform, continues to drive our growth delivering +25.2% CCY in the year. Despite economic headwinds, we have seen key customer KPIs improve YoY, with Traffic (+12.7%), Conversion (+20 bps) and Basket Size (+6.5%) all growing, reassuring us as to the strength of our core customer proposition.

 

In the period we invested most significantly in North America, primarily through our existing US site but complemented by the launch of a new dedicated site for Canada. Our US site is now the single largest contributor to our product revenue.

 

Our European sites also performed well, with growth in our established markets and the launch of Switzerland and the Netherlands in the period. The UK, our home market and the longest established, was particularly hard hit by the economic downturn in the final quarter but still delivered growth on the prior year.

 

Whilst digital growth overall fell short of our initial expectations for the year, the performance delivered reinforces our belief that our digital first approach to serving our customers should remain our primary strategy across markets.

 

Delivering this growth against the backdrop of huge challenges did not come without mistakes or learnings - notably the aforementioned issues around product revenue taxes and duty rates in markets outside of the EU - but we end the year with a better capability to execute than before.

 

With the launch of Canada, Switzerland and the Netherlands in the period the number of markets served by our own digital platform stands at 11 (United Kingdom, Germany, France, Spain, Italy, Netherlands, Rest of Europe, Switzerland, United States, Canada, Australia). Our platform was designed to allow us to launch new markets quickly and in a capital-efficient way - and is a key pillar of our growth strategy. We intend to launch dedicated sites in the Nordics before the end of the next financial year.

 

Digital partnerships

 

We believe in putting product where the customer shops - knowing that our marketing cannot reach everyone. To that end, we launched with Zalando in Germany, Austria, Switzerland, Belgium and the Netherlands during the year and with Next in the UK in February, helping our digital partner business deliver £2.0m (+87.8 CCY%) in incremental product revenue. Whilst this product revenue growth was above expectations, the profitability of Zalando has been disappointing and we are currently reviewing options by market. The profitability of Next has been in line with management expectations and we see encouraging opportunities to grow this business alongside continuing to explore other partnership opportunities.

 

Retail stores

 

We believe that having a small selection of flagship stores, in strategic locations, adds value to the brand. However, we continue to evaluate the performance of our portfolio of seven physical retail stores on a store-by-store, market-by-market basis. Our target remains to drive the portfolio as a whole to break even and we will make investments, or disposals, as appropriate to achieve this. The retail environment remained challenging for the entire period and well below management expectations of a return to FY19 levels, felt especially in our UK and US stores. Post year end we closed our Madison Avenue store in New York but retain both our Soho store and concession in Macy's Herald Square in the same city. We continue to operate our other stores in the UK and France. Our two Macy's concessions, operating on a turnover rent model, have delivered on our target of break even or better contribution.

 

Digital Marketing

 

Digital marketing continues to be the primary channel by which we reach our customers, by showing relevant and inspiring content and products to women in the early stages of pregnancy, or capturing demand for specific product searches.

 

During the year, we experienced a number of headwinds that impacted our return on investment. In the first half, the well-publicised supply chain issues meant that our product catalogue was fragmented for a number of weeks, having a direct impact on the quality of our marketing which is primarily product and needs driven. We saw this recover strongly in line with our stock position early in H2, however in the second half of this period we were impacted by significant inflation in advertising costs, along with a decline in broader consumer sentiment.

 

We operate a number of successful targeting strategies and are working to reallocate investment across these and to deploy spend into other channels, including more traditional marketing, but it is likely that it will take some time to fully mitigate the increases in cost.

 

The overall blended Customer Acquisition Cost (CAC) in the period was £16 vs £13 in the prior year.

 

People

 

Our people are our greatest strength and core to everything we do. Our culture is inclusive, innovative and collaborative - and it is testament to this that in a challenging year it was ultimately our own people that uncovered and solved problems. It is also the reason why we can do so much in house - including design, prototyping and creative marketing. It provides us with agility and flexibility at the very core of our business - and I am extremely proud of the entire team.

 

We have made a significant investment in people during the year, strengthening our team for the future. This began with the appointment of our new CFO, Lee Williams, who has made good progress in improving our Finance function, reinforcing expertise in the areas of financial planning, accounting, and reporting.

 

Looking to the wider Executive Committee, we have appointed a COO, who will lead the transformation of our business systems and in-house logistics and operations capability, and a Trading Director who will define and execute our multi-channel and multi-market trading strategy.

 

Product Update

 

In the period we launched our new athleisure range, bringing our expertise in superior fit to another category. We continued to innovate in our outerwear range, launching multi-season coats with babywearing functionality, thus further extending the longevity of wear. Responding to a resurgence in customer demand for occasion wear as lockdown measures eased, we grew our occasion wear collection with a particular focus on innovative nursing functionality. Across the range we balanced the maximisation of our strong, core continuity range with on-trend style and choice in our seasonal lines - all with the common thread of delivering fantastic-looking products that solve common motherhood issues.

 

We also continued to invest in the core Seraphine proposition - products that look incredible whilst also supporting women with technical innovations that ease and enhance the journey of motherhood. We designed two new products with innovations we believe to be unique in the space - one of which, a Babygro with an easy-change zip system, launched post period end and the other, which will see us enter a new category, will be brought to market later in FY23.

 

At the end of the period we conducted the first broad-based pricing review since 2017, ensuring that whilst we protect key entry level products and price points, we maximise profitability on mid-market and higher-end products where we have traditionally offered exceptional value. We will continue to review pricing regularly.

 

Our competitive position within our markets

 

Seraphine differentiates itself from its competitors in three key ways:

 

1.    Product innovation. Every garment is designed to not only to help our customers look and feel stylish, but with integrated technical functionalities designed specifically for pregnant and nursing women - all with a focus on long-term use (almost all products can be worn both during pregnancy and post-partum) and sustainability.

2.    Affordable premium price point. We target the mid-market customer and above, balancing a large and resilient customer base with a commitment to strong gross margins

3.    Digital first. Our business is primarily driven by our own digital platform, giving us a cost base advantage over competitors and the flexibility to launch new markets in a capital-efficient way.

The unique creative in-house force behind our digital marketing translates well across markets and is key to our market launch strategy.

 

Supply Chain

 

Like many retailers, we have not been immune to global supply chain disruption caused as a knock-on effect of Covid-19. Beginning in July 2021 we were impacted by the late arrival of product, which slowed momentum over the summer, resulted in less customers being onboarded, and impacted repeat custom in the early autumn. Once the stock issues were identified, we acted quickly and were able to restore the stock position back to planned levels by the end of the August holidays - and have had no further impacts since.

 

We have long-standing relationships with our suppliers built up over more than 20 years, which have proved invaluable in providing our design and production teams with the necessary flexibility to minimise external impacts - both during the pandemic, when we were able to quickly pivot our product mix based on changing customer demand, and more recently as we navigated supply chain disruption.

 

We have in addition worked with our freight forwarding partners to improve the management information we receive and have strengthened our internal logistics function and processes to minimise future risk.

 

We ended the year with a stock position much higher than historic years as a result of conservative planning around global supply chain challenges and lower than expected demand during the final quarter of the financial year. Subsequently we have taken the decision to reduce future stock intakes whilst preserving newness and innovation. This is achievable due to the high continuity product mix of the business and lasting appeal of seasonal stock.

 

ESG

 

As a business that is synonymous with the creation of life, aspiring to leave a better planet for our children has always been at the heart of what we do and is engrained in our culture. Every new product innovation considers sustainability from the outset, whether it be materials, packaging or sourcing - and each year we also make strides in reducing our impact on the environment across our existing product range. This year initiatives included reducing plastic in packaging, increasing the longevity of our products, and improving visibility in our supply chain.

 

Further details on our ESG strategy and progress made are set out in our Annual Report.

 

Outlook

 

The current trading environment remains challenging and in particular we continue to experience significant inflation in marketing costs. Rather than being driven by our own customer KPIs, this is primarily a result of inflation in the cost of displaying advertising in our primary channels which we believe to be influenced by the more challenging macro environment and weaker broader consumer sentiment. As a result, we are spending circa 33% more to maintain prior year product revenue levels, with blended CAC up circa 60% on prior year at £25.4 partially offset by higher gross basket sizes. Product revenue in the first quarter of FY23 was below last year, however trading improved throughout the quarter, with June product revenue in line with prior year.

 

Our customer KPIs remain resilient. Return rates have increased marginally above budget but have been offset by increased basket sizes. As a result, net baskets (the amount customers keep) have improved in all markets YoY, and the average net revenue per customer visit is only marginally softer than the prior year which is testament to the strength of our customer proposition.

 

The biggest challenge for the Group today is the inflation experienced in marketing costs, as our customer KPIs demonstrate the success of our brand when we are able to put our products in front of customers. Therefore, management is focused on optimising our digital marketing spend and redeploying budget to traditional marketing channels and partnerships, but it is too early to provide guidance on potential mitigations to CAC for the remainder of the year.

 

We will take immediate advantage of any reduction in CAC on a market-by-market basis but will not increase our overall marketing budget for the year to compensate for the current inflation. By doing so we will only drive growth in the short term when we believe we can do so profitably. We are therefore updating our guidance for FY23 to deliver product revenue growth of 0% - 15%. The Group expects to remain profitable with improving margin throughout this range, however it is too early in the year to be able to guide to a specific EBITDA margin with confidence.

 

The Board is confident on the Group's ability to maintain sufficient liquidity throughout the year.

 

Management is focused on driving efficiencies and setting a strong base for profitable growth once the challenging external conditions subside. The recent reinforcement of the management team and the resilience seen in customer KPIs once exposed to the brand provides reassurance on the underlying strength of our proposition. We remain confident in the medium-term opportunities for the business.

 

 

CFO Statement

 

All commentary is for the 52 week period ending 3 April 2022 against the non-statutory comparatives of 52 weeks to 4 April 2021. Please refer to page 17 for further detail.

 

In the 52 weeks to 3 April 2022 the business delivered strong Product revenue performance though somewhat short on the previous full year expectations.

 

We delivered product revenue growth of 28.8% year-on-year to £44.0m, (+33.0% at Constant Currency (CCY)) and an adjusted EBITDA of £2.6m. This fell below previously guided expectations due to the final audit adjustments.

 

We finished the year with £2.8m of cash, having drawn down £3.0m of our £6.0m Revolving Credit Facility, equating to net debt of £0.2m at 3 April 2022.

 

These results were delivered despite extensive industry-wide supply chain disruptions experienced due to the Covid-19 pandemic. In addition to this, the start of the Russia-Ukraine conflict in February quickly led to a noticeable decline in customer sentiment across Europe.

 

At a statutory level we delivered a loss after taxation for the group of £(33.9)m, with exceptional items of £(29.9)m making up a large part of that loss. The exceptional items are mainly the impairment of Goodwill and other intangibles of £(27.9)m, as well as the IPO costs of £(3.5)m. These are offset by gain on lease modification of £1.6m.

 

The other component of that loss is the finance costs of £(4.1)m, covered in the Interest section.

 

Product revenue

 

During the year total product revenue increased to £44.0m, a +28.8% (+33.0% CCY) improvement on the prior year.

 

Own digital product revenue

 

Own digital product revenue grew to £37.0m (FY21: £30.5m) an increase of 21.2% (25.2% CCY). All existing sites delivered growth during the year with North America being the strongest market, growing 53.2% year-on-year. Although Europe and the UK delivered double digit product revenue growth over the course of the full year, consumer sentiment was noticeably softer in Q4 following the Ukraine invasion. Product revenue growth from existing markets was bolstered by the addition of new websites in Canada (+£1.2m), the Netherlands (+£0.3m) and Switzerland (+£0.8m).

 

Digital partners

 

Our digital partners channel, which includes wholesale customers, also saw strong growth with product revenue of £4.4m across the 12 months (FY21: £2.4m) an increase of 83.2% (87.8% CCY). We launched two partners in the year: Zalando in Germany, Switzerland, Austria, Belgium and the Netherlands, adding around £1.5m to product revenue, and Next in the UK.

 

Retail stores

 

Our retail stores in France, UK and US, following the reopening, grew product revenue to £2.6m (FY21: £1.2m) more than doubling product revenue over the period compared with the previous year which was impacted by the pandemic lockdowns.

 

Product revenue by geography

 

North America

 

Following a strong performance in the first half, the North American market has continued to trade well, delivering £14.4m of product revenue across the whole year, an improvement on the prior year of +47.3% (+53.2% CCY) with the strong debut of the dedicated Canadian site making a big impact in that geography, complemented by the reopening of the two New York stores and the two Macy's concessions following lockdown.

 

Europe

 

The EU market growth of +29.9% (+36.3% CCY) to £17.8m was driven by our own digital platforms, the launch of the Swiss site and Zalando Partnership Programme across a number of markets, together with the reopening of the two Paris stores.

 

UK

 

UK Product revenue growth of +11.7% to £10.0m was achieved across the digital platform, the reopening of the four UK stores and our Digital Partners. This growth was driven by our own digital platforms but also retail stores. As retail was open for all 12 months of the financial year, compared to 7 months in the prior year, this channel was up 154%, +£0.5m.

 

Rest of World

 

Growth in the Rest of World segment slowed down in the second half, delivering £1.8m Product revenue, growth of +4.3% (+1.0% CCY) with the largest component of that being the Australian market.  

 

Gross margin

 

The Company delivered product gross profit of £27.8m (FY21: £22.5m), achieving a gross profit margin of 63.2% (FY21: 65.9%). The gross profit dilution of 270 basis points has mainly fallen within our own digital channel due to a number of previously disclosed market challenges including:-

 

- increased inbound freight costs

- higher level of promotional activity across the year with significant activity over the late December and early January period.

 

Distribution and administrative expenses costs

 

Direct operational costs have increased ahead of Product revenue growth due to the store reopenings following the Covid-19 lockdowns together with the ending of furlough. The increase in the cost of customer acquisition by around 51% year-on-year from 19.4% of net Product revenue to 22.8%.

 

Adjusted distribution costs for the period increased to £10.0m (FY21: £6.6m), 18.3% (FY21: 14.7%) as a proportion of product revenue. Much of the increase is being driven by two elements: a significant increase in returns costs with returns rates increasing towards pre-pandemic rates as well as the changes to international shipments bought about by increased cross-border costs. These have significantly increased the number of despatches incurring administration and paperwork costs. These are in addition to the inflationary costs being driven by the pandemic as well as the increase in energy costs partly due to the Ukraine war. We also incurred unexpected costs in the year totalling around £0.3m when launching in new markets. This related to failing to charge Canadian Product revenue tax when initially trading in that market and making an incorrect duty declaration when returning stock from Switzerland. Both these issues have been addressed and resolved and have a one-off impact in FY22.

 

Customer acquisition spend as part of our administrative expenses increased to £7.6m (FY21: £5.2m), reflecting continued investment in the Company's new and existing own digital platforms. We have also experienced inflationary increases with these costs with an additional £1.4m of rate increases being incurred above and beyond that which was Product revenue driven.

 

Other central costs within administration costs have increased to £6.0m (FY21: £4.2m). This was £0.6m lower than expected due to delays in recruiting for new roles. These roles relate to planned growth in our operational abilities combined with reduced rent concessions and government support as well as the costs to support the Company's transition to a plc. 

 

Adjusted EBITDA pre-IFRS 16

 

The adjusted EBITDA (pre-IFRS 16) of £2.6m (5.8%) is considerably lower than the prior year at £6.2m (18.0%).

 

Lower than expected Product revenue growth reduced EBITDA from £6.2m to £5.8m

The further fall in EBITDA was a result of:

·    £1.4m of increased marketing costs in the form of digital marketing rates

·    £1.0m of increased supply chain costs in the form of duty and cross-border paperwork

·    £1.1m of margin dilution, driven by higher promotional spend

·    £0.3m of unexpected costs relating to new market launches

·    Offset by £0.6m of delayed spend on head office overheads.

 

Interest

Net finance costs in the period were £4.1m. This is predominantly driven by ownership restructuring following the IPO, specifically the writing off of the prepayment of £2.4m of facility fees, the repayment of shareholder loan notes and HSBC term loans from IPO proceeds. Shareholder interest costs up to the IPO were £1.3m. 

 

Tax

For the current period, a tax rate of 19.3% has been calculated, which is in line with HMRC guidelines. The tax has been adjusted for non-deductible items, which includes shareholder loan facility fees, shareholder interests and exceptional items associated with the listing of Seraphine Group plc. 

 

Exceptional costs items include all costs associated with the IPO

 

Earnings per share

 

Basic loss for the period per weighted average shares was 75.6p

Basic loss per share at 3 April 2022 was 66.6p

Adjusted Earnings (EBITDA pre IFRS 16) per weighted average share was 5.7p

Adjusted Earnings (EBITDA pre IFRS 16) per share at 3 April 2022 was 5.0p

 

Balance sheet

 

On 16 July 2021 we listed on the premium segment of the London Stock Exchange. The listing raised £56.1m gross proceeds.

 

Impairment of Goodwill and Other Intangibles

 

At the year end the value of Goodwill has been tested and largely due to a revised discount rate used compared to previously as well as a change in cost assumptions, an impairment of the value of £27.9m has been made. This is an exceptional adjustment and a noncash item.

 

The Board is intending to carry out a capital restructure of investments in the subsidiaries following the impairment of goodwill and other intangibles. Shareholders will be asked to support this process at the Annual General Meeting.

 

Inventory

Inventories increased from £7.5m at the end of FY21 to £14.7m. This stock build reflects the strategic investment in inventory to reduce the reliance on timely shipments, building in a level of latency to minimise trading impacts brought about by issues within the supply chain, including further lockdowns and shipping delays. This stock build will be utilised to drive performance in FY23 but with overall inventory falling to a more normal level by the end of FY23.

 

The write-off of damaged stock arose due to products being returned which our team have identified as being no longer of the quality we expect. The team are now empowered, subject to cost threshold, to decide whether to undertake the work to correct the defect (perhaps a missing component) or write the items off on a timely and regular basis. Our product team will be notified of any styles that suffer multiple issues to identify if the original design of the product can be amended to address the issue.

 

Within trade and other receivables are trade debtors covering our Digital Partners channel. This increased from £0.5m to £0.8m, an increase of 60% driven by the Product revenue growth in the Digital Partners channel of 83.2% year-on-year. Prepayments and other debtors at £0.7mwas flat to FY21.

 

The increases in inventory brought with it an increase in Trade Creditors to £6.9m (FY21: £3.1m), more than doubling on the year, while other Product revenue volume-driven creditors, such as the returns provision and duty payable due to bonded nature of our warehouse, also increased year-on-year. This meant total trade and other payables increased to £12.6m (FY21: £7.2m), offsetting some of the working capital increase from inventory.

 

Cash and cash equivalents at the year-end were £2.8m while borrowings are £3.0m of the total £6.0m available, net debt is therefore £0.2m

 

Cash flow

The cash generated from operations for the period was £1.6m was an improvement of £1.0m YoY,.

 

Cash flow has been impacted by the working capital impact of increasing the level of stock in the business to offset any future delays to inbound stock and the subsequent increase in stock holding, while partly offset by the increase in creditors.

 

Seraphine's outflow within investing activities up to 3 April 2022 was £0.8m across tangible and intangible assets. £1.2m was in relation to the previously disclosed earnout payment to the previous owners of the group, Bridgepoint Growth, Cecile Reinaud and Management.

 

Seraphine's net cash generated in financing activities up to 3 April 2022 was £2.8m, representing net cash flow from IPO proceeds after loan notes and bank debt repayments.

 

The impact of the additional time needed to deliver product to the distribution centre has had a negative impact on the Company's free cash flow.

 

The free cash flow for the period represented -5.7% of adjusted EBITDA (pre-IFRS 16). The management team will continue to prioritise and proactively manage our inbound stock position whilst supply chain issues remain and we therefore expect second half free cashflow to improve over first half but still be lower than historical levels.

 

Auditor's appointment

 

PricewaterhouseCoopers LLP was appointed as independent auditor to the Company and in accordance with section 485 of the Companies Act 2006, a resolution proposing their reappointment will be put to the next Annual General Meeting.

 

 

 

 

 

Alternative Performance Measures

 

Presented below is the unaudited proforma consolidated statement of total income.  The comparative information in this is different to the statutory version presented in the financial statements.  To allow year on year comparison of our results a 52 weeks period is presented in the proforma, however the statutory comparative period is 15 weeks ended on 4 April 2021.

The comparative period includes the period to 22 December 2021, prior to the acquisition of the group adjusted to include the impact of IFRS 16.  The 15 weeks to 4 April 2021 includes the post acquisition accounting including the recognition of goodwill and intangibles and the associated amortisation.  

Proforma Consolidated Statement of Total Comprehensive Income
	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m	15 weeks ended 4 April 2021 £m
Product Revenue	44.0	34.2	8.7
Service Revenue	2.0	1.6	0.5
Total Revenue	46.0	36.1	9.2
Product Cost of Sales	(16.2)	(11.7)	(3.0)
Service Cost of Sales	(5.2)	(4.0)	(1.5)
Total Cost of Sales	(21.4)	(15.7)	(4.4)
Product Gross Profit	27.8	22.5	5.7
Service Gross Profit	(3.2)	(2.1)	(1.0)
Total Gross Profit	24.6	20.4	4.7
Distribution costs	(4.9)	(2.6)	(0.2)
Administrative expenses	(21.8)	(14.5)	(4.8)
Adjusted operating profit	(2.0)	3.3	(0.2)
Exceptional Items	(29.9)	(5.4)	(4.7)
Operating (loss) / profit	(31.9)	(2.1)	(4.9)
Finance costs	(4.1)	(1.7)	(1.4)
Profit / (loss) before taxation	(36.0)	(3.8)	(6.4)
Taxation	2.1	(0.5)	0.0
Profit / (loss) for the period	(33.9)	(4.3)	(6.3)
Other comprehensive income
Exchange gains arising on translation	0.0	0.0	0.0
Total comprehensive income / (loss)	(33.9)	(4.2)	(6.3)

 

 

 

References to revenue and sales in the CEO and CFO statement relate to the total revenue before income from other services

 

Reconciliation of operating profit to Adjusted EBITDA pre IFRS16

	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m
Operating (loss) / profit	(31.9)	(2.1)
Exceptional Items	29.9	5.4
Depreciation and amortisation	0.5	0.4
Amortisation of brand value	4.1	2.1
Right of use amortisation	1.0	0.9
Right of use impairment	0.0	0.2
Private Equity fees	0.0	0.1
IFRS 16 Adjustment	(1.0)	(0.8)
Adjusted EBITDA pre IFRS(2)	2.6	6.2
Number of shares	50,902,011
Weighted average number of shares	44,871,216
Adjusted EPS (pence)	5.0
Adjusted Earnings per weighted average share (pence)	5.7

 

 

 

(2) All future results will be based on post IFRS numbers

 

	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m
Operating (loss)	(31.9)	(2.1)
Exceptional Items	29.9	5.4
Depreciation and amortisation	0.5	0.4
Amortisation of brand value	4.1	2.1
Right of use amortisation	1.0	0.9
Right of use impairment	0.0	0.2
Private Equity fees	0.0	0.1
IFRS 16 Adjustment	(1.0)	(0.8)
Adjusted EBITDA pre IFRS	2.6	6.2
Number of shares	50,902,011
Weighted average number of shares	44,871,216
Adjusted EPS (pence)	5.0
Adjusted Earnings per weighted average share (pence)	5.7
Adjusted EBIT	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m
Operating (loss) / profit	(31.9)	(2.1)
Exceptional Items	29.9	5.4
Amortisation of brand value	4.1	2.1
Private Equity fees	0.0	0.1
Right of use impairment	0.0	0.2
	2.2	5.6
Adjusted PAT
Adjusted EBIT	2.2	5.6
Recurring finance costs	(0.3)	(0.2)
Adjusted PBT	1.9	5.4
Tax at 19.3%	(0.4)	(1.0)
Adjusted PAT	1.5	4.4

 

 

Adjusted Administration Expenses	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m
Reported Administration Expenses	(21.8)	(14.5)
Depreciation and amortisation	0.5	0.4
Amortisation of brand value	4.1	2.1
Right of use amortisation	1.0	0.9
Right of use impairment	0.0	0.2
Private Equity fees	0.0	0.1
IFRS 16 Adjustment	(1.0)	(0.8)
	(17.3)	(11.6)
Adjusted Gross Profit	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m
Total Gross Profit	24.7	20.1
Service Gross Profit	3.1	2.4
Product Gross Profit	27.8	22.5
Adjusted Gross Profit %	63.2%	65.8%
Adjusted Distribution Costs	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m
Distribution Costs - IFRS 15 basis	(4.9)	(2.6)
Add Service COS	(5.2)	(4.0)
Adjusted Distribution Costs	(10.0)	(6.6)
Adjusted EBITDA %	52 weeks to 3 April 2022 £m	52 weeks to 4 April 2021 £m
Product Revenue	44.0	34.2
EBITDA	2.6	6.2
Adjusted EBITDA %	5.8%	18.0%

 

 

Alternative Performance Measures Definitions

 

Performance Measure	Definition	How we use the measure
Product revenue	Product revenue of goods through our own digital platform, digital partnerships and stores reported net of discounts, value added taxes and returns	A measure of the Group's trading performance focusing on the sale of products to end customers.  It is used by management to monitor overall performance across markets and channels
Adjusted Product Gross Profit	Product revenue less product cost of Product revenue	A measure of underlying core product profitability
Adjusted Administration expenses	Administration expenses excluding depreciation, amortisation, impairment charges, private equity fees and IFRS 16 adjustments.	A measure of underlying operational administration costs of the business
Adjusted Distribution costs	Distribution costs including service Product revenue cost of Product revenue	A measure of total distribution costs.
Adjusted EBITDA pre IFRS	Adjusted EBITDA is Operating (loss)/profit adding back exceptional items, depreciation and amortisation adjusted to a pre IFRS 16 basis	A measure of the Group's underlying profitability for the period, as well as a measure for management to monitor the performance and profitability of the business each month
Adjusted EBIT	Operating (loss)/profit adding back exceptional items, brand amortisation and private equity fees	A measure of the Group's underlying profitability for the period, as well as a measure for management to monitor the performance and profitability of the business each month
Adjusted PAT (post IFRS 16)	Adjusted EBIT less recurring finance costs and the corporation tax charge for the period	Included as a measure within the adjusted earnings per share calculation for the Group
Adjusted EPS (pence)	Adjusted EBITDA pre IFRS 16 per share outstanding at the period end	A measure of the Group's underlying return to shareholders
Adjusted weighted EPS (pence)	Adjusted EBITDA pre IFRS 16 per weighted average number of shares outstanding in the period	A measure of the Group's underlying return to shareholders
Net Debt	Cash and cash equivalents less any borrowings drawn down at the period-end	A measure of the Group's liquidity
Adjusted Free Cash flow	Free cashflow is adjusted EBITDA (pre IFRS16) adjusted for net change in working capital and capital expenditure	A measure of underlying cash generated by the Group excluding cash flows relating to financing activities and excluding the impact of non-underlying transactions
Free Cashflow Conversion	Adjusted free cash flow divided by Adjusted EBITDA pre-IFRS	Liquidity ratio monitored by management to track the Group's ability to convert its operating profits into free cash flow (FCF)
Constant Currency (CCY)	Current year metrics converted into reporting currency using the prior year exchange rates	A measure of underlying performance excluding the impact of foreign exchange fluctuations between periods
Visits (Website Traffic)	Number of distinct session of engagement with our websites	Used by management to track the magnitude of customer engagement with our website
Orders	Orders received in the period prior to any returns	Used by management to calculate other key APMs and to assist in estimating order fulfilment requirements
Conversion Rate	Orders divided by Visits	Used by management to track the performance of our website and products in converting visits into Product revenue
Average basket value	Gross Product revenue divided by orders	Internal KPI used by the group to assess the customer value and underlying profitability of orders
Average Customer Acquisition Cost	Customer Acquisition Costs divided by Orders	This is used by management to allocate marketing spend at the order level to help calculate and optimise order profitability
Customer Acquisition Costs	Total direct marketing spend for own digital channel	Used by management to track efficiency of marketing spend to drive traffic and convert to orders
Year on Year (YoY)	52 weeks ended 3 April 2022 vs. the 52 weeks ended 4th April 2021	Used to assess change over reporting periods in the majority of these APMs

 

Exceptional items included in adjusting items

To calculate the alternative performance measures listed above adjustments have been made for exceptional items. These are significant items of income or expense in Product revenue, profit from operations, net finance costs, taxation which individually or, if of a similar type, in aggregate, are relevant to an understanding of the Group's underlying financial performance because of their size, nature or incidence.

·    Project EROS costs of £3.5m reflect associated expenditure with the IPO process that took place from July 2021.

·    Changes to two of the US store lease agreements resulted in a gain on early termination, as well as a gain on lease modification in the period of £0.1m and £1.5m respectively.

 

·    An impairment of £27.9m has arisen upon management's assessment of impairment in relation to goodwill and intangible assets.

 

·    Included within other exceptional items is design infringement costs, head office expenditure and redundancy costs.

 

 

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

For the 52 weeks ended 3 April 2022

				52 weeks ended 3 April 2022   £			15 weeks ended 4 April 2021 Unaudited £
		Note
Revenue from sales		8		44,018,845			8,689,006
Income from other services		9		1,997,725			468,761
Total Revenue				46,016,570			9,157,767
Cost of sales				(21,357,620)			(4,431,814)
GROSS PROFIT				24,658,950			4,725,953
Distribution costs				(4,853,338)			(157,637)
Administrative expenses				(21,792,464)			(4,759,446)
Exceptional items		10		(29,922,900)			(4,726,733)
OPERATING LOSS		11		(31,909,752)			(4,917,863)
Finance costs		12		(4,065,338)			(1,418,817)
LOSS BEFORE TAXATION				(35,975,090)			(6,336,680)
Taxation		13		2,054,517			20,449
LOSS FOR THE FINANCIAL PERIOD FOR THE GROUP				(33,920,573)			(6,316,231)
OTHER COMPREHENSIVE INCOME Items that may be reclassified subsequently to profit or loss
Exchange differences on retranslation of subsidiary undertakings, net of tax				(2,892)			9,197
TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD				(33,923,465)			(6,307,034)
Basic loss per ordinary share (pence)		14		(0.76)			(0.21)
Diluted loss per ordinary share (pence)		14		(0.76)			(0.21)

 

Loss for the financial period is all attributable to the owners of the parent company.

Total comprehensive expense for the period is all attributable to the owners of the parent company.