7 November 2022

This announcement contains inside information within the meaning of the Market Abuse Regulation.

Joules Group Plc

("Joules", the "Group", the "Company")

Business Update

Joules, the premium British lifestyle group, provides an update in regard to its turnaround plan, and current trading and financial position.

Turnaround plan

The Company has made good progress in defining and delivering its turnaround plan as well as continuing its focus on cost control and cash management. Key initiatives are now developed and implementation is underway including:

·      Wholesale simplification and the exit from EU and US territories near completion;

·      New leaner, simpler organisation and leadership structure now in place;

·      Channel cost and margin optimisation changes to be complete by December;

·      Revised trading, promotion and buying execution approach well underway; and

·      Changes to product process and sourcing model all complete.

Under the leadership of Tom Joule, in his capacity as Product Director, a new product design and development process is in place to drive further substantial improvement in product quality and design.

Current trading and financial position

Current trading

Since its previous trading update, the Group has seen the continuation of the trends highlighted in the 19 August trading statement. Active customers are in growth, and brand health and awareness KPIs, which reflect consumer perception of the brand, have remained strong. However, trading overall for the 11 weeks to 30 October 2022 (the "period") has been behind the Group's expectations. The Group believes this, in large part, reflects the challenging UK economic environment which has negatively impacted consumer confidence and disposable income. In addition, whilst dresses, menswear and more formal product categories have performed well, larger core categories such as outerwear, wellies and knitwear have been impacted, in part, by the milder than expected weather.

Retail ecommerce sales have been behind expectations for the period, particularly due to softer ecommerce traffic, driven by the reasons mentioned above. Stores sales have been slightly ahead of expectations.

Retail margins have benefitted from the positive impact of the Group's improved pricing and delivery proposition, however this has been offset by the high levels of promotional activity across the market, leaving overall retail margin performance slightly behind expectations.

UK wholesale for the Joules brand has performed well and has been in line with expectations, however wholesale performance overall has been impacted by underperformance across Garden Trading and US wholesale. Friends of Joules continues to perform well, with updates to its proposition further leveraging its appeal. 

Financial position

The Company has previously announced that it is assessing its ongoing financing requirements, including a possible equity raise, to allow the Company to strengthen its balance sheet and provide a strong platform to support the turnaround plan. Since this announcement, the Company has advanced discussions with a number of strategic investors, including Tom Joule, to provide a cornerstone investment in an equity raise. Furthermore, the Group is continuing to progress alternative options with the assistance of Interpath Advisory, including CVA planning, in conjunction with the equity raise referred to above. It is the Group's intention to commence consultation with key stakeholders, including suppliers, on the turnaround plan including potential alternative options, should they be required.

The Company also remains in discussions with its lender in relation to a waiver of certain financial covenants in its existing facilities and on its medium-term financing, including a review of covenants, to support the turnaround plan.

The trading underperformance mentioned above has resulted in the Company's working capital position being below expectations. Net debt at the end of October was £25.7m with headroom of £11.4m. However, this headroom is reduced by £5.6m of 'trapped cash' (i.e. cash held in transit by payment providers etc) and would also be reduced by repayment of the £5m short-term RCF ("STRCF"), due for repayment on 30 November 2022. The Company is currently in discussions with Tom Joule and its lender in regard to a bridge financing proposal in order to enable continued progress to be made with the re-financing plans referred to above.  However, there can be no certainty that any bridge financing proposal will be agreed, nor as to its terms, in which case the Company expects it would be unable to repay the STRCF on its due date for repayment.

A further announcement will be made as and when appropriate.

 This announcement contains inside information within the meaning of the Market Abuse Regulation. The person responsible for arranging release of this announcement on behalf of Joules is Caroline York, Chief Financial Officer.