18 July 2024

FRASERS GROUP PLC ("Frasers Group", "the Group", or "the Company")

 

Full year results for the 52 weeks ended 28 April 2024 ("FY24")

 

Sustained profitable growth

 

Headlines

·      Continued strategic progress against key priorities:

 

1.     Profitable growth

·      APBT ⁽¹⁾ of £544.8m (+13.1%), at the top end of our guidance range (£500-£550m).

·      Adjusted EPS ⁽¹⁾ of 95.8p (+33.6%).

·      Continued strong profitable growth - FY25 APBT expected to be £575m-£625m.

 

2. Elevation Strategy and brands

·      Continued successful execution of Elevation Strategy and strengthened brand partnerships, including onboarding new brands such as The North Face, On and Columbia. This contributed to a strong trading performance especially from Sports Direct, which delivered continuing year-on-year revenue and gross profit growth.

·      The continued strength of third-party brand relationships and Sports Direct's positioning, are unlocking further international expansion opportunities. Growing our presence in the Nordics, a joint venture in Southeast Asia, and currently acquiring a leading sports retailer in the Netherlands.

 

3. Integrations and synergies

·      Virtual completion of warehouse automation project increased the efficiency of our warehouse and inventory handling processes resulting in a £138.2m (8.2%) reduction in gross stock holding year-on-year. This represents a £266.7m (14.7%) reduction compared to October 2023 and marks significant progress in reducing the like-for-like gross inventory balance by 5-15% by the end of the calendar year.

·      Successful integration of acquisitions which will improve efficiency and profitability in coming years.

·      Rolling out a new group-wide digital platform, streamlining and enhancing retail operations and improving consumer experiences across all digital brand channels.

 

4. Frasers Plus

·      Very encouraging early performance of Frasers Plus. We see a great deal of potential for Frasers Plus as a new revenue stream and a key pillar of our brand ecosystem. We have a long-term ambition of £1bn+ in sales, £600m in balances delivering a greater than 15% yield with over 2 million active Frasers Plus customers - this is excluding any third-party partnerships.

·      Agreed strategic partnership with THG plc ("THG"), post year-end. The partnership includes the integration of Frasers Plus into THG's Ingenuity platform, benefiting customers across THG's retail sites. This marks the first Frasers Plus partnership with an external partner.

 

5. Strong balance sheet and cash flow

·      The Group's strategy is underpinned by a strong balance sheet with net assets increasing to £1,873.0m even after a £126.4m share buyback programme in the year.

·      Cash inflow from operating activities before working capital movements of £834.6m, largely driven by strong trading performance particularly at Sports Direct, down 4.7% year-on-year reflecting the non-repeat of the £95.0m reversal of legal and regulatory provisions in the prior year.

 

 

Michael Murray, Chief Executive of Frasers Group: 

 

"This has been a break-out year for building Frasers' future growth. As well as delivering a strong trading performance, particularly from Sports Direct, we made significant progress with our Elevation Strategy. We expanded our retail ecosystem, establishing valuable partnerships with new brands. Our brand relationships have never been stronger, giving us invaluable support as we continue the international expansion of our business. We invested in group-wide operational efficiencies in warehouse automation and digital infrastructure, which we expect to yield a tangible impact as early as FY25. And we generated new growth opportunities with the rollout of Frasers Plus, including recently signing our first third party partner in THG.

 

I'm really proud of what we have achieved at Frasers this year and would like to thank all colleagues for their continued hard work and our brand partners for their support. Together, we are building a resilient, profitable growth retail ecosystem that delivers exceptional value for our partners, consumers and shareholders. We have built a lot of momentum this year and are entering the new financial year with many exciting growth opportunities ahead of us, which we will continue to invest in for the long-term benefit of the Group."  

 

Outlook

 

Our successful Elevation Strategy is powering our strong financial performance, with strategic brand relationships giving us better access to product across the Frasers Group. As we move into FY25 and the Summer of Sport, we remain confident that our strategy will drive continued strong performance, and we expect significant synergies from both our automation programme and the integration of acquisitions. We continue to build a diverse business within retail, both in the UK and internationally, and also within financial services and property, that can deliver sustainable multi-year profitable growth. For FY25, we expect to achieve another strong increase in APBT in the range £575m-£625m.

 

 

 

	FY24 52 weeks	FY23 (2) 53 weeks	Change
Income statement summary
UK Sports Retail	£2,860.8m	£2,959.1m	(3.3%)
Premium Lifestyle	£1,204.0m	£1,218.1m	(1.2%)
International Retail	£1,289.2m	£1,247.7m	3.3%
Retail revenue	£5,354.0m	£5,424.9m	(1.3%)
Property	£72.7m	£36.1m	101.4%
Financial Services	£111.0m	£125.0m	(11.2%)
Group revenue	£5,537.7m	£5,586.0m	(0.9%)
Retail gross margin	41.8%	41.5%	+30 bps
Group gross margin	43.3%	42.9%	+40 bps
Retail operating costs	(£1,501.0m)	(£1,506.7m)	0.4%
Retail profit from trading	£738.9m	£745.3m	(0.9%)
Other operating costs	(£73.6m)	(£68.8m)	(7.0%)
Fair value adjustments to investment properties	£11.5m	(£6.5m)	276.9%
Gain on disposal of properties	£3.5m	£95.4m	(96.3%)
Group profit from trading	£835.6m	£908.4m	(8.0%)
Depreciation & amortisation	(£284.6m)	(£242.4m)	(17.4%)
Impairments net of impairment reversals/impairments	(£21.4m)	(£239.7m)	91.1%
Share-based payments	(£23.4m)	(£19.3m)	(21.2%)
Foreign exchange realised	£14.4m	£31.2m	(53.8%)
Exceptional items	-	£97.1m	(100.0%)
Operating profit	£520.6m	£535.3m	(2.7%)
Reported profit before tax ("PBT") from continuing operations	£507.0m	£638.0m	(20.5%)
Exceptional items	-	(£97.1m)
Result from discontinued operations	(£12.5m)	£26.4m
Fair value adjustment to derivative financial instruments	(£27.6m)	(£32.5m)
Fair value losses/(gains) and loss/(profit) on disposal of equity derivatives	£68.9m	(£41.1m)
Foreign exchange realised	(£14.4m)	(£31.2m)
Share-based payments	£23.4m	£19.3m
Adjusted profit before tax ("APBT") (1)	£544.8m	£481.8m	13.1%
Reported basic earnings per share ("EPS")	86.8p	106.9p	(18.8%)
Adjusted basic EPS (1)	95.8p	71.7p	33.6%

 

 

Balance Sheet summary
Property, plant & equipment	£962.6m	£1,132.0m	(15.0%)
Investment property	£350.5m	£160.0m	119.1%
Inventories (net of provision)	£1,355.3m	£1,464.9m	(7.5%)
Net assets	£1,873.0m	£1,668.2m	12.3%
Cashflow & capital allocation
Cash inflow from operating activities before working capital	£834.6m	£875.6m	(4.7%)
Net capital expenditure (including sale & leasebacks)	(£211.3m)	(£214.5m)	1.5%
Purchase of own shares	(£126.4m)	(£155.3m)	18.6%

 

Summary of financial performance

 

·      APBT ⁽¹⁾ increased by 13.1% to £544.8m despite lower profits from the disposal of properties and subsidiaries (£28.5m in the current period vs. £113.0m in prior year) and a £12.5m loss in respect of the Group's acquisition of Matches Fashion (vs. a £26.3m gain on disposal of Bob's in prior year). Property and acquisition related impairments returned to more normalised levels in the current year as a result of the strong trading performance combined with the rationalisation of loss-making stores, and future forecasts outweighing our downside impairment assumptions (a net impairment charge of £21.4m in the current period vs. £239.7m charge in the prior year).

 

·      Retail profit from trading of £738.9m, down 0.9%. A strong trading performance from Sports Direct reflecting the continuing success of the Elevation Strategy and strengthening brand relationships, was broadly offset by expected declines in Game UK and Studio Retail, planned House of Fraser store closures, and a softer luxury market. The previous year's result also included the benefit of a 53^rd week of trading.

 

·      Reported PBT of £507.0m, a decrease of 20.5%. The Group's trading performance has been offset by a decrease in foreign exchange gains, non-cash fair value movements on equity derivatives and the non-repeat of exceptional gains (primarily related to the gain made on businesses acquired from JD Sports Fashion plc).

 

·      Group:

·      Retail revenue decreased by 1.3%. A strong trading performance from the core Sports Direct business offset the majority of the planned sales declines in Game UK and Studio Retail, as well as the impact of House of Fraser store closures and a softer luxury market in Premium Lifestyle. Excluding the impact of the 53^rd week from prior year, revenue increased by 0.6%. ⁽³⁾

·      Group gross margin % increased to 43.3% from 42.9%, driven by an increase in retail gross margin reflecting improvements in Sports Direct's product mix as a result of strengthening brand relationships mitigated by the softer luxury market.

 

·      UK Sports (51.7% of total group revenue):

·      Revenue decreased by 3.3% with Sports Direct largely mitigating planned declines in Game UK and Studio Retail. Excluding the impact of the 53^rd week from prior year, revenue decreased by 1.5%. ⁽³⁾

·      Gross profit increased by £28.9m and gross margin increased by +250 bps to 45.5% reflecting an improved product mix at Sports Direct due to strengthening brand relationships, as well as reduced lower margin sales from Game UK and Studio Retail. This contributed to a £13.7m (3.0%) increase in the segment's profit from trading.

 

·      Premium Lifestyle (21.7% of total group revenue):

·      We have invested in a unique proposition in our luxury business and are well positioned for the future. Our long-term ambitions for this business remain unchanged, although it is likely that progress will remain subdued for the short to medium term in the face of a softer market. However, we view this as an opportunity for continued consolidation in order to further strengthen our position.

·      Revenue decreased by 1.2%, as the impact of planned House of Fraser store closures and a softer luxury market were partially offset by sales from the businesses acquired from JD Sports Fashion plc in H2 of FY23. Excluding the impact of the 53^rd week from prior year, revenue increased by 0.7%. ⁽³⁾

·      Segment profit from trading was broadly flat at £137.2m with the planned clearance of surplus inventory from businesses acquired from JD Sports Fashion plc and the impact of continuing closures of legacy House of Fraser stores leading to a 340bps reduction in gross margin to 35.8%. This was offset by overheads savings arising from the closure of House of Fraser stores and acquired businesses being integrated into the Group.

 

·      International Retail (23.3% of total group revenue):

·      Revenue increased by 3.3% due to growth from the Sports Direct International business, as well as the acquisition of the MySale business in Australia in mid FY23. Excluding the impact of the 53^rd week from prior year, revenue increased by 5.3%. ⁽³⁾

·      Segment profit from trading decreased by £23.3m (14.9%) year on year as gross profit growth (achieved at a lower margin % due to Game Spain (console sales) and MySale) was more than offset by the one-off costs associated with integrating acquired businesses (such as Sportmaster in Denmark), and inflation linked operating cost increases.

·      We continue to explore opportunities for growth having invested in our Indonesian joint venture and expect to complete on the purchase of Netherlands retailer, Twinsport post year-end.

 

·      Property (1.3% of total group revenue):

·      Property investment remains a key focus for the Group, unlocking occupational demand for our retail business whilst delivering strong property returns that can be recycled at the appropriate time.

·      Revenue increased by 101.4%, largely due to the annualisation of the prior year acquisitions of Luton, Dundee and Coventry Arena, as well as the impact of current year acquisitions such as the Castleford shopping centre.

·      Segment profit from trading declined by £58.2m, with the equivalent result in FY23 including a £95.4m gain on disposal of properties.

 

·      Financial Services (2.0% of total group revenue):

·      We see a great deal of potential for Frasers Plus as a new revenue stream and a key pillar of our compelling brand ecosystem. We are excited to grow our new Financial Services division with a long-term ambition of £1bn+ in sales, £600m in balances delivering a greater than 15% yield with over 2 million active Frasers Plus customers - this is excluding any third-party partnerships.

·      Our focus is to prioritise the growth of our new Frasers Plus credit offering and reduce the Studio Retail book. As a result of this, and the planned reduction in sales as Studio Retail was integrated into the Group's warehouse and ecommerce infrastructure, revenue decreased 11.2%.

·      Segment profit from trading decreased £8.2m (12.5%) year-on-year with the impairment charge returning to normalised levels (following a release of impairment provision in the prior year as a result of the cost-of-living crisis being less severe than anticipated) and an increase in overhead costs arising from the implementation of Frasers Plus.

·      Post year-end, we agreed a strategic partnership with THG. The partnership includes the integration of Frasers Plus into THG's Ingenuity platform, benefiting customers across THG's retail sites. This marks the first Frasers Plus partnership with an external partner.

 

·      Basic EPS of 86.8p, a decrease of 20.1p year-on-year. Adjusted EPS ⁽¹⁾ of 95.8p, an increase of 24.1p (33.6%) due to increased underlying profitability, the impact of share buy-backs and a lower effective tax rate.

 

·      Net assets have increased to £1,873.0m from £1,668.2m at 30 April 2023, due to the profitability of the Group offset by share buybacks.

 

·      Cash inflow from operating activities before working capital movements of £834.6m, largely driven by strong trading performance particularly in Sports Direct, down 4.7% year-on-year reflecting the non-repeat of the £95.0m reversal of legal and regulatory provisions in the prior year.

 

Acquisitions and investments

 

·      We expect to complete on the purchase of Netherlands retailer, Twinsport post year-end further supporting our growth ambitions in Europe.

·      Launched new joint venture in Indonesia to support our expansion plans in Southeast Asia.

·      Made further strategic investments as the Group continues to explore opportunities to expand commercial relationships and further develop the Group's ecosystem.

·      Strategic disposal of several non-core properties and lesser-performing brands, optimising the Group's portfolio and allowing us to focus on high-growth areas.

 

Revised segments

 

Following a review of the Group's operating segments at the start of the 2023/24 financial year, a decision was taken to change the Group's segmental reporting to more accurately reflect the impact of recent acquisitions and strategy changes on how management views the business and makes decisions, and to allow a more granular analysis of the Group's operating base. Further details are given in note 3 to the financial information below.

 

Other notes

(1)         This is an Alternative Performance Measure. APBT is reconciled to the equivalent GAAP measure in note 3 to the financial information. Adjusted EPS is discussed in note 10 to the financial information.

(2)         Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

(3)         A reconciliation to results excluding the 53^rd week in prior year can be found in performance review by segment section below.

 

Enquiries

 

Andrew Kasoulis

Investor Relations Director

E. andrew.kasoulis@frasers.group

T. 07826 532191

 

Ronnie Laffar

Group Head of Communications

E. fgpr@frasers.group

T. 07931 841082

 

Rosie Oddy

Brunswick Group, PR Advisors                                      

E. frasersgroup@brunswickgroup.com

T. 07557 804 512

 

CHIEF EXECUTIVE'S REPORT AND BUSINESS REVIEW

 

Introduction

 

Reflecting on this past year, I am proud of the strides we have made at Frasers Group and the disciplined execution of our Elevation Strategy, which is bringing the business closer to where we want to be for our consumers, people, brand partners, and shareholders. Despite macro-economic challenges, we continue to remain focused on delivering our Elevation Strategy and further building our brand ecosystem across attractive segments. Given the scale of growth the Frasers Group has experienced in recent years, it is more important than ever to ensure we keep our business simple. With this in mind, from FY24, we have clearly defined our segments as UK Sports Retail, Premium Lifestyle, International Retail, Property and Financial Services to best illustrate our focus areas.  FY24 has been an exceptional year. We have delivered a strong financial performance thanks in part to the breadth of our business across these segments, and affirming the Frasers equity story: best brands, diverse growth, and cash compounder.

 

Best Brands

·      Our brand relationships are stronger than they have ever been, unlocking selectively distributed products from the world's best brands.

·      Continued commitment to the Elevation Strategy reaffirms our new positioning, creating more opportunities and securing the Group in markets with high barriers to entry.

·      The strength of our ecosystem positions us as a key strategic wholesale partner for the world's best brands, giving them access to new consumers, an elevated omni-channel experience, and an aligned wholesale strategy.

Diverse Growth

·      While Sport has always and continues to be a core tenet of the business, we have exciting profitable growth opportunities across a diverse range of segments including differentiated retail and international opportunities and, most recently, property and financial services.

·      A focus on leveraging these new revenue streams for the Group whilst fixating on profitable growth.

Cash Compounder

·      Frasers Group is highly cash generative and a cash compounder, consistently generating new and diverse profit growth opportunities.

·      The business has delivered £3.7bn in operating cash over the last 9 years which has been reinvested, funding the Elevation Strategy which started in 2016, and delivered great value for all stakeholders whilst maintaining consistently low leverage.

·      This impressive cash compounder model is supported by conservative, consistent and simple accounting principles.

Financials 

 

We have seen strong trading momentum across much of our diversified portfolio, especially in Sports Direct, underscoring the resilience of our operations and the strength of our business. We continue our practice of adopting conservative, consistent, and simple accounting principles. This disciplined approach to our balance sheet ensures that stakeholders have a transparent view of the value creation within the business.

 

Our financial performance has been robust, with our cash compounder model driving significant returns. We maintained strong financials across our diverse growth sectors, including Retail across multiple sectors, international markets, Property, and Financial Services. Our commitment to a strong balance sheet provides a solid foundation for future growth and stability, positioning us well to capitalise on emerging opportunities.

 

Key financial metrics include:

 

·      UK Sports segment gross margin increased 250bps to 45.5% demonstrating the strength of our proposition and brand relationships, and improving product access.

·      Adjusted PBT ⁽¹⁾ increased to £544.8m (13.1%) driven particularly by Sports Direct, and more normalised impairment levels as results and forecasts outperform downside assumption scenarios.

·      Reported PBT of £507.0m, a decrease of 20.5%. The Group's trading performance has been offset by a decrease in foreign exchange gains, non-cash fair value movements on equity derivatives and the non-repeat of exceptional gains (primarily related to the gain made on businesses acquired from JD Sports Fashion plc).

·      Adjusted EPS ⁽¹⁾ up 33.6% to 95.8p due to improved profitability supported by the significant share buy-back programme in the year and lower effective tax rate.

·      Net assets have increased 12.3% to £1.9bn.

·      £126.4m of capital returned to shareholders by way of share buy-backs in the year.

·      Very strong cash inflow from operating activities before working capital movements of £834.6m versus the prior year of £875.6m, which included £95.0m of legal and regulatory provision reversals not repeated in the current year.

·      Continued self-funded growth of the Group and investment in the Elevation Strategy with leverage remaining consistently low.

 

Retail

 

Our mission at Frasers Group is to build the planet's most admired and compelling brand ecosystem. We obsess over our relationships with the best brands across Sport, Premium and Luxury. Part of the strength of our ecosystem is its diversity: no single brand supplier represents more than 15% of our total Group sales. Our brand portfolio is strengthened by an ever-evolving roster of new brands, such as The North Face, ON, Salomon, Columbia and Alo Yoga, which we have onboarded this year. Importantly, this is underpinned by Frasers' owned brands, which generate higher gross margin for the Group. This brand mix not only provides consumers with a wide selection of products across sectors but also provides varied price points to serve different consumer groups. As brands continue to evaluate their direct-to-consumer model, wholesale partners are becoming increasingly imperative. Our Elevation Strategy has enabled clear alignment with the world's best brands making us a key strategic partner and presenting us with greater opportunities.

 

The mutual value of our brand relationships came to life at the Frasers Festival held in May, where over 40 of our strategic brand partners joined us for two days to celebrate and foster collaboration. We had founders and CEOs join us from the world's biggest brands, such as Kevin Plank, Founder and CEO of Under Armour, Bjørn Gulden, CEO of adidas, Daniel Grieder, CEO of Hugo Boss, Marc Maurer, Co-CEO of ON, and more. It was fantastic to celebrate our achievements together and their endorsement of Frasers Festival 2024 truly demonstrated their trust in the repositioning of our business and their alignment to-- our vision.

 

Sports Direct continues to reinforce its position as an undisputed leader in Sport. The Sport industry is not slowing down; high consumer demand, coupled with our unique proposition continues to drive profitable growth for the division. In FY24, we have built on our strong foundations with the successful roll-out of new elevated stores, experiential-led flagship store openings and best-in-class category concepts. We will continue to invest significantly in our store estate over the coming years, always ensuring our robust payback model for store investment is adhered to. In line with our international expansion ambition, we have made meaningful progress with acquiring the intellectual property of sporting goods retailers Perry Sport, and Atkiesport, and contracted to acquire Twinsport post year-end - which now makes us the #1 top Sport retailer in Benelux. We have increased our equity investment in Norwegian sports retailer, XXL and remain close to agreeing a strategic partnership to further develop our presence across the Nordics. We are also excited about our joint venture with international retail giant, PT MAP Active, having already opened 3 stores in Indonesia. We will be further growing our presence across Southeast Asia and are very excited about the opportunities that arise from this partnership.

 

While Sport moves from strength-to-strength, our Premium and Luxury division experienced the softening of the global luxury market felt by most high-end retailers and brands. We made the difficult but necessary decision to put MATCHES into administration once it became clear that too much further investment would be required to sustain the business. Following an extensive process by the Joint Administrators, we reached an agreement to acquire certain intellectual property assets. We remain committed to the luxury market and, whilst the environment is likely to remain challenging for the medium-term, we are confident in our well-invested and differentiated proposition with FLANNELS; we have strong relationships with key brand partners and remain well-placed to capitalise on longer-term opportunities. In our Premium division, we have made good progress on consolidating the House of Fraser store estate and introduced other Frasers Group fascias to make the retail space more productive whilst increasing the product offering for the consumer. This new retail model with more of our concepts under one roof is proving hugely attractive and is a commercial way to incorporate multiple fascias together.

 

Over the last 12 months, we have made excellent progress on our warehouse automation programme across our supply chain, which is set to transform our Group-wide retail operations. The project is now 99% complete and already enabling further Group efficiencies and synergies, and we have already made significant headway rationalising our stock holding by £138.2m year-on-year.

 

This improvement in our operations enables us to accelerate the integrations of acquisitions, unlocking potential for the years ahead by reducing warehouse locations, systems and infrastructure costs and, ultimately, increasing profitability. Finally, we are nearing completion of the integration of several acquisitions, including Studio Retail, Sportmaster and GAME which we expect to produce further efficiency and profitability improvements once completed.

 

Our strong infrastructure has been a key enabler for the elevation of our digital platform. Earlier this year, we started the overhaul of our digital offering with the creation of a cutting-edge platform that is transforming the consumer e-commerce experience through personalisation and better product discoverability, building on our operational efficiencies and improvements. To complement our international expansion, we launched 10 new localised Sports Direct websites this year, which allows us to unlock the strong demand across Europe, and we are looking forward to scaling this further.

 

Strategic investments

 

Building a compelling brand ecosystem requires a dynamic M&A strategy which is central to the Group's DNA. Starting with one store in 1982, the Group has grown to over £5 billion in sales across a number of diverse sectors and countries, nearly all of which have been acquired as part of our ongoing M&A strategy. We regularly review our investment portfolio to ensure it is diverse and resilient, but also conducive to synergies and future growth as demonstrated by our recently increased investment in Hugo Boss. We are and always have been incredibly supportive of Hugo Boss' strategy and work closely with the management team to bring synergies for both businesses. It is our intention to remain a long-term and supportive shareholder.

 

Property

 

Frasers Group occupies over 20 million square feet of stores, warehouses, and office space. Actively managing this vast estate is essential, and our presence in large towns and cities often exceeds 150,000 square feet. Our unique advantage lies in our deep understanding of trading data, enabling us to effectively underwrite our occupational demand, giving us an edge over other investors. This insight has unlocked numerous opportunities to acquire property assets at attractive prices.

 

By leveraging these acquisitions, we not only fulfil our retail representation requirements but also drive additional footfall, enhance the tenant mix, and ultimately increase the value of our assets. When market conditions are favourable, we maintain the flexibility to sell these assets, capturing the value created and redeploying the proceeds across the Group. In FY24, we successfully executed property acquisitions totalling £91.0m and completed £12.1m of disposals. As we move forward, we remain vigilant in monitoring further opportunities to expand and optimise our portfolio.

 

Financial Services

 

We are incredibly optimistic about our Financial Services proposition, further expanding our diverse ecosystem. The platform evolves our capability, allowing us to better understand our consumers cross-fascia, streamline the consumer experience with a one-click checkout, and reward our most loyal consumers.

 

Our improved capabilities support the continued success of Frasers Plus - our FCA-regulated credit payment account and rewards product - which is changing how consumers shop across the Group's brands and third-party platforms. The early performance of Frasers Plus has been very encouraging, as it is an attractive product for consumers, and has driven a rise in spending across categories and segments, and Average Order Value above where we initially forecasted.

 

After a promising early uptake from our consumers within Frasers Group, which generated invaluable consumer insights and data that will help us better serve our consumers, we entered our first external Frasers Plus partnership with THG. Frasers Plus will be integrated into THG's Ingenuity platform, benefiting consumers across THG retail sites and unlocking new growth opportunities for the business by recruiting new consumers and offering existing Frasers Plus members exciting new products.

 

We see a great deal of potential for Frasers Plus as a new revenue stream and a key pillar of our compelling brand ecosystem. We are excited to grow our new Financial Services division with a long-term ambition of £1bn+ in sales, £600m in balances delivering a greater than 15% yield with over 2 million active Frasers Plus customers - this is excluding any third-party partnerships.

 

Our teams

 

Our people are our best and most important asset - whether on the shop floor, in our warehouse, or at head office - and we're always looking for new ways to inspire and drive them. That's why we hosted our second Frasers Festival in May, which brought together over 1,500 of our top-performing colleagues from across the world. The day aimed to inspire, connect and motivate our teams through fitness challenges, brand activations and panel talks from global brand leaders. Feedback from employees has been overwhelmingly positive as we head into a busy summer period. We strongly believe that rewarding colleagues for their contribution is crucial, which is why our Fearless 1000 bonus scheme recognises and rewards the Group's top 1,000 performers. We also introduced 'Retail Reconnect' for Head Office staff whereby they spend two days a year in either a Retail or Warehouse environment. The experience drives collaboration and a better understanding of the demands facing our Retail and Warehouse teams, as well as an understanding of our consumers. We're already reaping the benefits of this initiative and seeing greater cohesion among our people.

 

Continued focus on environmental, social, and governance

 

This year, we introduced Frasers Group's global Sustainability framework against which we benchmark and measure our ESG progress and impact. We have made significant strides against our ESG framework, underpinning our dedication to environmental stewardship and social responsibility. While we have made progress we can be proud of, we recognise that meaningful change will take time and that we are at the beginning of a long journey.

 

We're in the process of completing our global carbon footprint audit for FY24, which demonstrates our commitment to transparency and continuous improvement. Our collaborative efforts with brand partners have optimised shipping, significantly increased efficiency and reduced our carbon footprint. We have also focused on reducing our reliance on single-use plastics, as well as saving over 2-million hangers from disposal to keep them in circulation for longer. We have implemented energy-saving initiatives, including voltage optimisation projects and LED installations, which led to a noteworthy reduction in energy consumption.

 

Outlook

 

As I mark two years as Chief Executive at Frasers Group, I want to extend my gratitude and thanks to every member of the Frasers Group team, our Board of Directors, investors, and partners. Your ongoing commitment and support drive us forward every day, and here's to continuing our shared success in the years to come.

 

Looking ahead to FY25, we are confident that our strategy will continue to drive strong trading, bolstered by a Summer of Sport, the integration of recent acquisitions and synergies from our automation programme. We also expect to reduce the like-for-like gross inventory balance by 5% to 15% by the end of the calendar year, and have already made significant progress. We're continuing to build a diversified and global retail business for sustained multi-year growth and expect to achieve another significant increase in FY25 APBT in the range £575m-£625m.

 

 

 

Michael Murray

Chief Executive Officer

17 July 2024

 

 

PERFORMANCE OVERVIEW

 

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023 (1)
Retail revenue	£5,354.0m	£5,424.9m
Total revenue	£5,537.7m	£5,586.0m
Retail gross profit	£2,239.9m	£2,252.0m
Group gross profit	£2,395.2m	£2,395.0m
Retail gross margin	41.8%	41.5%
Group gross margin	43.3%	42.9%
Retail profit from trading	£738.9m	£745.3m
Group profit from trading	£835.6m	£908.4m
Reported profit before tax ("PBT") from continuing operations	£507.0m	£638.0m
Adjusted profit before tax ("APBT") (2)	£544.8m	£481.8m
Reported basic earnings per share ("EPS")	86.8p	106.9p
Adjusted basic EPS (2)	95.8p	71.7p
Net assets	£1,873.0m	£1,668.2m
Cash inflow from operating activities before working capital	£834.6m	£875.6m

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

(2)  This is an Alternative Performance Measure. APBT is reconciled to the equivalent GAAP measure in note 3 to the financial information. Adjusted EPS is discussed in note 10 to the financial information.

 

The Directors have adopted Alternative Performance Measures (APM's). APM's should be considered in addition to UK-Adopted International Accounting Standards ("UK IAS") measures. The Directors believe that Adjusted profit before tax ("APBT") and Adjusted basic EPS provide further useful information for shareholders on the underlying performance of the Group in addition to the reported numbers and are consistent with how business performance is measured internally. They are not recognised profit measures under UK IAS and may not be directly comparable with "adjusted" or "alternative" profit measures used by other companies.

 

Retail revenue decreased by 1.3%. A strong trading performance from the core Sports Direct business has offset the majority of the planned sales declines in Game UK and Studio Retail, as well as the impact of House of Fraser store closures and a softer luxury market in Premium Lifestyle. Excluding the impact of the 53rd week from prior year, retail revenue increased by 0.6%. Total group revenue decreased by 0.9% with growth in the property segment partially mitigating declines in Retail and Financial Services. Excluding the impact of the 53rd week from prior year, total revenue increased by 1.0%.

 

Group gross margin % increased to 43.3% from 42.9%, driven by an increase in retail gross margin reflecting improvements in Sports Direct's product mix as a result of strengthening brand relationships mitigated by the softer luxury market.

 

Retail profit from trading of £738.9m, down 0.9%. A strong trading performance from Sports Direct reflecting the continuing success of the Elevation Strategy and strengthening brand relationships, was broadly offset by expected declines in Game UK and Studio Retail, planned House of Fraser store closures, and a softer luxury market. The previous year's result also included the benefit of a 53^rd week of trading.

 

APBT ⁽²⁾ increased by 13.1% to £544.8m despite lower profits from the disposal of properties and subsidiaries (£28.5m in the current period vs. £113.0m in prior year) and a £12.5m loss in respect of the Group's acquisition of Matches Fashion (vs. a £26.3m gain on disposal of Bob's in prior year). Property and acquisition related impairments returned to more normalised levels in the current year as a result of the strong trading performance combined with the rationalisation of loss-making stores, and future forecasts outweighing our downside impairment assumptions (a net impairment charge of £21.4m in the current period vs. £239.7m charge in the prior year).

 

Reported PBT of £507.0m, a decrease of 20.5%. The Group's trading performance has been offset by a decrease in foreign exchange gains, non-cash fair value movements on equity derivatives (which have moved from a £41.1m gain in FY23 to a loss of £68.9m in FY24 and account for a significant portion of the year-on-year decline in statutory PBT) and the non-repeat of exceptional gains (primarily related to the gain made on businesses acquired from JD Sports Fashion plc).

 

Basic EPS of 86.8p, a decrease of 20.1p year-on-year. Adjusted EPS ⁽²⁾ of 95.8p, an increase of 24.1p (33.6%) due to increased underlying profitability, the impact of share buy-backs and a lower effective tax rate.

 

Net assets have increased to £1,873.0m from £1,668.2m at 30 April 2023, due to the profitability of the Group offset by share buybacks.

 

Cash inflow from operating activities before working capital movements of £834.6m, largely driven by strong trading performance particularly in Sports Direct, down 4.7% year-on-year reflecting the non-repeat of the £95.0m reversal of legal and regulatory provisions in the prior year.

 

 

REVIEW BY BUSINESS SEGMENT

UK SPORTS

This segment now includes the results of the Group's core sports retail store operations in the UK, plus all the Group's sports retail online business, other UK-based sports retail and wholesale operations, GAME UK stores and online operations, retail store operations in Northern Ireland, Frasers Fitness, and the Group's central operating functions (including the Shirebrook campus).

UK Sports accounts for 51.7% (FY23: 53.0%) of the Group's revenue.

 

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023(1)	Pro-forma 52 weeks ended April 2023
Revenue	£2,860.8m	£2,959.1m	£2,903.3m
Cost of sales	(£1,558.5m)	(£1,685.7m)	(£1,653.9m)
Gross profit	£1,302.3m	£1,273.4m	£1,249.4m
Gross margin %	45.5%	43.0%	43.0%
Trading result	£468.4m	£454.7m	£446.1m
Operating profit	£353.1m	£328.3m	£322.1m
Store numbers	797	812

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

Revenue decreased by 3.3% with Sports Direct largely mitigating planned declines in Game UK and Studio Retail. Excluding the impact of the 53rd week from prior year, revenue decreased by 1.5%.

Gross profit increased by £28.9m and gross margin increased by +250 bps to 45.5% reflecting an improved product mix at Sports Direct due to strengthening brand relationships, as well as reduced lower margin sales from Game UK and Studio Retail. This contributed to a £13.7m (3.0%) increase in the segment's profit from trading.

 

UK Sports' operating profit result of £353.1m (FY23: £328.3m) includes impairment reversals of £8.4m (FY23: impairments of £25.1m), a result of the strong trading performance, and future forecasts outweighing our downside impairment assumptions, and foreign exchange gains of £9.2m (FY23: £35.8m).

 

Store numbers decreased from 812 to 797 mainly driven by the replacement of standalone Game stores with Game concessions situated inside larger Sports Direct stores.

 

PREMIUM LIFESTYLE

This segment includes the results of the Group's premium and luxury retail businesses FLANNELS, Cruise, Van Mildert, Jack Wills, House of Fraser, Gieves and Hawkes, and Sofa.com along with the related websites, the businesses acquired from JD Sports in FY23, as well as the results from the I Saw it First website and the Missguided website until the disposal of the Missguided intellectual property in October 2023.

 

Premium Lifestyle accounts for 21.7% (FY23: 21.8%) of the Group's revenue

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023(1)	Pro-forma 52 weeks ended April 2023
Revenue	£1,204.0m	£1,218.1m	£1,195.1m
Cost of sales	(£773.2m)	(£741.0m)	(£727.0m)
Gross profit	£430.8m	£477.1m	£468.1m
Gross margin %	35.8%	39.2%	39.2%
Trading result	£137.2m	£134.0m	£131.5m
Operating profit	£98.6m	£91.0m	£89.3m
Store numbers	181	221

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

Revenue decreased by 1.2%, as the impact of planned House of Fraser store closures and a softer luxury market were partially offset by sales from the businesses acquired from JD Sports Fashion plc in H2 of FY23. Excluding the impact of the 53^rd week from prior year, revenue increased by 0.7%.

 

Segment profit from trading was broadly flat at £137.2m with the planned clearance of surplus inventory from businesses acquired from JD Sports Fashion plc and the impact of continuing closures of legacy House of Fraser stores leading to a 340bps reduction in gross margin to 35.8%. This was offset by overheads savings arising from the closure of House of Fraser stores and acquired businesses being integrated into the Group.

 

Premium Lifestyle's operating profit result of £98.6m (FY23: £91.0m) includes impairments of £2.5m (FY23: impairments of £56.9m including £20.5m in respect of writing down intangibles recognised on the acquisition of Missguided and I Saw it First).

 

We have invested in a unique proposition in our luxury business and are well positioned for the future. Our long-term ambitions for this business remain unchanged, although it is likely that progress will remain subdued for the short to medium term in the face of a softer market. However, we view this as an opportunity for continued consolidation in order to further strengthen our position.

 

Store numbers decreased from 221 to 181 as we continued to rationalise the House of Frasers store estate and close unprofitable stores in the businesses acquired from JD Sports Fashion plc in H2 of FY23.

 

INTERNATIONAL RETAIL

 

This segment includes the results all of the Group's sports retail stores, management and operating functions in Europe, Asia and the rest of the world, including the Group's European Distribution Centres in Belgium and Austria, GAME Spain stores and e-commerce offering, the Baltics & Asia e-commerce offerings, the MySale business in Australia, the Group's US retail operations until they were disposed of in 2022, and all non-UK based wholesale and licensing activities (relating to brands such as Everlast, Karrimor and Slazenger).

 

International accounts for 23.3% (FY23: 22.3%) of the Group's revenue.

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023(1)	Pro-forma 52 weeks ended April 2023
Revenue	£1,289.2m	£1,247.7m	£1,224.2m
Cost of sales	(£782.4m)	(£746.2m)	(£732.1m)
Gross profit	£506.8m	£501.5m	£492.1m
Gross margin %	39.3%	40.2%	40.2%
Trading result	£133.3m	£156.6m	£153.6m
Operating profit/(loss)	£44.1m	(£11.3m)	(£11.1m)
Store numbers	575	597

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

Revenue increased by 3.3% due to growth from the Sports Direct International business, as well as the acquisition of the MySale business in Australia in mid FY23. Excluding the impact of the 53^rd week from prior year, revenue increased by 5.3%.

 

Segment profit from trading decreased by £23.3m (14.9%) year on year as gross profit growth (achieved at a lower margin % due to Game Spain (console sales) and MySale) was more than offset by the one-off costs associated with integrating acquired businesses (such as Sportmaster in Denmark), and inflation linked operating cost increases.

 

International's operating profit result of £44.1m (FY23: loss of £11.3m) includes impairments of £12.5m (FY23: impairments of £133.8m, including £87.9m in respect of intangible assets allocated to the Everlast CGU) and foreign exchange gains of £0.3m (FY23: losses of £4.7m).

 

We continue to explore opportunities for growth having invested in our Indonesian joint venture and expect to complete on the purchase of Netherlands retailer, Twinsport post year-end.

 

Store numbers decreased from 597 to 575 as we continued to evaluate our stores at lease expiries and breaks, to rationalise the store international store portfolio.

 

PROPERTY

This segment includes the results from the Group's freehold property owning and long leasehold holding property companies that generate third party rental and other property related income (e.g., car parking, conference and events income). The results of the Coventry Arena are reported in this segment.

 

Property accounts for 1.3% (FY23: 0.6%) of the Group's revenue.

 

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023(1)	Pro-forma 52 weeks ended April 2023
Revenue	£72.7m	£36.1m	£35.4m
Cost of sales	(£7.8m)	(£2.6m)	(£2.6m)
Gross profit	£64.9m	£33.5m	£32.8m
Gross margin %	89.3%	92.8%	92.7%
Trading result	£39.1m	£97.3m	£95.5m
Operating (loss)/profit	(£31.3m)	£37.4m	£36.7m

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

Revenue increased by 101.4%, largely due to the annualisation of the prior year acquisitions of Luton, Dundee and Coventry Arena, as well as the impact of current year acquisitions such as the Castleford retail park retail park.

 

Segment profit from trading declined by £58.2m, with the equivalent result in FY23 including a £95.4m gain on disposal of properties.

 

Property's operating loss of £31.3m (FY23: profit of £37.4m) includes a net impairment charge of £14.8m (FY23: impairments of £23.9m), fair value gains on investment property £11.5m (FY23: fair value loss of £6.5m) and depreciation of £60.2m (FY23: £36.0m).

Property investment remains a key focus for the Group, unlocking occupational demand for our retail business whilst delivering strong property returns that can be recycled at the appropriate time.

 

FINANCIAL SERVICES

This segment includes the results of Frasers Group Financial Services. This includes interest charged on amounts advanced to consumer credit customers, along with the associated impairment and operating costs.

 

Financial Services accounts for 2.0% (FY23: 2.2%) of the Group's revenue.

 

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023(1)	Pro-forma 52 weeks ended April 2023
Revenue	£111.0m	£125.0m	£122.6m
Impairment losses on credit receivables	(£20.6m)	(£15.5m)	(£15.2m)
Gross profit	£90.4m	£109.5m	£107.4m
Gross margin %	81.4%	87.6%	87.6%
Trading result	£57.6m	£65.8m	£64.6m
Operating profit	£56.1m	£89.9m	£88.2m

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

Our focus is to prioritise the growth of our new Frasers Plus credit offering and reduce the Studio Retail book. As a result of this, and the planned reduction in sales as Studio Retail was integrated into the Group's warehouse and ecommerce infrastructure, revenue decreased 11.2%.

 

Segment profit from trading decreased £8.2m (12.5%) year-on-year with the impairment charge returning to normalised levels (following a release of impairment provision in the prior year as a result of the cost-of-living crisis being less severe than anticipated) and an increase in overhead costs arising from the implementation of Frasers Plus.

 

We see a great deal of potential for Frasers Plus as a new revenue stream and a key pillar of our compelling brand ecosystem. We are excited to grow our new Financial Services division with a long-term ambition of £1bn+ in sales, £600m in balances delivering a greater than 15% yield with over 2 million active Frasers Plus customers - this is excluding any third-party partnerships.

 

Post year-end, we agreed a strategic partnership with THG plc ("THG"), post year-end. The partnership includes the integration of Frasers Plus into THG's Ingenuity platform, benefiting customers across THG's retail sites. This marks the first Frasers Plus partnership with an external partner.

 

DISCONTINUED OPERATION

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023(1)
Result from discontinued operation (net of tax)	(£12.5m)	£26.3m

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

On 20 December 2023, the Group acquired the Matches business ("Matches") from MF Intermediate Limited, by way of the purchase of 100% of the shares of a group of 6 companies (of which MatchesFashion Limited was the main trading subsidiary) and the acquisition of the senior and junior debt owed by those companies. The consideration payable was £51.9m.

 

Following the acquisition, the Group provided significant funding to Matches but the business continued to generate material trading losses. As a result of this, management concluded that the funding requirements of the business would be far in excess of amounts that the Group considers to be viable and on 8 March 2024 administrators were appointed. Since the Group lost control of Matches upon the administrators' appointment, its net assets (including the associated goodwill) were derecognised and the loans due to the Group from Matches were recognised at this point, net of a provision for expected credit loss.

 

The £12.5m loss from discontinued operation reflects a trading loss of £8.4m for the period during which Matches was a subsidiary of the Group and £4.1m loss on disposal, reflecting the difference between the carrying value of the net assets at the point the Group ceased to control Matches and the recoveries expected from the administration.

 

In the period between the administrators' appointment and 28 April 2024, the Group purchased the brand names and intellectual property of Matches for £20.0m, with the consideration payable being treated as a reduction in the amounts owed to the Group by Matches.

 

In the prior period, the Group disposed of its US retail businesses trading as Bobs Stores and Eastern Mountain Sports for net cash consideration of approximately £43.6m. The £26.3m profit from discontinued operation reflects a break even trading performance (after tax) for the period during which these businesses were subsidiaries of the Group and a £26.3m gain on disposal.

 

 

FINANCIAL REVIEW

 

The consolidated financial statements for the 52 weeks ended 28 April 2024 are presented in accordance with UK-adopted International Accounting Standards (UK IAS).

SUMMARY OF RESULTS

 

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023 (1)
Revenue	£5,537.7m	£5,586.0m
Reported profit before tax	£507.0m	£638.0m
Adjusted PBT (2)	£544.8m	£481.8m
Reported basic EPS	86.8p	106.9p
Adjusted basic EPS (2)	95.8p	71.7p

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

(2)  This is an Alternative Performance Measure. APBT is reconciled to the equivalent GAAP measure in note 3 to the financial information. Adjusted EPS is discussed in note 10 to the financial information.

 

FOREIGN EXCHANGE AND TREASURY

The Group reports its results in GBP but trades internationally and is therefore exposed to currency fluctuations on currency cash flows in various ways. These include purchasing inventory from overseas suppliers, making sales in currencies other than GBP and holding overseas assets in other currencies. The Board mitigates the cash flow risks associated with these fluctuations with the careful use of currency hedging using forward contracts and other derivative financial instruments.

The Group uses forward contracts that qualify for hedge accounting in two main ways - to hedge highly probable EUR sales income and USD inventory purchases. This introduces a level of certainty into the Group's planning and forecasting process. Management has reviewed detailed forecasts and the growth assumptions within them and is satisfied that the forecasts meet the criteria for being highly probable forecast transactions.

As at 28 April 2024, the Group had the following forward contracts and bought options that qualified for hedge accounting under IFRS 9 Financial Instruments ("IFRS 9"), meaning that fluctuations in the value of the contracts before maturity are recognised in the Hedging Reserve through Other Comprehensive Income. After maturity, the sales and purchases are then valued at the hedge rate.

Currency	Hedging against	Currency value	Timing	Rates
USD / GBP	USD Inventory Purchases	USD 275m	FY25	1.31
EUR / GBP	Euro sales	EUR 456m	FY25-FY26	0.98-1.08

 

The Group also uses currency options, swaps and spots for more flexibility against cash flows that are less than highly probable and therefore do not qualify for hedge accounting under IFRS 9. The fair value movements before maturity are recognised in the Income Statement.

The Group has the following sold currency options and unhedged forwards:

Currency	Expected use	Currency value	Timing	Rates
USD / GBP	USD inventory purchases	USD 240m	FY25	1.26 - 1.31
USD / EUR	USD inventory purchases	USD 95m	FY25	1.04 - 1.31
EUR / GBP	Euro sales	EUR 1,056m	FY25 - FY27	0.98 - 1.15

 

The Group is proactive in managing its currency requirements. The Treasury team works closely with senior management to understand the Group's plans and forecasts and discusses and understands appropriate financial products with various financial institutions, including those within the Group Financing Facility. This information is then used to implement suitable currency products to align with the Group's strategy.

Regular reviews of the hedging performance are performed by the Treasury team alongside senior management to ensure the continued appropriateness of the currency hedging in place and, where suitable, to implement additional strategies and or restructure existing approaches, in conjunction with our financial institution partners.

Given the potential impact of commodity prices on raw material costs, the Group may hedge certain input costs, including cotton, crude oil and electricity.

EARNINGS

Basic earnings per share (EPS) is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the financial period. Shares held in Treasury and the Employee Benefit Trust are excluded from this figure.

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023 (1)
Reported EPS (Basic)	86.8p	106.9p
Adjusted EPS (Basic) (2)	95.8p	71.7p
Weighted average number of shares (actual)	438,504,703	459,911,330

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

(2)  This is an Alternative Performance Measure. Adjusted EPS is discussed in note10 to the financial information.

 

Basic EPS of 86.8p, a decrease of 20.1p year-on-year. Adjusted EPS ⁽²⁾ of 95.8p, an increase of 24.1p (33.6%) due to increased underlying profitability, the impact of share buy-backs and a lower effective tax rate.

 

DIVIDENDS & SHARE BUYBACKS

The Board has decided not to pay a final dividend in relation to FY24 (FY23: £nil). The Board remains of the opinion that it is in the best interests of the Group and its shareholders to preserve financial flexibility and facilitate future investments and other growth opportunities. The payment of dividends remains under review.

The Group's share buyback programme has continued during the year which is a demonstration of our commitment to shareholder returns, our confidence in our strategy and our potential for future growth. Share buy-backs totalled £126.4m (FY23: £155.3m).

 

CAPITAL EXPENDITURE

During the period, gross capital expenditure (excluding IFRS 16) amounted to £267.2m (FY23: £468.4m - this figure was inflated as a result of the sale and leaseback transaction entered into in the prior year).

 

STRATEGIC INVESTMENTS

The Group continues to hold various strategic investments as detailed in note 15. In addition, the Group also holds indirect strategic investments within contracts for difference and options.

On initial application of IFRS 9 the Group made the irrevocable election to account for long term financial assets (i.e., strategic investments) at fair value through other comprehensive income (FVOCI) given these are not held for trading purposes. The election is made on an instrument-by-instrument basis, only qualifying dividend income is recognised in profit and loss, changes in fair value are recognised within OCI and never reclassified to profit and loss, even if the asset is impaired, sold or otherwise derecognised.

The fair values of the contracts for difference and options are recognised in Derivative Financial Assets or Liabilities on the Group's Balance Sheet, with the movement in fair value recorded in the Income Statement.

The Frasers Group's strategic investment strategy is a key enabler in the growth and success of the Group and is in the ordinary course of business.

ACQUISITIONS

The Group acquired a number of businesses during the period.

RELATED PARTIES

 

Relationship Between Frasers Group plc and Mike Ashley

Mike Ashley opened his first sports shop in 1982 and built the Frasers Group into a multi-billion-pound retailer over the next forty years. The Group was initially floated on the London Stock Exchange in 2007 and following continued growth Mike stepped down as CEO in 2022. He also stepped down from the Board of Directors in 2022 and has no day-to-day involvement or responsibility for the strategic direction of the Group or any Board matters.  

However, given his extensive involvement in leading the business for over forty years, the Board has an agreement with Mr Ashley, through his own company MASH Holdings Limited, which provides for management to seek his expertise in discrete areas where he has specific knowledge, for example in warehousing, logistics or strategic relationships with the supply chain. He does not receive any remuneration for providing this advice to management and has no decision-making powers.  

 

TAXATION

 

Total tax contribution

The effective tax rate on profit before tax in FY24 was 21.8% (FY23 restated: 24.0%). The Group has contributed approximately £500m (FY23: £469m) in taxes paid and collected during the year.  Taxes paid by the Group of approximately £220m (FY23: £204m) are primarily business rates, corporation tax and employer's national insurance contributions.  Taxes collected by the Group of approximately £280m (FY23: £265m) are primarily net VAT, PAYE and employee's national insurance contributions.

 

The Group's Tax Strategy is published at: https://frasers-cms.netlify.app//assets//files/financials/fy24-tax-strategy.pdf

Taxes paid by country

The Group generates 92.6% of its profits in companies that are resident in the UK and pays 88.3% of its corporation tax liabilities to HMRC in the UK.

Plastic Packaging Taxes

During FY24 the Group has paid approx. £0.1m in respect of the new UK Plastics Packaging Tax.

 

 

CASH FLOW AND NET DEBT

Net debt increased by £30.8m from £416.8m at 30 April 2023 to £447.6m at 28 April 2024. Net debt includes £126.8m of borrowings relating to the Frasers Group Financial Services Limited securitisation facility (30 April 2023: £161.6m). Net interest on bank loans and overdrafts increased to £51.4m in the year (FY23: £37.2m) largely due to increased interest rates and increased usage of the Revolving Credit Facility ("RCF") in the period.

Analysis of net debt:

	28 April 2024	30 April 2023
Cash and cash equivalents	£358.6m	£332.9m
Borrowings	(£806.2m)	(£749.7m)
Net debt	(£447.6m)	(£416.8m)
Securitisation (disclosed within borrowings)	(£126.8m)	(£161.6m)
Net debt excluding securitisation	(£320.8m)	(£255.2m)

 

The Group enacted the second one-year extension to its Group facility and currently has access to a combined term loan and RCF with total commitments of £1,432.5m until November 2025. This reduces to 1,372.5m from December 2025 until maturity in November 2026.

The Group continues to operate comfortably within its banking facilities and covenants and the Board remains comfortable with the Group's available headroom.

 

SUMMARY OF CASH FLOW

	28 April 2024	30 April 2023 (1)
Operating cash inflow before changes in working capital	£834.6m	£875.6m
(Increase)/decrease in receivables	(£47.4m)	£95.8m
Decrease/(increase) in inventories	£114.1m	(£71.6m)
Decrease in payables	(£42.6m)	(£132.4m)
Decrease in provisions	(£47.5m)	(£132.5m)
Cash inflows from operating activities	£811.2m	£634.9m
Income taxes paid	(£129.0m)	(£93.2m)
Net cash inflows from operating activities	£682.2m	£541.7m
Lease payments	(£162.8m)	(£140.7m)
Net finance costs paid	(£35.6m)	(£30.4m)
Net capital expenditure (including sale & leasebacks)	(£211.3m)	(£214.5m)
Net proceeds from acquisition and disposal of subsidiary undertakings	(£35.9m)	£18.5m
Purchase of listed investments, net of disposal proceeds	(£249.3m)	(£70.9m)
Proceeds in relation to equity derivatives	£58.0m	£66.2m
Decrease in deposits relating to equity derivatives	£51.1m	£53.8m
Investment income	£2.3m	£3.0m
Exchange movement on cash balances	(£3.1m)	£3.6m
Purchase of own shares	(£126.4m)	(£155.3m)
Dividends paid to non-controlling interests	-	(£0.7m)
Movement in net debt	(£30.8m)	£74.3m

1)   Restated to reflect the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

 

 

SUMMARY OF CONSOLIDATED BALANCE SHEET

	28 April 2024	30 April 2023 (1)
Property, plant & equipment	£962.6m	£1,132.0m
Investment properties	£350.5m	£160.0m
Long-term financial assets	£495.4m	£289.6m
Intangible assets	£42.2m	£24.1m
Inventories	£1,355.3m	£1,464.9m
Trade & other receivables	£674.9m	£720.1m
Trade & other payables	(£683.9m)	(£711.9m)
Provisions	(£259.0m)	(£306.5m)
Net debt (excluding securitisation borrowings)	(£320.8m)	(£255.2m)
Securitisation borrowings	(£126.8m)	(£161.6m)
Lease liabilities	(£646.3m)	(£679.9m)
Other	£28.9m	(£7.4m)
Net assets	£1,873.0m	£1,668.2m

1)   Restated to reflect the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

 

The decrease within property, plant and equipment from 30 April 2023 is largely due to net additions offset by depreciation and the transfer of three properties with a net book value of approximately £79.4m to investment property following a change of use in the period. The increase in investment property reflects this transfer, acquisitions in the year (including the Junction 32 retail park in Castleford, Yorkshire) and fair value gains of £11.5m.

The year-on-year increase within intangible assets primarily reflects the purchase of the Matches intellectual property and brand names for £20m offset by the amortisation of brands allocated to the Everlast cash generating unit ("CGU").

Long-term financial assets have increased since 30 April 2023 due to the business making significant strategic investments including in AO World plc, ASOS plc and Boohoo plc during the period.

Gross inventory has reduced by £138.2m (8.2%) year-on-year. This reflects the increased the efficiency of our warehouse and inventory handling processes following the virtual completion of the automation project, as well as the rationalisation of inventory from the businesses acquired from JD sports fashion plc in the second half of FY23.

Trade and other receivables include £139.0m relating to deposits in respect of derivative financial instruments (30 April 2023: £190.1m) and the Frasers Group Financial Services consumer credit receivables portfolio with a carrying value of £206.2m (30 April 2023: £225.9m).

Trade and other payables have reduced by £28.0m from £711.9m to £683.9m reflecting the timing of supplier payments around the prior year end due to the 53^rd week.

Provisions have reduced by £47.5m from £306.5m to £259.0m reflecting the utilisation and partial release of property related provisions due to the Group's strong trading performance, combined with the rationalisation of loss-making stores and future forecasts outweighing our downside assumptions.

Included within other, the closing corporation tax creditor at 28 April 2024 is approximately £94.4m (FY23: £102.6m) and net deferred tax assets of £82.1m (FY23: £66.4m) have been recognised.

 

Chris Wootton

Chief Financial Officer

17 July 2024

 

KEY PERFORMANCE INDICATORS

The Board manages the Group's performance by reviewing a number of key performance indicators (KPIs). The table below summarises the Group's KPIs.

 

	52 weeks ended 28 April 2024	53 weeks ended 30 April 2023 (1)
Group revenue	£5,537.7m	£5,586.0m
Reported PBT	£507.0m	£638.0m
Adjusted PBT (2)	£544.8m	£481.8m
Cash inflow from operating activities before working capital	£834.6m	£875.6m
Net assets	£1,873.0m	£1,668.2m
NON-FINANCIAL KPIs
Number of retail stores	1,551	1,630
Workforce turnover	31.0%	32%*
Electricity consumption on like for like stores improvement vs FY20	24.8%	15.9%

 

(1)  Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the financial information for details.

(2)  This is an Alternative Performance Measure. APBT is reconciled to the equivalent GAAP measure in note 3 to the financial information. Adjusted EPS is discussed in note 10 to the financial information.

 

The Directors have adopted Alternative Performance Measures (APM's). APMs should be considered in addition to UK-Adopted International Accounting Standards ("UK IAS") measures. The Directors believe that Adjusted profit before tax ("APBT") provides further useful information for shareholders on the underlying performance of the Group in addition to the reported numbers, and is consistent with how business performance is measured internally. They are not recognised profit measures under UK IAS and may not be directly comparable with 'adjusted' or 'alternative' profit measures used by other companies.

Adjusted PBT is profit before tax excluding the effects of exceptional items, realised foreign exchange, fair value adjustments to derivative financial instruments included within finance income/costs, fair value gains/losses and profit on disposal of equity derivatives, and share schemes. This measure has been reviewed by the Audit Committee which has appropriately challenged management on the presentation and the adjusting items included in this APM.

Group Revenue

The Board considers that this measurement is a key indicator of the Group's growth.

Reported Profit Before Tax

Reported PBT shows both the Group's trading and operational efficiency, as well as the effects on the Group of external factors as shown in the fair value movements in Strategic investments and FX.

Adjusted Profit Before Tax

Adjusted PBT shows how well the Group is managing its ongoing trading performance and controllable costs and therefore the overall performance of the Group.

Cash Inflow from Operating Activities Before Working Capital

Cash inflow from operating activities before working capital is considered an important indicator for the Group of the cash generated and available for investment in the Elevation strategy.

Net Assets

The Board considers that this measurement is a key indicator of the Group's financial position and health.

Number of Retail Stores

The Board considers that this measure is an indicator of the Group's growth. The Group's Elevation strategy is replacing older stores and often this can result in the closure of two or three stores, to be replaced by one larger new generation store.

Workforce Turnover

The Board considers that this measure is a key indicator of the contentment of our people We have adjusted the measure this year to report only non-redundancy related staff turnover in order to drive a focus on the parts of our business that have a higher attrition. \* The prior period figure has been restated on an equivalent basis (FY23: reported figure 44.5%).

Like for Like electricity consumption

This measure links to our targets in the TCFD report around the installation of LED lighting, building management services, and voltage optimisation. This measure allows the board to determine the effectiveness of these projects in reducing the Group's energy consumption. Like for like stores includes stores in Great Britain, above a de minimis consumption, and that were open from 2019 onwards.

 

FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

 

For the 52 weeks ended 28 April 2024

		Total	Total
		52 weeks ended 28 April 2024	53 weeks ended 30 April 2023 (restated)1
	Note
		(£'m)	(£'m)
CONTINUING OPERATIONS
Revenue		5,426.7	5,461.0
Credit account interest		111.0	125.0
Total revenue (including credit account interest)	3	5,537.7	5,586.0
Cost of sales		(3,121.9)	(3,175.5)
Impairment losses on credit customer receivables	16	(20.6)	(15.5)
Gross profit	3	2,395.2	2,395.0
Selling, distribution and administrative expenses		(1,886.0)	(1,957.8)
Other operating income		10.9	11.7
Property related impairments	12,13	(14.5)	(99.6)
Exceptional items	4	-	97.1
Profit on sale of properties		3.5	95.4
Fair value adjustment to investment properties	13	11.5	(6.5)
Operating profit	3	520.6	535.3
Gain on sale of subsidiaries	11	25.0	17.6
Investment income	5	78.4	112.6
Investment costs	6	(68.9)	(4.6)
Finance income	7	43.4	46.1
Finance costs	8	(91.5)	(69.0)
Profit before taxation	3	507.0	638.0
Taxation	9	(107.9)	(159.3)
Profit after taxation from continuing operations		399.1	478.7
DISCONTINUED OPERATIONS
Result from discontinued operation, net of tax	11	(12.5)	26.3
Profit for the period		386.6	505.0
ATTRIBUTABLE TO:
Equity holders of the Group		380.8	491.7
Non-controlling interests		5.8	13.3
Profit for the period		386.6	505.0
		Pence per share	Pence per share
Basic earnings per share - Continuing operations	10	89.7	101.2
Basic earnings per share - Discontinued operations	10	(2.9)	5.7
Basic earnings per share - Total	10	86.8	106.9
Diluted earnings per share - Continuing operations	10	89.7	101.2
Diluted earnings per share - Discontinued operations	10	(2.9)	5.7
Diluted earnings per share - Total	10	86.8	106.9

 

(1)     Restated to reflect the change in presentation of discontinued operations into a single line, accounting policy regarding the valuation of investment property and reclassification of rental income. Please refer to note 1 for further details.

 

Discontinued operations relate to MATCHES in the current year and the Group's US retail businesses which were disposed of in the prior year. See note 11.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 52 weeks ended 28 April 2024

 

		52 weeks ended	53 weeks ended
	Note	28 April 2024	30 April 2023 (restated)1
		(£'m)	(£'m)
Profit for the period		386.6	505.0
OTHER COMPREHENSIVE (LOSS)/INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Fair value movement on long-term financial assets		(43.7)	9.9
Remeasurements of defined benefit pension scheme		0.4	(0.5)
Fair value adjustment in respect of properties transferred to investment property		1.2	-
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS
Exchange differences on translation of foreign operations		(21.7)	13.4
Foreign exchange impact of disposal of discontinued operations		-	(1.6)
Fair value movement on hedged contracts - recognised in the period		25.5	6.5
Fair value movement on hedged contracts - recognised time value of options		(0.7)	0.7
Fair value movement on hedged contracts - reclassified and reported in sales		(6.1)	(24.6)
Fair value movement on hedged contracts - reclassified and reported in inventory/cost of sales		(8.1)	(38.5)
Fair value movement on hedged contracts - taxation taken to reserves		(2.9)	14.6
OTHER COMPREHENSIVE LOSS FOR THE PERIOD, NET OF TAX		(56.1)	(20.1)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		330.5	484.9
Continuing operations		343.0	460.2
Discontinued operations		(12.5)	24.7
		330.5	484.9
ATTRIBUTABLE TO:
Equity holders of the Group		324.7	471.6
Non-controlling interest		5.8	13.3
		330.5	484.9

 

(1)     Restated to reflect the change in accounting policy regarding the valuation of investment property and reclassification of rental income. Please refer to note 1 for further details.

 

 

 

CONSOLIDATED BALANCE SHEET                                                                                                                                          Company number: 06035106

As at 28 April 2024

	Note	28 April 2024	30 April 2023 (restated)1	24 April 2022 (restated)1
		(£'m)	(£'m)	(£'m)
ASSETS - NON CURRENT
Property, plant and equipment	12	962.6	1,132.0	1,011.0
Investment properties	13	350.5	160.0	95.5
Intangible assets	14	42.2	24.1	120.6
Long-term financial assets		495.4	289.6	206.6
Investment in associate undertakings		18.0	16.9	-
Retirement benefit surplus		0.6	0.8	2.2
Deferred tax assets		109.6	82.1	100.8
		1,978.9	1,705.5	1,536.7
ASSETS - CURRENT
Inventories		1,355.3	1,464.9	1,277.6
Trade and other receivables	16	674.9	720.1	841.4
Derivative financial assets		87.2	79.3	116.5
Cash and cash equivalents		358.6	332.9	336.8
		2,476.0	2,597.2	2,572.3
Assets in disposal groups classified as held for sale		-	-	40.0
TOTAL ASSETS		4,454.9	4,302.7	4,149.0
LIABILITIES - NON CURRENT
Lease liabilities		(533.8)	(560.3)	(503.6)
Borrowings	17	(806.2)	(749.7)	(827.9)
Retirement benefit obligations		(1.8)	(1.7)	(1.6)
Deferred tax liabilities		(27.5)	(15.7)	(40.4)
Provisions	18	(247.8)	(290.2)	(433.0)
		(1,617.1)	(1,617.6)	(1,806.5)
LIABILITIES - CURRENT
Derivative financial liabilities		(62.8)	(66.5)	(107.2)
Trade and other payables		(683.9)	(711.9)	(729.8)
Lease liabilities		(112.5)	(119.6)	(117.0)
Provisions	18	(11.2)	(16.3)	-
Current tax liabilities		(94.4)	(102.6)	(50.9)
		(964.8)	(1,016.9)	(1,004.9)
Liabilities in disposal groups classified as held for sale		-	-	(22.7)
TOTAL LIABILITIES		(2,581.9)	(2,634.5)	(2,834.1)
NET ASSETS		1,873.0	1,668.2	1,314.9
EQUITY
Share capital		64.1	64.1	64.1
Share premium		874.3	874.3	874.3
Treasury shares reserve		(770.6)	(644.2)	(488.9)
Permanent contribution to capital		0.1	0.1	0.1
Capital redemption reserve		8.0	8.0	8.0
Foreign currency translation reserve		25.7	47.4	35.6
Reverse combination reserve		(987.3)	(987.3)	(987.3)
Own share reserve		(66.8)	(66.8)	(66.8)
Hedging reserve		21.7	14.0	55.3
Share based payment reserve		51.4	33.1	14.1
Revaluation reserve		1.2	-	-
Retained earnings		2,623.0	2,285.5	1,784.4
Issued capital and reserves attributable to owners of the parent		1,844.8	1,628.2	1,292.9
Non-controlling interests		28.2	40.0	22.0
TOTAL EQUITY		1,873.0	1,668.2	1,314.9

1)                   Restated to reflect the change in accounting policy regarding the valuation of investment property and reclassification of rental income. Please refer to note 1 for further details.

The Group's Financial Statements were approved by the Board and authorised for issue on 17 July 2024 and were signed on its behalf by:

Chris Wootton

 

Chief Financial Officer