TIDMBOO
RNS Number : 0568O
boohoo group plc
27 May 2020
For Immediate Release 27 May 2020
boohoo group plc
("boohoo" or "the Group")
Response to share price
boohoo (AIM: BOO), a leading online fashion group, notes the
recent decline in its share price which the Group understands is in
response to a short-selling note issued on 26(th) May that contains
allegations of disclosing information that could be deemed to be
misleading.
The Group strongly refutes the allegations made in the research
note, and would highlight the following to investors:
Definition of Free cash flow
Free cash flow is disclosed within page 9 of the Group's most
recent annual results published on 22 April 2020, and contains
clear definitions, alongside a full reconciliation down to net cash
flow for the financial year, including items such as tax paid and
dividends paid to minority shareholders.
International accounting standards require the Group to fully
consolidate its cash flows, and its treatment of this with respect
to its subsidiary, PrettyLittleThing ("PLT") reflects this
conformance with accounting standards.
PLT profitability
The Group strongly refutes any allegations of understating costs
incurred by PLT, thereby overstating its profitability. All
inter-company transactions are conducted on an arms' length basis.
The Group operates a multi-brand strategy with the profitability of
its more established brands such as boohoo and PLT being
significantly ahead of the Group's adjusted EBITDA margin of 10.2%;
with that higher margin being reinvested into new opportunities and
brands that the Group has started or acquired in recent years such
as boohooMAN, Nasty Gal, MissPap, Karen Millen and Coast.
PLT option
As disclosed at the time of the acquisition of the majority of
PLT, and in the latest annual report and accounts, the Group has
the option to acquire the remaining 34% minority shareholding in
PLT, with the terms of the option coming into being on 28 February
2022. Under the terms of the agreement, it was agreed that an
independent big-four accountancy firm would undertake a valuation
exercise to determine the market value for PLT, after which a
minority discount may be applied of up to 30%.
Treatment of non-controlling interest
In note 1 of the Group's latest Full Year Results Announcement,
"Accounting Policies", the Group highlighted a change in accounting
treatment with regards to the non-controlling interest, following
on from a review of the agreement with its auditors, extract
below:
"Following a review of the accounting treatment of the
non-controlling interest of shareholders in PrettyLittleThing.com
Limited ("PLT"), it has been determined that the restrictions
imposed by the Shareholders' Agreement require the proportion of
the non-controlling interests' share of the profits of PLT to
accrue in accordance with certain terms of the agreement and not as
34% as previously stated. The accumulated profit attributable to
non-controlling interests of GBP8,761,000 as at 28 February 2018
has been adjusted to GBP4,018,000 and the share of profits for the
year to 28 February 2019 from GBP9,687,000 to GBP3,875,000 and the
difference added to retained earnings. The share of profits
recognised by the non-controlling interest increases each year by
20% of 34% of the earnings of PLT from 20% of 34% to 100% of 34%
over the five-year period of the agreement, as does the
non-controlling interests' share of the net assets."
Whilst the Group has recognised the minority interest in this
manner at a statutory level, for adjusted earnings per share, the
Group has deemed it appropriate to recognise the full 100% of the
34% of PLT's adjusted profit after tax to allow its shareholders
and readers of the accounts to fully understand PLT's underlying
profitability. To not do so would risk over-stating the Group's
current adjusted earnings per share, and understate the minority
shareholders' likely future interest in the after-tax profits of
PLT.
Share placing
The Group's recent share placing, raised gross proceeds of
GBP197.7m. As previously stated, the Group intends to use the net
proceeds of the Placing to take advantage of numerous opportunities
that are likely to emerge in the global fashion industry over the
coming months, particularly following the disruption caused by the
onset of COVID-19. The Group continues to review a number of
possible M&A opportunities and will update shareholders as
required.
I Saw It First
I Saw It First is an online fashion business, based in the UK,
set up by Jalal Kamani in 2016, having previously worked at boohoo
group. Jalal Kamani retains a small holding in boohoo group plc
(0.65%). The business is an unrelated entity to boohoo group and is
a smaller competitor in a highly fragmented marketplace.
Notice of trading update
The Group will provide an update for the three month trading
period to May 31st 2020 on June 17(th) 2020.
-ends-
Enquiries
boohoo group plc
Neil Catto, Chief Financial Officer Tel: +44 (0)161 233
2050
Alistair Davies, Investor Relations Tel: +44 (0)161 233
2050
Clara Melia, Investor Relations Tel: +44 (0)20 3289
5520
Zeus Capital - Nominated adviser and joint
broker
Nick Cowles/Andrew Jones (Corporate Finance) Tel: +44 (0)161 831
1512
John Goold/Benjamin Robertson (Corporate Tel: +44 (0)20 3829
Broking) 5000
Jefferies - Joint broker
Philip Noblet/Max Jones Tel: +44 (0)20 7029
8000
Buchanan - Financial PR adviser boohoo@buchanan.uk.com
Richard Oldworth/ Kim Looringh-van Beeck/Toto Tel: +44 (0)20 7466
Berger 5000
About boohoo group plc
"Leading the fashion eCommerce market"
Founded in Manchester in 2006, boohoo is an inclusive and
innovative brand targeting young, value-orientated customers. Since
2006, boohoo has been pushing boundaries to bring its customers
up-to-date and inspirational fashion, 24/7. boohoo has grown
rapidly in the UK and internationally, expanding its offering with
range extensions into menswear, through boohooMAN.
In early 2017 the group extended its customer offering through
the acquisitions of the vibrant fashion brand PrettyLittleThing,
and free-thinking brand Nasty Gal. In March 2019 the group acquired
the MissPap brand and in August 2019, the Karen Millen and Coast
brands, all complementary to the group's scalable multi-brand
platform. United by a shared customer value proposition, our brands
design, source, market and sell great quality clothes, shoes and
accessories at unbeatable prices. These investment propositions
have helped us grow from a single brand, into a major multi-brand
online retailer, leading the fashion eCommerce market for 16 to
40-year-olds around the world. As at 29 February 2020, the boohoo
group had around 14 million active customers across all its brands
around the world.
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END
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