Full Year Results

RNS Number : 9441S

In The Style Group PLC

19 July 2022

In The Style Group plc

("In The Style", the "Company" or the "Group")

Full Year Results for the Year Ended 31 March 2022

In The Style Group plc (AIM:ITS), the disruptive and inclusive digital womenswear fashion brand, announces full year results for the financial year ended 31 March 2022 ("FY22", "2022").

Financial highlights

	Year ended 31 March 2022	Year ended 31 March 2021	Change %
Revenue (£'000)	57,317	44,705	28%
Gross profit⁽¹⁾ (£'000)	25,169	20,589	22%
Gross profit margin⁽²⁾ (%)	43.9%	46.1%	(2.2%pts)
Adjusted EBITDA⁽³⁾ (£'000)	551	3,799	(85%)
Adjusted EBITDA margin⁽⁴⁾ (%)	1.0%	8.5%	(7.5%pts)
(Loss) / profit before tax (£'000)	(1,545)	125	n.m
Net cash as at 31 March (£'000)	5,823	11,939	(51%)

· Group revenue increased by 28% to £57.3m (2021: £44.7m)

o Direct-to-consumer ("DTC") revenue grew by 23% to £44.7m (2021: £36.4m)

o Wholesale revenue grew by 52% to £12.6m (2021: £8.3m)

o Revenue growth was driven by the ongoing expansion and optimisation of the influencer-based business model

· Gross profit⁽¹⁾ grew 22% to £25.2m (2021: £20.6m)

o Gross profit margin⁽²⁾ reduced by 2.2%pts to 43.9% (2021: 46.1%) as the proportion of revenue from our wholesale channel increased

o Product cost increases were well managed through DTC but reduced wholesale gross margin. Cost pressures remain as we move into the current year

· Adjusted EBTIDA⁽³⁾ for the year of £0.6m (2021: £3.8m)

o Adjusted EBTIDA margin⁽⁴⁾ of 1.0% (2021: 8.5%)

· The Group made a loss before tax of £1.5m (2021: profit of £0.1m)

· Cash at 31 March 2022 was £5.8m (March 2021: £11.9m). As was expected, cash levels reduced in the year as the Group invested in its technology platform and had increased working capital requirements due to growth within the wholesale channel. Following the year end, the Group has entered into a new invoice discounting facility to provide liquidity over trade receivables. This replaces the previous facility that was cancelled in December 2021. Cash at 30 June 2022 was £10.5m.

Operational highlights

· We have seen strong progress across all of our operational KPIs:

o Total orders⁽⁵⁾ increased by 13% to 1,523,000 (2021: 1,343,000)

o Cross-platform visits increased by 4% across app and web

o Conversion rate⁽⁶⁾ improved to 3.16% (2021: 2.89%)

o Average order value⁽⁷⁾ increased by 21% to £52.00 (2021: £42.85)

o New customers increased by 391,000 in the year; active customer⁽⁸⁾ base grew by 4% to 677,000 (2021: 653,000)

o Order frequency⁽⁹⁾ increased by 9% to 2.25 times per year (2021: 2.06 time per year)

Strategic highlights

· The Group continued to leverage its highly distinctive social-influencer collaboration model, launching 193 collaboration collections across 27 influencers. This influencer base included both established names such as Jac Jossa and Lorna Luxe as well as a number of new influencers including Perrie Sian, Gemma Atkinson and Stacey Solomon, with whom In The Style launched its first ever sustainable collection.

· Our first collaboration with Stacey Solomon in April 2021 was our largest ever single launch night. At its peak, we processed 500 orders per second and took over £1 million gross order value in the first hour after launch.

· Consumer engagement with the In The Style proprietary app continues to be strong, with over 850,000 downloads in the year. We made good strides in the app customer journey including the addition of 'selling fast' flags and the ability for customers to save card details to make the checkout process easier.

· We reached an agreement to collaborate with Dame Deborah James in early 2022 which was well aligned to our purpose of inspiring confidence. As we grew to know Deborah, we ourselves were inspired by her desire to make a difference. Following the year end, we have helped raise over £1.25m for the Bowelbabe fund for Cancer Research UK by donating all profits from both the original collection and a range of Rebellious Hope T-shirts which Deborah designed. We are saddened by Deborah's passing and hope In The Style's contribution will play some small part in the fight against cancer.

· Sam Perkins joined the Company as Chief Executive Officer in January 2022 allowing Adam Frisby to focus on leading the Group's creative direction in a new role as Chief Brand Officer. Richard Monaghan joined the Company in March 2022 as Chief Financial Officer following Paul Masters decision to retire.

Q1 2023 trading

• Trading through Q1 2023 has been robust in a challenging trading environment. Through the first quarter of the financial year we have launched 44 ranges in collaboration with 18 influencers.

• Our customer KPIs have continued to improve and return rates have been in line with management expectations.

• Through Q1, we have seen year-on-year revenue growth in our DTC channel of +12%. This includes revenue generated from the collaborations with Dame Deborah James, the profits of which will go to the Bowelbabe fund for Cancer Research UK. We have raised >£1.25 million for the charity so far.

• Total revenue was broadly flat year-on-year in the quarter. Wholesale revenue decreased year-on-year as we reviewed how our launch model works in physical retail.

• Overall gross profit margin was in line with Q1 FY22.

• As at 30 June 2022, the Group had cash of £10.5m.

FY23 Outlook

· As we consider the outlook for FY23 as a whole, we have to balance our confidence in the underlying business model and the opportunity to implement our growth strategy. The combination of our authentic inclusive brand, our differentiated influencer collaboration model, our agile supply chain and our well invested technology platform provides us with a competitive edge that can be further leveraged.

· We are planning for Group revenue to be broadly flat, with DTC revenue growing at mid-single digit rates. Revenue from our wholesale channel is expected to decline at a double-digit rate as we focus on our digital partners.

· We expect DTC gross margin to reduce but wholesale gross margin to return to FY21 levels.

· We anticipate that by the end of September 2022 we will have moved to a new warehouse and we will improve our fulfilment efficiency as a result. We anticipate exceptional costs of c£0.5m in relation to the move.

· Taking into account all of the above, together with the very uncertain market conditions, we are forecasting an adjusted EBITDA loss for the year of £2.0 million.

· The Group manages cash carefully and we are well capitalised to navigate through this difficult period.

· The Board is excited by the future growth strategy set out and is confident of the medium- and long-term growth prospects.

Sam Perkins, Chief Executive Officer of In The Style Group plc said:

"I am pleased to report that in our first full year as a public company In The Style has delivered further strong revenue growth, representing almost +200% on a two-year basis. This has been supported by encouraging improvements across all our key customer and brand metrics.

"Our purpose is to inspire confidence, and this drives us to create unique products that help our customers to feel great about themselves. We have a strong, inclusive brand and differentiated influencer collaboration model which gives us fantastic reach, highly effective marketing, and broad customer appeal. This underpins our long-term confidence to create one of the UK's most exciting fashion brands.

"This year is expected to be a challenging one for consumers and retailers. We are taking actions to respond including prudent cost control, cash management and executing against our refined growth strategy."

Analyst presentation

A presentation for analysts will be held at the offices of Hudson Sandler at 9.30am, Tuesday 19 July 2022. If you wish to attend, please contact Hudson Sandler on the details below.

A live presentation relating to the Group's Preliminary Results for the year ended 31 March 2022 will be conducted via the Investor Meet Company platform on Wednesday 20th July 2022 at 3:00pm BST. The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet In The Style via:

https://www.investormeetcompany.com/in-the-style-group-plc/register-investor

For media enquiries:

Please contact the team at Hudson Sandler on +44 (0)20 7796 4133 or email inthestyle@hudsonsandler.com .

In The Style Group plc Via Hudson Sandler

Sam Perkins, CEO

Rich Monaghan, CFO

Liberum Capital Limited (Nomad and Broker) +44 (0)20 3100 2000

Clayton Bush

Scott Mathieson

Ed Thomas

Miquela Bezuidenhoudt

Hudson Sandler +44 (0)20 7796 4133

Alex Brennan inthestyle@hudsonsandler.com

Lucy Wollam

Ben Wilson

About In The Style

In The Style is a fast-growing digital womenswear fashion brand with an innovative social media influencer collaboration model. Founded in 2013 by entrepreneur Adam Frisby, the brand champions inclusivity, body positivity and real beauty.

The brand's innovative and highly adaptable influencer collaboration model, which sees it work with influencers on a long-term basis to collaboratively design, develop and promote branded collections, differentiates it from competitors. In The Style currently partners with a stable of 25+ influencers, including Jac Jossa, Stacey Solomon and Perrie Sian. Together they enjoy a combined global social media reach of over 30m followers.

For more information, please visit https://corporate.inthestyle.com/about/

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

Cautionary statement

This announcement of annual results does not constitute or form part of and should not be construed as an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any In The Style Group plc (the "Company") shares or other securities in any jurisdiction nor is it an inducement to enter into investment activity nor should it form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. It does not constitute a recommendation regarding any securities. Past performance, including the price at which the Company's securities have been bought or sold in the past, is no guide to future performance and persons needing advice should consult an independent financial advisor. Certain statements in this announcement constitute forward looking statements (including beliefs or opinions). Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward looking statements are subject to risks and uncertainties because they relate to events that may or may not occur in the future, that may cause actual results to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this results announcement. As a result, you are cautioned not to place reliance on such forward-looking statements, which are not guarantees of future performance. Except as is required by applicable laws and regulatory obligations, no undertaking is given to update the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast. This announcement has been prepared for the Company's group as a whole and, therefore, gives greater emphasis to those matters which are significant to the Company and its subsidiary undertakings when viewed as a whole.

Summary financial performance

	Units	Year ended 31 March 2022	Year ended 31 March 2021	Year-on-year change %
Income statement
Direct-to-consumer revenue	£'000	44,683	36,374	23%
Wholesale revenue	£'000	12,634	8,331	52%
Revenue	£'000	57,317	44,705	28%
Gross profit⁽¹⁾	£'000	25,169	20,589	22%
Gross profit margin⁽²⁾	%	43.9%	46.1%	(2.2%pts)
Adjusted EBITDA⁽³⁾	£'000	551	3,799	(86%)
Adjusted EBITDA margin⁽⁴⁾	%	1.0%	8.5%	(7.5%pts)
(Loss) / profit before tax	£'000	(1,545)	125	n.m
Basic (loss) / earnings per share⁽¹⁰⁾	pence	(2.53)	1.19	(313%)

Cash flow
Net cash as at 31 March	£'000	5,823	11,939	(51%)
Cash (used in) / generated from operations	£'000	(3,771)	1,129	n.m
Capital expenditure including intangible assets	£'000	(2,121)	(414)	n.m

Key performance indicators
Total orders⁽⁵⁾	'000	1,523	1,343	13%
Conversion rate⁽⁶⁾	%	3.16%	2.89%	27bps
Average order value⁽⁷⁾	£	52.00	42.85	21%
Active customers⁽⁸⁾	'000	677	653	4%
Order frequency⁽⁹⁾	Times per year	2.25	2.06	9%

(1) Gross profit is defined as revenue less all direct costs incurred in purchasing products for resale.

(2) Gross profit margin is gross profit as a percentage of retail.

(3) Adjusted EBITDA is defined as profit before net finance costs, tax, depreciation, amortisation, share-based payments and exceptional items (which are material and non-recurring in nature).

(4) Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue.

(5) Total orders is defined as the total number of orders placed through our direct-to-consumer channel in the year.

(6) Conversion rate is defined as total orders divided by visits to the Group's platform.

(7) Average order value is defined as gross sales (including sales tax) divided by total orders.

(8) Active customers is defined as the number of consumers who have made at least one purchase in the last twelve months through either the In The Style website or the In The Style app.

(9) Order frequency has been defined as the total number of orders placed by consumers divided by the number of active customers.

(10) Basic EPS has been calculated for the comparative periods using the weighted average number of shares in issue immediately prior to the IPO in March 2021.

FY22 performance overview

This has been a truly landmark year for In The Style. In our first year as a listed company, and against a challenging market backdrop, we improved all of our key customer metrics including visits, conversion, order frequency and average order value. Revenue of £57.3m (2021: £44.7m) represented a strong year-on-year increase of 28% and transformational growth of 197% on a two-year basis. Adjusted EBITDA for the year was £0.6m (2021: £3.8m) which resulted in an adjusted EBITDA margin of 1% (2021: 8.5%).

Continued revenue growth and strategic progress

The continued momentum in revenue growth was driven by the ongoing expansion and optimisation of our influencer-based business model, through which we launched 193 collaborations across 27 influencers, creating over 7,500 new products. Our collaborations over the past year included established partners such as Jac Jossa and Lorna Luxe, along with a number of new partnerships with Perrie Sian, Gemma Atkinson and Stacey Solomon, with whom In The Style launched its first ever sustainable collection.

In The Style's platforms attracted 48.2 million visits from consumers in 2022 (2021: 46.5 million), an increase of 4% on the prior year. Consumer engagement with the In The Style proprietary app continued to be particularly strong, with over 850,000 downloads during the year. Conversion from visit to order increased to 3.16% (2021: 2.89%) as our inspirational product designs and increased social reach were backed up by improvements in the customer journey. During the year we added features such as 'fast selling' flags to products, quick purchase, and the ability to save card details to allow a smooth checkout journey.

Total orders increased by 13% to 1,523,000 (2021: 1,343,000). On average, we attracted an average of 33,000 new customers a month through 2022 to grow our active customer base by 4% to 677,000 (2021: 653,000). Order frequency increased by 9% to 2.25x per year (2021: 2.06x) as we leveraged the use of our proprietary app, along with an increase in launch frequency, to increase the propensity to purchase. Although we are pleased that both of these core metrics improved in the year, we believe that there is a great opportunity to reactivate customers to grow our active customer base.

Our collaboration model allows us to design products which resonate with consumers and promote high levels of body confidence. By taking this approach we have been able to increase the value we provide to our customers. Average order value increased by 21% to £52.00 (2021: £42.85) through both retail price inflation and as the sales mix shifted to higher value product categories, such as occasion wear, following the end of lockdown restrictions in May 2021.

The Group's wholesale channel continued to grow, increasing by 52% to £12.6m (2021: £8.3m) to represent 22% of total revenue (2021: 19%). Retail partnerships provide the Group with additional consumer reach which support increased levels of brand awareness. In the year, the Group started to retail product to key European markets through Zalando and About You. Although sales to international markets remained small in 2022, this remains an important growth opportunity for the Group in the coming years.

Managing costs through a challenging period

Adjusted EBITDA margin reduced to 1.0% in 2022 (2021: 8.5%) which equated to adjusted EBITDA of £0.6m (2021: £3.8m).

Disruption to worldwide supply chains and inflationary pressures as a result of Covid-19 and the Russia-Ukraine conflict have been well documented, and we were not immune to these. Increases to product costs and the cost of freight put pressure on our gross margin whilst delivery timelines became less predictable which had an impact on our launch schedule. Our teams were able to react quickly to any disruption in our supply chain and flex our sourcing channels. That led to some substantial changes in our supplier base in the year, away from China and into new territories such as Morocco and India.

As a result of this cost management and increasing retail prices on our platform, inflation was well managed through our direct-to-consumer segment, but it did impact our growing wholesale channel where retail prices are set in advance. Overall gross margin therefore decreased by 220bps to 43.9% (2021: 46.1%).

Adjusted EBITDA margin was also impacted from rising distribution costs, an increase in return rates following a year of lockdown restrictions, and an increase in salaries and overheads as we invested for future growth.

Investment for sustained growth

During the year we made several key investments in our team and infrastructure to strengthen our business for long-term, sustainable growth.

We strengthened our senior team with appointments across product, people and finance. In addition, we made several hires in our technology team under the leadership of John Allen, our Chief Technology Officer. As well as the customer journey improvements mentioned previously, we added features such as a chatbot to gain efficiencies in customer services and we have substantially replatformed our site. The team are now working to a detailed roadmap of further app and website improvements that put the customer journey at its centre.

We know that the environment in which our people work is important to them, and we want to provide a space which gives our creative talent the best chance to flourish. In October 2021 we moved our head office to a new, larger premises close to our previous headquarters in Salford. Our new site offers space for, amongst other things, an on-site photography studio, as well as a better collaborative environment for our teams.

Operating responsibly

We are committed to operating responsibly and we are mindful of the communities we impact, our customers, our suppliers and the environment. During the year we made further progress against the actions resulting from a supply chain review undertaken by Anthesis ahead of the Group's IPO in March 2021. This included mapping our supply chain for visibility, strengthening our due diligence processes as we onboard suppliers and throughout our supplier relationships, and updating our CSR policies. 70% of all short- and medium-term recommendations from this review are now complete, with plans in place to deliver against the remaining recommendations.

Furthermore, led by the Group's CSR Committee, we have sought to reduce our impact on the environment and improve the lives of people in our supply chain. We have delivered our first full collection featuring more sustainable fabrics, strengthened our commitment to only work with suppliers committed to meeting our ethical standards, and reviewed our own purchasing practices and the impact these have on our supply chain.

In January 2022, we launched the first In The Style collection made from sustainable and recycled materials. The collection, created in partnership with ITS influencer Stacey Solomon, was received well by customers and has presented a number of useful insights for future collections of this kind.

An evolution of our strategy

The Group is well positioned and has three competitive advantages which we can build on in the coming years:

· Our authentic brand purpose-built around inclusivity

As a brand, In The Style was born out of a desire to inspire all women to love who they are by giving them the best inclusive fashion and unique influencer collaborations. This brand purpose is authentic, runs through the very lifeblood of the Group, and is not easy for others to replicate.

· Our differentiated, influencer-led business model

ITS operates a differentiated social influencer-led business model, which sees us work collaboratively with social influencers to develop and launch its eponymous design-led collections. This model creates real engagement with consumers, an ability to respond rapidly to changing consumer trends, and drives the Group's robust economic model.

· Our well-invested technology platform

Comprising the In The Style e-commerce site and proprietary app, the Group's scalable technology platform has been developed to deliver a seamless customer experience, particularly during periods of very high browsing and transaction volumes and frequencies. The In The Style app, which is created by our in-house tech team and is bespoke to the Group, successfully drives engagement and conversion.

As we look ahead to the Company's next phase of growth, we have taken the opportunity to evolve and refine our growth strategy to maximise value for all stakeholders, built around the following pillars:

1. A retail experience equal to the brand

The Group's model of collaborating with influencers to launch small but regular ranges that are size inclusive has been well received. Our collaborative launch model will always be at the heart of the brand. The model is an unrivalled source of new customers and gives us great reach in a cost-effective way. As we move forward, we will look to adapt this to become the 'best of launch and browse'. To do that we will relentlessly focus on product quality and fit, increasing our assortment and improve our customer experience by honing our app and our website.

2. Reach through partnerships

Our brand is attractive to established retailers and marketplaces, and we have grown wholesale revenue as a result. We have an opportunity to use our partners to increase our consumer reach both in the UK and internationally. We aim to develop technology that allows us to partner at scale and speed with efficiencies for all.

3. New influencer-based business models

Engaging consumers through social has been key to In The Style's success. In 2022 we collaborated with 27 influencers and launched 193 collections. As this approach evolves, over the long-term we will look to new business models that could be incremental to our success and the potential of new brands to expand our consumer reach. This could mean retailing to different customer types, helping influencers to launch their own brands, or helping others adopt a similar launch model. This could be accelerated through the right acquisitions.

The Board

During the year we announced two important changes to our leadership team. Firstly, having founded In The Style and led the Company for the last eight years, Adam Frisby took the decision to become Chief Brand Officer, a newly created Board-level Executive Director role with responsibility for developing the Group's influencer partnerships and the brand's creative direction. At the same time, we were delighted to announce the appointment of Sam Perkins as the Group's new CEO.

Sam has a proven track record of delivering strategic and commercial success across multichannel and pureplay retailers.

He joined In The Style from The Very Group, where he held the role of Managing Director of the Group's retail division since 2018 and helped to drive the company's transformation from a multi-brand catalogue business to a fast-paced pure-play retailer.

In March 2022, Paul Masters, the Group's CFO & COO, stepped down from his role to focus on his health. Paul joined In The Style in 2017 and during his tenure played a critical role in driving the Company's growth, including through its IPO in March 2021. I would like to again take this opportunity to thank Paul on behalf of everyone at In The Style for his outstanding commitment and significant contributions during his time with the Group.

In Richard Monaghan the Group identified a high calibre successor. Richard is an ICAEW qualified Chartered Accountant with significant experience at consumer-facing businesses, having previously held the roles of Director of Finance at Victorian Plumbing Group plc, and Deputy CFO and Group Financial Controller at Auto Trader Group plc.

The Board has been delighted with both Sam and Richard's contributions since joining the business and we believe that along with Adam, we have a formidable and ambitious executive leadership team to help drive the business through the next chapters of its growth.

Financial review

In our first full year as a public company, we achieved another strong year of revenue growth.

	2022 £'000	2021 £'000	Change %
Direct-to-consumer ('DTC')	44,683	36,374	23%
Wholesale	12,634	8,331	52%
Revenue	57,317	44,705	28%
Cost of sales	(32,148)	(24,116)	(33%)
Gross profit	25,169	20,589	22%
Distribution costs	(10,036)	(7,402)	(36%)
Underlying administrative expenses	(14,582)	(9,665)	(51%)
Other operating income	-	277	(100%)
Adjusted EBITDA	551	3,799	(85%)
Depreciation and amortisation	(980)	(934)	(5%)
Share-based payments	(861)	-	n.m.
Exceptional items	(216)	(2,346)	91%
Operating (loss)/ profit	(1,506)	519	(390%)

Revenue

The past financial year saw another strong year of revenue growth. Revenue increased by 28% to £57.3m (2021: £44.7m). Growth came through both our Direct-to-consumer ('DTC') and Wholesale channels.

DTC revenue, which is generated through the sale of apparel on the Group's platforms, increased by 23% to £44.7m (2021: £36.4m). This was achieved through increases in total order volumes and the average revenue per order.

The Group leverages its distinctive collaboration launch model with influencers to drive engagement with consumers. An increase in visits to our platform was amplified by an increase in conversion and resulted in a 13% increase in the total number of orders served by the Group to over 1,523,000 (2021: 1,343,000).

These orders were generated from 677,000 active customers, an increase of 4% on the prior year (2021: 653,000). Order frequency, defined as total orders divided by active customers, increased by 9% to 2.25 times per year (2021: 2.06 times per year).

Average revenue per order increased by 8% to £29.34 (2021: £27.08) with an increase in average order value being offset somewhat by an increase in return rates.

Average order value, which we define as gross sales including sales tax divided by the number of orders, increased by 21% to £52.00 (2021: £42.85). This increase in average order value resulted from a combination of a change in sales mix between both influencers and product categories, and an increase in average recommended retail prices. The number of items per order remained flat at 2.4 (2021: 2.4).

Return rates increased by 900bps to 34.3% (2021: 25.3%), partly due to the forementioned change in sales mix between product categories. In addition, the Group temporarily experienced particularly high levels of returns in the first half of 2022 as improvised changes in the supplier base made to mitigate disruption caused by Covid-19, resulted in challenges in product fit. This normalised through the second half of the year.

Wholesale revenue, which is generated through sales to third-party retail partners, increased by 52% to £12.6m (2021: £8.3m). The brand's association with high profile retail partners such as ASOS and The Very Group provide a profitable revenue stream and access to a broader consumer base which increases brand awareness.

Gross profit

Gross profit increased by 22% to £25.2m (2021: £20.6m) although gross profit margin reduced by 220bps to 43.9% (2021: 46.1%).

Direct-to-consumer gross profit margin remained flat at 52% (2021: 52%). The Group incurred cost inflation due to supply chain disruption caused by Covid-19 and the Russia-Ukraine conflict. Increases in average revenue per order were therefore largely offset by increases in raw material costs and increased rates for both air and sea freight.

These cost pressures were more challenging to mitigate as effectively through our wholesale channel. Wholesale gross margin reduced as a result to 15% (2021: 19%).

Distribution costs

Distribution costs, which includes postage, direct warehouse costs and transaction fees, increased by 36% to £10.0m (2021: £7.4m) which was equivalent to 17.5% of revenue (2021: 16.6%). The Group incurred increases in direct warehouse costs due to staff labour inflation, an increased out-of-hours operation to keep up with rapid growth, and the outsourcing of returns on a short-term basis to conserve warehouse space. It is expected that by moving to a larger warehouse space in the coming year we will be able to gain efficiencies on a cost per unit basis.

Underlying administrative expenses

Underlying administrative expenses increased by 51% to £14.6m (2021: £9.6m).

	2022 £'000	2021 £'000	Change %
Marketing	7,076	4,995	42%
People costs (exc direct warehouse)	4,311	2,843	52%
Overheads	3,195	1,801	77%
Underlying administrative expenses	14,582	9,639	51%

Marketing costs increased by 42% to £7.1m (2021: £5.0m), equating to 12% of revenue (2021: 11%). The majority of marketing costs relate to influencer commissions on collaborations. The Group also increased the amount invested in performance marketing through the first half of 2022 to amplify consumer traffic to our platforms.

People costs, excluding direct warehouse costs and share-based payments, increased by 52% year-on-year to £4.3m (2021: £2.8m). The number of full-time equivalent employees, excluding warehouse colleagues, increased by 42% to 122 (2021: 86). Cost per FTE increased by 10%, primarily as a result of changes in staff mix as we invested in the middle and senior management level of the team to give us the best possible chance of achieving future sustainable growth.

Overheads increased by 75% to £3.2m (2021: £1.8m). Of the £1.4m increase in overheads year-on-year, £0.3m were costs incurred in relation to being a listed business. Other increases related to supply chain governance, tech infrastructure and services to improve our platform, and an increase in travel following the easing of lockdown restrictions.

Adjusted EBITDA

Significant items of income and expense that do not relate to the trading of the Group are disclosed separately. Examples of such items are exceptional items and share-based payment charges relating to one-off awards.

The table below provides a reconciliation from operating profit to adjusted EBITDA, which is a non-GAAP metric used by the Group to assess the operating performance.

	2022 £'000	2021 £'000	Change %
Operating (loss)/ profit	(1,506)	519	(390%)
Share-based payments	861	-	n.m.
Exceptional items	216	2,346	91%
Adjusted operating (loss)/ profit	(429)	2,865	(115%)
Depreciation and amortisation	980	934	(5%)
Adjusted EBITDA	551	3,799	(85%)

Adjusted EBTIDA for the year was £0.6m (2021: £3.8m) which resulted in an adjusted EBITDA margin of 1.0% (2021: 8.5%).

Operating loss/(profit)

The Group made an operating loss for the year of £1.5m (2021: £0.5m operating profit).

Depreciation and amortisation for the year amounted to £1.0m (2021: £0.9m) and primarily related to capitalised development of the Group's web and app platforms.

The Group incurred share-based payment charges (including associated NI) of £0.9m (2021: £nil). The majority of the charge recognised relates to shares awarded to management at IPO. The award made vests over three years.

Costs associated with the Board reorganisation and the appointment of Sam Perkins (CEO) and Richard Monaghan (CFO) amounted to £0.2m (2021: £nil) and have been recognised as exceptional. Exceptional items in 2021 related to IPO expenses.

Loss/(profit) before tax

The Group made a loss before tax of £1.5m in the year (2021: £0.1m profit).

Taxation

The Group recognised a deferred tax credit of £0.2m in the year in respect of losses carried forward.

Earnings per share

Basic earnings per share ('EPS') from continuing operations, which is calculated for both the current and comparative year based upon the weighted average number of shares in issue immediately prior to the IPO, was a 2.53 pence loss per share (2021: 1.19 pence profit per share).

The adjusted basic earnings per share from continuing operations decreased to a 0.56 pence loss per share (2021: 5.66 pence profit per share). The table shows the effect on the Group's basic earnings per share of the exceptional items and share-based payments.

	2022 £'000	2021 £'000	Change %
(Loss)/profit for EPS	(1,329)	519	(356%)
Share-based payments	861	-	n.m.
Exceptional items	216	2,346	(91%)
Tax effect	(41)	-	n.m.
Adjusted (loss)/profit for EPS	(293)	2,865	(110%)
Weighted average number of ordinary shares for basic EPS (thousands)	52,450	52,450	-
Adjusted EPS	(0.56)	5.66	(110%)

Cash flow and net cash

Net cash at the year end was £5.8m (2021: £11.9m). Net cash outflows from operating activities totalled £3.8m (2021: £1.1m inflow). Changes in working capital resulted in a cash outflow of £4.1m. An increase in trade receivables relating to the growing wholesale business was the primary reason for that movement. In total, movements in trade and other receivables resulted in a £3.5m cash outflow. Following the period end, the Group has signed into a new invoice discounting arrangement which allows the Group prepayment of up to 85% of the trade receivables balance. This replaces the previous facility which was cancelled during the past year.

Stock increased by £1.2m causing an additional working capital cash outflow. Increased stock levels are a result of an increase in purchase price, additional volume held as the business stocks up to fuel growth, and increased levels of stock in transit as we look to gain efficiencies by moving to a 'Free-on-Board' model. Payables increased by £0.6m resulting in an offsetting cash inflow.

Cash flows used in investing activities, and specifically capital expenditure, amounted to £2.1m (2021: £0.4m). The majority of capital expenditure relates to the development of the Group's web and app platforms. Costs related to the fit out of the Group's new head office were included within the £0.7m investment in property, plant and equipment.

Cash flows used in financing activities totalled £0.2m (2021: £9.2m inflow) and primarily related to lease payments. Cash inflows in the prior year were in relation to the IPO that took place in March 2021.

Events after the reporting period

On 16 June 2022 the Group entered into an agreement to lease for a circa 84,000 sqft warehouse in Heywood, Lancashire. It is expected that the warehouse will be available for occupation at the end of July and the Group expects this facility to be the main fulfilment centre from September 2022. The lease term is 10 years with a rental cost of £5.06 per square foot for the first three years of the term and £6.50 thereafter. As part of the terms of the agreement, £0.4m will be paid to the landlord to be held on deposit until the end of the lease term.

On 24 June 2022 the Group signed into an invoicing discounting facility. The facility allows prepayment of up to 85% of the Group's trade receivables up to a limit of £4.0m. Interest is charged on pre-paid amounts at a rate of 2.0% per annum.

Dividend

No final dividend for the year ended 31 March 2022 has been declared.

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

For the year ended 31 March 2022

	Note	2022 £'000	2021 £'000

Revenue	3	57,317	44,705
Cost of sales	4	(32,148)	(24,116)
Gross profit		25,169	20,589

Distribution costs	4	(10,036)	(7,428)
Administrative expenses	4	(16,639)	(12,919)
Other operating income	4	-	277
Operating profit/(loss)		(1,506)	519

Adjusted EBITDA¹	3	551	3,799
Depreciation	11, 16	(585)	(360)
Amortisation	10	(395)	(574)
Share-based payments charge	18	(861)
Exceptional items	5	(216)	(2,346)

Operating (loss)/profit		(1,506)	519

Finance income	6	1	1
Finance costs	7	(40)	(395)
(Loss)/profit before taxation		(1,545)	125

Income tax	8	216	500
(Loss)/profit and total comprehensive (loss)/income for the year		(1,329)	625


Earnings per share (pence)
(Loss)/profit per share - basic and diluted	9	(2.53)	1.19

Note 1: Adjusted EBITDA is defined as EBITDA (earnings before interest, tax, depreciation and amortisation) less exceptional items and IFRS 2 charges in respect of share-based payments along with associated national insurance. Adjusted EBITDA is a non-GAAP metric used by management and the Board to assist in providing analysis of trading results and is not an IFRS disclosure. Exceptional items are items which are material and non-recurring in nature as disclosed in note 5.

All results derive from continuing operations.

Profit/(loss) and total comprehensive profit/(loss) is attributable to equity holders of the Company.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March

		2022	2021
	Note	£'000	£'000
Assets
Non-current assets
Intangible assets	10	2,154	1,125
Property, plant and equipment	11	773	272
Right-of-use assets	16	972	292
Deferred tax asset	8	716	500
Total non-current assets		4,615	2,189

Current assets
Inventories	12	3,142	1,955
Trade and other receivables	13	5,191	1,746
Cash and cash equivalents		5,823	11,939
Total current assets		14,156	15,640

Total assets		18,771	17,829

Equity
Share capital	17	131	131
Share premium		10,942	10,942
Merger reserve		(58)	(58)
Share-based payments reserve		861	-
Accumulated losses/(retained earnings)		(1,161)	168
Total equity		10,715	11,183

Liabilities
Non-current liabilities
Provisions		127	-
Lease liability	16	686	281
Total non-current liabilities		813	281

Current liabilities
Trade and other payables	14	5,908	5,088
Contract liabilities	15	871	1,113
Provisions		179	-
Lease liability	16	285	164
Total current liabilities		7,243	6,365

Total liabilities		8,056	6,646

Total equity and liabilities		18,771	17,829

These financial statements were approved by the Board of Directors on 19 July 2022 and authorised for issue.

Richard Monaghan

Chief Financial Officer

In The Style Group plc

Registered number: 13245400

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2022

	Share Capital	Share Premium	Merger reserve	Share based payments reserve	Retained earnings / (accumulated losses)	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
As at 31 March 2020	15	4,914	-	-	(7,606)	(2,677)

Profit for the year	-	-	-	-	625	625
Total comprehensive income for the year	-	-	-	-	625	625

Transactions with shareholders:
Dividend	-	-	-	-	(1,250)	(1,250)
Share reorganisation - preference share redesignation as equity and cancellation of share premium (note 17)	-	-	-	-	3,470	3,470
Share capital reduction (note 17)	(15)	(4,914)	-	-	4,929	-
Issued on incorporation (note 17)	59	-	-	-	-	59
Group reorganisation (note 17)	58	-	(58)	-	-	-
Share issue on IPO (note 17)	14	10,986	-	-	-	11,000
IPO costs (note 17)	-	(44)	-	-	-	(44)
Total transactions with shareholders	116	6,028	(58)	-	7,149	13,235

As at 31 March 2021	131	10,942	(58)	-	168	11,183

Loss for the year	-	-	-	-	(1,329)	(1,329)
Total comprehensive loss for the year	-	-	-	-	(1,329)	(1,329)

Transactions with shareholders:
Employee share schemes - value of employee services (note 18)	-	-	-	861	-	861
Total transactions with shareholders	-	-	-	861	-	861

As at 31 March 2022	131	10,942	(58)	861	(1,161)	10,715

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2022

		Year Ended 31 March 2022	Year Ended 31 March 2021
	Note	£'000	£'000
Net cash flow from operating activities
(Loss)/profit for the year		(1,329)	625
Adjustments for:
Share based payments charge	18	861	-
Amortisation of intangible assets	10	395	574
Depreciation of property, plant and equipment	11	585	360
Finance income	6	(1)	(1)
Finance costs	7	40	395
Income tax expense	8	(216)	(500)
Working capital adjustments
Increase in inventories		(1,187)	(1,103)
Increase in trade and other receivables		(3,499)	(771)
Increase in trade and other payables		580	1,550

Taxation paid		-	-
Net cash (used in)/ generated from operations		(3,771)	1,129
Cash flows used in investing activities
Purchase of intangible assets	10	(1,424)	(325)
Purchase of property, plant and equipment	11	(698)	(89)
Interest received		1	1
Net cash used in investing activities		(2,121)	(413)
Cash flows (used in)/ generated from financing activities
Issue of ordinary shares	17	-	11,000
Costs incurred on IPO charged to share premium		-	(44)
Receipt from/(repayment of) invoice discounting facility		53	(365)
Dividend paid		-	(1,250)
Interest paid on lease liabilities	16	(40)	(19)
Repayment of lease liabilities	16	(237)	(146)
Net cash (used in)/ generated from financing activities		(224)	9,176

Net (decrease)/ increase in cash and cash equivalents		(6,116)	9,892
Cash and cash equivalents brought forward		11,939	2,047

Cash and cash equivalents carried forward		5,823	11,939

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information

The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, and in accordance with UK-adopted international accounting standards. The consolidated financial statements have been prepared on the going concern basis and under the historical cost convention. The financial information is presented in sterling and has been rounded to the nearest thousand (£'000).

The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on 1 April 2021:

• COVID-19-Related Rent Concessions (Amendment to IFRS 16);

• Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);

• COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) The adoption of these amendments has had no material effect on the Group's consolidated financial statements.

There are a number of amendments to IFRS that have been issued by the IASB that become mandatory in a subsequent accounting period including:

• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

• Annual Improvements to IFRS Standards 2018-2020

• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

• Reference to the Conceptual Framework (Amendments to IFRS 3)

• IFRS 17 Insurance Contracts • Classification of liabilities as current or non-current (Amendments to IAS 1) • Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

• Definition of Accounting Estimate (Amendments to IAS 8)

• Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction - Amendments to IAS 12 Income Taxes

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

The Group has evaluated these changes and none are expected to have a significant impact on these consolidated financial statements.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2022 or 31 March 2021 but is derived from those accounts. Statutory accounts for 31 March 2021 have been delivered to the registrar of companies, and those for 31 March 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Going concern

The Group's ability to continue as a going concern is dependent on maintaining adequate levels of resources to continue to operate for the foreseeable future. The Directors have considered a number of key dependencies which are set out in the group's risk management section, specifically the group's exposure to liquidity risk and foreign exchange risk.

When assessing the going concern of the Group, the Directors have reviewed the year-to-date financial results, as well as detailed financial forecasts for the Going Concern Review period up to 31 July 2023. The assumptions used in the financial forecasts are based on the Group's historical performance and management's extensive experience of the industry. Taking into consideration the wider economic environment, the forecasts have been assessed and stress tested to ensure that a robust assessment of the Group's working capital and cash requirements has been performed.

Liquidity and financing

At 31 March 2022, the Group held instantly accessible cash and cash equivalents of £5.8m. In addition, in June 2022 the Group signed into an invoice discounting facility. There is a sufficient level of liquidity/financing headroom post stress testing across the going concern forecast period to 31 July 2023, as outlined in more detail below.

Approach to stress testing

The going concern analysis, which was approved by the Board in July 2022, reflected the actual trading to May 2022, as well as detailed financial forecasts for the period up to 31 July 2023. The Group has taken a measured approach to its forecasting. The Group has balanced the expected trading conditions with opportunities available in the market which is still transitioning online. Given the uncertainty of the impact of Covid-19, the conflict in Ukraine and the current high levels of inflation in the UK, the Board has in its assessment of going concern considered the potential impact of a generalised economic downturn leading to a greater impact on the spending patterns of consumers than has been experienced to date.

In addition, the Board has considered the impact of disruption to the supply chain caused by Covid-19, climate change risks and the impact on gross margin. The extent to which these factors could adversely affect the Group's revenue, gross margin and customer acquisition costs, as well as the extent to which this can be offset by cost savings, was modelled. The Group has prepared a reasonable worst case downside scenario, which incorporated the assumptions listed below:

· Reduction in customer numbers and conversion when compared with the Base Case and 2022 actual

· Maintenance of average order value at 2022 actual levels, despite seeing average order value grow in recent years

· Increased marketing spend as a proportion of revenue

· Reduction in gross margin

· Increased stock holding due to the reduction in sales

The effect of the combination of applying all the above downsides is a reduction in adjusted EBITDA on the 2022 base case and an increased level of cash burn which resulted in additional funding being necessary within the forecasting period. Mitigating factors were then considered, including reducing stock buys to reduce the working capital requirement and increase the level of full price sales, reducing the level of software development planned to make improvements to the Group's platform and reducing the level of marketing through channels other than the Group's influencer relationships. All of these mitigations are within the Group's control and would be expected in a consumer downturn. The severe downside scenario with reasonable mitigations results in sufficient cash forecast to be held throughout the period to 31 July 2023 to cover the Group's liabilities as they fall due.

Going concern conclusion

Based on the analysis described above, the Group has sufficient liquidity headroom through the forecast period. The Directors therefore have reasonable expectation that the Group has the financial resources to enable it to continue in operational existence for the period to 31 July 2023. Accordingly, the Directors conclude it is appropriate that these consolidated financial statements be prepared on a going concern basis.

2. Critical accounting estimates and judgements

The preparation of these Group financial statements requires management to make judgements and estimates that affect the reported amounts of assets and liabilities at each Statement of Financial Position date and the reported amounts of revenue during the reporting periods. Actual results could differ from these estimates. Information about such judgements and estimations are contained in individual accounting policies. The key judgements and sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of asset or liabilities within the next accounting period are outlined below:

Accounting estimates

2.1 Impairment of intangible assets

The Group tests goodwill for impairment every year in accordance with the relevant accounting policies. The recoverable amounts of the cash-generating unit is determined by calculating value in use. This calculation requires the use of estimates.

Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired and amounts to £528,000 as at 31 March 2022 (2021: £528,000). At the date of preparation of the Group financial statements the Management have not identified any indicators of impairment in respect of the goodwill. As explained in note 10, goodwill relates to the business as a whole and given the strong trading in the financial year and considering the low value of the goodwill held there is little sensitivity to the recoverability of the carrying value.

2.2 Useful economic lives of intangible assets

Intangible fixed assets are amortised over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. The net book value of these assets is £1,193,000 as at 31 March 2022 (2021: 597,000). Management regularly review the status of the capitalised projects to ensure that their useful economic life remains appropriate and as such there is little sensitivity to the carrying value.

2.3 Returns provision

The provision for sales returns is estimated based on recent historical returns and management's best estimates and is allocated to the period in which the revenue is recorded. Actual returns could differ from these estimates. The historic difference between the provision estimate and the actual returns is not material. The gross value of the provision for returns as at 31 March 2022 is £754,000 (2021: £628,000). A difference of 1% in returns rates based on overall gross order value would give rise to a difference of +/- £34,000 in gross margin. Management have reviewed the actual returns incurred post year end and given the amounts involved, the short return window, and compared to returns actually incurred they are satisfied with the estimate made at the reporting date.

2.4 Inventory valuation

Inventory is carried at the lower of cost and net realisable value, on a first-in first-out basis. A provision is made to write down any slow-moving or obsolete inventory to net realisable value. The provision is £552,000 at 31 March 2022 (2021: £372,000), an overall charge to the consolidated statement of comprehensive income of £180,000 (2021: £165,000) was recognised during the year. A difference of 1% in the provision as a percentage of gross inventory would give rise to a difference of +/- £32,000 in gross margin.

Accounting judgements

2.5 Capitalisation of software development costs

Intangible assets include capitalised internal salaries and third-party costs for computer software development. A certain proportion of the total costs are capitalised, as they relate to development costs, whilst the remaining costs are deemed to be maintenance costs and are expensed to the statement of comprehensive income. The proportion is calculated using a combination of management's best estimate and information provided by the third party.

2.6 Calculation for share-based payment charges

The charge related to equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date they are granted, using an appropriate valuation model selected according to the terms and conditions of the grant. Judgement is applied in determining the most appropriate valuation model and estimates are used in determining the inputs to the model. Third-party experts are engaged to advise in this area where necessary. Judgements are also applied in relation to estimations of the number of options which are expected to vest, by reference to historic leaver rates and expected outcomes under relevant performance conditions.

3. Segmental analysis and non-GAAP measures

The Chief Operating Decision Maker ("CODM") has been identified as the Senior Leadership Team ('SLT'). The SLT reviews internal reporting in order to assess performance and allocate resources. The SLT has determined that there are two operating segments, being wholesale and direct to consumer retail, and together they form the 'Operating group'.

	Revenue		Gross Profit
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Wholesale	12,634	8,331	1,855	1,594
Direct-to-consumer	44,683	36,374	23,314	18,995
	57,317	44,705	25,169	20,589

There are no sales between the two operating segments, and all revenue is earned from external customers. The operating segments gross profit is reconciled to profit before taxation as per the Statement of Total Comprehensive Income.

The Group's overheads are managed centrally by the SLT and consequently there is no reconciliation to profit before tax at a segmental level. The Group's assets are managed centrally by the SLT and consequently there is no reconciliation between the Group's assets per the Statement of Financial Position and the segment assets.

Information about major customers

The Group has not generated revenue from any individual customer that accounted for greater than 10% of total revenue in either the current or the prior year.

Analysis of revenue by geographical destination

	2022 £'000	2021 £'000
United Kingdom	53,558	42,388
Europe	2,598	1,336
Rest of the World	1,161	981
	57,317	44,705

The above revenues are all generated from contracts with customers and are recognised at a point in time. All assets of the Group reside in the UK.

Adjusted EBITDA

Operating costs, comprising administrative expenses, are managed on a Group basis. The SLT measures the overall performance of the Operating group by reference to the following non-GAAP measure:

· Adjusted EBITDA which is EBITDA (earnings before interest, tax, depreciation and amortisation) less exceptional items and IFRS 2 charges in respect of share-based payments along with associated national insurance.

This adjusted profit measure is applied by the SLT to understand the earnings trends of the Operating group and is considered an additional, useful measure under which to assess the operating performance of the Operating group.

In addition to annual bonuses which are linked to the Operating group's financial performance, the Operating group has implemented a number of longer-term share-based payment incentives linked to changes in ownership of the Operating group rather than the achievement of individual or Company-specific financial performance targets.

A reconciliation of Adjusted EBITDA is set out below:

	Note	2022 £'000	2021 £'000
Operating (loss)/profit	4	(1,506)	519
Depreciation	11	585	360
Amortisation	10	395	574
Share-based payments charge	18	861	-
Exceptional items	5	216	2,346
Adjusted EBITDA		551	3,799

4. Operating profit

The operating (loss)/profit is stated after charging the following expenses.

	2022 £'000	2021 £'000
Inventories recognised as an expense	31,968	22,464
Impairment of inventories	180	165
Staff costs included in administrative expenses	4,263	4,687
Contractors	48	-
Adjusting and non-recurring items	216	2,346
Distribution costs	10,036	7,428
Loss on disposal of property, plant and equipment and intangible assets	1	-
Depreciation - property, plant and equipment	193	118
Depreciation - right of use assets	392	242
Amortisation	395	574
Share-based payment charges	861	-
Marketing expenses	7,076	4,995
Research and development income	-	(277)
Foreign exchange	11	(10)
Auditor's remuneration	50	42
Other operating expenses	3,133	1,412
Total cost of sales, distribution costs, administrative expenses and operating income	58,823	44,186

5. Exceptional items

	2022 £'000	2021 £'000
Board reorganisation	216	-
IPO related expenses	-	2,346
	216	2,346

To understand the underlying performance of the business, certain costs included within administrative costs are classified as exceptional items on the basis of their size and their nature of being non-recurring. In the year ended 31 March 2022 these costs related to search and recruitment fees incurred for Sam Perkins and Richard Monaghan. In the year ended 31 March 2021 these items principally related to legal and professional fees relating to the IPO of £1,638,000 and bonuses of £708,000.

6. Finance income

	2022 £'000	2021 £'000
Bank interest receivable	1	1
	1	1

7. Finance expense

	2022 £'000	2021 £'000
Preference share dividends	-	376
Interest on lease liabilities	40	19
	40	395

During the year ended 31 March 2021 the Group had outstanding 2,500,000 £1 preference shares on which dividends were paid. The preference shares were redesignated as part of the Group reorganisation in March 2021.

8. Taxation

	2022 £'000	2021 £'000
Deferred tax
Origination and timing differences	(216)	(500)
Total deferred tax credit	(216)	(500)
Total tax credit	(216)	(500)

The taxation credit for the year is lower than the effective rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained below:

	2022 £'000	2021 £'000
(Loss)/Profit before taxation	(1,545)	125
Tax at the UK corporation tax rate of 19% (2021: 19%)	(294)	24

Expenses not deductible for taxation purposes	286	465
Deferred taxation not previously recognised	-	(989)
Timing differences	(76)	-
Adjustments in respect of prior years	40	-
Changes in the tax rate	(172)	-
Total taxation credit	(216)	(500)

The tax charge for the year is based on the standard rate of UK corporation tax for the period of 19% (2021: 19%). Deferred income taxes have been measured at the tax rate expected to be applicable at the date the deferred income tax assets and liabilities are realised.

On 10 June 2021, Royal Assent to the Finance Act was given to increase the UK corporation tax from 19% to 25% from 1 April 2023. Management has performed an assessment, for all material deferred income tax assets and liabilities, to determine the period over which the deferred income tax assets and liabilities are forecast to be realised, which has resulted in an average deferred income tax rate of 25% being used to measure all deferred tax balances as at 31 March 2022 (2021: 19%).

Movement in deferred taxation in the year	2022 £'000	2021 £'000
Balance brought forward	500	-
Credited to profit or loss	216	500
Balance carried forward	716	500

Deferred taxation consists of losses carried forward of £716,000 (2021: £500,000). The value of the unrecognised deferred tax asset at 31 March 2022 is £nil (2021: £158,000).

9. Earnings per share

Basic and diluted earnings per share

	Weighted average number of ordinary shares	Total earnings £'000	Pence per share
Year ended 31 March 2022
Basic	52,499,998	(1,329)	(2.53)
Diluted	52,499,998	(1,329)	(2.53)

Year ended 31 March 2021
Basic	52,499,998	625	1.19
Diluted	52,499,998	625	1.19

Basic earnings per share and diluted earnings per share are calculated by dividing profit for the year attributable to equity holders of the parent by the weighted average number of shares in issue.

The weighted average number of shares for the year to March 2021 has been stated as if the Group reorganisation completed on 7 March 2021 had occurred at the beginning of the 2021 financial year. The weighted average number of shares in issue in the period from 7 March 2021 to the year end was 52,499,998.

Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the number of incremental ordinary shares, calculated using the treasury stock method, that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The difference between the basic and diluted weighted average number of shares represents the dilutive effect of options issued under the In The Style Fashion Enterprise Management Incentive Option Plan . The options issued under the plan are anti-dilutive in both 2022 and 2021 and so there is no difference between basic and dilutive EPS for either year.

Adjusted earnings per share

Adjusted basic and diluted earnings per share figures are calculated by dividing adjusted profit after tax for the year by the weighted average number of shares in issue (as set out above).

	2022 £'000	2021 £'000
(Loss)/profit for basic EPS	(1,329)	625
Exceptional items	216	2,346
Share-based payments	861	-
Tax impact	(41)	-
Adjusted (loss)/profit	(293)	2,971

Adjusted basic earnings per share (pence)	(0.56)	5.66
Adjusted diluted earnings per share (pence)	(0.56)	5.66

10. Intangible assets

	Goodwill £'000	Software development costs £'000	Assets under construction £'000	Total £'000
Cost
At 1 April 2020	528	1,562	-	2,090
Additions	-	325	-	325
At 31 March 2021	528	1,887	-	2,415
Additions	-	991	433	1,424
Disposals	-	-	-	-
At 31 March 2022	528	2,878	433	3,839

Accumulated amortisation
At 1 April 2020	-	(716)	-	(716)
Amortisation charged in the year	-	(574)	-	(574)
At 31 March 2021	-	(1,290)	-	(1,290)
Amortisation charged in the year	-	(395)	-	(395)
At 31 March 2022	-	(1,685)	-	(1,685)

Carrying amount
At 31 March 2020	528	846	-	1,374
At 31 March 2021	528	597	-	1,125
At 31 March 2022	528	1,193	433	2,154

Goodwill represents the excess of the cost of acquisition of unincorporated businesses over the fair value of net assets acquired and represents goodwill in the business as a whole.

In accordance with International Financial Reporting Standards, goodwill is not amortised, but instead is tested annually for impairment, or more frequently if there are indicators of impairment. Goodwill is carried at cost less accumulated impairment losses.

Software development costs comprises both internal salaries and external development capitalised in relation to the Group's bespoke operational software. This includes development over bespoke front-end software and functionality relating to the Group's website and app and development to the Group's back-end operational systems and infrastructure.

Assets are categorised as assets under construction if costs have been incurred which meet the definition of an intangible asset under IAS 38 but have not yet been completed and brought into use.

The Group increased its investment in technology during 2022 in three areas: customer journey, increasing the scalability of the platform, and back-end operational systems that have the ability to streamline the Group's operation. Additions to software development costs and assets under construction in the year relate to these three areas.

Intangible assets which have a finite useful life are carried at cost less accumulated amortisation. Amortisation of these intangible assets is calculated using the straight-line method to allocate the cost of the assets over their estimated useful lives (3 years). The longest estimated useful life remaining at 31 March 2022 is 3 years (31 March 2021: 3 years).

For the year to 31 March 2022, the amortisation charge of £395,000 (2021: £574,000) has been charged to administrative expenses in the consolidated statement of comprehensive income.

11. Property, plant and equipment

	Property improvements £'000	Plant and machinery £'000	Motor vehicles £'000	Fixture and fittings £'000	Computer equipment £'000	Total £'000
Cost or valuation
At 1 April 2019	83	32	1	283	190	589
Additions	-	23	-	13	53	89
Disposals	-	-	-	-	(2)	(2)
At 31 March 2020	83	55	1	296	241	676
Additions	467	-	-	126	105	698
Disposals	-	-	-	(1)	(3)	(4)
At 31 March 2022	550	55	-	421	343	1,370

Depreciation
At 1 April 2020	45	5	-	104	132	286
Depreciation	20	14	-	42	42	118
At 31 March 2021	65	19	-	146	174	404
Depreciation	70	2	-	74	50	196
Disposals	-	-	-	-	(3)	(3)
At 31 March 2022	135	21	-	220	221	597

Carrying amount
At 31 March 2020	38	27	1	179	58	303
At 31 March 2021	18	36	1	150	67	272
At 31 March 2022	415	34	1	201	122	773

For the year to 31 March 2022, the depreciation charge of £196,000 (2021: £118,000) has been charged to administrative expenses in the consolidated statement of comprehensive income.

12. Inventories

	2022 £'000	2021 £'000
Finished goods and goods for resale	2,755	1,583
Right-of-return inventory	387	372
	3,142	1,955

The Directors believe that the replacement value of inventories at would not be materially different than book value.

Inventories at 31 March 2022 are stated after provisions for impairment of £552,000 (2021: £372,000).

13. Trade and other receivables

	2022 £'000	2021 £'000
Trade receivables	4,070	993
Prepayments	688	641
Called up share capital not paid	-	59
Other debtors	433	-
Invoice finance facility	-	53
	5,191	1,746

Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan.

Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. There is no provision at 31 March 2022 for impairment loss against trade receivables (2021: nil).

14. Trade and other payables

	2022 £'000	2021 £'000
Trade payables	2,154	2,041
Other taxation and social security	166	425
Other payables	53	-
Accruals	3,535	2,622
	5,908	5,088

15. Contract liabilities

	2022 £'000	2021 £'000
Balance at 1 April	1,113	362
Recognised as revenue in the year	(1,113)	(362)
New and existing contracts with customers	871	1,113
Balance at 31 March	871	1,113

Deferred revenue outstanding at each year end is expected to be recognised within revenue within 12 months from the reporting date.

16. Leases

The group leases offices and warehouses. Rental contracts are typically made for fixed periods of 3 to 5 years. There are no judgements over the length of the lease term for any of the Group's leases. There are no variable lease payments in any of the Group's leases.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases of the Group, the incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

Amounts recognised in the Statement of Financial Position

Right-of-use assets	£'000
Balance at 31 March 2020	303
New leases recognised in the year	65
Lease modifications	166
Depreciation charge for the year	(242)
Balance at 31 March 2021	292
New leases recognised in the year	942
Lease modifications	127
Depreciation charge for the year	(389)
Balance at 31 March 2022	972

The net book value of the right of use assets all relates to property leases.

Lease liabilities	2022 £'000	2021 £'000
Maturity analysis - contractual undiscounted cash flows
Less than one year	315	171
More than one year, less than two years	218	283
More than two years, less than three years	212	6
More than three years, less than four years	212	-
More than four years, less than five years	88	-
Total undiscounted lease liabilities at year end	1,045	460
Finance costs	(74)	(15)
Total discounted lease liabilities at year end	971	445

Lease liabilities included in the statement of financial position
Current	285	164
Non-current	686	281
	971	445

Amounts recognised in the consolidated statement of comprehensive income.

The consolidated statement of comprehensive income shows the following amounts relating to leases:

	2022 £'000	2021 £'000
Depreciation charge (within administrative expenses)	389	242
Interest expense (within finance costs)	40	19
Expense relating to leases of low-value assets	-	-

The total cash outflow for in relation to lease liabilities in the year was £277,000 (2021: £165,000).

17. Share capital

	Ordinary shares of £0.0025 No.	Ordinary shares of £0.0000001 No.	Ordinary A1 shares of £0.0000001 No.	Ordinary B1 shares of £0.0000001 No.	Deferred shares of £0.0000001 No.	Total £
At 31 March 2020	-	-	12,986,532,000	12,400,000,000	128,470,950,000	15,386
Issue in the year	-	237,141	-	-	-	-
Re-designation ordinary shares	-	22,637,858	(12,986,532,000)	(12,400,000,000)	25,363,894,142	-
Re-designation preference shares	-	625,000	-	-	1,875,000	-
Purchase and cancellation	-	-	-	-	(153,836,719,142)	(15,386)
Issued on 4 March 2021	23,499,999	-	-	-	-	58,750
Group reorganisation	23,499,999	(23,499,999)	-	-	-	58,750
Issued on IPO	5,500,000	-	-	-	-	13,750
At 31 March 2021	52,499,998	-	-	-	-	131,250
At 31 March 2022	52,499,998	-	-	-	-	131,250

All shares rank pari-passu except the deferred shares which are non-voting and have no right to dividends.

In anticipation of the IPO in March 2921, the share capital structure was re-organised with the following:

· The Ordinary A1 and B1 shares were re-designated as Ordinary shares of £0.0000001 and Deferred shares of £0.0000001;

· The 2,500,000 £1 preference shares were re-designated as 625,000 Ordinary shares of £0.0000001 and 1,875,000 Deferred shares of £0.0000001; and

· The Deferred shares were purchased and cancelled.

The Company was incorporated on 4 March 2021 as a public company limited by shares in England and Wales with the issue of 23,499,999 £0.0025 ordinary shares.

On 4 March 2021 the Company allotted and credited as fully paid 23,499,499 Ordinary shares of £0.0025 in exchange for the entire issued share capital of In The Style Fashion Limited pursuant to an exchange agreement entered into between the Company and the then shareholders of In The Style Fashion Limited.

On 15 March 2021, the Company issued 5,500,000 Ordinary shares of £0.0025 each for consideration of £11,000,000 in an IPO, with the balance recorded as share premium. IPO costs of £1,638,000 have been charged to the income statement and £44,000 were recorded within share premium.

The Ordinary shares of £0.0025 relate solely to the Company. The other classes of share disclosed above show the movements of In The Style Fashion Limited.

18. Share-based payments

During the year the Group operated one share plan, being the In The Style Fashion Enterprise Management Incentive Option Plan (the "MIOP" or "LTIP").

The total charge in the year relating to the scheme was £861,000 (2021: £nil) with a Company charge of £nil (2021: £nil). This included associated national insurance ('NI') at 15.05%, which management expects to be the prevailing rate when the awards are exercised, and apprentice levy at 0.5%, based on the share price at the reporting date.

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Management incentive option plan	861	-	-	-
National insurance and apprentice levy	-	-	-	-
	861	-	-	-

All share-based incentives carry a service condition. Such conditions are not taken into account in the fair value of the service received. The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted. The estimate of the fair value of the share-based incentives is measured using the Black-Scholes pricing model. Sensitivity analysis has been performed in assessing the fair value of the share-based incentives. There are no changes to key assumptions that are considered by the Directors to be reasonably possible, which give rise to a material difference in the fair value of the share-based incentives.

The Group operates a Management Incentive Option Plan (the "MIOP" or "LTIP") for the Senior Leadership Team and certain key employees. The awards will vest in three tranches, with the first tranche vesting on the first anniversary of the award, and subsequent tranches vesting on the second and third anniversaries, subject to continuing employment.

On 24 January 2022, the Group awarded 1,574,999 options under the MIOP scheme with an exercise price of £0.91 per option. The fair was determined to be £0.34 per option. The awards have been valued using a Black-Scholes pricing model.

The resulting share-based payments charge is being spread evenly over the period between the grant date and the vesting date. MIOP award holders are entitled to receive dividends accruing between the grant date and the vesting date and this value will be delivered in shares. The assumptions used in the measurement of the fair value at grant date of the MIOP awards are as follows:

Grant date

Share price at grant date

Exercise price

Expected volatility

Option life

years

Risk-free rate

Dividend yield

Non-vesting condition

Fair value per option

15/03/2021

2.00

56%

0.25%

0.0%

£0.85

24/01/2022

0.91

47%

0.90%

0.0%

£0.34

As the Company listed on or just before the dates of grant, there is no share price history available to use to derive a volatility assumption directly. Expected volatility is therefore derived from the historical 4-year volatility of the constituents of the FTSE AIM Retailers super-sector (to the extent that they have sufficient share price history prior to the respective date of grant), as of the date of grant.

During the year, the Directors in office in total had gains of £nil (2021: £nil) arising on the exercise of share-based incentive awards.

	2022 number	2021 number
Outstanding at 1 April	1,862,500	-
Options granted in the year	1,574,999	1,862,500
Options forfeited in the year	(354,375)	-
Outstanding at 31 March	3,083,124	1,862,500
Exercisable at 31 March	-	-

19. Post balance sheet events

Principle risks and uncertainties

RISK

POTENTIAL IMPACT

CHANGES IN THE YEAR

1. Economy, market and business environment

Specific macroeconomic factors and changes due to geopolitical uncertainty can have an impact on how customers behave and can also have an impact on our operations and the operations of our supply chain. In turn, this could impact our overall financial performance. Examples of such events include a pandemic or national conflict.

Covid-19 restrictions across the world resulted in some disruption in the supply chain through 2021. Logistics costs increased as a result of a container shortage and port/airport closures. As we entered into 2022, these pressures began to normalise.

The conflict in Ukraine has placed renewed pressure on logistics providers, particularly air freight from the Far East.

Cost of raw materials have increased.

Inflation levels in the UK have risen, and with energy prices increasing, there is a cost-of-living crisis in the UK. This could reduce the discretionary spend available to consumers.

2. Influencer model

The Group's business model is based heavily on designing products in conjunction with influencers and marketing these products using both the Group's and the relevant influencer's social media platforms.

If the Group is not able to develop and maintain positive relationships with its network of influencers, the Group's ability to promote and maintain awareness of its brand and leverage social media platforms to drive visits to its website and app may be adversely affected.

The Group's network of influencers currently comprises c.27 influencer relationships. Negative publicity relating to any one of these influencers (including in relation to the matters outlined further on within this section) or a breakdown in such relationship with the Group may have a material adverse effect on the Group's business, results of operations and financial condition.

Influencer commissions may increase over time and/or the market for influencers may become more competitive over time. There is no guarantee a new influencer will be a success.

Influencers are often responsible for creating their own content, and the commission model means that they can often do this independent from In The Style. A risk therefore exists that influencers do not comply with the relevant advertising standards or provide false information to consumers.

The Group expanded its influencer base with a number of influencers signed up to do collaborations. These included Perrie Sian, Gemma Atkinson and Stacey Solomon.

The Group's founder, Adam Frisby, stepped down from his role as CEO to become Chief Brand Officer. This role allows Adam to focus more on building the brand and working with the influencers.

The Group invested in its product and merchandising teams that work alongside the influencers to produce product.

During the year a small number of the influencers we work with have been warned by the Advertising Standards Agency for not adhering to the CAP code. Our social team have increased their efforts in educating influencers as to why this is important and now monitors posts to ensure compliance.

3. Social media

Social media platforms may change their advertising policies, or be required to do so by changes to regulation.

If any change to these policies delays or prevents the Group from advertising through these channels or reduces the effectiveness of its influencer strategy, this could result in a reduction in consumer traffic to the Group's website and app and reduced sales of its products.

In addition, the Group's social media presence amplifies consumer engagement but is less controllable, due to consumer comments and hashtags, than more traditional public relations and marketing methods. This could associate the brand with content which is not aligned with the Group's values, something that could result in negative publicity

Social media platforms such as Instagram and Facebook are continually changing their algorithms and seemingly placing more relevance on paid-for advertisements. This has the ability over time to reduce the number of impressions served to consumers.

Instagram users are being drawn more towards 'stories' than posts. Although the use of stories is an effective way to reach consumers with dynamic content, they are not as permanent as a traditional post.

New platforms such as Tik Tok continue to grow consumer audience. The Group ensures that it quickly grows a presence on these platforms as they emerge so we learn how to market effectively and whether different influencers are required for different audiences.

4. Design

As a design-led female apparel and accessories brand, there is a risk that the Group's product proposition does not satisfy the needs of our customer base, or that the Group fails to correctly identify trends that are desired by its customer base.

As a result, lower sales, excess inventories and increased levels of discounting may occur.

The Group invested in product and merchandising teams in the year, including appointing a head of product to lead the design area alongside Adam Frisby who moved into a Chief Brand Officer role.

The Group collaborates on product with influencers and worked with 15 new influencers to design apparel through the year.

5. Supply chain ethics

The Group may be subject to potential reputational damage if one or more of its suppliers violates or is alleged to have violated applicable laws or regulations including improper labour conditions or human rights abuses, fails to meet the Group's requirements or does not meet industry standards and safety specifications.

Ongoing spotlight on labour conditions in UK garment industry.

National and international scrutiny on ethical trading is increasing and we continue to engage with stakeholders to monitor and react to ethical risk in the supply chain.

6. Supply chain operations

The Group's ability to remain competitive is highly dependent on its success in maintaining access to its production facilities and an efficient distribution network. ITS typically works with a relatively tight supplier base of circa 50 product suppliers and so the loss of one or a handful of those suppliers could have a material impact on the Group's business.

One or more of the Group's suppliers may be unable to supply or decide to cease supplying the Group for reasons beyond the Group's control, or they may increase prices significantly where it is not possible to pass on price increases to customers. Alternative suppliers may be difficult or impossible to identify and, in any event, may take a significant period of time to begin supplying the Group. Moreover, if the Group expands beyond the production capacity of its current suppliers as it continues to grow, it may not be able to find new suppliers with an appropriate level of expertise and capacity in a timely manner. The Group operates a just-in-time supply chain in relation to stock which adds risk to the business model.

The Group's supply chain could also be materially adversely affected by a number of other factors, including, among other things, potential economic and political instability in countries where its suppliers are located, increases in shipping or other transportation costs, manufacturing and transportation delays and interruptions, whether as a result of pandemics, natural disasters, political crises, civil unrest and other catastrophic events. Given the profit margins of the business, any supply chain cost inflation or disruption that leads to higher costs, could have a significant impact on profitability given it may not be possible to pass on price increases to customers.

Since March 2020, disruption caused by Covid-19 resulted has resulted in challenges across our supply chain.

Over the past year the Group further diversified its geographical base of suppliers, moving away from China which was impacted by both factory shutdowns and logistics availability.

A reduction in the availability of space for freight and a resulting increase in costs relating to shipping have been a challenge in the year. This was caused first through Covid-19 lockdown restrictions and subsequently impacted by the conflict in Ukraine. The Group has invested in a small but specialised logistics team so that it can source more product on an 'Free On Board' ('FOB') basis, improving rates and allowing for greater visibility of stock before it reaches our warehouse.

The Group has defined improving our 'critical path' as a focus area for the year. As part of this focus, the Group is exploring ways in which it can move a greater proportion of its product by sea rather than by air.

7. Employees and key individuals

The Group's business, development and prospects are dependent on a small number of key management personnel. The loss of the service of one or more of such key management personnel may have an adverse effect on the Group. The Directors believe that the experience, technical know-how and commercial relationships of the Group's key management personnel help provide the Group with strategic focus and a competitive advantage.

The Group's ability to develop its business and achieve future growth and profitability will depend in large part on the efforts of these individuals and the Group's ability, when required, to attract new key management personnel of a similar calibre.

The loss of the services of any key management personnel, for any reason, or failure to attract and retain necessary additional personnel, could adversely impact on the business, development, financial condition, results of operations and prospects of the Group. The Directors believe that the Group operates a progressive and competitive remuneration policy which will play an important part in retaining and attracting key management personnel.

Over the past year the Group has invested in its senior leadership team, bringing on key roles such as Head of Product and Head of People.

In addition, the Group went through significant change at Board level. Adam Frisby, the founder of In The Style, stepped down from his role as CEO to become Chief Brand Officer. Sam Perkins joined the business in January 2022 as CEO. Subsequently, in March 2022, Paul Masters retired from his position on the Board and Richard Monaghan joined the Group as CFO.

These changes and overall investment in the management structure further mitigate risks of key personnel loss.

8. Response to sustainability

The focus on climate change and sustainability is growing, and is in the spotlight more now than ever before. We recognise that we need to play our part in combating climate change and, if we fail to do this, we risk adversely impacting our brand and reputation.

Through the year we have placed further focus on how we can make a difference in this area. We have started to define our ESG strategy across three pillars, one of which is how we help the planet.

We launched our first sustainable range in collaboration with Stacey Solomon in the year.

9. IT and cyber security

The Group relies on systems and websites that allow for the secure storage and transmission of proprietary or confidential information regarding its consumers, customers, suppliers, employees and others, including credit card information and personal information.

Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction data or other sensitive and confidential information from being breached or compromised. In addition, e-commerce websites are often attacked through compromised credentials, including those obtained through phishing and credential stuffing.

If any of these breaches of security should occur, the reputation of the Group could be damaged, customers could develop the perception that the Group's platforms are not secure, its business may suffer, it could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and it could be exposed to a risk of loss, litigation or regulatory action and possible liability.

External threats are now managed through web application firewalls and multi-layer security so that the core line of business data, including customer transaction data, is at least two levels away from the external interfaces. These tools ensure low level attempts to probe or attempt to run scripts against our sites are automatically blocked and monitored.

More sophisticated brute force attacks intending to stop commercial activity do occur from time to time. When these happen the same tools are used to block, diagnose and manage the attacks and then new rules added to prevent ongoing impact.

The Group has adopted a cloud-first model, this ensures data typically remains at its source, is managed based on usage, and transmission and duplication of data is therefore minimised across the Group.

The Group uses tokenisation for all payment types and thus never holds nor transmits payment data.

Group staff have enforced two-step authentication and a robust policy is in place to ensure removal of leavers and that staff have appropriate access to systems based on role and experience.

10. Regulatory compliance

There is a risk that the Group fails to comply with regulatory requirements or to respond to changes in regulations, including GDPR.

The Group stores some personally identifiable information of its customers, employees and other stakeholders and is subject to data protection and privacy regulations such as the General Data Protection Regulation (Eu) 2016/679 (the "GDPR"), which forms part of domestic law pursuant to the Data Protection, Privacy and Electronic Communications (Amendments etc) (Eu Exit) Regulations 2019.

The Group has policies and procedures in place in relation to data protection but there can be no guarantees that even strict compliance with such policies and procedures will completely eliminate all risk in this regard.

Any perceived or actual failure by the Group, including its third-party service providers, to protect confidential data or any material non-compliance with privacy or data protection or other consumer protection laws or regulations may harm the Group's reputation and credibility, adversely affect revenue, reduce its ability to attract and retain customers and consumers, result in litigation or other actions being brought against the Group and the imposition of significant fines and, as a result, could 3have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Policies that govern GDPR have been embedded into the employee contract, handbook and working practices of the Group. In summary the Group requires that user consent and data is given based only on the need to provide the core business services and that all other usage of data is expressly linked to consent for that purpose only.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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Itsarm (ITS)

Monday, 13th May 2024

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