Interim Results - six months to 30 September 2022

RNS Number : 9872I

In The Style Group PLC

08 December 2022

8 December 2022

In The Style Group plc

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

Interim Results for the six months ended 30 September 2022

In The Style Group plc (AIM:ITS), the disruptive and inclusive digital womenswear fashion brand, announces interim results for the six months ended 30 September 2022 ("H1 2023").

In the first half of FY23, the first H1 absent of any pandemic related impact since H1 2020, the Group has demonstrated that it has consolidated the revenue gains made over the last three years through its direct-to-consumer channel.

Strategic highlights

Re-engineering the model

Number of measures taken to improve profitability that will take effect for the second half, including:

· Focus on cost control including restructuring the Group's marketing and product departments to increase the effectiveness of these teams whilst removing cost

· Successful relocation to a larger 84,000 sq. ft. warehouse at the end of August provides opportunity for operational efficiencies and sufficient capacity for future growth

· Good progress made in optimising stock buys, in line with the Group's strategic focus on increasing the proportion of full price sales and reducing the level of overall discount

Retail experience equal to the brand

· Launched 72 collections with 19 distinct influencers through our distinctive social collaboration model. To complement this, we increased the level of reach generated through our micro-influencer network, engaging with over 140 different micro-influencers with a combined reach of over 2.8m followers

· Successful launch of 'FITS', a collection of own-brand wardrobe staples, providing the Group with additional opportunities to engage with customers and to improve profitability. The FITS brand debuted in August and we have released over 160 products to date with over 5,900 customers purchasing at least one of these products

· Simplified our technology roadmap to prioritise enhancements that align with the Group's strategy. We now have a smaller team focused on the development of our app and the stability of the back-end product and merchandising system. Focusing in these areas will result in ITS having a platform that can be the 'best of launch and browse'

· Proud to collaborate with the late Dame Deborah James to raise £1.7m for the Bowelbabe fund for Cancer Research UK

Reach through digital partnerships

· Concession model agreed with one of our digital partners as we move a step closer to stockless partnerships. We have also mutually agreed to cease our in-store trial partnership which ran for the duration of FY22

Operational highlights

· Stock health remains good and stock levels are being well managed. The Group took ownership of Autumn/ Winter stock earlier this season in order to optimise the launch schedule through the peak trading period and this approach has been successful as stock volumes were 8% lower than the prior year by the end of November

· N ew customers totalled 293,000 (H1 2022: 243,000) with the Group growing its active customer⁽¹⁾ base by 17% to 523,000 (H1 2022: 446,000)

· Total customer orders⁽²⁾ increased by 2% to 841,000 (H1 2022: 826,000)

· Cross-platform visits totalled 25.0m (H1 2022: 26.9m) with conversion⁽³⁾ improving to 3.36% (H1 2022: 3.07%)

· Average order value⁽⁴⁾ reduced by 5% to £49.89 (H1 2022: £52.75)

· Order frequency⁽⁵⁾ decreased by 13% to 1.61 purchases over the six month period (H1 2022: 1.85 times)

Financial highlights

	H1 2023	H1 2022	YoY Change	H1 2020*	H1 2023 vs H1 2020
Direct-to-consumer (£'000)	22,847	22,962	(1%)	7,904	189%
Wholesale (£'000)	3,735	6,852	(45%)	726	414%
Revenue (£'000)	26,582	29,814	(11%)	8,630	208%
Gross profit margin⁽⁶⁾ (%)	48.5%	47.1%	+1.4%pt	53.3%	(4.8%pts)
Adjusted EBITDA⁽⁷⁾ (£'000)	(1,832)	1,196	(253%)	(624)	(194%)
Adjusted EBITDA margin⁽⁸⁾ (%)	(6.9%)	4.0%	(10.9%)	(7.2%)	+0.3%pts
(Loss) / profit before tax (£'000)	(3,149)	890	(454%)	(898)	(251%)
Net cash at 30 September (£'000)	3,851	9,894	(61%)	1,616	138%

* Presented as this was the last comparative six months not impacted by restrictions imposed by the Covid-19 pandemic

· Group revenue reduced by 11% year-on-year to £26.6m (H1 2022: £29.8m) but remains 208% up on H1 2020 as the step change made in market share through the pandemic period was largely maintained

o Direct-to-consumer ("DTC") remained broadly flat at £22.8m (H1 2022: £23.0m). In a challenging market, the Group continues to leverage its distinctive influencer collaboration model to drive real interest in the product that we design for consumers

o Wholesale revenue reduced by 45% to £3.7m (H1 2022: £6.9m) in part due to the mutually agreed cessation of the in-store trial with one partner

· Gross profit margin⁽⁶⁾ increased by 1.4%pts to 48.5% (H1 2022: 47.1%) as sales mix shifted to the higher margin DTC channel

· The Group made an adjusted EBTIDA⁽⁷⁾ loss for the period of £1.8m (H1 2022: £1.2m profit) as a result of a reduction in gross profit whilst fixed costs relating to people and overheads increased as the business previously scaled up for growth

· The Group made a loss before tax of £3.1m (H1 2022: profit of £0.9m)

· Cash at 30 September 2022 was £3.9m (31 March 2022: £5.8m). The Group's invoice discounting facility remained materially undrawn throughout the period with £0.8m available to the Group as at 30 September 2022.

Current trading & outlook

· The Board confirms that its expectation for full year Adjusted EBITDA remains unchanged.

· Trading within our DTC channel through the important peak period of November has been strong. In particular, In The Style is pleased to have delivered a record Black Friday Cyber Fortnight, as follows:

- gross order value 6% higher than 2021 (12% higher than 2020);

- average order value up 12% on 2021 (24% up on 2020); and

- gross margin 1.8%pts above that achieved in 2021, with a lower level of discounting.

Nevertheless, consumer sentiment remains uncertain and so we now would expect DTC revenue for the full year to be broadly similar to that achieved in FY22.

· Wholesale is likely to continue to be a challenge and we would expect revenue in H2 to be similar to that achieved in H1.

· Stock levels heading into Christmas period are being well managed with stock volume at the end of November being 8% less than the prior year.

· Cash position improved to £4.4 million at 30 November 2022, due to favourable working capital movements with an additional £1.1m available through the invoice discounting facility.

· Underpinned by the Group's distinctive brand and differentiated model, the Board looks forward to continuing the strong strategic momentum delivered throughout the first half and is confident of the long-term growth prospects of the Group.

Board changes

As communicated in a separate announcement by the Company this morning, Sam Perkins has informed the Board of his intention to step down as Group CEO. Sam will leave In The Style on 31 December 2022. During Sam's tenure as CEO, the Group has developed and begun to implement several strategic initiatives to support the Group's future profitable growth.

In The Style's Founder, Adam Frisby, will return to the role of CEO on an interim basis. Adam led the Group as CEO for seven years until January 2022. Since then, Adam has held the role of Chief Brand Officer, with responsibility for developing the Group's influencer partnerships and the brand's creative direction.

Strategic review

As was also announced on 8 December 2022, the Board believes that there has been limited liquidity for In The Style's shareholders for some time and that the current market capitalisation of the Company does not properly reflect the underlying growth potential of the Group which may be better realised under an alternative ownership structure.

The Board has, therefore, decided to conduct a strategic review of the Group's business as a whole (the "Strategic Review") and has appointed Lincoln International to assist with this process. The outcome of the Strategic Review may or may not result in a sale of the Company or some or all of the Group's business and assets. The Company is not in talks with any potential offeror and is not in receipt of any approach with regard to a possible offer.

Adam Frisby, Founder and Chief Brand Officer of In The Style Group plc said:

"We have made important progress against our strategic priorities during the first six months of the year as we look to evolve our business and re-engineer our economic model. Highlights have included moving our warehouse operations, restructuring the way in which our teams work and, most encouragingly, launching FITS to a very positive customer reception.

"Our DTC channel delivered a robust performance in the current economic environment and the Group's core operational metrics have remained solid, with gains in engagement levels and the customer base that were made through the pandemic period being maintained which provides a strong platform for future growth.

"We expect trading conditions to be challenging in the second -half. We will continue to focus on cost control and profitability, and we look forward to delivering further strategic progress over the remainder of the financial year. We remain very excited about the long-term potential of the Group ."

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

Jim Sharp, Chairman

Rich Monaghan, CFO

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

Clayton Bush

Scott Mathieson

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 performance

	Units	Six months ended 30 September 2022	Six months ended 30 September 2021	Year-on-year change %
Income statement
Direct-to-consumer	£'000	22,847	22,962	(1%)
Wholesale	£'000	3,735	6,852	(45%)
Revenue	£'000	26,582	29,814	(11%)
Gross profit⁽⁹⁾	£'000	12,895	14,033	(8%)
Gross profit margin⁽⁶⁾	%	48.5%	47.1%	1.4%pts
Adjusted EBITDA⁽⁷⁾	£'000	(1,832)	1,196	(253%)
Adjusted EBITDA margin⁽⁸⁾	%	(6.9%)	4.0%	(10.9%pts)
(Loss) / profit before tax	£'000	(3,149)	890	(454%)
Basic (loss) / earnings per share	pence	(6.00)	1.70	(453%)

Cash flow
Net cash as at period end	£'000	3,851	9,894	(61%)
Cash used in operations	£'000	(4165	(1,462)	72%
Capital expenditure including intangible assets	£'000	(782)	(655)	(19%)

Key performance indicators
Total orders⁽²⁾	'000	841	826	2%
Conversion rate⁽³⁾	%	3.36%	3.07%	0.29%pts
Average order value⁽⁴⁾	£	49.89	52.75	(5%)
Active customers⁽¹⁾	'000	523	446	17%
Order frequency⁽⁵⁾	#	1.61	1.85	(13%)

(1) Active customers is defined as the number of consumers who have made at least one purchase in the six month period through either the In The Style website or the In The Style app.

(2) Total orders is defined as the total number of orders placed through our direct-to-consumer channel in the six month period.

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

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

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

(6) Gross profit margin is gross profit as a percentage of revenue.

(7) 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).

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

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

STRATEGIC UPDATE

Overview of H1

We have made good strategic progress through what has been a challenging first half of the year for the industry. Consumer sentiment and the appetite to spend on discretionary items has been negatively impacted by inflationary pressures and an uncertain macroeconomic outlook. Revenue gains through the pandemic period have been largely maintained, however revenue declined year-on-year by 11% to £26.6m (H1 2022: £29.8m) and the Group made an adjusted EBITDA loss of £1.8m (H1 2022: £1.2m profit).

The Group's Direct-to-Consumer ('DTC') channel has continued to deliver a robust performance against this challenging consumer backdrop. DTC revenue for the six months ended 30 September 2022 was broadly flat year-on-year at £22.8m (H1 2022: £23.0m) and has increased by 189% against the six months ended 30 September 2019 - the last first half that was not impacted in some way by the Covid-19 pandemic.

In contrast, revenue generated from the Group's wholesale channel reduced by 45% year-on-year to £3.7m (H1 2022: £6.9m). An element of this reduction was anticipated as the Group scaled down and subsequently ended its in-store trial partnership that had been ongoing through the last financial year. The appetite of our other digital partners for holding stock has however also reduced. This has impacted wholesale revenue and further emphasises the importance of our plans to operationalise a 'stockless' technology solution for our partners.

For a number of reasons, profitability has been a challenge through the first half of the year. The inflationary environment and unpredictable economic outlook have impacted both our business, and consumers' appetites to spend on discretionary apparel. The Group had previously increased resources in anticipation of further growth and so entered the year with a fixed cost base that was too high, and more stock on order than was likely required given the softening in consumer demand. These factors, along with continued raw material cost inflation, the depreciation of the pound against the dollar, and higher levels of promotion than usual in the industry resulted in an Adjusted EBITDA loss for the period of £1.8m (H1 2022: £1.2m profit).

Cash at the end of September was £3.9m (30 September 2021: £9.9m; 31 March 2022: £5.8m) with the Group's invoice discounting facility remaining materially undrawn throughout the period.

Strategic progress

We have a clear strategy for medium-to-long term growth as communicated to our investors and our people over the course of the past summer. It is vital that we are able to execute these priorities as we move through the current subdued trading environment to allow the business to emerge stronger than it is today.

We recognise that our success through this difficult period depends not on our ability to predict the future but rather how we adapt to a changing environment. With consumer demand and margins under pressure, our focus right now is firmly on driving profitable sales and prudent working capital management, rather than simply pursuing top-line growth. Our priorities during the first half have been, and will continue to be, aligned to this whilst not losing sight of In The Style's considerable growth potential.

In the first half of the year we have made important changes across a number of key areas of the business. These changes which will provide a stronger base for sustainable growth as we enter H2:

· We launched 'FITS', our own-brand product that has been designed to inspire confidence through great fit and quality. To date, we have launched categories including wardrobe staples, denim, knitwear and outerwear, and have had a very positive customer response with over 5,900 unique customers purchasing at least one of these products. We see this range of own brand being key in enabling the Group to engage with its customers and increase sales outside of the Group's traditional influencer campaign launch cycle at an elevated contribution margin.

· We successfully moved our operations to a new, larger 84,000 sq. ft. warehouse and have been fully operational for DTC distribution since the beginning of September. The larger space allows us to consolidate our fulfilment operations from four premises into one, which will realise cost savings. The most immediate of these has been the cost of processing returns, which has decreased by circa 50% since returning in-house from a third party. Over the next six months we are targeting efficiencies in the costs to pick of approximately 10% as a result of the additional space.

· Good progress has been made in optimising stock buys, in line with the Group's strategic focus on increasing the proportion of full price sales and reducing the amount of clearance stock. We have seen a modest but encouraging step change in full price sales through the start of Q3 FY23. As part of this process, we have mutually terminated agreements with some influencers that were no longer driving meaningful contribution.

· We have completed a restructuring of the Group's marketing, technology and product departments to increase operating efficiencies and this has been effective since 1 October 2022. Significant changes were made to how the product teams work, with teams now segmented by category rather than by collaboration. We believe that this change will result in greater product expertise which in turn will increase the quality of the product we produce and reduce the time it takes to design and source garments. The annualised cash saving resulting from the overall restructure is circa £1m, of which £0.6m will likely be a benefit to people costs with the remaining £0.4m being a reduction in capitalised salaries relating to technology development.

· We have prepared for earlier launches of Christmas and party related product to maximise the time to sell in an unpredictable environment. This meant we took ownership of stock earlier, but by the end of November we had reduced overall stock volumes to be down 8% year-on-year.

Through the second half of the year we will continue to focus on key areas of the business where we see opportunity to drive efficiencies. These priorities are:

· Increasing the selection of products available under the FITS own brand. We aim to have launched 300 distinct products under the FITS brand by the end of the year.

· Improving search capability and algorithmic product ordering across the In The Style website and app. These changes will ensure customers see the most relevant results and should increase conversion and customer frequency.

· Adopting a more sophisticated CRM tool which allows us to launch focused customer campaigns to increase engagement between launches. Our CRM capability has been limited to app and email notifications around collaboration launches.

· Using our new category led product structure to optimise our supplier base further. This means focusing on quality and value and exiting suppliers that no longer adhere to those standards.

· We aim to have substantially completed the re-platforming of the Group's back-end stock and merchandising systems by the end of the financial year. The Group's new capability includes an upgraded product information database and improved category management along with more built-in integrations to allow distribution to other marketplaces.

· We have agreed a new concession model with one of our digital partners and will be operating this channel by the end of the year.

Maintaining an engaged customer base

The Group's brand and purpose are attractive to our core customer base which comprises women in their mid-twenties to mid-forties, typically of low- to mid-incomes. Engagement levels with this core base have remained robust despite the softening in consumer confidence over the course of the calendar year to date. Gains in engagement levels and the customer base that the Group made through the pandemic period have been largely maintained, providing a strong platform for future growth.

DTC metrics	H1 2023	H1 2022	H1 2023 vs H1 2022	H1 2020*	H1 2023 vs H1 2020
DTC revenue (£'000)	22,847	22,962	(1%)	7,904	189%
Total orders ('000)	841	826	2%	341	146%
Average order value (£)	49.89	52.75	(5%)	44.85	11%
Visits (m)	25.0	26.9	(7%)	16.5	52%
Conversion (%)	3.36%	3.07%	0.29%pts	2.07%	1.29%pts
Active customers ('000)	523	446	17%	240	118%
Order frequency (times)	1.61	1.85	(13%)	1.42	13%

* Presented as this was the last comparative six months not impacted by restrictions imposed by the Covid-19 pandemic.

During the first six months of the year we launched 72 collections with 19 distinct influencers through our distinctive social collaboration model. To complement this, we increased the level of reach generated through our micro-influencer network. Through the first six months of the year we engaged over 140 different micro-influencers with a combined reach of over 2.8m followers who made over 1,800 posts relating to In The Style products.

The total number of orders placed during the period increased by 2% to 841,000 (H1 2022: 826,000) with an average order value of £49.89 (H1 2022: £52.75). Conversion was particularly strong for the period at 3.36%, an increase of 0.29% year-on-year (H1 2022 3.07%) as incremental improvements in the customer journey resulted in a positive impact. Visits reduced by 7% year-on-year to 25.0m (H1 2022: 26.9m) reflecting the market softening relative to a year ago.

Active customers increased by 17% to 523,000 (H1 2022: 446,000) meaning that order frequency reduced to 1.61x in the period. The Group's collaboration with Dame Deborah James launched to support Cancer Research UK, attracted over 120,000 new customers during the period, with over 37,000 going on to make a second purchase. This increase in brand exposure was positive for In The Style, but the large inflow of new customers, some of which are outside of the Group's core demographic, diluted order frequency.

We recognise that increasing order frequency remains one of the largest growth opportunities for the Group. Becoming the 'best of launch and browse' is key to the Group's strategy, and we expect developments being made in the second half of the year to improve the way customers shop on our site.

Having a positive impact

During the first half of the year, the Group supported a number of charitable campaigns that resonate with our purpose of inspiring confidence. The largest of these was the campaign for the BowelBabe Fund for Cancer UK in collaboration with Dame Deborah James. Profits from the collections were donated to the fund with the Group helping to raise £1.7m for further research into bowel cancer.

FINANCIAL REVIEW

	H1 2023 £'000	H1 2022 £'000	H1 2023 v H1 2022 %	H1 2020* £'000	H1 2023 v H1 2020 %
Direct-to-consumer	22,847	22,962	(1%)	7,904	189%
Wholesale	3,735	6,852	(45%)	726	414%
Revenue	26,582	29,814	(11%)	8,630	208%
Cost of sales	(13,687)	(15,781)	13%	(4,027)	(240%)
Gross profit	12,895	14,033	(8%)	4,603	180%
Gross profit margin	48.5%	47.1%	1.4%pts	53.3%	(4.8%pts)

Distribution costs	(4,784)	(5,457)	12%	(1,923)	(149%)
Underlying administrative expenses	(9,943)	(7,380)	(35%)	(3,304)	(201%)
Adjusted EBITDA	(1,832)	1,196	(253%)	(624)	194%
Adjusted EBTIDA margin %	(6.9%)	4.0%	(10.9%)	(7.2%)	0.3%pts

Depreciation and amortisation	(802)	(293)	(174%)	(266)	(202%)
Share-based payments	(115)	-	n.m.	-	n.m.
Exceptional items	(325)	-	n.m.	-	n.m.
Operating (loss)/ profit	(3,074)	903	(440%)	(890)	(245%)

*H1 2020 used as an alternative comparative given that it is the last H1 not impacted by Covid-19 restrictions.

Revenue

Revenue totalled £26.6m for the six months ended 30 September 2022, a reduction of 11% when compared to the prior year (H1 2022: £29.8m) reflecting a challenging consumer environment. The Group has however consolidated the gains it made through the period that was impacted by Covid-19 with revenue growth of 208% when compared to H1 2020.

DTC revenue, which is generated through the sale of apparel on the Group's e-commerce website and proprietary In The Style mobile app, remained broadly flat at £22.8m (H1 2022: £23.0m) despite the nationwide reduction in consumer confidence.

The Group continues to leverage its distinctive collaboration launch model with influencers to drive engagement with consumers and to give the inspiration to purchase. Total visits decreased by 7% to 25.0m (H1 2022: 26.9m) however product engagement continues to be strong, with conversion increasing by 0.29%pts to 3.36% (H1 2022: 3.07%).

Average order value, which we define as gross sales including sales tax divided by the number of orders, decreased by 5% to £49.89 (H1 2022: £52.75). The decline resulted from a decrease in items per order, which fell by 10% to 2.23 (H1 2022: 2.49). Increases in RRPs from H1 2022 were offset partly by an adverse movement in sales mix resulting in the average revenue per item increasing by 6% year-on-year. Full price sales (excluding charity) for the period were 28% which was in line with prior year (H1 2022: 28%).

Total orders processed increased by 2% to 841,000 (H1 2022: 826,000). These orders were generated from 523,000 active customers, an increase of 17% on the prior year (H1 2022: 446,000). Order frequency, defined as total orders divided by active customers, decreased by 13% to 1.61 times in the six-month period (H1 2022: 1.85 times per six months).

Return rates reduced by 1.5% to 37.0% (H1 2022: 38.5%).

Wholesale revenue, which is generated through sales to third-party retail partners, reduced by 45% to £3.7m (H1 2022: £6.9m). This reduction was expected in part as the Group made the decision to scale down its in-store partnership to concentrate on digital partnerships. In addition to this, all of our digital partners have tightened their stock holding, resulting in a reduced volume of sales. This further reinforces our strategic desire to create a stockless option for partners.

Gross profit

Gross profit reduced by 8% to £12.9m (H1 2022: £14.0m) although gross profit margin increased by 1.4%pts to 48.5% (H1 2022: 47.1%).

Direct-to-consumer gross profit margin reduced by 1.5%pts to 53.7% (H1 2022: 55.2%). Through the first six months of the year, the Group has been disciplined with stock control which has resulted in appropriate offers and mark-down of product. In addition, raw material costs have increased and this has been amplified by the depreciation of the pound against the dollar. Offsetting these headwinds was the positive influence of the Dame Deborah James charity collection which was high gross margin but became break even at AEBITDA due to all profits being donated. Excluding the Dame Deborah James T-shirts, DTC gross profit margin for the period was 50.8%.

Wholesale gross margin reduced by 3.4%pts to 16.6% (H1 2022: 20.0%).

Distribution costs

Distribution costs, which includes postage, direct warehouse costs and transaction fees, decreased by 12% to £4.8m (H1 2022: £5.5m) which was equivalent to 18.0% of revenue (H1 2022: 18.3%).

The Group has been focused on optimising warehouse costs and has realised savings through a more favourable permanent to temporary staff split and the in-housing of returns which has halved the processing cost. It is envisaged that moving to our new facility will result in further efficiencies through the second half of the year as the additional space allows us to optimise our operations further.

Transaction fees as a percentage of revenue increased as a greater proportion of sales came through buy now - pay later providers.

Underlying administrative expenses

Underlying expenses increased by 35% to £9.9m (H1 2022: £7.4m). This includes £1.8m of charity donations in the period, the majority of which was related to the Dame Deborah James collection which saw all profits donated to the Bowelbabe fund for Cancer Research UK.

Excluding charity donations, underlying administrative expenses increased by 10% to £8.1m (H1 2022: £7.4m).

	H1 2023 £'000	H1 2022 £'000	Change %
Marketing	3,263	4,145	(21%)
People costs (excluding direct warehouse)	2,731	1,991	37%
Overheads	2,130	1,244	71%
Underlying costs exc. charitable donations	8,124	7,380	10%
Charitable donations	1,819	-	n.m.
Underlying administrative expenses	9,943	7,380	35%

Marketing costs decreased by 21% to £3.3m (H1 2022: £4.1m). The majority of marketing costs relate to influencer commissions for profit generated through collaborations. Cost relating to commissions reduced year-on-year due to the reduction in both revenue generated and product profitability. The Group also invested less year-on-year in pay-per-click marketing spend as the net benefits were identified as being negligible in the current period.

People costs, excluding direct warehouse costs and share-based payments, increased by 37% year-on-year to £2.7m (H1 2022: £2.0m). The number of full-time equivalent employees ('FTEs'), excluding warehouse colleagues, increased by 10% to 131 (H1 2022: 119) on average for the period. Cost per FTE increased by 25%, primarily as a result of changes in staff mix in the second half of FY22. The Group completed a reorganisation of its core teams in September 2022, exiting the period with 103 FTEs compared to 125 at the start of the period.

Overheads increased by 71% to £2.1m (H1 2022: £1.2m). Of the £0.9m increase in overheads year-on-year, £0.5m related to increased tech spend, which related to general improvements in website functionality. A further £0.2m related to facility costs for the Group's head office which was occupied in H2 2022.

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 payments. 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.

	H1 2023 £'000	H1 2022 £'000	Change %
Operating (loss)/ profit	(3,074)	903	(440%)
Share-based payments	115	-	n.m.
Exceptional items	325	-	n.m.
Adjusted operating (loss)/ profit	(2,634)	903	(392%)
Depreciation and amortisation	802	293	(174%)
Adjusted EBITDA	(1,832)	1,196	(253%)

Adjusted EBTIDA for the year was a loss of £1.8m (H1 2022: £1.2m profit).

Operating loss/(profit)

The Group made an operating loss for the period of £3.1m (H1 2022: £0.9m operating profit).

Depreciation and amortisation for the six months ended 30 September 2022 amounted to £0.8m (H1 2022: £0.3m) and primarily related to capitalised development of the Group's web and app platforms, and the recognition of new IFRS 16 assets across H2 2022 and H1 2023.

The Group incurred share-based payment charges (including associated NI) of £0.1m (H1 2022: £nil). Charges relate to share options granted to senior management.

Exceptional items totalling £0.3m relate to the Group's warehouse relocation across August and September 2022.

Loss/ profit before tax

The Group made a loss before tax of £3.1m in the six months ended 30 September 2022 (H1 2022: £0.9m profit).

Taxation

The Group's expected effective tax rate for the year is 15% which is marginally below the standard corporation tax rate in the UK. The Group has not recognised any additional deferred taxation credit for losses in the period and the resulting tax charge is therefore £nil (H1 2022: £nil).

Earnings per share

Basic earnings per share ('EPS') from continuing operations was a 6.00 pence loss per share (H1 2022: 1.70 pence profit per share).

The adjusted basic earnings per share from continuing operations was a 5.16 pence loss per share (H1 2022: 1.70 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.

	H1 2023 £'000	H1 2022 £'000	Change %
(Loss)/profit for EPS	(3,149)	890	(454%)
Share-based payments	115	-	n.m.
Exceptional items	325	-	n.m.
Adjusted (loss)/profit for EPS	(2,709)	890	(404%)
Weighted average number of ordinary shares for basic EPS (thousands)	52,450	52,450	-
Adjusted EPS	(5.16)	1.70	(404%)

Cash flow and net cash

Net cash as at 30 September 2022 was £3.9m (30 September 2021: £9.9m; 31 March 2022: £5.8m).

Net cash outflows from operating activities totalled £0.4m (H1 2022: £1.5m outflow). Changes in working capital resulted in a cash inflow of £1.7m.

A reduction in wholesale debtors was the primary reason for a £0.4m cash inflow relating to trade and other receivables.

Stock levels increased to £7.1m as of 30 September 2022 (31 March 2022 £3.1m) resulting in a £3.9m working capital cash outflow. Stock health remained strong, with the Group entering the second half of the year with less problem stock that in the prior year. Increases in stock volumes therefore resulted from three initiatives: (i) improving the customer experience by ensuring stock is received in good time prior to a launch; (ii) launching earlier in the season so that stock can be available for sale for a longer amount of time; and (iii) shipping product via sea rather than by air to gain margin benefits (which results in a greater amount in transit).

Managing stock levels to maintain liquidity is of utmost importance, and stock levels have reduced since the period end as we trade through the peak trading quarter for the Group.

Movements in trade and other payables resulted in a £5.3m working capital inflow (H1 2022: £3.1m). The majority of this benefit is related to creditors that correspond to increased stock levels. The Group negotiated improved credit terms with the majority of suppliers over the course of the period to offset the impact of changing shipping methods from air to sea.

Cash flows used in investing activities, and specifically capital expenditure, amounted to £0.8m (H1 2022: £0.7m). The majority of capital expenditure relates to the development of the Group's web and app platforms. Capital additions relating to the fit out of the Group's new warehouse amounted to £0.1m.

Cash flows used in financing activities totalled £0.8m (H1 2022: £0.1m inflow). Of the cash outflow for the period, £0.3m related to lease payments (H1 2022: £0.1m) with £0.4m being the one-off deposit payment for the new warehouse. This deposit will be returned at the end of the 10-year lease.

CONSOLIDATED INTERIM STATEMENT OF TOTAL COMPREHENSIVE INCOME

For the six months ended 30 September 2022

		6 months to	6 months to	Year to
		September 2022	September 2021	March 2022
		£'000	£'000	£'000
	Note	(Unaudited)	(Unaudited)	(Audited)

Revenue	2	26,582	29,814	57,317
Cost of sales		(13,687)	(15,781)	(32,148)
Gross profit		12,895	14,033	25,169

Distribution costs		(4,784)	(5,457)	(10,036)
Administration expenses		(11,185)	(7,673)	(16,639)
Other operating income		-	-	-
Operating (loss)/profit		(3,074)	903	(1,506)

Adjusted EBITDA		(1,832)	1,196	551
Depreciation	8 , 14	(432)	(219)	(585)
Amortisation	7	(370)	(74)	(395)
Share-based payments		(115)	-	(861)
Exceptional items	3	(325)	-	(216)

Operating (loss)/profit		(3,074)	903	(1,506)

Net finance costs	4	(75)	(13)	(39)
(Loss)/profit before taxation		(3,149)	890	(1,545)

Income tax	5	-	-	216
(Loss)/profit and total comprehensive (loss)/income for the year		(3,149)	890	(1,329)

(Loss)/profit per share - basic and diluted	6	(6.00)	1.70	(2.53)

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 3.

All results derive from continuing operations.

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

CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

As at 30 September 2022


		September 2022	September 2021	March 2022
		£'000	£'000	£'000
	Note	(Unaudited)	(Unaudited)	(Audited)
Assets
Non-current assets
Intangible assets	7	2,405	1,562	2,154
Property, plant and equipment	8	799	356	773
Right of use assets	14	6,142	1,202	972
Other debtors	9	441	-	-
Deferred tax asset		716	500	716
Total non-current assets		10,503	3,620	4,615

Current assets
Inventories	10	7,086	3,414	3,142
Trade and other receivables	11	4,832	6,034	5,191
Cash and cash equivalents		3,851	9,894	5,823
Total current assets		15,769	19,342	14,156

Total assets		26,272	22,962	18,771

Equity
Share capital	16	131	131	131
Share premium		10,942	10,942	10,942
Merger reserve		(58)	(58)	(58)
Share based payments reserve		976	-	861
Retained earnings/(accumulated losses)		(4,310)	1,058	(1,161)
Total equity/(deficit)		7,681	12,073	10,715

Liabilities
Non-current liabilities
Provisions	15	929	-	127
Lease liability	14	5,014	843	686
Total non-current liabilities		5,943	843	813

Current liabilities
Trade and other payables	12	11,032	8,073	5,908
Contract liabilities	13	1,011	1,360	871
Provisions	15	-	-	179
Lease liabilities	14	605	613	285
Total current liabilities		12,648	10,046	7,243

Total liabilities		18,591	10,889	8,056

Total equity and liabilities		26,272	22,962	18,771

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2022

	Share Capital	Share Premium	Merger reserve	Share based payments reserve	(Accumulated losses)/ retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000

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

Profit for the period	-	-	-	-	890	890
Total comprehensive profit for the period	-	-	-	-	890	890


As at 30 September 2021 (Unaudited)	131	10,942	(58)	-	1,058	12,073

Loss for the period	-	-	-	-	(2,219)	(2,219)
Total comprehensive loss for the year	-	-	-	-	(2,219)	(2,219)

Transactions with shareholders:
Employee share schemes - value of employee services	-	-	-	861	-	861
Employee share schemes - value of employee services	-	-	-	861	-	861
Total transactions with shareholders	-	-	-	861	-	861

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

Loss for the period	-	-	-	-	(3,149)	(3,149)
Total comprehensive loss for the year	-	-	-	-	(3,149)	(3,149)

Transactions with shareholders:
Employee share schemes - value of employee services	-	-	-	115	-	115
Employee share schemes - value of employee services	-	-	-	115	-	115
Total transactions with shareholders	-	-	-	115	-	115

As at 30 September 2022 (Unaudited)	131	10,942	(58)	976	(4,310)	7,681

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

For the period ended 30 September 2022

		6 months to	6 months to	Year to
		September 2022	September 2021	March 2022
	Note	£'000	£'000	£'000
		(Unaudited)	(Unaudited)	(Audited)
Net cash flows used in operating activities
(Loss)/ Profit for the period		(3,149)	890	(1,329)

Adjustments for:
Share-based payments		115	-	861
Amortisation of intangible assets	7	370	74	395
Depreciation of property, plant and equipment	8, 14	432	219	585
Finance income	4	(3)	(1)	(1)
Finance costs	4	78	14	40
Income tax expense	5	-	-	(216)

Movements in working capital
Increase in inventories		(3,944)	(1,459)	(1,187)
Decrease/ (increase) in trade and other receivables		359	(4,342)	(3,499)
Increase in trade and other payables		5,327	3,143	580

Taxation paid		-	-	-
Net cash used in operating activities		(415)	(1,462)	(3,771)

Cash flows used in investing activities
Purchase of intangible assets	7	(622)	(511)	(1,424)
Purchase of property, plant and equipment	8	(160)	(144)	(698)
Interest received	4	3	1	1
Net cash used in investing activities		(779)	(654)	(2,121)

Cash flows from financing activities
Receipt from invoice discounting facility		2	171	53
Deposit paid on lease liabilities	9	(441)	-	-
Interest paid on lease liabilities	14	(78)	(14)	(40)
Repayment of lease liabilities	14	(261)	(86)	(237)
Net cash (used in)/from financing activities		(778)	71	(224)

Net decrease in cash and cash equivalents		(1,972)	(2,045)	(6,116)

Cash and cash equivalents brought forward		5,823	11,939	11,939
Cash and cash equivalents carried forward		3,851	9,894	5,823

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. General information

These condensed consolidated interim financial statements have been prepared as at, and for the six months ended 30 September 2022. The comparative information presented has been prepared as at, and for the six months ended 30 September 2021.

The condensed consolidated interim 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 condensed 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).

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, 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 December 2023. The assumptions used in the financial forecasts are based on the Group's historical performance and management's extensive experience of the industry.

The Directors do however recognise that the wider economic environment provides uncertainty in the short- to medium- term. Significant levels of inflation, particularly in relation to energy, food and interest rates, are impacting our customer base and will likely lead to a recessionary environment in the current months but the extent to which this will impact In The Style is unknown.

The Group has formulated a base case forecast that take into consideration the wider economic environment and the current positioning of our business. This forecast has then 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 30 September 2022, the Group held instantly accessible cash and cash equivalents of £3.9m with an additional £0.8m available through the Group's invoice discounting facility. Movements in working capital following the period end resulted in cash and cash equivalents at the end of November being £4.4m with an additional £1.1m available through the Group's invoice discounting facility.

Through the first half of the financial year, the Group has taken a number of steps to increase its profitability. These initiatives include restructuring the product, marketing and tech teams; optimising stock buys to reduce overall discount levels; and exiting relationships with influencers who are unprofitable. As a result, the Group expects the level of profitability to improve in the second half of the year.

The Directors believe that following these initiatives there is a sufficient level of liquidity/financing headroom post stress testing across the going concern forecast period to 31 December 2023, as outlined in more detail below.

Approach to stress testing

The going concern analysis, which was approved by the Board in November 2022, reflected the actual trading to September 2022, as well as detailed financial forecasts for the period up to 31 December 2023. The Group has taken a measured approach to its forecasting.

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. Such events would, for example, lead to a greater level of discounting in order to liquidate stock and therefore a reduction in gross margin and overall profitability. In addition, the Board has considered the impact of disruption to the supply chain caused by Covid-19 in China 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 plausible downside scenario incorporating the following:

• A reduction in visits of 7% across the forecast period compared with the base case combined with a reduction customer conversion of 4% from visits to order. When combined with a reduction in average order value, the downside scenario assumes a reduction in gross sales of 13% compared to the base case;

• Increased marketing spend as a proportion of revenue by 2%pts each month for the entire going concern forecast period; and

• Reduction in gross margin of 4%pts compared to the base case over the remainder of the financial year to clear any unwanted stock and maintain liquidity. Stock buys are then moderated to maintain historical levels of gross profit levels from April 2023 until the end of the forecast period.

The scenario shows that the Group would have sufficient cash reserves to trade through the forecast period to cover the Group's liabilities as they fall due. In addition, there are additional mitigating steps available to the Group should management believe they are required. These mitigating actions include reducing stock buys further to reduce the working capital requirement and reduce the risk of loss making sales, reducing the level of software development planned to make medium-term improvements to the Group's platform, reducing headcount in support functions 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 severe but plausible consumer downturn.

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 December 2023. Accordingly, the Directors conclude it is appropriate that these consolidated financial statements be prepared on a going concern basis.

2. 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
	September	September	March	September	September	March
	2022	2021	2022	2022	2021	2022
	£'000	£'000	£'000	£'000	£'000	£'000
Direct-to-consumer	22,847	22,962	44,683	12,275	12,666	23,314
Wholesale	3,735	6,852	12,634	620	1,367	1,855
	26,582	29,814	57,317	12,895	14,033	25,169

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

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
United Kingdom	24,521	28,663	53,558
Europe	1,734	651	2,598
Rest of the World	327	500	1,161
	26,582	29,814	57,317

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.

A reconciliation of Adjusted EBITDA is set out below:

		September	September	March
	Note	2022	2021	2022
		£'000	£'000	£'000
Operating (loss)/profit		(3,074)	903	(1,506)
Depreciation	8, 14	432	219	585
Amortisation	7	370	74	395
Share-based payments		115	-	861
Exceptional items	3	325	-	216
Adjusted EBITDA		(1,832)	1,196	551

3. Exceptional items

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Board reorganisation	-	-	216
Warehouse transition	325	-	-
	325	-	216

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 period ended 30 September 2022 these costs related to the search and agreement to lease of the new warehouse facility based in Heywood along with the subsequent costs to move the Group's operations.

There were no exceptional costs in the period ended September 2021. For the year ended March 2022, exceptional costs related to the search and recruitment fees incurred for two new executives.

4. Net finance costs

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Bank Interest receivable	3	1	1
Interest on lease liabilities	(78)	(14)	(40)
	(75)	(13)	(39)

5. Taxation

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Income tax (credit)	-	-	(216)

Taxation has been calculated based on the standard rate of UK corporation tax for the period of 19% (September 2021: 19%).

The taxation for the period has been calculated based on management's best estimate of the effective tax rate for the full year of 14.8% which would have resulted in a tax credit for the period of £466k. Given the current level of profitability of the Group, and the amount of tax losses already recognised, no further deferred tax assets have been recognised in the period and as such the income tax credit for the period is £nil.

6. Earnings per share

Basic and diluted earnings per share

	Weighted average number of ordinary shares	Total earnings	Pence
	Weighted average number of ordinary shares	£'000	per share
Six months ended 30 September 2022
Basic	52,499,998	(3,149)	(6.00)
Diluted	52,499,998	(3,149)	(6.00)

Six months ended 30 September 2021
Basic	52,499,998	890	1.70
Diluted	52,499,998	890	1.70

Year ended 31 March 2022
Basic	52,499,998	(1,329)	(2.53)
Diluted	52,499,998	(1,329)	(2.53)

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 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 2023 and 2022 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).

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
(Loss)/profit for basic EPS	(3,149)	890	(1,329)
Exceptional items	325	-	216
Share-based payments	115	-	861
Tax Impact	-	-	(41)
Adjusted (loss)/profit	(2,709)	890	(293)
Adjusted basic and diluted earnings per share (pence)	(5.16)	1.70	(0.56)

7. Intangible assets

		Software	Assets
		Development	under
	Goodwill	Costs	Construction	Total
	£'000	£'000	£'000	£'000
Cost
At 1 April 2021	528	1,887	-	2,415
Additions	-	511	-	511
Disposals	-	-	-	0
At 30 September 2021	528	2,398	-	2,926

Accumulated amortisation
At 1 April 2021	-	(1,290)	-	(1,290)
Amortisation charged in the period	-	(74)	-	(74)
Disposals	-	-	-	0
At 30 September 2021	-	(1,364)	-	(1,364)

Carrying amount
At 30 September 2021	528	1,034	-	1,562


		Software	Assets
		Development	under
	Goodwill	Costs	Construction	Total
	£'000	£'000	£'000	£'000
Cost
At 1 April 2022	528	2,878	433	3,839
Additions	-	250	372	622
Disposals	-	-	-	-
At 30 September 2022	528	3,128	805	4,461

Accumulated amortisation
At 1 April 2022	-	(1,686)	-	(1,686)
Amortisation charged in the period	-	(370)	-	(370)
Disposals	-	-	-	-
At 30 September 2022	-	(2,056)	-	(2,056)

Carrying amount
At 30 September 2022	528	1,072	805	2,405

8. Property, plant and equipment

	Property	Plant and	Motor	Fixture and	Computer
	improvements	machinery	Vehicles	fittings	equipment	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 April 2021	83	55	1	296	241	676
Additions	36	-	-	45	63	144
Disposals	-	-	-	-	-	-
At 30 September 2021	119	55	1	341	304	820

Accumulated depreciation
At 1 April 2021	(65)	(19)	-	(146)	(174)	(404)
Depreciation charged in the period	(7)	(11)	-	(21)	(21)	(60)
Disposals	-	-	-	-	-	-
At 30 September 2021	(72)	(30)	-	(167)	(195)	(464)

Carrying amount
At 30 September 2021	47	25	1	174	109	356


	Property	Plant and	Motor	Fixture and	Computer
	improvements	machinery	Vehicles	fittings	equipment	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 April 2022	550	55	1	421	343	1,370
Additions	-	92	-	11	57	160
Disposals	-	-	-	-	-	0
At 30 September 2022	550	147	1	432	400	1,530

Accumulated depreciation
At 1 April 2022	(135)	(21)	-	(220)	(221)	(597)
Depreciation charged in the period	(48)	(22)	-	(30)	(34)	(134)
Disposals	-	-	-	-	-	-
At 30 September 2022	(183)	(43)	-	(250)	(255)	(731)

Carrying amount
At 30 September 2022	367	104	1	182	145	799

For the period to 30 September 2022, the depreciation charge of £134,000 (2021: £60,000) has been charged to administrative expenses in the consolidated statement of comprehensive income.

9. Non-current assets - Other debtors

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Warehouse rent deposit	441	-	-
	441	-	-

On 31 July 2022 the Group entered into a lease agreement for a warehouse facility to increase the capacity of its operations. Under the terms of the lease, the Group was required to place an amount on deposit with the landlord. This amount is returned to the Group at the end of the ten-year term, or if certain financial health metrics are passed.

10. Inventories

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Finished goods and goods for resale	4,330	2,939	2,373
Right-of-return inventory	420	475	387
Goods in transit	2,336	-	382
	7,086	3,414	3,142

The Directors believe that the replacement value of inventories at would not be materially different than book value. Inventories at 30 September 2022 are stated after provisions for impairment of £696,000 (September 2021: £488,000).

Goods in transit inventory relates to items in transit from the manufacturer. Over the past year the Group has increased its level of stock purchased using a 'free-on-board' model through which the Group obtains possession of the stock at the country of origin and becomes responsible for its transit to the UK.

11. Trade and other receivables

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Trade receivables	2,874	4,464	4,070
Prepayments	1,322	1,549	688
Other debtors	636	21	433
	4,832	6,034	5,191

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 30 September 2022 for impairment loss against trade receivables (September 2021: nil). For the year ended 31 March 2022 the provision for impairment loss against trade receivables was nil.

12. Trade and other payables

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Trade payables	3,692	2,297	2,154
Other taxation and social security	204	353	166
Other payables	50	197	53
Accruals	7,086	5,226	3,535
	11,032	8,073	5,908

13. Contract liabilities

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Balance at the beginning of the period	871	760	1,113
Recognised as revenue in the year	(871)	(760)	(1,113)
New and existing contracts with customers	1,011	1,360	871
Balance at the end of the period	859	1,360	871

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

14. Leases

The group leases offices and warehouses for its operations. Rental contracts are typically made for fixed periods of 3 to 10 years. There are no judgements over the length of the lease term, other than whether or not break clauses are expected to be exercised 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 2021	292
New leases recognised in the year	1,069
Lease modifications	-
Depreciation charge for the year	(159)
Balance at 30 September 2021	1,202

Balance at 31 March 2022	972
New leases recognised in the year	4,411
Lease modifications	1,057
Depreciation charge for the year	(298)
Balance at 30 September 2022	6,142

During the year the Group entered into a new lease for its new warehouse at Heywood. This represents a 10 year lease agreement.

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

	September	September	March
Lease liabilities	2022	2021	2022
Lease liabilities	£'000	£'000	£'000
Maturity analysis - contractual undiscounted cash flows
Less than one year	866	496	315
More than one year, less than two years	848	292	218
More than two years, less than three years	869	269	212
More than three years, less than four years	954	270	212
More than four years, less than five years	690	247	88
Greater than five years	2,692	-	-
Total undiscounted lease liabilities at year end	6,919	1,574	1,045
Finance costs	(1,300)	(118)	(74)
Total discounted lease liabilities at year end	5,619	1,456	971


Lease liabilities included in the statement of financial position
Current	605	613	285
Non-current	5,014	843	686
	5,619	1,456	971

The total cash outflow for in relation to lease liabilities in the period was £339,000 (2021: £100,000). The total cash outflow in relation to lease liabilities in the year ended March 2022 was £277,000.

Amounts recognised in the consolidated statement of comprehensive income.

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

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Depreciation charge (within administration expenses)	298	159	389
Interest expense (within finance costs)	78	14	40

15. Provisions

Dilapidations have been recognised to account for the cost of returning leased properties to their original condition

	£'000
Balance as at 31 March 2022	306
Provision for dilapidations included within new right-of-use-asset	612
Interest charged on discounted cashflows	11
Balance as 30 September 2022	929

16. Share capital

	September	September	March
	2022	2021	2022
	£'000	£'000	£'000
Allotted , called up and fully paid ordinary shares
At beginning of period	52,499,998	52,499,998	52,499,998
At end of period	52,499,998	52,499,998	52,499,998

All shares rank pari-passu.

17. Events after the reporting period

There have been no material events that have occurred after the end of the reporting period other than the Board changes and the intention to perform a Strategic review as described within the Strategic update which forms part of this announcement.

18. Principal 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 continued to place 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.25 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 over the last twelve months with a number of influencers signed up to do collaborations. These included Perrie Sian, Gemma Atkinson and Yasmin Devonport.

The Group's founder, Adam Frisby, is operating as the Groups 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 and has restructured both product and marketing teams during the period to realise greater efficiency and improved product quality.

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 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 and has restructured to promote greater collaboration between designers and buyers.

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

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 (including the Covid-19 pandemic as set out below in the risk factor titled Covid-19), 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,

During the prior year, the Group 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.

Through the first half of the year, this objective was largely fulfilled.

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 climate change

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.

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 have 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.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

IR DZMGZMNZGZZZ

Companies

Itsarm (ITS)

Monday, 13th May 2024

COMPANIES COVERED:

VCT DPLM ZOO

Diploma shares jump as full year guidance is upgraded in the wake of successful acquisitions but Victrex slides as forecast headwinds hit home. Zoo Digital also finds support as last year’s woes for the wider entertainment industry fade.

Full Archive

UK 100

Latest directors dealings

8 hours ago Argentex Group
8 hours ago Centrica
9 hours ago OSB Group
9 hours ago Legal & General Group
9 hours ago Team17 Group

All directors dealings today