Interim results for the six months to 31 July 2022

RNS Number : 9312Z

Unbound Group PLC

20 September 2022

 

Unbound Group plc

Interim results for the six months to 31 July 2022

Continued growth and strategic progress in a challenging consumer environment

20^th September 2022

Half Year Financial Highlights:

· Revenue growth of 10.4% to £27.6m (H1 FY22 £25m), illustrating benefits of multi-channel sales model despite challenging market conditions

· Expansion of Gross Margin to 63.4%, growth of 180 bps over the prior year, driven by progress in efficiency plan and delivery of product strategy, resulting in gross profit growth of £2.1m

· EBIT loss of £0.3m after costs incurred in technical launch of Unbound platform of £1.0m and non-recurring PLC costs of £0.15m

· Cash at H1 FY22 of £2.7m (H1 FY22 £3.4m) with net debt of £8.4m (H1 FY22 £16.4m), pre-equity fundraise in August 2022 raising £3.1m (net of expenses)

Summarised key financials (£000):

	A+B+C	A	B	C
	Unbound Group Consolidated	Unbound Group Costs	Unbound Development Costs	Hotter Shoes	Hotter Shoes	Hotter YOY
	July 22	July 22	July 22	July 22	July 21
Revenue	27,630	-	-	27,630	25,028	+10.4%
Gross Profit	17,518	-	-	17,518	15,417	+£2.1m
Gross Margin %	63.4%	-	-	63.4%	61.6%	-
Costs	(17,865)	(343)[1]	(978)[2]	(16,544)	(14,094)[3]	+17.4%
Operating (loss)/ profit - Pre Exceptional	(347)	(343)	(978)	974	1,323	-26.4%
Net Debt1	£8.4m	-	-	-	£16.4m
Inventory	£7.2m	-	-	£7.2m	£4.6m	+£2.6m[4]

  Notes: 

In the above table and throughout this document references to Hotter Shoes refer to the trading activities of Beaconsfield Footwear Limited.

Alternative performance measures are defined in Note 7.

¹ Unbound PLC related costs (including LTIP charge of £0.1m) of which approx. £0.6m will be recurring (per annum) – post cost reduction programme referenced below

² Unbound platform development costs of which £0.7m are one-off in nature

³ Hotter Shoes prior year operating costs reduced by Covid-related support of £1.5m

⁴ Prior year inventory reduced from optimal by approx. £2.5m due to impact of supply chain disruption

Half Year Operational and Strategic Highlights:

Unbound Group

· Successful equity raise of £3.1m (net of expenses) post half-year, enabling the execution of our strategic growth plan as market conditions improve, increasing the resilience and significantly strengthening the liquidity position of the Group

· Unbound trading platform roll-out is on track with technical delivery and costs complete on schedule in July, with partner brands continuing to be on-boarded throughout Q3 and Q4

· Established an 'always-on' community of target consumers, 'U_Space', to fuel deep insight into their lifestyles, attitudes and behaviours, shaping the future development of Unbound Group. Further roll out is underway, to position Unbound as the authority voice in the 55+ consumer

Hotter Shoes

· All channels growing YoY, with notably strong performance in Retail +71.6%, adjusting for COVID related closures in FY22 +17%

· The combination of our UK manufacturing facility and strengthened supply chain enabled us to respond to changing consumer behaviour in-season, which has and will continue to benefit our performance in an unpredictable environment 

· Strong strategic and operational progress delivered year to date:

§ Autumn Winter stock availability for Hotter at highest ever levels for season launch

§ Continuous Improvement culture expanded throughout the business, with targeted project groups working across departments, focussed on efficiency and cost savings

§ ISO9001 Quality Management Systems accreditation achieved

§ Awarded Drapers Footwear 'Best Store Design' for Solihull concept store

§ Finalists for 'Best Retailer' (£10-100m) at Drapers

§ Finalists for parliamentary Responsible Business Award, acknowledging our ESG improvements and plans.

Outlook:

· We have seen tougher trading conditions in recent weeks, the short-term outlook is very challenging to predict, given the volatility of the economic backdrop and resultant impact on consumer confidence

· Medium term growth objectives remain unchanged and, with 10% sales growth achieved in H1 despite challenging economic circumstances, we remain confident, but recognise an increased short-term risk. Focus will continue to be on managing costs, protecting margins and cashflow, ensuring the appropriate levels of working capital and managing capital investment tightly

· The launch of the Unbound platform will allow for a greater degree of revenue diversification over the medium term, in addition to growing and engaging with our active customer base

· We have made good progress with partner brand sign-ups for Unbound, and will continue to focus on onboarding further complementary brands within apparel, with plans to introduce wellness categories in Q1 2023. As planned, Unbound revenues in H2 will be small in the context of the Group, with the focus being onboarding partners onto the platform

· Given the challenging short term economic outlook we anticipate full year Operating Profit (pre-exceptional) will be between £nil and a £1m loss after H1 non-recurring costs of £0.7m

Ian Watson, Chief Executive Officer of Unbound Group plc, commented:

"Unbound Group has delivered an encouraging first half performance that builds on the momentum of 2021, despite the increased challenges of high inflation and a volatile and unpredictable consumer environment.  The combination of further growth in sales and gross margins demonstrates the effectiveness of our strategic initiatives and the value that our customers attach to our core Hotter product, giving us confidence despite the market conditions, which have become more challenging in recent weeks.  We have made good strategic progress in H1 and will continue to focus on efficiency gains and cost management in H2 to protect margins. We are confident in our brand and the benefits that will result from this focus and our continued ability to deliver our strategy over the long term.

The broader revenue base we have created with the launch of the Unbound platform marks an important strategic shift for the Group.  However, we remain mindful of the growing pressures on consumer spend. Consequently, we continue to review and adapt to the changing market conditions, maintaining our specialist focus on our core customer demographic of financially resilient 55+ consumers."

ENDS

Enquiries

Unbound Group plc
Ian Watson / Dan Lampard
[e-mail]
020 3874 8300

Singer Capital Markets

Peter Steel / Tom Salvesen / Alaina Wong / Kailey Aliyar

0207 496 3000

Vico Partners
Sofia Newitt
[e-mail]
020 3957 5045

CHIEF EXECUTIVE'S REVIEW

Unbound Group plc - overview:

Unbound Group plc is the parent company for a group selling a range of brands focused on the 55+ demographic. Unbound Group will build on the solid foundation of Hotter Shoes, its current main business, to grow value through its curated, multi-brand retail platform supporting the active lifestyles of the 55+ demographic with a range of products and services. Unbound Group's platform is powered by Mirakl's leading marketplace technology to enable the Group to partner seamlessly with selected third-party brands, on a drop ship model while negating the need to invest in working capital. Unbound Group's expanded offering beyond footwear will feature a broad range of active lifestyle products and services, with third-party complementary brands featuring alongside new Unbound Group brands, as well as Hotter.

Hotter Shoes - overview:

Hotter Shoes, an Unbound Group plc company, is one of the UK's leading specialist footwear brands, selling over 1.4 million pairs of shoes per year. Hotter's footwear has an uncompromising focus on 'customised comfort' and perfect fit through the use of its differentiating technology, including its e-commerce platform, 3D foot scanner and augmented reality app which enables the consumer to try products virtually from home. Hotter has been transformed from a retail to a digitally led, omni-channel business over the past 3 years, selling its footwear to over 4 million customers via online, its direct mail order channel and its targeted 17 Technology Centres and 8 garden centre concessions in the UK. Over 75% of sales are direct to consumer through digital channels. With its clearly defined, large and growing target demographic, Hotter now reaches 29% of the female population in the UK over the age of 55. Digital partnerships have recently been established with several online retailers including Next, John Lewis, The Very Group and M&S.

Brand awareness:

Hotter Shoes has a strong brand reputation amongst its core demographic, demonstrated by recent studies showing that 60 per cent. of the people surveyed (aged 50+) recognise Hotter Shoes as the number one brand for comfort shoes in the UK, ahead of Clarks on 57 per cent., Ecco on 49 per cent. and M&S and Gabor on 27 per cent. each. This sector (comfort and fit) is a significant segment of the footwear market, where numerous trends support positive market growth dynamics compared to other market segments. Furthermore, Hotter Shoes has a differentiated, premium product range, where 68 per cent. of its range is continuity product rather than fashion footwear, focusing on "Cushion+" lightweight cushioned soles, "Stability+" ultra supportive and "Precision fit" with over 40 width and size combinations.

Market drivers and expansion opportunity:

As a result of the Hotter Shoes' history and brand, the Group has a growing (currently 4.6 million individuals) customer database, with approximately 30 per cent. of the 55+ female population in the UK represented. With c. 15 million website visits each year, the customer base continues to grow, with the Group's email database having exceeded 1 million individuals in 2022.

Unbound's target demographic is not only the fastest growing demographic of the UK population, it is also an increasingly wealthy demographic generally experiencing a higher discretionary spend compared with the under 55s. The Group's target cohort of customers aged 55+ is increasingly focusing on health and wellbeing and becoming more active with the largest percentage rise in exercise participation being in this cohort. The majority of e-commerce businesses tend to be focussed on younger demographics leaving, in the opinion of the Directors, the Group's target demographic materially underserved online, despite online shopping participation and general digital literacy increasing the most amongst the over 65s age group.

The Directors believe that this offers an opportunity for sustainable incremental growth beyond that already being targeted by the Group's Hotter footwear brand. The Directors believe that Unbound has a specialist 'insight-led' focus on this under-served demographic and therefore intend to seek to capitalise on this opportunity by accelerating the Company's growth strategy as and when market conditions allow.

Trading performance:

In the first half of the year, performance was hit by significant macro-economic disruption, which was unforeseen and not factored into our original assumptions. The on-going conflict in Ukraine, political destabilisation, high inflation and the cost-of-living crisis were incremental impacts felt. Despite this, Hotter delivered a successful first half, and we built and launched our Unboundgroup.co.uk trading site, on time, on budget and to specification.

Our performance benefitted from our UK manufacturing base, including our strengthened supply chains which allowed us to react in season to changing customer demand patterns, as we saw a return to event-led and seasonal products.

Whilst volatility remains, management have taken swift action to address a number of external factors meaning Unbound has made strong operational progress in the first half of the year and approaches the second half with a clear set of strategic priorities and optimised stock availability. In addition, the Group now carries significantly less net debt, allowing for a more agile approach to executing on our strategic priorities to deliver shareholder value over the medium term.

Post period-end equity raise:

We have been able to progress all aspects of our strategy during H1. Our successful equity raise in August allows the acceleration of this, covering the areas below while also significantly strengthening the liquidity of the Group:

· Driving digital connection with our target customer base through growth of our Unbound Group partner brand strategy;

· Further expansion of our garden centre concession model;

· Investment in technology to improve customer experience, deliver cost efficiencies and facilitate accelerated scalable growth; and

· Increasing inventory effectiveness by utilising near shore suppliers with shorter lead time procurement of design-led and own-brand goods.

As detailed at the time of completion in August 2022, we will deploy the proceeds of the equity raise in controlled fashion as and when market conditions allow. We look forward to updating shareholders on our progress.

Strategic and business update

Our five strategic principles:

1.  Guided by Insight - Insight excellence drives all we do

We build our business out of unrivalled insight into the needs, attitudes and behaviours of our 55+ audience.

We go the extra mile to engage with, listen to and respond to their changing needs. We continuously track, measure and improve based on our learnings - embedding insight into everything we do.

Progress made during H1:

In March, we set up 'U_Space', an 'always-on' community of target Unbound Group consumers, to fuel deep insight into their lifestyles, attitudes and behaviours. This platform is used to shape the future development of Unbound Group. Further roll out is underway, to position Unbound as the authority voice in the 55+ consumer.

'U_Space' has two core insight objectives:

1.  Connection

a.  Provide the insight to help us connect with and sell to our audience

b.  Development of group strategy, partner offer and own brand offer

c.  Guiding communications strategy and execution

2.  Credibility

a.  Provide the data to underpin Unbound's position of expertise in the 55+ audience

b.  Driving Unbound profile and perceptions in media and broader discourse

2.  Superiority through specialism - Expert and focus are how we win

We're focused and undistracted. Focused on the 55+ consumer. Experts in comfort that helps you do more of what you love. We leverage our audience and comfort specialism to both strengthen our roots in footwear and expand into relevant adjacent categories. Growing and leveraging our unique database of engaged consumers is central to our business strategy and the tactics we deploy to achieve our goals.

Progress made during H1 - Focus on our next generation of core comfort styles:

We continue to enhance our products and build superiority through specialism. Our Autumn Winter (AW) 22 Hotter collection sees a +10% growth in shoes featuring our unique, comfort technologies, specific to the needs of the 55+ consumer. 

We have increased real choice for the season, with +17% more styles available within the range. A culture of continual improvement sees the brand striving to establish next generation, comfort hero styles. Successful new constructions from Spring Summer (SS) 2022 have been developed with seasonally appropriate styling, adding further breadth and consumer choice.

H1 FY23 saw a return to normalised product category demand. Seasonal styling outperformed versus plan and bounced back to pre-pandemic mix levels. We have reshaped our AW22 collection to reflect this behavioural change, resulting in style growth of 16% within our boot category, for example.

Our SS23 range continues to evolve and become a wider offer, as we expand into new comfort constructions following the success of recent sourcing and styling trials. We expect overall style growth of +4% on SS22.

Our expertise in comfort is further enhanced through the launch of a new technology Flex+. This addition to our family of technologies supports natural movement through anatomically placed flex grooves within Hotter exclusive sole designs.  Comfort technology within the collection has grown by +25% vs last season.

Hotter SS23 product strategy reflects the ongoing market shift towards Athleisure and Sport styling. Following a strong performance of +32% on prior year in SS22, further style growth has been planned for the season at +11%. New for SS23 is an exclusive range of functional athletic footwear suitable for light exercise.

Insight, gained via product testing with our core consumer, demonstrates the equal importance of desirability and comfort when buying. SS23 sees the range evolve from being 'item led' with a focus on improved styling and a nod to relevant fashion trends. Trends were validated and product tested with Hotter customers ahead of orders being placed.

Within 'superiority through specialism', we have focussed on improving the capabilities of our supply chain, which allowed us to respond in-season to changing customer demand patterns, with a return to seasonal, event-led demand. Our own UK-based manufacturing plant provides flexibility and resilience within our supply chain and as we enter the autumn / winter season our inventory levels and availability are at optimal levels.

3.  Growth through connection - We grow our business by curating, connecting and engaging

We have unique access to and understanding of the 55+ consumer. Leveraging our combination of access and understanding we bring together a highly curated group of brands with deep relevancy for our consumer.

Our connected commerce excellence means we enable our customers to shop when, where and how they want. We drive loyalty, frequency and advocacy by engaging our customers with targeted marketing and personalised journeys, amplified by our digital content and community.

Progress made during H1: Significant progress bringing partners onto Unboundgroup.co.uk

The Unboundgroup.co.uk website successfully launched on time, on budget and to specification on Thursday 28^th July with 7 brands operating on a capital light, drop-ship basis, live at point of launch. The team continue to engage with complementary partner brands, with further apparel brands expected to be on-boarded during October before developing a wellness category in Q1 2023. The partner brands we have met and are working with have unanimously recognised the strategic opportunity that Unbound Group presents.

The initial launch phase had the objective of ensuring technical and business readiness (for both Unbound and partner brands), for a seamless customer journey. The site stability and performance has been resilient and transactions, despatch and returns successful ahead of our further partner brands on-boarding in the coming weeks and months.

4.  Working Smarter - We fuel success by driving productivity

We continuously assess and improve the ways we work - seeking to maximise our efficiency and enhance our outputs. We utilise LEAN 6 Sigma principles to minimise wastage and maximise the customer experience.  We do this every day in all we do - believing in the power of marginal gains to drive our business forward.

Progress made during H1: Robust operational performance and tight cost control, with Continuous Improvement at the heart of our culture

We have developed a culture of Continuous Improvement, which began within the operations team and has been expanded, driving productivity across the business. Over 80 members of the workforce are now trained and skilled in the tools of LEAN 6 Sigma, delivering six figure productivity savings. This culture is underpinned by our corporate values and behaviours, which were rolled out across the business in May, embedding a culture of efficiency and cost saving focus throughout our workforce. This initiative comes in to sharper focus in volatile periods and will remain a core part of our drive to protect margins in the short term and enhance them over time, as evidenced in this set of results.

Our Corporate Values & Behaviours:

Our Vision:	We're here to help people move better, feel better and do more of what they love
Our Values:	EMPATHY	COURAGE	COMMITMENT	COLLABORATION
Our behaviours:	Start with the customer	Lead the way	Strive for better	Succeed together
	We believe every member of the team should be able to walk in our customers' shoes	We think courage is the quality that sets apart great businesses from good businesses	We think good enough is never good enough, always striving to improve	We think together we can go further and move faster

5.  Stepping up - We step up - for our business, our planet & our community

We believe in taking responsibility - individually and collectively for the way we operate as a business. For reducing our impact on the planet. And for contributing to the communities, we are part of. 

Progress made during H1: Driving our culture to enable team success in an unpredictable environment

During H1 we have increased focus on ESG initiatives, with business wide targets agreed and set in July, formalising much of the existing work that was on-going. The focus and passion of the teams earned us a place as finalist in the parliamentary Responsible Business Award.

Staff training and development continues to be a core focus, as we build an empowered and agile team to fuel our performance culture. The robustness and strength of the team to deliver multiple projects during H1 has been highlighted against the unprecedented macro backdrop that we are experience and gives us confidence in our resilience entering into H2.

Summary

Since the beginning of H1, and increasingly in the recent weeks, the external environment has become more challenging and harder to predict. The business, however, has performed well, delivering double digit growth and completing a range of strategic objectives to improve reach, scale and improved efficiencies. The team has applied LEAN principles, controlled costs successfully and acted decisively to manage the factors within our control.  A culture of continuous improvement is now engrained in our business and will allow for a greater degree of resilience during this period of volatility.

In an uncertain environment, the team has delivered a solid performance in H1 and remain focused on strategic deliverables, cash conservation and driving inefficiencies out of the business.

FINANCIAL REVIEW

Unbound Group plc was renamed from Electra Private Equity PLC ('Electra') on 21 January 2022.  Electra was a Main Market listed investment company with a private equity strategy. Following Electra's decision to dispose of its investment business, as announced on 21 May 2021, it sold or demerged a number of companies. Following the demerger of Hostmore plc on 1 November 2021, Electra's only remaining trading subsidiary was Beaconsfield Footwear Limited, trading as Hotter.

As part of the move from the Main Market to trading on AIM, Electra/Unbound Group plc ceased to be an investment trust so was no longer exempt from the obligation to prepare consolidated accounts.  Thus, the Unbound Group plc accounts for the period ending 31 July 2022 contain all the trading activities and operational assets and liabilities of the Hotter Group.  During the previous accounting period, the Electra accounts did not contain the trading activities and operational assets and liabilities of the Hotter Group whilst the accounts of Beaconsfield Footwear Limited did contain all of the trading activities and operational assets and liabilities of the Hotter Group and these accounts, which were included in the AIM Admission Document, have been used to show the comparative figures for the corresponding period.

As a result of the transfer to AIM, the capital structure of the group changed so that the financing (cash and borrowings) and equity of Unbound Group plc is different to that shown in the comparatives for Beaconsfield Footwear Limited.  In addition, the balance sheet of Unbound Group plc included a number of financial and non-trading assets that were previously owned by Electra most of which were disposed of prior to the reporting date.

In order to comply with the requirements of AIM rule 18 which requires that the information contained in a half-yearly report must include at least a balance sheet, an income statement, a cash flow statement and must contain comparative figures for the corresponding period in the preceding financial year (apart from the balance sheet which may contain comparative figures from the last balance sheet notified), the half-yearly report shows the comparative data in a consistent format to that which will be adopted in the AIM company's annual accounts having regard to the accounting standards applicable to such annual accounts i.e accounts that are in the format of a commercial group rather than an investment group as was the case for the published accounts for Unbound Group plc when it was listed on the Main Market as an Investment trust which included the set of accounts published for the year ended 31 January 2022.

KPIs

Unbound Group
6 months ended 31st July 2022 6 months ended 1st August 2021 Change % £'000s £'000s Revenue 27,630 25,028 +10.4% Gross Profit 17,518 15,417 +13.6% Gross Margin % 63.4% 61.6% +180bps Operating Loss pre exceptionals1 (347) 1,323 -126.2% EBITDA pre exceptionals1 1,619 3,154 -48.7%
1 Alternative Performance Measures are defined in Note 7.
Hotter Online Direct to Consumer Metrics
6 months ended 31st July 2022 6 months ended 1st August 2021 Change % Visits (000's) 9,313 9,315 (0.0)% Conversion Rate % (i) 3.4% 3.7% (0.3)% No. of Orders (000's) 317 341 (7.0)% Average Order Value (ii) £64.17 £57.14 12.3% Active Customer Base (iii) 619 587 5.5% Order Frequency (iv) 1.58 1.54 2.6% i.  Calculated as total orders divided by total visits ii.  Calculated as total order value divided by total orders iii.  Defined as having shopped in the last 12 months as at 31 July 2022 iv.  Calculated as last 12 months total shipped orders divided by active customers
		6 months ended 31st July 2022		6 months ended 1st August 2021		Change %
	Segmental	£'000s		£'000s
	Direct to Consumer	20,703		20,218		+2.4%
	Retail	5,052		2,944		+71.6%
	Wholesale	1,875		1, 866		+0.5%
	Total Revenue - Hotter	27,630		25,028		+10.4%
	Gross Profit	17,518		15,417
	Administration costs	(14,578)		(12,263)		+18.9%
	EBITDA pre exceptionals - Hotter	2,940		3,154
	Unbound Trading	(978)		-
	PLC Costs	(223)		-
	Share based payment	(120)		-
	EBITDA pre exceptionals - Unbound Group	1,619		3,154		-48.7%
	Depreciation and amortisation	(1,966)		(1,831)		+7.4%
	Operating (loss) / profit pre exceptional items	(347)		1,323		-126.2%

Hotter

Hotter performed strongly across all channels with growth in all segments, most notably Retail stores with annual growth being driven from COVID related closures in H1 FY22, however on a like for like trading day basis excluding this impact over 17% annualised growth.

Total revenue in the period has increased by 10.4% to £27.6m and gross margin expansion to 63.4%, growth of 180 bps over the prior year. Revenue growth was driven by higher average selling prices, due to a combination of increased technology within the range and increased RRPs. The higher selling prices combined with the progress in operational efficiencies more than offset operational inflationary pressures resulting in gross profit growth of £2.1m.

Digital KPIs on the whole improved compared to the prior period, as demonstrated by stable levels of web traffic and strong conversion levels. Growth in the active customer database, average order value and frequency was the driver of revenue growth.

We controlled costs tightly across all areas, with the annual increase in costs predominantly driven by the removal of one-off support events such as CJRS, rent and rates relief which were £1.5m in H1 FY22.

We delivered efficiencies in marketing costs with spend in H1 FY23 being 20.1% of revenue compared to 20.9% in the prior year. Fixed cost underlying growth was 3.6% with the removal of the rent and rates non-recurring benefit of H1 FY22. 

EBITDA (pre-exceptional charges) was £2.9m delivering a 10.6% margin. As noted above, comparative profits have been impacted by the removal of one-off support events such as CJRS, rent and rates relief which were £1.5m in H1 FY22.

Unbound Trading

As previously disclosed, the costs associated with the launch of the Unbound platform have resulted in a HY loss of £1m. The costs incurred relate to people, marketing and launch related costs. Of these costs c£0.7m are one off in nature.

As the trading platform launched (www.unboundgroup.co.uk) at the end of H1, no revenues occurred during H1.

Group Costs

Net of residual income streams the PLC costs were £0.2m in H1 HY23.  The Company has given notice on the offices at Old Park Lane in London and these will be vacated by the end of the calendar year. This will result in an annualised cost reduction of £0.3m. Ongoing recurring cash costs (i.e. excluding LTIPs) are anticipated to be £0.6m per annum.

Balance Sheet and Cash Flow

The increase in intangible assets, up by £1.2 million to £31.2 million (31 January 2022: £30.1 million), reflects the investment during the period in the ecommerce and technology platform.

The reduction in investments held for sale of £3.7 million to £0.1 million (31 January 2022: £3.8 million) relates to the disposal of the Company's shares in Hostmore plc and leasehold property investment during H1. These transactions generated gross cash proceeds of £2.4m and an aggregated loss on disposal of £1.3 million.

Inventory increased by £2.3 million to £7.2 million (31 January 2022: £4.9 million; H1 FY22 (Hotter Shoes): £4.6m). The overriding majority of inventory is represented by Hotter Shoes, with the increase driven by supply chain issues in the comparative period and strong availability for the autumn winter season.

Cash at H1 FY23 was £2.7m (31 January 2022: £5.5 million; H1 FY22 (Hotter Shoes): £3.4m) with net debt of £8.4m (31 January 2022: £6.6 million; H1 FY22 (Hotter Shoes): £16.4m). The H1 FY23 cash and net debt positions are stated pre the equity fundraise in August 2022 which raised £3.1m (net of expenses). The bulk of the net debt position is accounted for by Hotter Shoes, the decrease since H1 FY22 due to the refinancing completed in December 2021 which reduced debt by £5m and a further £1m repaid in July 2022.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE 6 MONTHS ENDED 31 JULY 2022

		Unbound Group plc		Hotter Shoes
	Notes	6 months ended 31st July 2022		6 months ended 1st August 2021
		£'000s		£'000s
Revenue	3	27,630		25,028
Operational Costs		(10,112)		(9,611)
Gross Profit	3	17,518		15,417
Other operating income		288		804
Administrative expenses		(16,067)		(13,067)
Share based payment		(120)		-
Depreciation and amortisation		(1,966)		(1,831)
Operating (loss) / profit pre-exceptional items		(347)		1,323
Exceptional items	4	(1,152)		(3,160)
Operating loss post exceptional items		(1,499)		(1,837)
Finance cost		(645)		(284)
Loss on ordinary activities before tax		(2,144)		(2,121)
Taxation		-		707
Loss on ordinary activities after tax		(2,144)		(1,414)
Loss on investments held for sale		(1,292)		-
Other comprehensive income		-		-
Total comprehensive income for the period		(3,436)		(1,414)
Attributable to:
Equity holders of the parent		(3,436)		(1,414)
Total comprehensive loss for the period		(3,436)		(1,414)
Loss per share:
Loss per share - basic and diluted, attributable to ordinary equity holders of the parent (pence)		(0.08)

The comparative financial information presented represents the historical financial information of Beaconsfield Footwear Limited, as was set out in Section B of Part 3 of the admission document dated 27 January 2022 (the "Admission Document") of Unbound Group plc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 JULY 2022

		Unbound Group plc	Hotter Shoes			Unbound Group plc
	Notes	6 months ended 31st July 2022	6 months ended 1st August 2021			16 months ended 31st January 20221
		£'000s	£'000s			£'000s
Assets
Non-current assets
Intangible assets		31,229	3,968			30,057
Right-of-use asset		6,207	7,640			6,922
Property, plant and equipment		2,163	2,749			2,665
Deferred tax		3,894	4,163			3,887
Total non-current assets		43,493	18,520			43,531
Current assets
Investments		38	-			3,755
Inventories		7,220	4,582			4,855
Trade and other receivables		2,691	1,989			2,283
Cash and cash equivalents		2,705	3,425			5,484
Total current assets		12,654	9,996			16,377
Total assets		56,147	28,516			59,908
Equity and liabilities
Equity
Share capital	5	10,565	42			10,565
Share premium	5	4,959	-			4,959
Own shares held	5	(2,273)	-			(2,426)
Revenue reserve	5	7,958	(9,972)			11,427
Equity attributable to owners of the parent		21,209	(9,930)			24,525
Total equity		21,209	(9,930)			24,525
Current liabilities
Trade and other payables		15,809	9,366			14,114
Borrowings		2,000	19,778			2,000
Lease liability		1,462	1,312			1,383
Provisions		107	-			490
Total current liabilities		19,378	30,456			17,987
Non-Current liabilities
Borrowings		9,100	-			10,100
Provisions		876	975			981
Lease liability		5,584	7,015			6,315
Total non-current liabilities		15,560	7,990			17,396
Total liabilities		34,938	38,446			35,383
Total equity and liabilities		56,147	28,516			59,908

¹ Unaudited Group Statement of Financial Position following the transition of Electra Private Equity Plc, an investment company to Unbound Group Plc, a trading group with effect from 1 February 2022.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS ENDED 31 JULY 2022

			Unbound Group plc		Hotter Shoes
	Notes		6 months ended 31st July 2022		6 months ended 1st August 2021
			£'000s		£'000s
Cash flows from operating activities
Group loss for the period			(3,436)		(2,121)
Share based payments			120		-
Depreciation and amortisation			1,966		1,831
(Profit) on disposal of property, plant and equipment			-		(11)
Loss on disposal of investments held for sale			1,292		-
Impairment of intercompany loan receivable			-		2,524
Gain on extinguishment of lease liabilities			-		(1)
Finance expense			645		284
Working capital adjustments
Change in inventories			(2,380)		1,389
Change in trade and other receivables			(688)		552
Change in trade and other payables			1,793		(1,504)
Cash (used in)/ generated from operating activities			(688)		2,943
Corporation tax refunded			-		55
Net cash flow (used in)/ generated from operating activities			(688)		2,998
Cash flow from investing activities
Addition of property, plant and equipment			(9)		(92)
Addition of intangibles			(1,912)		(384)
Proceeds from disposal of investments held for sale			2,424		-
Proceeds from disposal of property, plant and equipment			-		19
Bank interest paid			(596)		-
Net cash flow from investing activities			(93)		(457)
Cash flow from financing activities
Payment of lease liabilities			(763)		(629)
Payment of interest on lease liabilities			(235)		(276)
Payment of borrowings			(1,000)		(2,524)
Other interest paid			-		(8)
Net cash flow from financing activities			(1,998)		(3,437)
Net change in cash and cash equivalents			(2,779)		(896)
Cash and cash equivalents at beginning of period			5,484		4,321
Cash and cash equivalents at end of period			2,705		3,425

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6 MONTHS ENDED 31 JULY 2022

		Share capital	Share premium	Own shares held	Capital reserve	Revenue reserve	Total equity
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
As at 1 February 2022 - Electra		10,565	4,959	(2,426)	(35,350)	45,325	23,073
On transition from Electra to Unbound1	-  -			-	-	1,452	1,452
Reserves combination on ceasing to be an investment trust	-  -			-	35,350	(35,350)	-
As at 1 February 2022 - Unbound   10,565  4,959				(2,426)	-	11,427	24,525
Total comprehensive expense for the period
Loss during the period		-	-	-	-	(3,436)	(3,436)
Total comprehensive expense for the period		-	-	-	-	(3,436)	(3,436)
Contributions by and distributions to owners of the Company
Share based payments		-	-	153	-	(33)	120
As at 31 July 2022		10,565	4,959	(2,273)	-	7,958	21,209

¹ The net impact of the transition of Electra (an investment trust) to Unbound (a trading group) which recognises the assets and liabilities of Hotter Shoes (Beaconsfield Footwear Limited) on a line by line basis within the Group's results.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOR THE 6 MONTHS ENDED 31 JULY 2022

1.  General Information

Unbound Group Plc (the 'Company') is a limited liability company incorporated and domiciled in the United Kingdom. The address of the Company's Registered Office is 17 Old Park Lane, London, United Kingdom, W1K 1QT with Hotter Shoe's Registered Office being 2 Peel Road, Skelmersdale, Lancashire, WN8 9PT.

The Company is listed on the Alternative Investment Market (AIM) of the London Stock Exchange (ticker: UBG).

The financial information set out in this Interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. These condensed consolidated interim financial statements as at and for the six months ended 31 July 2022 comprise of the Company and its subsidiaries (together referred to as the 'Group'). These condensed consolidated interim financial statements has not been audited or reviewed by the Company's auditor.

This condensed consolidated interim financial information was approved and authorised for issue by a duly appointed and authorised committee of the Board of Directors on 16 September 2022.

2.  Basis of preparation and significant accounting policies

The interim financial statements, which are unaudited, have been prepared on the basis of the accounting policies expected to apply for the financial year to 5 February 2023 and in accordance with recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union. The accounting policies applied in the preparation of these interim financial statements are consistent with those used in the financial statements for the year ended 31 January 2021 for Beaconsfield Footwear Limited as disclosed in the Admission Document published by the company on 1 February 2022.

The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all of the disclosures in IAS34 'Interim Financial Reporting'.  Accordingly, while the interim financial statements have been prepared in accordance with IFRS they cannot be construed as being in full compliance with IFRS.

The Group's statutory financial information for the year ended 31 January 2022 does not constitute the full statutory accounts for that period.  The Annual Report and Accounts for 31 January 2022 for the Group, prepared under International Financial Reporting Standards ("IFRS"), have been filed with the Registrar of Companies.  The Independent Auditors' Report on the Annual Report and Accounts for the year ended 31 January 2022 was unqualified and did not include references to any matters which the auditors drew attention to by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.  Similarly the Annual Report and Accounts for 31 January 2022 for Beaconsfield Footwear Limited have been filed with the Registrar of Companies and the Independent Auditors' Report on the Annual Report and Accounts for the year ended 31 January 2022 was unqualified and did not include references to any matters which the auditors drew attention to by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

  Going concern

The Directors have reviewed current performance and cash flow forecasts, and are satisfied that the Group's forecasts and projections, taking account of potential changes in trading performance, along with potential mitigations available, in addition to factoring in the successful equity raise completed post half year (in August 2022) show that the Group will be able to operate within the level of its available facilities for the foreseeable future. The Directors have therefore continued to adopt the going concern basis in preparing the Group's financial statements.

3.  Segmental reporting

The Chief Operating Decision Maker has been identified as the Directors. In the opinion of the Directors, the Group has one single operating segment, the manufacture and sale of footwear with the sales of the products being through three channels as follows:

Unbound Group Plc: 6 months ended 31st July 2022 

	Direct to consumer	Retail	Wholesale	Group
	£'000s	£'000s	£'000s	£'000s
Revenue	20,703	5,052	1,875	27,630
Gross Profit	13,375	3,277	866	17,518
Gross Profit %	64.6%	64.9%	46.2%	63.4%

Hotter Shoes: 6 months ended 1st August 2021 

	Direct to consumer	Retail	Wholesale	Group
	£'000s	£'000s	£'000s	£'000s
Revenue	20,218	2,944	1,866	25,028
Gross Profit	12,993	1,830	594	15,417
Gross Profit %	64.3%	62.2%	31.8%	61.6%

4.  Exceptional items

	Unbound Group plc		Hotter Shoes
	6 months ended 31st July 2022		6 months ended 1st August 2021
	£'000s		£'000s
Impairment of amounts owed by group undertakings (i)	-		2,524
IPO and transition related costs (ii)	656		-
Profit on disposal of property, plant and equipment	-		(11)
Refinancing costs (iii)	-		155
Other restructuring and one-off costs (iv)	496		492
	1,152		3,160

Exceptional items include the following:

i.  Impairment of amounts owed by group undertakings - sums due from intermediate holding companies have been provided against when the recoverability of those loans is considered in doubt.

ii.  Legal, transitional costs, advisory and insurance fees incurred directly in relation to the Group relinquishing its listing on the FTSE Main Market and subsequent admission to the 'Alternative Investment Market ('AIM') on 1 February 2022.

iii.  Refinancing costs incurred in the prior period as a result of the need to renegotiate banking facilities that whilst held primarily by a holding company were effectively for the benefit of Hotter Shoes as the trading company in the group.

iv.  Other restructuring and one-off costs include severance costs associated with headcount reductions as well as the costs associated with strategic reviews.

5.  Share capital and reserves

Share capital

	Unbound Group plc 6 months ended 31st July 2022
	No.		£'000s
Allotted, called up and fully paid shares
Opening number of 25p ordinary shares	42,258,128		10,564
Closing number of 25p ordinary shares	42,258,128		10,564

	Hotter Shoes 6 months ended 1st August 2021
	No.		£'000s
Allotted, called up and fully paid shares
Opening number of £1 ordinary shares	42,000		42
Opening number of £1 ordinary shares	42,000		42

Own Shares Held

Own shares held are shares purchased by the Company's Employee Benefit Trust (the "Trust"). The Trust waives its rights to dividends on the shares held.

The number of shares held by the Trust was 690,481 as at 31 January 2022 held at a historic cost of £2.4 million. 43,650 were withdrawn from the Trust in HY FY23 and issued to all employees of the Group at nil cost on the date of entry to AIM.

Share Premium

Issuance of the 690,566 ordinary shares in settlement of vesting of the Electra Share of Value Plan (SoVP) in May 2021 and 3,284,799 ordinary shares in settlement of the Hotter MIP in January 2022 created a £5.0 million share premium account.

Capital and Revenue Reserve

The brought forward capital reserve has been combined with the revenue reserve following Unbound Group Plc ceasing to be an investment trust.

The revenue reserve is the accumulated net revenue profits and losses of the Group.

6.  Loss per share

Basic loss per share is calculated by dividing the loss attributable to the owners of the parent company by the weighted average number of ordinary shares in issue during the period. Own shares held by the Employee Benefit Trust are eliminated from the weighted average number of ordinary shares.

Diluted loss per share is calculated by dividing the profit attributable to the owners of the parent company by the weighted average number of ordinary shares in issue during the period, adjusted for the effects of potentially dilutive share options.

	Unbound Group plc
	6 months ended 31st July 2022
Loss for the period attributable to equity shareholders (£000's)	(3,436)
Weighted average share capital (No. of shares)
- Issued ordinary shares at beginning of year	42,258,128
- Effect of own shares held	(646,831)
Weighted average shares in issue for basic earnings per share	41,611,297
Weighted average effect of dilutive options	-
Weighted average shares in issue for diluted earnings per share	41,611,297
Basic loss per share /	(0.08)
Diluted loss per share

No meaningful comparative is available for the prior period as the prior year results shown is that for Hotter Shoes, a limited company with 42,000 shares.

The Group has issued 1,390,398 nil cost LTIP options which are potentially convertible on vesting. These have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the six months ended 31 July 2022.

7.  Alternative performance measures

The Group use the below alternative performance measures to assist shareholders to better understand underlying financial performance and position, in addition to being used by the Board in evaluating performance. However, this additional information presented is not required by IFRS or uniformly defined by all companies. Certain measures are derived from amounts calculated in accordance with IFRS but are not in isolation an expressly permitted GAAP measure. The measures are as follows:

i.  Operating loss/profit pre-exceptional items is based on ordinary operating performance before the impact of exceptional items. This metric is used by the Board to assess the underlying performance of the business excluding items that are, in aggregate, material in size and / or unusual or infrequent in nature. Exceptional items are disclosed in note 4;

ii.  EBITDA pre-exceptional items is ordinary loss before finance costs, tax, depreciation, amortisation, and exceptional items. This metric is used as a measure of the Group's underlying cash generating ability for the period;

	Unbound Group plc		Hotter Shoes
	6 months ended 31st July 2022		6 months ended 1st August 2021
	£'000s		£'000s
Loss on ordinary activities after tax	(2,144)		(1,414)
Taxation	-		(707)
Finance costs	645		284
Depreciation and amortisation	1,966		1,831
Exceptional items	1,152		3,160
EBITDA pre-exceptional items	1,619		3,154

iii.  Net debt is cash and cash equivalents less any borrowings drawn down at the period end, but excluding outstanding lease liabilities. This metric is used as a measure of the Group's liquidity.

	Unbound Group plc	Hotter Shoes
	6 months ended 31st July 2022	6 months ended 1st August 2021
	£'000s	£'000s
Cash and cash equivalents	2,705	3,425
Borrowings - current	(2,000)	(19,778)
Borrowings - non current	(9,100)	-
Net debt	(8,395)	(16,353)

The borrowings in relation to Hotter Shoes (an unconsolidated view) for the 6 months ended 1st August 2021 represents a related party loan payable, which was classified as due within one year as there was no formal agreement.

8.  Post balance sheet events

In August 2022, the Company successfully raised £3.1 million (net of expenses) through an equity raise. As a result on 11 August 2022, the Company issued and allotted 20,783,334 Placing Shares, 1,221,281 Subscription Shares and 893,237 Open Offer accordingly.

The issue price was 15 pence a share which was less than the nominal value of an ordinary share of 25 pence. The issue of new shares at a price which is less than the current nominal value is prohibited under the Companies Act 2006. A Share Capital Reorganisation was performed accordingly whereby each existing Ordinary Share was subdivided into 1 ordinary share of 0.01 (New Ordinary Share) and 1 deferred ordinary share of 0.24 (Deferred Share). The interests of existing Shareholders (both in terms of their economic interest and voting rights) will not be diluted by the implementation of the Share Capital Reorganisation.

 

END

 

 

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