Trading Update and Operating Review - Replacement

RNS Number : 9713M

Unbound Group PLC

17 January 2023

 

The following amendment has been made to the 'Trading Update and Operating Review' announcement released on 17 January 2023 at 07:00 under RNS Number 8967M:

Deleting the reference to "and adjusted pre-tax profit of £1.0m respectively" in the footnote at the end of the announcement.

All other details remain unchanged.

The full amended text is shown below.

Unbound Group plc

('the Group')

Trading Update and Operating Review

Unbound Group plc today provides an update on its trading performance in the year to 5^th February 2023 (FY23) and announces significant initiatives focused on optimising the efficiency and growth of the Group.

Trading Update

Despite a cautionary outlook at the Group's interim results, trading conditions in the second half of the financial year have been more challenging. Several external factors, including the extended period of hot weather, the impact of Royal Mail industrial action and broader economic conditions significantly impacted sales of our Autumn/Winter range in the final five months of the year.

Following a strong start to the year, revenue growth has slowed with a poor Q3 and November performance and a small return to growth in December and in January to date. As a result, full year revenue is now expected to be £53-£54m, 3-4% growth on the prior year. Gross margins have been broadly in line with expectation. Given this, we now expect to incur a pre-IFRS16 adjusted EBITDA loss of £0.75-£1.25m and adjusted pre-tax loss of £4.25-£4.75m (both pre-exceptional and after non-recurring costs of c.£1m) in FY23, below current market expectations*.

Net banking debt as at 31 December 2022 was £8.8m after investing £1.5m in pre-payment of spring range extension stock. This provides current funding headroom of at least £1.3m, which the Board expects will increase in Q1 of the financial year ending 4^th February 2024 ("FY24") as the incremental inventory investment in working capital reverses. Having developed the Unbound platform in the current financial year, capital expenditure in FY24 will be substantially lower than FY23.

Despite the short-term challenges experienced, the Group is well positioned for an enhanced Spring / Summer product portfolio launch supported by well-balanced inventory levels. Following the success of recent sourcing trials, we will be introducing incremental new product styles, including a new range of athleisure products.

The Unbound Group currently has 11 partner brands that have gone live over the past five months. We anticipate signing further partnerships in 2023 and still see significant scope for growth and complementary brand diversification over the medium term. However, given the current consumer backdrop the partnership model has had a slow start to trading, as management has focused attention on its core Hotter brand.

Focus on efficiency and growth

As highlighted previously, to optimise the Group's trading performance in the current challenging economic and market conditions, focus will remain on managing costs, protecting margins and cashflow, ensuring that appropriate levels of working capital are maintained and managing capital investment tightly.  In line with strategy, annualised cost savings of approximately £2.3m have already been identified within the Group's existing operating model, with £1.3m being realised across the final quarter of the current financial year and into the first quarter of the next financial year.  A further £1m will be realised across Q2 and Q3 of FY24.

The cost reduction activity outlined above is intended to underpin a return to pre-IFRS16 EBITDA profitability during the next financial year. Furthermore, the Board has accelerated its planned review of the operating structure of the Group. This is focused on streamlining activities and simplifying processes in order to drive growth of revenue and profits.

The review will cover areas including:

· The most appropriate structure and strategy for the future of its US business, which contributes 11% of revenues

· Broadening the product range to ensure that styles remain relevant and attractive to the consumer but with reduced SKUs and resultant business complexity

· Further development of the Unbound Group trading platform, which now has 11 partner brands selected for relevance to our over 55-year-old target customer demographic.

Further detail on the key outputs from the Board's growth and efficiency review will be provided alongside the Group's FY23 annual results, expected to be published in May.

Ian Watson, Chief Executive, commented:

"Since our strong start to the year, trading in the second half has been disappointing, with weakened demand from the current economic slowdown and a number of external factors. However, we are pleased that margin discipline was maintained.

Our core brand Hotter retains a highly loyal and engaged customer base.  We will focus on a broader product range, driven by our insight into our customer's needs, attitudes and behaviours. In reaction to the challenging trading environment, our strategic focus is centred around growth and simplification. The Group will also generate significant annualised cost savings which will be fully implemented by the end of October 2023.

As we continue to navigate our way through the current challenging consumer backdrop, I remain confident in the long-term future of Hotter and the wider Unbound platform as we build strategic partnerships with brands who want to partner with us to target our Group's key demographic."

* Current consensus market expectations for the year ending 5^th February 2023 are for revenue of £57.7m, pre-IFRS16 adjusted EBITDA of £2.3m and an adjusted pre-tax loss of £1.2m.

Enquiries

Unbound Group plc
Ian Watson, CEO	c/o Alma PR
Gavin Manson, CFO
Singer Capital Markets Peter Steel / Tom Salvesen / Alaina Wong	[phone]
Alma PR Limited (Financial PR)	[phone]
Josh Royston / Sam Modlin/ Hannah Campbell	[e-mail]

This announcement contains inside information for the purposes of the retained UK version of the EU Market Abuse Regulation (EU) 596/2014 ("UK MAR").

 

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