ASOS Regulatory News (ASC)

ASOS plc ("Group")

Leading online fashion store

Interim Results for the 6 months ended 30 September 2010

"International Spearheading Growth"

Summary results table

*Includes retail sales, postage and packaging (P&P) income and 3rd party revenues

H1 Highlights:

·; Retail sales up 50%

·; UK retail sales +26%, International retail sales +120%

·; International retail sales account for 37% of total retail sales (25% LY)

·; Retail gross margin ahead of prior year (47.4% vs 44.6%)

·; Profit before tax £7m (+59%)

·; US website launched with initial trends in line with expectations

Since period end and outlook:

·; Investment in stock levels to support continued strong growth

·; ASOS Mobile launched 14th October

·; French and German websites launched 28th October

·; ASOS Marketplace and ASOS Fashion Finder launches imminent

·; New warehouse in Barnsley on track for commissioning in Spring 2011

·; Expect full year results to be in line with market expectations

Nick Robertson, CEO, commented:

"I am pleased to report a strong set of results for the first half with both our UK and International businesses performing well. Since the period end we have launched our French and German websites which, coupled with our US site launch in September, are all key milestones in our International expansion programme.

Our retail margin recovered strongly over the period (+280 bps) and our profit before tax increased 59% to £7m.

In anticipation of continued strong growth, we have maintained our programme of investment, specifically around resource, logistics and our technical capabilities.

As we head into the important Q3 trading period, we remain positive about the outlook for the second half and expect our full year results to be in line with market expectations".

8 November 2010

For further information:

Background note

ASOS.com is an international independent online fashion and beauty retailer and offers over 40,000 branded and own label product lines across womenswear, menswear, footwear, accessories, jewellery and beauty with approximately 1,500 new product lines being introduced each week.

Aimed primarily at fashion forward 16-34 year olds, ASOS.com attracts over 9 million unique visitors a month and as at 30 September 2010 had 4.3 million registered users and 2.4 million active customers (defined as having shopped in the last 12 months).

www.asos.com 

www.us.asos.com

www.asos.de

www.asos.fr

m.asos.com

 ASOS plc ("the Group")

Leading online fashion store

Interim Results for the 6 months ended 30 September 2010

Chief Executive's Review

Summary

We have had another good first half with Group retail sales 50% ahead (against 49% growth in H1 2009/10), International retail sales 120% ahead and UK retail sales 26% ahead over the period. International now accounts for 37% of our retail sales, up from 25% last year. The period was characterised by an improvement in our retail gross margin of 280bps and tight cost control resulting in an increase in our profit before tax of 59% to £7 million.

We launched our first stand alone international site in September 2010 in the US and have since launched both our French and German local sites. Order fulfilment for these countries and the other 163 countries we currently ship to is being handled from our distribution centre in the UK. Since the end of the reporting period, we have added 29 additional countries and we now ship to 195 countries.

Key performance indicators

All the key metrics illustrate our continued strong performance. Average basket value is up by 9%, average selling price is up 11%, visits are up 65% and the number of active customers is up 33%. The average units per basket is marginally down (-2%) driven by the introduction of our free delivery proposition in the UK and US. Customers are therefore no longer having to bulk up their orders to qualify for a free delivery threshold.

* During September 2010

**As at 30 September 2010

Business review

The business is undergoing a transformation as we focus our efforts and resource on our international expansion. Our customer base is now a global pool of fashion followers in their 20's, as opposed to a UK only pool. The UK represents approximately 3-5% of global internet traffic.

We now have dedicated websites in four main markets (UK, US, France and Germany) and we are increasing our activity in a number of other markets including Australia, Ireland, Denmark and Russia.

According to Comscore, an international traffic measurement tool, we already have significant traction in a number of our markets. In Australia and Ireland we are already No. 1 and in Denmark we are the No. 2 player. Moreover, over the last 15 months, we have significantly improved our rankings in the US, France and Germany. Initial trends following the launch of our US website are encouraging. Conversion rates are in line with our expectations and initial trends indicate a positive take-up of the ASOS own label range.

We plan a centralised operation with responsibility for all key business functions staying in the UK. Where required, specifically in certain areas of product, local marketing and returns, small in-country teams or third party providers will be used. This gives us the speed and flexibility to establish ASOS quickly but also, importantly, retain central control as we expand. All the teams in the UK are being enhanced to include territory specific responsibilities with foreign nationals where appropriate. We appointed 197 new employees in the first half (April - Sept 2010) taking our total headcount to 1161 (inclusive of our Unipart warehouse staff).

Key to the success of our international expansion is the Barnsley warehouse project and I am pleased to report that this project is on schedule for commissioning in Spring 2011. This will have an initial sales capacity of £600 million. Fully fitted, it will give us capacity for over £1 billion of sales.

Our technology platform is also key to our future expansion plans and we are currently undertaking a number of key projects to support the back-office, international sites, capacity and resilience. We are also investing in a new Buying and Merchandising system, to be introduced in 3 stages and fully implemented by May 2011.

Since the period end ASOS also went 'mobile'. Visits to ASOS via mobile devices have doubled since January 2010 and now account for 3% of all ASOS traffic. Our mobile site has been designed to work across all mobile devices including Blackberry, Symbian, Android and iPhone operating systems.During the period we further improved our service proposition in the UK by allowing customers to return their items to any of the 3,500 Collect+ convenience stores across the country. This service has proved very popular and already accounts for a significant percentage of our returns traffic.

Outlook

As a business we remain positive about the outlook for the second half of the financial year and beyond. Our customers are now global customers, not just UK customers and our internet model is well positioned to be able to access the opportunity quickly and economically.

Softer comparatives in the UK coupled with our strong international growth, adequate stock levels and well managed costs should all lead to performance in the second half being ahead year-on-year and in line with market expectations.

ASOS is also embarking on a new journey, from online store (albeit a big one) to a global fashion destination. The purpose of this is to drive incremental traffic and therefore extra sales through the ASOS website. To support this, two new initiatives, ASOS Marketplace and ASOS Fashion Finder will be launching this calendar year. Marketplace is a new platform allowing small boutiques, independent designers and ASOS customers to showcase and sell their fashion product to all ASOS visitors. The second initiative, Fashion Finder, is also a new platform that will enable us to present great fashion to our customers from brands that we might not necessarily sell, but which we believe our customers will appreciate. Both of these will give customers even more reason to visit ASOS and to allow us to monetise areas of the fashion internet not previously available to us.

Finance Director's Review

The Group made excellent progress in delivering on its strategy during the half year ended 30 September 2010. Group revenues increased by 45% over the previous year. Our financial focus is firmly anchored in maximising cash profit and leveraging our asset base in order to drive high returns on invested capital. Accordingly, we continued to invest in our customer proposition, resources, infrastructure and systems.

Revenues

The Group derives its revenues through retail sales, delivery receipts and third party revenues. Retail sales are the principal income stream from the sale of product. Third party revenues are mainly comprised of advertising revenues from the website and ASOS magazine. An analysis of our revenues by channel and by geographical segment is shown below:

Total retail sales grew by 50%, with continued strong growth in the UK, up 26% and exceptional growth in our international markets, up 120% on the previous year. Within that we are pleased to note that the Rest of World segment (boosted by Australia) and the US segment posted the highest growth rates.

Delivery receipts amounted to £6.8 million, a reduction of 15% on the previous year. This reduction in our delivery receipts reflects the substantial investment in our delivery proposition, such as free delivery options, particularly in the UK made during the last 12 months.

Third party revenues grew 62% during the period.

Gross profit

The Group gross profit increased 43% and was boosted by the strong growth from higher margin territories. Gross profit in the UK grew by 18% on the previous year to £35.4 million while International gross profit grew by 113% to £22.5 million. The analysis of the gross profit by geographical segments is set out below.

The Group retail margin increased by 280 basis points from 44.6% to 47.4%. The increase in retail margin resulted from further buying gains and a reduction in markdown spend. We expect continued buying gains in the second half which we anticipate will offset the cost increases from labour and raw material inflation.

The total gross margin was diluted as a result of the investment in our delivery proposition, reducing our gross profit by £5.8 million in the first half. The total gross margin amounted to 41.4%, a reduction of 60 basis points on the prior year and in line with guidance.

Investment in our operating resources

The Group increased its investment in its operating resources and capability by 41% to £50.8 million. This investment was achieved along with increased productivity. The Group's operating cost ratio improved by 100 basis points from 37.4% to 36.4%. The table below details the operating costs incurred by the Group.

The operating leverage delivered by the Group has again strengthened the underlying operating and financial performance. Our warehouse costs were £11.0 million, down from 10% of sales in H1 2009/10 to 7.9% during the reporting period. This was delivered through the benefits of greater scale and continued productivity gains.

Payroll and staff costs increased by 36%, thereby delivering further operating cost improvement. The main increases in our headcount were in our international, technology and retail teams.

The operational cost improvements delivered during the period were partly re-invested in increased marketing expenditure both in the UK and internationally to drive higher customer awareness.

Technology costs increased by 68% year on year principally down to the support for the wider technology footprint now deployed by the Group and from investments made to deliver faster more reliable website performance for our global customers.

Other operating costs include the day to day running of head office, credit card handling fees, legal and professional fees. The primary driver of the cost increases during the half relates to International translation services.

Operating profit

Operating profit during the half increased by 61% to £7.0 million. The operating margin improved from 4.5% to 5.0%. The gross margin dilution of 60 basis points was therefore more than fully offset by an enhancement in the operating cost ratio.

Finance income and taxation

Finance income was substantially lower as a result of the lower prevailing interest rates and the reduction in the net cash position.

Earnings per share

Diluted earnings per share increased by 63% to 6.5p per share (2009: 4.0p). The increase in the diluted and basic earnings per share reflects the increase in underlying profitability.

Investment in our infrastructure

Our capital investment has continued to focus around delivering new innovation to our customers and the enhancement of our core operating systems and infrastructure.

We have commenced the fit out programme for our new warehouse in Barnsley. This accounted for £1 million of capital expenditure in the first half.

The Barnsley warehouse programme is progressing to its planned timescales and development costs. We expect the new warehouse to be operational in Spring 2011. The new warehousing facility will initially give the business operating capacity of £600 million of sales. Our capital expenditure forecast in relation to the new facility remains unchanged for the next three years, being £20 million during this financial year, with further expenditure of £13 million in 2011/12 and £6 million in 2012/13. These additional investments are dependent on future business growth and will enable the new facility to deliver sales processing capacity of over £1 billion.

In relation to this transition we estimate dual running costs that could be incurred of c.£2-3 million in the balance of the financial year, which will be treated as continuing operational costs. In addition, there may also be exceptional operating costs in relation to set-up costs and non-cash write-offs of not more than £12 million in this financial year.

Cash flow and balance sheet

The Group has a strong cash backed balance sheet which is free from long term encumbrances and liabilities. Net assets increased by 92% to £58.3 million. (2009: £30.4m). The Group cash balance was £4.0 million as at the 30th September 2010. The summary cash flow is detailed below.

Operating cash flow of £9.3 million (up 59% on the previous year) was offset by the working capital outflow of £14.6 million. This increased working capital requirement was a result of the enhanced levels of stock in preparation for the future growth of the business. The capital expenditure was broadly consistent with the prior year.

Our investments are funded by operating cash flows, with additional short term facilities to support the working capital movement and the planned capital expenditure by the Group. Currently the Group has committed facilities of up to £20 million.

Dividend

The Board is of the opinion that shareholder's interests are best served by continuing to reinvest the cash generated by the business to exploit the substantial growth opportunities both in the UK and Internationally. Accordingly, it has proposed not paying a dividend this half year. This policy remains under regular review.

Unaudited Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2010

Unaudited Consolidated Statement of Changes in Equity

For the six months ended 30 September 2010

Unaudited Consolidated Statement of Financial Position

As at 30 September 2010

Unaudited Consolidated Cash Flow Statement

For the six months ended 30 September 2010

Notes to the Unaudited Interim Financial Statements

For the six months ended 30 September 2010

1. Basis of Preparation, Accounting Policies and Approval of Interim Statement

The Interim Financial Statements for the 6 months ended 30 September 2010 have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union. This report should be read in conjunction with the Group's Annual Report and Accounts 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

The financial information set out in this report does not constitute statutory accounts within the meaning of section 434 the Companies Act 2006. The Annual Report and Accounts 2010 have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under s498(2) or s498(3) of the Companies Act 2006.

The Interim Financial Statements have been prepared in accordance with the accounting policies set out in the 2010 Annual Report and Accounts and it is these accounting policies which are expected to be followed in the preparation of the full financial statements for the financial year ended 31 March 2011. The following standards, amendments and interpretations became effective for the first time for the financial year beginning 1 April 2010 but either have no material impact or are not applicable to the Group:

·; Amendment to IAS 27 - 'Consolidated and Separate Financial Statements';

·; Amendment to IAS 32 - 'Financial Instruments: Presentation - Disclosure provisions superseded by IFRS 7 effective 2007';

·; Amendment to IAS 39 - 'Eligible Hedged Items';

·; Amendment to IFRS 1 - 'First-time Adoption of International Financial Reporting Standards';

·; Amendment to IFRS 2 - 'Group Cash-settled Share-Based Payment';

·; Amendment to IFRS 3 - 'Business Combinations';

·; Improvements to IFRSs (April 2009);

·; IFRIC 17 - 'Distributions of Non-cash Assets to Owners'.

At the balance sheet date a number of new standards, amendments and interpretations were in issue but not yet effective:

·; Amendment to IAS 24 - 'Related Party Disclosures';

·; IFRS 9 - 'Financial Instruments;

·; IFRIC 19 - 'Extinguishing Financial Liabilities with Equity Instruments'.

The Group has not early-adopted any of these above new standards, amendments or interpretations. Their impact will be fully considered in due course.

The Group's business activities together with the factors that are likely to affect its future developments, performance and position are set out in the Finance Director's Review. The Finance Director's Review describes the Group's financial position, cash flows and borrowing facilities and also highlights the principal risks and uncertainties facing the Group. The Annual Report and Accounts 2010 includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.

The directors have reviewed current performance and forecasts, combined with expenditure commitments, including capital expenditure. After making enquiries, the directors have a reasonable expectation that the Group has adequate financial resources to continue its current operations, including contractual and commercial commitments for the foreseeable future despite the current uncertain economic outlook. For this reason, they have continued to adopt the going concern basis in preparing the financial statements.

The Interim Financial Statements are unaudited and were approved by the Board of Directors on 5th November 2010.

2. Segmental Analysis

IFRS 8 'Operating Segments' requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Operating Board. The Operating Board has determined that the primary segmental reporting format is geographical, based on the Group's management and internal reporting structure. Due to the rapid expansion of the International business over the interim period, the Operating Board has expanded its primary reporting segments and split the previously reported "International" segment into USA, EU and Rest of World ("RoW"). The Operating Board assesses the performance of each segment based on revenue and gross profit which excludes unallocated central costs which include items such as warehouse costs, staff costs and other administration costs. The Group has central distribution centres and one head office, which are in the United Kingdom, therefore it is not practical to determine a segmental split of the Balance Sheet.

Revenue

3. Earnings Per Share

Basic earnings 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 year. Own shares held by the ASOS.com Limited Employee Benefit Trust are eliminated from the weighted average number of ordinary shares.

Diluted earnings per share amounts are 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 year, adjusted for the effects of potentially dilutive share options.

4. Related Parties

The Group's related parties are its joint venture, Employee Benefit Trust and key management personnel. There have been no material changes to the related party transactions during the interim period under review.