Frasers Group Regulatory News (FRAS)

7 December 2023

FRASERS GROUP PLC ("Frasers Group", "the Group", or "the Company")

Unaudited half year results for the 26 weeks ended 29 October 2023 ("FY24 H1")

Elevation Strategy drives strong first half performance; on track to achieve full year guidance

Michael Murray, Chief Executive of Frasers Group: 

"We have delivered a strong performance in the first half of the year, with great momentum as we head into the Christmas trading period. The elevation strategy continues to drive strong trading performance across the business with good growth in Sports Direct supported by our brand partners.

Our long-term ambitions for our Premium Lifestyle business remain unchanged although it is likely that progress will remain subdued for the short to medium term in the face of a softer luxury market however, we continue to invest with confidence in our unique proposition.

During the period, we have opened new elevated stores, and further strengthened brand partnerships to allow us to deliver the best consumer experience. I am also excited about the potential of our strategic investments which we expect to unlock further opportunities for the Group. We have a clear ambition to be the leading sports retailer in EMEA and we are making progress on broadening our footprint through a focused international M&A strategy.

As we look to 2024, we are confident that our diversified proposition will continue to provide consumers with choice across a range of brands and price points. I want to thank our talented colleagues for their relentless focus and hard work which has enabled another strong set of results."   

Outlook

"As noted at the FY23 preliminary results, FY24 started well. This strong trading momentum continued throughout the first half of FY24 and into the early recent weeks of the second half especially at Sports Direct. We are looking forward to our Christmas trading period and remain confident of achieving APBT in the range £500m-£550m. We are building a diverse business for sustained multi-year growth. Our substantial ongoing investment into our elevation strategy, infrastructure and new business integrations continues to unlock that potential, and we expect further profitable growth for FY25 and beyond."

Headlines

· Continued strategic progress against key priorities:

· Strong trading performance with continued revenue and profit growth in UK Sports and International;

· Investment in elevation and brand relationships, bringing in new brands including The North Face and On Running;

· Completion of warehouse automation project has increased the efficiency of our warehouse and inventory handling processes. We expect this will lead to a 5% to 15% gross reduction in like-for-like inventory holding in the next 12 months; and

· Accelerated integration of acquired entities (including Studio Retail and Sportmaster) which will improve efficiency and profitability in coming years.

· Retail profit from trading of £364.7m, an increase of £74.5m (25.7%) driven by strong trading performance from Sports Direct reflecting the continuing success of the elevation strategy and strengthening brand relationships.

· APBT (2) increased by 12.6% to £303.8m despite lower profits from the disposal of properties and subsidiaries (£20.0m in the current period vs. £117.5m in H1 of FY23). There was also a significant reduction in property and acquisition related impairments as a result of the strong trading performance, and future forecasts outweighing our downside impairment assumptions (a net impairment reversal of £5.9m in the current period vs. £77.7m of impairments in H1 of FY23).

· Reported PBT of £310.2m, an increase of 8.0% and reported profit after tax of £234.6m, an increase of 5.6% reflecting the strong trading performance partially offset by a reduction in foreign exchange gains and an increase in effective tax rate.

Summary of financial performance

· Group:

· Retail revenue increased by 4.0%, largely due to the impact of businesses acquired in H2 of FY23 and a strong underlying performance from Sports Direct. Excluding acquisitions and disposals, on a currency neutral basis, revenue increased by 0.8%. (3)

· Group gross margin increased to 43.0% from 42.3%, driven by an increase in retail gross margin reflecting improvements in Sports Direct's product mix as a result of strengthening brand relationships.

· UK Sports (53.6% of total group revenue):

· Revenue increased by 0.8% with Sports Direct more than mitigating a decline in Game UK and Studio Retail.

· Gross profit increased by £76.7m and gross margin increased by +490 bps to 44.4% reflecting an improved product mix in Sports Direct due to strengthening brand relationships, as well as reduced lower margin sales from Game UK and Studio Retail. This contributed to a substantial £105.5m (74.7%) increase in the segment's profit from trading.

· Premium Lifestyle (19.9% of total group revenue):

· Revenue increased by 3.1%, with the impact of planned House of Fraser store closures and a softer luxury market offset by sales from the businesses acquired from JD Sports Fashion plc in H2 of FY23. Excluding acquisitions and disposals, revenue decreased by 11.2%. (3)

· Segment profit from trading reduced by £35.1m driven by the planned clearance of surplus inventory from businesses acquired from JD Sports Fashion plc and the impact of continuing closures of legacy House of Fraser stores, combined with an increase in operating costs related to integrating these acquired businesses into the Group.

· We have invested in a unique proposition in our luxury business and are well positioned for the future. Our long-term ambitions for this business remain unchanged although it is likely that progress will remain subdued for the short to medium term in the face of a softer market.

· International Retail (23.3% of total group revenue):

· Revenue increased by 13.2% due to growth from Game Spain, and the Sports Direct business in Europe, especially in Ireland, as well as the acquisition of the MySale business in Australia at the end of H1 FY23. Game Spain's sales have benefited from increased availability of games consoles as inventory has become available in the Spanish market. Excluding acquisitions and disposals, on a currency neutral basis, revenue increased by 12.7%. (3)

· Segment profit from trading increased by £4.1m (5.5%) year on year as gross profit growth (achieved at a lower margin % due to Game Spain) was partially offset by the one-off costs associated with integrating acquired businesses.

· Property (1.1% of total group revenue):

· Revenue increased by 124.3%, largely due to the acquisitions of the Luton and Dundee shopping centres and Coventry Arena.

· Segment profit from trading declined by £93.3m, with the equivalent result in H1 of FY23 including a £91.2m gain on disposal of properties.

· Financial Services (2.1% of total group revenue):

· Revenue decreased 6.2% due to lower sales in the Studio Retail business which was largely the result of reduced trading whilst the business was integrated into the Group's warehouse and ecommerce infrastructure.

· Segment profit from trading was down year-on-year with the impairment charge returning to normalised levels (a charge of £15.2m vs. a credit of £3.8m). H1 of FY23 benefitted from a reduction in impairment provision as a result of the impact of the cost-of-living crisis being less severe than anticipated. We remain focused on rebuilding a profitable Studio Retail business and growing Frasers Plus.

· Basic EPS of 53.0p, an increase of 6.3p year-on-year.

· Cash inflow from operating activities before working capital movements of £441.1m, an increase of £51.2m (13.1%) largely driven by strong trading performance particularly in Sports Direct.

· Net assets have increased to £1,736.2m from £1,668.2m at 30 April 2023, due to the H1 profitability of the Group offset by share buybacks.

Strategic and operational highlights

Strategic progress: 

· Significant momentum behind the growth of Sports Direct, supporting our ambition to become the number one sports retailer in EMEA.

· Continued to diversify and strengthen our brand partnerships, with new brands such as On Running, The North Face, Columbia and Salomon, joining other category-leading brands from adidas and Nike, to Puma and Under Armour.

· Promising early uptake of Frasers Plus, following the roll-out across the Group earlier in the year.

· Submitted planning application for a global headquarters campus in Warwickshire, which will enable Frasers' future growth.

· Continued investment into the omni-channel experience for consumers, opening new flagship models across our Sports, Premium and Luxury pillars, including our largest and most advanced Everlast Gym concept in Newcastle post period-end.

Acquisitions and investments:

· Launched new joint venture in Indonesia to support our international expansion.

· Made further strategic investments in AO World, ASOS, Currys and Boohoo, as the Group looks to explore opportunities to expand commercial relationships and further develop the Group's ecosystem.

· Sold the Missguided intellectual property for £28m, enabling us to rationalise the number of brands within the Premium Lifestyle segment. This resulted in a gain on disposal of £20m in the period.

· Acquired shopping destinations in Castleford, Luton, and Dundee, each of which are well positioned to unlock future growth opportunities in high-performing retail locations.

Revised segments

Following a review of the Group's operating segments at the start of the 2023/24 financial year, a decision was taken to change the Group's segmental reporting to more accurately reflect the impact of recent acquisitions and strategy changes on how management views the business and makes decisions, and to allow a more granular analysis of the Group's operating base. Further details are given in note 1 to the condensed consolidated financial statements and in the appendix below.

Other notes

(1) Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

(2) This is an Alternative Performance Measure, for which the reconciliation to the equivalent GAAP measure is set out in the Glossary section below. Adjusted EPS is discussed in note 8.

(3) A reconciliation to results excluding acquisitions and disposals, and currency neutral performance measures can be found in the Glossary section below.

Enquiries

Andrew Kasoulis

Investor Relations Director

E. andrew.kasoulis@frasers.group

T. 07826 532191

Ronnie Laffar

Group Head of Communications

E. fgpr@frasers.group

T. 07931 841082

Rosie Oddy

Brunswick Group, PR Advisors

E. frasersgroup@brunswickgroup.com

T. 07557 804512

CEO'S STATEMENT

Introduction

We are pleased to report a strong start to the year, and we are firmly on track to achieve the profit guidance set out at FY23. Demand across the Group's key brands remains resilient despite the economic headwinds, with our biggest segment, Sport, driving a particularly strong performance. Our substantial ongoing investment into our elevation strategy, infrastructure and integrations continues to unlock Frasers potential, and we expect further profitable growth for FY25 and beyond.

Strategy

The Elevation Strategy continues to deliver, with significant progress across the key priorities we set out at full year results.

The global growth of, and interest in, Sport is at an all time high and continues to grow. Sports Direct is a market leader, delivering against our mission to serve the athlete with the best kit their money can buy. Our brand partnerships are stronger than ever, unlocking a more elevated product mix for our consumers, and we are proud to now have all the leading sports brands available via the Frasers ecosystem. During the year we welcomed On Running and The North Face, joining other leading brands from adidas and Nike, to Puma and Under Armour. The significant momentum we see behind our biggest segment, Sports Direct, provides us with confidence in the Group's future expansion strategy.

In our Premium and Luxury division, our dynamic brand partnerships enable us to elevate the consumer experience whilst providing an unrivalled proposition. FLANNELS continues to collaborate with its luxury brand partners, including Christian Louboutin, C.P. Company and Hugo Boss, while the FLANNELS X concept space in London keeps pioneering innovative cultural experiences.

Whilst there has been some softening in the global luxury market, partly because of the cost-of-living challenges facing the consumer, we have seen a positive demand due to our unique proposition. Our long-term ambitions for our Premium and Luxury business remain unchanged and we continue to invest with confidence in our unique proposition, although it is likely that progress will remain subdued for the short to medium term in the face of a softer luxury market. However, we are excited about the potential prospects and are well placed to capitalise on opportunities in the sector.

In our Frasers business, we are seeing a successful execution of our new concept stores, with a positive response from consumers and partners. We continue to redefine the brand as we build a sustainable and productive business model. 

As huge advocates of physical retail, we continue to make significant investments in our Group portfolio, both in the UK and internationally. Our programme of refurbishments, relocations and new store openings remains on track, with several new, experiential FLANNELS, Frasers and Sports Direct stores. Last month, we were also excited to open our largest and most advanced Everlast Gyms concept in Gateshead, Newcastle alongside a FLANNELS and Sports Direct flagship store. 

To further innovate our omni-channel experience, we are investing significantly to transform the Group's digital infrastructure by building a cutting-edge digital platform which will elevate the consumer experience through personalisation, elevated designs and better product discoverability.

Our improved digital capabilities will support the launch of the next phase of Frasers Plus, our credit and loyalty facility, which will change how consumers can shop across the Group's brands. Frasers Plus has now been rolled out across the Group, and we have been pleased to see a promising initial take-up as well as gaining invaluable consumer insights which will help us serve consumers better.

In addition, we have been pleased to see the completion of our automation programme across the supply chain which is enabling us to manage our stock more efficiently. Due to the increased optimisation, we expect this will lead to a gross stock reduction of 5-15% on a like-for-like basis for HY25. ----

Investments

Strategic investments and acquisitions are a key part of Frasers' DNA, and we have continued to explore new partnerships which are aligned with our strategy, strengthen our ecosystem, and unlock synergies.

In the UK, we made further investments in AO World, ASOS, Currys and Boohoo, and to rationalise the number of brands in our women's ecommerce portfolio, we divested the Missguided IP to SHEIN, the Singapore-based fashion retailer. More broadly, the integrations of our recent acquisitions remain on track to unlock further cost savings this year and beyond.

We remain committed to our ambition to be the leading sports retailer in EMEA and we are excited about potential strategic investments and acquisitions. While we were disappointed by the insolvency of SportScheck, we continue to believe it is an attractive asset in one of Europe's most important markets, and are actively working with the appointed administrator to explore the possibility of acquiring the business out of administration. We have also strategically invested into the Norwegian sports retailer, XXL, and look forward to unlocking future synergies.

As we grow our footprint in South East Asia and build on the success we have seen with our Sport business, we have entered into a joint venture with MAP Active, a retail conglomerate which is rapidly expanding across South East Asia. The joint venture will allow us to introduce Sports Direct stores across Indonesia with both wholesale and retail components. 

Our investments in property remain an important element of the Elevation Strategy, acquiring real estate where we have good occupational demands, whilst offering strong investment returns. Over the past year we have acquired shopping destinations in Castleford, Luton and Dundee, each of which are well positioned to unlock future growth opportunities for Frasers brands in popular retail locations.

People

Our people remain our greatest asset. Through their unrivalled passion, attitude and determination we have been able to make huge strides in progressing our strategy and delivering another successful set of results. -

To ensure we continue to have the best team on the planet, we believe it's important to create an inclusive and diverse working environment where everyone is set up for success. That is why we purchased, subject to planning, a new site in Rugby, Warwickshire for the development of a potential Frasers Group Global Headquarters, a state-of-the-art campus which would give us the scale to grow while providing amazing facilities for colleagues and the public. The planning, which was submitted in October, includes proposals that would deliver a well-located, world-class platform to further bolster our sector-leading ecosystem and growth ambitions.

As part of our efforts to create an inclusive and energetic workforce, we have introduced 'Retail Reconnect' for Head Office staff whereby they will spend two days a year in either a Retail or Warehouse environment. The benefits so far have been incredible, driving collaboration and enabling our teams to better understand our consumers and our business. I have spent some time working at the Sports Direct Oxford Street flagship, which provided me with invaluable insights that have enabled us to improve our operations, and I look forward to working within our Premium and Luxury stores in the remainder of FY24.

As we look ahead, I am confident and excited about the future for Frasers Group. Our proposition remains compelling, and our dynamic ecosystem allows us to deliver on our strategic vision and grow at pace.

Michael Murray

Chief Executive Officer

6 December 2023

INTERIM MANAGEMENT STATEMENT

SUMMARY OF RESULTS

(1) Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

(2) This is an Alternative Performance Measure, for which the reconciliation to the equivalent GAAP measure is set out in the Glossary section below. Adjusted EPS is discussed in note 8.

The Directors have adopted Alternative Performance Measures (APM's). APM's should be considered in addition to UK-Adopted International Accounting Standards ("UK IAS") measures. The Directors believe that Adjusted profit before tax ("APBT") and Adjusted basic EPS provide further useful information for shareholders on the underlying performance of the Group in addition to the reported numbers and are consistent with how business performance is measured internally. They are not recognised profit measures under UK IAS and may not be directly comparable with "adjusted" or "alternative" profit measures used by other companies.

PERFORMANCE OVERVIEW

Retail revenue increased by 4.0%, largely due to the impact of businesses acquired in H2 of FY23 and a strong underlying performance from Sports Direct. Total group revenue increased 4.4% due to retail growth combined with revenue from acquisitions in the property segment.

Group gross margin increased to 43.0% from 42.3%, driven by an increase in retail gross margin reflecting improvements in Sports Direct's product mix as a result of strengthening brand relationships.

Retail profit from trading increased by £74.5m (25.7%) to £364.7m, driven by strong trading performance from Sports Direct reflecting the continuing success of the elevation strategy and strengthening brand relationships.

APBT (2) increased by 12.6% to £303.8m despite lower profits from the disposal of properties and subsidiaries (£20.0m in the current period vs. £117.5m in H1 of FY23). There was also a significant reduction in property and acquisition related impairments as a result of the strong trading performance, and future forecasts outweighing our downside impairment assumptions (a net impairment reversal of £5.9m in the current period vs. £77.7m of impairments in H1 of FY23).

Reported PBT of £310.2m, an increase of 8.0% and reported profit after tax of £234.6m, an increase of 5.6% reflecting the strong trading performance partially offset by a reduction in foreign exchange gains and an increase in effective tax rate.

Adjusted EPS increased by 8.3p (18.3%) to 53.7p.

Cash inflow from operating activities before working capital movements of £441.1m, an increase of £51.2m (13.1%) largely driven by strong trading performance particularly in Sports Direct.

Net assets have increased to £1,736.2m from £1,668.2m at 30 April 2023, due to the H1 profitability of the Group offset by share buybacks.

REVIEW BY BUSINESS SEGMENT

UK SPORTS

This segment now includes the results of the Group's core sports retail store operations in the UK, plus all the Group's sports retail online business, other UK-based sports retail and wholesale operations, GAME UK stores and online operations, retail store operations in Northern Ireland, Frasers Fitness, and the Group's central operating functions (including the Shirebrook campus).

UK Sports accounts for 53.6% (FY23 H1: 55.5%) of the Group's revenue.

(1) Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

Revenue increased by 0.8% with Sports Direct more than mitigating a decline in Game UK and Studio Retail.

Gross profit increased by £76.7m and gross margin increased by +490 bps to 44.4% reflecting an improved product mix in Sports Direct due to strengthening brand relationships, as well as reduced lower margin sales from Game UK and Studio Retail. This contributed to a substantial £105.5m (74.7%) increase in the segment's profit from trading.

UK Sports' operating profit result of £241.8m (FY23 H1: £121.1m) includes impairment reversals of £23.7m (FY23 H1: impairments of £10.2m), a result of the strong trading performance, and future forecasts outweighing our downside impairment assumptions, and foreign exchange gains of £24.9m (FY23 H1: £47.7m).

UK SPORTS RETAIL STORE PORTFOLIO (3)

(1) The GAME UK store numbers include 205 concessions operating within Sports Direct fascia stores (30 April 2023: 176) and does not include BELONG arenas.

(2) The Evans Cycles store numbers include 2 concessions operating within House of Fraser fascia stores (30 April 2023: 2).

(3) Table excludes the Group's standalone gyms.

PREMIUM LIFESTYLE

This segment includes the results of the Group's premium and luxury retail businesses FLANNELS, Cruise, Van Mildert, Jack Wills, House of Fraser, Gieves and Hawkes, and Sofa.com along with the related websites, the businesses acquired from JD Sports in FY23, as well as the results from the I Saw it First website and the Missguided website until the disposal of the Missguided intellectual property in October 2023.

Premium Lifestyle accounts for 19.9% (FY23 H1: 20.1%) of the Group's revenue.

(1) Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

Revenue increased by 3.1%, with the impact of planned House of Fraser store closures and a softer luxury market offset by sales from the businesses acquired from JD Sports Fashion plc in H2 of FY23. Excluding acquisitions and disposals, revenue decreased by 11.2%. (3)

Segment profit from trading reduced by £35.1m driven by the planned clearance of surplus inventory from businesses acquired from JD Sports Fashion plc and the impact of continuing closures of legacy House of Fraser stores, combined with an increase in operating costs related to integrating these acquired businesses into the Group.

Premium Lifestyle's operating profit result of £23.1m (FY23 H1: £20.2m) includes impairment reversals of £2.4m (FY23 H1: impairments of £48.0m including £20.5m in respect of writing down intangibles recognised on the acquisition of Missguided and I Saw it First).

We have invested in a unique proposition in our luxury business and are well positioned for the future. Our long-term ambitions for this business remain unchanged although it is likely that progress will remain subdued for the short to medium term in the face of a softer luxury market.

PREMIUM LIFESTYLE STORE PORTFOLIO

(1) Sofa.com store numbers include 13 concessions operating within House of Fraser fascia stores (30 April 2023: 13).

(2) Jack Wills and Frasers stores in Republic of Ireland are shown in the International store numbers as opposed to the Premium Lifestyle store numbers.

(3) During the period 18 stores were closed from Fashion Brands and rebranded as Flannels and Flannels Junior

INTERNATIONAL

This segment includes the results all of the Group's sports retail stores, management and operating functions in Europe, Asia and the rest of the world, including the Group's European Distribution Centres in Belgium and Austria, GAME Spain stores, the Baltics & Asia e-commerce offerings, the MySale business in Australia, the Group's US retail operations until they were disposed of in 2022, and all non-UK based wholesale and licensing activities (relating to brands such as Everlast, Karrimor and Slazenger).

International accounts for 23.3% (FY23 H1: 21.5%) of the Group's revenue.

(1) Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

Revenue increased by 13.2% due to growth from Game Spain, and the Sports Direct business in Europe, especially in Ireland, as well as the acquisition of the MySale business in Australia at the end of H1 FY23. Game Spain's sales have benefited from increased availability of games consoles as inventory has become available in the Spanish market. Excluding acquisitions and disposals, on a currency neutral basis, revenue increased by 12.7%. (3)

Segment profit from trading increased by £4.1m (5.5%) year on year as gross profit growth, achieved at a lower margin % (-160bps) due to lower margins made by Game Spain on the sale of consoles, was partially offset by the one-off costs associated with integrating acquired businesses.

International's operating profit result of £35.9m (FY23 H1: £33.2m) includes impairments of £4.2m (FY23 H1: impairments of £8.4m) and foreign exchange losses of £4.6m (FY23 H1: losses of £3.8m).

INTERNATIONAL STORE PORTFOLIO

(1) Includes only stores with SPORTSDIRECT.com and SPORTLAND fascias.

(2) Excluding Heatons fascia stores.

PROPERTY

This segment includes the results from the Group's freehold property owning and long leasehold holding property companies that generate third party rental and other property related income (e.g., car parking, conference and events income). The results of the Coventry Arena are reported in this segment.

Property accounts for 1.1% (FY23 H1: 0.5%) of the Group's revenue.

(1) Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

Revenue increased by 124.3%, largely due to the acquisitions of Luton, Dundee and Coventry Arena.

Segment profit from trading declined by £93.3m, with the equivalent result in H1 of FY23 including a £91.2m gain on disposal of properties.

Property's operating loss of £40.2m (FY23 H1: profit of £70.3m) includes impairments of £16.0m (FY23 H1: impairments of £6.4m) and depreciation of £35.5m (FY23 H1: £26.1m).

The cost of sales in the current period of £4.2m (FY23 H1: £nil) relates to the generation of non-rental income at the Coventry Arena.

FINANCIAL SERVICES

This segment includes the results of Frasers Group Financial Services. This includes interest charged on amounts advanced to consumer credit customers, along with the associated impairment and operating costs.

Financial Services accounts for 2.1% (FY23 H1: 2.3%) of the Group's revenue.

* In the Financial Services segment, impairment losses on consumer credit receivables are disclosed within gross margin.

(1) Restated to reflect the Group's revised segmental reporting, the reclassification of rental income and the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

Revenue decreased 6.2% due to lower sales in the Studio Retail business which was largely the result of reduced trading whilst the business was integrated into the Group's warehouse and ecommerce infrastructure.

Segment profit from trading was down year-on-year with the impairment charge returning to normalised levels (a charge of £15.2m vs. a credit of £3.8m). H1 of FY23 benefitted from a reduction in impairment provision as a result of the impact of the cost-of-living crisis being less severe than anticipated. We remain focused on rebuilding a profitable Studio Retail business and growing Frasers Plus.

STRATEGIC INVESTMENTS

Included within long-term financial assets at the period ended 29 October 2023 are the following direct interests held by the Group:

In addition to those listed, there are various other interests held, none of which represent more than 5% of the voting power of the investee. The movements in fair value of these long-term financial assets are recognised within Other Comprehensive Income.

The Group also holds indirect strategic investments via options. The fair value of the options are recognised in Derivative Financial Assets or Liabilities on the Group Balance Sheet, with the movement in fair value recorded in the Income Statement.

The Group's largest sold put position is in Hugo Boss at approximately 18% of the equivalent share capital. On 15 December 2023 10.9% of this position expires, and as at the date of reporting it is anticipated that these will expire unexercised. Management would anticipate a significant double digit % decline in the Hugo Boss spot price being required for these sold put options in December 2023 to exercise.

FOREIGN EXCHANGE AND TREASURY

The Group reports its results in GBP but trades internationally and is therefore exposed to currency fluctuations on currency cash flows in various ways. These include purchasing inventory from overseas suppliers, making sales in currencies other than GBP and holding overseas assets in other currencies. The Board mitigate the cash flow risks associated with these fluctuations with the careful use of currency hedging using  forward contracts and other derivative financial instruments.

The Group uses forward contracts that qualify for hedge accounting in two main ways - to hedge highly probable EUR sales income and USD inventory purchases. This introduces a level of certainty into the Group's planning and forecasting process. Management has reviewed detailed forecasts and the growth assumptions within them and are satisfied that the forecasts meet the criteria as being highly probable forecast  transactions.

As at 29 October 2023, the Group had the following forward contracts that qualified for hedge accounting under IFRS 9 Financial Instruments, meaning that fluctuations in the value of the contracts before maturity are recognised in the Hedging Reserve through Other Comprehensive Income. After maturity, the sales and purchases are then valued at the hedge rate.

The Group also uses currency options, swaps and spots for more flexibility against cash flows that are less than highly probable and therefore do not qualify for hedge accounting under IFRS 9 Financial Instruments. The fair value movements before maturity are recognised in the Income Statement.

The Group has the following currency options and unhedged forwards:

The Group also holds short-term swaps for Treasury management purposes:

The Group is proactive in managing its currency requirements. The Treasury team works closely with senior management to understand the Group's plans and forecasts, they also discuss and understand appropriate financial products with various financial institutions, including those within the Group's Bank Financed Facility. This information is then used to implement suitable currency products to align with the Group's strategy.

Regular reviews of the hedging performance are performed by the Treasury team alongside senior management to ensure the continued appropriateness of the currency hedging in place, and where suitable, either implementing additional strategies and/or restructuring existing approaches in conjunction with our financial institution partners.

Given the potential impact of commodity prices on raw material costs, the Group may hedge certain input costs, including cotton, crude oil and electricity.

CASH FLOW AND NET DEBT

Net debt increased by £180.7m from £416.8m at 30 April 2023 to £597.5m at 29 October 2023. Net debt includes £146.3m borrowings relating to the Frasers Group Financial Services Limited securitisation facility (30 April 2023: £161.6m). Net interest on bank loans and overdrafts increased to £25.0m (FY23 H1: £16.8m) largely due to increased interest rates and increased usage of the Revolving Credit Facility ("RCF") in the period.

Analysis of net debt:

Cash flow:

(1) Restated to reflect the change in presentation of movements in deposits relating to equity derivatives detailed in the FY23 annual report.

SUMMARY CONSOLIDATED BALANCE SHEET (EXTRACT)

(1) Restated to reflect the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

The increase within property, plant and equipment from 30 April 2023 is largely due to net additions offset by depreciation and the transfer of three properties with a net book value of approximately £50m to investment property following a change of use in the period. This transfer also accounts for the increase in investment property since 30 April 2023. 

Long-term financial assets have increased since 30 April 2023 due to the business making significant strategic investments in AO World plc, ASOS plc and Boohoo plc during the period.

Inventory has increased from 30 April 2023 as holdings are increased in the build up to the peak Christmas trading period and also due to acquisitions. The increase compared to 23 October 2022 is principally due to acquisitions.

Trade and other receivables includes £244.4m relating to deposits in respect of derivative financial instruments (30 April 2023: £190.1m; 23 October 2022: £389.7m) and the Frasers Group Financial Services consumer credit receivables portfolio with a carrying value of £211.5m (30 April 2023: £225.9m; 23 October 2022: £240.3m).

See note 10 for further details in relation to provisions.

The increase in trade and other payables since 30 April 2023 largely follows the seasonal increase in inventory holding noted above.

RELATED PARTY TRANSACTIONS

Related party transactions are disclosed in note 15. There have been no material changes in the related party transactions described in the last annual report.

GOING CONCERN

Having thoroughly reviewed the performance of the Group and having made suitable enquiries, the Directors are confident that the Group has adequate resources to remain in operational existence for the foreseeable future which is at least 12 months from the date of approval of these unaudited condensed consolidated financial statements. Full details of this assessment can be found in note 1.

DIRECTORS' RESPONSIBILITY STATEMENT

There have been no changes in Directors in the period. Each of the directors confirm that to the best of their knowledge:

The summary of results for the 53 weeks ended 30 April 2023 is an extract from the published Annual Report and Financial Statements which have been reported on by the Group's auditors at the time and delivered to the Registrar of Companies. The audit report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006.

Michael Murray

Chief Executive Officer

6 December 2023

FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENT

FOR THE 26 WEEKS ENDED 29 OCTOBER 2023

(1) Restated to reflect the change in accounting policy regarding the valuation of investment property and the reclassification of rental income. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

The accompanying accounting policies and notes form part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 26 WEEKS ENDED 29 OCTOBER 2023

(1) Restated to reflect the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

The accompanying accounting policies and notes form part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(1) Restated to reflect the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

The accompanying accounting policies and notes form part of these condensed consolidated financial Statements.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE 26 WEEKS ENDED 29 OCTOBER 2023

(1) Restated to reflect the change in accounting policy regarding the valuation of investment property. Please refer to note 1 of the condensed consolidated financial statements and the appendix below for details.

(2) Movements in deposits relating to equity derivatives have been presented as a separate line item within net cash outflows from investing activities in the current period. Following a reassessment in FY23, management have concluded that this is a more appropriate presentation of movements in these collateral deposits in line with IAS 7 Statement of Cash Flows. Prior period information has been restated on an equivalent basis. The presentational adjustment does not have any impact on net decrease in cash and cash equivalents, the balance sheet, the Group's profit, or earnings per share in any of the periods presented.

The accompanying accounting policies and notes form part of these condensed consolidated financial Statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE 26 WEEKS ENDED 29 OCTOBER 2023 (UNAUDITED)

FOR THE 26 WEEKS ENDED 23 OCTOBER 2022 (UNAUDITED)