KOOV.L Regulatory News (KOOV)

22 December 2016

Strong Sales Growth of 114%. Increased Brand Awareness delivers significant growth in

Website Traffic, Registered Base and Active Users 

Koovs plc (AIM:KOOV), ("Koovs" or the "Company") the fashion-forward business focused on the young Indian e-commerce market, today announces its interim results for the six months to 30 September 2016.

The business continues to deliver rapid sales growth through the KOOVS.COM website and on its stated strategic objectives to build scale and establish Koovs as the favourite western fashion brand for the style conscious 20-something consumer in India.

BUSINESS HIGHLIGHTS

Koovs.com KPIs (H1 FY17 v H1 FY16)

· Sales growth * +114% To £7.9m from £3.7m

· Website traffic +132% To 38.0m from 16.4m

· Registered base +150% to 1.5m from 0.6m

· Active customers** +138% to 431,000 from 181,000

· Investment in Koovs multi-channel marketing programme has further increased brand awareness from 8% to 18%, resulting in a step change in web traffic, registered base, active customers and customer orders, more than doubling sales to £8m.

· Orders via mobile have increased to 62% of transactions, including a significant increase of 421% YoY in orders using the Koovs App.

· By placing social media activity at the heart of customer engagement programme, Koovs has more than doubled its social following (102%) YoY to 1.7m. The company now has three times the Instagram followers and twice as many engaged users on Facebook than its nearest competitor on each platform.

· Koovs stated aim to extend product offering has seen the exclusive Koovs private label collections continue to expand as the most popular brand on the KOOVS.COM web site, growing 124% and accounting for 40% of all sales.

· Invested in improving operational and business performance during H1 FY17 by strengthening the management team with the appointment of a new Chief Financial Officer, Chief Technology Officer and Chief Marketing Officer, and partnering to access an additional and expandable 2,800m2 in warehouse space.

Mary Turner, CEO, said:

"It has been another amazing six months of growth for both sales and new customers. We have delivered on both our strategic and financial objectives and are in line with expectations. The increases in our customer base, registered base and social followers will provide an excellent opportunity for future growth. Whilst demonetisation had a short-term impact on the market and ecommerce we have seen good growth in November and had some of our best days for sales in December.

The Indian online fashion market is projected to grow to £2.5bn by 2020 and the combination of a strengthened management team, our exclusive London based designs and operational expertise in India, mean Koovs is well positioned to capture a significant market share in this rapidly growing market. "

* Gross Sales (Gross Order Value) order value placed through the KOOVS.COM website including taxes

** Customers who have transacted at least once during the previous 12-month period.

Comment on demonetisation since 8 November 2016

On 8 November the Indian Government announced it would immediately replace the Rs500 and Rs1000 notes with new Rs500 and Rs2000 denominations. This was a significant move and has caused short-term cash liquidity issues.

With cash on delivery a standard feature in India, ecommerce companies have been affected. The management's rapid response to offer flexible customer payment options, including door step conversion to card and e-wallet payments, and an increased focus on highly targeted marketing promotions, has resulted in a shift to 50% digital payments (from 30%), strong YoY growth in November 2016 and one of our best sales days ever during December.

With the recent approval by the Reserve Bank of India for new simplified online payments up to Rs2000, Koovs is in a strong position in the medium term to capitalise on increased digital transactions and to maximise the space in the market created by this monetary transition.

FINANCIAL OVERVIEW KOOVS PLC

· Koovs plc Group revenue +100% to £4.0m (INR366.7m), (H1 FY15: £2.0m (INR199.2m)).

· Loss before tax of £9.1m (INR835m), (H1 FY15: loss of £5.7m (INR571m), in line with expectations as the business continues increase its investment in marketing and technology, to build presence in the market and grow revenues, and expand operational capabilities.

· £26.2m / INR 2,483.2m of additional share capital was raised in the six months to 30 September 2016

· Group structure normalised through £9m acquisition of minority stake in Koovs Marketing Consulting Private Limited bringing Koovs PLC ownership to 100%.

Notes to Editors

The Company is headquartered in London, where the majority of its design and buying team is based, with all other operational functions based in India.

# Koovs plc revenue reflects the wholesale value of products supplied to the KOOVS.COM website.

^ Sterling equivalent of Indian Rupee values at exchange rates ruling in the relevant period or on the relevant date.

The information presented in this report has not been audited nor reviewed by the Company's auditors.

CHAIRMAN'S STATEMENT FOR THE SIX MONTHS TO 30 SEPTEMBER 2016

Targeted and efficient marketing campaigns have delivered another period of excellent sales growth for KOOVS.COM. In addition, consumer engagement with the company has grown strongly. Amplification of the brand, unique design collaborations and popular social media campaigns have generated 1.7m social followers and 1.5m registered users providing the platform for significant future growth.

These results have been achieved through our continued focus on the five strategic objectives set out in our Annual Report for the year to 31 March 2016.

Build the Koovs private label - Koovs private label now accounts for 40% of sales and has grown 124% YoY and the number of style options has increased by 42%.

Bring international brands to India -new brands introduced included Boohoo, Liquor n' Poker, Fila Black and First & I.

Extend fashion credentials - Authoritative fashion forward content has made KOOVS.COM the clear leaders on social media, with 2 to 3 times the number of engaged users than Koovs biggest rival. Exclusive collaborations with high-profile designers, including Manish Arora and graphic artist Hattie Stewart have generated extensive media coverage and have seen these collections worn by Indian celebrities and Bollywood stars.

Develop delivery and price promises - Improved distribution and continual focus on price architecture has enhanced customer satisfaction. Review scores are now significantly ahead of all competitors.

Use technology to empower customers - Koovs has increased App and Desktop scalability and performance, and has adopted a "Mobile First" approach to technology with new Android and IOS Apps to be released in H2, reflecting the development that smartphones are now the preferred channel for our consumers to access the web.

Fund raising

During the period £17.2m has been raised as part of the capital raise program announced in October 2015. Also during the period an additional £9m was raised to take 100% ownership of Koovs Marketing Consulting Pvt Ltd our Indian subsidiary. In November 2016 and additional £12.9m. was raised. As previously disclosed these amounts include strategic investments from the Hindustan Times (£3.0M) and the Times of India group of companies (£3.9M), also providing significant partnerships with two of the leading media companies in India.

Waheed Alli

Chairman

22 December 2016

INTERIM REVIEW

Strategy

Koovs commercial strategy and goal to become India's number one international fashion destination is aimed at rapidly building scale in the business. We will do this by leveraging our established fashion credibility and extending the Koovs range into new categories that appeal to and meet more consumer lifestyle needs. New categories such as leisure wear, work wear, active wear and fashion basics further underpin the Koovs trend ranges to ensure we can deliver the right fashion at the right price.

We will provide the most engaging customer experience through fashion and lifestyle related content and develop a seamless experience across web, mobile and tablet.

Further, we will become the undisputed brand for affordable international style for the fashion lover in India by amplifying our voice to become "famous for fashion" through an extensive and targeted marketing campaign across multiple channels in India's major cities.

Trading performance

Sales generated on the KOOVS.COM website during the six months to 30 September 2016 amounted to £7.9m (equivalent to INR730m), representing an increase of 114% in sales over the first half of the previous financial year. Net Sales after returns and tax amounted to

Orders generated in the period increased by 135% to 559,000 due an increase in web traffic and an increase in conversion rate from 1.4% to 1.5%. The "Mobile First" approach to development has helped accelerate growth with 62% of all orders coming though mobile devices (45% in H1 FY16), a growth of 223% compared to H1 FY16. Most encouragingly orders though the Koovs App increased by 421% to 41% of all orders, and now represent the most popular method of ordering for our customer.

With the introduction of the Koovs Essentials range, a lower value fashion basics range, average order value has decreased by 11% from £15.90 (INR 1570) to £14.20 (INR 1305). The range has proved very popular increasing the average units per order by 10% from 1.7 to 1.8. The overall numbers of units shipped in H1 FY17 have now broken the 1m barrier and have increased by 157% to 1.03m (0.40m in H1 FY16).

Operationally the company has manged the growth in sales and orders shipped by investing in warehouse capacity and customer support. Customer satisfaction has increased with improved review scores which now exceed all other major clothing and fashion e-retailers in India. (mouthshut.com on 12/12/2016, scores out of 5: Koovs 4.07, ABOF 3.29, Myntra 3.11, Jabong 2.84, AJIO 2.27)

Financial results, cash flow and funds

Revenue in the period, representing the wholesale price of products sold was £4.0m / INR 366.7m (Six months to 30 September 2015: £2.0m / INR 199.2m). After cost of sales and overhead costs, the net loss before tax in the period was in line with expectations at £9.1m / INR 835.2m (Six months to 30 September 2015: £5.7m / INR 570.6m). Other than one off costs of £0.2m (INR 18.0m) for the restructure of the senior management team, the increase in overheads was due to the additional investment in marketing.

At 1 April 2016, including both short- and long-term deposits, the business had access to £2.5 / INR 241m (2015: £13.7m / INR 1,266.9m) for the purposes of funding the business.

During the period, £12.2m / INR 1,118.2m (Six months to 30 September 2015: £7.3m / INR 728.6m) was utilised in funding losses and additional working capital, including a £3.2m (INR 291m) prepayment of marketing expenses. £26.2m / INR 2,534.0m of additional share capital was raised through a series of fundraising rounds, of which £9.0m INR 869.8m was utilised in in acquiring the remaining issued share capital of Koovs India, resulting in the Group's subsidiary being 100% owned.

At 30 September 2016, including both short- and long-term deposits, the business had access to INR 667.9m / £7.7m (30 September 2015: INR 568.6m /£5.6m) for the purposes of funding the business. The funds are held in term deposits or current accounts, mainly in India. Additionally, £3.2m (INR 291m) of marketing funds have been prepaid to secure significantly reduced media rates, and been recorded in the Statement of Financial Position under "Trade receivables, other receivables, prepayments and other assets".

Since 30 September 2016, a further £12.9m / INR 1,091m has been secured in equity funding.

Principal risks and uncertainties

The Company's business activities, together with the factors likely to affect its future development, financial position, financial risk management objectives, details of its financial instruments and its exposures to price, credit, liquidity and cash flow risk are described in the Chairman's Statement and the Strategic Report published in the annual report for the period ended 31 March 2016.

The board considers the principal risks and uncertainties facing the Group to be unchanged from those set out in the Annual Report and Accounts for the period ended 31 March 2016, summarised as follows:

· Funding risk, including the ability of the Board to secure the funding required to implement its plans;

· Market and economic risks, including the economic climate and competition in India;

· Financial risks, including interest rate and currency risk;

· Technological risk;

· Warehouse disruption; and

· Reliance on key personnel.

These are set out in detail in the Group's Annual Report and Accounts for the period ended 31 March 2016, a copy of which is available on the Group's website.

Capital Raising and Going Concern

The Company's business activities, together with the factors likely to affect its future development, financial position, financial risk management objectives, details of its financial instruments and its exposures to price, credit, liquidity and cash flow risk are described in the Chairman's Statement and the Strategic Report set out in the Annual Report for the year ended 31 March 2016.

This Interim Report has been prepared on the assumption that the business is a going concern.

The Board and its advisors have been engaged in a staged capital raising process which has secured additional equity funding amounting to INR4,166.2 million / £44.6 million by the date of this report. Of this, INR869.8 million / £9 million was used, during May 2016 to acquire the remaining shares in Koovs India, which is now a wholly owned subsidiary.

The success of the recently completed capital raising and the ongoing support from existing shareholders give the Board a high level of confidence that further funding will be secured in due course and therefore the Board has reasonable expectation that the Group and Company will have adequate resources to continue in operational existence for the foreseeable future.

The Directors therefore consider it appropriate for this report to be prepared on a going concern basis.

Events occurring after the period end

Demonetisation

The announcement by the Indian Government on 8 November that it would remove 500 and 1000 Rupee notes from circulation was a significant move which has caused short-term cash liquidity issues. Consumers have been able to exchange these notes but within daily limits.

Cash on delivery is a normal feature of the Indian ecommerce market today and therefore ecommerce companies have been affected by this. While Koovs cannot underplay the impact of demonetisation, the company has quickly and cost effectively adapted marketing activity to increase focus on highly targeted promotions and to offer flexible and additional digital customer payment options. This move has resulted not only in a shift to 50% digital payments from 30%, but also has delivered strong YoY growth for the month of November and one of Koovs best sales days during December.

RBI (Reserve Bank of India) has recently approved the simplification of online payment to remove a second level of authentication for 'card not present' transactions up to 2000 Rupees. Requiring only a one-time registration, this initiative can only accelerate the transition to digital payments.

Koovs, as an established and unique ecommerce brand in India, is in a strong position in the medium term to capitalise on the move to digital transactions and to exploit the space in the market created by this market transition.

Fundraising

In November 2016 and additional £12.9m / INR 1,091m was raised including a £3.9m / INR 330m investment from the Times of India group of companies

Outlook

We intend to remain resolutely focused on our strategy in order to capitalise on the growing ecommerce market in India.

On behalf of the board of directors

Mary Turner Robert Pursell

Director Director

22 December 2016 22 December 2016

Condensed Consolidated Income Statement

for the six month period to 30 September 2016

All results relate to continuing operations.

Condensed Consolidated Statement of Comprehensive Income

for the six month period to 30 September 2016

All results relate to continuing operations.

Condensed Consolidated Statement of Financial Position

at 30 September 2016

All results relate to continuing operations.

Condensed Consolidated Statement of Changes in Equity

for the six month period to 30 September 2016

Condensed Consolidated Statement of Cash Flows

for the six month period to 30 September 2016

Notes

1. Authorisation of condensed interim financial statements

The condensed consolidated financial statements of Koovs plc (the "Company") and it subsidiary (together, the "Group") for the six month period to 30 September 2016 were authorised for issue by the board of directors on 21 December 2016 and the Condensed Consolidated Statement of Financial Position was signed on the board's behalf by Mary Turner and Rob Pursell.

Koovs plc is a public limited company incorporated and domiciled in England and Wales. The address of its registered office is York House, 23 Kingsway, London, WC2B 6UJ.

2. Basis of preparation and accounting policies

2.1. Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 September 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's audited financial statements as at 31 March 2016.

This interim report has not been audited or reviewed by the Group's auditors.

2.2. Going concern

This Interim Report has been prepared on the assumption that the business is a going concern.

The Company's business activities, together with the factors likely to affect its future development, financial position, financial risk management objectives, details of its financial instruments and its exposures to price, credit, liquidity and cash flow risk are described in the Chairman's Statement and the Strategic Report set out in the Annual Report for the year ended 31 March 2016.

This Interim Report has been prepared on the assumption that the business is a going concern.

The Board and its advisors have been engaged in a staged capital raising process which has secured additional equity funding amounting to INR4,166.2 million / £44.6 million by the date of this report. Of this, INR869.8 million / £9 million was used, during May 2016 to acquire the remaining shares in Koovs India, which is now a wholly-owned subsidiary.

The success of the recently completed capital raising and the on-going support from existing shareholders give the Board a high level of confidence that further funding will be secured in due course and therefore the Board has reasonable expectation that the Group and Company will have adequate resources to continue in operational existence for the foreseeable future.

The Directors therefore consider it appropriate for this report to be prepared on a going concern basis.

2.3. Accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's consolidated financial statements for the period ended 31 March 2016.

There are no revisions to adopted IFRS that became applicable for the period ended 30 September 2016 which have had a significant impact on the Group's financial statements.

2.4. Reporting currency

To assist UK-based readers of the accounts, translations into Sterling have be supplied on a memorandum basis to allow a clear understanding of the results and financial position of the business. The memorandum information does not form part of the financial reporting of the Group representing, as they do, simple translations of the Rupee information. The exchange rates used are shown in the table below.

2.5. Comparative information

This interim report of the Group includes for comparison purposes the trading results for the six month period ended 30 September 2015 and the year to 31 March 2016 and the balance sheets at 30 September 2015 and 31 March 2016.

The comparative figures are not the company's statutory accounts. Statutory accounts for the period ended 31 March 2016 have been delivered to the registrar and are available on the Company's website.

The report of the auditors did not include any statement under s498(2) or under s498(3) of the Companies Act 2006.

2.6 Definitions

Sales (Gross order value): Total value of orders placed by consumers on the KOOVS.COM website for products supplied by the Group.

Web Traffic: Total number of visits to the KOOVS.COM website or use of the KOOVS.COM app.

Registered Users: Number of website visitors who have registered an account on Koovs.com

Conversion: ratio of orders placed to visits.

Active customers: number of customers who have placed at least one order during the preceding 12 months.

3. Revenue

All of the Group's revenue is generated by the Group's subsidiary in India through its operations as a supplier of branded fashion products. The chief operating decision maker is the Chief Executive Officer who makes resource allocation decisions based on Group management accounts and operating reports for the entire Group. The Group therefore represents a single cash generating unit and a single operating segment.

All of the Group's revenue in both periods was generated in the Republic of India.

4. Taxation

No income tax liability arose during the six months to 30 September 2016, the six months to 30 September 2015, or the year ended 31 March 2016. There is no tax charge or credit relating to items charged or credited to other comprehensive income.

5. Earnings Per Share

Basic earnings per share is calculated by dividing the earnings attributable to the owners of the Parent Company by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share is calculated by amending the weighted average number of ordinary shares in issue during the period for the effect of dilutive share options in issue.

The effect of the share options in issue is anti-dilutive and therefore no adjustment has been made to the weighted average shares in issue when calculating diluted earnings per share. There is therefore no difference between basic earnings per share and diluted earnings per share.

6. Cash and bank deposits

Cash and cash equivalents comprise cash in hand and cash held in bank accounts from which deposits can be drawn without any substantial delay and which have not been deposited under any agreement for a fixed term, net of any bank overdrafts which are utilised for operational cash flow purposes.

7. Issued share capital

During the six months to 30 September 2016 the following shares were issued:

The share capital of the parent company, Koovs plc, is denominated in Sterling and therefore the information provided in relation to the share capital of the Company is given in Sterling but has been translated into Rupees at the rates ruling on the date of the issue of the shares for the purposes of the consolidated accounts.

In November 2016, the Company issued a further 25,700,000 ordinary shares of 1p each raising a further INR1,091m / £12.9 million to support the operations of the Group.

8. Acquisition of remaining shares in subsidiary

In May 2016 the Company acquired the remaining shares in Koovs India at a cost of INR869.7m / £9.0m. Consequently, Koovs India became a wholly-owned subsidiary. As there was no change of control no goodwill could be created so the cost of the acquisition and the non-controlling interest in the net liabilities of the subsidiary at the date of acquisition have been charged to reserves in the period.

9. Fair value of financial instruments

The fair value of cash and cash equivalents, inventories, trade receivables, trade payables, and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments. There is no material difference between the carrying amount and the fair value of any other assets or liabilities in the Statement of Financial Position.

10. Related parties

During the period, the Group entered into transactions in the ordinary course of business with certain related parties as follows:

There have been no changes in the list of related parties since 31 March 2016 except that since Infotel E-commerce Pvt Ltd is no longer a shareholder in Koovs India.