STU.L Regulatory News (STU)

30 June 2021

Studio Retail Group plc ("SRG" or "the Group")

Results for the 52 weeks ended 26 March 2021

A transformational year for the Group

SRG, the digital value retail business, today announces its full year results for the 52-week period ended 26 March 2021.

Group Summary

· Revenue from continuing operations of £578.6m, up 33% (FY20: £434.9m) 

· Adjusted profit before tax* from continuing operations of £48.8m, up 79% from £27.3m in FY20.

· Core net debt* reduced by £24.3m to £27.6m

· Undertook a strategic review of the Group which successfully completed with the sale of Findel Education for £30m in April 2021.

· Recently completed a refinancing of the Group's £50m core bank facility with a new maturity date of September 2024, which provides a solid medium-term liquidity platform for further growth.

Studio

· Active customer base at Studio at records levels; up 35% in FY21 to 2.5m at March 2021, including 1.5m with an active credit account (a year on year increase of 14%).

· Product revenue of £445.4m (FY20: £311.7m), growth of 43%, achieved alongside a +290bps improvement to product gross margin % to 35.9%. The relative lack of promotional discounting from the high street at points during the year is likely to have contributed to some of this increase.

· Financial services revenue up 8.2% with no material increase in arrears seen to date. The impairment charge of £45.7m reflects management's view that some customers have benefitted from the temporary regulatory support put in place by the Government to protect jobs and incomes and the impairment provision has been kept at a level commensurate to this risk.

· Eligible Receivables at the year-end were £315.3m, approximately 20% up against prior year. To facilitate further receivables growth, a further increase in the securitisation facility from £225m to £250m was agreed in April 2021. Drawings at the year-end were £225m (March 2020: £197.6m).

· Adjusted operating profit* for the business of £61.7m (FY20 restated**: £39.1m) after investment in upgraded systems and processes.

Current trading & outlook

The first quarter of the new financial year has seen Studio's product sales in line with the same period at the start of the pandemic last year, which in turn represents an increase of 51% on the first quarter of FY20. Product margin rates are c.340bp higher than last year due to the non-recurrence of Studio's significant discounting of clothing and footwear ranges seen at this point last year.

We expect that there will be a resumption of more competitive market conditions later in the year, alongside inflationary impacts on some raw material and shipping costs.

Financial services revenue is up 15% in Q1, although this is expected to moderate later in the year. Studio is implementing changes to some elements of its financial services products this year to improve outcomes for customers. At this early stage of the new financial year, we anticipate that Group adjusted profit before tax for the 52 weeks to 25 March 2022 will be in the range of £42m-45m.

Paul Kendrick, Group Chief Executive, commented:

"The Covid-19 pandemic showed the resilience and agility of Studio, and we emerge from it a much stronger business.

"The changes over the last few years, to transform Studio into a digital value retailer with integrated financial services, meant we could react quickly to changing market conditions, and deliver record levels of growth in sales, profit and customer numbers. The success of the last year could not have been achieved without the commitment and hard work of all our colleagues and I am proud of how they have strived through the year to deliver for our customers.

"With the strong performance last year, and having sold the Findel Education business, Studio is in a stronger financial position and is now focused on pushing forward with a well-defined purpose that delivers great value, affordable products for our customers. The business has a clear growth strategy, fuelled by its digital capabilities, service enhancements, and ability to utilise data to drive better customer targeting, credit underwriting and product offers. All of this bodes well as we emerge from the pandemic and I am confident Studio can go from strength to strength and benefit all stakeholders."

Enquiries

Studio Retail Group plc

Paul Kendrick, Group CEO

Stuart Caldwell, Group CFO

0161 303 3465

Tulchan Communications Sunni Chauhan

Will Palfreyman020 7353 4200

* this is an Alternative Performance Measure, for which the reconciliation to the equivalent GAAP measure can be found below

** balances have been restated as set out in note 1 to the Group Financial Information below.

Chairman's Statement

The Covid-19 pandemic has produced both challenges and opportunities for the Group. The multi-year transformation of Studio's business model into a digital-first value retailer means that it is ideally positioned to serve the increasing number of customers who choose to shop online; a trend which was evident before the pandemic, but which has accelerated over the last year. The Group's sales, profit and customer numbers all grew substantially during FY21 and we start the new financial year with a strong trading and financial position. This performance was achieved without reliance on government or external support (a small amount was initially claimed under the Government's Coronavirus Job Retention Scheme along with a short-term payment deferral of employment taxes but these amounts were repaid before the year-end) and we did not make any employees redundant as a result of the Covid-19 pandemic.

This performance would not have been possible without the contribution of all our colleagues across the business. The upgrading of key systems over the last few years allowed the majority of our head-office colleagues to work effectively from home, and we see a hybrid approach to home/office working continuing into the future. Our frontline colleagues in our warehouses were protected through ensuring that our facilities were quickly upgraded with the appropriate social distancing and hygiene measures, by introducing onsite testing facilities as soon as these became available, by protecting colleagues' incomes where they needed to self-isolate, and by rewarding them for their efforts with additional vouchers and cash bonuses during the year. On behalf of the Board, I would like to thank all our colleagues for their hard work, which has ensured that we have been able to serve our customers throughout the year despite lockdown disruptions.

Financial performance

A record number of more than 2.5m customers shopped with Studio in FY21, an increase of 35% in the year. Within that, the number of customers with a credit account, who typically exhibit far greater shopping loyalty, increased by 14% to just over 1.5m. Total revenue from Studio increased by 33% to £578.6m (FY20: £434.9m), which led to adjusted profit before tax* increasing by 79% to £48.8m (FY20: £27.3m). The statutory profit before tax from continuing operations was £41.7m (FY20: £6.8m). Adjusted EPS increased by 271% to 44.9p (FY20: 12.1p).

Strategic Review

In December 2020, following the abandonment of the proposed sale of Education to YPO, the Board of Directors announced a review of all strategic options available to it to maximise value for all its shareholders (the "Strategic Review"). Having reviewed a number of options, including the disposal of a division and seeking offers for the Group as a whole pursuant to a formal sale process, the Strategic Review concluded in April 2021 with the sale of Findel Education to a newly-formed company owned by funds managed by Endless LLP for a gross consideration of £30m. That transaction completed after the year end on 16 April 2021 and we wish the team at Findel Education well for the future.

Balance sheet and dividends

Core net debt* ended the year at £27.6m (March 2020: £51.8m), a position which improved in April 2021 following the receipt of the proceeds from the sale of Findel Education and additional drawings from an increase to the securitisation facility.

We have recently completed a refinancing of the Group's £50m core bank facility with a new maturity date of September 2024, which provides a solid medium-term liquidity platform for further growth.

The Group is working with the trustees of the legacy defined benefit pension scheme to explore ways of removing any residual pension liabilities, for example by potentially acquiring insurance cover for some or all of its sections.

The Board will continue to prioritise investment in improving Studio's digital capabilities and in further strengthening its financial position in light of the broader economic environment. Although it does not have plans to reinstate dividend payments at this stage, the strong trading performance of Studio during FY21 enabled intra-group dividends to be made that brought the financial position of the parent company into accumulated profits of £9.9m (FY20: accumulated losses of £73.3m).

The Company intends to buy back the former convertible shares issued in 2011, which have now automatically become deferred shares following the expiration of the conversion period, for a nominal sum later in the year.

Management and Board

Paul Kendrick, who has been Managing Director of Studio since April 2017, was appointed as Group CEO upon the retirement of Phil Maudsley on 26 March 2021 as the culmination of a planned succession process. Francois Coumau will retire from the Board at the end of the AGM in September having completed seven years, the last two of which as Chairman of the Remuneration Committee. Elaine O'Donnell has also indicated that she does not intend to stand for re-election at the AGM. I would like to thank Francois and Elaine for their contributions and to Phil for his long service to the Group.

Current trading and outlook

The first quarter of the new financial year has seen Studio's product sales in line with the same period at the start of the pandemic last year, which in turn represents an increase of 51% on the first quarter of FY20. Margin rates are c.340bp higher than last year due to the non-recurrence of Studio's significant discounting of clothing and footwear ranges seen at this point last year. We expect that there will be a resumption of more competitive market conditions later in the year, alongside inflationary impacts on some raw material and shipping costs.

Financial services revenue is up 15% in Q1, although this is expected to moderate later in the year.

Studio is implementing changes to some elements of its financial services products this year to improve outcomes for customers. At this early stage of the new financial year, we anticipate that Group adjusted profit before tax for the 52 weeks to 25 March 2022 will be in the range of £42m-45m.

While the emergence of potential new variants of the virus and the prospect of higher transmission levels as the UK continues to unlock mean the external environment remains uncertain in the near term, our digital value retail model remains robust, and the changes we have made to our business enable us to continue providing our services to our customers with minimal disruption.

We have set out strategic plans to grow the Studio business towards achieving revenue of £1bn in the medium-term. The encouraging start of our current financial year against last year's challenging comparator gives us confidence in those plans.

Ian Burke

Chairman

29 June 2021

* this is an Alternative Performance Measure, for which the reconciliation to the equivalent GAAP measure can be found below

** balances have been restated as set out in note 1 to the Group Financial Information below.

STUDIO

Studio is a digital value retailer with a broad product offer of clothing and footwear alongside home and electrical products plus more seasonal ranges, many of which can be personalised for free. Underpinning all this, is the drive to amaze our customers with value and provide them with a range of payment options, including our flexible credit facility.

Our medium-term ambition is to achieve over £1 billion of revenue, through the following three levers for growth:

· Attracting more of our core customers who appreciate the affordability of Studio's VALUE proposition through building brand awareness and through enhanced use of data analytics for customer targeting and credit decisioning;

· Extending the product range providing greater CHOICE for customers alongside a personalised financial service proposition, and digital CRM programmes to build spend per customer; and

· Broadening the appeal of Studio to a wider customer base who are still seeking great value and flexible PAYMENT OPTIONS.

Summary income statement

* this is an Alternative Performance Measure, for which the reconciliation to the equivalent GAAP measure can be found below

** balances have been restated as set out in note 1 to the Group Financial Information below.

Our purpose and culture

Our purpose at Studio shapes our culture, policies and processes and given it is socially driven, it naturally forms the basis of our wider ESG agenda, which at Studio is our newly created "Sustainable, Responsible, and Good" plan. We strive to make more affordable, make more possible for our customers and we will do that in the most sustainable and responsible way whilst maintaining our value proposition and operating our unique business model.

We will balance our profits with protecting our planet whilst doing right by our customers, colleagues and wider stakeholders. We are putting our focus and emphasis on the areas where we can make the most positive difference, which is about helping people to thrive.

Following an extensive assessment, reviewing over 500 potential areas, engaging with colleagues, customers and shareholders, we aligned on 19 key material issues to tackle as a priority in the years ahead. These issues are represented by a five- pillar plan which will be set out in the Annual Report.

Our business model

Over the last few years, Studio has completed the first phase of its digital transformation, moving Studio from a traditional catalogue retailer to an online pureplay. The transformation now continues to become truly digital, utilising data and technology in all aspects of the business to improve customer experience and engagement.

Customer shopping patterns have been gradually shifting away from the high street and towards online digital retailers for some time. The Covid pandemic has accelerated this pre-existing trend and Studio has seen a very rapid level of sales growth over the last year as customers browse online, including using our new app, to find products that help make family life that bit easier. New customers have found the combination of a broad, value product range and integrated financial services creates a point of difference to other retailers. The business has no physical stores to service and virtually all orders received online (a small minority still being phone and postal orders).

We believe that Studio has a valuable and arguably unique position in the market being digital, value and with integrated credit. Many successful value retailers struggle with the move to trading online as the economics of the business model do not generally work on low price point, low margin ranges. At Studio we achieve this by having the additional income stream from financial services, but also from how the credit account drives customer loyalty. The increased number of customer touchpoints with our credit account customers drives order frequency and spend over time. Our focus on lifetime value means we can invest upfront in customer acquisition and then, through high levels of retention, drive longer term returns. When we then compare to others who have an integrated credit proposition, they do not generally market themselves as having unbeatable value, or are not pureplay in the way Studio now is. New entrants to the retail credit market have emerged in recent years. However, the key difference with our model is that Studio owns the data on both retail and financial services, allowing us to make better informed credit underwriting decisions.

Our routes to growth #1 - VALUE

The VALUE growth pillar is all about increasing our current core customer base which are attracted to Studio through the unbeatable value we offer. Market studies suggest our current base of 2.5m active customers has a penetration of less than a quarter of our target market, so there is plenty of scope to grow.

Our own research tells us that one of the main reasons that customers don't choose Studio today is a lack of awareness of the brand. In today's digital world, Studio's adverts appear alongside other brands and awareness becomes important to build trust and confidence with customers. We have been building awareness over the last two years through increased TV advertising and developing partnerships with popular ITV programmes such as "I'm a Celebrity, Get Me Out of Here", "This Morning" and "In For a Penny". We have also extended our focus on having our products displayed in press features displaying our value credentials.

We can then harvest the interest generated by using data-driven customer acquisition, with better targeting driving marketing efficiencies. Once a customer comes to us, we then promote the benefits of the credit proposition.

With more customers aware of Studio, attracted to our value product offer and with the ability to responsibly accept more applicants, we will drive up the number of new credit customers who shop with Studio each year.

Our routes to growth #2 - CHOICE

Our second route to growth is around driving up our share of the customer's wallet and the annual spend per customer through broader product CHOICE. This growth route is likely to be the most significant over the short to medium term, as we have identified that our customers' current average spend benchmarks at around half that of other large integrated online retailers. Studio's current annual spend per customer is around £180 based upon the overall base of 2.5m customers. However, we know that the spend from our credit customers is higher than that at approximately £250 due to the greater frequency of shopping from that cohort.

Much of Studio's new customer recruitment is driven by our own-brand, great value products, such as our personalised nightwear and wooden toy ranges. An opportunity exists to broaden sales in future through a gradual widening and depth of product ranges . In particular, we see a significant opportunity in clothing and footwear, which makes up only around a quarter of our total sales today, as this category tends to see greater order frequency.

Our research suggests that we have also historically underperformed against our peers in higher-value ranges like electricals, furniture and garden. Some progress has been made in these ranges through the pandemic, but an opportunity still exists which we expect will feed through to push up order values over time. Our ambition through greater frequency, and greater order value, is to increase spend per customer by around 20-25% over time. We believe this to be a credible ambition as, even at this level, it is still lower than competitor benchmarks.

This range extension, much of which can be sent direct to customer by the supplier so that we do not stock the product, is supported again by the use of data-driven marketing, predominately through digital activity, to engage customers and offer tailored financial services offers to further add to retention and spend.

Our routes to growth #3 - PAYMENT OPTIONS

The third route to growth, by expanding our range of flexible PAYMENT OPTIONS, is likely to be less visible in the short term, but may create a strong longer-term opportunity. Our research indicates that some customers or potential customers with better credit profiles are attracted by Studio's great value products. However, they do not need the current credit proposition that we offer, which in turn leads to a lower frequency of product shopping because they do not see the increased level of customer touchpoints such as those generated by monthly account statements.

Recent changes to the technology used by Studio to underwrite and responsibly oversee our credit accounts have allowed Studio to vary the APR at the point of application using a tailored rate-for-risk approach. This reduces the level of drop-out for better-quality customers through the application process, as data allows us to accept that profile of applicant with less friction in the customer journey. It may also increase the proportion of seemingly higher-risk customers that can be responsibly accepted by asking supplementary questions and taking additional steps such as the use of Open Banking to validate they can afford the credit offered.

Recruiting a greater number of customers with a slightly nearer-prime profile onto a relevant financial services product is likely to increase the second income stream from interest, but also increase the frequency of product shopping from this segment of the population.

Digital Transformation

Studio has made progress over the last few years in gradually replacing its legacy mainframe systems and IT architecture through the development of a clear IT strategy built around data, application and infrastructure architecture. Notable improvements to the CRM, marketing and financial services underwriting systems have created the flexibility for many of our colleagues to work effectively from home during the pandemic.

The introduction of the Studio App in late 2019 has been a significant contributor to the success of the business during FY21, with over 1 million customers downloading the App. As well as now accounting for over 20% of product sales in FY21, it has introduced a virtually cost-free marketing channel via push notifications which have been enabled by around two-thirds of its users.

There remains much still to do to achieve our ambition of becoming a truly digital business, utilising data and technology in all aspects of the business to improve customer experience and engagement. We have therefore organised our ongoing transformation activity around four workstreams:

· Retail Transformation - delivering an upgraded real-time experience for customers to improve retention; equipping colleagues to better serve our customers; and encouraging our direct to customer partners to provide better stock security and a better delivery experience. This programme of activity will address most of our existing customer pain points;

· Data Strategy - this programme aims to deliver value-creating insight that will drive the whole business, specifically supporting product ranging decisions to increase choice and enabling us to target our existing and new customers with the right offers more cost-effectively;

· Continuous improvement - an ongoing portfolio and programme of continual improvement of our existing systems, delivering a rhythm of incremental gains across the business enabling us to underpin our value proposition;

· IT Strategy - our programme to ensure our systems are built on secure, reliable and scalable environments, including the gradual retirement of the legacy mainframe environment.

Performance and Progress

FY21 represented a step-change in the level of performance for Studio. The growth in its active customer base from 1.8m to 2.5m customers included a number of cash-paying customers who found Studio for the first time during the pandemic when the high-street alternatives were closed. The number of customers within this total who now have a credit account increased by 14% to 1.5m. The average annual spend per customer increased by around 5% to £180, which led to product revenue increasing by 43% over the year to £445.4m (FY20: £311.7m).

The product margin rate increased by 290bp during the year to end at 35.9%. The relative lack of promotional discounting from the high street at points during the year is likely to have contributed to some of this increase. However, the pandemic also led to factors that reduced the overall margin, such as lower sales of "going out" clothing and footwear which are normally higher-margin ranges, and higher sales of electricals such as TVs, laptops and gaming consoles which are normally lower-margin ranges. Management estimate that mix effect to have been around -20bp, meaning that the underlying increase in the margin rate through pricing and better buying practices increased by 310bp.

The increase in the number of credit account customers led to growth in the closing Eligible Receivables* book of 20%. Revenue from financial services during the year grew at 8.2% to £133.2m, due to lower fees being charged to customers who missed payments due to the greater level of forbearance and payment holidays offered to those most affected by the pandemic. Studio also significantly increased the level of new customer recruitment undertaken in the final quarter of the year, including via its "Interest Saver" product that allows customers to repay over either 3 or 6 months without accruing any interest.

Studio estimated that the increase in its bad debt provision required at the end of March 2020 by the sudden deterioration in future economic prospects caused by the start of the pandemic to be around £20m. There are too many competing factors to allow us to identify reliably how much of this increase now remains within the closing provision at March 2021. The book has grown significantly during FY21, there are a higher proportion of new customers within the portfolio at the year-end although the overall quality of new recruits during the year has improved, and the future economic outlook is less pessimistic than a year ago. However, management's analysis of the arrears profile of the portfolio indicates that some customers have benefitted from the temporary regulatory support put in place by the government to protect jobs and incomes. We therefore believe that some of these customers are in a better, lower-provision state than will ultimately be appropriate. Judgement has therefore been applied in determining the year-end provision, which has increased it by approximately £13m from the central level derived from the normal forecasting model. That in turn leads to a bad debt charge for the year of £45.7m, compared to the underlying level of £37.6m in FY20 (or £53.9m including the £20m additional Covid estimate offset by the £3.7m change to model estimate reported in FY20).

The gross profit for Studio therefore increased to £247.4m, up by 31.3% using the underlying measure of bad debt. Marketing costs increased by 8.8% to £34.5m, a much lower rate than the growth in customers and revenue, due to lower tariffs being available on certain channels at various times during FY20. Normal tariffs appear to have returned by the start of FY22.

Distribution costs have inherently increased alongside the growth in product revenue. Admin costs have also increased with the Group incurring additional payroll costs, higher variable overheads through increased alongside activity and high costs through the investment in both people and IT systems.

The adjusted operating profit* was therefore £61.7m, an increase of 58.1% on the £39.1m seen in FY20.

* this is an Alternative Performance Measure, for which the reconciliation to the equivalent GAAP measure can be found below

FINANCE REVIEW

Adjusted profit before tax*

The Group reported an adjusted profit before tax from continuing operations of £48.8m, as set out in the table below. Full reconciliations between the adjusted figures presented below and their statutory equivalents are shown in the Alternative Performance Measures section below.

* this is an Alternative Performance Measure, for which the reconciliation to the equivalent GAAP measure can be found below

** balances have been restated as set out in note 1 to the Group Financial Information below.

The key elements of this improved performance are discussed above.

Individually significant items totalling £1.1m (FY20: £6.8m) were incurred, as discussed in more detail below and set out in Note 3 to the Group Financial Information below. The fair value movement on derivative financial instruments was a charge of £6.1m (FY20: credit of £2.6m). This is presented below the adjusted profit before tax* on the income statement as it relates to the reversal of prior year fair value movements net of the revaluation of hedging contracts that will unwind during FY22.

Individually significant items

The Strategic Review announced in December 2020 included a formal sale process for the Group as a whole, in addition to the successful sale of Education. Professional fees incurred in relation to that former element, totalling £0.8m have been recorded as an individual significant item. Fees relating to the sale of Education are included within discontinued operations.

A further High Court decision relating to the historical treatment of Guaranteed Minimum Pensions was issued during the second half of the year and builds on similar previous decisions on this topic. The impact of the court's findings when applied to Studio's legacy defined benefit pension scheme is an additional charge of £0.8m which has been recorded as an increase to past-service benefits and therefore taken through the income statement. However, due to its nature, and in line with the approach taken in the past, the item has been recorded as an individually significant item.

A review of the ongoing use of the Group's former head office property in Hyde has been undertaken in light of the sale of Education and planned changes to the use of this property as we emerge from the pandemic into more hybrid working. That has led to a reduction in the level of impairment previously recorded against this the right-of-use property asset of £0.5m, which has been recorded within individually significant items to be consistent with the previous impairment treatment.

Discontinued Operation - Education

Education reported an adjusted operating loss* for the year of £0.4m (FY20 profit restated: £2.4m). An impairment charge of £11.1m was recorded against the carrying value of its intangible assets to align with the value achieved upon the subsequent sale of the business in April 2021. Associated disposal costs totalling £2.5m have also been recorded within discontinued operations.

Pensions

The net valuation on the Group's legacy defined benefit scheme at the end of FY21, measured in accordance with IAS 19, reduced from a surplus of £31.7m at March 2020 to £20.8m at March 2021 due to reductions in the assumed level of future returns.

The IAS 19 valuation has no bearing on the contributions made by the Group to the scheme, which is instead derived from the triennial valuation of the scheme. The most recent valuation measured as at April 2019 concluded during the year leading to a continuation of contributions totalling £5.0m p.a. until September 2023. The lump-sum contribution of £13m and lower contributions noted in the FY20 accounts relating to the proposed sale of Education to YPO did not occur as they were contingent upon completion of that sale, which did not occur.

As part of the subsequent agreement to sell Education to Endless LLP, the Group made an additional contribution of £9m into the scheme in May 2021. This has brought the valuation of the scheme measured by reference to the actuarial targets into surplus. The Company is therefore working with the scheme's trustees to explore options to remove this potentially volatile liability from the balance sheet, including the potential use of insurance.

Taxation

The Group posted a charge of £8.6m in the year in respect of taxation for continuing operations (FY20: credit of £0.2m). The underlying effective tax rate* for the year was 20.6% (FY20 restated: 18.2%).

Earnings per share

The adjusted earnings per share* for the year from continuing operations was 44.9p in FY20 (FY20 restated: 12.1p). The basic earnings per share from continuing operations was 38.2p per share (FY20 restated: 8.2p).

Summary balance sheet

Consolidated net assets amounted to £84.9m at the period end (FY20 restated: £74.0m) as summarised above, reflecting the net profit reported and the actuarial remeasurements in respect of the pension deficit. The net assets are equivalent to 98p per ordinary share (FY20 restated: 86p per ordinary share).

Cash flow and borrowings

After taking account of interest and the net impact of finance leases, the Group's core net debt reduced by £24.3m to £27.3m (FY20: £51.8m), as summarised below.

Total net debt* at the year-end was as follows:

The Group's revolving credit facility was refinanced in June 2021, with the available level of facilities now scheduled to be £50m until the end of September 2024. The securitisation facility was increased from £200m to £225m during the year, and then subsequently increased further to £250m in April 2021 to cater for the continued growth in Studio's trade receivables. The final maturity date of the securitisation facility is the earlier of 30 December 2028 or the date on which drawings in respect of eligible receivables in place at 30 December 2022 are repaid. Under the current agreement, the Group cannot make additional drawings on the facility after 30 December 2022.

Dividends and capital structure

Dividends totalling £110m were received by the Company from its subsidiaries during the period and its balance sheet as at 26 March 2021 shows a surplus of £9.9m on its retained reserves (FY20: deficiency of £73.3m).

The 166.9m convertible ordinary shares in the Company automatically converted to become non-voting deferred shares on 23 March 2021. The Company is able to repurchase and cancel these shares for a nominal sum, which it plans to do later in FY22.

Our ambition over the next few years is to invest in our digital capabilities in order to increase the level of potentially distributable reserves within the primary operating subsidiary, Studio Retail Limited, to enable it to remit dividends to Studio Retail Group plc. Studio Retail Group plc does not have plans to reinstate dividend payments at this stage. The Directors have determined that no interim dividend will be paid (FY20: £nil) and are not recommending the payment of a final dividend (FY20: £nil).

Treasury and risk management

The Group's central treasury function seeks to reduce or eliminate exposure to foreign exchange, interest rate and other financial risks, to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. It does not engage in speculative transactions and transacts only in relation to underlying business requirements in accordance with approved policies.

Interest rate risk management

The Group's interest rate exposure is managed by the use of derivative arrangements as appropriate. The Group has purchased interest rate caps covering the period to July 2021 to protect against the risk of unforeseen increases to LIBOR rates.

Net interest costs for the year for continuing operations were £9.2m, (FY20: £10.5m), with a reduction being largely caused by the significant increase in the opening pension scheme surplus of £31.7m, together with lower LIBOR and a lower borrowing margin. Finance charges were covered 6.3 times by adjusted operating profit* (FY20 restated: 3.6 times).

Currency risk management

A significant proportion of the products sold by Studio are procured through the Group's Far-East buying operations and beyond. The currency of purchase for these goods is principally the US dollar.

The Group's hedging policy aims to cover anticipated future exposures on a rolling 12-month basis. As at the balance sheet date, the Group had forward contracts with an outstanding principal of $104m (FY20: $91m) and an average rate of £1/$1.33 (FY20: $1.286). The market value and unrealised loss on those contracts as at the balance sheet date, less the reversal of the equivalent valuation as at the end of March 2020, was a charge of £6.1m (FY20: gain of £2.6m). This is presented separately on the Income Statement as it represents an element of product costs to be realised in FY22 as the contracts unwind. The Group currently has forward contracts in place with an outstanding principal of $91.5m covering the 12 months to June 2022.

In addition to this direct exposure, the divisions face a significant level of indirect exposure from supplies made by UK suppliers who in turn source goods from overseas. That risk is normally mitigated through a combination of supplier agreements and fixed term pricing, although from time to time there may be a requirement to increase prices to customers to maintain margins.

Borrowing and counterparty risk

The Group's exposure to borrowing and cash investment risk is managed by dealing only with banks and financial institutions with strong credit ratings.

Alternative Performance Measures

The Directors use several Alternative Performance Measures ("APMs") that are considered to provide useful information about the performance and underlying trends facing the Group. As these APMs are not defined by IFRS, they may not be comparable with APMs shown in other companies' accounts. They are not intended to be a replacement for, or be superior to, IFRS measures.

The principal APMs used by management are set out below.

Adjusted profit before tax

this measure is used by management to assess the underlying trading performance of the Group from period to period.

In both the current and prior period, the following items have been excluded in arriving at adjusted PBT:

· Individually significant items are, due to their nature or scale, not reflective of the underlying performance of the Group. The Directors believe that presenting these items separately aids year on year comparability of performance.

· The Group's foreign exchange hedging policy means that there will be unrealised fair value gains or losses at the period end relating to contracts intended for future periods. Those fair value movements are therefore excluded from the underlying performance of the Group until realised.

In the prior period, owing to the impact of Covid-19, the ongoing disposal process in respect of the sale of Education to YPO and the adoption of IFRS 16 Leases ("IFRS 16), further items were adjusted for to ensure the figures were presented on a consistent basis:

1. The £20m estimated impact of Covid-19 on the impairment charge in Studio was excluded in reaching like-for-like adjusted operating profit and profit before tax to enable comparability with the results of the prior periods and to allow a fair (although estimated) assessment of the business' underlying trading performance excluding Covid-19.

2. During the prior period, the Group refined its impairment models to make use of more up to date customer data that was more reflective of current credit policies and operational processes. The availability of this more granular and up to date information enabled management to refine its estimate in respect of the level of impairment provision required and resulted in reduction in the level of provision required by £3.8m. Since this change was not reflective of the underlying performance of the receivables portfolio, it was excluded when arriving at like-for-like adjusted operating profit and profit before tax to enable to allow a fair and balanced assessment of the business' underlying trading performance in FY20.

3. IFRS 16 was adopted for the first time in FY20 using the modified retrospective adoption approach. In effect, this meant that the FY20 income statement was presented on an IFRS 16 basis, whilst the FY19 comparative was stated based on the requirements of IAS 17 Leases ("IAS 17"). In order to allow for a like-for-like comparison, and to present results on a consistent basis with that used to formulate market consensus, the impact of IFRS 16 was excluded in reaching like-for-like adjusted operating profit and profit before tax.

4. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations ("IFRS 5"). Since the Group was engaged in an active sale process from September 2019 onwards, Education met the criteria to classified as held for sale and as a result, its FY20 results were presented separately in a single, post-tax "result from discontinued operation" line in the income statement. In addition, the amortisation of intangible assets relating to Education, which arise upon consolidation, and were previously disclosed within Central costs, were included within the result from discontinued operation. IFRS 5 also required that no depreciation or amortisation be recorded against Education once it was classified as held for sale. As such, depreciation and amortisation charged in H2 of FY20 was reversed. In order to make the presentation of results fair, balanced and understandable, and since Education was run as an active part of the Group throughout FY20, all IFRS 5 adjustments were reversed when arriving at the like-for-like adjusted operating profit and profit before tax (i.e. its results were presented as they would have been if the disposal process had not taken place).

In order to allow for a fair comparison with the results for FY21, adjustments 1 and 2 will still be made to in arriving at an equivalent adjusted profit before tax measure for FY20.

Since the requirements of IFRS 16 have been applied in both FY21 and FY20, the adjustment set out in 3 is no longer required to aid comparability.

Since the Education business met the criteria to be held for sale at 26 March 2021, its results have been presented separately in the consolidated income statement in both the 52-week period ended 26 March 2021 and the 52-week period ended 27 March 2020. Since the business was involved in two disposal processes during FY21 and was sold in April 2021, management have concluded that the results of Education are no longer relevant when assessing the underlying performance of the Group and have therefore focused on the results from continuing operations.

A reconciliation from adjusted profit before tax to profit before tax is shown below:

EBITDA before individually significant items and adjusted operating before individually significant items

The calculation EBITDA before individually significant items and adjusted operating before individually significant items is set out in note 2 to the Group Financial Information.

Studio Product Gross Margin %

This is used as a measure of the gross profit made by Studio on the sale of products only, which shows progress against one of Studio's strategic pillars. It is derived as follows:

Studio underlying impairment loss as a % of revenue

This is an assessment of the underlying impairment loss incurred in respect of Studio's trade receivables, which enables management to assess the quality and performance of its trade receivables from period to period. The estimated impact of COVID-19 and the change in accounting estimate (detailed above) in the prior period are excluded from the reported impairment loss when calculating this measure, as they are not reflective of the underlying performance of the receivables portfolio.

Studio marketing costs to sales ratio

This measure allows management to assess the efficiency of our marketing spend as we pursue our stated strategy of increasing the profile of the Studio brand. It is calculated by dividing marketing costs by product revenue.

Overall net debt

This measure takes account of total borrowings less cash held by the Group and represents our total indebtedness. Management use this measure for assessing overall gearing.

It is calculated as follows:

* balances have been restated as set out in note 1 to the Group Financial Information.

Core net debt

This measure excludes lease liabilities and securitisation borrowings from net debt to show borrowings under the revolving credit facility net of cash held by the Group. This is our preferred measure of the indebtedness of the Group and is relevant for covenant purposes.

It is calculated as follows:

** Disclosed within bank loans.

* balances have been restated as set out in note 1 to the Group Financial Information.

Debt funding consumer receivables

The majority of Studio's trade receivables are eligible to be funded in part from the securitisation facility, with the remainder being funded from working capital. This measure indicates the face value of trade receivables (before any impairment provision) capable of being funded from the securitisation facility. It is useful to management as it demonstrates the proportion of net debt that is supported by paying customer receivables.

It is calculated as follows:

The drawings under the securitisation facility at the end of March 2021 stood at the prevailing facility limit of £225m. The lenders and the Group mutually agreed a variation to the facility in April 2021 to increase the facility limit to £250m. If that higher limit had been in place at the period end, then an advance rate of 75% totalling £236.5m could theoretically have been drawn.

Adjusted earnings per share

This measure shows the earnings per share given when individually significant items and fair value movements on derivative financial instruments are excluded from the profit after tax figure. Details of how the adjusted earnings per share are calculated can be found in note 6 to the to the Group Financial Information.

Underlying effective tax rate

This measure shows the Group's effective tax rate when the tax impact of individually significant items and other non-recurring items are adjusted for. This measure allows management to assess underlying trends in the Group's tax rate. It is calculated as follows:

Principal risks and uncertainties

Studio Retail Group plc

Group Financial Information

Consolidated Income Statement

52-week period ended 26 March 2021

The accompanying notes are an integral part of this consolidated income statement.

*Earnings before interest, tax, depreciation, amortisation and fair value movements on derivative financial instruments. 

52-week period ended 27 March 2020 (restated)

The accompanying notes are an integral part of this consolidated income statement. A restated Consolidated Income Statement has been presented in note 1.

*Earnings before interest, tax, depreciation, amortisation and fair value movements on derivative financial instruments  

Consolidated Statement of Comprehensive Income

week period ended 26 March 2021

The total comprehensive income for the period is attributable to the equity shareholders of the parent company Studio Retail Group plc.

The accompanying notes are an integral part of this consolidated statement of comprehensive income.

Consolidated Balance Sheet Company Number: 549034

at 26 March 2021

The accompanying notes are an integral part of this consolidated balance sheet.

Consolidated Cash Flow Statement

week period ended 26 March 2021

The accompanying notes are an integral part of this consolidated cash flow statement.

Consolidated Statement of Changes in Equity

52-week period ended 26 March 2021

The total equity is attributable to the equity shareholders of the parent company Studio Retail Group plc.

The accompanying notes are an integral part of this consolidated statement of changes in equity.

Studio Retail Group plc

Notes to the Group Financial Information

1 Basis of preparation of consolidated financial information

The financial information set out herein does not constitute the Company's statutory financial statements for the periods ended 26 March 2021 or 27 March 2020, but is derived from those financial statements. Statutory financial statements for 2020 have been delivered to the Registrar of Companies, and those for 2021 will be delivered in due course. The financial statements were approved by the Board of directors on 29 June 2021. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Copies of the Company's statutory financial statements will be available on the Group's corporate website. Additional copies will be available upon request from Studio Retail Group plc, Church Bridge House, Accrington, BB5 4EE.

The Group financial information has been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the group financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and in accordance with the accounting policies included in the Annual Report for the period ended 27 March 2020 except as stated below.

Going concern

The directors have adopted the going concern basis in preparing these financial statements after assessing the principal risks and having considered the impact of severe but plausible downside scenarios for COVID-19. The Group is financed by a securitisation facility and a Revolving Credit Facility ("RCF"). The directors considered the impact of the current COVID-19 environment on the business, as disclosed in the strategic report, for the next 12 months, the viability period and the longer term. Whilst there is inherent uncertainty in forecasts caused by COVID-19, the directors have considered a number of impacts on sales, profits and cash flows.

The directors have assumed that the Group's operations remain open and that we will continue to be able to serve our customers in the event of any further national lockdowns, as we have done since March 2020. The downside sensitivities considered include a reduction in new customer growth and existing customer spend, the level of future forecast revenue and gross margin growth as well the impact of economic factors (particularly unemployment rates) on the ability of the Group's customer base to continue to shop with us and to service their credit accounts. The directors also considered the impact of these sensitivities occurring in combination. In the event that one of or a number of these downside scenario arise at the same time the directors consider they are able to take reasonable mitigating actions, which include but are not limited to, a reduction in discretionary capital expenditure and a reduction in discretionary marketing spend. Implementing these mitigating actions would enable the Group to continue to operate within its existing facilities during the forecast period.

The directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, noting that further agreement would be required to make fresh drawings on the securitisation facility after 30 December 2022 and its RCF matures on 30 September 2024, and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least 12 months from the signing date of these consolidated financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements.

Non-current assets classified as held for sale and discontinued operations

A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year.

On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss. The same applies to gains and losses on subsequent remeasurement although gains are not recognised in excess of any cumulative impairment loss. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group's accounting policies. Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated.

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated as if the operation has been discontinued from the start of the comparative period.

Findel Education

As at 27 March 2020 the Group's Education business was classified as a discontinued operation as defined by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Due to the CMA's provisional findings, the planned transaction did not proceed to completion and therefore we have restated the comparative consolidated income statement for the 52-week period to 27 March 2020 and the consolidated balance sheet as at 27 March 2020 to present the results of Findel Education as a continuing operation. An adjustment has also been made to opening equity to reinstate £1,710,000 of depreciation and amortisation that was not charged for the 26-week period to 27 March 2020 (i.e. the period during which Findel Education was classified as held for sale). This adjustment carries a deferred tax impact of £325,000, therefore the net impact to opening reserves is £1,385,000.

On 16 April 2021 the Group's Education business was sold to West Moorland 221 Limited, a newly formed company owned by investment funds managed by Endless LLP. At 26 March 2021 the business met the criteria to be accounted for as held for sale and as a discontinued operation as defined by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Education's results have therefore been separated out in the consolidated income statement for the 52-week period ended 26 March 2021, and its assets and liabilities have been classified as held for sale in the consolidated balance sheet at 26 March 2021. In addition, the comparative figures given in the consolidated income statement for the 52-week period ended 27 March 2020 has been restated to show the results from this discontinued operation separately, in order to enhance the comparability of the results of the Group's ongoing businesses.

The restated Consolidated Income Statement and Consolidated Balance Sheet shown below summarise the restatements made.

Reclassification of software

During the period, management performed a review of the Group's accounting policies and identified that software that had previously been disclosed within property, plant and equipment and should been disclosed within intangible assets. Consequently, software with a net book value £18,668,000 at 27 March 2020 has been reclassified from property plant and equipment to intangible assets. This is a balance sheet reclassification only and has no impact on the income statement or net assets. A third balance sheet has not been presented as management consider that this reclassification does not have material effect on the information in the statement of financial position at the beginning of the preceding period, since the impact on net assets is £nil and the total value of non-current assets remains unchanged. The group have considered the tax consequences of this adjustment and have conclude that there is no impact.

The restated Consolidated Balance Sheet shown below summarises the restatement made.

Restated Consolidated Income Statement

Restated Consolidated Balance Sheet

at 27 March 2020

Critical accounting judgements and key sources of estimation uncertainty

In the course of preparing the consolidated financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses.

Critical accounting judgements

Recognition of defined benefit pension surplus  

At 26 March 2021 the Group's defined benefit pension scheme showed a surplus of £20.8m (2020: £31.7m). This surplus has been recognised in the Group's consolidated balance sheet. In recognising the surplus, management exercised judgement as to whether the Company (as sponsoring employer) has an unconditional right to benefit from any pension surplus at some point in the future (through refunds of surplus or reductions in future contributions), in accordance with the requirements of IFRIC 14. Management concluded that this was the case.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

Studio's trade receivables

Studio's trade receivables are recognised on the balance sheet at amortised cost (i.e. net of provision for expected credit loss). At 26 March 2021 trade receivables with a gross value of £385.5m (2020: £317.8m) were recorded on the balance sheet, less a provision for impairment of £106.8m (2020: £101.8m).

An appropriate allowance for expected credit loss in respect of trade receivables is derived from estimates and underlying assumptions such as the Probability of Default and the Loss Given Default, taking into consideration forward looking macro-economic assumptions. Changes in the assumptions applied such as the value and frequency of future debt sales in calculating the Loss Given Default, and the estimation of customer repayments and Probability of Default rates, as well as the weighting of the macro-economic scenarios applied to the impairment model could have a significant impact on the carrying value of trade receivables.

These assumptions are continually assessed for relevance and adjusted appropriately. Revisions to estimates are recognised prospectively.

The macro-economic drivers that impact the bad debt charge are as follows:

· Annual changes in unemployment rate;

· Actual unemployment rate; and

· Changes in average weekly earnings.

The latest economic scenarios are heavily influenced by the impact of Covid-19 on the UK economy, in particular the impact on unemployment.

We consider four economic scenarios, and apply a weighting based on probability. These are:

· Upside

Assumes unemployment would peak at 5.4% in financial Q3/Q4 before falling sharply as the economy returns more-or-less to normal by the March 2022.

· Baseline

The economy is expected to contract in financial Q1 as the economy remains in lockdown for most of the quarter. But once restrictions are lifted, much of normal life would be quickly resumed. The economy is expected to regain the December 2019 level of GDP in mid-2022.

· Downside

A prolonged downturn in the economy, as ongoing consumer choose to retain rather than spend their savings. The unemployment rate peaks at 8% at the start of 2022 as workers leaving furlough struggle to find employment.

· Stress

Assumes a prolonged, deep downturn, with the virus mutating and the vaccine proving less effective than hoped. Most of the country remains restricted through next winter, resulting in higher unemployment and a deterioration in customer payment performance as a result.

The table below summarises the peak employment levels assumed within each scenario, with the weightings we have applied to each.

We note that the impairment model was not designed to take into account changes to customer payment and default performance arising as a result of the Covid-19 pandemic, and that Covid-19 has inherently impacted the economic inputs of the model. Whilst we have not yet seen a significant increase in the level of customer arrears resulting from the pandemic, nor have we seen a reduction in customer payment rates, management's analysis of the arrears profile of the portfolio indicates that some customers have benefitted from the temporary regulatory support put in place by the government to protect jobs and incomes. We therefore believe that some of these customers are in a better, lower-provision state than will ultimately be appropriate. Judgement has therefore been applied in determining the year-end provision, which has increased it by approximately £13m from the central level derived from the normal forecasting model.

We note that the unprecedented level of uncertainty around the impact of Covid-19 on the UK economy as a whole, and subsequently on our customer base, continues to cause challenges in assessing bad debt on a forward-looking basis.

Discount rate for pension scheme liabilities

At 26 March 2021 the Group's defined benefit pension scheme showed a surplus of £20.8m (2020: £31.7m). Management makes use of the PwC Single Agency corporate bond yield curve to derive the discount rate applied to the scheme's projected cash flows, in the calculation of its liabilities under IAS 19. Changes to the discount rate applied could lead to significant changes in the level of pension obligation recognised..

The carrying amounts of the assets and liabilities detailed above are sensitive to the underlying assumptions used by management in their calculation. It is reasonably possible that the outcomes within the next financial year could differ from the assumptions made, which would impact upon the carrying values assumed.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any of the future periods affected.

Other key accounting estimates which, although important estimates, are not considered to be a significant risk of resulting in a material adjustment within the next financial year are as follows:

Inventory provisioning

The Group carries significant amounts of inventory against which there are provisions for slow moving and delisted products. At 26 March 2021 a provision of £3.6m (2020 restated: £1.9m) was held against a gross inventory value of £41.4m (2020 restated: £60.8m).

Provisions are made against inventory based upon its location, the planned method of sale, the age of inventory and the level of holding compared to forecast sales levels. The provisioning calculations require a high degree of judgement in assessing which lines require provisioning against and the use of estimates around historical recovery rates for slow moving and delisted products.

If a further 10% of lines were assessed as being slow moving, then the provision required would increase by approximately £150,000. If the recovery rate assumed decreased by 10% then the provision would increase by approximately £250,000. These sensitivities reflect management's assessment of reasonably possible changes to key assumptions which could result in adjustments to the level of provision within the next financial year.

Carrying value of right of use assets

The Group has rights of use assets of £30.7m as at 26 March 2021 (2020 restated: £39.4m) which is primarily made up of property leases. These assets are held at cost less accumulated depreciation and are tested annually for impairment. Tests for impairment are primarily based on the calculation of a value in use for each cash generating unit. This involves the preparation of discounted cash flow projections, which require an estimate of both future operating cash flows and an appropriate discount rate.

In determining the length of lease terms, the Group has made a judgement based on the likelihood of extension, if applicable, based on current and expected usage of the asset.

2 Segmental analysis

52 weeks ended 26 March 2021

*Earnings before interest, tax, depreciation, amortisation, fair value movements on derivative financial instruments and individually significant items.

52 weeks ended 27 March 2020 (restated)

*Earnings before interest, tax, depreciation, amortisation and fair value movements on derivative financial instruments.

3 Individually significant items

An analysis of individually significant items arising during the current and prior periods is as follows:

Continuing operations

Discontinued operation

Costs of £750,000 were incurred in respect of the strategic review which was undertaken by the business during the period.

In October 2018, the High Court handed down a judgement involving the Lloyds Banking Group's defined benefit pension schemes. The latest ruling in November 2020, the 'Lloyds III judgment', concluded that schemes will now need to review past transfer values and consider whether any top up would be required to equalise those benefits. There is no limit to the look back period and Trustees will need to consider any transfer values paid where a member has accrued service between 17 May 1990 and 5 April 1997. After discussion with the trustees, actuaries and legal advisors of our fund, a past service cost of £825,000 was recognised in the current period to address this historical issue.

During the period the Group reassessed the use of the Hyde property which resulted in an impairment reversal of £522,000. A prior period charge of £1,159,000 was recorded in respect of the impairment of the right of use asset for the Group's property at Hyde following Education being classified as held for sale from September 2019 onwards. The right of use asset in respect of the Hyde property was assessed for impairment individually rather than part of a cash generating unit.

A charge of £5,648,000 was recorded in the prior period in respect of an increase in provisions for redress and refunds for flawed financial services products.

Disposal costs of £2,486,000 were incurred during current period (2020: £1,535,000) in relation to the aborted sale of Education to YPO and the subsequent sale to West Moorland 221 Limited. These costs have been disclosed within the result from discontinued operation in accordance with IFRS 5.

An impairment of £11,075,000 has been recorded against the intangible assets of the Education business. This has been calculated based on the FVLCS following the disposal of the business.

A charge of £5,648,000 was recorded in the prior period in respect of an increase in provisions for redress and refunds for flawed financial services products.

4 Discontinued operation

On 16 April 2021, the Group entered into a definitive agreement for the sale of Findel Education Limited to West Moorland 221 Limited, a newly formed company owned by investment funds managed by Endless LLP for a gross consideration of £30.0 million on a debt free, cash free basis paid in cash on completion. In addition to the consideration, the Group has made available a working capital facility of £2.0 million to Findel Education. The net cash proceeds were used to make a voluntary payment to the Group's defined benefit pension fund of £9.0 million with the remainder used to reduce the Group's net debt.

An impairment review was conducted using the fair value less costs to sell (FVLCS) methodology. FVLCS was compared to the carrying value of the assets of the disposal group at 26 March 2021. An impairment of £11,075,000 was indicated and was recorded against the brand names allocated to the Education CGU.

Education's results for the 52-week period to 26 March 2021 and the 52-week period to 27 March 2020 have been presented to show the discontinued operation separately from continuing operations and are summarised below: