FY14 Preliminary Results and Q1 Trading Update

For Immediate Release                                                                                                                                                12 June 2014

boohoo.com plc - Results for the year to 28 February 2014 and trading update for the three months to 31 May 2014

"The Global Fashion Leader for a Social Generation"

(1): Adjustment to reflect direct sourcing by boohoo.com plc, not via (now discontinued) related party companies;

EBITDA is pre-exceptional costs of £0.4m

Highlights for the year to 28 February 2014

·     Revenue up 63% (international revenue 35% of total)

·     Gross margin 63% for the year

·     Pro forma EBITDA of £16.0m, ahead of expectations

·     2.3m active customers⁽²⁾, up 54% on prior year

·     Significant infrastructure investment in the warehouse and IT

·     Another year of international expansion with our first foreign language website successfully launched in France

·     47% of traffic from mobile devices, compared to 29% in the prior year

·     Extension of our range with successful launch of boohooMan

Highlights for the three months to 31 May 2014 (unaudited)

·     Revenue of £30.7m up 24% (28% CER⁽³⁾) on top of 128% for Q1 FY 2014

·     Acceleration of growth through the quarter and trading in line with expectations for the full year

·     UK revenue up 44%, Rest of Europe up 36% (41% CER), Rest of the World down 20% (-7% CER) driven by Australia and currency headwinds

·     Gross margins maintained at 63%

·     Strong balance sheet with net cash of £53m

·     Second foreign language website launched in Spanish, with further currencies and languages planned

 (2): Active customers defined as having shopped in the last year

 (3): CER designates Constant Exchange Rate translation of foreign currency revenue

Mahmud Kamani and Carol Kane, joint CEOs, commented:

"The past year has been an exciting one, and we are very proud of the growth we have seen in both our UK and International markets.

The launch of new product categories, investment in our warehouse and IT infrastructure, and of course the investment and development of our teams all support our future growth. The Company is well positioned to benefit from its transformation to becoming a PLC after its successful IPO.

The management team is focused on further growth and since the year end we have accelerated that growth through an increase in marketing spend and activity to increase conversion in line with our revenue plans for the full year.

We continue to trade in line with expectations for the full year and anticipate revenue growth to accelerate as comparatives become less demanding and as we increase our marketing spend in line with our targets.

Looking ahead we are excited about our future growth prospects, delivering new foreign language websites and introducing additional currency options, as well as further improving our mobile website and customer experience."

Investor and Analyst Meeting

An analysts' presentation will be held at 8.30am today at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.

For further information:

About boohoo.com

"The Global Fashion Leader for a Social Generation"

boohoo.com is one of the UK's largest pure-play online, own brand fashion retailers. The Company designs, sources, markets and sells own brand clothing, shoes and accessories through the www.boohoo.comwebsite to a core market of 14-35 year old consumers in the UK and globally.

boohoo.com is focused on selling the latest on-trend fashions across a range of aspirational, but value orientated, boohoo branded products.  Founded in 2006, boohoo.com has grown rapidly, developing a brand identity and an international online proposition for consumers, and now has over 2.3 million active customers.

www.boohoo.com

www.boohoo.com/usa

www.boohoo.com/canada

www.boohoo.com/aus

www.boohoo.com/newz

fr.boohoo.com

es.boohoo.com

boohoo.com plc ("the Company")

The Global Fashion Leader for a Social Generation

Preliminary Results for the year ended 28 February 2014

Business Review

We have achieved record revenue of £110m, up 63% for the year ended February 2014.  Our largest market is the UK, where revenue for the year grew by 60%.  Revenue in the rest of Europe grew by 78% and rest of the world by 65%.  In total our international markets counted for 35% of revenues.  A slowdown in marketing expenditure in the last quarter of the year enabled us to accelerate investment in IT and warehouse infrastructure to support future growth.  Pro forma EBITDA for the year was ahead of expectations at £16.0m.

Fashion

We carry a range of around 9,000 styles for the traditional seasons of spring/summer and autumn/winter. Dresses represented over 30% of the product range. The main range dresses are priced between £12 and £25 and are developed to be both high fashion and low cost. Style Steals are a basics range with an entry price point of £3. The Boutique Collection is a higher price point offering to a slightly older age group with more disposable income and has generated significant PR interest. This range grew its sales by 170% during the year.

Our range of swimwear performed well, with sales increasing by 454% over the previous year. Knitwear was also highly successful and grew by 118%. Fashion playsuits, in particular, were also very popular and sales rose by 157%.

boohooMan was introduced in autumn 2013 and comprises a mix of high fashion and style steals. Marketing activity commenced in February 2014 on TV and billboards to build momentum for the new ranges that are expected to perform well after a promising start. Menswear grew by 117% over the previous year.

Our plus size range, boohoo plus, introduced earlier in 2014 was very well received and we will be expanding the product offering to satisfy demand from this segment. We have plans to offer a petite range later this year.

Marketing

Marketing activity is performed through a variety of media including: TV advertising; billboards; catalogues; social media and via the websites. Hundreds of products are added to the website each week through our on-site photography and art studio and displayed by gallery photos and catwalk videos. The speed and agility of the Group enables it to be first on the market with the latest, on-trend styles and fashion.

This summer has seen us roll out our biggest ever marketing campaign "#experienceeverything".  Split into a series of three different creatives, the messaging is being pushed out through TV advertising across our key markets. The creative is also being utilised in above the line advertising on the underground, digital display, banners and video, blogger outreach, direct mail and on the very first day of launch the campaign was trending on twitter.   

This autumn/winter we are working with international blogger Nadia Aboulhosn on the launch of an exclusive plus size collection, building on the successful launch earlier this year.

Historically we have seen a strong correlation between marketing spend and sales.  Marketing expenditure for the year to February 2014 was 14.0% of revenue, after a significant reduction in the last quarter to 12.4% to allow for investment in infrastructure to cater for rapidly increasing demand.  Growth rates for the last quarter of the year were somewhat lower than we would have achieved with a higher marketing spend.

Customer experience

We continue to work on increasing the personalisation of the website to include products, promotions and menus tailored to the individual's preferences and buying history. Customers receive a pro-active offer of support and promotional incentives when they do not complete orders and feedback is requested to help us maintain the highest levels of customer service.

Additional delivery options are being developed including Sunday delivery, a 10pm cut-off for next day delivery, express service to Europe and other countries, improved transit times for foreign deliveries and more returns options for customers, including alternative collection and return points. We also plan to add text messaging to enable delivery point and time to be amended by the customer during transit.

Technology

New foreign language websites have been launched on our in-house developed platform.  This will enable us to launch additional foreign language websites based on the same template with appropriate localisation and translation.

A new payment gateway incorporating additional payment options will be available shortly, adding additional Scandinavian currency payments and payment by Sofort and Ideal cards in Europe.

boohoo.com continues to be able to price differently in any country or currency. 

Growth in mobile continues with mobile traffic representing 47% of total visitors for the year, compared to 30% in the prior year.  We are currently developing an updated mobile look and feel which will be live shortly.  A more responsive mobile website is planned for later in the year on both in house and third party hosted platforms.

International expansion

International sales grew strongly in the year and represented 35% of total revenue. The launch of our first foreign language website in France in November 2013 has led to increased traffic, conversion and sales. Revenue growth since launch of the French language website has been 90%.  A Spanish foreign language website went live in May 2014 and other foreign language websites are planned for later in the year with dedicated marketing campaigns. We are also adding more currencies and payment methods to grow revenues in other European countries.

The Australian market has faced significant currency headwinds through the year to February 2014 with growth slowing from a very strong performance in the first half last year.

The US market grew strongly during the year, trebling in size and remains a potential market for much greater investment in the future. A local office in New York is planned and during a recent visit, management have identified office space and are beginning to build a local team to help execute on the significant growth opportunities in that market.

Further international expansion is planned this coming year through adding currencies for Scandinavia as well as launching additional local language websites in a number of other European markets.

Warehouse

Investment in the warehouse was accelerated to ensure our ability to deliver on future growth is not capacity constrained.  The construction of mezzanine floors within the existing warehouse has increased capacity to support gross annual sales of £350m.  An extension to the existing site has received planning permission and is scheduled for completion by the end of the current financial year resulting in capacity to support £500m of gross sales.  The 110,000 square foot extension has multiple floors and will add 670,000 square feet of storage space, enough to store 8 million units, more than four times the present capacity.

A new warehouse management system is in the advanced stages of implementation following a £1.5m investment programme.  The system will improve efficiency through optimisation of the pickers' routes using Wi-Fi arm mounted units, improving order management and stock control.

The warehouse management team has been strengthened with the addition of three senior management appointments and a number of technical specialists in finance and stock control.

People

We have an excellent opportunity as a public company to hire first rate talent to help build boohoo.com for the long term.  Over the last year key hires have been made including an IT director, logistics director, buying director, head of garment technology, head of financial planning and head of financial reporting.

As part of the IPO, we now have an even more experienced board providing insightful input into building boohoo.com for the future.

Trading operations

Revenue

(1)    The geographic split of revenue in 2013 has been restated in respect of certain European countries that were in rest of world and for a more accurate regional allocation of returns provisions. Further detail is given in appendix 1.

Revenue growth was broad-based across all territories, with UK growing by 60%, rest of Europe by 78% and rest of world by 65%. Following the introduction of the French language website in November 2013, revenue in France continues to grow strongly. The USA market also grew strongly, with turnover trebling over last year, and remains a key market for much greater opportunities in the future. In Australia, sales grew strongly, although growth slowed towards the end of the year due largely due to currency headwinds.

KPIs

(1)      Defined as having shopped in the last year

(2)      Defined as the percentage of monthly unique visitors to the site making a purchase

(3)      Calculated as gross sales including sales tax divided by the number of orders

We have continued to grow our business strongly, attracting new customers and retaining existing ones through our quality product offerings and focus on customer service. Conversion rates have increased during the year to 6.9%. Average order value has decreased marginally whilst the number of items per basket has increased.

Consolidated statement of comprehensive income

(1)      Consist of capital reorganisation fees included in administrative expenses

Reported gross profit margin rose from 54.5% to 59.1% due to the increasing proportion of inventories sourced by boohoo.com direct from suppliers.

Distribution costs and administrative expenses have increased as the business has expanded and we have continued to invest in improved and more efficient systems and in talented people. Cost control remains uppermost in our management philosophy and is tightly managed throughout the business.

The exceptional items of £375,000 in 2014, included in administrative expenses, related to capital reorganisation fees incurred prior to the flotation of the Company in March 2014.

EBITDA increased by 216% from £3.9m to £12.2m on an actuals basis and from £8.6m to £16.0m on a pro forma basis.

Statement of financial position

Net assets have increased by £7.9m to £9.8m, driven by strong profits. Working capital has increased by £3.9m and the group has a strong net cash (cash less bank borrowings and other loans) position up £0.8m at £2.7m at the year end. After the reporting date the Company received net proceeds of £46m from its Initial Public Offering.

Statement of cash flows

Free cash flow was £3.2m compared to £1.1m in 2013. Working capital requirements have increased due to the growth of business activity and the change to direct sourcing: inventories have increased due to the requirement to hold more products to serve our growing customer base; receivables have increased in line with revenue growth and due to a £0.5m deposit guarantee for global credit card payments and £1.1m increase in related party receivables and increase in other receivables of £1.4m. Capital expenditure was £4.6m as we have continued to invest in our warehouse and IT systems to support projected growth in trade. At the year end, and before the net injection of £46m following the flotation on 14 March 2014, the cash balances were £5.4m compared to £4.6m in 2013.

First Quarter to 31 May 2014

The quarter to May 2014, delivered record revenues of £30.7m up 24% (28% CER) on top of comparative quarterly growth of 128% for Q1 FY 2014.  The comparisons with last year ease throughout the year given the 100% growth in H1 FY 2014 compared to 41% in H2 FY 2014.

During the first quarter we increased our marketing spend into the spring season and Easter to 17.7% of revenue. The impact of this planned increase in marketing spend led to acceleration in growth through the quarter with May's revenue growth being double that seen in March.

The UK market has performed very strongly delivering first quarter revenue growth of 44% and Europe up 36% (41% CER).  France, which drove a 107% increase in visitors, grew strongly with the first quarter revenues up 48% compared to the previous quarter, demonstrating the successful impact of the local language website.

Rest of world revenue declined by 20% (7% CER) driven by Australia. This decline was against an increase of 626% (596% CER) for Q1 FY 2014.  The Australian market has however been highly profitable and with gross margins in excess of 70%, the focus had been on protecting profitability.  Following recent internal review and two visits to Australia by the joint CEOs, the pricing strategy has been amended in order to reflect the weaker Australian dollar.  We continue to manage Australia for profitability and have recently appointed a country manager.

Outlook

We continue to trade in line with expectations for the full year and anticipate revenue growth to accelerate as comparatives become less demanding and as we increase our marketing spend in line with our targets.

We are excited about our future growth prospects including: introduction of new product ranges, delivering new foreign language websites and new currency options as well as further improving our mobile website and customer experience.