Interim results

RNS Number : 9718X

SuperGroup PLC

15 December 2010

 



15^th December 2010

SuperGroup PLC ("the Group")

Interim results for the 26 weeks ended 31 October 2010

Strong performance with growth across all sales channels

Financial Results

·      Group revenue of £90.3m, up 65.1% (2009: £54.7m);

·      Underlying¹ gross profit of £49.7m, up 82.4% (2009: £27.3m);

·      Underlying¹ profit before tax of £13.5m, up 68.9% (2009: £8.0m);

·      Profit before tax of £14.6m, up 86.4% (2009: £7.8m);

·      Basic EPS of 11.3p;

·      Net cash position of £19.5m as at 31 October (2 May 2010: £28.0m).

1.   Stated before the impact of financial derivatives, and the prior period impact of the adoption of a new accounting policy to include additional freight and duty costs within inventory.

Key Highlights

Retail

·      Retail sales of £54.4m up 71.7% (2009: £31.7m);

·      Standalone stores number 55 at the period end compared with 42 at the end of FY10;

·      13 concessions opened in the period including 11 womenswear bringing the total to 69.

Wholesale

·     Wholesale sales of £35.9m, up 56.1% (2009: £23.0m);

·     Wholesale now sells to 43 countries compared with 36 at the end of FY10;

·     17 franchise and licensee stores opened in the period bringing total number to 53   located in 15 countries (including the UK).

Julian Dunkerton, Chief Executive, said:  'We are delighted to report such strong growth in the first half of the year with momentum established in both divisions.  We are very pleased by the progress being made across the whole business, particularly with our recent Autumn/Winter range and the new store fit-out, which are delivering improved business performance and profitability.'

Contacts:     SuperGroup PLC      Matthew Barnett                                               07703 026 966

                     M:Communications   Georgina Briscoe / Ann-marie Wilkinson          0207 920 2348

                     Seymour Pierce        Nicola Marrin                                                    0207 107 8018

Business Review

The Group has again delivered strong results. Both divisions of the business have traded well in the period and we have seen good increases in both revenue and profit.  This performance is particularly encouraging given the challenging economic and trading backdrop.

SuperGroup targets the youth fashion market with affordable, premium quality clothing for both men and women.  The Group's strategy is focused on delivering growth in four main areas:  the roll-out of standalone stores in the UK, extension of the Superdry product range, expansion of the total wholesale business with particular emphasis on international franchise operations, together with development of the on-line offering.  

Group Results

Total Group revenue of £90.3m was up £35.6m, an increase of 65.1% on the same period in the previous year, as the business continues to expand in both the UK and internationally.  Underlying¹ operating profit increased £5.4m to £13.5m (+66.8%) on the same period last year (2009: £8.1m), driven by strong sales performance and improvements in gross margins, partly offset by our investment in strengthening the management team and expansion of the infrastructure to support future growth.

Underlying¹ operating margin for the Group has increased marginally to 14.9% (2009: 14.8%). 

Underlying¹ profit before tax was £13.5m (+68.9%) compared with £8.0m in the same period last year. Profit before tax was £14.6m, up £6.8m +86.4% (2009: £7.8m).

	Reported 26 weeks ended  31 October 2010	Impact of new accounting policy relating to prior periods	Financial derivatives	Underlying1 26 weeks ended 31 October 2010	Reported 26 weeks ended 1 November 2009	Financial derivatives	Underlying1 26 weeks ended 1 November 2009
Revenue Retail        Wholesale Total Revenue	54,370 35,891 90,261	- - -	- - -	54,370 35,891 90,261	31,661 22,998 54,659	- - -	31,661 22,998 54,659
Gross Profit	51,170	(1,577)	121	49,714	27,173	88	27,261
Operating Profit        Retail        Wholesale Total Operating Profit (see note)	7,001 7,580 14,581	(1,431) (146) (1,577)	330 153 483	5,900 7,587 13,487	5,221 2,703 7,924	13 151 164	5,234 2,854 8,088
Net Finance Costs	1			1	(102)		(102)
Profit Before Tax	14,582	(1,577)	483	13,488	7,822	164	7,986
Retail Wholesale	7,002 7,580	(1,431) (146)	330 153	5,901 7,587	5,178 2,644	13 151	5,191 2,795

Note: Operating profit and profit before tax are stated before inter-segment royalties of £4.2m.

Retail

The retail division comprises Cult and Superdry branded retail outlets in the UK, concessions and an internet sales channel.

This division delivered £54.4m of revenue, an increase of 71.7% on the same period in the prior year (2009: £31.7m). 

All Group overheads are allocated to this division and thus profitability and margins have been impacted by investment in people resources and skills, together with the additional costs associated with being a public limited company and termination of the contract with 888 clothing. This has had a disproportionate effect on the division in the first half of the financial year which is traditionally a less profitable period when compared with the second half.

 Underlying¹ operating profit was £5.9m, up 12.7% (2009: £5.2m) and underlying¹ operating margin was 10.9% (2009: 16.5%), both stated before inter-segment royalty of £4.2m.

Before the allocation of Group overheads and inter-segment royalty, underlying1 operating margin was 19.1% (2009: 19.1%).

Operating profit was £7.0m, up 34.1% (2009: £5.2m) and profit before tax was £7.0m, up 35.2% (2009: £5.2m), both stated before inter-segment royalties of £4.2m. Operating profit and profit before tax after royalty was £2.8m (2009: £5.2m).

The store roll-out programme saw 14 store openings in the period, including the relocation of our Norwich store and totalled 55 at the period end. Key retail destinations such as Lakeside in Essex and the prestigious One New Change development in the City of London opened during the first half. Six stores have opened since the period end ahead of the busy Christmas trading period, including the Trafford Centre in Manchester, Westfield in West London and Glasgow. 

Lease incentives are still being offered to the Group and the business is taking advantage of these wherever possible.  Of the capital expenditure during the period, approximately two thirds was funded by cash contributions from landlords.

Womenswear continues to advance and now comprises 37% of total retail sales, up from 34% at the end of the financial year. 

During the period we opened 13 concessions, 11 of which were womenswear, taking the total to 69. The Harrods concession opened on 7 December with both menswear and womenswear.  

Following the recent appointment of a Head of e-Commerce, the e-Commerce business is on plan. We launched local language web sites in Germany, France and Belgium, three of our strongest international markets and total sales were up some 140% when compared with prior year. 

Wholesale

The wholesale division sells the Superdry brand to a growing number of international distributors, franchisees, licensees and independent retailers (some via agents).

This division delivered £35.9m of revenue, an increase of 56.1% on the same period in the prior year (2009: £23.0m).

Underlying¹ operating profit before inter-segment royalties of £4.2m was £7.6m, up £4.7m, +165.8% (2009: £2.9m). Underlying¹ operating margins before inter-segment royalties of £4.2m increased from 12.4% in the 26 weeks ended 1 November 2009 to 21.1% following improvements to delivery performance and increased skills and experience with the new IT systems.

Operating profit was £7.6m, up 180.4% (2009: £2.7m) and profit before tax was £7.6m, up 186.7% (2009: £2.6m), both stated before inter-segment royalty of £4.2m. Operating profit and profit before tax after royalty was £11.7m (2009: £2.7m and £2.6m respectively).

During the period, we focused on expanding our reach of franchise and licensee stores in Korea, Dubai, the United States and Australia.  At the same time, 11 franchise stores opened in the core continental markets of France and Belgium while three franchise stores in the UK were converted to own retail. The total franchise and licensee stores numbered 53 at the period end, compared with 39 at the end of FY10. At the end of November a further 6 franchise stores had opened including a second store in each of Denmark, South Korea and UAE,  together with additions in Australia, Venezuela and the USA.

Infrastructure

Investment in the Group's infrastructure continues with key management appointments in Merchandising, Property and IT. We continue to invest in and develop our business infrastructure to support our rapidly growing business.

Current Trading and Outlook

The early signs of Christmas trading are very encouraging and we are well positioned to capitalise on the remainder of this busy trading period.

The Autumn/Winter collection has been well received by our customers in the UK and overseas, and our owned and franchised retail expansion is progressing as planned. 

Our e-Commerce offer is performing well in the run-up to Christmas.

In wholesale, the Spring/Summer order book is strong and we are gaining real traction as our business consolidates its position overseas.  In addition, the pipeline of new franchise stores extends well into the next financial year giving us confidence in the ongoing strength of the brand internationally.

The business has an enviable list of opportunities for both divisions. Increases in raw material prices may affect gross margins in the next financial year; however we will keep these under review and expect our margins to return to more normal levels by FY13.

Financial Review

Gross Profit

Gross profit has increased to £51.2m, up £24.0m (+88.3%). This has been adjusted to derive underlying gross profit as follows:-

Firstly both retail and wholesale have adopted a new accounting policy to include all inward freight and duty costs into inventory. Previously some of these costs were written off to the statement of comprehensive income as incurred since the amounts were considered to be immaterial. The total adjustment was £2.7m in the period, being the cumulative adjustment to inventory at the period end. This includes £1.1m relating to the half year ended 31 October 2010. The remaining balance of £1.6m relates to all prior periods. 

Secondly reported gross profit has been adjusted for the impact of financial derivatives which totalled £0.1m charge in the year (2009: £0.1m charge).

Underlying¹ gross profit has increased to £49.7m, up £22.5m (+82.4%) on the same period last year with substantial advances in both retail and wholesale (2009: £27.3m).

Improved delivery performance and increased skill and experience with new IT systems in wholesale have driven up underlying¹ gross margin percentage from 49.9% to 55.1%.

Finance Costs and Income

Interest income and finance charges offset each other during the period.

Profit Before Tax

Profit before tax was £14.6m (2009: £7.8m), up £6.8m, +86.4%. Underlying¹ profit before tax was £13.5m (2009: £8.0m), up £5.5m, +68.9%.  The percentage of underlying¹ profit before tax to sales increased marginally from 14.6% to 14.9%.

Fair valuing forward foreign exchange contracts resulted in a charge to the statement of comprehensive income of £0.5m (2009 £0.2m).

Taxation 

The headline tax rate applicable to the Group remains at 28%.  The effective cash tax rate however for the six month period is 22.7% after adjusting for capital allowances, other non-allowable expenditure and the benefit of intangible asset and goodwill amortisation.  Discussions with HMRC to secure final clearance of the intangible asset and goodwill amortisation continue.

Earnings per Share

Basic and diluted earnings per share are 11.3p.

Balance Sheet and Cash Flow

The Group's balance sheet remains strong, with a net cash position £19.5m at the period end, compared with £28.0m at the end of FY10 which included £16.4m of proceeds from the IPO.  However the balance is £25.2m higher than at the same time last year when net debt was £5.7m.

Fixed assets have increased by £6.5m in the last 6 months as a direct result of the UK retail estate roll-out and investment in intangible assets, as the Group registers trademarks to protect its brands internationally.

Working capital was 21.8% of last 12 months revenue, compared with 25.6% at the end of FY10.  At the same point last year working capital was 25.6% of last twelve months sales.

Cash out flow in the 6 months to 31 October 2010 was £8.7m (2009: £7.1m inflow)

Cash used in operations was £2.2m (2009: £2.3m inflow) as profit before tax (adjusted for non cash items), of £19.1m (2009: £9.4), was more than offset by investment in working capital.  Inventory has increased by £23.5m in the period in advance of the Christmas trading period and reflecting the additional retail space opened since last year end.

Capital expenditure of £10.1m was incurred (2009: £5.5m), within which store fit-out costs of £9.8m (2009: £5.2m) were offset by £5.6m landlord's cash contributions (2009: £4.7m).

Dividends

The Board has agreed that to be able to take advantage of the opportunities available to pursue our agreed strategy, the company is best served by retaining its cash resources and thus will not be recommending an interim dividend for the 6 months to 31 October 2010.

Going Concern

The Directors report that, having reviewed current performance forecasts, they have a reasonable expectation that the Company and the Group have adequate resources to continue their operations for the foreseeable future.  For this reason they will continue to adopt the going concern basis in preparing the financial information.

Principal Risks and Uncertainties

The principal risks and uncertainties were outlined in the Director's Report within the Annual Report, (pages 43-46).  These remain unchanged apart from exposure to cotton prices and a list of these can be found in note 16 to interim results announcement. The Group will continue to monitor risks to the business.

SuperGroup PLC ("the Group")

Responsibility statement of the directors in respect of the condensed consolidated interim financial information

The directors confirm that to the best of their knowledge:

·      the condensed financial information have been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the EU;

·       the interim management report includes a fair review of the information required by:

a)   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first 26 weeks of the financial year and their impact on the condensed financial information, and a description of the principal risks and uncertainties for the remaining 26 weeks of the financial year;

b)   DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 26 weeks of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

The directors of SuperGroup PLC are listed on page 19 & 20 of the financial statements for the

52 weeks to 2 May 2010. There have been no changes to the directors since that report.

By order of the Board

J Dunkerton                                                                   C Howes

Chief Executive Officer                                                    Group Finance Director

14 December 2010                                                         14 December 2010

Cautionary statement

This report contains certain forward-looking statements with respect to the financial condition, results of the operations, and businesses of SuperGroup PLC. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, SuperGroup PLC has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

Condensed Group Statement of Comprehensive Income

	Note	Unaudited 26 weeks ended 31 October 2010	Unaudited 26 weeks ended 1 November 2009	Audited 52 weeks ended 2 May 2010
		£'000	£'000	£'000
Revenue	4	90,261	54,659	139,404
Cost of sales		(39,091)	(27,486)	(66,130)
Gross profit		51,170	27,173	73,274
Selling, general and administrative expenses excluding exceptional items		(37,214)	(19,347)	(47,630)
Selling, general and administrative expenses - exceptional items	5	-	-	(3,811)
Total selling, general and administrative expenses		(37,214)	(19,347)	(51,441)
Other gains and losses (net)		625	98	790
Operating profit		14,581	7,924	22,623
Finance income		38	-	3
Finance costs		(37)	(102)	(170)
Profit before tax before exceptional items, derivatives and impact of new accounting policies		13,488	7,986	26,501
Exceptional items	5	-	-	(3,811)
Net derivatives expense		(483)	(164)	(234)
Impact of new inventory accounting policy relating to prior periods	2	1,577	-	-
Profit before tax		14,582	7,822	22,456
Income tax expense excluding exceptional items	6	(3,966)	-	(187)
Exceptional income tax (expense) / credit	6	(1,697)	-	49,889
Total income tax (expense) / credit		(5,663)	-	49,702
Profit for the period		8,919	7,822	72,158
Other comprehensive income net of tax:
Currency translation difference		(32)	-	(33)
Total comprehensive income for the period		8,887	7,822	72,125
Attributable to:
Shareholders of the Company		8,887	7,822	72,125
		pence per share	pence per share	pence per share
Earnings per share:
Basic	13	11.3	14.5	127.2
Diluted	13	11.3	14.5	127.2

The results for the financial period are derived from continuing operations.

Condensed Group Balance Sheet

	Note	Unaudited 31 October 2010	Unaudited 1 November 2009	Audited 2 May 2010
		£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment	8	29,837	15,717	23,299
Intangible assets		1,318	867	1,093
Deferred income tax assets		47,344	-	49,702
Total non-current assets		78,499	16,584	74,094
Current assets
Inventories	10	44,615	22,868	21,130
Trade and other receivables		19,720	16,885	16,373
Derivative financial instruments		-	115	103
Cash and cash equivalents		19,553	7,971	29,359
Total current assets		83,888	47,839	66,965
LIABILITIES
Current liabilities
Borrowings		9	11,068	1,349
Trade and other payables		30,105	14,857	21,480
Derivative financial instruments		553	279	337
Provisions for other liabilities and charges		813	187	817
Total current liabilities		31,480	26,391	23,983
Net current assets		52,408	21,448	42,982
Non-current liabilities
Borrowings		2	2,573	21
Trade and other payables		20,994	12,518	16,528
Total non-current liabilities		20,996	15,091	16,549
Net assets		109,911	22,941	100,527
Equity
Share capital	11	3,954	2,700	3,950
Share premium		120,663	-	120,138
Translation reserve		(65)	-	(33)
Merger reserve		(342,265)	(2,700)	(342,265)
Retained earnings		327,624	22,941	318,737
Total equity		109,911	22,941	100,527

Condensed Group Cash Flow Statement

		Unaudited 26 weeks ended 31 October 2010	Unaudited 26 weeks ended 1 November 2009	Audited 52 weeks ended 2 May 2010
		£'000	£'000	£'000
Cash flow from operating activities
Profit before income tax		14,582	7,822	22,456
Adjusted for:
Depreciation of property, plant and equipment		3,213	1,617	4,070
Loss on disposal of property, plant and equipment		8	65	29
Amortisation of intangible assets		116	70	126
Net impact of lease incentives		293	(22)	388
Net finance (receipts)/ costs		(1)	102	167
Fair value (gains)/ losses on derivative financial instruments		483	(165)	234
Foreign exchange gains on operating activities		(84)	(61)	(254)
Share based payment for termination agreement with 888 clothing		529	-	-
Changes in working capital:
Increase in inventories		(23,485)	(5,305)	(3,567)
Increase in trade and other receivables		(4,584)	(4,362)	(5,145)
Increase in trade and other payables		6,703	2,498	8,730
Cash (used in) / generated from operations		(2,227)	2,259	27,234
Interest received		38	-	3
Interest paid		(37)	(102)	(170)
Tax paid		(1,919)	-	-
Net cash (used in) / generated from operating activities		(4,145)	2,157	27,067
Cash flow from investing activities
Purchase of property, plant and equipment		(9,757)	(5,150)	(15,236)
Proceeds on sales of property, plant and equipment		-	-	88
Purchase of intangible assets		(341)	(310)	(592)
Net cash used in investing activities		(10,098)	(5,460)	(15,740)
Cash flow from financing activities
Capital contributions received from landlords		5,592	4,744	11,152
(Repayment)/ Proceeds from related party		-	10	(156)
(Repayment)/ Proceeds from borrowings		-	6,251	(2,866)
Repayment of capital element of finance leases		(31)	(11)	(21)
Members' drawings/ transfers		-	(630)	(5,859)
Amounts repaid to retired members		-	-	(181)
Proceeds received from issuance of shares net of transaction costs		-	-	121,388
Repayment of loan notes		-	-	(105,000)
Net cash generated from financing activities		5,561	10,364	18,457

Condensed Group Cash Flow Statement (continued)

	Note	Unaudited 26 weeks ended 31 October 2010	Unaudited 26 weeks ended 1 November 2009	Audited 52 weeks ended 2 May 2010
		£'000	£'000	£'000
Net (decrease) / increase in cash and cash equivalents	15	(8,682)	7,061	29,784
Cash and cash equivalents, net of overdraft, at beginning of period		28,031	(1,743)	(1,743)
Exchange gains/ (losses) on cash and cash equivalents		204	106	(10)
Cash and cash equivalents at end of period, net of overdraft		19,553	5,424	28,031

Condensed Group Statement of Changes in Equity for the 26 weeks ended 31 October 2010 (unaudited)

	Share capital	Share premium	Translation reserve	Merger reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 3 May 2010	3,950	120,138	(33)	(342,265)	318,737	100,527
Comprehensive income
Profit for the period	-	-	-	-	8,887	8,887
Other comprehensive income
Currency translation differences	-	-	(32)	-	-	(32)
Total other comprehensive income	-	-	(32)	-	-	(32)
Total comprehensive income for the period	-	-	(32)	-	8,887	8,855
Transactions with owners
Shares issued - termination agreement with 888 clothing	4	525	-	-	-	529
Total transactions with owners	4	525	-	-	-	529
Balance at 31 October 2010	3,954	120,663	(65)	(342,265)	327,624	109,911

Condensed Group Statement of Changes in Equity for the 26 weeks ended 1 November 2009 (unaudited)

	Share capital	Share premium	Translation reserve	Merger reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 4 May 2009	2,700	-	-	(2,700)	15,749	15,749
Comprehensive income
Profit for the period	-	-	-	-	7,822	7,822
Total comprehensive income	-	-	-	-	7,822	7,822
Transactions with owners
Members drawings	-	-	-	-	(630)	(630)
Total transactions with owners	-	-	-	-	(630)	(630)
Balance at 1 November 2009	2,700	-	-	(2,700)	22,941	22,941

Condensed Group Statement of Changes in Equity for the 52 weeks ended 2 May 2010

	Share capital	Share premium	Other reserves	Translation reserve	Merger reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 4 May 2009	2,700	-	-	-	(2,700)	15,749	15,749
Comprehensive income
Profit for the period	-	-	-	-	-	72,158	72,158
Other comprehensive income
Currency translation differences	-	-	-	(33)	-	-	(33)
Total other comprehensive income	-	-	-	(33)	-	-	(33)
Total comprehensive income for the period	-	-	-	(33)	-	72,158	72,125
Transactions with owners
Reverse opening capital structure under predecessor accounting	(2,700)	-	-	-	2,700	-	-
Withdrawal of members' capital accounts relating to the business combination	-	-	-	-	-	(36,470)	(36,470)
Shares issued relating to the business combination	270,000	-	-	-	-	-	270.000
Issue of loan notes relating to the business combination	-	-	69,380	-	-	-	69,380
Capital reduction	(267,300)	-	-	-	-	267,300	-
Proceeds from shares issued at a premium on IPO	1,250	123,750	-	-	-	-	125,000
Directly attributable costs for shares issued at a premium on IPO	-	(3,612)	-	-	-	-	(3,612)
Repayment of loan notes	-	-	(69,380)	-	-	-	(69,380)
Merger reserve arising on business combinations	-	-	-	-	(342,265)	-	(342,265)
Total transactions with owners	1,250	120,138	-	-	(339,565)	230,830	12,653
Balance at 2 May 2010	3,950	120,138	-	(33)	(342,265)	318,737	100,527

The Group was restructured on 7 March 2010 which, under predecessor accounting, created a merger reserve upon consolidation.

Notes to the Condensed Consolidated Interim Financial Information

1.   Basis of preparation

SuperGroup Plc is a company domiciled in the United Kingdom. The condensed consolidated interim financial information ("interim financial information") of SuperGroup Plc for the 26 weeks ended 31 October 2010 comprise the Company and its subsidiaries (together referred to as "the Group"). 

This interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group statutory financial statements for the 52 weeks ended 2 May 2010 are available upon request from the Company's registered office at SuperGroup Plc, Unit 60, The Runnings, Cheltenham, Gloucestershire, GL51 9NW or www.supergroup.co.uk.

This interim financial information has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and the requirements of the Disclosures and Transparency Rules. They do not include all of the information required for full annual financial statements and should be read in conjunction with the Group financial statements as at and for the 52 weeks ended 2 May 2010. This interim financial information was approved by the Board of Directors on 14 December 2010.

The comparative figures for the 52 weeks 2 May 2010 are extracted from the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors (i) was 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. These sections address whether proper accounting records have been kept, whether the Group's accounts are in agreement with these records and whether the auditors have obtained all the information and explanations necessary for the purposes of the audit.

The financial information in this document is unaudited, but has been reviewed by the auditors in accordance with the Auditing Practices Board guidance on Review of Interim Financial Information.

2.   Significant accounting policies

Except as noted below, the interim financial information has been prepared using the same accounting policies as used in the preparation of the Group's financial statements for the 52 weeks ended 2 May 2010 and as discussed therein.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

a)   The following standards have been adopted or amended by the Group in the financial year beginning 3 May 2010 due to the related balances being immaterial in previous periods.

(i) IAS 2 'Inventories'. Previously certain non-reclaimable duty and freight costs were expensed as incurred by the Group on the basis that they were not considered to be material.  In the current period, the Group has adopted a policy of including all non-reclaimable duty costs and freight costs incurred in getting inventories into the Group's warehouse into the cost of inventory.  Freight costs incurred for moving inventories between warehouses, stores and other locations are expensed as incurred. 

In accordance with IAS 8, 'Accounting Policies, Changes in Accounting Estimates and Errors', a circumstance where an accounting policy is introduced to account for  transactions that were not material in a prior period is not a change in accounting policy. The application of such a policy is then made on a prospective basis and this is the approach that has been adopted by the Group.

The impact of adopting this new policy is to increase the value of inventories by £2,747,000 as at 31 October 2010, of which £1,170,000 relates to the 26 weeks ended 31 October 2010 and £1,577,000 relates to prior periods, of which £199,000 relates to the 2 May 2010 financial year.

The impact of the new inventory accounting policy on gross profit is as follows:

	Unaudited 26 weeks ended 31 October 2010	Unaudited 26 weeks ended 1 November 2009	Audited 52 weeks ended 2 May 2010
	£'000	£'000	£'000
Revenue	90,261	54,659	139,404
Cost of sales prior to impact of new inventory accounting policy relating to prior periods	(40,668)	(27,486)	(66,130)
Gross profit before impact of new inventory accounting policy relating to prior periods	49,593	27,173	73,274
Impact of new inventory accounting policy relating to prior periods	1,577	-	-
Gross profit	51,170	27,173	73,274

The impact of the increase to the value of inventories if they had been reflected in those prior periods would have been as follows:

	Unaudited 26 weeks ended 1 November 2009	Audited 52 weeks ended 2 May 2010
	£'000	£'000
Uplift to the value of Inventories at the balance sheet date	1,434	1,577
Net increase to Gross Profit for the period	56	199

(ii) IFRS 2, 'Share-based payments'. On 23 September 2010 the Group commenced an equity settled share based compensation plan.  The fair value of the employee services received under such plans is recognised as an expense in the statement of comprehensive income.  Fair value is determined using the Black Scholes Option Pricing Model. The amount to be expensed over the vesting period is determined by reference to the fair value of share incentives excluding the impact of any non-market vesting conditions. Non-market vesting conditions are considered as part of the assumptions about the number of share incentives that are expected to vest. At each balance sheet date, the Group revises its estimates of the number of share incentives that are expected to vest. The impact of the revision on original estimates, if any, is recognised in the Statement of Comprehensive Income, with a corresponding adjustment to equity over the remaining vesting period.

In the 26 weeks ended 31 October 2010 the expense was not material.

b)   The following new and amended standards have been adopted by the Group in the financial year beginning 3 May 2010:

IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates', and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.

The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the Group Statement of Comprehensive Income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets.

All acquisition-related costs are expensed. There is no material impact on the Group in the period as there have not been any material business combinations.

c)   The following standards, amendments and interpretations to existing standards are effective but not relevant to the Group for the financial year beginning 3 May 2010

IFRIC 17, 'Distribution of non-cash assets to owners' (effective for annual periods commencing on or after 1 July 2009).  This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. This is not currently applicable to the Group, as it has not made any non-cash distributions.

IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 31 October 2009. This is not relevant for the Group, as it has not received any assets from customers.

'Additional exemptions for first-time adopters' (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer.

Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010.

'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. The amendment should be applied for annual periods commencing on or after 1 February 2010. This is not relevant to the Group, as it has not made any rights issues.

d)   The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 3 May 2010.

IFRS 9, 'Financial instruments', issued in December 2009. This addresses the classification and measurement of financial assets and is likely to affect the Group's accounting for its financial assets.

The standard is not applicable until 2 May 2013 but is available for early adoption. The Group is yet to assess IFRS 9's full impact. However, initial indications are that it will not materially affect the Group'sfinancial statements.

'Prepayments of a minimum funding requirement' (Amendments to IFRIC 14), issued in November 2009.  The amendments correct an unintended consequence of IFRIC 14. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. The amendments are effective for annual periods commencing 1 January 2011. This is not applicable for the group as they do not have any defined benefit pension schemes.

IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. This clarified the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods commencing on or after 1 July 2010.  This is not expected to affect the Group's financial statements as no such transactions have occurred.

IAS 24 (revised), 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related

party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011.

e)   The following reconciliation of stated financial information to underlying financial information is not required under IFRS but is considered useful to the reader:

	Reported 26 weeks ended  31 October 2010	Impact of new accounting policy relating to prior periods	Financial derivatives	Underlying 26 weeks ended 31 October 2010	Reported 26 weeks ended 1 November 2009	Financial derivatives	Underlying 26 weeks ended 1 November 2009
Revenue Retail        Wholesale Total Revenue	54,370 35,891 90,261	- - -	- - -	54,370 35,891 90,261	31,661 22,998 54,659	- - -	31,661 22,998 54,659
Gross Profit	51,170	(1,577)	121	49,714	27,173	88	27,261
Operating Profit        Retail        Wholesale Total Operating Profit	7,001 7,580 14,581	(1,431) (146) (1,577)	330 153 483	5,900 7,587 13,487	5,221 2,703 7,924	13 151 164	5,234 2,854 8,088
Net Finance Costs	1			1	(102)		(102)
Profit Before Tax	14,582	(1,577)	483	13,488	7,822	164	7,986
Retail Wholesale	7,002 7,580	(1,431) (146)	330 153	5,901 7,587	5,178 2,644	13 151	5,191 2,795

Note: Operating profit and profit before tax are stated before inter-segment royalties of £4.2m.

3.   Seasonality of operations

Due to the seasonal nature of the retail segment, higher revenues and operating profits are usually expected in the second half of the year than the first six months. This will be compounded by the impact of the store opening programme, which has historically been weighted to the second half of the year, and the fact that currently the retail business does not have the traditional post season sales. Wholesale seasonality is more evenly spread between the two half years.

In the financial year ended 2 May 2010, 39% of revenues accumulated in the first half of the year, with 61% accumulating in the second half.

4.   Segmental information

The Group's operating segments under IFRS 8 have been determined based on the reports reviewed by the Group's Chief Operating Decision Maker ("the Board"). The Board assesses the performance of the operating segments based on profit before tax. The Board considers the business from a customer perspective only, being retail and wholesale.

The Board receives information, reviews the performance of the business, allocates resources and approves budgets for two operating segments, and therefore information is disclosed in respect of the following two segments:

·      Retail - principal activities comprise the operation of stores, concessions and internet sites. Revenue is derived from the sale to individual consumers of own brand and third party clothing, shoes and accessories; and

·      Wholesale - principal activities comprise the design and ownership of brands, and wholesale distribution of own brand products (clothes, shoes and accessories) worldwide.

Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The Group reports and manages central functions as part of retail operations.

Sales between segments are carried out at arms' length. The revenue from external parties reported to the Board is measured in a manner consistent with that of the IFRS financial statements.

Internal charges between segments have been reflected in the performance of each business segment. Inter-segment transfers or transactions are entered into under a cost plus pricing structure.

Segment information for the main reportable business segments of the Group for the 26 weeks ended 31 October 2010 is set out below:

31 October 2010 segmental analysis (unaudited)	Retail	Wholesale	Group
	£'000	£'000	£'000
Total segment revenue	54,370	36,131	90,501
Inter-segment revenue	-	(240)	(240)
Revenue from external customers	54,370	35,891	90,261
Finance income	37	1	38
Finance costs	(36)	(1)	(37)
*Profit before tax before inter-segment royalties	7,002	7,580	14,582
Inter-segment royalties	(4,158)	4,158	-
Profit before tax	2,844	11,738	14,582
Total assets	73,384	89,003	162,387

* Inter-segmental royalties commenced from 8^th March 2010 and therefore the comparatives do not include any royalties.

Segment information for the main reportable business segments of the Group for the 26 weeks ended 1 November 2009 is set out below:

1 November 2009 segmental analysis (unaudited)	Retail	Wholesale	Group
	£'000	£'000	£'000
Total segment revenue	31,661	24,092	55,753
Inter-segment revenue	-	(1,094)	(1,094)
Revenue from external customers	31,661	22,998	54,659
Finance income	-	-	-
Finance costs	(43)	(59)	(102)
Profit before tax	5,178	2,644	7,822
Total assets	44,259	20,164	64,423

Segment information for the main reportable business segments of the Group for the 52 weeks ended 2 May 2010 is set out below:

2 May 2010 segmental analysis	Retail	Wholesale	Group
	£'000	£'000	£'000
Total segment revenue	86,394	58,148	144,542
Inter-segment revenue	-	(5,138)	(5,138)
Revenue from external customers	86,394	53,010	139,404
Finance income	3	-	3
Finance costs	(99)	(71)	(170)
Profit before tax	11,885	10,571	22,456
Total assets	71,175	69,884	141,059

Each subsidiary of the Group is incorporated and resident in the UK, with the exception of SuperGroup Retail Ireland Limited which is incorporated in the Republic of Ireland. Revenue from external customers in the UK and the total revenue from external customers from other countries are:

	Unaudited 26 weeks ended 31 October 2010	Unaudited 26 weeks ended 1 November 2009	Audited 52 weeks ended 2 May 2010
	£'000	£'000	£'000
External revenue - UK	70,970	43,819	110,530
External revenue - Overseas	19,291	10,840	28,874
Total external revenue	90,261	54,659	139,404

Revenue of approximately £7,449,000 (26 weeks ended 1 November 2009: £7,150,000, 52 weeks ended 2 May 2010: £16,700,000) in the UK retail segment is derived from concessions within department stores which are all under common ownership.

5.   Selling, general and administrative expenses - exceptional items

Costs incurred in relation to financial and operational restructuring, and the initial public offering (exceptional items), charged in the 52 week period ended 2 May 2010 were £3,811,000.

6.   Income tax

The Group's effective tax rate on ordinary activities for the 26 weeks ended 31 October 2010 was 27.2% which is based on the full year forecast effective rate. This is the first full period to which the total Group's taxable profit is subject to corporation tax. Taking into account the annual tax amortisation of goodwill, the effective cash tax rate for the period is 22.7%.

An exceptional deferred tax charge of £1,697,000 in the period relates to the change in corporation tax rate to 27% (substantively enacted on 22 June 2010) which requires the deferred tax balances to be re-measured at 27%. Further annual reductions of 1% are expected until 1 April 2014, until the corporation tax rate reaches 24%. The impact of reducing the corporation tax rate on deferred tax balances will be accounted for in the period when any rate change is substantively enacted. Accordingly, a further charge of £1,697,000 may arise in the year to 1 May 2011 since the next rate reduction to 26% could be substantially enacted by the year end.

7.   Dividends

No dividends were proposed by the Board for the 26 weeks ended 31 October 2010, 26 weeks ended 1 November 2009 or 52 weeks ended 2 May 2010.

8.   Property, plant and equipment

The Group made improvements to leasehold buildings and acquired fixtures and fittings at a total cost of £8,406,000 during the 26 weeks ended 31 October 2010 (£4,787,000 for the 26 weeks ended 1 November 2009 and £14,276,000 for the 52 weeks ended 2 May 2010).

9.   Capital expenditure commitments

The Group is committed to capital expenditure on property, plant and equipment of £5,527,000 as at 31 October 2010 (£3,761,000 as at 1 November 2009 and £591,000 as at 2 May 2010).

10.  Inventory write-downs

The Group has provided for inventory write downs of £618,000 as at 31 October 2010 (£677,000 as at 1 November 2009 and £734,000 as at 2 May 2010). During the period the charge for inventory write downs was £150,000 and the amounts reversed was £266,000.

11.  Equity securities

During the 26 weeks ended 31 October 2010 74,536 Ordinary shares of 5p each were issued for a total non-cash consideration of £529,000.

12.  Share based Long Term Incentive Plans "LTIP"

Equity settled awards are granted to employees in the form of share awards. No consideration is payable when share awards vest. The vesting period is three years. Share awards will also expire if the employee leaves the Group prior to the exercise or vesting date subject to the discretionary powers of the Remuneration Committee.

Performance Share Plan

The award of shares is made under the SuperGroup Performance Share Plan ("PSP"). Shares have no value at grant, but subject to the satisfaction of earnings per share, share price and total shareholder return performance targets can convert and give participants the right to be granted nil-cost shares at the end of the performance period.

The terms and conditions of the award of shares granted under the PSP during the 26 weeks ended 31 October 2010 are as follows:

Grant date	Type of award	Number of shares	Vesting period
23 September 2010	Share awards	70,985	3 years

The fair value of the share awards at grant date was £856,000. No charge has been recorded in the statement of comprehensive income for the 26 weeks ended 31 October 2010 for PSP awards as the amount of £29,000 is wholly immaterial.

13.  Earnings per share

	Unaudited 26 weeks ended 31 October 2010	Unaudited 26 weeks ended  1 November 2009	Audited 52 weeks ended 2 May 2010
	No	No	No
Number of shares at period end	79,074,556	54,000,020	79,000,020
Weighted average number of ordinary shares outstanding for the period - basic	79,053,260	54,000,020	56,747,273
Effect of dilutive options	14,821	-	-
Weighted average number of ordinary shares outstanding - diluted	79,068,081	54,000,020	56,747,273
Earnings
Profit for the period - basic and diluted (£'000)	8,919	7,822	72,158
Basic earnings per share (pence per share)	11.3	14.5	127.2
Diluted earnings per share (pence per share)	11.3	14.5	127.2

In the period ended 1 November 2009, the number of shares represents the capital structure at 7 March 2010 as determined in accordance with the application of predecessor accounting.

There were no share related events after the balance sheet date that may affect earnings per share.

14.  Related Parties

Directors of the Group and their immediate relatives control 65% of the voting shares of the Group.

The Group occupies two properties owned by J M Dunkerton SIPP pension fund, whose beneficiary and member trustee is Julian Dunkerton. The properties are rented to the Group on an arm's length basis.

On 6 October 2009, Cult Retail LLP signed an operating lease agreement to act as a guarantor on a retail premises in Kildare, Ireland. The premises are leased to Tokyo Retail Limited in which Julian Dunkerton's brother-in-law is a director. The annual rent is €79,400 plus a turnover linked element. The guarantee expires in October 2011.

15.  Net Debt

Analysis of net cash/ (debt) 31 October 2010 (unaudited)	3 May 2010	Cashflow	Other non cash changes	31 October 2010
Cash and short term deposits	29,359	(10,006)	200	19,553
Overdrafts	(1,328)	1,328	-	-
Cash and cash equivalents	28,031	(8,678)	200	19,553
Finance lease liabilities	(42)	31	-	(11)
Total net cash/ (debt)	27,989	(8,647)	200	19,542

Analysis of net cash/ (debt) 1 November 2009 (unaudited)	4 May 2009	Cashflow	Other non cash changes	1 November  2009
Cash and short term deposits	777	7,088	106	7,971
Overdrafts	(2,520)	(27)	-	(2,547)
Cash and cash equivalents	(1,743)	7,061	106	5,424
Bank loans	(1,924)	(5,847)	618	(7,153)
Loan from related party	(2,533)	9	(19)	(2,543)
Finance lease liabilities	(63)	11	-	(52)
Revolving credit facility	(942)	(404)	-	(1,346)
Total net cash/ (debt)	(7,205)	830	705	(5,670)

Analysis of net cash/ (debt) 2 May 2010	4 May 2009	Cashflow	Other non cash changes	2 May 2010
Cash and short term deposits	777	28,592	(10)	29,359
Overdrafts	(2,520)	1,192	-	(1,328)
Cash and cash equivalents	(1,743)	29,784	(10)	28,031
Bank loans	(1,924)	1,924	-	-
Loan from related party	(2,533)	156	2,377	-
Finance lease liabilities	(63)	21	-	(42)
Revolving credit facility	(942)	942	-	-
Total net cash/ (debt)	(7,205)	32,827	2,367	27,989

16.  Principal Risks and Uncertainties

The principal risks and uncertainties were outlined in the Directors' Report within the Annual Report, (pages 43-46).  These remain unchanged except for the cotton price risk identified in the period.  The principal risks and uncertainties outlined in the Annual Report were as follows:

External

·      Changing fashions and trends;

·      The Group depends on economic conditions that allow discretionary consumer spending;

·      The Group bears the risk of unfavourable changes in currency exchanges despite its foreign exchange contracts;

·      The Group's expansion overseas may not be successful.

Internal

·      The Group relies on the knowledge and skills of its senior management team and its ability to recruit and retain suitable staff to support growth;

·      The Group must effectively manage rapid growth to protect its business, brands and profitability;

·      If the Group is unable to manage licensees, franchisees or manufacturers then the goodwill of the business may be damaged;

·      A breakdown in the relationship with any of the Group's longstanding suppliers, or any of them failing to supply sufficient or acceptable quality of products, could have an adverse effect on Group finances;

·      The Group may not be able to effectively control and monitor suppliers and manufacturers to comply with labour, employment and other laws;

·      Business interruption at the Group's UK warehouse;

·      The Group's disaster recovery plans may not be sufficient.

The Group monitors risks to the business and has noted that a significant proportion of the Group's product portfolio is exposed to fluctuation in cotton prices: the Directors will continue to monitor and assess the status of cotton markets. 

 

END

 

 

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