ASOS : Final Results for the year ended 31 August 2020

14 October 2020

ASOS plc

Global Online Fashion Destination

Final Results for the year to 31 August 2020

Strong FY20 operational and financial performance

Well positioned to progress as one of the few truly global leaders in fashion retail

Summary financial results

	Year to 31	Year to 31		CCY2
£m1	August 2020	August 2019	Change	Change
Group revenues3	3,263.5	2,733.5	19%	19%
Retail sales	3,171.0	2,657.7	19%	19%
UK retail sales	1,175.9	993.4	18%	18%
International retail sales	1,995.1	1,664.3	20%	19%
Gross profit	1,547.4	1,334.3	16%
Retail gross margin	45.9%	47.4%	(150bps)
Gross margin	47.4%	48.8%	(140bps)
Profit before tax	142.1	33.1	329%
Diluted earnings per share	125.6p	29.4p	327%
Net cash/(debt)4	407.5	(90.5)

1All numbers subject to rounding throughout this document, 2Constant currency is calculated to take account of hedged rate movements on hedged sales and spot rate movements on unhedged sales, 3Includes retail sales, delivery receipts and third party revenues, 4Net cash/(debt) is the cash and cash equivalents less borrowings

Results Summary

• Strong sales growth group-wide; UK +18%, EU +22%, US +18%, ROW +18%
• Active customer base up 3.1m to 23.4m demonstrating momentum in customer acquisition and high levels of engagement
• PBT of £142.1m reflecting underlying improvements in profitability and net Covid-19 tailwind (c.£45m with incremental costs offset by favourable return rates)
• Cash generation of £258.6m driven by strong operational performance and favourable working capital due to later peak stock build (c.£89m benefit which will be re-phased into FY21)
• Solid P4 performance in context of normalising customer returns rates and continued reduced demand for occasion wear; growth of 15% on underlying basis adjusting for Covid-19 returns behaviour

Strategic & Operational Highlights

• Delivered against FY20 priorities to strengthen our foundations for future growth
• Operational agility and resilience demonstrated across warehousing and supply chain despite the significant challenges presented by Covid-19
• Strong product performance across the year with a dynamic reshaping of offer in the second half to match customer demand in lockdown categories; continued opportunity to further develop ASOS brands and offer in Face + Body and activewear
• Substantial removal of non-strategic cost (c.£50m) drove sustainable improvements to profitability this year; confident of further progress

Outlook

• Positioned to capture the global opportunity despite significant short-term uncertainty through continued development of the ASOS brands, the ASOS platform and the ASOS customer experience
• Continue to improve the capability, resilience and agility of our business
• Well-setfor peak trading; warehousing capacity operating at normal levels whilst maintaining social distancing and greater diversity planned into product mix
• Solid start to the year but retaining caution on outlook for consumer demand whilst economic prospects and lifestyles of 20-somethings remain disrupted
• Continued investment in technology and infrastructure including new fulfilment centre to support continued strong UK growth and deliver capacity well ahead of planned requirements for peak FY23
• Expecting to deliver continued improvement in underlying profit (excl. Covid-19 tailwind)

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Nick Beighton, CEO, commented:

"After a record first half which saw us make progress in addressing the performance issues of the previous financial year, the second half will always be defined by our response to Covid-19. I am proud of the way ASOS met this challenge head on, putting our duty to act as a responsible business at the heart of our approach and working to balance our performance in that context. As well as protecting staff, suppliers and customers, we've driven efficiency and have emerged a stronger, more resilient and agile business whilst delivering strong profit and cash generation.

I am pleased by the improvements we have made this year but there is still more for us to do to continue our progress. Whilst life for our 20-something customers is unlikely to return to normal for quite some time, ASOS will continue to engage, respond and adapt as one of the few truly global leaders in online fashion retail."

Investor and analyst meeting:

There will be a webcast for investors and analysts that will take place at 8.30am, 14 October 2020. To access live please join the following link https://asos.register-me.uk/full-year-results-2020or dial [phone], and use conference call ID: 325 893 558#. The webcast will be available both live and following the meeting at www.asosplc.com.

For further information:
ASOS plc	Tel: [phone]
Nick Beighton, Chief Executive Officer
Mat Dunn, Chief Financial Officer
Alison Lygo, Investor Relations
Website: www.asosplc.com/investors
Headland Consultancy	Tel: [phone]
Susanna Voyle / Stephen Malthouse / Fay Rajaratnam
JPMorgan Cazenove	Tel: [phone]
Bill Hutchings / Christopher Wood
Numis Securities	Tel: [phone]
Alex Ham / Luke Bordewich
Forward looking statements:

This announcement may include statements that are, or may be deemed to be, "forward-looking statements" (including words such as "believe", "expect", "estimate", "intend", "anticipate" and words of similar meaning). By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances, and actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Save as required by applicable law, the Company undertakes no obligation to publicly revise any forward-looking statements in this announcement, whether following any change in its expectations or to reflect events or circumstances after the date of this announcement.

Background note

ASOS is an online retailer for fashion-loving20-somethings around the world, with a purpose to give its customers the confidence to be whoever they want to be. Through its market-leading app and mobile/desktop web experience, available in ten languages and in over 200 markets, ASOS customers can shop a curated edit of 85,000 products, sourced from 850 of the best global and local third-party brands and its mix of fashion-ledin-house labels - ASOS Design, ASOS Edition, ASOS 4505 and Collusion. ASOS aims to give all of its customers a truly frictionless experience, with an ever-greater number of different payment methods and hundreds of local deliveries and returns options, including Next-Day and Same- Day Delivery, dispatched from state-of-the-art fulfilment centres in the UK, US and Germany.

ASOS's websites attracted 233.4m visits during August 2020 (August 2019: 187.4m) and as at 31 August 2020 had 23.4m

active customers1 (31 August 2019: 20.3m), of which 7.1m were located in the UK and 16.3m were located in international

territories (31 August 2019: 6.4m in the UK and 13.9m internationally).

• Defined as having shopped in the last 12 months as at 31 August

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ASOS plc ("the Group")

Global Online Fashion Destination

Final Results for the year to 31 August 2020

Overview

ASOS delivered a strong performance across the year as we navigated the unprecedented challenges that arose as a result of the Coronavirus-19 pandemic ("Covid-19"). Total sales grew by 19% to £3,263.5m and profit before tax increased to £142.1m, an increase of £109.0m on the previous year. We entered this financial year with a clear focus on rebuilding momentum and executing consistently. Last October, we set out the key priorities to help us achieve this; restoring the strength of our customer facing offer and ensuring we had the right internal capabilities and financial strength to continue pursuing our global growth ambitions. Notwithstanding the backdrop, we made solid progress against each of the priorities which has strengthened the foundations of our business. There is still a lot more work for us to do but we are pleased with the improvements we have made this year.

This progress, combined with an increased operational grip and more rigorous performance management, enabled us to steer the business through the challenges caused by the pandemic. The business showed great agility, adapting to significant operational change, disruption across our supply chain, a dramatic shift in consumer demand and an uncertain and fast changing landscape. From our perspective, Covid-19 initially presented itself as a challenge to product supply as suppliers managed lockdown constraints and freight was disrupted. As we moved into April, the challenge we faced shifted to uncertain demand. Whilst demand for certain types of product, particularly occasion and formal-wear, remained constrained, we saw strong growth in casualwear and other lockdown relevant products. However, this polarisation in demand in turn drove further supply constraints exacerbated by the reduction in product produced globally this year given the restrictions most businesses are operating under.

Throughout this period, our primary focus was on continuing to do the right thing - ensuring the health and safety of people across our operations, our customers and our wider supply chain. Initially we had to restrict our business to protect our people and give us the space to reshape every element of how we work to ensure that we were able to slowly increase our capacity in a Covid-19 secure manner. The amount of change we undertook to reshape every element of our business was unprecedented - we learnt much and many of the processes we developed are and will remain the way we do business. As we progressed we were increasingly able to capitalise on opportunities for customer acquisition and growth as they arose.

As these results demonstrate, we have emerged from this financial year as a stronger, more resilient and agile business, having progressed with our priorities as planned, but also having taken many learnings from the challenges and disruption the pandemic has presented. This positions us well as we consider the uncertain landscape ahead. We continue to foresee headwinds to consumer demand, which will not abate until lifestyles and financial stability normalise for our 20-something customer and we expect the disruption to global product supply will be felt into 2021. However, we have built greater diversity into our product mix and have proven how operationally flexible our business can be. This gives us confidence that we will be able to navigate the year ahead and continue to progress as one of the few truly global leaders in fashion retail. To help us achieve our ambition to be a truly global fashion retailer, we have set out today our clear focus on continuing to develop the three key strategic pillars of our model: the ASOS brands, the ASOS platform and the ASOS customer experience. All of which will be underpinned by an increasingly efficient, effective and sustainable operating model.

Financial Performance

The business has delivered an exceptionally strong financial performance this year including record levels of profit and cash generation. EBIT increased £116.0m to £151.1m and equated to a margin of 4.6%, up 330bps year on year. Whilst this strong growth in profit was assisted by unusually low customer returns rates through lockdown, a strong operational grip, greater discipline around investment, the removal of non-strategic cost and leverage from the transformational investments we have made are driving sustainable underlying profit growth.

Covid-19 had a substantial impact on the shape of the P&L this financial year. We experienced material incremental costs from disruption, however the mitigating action taken across the business, combined with the significant reduction in returns rates, generated a profit tailwind for the business this year of c.£45m.

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The incremental Covid-19 costs we incurred were primarily driven by: the increased safety measures we implemented in our warehouse operations (which increased support costs and reduced efficiencies); higher airfreight rates; and additional customer facing investment to stimulate demand on 'going out' product. However, these were more than offset by two main cost benefits that we would not expect to repeat. Warehouse and distribution costs benefited from a significant reduction in returns rates, as customers mixed into lower returns rate categories and exhibited more deliberate purchasing behaviour, which drove lower processing costs through our network. Secondly, we reduced our marketing spend significantly in P3 to avoid stimulating demand we could not service as we managed capacity restrictions in our warehouses, implemented for social distancing purposes.

Beyond this, we made good progress in removing non-strategic costs across the business and saw substantial improvements in efficiency from the transformational investments we have made in automation, more detail of which can be found in this statement under our corresponding key priorities.

We closed the financial year in a strong net cash position of £407.5m, up from a net debt position of £90.5m at the start of the year. This inflow has been driven by a combination of the proactive capital raise we undertook in April (net cash proceeds of £239.4m), a significant increase in EBITDA and improved working capital discipline. In addition, the year end position has been enhanced by a later than usual stock build for peak trading due to Covid-19, which is phased into the first half of FY21. Excluding this tailwind of c.£89m, we expect to be cash generative in the year ahead.

Capital expenditure of £115.6m was invested this year across our technology platforms and warehouse infrastructure. This was lower than our initial expectations as we delayed implementation of our TGR programme due to lockdown restrictions, which will be rephased into FY21. We plan to invest £170m-£180m in capital expenditure in FY21. This includes the conclusion of the £5m investment we made to ensure our warehouses go well beyond government guidelines with respect to Covid-19 secure sites. We will also commence investment into our fourth fulfilment centre. Leveraging learnings from the recent investments we have made, investment work will begin this year to allow for a gradual ramp up ahead of the capacity requirements for peak in FY23. This incremental capacity will be situated in the UK and will support the continuing high growth we have seen in our home market and, also allows for maximum flexibility and resilience to service demand across our global network. We have learnt a lot from our recent investment programme and are confident that the implementation timeframe, as well as our ability to bring the centre on-stream in a measured way to enhance the capacity we already have around the Group, should help in the implementation of this project.

Strengthening Organisational Capabilities

We have made good progress this year in building out the breadth and depth of experience in our executive team. During the year, three new executives have joined the business, Robert Birge as Chief Growth Officer, Jo Butler as Chief People Officer and Patrik Silén as Chief Strategy Officer. We will announce our fourth and final appointment to our new executive team shortly. The Chief Commercial Officer, will take end-to-end ownership of product, from design and buying through to presentation. This new executive team will allow us to drive greater end-to-end ownership and accountability of product and customers as well as ensuring we have the right capabilities as ASOS continues to grow in terms of scale and complexity. We have also reshaped our organisation beyond the executive team building new structures, processes and ways of working. This has enabled us to improve our operational execution whilst managing significant organisational change and building out our strategic framework to support our future growth ambitions. As we look forward there is still much for us to do to improve our organisation but we have made significant progress this year and have set the foundations for the future.

Removing Non-Strategic Cost

As we set out this year, we had identified a multi-year opportunity to drive greater efficiency across our business allowing us to maximise the benefit of our investment whilst making sure we do that at minimum cost. This opportunity is apparent in many areas across the business, from the way we invest into the customer experience and the return generated from marketing, to the way our teams are structured and our commercial partner agreements. Whilst the opportunity is potentially significant, this has been a new challenge for us and we were rightly cautious about how long it would take to capture this opportunity. However, our progress in removing c.£50m of non-strategic costs has exceeded our initial expectations this year, owing to the tenacity and adaptability of our people, alongside the greater rigour instilled in our financial discipline and operational performance management processes. We further leveraged the opportunity presented by the disruption and operational change required by Covid-19 to test and further understand the return associated with spend in a number of areas and took action accordingly. Looking forward, there is further opportunity but having taken these large initial steps it will be more challenging to access the next set of efficiencies. We are clear what they are and what it will take, but remain cautious about our rate and speed of progress. However, we are confident that this opportunity will support continuing improvements in profitability as well as allowing for disciplined reinvestment into the business.

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