SUPERDRY PLC The carrying amount of the right of use asset is split between motor vehicles of GBP0.2m (2020: GBP0.4m) and property of GBP89.9m (2020: GBP117.6m).
Group
52 weeks ended 25 April 2020 Right of use
asset
GBPm
Cost
At 28 April 2019 -
Recognition of cost of transition 335.7
Additions 7.7
Disposals (2.0)
Lease modifications (0.6)
Exchange rate difference 3.4
At 25 April 2020 344.2
Group
Accumulated depreciation
Right of use asset
GBPm
At 28 April 2019 -
Recognition of impairment at transition 48.4
Depreciation charge 55.0
Disposals -
Net impairment charges and reversals 122.8
At 25 April 2020 226.2
Net balance sheet amount on 25 April 2020 118.0 Items in the Group statement of comprehensive income not impacted by IFRS 16 are:
Group
2021 2020
GBPm GBPm
Lease expense relating to short-term assets 4.3 5.1
The expense of variable lease payments not included in the lease liabilities 1.3 3.8 The above lease expenses are gross of onerous property related contracts provision, capital contribution releases and rent-free releases.
Lease liability
Lease liabilities are calculated by discounting fixed lease payments using the incremental borrowing rate at the lease inception date determined with reference to the geographical location and length of the lease. The discount rates applied to leases range between 0.3% and 8.5% (2020: 0.1% to 8.5%).
Group
Analysed as: 2021 2020
GBPm GBPm
Current lease liability 94.1 80.1
Non-current lease liability 175.5 240.8
Total lease liability 269.6 320.9 The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Group
2021 2020
GBPm GBPm
Less than one year 94.1 84.4
One to two years 54.3 65.2
Two to three years 43.8 55.7
Three to four years 36.7 45.1
Four to five years 25.5 37.8
More than five years 24.4 51.8
Total undiscounted lease liability 278.8 340.0 Reconciliation of liabilities to cash flow arising from financing activities:
Group
2021 2020
GBPm GBPm
Opening lease liability 320.9 -
Recognition of lease liability on transition - 372.1
Payment of lease liability (45.4) (66.8)
Present value of Covid-19 rent concessions and deferrals (4.2) -
Increase due to lease additions and modifications 18.0 7.8
Decrease due to lease disposals and modifications (21.3) (2.3)
Interest expense 5.5 5.7
Foreign exchange differences (3.9) 4.4
Closing lease liability 269.6 320.9 All movements in the table above are non-cash movements except for payment of lease liability and interest expense which are cash movements.
18. Note to the cash flow statement
Reconciliation of operating profit to cash generated from operations
Group
Note 2021 2020
GBPm GBPm
Operating loss (29.5) (159.4)
Adjusted for:
-- Loss/(gain) on derivatives 4.7 (1.9)
-- Depreciation of property, plant and equipment and right of use 13,17 42.4 78.5
assets
-- Amortisation of intangible assets 14 11.0 8.7
-- Impairment of property, plant and equipment, right of use assets 12.8 139.1
and intangible assets
-- Loss on disposal of property, plant and equipment 0.1 0.3
-- Lease modifications 17 (14.3) -
(4.0) - (1.6) -
-- IFRS 16 Covid-19 rent concessions - -- Increase/(decrease) in onerous property related contracts 4.6 provision (net of releases on exited stores) (12.0)
-- Increase/(decrease) in other provisions 1.6 -
-- Release of lease incentives (0.3)
(0.1)
-- Employee share award schemes 8 1.1 0.9
-- IFRS 2 charge - FSP 9 0.5 0.3
-- Foreign exchange losses 0.5
(1.9)
-- Write down of inventory 2.3 7.7
-- Net impairment (credit)/loss of trade receivables (3.8) 15.3
Operating cash flow before movements in working capital 29.7 75.5
Changes in working capital:
-- Decrease/(increase) in inventories 6.2 21.6
-- (Increase)/decrease in trade and other receivables (10.8) 14.6
-- Increase/(decrease) in trade and other payables and provisions 25.0 (24.2)
Cash generated from/(used in) operating activities 50.1 87.5
Group cash flows arising from adjusting items are GBP1.4m (2020: GBPnil).
19. Net cash/(debt)
Analysis of net cash/(debt)
Group
2020 Cash flow Non-cash changes 2021
GBPm GBPm GBPm GBPm
Cash and bank balances 307.4 (278.7) 10.2 38.9
Overdraft (270.7) 270.7 - -
Net cash/(debt) 36.7 (8.0) 10.2 38.9
Non-cash changes relate to exchange gains on cash and cash equivalents. Interest of GBPnil (2020: GBP0.2m) has been incurred in respect of short-term facilities.
The position outlined above is not inclusive of financing liabilities in relation to IFRS 16. Financing liabilities comprise overdrafts and lease liabilities, and the reconciliation from opening to closing financing liabilities is disclosed in the table above for overdrafts, and in note 17 for lease liabilities.
See note 22 for an explanation of the use of Net cash/debt.
20. Financial risk management
The Company's and Group's activities expose it to a variety of financial risks, including market risk (including foreign currency risk and cash flow interest rate risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain foreign exchange exposures.
Credit risk - Group accounts
Credit risk is managed on a Group basis through a shared service centre based in Cheltenham. Credit risk arises from cash and cash equivalents, as well as credit exposures to Wholesale and to a lesser extent Store and Ecommerce customers, including outstanding receivables and committed transactions. For Wholesale customers, management assesses the credit quality of the customer, considering its financial position, past experience and other factors. The Group mitigates risk in certain markets or with customers considered higher risk with payments in advance and bank guarantees, as well as adopting credit insurance where appropriate. The Group regularly monitors its exposure to bad debts in order to minimise risk of associated losses.
The Group is party to banking agreements that include a legal right of offset which enables the overdraft balances to be settled net with cash balances (2021 overdrafts: GBPnil, 2020 overdrafts: GBP270.7m). These balances have been excluded from contractual cash flows.
Sales to Store and Ecommerce customers are settled in cash, by major credit cards, or other online payment providers. Credit risk from cash and cash equivalents is managed via banking with well-established banks with a strong credit rating.
(MORE TO FOLLOW) Dow Jones Newswires
September 16, 2021 02:00 ET (06:00 GMT)
