Total trade and other receivables increased 11.7% to GBP102.3m because of the disruptive impact on both shipments and sales to Wholesale partners in the prior year. Although cash collections have been ahead of internal expectations, the partner support programmes have led to a temporary increase in debtor days from 47.5 days to 67.3 days. However, there has been a reduction in the level of expected credit loss which is reflective of the quality in the current debtor book.

Total trade and other payables increased by 22.5% to GBP126.5m largely due to deferred rent for non-IFRS 16 leases of GBP11m included within the balance and the later timing of inventory shipments towards the end of FY21. The deferred rent for IFRS 16 leases of GBP24m is included within lease liabilities.

Net working capital decreased by 15.6% to GBP124.1m (FY20: GBP147.0m) and as a proportion of Group revenue was 22.3% (FY20: 20.9%).

Capital expenditure

Additions in property, plant and equipment and intangible assets totalled GBP13.8m (FY20: GBP13.7m). Capital expenditure has remained suppressed as a result of short-term cash preservation initiatives during Covid-19. Spend has been and will continue to be focused on IT systems and technology as we support Ecommerce as our channel of growth.

At 24 April 2021, the net book value of property, plant and equipment had decreased to GBP29.4m (FY20: GBP41.7m) as a consequence of the store impairment and depreciation charges. During the year, GBP6.8m (FY20: GBP6.5m) of capital additions were made, of which GBP2.3m (FY20: GBP1.6m) related to leasehold improvements across the Group. The remaining balance of capital additions includes furniture, fixtures, and fittings (GBP3.5m) and computer equipment (GBP1.0m).

Intangible assets, comprising goodwill, lease premiums, distribution agreements, trademarks, website, and computer software, stood at GBP41.7m at the year end (FY20: GBP48.4m). Additions in the year were GBP7.0m (FY20: GBP7.2m), comprising mainly website and software additions.

Internal controls

In the prior year, a number of accounting and control issues were identified in the business. In response to this a review of the internal control environment was carried out by the Audit Committee. External advisors (PwC) were engaged to support the development of an improved internal controls framework, which included mapping key risks to business processes and developing controls to mitigate these risks. Priority was placed on delivering material improvements for the FY21 year-end close, including remediating balance sheet controls around inventory, accounts payable, cash, and the month end close and review processes.

Although there has been improvement leading up to the end of FY21, work remains and will continue through FY22. The process of establishing a fully robust control environment remains one of our top priorities and we are confident in the progress being made.

Outlook

Whilst significant market uncertainty remains, we do expect a recovery in total revenue in FY22, driven by:

-- Improving store trading from gradually improving footfall throughout the year, although not reachinghistoric levels;

-- Strong 2-year Ecommerce growth compared to FY20, but supressed year-on-year as we anniversary toughpromotion-driven comparatives and some trade switches back into physical stores; and

-- A modest, but sustainable revenue recovery in Wholesale

We expect margin to increase across all channels as we transition towards a full price stance, supported by further mix benefits from the switch back into stores.

We expect to generate operating leverage from reduced store rents and payroll compared to pre-Covid levels, although we anticipate a GBP35-45m year-on-year increase in costs due to one-off benefits recognised in FY21, such as the return of UK business rates, the end of furlough support, and the normalisation of other variable and discretionary costs.

We are continuing to focus on cash generation and working capital efficiency in FY22. We expect to reduce inventory by a further 2m units, which will partially offset the unwind of deferred rent and service charges (GBP40m, inclusive of VAT), some of which we expect to crystallise as permanent savings as we continue to negotiate lease terms.

Recognising the structural growth opportunity in Ecommerce, as well as the geographic and customer segmental targeting opportunities in our Wholesale business, we expect revenue to exceed peak historic levels in the medium term. Disciplined full price trading, continuing rent renegotiations, and the operating leverage from cost savings will also return the business to historic operating profit margins.

Assessment of Group's prospects

The financial position of the Group, its cash flows and liquidity position are set out in the financial statements. Furthermore, the Group financial statements include the Group's objectives and policies for managing its capital, its financial risk management objectives, details of its financial instruments and exposure to credit and liquidity risk (please refer to note 20).

Background - Impact of continuing lockdowns and social distancing restrictions in FY21

The lasting impact of the pandemic saw unprecedented levels of disruption throughout FY21. Following the 'initial wave' of lockdowns, beginning March 2020 and impacting much the first quarter of FY21, infection rates in our key markets substantially reduced by late September 2020 and, with the majority of our owned store estate reopening, the prevailing view at that time was that further widespread lockdowns appeared unlikely.

However, the announcement of a second wave of lockdowns resulted in temporary store closures in the UK and certain EU markets from late October 2020, albeit with a brief opening period before a further hard lockdown from January through to April 2021. Together with the wider factors affecting open stores, such as social distancing measures and broader economic and health concerns, the Group saw a continued suppression of footfall in stores which was only partially offset by Ecommerce sales.

In total, the business lost an unprecedented 39% of store trading days in FY21 (FY20: 10%); a conservative measure which does not reflect other impacts such as shortened trading hours, appointment-only openings, and general operational disruptions from the ever-changing government regulations. By the end of June 2021, most of our owned stores had reopened although footfall remains subdued as the economic recovery continues.

Though there is no certainty that there will not be further lockdowns, vaccine rollouts are progressing well in many of our core markets, and government communications reflect an increasing pressure to re-open economies.

There are several key mitigations that the Group has undertaken to partially offset the adverse revenue impacts of these lockdowns:

-- As a consequence of the protracted lockdown periods in FY21, we recognised GBP7.7m of one-off rent savingsrelating to the disrupted periods, with at least a further GBP10m expected to be realised in FY22. These one-off rentbenefits are in addition to the ongoing lease renewal savings that have been achieved to date, which we expect willcontinue to be realised as we review our store estate.

-- In many markets, governments have extended furlough support where store closures have been mandated.Superdry has received GBP9.2m of furlough support in FY21, predominantly relating to store colleagues. We have alsoclaimed GBP2.5m in government grants for business disruption support.

-- A reduction in future stock purchases, aided by the carry over and recoding of core product, remains ourlargest cash mitigation. In addition to the volume of intake, we will continue to work closely with our suppliersto manage payment terms, particularly through our cash trough ahead of the Autumn / Winter season.

Liquidity headroom

On 10 August 2020 the Group announced that it had completed a refinancing of its facilities, moving from a Revolving Credit Facility ('RCF') of GBP70m, due to expire in January 2022, to a new Asset Backed Lending ('ABL') facility for up to GBP70m, due to expire in January 2023, with amended covenants (detailed in the Covenant testing section below) and the option to extend, at the discretion of the lender, for a further 12 months.

The Group's ability to preserve and manage cash has been clearly evidenced (and detailed in the Mitigating Actions section, below), with the business maintaining a positive net cash balance in excess of GBP20m throughout FY21, despite the pressures of the pandemic.

In addition, the Group has an overdraft facility of up to GBP10m available on a rolling annual basis, albeit as this is not committed, it has not been considered by management as part of the going concern or viability assessment.

Base case:

The Group's going concern assessment has been based on a 12-month financial plan (the 'Plan') derived from the latest FY22 and FY23 forecasts. Though the effects of Covid-19 on consumer behaviour long term are yet to be fully understood, the trading outlook for the Group has improved relative to the prior year, which is reflected in the Plan.

In determining the Plan, management has made a number of assumptions regarding the Group's trading performance in light of the coronavirus pandemic. The most significant of those are:

-- All trading channels benefit from ongoing product improvements, operational initiatives and marketingactivity to support the brand reset which began in October 2020, the full benefit of which is not yet realised,given the ongoing store closures in FY21.

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