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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated:
November 4, 2021
|
NAKED
BRAND GROUP LIMITED
|
|
|
|
|
By:
|
/s/
Justin Davis-Rice
|
|
Name:
|
Justin
Davis-Rice
|
|
Title:
|
Chairman
and Chief Executive Officer
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following management’s discussion and analysis of financial condition and results of operations (“MD&A”) for Naked
Brand Group Limited (the “Company,” the “Group” or “we,” “us” and “our”)
provides information concerning our financial condition and results of operations for each of the six month periods ended July 31, 2021
and July 31, 2020 and should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related
notes included with this report (the “financial statements”).
Forward-Looking
Statements
This
report contains forward-looking statements. Forward-looking statements include all statements that are not historical facts. Forward-looking
statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,”
“expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,”
“potential,” “will,” “would,” “could,” “should,” “continue,”
“contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words.
They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations
concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry
in which we operate. Forward-looking statements contained in this report include, among other things, statements relating to:
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our
restructuring initiatives;
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expectations
regarding industry trends and the size and growth rates of addressable markets;
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our
business plan and our growth strategies, including plans for acquisitions and expansion to
new markets and new products; and
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expectations
for seasonal trends.
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These
statements are not assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding
the future of our business, future plans and strategies, and other future conditions. Although we base the forward-looking statements
contained in this report on assumptions that we believe are reasonable, we caution you that actual results and developments (including
our results of operations, financial condition and liquidity, and the development of the industry in which we operate) may differ materially
from those made in or suggested by the forward-looking statements contained in this report. In addition, even if results and developments
are consistent with the forward-looking statements contained in this report, those results and developments may not be indicative of
results or developments in subsequent periods.
By
their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that
may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in
Item 3.D, “Risk Factors,” of our Annual Report on Form 20-F filed on May 18, 2021 (the “Annual Report”),
which include, but are not limited to, the following risks:
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our
reliance on our Frederick’s of Hollywood brand;
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our
ability to protect or preserve our brand image and proprietary rights;
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our
ability to satisfy changing consumer preferences;
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an
economic downturn affecting discretionary consumer spending;
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our
ability to manage our growth effectively;
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the
success of our business restructuring;
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our
ability to raise any necessary capital;
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poor
performance during our peak season affecting our operating results for the full year;
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our
ability to manage our product distribution given our reliance on third-party distribution/fulfilment;
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the
success of our marketing programs;
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the
impact of the COVID-19 pandemic.
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Actual
results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we
make. As a result, any, or all of our forward-looking statements in this report may turn out to be inaccurate. We have included important
factors in the cautionary statements included in our Annual Report, particularly in Item 3.D of our Annual Report, “Risk Factors,”
that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. We may not
actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking
statements. Moreover, we operate in a highly competitive and rapidly changing environment in which new risks often emerge. It is not
possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements
we may make.
You
should read this report and the documents that we reference herein and have filed as exhibits hereto completely and with the understanding
that our actual future results may be materially different from what we expect. The forward-looking statements contained herein are made
as of the date of this report, and we do not assume any obligation to update any forward-looking statements except as required by applicable
law.
Introduction
We
are a designer and e-commerce retailer of women’s intimates apparel, sleepwear and swimwear. We sell products under the licensed
brand, Frederick’s of Hollywood in the U.S. We are the exclusive licensee of the Frederick’s of Hollywood global online license,
under which we sell Frederick’s of Hollywood intimates products, sleepwear and loungewear products, swimwear and swimwear accessories
products, and costume products.
We
previously sold products through the Bendon business in Australia and New Zealand. On January 21, 2021, we announced plans to undertake
a transformative restructure in which we would dispose of our bricks-and-mortar operations in order to focus exclusively on our e-commerce
business. To that end, on April 30, 2021, we signed the Bendon Share Sale Agreement and simultaneously consummated the Bendon Sale contemplated
thereby. As a result of the Bendon Sale, our sole operating subsidiary is FOH, through which we hold the Frederick’s of Hollywood
global online license. Post sale Naked has been legally released from the leases relating to the Bendon business.
We
also previously sold products under the Heidi Klum and Naked brands. On January 31, 2020, we entered into a termination agreement with
Heidi Klum and Heidi Klum Company, LLC, which provides for the termination of the license agreement between the parties. We were permitted
to continue selling existing Heidi Klum branded products, as well as Heidi Klum branded products manufactured on or prior to June 30,
2020 under existing contracts. The right to continue selling such products expired on January 31, 2021. On January 28, 2020, we sold
all of our right, title and interest in the Naked brands to Gogogo SRL. We were permitted to continue selling any inventory bearing the
Naked brand that was in existence as of the closing.
Basis
of Presentation
The
unaudited interim financial statements of the Group included with this report have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and are presented
in thousands of United States dollars, except where otherwise indicated. However, certain financial measures contained in this MD&A
are non-IFRS measures and are discussed further under “Non-IFRS Financial Measures” below. All references to “$”
and “dollars” refer to United States dollars, unless otherwise indicated. Certain totals, subtotals and percentages throughout
this MD&A may not reconcile due to rounding.
On
January 21, 2021 we announce our plans to divest the Bendon and on April 23, 2021 we held and Extraordinary General Meeting of shareholders,
at which our shareholders approved the Bendon sale. On April 30, 2021 we signed the Bendon Share Sale Agreement and simultaneously consummated
the transactions contemplated thereby. In accordance with IFRS 5, “Non-Current Assets Held for Sale and Discontinued Operations”,
the Bendon Group operations have been classified as discontinued operations in these unaudited interim condensed consolidated financial
statements. In order to present the results of the continuing operations on a comparable basis, and consistent with IFRS 5 requirements,
loss after tax attributable to the discontinued Bendon Group’s operations up until its divestiture on April 30, 2021 has been shown
in a single line in the income statement for the 6 months period to July 31, 2021 with comparatives for the 6 months to July 31, 2020
being re-stated accordingly. Under IFRS, comparative balance sheet and cash flow amounts are not re-presented for discontinued operations.
As
at April 30, 2021, due to divestment of Bendon Group, functional currency of the parent entity has changed from AUD to
USD. This change in functional currency is accounted for prospectively from the date of change, in other words, the parent entity
translated all items into the new functional currency using the exchange rate as at the date of the change. The resulting translated
amounts for non-monetary items have been treated as their historical cost. Consequently, the presentation currency of the Group was also
changed from NZD to USD to align with the functional currency.
Since
change in the presentation currency represents a change in accounting policy, the change is accounted for retrospectively as if USD had
always been the presentation currency of the Group. Accordingly, statement of comprehensive income is translated from the old reporting
currency into the new reporting currency using a weighted average exchange rate for the applicable period. The balance sheet is translated
using the applicable period end exchange rate, while equity is translated based on historical rates.
Overview
of Results of Operations
6-month
period ended July 31, 2021 and the 6-month period ended July 31, 2020
This
period has been marked by a significant transformation of the Group following an extended period of restructuring. With the divestment
of our bricks-and-mortar operations of Bendon, the completion of a series of strategic capital raisings and repayment of all of our bank
debt, the Group is in a strong financial position with net cash of $279.0m at the end of the period. In addition, we have realigned our
leadership team with the re-appointment of Justin Davis-Rice as Chief Executive Officer and the appointment of Simon Tripp, a season
investment banker and M&A executive, as a non-executive director, as well as the appointment of Mark Ziirsen as Chief Financial Officer.
With a strong balance sheet, simplified structure, and expanded leadership capabilities, we believe we are well positioned as we seek
to drive shareholder value through partnering with an industry leader in a sector with compelling growth prospects and disruptive technology.
In
this period, our continuing operations are comprised of our sole operating business Fredericks of Hollywood (“FOH”) and our
ongoing corporate operations, where we have continued to incur significant costs associated with the restructure of the Group and capital
raising activities. Losses from continuing operations during the period were $28.3m higher than the comparable period of the prior year,
driven primarily by fair value losses on convertible notes and warrants of $10.8m, brand transition, restructure and transactions expenses
that were higher by $10.2m, impairment expense that was up $5.0m and corporate costs up $2.0m. Adjusted EBITDA losses from continuing
operations were $1.2m higher than the corresponding period due primarily to reduced gross profit from lower revenues and higher corporate
costs partially offset by lower brand management expenses than the comparable period of the prior year.
During
the 6 months ended July 31, 2021 and 6 months ended July 31, 2020, we incurred a net comprehensive loss of $45.3m and $12.7m,
respectively. The increased losses of $32.6m resulted from brand transition, restructure and transaction expenses that were $10.2m
higher, fair value loss that were $10.8m higher, impairment expenses of $5.0m, other foreign currency losses up $2.5m, corporate costs
up $2.0m and loss on disposal of Bendon of $10.8m being partially offset by favorable exchange rate differences on translation
of foreign operations of $4.6m, lower finance expenses of $2.1m and relatively lower losses from the discontinued Bendon operations
of $1.9m. The discontinued operations of Bendon incurred a loss of $4.8m for the three months until its disposal on April 30, 2021 compared
to a loss of $6.7m in the 6 months ended July 31, 2020.
Net
sales in the 6 months ended July 31, 2021 decreased by $1.7m, or 20.2%, to $6.6m when compared with $8.2m in the comparable period of
the prior year. The lower sales were driven by lower traffic and lower rates of conversion of traffic to orders placed.
Gross
Profit in the 6 months ended July 31, 2021 decreased 12.1% to $2.2m compared to $2.4m in the comparable period of the prior year on sales
that were down 20.2%, as a result of improved margins due to improved purchasing and higher average order values.
Loss
for the 6 months ended July 31, 2021 increased by $37.2m to $48.8m when compared to the comparable period of the prior year. Key drivers
of the adverse variance were brand transition, restructure and transaction expenses that were $10.2m higher, fair value loss of $10.8m,
impairment expenses of $5.0m, other currency losses of $2.5m, higher corporate costs up $2.0m and loss on disposal of Bendon of $10.8m
being partially offset by lower finance expenses of $2.1 and relatively lower losses after income tax from the discontinued Bendon
operations of $1.9m.
Adjusted
EBITDA loss from continuing operations was $2.4m in the 6 months ended July 31, 2021 compared to the loss of $1.2m in the comparable
period in the prior year, due primarily to reduced margins from lower revenues and higher overall overheads. See “Non-IFRS Financial
Measures” below for a discussion of adjusted EBITDA and a reconciliation of such measure to the most comparable measure calculated
under IFRS.
Recent
Developments
COVID-19
On
January 30, 2020, the World Health Organization (the “WHO”) announced a global health emergency because of a new strain of
coronavirus originating in Wuhan, China, COVID-19, and the risks to the international community as the virus spreads globally beyond
its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude
that the pandemic will have on the business’ financial condition, liquidity, and future results of operations. Management is actively
monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.
As
of the time of this filing, the impacts of the COVID-19 pandemic have been broad reaching, including impacts to our retail, wholesale
and licensing businesses. Throughout the financial period reported and until the divestiture of the Bendon business, the business has
had periods where it has temporarily closed its bricks and mortar stores. Throughout these periods the business has been able to continue
to trade through the Bendon Lingerie online store (until the divestiture of the Bendon business) and the Frederick’s of Hollywood
online store and has been able to fulfil online orders from the New Zealand warehouse (until the divestiture of the Bendon business)
and the U.S. warehouse. To mitigate the significant impact on cashflow the business was able to work with suppliers to get support with
delayed payments and, until the divestiture of the Bendon business, to negotiate support from the majority of landlords to provide rent
abatements through the periods of closure. Employees of the Bendon business agreed to work reduced hours for the initial key shutdown
periods. For the Bendon business, we were able to apply for Government wage subsidies from the New Zealand and Australian governments.
Until the date of the divestiture of the Bendon business, we had received US $2.0m in subsidies from the New Zealand government
and US $0.8m from the Australian Government. The Bendon business was able to receive support from the Bank of New Zealand (“BNZ”)
to defer loan repayments and has subsequently repaid this loan and closed the facility (see “Senior Secured Credit Facility”
below). The impact of COVID-19 in Asia initially delayed stock flow due to temporary factory closures, however, the business was able
to work with suppliers to prioritise and reschedule orders.
Bendon
Sale
On
April 30, 2021, we signed the Bendon Share Sale Agreement with JADR Holdings Pty Limited as trustee for the JDR Family Trust No 2, an
entity affiliated with Justin Davis-Rice, and Matana Intimates Holdings Trustee Limited as trustee for the Matana Intimates Holding Trust,
an entity affiliated with Anna Johnson (together, the “Buyers”), and simultaneously consummated the Bendon Sale contemplated
thereby. Pursuant to the Bendon Share Sale Agreement, we sold all of the issued share capital in Bendon together with any accrued rights
free from encumbrances for the consideration described below on the terms and conditions set out in the Bendon Share Sale Agreement.
The Bendon Sale had an economic close of January 31, 2021 (the “Accounts Date”) notwithstanding that closing of the Transaction
(the “Completion”) occurred on April 30, 2021.
Because
the Buyers are related parties of ours, we adopted strict governance and information protocols to ensure independent consideration and
assessment of the Buyers’ proposal and the Bendon Share Sale Agreement. Our independent directors formed an independent committee
of the board of directors, which considered, on our behalf, the Bendon Sale. The consideration paid for the share capital of Bendon was
determined through negotiations between the independent committee and the Buyers.
The
key terms of the Bendon Share Sale Agreement are as follows:
Consideration.
The consideration paid by the Buyers was US$0.72 (NZ$1.00) as adjusted based on the target inventory amount of US$13.2m (NZ$18.2m) and
by a true up adjustment for estimated Net Cash/(Debt) and Working Capital as at the Accounts Date. The inventory adjustment resulted
in a payment by us to Bendon in the amount of US$3.5m (NZ$4.8m). The Net Cash/(Debt) and Working Capital adjustments are to be prepared
within 30 business days after Completion.
Exit
Event Proceeds. If the Buyers or Mr. Davis-Rice and Ms. Johnson agree to sell the shares in Bendon or its business within three years
following Completion, we will be entitled to the following percentage of the net proceeds of the sale: in the first year following Completion,
75%; in the second year following Completion, 50%; and in the third year following Completion, 25%.
Profit
share. We are entitled to a tiered percentage of net profits of Bendon and the entities controlled by Bendon (the “Bendon Group”)
for three years commencing on July 1, 2021, being in: the first year, 30%; the second year, 20%; and the third year, 10%. The net profits
are to be calculated on a cumulative basis so that any losses from the first or second year are offset against any profits in a subsequent
year.
Forgiveness
of the Intra Group Loans. We forgave all inter-company debt owing by the Bendon Group to us and our subsidiaries other than the Bendon
Group effective as of January 30, 2021 (which is approximately US$31.3m (NZ$43.1m)).
Naked
Facility. We will provide Bendon with a 5 year loan of up to US$4.9m (NZ$7.0m) (the “Naked Facility”) at an initial interest
rate per annum of 2.5% and, following Bendon obtaining additional external senior debt which the Buyers and Bendon are proposing
to raise after Completion, an interest rate of 50 basis points above the rate of this senior debt. The Naked Facility will also be subordinated
to this senior debt. Bendon drew down the full US$4.9m (NZ$7.0m) facility on August 23, 2021.
Costs.
We agreed to pay up to US$0.2m (NZ$0.3m) of the Buyers’ and Bendon’s costs in relation to the Bendon Sale, which was agreed
in exchange for the Buyers’ agreeing for the term sheet to be entered into on a non-exclusive basis.
FOH
Services Agreement. FOH, our wholly owned subsidiary, entered into a management services agreement (the “FOH Services Agreement”)
with Bendon pursuant to which Bendon will provide certain management services.
As
noted above, we reported a loss on disposal of US $10.8m on the sale of Bendon.
As
a result of the Bendon Sale, our sole operating subsidiary is FOH. Through FOH, we are the exclusive licensee of the Frederick’s
of Hollywood global online license, under which we sell Frederick’s of Hollywood intimates products, sleepwear and loungewear products,
swimwear and swimwear accessories products, and costume products.
Changes in Management and Executive Compensation
On
January 21, 2021, our board of directors appointed Justin Davis-Rice as our Chief Executive Officer, replacing Anna Johnson. Ms. Johnson
remained the Chief Executive Officer of Bendon. In connection with his appointment, our board of directors, upon the recommendation of
the compensation committee, granted to Mr. Davis-Rice phantom warrants with a strike price equal to US $0.37 (the 20-day volume-weighted
average price of the Ordinary Shares). The phantom warrants will vest in three tranches, with the first tranche vesting immediately,
the second tranche vesting on July 21, 2021 and the third tranche vesting on January 21, 2022. Each tranche will cover 1.5% of our outstanding
Ordinary Shares as of the date of vesting and will expire three years after its vesting date. Upon exercise, the Company will net cash
settle the phantom warrants. As a result, no Ordinary Shares will be issued.
On
January 18, 2021, our board of directors appointed Simon Tripp as a director of the Company. Mr. Tripp replaced Paul Hayes, who resigned
as a director of the Company on the same day. See Item 6 of our Annual Report, “Directors, Senior Management and Employees,”
for biographical information about Mr. Tripp.
On
April 19, 2021 Mark Ziirsen was appointed as Chief Financial Officer, replacing Cheryl Durose. See Item 6 of our Annual Report, “Directors,
Senior Management and Employees,” for biographical information about Mr. Ziirsen.
On
September 22, 2021, our board of directors, upon the recommendation
of our compensation committee, granted to Mr. Davis-Rice an incentive award, as follows: on the first, second and third anniversary
of the grant of the award, Mr. Davis-Rice will be granted Ordinary Shares with a market value equal to 1.5% of the increase in
our total market capitalization since the grant of the award. The market value of the Ordinary Shares to be issued and the total
market capitalization will be determined based on the daily VWAP for the Ordinary Shares for the five trading days immediately
prior to the applicable anniversary. The payment of the incentive award will be accelerated in the event of a change in control of the
Company, and the Ordinary Shares issued in the change in control generally will be included in determining the total market capitalization.
A change in control includes any person obtaining voting power in excess of 50.1% of the Ordinary Shares, any person being able to appoint
or remove a majority of our board of directors, and/or our issuing Ordinary Shares or securities convertible into Ordinary Shares that
together exceed the number of shares outstanding at the date of announcement of the change in control transaction.
Nasdaq
Compliance
On
April 26, 2021, we received a notice from Nasdaq’s Listing Qualifications Department stating that, for the 30 consecutive business
days ending April 23, 2021, the closing bid price for the Ordinary Shares had been below the minimum of US $1.00 per share required
for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that we would
be afforded an initial 180 day period to regain compliance with the minimum bid price requirement. The notification letter
also stated that in the event we did not regain compliance within the initial 180-day period, we could be eligible
for additional time.
We did not regain compliance with the minimum
bid price requirement during the initial 180-day period. However, on October 26, 2021, we received a notice from Nasdaq stating that
Nasdaq’s staff had determined that we were eligible for an additional 180-day period (until April 25, 2022) within which to regain
compliance. In order to regain compliance, the bid price for the Ordinary Shares must close at US$1.00 per share or more for a minimum
of ten consecutive business days.
The
Nasdaq notification did not have any immediate effect on the listing of the Ordinary Shares, and the Ordinary Shares continue to trade
under the symbol “NAKD”. Naked management intends to actively monitor the bid price for the Ordinary Shares and will consider
all available options to regain compliance with the minimum bid price requirement. We intend to cure the deficiency during the additional
180-day period by effecting a reverse stock split, if necessary.
Financing
Transactions
February
2021 Private Placement
On
February 24, 2021, we entered into a securities purchase agreement (the “February 2021 SPA”) with certain accredited investors,
pursuant to which we agreed to sell in a private placement an aggregate of US$100,000,000 of units, each unit consisting of one Ordinary
Share and one warrant to purchase Ordinary Shares (the “February 2021 Warrants”). On March 10, 2021, we entered into an amendment
to the February 2021 SPA, which reduced the price per unit sold under the February 2021 SPA and made certain changes to the form of the
February 2021 Warrant to, among other things, reduce the initial exercise price and limit the number of Ordinary Shares which
may be issued upon a Black-Scholes value cashless exercise of the February 2021 Warrant (as more fully described below), by increasing
the floor price specified in the warrants, lowering the underlying price used in the calculation of the Black-Scholes value per warrant
and establishing a maximum number of Ordinary Shares that may be issued under the warrants. On the same day, we consummated the sale
of the units pursuant to the February 2021 SPA. The purchase price per unit was US$0.85, resulting in the issuance of an aggregate of
117,647,059 Units (representing an aggregate of 117,647,059 Ordinary Shares and 117,647,059 February 2021 Warrants). We granted a financing
rebate to the investors, resulting in net proceeds to us, after offering expenses, of approximately US$94,900,000.
The
February 2021 Warrants had an exercise price of US$0.935 per share and would have expired on March 10, 2026. The February
2021 Warrants contained a Black-Scholes cashless exercise feature, which permitted the February 2021 Warrants to be exercised
on a cashless basis for a number of Ordinary Shares equal to the Black-Scholes value per share, multiplied by the number of Ordinary
Shares as to which the warrant was being exercised, divided by the closing bid price on Nasdaq as of two trading days prior to
the exercise date, as reported by Bloomberg (but not less than a specified floor price). For this purpose, the Black-Scholes value per
share was calculated using an underlying price equal to US$0.95 (as may be adjusted for stock dividends, subdivisions, or combinations);
a risk-free interest rate corresponding to the U.S. Treasury rate; a strike price equal to the US $0.935 exercise price; an expected
volatility equal to 135%; and a deemed remaining term of five years (regardless of the actual remaining term of the February 2021 Warrant).
Accordingly, the Black-Scholes value calculation would not change as a result of future changes in the stock price, risk-free
interest rate, volatility or remaining life of the February 2021 Warrants. As a result, the number of Ordinary Shares issued upon exercise
of the February 2021 Warrants substantially exceeded 117,647,059 shares. As of July 31, 2021 the February 2021 Warrants had been
exercised in full, pursuant to the Black-Scholes cashless exercise provision, for an aggregate issuance of 186,391,411 Ordinary Shares.
The
February 2021 SPA also included a put right. To the extent allowable under federal securities laws and the rules of Nasdaq, and subject
to our continued listing on Nasdaq, on the day after the day that an investor no longer held any Ordinary Shares or any February
2021 Warrants issued under the February 2021 SPA, we agreed to sell to the investor and the investor agreed to purchase from us, in a
private placement, such number of Ordinary Shares, priced at the previous day’s closing bid price, equal to a portion of the investor’s
net profit from the investor’s sale of the Ordinary Shares and Warrants purchased under the February 2021 SPA.
On
July 2, 2021, pursuant to the put right under the February 2021 SPA, we sold an aggregate of 53,548,594 Ordinary Shares to the investors,
at a purchase price of US$0.6256 per share (the closing bid price of the Ordinary Shares on July 1, 2021).
ATM
Offerings
On
February 24, 2021, we entered into an equity distribution agreement (the “February EDA”) with Maxim Group LLC (“Maxim”),
pursuant to which we may sell, from time to time, through Maxim, Ordinary Shares having an aggregate offering price of up to US$99,500,000
(the “ATM Offering”). Sales of Ordinary Shares in the ATM Offering, if any, will be made by any method permitted that is
deemed an “at the market offering” as defined in Rule 415 under the Securities Act. Maxim is not required to sell any specific
amount but will act as our exclusive sales agent using commercially reasonable efforts consistent with its normal trading and sales practices,
on mutually agreed terms between Maxim and us. We have no obligation to sell any of the Ordinary Shares under the February EDA and may
at any time suspend solicitation and offers under the February EDA. As of July 31, 2021, we sold an aggregate of 72,117,042 Ordinary
Shares pursuant to the February EDA, for gross proceeds of US$70,761,188 and net proceeds of US$68,638,352, after payment to Maxim of
an aggregate of US$2,122,836 in commissions.
In
addition, we conducted two prior “at the market” offerings through Maxim. On October 19, 2020, we entered into an equity
distribution agreement with Maxim (the “October EDA”), pursuant to which we sold an aggregate of 107,036,117 Ordinary Shares,
for gross proceeds of US$49,999,716 and net proceeds of US$48,499,725, after payment to Maxim of an aggregate of US$1,499,991 in commissions.
In connection with the execution of the February EDA, we terminated the offering under the October EDA. On August 20, 2020, we entered
into an equity distribution agreement with Maxim, as amended on September 25, 2020 (the “August EDA”), pursuant to which
we sold an aggregate of 138,252,413 Ordinary Shares, for gross proceeds of US$17,998,700 and net proceeds of US$17,458,739, after payment
to Maxim of an aggregate of US$539,961 in commissions. In connection with the commencement of sales under the October EDA, we terminated
the offering under the August EDA.
Repayment
of Credit Facility
Through
February 10, 2021, we were party to a facility agreement, originally dated June 27, 2016, as amended from time to time, by and among
Bendon, as borrower, us and certain subsidiaries and affiliates of ours, as guarantors, and BNZ, as lender. Under the facility agreement,
BNZ had made available to us and our subsidiaries a revolving credit facility and an instrument facility. On February 10, 2021, we paid
approximately US$10,394,000 to BNZ, which constituted repayment in full of all amounts due under the facility with BNZ, and the facility
was terminated. See “Liquidity, and Capital Resources—Financing Transactions” below for more information regarding
the credit facility.
Registered
Direct Offering
On
February 1, 2021, we closed on the sale of 29,415,000 Ordinary Shares in a public offering to certain institutional investors at a price
of US $1.70 per share, for gross proceeds of US$50,005,500. Maxim acted as the sole placement agent in connection with the Offering.
The net proceeds to the Company from the offering were approximately US$46,900,000, after deducting the placement agent’s fees
of US$3,000,330 and other estimated offering expenses.
Note
and Purchase Warrant Issued in July 2020
In
July 2020, we completed a private placement of a convertible promissory note (the “July 2020 Note”) and a warrant
to purchase Ordinary Shares (the “July 2020 Purchase Warrant”) to an accredited investor Iliad Research Trading
L.P., pursuant to a securities purchase agreement, for an aggregate purchase price of US$8,000,000. The July 2020 Note was issued with
an original issue discount of 5%, and certain expenses of the investor were added to the balance of the July Note, for an original principal
balance of US$8,420,000. We also granted a financing rebate to the investor, resulting in net proceeds to us of approximately US$7,200,000
from the sale of the July 2020 Note. The July 2020 Note provided for interest at the following rate: (i) for a period of 90 days starting
on its issuance date, 2.0% per annum, (ii) for the next 90 days, 10.0% per annum and (iii) thereafter, 15.0% per annum, and provided
for maturity on the second anniversary of its issuance. The July 2020 Note was convertible, at our election (subject to certain limitations)
or at the election of the investor, into Ordinary Shares at a conversion price equal to US$0.2424. The July 2020 Purchase Warrant entitled
the investor to purchase Ordinary Shares at an exercise price of US$0.6707 per share. In addition, if the exercise price of the July
2020 Purchase Warrant was higher than the last closing bid price of the Ordinary Shares, the July 2020 Purchase Warrant could be exercised
on a cashless basis for a number of shares equal to the Black-Scholes value per share underlying the July 2020 Purchase Warrant, multiplied
by the number of shares as to which the July 2020 Purchase Warrant was being exercised, divided by the closing bid price as of two business
days prior to the exercise date, but in any event not less than the floor price specified in the July 2020 Purchase Warrant. For this
purpose, the Black-Scholes value per share underlying the July 2020 Purchase Warrant was a fixed value as set forth in the July 2020
Purchase Warrant.
As
of January 27, 2021, the July 2020 Note had been converted in full into an aggregate of 35,081,733 Ordinary Shares and the July 2020
Purchase Warrant had been exercised in full, pursuant to the Black-Scholes cashless exercise provision, for an aggregate of 47,817,633
Ordinary Shares.
Bendon
Conversion Shares
On
October 5, 2020, we and one of our operating subsidiaries, Bendon, entered into a settlement agreement with each of (i) Timothy D. Connell
and (ii) William Gibson and Ivory Castle Limited (collectively, the “Lenders”). The Lenders had alleged that specific repayment
terms of loans made by them were not met as promised and sought repayment of the loans. Pursuant to the settlement agreements, the Lenders
agreed to settle the dispute in consideration for Bendon’s issuance to them of redeemable conversion shares of Bendon (the “Bendon
Conversion Shares”) with an aggregate value of US$3,789,654. The Bendon Conversion Shares were convertible into Ordinary Shares
at a conversion price equal to the closing market price of the Ordinary Shares on the trading day immediately preceding the
date of conversion (but in any event at not less than a specified floor price). As of December 4, 2020, the Bendon Conversion Shares
had been converted in full into an aggregate of 45,930,930 Ordinary Shares.
Notes
Issued in October, November, and December 2019 and January, February, and April 2020
In
each of October, November and December 2019 and January, February, and April 2020, we completed a private placement of a convertible
promissory note (each, a “Prior Note”) and a warrant to purchase Ordinary Shares to one of St. George Investments
LLC or Iliad Research and Trading L.P., which are affiliates of one another (together, the “Affiliated Holders”). As of November
27, 2020, the Prior Notes issued in October, November and December 2019 and January and February 2020 had been converted in full into
an aggregate of 66,580,270 Ordinary Shares. In addition, on February 25, 2021, we exchanged the Prior Note issued in April 2021 for 4,002,789
Ordinary Shares. See “Liquidity, and Capital Resources—Financing Transactions” below for more information regarding
the Prior Notes.
Application
of Critical Accounting Policies, Estimates, and Judgements
Our
accounting policies form the basis for preparation of our financial statements and our financial statements in tum are an essential factor
in understanding our operations. Our accounting policies are in accordance with IFRS as issued by the IASB and are fully described in
the notes to our audited financial statements as of and for the year ended January 31, 2021. The preparation of our financial statements
required management to make judgments, estimates, assumptions and judgments that affect the reported amounts of revenue, assets, liabilities
and expenses. Our management re-evaluates estimates on an on-going basis and such estimates are based on historical experience and on
various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from these estimates
under different assumptions or conditions.
Critical
Accounting Policies
Critical
accounting policies are those that reflect our industry and activity specific accounting treatments used in preparing our financial statements
for the 6 months ended July 31, 2021 and 2020, or that have significant potential to result in a material adjustment to the carrying
amounts of assets and liabilities during each of the years.
Change
in functional and presentation currency
As
at April 30, 2021, due to divestment of Bendon Group, functional currency of the parent entity ‘Naked Brand Group
Limited’ has changed from AUD to USD. This change in functional currency is accounted for prospectively from the date of
change, in other words, the parent entity translated all items into the new functional currency using the exchange rate as at the
date of the change. The resulting translated amounts for non-monetary items have been treated as their historical cost.
Consequently, the presentation currency of the Group was also changed from NZD to USD to align with the functional
currency.
Since
change in the presentation currency represents a change in accounting policy, the change is accounted for retrospectively as if USD had
always been the presentation currency of the Group. Accordingly, statement of comprehensive income is translated from the old reporting
currency into the new reporting currency using a weighted average exchange rate for the applicable period. The balance sheet is translated
using the applicable period end exchange rate, while equity is translated based on historical rates.
Revenue
Recognition
Sale
of Goods
Due
to divestment of Bendon on 30 April 2021, the group exited their operation through retail stores and wholesale channels. Until 30 April
2021, sales of goods through retail stores, e-commerce and wholesale channels are recognised at a point in time when there has been a
transfer of control of goods to the customer. Control of goods transfer at point of sale for retail stores sales. For wholesale and e-commerce
sales, control of goods is transferred when goods are delivered to customers, and therefore reflects an estimate of shipments that have
not been received at the reporting date based on shipping terms and historical delivery times. The Group also provides a reserve for
projected merchandise returns based on prior experience.
The
Group sells gift cards to customers. The Group recognises revenue from gift cards when they are redeemed by the customers. In addition,
the Group recognises revenue on unredeemed gift cards after one year, when the gift cards have expired.
Sale
of Goods – Wholesale
The
Group used to sell lingerie products in the wholesale market till 30 April 2021. Sales were recognised at a point in time when control
of the products had transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the
channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler’s acceptance of
the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been
transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance
provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.
Revenue
from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. The estimates of
discount is based on the trading terms in the contracts, and revenue is only recognised to the extent that it is highly probable that
a significant reversal will not occur. A refund liability (included in trade and other payables) is recognised for expected volume payable
to customers in relation to sales made until the end of the reporting period. The Group’s obligation to provide a refund for faulty
products under the standard trading terms is recognised as a provision.
Sale
of Goods – E-Commerce
The
Group operates e-commerce websites selling lingerie products, and used to also operate a chain of retail stores till April 30, 2021 before
the divesture of Bendon. Revenue from the sale of goods is recognised at a point in time when a Group entity sells a product to the customer.
Payment
of the transaction price is due immediately when the customer purchases the product. It is the Group’s policy to sell its products
to the end customer with a right of return within 30 days. Therefore, a refund liability (included in trade and other payables) and a
right to the returned goods (included in inventory) are recognised for the products expected to be returned. Accumulated experience is
used to estimate such returns at the time of sale at a portfolio level (expected value method). Because the number of products returned
has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will not occur. The
validity of this assumption and the estimated amount of returns are reassessed at each reporting date.
Other
Income
Other
income is recognised on an accruals basis when the Group is entitled to it. During the 6 months ended July 31, 2021, the Group did not
receive any Government grants and wage subsidies in its continuing operations, however $1.6m was received in the 6 months ended July
31, 2020.
Significant
Accounting Judgments, Estimates, and Assumptions
Significant
accounting judgments, estimates, and assumptions that have been used in the preparation of our financial statements are set out below.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
We
make estimates and assumptions concerning the future in determining accounting treatments and quantifying amounts for transactions and
balances in certain circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Inventory
Each
item on inventory is reviewed on an annual basis to determine whether it is being carried at higher than its net realizable value. During
the period, management have written down inventory based on best estimate of the net realizable value, although until the time that inventory
is sold this is an estimate.
Impairment
of Intangible Assets
In
accordance with IAS 36 ‘Impairment of Assets’ the Group is required to estimate the recoverable amount of certain intangible
assets at each reporting period.
Impairment
testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by
their value in use or fair value less cost to sell.
In
calculating the fair value less costs to sell, certain assumptions are required to be made in respect of highly uncertain matters including
management’s expectations of:
|
-
|
growth
in brand revenues
|
|
-
|
the
selection of discount rates to reflect the risks involved, and
|
|
-
|
long-term
growth rates
|
Changing
the assumptions selected by management, in particular the growth rate and discount rate used, could significantly affect the Group’s
impairment evaluation and hence results.
The
Group’s review includes the key assumptions related to sensitivity in the model. Further details are provided in Note 9 to the
consolidated financial statements.
Fair
Value of Financial Instruments
The
Group has certain financial assets and liabilities which are measured at fair value. Where fair value has not been able to be determined
based on quoted price, a valuation model has been used. The inputs to these models are observable, where possible, however these techniques
involve significant estimates and therefore fair value of the instruments could be affected by changes in these assumptions and inputs.
Determining
the Lease Term of Contracts with Renewal Options
We
determine the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease
if it is reasonably certain to be exercised within the next 12 months. As per our policy, the options are not exercised when the lease
terms are beyond 12 months as of the assessment date. When we have the option to lease the assets for additional terms, we apply judgement
in evaluating whether we are reasonably certain to exercise the option to renew, considering all relevant factors that create an economic
incentive for us to exercise the renewal. After the commencement date, we reassess the lease term if there is a significant event or
change in circumstances that is within our control and affect our ability to exercise (or not to exercise) the option to renew.
Taxes
Determining
income tax provisions and the recognition of deferred tax assets including carried forward income tax involves judgment on the tax treatment
of certain transactions. Deferred tax is recognised on tax losses not yet used and on temporary differences where it is probable that
there will be taxable revenue against which these can be offset. Management has made judgments as to the probability of future taxable
income being generated against which tax losses will be available for offset based on budgets, current and future expected economic conditions.
Recent
Accounting Pronouncements
During
the prior period, the Group received rent concessions from a number of landlords across its retail and outlet stores as well as its distribution
centre. As such, the Group applied “practical expedients” as permitted under IFRS 16 in relation to rent concessions it received
and has recognised the concessions in the statement of profit or loss and under comprehensive income. However, it is within discontinued
operations. There are no rent concessions in the 6 month period ended July 31, 2021. The rent concessions are a temporary reduction in
rent for a short period of time in relation to COVID-19. Upon review, the Group did not deem the rent concession as a modification to
the existing lease agreements.
Operating
Results
The
following table sets forth certain selected operating results and other financial information for the 6 month periods ended July 31,
2021 and 2020:
|
|
6 months ended
July 31, 2021
|
|
|
6 months ended
July 31, 2020
|
|
|
% movement
|
|
|
|
|
US $000’s
|
|
|
|
US $000’s
|
|
|
|
|
|
Revenue
|
|
|
6,571
|
|
|
|
8,235
|
|
|
|
-20.2
|
%
|
Cost of goods sold
|
|
|
(4,420
|
)
|
|
|
(5,788
|
)
|
|
|
-23.6
|
%
|
Gross profit
|
|
|
2,151
|
|
|
|
2,447
|
|
|
|
-12.1
|
%
|
Other income
|
|
|
84
|
|
|
|
-
|
|
|
|
nm
|
%
|
Brand management
|
|
|
(2,123
|
)
|
|
|
(2,857
|
)
|
|
|
-25.7
|
%
|
Administrative expenses
|
|
|
(722
|
)
|
|
|
(331
|
)
|
|
|
118.1
|
%
|
Corporate expenses
|
|
|
(2,948
|
)
|
|
|
(928
|
)
|
|
|
-217.7
|
%
|
Finance expense
|
|
|
(44
|
)
|
|
|
(2,155
|
)
|
|
|
-98.0
|
%
|
Brand transition, restructure and transaction expenses
|
|
|
(13,317
|
)
|
|
|
(3,078
|
)
|
|
|
332.7
|
%
|
Impairment expense
|
|
|
(4,971
|
)
|
|
|
-
|
|
|
|
nm
|
%
|
Other foreign currency gains/(losses)
|
|
|
(483
|
)
|
|
|
2,003
|
|
|
|
-124.1
|
%
|
Fair value loss on convertible notes derivative and warrants
|
|
|
(10,794
|
)
|
|
|
-
|
|
|
|
nm
|
%
|
Loss before income tax
|
|
|
(33,167
|
)
|
|
|
(4,899
|
)
|
|
|
577.0
|
%
|
Income tax benefit/(expense)
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
nm
|
%
|
Loss for the period from continuing operations
|
|
|
(33,200
|
)
|
|
|
(4,899
|
)
|
|
|
577.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinuing operations
|
|
|
(4,771
|
)
|
|
|
(6,659
|
)
|
|
|
-28.4
|
%
|
Loss on disposal of subsidiary
|
|
|
(10,796
|
)
|
|
|
-
|
|
|
|
nm
|
%
|
Total loss for the period
|
|
|
(48,767
|
)
|
|
|
(11,558
|
)
|
|
|
321.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate differences on translation of foreign operations - continuing operations
|
|
|
0
|
|
|
|
1,049
|
|
|
|
-100.0
|
%
|
Exchange rate differences on translation of foreign operations - discontinuing operations
|
|
|
3,481
|
|
|
|
(2,190
|
)
|
|
|
-258.9
|
%
|
Other comprehensive loss for the period, net of tax
|
|
|
3,481
|
|
|
|
(1,141
|
)
|
|
|
-405.1
|
%
|
Total comprehensive loss for the period
|
|
|
(45,286
|
)
|
|
|
(12,669
|
)
|
|
|
256.6
|
%
|
Revenue
6-month
period ended July 31, 2021 compared to 6-month period ended July 31, 2020
During
the 6-month period ended July 31, 2021 the net sales of $6.6m showed a decrease of $1.7m or 20.2% when compared with $8.2m in the 6 month
period ended July 31, 2020. The lower sales were driven by lower traffic and lower conversion rates of traffic into orders placed.
Gross
margins
6-month
period ended July 31, 2021 compared to 6-month period ended July 31, 2020
During
the 6 month period ended July 31, 2021 and the 6 month period ended July 31, 2020, the gross profit were $2.2m and $2.4m, respectively.
The decrease of 12.1% was achieved on revenues that were 20.2% lower, as a result of improved gross margins that were 32.7% and 29.7%,
respectively, driven by improved purchasing and higher average order values.
Operating
expenses
6-month
period ended July 31, 2021 compared to 6-month period ended July 31, 2020
The
following table sets forth operating expenses for the 6-month periods ended July 31, 2021 and 2020:
|
|
6 months ended
July 31, 2021
|
|
|
6 months ended
July 31, 2020
|
|
|
% movement
|
|
|
|
|
US $000’s
|
|
|
|
US $000’s
|
|
|
|
|
|
Brand management
|
|
|
(2,123
|
)
|
|
|
(2,857
|
)
|
|
|
-25.7
|
%
|
Administrative expenses
|
|
|
(722
|
)
|
|
|
(331
|
)
|
|
|
118.1
|
%
|
Corporate expenses
|
|
|
(2,948
|
)
|
|
|
(928
|
)
|
|
|
217.7
|
%
|
Finance expense
|
|
|
(44
|
)
|
|
|
(2,155
|
)
|
|
|
-98.0
|
%
|
Brand transition, restructure and transaction expenses
|
|
|
(13,317
|
)
|
|
|
(3,078
|
)
|
|
|
332.7
|
%
|
Impairment expense
|
|
|
(4,971
|
)
|
|
|
-
|
|
|
|
nm
|
%
|
Other foreign currency gains/(losses)
|
|
|
(483
|
)
|
|
|
2,003
|
|
|
|
-124.1
|
%
|
Fair value loss on convertible notes derivative and warrants
|
|
|
(10,794
|
)
|
|
|
-
|
|
|
|
nm
|
%
|
Brand
management expenses decreased by $0.7m, or 25.7%, from $2.9m to $2.1m. Most notably due to variable spend driven by revenues that were
down 20.2%.
Administrative
expenses increased by $0.4m, or 118.1%, from $0.3m to $0.7m. The change in administrative expenses was primarily driven by other expenses.
Corporate
expenses increased by $2.0 m, or 217.7%, from $0.9m to $2.9m, due to increased legal and advisory costs, and costs associated with the
shareholder meeting related to the sale of Bendon.
Finance
expenses decreased by $2.1m, or 98%, from $2.1m to $0.04m, due to the repayment of the BNZ loan and settlement of convertible notes.
Brand
transition, restructure and transaction expenses increased by $10.2m, or 332.7%, from $3.1m to $13.3m, driven primarily by Phantom Warrant
costs of $8.2m and higher transaction costs related to warrants issued as part of the Group’s February 2021 $100m capital raise.
Impairment
expenses increased by $5.0m from $Nil in the prior comparable period. These non-cash impairment expenses relate to the carrying value
of the FOH License Agreement and are largely the result of lowering assumptions concerning expected future revenues and margins.
Other
foreign currency gains/(losses) decreased by $2.5m, or 124.1%, from a gain of $2.0m in the prior period to a loss of $0.5m in the 6 months
to July 31, 2021 as a result of changes in foreign currency balances.
Fair
value losses of $10.8m were recognized, and are made up of $10.6m relating to the fair value of warrants issued as part of the February
2021 capital raising and that were fully exercised during the period and $0.2m relating to the April 2020 Prior Notes that were exchanged
in full in February 2021. These losses are both non-cash.
Taxation
6-month
period ended July 31, 2021 compared to 6-month period ended July 31, 2020
The
tax expense of $0.03m in the 6 months ended July 31, 2021 was a 100% increased on the prior comparable period. The Group has not recognized
benefits of tax losses.
Discontinued
operations
6-month
period ended July 31, 2021 compared to 6-month period ended July 31, 2020
The
discontinued operations of Bendon incurred a loss of $4.8m for the three months until its disposal on April 30, 2021 compared to a loss
of $6.7m in the 6 months ended July 31, 2020. A loss on disposal of $10.8m was recognized on the Bendon sale.
Net
loss
6-month
period ended July 31, 2021 compared to 6-month period ended July 31, 2020
During
the 6 months ended July 31, 2021 and 6 months ended July 31, 2020, we incurred a net comprehensive loss of $45.3m and $12.7m,
respectively. The increased losses of $32.6m resulted from brand transition, restructure and transaction expenses that were $10.2m
higher, fair value losses of $10.8m, non-cash impairment expenses of $5.0m, other foreign currency losses up $2.5m, corporate
costs up $2.0m and loss on disposal of Bendon of $10.8m being partially offset by favorable translational exchange rate differences
of $4.6m, lower finance expenses of $2.1m and relatively lower losses from the discontinued Bendon operations of $1.9m. The discontinued
operations of Bendon incurred a loss of $4.8m for the three months until its disposal on April 30, 2021 compared to a loss of $6.7m in
the 6 months ended July 31, 2020.
Segmented
Reporting
For
the 6-month period ended July 31, 2021, we had only 1 reportable segment (E-commerce) as a result of the sale of Bendon. In the comparative
period, we had 3 reportable segments, namely:
|
●
|
Retail.
This segment covers retail and outlet stores located through Australia and New Zealand.
|
|
●
|
Wholesale.
This segment covers wholesale of intimates apparel to customers based in Australia, New
Zealand and Europe.
|
|
●
|
E-commerce.
This segment covers the Group’s online retail activities.
|
The
following table provides our segment net sales revenue, gross margin and adjusted EBITDA for the 6 months ended July 31, 2021 and for
the 6 months ended July 31, 2020 for the E-commerce segment of the continuing operations. See “Non-IFRS Financials Measures”
below for a discussion of the adjusted EBITDA and a reconciliation of such measure to the most comparable measure calculated under IFRS.
|
|
6 months ended
|
|
|
6 months ended
|
|
US $000’s
|
|
July 31, 2021
|
|
|
July 31, 2020
|
|
Revenue
|
|
|
6,571
|
|
|
|
8,235
|
|
Gross margin
|
|
|
2,151
|
|
|
|
2,447
|
|
Adjusted EBITDA
|
|
|
(2,384
|
)
|
|
|
(1,189
|
)
|
Non-IFRS
Financial Measures
Adjusted
EBITDA for continuing operations is defined as earnings before interest, taxes, depreciation, depletion, amortization and impairment.
Our management uses adjusted EBITDA as a measure of our operating results and considers it to be a meaningful supplement to net income
as a performance measurement, primarily because we incur significant depreciation and depletion and impairment charges, and the exclusion
of such amounts in adjusted EBITDA eliminates the non-cash impact.
A
reconciliation of adjusted EBITDA to the consolidated statements of profit or loss and other comprehensive income for the 6 months ended
July 31, 2021 and 2020 is as follows:
|
|
6 months ended
|
|
|
6 months ended
|
|
US $000’s
|
|
July 31, 2021
|
|
|
July 31, 2020
|
|
Adjusted EBITDA
|
|
|
(2,384
|
)
|
|
|
(1,189
|
)
|
Income tax (expense)/benefit
|
|
|
(33
|
)
|
|
|
-
|
|
Other reconciliation items
|
|
|
(30,783
|
)
|
|
|
(3,710
|
)
|
Total net loss after tax
|
|
|
(33,200
|
)
|
|
|
(4,899
|
)
|
Reconciling
items of $30.8m are $27.0m higher than the prior comparable period’s $4.9m and comprise of brand transition, restructure and transaction
expenses, finance expense, impairment expense, fair value loss, depreciation and amortisation expenses and unrealized foreign exchange
loss. Compared to the prior comparable period, fair value losses are $10.8m higher, brand transition, restructure and transaction expenses
are $10.2m higher, impairment expenses are $5.0m higher and unrealized foreign exchange loss is $3.2m higher being partially offset by
lower finance expenses of $2.1m. .
The
below table shows a reconciliation from EBITDA to net loss after tax for the continuing operations:
|
|
6 months ended
|
|
|
6 months ended
|
|
US $000’s
|
|
July 31, 2021
|
|
|
July 31, 2020
|
|
Adjusted EBITDA
|
|
|
(2,384
|
)
|
|
|
(1,188
|
)
|
Brand transition, restructure and transaction expenses
|
|
|
(13,317
|
)
|
|
|
(3,078
|
)
|
Finance expense
|
|
|
(44
|
)
|
|
|
(2,155
|
)
|
Impairment expense
|
|
|
(4,971
|
)
|
|
|
-
|
|
Depreciation and amortisation
|
|
|
(170
|
)
|
|
|
(143
|
)
|
Unrealised foreign exchange gain
|
|
|
(1,487
|
)
|
|
|
1,665
|
|
Fair value loss on convertible notes derivative and warrants
|
|
|
(10,794
|
)
|
|
|
-
|
|
Income/(loss) before income tax expense
|
|
|
(33,167
|
)
|
|
|
(4,899
|
)
|
Income tax expense
|
|
|
(33
|
)
|
|
|
-
|
|
Total net loss after tax
|
|
|
(33,200
|
)
|
|
|
(4,899
|
)
|
Liquidity,
and Capital Resources
Liquidity
We
finance our business through cash from operations and equity and debt financing. Our cash requirements have been principally to fund
working capital needs, to support the growth of the business and to repay our bank loan. We may also use cash for strategic acquisitions
of businesses or technologies.
Management
may continue to raise funds from equity and debt financing to fund our operations and objectives, including for strategic acquisitions.
There is no assurance the additional funding will be obtained. If we are unable to obtain the additional funding, we may not be able
to conduct our operations and pursue our objectives as presently contemplated, which may adversely affect our results of operations and
financial condition.
As
at July 31, 2021 and January 31, 2021, we had cash totaling $279.0m and $65.1m, respectively. During the 6 months ended July 31, 2021,
we undertook a number of financing activities and raised $244.1m. Of this amount, $10.6m was utilized to repay the BNZ debt in full and
the balance was utilized as working capital in the operating business.
Working
capital
US $000’s
|
|
July 31, 2021
|
|
|
July 31, 2020
|
|
Current Assets
|
|
|
286,189
|
|
|
|
26,547
|
|
Current Liabilities
|
|
|
(14,052
|
)
|
|
|
(33,313
|
)
|
Working Capital
|
|
|
272,137
|
|
|
|
(6,766
|
)
|
Working
capital at July 31, 2021 was $272.1m, compared with negative $6.8m as at January 31, 2021, an increase of $278.9m. An improved cash position,
driven by the successful capital raisings, together with lower payables and maturity of borrowings were the key contributors to the favourable
change in working capital.
Cash
flows
US $000’s
|
|
6 months ended
July 31, 2021
|
|
|
6 months ended
July 31, 2020
|
|
Net cash inflow/(outflow) from operating activities
|
|
|
(5,401
|
)
|
|
|
236
|
|
Net cash outflow from investing activities
|
|
|
(13,056
|
)
|
|
|
(152
|
)
|
Net cash inflow from financing activities
|
|
|
232,275
|
|
|
|
8,854
|
|
Net increase/(decrease) in cash and cash equivalents held
|
|
|
213,818
|
|
|
|
8,939
|
|
Cash and cash equivalents at end of the half year
|
|
|
279,035
|
|
|
|
12,011
|
|
Operating
Activities
Net
cash outflow from operating activities for the 6 months ended July 31, 2021 was $5.4m, compared to net cash inflow for 6 months ended
July 31, 2020 of $0.2m driven primarily by higher payments to suppliers and employees.
Investing
Activities
Net
cash outflow from investing activities for the 6 months ended July 31, 2021 was $13.1m, compared to net cash outflow from investing activities
of $0.2m for the 6 months ended July 31, 2020 driven primarily by cash of discontinued operations of $12.5m.
Financing
Activities
Net
cash inflow from financing activities for the 6 months ended July 31, 2021 was $232.3m, compared to net cash inflow from financing activities
of $8.9m for 6 months ended July 31, 2020 driven primarily by proceeds from share issues. During the 6 months ended July 31, 2021, the
company raised US$244.1m through the issue of shares. These funds were used to fund operations, repay borrowings and to provide working
capital.
Financing
Transactions
For
additional information on financing transactions completed by us during the 12 months ended January 31, 2021 and the 6 months ended July
31, 2021, see “Recent Developments— Financing Transactions” above.
Senior
Secured Credit Facility
Through
February 10, 2021, we were party to a facility agreement, originally dated June 27, 2016, as amended from time to time, by and among
Bendon, as borrower, us and certain subsidiaries and affiliates of ours, as guarantors, and BNZ, as lender.
Originally,
the facility provided for a term loan and a revolving loan. The facility limits of the term loan and revolving loan were NZ$54.0m in
aggregate. On June 13, 2018, we entered into a deed of amendment with BNZ to reduce the term loan and revolving loan facility limits
from NZ$54.0m in the aggregate to a single revolving loan facility limit of NZ$20.0m. In addition, the facility took over certain guarantees
and other financial instruments totaling $1.3m. In connection with the deed of amendment, we repaid approximately NZ$18.0m of the outstanding
loans. Effective March 12, 2020, we entered into an amended and restated facility agreement with BNZ. Under the amended and restated
facility agreement, BNZ continued to make available (i) the revolving loan facility, for which the facility limit, as amended, initially
was NZ$16.7 million, and (ii) the instrument facility, for which the facility limit was NZ$1.3m. We agreed to reduce our indebtedness
under the amended and restated facility agreement by an aggregate of NZ$7.0m in instalments between March 31, 2020 and November 30, 2021,
which would also reduce the facility limit under the revolving loan facility.
Drawings
in New Zealand dollars bore interest for each interest period at a rate per annum equal to the sum of (i) the New Zealand bank bill reference
rate administered by the New Zealand Financial Markets Association, as determined and adjusted in accordance with the facility agreement,
(ii) a liquidity premium determined by BNZ from time to time and advised to us, (iii) a business basis premium published by BNZ on its
website, if the interest period is greater than one month but less than three months, and (iv) 2.00% per annum. Each interest period
was three months, unless otherwise agreed by BNZ.
BNZ
made instruments available under the instrument facility, subject to the facility limit and certain other conditions being satisfied.
The types of available instruments included letters of credit, bank guarantees and performance bonds.
The
Borrower paid BNZ a one-time establishment fee equal to 3% of the aggregate facility limit and paid BNZ an annual line fee equal to 2%
of the aggregate facility limit.
All
of the obligations under the amended and restated facility agreement were guaranteed by us and certain subsidiaries and affiliates of
ours. The obligations were secured pursuant to a general security interest granted over the assets of Bendon, us and certain subsidiaries
and affiliates of ours.
The
amended and restated agreement contained certain customary representations, covenants and events of default. The agreement also included
financial covenants providing that (i) for any calendar month in the 12-month period preceding each fiscal quarter end, our actual sales
and gross profit would not vary adversely by more than 15% from our budget and (ii) for each calendar month, the ratio of inventory to
debt under the Revolving Facility would be more than 1.35 times until July 31, 2020 and more than 1.65 times thereafter.
On
February 9, 2021, we paid approximately NZ$14.5m (US$10.4m) to BNZ, which constituted repayment in full of all amounts due under the
facility with BNZ, and the facility was terminated.
The
amount outstanding under the revolving facility was NZ$Nil and NZ$14.5m (US$10.4m) as of July 31, 2021 and January, 2021, respectively.
The interest rate on the Revolving Facility for the 6 months period ended July 31, 2021 and July 2020, respectively, varied between 4.25%
and 5.26%.
Notes
Issued in October, November, and December 2019 and January, February, and April 2020
In
each of October, November and December 2019 and January, February, and April 2020, we completed a private placement of a Prior Note and
a warrant to purchase ordinary shares to an Affiliated Holder. Each private placement of a Prior Note was made pursuant to a Securities
Purchase Agreement with the applicable Affiliated Holder. The aggregate purchase price of the Prior Notes was US$15,500,000. Each of
the Prior Notes was issued with an original issue discount of 5%, and certain expenses of the Affiliated Holder were added to the balance
of each Prior Note. In addition, the applicable Affiliated Holder had the right to exchange each warrant for a 5% increase in the outstanding
balance of the related Prior Note, a right the Affiliated Holder exercised in each case. Because we did not timely complete an equity
financing as required by each of the Prior Notes and did not timely file a registration statement as required by the Prior Notes issued
in February and April 2020, the outstanding balance of each applicable Prior Note was increased by 10% for each such occurrence. Each
of the Prior Notes provided for an interest rate of 20% per annum, compounded daily, and for maturity on the second anniversary of its
issuance. Each of the Prior Notes originally provided for a fixed conversion price, but we agreed to three temporary reductions of the
conversion price of the Prior Note issued in December 2019 and subsequently agreed to amend each of the Prior Notes issued in October,
November and December 2019 and in January and February 2020 so that each such note could be converted at a floating conversion price
(but in any event at not less than a specified floor price), provided we approved each such conversion.
As
of November 27, 2020, the Prior Notes issued in October, November and December 2019 and January and February 2020 had been converted
in full into an aggregate of 66,580,270 Ordinary Shares. In addition, on February 25, 2021, we exchanged the Prior Note issued in April
2020 for 4,002,789 Ordinary Shares.
The
amount outstanding under the Prior Notes was $Nil and $2.1m as of July 31, 2021 and January 31, 2021, respectively.
Research
and Development, Patents and Licenses
We
do not have any set research and development policies and have not spent a significant amount on research and development in the 6 months
ended July 31, 2021 or in the 12 months ended January 31, 2021, 2020 or 2019.
Off-balance
Sheet Arrangements
We
do not have any material off-balance sheet commitments or arrangements.
Contractual
Obligations
For
information on our contractual obligations as of January 31, 2021, see Item 5.F of our Annual Report. During the 6 months ended July
31, 2021, our contractual obligations, excluding trade creditors, changed as follows:
Our
convertible note obligations were reduced by $2.1m through the exchange of such notes to equity and our bank loans were reduced by $10.4m
through the repayment of our credit facility with BNZ, each as described in “Liquidity, and Capital Resources” above.
In addition, various contractual obligations related to the Bendon Sale were settled each as described in “Bendon Sale” above.
Other contractual obligations as of January 31, 2021 relate to the discontinued operations.
Naked
Brand Group Limited
Contents
for the Half Year Ended 31 July 2020
Naked
Brand Group Limited
Consolidated
Statements of Profit or Loss and Other Comprehensive Income
|
For
the 6 Months Ended 31 July 2021 and 2020
|
|
|
|
|
|
|
|
6
months to
31
July 2021
US
$
|
|
|
|
6
months to
31 July 2020
US $
|
|
Loss per share from loss from continuing operations
attributable to the ordinary equity holders of Naked Brand Group Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
|
14
|
|
|
|
(0.045
|
)
|
|
|
(0.379
|
)
|
Diluted loss per share
|
|
|
14
|
|
|
|
(0.045
|
)
|
|
|
(0.379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share from loss from discontinuing
operations attributable to the ordinary equity holders of Naked Brand Group Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
|
14
|
|
|
|
(0.021
|
)
|
|
|
(0.515
|
)
|
Diluted loss per share
|
|
|
14
|
|
|
|
(0.021
|
)
|
|
|
(0.515
|
)
|
The
above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Naked
Brand Group Limited
Consolidated
Statement of Financial Position
|
As
at 31 July 2021 and 31 January 2021
|
The
above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Naked
Brand Group Limited
Consolidated
Statement of Changes in Equity
|
For the Half Year Ended 31 July 2021 and 2020
|
The
above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Naked
Brand Group Limited
Consolidated
Statement of Cash Flows
|
For
the Half Year Ended 31 July 2021 and 2020
|
The
above consolidated statement of cashflows should be read in conjunction with the accompanying notes.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
1. Description of the business
Naked
Brand Group Limited (‘the Group’) is a designer, distributor and retailer of women’s intimates apparel globally. Until
April 30, 2021, the Group sold its merchandise through retail and outlet stores in New Zealand and Australia, wholesale operations in
New Zealand, Australia, the United States and Europe, and through online channels. The Group operated both licensed and owned brands,
including the following:
Licensed
brands:
Fredericks
of Hollywood
Owned
brands:
Pleasure
State, Davenport, Lovable, Bendon, Fayreform, Naked, VaVoom, Evollove, Hickory
From
May 1, 2021, the Group operates through its operating subsidiary Fredericks of Hollywood (‘FOH’). The Group has exclusive
FOH’s global online license, under which the Group sell FOH intimates’ products, sleepwear and loungewear products, swimwear
and swimwear accessories products, and costume products.
The
financial report covers Naked Brand Group Limited and its controlled entities (‘the Group’). Naked Brand Group Limited (referred
to hereafter as the ‘Company’ or ‘parent entity’) is a for-profit Group, incorporated and domiciled in Australia.
Following
significant changes occurred during the interim period presented, for which there is further disclosure contained within this report:
|
●
|
On
January 21, 2021, the Group announced plans to undertake a transformative restructure in
which the Group would dispose of its bricks-and-mortar operations to focus exclusively on
its e-commerce business. To that end, the Company signed a non-binding and non-exclusive
term sheet to divest itself of its Bendon Limited (“Bendon”) subsidiary, to the
existing management of the Group, including Justin Davis-Rice, the Executive Chairman and
Chief Executive Officer of the Group, and Anna Johnson, the Chief Executive Officer of Bendon,
or the “Bendon Sale”.
|
|
●
|
On
April 23, 2021, the Group held an Extraordinary General Meeting of Shareholders, at which
its shareholders approved the Bendon Sale.
|
|
●
|
On
April 30, 2021, the Group signed a conditional share sale agreement for the Bendon Sale,
or the “Bendon Share Sale Agreement”, and simultaneously consummated the transactions
contemplated thereby. The investment in the Bendon Group was fully disposed of on April 30,
2021. The sale of Bendon Group is classified as discontinued operations (Refer to note 15).
|
|
●
|
FOH
entered into a services agreement with Bendon Limited whereby Bendon will continue to provide
a full range of services to FOH covering selling, marketing, advertising, manufacturing,
designing, distribution and logistics, inventory management, e-commerce and website management,
customer service and associated MIS-business systems and operational financial support (Refer
to note 15 ‘Related party’ for further details).
|
COVID-19
pandemic
The
consequences of the Coronavirus (COVID-19) pandemic are continuing to be felt around the world, and its impact on the Group, if any,
has been reflected in its published results to date. Whilst it would appear that control measures and related government policies have
started to mitigate the risks caused by COVID-19, it is not possible at this time to state that the pandemic will not subsequently impact
the Group’s operations going forward, especially with the new variant of the virus that may cause significant continued lockdowns.
The Group now has experience in the swift implementation of business continuation processes should future lockdowns of the population
occur, and these processes continue to evolve to minimise any operational disruption. Management continues to monitor the situation both
locally and internationally.
The
amounts in the financial statements have been rounded to the nearest thousand dollars.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
2. Basis of preparation of half year report
The
Group has presented its interim consolidated financial report for the half year ended July 31, 2021 in accordance with IAS 34 Interim
Financial Reporting as issued by the International Accounting Standards Board (IASB).
The
interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report should
be read in conjunction with the last annual report for the year ended January 31, 2021 and any public announcement made by the Group
during the interim reporting period.
The
accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except
for the change in presentation currency.
The
accompanying consolidated financial statements have been prepared assuming that the Group will continue as a going concern for at least
a period of twelve months from the date of approval of the unaudited condensed consolidated interim financial statements. This basis
of accounting contemplates the recovery of the assets and the satisfaction of liabilities in the normal course of business.
Standard
issued but not yet effective
This
description is of the standards and interpretations issued that the Group reasonably expects to be applicable at a future date. The Group
intends to adopt these standards when they become effective.
In
January 2020 the IASB issued amendments to IAS 1 - Presentation of Financial Statements: Classification of Liabilities as Current or
Non-Current to clarify how to classify debt and other liabilities as current or non-current, and in particular how to classify liabilities
with an uncertain settlement rate and liabilities that may be settled by converting to equity. These amendments are effective on or after
January 1, 2023. The Group does not expect any material impact from the adoption of these amendments.
In
May 2020, the IASB issued amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”).
The amendments clarify that for purpose of assessing whether a contract is onerous, the cost of fulfilling the contract includes both
the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts. The
amendments are effective for contracts for which an entity has not yet fulfilled all its obligations on or after January 1, 2022. Earlier
application is permitted. Management is currently assessing the impacts of the amended standard.
In
May 2020, the IASB issued further amendments to IFRS 3, Business Combinations (“IFRS 3”) which update references in
IFRS 3 to the revised 2018 Conceptual Framework. To ensure that this update in referencing does not change which assets and liabilities
qualify for recognition in a business combination, or create new Day 2 gains or losses, the amendments introduce new exception to the
recognition and measurement principles in IFRS 3.
An
acquirer should apply the definition of liability in IAS 37, rather than the definition in the Conceptual Framework, to determine
whether a present obligation exists at the acquisition date as a result of past events. For a levy in the scope of IFRIC 21, Levies
(“IFRIC 21”). The acquire should apply the criteria in IFRSIC 21 to determine whether the obligation event that gives
rise to a liability to pay the levy has occurred by the acquisition date. In addition, the amendments clarify that the acquirer should
not recognise a contingent asset at the acquisition date. The amendments to IFRS 3 are effective for business combinations occurring
in the reporting periods starting on or after January 1, 2022. Earlier application is permitted. Management is currently assessing the
impacts of the amended standard.
In
May 2020, the IASB issued Property, Plant and Equipment – Proceeds before Intended Use, which made amendments to IAS 16. The amendments
prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the
company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit
or loss. The amendments are affective for annual periods beginning on or after January 1, 2022. Early application is permitted. Management
is currently assessing the impacts of the amended standard.
In
May 2020, the IASB issued Annual Improvements to IFRS standards 2018-2020 which contain an amendment to IFRS 9. The amendment
clarifies which fees an entity includes when it applies the “10 per cent” test in paragraph B3.3.6 of IFRS 9 in assessing
whether to recognise a financial liability. An entity includes only fees pair or received between the entity (the borrower) and the lender,
including fees paid or received by either the entity or the lender on the other’s behalf. The amendment is effective for annual
reporting periods beginning on or after January 1, 2022. Management is currently assessing the impacts of the amended standard.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
In
August 2020 the IASB issued a package of phase 2 amendments to IFRS 9 - Financial Instruments, IFRS 7 - Financial Instruments: Disclosures,
IFRS 4 - Insurance Contracts and IFRS 16 - Leases in response to the ongoing reform of inter-bank offered rates (IBOR) and other interest
rate benchmarks. The amendments are aimed at helping companies to provide investors with useful information about the effects of the
reform on those companies’ financial statements. These amendments complement amendments issued in 2019 (phase 1 amendment) and
focus on the effects on financial statements when a company replaces the old interest rate benchmark with an alternative benchmark rate
as a result of the reform. The phase 2 amendments relate to:
|
●
|
changes
to contractual cash flows - a company will not be required to derecognize or adjust the carrying
amount of financial instruments for changes required by the interest rate benchmark reform,
but will instead update the effective interest rate to reflect the change to the alternative
benchmark rate;
|
|
●
|
hedge
accounting - a company will not have to discontinue its hedge accounting solely because it
makes changes required by the interest rate benchmark reform if the hedge meets other hedge
accounting criteria; and
|
|
●
|
disclosures
- a company will be required to disclose information about new risks that arise from the
interest rate benchmark reform and how the company manages the transition to alternative
benchmark rates.
|
These
phase 2 amendments are effective on or after January 1, 2021, with early adoption permitted.
In
February 2021 the IASB issued amendments to IAS 1 - Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of
Accounting policies which require companies to disclose their material accounting policy information rather than their significant accounting
policies and provide guidance on how to apply the concept of materiality to accounting policy disclosures. These amendments are effective
on or after January 1, 2023. The Group does not expect any material impact from the adoption of these amendments.
In
February 2021 the IASB issued amendments to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting
Estimates which clarify how companies should distinguish changes in accounting policies from changes in accounting estimates. These amendments
are effective on or after January 1, 2023. The Group does not expect any material impact from the adoption of these amendments.
Historical
cost convention
The
financial statements are based on historical costs, except for the measurement at fair value of selected financial assets and financial
liabilities.
3. Summary of significant accounting policies
(a) Going concern
For
the 6 months ended July 31, 2021 the Group incurred a loss after income tax from continuing operations of $33.2m and net cash outflows
from operations of $5.4m. Following a number of successful equity raises during the period that raised net proceeds of $244.1m, the Group
has a working capital surplus of $272.1m, a net tangible asset position of $272.4m and a positive shareholder equity position of $281.0m
at July 31, 2021.
The
cash balance as at July 31, 2021 was $279.0m and there were no borrowings as at July 31, 2021. As such, with a substantially strengthened
balance sheet, the directors believe that a reasonable basis exists to expect that the Group has adequate resources to continue as a
going concern for at least the next 12 months and accordingly apply the going concern basis of accounting in preparing the financial
statements.
(b) Basis for consideration
Subsidiaries
Subsidiaries
are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
Intercompany
transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the Group.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
When
the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence,
any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss.
This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate,
joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity
are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised
in other comprehensive income are reclassified to profit or loss.
If
the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
(c) Income Tax
The
tax expense/(benefit) recognised in the consolidated statements of profit or loss and other comprehensive income comprises of current
income tax expense plus deferred tax expense/(benefit).
Current
tax is the amount of income taxes payable/(recoverable) in respect of the taxable profit/(loss) for the period and is measured at the
amount expected to be paid to/(recovered from) the taxation authorities, using the tax rates and laws that have been enacted or substantively
enacted by each jurisdiction by the end of the reporting period. Current tax liabilities/(assets) are measured at the amounts expected
to be paid to/(recovered from) the relevant taxation authority.
Deferred
tax is provided on temporary differences which are determined by comparing the carrying amounts of tax bases of assets and liabilities
to the carrying amounts in the consolidated financial statements.
Deferred
tax is not provided for the following:
|
●
|
The
initial recognition of an asset or liability in a transaction that is not a business combination
and at the time of the transaction, affects neither accounting profit nor taxable profit/(tax
loss).
|
|
●
|
Taxable
temporary differences arising on the initial recognition of goodwill.
|
|
●
|
Temporary
differences related to investment in subsidiaries, associates and jointly controlled entities
to the extent that the Group is able to control the timing of the reversal of the temporary
differences and it is probable that they will not reverse in the foreseeable future.
|
Deferred
tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by each jurisdiction by the end of the
reporting period.
Deferred
tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences and losses can be utilised.
Current
and deferred tax is recognised as income or an expense and included in profit or loss for the period except where the tax arises from
a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive
income or equity respectively.
In
determining the amount of current and deferred income tax, the Group takes into account the impact of uncertain income tax positions
and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of
judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy
of existing tax liabilities; such changes to tax liabilities will impact the income tax expense in the period that such a determination
is made.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
(d) Revenue and other income
Sale
of goods
Due
to divestment of Bendon on April 30, 2021, the Group exited their operations through retail stores and wholesale channels. Until April
30, 2021, sales of goods through retail stores, e-commerce and wholesale channels are recognised at a point in time when there has been
a transfer of control of goods to the customer. Control of goods transfer at point of sale for retail stores sales. For wholesale and
e-commerce sales, control of goods is transferred when goods are delivered to customers, and therefore reflects an estimate of shipments
that have not been received at the reporting date based on shipping terms and historical delivery times. The Group also provides a reserve
for projected merchandise returns based on prior experience.
The
Group sells gift cards to customers. The Group recognises revenue from gift cards when they are redeemed by the customers. In addition,
the Group recognises revenue on unredeemed gift cards after one year, when the gift cards have expired.
(i)
Sale of goods - retail/e-commerce
The
Group operates e-commerce websites selling lingerie products, and used to also operate a chain of retail stores through April 30, 2021
before the divesture of Bendon. Revenue from the sale of goods is recognised at a point in time when a Group entity sells a product to
the customer.
Payment
of the transaction price is due immediately when the customer purchases the product. It is the Group’s policy to sell its products
to the end customer with a right of return within 30 days. Therefore, a refund liability (included in trade and other payables) and a
right to the returned goods (included in inventory) are recognised for the products expected to be returned. Accumulated experience is
used to estimate such returns at the time of sale at a portfolio level (expected value method).
Because
the number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue
recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.
(ii) Sale
of goods - wholesale
The
Group used to sell lingerie products in the wholesale market through April 30, 2021. Sales were recognised at a point in time when control
of the products had transferred, being when the products were delivered to the wholesaler, the wholesaler had full discretion over the
channel and price to sell the products, and there was no unfulfilled obligation that could affect the wholesaler’s acceptance of
the products. Delivery occurred when the products were shipped to the specific location, the risks of obsolescence and loss were transferred
to the wholesaler, and either the wholesaler accepted the products in accordance with the sales contract, the acceptance provisions lapsed,
or the Group had objective evidence that all criteria for acceptance were satisfied.
Revenue
from these sales was recognised based on the price specified in the contract, net of the estimated volume discounts. The estimates of
discount was based on the trading terms in the contracts, and revenue was only recognised to the extent that it was highly probable that
a significant reversal would not occur. A refund liability (included in trade and other payables) was recognised for expected volume
payable to customers in relation to sales made until the end of the reporting period. The Group’s obligation to provide a refund
for faulty products under the standard trading terms was recognised as a provision.
Interest
revenue
Interest
is recognised using the effective interest method and recognised when it is earned.
Other
income
Other
income is recognised on an accruals basis when the Group is entitled to it. Wage subsidy and Job keeper payments are considered ‘government
grants’ and accounted for under IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, because they are
being provided by the Government in return for compliance with conditions relating to the operating activities of the Group. The grant
is recognised as income when the Group is reasonably assured that it will comply with the conditions attached to it, and the grant will
be received. The grant is recognised as a receivable when the associated wage payments are made. Receipt of reimbursement from the government
reduces the receivable.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
(e) Brand management, administrative and corporate expenses
Corporate
expenses include head office costs such as human resources, finance team and rental costs. Administrative expenses include depreciation
and amortisation of intangible assets, as well as professional accounting fees. Brand management expenses includes other costs incurred
in selling products, including advertising, design and payroll.
(f) Borrowing costs
Borrowing
costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take
a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the
assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowing
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All
other borrowing costs are recognised as an expense in the period in which they are incurred.
(g) Inventories
Inventories
are measured at the lower of cost and net realisable value. Cost of inventory is determined using the weighted average costs basis and
is net of any rebates and discounts received. Net realisable value represents the estimated selling price for inventories less costs
necessary to make the sale. Net realisable value is estimated using the most reliable evidence available at the reporting date and inventory
is written down through an obsolescence provision if necessary.
(h) Property, plant and equipment
Plant
and equipment
Plant
and equipment are measured using the cost model.
Under
the cost model the asset is carried at its cost less any accumulated depreciation and any impairment losses. Costs include purchase price
and other directly attributable costs associated with locating the asset to the installation site, where applicable.
Depreciation
Property,
plant and equipment, is depreciated on a straight-line basis over the asset’s useful life to the Group, commencing when the asset
is ready for use.
The
estimated useful lives used for each class of depreciable asset are shown below:
Disclosure of Detailed Information About Estimated Useful Lives of Property, Plant and Equipment
Fixed
asset class
|
|
Useful
life
|
Leasehold
improvements
|
|
10
years and where shorter over the lease term
|
Plant,
furniture, fittings and motor vehicles
|
|
7
years
|
At
the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is reviewed. Any revisions
are accounted for prospectively as a change in accounting estimate.
(i) Leases
The
Group adopted IFRS 16 on 1 February 2019. At inception of a contract, the Group assesses whether a contract is, or contains, a lease
based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group has elected to apply the practical expedient to account for leases for which the lease term ends within 12 months of the date
of initial application and leases of low value assets as short-term leases. The lease payments associated with these leases are recognized
as expenses on a straight-line basis over the lease term.
As
a lessee:
The
Group recognizes a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured
at cost, based on the initial amount of the lease liability.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Right-of-use
assets
Right-of-use
assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever
is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over
its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
Lease
liabilities
A
lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of
the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot
be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any
lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value
guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination
penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
During
the comparative period, the Group received rent concessions of $0.3m due to COVID-19 and has applied “practical expedients”
as permitted by IASB. This is included in the Financial performance and cash flow information section of Note 15 ‘Discontinued
Operations’.
(j) Financial instruments
Financial
instruments are recognised initially using trade date accounting, i.e. on the date that the Group becomes party to the contractual provisions
of the instrument.
On
initial recognition, all financial instruments are measured at fair value plus transaction costs (except for instruments measured at
fair value through profit or loss where transaction costs are expensed as incurred).
Financial
assets
(i) Classification
The
Group classifies its financial assets in the following measurement categories:
|
●
|
Those
to be measured subsequently at fair value (either through Other Comprehensive Income “OCI” or through profit or loss),
and
|
|
●
|
Those
to be measured at amortised cost.
|
The
classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For
assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments
that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition
to account for the equity investment at fair value through other comprehensive income (FVOCI).
The
Group reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Recognition
and derecognition
Purchases
and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial
assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At
initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction
costs of financial assets carried at FVPL are expensed in profit or loss.
Financial
assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal
and interest.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Debt
instruments
Subsequent
measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics
of the asset. There are three measurement categories into which the Group classifies its debt instruments:
|
●
|
Amortised
cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal
and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented
in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in
the statement of profit or loss.
|
|
●
|
FVOCI:
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash
flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through
OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised
in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified
from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in
finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses)
and impairment expenses are presented as separate line item in the statement of profit or loss.
|
|
●
|
FVPL:
Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is
subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which
it arises.
|
Equity
instruments
The
Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value
gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss
following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income
when the Group’s right to receive payments is established.
Changes
in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable.
Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other
changes in fair value.
(iv) Impairment
The
Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and
FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For
trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised
from initial recognition of the receivables.
(v) Subsequent
measurement
If
there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the
loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows
discounted at the financial assets original effective interest rate.
Subsequent
recoveries of amounts previously written off are credited against other expenses in profit or loss.
Financial
liabilities
Financial
liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or at amortised cost depending
on the purpose for which the liability was acquired. Although the Group uses derivative financial instruments in economic hedges of currency
and interest rate risk, it does not hedge account for these transactions.
The
Group’s financial liabilities include borrowings, trade and other payables (including finance lease liabilities), which are measured
at amortised cost using the effective interest rate method.
All
of the Group’s derivative financial instruments that are not designated as hedging instruments are accounted for at fair value
through profit or loss.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
(k) Impairment of non-financial assets
At
the end of each reporting period the Group determines whether there is an evidence of an impairment indicator for non- financial assets.
Where
an indicator exists and regardless for goodwill, indefinite life intangible assets and intangible assets not yet available for use, the
recoverable amount of the asset is estimated.
Where
assets do not operate independently of other assets, the recoverable amount of the relevant cash-generating unit (CGU) is estimated.
The
recoverable amount of an asset or CGU is the higher of the fair value less costs of disposal and the value in use. Value in use is the
present value of the future cash flows expected to be derived from an asset or cash-generating unit. Where the recoverable amount is
less than the carrying amount, an impairment loss is recognised in profit or loss. Reversal indicators are considered in subsequent periods
for all assets which have suffered an impairment loss, except for goodwill.
(l) Cash and cash equivalents
For
the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities in the statement of financial position.
(m) Trade receivables
Trade
receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
expected credit losses.
(n) Trade and other payables
These
amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts
are unsecured and are usually due within 30 days of recognition. Trade and other payables are presented as current liabilities unless
payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured
at amortised cost using the effective interest method.
(o) Intangibles
Goodwill
Goodwill
is carried at cost less accumulated impairment losses. Goodwill is calculated as the excess of the sum of:
|
i)
|
the
consideration transferred:
|
|
ii)
|
any
non-controlling interest; and
|
|
iii)
|
the
acquisition date fair value of any previously held equity interest
|
over
the acquisition date fair value of net identifiable assets acquired in a business combination.
Patents
and licenses
Separately
acquired patents and licenses are shown at historical cost. Licenses and customer contracts acquired in a business combination are recognised
at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation
and impairment losses. License fees have an estimated useful life of 5-50 years.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Software
Software
has a finite life and is carried at cost less any accumulated amortisation and impairment losses. It has an estimated useful life of
between one and three years.
Amortisation
Amortisation
is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and
brands, from the date that they are available for use.
Amortisation
methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Goodwill
and indefinite life brands are not amortised but are tested for impairment annually or more frequently if impairment indicators exist.
Goodwill is allocated to the Group’s cash generating units or Groups of cash generating units, which represent the lowest level
at which goodwill is monitored but where such level is not larger than an operating segment. Gains and losses on the disposal of an entity
include the carrying amount of goodwill related to the entity sold.
(p) Employee benefits
(i)
|
Short-term
obligations
|
Liabilities
for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12
months after the end of the period in which the employees render the related service are recognised in respect of employees’ services
up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities
are presented as current employee benefit obligations in the statement of financial position.
(ii)
|
Other
long-term employee benefit obligations
|
The
liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the period
in which the employees render the related service. They are therefore measured as the present value of expected future payments to be
made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration
is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments
are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that
match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in
actuarial assumptions are recognised in profit or loss.
(iii)
|
Share
based payments for cash settled phantom warrants.
|
The
Group also operates a phantom warrant share option scheme (a cash settled share based payment) that vest in three tranches being January
21, 2021, July 21, 2021 and January 21, 2022. There are no conditions or restrictions to receiving the benefit of all the phantom warrants
for the full bonus calculation period. An option pricing model is used to measure the Group’s liability at each reporting date,
taking into account the terms and conditions on which the bonus is awarded. Each tranche of phantom warrants may be exercised for cash
at any time in the three-year period following vesting date and as such is recognised as a liability. Movements in the liability (other
than cash payments are recognised in the consolidated statement of profit or loss and other comprehensive income.
(q) Provisions
Provisions
are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow
of economic benefits will result, and that outflow can be reliably measured.
Provisions
are measured at the present value of management’s best estimate of the outflow required to settle the obligation at the end of
the reporting period. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. The increase in the provision due to the unwinding of the discount is taken to finance costs in
the consolidated statements of profit or loss and other comprehensive income.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Provisions
recognised represent the best estimate of the amounts required to settle the obligation at the end of the reporting period.
(i)
|
Onerous
contract provision
|
The
Group provides for future losses on long-term contracts where it is considered probable that the contract costs are likely to exceed
revenues in future years. A provision is required for the present value of future losses. Estimating these future losses involves a number
of assumptions about the achievement of contract performance targets and the likely levels of future cost escalation over time.
The
Group is required to restore the lease premises of various retail stores to their original condition at the end of the respective lease
terms. Provisions for make good obligations are recognised when the Group has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably
estimated. A provision is recognised for the present value of the estimated expenditure required to remove any leasehold improvements.
These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the lease term.
(r) Earnings/(loss) per share
(i)
|
Basic
earnings/(loss) per share
|
Basic
earnings/(loss) per share is calculated by dividing:
|
●
|
the
profit/(loss) attributable to owners of the Group, excluding any costs of servicing equity
other than ordinary
|
|
●
|
by
the weighted average number of ordinary shares outstanding during the financial year.
|
(ii)
|
Diluted
earnings/(loss) per share
|
Diluted
earnings/(loss) per share adjusts the figures used in the determination of basic earnings per share to take into:
|
●
|
the
after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares, and
|
|
●
|
the
weighted average number of additional ordinary shares that would have been outstanding assuming
the conversion of all dilutive potential ordinary shares.
|
For
periods in which the Group has reported net losses, diluted net loss per share attributable to common shareholders is the same as basic
net loss per share attributable to common stockholders, since their impact would be anti-dilutive to the calculation of net loss per
share.
(s) Borrowings
Borrowings
are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period
of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred
until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down,
the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings
are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired.
The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income
or finance costs.
Where
the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part
of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is measured as the difference between
the carrying amount of the financial liability and the fair value of the equity instruments issued.
Borrowings
are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
(t) Convertible notes
On
issuance of the convertible notes, an assessment is made to determine whether the convertible notes contain an equity instrument or whether
the whole instrument should be classified as a financial liability.
When
it is determined that the whole instrument is a financial liability and no equity instrument is identified (for example for foreign-currency-denominated
convertibles notes), the conversion option is separated from the host debt and classified as a derivative liability. The carrying value
of the host contract (a contract denominated in a foreign currency) at initial recognition is determined as the difference between the
consideration received and the fair value of the embedded derivative. The host contract is subsequently measured at amortised cost using
the effective interest rate method. The embedded derivative is subsequently measured at fair value at the end of each reporting period
through the profit and loss. The convertible note and the derivative are presented as a single number on the statement of financial position
within interest-bearing loans and borrowings.
When
it is determined that the instrument contains an equity component based on the terms of the contract, on issuance of the convertible
notes, the fair value of the liability component is determined using a market rate for an equivalent non- convertible bond. This amount
is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or
redemption. The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity. Transaction
costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent
years.
(u) Share capital and warrants
Share
capital
Ordinary
shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and warrants are recognised
as a deduction from equity, net of any tax effects.
Warrants
|
○
|
Warrants,
issued as embedded derivatives of convertible notes or shares, were determined using the
fair value on the date a derivative contract is entered into and are subsequent change in
fair value at each reporting period end until settled.
|
|
○
|
Warrants,
issued as equity-based compensation under employee entitlements, are recorded at fair value
using the Black Sholes option pricing model and amortised over the terms of entitlement.
In assessing the fair value, estimates have to be made regarding the expected volatility
in share price, option life, dividend yield, risk-free rate, estimated life and estimated
forfeitures at the initial grant date.
|
Employee
entitlements are amortised over the terms of entitlement.
(v) Foreign currency transactions and balances
Each
of the entities within the Group prepare their financial statements based on the currency of the primary economic environment in which
the entity operates (functional currency).
Transaction
and balances
Foreign
currency transactions are recorded at the spot rate on the date of the transaction.
At
the end of the reporting period:
|
●
|
Foreign
currency monetary items are translated using the closing foreign currency rate;
|
|
●
|
Non-monetary
items that are measured at historical cost are translated using the exchange rate at the
date of the transaction; and
|
|
●
|
Non-monetary
items that are measured at fair value are translated using the rate at the date when fair
value was determined.
|
Exchange
differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they
were translated on initial recognition or in prior reporting periods are recognised through profit or loss, except where they relate
to an item of other comprehensive income or whether they are deferred in equity as qualifying hedges.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Group
companies
The
financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency
are translated as follows:
|
●
|
assets
and liabilities are translated at period-end exchange rates prevailing at that reporting
date;
|
|
●
|
income
and expenses are translated at average exchange rates for the period where the average rate
approximates the rate at the date of the transaction; and
|
|
●
|
retained
earnings are translated at the exchange rates prevailing at the date of the transaction.
|
Exchange
differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve
in the consolidated statement of financial position. These differences are recognised in the consolidated statements of profit or loss
and other comprehensive income in the period in which the operation is disposed.
Change
in functional and presentation currency:
On
April 30, 2021, due to divestment of Bendon Group, functional currency of the Company has changed from AUD to USD. In accordance with
IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’, the change in functional currency is accounted for prospectively
from the date of change, in other words, the Company translated all items into the new functional currency using the exchange rate as
at the date of the change except for equity. The resulting translated amounts for non-monetary items have been treated as their historical
cost.
Consequently,
the presentation currency of the Group was also changed from NZD to USD to align with the functional currency of the Company.
Since
change in the presentation currency represents a change in accounting policy as per IAS 8, the change is accounted for retrospectively.
Therefore IAS 21 principles are applied and Consolidated Statement of Profit and Loss and Other Comprehensive Income is translated from
the old reporting currency into the new reporting currency using the average exchange rate for the relevant period, while the balance
sheet is translated using the applicable period end exchange rate. Equity is translated on historical rates.
(w) Operating segments
Operating
segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The executive
directors are the chief operating decision maker, responsible for allocating resources and assessing performance of the operating segments
(refer to note 6 ‘Operating Segment’ for further details).
4. Critical accounting estimates and judgments
The
directors make estimates and judgements during the preparation of these financial statements regarding assumptions about current and
future events affecting transactions and balances.
These
estimates and judgements are based on the best information available at the time of preparing the financial statements, however as additional
information is known then the actual results may differ from the estimates.
The
significant estimates and judgements made have been described below.
Inventory
Each
item on inventory is reviewed on an annual basis to determine whether it is being carried at higher than its net realisable value. During
the period, management have written down inventory based on best estimate of the net realisable value, although until the time that inventory
is sold this is an estimate for the discontinued operations.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Fair
value of financial instruments and contingent consideration
The
Group has certain financial assets and liabilities which are measured at fair value. Further, the contingent consideration receivable
on sale of Bendon is also fair valued. Where fair value cannot be determined based on quoted price, a valuation model has been used.
The inputs to these models are observable, where possible, however these techniques involve significant estimates and therefore fair
value of the instruments could be affected by changes in these assumptions and inputs. This is discussed in more detail in note 17.
Impairment
of intangible assets
In
accordance with IAS 36 Impairment of Assets, the Group is required to estimate the recoverable amount of indefinite-lived brand assets
at each reporting period.
Impairment
testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by
their value in use or fair value less cost to sell.
In
calculating the fair value less costs to sell, certain assumptions are required to be made in respect of highly uncertain matters including
management’s expectations of:
|
-
|
growth
in brand revenues
|
|
-
|
the
selection of discount rates to reflect the risks involved, and
|
Changing
the assumptions selected by management, in particular the growth rate, discount rate and market royalty rate assumption used, could significantly
affect the Group’s impairment evaluation and hence results.
The
Group’s review includes the key assumptions related to sensitivity in the model. Further details are provided in note 9 to the
consolidated financial statements.
Determining
the lease term of contracts with renewal options
The
Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the
lease if it is reasonably certain to be exercised within the next 12 months. As per the Group policy, the options are not exercised when
the lease terms are beyond 12 months as of the assessment date. When the Group has the option to lease the assets for additional terms,
it applies judgement in evaluating whether it is reasonably certain to exercise the option to renew, considering all relevant factors
that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if
there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise)
the option to renew.
Rent
concessions
Lease
agreements have been reviewed and judgments have been made on whether rent concessions satisfy the criteria to be accounted for using
the practical expedient introduced by the amendments to IFRS 16.
Tax
Determining
income tax provisions and the recognition of deferred tax assets including carried forward income tax involves judgment on the tax treatment
of certain transactions. Deferred tax is recognised on tax losses not yet used and on temporary differences where it is probable that
there will be taxable revenue against which these can be offset. Management has made judgments as to the probability of future taxable
income being generated against which tax losses will be available for offset based on budgets, current and future expected economic conditions.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
5.
Profit and loss information
(a)
Revenue from continuing operations
Disclosure of Detailed Information about Revenue from Continuing Operations
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
Gross revenue
|
|
|
6,571
|
|
|
|
8,235
|
|
Rebates
|
|
|
-
|
|
|
|
-
|
|
Revenue
|
|
|
6,571
|
|
|
|
8,235
|
|
|
|
|
|
|
|
|
|
|
Sale of goods
|
|
|
|
|
|
|
|
|
-E-commerce
|
|
|
6,571
|
|
|
|
8,235
|
|
Sale of goods
|
|
|
6,571
|
|
|
|
8,235
|
|
Disaggregation
of revenue
The
Group derives its revenue from the transfer of goods at a point in time. Please refer Note 6 for breakdown of revenue by geography.
(b)
Significant items
The
loss for the half year was derived after (charging) / crediting the following items that are unusual and of significance because of their
size, nature and incidence:
Disclosure of Detailed Information about Profit Loss from Operating Activities
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
-Interest income
|
|
|
84
|
|
|
|
-
|
|
Other income
|
|
|
84
|
|
|
|
-
|
|
Finance expenses
|
|
|
|
|
|
|
|
|
- Interest expense on external borrowings
|
|
|
-
|
|
|
|
(425
|
)
|
- Interest expense on convertible loan notes
|
|
|
(43
|
)
|
|
|
(1,730
|
)
|
- Interest expense on leases
|
|
|
(1
|
)
|
|
|
-
|
|
- Amortisation of loan set up costs
|
|
|
-
|
|
|
|
-
|
|
Finance expenses
|
|
|
(44
|
)
|
|
|
(2,155
|
)
|
|
|
|
|
|
|
|
|
|
Other foreign currency gains/(losses)
|
|
|
|
|
|
|
|
|
-Net foreign exchange gains/(losses)
|
|
|
(483
|
)
|
|
|
2,003
|
|
Other foreign currency gains/(losses)
|
|
|
(483
|
)
|
|
|
2,003
|
|
Impairment expense
|
|
|
|
|
|
|
|
|
- Impairment of intangible assets
|
|
|
(4,971
|
)
|
|
|
-
|
|
- Impairment of property, plant and equipment
|
|
|
-
|
|
|
|
-
|
|
- Impairment of right-of-use assets
|
|
|
-
|
|
|
|
-
|
|
Impairment expense
|
|
|
(4,971
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Brand transition, restructure and transaction income/(expense)
|
|
|
|
|
|
|
|
|
- Brand transition expenses
|
|
|
-
|
|
|
|
-
|
|
- Restructure expenses
|
|
|
-
|
|
|
|
-
|
|
- Transaction expenses
|
|
|
(13,317
|
)
|
|
|
(3,078
|
)
|
Brand transition, restructure and transaction income/(expense)
|
|
|
(13,317
|
)
|
|
|
(3,078
|
)
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
(c)
Fair value loss on convertible notes derivatives and warrants
Disclosure of Fair Value of Convertible Notes and Warrants
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
Fair value loss on convertible notes and warrants
|
|
|
(10,794
|
)
|
|
|
-
|
|
Fair value loss
|
|
|
(10,794
|
)
|
|
|
-
|
|
April
2020 Notes:
During
the half year ended July 31, 2021 a fair value loss of $0.2m was recognized in relation to the April 2020 Notes that were exchanged in
full in February 2021, with further details provided in note 11 ‘Borrowings’.
Disclosure of Fair Value Gain or Loss
For 6 months ended 31 July 2021
|
|
Convertible Notes
US $000’s
|
|
|
Warrants US $000’s
|
|
|
Total US$ 000’s
|
|
Balance at the beginning of the period:
|
|
|
2,149
|
|
|
|
451
|
|
|
|
2,600
|
|
Foreign exchange movements
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
Interest
|
|
|
43
|
|
|
|
-
|
|
|
|
43
|
|
Fair Value through profit and loss
|
|
|
-
|
|
|
|
195
|
|
|
|
195
|
|
Exchange to ordinary shares
|
|
|
(2,195
|
)
|
|
|
(646
|
)
|
|
|
(2,841
|
)
|
Balance at the end of the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
February
2021 Warrants under “February 2021 SPA”:
On
February 24, 2021 the Group entered into a securities purchase agreement (the “February 2021 SPA”) with certain accredited
investors, pursuant to sell in a private placement an aggregate of $100,000,000 of units, each unit consisting of one ordinary share
and one warrant to purchase ordinary shares (the “February 2021 Warrants”). The February 2021 Warrants have an exercise price
of US$0.935 per share and will expire on March 10, 2026. The February 2021 Warrants contain a Black-Scholes cashless exercise feature,
which permits the February 2021 Warrants to be exercised on a cashless basis for a number of Ordinary Shares equal to the Black-Scholes
value per share, multiplied by the number of Ordinary Shares as to which the warrant is being exercised, divided by the closing bid price
on Nasdaq as of two trading days prior to the exercise date, as reported by Bloomberg (but not less than a specified floor price). For
this purpose, the Black-Scholes value per share is calculated using an underlying price equal to US$0.95 (as may be adjusted for stock
dividends, subdivisions, or combinations); a risk-free interest rate corresponding to the U.S. Treasury rate; a strike price equal to
the $0.935 exercise price; an expected volatility equal to 135%; and a deemed remaining term of five years (regardless of the actual
remaining term of the February 2021 Warrant). Accordingly, the Black-Scholes value calculation will not change as a result of future
changes in the stock price, risk-free interest rate, volatility or remaining life of the February 2021 Warrants. As a result, the number
of Ordinary Shares issued upon exercise of the February 2021 Warrants may substantially exceed 117,647,059 shares. The February 2021
Warrants may not be exercised to the extent the holder or any of its affiliates would beneficially own more than 9.9% of the Ordinary
Shares outstanding on the closing date after giving effect to such exercise. Further, in no event will the Group be required to issue
upon exercise of the warrants more than a fixed maximum number of Ordinary Shares specified in the February 2021 Warrants.
On
March 10, 2021, the Group entered an amendment to the February 2021 SPA, which reduced the price per unit to $0.85, resulting in the
issuance of an aggregate of 117,647,059 units (representing an aggregate of 117,647,059 ordinary shares and 117,647,059 February 2021
Warrants). The Group granted a financing rebate to the investors, resulting in net proceeds, after offering expenses, of approximately
US$94.9m.
During
the current period, the warrants have been exercised in full, pursuant to the Black-Scholes cashless exercise provision, for an aggregate
issuance of 186,391,411 ordinary shares.
The
February 2021 SPA also included a put right. On July 2, 2021 pursuant to the put right under the February 2021 SPA, the Group sold an
aggregate of 53,548,594 ordinary shares to the investors, at a purchase price of US$0.6256 per share, resulting in net proceeds of $33.5m.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Notwithstanding
warrants and put/call rights are settled by the issuance of equity shares, these components may not necessarily be classified as equity.
In accordance with IAS 32, an equity classification only applies where a fixed amount of cash (or liability), denominated in the issuer
functional currency, is exchanged for a fixed number of shares (the so called “fixed for fixed” test). The warrants and put
options failed the “fixed for fixed” test and therefore are required to be classified as financial liabilities. IAS 32 also
requires the Group to measure the fair value of derivatives as at the inception date of the transaction and at each reporting period
end until settled, with fair value changes recognised through profit and loss.
As
a result, a fair value loss of $10.6m was recognised during the current period relating to the exercise of the warrants, whilst no fair
value gain or loss was required to be recognized in relation to the exercise of the put options.
Disclosure of Fair Value Gain or Loss
For 6 months ended 31 July 2021
|
|
Warrants
US $000’s
|
|
|
Put options US $000’s
|
|
|
Total US$ 000’s
|
|
Balance at the beginning of the period:
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Initial recognition
|
|
|
97,482
|
|
|
|
-
|
|
|
|
97,482
|
|
Fair Value through profit and loss
|
|
|
10,599
|
|
|
|
-
|
|
|
|
10,599
|
|
Conversion of warrants
|
|
|
(108,081
|
)
|
|
|
-
|
|
|
|
(108,081
|
)
|
Cash collected on exercise of put options
|
|
|
-
|
|
|
|
33,500
|
|
|
|
33,500
|
|
Shares issued on exercise of put options
|
|
|
-
|
|
|
|
(33,500
|
)
|
|
|
(33,500
|
)
|
Balance at the end of the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(d)
Income tax expense
Income
tax expense/(benefits) is recognised based on the parent company’s effective annual income tax rate expected for the full financial
year. The annual tax rate used for the half year to July 31, 2021 is 30% (6 months to July 31, 2020: 28%). The Group has assessed future
forecast profits and concluded that not enough criteria have been satisfied to recognise any deferred tax assets at the half year ended
July 31, 2021. Unused tax losses do not have an expiry date.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
The
major components of tax expense/(benefit) comprise:
Disclosure of Components of Income Tax Expenses
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
Current tax
|
|
|
|
|
|
|
|
|
Current tax on losses for the period
|
|
|
(33
|
)
|
|
|
-
|
|
Adjustment for current tax on prior periods
|
|
|
-
|
|
|
|
-
|
|
Total current tax expense
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
|
|
|
|
|
|
|
|
|
Decrease in deferred tax asset
|
|
|
-
|
|
|
|
-
|
|
Income tax benefit for continuing operations
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of income tax to accounting loss:
|
|
|
|
|
|
|
|
|
Loss before income tax from continuing operations
|
|
|
(33,167
|
)
|
|
|
(4,899
|
)
|
Loss before income tax from discontinued operations
|
|
|
(15,534
|
)
|
|
|
(6,633
|
)
|
Accounting profit before tax
|
|
|
(48,701
|
)
|
|
|
(11,532
|
)
|
Tax at Australia tax rate of 30% (July 2020: tax at New Zealand tax rate of 28%)
|
|
|
(14,610
|
)
|
|
|
(3,229
|
)
|
|
|
|
|
|
|
|
|
|
Tax effect of:
|
|
|
|
|
|
|
|
|
- permanent differences including discontinued operations
|
|
|
14,302
|
|
|
|
990
|
|
- adjustments in respect of current tax or prior periods
|
|
|
-
|
|
|
|
23
|
|
- effects of different tax rates of subsidiaries operating in other jurisdictions
|
|
|
48
|
|
|
|
(2
|
)
|
- deferred tax assets relating to the current period not recognized
|
|
|
326
|
|
|
|
2,256
|
|
- other
|
|
|
-
|
|
|
|
(12
|
)
|
Income tax expense
|
|
|
66
|
|
|
|
26
|
|
Income tax expense reported in statement of profit or loss
|
|
|
(33
|
)
|
|
|
-
|
|
Income tax attributable to discontinued operations
|
|
|
33
|
|
|
|
26
|
|
The
Group has tax losses of $10.7m (year ended January 31, 2021: $8.5m after discontinued operations) that have not been recognised in the
financial statements. The ability to use these losses to offset future profits is subject to shareholder and business continuity criteria
in each local tax jurisdiction.
6. Operating segment
Segment
information
Identification
of reportable operating segments
For
the 6-month period ended July 31, 2020, the Group had three reportable segments:
|
●
|
Retail.
This segment covers retail and outlet stores located through Australia and New Zealand.
|
|
●
|
Wholesale.
This segment covers wholesale of intimates apparel to customers based in Australia, New Zealand
and Europe.
|
|
●
|
E-commerce. This
segment covers the Group’s online retail activities.
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
In
the 6 months to July 31, 2021, the Group exited the Retail and Wholesale segment as a result of the Bendon Sale. In order to improve
profitability, the Group also exited the U.S. wholesale market, although it continues to sell in the U.S. through online channels. To
reflect this, the Group now has a single reportable segment, that operates E-commerce business in the U.S.
From
May 2020, the Chief Executive Officer (CEO), also the Chief Operating Decision Maker, reviews and analyses monthly / quarterly Group
as one operating segment, E-commerce.
Reconciliations
Reconciliation
of segment EBITDA to the consolidated statements of profit or loss and other comprehensive income:
Management
meets on a monthly basis to assess the performance of each segment. Net operating profit does not include non- operating revenue and
expenses such as dividends, fair value gains and losses.
Disclosure of Reconciliation of Segment EBITDA to Profit or Loss and Other Comprehensive Income
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
(2,384
|
)
|
|
|
(1,188
|
)
|
Brand transition, restructure and transaction expenses
|
|
|
(13,317
|
)
|
|
|
(3,078
|
)
|
Finance expense
|
|
|
(44
|
)
|
|
|
(2,155
|
)
|
Impairment expense
|
|
|
(4,971
|
)
|
|
|
-
|
|
Depreciation and amortisation
|
|
|
(170
|
)
|
|
|
(143
|
)
|
Unrealised foreign exchange gain
|
|
|
(1,487
|
)
|
|
|
1,665
|
|
Fair value loss on Convertible Notes derivative and warrants
|
|
|
(10,794
|
)
|
|
|
-
|
|
Income tax expense
|
|
|
(33
|
)
|
|
|
-
|
|
Total net loss after tax
|
|
|
(33,200
|
)
|
|
|
(4,899
|
)
|
Other
reconciling items include brand transition, finance expenses, impairment expense, depreciation and amortisation, fair value gain/loss
on convertible notes and warrants, and unrealised foreign exchange gain/loss that cannot be allocated to segments.
This
is also based on the internal reports that are reviewed and used by the Chief Executive Officer (who is identified as the Chief Operating
Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources.
Geographical
information
In
presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers whereas
segment assets are based on the location of the assets.
Disclosure of Detailed Information About Geographical Information
Revenue
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
New Zealand
|
|
|
-
|
|
|
|
-
|
|
Australia
|
|
|
-
|
|
|
|
-
|
|
United States
|
|
|
6,571
|
|
|
|
8,235
|
|
Europe
|
|
|
-
|
|
|
|
-
|
|
|
|
|
6,571
|
|
|
|
8,235
|
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
7. Property, plant and equipment
Disclosure of Detailed Information About Property, Plant and Equipment
|
|
31 July 2021
US $000’s
|
|
|
31 January 2021
US $000’s
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
|
|
|
|
|
|
|
At cost
|
|
|
4
|
|
|
|
6,155
|
|
Accumulated depreciation
|
|
|
-
|
|
|
|
(5,654
|
)
|
|
|
|
4
|
|
|
|
501
|
|
|
|
|
|
|
|
|
|
|
Plant, furniture, fittings and motor vehicles
|
|
|
|
|
|
|
|
|
At cost
|
|
|
23
|
|
|
|
18,334
|
|
Accumulated depreciation
|
|
|
(1
|
)
|
|
|
(16,704
|
)
|
|
|
|
22
|
|
|
|
1,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
2,131
|
|
(a) Movements in carrying amounts of property, plant and equipment
Disclosure of Detailed Information About Movements in Carrying Amounts of Property, Plant and Equipment
Movement
in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial period:
|
|
Leasehold improvements
US $000’s
|
|
|
Plant, furniture, fittings and motor vehicles
US $000’s
|
|
|
Total
US $000’s
|
|
|
|
|
|
|
|
|
|
|
|
For the 6 months ended 31 July 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the period
|
|
|
501
|
|
|
|
1,630
|
|
|
|
2,131
|
|
Additions
|
|
|
4
|
|
|
|
51
|
|
|
|
55
|
|
Depreciation expense - continuing operations
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Depreciation expense - discontinued operations
|
|
|
(50
|
)
|
|
|
(120
|
)
|
|
|
(170
|
)
|
Reduction due to discontinued operations
|
|
|
(457
|
)
|
|
|
(1,559
|
)
|
|
|
(2,016
|
)
|
Impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Foreign exchange movements
|
|
|
6
|
|
|
|
21
|
|
|
|
27
|
|
Closing value at 31 July 2021
|
|
|
4
|
|
|
|
22
|
|
|
|
26
|
|
|
|
Leasehold improvements
US $000’s
|
|
|
Plant, furniture, fittings and motor vehicles
US $000’s
|
|
|
Total
US $000’s
|
|
|
|
|
|
|
|
|
|
|
|
For the 6 months ended 31 January 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the period
|
|
|
563
|
|
|
|
819
|
|
|
|
1,382
|
|
Additions
|
|
|
-
|
|
|
|
902
|
|
|
|
902
|
|
Disposals
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Depreciation expense
|
|
|
(96
|
)
|
|
|
(184
|
)
|
|
|
(280
|
)
|
Impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Foreign exchange movements
|
|
|
34
|
|
|
|
95
|
|
|
|
129
|
|
Closing value at 31 January 2021
|
|
|
501
|
|
|
|
1,630
|
|
|
|
2,131
|
|
Balance at the end of the period
|
|
|
501
|
|
|
|
1,630
|
|
|
|
2,131
|
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
8. Right-of-use assets
The
Group leases office facilities. The lease is for a period of 2 years.
The
Group also leases IT equipment and other point of sale equipment.
Information
about leases for which the Group is a lessee is presented below:
Right-of-use
assets
Disclosure of Right-of-Use Assets
|
|
Land &
Buildings
US $000’s
|
|
|
Plant, furniture, fittings and motor vehicles
US $000’s
|
|
|
Total
US $000’s
|
|
For the 6 months ended 31 July 2021
|
|
|
|
|
|
|
|
|
|
Balance as at 1 February 2021
|
|
|
12,919
|
|
|
|
254
|
|
|
|
13,173
|
|
Additions to right-of-use-assets
|
|
|
2,501
|
|
|
|
13
|
|
|
|
2,514
|
|
Depreciation expense – discontinued operations
|
|
|
(1,199
|
)
|
|
|
(19
|
)
|
|
|
(1,218
|
)
|
Depreciation expense – continuing operations
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
(9
|
)
|
Derecognized during the period
|
|
|
(3,611
|
)
|
|
|
-
|
|
|
|
(3,611
|
)
|
Reduction due to discontinued operations
|
|
|
(10,547
|
)
|
|
|
(251
|
)
|
|
|
(10,798
|
)
|
Foreign exchange movements
|
|
|
142
|
|
|
|
3
|
|
|
|
145
|
|
Balance at 31 July 2021
|
|
|
196
|
|
|
|
-
|
|
|
|
196
|
|
|
|
Land &
Buildings
US $000’s
|
|
|
Plant, furniture, fittings and motor vehicles
US $000’s
|
|
|
Total
US $000’s
|
|
Balance as at 1 August 2020
|
|
|
13,873
|
|
|
|
236
|
|
|
|
14,109
|
|
Balance at the beginning of the period
|
|
|
13,873
|
|
|
|
236
|
|
|
|
14,109
|
|
Additions to right-of-use-assets
|
|
|
244
|
|
|
|
68
|
|
|
|
312
|
|
Depreciation charge for the period
|
|
|
(2,327
|
)
|
|
|
(69
|
)
|
|
|
(2,396
|
)
|
Foreign exchange movements
|
|
|
1,129
|
|
|
|
19
|
|
|
|
1,148
|
|
Balance at 31 January 2021
|
|
|
12,919
|
|
|
|
254
|
|
|
|
13,173
|
|
Balance at the end of the period
|
|
|
12,919
|
|
|
|
254
|
|
|
|
13,173
|
|
Amounts
recognised in profit or loss
Disclosure of Amounts Recognised in Profit or Loss
|
|
31 July 2021
US $000’s
|
|
|
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
|
|
Interest of lease liabilities (Note 5b)
|
|
|
1
|
|
|
|
-
|
|
Extension
options
Some
property leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable contract period.
Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options
held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably
certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is
a significant event or significant changes in circumstances within its control.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
9. Intangible assets
Disclosure of Detailed Information About Intangible Assets
|
|
31 July 2021
US $000’s
|
|
|
31 January 2021 US $000’s
|
|
Goodwill
|
|
|
|
|
|
|
|
|
Cost
|
|
|
3,949
|
|
|
|
3,949
|
|
Accumulated impairment
|
|
|
(3,949
|
)
|
|
|
(3,949
|
)
|
|
|
|
-
|
|
|
|
-
|
|
Patents and licenses
|
|
|
|
|
|
|
|
|
Cost
|
|
|
15,730
|
|
|
|
16,368
|
|
Accumulated amortisation and impairment
|
|
|
(7,221
|
)
|
|
|
(2,612
|
)
|
|
|
|
8,509
|
|
|
|
13,756
|
|
Brands
|
|
|
|
|
|
|
|
|
Cost
|
|
|
-
|
|
|
|
8,772
|
|
Accumulated amortisation and impairment
|
|
|
-
|
|
|
|
(6,307
|
)
|
|
|
|
-
|
|
|
|
2,465
|
|
Software & Website
|
|
|
|
|
|
|
|
|
Cost
|
|
|
69
|
|
|
|
11,275
|
|
Accumulated amortisation and impairment
|
|
|
(18
|
)
|
|
|
(11,138
|
)
|
|
|
|
51
|
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
8,560
|
|
|
|
16,358
|
|
During
the period, the Group carried out impairment testing in accordance with IAS 38. As a result of this testing, the FOH licenses were impaired
partially on the basis of the Value in Use of the license.
(a) Movements in carrying amounts of intangible assets
Disclosure of Detailed Information About Movements in Carrying Amounts of Intangible Assets
|
|
Goodwill
US $000’s
|
|
|
Patents and licenses
US $000’s
|
|
|
Brands
US $000’s
|
|
|
Software & website
US $000’s
|
|
|
Total
US $000’s
|
|
For the 6 months ended 31 July 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the period
|
|
|
-
|
|
|
|
13,756
|
|
|
|
2,465
|
|
|
|
137
|
|
|
|
16,358
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amortisation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amortisation expense - continuing operations
|
|
|
-
|
|
|
|
(149
|
)
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
(160
|
)
|
Amortisation expense – discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
Reduction due to discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,501
|
)
|
|
|
(75
|
)
|
|
|
(2,576
|
)
|
Impairment
|
|
|
-
|
|
|
|
(4,971
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,971
|
)
|
Foreign exchange movements
|
|
|
-
|
|
|
|
(127
|
)
|
|
|
36
|
|
|
|
5
|
|
|
|
(86
|
)
|
Closing value at 31 July 2021
|
|
|
-
|
|
|
|
8,509
|
|
|
|
-
|
|
|
|
51
|
|
|
|
8,560
|
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
|
|
Goodwill
US $000’s
|
|
|
Patents and licenses
US $000’s
|
|
|
Brands
US $000’s
|
|
|
Software & Website
US $000’s
|
|
|
Total
US $000’s
|
|
For the 6 months ended 31 January 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the beginning of the period
|
|
|
-
|
|
|
|
13,768
|
|
|
|
3,675
|
|
|
|
55
|
|
|
|
17,498
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86
|
|
|
|
86
|
|
Amortisation expense
|
|
|
-
|
|
|
|
(146
|
)
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
(157
|
)
|
Impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,423
|
)
|
|
|
-
|
|
|
|
(1,423
|
)
|
Foreign exchange movements
|
|
|
-
|
|
|
|
134
|
|
|
|
213
|
|
|
|
7
|
|
|
|
354
|
|
Closing value at 31 January 2021
|
|
|
-
|
|
|
|
13,756
|
|
|
|
2,465
|
|
|
|
137
|
|
|
|
16,358
|
|
(b) Impairment of patents and licenses
Disclosure of Impairment of Intangible Assets
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
Impairment of FOH license
|
|
|
(4,971
|
)
|
|
|
-
|
|
Impairment of patents and licenses
|
|
|
(4,971
|
)
|
|
|
-
|
|
Impairment
assumptions
Management
has determined the recoverable amount of the FOH license asset by assessing the value in use (VIU) of the underlying assets. Management
has prepared cash flow forecast for the remaining term of license ownership, which is 49.5 years from July 31, 2021 after its renewal
in January 2021. These calculations use cash flow projections based on financial budgets approved by management covering a five and a
half year period. Cash flows beyond the period are extrapolated using the estimated growth rates shown below. These growth rates do not
exceed the long-term average growth rates for the industry. The result of the impairment assessment is that the carrying value of the
FOH license exceeds the value in use of the license by $5.0 million. This has resulted from a lowering of assumptions concerning expectations
of future revenues and margins in line with recent trends. As such, the license has been partially impaired for the period ended July
31, 2021.
Management’s
approach and the key assumptions used to determine the VIU were as follows:
Sales
growth: -0.1% in FY 2022, 8.1% in FY2023, 5% in FY2024, 4% in FY2025, and 3% for FY2026 and FY 2027
Net
margin: 33.0% to 38.9% between FY2022 and FY2027
EBITDA
margin: 3.7% to 13.4% between FY2022 to FY027
Post-tax
discount rate (%): 13.80% and 15.30%
Cash
flow revenue forecast period: 5.5 years (January 31, 2021: 5 years)
Long
term sales growth rate beyond year 5: 2.0%
(d)
Impairment for indefinite-life brand intangibles
Brand
intangible assets represent brands historically acquired by the Group and include Pleasure State, Davenport, Lovable and Naked. On April
30, 2021, the Group disposed of all indefinite life brand intangibles (Pleasure State) as part of the sale of Bendon Group in a management
buyout transaction. The Group therefore does not own indefinite life brand intangibles as at July 31, 2021.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
10. Trade and Other Payables
Disclosure of Detailed Information About Trade and Other Current Payables
|
|
31 July 2021
US $000’s
|
|
|
31 January 2021 US $000’s
|
|
Current:
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
3,106
|
|
|
|
4,474
|
|
Accruals
|
|
|
159
|
|
|
|
5,190
|
|
Employee benefit liabilities
|
|
|
10,594
|
|
|
|
10,902
|
|
Trade and other current payables
|
|
|
13,859
|
|
|
|
20,566
|
|
Trade
and other payables are unsecured, non-interest bearing and are normally due within 30 days however some trade creditors are out of term
as at July 31, 2021 and subsequent to the end of the financial period the Group has reduced the out of term trade creditors but further
work is required to bring all of the creditors in term. The carrying amounts are considered to be a reasonable approximation of fair
value.
Employee
benefits liabilities includes an accrual of $9.5m relating to phantom warrants. The Group uses the Black Scholes option pricing model
to determine the fair value of the phantom warrants which have an exercise price of US$0.37, volatility of 176% and risk-free rate of
0.35%, which vests in three tranches being January 21, 2021, July 21, 2021 and January 21, 2022, equal to 1.50% of the outstanding shares
of the Group on the vesting date. There are no conditions or restrictions to receiving the benefit of all the phantom warrants for the
full bonus calculation period. Each tranche of phantom warrants may be exercised for cash at any time in the three year period following
vesting date and as such is recognised as a liability.
11. Borrowings
Disclosure of Detailed Information About Borrowings
|
|
31 July
2021
US $000’s
|
|
|
31 January
2021
US $000’s
|
|
Amounts due in less than one year:
|
|
|
|
|
|
|
|
|
Bank loans
|
|
|
-
|
|
|
|
10,381
|
|
Debt issuance costs in relation to bank loan
|
|
|
-
|
|
|
|
(5
|
)
|
Other loan
|
|
|
-
|
|
|
|
10,376
|
|
Amounts due after more than one year:
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
-
|
|
|
|
2,149
|
|
Amounts due after more than one year
|
|
|
-
|
|
|
|
2,149
|
|
Borrowings
|
|
|
-
|
|
|
|
12,525
|
|
On
February 10, 2021, the Group paid NZ$14.5m (approximately US$10.4m) to BNZ, which constituted repayment in full of all amounts due under
the facility with BNZ, and the facility was terminated. On February 26, 2021, The April 20 convertible notes were fully exchanged with
ordinary shares (No of shares issued: 4,002,789), with further details provided in note 5 (c) ‘Fair value loss on convertible notes
derivatives and warrants’. In the comparative period, the fair value of borrowings is not considered to be materially different
to their carrying amounts.
12. Provisions
Disclosure of Detailed Information About Provisions
|
|
31 July 2021
US $000’s
|
|
|
31 January 2021
US $000’s
|
|
Current:
|
|
|
|
|
|
|
|
|
Other provisions
|
|
|
53
|
|
|
|
66
|
|
Make good
|
|
|
-
|
|
|
|
557
|
|
|
|
|
53
|
|
|
|
623
|
|
|
|
31 July 2021 US $000’s
|
|
|
31 January 2021
US $000’s
|
|
Non-current:
|
|
|
|
|
|
|
|
|
Make good
|
|
|
-
|
|
|
|
868
|
|
|
|
|
-
|
|
|
|
868
|
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Disclosure of Detailed Information About Reconciliation of Changes in Other Provisions
|
|
Other provisions
US $000’s
|
|
|
Make good
US $000’s
|
|
|
Total
US $000’s
|
|
Opening balance at 1 February 2021
|
|
|
66
|
|
|
|
1,425
|
|
|
|
1,491
|
|
Additional provisions recognised
|
|
|
53
|
|
|
|
-
|
|
|
|
53
|
|
Amounts used during the year
|
|
|
(53
|
)
|
|
|
-
|
|
|
|
(53
|
)
|
Reduction due to discontinued operations
|
|
|
(32
|
)
|
|
|
(1,425
|
)
|
|
|
(1,457
|
)
|
Exchange differences
|
|
|
19
|
|
|
|
-
|
|
|
|
19
|
|
Balance at 31 July 2021
|
|
|
53
|
|
|
|
-
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening balance at 1 August 2020
|
|
|
5,861
|
|
|
|
1,321
|
|
|
|
7,182
|
|
Opening balance
|
|
|
5,861
|
|
|
|
1,321
|
|
|
|
7,182
|
|
Additional provisions recognised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amounts used during the year
|
|
|
(6,055
|
)
|
|
|
(46
|
)
|
|
|
(6,101
|
)
|
Exchange differences
|
|
|
260
|
|
|
|
150
|
|
|
|
410
|
|
Balance at 31 January 2021
|
|
|
66
|
|
|
|
1,425
|
|
|
|
1,491
|
|
Ending balance
|
|
|
66
|
|
|
|
1,425
|
|
|
|
1,491
|
|
Make
good
On
April 30, 2021, the Group disposed of its New Zealand subsidiary Bendon Limited, and the entities controlled by Bendon Limited in a management
buyout transaction. In accordance with certain lease agreements of the disposed subsidiary, there was an obligation to refurbish and
restore the lease premises to a condition agreed with the landlord at the end of the lease term or as prescribed. As at January 31, 2021,
the provision was calculated using a pre-tax discount rate of 2%.
13. Share capital
Disclosure of Detailed Information About Share Capital
|
|
31 July 2021 US $000’s
|
|
|
31 January 2021
US $000’s
|
|
909,704,497 (31 January 2021: 446,582,604) Ordinary shares
|
|
|
494,423
|
|
|
|
232,050
|
|
Shares Outstanding Value
|
|
|
494,423
|
|
|
|
232,050
|
|
In
addition to ‘April 2020 note’ and ‘February 2021 SPA ‘disclosed in note 5 (c) Fair value loss on convertible
notes derivatives and warrants, following transactions have contributed to the movement of the ordinary shares in the current period.
ATM
Offerings
On
February 24, 2021, the Group entered into an equity distribution agreement (the “February EDA”) with Maxim Group LLC (“Maxim”),
pursuant to which the Group may sell, from time to time, through Maxim, Ordinary Shares having an aggregate offering price of up to $99.5m
(the “ATM Offering”). Sales of Ordinary Shares in the ATM Offering, if any, will be made by any method permitted that is
deemed an “at the market offering” as defined in Rule 415 under the Securities Act. Maxim is not required to sell any specific
amount but will act as the exclusive sales agent using commercially reasonable efforts consistent with its normal trading and sales practices,
on mutually agreed terms between Maxim and us. The Group has no obligation to sell any of the Ordinary Shares under the February EDA
and may at any time suspend solicitation and offers under the February EDA. As of July 31, 2021, the Group sold an aggregate of 72,117,042
Ordinary Shares pursuant to the February EDA, for gross proceeds of $70.86m and net proceeds of $68.6m, after payment to Maxim of an
aggregate of $2.1m in commissions.
Registered
Direct Offering
On
February 1, 2021, the Group closed on the sale of 29,415,000 Ordinary Shares in a public offering to certain institutional investors
at a price of $1.70 per share, for gross proceeds of $50.0m. Maxim acted as the sole placement agent in connection with the Offering.
The net proceeds to the Group from the offering were approximately $46.9m, after deducting the placement agent’s fees of $3m and
other estimated offering expenses.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Ordinary
shares
Disclosure of Detailed Information About Ordinary Shares Explanatory
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 January 2021
US $000’s
|
|
At the beginning of the reporting period
|
|
|
232,050
|
|
|
|
132,243
|
|
Issuance of ordinary shares:
|
|
|
|
|
|
|
|
|
-Cash collected from sale of new share issuances and cash exercise of warrants and put options
|
|
|
244,059
|
|
|
|
65,960
|
|
- Shares issued in lieu of inventory payment
|
|
|
-
|
|
|
|
3,789
|
|
- Convertible notes converted to equity
|
|
|
2,841
|
|
|
|
30,058
|
|
- Shares issued upon cashless exercise of warrants
|
|
|
15,473
|
|
|
|
-
|
|
At the end of the reporting period
|
|
|
494,423
|
|
|
|
232,050
|
|
The
holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Group. On a show of hands at
meetings of the Group, each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one
vote.
The
Group does not have authorised capital or par value in respect of its shares.
Warrants
The
following warrants were outstanding as at July 31, 2021 (January 31, 2021: 582,194)
Disclosure of Warrants Outstanding
Average Exercise Price USD
|
|
Issue Date
|
|
|
Expiry Date
|
|
|
No of Warrants
|
|
$0.01 - $0.49
|
|
|
Mar-19
|
|
|
|
Mar-24
|
|
|
|
252
|
|
|
|
|
Jul-19
|
|
|
|
May-25
|
|
|
|
170,100
|
|
|
|
|
Aug-19
|
|
|
|
Aug-24
|
|
|
|
22,857
|
|
|
|
|
Aug-19
|
|
|
|
Feb-25
|
|
|
|
285,714
|
|
$0.50 - $1.00
|
|
|
Mar-19
|
|
|
|
Mar-23
|
|
|
|
14,000
|
|
|
|
|
Apr-19
|
|
|
|
Apr-22
|
|
|
|
500
|
|
$1.50 - $2.00
|
|
|
Nov-17
|
|
|
|
Nov-21
|
|
|
|
2,000
|
|
|
|
|
Oct-18
|
|
|
|
Oct-21
|
|
|
|
20,000
|
|
$2.01 - $4.00
|
|
|
Jun-18
|
|
|
|
Jun-23
|
|
|
|
8,000
|
|
Total number of outstanding warrants as at 31 July 2021
|
|
|
|
523,423
|
|
14. Earnings per Share
Disclosure of Detailed Information About Earning Loss Per Share
|
(a)
|
Basic
and diluted loss per share
|
|
|
6 months to
31 July 2021
US $
|
|
|
6 months to
31 July 2020
US $
|
|
From continuing operations attributable to the ordinary equity holders of the company
|
|
|
(0.045
|
)
|
|
|
(0.379
|
)
|
From discontinued operations attributable to the ordinary equity holders of the company
|
|
|
(0.021
|
)
|
|
|
(0.515
|
)
|
Total basic and diluted loss per share attributable to the ordinary equity holders of the company
|
|
|
(0.066
|
)
|
|
|
(0.894
|
)
|
All
convertible notes and warrants issued during the period are not included in the calculation of diluted loss per share because they are
antidilutive in nature for the period ended July 31, 2021 and July 31, 2020. These notes could potentially dilute earnings/loss per share
in the future.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
|
(b)
|
Reconciliation
of loss used in calculating earnings per share
|
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
Basic and diluted loss per share
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to the ordinary equity holders of the Group used in calculating basic earnings per share
|
|
|
(33,200
|
)
|
|
|
(4,899
|
)
|
Loss from discontinuing operations attributable to the ordinary equity holders of the Group used in calculating basic earnings per share
|
|
|
(15,567
|
)
|
|
|
(6,659
|
)
|
Loss attributable to the ordinary
equity holders of the Group used in calculating basic earnings per share:
|
|
|
(48,767
|
)
|
|
|
(11,558
|
)
|
|
(c)
|
Weighted
average number of shares used as the denominator
|
|
|
31 July 2021
Number
|
|
|
31 July 2020
Number
|
|
Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share
|
|
|
733,230,584
|
|
|
|
12,921,978
|
|
15. Discontinued Operations
|
(a)
|
Sale
of Bendon Limited (Bendon)
|
On
January 21, 2021, Naked Brands Group Limited announced its plans to undertake a transformative restructure in which it will dispose of
its unprofitable bricks-and-mortar operations in order to focus exclusively on the planned rapid acceleration of its e-commerce business.
To that end, the Company disposed of its New Zealand subsidiary Bendon Limited, and the entities controlled by Bendon Limited in a management
buyout transaction. Shareholder approval on disposal of the Bendon Group was received on April 23, 2021, following which the share sale
agreement was executed on April 30, 2021 which is considered to be the date of loss of control.
The
key terms of the Bendon Share Sale Agreement are as follows:
Consideration.
The consideration paid by the Buyers was US$0.72 (NZ$1.00) as adjusted based on the target inventory amount of US$13.2 million (NZ$18.2
million) and by a true up adjustment for estimated Net Cash/(Debt) and Working Capital as at the Accounts Date. The inventory adjustment
resulted in a payment by the Group to Bendon in the amount of US$3.5m (NZ$4.8m). The Net Cash/(Debt) and Working Capital adjustments
are to be prepared within 30 business days after Completion.
Exit
Event Proceeds. If the Buyers or Mr. Davis-Rice and Ms. Johnson agree to sell the shares in Bendon or its business within three years
following Completion, the Company will be entitled to the following percentage of the net proceeds of the sale: in the first year following
Completion, 75%; in the second year following Completion, 50%; and in the third year following Completion, 25%.
Profit
share. The Group is entitled to a tiered percentage of net profits of Bendon and the entities controlled by Bendon (the “Bendon
Group”) for three years commencing on July 1, 2021, being in: the first year, 30%; the second year, 20%; and the third year, 10%.
The net profits are to be calculated on a cumulative basis so that any losses from the first or second year are offset against any profits
in a subsequent year.
Forgiveness
of the Intra Group Loans. The Group forgave all inter-company debt owing by the Bendon Group effective as of January 30, 2021 (which
is approximately US$31.25 million (NZ$43.1 million)).
Naked
Facility. The Group will provide Bendon with a 5-year loan of up to NZ$7.0m
(approximately US$4.9m)
(the “Naked Facility”) at an initial interest rate per annum of 2.5%
and, following Bendon obtaining additional external senior debt which
the Buyers and Bendon are proposing to raise after Completion, an interest rate of 50 basis points above the rate of this senior debt.
The Naked Facility will also be subordinated to this senior debt. Bendon drew down the full NZ$7.0m
(approximately US$4.9m)
facility on August 23, 2021.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Costs.
The Group agreed to pay up to US$0.2m (NZ$0.3m) of the Buyers’ and Bendon’s costs in relation to the Bendon Sale, which was
agreed in exchange for the Buyers’ agreeing for the term sheet to be entered into on a non-exclusive basis.
FOH
Services Agreement. FOH, Company’s wholly owned subsidiary, entered into a management services agreement (the “FOH Services
Agreement”) with Bendon pursuant to which Bendon will provide certain management services.
Financial
performance and cash flow information
Schedule
of Discontinued Operations
The
financial performance and cash flow information presented are for the 3 months ended April 30, 2021 (2021 column) and 6 months ended
July 31, 2020.
|
|
3 months ended
30 April 2021
US $000’s
|
|
|
6 months ended
31 July 2020
US $000’s
|
|
Revenue from contracts with customers
|
|
|
11,209
|
|
|
|
13,412
|
|
Other gains/(losses)
|
|
|
640
|
|
|
|
-
|
|
Expenses
|
|
|
(16,062
|
)
|
|
|
(19,596
|
)
|
Operating loss
|
|
|
(4,213
|
)
|
|
|
(6,184
|
)
|
Finance costs
|
|
|
(525
|
)
|
|
|
(449
|
)
|
Loss before tax from discontinued operations
|
|
|
(4,738
|
)
|
|
|
(6,633
|
)
|
Income tax expense
|
|
|
(33
|
)
|
|
|
(26
|
)
|
Loss after income tax of discontinued operations
|
|
|
(4,771
|
)
|
|
|
(6,659
|
)
|
Exchange translation reserve on foreign operations
|
|
|
3,481
|
|
|
|
(2,190
|
)
|
Total comprehensive Loss for the period
|
|
|
(1,290
|
)
|
|
|
(8,849
|
)
|
Calculation
of Total loss from discontinued operations
Loss after tax from discontinued operations
|
|
|
(4,771
|
)
|
|
|
(6,659
|
)
|
Loss on disposal of discontinued operations
|
|
|
(10,796
|
)
|
|
|
-
|
|
Total loss from discontinued operation
|
|
|
(15,567
|
)
|
|
|
(6,659
|
)
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
Basic loss for the year from discontinued operations
|
|
|
(0.021
|
)
|
|
|
(0.515
|
)
|
Diluted loss for the year from discontinued operations
|
|
|
(0.021
|
)
|
|
|
(0.515
|
)
|
Net
cash flows incurred by Bendon are as follows:
Net cash inflow/(outflow) from operating activities
|
|
|
(3,282
|
)
|
|
|
258
|
|
Net cash inflow/(outflow) from investing activities
|
|
|
(31
|
)
|
|
|
(129
|
)
|
Net cash inflow/(outflow) from financing activities
|
|
|
(49,627
|
)
|
|
|
8,879
|
|
Net increase in cash generated by the subsidiary
|
|
|
(52,940
|
)
|
|
|
9,008
|
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Details
of the sale of the subsidiary
|
|
US $000’s
|
|
I. Consideration
|
|
|
|
|
Completion payment
|
|
|
-
|
|
Inventory adjustment amount
|
|
|
(3,525
|
)
|
Intercompany debt forgiveness
|
|
|
(31,250
|
)
|
Transaction cost
|
|
|
(217
|
)
|
Adjustment amount
|
|
|
|
|
Working capital adjustment
|
|
|
(639
|
)
|
Term loan repaid
|
|
|
(10,505
|
)
|
Transaction cost considered as a part of adjustment amount
|
|
|
(412
|
)
|
Contingent consideration
|
|
|
-
|
|
Total Consideration (A)
|
|
|
(46,548
|
)
|
II. Less: Carrying amount of net assets of Bendon Group (B)
|
|
|
(35,783
|
)
|
Loss on sale before income tax and reclassification of Foreign currency translation reserve (A-B)
|
|
|
(10,765
|
)
|
Reclassification of foreign currency translation reserve
|
|
|
(31
|
)
|
Income tax expense on gain
|
|
|
-
|
|
Loss on sale of Bendon Group
|
|
|
(10,796
|
)
|
The
carrying amounts of assets and liabilities of Bendon group is as follows:
Particulars
|
|
30-Apr-2021
US$ 000’s
|
|
|
31-Jan-2021
US$ 000’s
|
|
Property, plant and equipment
|
|
|
2,016
|
|
|
|
2,131
|
|
Intangible Assets
|
|
|
2,576
|
|
|
|
2,539
|
|
Right of Use Assets
|
|
|
10,798
|
|
|
|
13,173
|
|
Cash and cash equivalents
|
|
|
12,464
|
|
|
|
64,497
|
|
Trade Receivables
|
|
|
1,206
|
|
|
|
5,436
|
|
Inventories
|
|
|
10,168
|
|
|
|
9,548
|
|
Prepayments
|
|
|
3,816
|
|
|
|
-
|
|
Other receivables
|
|
|
33
|
|
|
|
-
|
|
Total Assets
|
|
|
43,077
|
|
|
|
97,324
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
5,748
|
|
|
|
8,108
|
|
Lease Liabilities
|
|
|
12,747
|
|
|
|
15,429
|
|
Borrowings
|
|
|
-
|
|
|
|
10,376
|
|
Related party payables
|
|
|
57,535
|
|
|
|
95,334
|
|
Provisions
|
|
|
2,684
|
|
|
|
1,491
|
|
Tax
|
|
|
146
|
|
|
|
129
|
|
Total Liabilities
|
|
|
78,860
|
|
|
|
130,867
|
|
|
|
|
|
|
|
|
|
|
Net Assets
|
|
|
(35,783
|
)
|
|
|
(33,543
|
)
|
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
16. Related parties
|
(a)
|
The Group’s
main related parties are as follows:
|
Key
management personnel
Other
related parties include close family members of key management personnel and entities that are controlled or significantly influenced
by those key management personnel or their close family members.
Bendon
Group
On
April 30, 2021, the Group signed the Bendon Share Sale Agreement with JADR Holdings Pty Limited as trustee for the JDR Family Trust No
2, an entity affiliated with Justin Davis-Rice, and Matana Intimates Holdings Trustee Limited as trustee for the Matana Intimates Holding
Trust, an entity affiliated with Anna Johnson (together, the “Buyers”), and simultaneously consummated the Bendon Sale contemplated
thereby. Pursuant to the Bendon Share Sale Agreement, the Group sold all of the issued share capital in Bendon together with any accrued
rights free from encumbrances for the consideration described below on the terms and conditions set out in the Bendon Share Sale Agreement.
Because
the Buyers are related parties of the Group, the Group adopted strict governance and information protocols to ensure independent consideration
and assessment of the Buyers’ proposal and the Bendon Share Sale Agreement. The Group’s independent directors formed an independent
committee of the board of directors, which considered, on behalf of the Group, the Bendon Sale. The consideration paid for the share
capital of Bendon was determined through negotiations between the independent committee and the Buyers.
Following
the sales of fully owned subsidiary (the “Bendon Group”), as disclosed in note 15, the Group is entitled to a tiered percentage
of its net profits. The group also entered into the “Naked Facility” and “FOH service agreement” with Bendon
on April 30, 2021.
As
a result, Bendon Group became the related party on April 30, 2021.
|
(b)
|
Transactions
with related parties
|
During
the comparative period, the Group procured goods for resale from The Way Store Pty, a company registered in Australia, which is related
through common directorship. The Group purchased $0.5m worth of inventory.
During
the current period, the Group engaged taxation services ($0.03m) from Taxxat Pty Limited, a company registered in Australia, which is
related through common directorship.
Bendon
Group
The
outstanding balance owned by Bendon to the Group is $1.7m for the half year ended July 31, 21.
FOH
service agreement
On
April 30, 2021, FOH, the wholly owned subsidiary, entered into a management services agreement (the “FOH Services Agreement”)
with Bendon pursuant to which Bendon will provide certain management services. FOH agrees to pay Bendon the Service fee, including agreed
costs and administration fee. The service fee amounted to $0.2m was paid from FOH to Bendon during the period ended July 31, 2021.
Naked
Facility
Under
Naked Facility, the Company will provide Bendon with a 5-year loan of up to NZ$7.0m (approximately US$4.9m) (the “Naked Facility”)
as disclosed in note 15. The facility remains NZ$7.0m (approximately US$4.9m) with nil drawdown during the period ended July 31, 2021.
Subsequently, Bendon drew down the full NZ$7.0m (approximately US$4.9m) facility on August 23, 2021.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
17. Fair value measurements
The
Group measures the following assets and liabilities at fair value on a recurring basis:
|
●
|
Financial
assets - derivative financial instruments
|
|
●
|
Financial
liabilities - derivative financial instruments
|
|
●
|
Financial
liabilities convertible notes with embedded derivatives
|
|
●
|
Financial
liabilities Phantom Warrants
|
|
●
|
Contingent
consideration
|
Fair
value hierarchy
IFRS
13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a level in the fair value hierarchy
as follows:
|
Level
1
|
Unadjusted
quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
|
|
|
|
|
Level
2
|
Inputs
other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
|
|
|
|
Level
3
|
Unobservable
inputs for the asset or liability.
|
The
table below shows the assigned level for each asset and liability held at fair value by the Group:
Schedule of Fair Value Measurement of Assets and Liabilities
31 July 2021
|
|
Level 1
US $000s
|
|
|
Level 2
US $000s
|
|
|
Level 3
US $000s
|
|
|
Total
US $000s
|
|
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phantom warrant liabilities
|
|
|
-
|
|
|
|
9,685
|
|
|
|
-
|
|
|
|
9,685
|
|
Financial derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
31 January 2021
|
|
Level 1
US $000s
|
|
|
Level 2
US $000s
|
|
|
Level 3
US $000s
|
|
|
Total
US $000s
|
|
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phantom warrant liabilities
|
|
|
-
|
|
|
|
8,335
|
|
|
|
-
|
|
|
|
8,335
|
|
Financial derivative liabilities
|
|
|
-
|
|
|
|
450
|
|
|
|
-
|
|
|
|
450
|
|
There
were no transfers between levels during the financial periods.
The
carrying amount of trade and other receivables, related party receivables and trade and other payables are assumed to approximate their
fair values due to their short-term nature. Bank loans approximate fair value of the carrying amount on the basis of the variable nature
of the interest rates associated with the loans.
Valuation
techniques for fair value measurements categorized within level 2
The
fair value accrual for phantom warrants, and the fair value of the derivative on convertible notes has been determined using a Black-Scholes
model. Measurement inputs include share price on measurement date, expected term of the instrument, risk free rate, expected volatility
and expected dividend rate.
Naked
Brand Group Limited
Notes
to the Consolidated Financial Statements
For
the Half Year Ended 31 July 2021
Fair
value measurements using significant unobservable movements (level 3)
Contingent
consideration
On
April 30, 2021, the Group disposed of its New Zealand subsidiary Bendon Limited, and the entities controlled by Bendon Limited in a management
buyout transaction. As part of the agreement, the Group is entitled to contingent consideration in the form of tiered percentage of net
profits of Bendon and the entities controlled by Bendon (the “Bendon Group”) for three years commencing on July 1, 2021,
being in the first year, 30%; the second year, 20%; and the third year, 10%. The net profits are to be calculated on a cumulative basis
so that any losses from the first or second year are offset against any profits in a subsequent year.
However,
considering the history of losses of Bendon Group, management is not expecting Bendon Group to make profit in the next 3 years after
disposal. Hence, the fair value of contingent consideration is considered as nil as a part of consideration.
For
the period ended July 31, 2021, and January 31, 2021, there were no other financial instruments that were level 3.
18. Cash Flow Information
Schedule of Cash Flow Information
|
(a)
|
Reconciliations
of cash flow from operations with loss after income tax
|
|
|
6 months to
31 July 2021
US $000’s
|
|
|
6 months to
31 July 2020
US $000’s
|
|
|
|
|
|
|
|
|
Loss for the period from continuing operations
|
|
|
(33,200
|
)
|
|
|
(4,899
|
)
|
Loss for the period from discontinued operations
|
|
|
(15,567
|
)
|
|
|
(6,659
|
)
|
Total loss for the period
|
|
|
(48,767
|
)
|
|
|
(11,558
|
)
|
Cash flows excluded from loss attributable to operating activities
|
|
|
|
|
|
|
|
|
- interest paid on borrowings and lease liabilities
|
|
|
108
|
|
|
|
2,330
|
|
Non-cash flows in loss:
|
|
|
|
|
|
|
|
|
- depreciation and amortisation expense
|
|
|
411
|
|
|
|
2,856
|
|
- impairment expense
|
|
|
4,971
|
|
|
|
1,763
|
|
- Transaction expenses
|
|
|
13,398
|
|
|
|
4,226
|
|
- Fair value loss on convertible notes and warrants
|
|
|
10,794
|
|
|
|
-
|
|
Net changes in assets and liabilities
|
|
|
13,201
|
|
|
|
575
|
|
- net exchange differences
|
|
|
483
|
|
|
|
44
|
|
Cash flow from operations
|
|
|
(5,401
|
)
|
|
|
236
|
|
|
19. Events occurring after the reporting date
|
19.
Events occurring after the reporting date
Nasdaq
Compliance
On
April 26, 2021, the Group received a notice from Nasdaq’s Listing Qualifications Department stating that, for the 30 consecutive
business days ending April 23, 2021, the closing bid price for the Ordinary Shares had been below the minimum of US$1.00 per share required
for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that the Group
would be afforded an initial 180 day period to regain compliance with the minimum bid price requirement. The notification letter also
stated that in the event the Group did not regain compliance within the initial 180-day period, the Group could be eligible for additional
time.
The
Group did not regain compliance with the minimum bid price requirement during the initial 180-day period. However, on October 26, 2021,
the Group received a notice from Nasdaq stating that Nasdaq’s staff had determined that the Group were eligible for an additional
180-day period (until April 25, 2022) within which to regain compliance. In order to regain compliance, the bid price for the Ordinary
Shares must close at US$1.00 per share or more for a minimum of ten consecutive business days.
The
Nasdaq notification did not have any immediate effect on the listing of the Ordinary Shares, and the Ordinary Shares continue to trade
under the symbol “NAKD”. Naked management intends to actively monitor the bid price for the Ordinary Shares and will consider
all available options to regain compliance with the minimum bid price requirement. The Group intends to cure the deficiency during the
additional 180-day period by effecting a reverse stock split, if necessary.
Coronavirus
(COVID-19) pandemic
The
consequences of the Coronavirus (COVID-19) pandemic are continuing to be felt around the world, and its impact on the Group, if any,
has been reflected in its published results to date. Whilst it would appear that control measures and related government policies have
started to mitigate the risks caused by COVID-19, it is not possible at this time to state that the pandemic will not subsequently impact
the Group’s operations going forward. Despite the new variant of the virus may cause continued lockdowns, it would have limited
impact on FOH online, especially with the new variant of the virus that is causing or may cause significant continued lockdowns. The
Group now has experience in the swift implementation of business continuation processes should future lockdowns of the population occur,
and these processes continue to evolve to minimise any operational disruption. Management continues to monitor the situation both locally
and internationally.
On
August 23, 2021 the Company received a Drawdown Notice from Bendon Limited requesting a full drawdown of their NZ$7.0m
(approximately US$4.9m)
facility limit under their loan agreement entered as part of the Bendon Sale conditions. In accordance with the Notice and the terms
of the loan agreement the funds were advanced on August 24, 2021. Under the loan agreement, the Company has agreed to provide a 5-year
loan of up to NZ$7.0m
(approximately US$4.9m)
at an initial interest rate of 2.5%
and, following Bendon obtaining additional
external senior debt which the Buyers, an interest rate of 50 basis points above the rate of this senior debt. The Naked Facility will
also be subordinated to this senior debt.
On
September 22, 2021, the Group granted to Mr. Davis-Rice an incentive award, which provides that on the first, second and third anniversary
of the grant of the award, Mr. Davis-Rice will be receive ordinary shares with a market value equal to 1.5% of the increase in the Group’s
total market capitalization since the grant of the award. The market value of the ordinary shares to be issued and the total market capitalization
will be determined based on the daily VWAP for the Group’s ordinary shares for the five trading days immediately prior to the applicable
anniversary. The payment of the incentive award will be accelerated in the event of a change in control of the Company.