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UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
6-K
REPORT OF
FOREIGN PRIVATE ISSUER
PURSUANT
TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE
ACT OF 1934
For the
month of: November
2021
Commission
File Number:
001-38544
NAKED BRAND GROUP
LIMITED
(Translation
of registrant’s name into English)
Level 61,
MLC Centre,
25 Martin Place,
Sydney, NSW
2000,
Australia
(Address of
Principal Executive Offices)
Indicate by
check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F
☐
Indicate by
check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by
check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): ☐
Indicate by
check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934. Yes ☐ No ☒
If “Yes” is
marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):
82-___________.
Information Contained
in This Report
Set forth in
this report are the registrant’s Management’s Discussion and
Analysis of Financial Condition and Results of Operations and the
registrant’s Unaudited Interim Condensed Consolidated Financial
Statements and the related notes thereto, in each case as of and
for the six months ended July 31, 2021 and 2020.
The
information contained in this Report on Form 6-K, including the
exhibits hereto, shall be incorporated by reference in the
Company’s registration statements on Form F-3 (File Nos.
333-226192, 333-230757, 333- 232229, 333-235801, 333-243751,
333-249490, 333-249547, 333-254245, and 333-256258) and the
prospectuses included therein.
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:
|
● |
our
restructuring initiatives; |
|
● |
expectations
regarding industry trends and the size and growth rates of
addressable markets; |
|
● |
our business
plan and our growth strategies, including plans for acquisitions
and expansion to new markets and new products; and |
|
● |
expectations
for seasonal trends. |
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:
|
● |
our reliance
on our Frederick’s of Hollywood brand; |
|
● |
our ability
to protect or preserve our brand image and proprietary
rights; |
|
● |
our ability
to satisfy changing consumer preferences; |
|
● |
an economic
downturn affecting discretionary consumer spending; |
|
● |
our ability
to manage our growth effectively; |
|
● |
the success
of our business restructuring; |
|
● |
our ability
to raise any necessary capital; |
|
● |
poor
performance during our peak season affecting our operating results
for the full year; |
|
● |
our ability
to manage our product distribution given our reliance on
third-party distribution/fulfilment; |
|
● |
the success
of our marketing programs; |
|
● |
the impact
of the COVID-19 pandemic. |
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 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|