Boohoo’s (BOO) half-year results should have been cause for celebration for the fast fashion retailer. The company has emerged from the arrival of a global pandemic with healthy revenue and profit growth, which have helped to build a chunky cash pile. It made two acquisitions, increased its number of customers and managed to increase the average size of their baskets.
Sadly, 2020 will not, or should not, be remembered for the progress Boohoo has made in its accounts. The company was rocked by allegations in the summer surrounding working conditions in its Leicester supply chain. Boohoo launched a review after a report in The Sunday Times highlighted poor working conditions and the underpayment of workers. This review was published last week. It confirmed that the allegations were true, taking the view that while the company did not intentionally profit from these working conditions, senior directors were aware of these problems last year and failed to act quickly enough.
Speaking after the release of the company’s results, Boohoo chief financial officer Neil Catto was unable to put a figure on the percentage of its profits generated from the parts of the supply chain that have come under scrutiny. “What we do know, is that we have effectively paid high prices for goods from Leicester,” he said. “Sourcing goods from overseas could be significantly cheaper, but we also appreciate the speed to market that we get from the UK suppliers,” he added. Boohoo will invest £10m on improvements over the current and following financial years in order to overhaul its supply chain.
Boohoo has indeed lifted its planned capital expenditure to £80m-100m, which will go towards building out the automation of its Sheffield and Burnley facilities, alongside IT improvements. Boohoo's operating cash flow more than doubled to £147.2m, while it raised £198m via a share placing in May for the purpose of acquisitions. It purchased the Oasis and Warehouse brands during the period, as well as buying out the remaining minority stake in PrettyLittleThing, which was founded by Boohoo chairman Mahmud Kamani’s son, Umar. “Since then, we’ve not seen that many opportunities come along,” said Mr Catto.
Peel Hunt forecasts full-year 2021 adjusted pre-tax profits and earnings per share of £133.8m and 8.9p, respectively, rising to £166.5m and 10.9p in 2022.
| BOOHOO GROUP (BOO) | ||||
| ORD PRICE: | 382p | MARKET VALUE: | £4.81bn | |
| TOUCH: | 381.5-382p | 12-MONTH HIGH: | 434p | LOW: 133p |
| DIVIDEND YIELD: | 0.0% | PE RATIO: | 57 | |
| NET ASSET VALUE: | 32p | NET CASH: | £331m | |
| Half-year to 31 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 565 | 45.2 | 2.88 | 0.00 |
| 2020 | 817 | 68.1 | 4.08 | 0.00 |
| % change | +45 | +51 | +42 | - |
| Ex-div: | na | |||
| Payment: | na |
