Annual Results

7 September 2016

Joules Group Plc

("Joules", the "Group")

Annual Results for the 52 weeks ended 29 May 2016 

A transformational year for the Joules brand

Highlights:

Colin Porter, Chief Executive, commented:

"FY16 was a transformational year in the development and expansion of the Joules brand which included our successful admission to AIM in May. 

We have delivered strong growth across our Retail and Wholesale channels, significantly increasing profitability by effectively leveraging our operating cost base. Our active customer base and international sales have also grown impressively, all of which is great testament to the growing strength and appeal of Joules as a premium lifestyle brand.

Group trading to date in FY17 has been in line with expectations and early feedback on our Spring/Summer 17 ranges from our trade customers has been positive. The Group has a clear growth strategy, underpinned by the consistent quality and design of our products and the skill and commitment of our enterprising team.

The Board remains confident in the brand's long term development in the UK and internationally."

1 On a comparable 52 week basis, FY15 was a 53 week period.

2 Underlying excludes exceptional and non-recurring items, primarily related to the costs of admission to AIM and the capital structure in place prior to admission.

3 Reconciliation to Statutory profit before tax:

4 Earnings Per Share is calculated as: underlying PBT (as described above) less tax at the statutory tax rate, on a pro forma basis i.e. assuming that the number of shares in issue immediately post-IPO were in issue through the entire period.

Enquiries:

About Joules

Joules is a British, premium lifestyle brand. The Group designs and sells Joules branded clothing, footwear, accessories and homeware and operates a balanced multi-channel proposition which encompasses retail (stores and e-commerce), wholesale and other smaller channels such as country shows and events and licensing.

Joules has 97* UK and ROI stores, a customer database of approximately 2 million* customers, an established e-commerce platform and a fast growing international presence. Joules is also a top selling wholesale brand in major UK retailers such as John Lewis and Next Label and, in 2015, won "Fashion Retail Business of the Year" in the £30-£100m turnover category at the Drapers Awards.

The Joules brand is at the heart of the business and encompasses values of "time-off", heritage, countryside, Britishness, family and fun. These brand values are reflected in the product designs, which are recognisable for their distinctive colours, prints, detail and quality.

www.joules.com www.joulesgroup.com

*As at 29 May 2016

CHAIRMAN'S STATEMENT

INTRODUCTION

This is our first Annual Report as a public company and it is my great pleasure to welcome new shareholders to Joules. As Chairman for the last three years I have seen Joules grow and develop into the established and much-loved premium lifestyle brand it is today and I am now even more excited about our future prospects than ever before.

This was a significant year for the business with the Company's admission to the AIM market of the London Stock Exchange in May 2016 being a notable highlight. Joules has an authentic British heritage; a strong and distinctive brand; an enviable track record; and significant growth opportunities ahead. We were delighted with the enthusiasm and shareholder support shown during our Initial Public Offering ('IPO'), and we look forward to delivering value for all stakeholders over the coming years.

OUR BUSINESS

The Joules brand is at the heart of our business and encompasses values of 'time-off', heritage, countryside, Britishness, family and fun. These values resonate through all product designs, which are known and loved for their distinctive colours, prints, details and quality. These designs successfully span across a broad range of product categories, from Womenswear to Homeware, demonstrating the brand's relevance to multiple aspects of our customers' lives.

The growth of the business in recent years has been underpinned by significant investment that has been made in the Group's infrastructure, including supply chain, IT and international sales support offices. We are confident that this investment, along with the strength and appeal of the Joules brand, provides a strong foundation for sustainable, long term growth.

OUR TEAM

The skill, creativity and energy of our people continues to be a key factor in driving the business forward and expanding the Joules brand. I would like to take this opportunity to thank everyone in the Joules team across the world for their hard work and dedication throughout what has been such a transformational year for the business.

The success of the business to date has been led by a dynamic and highly talented management team who have a deep understanding of the Joules customer as well as strong commercial and product design expertise. This is underpinned by outstanding enthusiasm, energy and leadership skills.

With our IPO the leadership team was further strengthened with the appointment of two new Non-Executive Directors to our Board. These were David Stead, who has more than 15 years' experience as a director of companies in the UK retail sector, and Jill Little, who has vast relevant experience of the retail industry including driving international expansion. We are already benefiting from their experience and knowledge and look forward to their contributions in the years to come.

FINANCIAL RESULTS & DIVIDEND

Group revenue of £131.3 million increased by 12.8% compared to the prior period (53 weeks to 31 May 2015: £116.4 million). Against the comparable 52 week prior period, Group revenue increased by 14.2%. This reflects strong growth in both the Retail and Wholesale segments. On a geographic basis, UK sales increased 11.6% to £118.1 million and International sales increased 24.7% to £13.2 million. International now represents just over 10% of Group revenue. Underlying PBT grew by 41.5% to £7.5 million, and Underlying EPS was 6.9 pence per share (FY15: 4.8 pence). Statutory PBT was £(1.2)million (FY15: £0.1 million), statutory basic (and diluted) EPS are -2.0 pence per share (FY15: -0.5 pence per share). The Chief Executive's Strategic Report and Financial Review that follow provide a more in-depth analysis of the trading performance and financial results of the Group.

The Directors intend to pursue a progressive dividend policy, subject to the availability of sufficient distributable profits and the need to retain sufficient earnings for the future growth of the Group. It is currently intended that, in the absence of unforeseen circumstances, the first dividend following Admission will be paid in respect of the financial year ending May 2017 (FY17).

THE FUTURE

It is too early to assess the specific macro economic effects of the UK's decision to leave the European Union, though it has created an environment of increased uncertainty. I believe that Joules is well placed to meet these uncertainties through a combination of the strength of its brand and products; its target customer demographic; and the historic investment that has been made in infrastructure. The impact on the product cost base, resulting from a weaker GBP, is mitigated through foreign exchange hedging in place throughout FY17 and the first quarter of the subsequent year.

We have a loyal and growing customer base, a committed and enterprising team and a well-invested infrastructure. These qualities give us confidence of successfully delivering the Board's clear strategy for growing the Joules brand in the UK and internationally.

CHIEF EXECUTIVE OFFICER'S STRATEGIC REPORT

I am pleased to present the Group's first Strategic Report to shareholders. This is an exciting time for the Joules brand as we continue to expand both in the UK and internationally, whilst ensuring our focus is as resolute as ever on product quality, design and delighting our customers.

THE JOULES BRAND

Joules is a premium lifestyle brand with an authentic heritage. The brand is distinctive for its values of 'time-off', heritage, countryside, Britishness, family and fun. Our brand and design-led ethos deliver unique product designs, which remain central to Joules' continued success, growth and appeal. Key components of our designs include unwavering focus on quality, colour and surprising details that excite our customers. The brand is also known and loved for its exclusive, in-house designed proprietary prints, which include florals, conversationals, ''pops of colour'' and screen prints.

OUR BUSINESS MODEL

Joules operates a truly multi-channel business model, which is reflected in the Group's balanced revenue mix by channel. The Joules brand has two key channels to market: retail (including stores, e-commerce and the country shows and events circuit) and wholesale. Other channels include product licensing, which given the strength of the Joules brand, is likely to become increasingly important over time.

Retail

The Group has a fast growing and diverse store portfolio of 97 UK and Republic of Ireland stores (including five concessions) plus three franchise stores. Our stores have a diverse geographic footprint, reflecting the broad appeal of the brand. The Group operates a fully transactional and feature rich website, www.joules.com, through which Joules branded products are sold to customers in the UK and internationally. The Group also operates dedicated, local currency and local language consumer websites for the US and Germany.

Wholesale

Joules branded products are sold through selected wholesale partners, primarily in the UK, North America and Germany, supporting the expansion of the brand. The wholesale channel consists primarily of:

OUR GROWTH STRATEGY

We have a clear strategy for the long-term, sustainable development of Joules as a premium lifestyle brand, both in the UK and internationally. This strategy is built on the following key pillars, and is continuously underpinned by a firm focus on product quality and design.

1. INCREASING CUSTOMER VALUE - we intend to continue to grow our customer database, increase the number of active customers and develop the value of the average active customer.

2. UK AND REPUBLIC OF IRELAND (ROI) STORE ROLL-OUT - as part of our multi-channel approach, there remains significant further growth potential for the brand in the UK and ROI. We are targeting a net 10 to 12 new stores per year in the medium term.

3. INTERNATIONAL EXPANSION -  the Joules brand and products resonate well in international markets and the new markets provide an opportunity to further leverage the investment in our central creative and commercial teams. Our medium term focus is on North America and Germany.

4. PRODUCT EXTENSION - as a premium lifestyle brand, the Joules product offer naturally extends to meet many of the lifestyle needs of our customers. Joules has had success extending the product offer within existing categories and into new categories and we will continue to expand into new areas that are appropriate for the development of the Joules brand.

Key Performance Indicators

Our KPIs have been selected based on their link to the successful delivery of our strategy, they are monitored by the Board on a regular basis.

Financial KPIs:

- Revenue by channel - delivering balanced growth across our core-sales channels

- Group gross margin - maintaining overall product level profitability whilst developing the different channels to market

- EBITDA margin - how effectively we are leveraging our cost base and infrastructure

- Return on Capital Employed ('ROCE') - how we are managing working capital and growth capital investments

Revenue growth by channel

1Active customer defined as a customer who is registered on our database and has transacted within the last 12 months. Prior years restated following improvements in data cleansing processes during FY16.

2FY15 was a 53 week period

3Return on Capital employed ('ROCE') is calculated as Underlying Operating Profit after Tax divided by Average Capital employed (Capital employed defined as Underlying Net Assets adjusted for excess cash balances

BUSINESS REVIEW

A year of excellent progress

Joules has continued to make excellent progress over the past year, including the significant milestone of the Group's admission to the AIM market of the London Stock Exchange towards the end of the financial year. The success of our IPO reflects 27 years of careful development of the Joules brand, our unique multi-channel approach and our consistent focus on our customer. These qualities remained central to our performance in FY16 as the Group made further progress against its strategic objectives and continued to develop and expand as a premium lifestyle brand in the core UK market and also internationally.

Strong multi-channel retail growth

Retail sales, which includes stores, E-commerce and shows, continued to grow impressively by 12.8% during the year (on a consistent 52 week basis) as we expanded Joules' retail coverage across the UK and ROI to 97 stores at the end of the period. This was supported by 10 new store openings and the conversion of one franchise store during the year. During the year we closed five stores taking the opportunity of lease breaks to exit where we believe we could perform better in a different location. We relocated one store, in Harrogate, and expanded our space in two others, increasing total selling space to 111,000 square feet by the end of the year.

FY16 saw us expand into a new store location type with three Regional Shopping Centre locations - Milton Keynes, Meadowhall and Birmingham Grand Central. These stores, which have a larger selling space than average, have proved very popular with our customers - both old and new - and have served to further develop and strengthen our brand as well as deliver attractive financial returns.

Joules is a truly multi-channel brand, with e-commerce revenues representing nearly one third of retail revenue. E-commerce continued to deliver very strong sales growth of 17.3% against the prior year (on a consistent 52 week basis), this growth was supported by the ongoing development of our website functionality and the overall customer offer. We re-launched our Joules.com e-commerce site in September 2015, with improved functionality, richer content and optimisation for mobile devices.

With traffic from mobile and tablet devices now representing over 70% of the total, and with the mobile conversion rate improving by 50 basis points in the year, the re-launched site has been instrumental in supporting the growth of e-commerce revenues.

'Click & Collect' continues to prove popular with our customers and towards the end of the year we commenced the roll-out of 'Order in Store' which provides customers in store with access to the entire range of products across all of our categories.

Wholesale expansion in the UK and overseas

Wholesale sales increased by 18.3% (on a consistent 52 week basis), reflecting the growing appeal of the Joules brand. Continued expansion in the UK was driven primarily through national multi-channel retailers such as John Lewis and Next Label as well as through smaller, independent specialist partners that have a good fit with the Joules brand.

Joules' products with their unique prints, colour and British character continue to resonate strongly with customers in international markets, where our focus remains on North America and Germany where we are building brand awareness. During the year we invested further in our infrastructure in the US, opening a new, larger trade showroom and sales office in New York. Our focused approach, on developing larger wholesale accounts, continues to make good progress with increased product range listings in Nordstrom and Von Maur for Autumn/Winter 16 and the department store Dillards launching Childrenswear from Autumn/Winter 16.

The growth of international wholesale (up 48.1% in the year) helped drive a 24.7% increase in the Group's total international sales (including international retail). Excluding the impact of non-recurring international shows, total international revenues were up nearly 36%, taking international sales as a proportion of total Group sales to 10.1%.

Further development as a lifestyle brand

Joules delivered growth across every product category during the year, with particularly strong performances in the core Womenswear category and the newer Homeware, Accessories and 'Baby Joule' categories. Our licensed products, although relatively small in scale, continued to perform well.

The popularity of the brand across multiple product categories highlights the exciting growth potential for Joules as it continues to grow as a true lifestyle brand.

Customer and Marketing

Joules has a loyal, fast growing and highly engaged customer community. During the year we continued to expand our customer database - that now stands at just over two million customers - and developed new ways to communicate and engage with this community online, in stores, across social media platforms and through events. One innovative and successful example of digital customer engagement during the year was our 'Design Your Own Welly' App and competition. Customers were invited to go online and bring a Joules welly to life by creating their own, bespoke bold and bright designs. We received more than 45,000 entries to the competition, including many new customers, helping to raise brand awareness amongst existing and potential customers.

We were delighted to win 'Fashion Business of the Year' (in the £30-100m category) at the 2015 Drapers Awards, with the judges acknowledging Joules' "very impressive growth story while demonstrating confidence in our brand positioning, ethos and strategy". This award was fitting testament to the hard work of our team as well as the brand's strong values.

Platform for long term growth

The focus of the management team is on the long term, sustainable development of the Joules brand, as demonstrated by further investments made during the year including in our new stores, a strengthened e-commerce proposition and the infrastructure to support our US wholesale business.

During the year we implemented the first phase of our company wide ERP replacement programme. We are in the process of migrating our existing 'Sales & stock management' IT platform to the Microsoft Dynamics AX ERP platform. Phase one has seen the implementation of Microsoft Dynamics AX to support our US wholesale business. The programme, which represents a significant investment for the Group, is ongoing as we extend the platform across our core UK wholesale and retail channels with a plan to go live in FY18.

The creativity, skill and commitment of the Joules team are key drivers of the brand's growth and success. We continue to invest in skills and people development in all areas of the business including our customer facing colleagues and team leaders across the business.

Looking ahead

Group trading to date in the FY17 financial year has been in line with our expectations and early feedback on our Spring/Summer 17 ranges from our trade customers has been positive.

We have a strong brand, a loyal and growing customer base, a committed and enterprising team and a well-invested infrastructure. These qualities give me confidence for the future and for the delivery against our strategic objectives as we grow the Joules brand in the UK and internationally.

FINANCIAL REVIEW

Joules Group plc was admitted to AIM on 26 May 2016 (the 'IPO'), just prior to the end of the financial period. To provide a meaningful comparison to the prior financial period and for future reporting periods, the front section of this Annual Report reports on both the underlying the statutory results.

PROFIT BEFORE TAX - UNDERLYING

Underlying profit before tax ('PBT') was £7.5 million for the 52 weeks to 29 May 2016, an increase of 41.5% on the prior period (53 weeks to 31 May 2015).

EARNINGS BEFORE INTEREST, TAX, DEPRECIATION & AMORTISATION ('EBITDA')

Underlying EBITDA increased by 28.6% to £13.5 million (FY15: £10.5m). The underlying EBITDA margin increased by 1.3 percentage points from 9.0% to 10.3%.

UNDERLYING AND STATUTORY RESULTS

During the period there were a number of costs that were exceptional or non-recurring in nature. These items relate primarily to the IPO and to the capital structure that was in place prior to the IPO. To provide a meaningful year-on-year comparison, for historic and future periods, these items have been excluded from the underlying results reported in the front section of the Annual Report. A reconciliation between Underlying and Statutory (GAAP) results is provided below.

REVENUE

Group revenue increased by 12.8% to £131.3 million from £116.4 million in FY15, the prior year being a 53 week period. Against a comparable 52 weeks, Group revenue increased by 14.2%, with Retail revenue increasing by 12.8% and Wholesale revenue increasing by 18.3%. Sales in International markets, which are predominantly Wholesale, increased by 24.7% and now represent 10.1% of Group revenues (FY15: 9.1%).

Retail - Stores

Store revenue at £58.2 million increased by 13.1% on the comparable 52 weeks. During the year we opened 10 new stores, converted one franchise and closed five stores, resulting in an increase in owned store numbers from 91 to 97. Total store selling space increased by 10.9% to 111,000 sq. ft. over the period. We had three franchises at the end of FY16 (FY15: 4).

Retail - E-commerce

E-commerce revenue at £30.1 million increased by 17.3% on the comparable 52 weeks and was 32.1% of total Retail revenue (FY15: 30.6%). E-commerce benefited from more visitors and higher conversion following the re-launch of the content rich, mobile optimised website and the ongoing new customer acquisition activity.

Wholesale

Wholesale revenue at £37.2 million increased by 18.3% on the comparable 52 weeks. Good performances were delivered in both the UK and international markets and from both the larger 'house account' and the smaller 'field account' customer bases.

GROSS MARGIN

Gross margin at 53.5% was 0.2 percentage points higher than the prior year. Our commercial and buying activity enabled us to offset the impact of the strengthening US Dollar and maintain overall intake margins. Increasing international Wholesale sales, in particular within the US where we have a high mix of lower margin footwear sales and a significant proportion of our business via a distributor, result in downward pressure on Group gross margin which has been more than mitigated by the growth of the Retail segment and improved e-commerce distribution costs.

ADMINISTRATIVE EXPENSES - UNDERLYING

Underlying administrative expenses increased by 10.5% from £56.4 million to £62.3 million. Underlying operating expenses were 47.4% of revenue (FY15: 48.5%). The Group strengthened several central functions during the year particularly in design, commercial and support and increased investment in new customer acquisition and internal photo-shoot capability to support the retail and wholesale channels.

Total rent cost, including service charges, for the period was £9.3 million (FY15: £8.5m) with the increase due to new store openings and the relocation of our Shanghai sourcing office and expanded New York showroom during the period.

Underlying depreciation & amortisation increased to £5.5 million (FY15: £4.8m) following the completion of several IT infrastructure projects in the current and prior year, including the first phase of the Enterprise Resource Planning (ERP) programme.

Administrative expenses - non-underlying

Non-underlying administrative expenses totalled £3.1 million (FY15: £0.6m). This included IPO transaction related costs of £2.7 million (FY15: £nil) and non-recurring costs of £0.4 million (FY15: £0.6m). Non-recurring costs included costs related to the pre-IPO ownership structure £0.1 million (FY15: £0.1m) and asset impairment £0.3 million (FY15: £0.5m).

NET FINANCE COSTS - UNDERLYING

Underlying net finance costs of £0.5 million (FY15: £0.4m) related to interest and facility charges on the Group's revolving credit facility with Barclays Bank Plc.

Net finance costs - non-underlying

Non-underlying net finance costs totalled £5.6 million (FY15: £4.6m), consisting primarily of interest on shareholder loan notes at £4.7 million (FY15: £4.4m) and amortisation of the loan note arrangement fee of £0.9 million (FY15: £0.4m). The shareholder loan notes were converted to equity immediately prior to the IPO and the expense will not be ongoing.

TAXATION

The reported tax rate in the current and prior year is impacted by the non-underlying items noted above. These included a proportion of non-deductible costs and the impact from the proportion of the shareholder loan note interest that was deemed deductible on finalisation of the Advanced Thin Capitalisation Agreement ('ATCA') with HMRC during the period.

The Group's effective tax rate in future years is expected to be broadly in line with the statutory rate.

EARNINGS PER SHARE AND DIVIDEND

Statutory basic (and diluted) earnings per share for the period are -2.0 pence per share. On an underlying, pro forma basis the FY16 basic earnings per share are 6.9 pence (FY15: 4.8 pence).

To facilitate meaningful comparison of earnings per share the weighted average number of shares in issue has been restated on a pro forma basis to reflect the post-IPO capital structure. The pro forma assumes that the number of shares in issue post-IPO were in issue throughout. Earnings are adjusted for non-underlying items detailed above and to reflect the statutory tax rate.

As detailed in the Admission Document, The Board is not recommending the payment of a dividend for FY16.

CASH FLOW AND CASH POSITION

Net cash flow from operating activities was £16.9 million (FY15: £6.0m) including a net working capital inflow of £7.1 million due to improved inventory efficiency and higher trade payables at the period end.

The Group ended the period with underlying net cash/(debt) of £3.2 million (FY15: £(6.5)m) an improvement of £8.7 million in the period. Gross cash was £9.3 million (FY15: £2.1m) and underlying borrowings £6.1 million (FY15: £8.6m), which includes borrowings under the Group's revolving credit facility and asset finance loans. Underlying borrowings excludes shareholder loan notes that were settled during the year as part of the IPO transaction (FY15: £(42.8)m).

The Group has access to a £25 million revolving credit facility provided by Barclays Bank Plc to fund seasonal working capital requirements. This facility matures in May 2020.

INVENTORY

Inventory at year end was £19.3 million (FY15: £17.7m). The higher year-on-year inventory was a result of receiving deliveries for Autumn/Winter 16 ranges earlier than the prior year. Inventory management and stock turn both improved in the year.

CAPITAL EXPENDITURE

Investment in property, plant, equipment and intangible assets totalled £7.1 million in FY16 (FY15: £8.8m). Major areas of expenditure in the year were new store openings and relocations and spend on our core IT infrastructure, including the re-launch of our E-commerce platform and the completion of phase one of our ERP implementation. Phase two of the ERP implementation is ongoing, with a plan to go live in FY18.

PRINCIPAL RISKS AND UNCERTAINTIES

Set out below are the principal risks and uncertainties that the Directors consider could impact the business.  The Board continually reviews the potential risks facing the Group and the controls in place to mitigate any potential adverse impacts. The Board also recognises that the nature and scope of risks can change and that there may be other risks to which the Group is exposed and so the list is not intended to be exhaustive.

The Corporate Governance Report includes an overview of our approach to risk management and internal control systems and processes.

EXTERNAL RISKS

External risks reflect those risks where we are unable to influence the likelihood of the risk arising and therefore focus is on minimising the impact should the risk arise.

INTERNAL RISKS

Internal risks reflect those where we can influence the likelihood of the risk arising and the impact if the risk should arise.

JOULES GROUP PLC

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PREPARATION OF PRELIMINARY ANNOUCEMENT

The preliminary consolidated financial information for the 52 weeks ended 29 May 2016 was approved by the Directors on 5 September 2016.

This preliminary consolidated financial information has been prepared in accordance with the principles of International Financial Reporting Standards ('IFRS') and has been prepared on a going concern basis. The preliminary consolidated financial information does not constitute statutory consolidated financial statements for the 52 weeks ended 29 May 2016 as defined in section 434 of the Companies Act 2006.

The Annual Report and Group Financial Statements for the 52 weeks ended 29 May 2016 were the first for Joules Group plc and they were approved by the Board of Directors on 5 September 2016. The report of the auditor on those Group Financial Statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The Annual Report and Group Financial Statements for the 52 weeks ended 29 May 2016 will be filed with the Registrar in due course.

Going concern

The Directors have prepared a detailed forecast with a supporting business plan for the foreseeable future. The forecast indicates that the Group will remain in compliance with covenants throughout the forecast period. As such, the Directors have a reasonable expectation the Company and Group will have adequate resources to continue in operational existence for the foreseeable future. As such, they continue to prepare the financial statements on the basis of going concern.

2. SEGMENT REPORTING

The Group has three reportable segments; Retail, Wholesale and Other. For each of the three segments, the Group's chief operating decision maker (the "Board") reviews internal management reports on a monthly basis. Each segment can be summarised as follows:

The accounting policies of the reportable segments are the same as described in note 1. Information regarding the results of each reportable segment is included below. Segment results before exceptional items are used to measure performance as management believes that such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within these industries.

Segment Review and Results

There are no discontinued operations in the period.

GEOGRAPHICAL INFORMATION

The Group's revenue from external customers by geographical location are as detailed below. Predominantly all non-current assets (excluding financial instruments, deferred tax assets and other financial assets) are situated in the UK, therefore separate geographical disclosure of non-current assets is not considered necessary.

3. EXPENSES BY NATURE

Other expenses and exceptional impairment include £3,128,000 for May 2016 (May 2015: £500,000) of exceptional items which have been disclosed separately on the face of the income statement in order to summarise the underlying results. Neither 'underlying profit or loss' nor 'exceptional items' are defined by IFRS however the directors believe that the disclosures presented in this manner provide clear presentation of the financial performance of the Group.

Other expenses include £3,162,000 of costs and offsetting income, which net to £nil, that were incurred as part of the listing of Joules Group plc on AIM. These costs were recharged to the exiting shareholders as the listing related to the disposal of their shares. The net amount of £nil has been classified as Exceptional.

Other services pursuant to legislation:

4. OPERATING PROFIT

5. INTEREST PAYABLE AND SIMILAR CHARGES

Amortisation of debt costs relate to fees incurred in 2013 with regard to the Shareholder loan notes, as these fees related to a debt facility they were amortised over the expected life of the facility. During the period the Shareholder loan note debt was settled and all remaining unamortised debt costs were expensed.

6. INCOME TAX

In addition to the amount charged to the income statement, the following amounts relating to tax have been recognised in other comprehensive income.

6. INCOME TAX (Continued)

b) Factors affecting the tax charge for the period

There are reconciling items between the expected tax charge and the actual which are shown below:

The 2013 budget issued on 20 March 2013 announced that the main rate of corporation tax would be reduced to 21% from 1 April 2014 and to 20% from 1 April 2015. The UK corporation tax at the standard rate for the year is therefore 20.0% (2015: 20.8%).

In July 2015 the UK government announced its intention to reduce the standard corporation tax rate to 18% by 2020. The measure to reduce the rate to 19% for the financial year beginning 1 April 2017 and to 18% for the financial year beginning 1 April 2020 were substantively enacted on 26 October 2015 and have been reflected in the calculation of deferred tax in the May 2016 numbers.

7 & 8. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

Property, Plant and Equipment and Intangibles

During the period the Directors conducted a detailed review of the Group's fixed assets, as a result of this review £9,044,000 (£8,370,000 of Property, Plant and Equipment and £674,000 of Intangibles) of nil book value items which were no longer in existence or use as at the balance sheet date were identified, these have been recorded as a disposal above.

9. BORROWINGS

9. BORROWINGS (Continued)

Summary of borrowing arrangements

The Bank Loan is a Revolving Credit Facility in which amounts drawn down are generally repayable within three months. The facility matures in May 2020. The asset loans are secured against the assets to which they relate. Interest is paid at varying rates above base rate.

The shareholder loan notes were issued in November 2013 and were repayable in equal amounts representing 20% of the outstanding balance annually from 31 October 2018 for a period of 5 years. Interest accrued annually at 11% and was added to the principal amount outstanding. The loan notes were settled in full on 26th May 2016 as a part of the IPO on admission to AIM.

The weighted average interest rates paid during the period were as follows:

10. FINANCIAL COMMITMENTS

Operating Lease Commitments

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: