Interim Results

22 December 2015

Interim Results for the six months ended 30 September 2015

Koovs plc ("Koovs" or the "Company") 

Koovs plc (AIM:KOOV), the fashion-forward business focused on the young Indian e-commerce market, today announces its interim results for the six months to 30 September 2015.

The business continues to deliver rapid sales growth through the KOOVS.COM website and is achieving good progress on its five strategic objectives to build scale and develop the Koovs brand. The Group's financial and trading performance remains in line with expectations.

FINANCIAL HIGHLIGHTS

Koovs.com KPIs

* Sales made through the KOOVS.COM website including taxes, net of returns. This does not represent the revenue of the Koovs plc Group.

** Customers who have transacted at least once during the previous 12 month period.

Koovs plc

· Koovs plc Group revenue +144% to INR199.2m (£2.0m), (H1 FY15: INR81.7m (£0.8m));

· Loss before tax of INR570.6 million (£5.7m), (H1 FY15: loss of INR359.5 (£3.6m)) as the business continues to build presence in the market and grow revenue.

Fundraising

· The Company announced plans in September 2015 to raise up to £35m over three years to invest in marketing, product range and infrastructure to drive scale;

· Initial tranche of £1.1m raised from shares issued to management in October 2015. The company remains confident of delivering the funding plan for the business.

OPERATIONAL HIGHLIGHTS

· Mary Turner joined the company as Chief Executive Officer on October 1, 2015;

· Continued progress on five strategic objectives:

1. Build Koovs' private label

2. Bring international brands to India

3. Extend fashion credentials

4. Develop delivery and price promises

5. Use technology to empower customers

· Launched a major multi-media brand advertising campaign in December 2015 aiming to raise brand awareness, with exciting initial results including an immediate increase in brand awareness;

· Website refreshed and a new customer engagement platform launched called "Style Stories" where customers can share fashion inspiration and style news;

Waheed Alli, Chairman of Koovs, said:

"It has been another period of exceptional sales growth for KOOVS.COM, as young, fashion forward Indians continue to take Koovs to their hearts in increasing numbers. We have a clear strategy and fundraising plan to scale the business and deliver continued growth. I am delighted to welcome Mary Turner, our new CEO, to the business who brings exceptional experience, energy and enthusiasm to our team."

Mary Turner, CEO, said:

"It is an incredibly exciting time to join Koovs, as young, fashion-conscious Indians are searching for brands that share their passion for exclusive western fashion. I have always described Koovs as India's best kept secret and I am delighted to be part of the journey as we build our profile and ensure more young customers can share this secret."

INTERIM RESULTS

# Koovs plc revenue reflects the wholesale value of products supplied to the KOOVS.COM website.

^ Sterling equivalent of Indian Rupee values at exchange rates ruling in the relevant period or on the relevant date.

The information presented in this report has not been audited nor reviewed by the Company's auditors.

Notes to Editors

Koovs is focused on building KOOVS.COM into the leading fashion destination in India. The Company is headquartered in London, where the majority of its design and buying team is based, with all other operational functions based in India.

CHAIRMAN'S STATEMENT FOR THE SIX MONTHS TO 30 SEPTEMBER 2015

I'm pleased to report that sales at KOOVS.COM continues to grow rapidly, demonstrating that fashionable consumers in India continue to take Koovs to their hearts in increasing numbers. Our key performance indicators for the first half of the financial year reflect this as follows:

This has been achieved through our continued focus on the five strategic objectives set out in our Annual Report for the year to 31 March 2015 and with no significant price promotion outside of the end-of-season sale and on a consistent marketing investment week-on-week across the period:

Build the Koovs private label - with growing breadth of choice from our design office in London.

Bring international brands to India - representing 60% of our sales volumes.

Extend fashion credentials - through product collaborations with high-profile designers.

Develop delivery and price promises - with an expanded distribution centre and continual focus on price architecture to ensure we provide fashion at affordable prices.

Use technology to empower customers - with a recent site re-fresh, the addition of "Style Stories", our online destination for fashion inspiration, and simplified customer order tracking and management.

In the first weeks of the second half of our financial year, growth has continued unabated, providing further confidence that our strategy will generate the scale which will deliver value to our shareholders. Mary Turner joined as CEO in October 2015 and is working to accelerate the business towards our goals.

Fund raising

As reported in the Annual Report published on 30 September 2015, the Group is in the process of securing further funding of up to £35 million for the next three years. An initial tranche of shares was issued to management for cash in early October, raising £1.1m. A second tranche of shares is expected to be issued in the new year, more details of which will be announced in due course.

Waheed Alli

Chairman

22 December 2015

INTERIM REVIEW

Strategy

Our commercial strategy to achieve our goal of becoming India's number one international fashion destination is aimed at rapidly building scale in the business. We will do this by leveraging our established fashion credibility to extend and broaden into new categories to appeal across more end-uses, such as casual wear, work wear and active wear, and to develop fashion basics to underpin the trend ranges, delivering the right fashion at the right price.

We will provide the most engaging customer experience through fashion and lifestyle related content and develop a seamless experience across web, mobile and tablet.

Further, we will become the undisputed brand for affordable international fashion for the fashion lover in India by amplifying our voice to become "famous for fashion" through an extensive, targeted marketing campaign across multiple channels in the major cities in India. Our aim is to achieve 25% brand awareness within our target market within 18 months and therefore substantially increase our market share.

Trading performance

Sales generated on the KOOVS.COM website (net of returns) during the six months to 30 September 2015 amounted to INR 282m (equivalent to £2.8m), representing an increase of 187% in sales over the first half of the previous financial year and a 63% increase on the immediately preceding six months. Very encouragingly, conversion has increased to 1.43% for the period (from 0.93% achieved during the six month period to 30 September 2014).

The sales made on KOOVS.COM in the period were made at a reduced level of promotional discount and therefore a positive notional gross margin, although this was limited by the relatively small scale of the operation at present. Margin is planned to improve as the purchasing power of the Group increases with scale.

Other operating costs are running to plan and, specifically, the marketing budget has been held at a constant weekly spend across the period.

Financial results, cash flow and funds

Revenue in the period, representing the wholesale price of products sold was INR 199.2m / £2.0m (Six months to 30 September 2014: INR 81.7m / £0.8m). After cost of sales and overhead costs, the net loss before tax in the period was INR 570.6m / £5.7m (Six months to 30 September 2014: INR 359.5m / £3.6m), in line with our expectations.

At 1 April 2015, including both short- and long-term deposits, the business had access to INR 1,266.9m / £13.7m (2014: INR 2,186m / £21.9m ) for the purposes of funding the business.

During the period, INR728.6m /£7.3 million (Six months to 30 September 2014: INR 432.6m / £4.3m ) was utilised in funding losses and additional working capital.

At 30 September 2015, including both short- and long-term deposits, the business had access to INR 568.6m / £5.6m (30 September 2014: INR 1,821.6m /£18.2m) for the purposes of funding the business. The funds are held in term deposits or current accounts, mainly in India. Given the Group's on-going rate of expenditure, further funding is required to support the business and the Board is in the process of securing further equity funding for the business.

Principal risks and uncertainties

The Company's business activities, together with the factors likely to affect its future development, financial position, financial risk management objectives, details of its financial instruments and its exposures to price, credit, liquidity and cash flow risk are described in the Chairman's Statement and the Strategic Report published in the annual report for the period ended 31 March 2015.

The board considers the principal risks and uncertainties facing the Group to be unchanged from those set out in the Annual Report and Accounts for the period ended 31 March 2015, summarised as follows:

· Funding risk, including the ability of the Board to secure the funding required to implement its plans;

· Market and economic risks, including the economic climate and competition in India;

· Financial risks, including interest rate and currency risk;

· Technological risk;

· Warehouse disruption; and

· Reliance on key personnel.

These are set out in detail in the Group's Annual Report and Accounts for the period ended 31 March 2015, a copy of which is available on the Group's website.

Going Concern

This Interim Report has been prepared on the assumption that the business is a going concern.

The Group is in the early stages of its aim to build a significant business in India. The business plan envisages a period of development and investment for which funding was initially secured through the public offering of shares completed on 10 March 2014.

During the period since March 2014 revenue has grown dramatically as demonstrated in the Consolidated Income Statement and Koovs has built a strong initial market position from which to develop further. In building to this point the investment required in advertising and marketing has been higher than originally anticipated. The e-commerce market in India is growing extremely quickly and is attracting significant investment from a number of major players who aim to claim leading brand recognition. With this level of noise in the market and the inevitable upward pressure on marketing costs, particularly for biddable search terms, we have found it necessary to increase our investment in marketing in order to secure sufficient share of voice in the market to maintain a healthy growth in revenue.

Further, we recognise that in order to achieve our goals, the brand requires to achieve significantly higher brand awareness in the short term. We have therefore developed a detailed plan to raise the awareness of the Koovs brand and to generate significantly higher revenues. A detailed marketing plan has been built with the objective of making Koovs "famous" and achieving significantly higher brand awareness in our target market of affluent fashion focused youth in the major metropolitan areas of India. The campaigns have been designed to be as cost-effective as possible, but will represent a major investment.

For these reasons the Board, in conjunction with its advisors, has been making arrangements to raise additional capital of up to £35m over the next three years.

At the date of publication of these accounts an initial tranche of £1.1 million has been raised through the issue of new ordinary shares of Koovs plc and, subject to the approval of shareholders, further shares will be issued early in the new year.

This situation has created the following material uncertainties:

· The Group's ability to access sufficient further funding in order to support the business over the next 12 months; and

· The Group's ability to meet its forecasts, manage its expenses in order to extend the period when the Group is expected to have sufficient liquidity and to predict the impact of any change in marketing expenditure.

These circumstances represent material uncertainties that cast significant doubt upon the Company's ability to continue as a going concern.

Although the funding process has not yet concluded, discussions with a number of potential investors have been encouraging. Based on this the Directors have a reasonable expectation that the on-going efforts will be successful and that therefore the Group and Company will have adequate resources to continue in operational existence for the foreseeable future.

The Directors therefore consider it appropriate for this interim statement to be prepared on a going concern basis. This statement does not include any potential impairment to intangible assets based on the above material uncertainties nor include the adjustments that would result if the Group was unable to continue as a going concern and the accounts were prepared on a break-up basis.

Events occurring after the period end

There have been no significant or important events occurring after the period end which are not reflected in this report.

Outlook

We intend to remain resolutely focused on our strategy in order to capitalise on the growing e-commerce market in India.

On behalf of the board of directors

Mary Turner Roy Naismith

Director Director

22 December 2015 22 December 2015

Condensed Consolidated Income Statement

for the six month period to 30 September 2015

All results relate to continuing operations.

Condensed Consolidated Statement of Comprehensive Income

for the six month period to 30 September 2015

All results relate to continuing operations.

Condensed Consolidated Statement of Financial Position

at 30 September 2015

All results relate to continuing operations.  

Condensed Consolidated Statement of Changes in Equity

for the six month period to 30 September 2015

Condensed Consolidated Statement of Cash Flows

for the six month period to 30 September 2015

Notes

1. Authorisation of condensed interim financial statements

The condensed consolidated financial statements of Koovs plc (the "Company") and it subsidiary (together, the "Group") for the six month period to 30 September 2015 were authorised for issue by the board of directors on 22 December 2015 and the Condensed Consolidated Statement of Financial Position was signed on the board's behalf by Waheed Alli and Roy Naismith.

Koovs plc is a public limited company incorporated and domiciled in England and Wales. The address of its registered office is Aldwych House, 81 Aldwych, London WC2B 4HN.

2. Basis of preparation and accounting policies

2.1. Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 September 2015 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's audited financial statements as at 31 March 2015.

This interim report has not been audited or reviewed by the Group's auditors.

2.2. Going concern

This Interim Report has been prepared on the assumption that the business is a going concern.

The Group is in the early stages of its aim to build a significant business in India. The business plan envisages a period of development and investment for which funding was initially secured through the public offering of shares completed on 10 March 2014.

During the period since March 2014 revenue has grown dramatically as demonstrated in the Consolidated Income Statement and Koovs has built a strong initial market position from which to develop further. In building to this point the investment required in advertising and marketing has been higher than originally anticipated. The e-commerce market in India is growing extremely quickly and is attracting significant investment from a number of major players who aim to claim leading brand recognition. With this level of noise in the market and the inevitable upward pressure on marketing costs, particularly for biddable search terms, we have found it necessary to increase our investment in marketing in order to secure sufficient share of voice in the market to maintain a healthy growth in revenue.

Further, we recognise that in order to achieve our goals, the brand requires to achieve significantly higher brand awareness in the short term. We have therefore developed a detailed plan to raise the awareness of the Koovs brand and to generate significantly higher revenues. A detailed marketing plan has been built with the objective of making Koovs "famous" and achieving significantly higher brand awareness in our target market of affluent fashion focused youth in the major metropolitan areas of India. The campaigns have been designed to be as cost-effective as possible, but will represent a major investment.

For these reasons the Board, in conjunction with its advisors, has been making arrangements to raise additional capital of up to £35 million over the next three years.

At the date of publication of these accounts an initial tranche of £1.1 million has been raised through the issue of new ordinary shares of Koovs plc and, subject to the approval of shareholders, further shares will be issued early in the new year. 

This situation has created the following material uncertainties:

· The Group's ability to access sufficient further funding in order to support the business over the next 12 months; and

· The Group's ability to meet its forecasts, manage its expenses in order to extend the period when the Group is expected to have sufficient liquidity and to predict the impact of any change in marketing expenditure.

These circumstances represent material uncertainties that cast significant doubt upon the Company's ability to continue as a going concern.

Although the funding process has not yet concluded, discussions with a number of potential investors have been encouraging. Based on this the Directors have a reasonable expectation that the on-going efforts will be successful and that therefore the Group and Company will have adequate resources to continue in operational existence for the foreseeable future.

The Directors therefore consider it appropriate for this interim statement to be prepared on a going concern basis. This statement does not include any potential impairment to intangible assets based on the above material uncertainties nor include the adjustments that would result if the Group was unable to continue as a going concern and the accounts were prepared on a break-up basis.

2.3. Accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's consolidated financial statements for the period ended 31 March 2015.

There are no revisions to Adopted IFRS that became applicable for the period ended 30 September 2015 which have had a significant impact on the Group's financial statements.

2.4. Reporting currency

To assist UK-based readers of the accounts, translations into Sterling have be supplied on a memorandum basis to allow a clear understanding of the results and financial position of the business. The memorandum information does not form part of the financial reporting of the Group representing, as they do, simple translations of the Rupee information. The exchange rates used are shown in the table below.

2.5. Comparative information

This interim report of the Group includes for comparison purposes the trading results for the six month period ended 30 September 2014 and the year to 31 March 2015 and the balance sheets at 30 September 2014 and 31 March 2015.

The comparative figures are not the company's statutory accounts. Statutory accounts for the period ended 31 March 2015 have been delivered to the registrar and are available from the Company's website. The auditors did not express an opinion on the financial statements as they were unable to obtain sufficient appropriate audit evidence regarding matters of material uncertainty in respect of the funding of the business and were therefore unable to determine whether it was appropriate to prepare the financial statements on a going concern basis.

The report of the auditors did not include any statement under s498(2) or, other than that matter referred to above, under s498(3) of the Companies Act 2006.

2.6 Definitions

Gross order value: Total value of orders placed by consumers on the KOOVS.COM website for products supplied by the Group.

Net sales after returns: Total value of sales made by KOOVS.COM, including VAT, after deducting products which are returned, or not accepted, by the consumer.

Visits to the Koovs.com site: Total number of visits to the KOOVS.COM website or use of the KOOVS.COM app.

Conversion: ratio of orders placed to visits.

Active customers: number of customers who have placed at least one order during the preceding 12 months.

3. Revenue

All of the Group's revenue is generated by the Group's subsidiary in India through its operations as a supplier of branded fashion products. The chief operating decision maker is the Chief Executive Officer who makes resource allocation decisions based on Group management accounts and operating reports for the entire Group. The Group therefore represents a single cash generating unit and a single operating segment.

All of the Group's revenue in both periods was generated in the Republic of India.

4. Taxation

No income tax liability arose during the six months to 30 September 2015 or the year ended 31 March 2015. During the period ended 30 September 2014 a provision was made in relation to potentially unrecoverable income taxes arising in India. This provision was subsequently reversed as not required.

There is no tax charge or credit relating to items charged or credited to other comprehensive income.

5. Earnings Per Share

Basic earnings per share is calculated by dividing the earnings attributable to the owners of the Parent Company by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share is calculated by amending the weighted average number of ordinary shares in issue during the period for the effect of dilutive share options in issue.

The effect of the share options in issue is anti-dilutive and therefore no adjustment has been made to the weighted average shares in issue when calculating diluted earnings per share. There is therefore no difference between basic earnings per share and diluted earnings per share.

6. Cash and bank deposits

Deposits with an original maturity of more than 12 months represent mainly fixed term cash deposits with substantial banks in India.

7. Fair value of financial instruments

The fair value of cash and cash equivalents, inventories, trade receivables, trade payables, and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments. There is no material difference between the carrying amount and the fair value of any other assets or liabilities in the Statement of Financial Position.

8. Related parties

During the period, the Group entered into transactions in the ordinary course of business with certain related parties as follows:

There have been no changes in the list of related parties since 31 March 2015.