The information contained within this announcement is deemed to constitute inside information as stipulated under retained EU law version of the Market Abuse Regulations (EU No. 596/2014) (the "UK MAR"), which is part of UK law by virtue of the European Union (withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

9 December 2021

Seraphine Group plc

("Seraphine" or the "Company")

Interim Results

Seraphine Group plc, the international digitally-led maternity and nursing wear brand, today issues its results for the six months ended 3 October 2021 (the "Period").

Summary Financial Results

^{1. Adjusted EBITDA is Operating (loss)/profit adding back Exceptional items, depreciation and amortisation, private equity fees and share based payments. IFRS 16 adjustment added back for pre-IFRS 16 adjusted EBITDA}

^{2. Adjusted EBIT is Operating (loss)/profit adding back exceptional items and brand value amortisation. IFRS 16 adjustment added back for pre-IFRS adjusted EBIT}

^{3. Free cashflow is adjusted EBITDA adjusted for net change in working capital, IFRS 16 adjustment and capital expenditure}

^{4. Adjusted PAT is adjusted EBIT (post-IFRS 16) less ongoing finance costs and taxation at the company's effective tax rate}

Period Financial Results

·      Total revenue increased by 37.2% on a constant currency basis to £20.8m (H1 FY21: £15.7m), driven by:

o  Strong sales growth in North America +52.8% (CCY) and Europe +43.2% (CCY); and

o  Continued growth in UK home market of +16.7% (CCY)

·      Stable gross profit margin 65.6% (H1 FY21: 65.8%)

·      Adjusted EBITDA (pre-IFRS 16) £2.5m (H1 FY21: £2.9m)

·      Supply chain issues in Q2 impacted momentum and marketing efficiency leading to lower EBITDA margins and impact to free cashflow

Operational Highlights

·      Further expansion of own digital platform with dedicated market sites launched for Canada and Switzerland

·      Successful launch of Zalando Partner Program, strengthening our Digital Partner portfolio

·      Double digit website traffic growth of 12.2% to 7.7m and total orders up 27.0% to 226,183

·      Recruited a variety of senior roles including Chief Information Officer, Financial Planning & Analysis Director, Head of Legal & CoSec in addition to strengthening our PR and HR teams

Post Period End

·      Launched dedicated own digital platform market site for the Netherlands

·      Extended Zalando Digital Partner Programme into Belgium and Switzerland

·      Signed agreement with NEXT as a Digital Partner in the UK with planned launch in 2022

·      Moved to a new, centrally located London Head Office, facilitating better access to talent as we grow

Current Trading and Outlook

·      Positive reaction to marketing mix change with momentum rebuilding quickly: Last 8 weeks trading ending 28 November, including key Black Friday period, at +51% (CCY) sales growth, with own digital platform at +39% (CCY) and North American total sales at +81% (CCY).

·      Digital Partner business trading well, with the Zalando partnership delivering a strong performance to date

·      Retail store environment remains challenging and footfall still below pre-Covid levels

·      Fully stocked for the remainder of the Autumn Winter 21 season with improvements being seen in supply chain for Spring Summer 22 in addition to extra contingency planning by management. Belgian based distribution centre is not impacted by road haulage issues being experienced in the UK.

·      Increases in raw material and freight forwarding costs are having a marginal impact on intake margin, offset by market and channel mix changes at the gross margin level

David Williams, Chief Executive Officer of Seraphine, commented:

"We are today reporting sales growth for H1 in line with updated guidance. In the period, we delivered on key strategic milestones with the launch of Canada and Switzerland (and the Netherlands post period end) dedicated market sites on our own digital platform and successfully launched with a new key Digital Partner, Zalando.

Whilst the period was, as previously noted, impacted by the significantly delayed arrival of key seasonal stock from China, I am pleased to report that the actions taken to rebuild momentum are having a positive impact on current trading and we are therefore confident in delivering on our updated guidance for the full year."

For further information, please contact:

Notes to Editors

Seraphine is an international, digitally led, affordable luxury maternity and nursing wear brand with a diverse range of innovative maternity and nursing products serving an under-competed, needs based, global market.

Seraphine was founded in 2002 with the vision of creating desirable clothes which women would want to wear even if they were not pregnant, and this ethos remains true to this day. The Group has over 19 years' experience designing and developing maternity and nursing wear for women, from first trimester to post-partum and nursing products. The Company's broad product offering is underpinned by Seraphine's core "Continuity" range, which comprises timeless staple pieces which are repeated year-after-year for the relevant seasons and accounts for approximately 70% of the product range.

The Group has achieved global brand recognition through its rapidly growing digital platform. The Group currently exports products to customers in over 120 countries globally, with the Group's largest markets being Europe, North America and the UK.

Chief Executive's Report

I would like to welcome all new shareholders to Seraphine Group plc following our admission to the Main Market of the London Stock Exchange in July.

During the first half total revenue increased by 37.2% on a constant currency basis to £20.8 million (+31.8% at variable currency), with the Group experiencing strong revenue growth from North America of 52.8%, driven primarily by our own digital platform.

First quarter sales growth was particularly strong at over 50%, but, like many other retailers, second quarter growth was impacted by supply chain issues due to the significantly delayed arrival of the Group's core Continuity range as well as new season product from China. This impacted our ability both to satisfy existing customer demand but also to efficiently win new customers early in their pregnancy journey, resulting in a loss of momentum through the key trading month of September. The mitigating actions put in place by management, outlined in our Trading Update on 23 September 2021, have had a positive effect with momentum rebuilding quickly.

We remain focused on our strategy of bringing our innovative and stylish product to more customers worldwide, through our own digital channels and those of our partners. To that end, we successfully launched our new dedicated Canadian and Swiss websites in May (as well as the Netherlands, post period end, in October) and launched direct fulfilment of our own product via the Zalando Partner Program in Germany in July.

Channel Review

The quality and innovation of our product, breadth of choice and strong service proposition continues to attract new and expectant mothers worldwide, for whom we are there throughout their journey of motherhood. Our own digital platforms (eCommerce sites) remain the core of our business, delivering over 85% of sales in the period, and we continue to successfully replicate this in new markets efficiently and profitably. Our capital investment in the Canadian and Swiss sites totalled £30k and as expected we have observed an acceleration in sales in those markets since launch. We saw Group traffic growth of 12.2% to 7.7m, orders increase 27.0% to 226,183 and average basket value increase to £135 from £131.  Our own digital offering is supplemented by new and existing Digital Partners, which contributed 9% of sales. The Zalando Partner Program has unlocked further growth in Germany, with direct fulfilment by Seraphine of sales taken through that channel. Post period end, we have expanded this partnership into Switzerland and Belgium. We have also signed an agreement with NEXT to distribute product through next.co.uk in the UK and expect to launch this in 2022.

Trading in our eight physical retail stores remains challenging, contributing 6% of total sales in the period. Whilst this represents 120% growth from the prior year, this was notably from a very low base due to Covid restrictions/lockdowns in the comparative period and we are not yet seeing footfall return to pre-Covid levels. Our European stores are trading close to our break-even target but the US store trading environment remains challenging. Our US concessions business continues to trade in line with expectations.

Digital Marketing

In the second quarter, our historically highly efficient and first order profitable digital marketing strategy was impacted by the lack of availability of key styles as a result of the aforementioned supply chain issues, impacting conversion rate and resulting in a higher blended CAC in the period of £16.50, compared to a historical average of around £13.30. Overall conversion rate in Q1 was strong at 3.0%, a trend we had expected to continue were it not for the stock issues, which resulted in a drop to 2.8% in Q2. With stock availability resolved and a rebalancing of our marketing investment in favour of demand creation channels, we are seeing blended CAC levels closer to historical levels since the period end.

Product Strategy

In the period we launched our dedicated Athleisure range, further strengthened our outerwear collection with the introduction of multi-climate coats and increased our size range to offer a more inclusive shopping experience for our global customer base. Product innovation continues to be at the heart of what we do at Seraphine and our innovation pipeline is extremely healthy, underpinned by Seraphine's Continuity range.

People

We successfully recruited a variety of senior roles to help support the next growth phase of the Company including a Chief Information Officer, Financial Planning & Analysis Director, and Head of Legal & CoSec. We also strengthened our PR and Human Resources teams and post period end moved to a new, centrally located London Head Office, facilitating better access to talent as we grow.

Current Trading and Outlook

In the 8 weeks to 28^th November, we have delivered revenue growth of +51% (on a constant currency basis), with momentum rebuilding quickly as a result of the actions put in place by management in September. Our own digital platform grew at 39% (CCY) in the period and we continue to see strong total sales growth in North America of +81% (CCY), which has reacted particularly well. We plan to launch dedicated own digital platform sites in the Nordics in 2022.

Our Digital Partner business is trading well, with the Zalando partnership delivering a strong performance to date and an agreement signed with NEXT to launch in the UK in 2022.

Trading in our eight retail stores remains challenging and we have yet to see footfall return to pre-pandemic levels.

We are fully stocked for the remainder of the Autumn Winter 21 season, including the Christmas period. Despite the situation being much improved since the Summer, some supply chain disruption remains, and we have put in place additional contingency planning leaving us much better placed to manage any future supply chain impact. With our Distribution Centre being Belgian based, we are not affected by the current road haulage issues being experienced in the UK.

We remain confident in our previous guidance of sales growth for the full year of at least in line with H1 FY22 and Adjusted EBITDA (pre IFRS 16) of at least the level of FY21.

Financial Review

Revenue

During the first half total revenue increased to £20.8 million (+31.8% at variable currency), with the Group experiencing strong revenue growth from our own digital platform, with all existing sites increasing sales and the addition of new sites in Italy, Switzerland and Canada.

This growth was complemented by the launch of the Zalando Partnership Programme in June 2021, the re-opening of our retail stores and wholesale sales recovering post COVID-19. The North American market has performed strongly (+40.8% at variable currency) where growth is driven by own digital platforms including the launch of a dedicated Canadian site, complemented by the re-opening of the two New York stores and the two Macys concessions. The EU growth (+37.5% at variable currency) was also driven by own digital platforms, the launch of the Swiss site and Zalando Partnership Programme in Germany and the re-opening of the two Paris Stores. UK revenue (+16.7% at variable currency) growth was achieved from the digital platform and the re-opening of the four UK stores. Rest of World growth (+16.4% at variable currency) was driven by the Australian digital platform.  

Gross Margin

The Company delivered gross profit of £13.6m (H1 1: £10.3m), achieving a gross profit margin of 65.6%. The level of gross profit has been slightly impacted by increased freight costs, arising from the disruption to sea freight from China.

Adjusted EBITDA pre-IFRS 16

The adjusted EBITDA pre-IFRS 16 margin of 12.0% is lower than the prior year at 18.6%, primarily due to supply chain disruption. The impact of the supply chain issues in the second quarter resulted in a loss of trade, which impacted the return on investment of customer acquisition and the ratio of fixed costs to sales.

Operating costs

Distribution costs for the period increased to £3.5m (H1 FY21: £2.3m), in line with expectations. The increase was principally a result of the variable nature of these costs, combined with a commensurate increase in revenue. Distribution costs increased as a proportion of revenue from 14.5% to 16.7%, as the Company experienced an increased share of orders from the United States, further developed its service proposition and faced both Covid and Brexit related surcharges on courier costs.

Customer acquisition spend increased as planned to £3.8m (H1 FY21: £2.4m), reflecting continued investment in the Company's new and existing own digital platform sites.

Retail store costs have increased in line with the reopening of stores post Covid.

Other operational costs have increased to £3.4m (H1 FY21: £2.5m). This relates to planned growth combined with lower rent concessions and government support and additional investment in resources to support the Company's transition to a plc.

Interest

Net interest costs increased £3.7m in the period to £3.9m (H1 FY21: £0.2m). This is predominantly driven by writing off the prepayment of £2.4m of facility fees and the repayment of shareholder loan notes and HSBC term loans from IPO proceeds. Shareholder interest costs up to the IPO were £1.3m. 

Tax

For the current period, a tax rate of 19% has been used, which is in line with HMRC guidelines. The tax has been adjusted for non-deductible items, which includes shareholder loan facility fees, shareholder interests and exceptional items associated with the listing of Seraphine Group plc.

Exceptional costs

Items included within exceptional costs include all costs associated with the IPO

Loss per share

Basic loss per share was 30.7p

Cashflow

The operating cash flow for the period was £1.8m, excluding exceptional items. This compares to £3.6m in the equivalent prior period. Cash flow has been impacted by the working capital impact of supply chain delays to inbound stock.

Seraphine's outflow within investing activities up to 3 October 2021 was £0.8m compared with a prior year net outflow of £0.2m, as previously disclosed £0.6m of this outflow represents the first of two tranches of the earnout payment to the previous owners of the group, Bridgepoint Growth, Cecile Reinaud and Management. 

Seraphine's net cash generated in financing activities up to 3 October 2021 was £2.7m, representing net cash flow from IPO proceeds after loan notes and bank debt repayments, compared to £1.7m outflow in the prior year.

The impact of the additional time needed to deliver product to the distribution centre has had a negative impact on the Company's free cashflow. The free cashflow for the period represented 50.7% of adjusted EBITDA (pre-IFRS 16). The management team will continue to prioritise and proactively manage our inbound stock position whilst supply chain issues remain and we therefore expect second half free cashflow to improve over first half but still be lower than historical levels.

Auditors' appointment

PricewaterhouseCoopers LLP was appointed as independent auditor to the Company and in accordance with section 485 of the Companies Act 2006, a resolution proposing their re-appointment will be put to the next Annual General Meeting.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares or other securities in the Company nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares or other securities of the Company. Statements in this announcement reflect the knowledge and information available at the time of its preparation.

Forward-looking statements

This announcement contains forward-looking statements. Forward-looking statements sometimes use words such as 'may', 'will', 'seek', 'continue', 'aim', 'anticipate', 'target', 'projected', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', 'on track', 'achieve' or other words of similar meaning. Such statements and forecasts involve risk and uncertainty because they are based on current expectations and assumptions but relate to events and depend upon circumstances in the future and you should not place reliance on them. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this announcement.

Subject to our obligations under the applicable laws and regulations of any relevant jurisdiction, in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Nothing in this announcement constitutes or should be construed as constituting a profit forecast.

CONDENSED CONSOLIDATED INCOME STATEMENT AND CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 3 October 2021