ASOS : Financial Report

10 May 2023ASOS plc ("the Company")

Global Online Fashion Destination

Interim Results for the six months to 28 February 2023

Executing on Driving Change agenda, creating strong foundations for a return to profitability

and cash generation in H2 FY23 and beyond

Summary financial results

Strategic Update

• Despite the ongoing challenges in the operating environment, ASOS is on track to deliver full year targets of: o Over £300m of Driving Change agenda benefits, with over £100m delivered in H1. Actions already taken
  will drive more than 95% of c.£200m profitability benefits expected in H2 FY23;
  o Inventory reduction of c.20% year-on-year ('YoY'), with 9% reduction vs FY22 achieved in H1, slightly ahead of plan;
  o Adjusted gross margin improvement of c.100bps, with recent run-rate up more than 300bps YoY;
  o Profitability and cash generation in H2 FY23 and beyond, with £40-60m adjusted earnings before interest and tax ('EBIT') and over £150m free cash inflow7 in H2 FY23;
• Robust and flexible balance sheet with an amendment and extension of existing £350m revolving credit facility ('RCF') through to November 2024. The facility steps down over the term, reducing to £220m by August 2024. The Company had cash and undrawn facilities over £400m at 28 February 2023.
• Refreshed management team, with newly formed Management Committee now largely complete.
• ASOS remains focused on executing the final stages of its Driving Change agenda, creating strong foundations for its next phase of growth.

H1 Results Summary

• Revenue8 declined by 7% (down 8% on a reported basis) in H1 FY23 and 15% in P2 FY23, reflecting both deliberate actions on capital allocation to improve profitability and a challenging trading backdrop. The actions taken account for broadly 50% of the revenue decline since December but are driving improving order economics.
• Sales momentum in January and February reflected: (1) planned profitability actions including reduced markdown, discipline on marketing spend and country-specific proposition changes; (2) reduced width in the assortment as the Company took decisive action to right-size stock; and (3) a challenging online retail environment as online penetration declined YoY - although remaining notably higher than pre-pandemic.
• UK sales were down 10% YoY, Europe flat, US down 7% and Rest of World down 12%. Variation in performance reflects regional differences in the economic backdrop as well as country-specific profit actions taken by the

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Company in-line with its focus on profitability over top-line growth. The regional trends in sales growth were reflected in active customer numbers in the period. However, ASOS has continued to grow its share of its core UK online retail market among its main 16-35 demographic and has increased its share of its customers' wallets9.

• Adjusted gross margin10 was broadly flat, both YoY and from P1 FY23, at 42.9%. It showed encouraging progress over the period, with February adjusted gross margin up more than 300bps YoY and sustained through March and April, supported by lower freight and duty rates.
• Stock has been reduced by 9% from the level reported at FY22, slightly ahead of the 5% H1 FY23 reduction planned at the time of the P1 FY23 update.
• H1 FY23 adjusted EBIT loss was £69.4m and adjusted loss before tax was £87.4m. Actions taken under the Driving Change agenda had a positive profit impact of more than £100m, partially offsetting anticipated headwinds of c.£180m (predominantly from inflation and normalisation of return rates).
• The reported loss before tax of £290.9m includes £203.5m of adjusting items, primarily relating to the execution of the Driving Change agenda. These include £128.2m relating to the previously announced stock write-off and £49.4m of non-cash property impairments and closure costs relating to the reduction of the Company's head office and logistics footprint. The cash outflow relating to adjusting items in the period was £23.0m. Further detail on the adjusting items is included in note 3 on pages 23-26.
• Free cash outflow11 for the half was £262.7m mainly driven by the reported loss in the period, H1-weighted historical committed capex investment of £115.0m and the phasing of stock receipts and payments, with the cash benefit associated with the lower H1 intake expected in H2 FY23.
• ASOS ended H1 FY23 with cash and undrawn facilities totalling £408.6m at what is typically the seasonal trough in its net working capital cycle.

Current Trading & Outlook

• Sales momentum in P2 FY23 (-15% CCY ex-Russia) has broadly continued into March and April with approximately half of the sales decline driven by planned Driving Change initiatives. However, with adjusted gross margin run rate up more than 300bps YoY, adjusted gross profit was broadly flat YoY over the same period, reflective of the prioritisation of profitability over growth.
• ASOS will retain its focus on profitable sales in H2 FY23 and its commitment to exit the year with a cleaner inventory position. If there is no improvement to the external trading environment, expectations for H2 FY23 are:
  o Sales (CCY ex-Russia) decline of low double-digit YoY; o Adjusted gross margin up c.200bps YoY;
  o Inventory reduction of c.20% YoY;
  o Adjusted EBIT of £40-60m, adjusted EBIT margin c.3%;
  o Free cash inflow of over £150m, excluding all incremental refinancing costs (interest, arrangement and advisor fees). This equates to over £125m free cash inflow including refinancing costs;
  o Capex of £60-85m(in-line with FY23 guidance of £175-200m);
  o Interest expense of c.£30m, including amortisation of arrangement fees and related costs;
  o EBIT impact of adjusting items in the range of £25m-£30m in H2 FY23, of which £15m is non-cash (mostly relating to the Driving Change agenda).
• For FY23, free cash outflow (prior to incremental refinancing costs) will be around £100m (i.e. around the bottom end of the £0 to £100m outflow guidance provided at FY22).

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José Antonio Ramos Calamonte, Chief Executive Officer said:

"Our focus is on improving our core profitability, prioritising order economics over top-line growth and I am pleased with the strategic and rapid operational progress the business has made in the first half of the financial year, against some very challenging trading conditions. Thanks to the hard work and commitment of our teams, we have accelerated the roll-out of our new commercial model, delivered more than £100m of profit optimisation and cost saving initiatives, extended our financing facility and continued to build out our top team while remaining committed to our Fashion with Integrity agenda. Taken together, these measures will create a more sustainably profitable and cash generative business as we reinforce our position as a leading destination for our fashion-loving customers.

"While some of these changes have impacted short-term sales growth, there are many causes for optimism as we progress through the second half of the year. We are improving our gross margin run rate in the face of significant headwinds, are starting to see the benefits of a repositioned stock profile, and are taking action to reduce the proportion of our sales which are not profitable. Initiatives are in place to drive a further c.£200m of benefit in the second half and I am very confident of our return to sustainable profit and cash generation in the second half of the year and beyond."

The amendment and extension to Revolving Credit Facility agreed with the Company's banking syndicate constitutes inside information. This announcement therefore includes inside information.

The person responsible for arranging the release of this announcement on behalf of ASOS is Emma Whyte, General Counsel and Company Secretary.

Notes

1. All numbers subject to rounding throughout this document.
2. Constant currency is calculated to take account of hedged rate movements on hedged sales and spot rate movements on unhedged sales.
3. Calculation of metrics, or movements in metrics, on an ex-Russia basis involves the removal of Russia from H1 FY22 performance. This adjustment allows YoY comparisons to be made on a like-for-like basis following the decision to suspend trade in Russia on 2 March 2022.
4. Excludes one-off jobber income in relation to the stock write-off program of £2.1m in H1 FY23. Further detail on the adjusting items can be found in note 3 on pages 23-26.
5. Includes retail sales, wholesale and income from other services.
6. Definitions of the adjusted performance measures used above and throughout this document can be found on pages 45-46.
7. Free cashflow guidance is excluding all incremental refinancing costs (interest, arrangement and advisor fees).
8. All sales numbers quoted in this document are at constant currency and exclude Russia from the H1 FY22 comparative base period unless otherwise stated.
9. Share of UK online retail market based on Kantar | Total Market | Total Clothing, Footwear and Accessories | 16-35 year olds | Market Shares |

1. w/e 5th March 2023 vs LY, share of customers' wallets based on Kantar | ASOS Shoppers | Online | Spend % I 24 w/e 5th March 2023 vs LY.

1. Excluding the gross profit impact of the stock write-off of £119.7m announced at FY22 and non-underlying sales tax of £4.9m. Reported gross margin of 36.1% (down 700bps YoY). Further detail on adjusting items can be found in note 3 on pages 23-26.
2. Definition of free cash outflow can be found on pages 45-46.

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Investor and analyst meeting:

The Company will be hosting an in-person presentation for analysts and investors at 9.00am at ASOS HQ, Greater London House, NW1 7FB. For those unable to attend in person a live webcast will be available, and a recording of the presentation will be uploaded to the ASOS investor relations website afterwards.

To access live please dial +44 203 901 7895 and use Meeting ID: 882 4156 1706 and passcode: 747285. A live stream of the event will be available here.

A recording of this webcast will be available on the ASOS Plc investor centre website after the event: https://www.asosplc.com/investor-relations/

Background note

ASOS is a destination for fashion-loving20-somethings around the world, with a purpose to give its customers the confidence to be whoever they want to be. Through its app and mobile/desktop web experience, available in nine languages and in over 200 markets, ASOS customers can shop a curated edit of over 60,000 products, sourced from nearly 900 global and local third-party brands alongside a mix of fashion-ledown-brand labels - ASOS Design, ASOS Edition, ASOS 4505, Collusion, Reclaimed Vintage, Topshop, Topman, Miss Selfridge and HIIT. ASOS aims to give all of its customers a truly frictionless experience, with an ever-greater number of different payment methods and hundreds of local deliveries and return options, including Next-Day Delivery and Same-Day Delivery, dispatched from state-of-the-art fulfilment centres in the UK, US and Germany.

Forward looking statements:

This announcement may include statements that are, or may be deemed to be, "forward-looking statements" (including words such as "believe", "expect", "estimate", "intend", "anticipate" and words of similar meaning). By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances, and actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Save as required by applicable law, the Company undertakes no obligation to publicly revise any forward-looking statements in this announcement, whether following any change in its expectations or to reflect events or circumstances after the date of this announcement.

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ASOS plc ("the Company")

Global Online Fashion Destination

Interim Results for the six months to 28 February 2023

CEO Review

In my inaugural ASOS results announcement last October, I set out a frank assessment of the Company's many strengths, but also some areas where our performance was lacking. This is an incredible business with a compelling brand, customer offer and fashion credibility. The opportunity is in improving the way we operate, including delivering on our Fashion with Integrity programme on which we have published our second annual progress report. This diagnosis resulted in our Driving Change agenda, an action plan to accelerate the changes needed to transform ASOS into a sustainably profitable and cash generative business, built on four key principles: simplicity, speed to market, operational excellence; and flexibility and resilience. The economic environment we are operating in is extremely challenging, but I am delighted with the commitment and dedication of the ASOS team to deliver on our plan. The Driving Change initiatives implemented to date have generated more than £100m of benefit in H1 FY23 and created a strong foundation for ASOS' return to profitability in H2 FY23 and beyond. Indeed, more than 95% of the c.£200m of benefits expected in H2 FY23 are based on initiatives already in place.

Revenue declined 7%1 YoY in H1 FY23 to £1,840.6m (down 8% on a reported basis2). This performance reflects both a challenging trading environment and the impact of profitability actions taken under the Driving Change agenda, largely since December. We remain convinced these measures are the right ones to achieve our ambition to become a sustainably profitable, cash generative business in the longer term and we have already seen order economics improve as a result. We are making these changes at the same time as our customers are feeling the squeeze financially and in the short-term are returning to physical stores post-pandemic. However, on a three-year view online penetration has increased substantially, and we remain confident in the structural drivers underpinning continued growth in the online channel in the medium term. In the meantime, we have grown our share of the 16 to 35 online retail market in the UK, maintaining our market leading position as our proposition continues to resonate with our core consumer. The strength of our offer is perhaps best reflected by the performance of the Topshop brand, which has delivered retail sales growth of 12%3 YoY and a higher margin than the Company average.

A detailed update of our progress against our Driving Change agenda is covered in the following pages.

1. Renewed commercial model

The new commercial model comprises a comprehensive change in ASOS' approach to buying and merchandising, improved stock management discipline and reduced complexity in our logistics network to ensure that its fashion-loving20-something core customer base is exposed to cutting edge fashion curated in ASOS' own unique way. The benefits of this are twofold: a more engaging customer experience with exposure to more inspirational, relevant product; and a higher proportion of more profitable full-price sales.

Current product lead times mean there is a lag between operational change and visible results. However, over the period ASOS has taken decisive action aimed at simplifying the product journey, including increasing flexibility in its buying processes, re-setting its stock profile and closing ancillary warehouse space. Encouragingly, there was positive progression in underlying gross margin through the half. While the sales outlook for the year is more challenging than initially anticipated, the current adjusted gross margin run rate is up more than 300bps YoY and provides headroom for ASOS to take action if necessary to ensure it exits the year with a significantly improved stock profile, thus laying the foundations for FY24.

1. Total revenue CCY excluding Russia declined by 7% (down 10% CCY including Russia).
2. Total reported revenue including Russia declined by 8% (down 5% on a reported basis excluding Russia).
3. Topshop brand sales on the ASOS.com platform growth of 12% (excluding Russia) and 10% (including Russia).

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