Filing identity and reporting period
Important mismatch: The supplied filing is Naked Brand Group Limited’s annual Form 20-F, filed May 8, 2020, for the fiscal year ended January 31, 2020. It is not a Cenntro Inc. filing and does not report a 2019 Q4 period. Financial statements are audited, prepared under IFRS, and presented in New Zealand dollars (NZ$), generally in millions below.
Business context
Naked Brand Group designed, distributed, wholesaled and retailed intimate apparel and swimwear. Its channels included stores in Australia and New Zealand, e-commerce, and wholesale partners. The company was restructuring and reducing its geographic footprint, including exiting U.S. wholesale and substantially reducing E.U./U.K. wholesale operations. It sold the Naked and NKD trademarks and terminated its Heidi Klum license.
Key financial results
| Metric | FY ended Jan. 31, 2020 | FY ended Jan. 31, 2019 |
|---|---|---|
| Revenue | NZ$90.1m | NZ$111.9m |
| Gross profit / margin | NZ$33.8m / 37.5% | NZ$37.4m / 33.5% |
| Net loss | NZ$54.3m | NZ$49.2m |
| Non-IFRS EBITDA | Loss of NZ$16.2m | Loss of NZ$25.6m |
| Operating cash flow | Outflow NZ$19.9m | Outflow NZ$9.4m |
| Cash and cash equivalents | NZ$3.8m | NZ$2.0m |
| Working capital | Deficit NZ$22.2m | Deficit NZ$29.4m |
| Borrowings | NZ$38.9m | NZ$21.0m |
| Total shareholders’ equity | Deficit NZ$6.3m | NZ$10.5m positive |
Revenue fell 19.5%, primarily due to inventory shortages associated with liquidity constraints and the wholesale-market exits. Gross margin improved, which management attributed to product and customer mix and promotional activity, but remained affected by supply issues. Brand-management expense declined 27.8% amid lower store overhead and marketing spend. Net loss widened 10.3%, reflecting lower gross profit, higher tax expense and significant restructuring, impairment and lease-related costs.
Operating cash outflow more than doubled year over year. Financing provided NZ$22.1m of net cash, including proceeds from shares and convertible notes; cash at year-end rose by NZ$1.8m. Investing cash outflow was NZ$0.4m. The company reported no dividend.
Debt, liquidity and material changes
- At January 31, 2020, borrowings included NZ$17.9m of bank loans, NZ$19.7m of convertible notes and NZ$1.3m of other loans. Lease liabilities, presented separately, totaled NZ$25.8m.
- After year-end, the BNZ facility was amended and extended to March 2022. The revolving facility limit and outstanding balance were NZ$16.7m as described after the amendment; required repayments total NZ$7m through November 2021. The company said COVID-19 could cause covenant noncompliance and it was negotiating revisions with BNZ.
- Convertible notes issued across 2019–2020 bear 20% annual interest compounded daily, generally mature 24 months after issuance, and can create substantial dilution. Reported outstanding balances and funding totals vary by date and passage in the filing.
- FY2020 included NZ$14.6m of brand-transition, restructuring and transaction expenses and NZ$8.9m of impairment expense. Intangible assets declined to NZ$28.3m from NZ$37.9m, including full impairment of U.S. goodwill and further brand and license impairments.
- IFRS 16 adoption brought NZ$27.9m of lease liabilities and NZ$26.2m of right-of-use assets onto the balance sheet at transition. It also changed the presentation of lease expenses and cash flows, limiting direct comparison with the prior year.
Outlook, risks and contingencies
The auditor included an explanatory paragraph stating that recurring losses and operating cash outflows, a working-capital deficit, covenant breaches and other matters raise substantial doubt about the company’s ability to continue as a going concern. Management said additional capital, improved sales and margins, creditor support, and lender cooperation were needed; it expected to fund losses through the beginning of FY2022. The filing gives differing amounts and status for post-year-end fundraising, so the exact remaining funding need is not clear from the text.
COVID-19 had closed all brick-and-mortar stores as of the filing and disrupted suppliers, deliveries and inventory flow. E-commerce continued, and the company reported NZ$2.0m of New Zealand government subsidies received. It was seeking supplier payment extensions, rent abatements and loan-payment relief; future revenue, liquidity and operating results were uncertain. No specific financial guidance was provided.
Other notable risks include dependence on external financing, high-interest convertible debt and potential dilution, weak liquidity and covenant risk, competition and changing consumer demand, seasonal sales concentration, supplier and inventory availability, foreign-exchange exposure, and customer credit risk. Nasdaq had notified the company of a minimum-bid-price deficiency, with a stated compliance deadline of November 23, 2020 after a COVID-related tolling period. The company also disclosed material weaknesses in financial-reporting controls, including insufficient IFRS/SEC expertise, no formally implemented documented control system, and inadequate review processes. Management’s remediation plans were not guaranteed to succeed.
A lawsuit filed March 24, 2020 sought rescission of a share-issuance transaction; management intended to defend it and recorded no provision. The filing also reports NZ$0.7m of trade-guarantee arrangements. The Heidi Klum license termination involved a US$3.5m fee payable in installments through December 2020.
Investor verification priorities
- Confirm the issuer and period: this is Naked Brand Group Limited FY2020, not Cenntro Inc. or 2019 Q4.
- Verify the going-concern funding requirement, funds actually raised after year-end, cash runway, and status of supplier and creditor arrangements.
- Reconcile debt by instrument and date, including BNZ covenant waivers or amendments, convertible-note balances, interest, conversion terms and dilution exposure.
- Check the FY2020 cash-flow statement and working-capital position; assess whether inventory availability and operating cash burn improved after year-end.
- Review impairment assumptions and the effects of IFRS 16 when comparing margins, EBITDA and cash flows across periods.
- Track COVID-19 trading impacts, store reopening and supplier deliveries, Nasdaq listing compliance, control remediation, and the outcome of the Connell litigation.
- Reconcile reported revenue: one segment summary shows NZ$90.605m, while the audited consolidated statements report NZ$90.065m.