The directors present the strategic report for the period ended 3 February 2024.
The principal activity of the company is that of an investment holding company which is part of the Genesco Inc. group.
The company was incorporated on 13 June 2011 and its financial year ends on the Saturday closest to 31 January. On 23 June 2011 the company acquired the entire share capital of Schuh Group Limited, a company registered in Scotland for consideration of £79,046,151.
Genesco (UK) Limited issued Loan Notes to Genesco Jersey Ltd in January 2012. Genesco (UK) Limited then issued these on The International Stock Exchange (TISE) in February 2012 at a value of £44,985,155 at a fixed coupon rate of 7.7% redeemable in June 2021. On April 14, 2020, the company refinanced its loan notes listed on the International Stock Exchange. In the financial period ending 30 January 2021, Schuh Group Limited declared a dividend distribution of £50,000,000 to the company, and the company issued a new £36,461,107 note payable to Genesco Jersey Limited with an interest rate of 3.9% and a maturity date of April 2025. The company used the dividend distribution and the new loan note to repay its existing loan of £86,461,107 with Genesco Jersey Limited. This debt was listed on The International Stock Exchange on January 28, 2021.
Another key feature of the entity’s financing arrangement is the Revolving Credit Facility which was agreed on 31 January 2018 and amended on 28 January 2022 and matures on 28 January 2027. The current balance as at 3 February 2024 is £nil (2023: £12,000,000).
Interest payable was £2,065,000 (2023: £1,875,000).
The loss for the period after taxation amounted to £2,102,000 (2023: loss of £1,891,000).
In view of its limited activities, the company is only exposed to risks arising from:
Investment risk, in that the value of its investment in Schuh Group Limited could fall below its historical cost carrying value. Schuh Group seeks to maintain and improve its revenues through differentiation in its delivery of high standards of customer service. Costs are carefully controlled through commercially sound authorisation procedures and regular, sophisticated management reporting. The carrying value of investments is reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
Interest rate risk, the company is exposed to fair value risk on the fixed rate from the loan notes issued and cash flow risk from the variable rates on the revolver facility. Interest rate risk is monitored and reviewed through the Group treasury function.
Liquidity risk, in that the company will encounter difficulty in meeting obligations associated with financial liabilities. The company manages liquidity risk via revolving credit facilities and long-term debt. The company also manages liquidity risk via financial support from its ultimate parent company, Genesco Inc. Genesco Inc. has indicated in writing that for a period of twelve months from the approval of these financial statements, it will continue to make available funds as are needed by the company to meet its liabilities as they fall due.
Financial risk management objectives and policies
The company does not permit trade in any financial instruments or derivatives. The only significant financial instrument is debt that is held by Genesco UK Ltd and listed on the International Stock Exchange.
Measurement of the company's performance is consistently applied and control is exercised by local and divisional management. The company has a budgeting system in place whereby actual performance is measured against budget on a monthly reporting timetable. As the principal activity of the company is that of an investment holding company, management has not assigned any key performance indicators.
The Directors are well aware of their duty under s172 of the Companies Act 2006 to act in the way which they
consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole and, in doing so, to have regards (amongst other matters) to:
The likely consequences of any decision in the long term;
The interest of the company’s employees;
The need to foster the company’s business relationships with suppliers, customers, and others;
The impact of the company’s operation on the community and the environment;
The desirability of the company maintaining a reputation for high standards of business conduct; and
The need to act fairly as between members of the company.
As the principal activity of the company is to act as an intermediate holding company, the company has no employees and no external customers or suppliers. Therefore, the Board primarily considers the interest of its sole member and ultimate parent company, Genesco Inc., with regard to performing their duties under section 172. Board meetings are held regularly where the company’s activities are considered and decisions are made. All Board decisions made during the year were to promote the success of both the company and its ultimate parent company and were in line with the strategic goals and objectives of the group. All directors receive information to ensure that they have regard to section 172 when making relevant decisions.
Environment
The Directors have determined that there is no material impact from climate change known about now or that could arise in the future given the principal activity of the company is that of an investment holding company which is part of the Genesco Inc. group.
On behalf of the board
The directors present their annual report and financial statements for the period ended 3 February 2024.
The results for the period are set out on page 10.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
The company expects similar activity in the 2025 financial period, continuing as a holding company.
The auditor, Johnston Carmichael LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Going concern
The directors have undertaken an exercise to review the appropriateness of the continued use of the going concern basis. The company’s business activities, a review of the business and a description of the principal risks and uncertainties together with the company’s final risk management objectives and policies and narrative regarding its exposure to key financial risks are outlined in the strategic report.
At 3 February 2024 the company had net assets of £36.7m, and net current liabilities of £5.9m, including amounts owed to group undertakings of £42.8m. The company’s loss for the year of £2.1m was principally related to interest expenses on the amount owed to group undertakings.
The company is in a net asset position as at 3 February 2024. The directors have considered the company’s cash position and forecast cashflows for at least 12 months from the date of these financials. Based on current forecasts the company is expected to be able to operate for the foreseeable future with reliance on financial support from its ultimate parent company, Genesco Inc.
Genesco Inc. has indicated in writing that for a period of at least 12 months from the approval of these financial statements, it will continue to make available funds as they are needed by the company to meet its liabilities as they fall due.
The directors consider that the company has adequate resources to continue in operation for the foreseeable future and accordingly, they continue to adopt the going concern basis in preparing the financial statements.
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
We have audited the financial statements of Genesco (UK) Limited (the 'company') for the period ended 3 February 2024 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Extent to which the audit is considered capable of detecting irregularities, including fraud (continued)
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and the sector in which it operates, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
Companies Act 2006;
Tax legislation (UK); and
UK Generally Accepted Accounting Practice.
We gained an understanding of how the company is complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of submitted returns, external inspections, relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. In areas of the financial statements where the risks were considered to be higher, we performed procedures to address each identified risk. We identified a heightened fraud risk in relation to:
Management override of controls
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the company’s procurement of legal and professional services;
Performing audit procedures over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and assessing judgements made by management in their calculation of accounting estimates for potential management bias;
Completion of appropriate checklists and use of our experience to assess the company’s compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
There are no items of other comprehensive income in the current or prior period.
Genesco (UK) Limited is a private company limited by shares incorporated in England and Wales. The registered office is 5 New Street Square, London, United Kingdom, EC4A 3TW.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £000.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements (where applicable to the company):
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Genesco Inc. These consolidated financial statements are available from its registered office, 535 Marriott Drive, Nashville, TN 37214, USA.
The company prepares its financial year end to the Saturday closest to 31 January. For the current reporting period this has resulted in the financial statements being prepared for the period from 29 January 2023 to 3 February 2024. The comparative financial statements, prepared on the same basis, cover the period from 30 January 2022 to 28 January 2023 and as a result the comparative results (including related notes) are not directly comparable. The current period represents 53 week (2023: 52 week) trading period.
Basic financial assets, which include certain debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including certain creditors, loans from fellow group companies and other borrowings, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
At each reporting period end date, the directors review the carrying value of the company's fixed asset investments to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). The assessment of recoverable amount involves judgement over net sales value and future cash generation attributable to the underlying assets. The carrying value of fixed asset investments at the reporting date is outlined at note 8.
Fees payable to the company's auditor have been borne by one of the company's subsidiary undertakings.
Due to the principal activity of being a holding company, the company does not have any employees.
No director received payment, or was due to receive payment, from the company for their services provided during the period. These costs are borne by other group companies. The directors consider that the level of their qualifying services provided to this company is inconsequential in both 2024 and 2023.
The actual charge for the period can be reconciled to the expected credit for the period based on the profit or loss and the standard rate of tax as follows:
Deferred tax not recognised
The company has not recognised deferred tax assets in respect of certain tax losses and non-trading timing differences carried forward as at 3 February 2024 on the basis that the timing during which tax losses could be regarded as recoverable against future profits cannot be determined with reasonable certainty. The unprovided deferred tax asset is estimated at £4,211k (2023: £4,210k).
Change in tax rate
A change in the UK Corporation tax rate from 19% to 25% took effect from 1 April 2023.
The directors note that, as at 3 February 2024, the net assets of the subsidiaries are lower than the carrying value at which they are held in the company's balance sheet. The directors have considered whether impairment indicators exist for the investments, including considering the net realisable value of the companies based upon their expected future cashflows. No impairment indicators have been identified and no impairment allowance has been made within the financial statements.
Details of the company's subsidiaries at 3 February 2024 are as follows:
£6,292k (2023: £4,662k) of the accrual balance relates to accrued interest on the loan notes.
Loan notes issued
The company issued loan notes to Genesco Jersey Ltd in January 2012. The company then issued these on The International Stock Exchange ('TISE') in February 2012 at a value of £44,985k and at a fixed coupon rate of 7.7% redeemable in 2021. On 14 April 2020, the company refinanced its loan notes listed on TISE. In the financial period ending 30 January 2021, Schuh Group Limited declared a dividend distribution of £50,000,000 to the company, and the company issued a new £36,461,107 note payable to Genesco Jersey Limited with an interest rate of 3.9% and a maturity date of April 2025. The company used the dividend distribution and the new loan note to repay its existing loan of £86,461,107 with Genesco Jersey Limited. This debt was listed on TISE on 28 January 2021.
Revolver borrowings
On 31 January 2018, Genesco Inc. entered into the Fourth Amended and Restated Credit Agreement, (the “Credit Facility”) by and among Genesco Inc., certain subsidiaries of Genesco Inc. party thereto, as other borrowers, the lenders party thereto and Bank of America, N.A., as agent.
On 28 January 2022, Genesco Inc. entered into a Third Amendment to the Credit Facility to, among other things, (i) extend the maturity date to 28 January 2027, (ii) remove the first in-last out term loan that was in an amount equal to $17.5 million and (iii) add certain in-transit inventory to the borrowing base, subject to customary eligibility requirements. In addition, the Third Amendment makes conforming changes to replace LIBOR with the Secured Overnight Financing Rate ("SOFR"), the Sterling Overnight Index Average ("SONIA") and EURIBOR. The Total Commitments (as defined in the Credit Agreement) for the revolving loans remains at $332.5 million. The Credit Facility continues to be secured by certain assets of the company and certain subsidiaries of the company, including accounts receivable, inventory, payment intangibles and deposit accounts. Equity interests, certain equipment, intellectual property and most leasehold interests are specifically excluded. The Credit Facility continues to provide for the borrowing base to include real estate as those assets are added or maintained as collateral and contains customary real estate covenants.
The Credit Facility includes a revolving credit subfacility for the benefit of the company in an aggregate amount not to exceed $100.0 million, which includes a $10.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $10.0 million. For the period ended 3 February 2024, the interest rate on the facility ranged from 4.71% to 6.47% (2023: 1.48% to 4.71%).
The company has the option, from time to time, to increase the availability of its subfacility under the Credit Facility by an additional amount of up to $100.0 million.
The relevant assets of the company will be included in the Borrowing Base, provided that amounts borrowed by the company based solely on its own borrowing base will be limited to $100.0 million, subject to the increased facility.
The loans and other obligations under the Credit Facility are secured by a perfected first priority lien on, and security interest in certain assets of the company and certain subsidiaries of the company, including accounts receivable, inventory, payment intangibles, deposit accounts, certain intellectual property, and certain real estate assets and specifically excludes equity interests, equipment, and most leaseholds interests. The assets of the company will not be pledged as collateral unless the UK borrowing base is established and once pledged, will only serve to secure the obligations of GCO Canada ULC and the company and their respective subsidiaries.
At 3 February 2024, there were £nil (2023: £12,000,000) in borrowings under the company's part of the credit facility and the additional $100 million sublimit increase had not been exercised so the assets of the company have not been pledged as collateral. The company used the proceeds from each of the share issuances (per note 14) to repay in full its balance on the Revolving Credit Facility as of 26 October 2023.
Details on the maturity and any security in place over the company's borrowings is outlined at note 12.
On 25 July 2023, the company issued 5,812,279 Ordinary shares of £1 each at par value.
On 25 October 2023, the company issued 6,700,000 Ordinary shares of £1 each at par value.
The company used the proceeds from each of these share issuances to repay in full its balance on the Revolving Credit Facility as of 26 October 2023.
Profit and loss reserves represent total comprehensive income for the period and prior periods less dividends paid.
The company has taken advantage of the exemption in FRS 102 not to disclose transactions with other group companies which meet the criteria that all subsidiary undertakings which are party to the transactions are wholly owned by the ultimate parent undertaking.