ANNUAL
REPORT
2021
Dear Shareholders,
I trust this letter finds you in good health and good spirits. First and foremost, I want to thank you for your
continued support during this year, and as the world continues to navigate these often turbulent times.
As this letter was going to press, we have all been watching the terrible situation unfold in Ukraine. We abhor
violence and war, which only brings unimaginable suffering to innocent victims. Our energies are focused on
how we can practically support our colleagues, partners, customers and other stakeholders caught up in this
disaster. What we are all seeing in Ukraine is absolutely devastating. Our thoughts are with all affected, and we
can only hope for a fast resolution to this conflict.
Despite the volatility of the macro environment, our direction of travel remains unchanged. “Without proper
foundations,” Christian Dior famously said, “there can be no fashion.” Equally, without proper foundations, there
can be no fashion industry. I am pleased to report that our company’s platform has continued to embed itself as
a cornerstone of the global luxury industry.
In the past year, we have further proven ourselves to be a key partner, for both the biggest brands and the
smallest boutiques. For that, I have to thank my colleagues for their continued dynamism, creativity and
boundless enthusiasm in all circumstances.
We continue to see powerful dynamics across our global business, and we delivered our first full year of
Adjusted EBITDA profitability in 2021. The power of the platform continues to grow and our core marketplace
business remains exceptionally strong. In addition, a number of key strategic initiatives took root in 2021. These
are now well advanced and positioned to deliver significant long term value. I will touch on some in more detail
below.
The numbers, however, are only part of the story. As you have often heard me say, Farfetch is a values-
driven company. We are working every day towards our mission to connect the world’s creators, curators
and consumers for the Love of Fashion.
We understand that we are part of a bigger family and we will never lose sight of the people who make
the luxury fashion industry what it is. This year, we were sadly reminded that life is short, and we are
blessed to be able to do what we love surrounded by talented people. Undoubtedly one of the saddest
moments of last year was the untimely death of our great friend and collaborator, Virgil Abloh. He was an
incredible human who changed so much of what we know about culture and fashion. He led an
extraordinary team of people in everyone at Off-White, he was a friend, and he was a very important part
of the New Guards Group family.
We will miss him, and we will always remember him.
The power of the platform
The structural efficiencies of our platform and the relentless execution of strategy by our Farfetchers
meant that in 2021 we continued to capture market share. More than 1,400 brands and retailers are
listing more luxury products than ever and the platform continues to evolve, at the leading edge of market
trends.
We have strong relationships with our supply partners. Throughout 2021, we continued to partner with
brands to showcase their collections to Farfetch Marketplace visitors, generating record Media Solutions
revenue and delivering campaigns which engaged and delighted our global customers. Campaigns
included ‘The Language of Prada’, highlighting Prada’s new collection, the first of a two-part partnership;
‘Future Fantasy’ digital landscape campaign highlighting Balenciaga’s Autumn-Winter 2021 collection
utilizing virtual try-on, 3D-design and Instagram filters, and a livestream event for Moncler’s latest Genius
capsule collection.
These campaigns, along with our unique and ‘Only On FARFETCH’ offering meant we attracted a record
number of active customers during the year, and ended the year with 3.7 million active consumers.
Positively FARFETCH
Exploring ways we can help the wider industry move forward and thrive in the post-COVID world includes
championing more sustainable fashion and services.
One example from 2021 is the acquisition of LUXCLUSIF. LUXCLUSIF facilitates the acquisition,
authentication, and sale of second hand luxury goods to and from auctions, retailers, e-commerce
platforms, and stores worldwide.
LUXCLUSIF is a great business, and one we knew well. We had already worked together for a number of
years, first through our start-up accelerator program and most recently through the FARFETCH Second
Life resale service. We have begun to leverage their capabilities and positioning for both our customers
and industry partners. We aim to become the leading global platform for pre-owned luxury. The pre-
owned market is growing extremely fast and is increasingly important to both luxury customers and to the
luxury fashion industry as a whole. FARFETCH’s Conscious Luxury Trends Report showed that more
than half of surveyed customers had bought or sold pre-owned in the last year and industry estimates
suggest pre-owned is growing three times faster than the primary market.
Further focusing on our sustainability efforts, one of the highlights of the year was the launch of There
Was One, our first sustainable private label, powered by New Guards Group (NGG). There Was One -
available only on FARFETCH - is a line of elevated wardrobe classics with a conscious soul.
There Was One was devised in a truly customer-centric way. Using insights from what people were searching for
and buying on the FARFETCH marketplace, and combining it with NGG’s fashion and design prowess, it
delivers made-to-last, elevated pieces which everyone will want as their wardrobe-essentials.
Certified eco-friendly materials are used across the range and the products are designed with longevity in mind.
The brand minimises production by operating on a drop versus seasonal model and shipping to customers with
minimal packaging, which is compostable or recyclable.
Launching Beauty
As previously announced, we will be leveraging the platform in 2022 to broaden our luxury Marketplace offering
with the launch of Beauty. Our recent acquisition of renowned beauty destination and elevated content channel
Violet Grey offered a curtain raiser, ahead of the formal launch in the second quarter 2022. Violet Grey brings
industry expertise as well as a curated selection of products to be offered on the FARFETCH Marketplace, and
expands the beauty curator’s reach to extend to FARFETCH’s global customer base. Violet Grey will also
leverage Farfetch Platform Solutions’ expertise in technology, global logistics and operations in continuing to
drive its standalone business, comprised of VioletGrey.com and its Los Angeles retail store.
We expect to launch with a mix of key large and indie luxury brands in the beauty and skincare space on the
platform. For brand partners, our expansion into Beauty provides an opportunity to reach FARFETCH’s millions
of engaged luxury customers through co-branding and marketing opportunities to target the c.$70 billion global
Luxury Beauty market, one of the largest categories in the global Personal Luxury market. Our compelling
consumer proposition will offer FARFETCH’s extensive Millennial and Generation Z luxury audience a unique
experience for discovering and shopping for beauty, with access to insights and expertise from multiple beauty
experts and communities.
“Marketplace adjacent” opportunities
Launching Beauty will have the knock-on effect of further boosting the potential of our growing Media
Solutions business. Media Solutions offers a significant “marketplace adjacent” opportunity. To date, this
business has grown organically, out of the demand from brands for access to our multi-million strong
luxury audience across the globe. Last year saw striking and highly effective campaigns for, amongst
others, Gucci, Burberry, Valentino and Ralph Lauren. From 2022, the Media Solutions business will have
access to an additional huge advertiser market with the launch of Beauty. This, in turn, will allow us to
invest in our content creators and, we believe, rapidly grow our media business.
Media Solutions is not the only “marketplace adjacent” opportunity we believe is positioned for strong growth.
With accelerating interest in our Luxury New Retail vision, Farfetch Platform Solutions (FPS) continues to
revolutionize the digitization of the luxury experience and unlock significant value. It will come as no surprise to
hear me say that I think FPS does not get the credit it deserves, but it continues to move forward in accordance
with our strategy as it develops into what I believe will be one of the jewels in our crown. I was very pleased that
in 2021, we expanded our e-concessions-as-a-service module, which Harrods has leveraged to significantly
multiply the number of SKUs from Gucci, Burberry, Brunello Cucinelli and Zegna.
Fulfilment by Farfetch is another area where we have executed in accordance with our strategy. We are
investing in many initiatives to boost the volume we ship from our distribution centres in the United States,
Europe and China region. But this is not just about reducing our long-term logistics costs. Building out Fulfilment
by Farfetch platform capabilities will allow us to provide enhanced global ecommerce services for the broader
luxury industry. To this end, we were thrilled to announce our joint venture with Clipper Logistics in November
2021.The Joint Venture will create a unique logistics offering for inventory from Farfetch’s group of companies
including Browns and New Guards Group, as well as products from other luxury brands, that will specialise in the
complex and highly demanding fulfilment requirements of the global luxury goods sector.
Luxury New Retail
We always ask ourselves, how will people discover, experience and shop for luxury fashion in five to ten
years? We are always thinking about how we can innovate and build immersive experiences to meet
evolving customer desires and future needs - be that transacting in cryptocurrencies, building and
exchanging NFTs, or collaborating in the Metaverse - or indeed whatever new environments and
emerging virtual worlds there will be. This is what we call Luxury New Retail - our strategic approach to
answering this key question.
Luxury New Retail encompasses initiatives in China, Farfetch Platform Solutions, Farfetch Connected
Retail and our vision of the hybrid, online-offline future of luxury shopping including Web3 and future
innovations, and ensures we are creating experiences and services to meet the customer wherever they
are and wherever they may be in the years to come.
The resilience of the luxury industry is incredible and has continued to show this during what were two of
the hardest years for the industry for decades. I am very pleased that FARFETCH has been a true and
close partner for both retailers and brands in this time, delivering strong growth to our sellers, and as a
result nearly doubling our GMV over the last 24 months. All this boosts our progress towards becoming
the global platform for luxury, as we continue to advance our strategy of Luxury New Retail.
Luxury New Retail continues to connect the curators, creators and consumers of the luxury fashion
industry. The boundary between offline and online commerce is blurring ever further as store-based
operations are digitized, not least at our newly refurbished flagship boutique, Browns Brook Street.
Launched last spring, it fuses the historical and the contemporary, blending our exceptional service with
creativity and technology to offer a customer experience like no other. As I sit here and write this to you,
we have an amazing store installation, where we have transformed our Immersive Room into a
Soniferous Forest, offering a blissful 15 minutes of sonic escapism, reflection and relaxation. I enjoyed it
very much and would strongly recommend a visit if you happen to be in London before the end of March.
Confidence and humility
As we exit what were two of the hardest years for the industry for decades, it may seem hubristic to say that
we’re stronger than we’ve ever been. However, I truly believe this to be the case. The pandemic has certainly
evolved the shape of the luxury industry, accelerating the shift to online and also, at a Farfetch level, pushing us
to even greater heights in our mission to be the Global Platform for Luxury. I’m looking forward to pursuing
continued market share capture and sustained profitability.
There is so much to be excited about. In addition to the initiatives I’ve already mentioned, we are progressing
with plans for our new Portugal campus. This will be part of an sustainable development on the slopes of the
Leça River in Porto, named FUSE VALLEY, a project close to my heart. The campus will feature interconnected
buildings that each represent the different elements of the company’s organization, with the design of each
space tailored accordingly. Scheduled to break ground by early 2023, we look forward to showing you our new
space when it is complete in 2025.
In the meantime, there is lots to do. We have successfully navigated the last two years, positioning ourselves as
the leading force in online luxury and establishing very solid foundations for many years of growth and
development of our long-term vision. At the beginning of the letter, I quoted Christian Dior. As I draw to a close,
my mind turns to another soundbite from the great man: “By being natural and sincere, one can often create
revolutions without having sought them.” That is exactly what we are doing.
Wishing you all the best for a peaceful and productive year,
José Neves
Founder and CEO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission File Number 001-38655
Farfetch Limited
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
The Bower, 211 Old Street
London EC1V 9NR, United Kingdom
(Address of principal executive offices)
James L. Maynard
Chief Legal Officer & General Counsel
IR@farfetch.com
Farfetch Limited
The Bower, 211 Old Street
London EC1V 9NR, United Kingdom
(Name, E-mail and Address of Company Contact Person)
Securities registered or to be registered, pursuant to Section 12(b) of the Act
Title of each class
Class A ordinary shares, par value $0.04 per share
Trading
Symbol(s)
FTCH
Name of each exchange on which registered
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the
close of the period covered by the annual report. 337,923,238 Class A ordinary shares and
42,858,080 Class B ordinary shares.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☒ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by
check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting
Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements
included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question indicate by check mark which financial statement
item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-
2 of the Exchange Act). Yes ☐ No ☒
TABLE OF CONTENTS
Page
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
RISK FACTOR SUMMARY
PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Item 2.
Offer Statistics and Expected Timetable
Item 3.
Item 4.
Key Information
A. Reserved
B. Capitalization and Indebtedness
C. Reasons for the Offer and Use of Proceeds
D. Risk Factors
Information on the Company
A. History and Development of the Company
B. Business Overview
C. Organizational Structure
D. Property, Plant and Equipment
Item 4A.
Unresolved Staff Comments
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Operating and Financial Review and Prospects
A. Operating Results
B. Liquidity and Capital Resources
C. Research and Development, Patents and Licenses, etc.
D. Trend Information
E. Critical Accounting Estimates
Directors, Senior Management and Employees
A. Directors and Senior Management
B. Compensation
C. Board Practices
D. Employees
E. Share Ownership
Major Shareholders and Related Party Transactions
A. Major Shareholders
B. Related Party Transactions
C. Interests of Experts and Counsel
Financial Information
A. Consolidated Statements and Other Financial Information
B. Significant Changes
The Offer and Listing
A. Offer and Listing Details
B. Plan of Distribution
C. Markets
D. Selling Shareholders
E. Dilution
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Item 10.
F. Expenses of the Issue
Additional Information
A. Share Capital
B. Memorandum and Articles of Association
C. Material Contracts
D. Exchange Controls
E. Taxation
F. Dividends and Paying Agents
G. Statement by Experts
H. Documents on Display
I. Subsidiary Information
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
Item 12.
Description of Securities Other Than Equity Securities
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15.
Controls and Procedures
Item 16.
Reserved
Item 16A. Audit Committee Financial Expert
Item 16B.
Code of Ethics
Item 16C.
Principal Accountant Fees and Services
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16F.
Changes in Registrant’s Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 17.
Financial statements
Item 18.
Financial statements
Item 19.
Exhibits
SIGNATURES
CONSOLIDATED FINANCIAL STATEMENTS
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F-1
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
We report under International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (the “IASB”).
General Information
Our Consolidated financial statements are reported in U.S. dollars, which are denoted “dollars,” “USD” or
“$” throughout this Annual Report on Form 20-F (“Annual Report”). Also, throughout this Annual Report:
•
•
except where the context otherwise requires or where otherwise indicated, the terms “Farfetch,” the
“Company,” “we,” “us,” “our,” “our Company” and “our business” refer to Farfetch Limited, an
exempted company incorporated with limited liability under the Companies Act (as amended) of the
Cayman Islands, as amended and restated from time to time (the “Companies Act”), in each case
together with its consolidated subsidiaries as a consolidated entity;
the terms “€” or “euro” refer to the currency introduced at the start of the third stage of European
economic and monetary union pursuant to the treaty establishing the European Community, as
amended; and
•
the terms “pound sterling” or “£” refer to the legal currency of the United Kingdom.
Certain figures in this Annual Report may not recalculate exactly due to rounding. This is because
percentages and/or figures contained herein are calculated based on actual numbers and not the rounded numbers
presented.
Segment Change
Following the acquisition of New Guards, in the fourth quarter of the year ended December 31, 2019,
management determined that we have three reportable operating segments: (i) Digital Platform, (ii) Brand Platform
and (iii) In-Store, given our organizational structure and the manner in which our business is reviewed and managed.
In the fourth quarter of the year ended December 31, 2019, we realigned our reportable operating segments to reflect
how our Chief Operating Decision-Maker was making operating decisions, allocating resources and evaluating
operating performance. Refer to Item 5. “Operating and Financial Review and Prospects — Operating Results” and
Note 6, Segmental and geographical information, within our Consolidated financial statements included elsewhere
in this Annual Report for additional information about these segments. Information presented in this Annual Report
for periods prior to this segment change has been revised to reflect this segment realignment.
Defined Terms in this Annual Report
Throughout this Annual Report, we use a number of defined terms and provide information about a number
of key performance indicators used by management. Definitions are as follows, and additional information about our
key performance indicators is provided in Item 5. “Operating and Financial Review and Prospects — Key Operating
and Financial Metrics.”
•
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•
“Alibaba” means Alibaba Group Holding Limited.
“API” means our application programming interfaces that enable third-parties to connect with our
platform.
“Articles” means our amended and restated memorandum and articles of association (as may be
amended from time to time).
“brands” means entities that produce, sell and/or market luxury merchandise. We refer to brands
owned and operated by the New Guards Group as “New Guards’ brands” or “brands in the New
Guards portfolio” or the “New Guards portfolio of brands.” Please refer to the definition of “retailers”
3
below for the difference between “brands” and “retailers,” both of which are a source of supply on the
Farfetch Marketplace.
“consumer” means a person who browses and/or completes a purchase on the Farfetch Marketplace,
BrownsFashion.com, Stadium Goods, New Guards-owned sites or third-party websites or platforms on
which we operate.
“e-concession” means the retail distribution by brands via the operation of concessions on multi-brand
digital platforms, such as when brands sell directly to consumers via the Farfetch Marketplace.
“FPS” means Farfetch Platform Solutions, our comprehensive modular white-label business-to-
business e-commerce solution for brands and retailers.
“Farfetch China” means Farfetch China Holdings Ltd, our joint venture partnership with Alibaba and
Richemont and the entity through which our Farfetch Marketplace operations in the China region are
conducted. We conduct other operations in China, for example FPS, outside of this joint venture.
Within our Consolidated financial statements included elsewhere in this Annual Report, we account
for Farfetch China Holdings Ltd as a consolidated subsidiary, which the Group controls through its
majority ownership of the issued share capital of Farfetch China Holdings Ltd.
“Farfetch Marketplace” is as defined in Item 4. “Information on the Company — B. Business
Overview.”
“first-party original” refers to products developed by brands in the New Guards portfolio of brands and
sold direct-to-consumers on the Farfetch Marketplace.
“first-party sales” means sales on our platform of inventory purchased by us.
“Group” means Farfetch Limited and its consolidated subsidiaries.
“JD.com” means JD.com, Inc.
“Luxury New Retail” or “LNR” is the overarching strategy aiming to redefine the future of luxury
retail for Farfetch and the luxury industry at-large. This strategy is activated via our FPS business unit
which offers a full suite of enterprise solutions including our connected retail products and other
emerging technologies powered by the Farfetch platform.
“luxury sellers” means the retailers and brands with whom we have a direct contractual relationship to
display and sell their products on the Farfetch Marketplace.
“Marketplaces” means the Farfetch Marketplace and Stadium Goods Marketplace.
“New Guards” is as defined in Item 4. “Information on the Company — B. Business Overview.”
“retailers” means boutiques and department stores. Retailers buy wholesale from multiple luxury
brands to sell to the end consumer. Brands (1) sell wholesale to retailers; (2) operate concessions
within the offline stores of retailers and online via e-commerce sites; and/or (3) sell to consumers
directly through a mono-brand store or website. Both “brands” and “retailers” sell via the Farfetch
Marketplace, but the distinction is not apparent to our consumer.
“Richemont” means Compagnie Financière Richemont SA.
“Stadium Goods Marketplace” is as defined in Item 4. “Information on the Company — B. Business
Overview.”
“stock value” means the combined amount of all stock units available on the Farfetch Marketplace
and/or the Stadium Goods Marketplace multiplied by each item’s retail unit price.
“Tmall Luxury Pavilion” is Alibaba’s e-commerce platform on which we make available our luxury
shopping channel.
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4
Non-IFRS and Other Financial and Operating Metrics
We have included in this Annual Report certain financial measures not based on IFRS, including Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted EPS, Adjusted Revenue, Digital Platform Order Contribution and
Digital Platform Order Contribution Margin (together, the “Non-IFRS Measures”), as well as operating metrics,
including GMV, Digital Platform GMV, Brand Platform GMV, In-Store GMV, Active Consumers and Average
Order Value. Refer to Item 5. “Operating and Financial Review and Prospects – Reconciliations of Non-IFRS and
Other Financial and Operating Metrics” for additional information on the use of these Non-IFRS Measures and
reconciliations to the most directly comparable IFRS measures.
We define our non-IFRS Measures and other financial and operating metrics as follows:
“Active Consumers” means active consumers on our directly owned and operated sites and related apps or
on third-party websites or platforms on which we operate. A consumer is deemed to be active if they made a
purchase within the last twelve-month period, irrespective of cancellations or returns. Active Consumers includes
the Farfetch Marketplace, BrownsFashion.com, Stadium Goods, and the New Guards-owned sites operated by
Farfetch Platform Solutions plus third-party websites or platforms on which we operate, including Amazon.com and
Tmall Luxury Pavilion. Due to limitations in the data we are provided by certain third-party websites or platforms
on which we operate, a limited number of consumers who transact on such websites or platforms and on our directly
owned and operated sites and related apps, may be duplicated in the number of Active Consumers we report. The
number of Active Consumers is an indicator of our ability to attract and retain our consumer base to our platform
and of our ability to convert platform visits into sale orders.
“Adjusted EBITDA” means net income/(loss) after taxes before net finance expense/(income), income tax
expense/(benefit) and depreciation and amortization, further adjusted for share based compensation expense, share
of results of associates and items outside the normal scope of our ordinary activities (including other items, within
selling, general and administrative expenses, losses/(gains) on items held at fair value and remeasurements through
profit and loss, impairment losses on tangible assets, and impairment losses on intangible assets). Adjusted EBITDA
provides a basis for comparison of our business operations between current, past and future periods by excluding
items that we do not believe are indicative of our core operating performance. Adjusted EBITDA may not be
comparable to other similarly titled metrics of other companies.
“Adjusted EBITDA Margin” means Adjusted EBITDA calculated as a percentage of Adjusted Revenue.
“Adjusted EPS” means earnings per share further adjusted for share based payments, amortization of
acquired intangible assets, items outside the normal scope of our ordinary activities (including other items, within
selling, general and administrative expenses, losses/(gains) on items held at fair value and remeasurements through
profit and loss, impairment losses on tangible assets, and impairment losses on intangible assets) and the related tax
effects of these adjustments. Adjusted EPS provides a basis for comparison of our business operations between
current, past and future periods by excluding items that we do not believe are indicative of our core operating
performance. Adjusted EPS may not be comparable to other similarly titled metrics of other companies.
“Adjusted Revenue” means revenue less Digital Platform Fulfilment Revenue.
“Average Order Value” (“AOV”) means the average value of all orders excluding value added taxes placed
on either the Farfetch Marketplace or the Stadium Goods Marketplace, as indicated.
“Brand Platform Gross Profit” means Brand Platform Revenue less the direct cost of goods sold relating to
Brand Platform Revenue.
“Brand Platform GMV” and “Brand Platform Revenue” mean revenue relating to the New Guards
operations less revenue from New Guards’: (i) owned e-commerce websites, (ii) direct to consumer channel via our
Marketplaces and (iii) directly operated stores. Revenue realized from Brand Platform is equal to GMV as such sales
are not commission based.
5
“Digital Platform Fulfilment Revenue” means revenue from shipping and customs clearing services that we
provide to our digital consumers, net of centrally Farfetch-funded consumer promotional incentives, such as free
shipping and promotional codes. Digital Platform Fulfilment Revenue was referred to as Platform Fulfilment
Revenue in previous filings with the U.S. Securities and Exchange Commission (“SEC”).
“Digital Platform GMV” means GMV excluding In-Store GMV and Brand Platform GMV. Digital Platform
GMV was referred to as Platform GMV in previous filings with the SEC.
“Digital Platform Gross Profit” means gross profit excluding In-Store Gross Profit and Brand Platform
Gross Profit. Digital Platform Gross Profit was referred to as Platform Gross Profit in previous filings with the SEC.
“Digital Platform Gross Profit Margin” means Digital Platform Gross Profit calculated as a percentage of
Digital Platform Services Revenue. We provide fulfilment services to Marketplace consumers and receive revenue
from the provision of these services, which is primarily a pass-through cost with no economic benefit to us.
Therefore, we calculate our Digital Platform Gross Profit Margin, including Digital Platform third-party and first-
party gross profit margin, excluding Digital Platform Fulfilment Revenue.
“Digital Platform Order Contribution” means Digital Platform Gross Profit after deducting demand
generation expense, which includes fees that we pay for our various marketing channels. Digital Platform Order
Contribution provides an indicator of our ability to extract digital consumer value from our demand generation
expense, including the costs of retaining existing consumers and our ability to acquire new consumers. Digital
Platform Order Contribution was referred to as Platform Order Contribution in previous filings with the SEC.
“Digital Platform Order Contribution Margin” means Digital Platform Order Contribution calculated as a
percentage of Digital Platform Services Revenue. Digital Platform Order Contribution Margin was referred to as
Platform Order Contribution Margin in previous filings with the SEC.
“Digital Platform Revenue” means the sum of Digital Platform Services Revenue and Digital Platform
Fulfilment Revenue. Digital Platform Revenue was referred to as Platform Revenue in previous filings with the
SEC.
“Digital Platform Services Revenue” means Revenue less Digital Platform Fulfilment Revenue, In-Store
Revenue and Brand Platform Revenue. Digital Platform Services Revenue is driven by our Digital Platform GMV,
including commissions from third-party sales and revenue from first-party sales. Digital Platform Services Revenue
was also referred to as Adjusted Platform Revenue or Platform Services Revenue in previous filings with the SEC.
“Digital Platform Services third-party revenues” represent commissions and other income generated from
the provision of services to sellers in their transactions with consumers conducted on our technology platforms, as
well as fees for services provided to brands and retailers.
“Digital Platform Services first-party revenues” represents sales of owned-product, including First-Party
Original through our digital platform. The revenue realized from first-party sales is equal to the GMV of such sales
because we act as principal in these transactions and, therefore, related sales are not commission based. Digital
Platform Services first-party revenues represent sales net of promotional incentives, such as free shipping and
promotional codes, where these incentives are not designated as Farfetch-funded.
“Digital Platform Services third-party cost of revenues” and “Digital Platform Services first-party cost of
revenues" include packaging costs, credit card fees, and incremental shipping costs provided in relation to the
provision of these services. Digital Platform Services first-party cost of revenues also includes the cost of goods sold
of the owned products.
“First-Party Original” refers to brands developed by New Guards and sold direct to consumers on the digital
platform.
6
“Gross Merchandise Value” (“GMV”) means the total dollar value of orders processed. GMV is inclusive
of product value, shipping and duty. It is net of returns, value added taxes and cancellations. First-party GMV is also
net of promotions. GMV does not represent revenue earned by us, although GMV and revenue are correlated.
“In-Store Gross Profit” means In-Store Revenue less the direct cost of goods sold relating to In-Store
Revenue.
“In-Store GMV” and “In-Store Revenue” mean revenue generated in our retail stores which include
Browns, Stadium Goods and New Guards’ directly operated stores. Revenue realized from In-Store sales for Browns
and New Guards’ directly operated stores is equal to GMV of such sales because such sales are not commission
based. Revenue realized from In-store sales for Stadium Goods does not equal GMV of such sales as a certain
portion of those sales are third-party and are commission based.
“Order Contribution” means gross profit after deducting demand generation expense, which includes fees
that we pay for our various marketing channels to support the Digital Platform. Order Contribution provides an
indicator of our ability to extract consumer value from our demand generation expense, including the costs of
retaining existing consumers and our ability to acquire new consumers.
“Third-Party Take Rate” means Digital Platform Services Revenue excluding revenue from first-party
sales, as a percentage of Digital Platform GMV excluding GMV from first-party sales and Digital Platform
Fulfilment Revenue. Revenue from first-party sales, which is equal to GMV from first-party sales, means revenue
derived from sales on our platform of inventory purchased by us.
Refer to Item 5. “Operating and Financial Review and Prospects – Reconciliations of Non-IFRS and Other
Financial and Operating Metrics” for reconciliations of our Non-IFRS measures to the most directly comparable
IFRS financial measures.
Market and Industry Data
We obtained industry, market and competitive position data in this Annual Report from our own internal
estimates, surveys and research as well as from publicly available information, industry and general publications and
research, surveys and studies conducted by third-parties, such as public reports by Bain & Company (“Bain”).
Information contained in this Annual Report attributable to Bain is from the “Bain-Altagamma Luxury Goods
Worldwide Market Study, Fall 2021” (November 11, 2021).
7
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains statements that constitute “forward-looking statements” within the meaning of
the U.S. Private Securities Litigation Reform Act of 1995. These statements are neither historical facts nor
assurances of future performance. Although we believe that these estimates and forward-looking statements are
based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties, some
of which are beyond our control, and are made in light of the information currently available to us. Our actual results
or performance may differ materially from any future results or performance expressed or implied by these forward-
looking statements.
In some cases, these forward-looking statements can be identified by words or phrases such as “believe,”
“may,” “will,” “expect,” “estimate,” “project,” “forecast,” “could,” “should,” “anticipate,” “aim,” “intend,” “plan,”
“potential,” “continue,” “is/are likely to,” or other similar expressions. Forward-looking statements contained in this
Annual Report include, but are not limited to, statements about:
• Our future financial performance, including our revenue, operating expenses and our ability to
maintain profitability and our future business and operating results;
• Our strategies, plans, objectives and goals;
• Our expectations regarding acquisitions, partnerships and collaborations;
• Our expectations regarding the development of our industry, market size and the competitive
environment in which we operate; and
• Our environmental, sustainability, responsible sourcing, social and inclusion and diversity goals.
These forward-looking statements reflect our current views with respect to future events and are not a
guarantee of future performance. Actual outcomes may differ materially from the information contained in the
forward-looking statements as a result of a number of factors, including, without limitation, the risk factors
described under “Risk Factor Summary” below and the risk factors described in Item 3. “Key Information — D.
Risk Factors” of this Annual Report.
The forward-looking statements contained in this Annual Report speak only as of the date of this Annual
Report. Except as required by law, we do not undertake to update any forward-looking statement to reflect events or
circumstances after that date or to reflect the occurrence of unanticipated events. You should read this Annual
Report and the documents that we reference herein and file as exhibits hereto completely and with the understanding
that our actual future results may be materially different from what we expect.
8
RISK FACTOR SUMMARY
Our business is subject to numerous risks and uncertainties, including those described in Item 3. “Key
Information — D. Risk Factors.” You should carefully consider these risks and uncertainties when investing in our
Class A ordinary shares. Principal risks and uncertainties affecting our business include the following:
• The COVID-19 global pandemic has had and may continue to have an adverse effect on our business
and results of operations.
• Purchasers of luxury products may not choose to shop online, which would prevent us from growing
our business.
• We may be unable to generate sufficient revenue to be profitable or to generate positive cash flow on
a sustained basis, and our revenue growth rate may decline.
• We have experienced losses in the past, and we may experience losses in the future.
• The luxury fashion industry can be volatile and difficult to predict.
• We rely on a limited number of luxury sellers for the supply of products that we make available to
consumers on the Farfetch Marketplace.
• Our efforts to acquire or retain consumers may not be successful, which could prevent us from
maintaining or increasing our sales.
• Luxury sellers set their own prices for the products they make available on our Marketplaces, which
could affect our ability to respond to consumer preferences and trends.
•
If our luxury sellers fail to anticipate, identify and respond quickly to new and changing fashion
trends in consumer preferences, our business could be harmed.
• Our software is highly complex and may contain undetected errors.
• Our failure or the failure of third-parties to protect our or their sites, networks and systems against
security breaches, or otherwise to protect our or consumers’ and luxury sellers’ confidential
information, could damage our reputation and brand and substantially harm our business and
operating results.
• We rely on information technologies and systems to operate our business and maintain our
competitiveness, and any failure to invest in and adapt to technological developments and industry
trends could harm our business.
• Any significant disruption in service on our websites or apps or in our computer systems, some of
which are currently hosted by third-party providers, could damage our reputation and result in a loss
of consumers, which would harm our business and results of operations.
• We face significant competition in the global retail industry and may be unsuccessful in competing
against current and future competitors.
• We are subject to governmental regulation and other legal obligations related to privacy, data
protection and information security. If we are unable to comply with these, we may be subject to
governmental enforcement actions, litigation, fines and penalties or adverse publicity.
• We rely on our luxury sellers, suppliers, third-party warehousing providers, third-party carriers and
transportation providers as part of our fulfilment process, and these third-parties may fail to
adequately serve our consumers.
9
• Our failure to address the operational, compliance and regulatory risks associated with payment
methods could damage our reputation and brand and may cause our business and results of operations
to suffer.
• Our global operations involve additional risks, and our exposure to these risks will increase as our
business continues to expand.
• Assertions by third-parties of infringement or misappropriation by us of their intellectual property
rights or confidential know how could result in significant costs and substantially harm our business
and results of operations.
• Our use of open source software may pose particular risks to our proprietary software and systems.
• Failure to adequately protect, maintain or enforce our intellectual property rights could substantially
harm our business and results of operations.
• Our New Guards business is dependent on its production, inventory management and fulfilment
processes and systems, which could adversely affect its business if not successfully executed.
• The operation of retail stores subjects us to numerous risks, some of which are beyond our control.
• Our Chief Executive Officer, José Neves, has considerable influence over important corporate
matters due to his ownership of us. Our dual-class voting structure will limit your ability to influence
corporate matters and could discourage others from pursuing any change of control transactions that
holders of our Class A ordinary shares may view as beneficial.
• Our indebtedness could adversely affect our financial health and competitive position.
10
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. [Reserved]
Not applicable.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
An investment in our Class A ordinary shares involves a high degree of risk. You should carefully consider
the risks and uncertainties described below, together with all of the other information in this Annual Report,
including our audited Consolidated financial statements and related notes, before deciding to invest in our Class A
ordinary shares. Additional risks not presently known to us or that we currently deem immaterial may also impair
our business and operations. Our business, financial condition or results of operations could be materially and
adversely affected by any of these risks. In addition to the effects of the COVID-19 pandemic and resulting global
disruptions discussed in Item 5. “Operating and Financial Review and Prospects,” and in the important factors
below, additional or unforeseen effects from the COVID-19 pandemic and the global economic climate may give
rise to or amplify many of the risks discussed below. The trading price of our Class A ordinary shares could decline
due to any of these risks, and you could lose all or part of your investment.
Risks Relating to our Business and Industry
The COVID-19 global pandemic has had and may continue to have an adverse effect on our business and
results of operations.
The impact of the ongoing COVID-19 pandemic is widespread and continues to evolve. In March 2020, the
World Health Organization declared COVID-19 a global pandemic, and since then governmental authorities around
the world have implemented a range of measures to reduce the spread of COVID-19. These measures, including
quarantines, travel bans, vaccination requirements and other heightened restrictions suggested or mandated by
governmental authorities or otherwise elected by companies as preventive measures, have affected workforces,
customers, consumer sentiment, economies, and financial markets. It is impossible to predict all the effects and the
ultimate impact of the COVID-19 pandemic, as the situation continues to rapidly evolve, including as a result of the
emergence and spread of new variants.
The COVID-19 pandemic and resulting disruptions to our production facilities, offices and retail stores could
materially affect our operations. During 2020 and 2021, for example, our operations continued to be impacted as a
result of the COVID-19 pandemic. We temporarily closed most of our office locations and, at certain points, our
Browns, Stadium Goods and New Guards retail stores. In addition, in 2020 we temporarily closed our Los Angeles
11
and Hong Kong production facilities, and may have to do so again as the pandemic continues to develop and related
government orders evolve. Adapting our business to different or changing policies in the various countries in which
we operate may also create additional costs or disruptions. We continue to evaluate whether the actions we took
during 2020-2021 in response to the COVID-19 pandemic may need to be taken again.
A subset of our employees continue to work remotely as a result of the COVID-19 pandemic with others
gradually returning to our offices, and as some regions ease restrictions we are adopting a hybrid approach between
working from home and working in-office. If a natural disaster, power outage, connectivity issue, or other event
occurs that impacts our employees’ ability to work remotely, it could be difficult or, in certain cases, impossible, for
us to continue our business effectively for a period of time. Further, as the COVID-19 pandemic continues, and as
we aim to adapt to a more flexible in-person approach, we may experience disruptions if we are unable to
successfully manage this hybrid work environment, if our employees or third-party providers’ employees become ill
and are unable to perform their duties, or if our operations, or the operations of one or more of our third-party
providers, is impacted. The increase in remote working may also result in related consumer privacy, information
technology security and fraud concerns. In addition, the challenges to working caused by the COVID-19 pandemic
and related restrictions may have an impact on our employees’ wellness which could impact employee retention,
productivity and our culture.
The impact of the COVID-19 pandemic on our luxury sellers may have short and long-term impacts on our
supply. Since March 2020 and continuing through 2021, certain brands and retailers that serve as our luxury sellers
have temporarily for some period of time closed their physical stores, warehouses or distribution centers in response
to heightened restrictive measures, and may have to do so again as the pandemic progresses, which could impact the
breadth and depth of our supply and delivery times. For example, at its highest point in March 2020, more than 280
of our luxury sellers’ locations were fully or partially closed as a result of the COVID-19 pandemic. Long term, the
impacts of government measures, decreased global travel and changes in consumer spending could result in
bankruptcies among our luxury sellers and store closures or significant operational changes at our luxury sellers,
which could have a negative impact on supply.
In addition, the global supply chain has been impacted by the COVID-19 pandemic, which could interfere
with the ability of the luxury sellers who sell items through the Farfetch Marketplace to deliver products to
consumers. While much of our business is conducted online, the COVID-19 pandemic has caused and may continue
to cause disruptions or delays in our supply chain, fulfilment network and shipments. For example, the COVID-19
related preventative measures established by local government authorities in certain Chinese cities since January
2022 in relation to overseas parcels have had a direct impact on our operations in the short-term, including order
cancellations, returns and a forty-eight-hour closure of our Shanghai warehouse and closures of certain partners’
stock points in Hong Kong. These measures also impacted consumer sentiment toward cross-border e-commerce in
China, which, if it continues, could impact our business and financial results. In addition, delays in deliveries of
merchandise due to production slowdowns or other distribution disruptions may impact our and our sellers’
inventory levels and seasonality of stock. If delivery services are delayed or shut down, our business could be
negatively impacted. Further, as we continue to rely on third-parties to provide shipping services, changes in their
operations due to the ongoing impacts of the COVID-19 pandemic, as well as fluctuations in the supply and demand
for delivery services resulting from the COVID-19 pandemic have had an adverse impact on our results. During the
COVID-19 pandemic demand for carrier capacity has increased which has resulted in increased costs for carrier
services and operational difficulties that could decrease the quality of service provided to our consumers, including
delays and lost packages. In addition, competition for carrier capacity may be exacerbated by a decreased number of
flights due to government restrictions or impacts to the airline industry. These global supply chain challenges have
had a negative effect on our business, results of operations and financial condition.
We are unable to accurately predict the ultimate impact on our operations that the COVID-19 pandemic will
continue to have going forward, due to uncertainties that will be dictated by the length of time that such disruptions
continue, which will, in turn, depend on the currently unknowable duration of the COVID-19 pandemic, the impact
of government regulations that may be imposed in response to the pandemic, the efficiency and efficacy of
vaccination programs and overall changes in consumer behavior. The uncertainty created by the COVID-19
pandemic, for example, could impact our ability to attract new enterprise solutions clients, who may prefer to rely on
their existing e-commerce infrastructure during a period of uncertainty.
12
Furthermore, any global deterioration in economic conditions resulting from the COVID-19 pandemic could
have an adverse impact on discretionary consumer spending and impact our business. A reduction in consumer
spending or disposable income could affect us more significantly than companies in other industries and companies
with a more diversified product offering due in part to the fact that luxury items are often discretionary purchases for
consumers. In the past, governments have taken unprecedented actions in an attempt to address and rectify these
extreme market and economic conditions by providing liquidity and stability to financial markets. If such actions or
other economic measures are not successful or governments decrease or cease economic stimulus or support, the
return of adverse economic conditions could have a negative effect on our business, results of operations and
financial condition.
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have
the effect of heightening many of the other risks described in this “Risk Factors” section.
Purchasers of luxury products may not choose to shop online, which would prevent us from growing our
business.
Our success depends, in part, on our ability to attract additional consumers who have historically purchased
luxury products through traditional retailers rather than online. The online market for luxury products is significantly
less developed than the online market for other goods and services such as books, music, travel and other consumer
products. If the online market for personal luxury goods does not gain widespread acceptance, our business may
suffer. Furthermore, we may have to incur higher and more sustained advertising and promotional expenditures or
offer more incentives than we currently anticipate in order to attract additional online consumers and convert them
into purchasing consumers. Specific factors that could prevent consumers from purchasing luxury products from us
include:
• concerns about buying luxury products online without a physical storefront, face-to-face interaction with
sales personnel and the ability to physically handle and examine products;
• preference for a more personal experience when purchasing luxury products;
• product offerings that do not reflect current consumer tastes and preferences;
• preference for shopping mono-brand, rather than multi-brand;
• pricing that does not meet consumer expectations;
• delayed shipments or shipments of incorrect or damaged products;
inconvenience and costs associated with returning or exchanging items purchased online;
•
• concerns about the security of online transactions and the privacy of personal information; and
• usability, functionality and features of the Farfetch Marketplace.
We have seen the increased adoption of online channels by luxury consumers during the COVID-19
pandemic and the related heightened restrictions imposed by governments around the world. However, we cannot
guarantee that this trend will continue or accelerate, including after the heightened restrictions associated with the
COVID-19 pandemic are lifted; particularly if traditional brick-and-mortar stores become more attractive to
consumers as restrictions are lifted. Further, if this change in consumer behavior represents a secular trend toward
online purchases for luxury products by consumers, we cannot guarantee that we will continue to capitalize on this
trend or that our competitors will not capitalize more successfully.
If the online market for luxury products does not continue to develop and grow, or should we not succeed in
leveraging such growth, our business will not grow and our results of operations, financial condition and prospects
could be materially adversely affected.
We may be unable to generate sufficient revenue to be profitable or to generate positive cash flow on a
sustained basis, and our revenue growth rate may decline.
We cannot assure you that we will generate sufficient revenue to offset the cost of maintaining and growing
our platform and business. Our revenue growth from $1,673.9 million for the fiscal year ended December 31, 2020,
to $2,256.6 million for the fiscal year ended December 31, 2021 is not indicative of our future performance, and our
revenue growth rate may decline in the future because of a variety of factors, including increased competition and
the maturation of our business. We cannot guarantee that our revenue will continue to grow or will not decline. You
should not consider our historical revenue growth or operating expenses as indicative of our future performance. If
13
our revenue growth rate declines or our operating expenses exceed our expectations, our financial performance will
be adversely affected.
Additionally, we also expect our costs to increase in future periods, which could negatively affect our future
operating results and ability to achieve and sustain profitability. We expect to continue to expend substantial
financial and other resources on acquiring and retaining consumers, our technology infrastructure, research and
development, including investments in our research and development team and the development of new features,
sales and marketing, international expansion, and general administration, including expenses, related to being a
public company. These investments may not result in increased revenue or growth in our business. If we are unable
to continue to earn revenue at a rate that exceeds the costs associated with our business, we will not be able to
sustain profitability or generate positive cash flow on a sustained basis and our revenue growth rate may decline. If
we fail to continue to grow our revenue and overall business, our business, results of operations, financial condition
and prospects could be materially adversely affected.
We have experienced losses in the past, and we may experience losses in the future.
We experienced losses after tax of $3,315.6 million and $393.5 million in the years ended December 31,
2020 and 2019, respectively. Our ability to generate and sustain significant additional revenues and maintain after
tax profitability will depend on, among other things, our ability to increase our levels of sales and attract consumers
cost effectively, and the impact of the factors discussed elsewhere in this “Risk Factors” section, including impacts
from the COVID-19 pandemic. We may experience significant losses after tax in the future, and we cannot assure
you that we will sustain profitability in future periods. In addition, our level of profitability cannot be predicted and
may vary significantly from period to period.
The luxury fashion industry can be volatile and difficult to predict.
As a global platform for luxury fashion, we are subject to variable industry conditions. Consumer demand
can quickly change depending on many factors, including the behavior of both online and brick-and-mortar
competitors, promotional activities of competitors, rapidly changing tastes and preferences, frequent introductions of
new and innovative products and services, advances in technology and the internet, macroeconomic conditions
impacting discretionary spending, especially in light of the COVID-19 pandemic, and other macroeconomic and
geopolitical factors, many of which are beyond our control. For example, we have seen a change in consumer
spending habits since the beginning of the COVID-19 pandemic, as consumers have been purchasing more items in
lower price-point categories.
As another example, over the last few years the industry experienced a trend toward promotional activity.
While we believe promotional activity by luxury retailers may decrease in 2022 as brands continue to become more
disciplined and increasingly move towards an e-concession model, the impact of the COVID-19 pandemic may
delay such a shift as omnichannel retailers seek to recover from the COVID-19-related heightened restrictions and
store closures that occurred following the onset of the pandemic.
Promotional activity can have a material adverse effect on our results of operations, in particular on our
gross margins and order contribution metrics, our prospects and our relationships with our luxury sellers.
Alternatively, if we do not engage in promotional activity, in particular if we do not match competitors’ promotional
activity, it may adversely impact consumer demand across our platform, which in turn may impact our overall
market share capture and have a material adverse impact on our business, results of operations and prospects. We
also may decide not to incentivize promotional activity by our retailers by not funding, by reducing our funding for,
or by requiring our luxury sellers to fund in whole or part, promotional events on the Farfetch Marketplace, which
could adversely impact our relationships with our luxury sellers. When the luxury retail market experiences
increased promotional activity, we may not be successful in responding in a manner that does not also adversely
impact our results of operations.
Changes in consumer demand or tastes may also impact our ability to deliver expected margins on inventory
within our first-party and first-party original businesses. As a result of this constantly changing environment, our
future business strategies, practices and results may not meet expectations or respond quickly enough to consumer
14
demand, and we may face operational difficulties in adjusting to any changes in consumer demand. Any of these
developments could harm our business, results of operations, financial condition and prospects.
We rely on a limited number of luxury sellers for the supply of products that we make available to
consumers on the Farfetch Marketplace.
We rely on a limited number of luxury sellers for the supply of products available on the Farfetch
Marketplace. In the year ended December 31, 2021, 11.6% of our Marketplace GMV was from our top ten retailers,
excluding Browns, and 12.8% of our Marketplace GMV was from our top ten brand partners, excluding brands in
the New Guards portfolio. We cannot guarantee that these luxury sellers will always choose to use the Farfetch
Marketplace to sell their products. We also typically enter into one-year contracts with our luxury sellers, and there
is no guarantee our luxury sellers will renew these contracts upon expiration, which currently automatically renew
every year unless either party serves ninety days’ notice of termination for partners operating under our standard
template. Other than Browns, Stadium Goods and the brands in the New Guards portfolio, we cannot control
whether a luxury seller chooses to make any of its supply available on the Farfetch Marketplace, and brands may not
appreciate our value proposition. Further, other entities may, on their own, take actions that adversely affect our
business, such as creating their own marketplace that could directly compete with us. Additionally, our business may
be adversely affected if our access to products is limited or delayed because of deterioration in our relationships with
one or more of our luxury sellers, delays in deliveries of merchandise, including due to production slowdowns or
other distribution disruptions related to the COVID-19 pandemic, changes to their supply cycles, reductions in new
seasonal product, or if they choose to not sell their products with us for any other reason. For example, at its highest
point in March 2020, more than 280 of our luxury sellers’ locations were fully or partially closed as a result of the
COVID-19 pandemic, which resulted in some limited disruption to our supply chain. In addition, we saw production
delays from the ongoing effects of the United Kingdom’s withdrawal from the European Union, and if such delays
were to re-appear they could have an adverse effect on our results of operations. Moreover, if we fail to successfully
retain current, as well as acquire new, luxury sellers on our platform, our business, results of operations, financial
condition and prospects could be materially adversely affected.
Our efforts to acquire or retain consumers may not be successful, which could prevent us from
maintaining or increasing our sales.
If we do not promote and sustain our brand and platform through marketing and other tools, we may fail to
build and maintain the critical mass of consumers required to increase our sales. Promoting and positioning our
brand and platform, as well as the Browns and Stadium Goods brands and the New Guards portfolio of brands, will
depend largely on the success of our marketing efforts (including how we allocate resources among brand and direct
marketing), our ability to understand and attract consumers cost effectively and our ability to consistently provide a
high-quality product and user experience. In order to acquire and retain consumers, we have incurred and will
continue to incur substantial expenses related to advertising and other marketing efforts, including investments in
our ACCESS loyalty program. To the extent we are successful in retaining our existing customers, they may choose
to purchase products with lower AOVs. Similarly, to the extent we are successful in acquiring new consumers, they
may not be our most valuable consumers. We also may not be able to predict the behavior of new consumers as well
as we do for existing consumers. We use promotions to drive sales, which may not be effective and may adversely
affect our gross margins. Our investments in marketing may not effectively reach potential consumers and the spend
of consumers that purchase from us may not yield the intended return on investment. Our ability to measure the
effectiveness of our brand marketing remains relatively limited. Recent updates implemented by Apple in relation to
the Identifier for Advertisers (“IDFA”) have adversely impacted our ability to target and measure the effectiveness
of our new and existing consumer and retention marketing; and similar privacy measures by search engine and other
companies could impact our ability to do so in the future. For example, in February 2022 Google announced plans to
adopt new privacy restrictions to curtail tracking across apps on Android smartphones. In addition, the United States
or other governments may take administrative, legislative, or regulatory action that could interfere with certain
marketing efforts in particular jurisdictions. A failure of our marketing activities could also adversely affect our
ability to attract new and maintain existing relationships with our consumers and our luxury sellers, which may have
a material adverse effect on our business, results of operations, financial condition and prospects.
15
Luxury sellers set their own prices for the products they make available on our Marketplaces, which could
affect our ability to respond to consumer preferences and trends.
We do not control the pricing strategies of our luxury sellers on our Marketplaces (other than for our Group
entities, i.e., Browns, Stadium Goods first-party sales and the New Guards portfolio of brands when sold direct-to-
consumer via our Marketplaces), which could affect our revenue and our ability to effectively compete with other
distribution channels used by our luxury sellers, including e-commerce retailers and brick-and-mortar stores.
Furthermore, luxury sellers’ pricing on our Marketplaces, including certain region-specific promotions, may
adversely affect a consumer’s shopping experience, which may encourage them to shop through other online or
offline retailers. Luxury sellers may determine that they can more competitively price their products through other
distribution channels and may choose such other channels instead of listing products on our Marketplaces.
The global catalogue and competitive pricing of our partners are key features of the Farfetch Marketplace.
However, when brands adopt selective distribution models that restrict the distribution of goods in certain
geographies, and decide not to include Farfetch in the selective distribution network, such selective distribution may
reduce the Farfetch Marketplace catalogue available to consumers in particular markets. The adoption by brands of
selective distribution may therefore lead to reduced supply and lost sales in key markets, and could negatively affect
our business, results of operation, financial condition and prospects.
Additionally, where permitted by law, luxury sellers often employ different pricing strategies based on the
geographical location of consumers, which is accomplished online through geo-blocking that blocks a consumer’s
ability to access certain websites based on geography. EU legislation, which took effect in December 2018, prohibits
geo-blocking in the European Economic Area (“EEA”). As a result, consumers registered in the EEA can make
purchases at the prices listed in different EEA geographies irrespective of their country of residence in Europe,
which could adversely impact our business. In addition, the EU Platform-to-Business Regulation (Regulation (EU)
2019/1150) on promoting fairness and transparency for business users of online intermediation services entered into
force on July 12, 2020. This regulation introduced a number of new obligations on marketplaces, including
disclosing the main parameters they use to rank goods and services on their sites, any advantage they may give to
their own products over others, access that marketplace users may have to data generated through their use of the
service and dispute remedies. These obligations could adversely affect our business, results of operations, financial
condition and prospects.
If our luxury sellers fail to anticipate, identify and respond quickly to new and changing fashion trends in
consumer preferences, our business could be harmed.
The luxury apparel, footwear and accessories available on our Marketplaces are subject to rapidly changing
fashion trends and constantly evolving consumer tastes and demands. Our success is dependent on the ability of our
luxury sellers, including Browns, Stadium Goods and the New Guards portfolio of brands, to anticipate, identify and
respond to the latest fashion trends and consumer demands and to translate such trends and demands into product
offerings in a timely manner. The failure of our luxury sellers to anticipate, identify or react swiftly and
appropriately to new and changing styles, trends or desired consumer preferences, to accurately anticipate and
forecast demand for certain product offerings or to provide relevant and timely product offerings to list on our
Marketplaces may lead to lower demand for merchandise on our Marketplaces, which could cause, among other
things, declines in GMV sold through our Marketplaces. If our luxury sellers, including Browns, Stadium Goods and
the New Guards portfolio of brands, are not able to accurately anticipate, identify, forecast, analyze or respond to
changing fashion trends and consumer preferences, we may lose consumers and market share, which could have a
material adverse effect on our business, results of operations, financial condition and prospects.
In addition, New Guards’ success depends in large part on the brands in its portfolio being able to originate
and define fashion product trends, as well as to anticipate, gauge, and react to changing consumer demands in a
timely manner. Their products must appeal to consumers worldwide whose preferences cannot be predicted with
certainty and are subject to rapid change, influenced by fashion trends and current economic conditions, among
other factors. This issue is further compounded by the increasing use of digital and social media by consumers and
the speed by which information and opinions are shared across the globe. We cannot assure that the brands in New
Guards’ current or future portfolio will be able to continue to develop appealing styles or successfully meet
constantly changing consumer demands in the future. In addition, we cannot assure that any new products or brands
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that we introduce will be successfully received by consumers. In particular, the majority of New Guards’ existing
brands, including its largest brands, Off-White and Palm Angels, are currently focused on luxury streetwear and
should consumer preferences for streetwear decline that could have a significant impact on our business. Failures of
brands in the New Guards portfolio to anticipate, identify, and respond effectively to changing consumer demands
and fashion trends could adversely affect retail and consumer acceptance of their products and leave us with a
substantial amount of unsold inventory or missed opportunities. Conversely, if we underestimate consumer demand
for these brands’ products or if manufacturers fail to supply quality products in a timely manner, we may experience
inventory shortages. Any of these outcomes could have a material adverse effect on our business, results of
operations, and financial condition.
Our software is highly complex and may contain undetected errors.
The software underlying our sites is highly complex and may contain undetected errors or vulnerabilities,
some of which may only be discovered after the code has been released. We have in place a software engineering
practice known as “continuous deployment,” meaning that we typically release software code multiple times per
day. This practice may result in more frequent introduction of errors or vulnerabilities into the software underlying
our sites. Any errors or vulnerabilities discovered in our code after release could result in damage to our reputation,
loss of consumers, disruption to our operations, decline of net sales or liability for damages, any of which could
adversely affect our business, financial condition, result of operations and prospects.
Our failure or the failure of third-parties to protect our or their sites, networks and systems against
security breaches, or otherwise to protect our or consumers’ and luxury sellers’ confidential information,
could damage our reputation and brand and substantially harm our business and operating results.
We collect, maintain, transmit and store data about our consumers, luxury sellers and others, including credit
card information (and other payment information) and other personally identifiable information, as well as other
confidential and proprietary information about our business plans and activities.
We also engage third-parties that store, process and transmit these types of information on our behalf. We
rely on encryption and authentication technology licensed from third-parties in an effort to securely transmit
confidential and sensitive information, including credit card numbers. Advances in computer capabilities, new
technological discoveries or other developments may result in the whole or partial failure of this technology to
protect transaction data or other confidential and sensitive information from being breached or compromised. In
addition, e-commerce websites are often attacked through compromised credentials, including those obtained
through phishing and credential stuffing. Our security measures, and those of our third-party service providers, may
not detect or prevent all attempts to breach our or their systems, denial-of-service attacks, viruses, malicious
software, break-ins, phishing attacks, ransomware attacks, social engineering, security breaches or other attacks and
similar disruptions that may jeopardize the security of information stored in or transmitted by our or their websites,
networks and systems or that we or such third-parties otherwise maintain, including payment card systems, which
may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods. We
and such-third parties may not anticipate or prevent all types of attacks until after they have already been launched.
We may not be able to adjust our security measures fast enough to keep pace with the evolving nature of
cybersecurity risks, which could negatively impact our operations. Techniques used to obtain unauthorized access to
or sabotage systems change frequently and may not be known until launched against us or our third-party service
providers. In addition, security breaches can also occur as a result of non-technical issues, including intentional or
inadvertent breaches by our employees or by third-parties. These risks may increase over time as we grow our
business, including as a result of acquisitions, and as the complexity and number of technical systems and
applications we use increases.
Breaches of our security measures or those of our third-party service providers or cyber security incidents
could result in unauthorized access to our sites, networks and systems; unauthorized access to and misappropriation
of consumer information, including consumers’ personal data, or other confidential or proprietary information;
viruses, worms, spyware or other malware being served from our sites, networks or systems; deletion or
modification of content or the display of unauthorized content on our sites; interruption, disruption or malfunction of
operations; costs relating to breach remediation, deployment of additional personnel and protection technologies,
governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants;
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litigation, regulatory action and other potential liabilities. In the past, we have been the target of social engineering,
phishing, malware and similar attacks and threats of denial-of-service attacks; and further attacks of this type in the
future could have a material adverse effect on our operations. If any of these breaches of security should occur, our
reputation and brand could be damaged, our business may suffer, we could be required to expend significant capital
and other resources to alleviate problems caused by such breaches, and we could be exposed to a risk of loss,
litigation or regulatory action and possible liability. In addition, with a subset of our employees, and employees of
our third-party service providers, working from home as a result of the COVID-19 pandemic, our data and
information technology infrastructure is subject to greater exposure than in an office environment, which carries an
increased risk that our security measures or those of our third-party service providers could be compromised. We
cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss. Actual or
anticipated attacks may cause us to incur costs, including costs to deploy additional personnel and protection
technologies, train employees and engage third-party experts and consultants. In addition, any party who is able to
illicitly obtain a consumer’s password could access the consumer’s transaction data or personal information,
resulting in the perception that our systems are insecure.
Any compromise or breach of our security measures, or those of our third-party service providers, could
violate applicable privacy, data protection, data security, network and information systems security and other laws
and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security
measures, which could have a material adverse effect on our business, results of operations, financial condition and
prospects. We continue to devote significant resources to protect against security breaches and in the future we may
need to address problems caused by breaches, including notifying affected subscribers and responding to any
resulting litigation, which in turn, would divert resources from the growth and expansion of our business. Our
insurance policies have coverage limits and may not be adequate to reimburse us for all losses caused by security or
personal data breaches.
We may not succeed in promoting and sustaining our brand, which could have an adverse effect on our
future growth, reputation, business and net sales.
A critical component of our future growth is our ability to promote and sustain our brand, which we believe
can be achieved by providing a high-quality user experience. An important element of our brand promotion strategy
is establishing a relationship of trust with our consumers. In order to provide a high-quality user experience, we have
invested and intend to continue to invest substantial amounts of resources in the development and functionality of
our platform, website, technology infrastructure, fulfilment and customer service operations. Our ability to provide a
high-quality user experience is also highly dependent on external factors over which we may have little or no
control, including, without limitation, the reliability and environmental, social, governance, operational, and
commercial performance of our luxury sellers, suppliers, third-party warehousing providers and third-party carriers.
If our consumers are dissatisfied with the quality of the products sold on our platform or the customer service they
receive and their overall customer experience, or if we or our service providers cannot deliver products to our
consumers in a timely manner or at all, or if our consumers are dissatisfied with the environmental, social, or
governance performance of our luxury sellers, suppliers, third-party warehousing providers and third-party carriers,
our consumers may stop purchasing products from us. In addition, failures by any of New Guards’ brands to provide
consumers with high-quality products and high-quality customer experiences for any reason (including
environmental, social and governance reasons) could substantially harm the reputation of that brand and the New
Guards portfolio of brands more generally, which could have a material adverse effect on its business, results of
operations, financial condition and prospects. We also rely on third-parties for information, including product
characteristics and availability shown on the Farfetch Marketplace, that may be inaccurate.
Our failure to provide our consumers with high-quality products and high-quality user experiences for any
reason (including environmental, social and governance reasons) could substantially harm our reputation and
adversely impact our efforts to develop Farfetch as a trusted brand, which could have a material adverse effect on
our business, results of operations, financial condition and prospects.
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Use of social media, emails and text messages may adversely impact our reputation or subject us to fines
or other penalties.
We use social media, emails and text messages as part of our approach to marketing. As laws and regulations
rapidly evolve to govern the use of these channels, a failure by us, our employees or third-parties acting at our
direction to abide by applicable laws and regulations in the use of these channels could adversely affect our
reputation or subject us to fines or other penalties. In addition, our employees, including employees of brands within
the New Guards portfolio, or third-parties acting at our direction (including influencers) may knowingly or
inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property,
subject us to liability for illegal content as well as the public disclosure of proprietary, confidential or sensitive
personal information about our business, employees, consumers or others. Any such inappropriate use of social
media, emails and text messages could also cause damage to our reputation, the reputation of our businesses,
including Browns, Stadium Goods and any of the brands in the New Guards portfolio, or the reputation of the
designers or creative directors of New Guards’ brands.
Consumers value readily available information concerning retailers and their goods and services and often
act on such information without further investigation and without regard to its accuracy. Our consumers may engage
with us online through social media platforms, including Facebook, Instagram, Pinterest, TikTok and Twitter, by
providing feedback and public commentary about all aspects of our business. Information concerning us or our
luxury sellers, whether accurate or not, may be posted on social media platforms at any time and may have a
disproportionately adverse impact on our brand, reputation or business; and the third-party services we use to
monitor such postings that may be inaccurate or harmful to the reputation and perception of our brand may fail to
sufficiently identify such posts. Such harm could be immediate without affording us an opportunity for redress or
correction and have a material adverse effect on our business, results of operations, financial condition and
prospects.
We rely on information technologies and systems to operate our business and maintain our
competitiveness, and any failure to invest in and adapt to technological developments and industry trends
could harm our business.
We depend on the use of sophisticated information technologies and systems, including technology and
systems used for websites and apps, data analytics, customer service, supplier connectivity, communications, fraud
detection, enterprise resource planning, inventory management, warehouse management and administration. As our
operations grow in size, scope and complexity, we will need to continuously improve and upgrade our systems and
infrastructure to offer an increasing number of consumer-enhanced services, features and functionalities, while
maintaining and improving the reliability and integrity of our systems and infrastructure. In addition, with a subset
of our employees continuing to work from home as a result of the COVID-19 pandemic, our information
technologies and systems may be particularly strained.
Our future success also depends on our ability to adapt our services and infrastructure to meet rapidly
evolving consumer trends and demands while continuing to improve our platform’s performance, features and
reliability. The emergence of alternative platforms and niche competitors who may be able to optimize such services
or strategies, may require us to continue to invest in new and costly technology. We may not be successful in
developing and adopting new technologies that operate effectively across multiple devices and platforms and that
are appealing to consumers, which would negatively impact our business and financial performance. New
developments in other areas, such as cloud computing providers, could also make it easier for competitors to enter
our markets due to lower up-front technology costs. In addition, we may not be able to maintain our existing systems
or replace our current systems or introduce new technologies and systems as quickly or cost effectively as we desire.
Failure to invest in and adapt to technological developments and industry trends may have a material adverse effect
on our business, results of operations, financial condition and prospects.
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Any significant disruption in service on our websites or apps or in our computer systems, some of which
are currently hosted by third-party providers, could damage our reputation and result in a loss of
consumers, which would harm our business and results of operations.
Our brand, reputation and ability to attract and retain consumers depend upon the reliable performance of our
network infrastructure and content delivery processes. We have experienced interruptions in these systems in the
past, including server failures that temporarily slowed down or interfered with the performance of our websites and
apps, or particular features of our websites and apps, and we may experience interruptions in the future, particularly
in light of the COVID-19 pandemic. For example, in 2021 and the first quarter of 2022, there were a total of
seventeen interruptions and outages on our website that ranged in time from two to approximately fifty minutes, in
which our customers experienced difficulties involving, among others, the inability to use our payment systems, the
unavailability of thousands of products and our product catalogue, and the inability to complete their checkout
process. Interruptions in these systems, whether due to system failures, human input errors, computer viruses or
physical or electronic break-ins and denial-of-service attacks on us, third-party vendors or communications
infrastructure, could affect the availability of our services on our platform and prevent or inhibit the ability of
consumers to access our websites and apps or complete purchases on our websites and apps. Volume of traffic and
activity on our Marketplaces spikes on certain days, such as during a “Black Friday” promotion, and any
interruption would be particularly problematic if it were to occur at such a high-volume time. Problems with the
reliability of our systems could prevent us from earning revenue or commissions and could harm our reputation.
Damage to our reputation, any resulting loss of consumer, retailer or brand confidence and the cost of remedying
these problems could negatively affect our business, results of operations, financial condition and prospects.
Substantially all of the communications, network and computer hardware used to operate our website are
strategically located, for convenience and regulatory reasons, at facilities in Portugal, Netherlands, Russia, China,
Ireland and Brazil. Our ability to maintain communications, network, and computer hardware in these countries is,
or may in the future be, subject to regulatory review and licensing, and the failure to obtain any required licenses
could negatively affect our business. We either lease or own our servers and have service agreements with data
center providers. Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses,
earthquakes and similar events. The occurrence of any of the foregoing events could result in damage to our systems
and hardware or could cause them to fail completely, and our insurance may not cover such events or may be
insufficient to compensate us for losses that may occur. Our systems are not completely redundant, so a system
failure at one site could result in reduced platform functionality for our consumers, and a total failure of our systems
could cause our websites or apps to be inaccessible by some or all of our consumers.
We depend on third-parties to provide services in support of our website and fulfillment operations
technology, and any failure on their part could lead to a disruption of our business. Problems faced by our third-
party service providers with the telecommunications network providers with whom they contract or with the systems
by which they allocate capacity among their users, including us, could adversely affect the experience of our
consumers. Our third-party service providers could decide to close their facilities without adequate notice, including
in response to government-mandated restrictions or for health and safety reasons. Any financial difficulties, such as
bankruptcy or reorganization, faced by our third-party service providers or any of the service providers with whom
they contract, may have negative effects on our business, the nature and extent of which are difficult to predict. If
our third-party service providers are unable to keep up with our needs for capacity, particularly in light of increased
usage during the COVID-19 pandemic, this could have an adverse effect on our business. Any errors, defects,
disruptions or other performance problems with our services could harm our reputation and may have a material
adverse effect on our business, results of operations, financial condition and prospects.
The rapid growth of our business may adversely impact our ability to successfully utilize our data and
impact our sustained growth.
We employ a comprehensive approach to data analytics and data-led insights that helps guide our business
strategy and operations. We utilize data collected through our digital platform, brand platform and in-store
operations, including consumer data, to inform our approach to marketing, consumer targeting and expanding our
reach. For example, we apply data science and machine learning technologies to facilitate the personalization of the
consumer experience, use data insights to drive consumer acquisition, leverage data in support of our Luxury New
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Retail strategy (including in relation to FPS and connected retail) and our media solutions business, and proprietary
data logistic insights in our fulfillment services. However, the rapid growth of our business may negatively impact
data design, organization and accessibility across our operations. If we are unable to adequately utilize our data in
support of our operations due to growth-driven fragmentation or technical limitations, our ability to attract new
consumers to our Marketplaces, retain existing consumers, and continue the advancement of online and offline
integrations could be impaired. We will also need to adapt our approach to the design, organization and accessibility
of data across our business to keep pace with our growth and technological developments and regulatory
requirements. Any failure by us to adequately integrate such advancements in our approach to data management
could harm our ability to leverage data, including consumer data, collected through our technology and our systems,
which could have a negative effect on our business.
We may not be able to manage our growth effectively, and such growth may adversely affect our
corporate culture.
We have consistently and significantly expanded our operations, including through the New Guards
acquisition, Stadium Goods acquisition and our strategic partnership with Alibaba and Richemont; and anticipate
expanding further as we pursue our growth strategies. Such expansion increases our complexity and places a
significant burden on our management, operations, technical systems, financial resources and internal control over
financial reporting functions. Our current and planned personnel, systems, procedures and controls may not be
adequate to support and effectively manage our future operations, especially as we employ people in nineteen
countries. We are currently in the process of transitioning our business, financial systems and operating model to a
scale and organization that reflects the increased size, scope and complexity of our operations, and the process of
migrating our legacy systems could disrupt our ways of working and ability to timely and accurately process
information, which could adversely affect our results of operations and cause harm to our reputation. As a result, we
may not be able to manage our expansion effectively.
Our culture is important to us, and we believe it has been a major competitive advantage and contributor to
our success. We may have challenges maintaining our culture or adapting it sufficiently to meet the needs of our
future and evolving operations as we continue to grow, in particular internationally and through acquisitions. This is
heightened as we adapt to longer-term hybrid ways of working across all of our global offices. In addition, our
ability to maintain our culture as a public company, and in a remote environment, with the attendant changes in
policies, practices, corporate governance and management requirements may be challenging. Failure to maintain our
culture in a high-growth organization could have a material adverse effect on our business, results of operations,
financial condition and prospects.
We face significant competition in the global retail industry and may be unsuccessful in competing
against current and future competitors.
The global retail industry is intensely competitive. Online retail, including on mobile devices and tablets, is
rapidly evolving and is subject to changing technology, shifting consumer preferences and tastes, increased
convergence with offline retail and frequent introductions of new products and services. We face competition from
technology enablement companies, marketplaces, platforms, luxury sellers and enterprise solutions providers.
Technology enablement companies are those that enable commerce, such as Shopify or Square, and white-label
service providers that offer end-to-end solutions. Luxury sellers are typically either larger more established
companies, such as luxury department stores, luxury brand stores or online retailers, or multichannel players that are
independent retailers operating brick-and-mortar stores (most notably those with an online presence), and these
luxury sellers may have longer operating histories, greater brand recognition, existing consumer and supplier
relationships and significantly greater financial, marketing and other resources. Additionally, larger competitors
seeking to establish an online presence in luxury fashion may be able to devote substantially more resources to
website systems development and exert more leverage over the supply chain for luxury products than we can. For
example, in 2020 Amazon.com, Inc. launched “Amazon Luxury Stores.” Larger competitors may also be better
capitalized to opportunistically acquire, invest in or partner with other domestic and international businesses. Such
opportunistic acquisitions and investments may accelerate in an economic downturn. We believe that companies
with a combination of technical expertise, brand recognition, financial resources and e-commerce experience also
pose a significant threat of developing competing luxury fashion distribution technologies. In particular, if known
incumbents in the e-commerce space choose to offer competing services, they may devote greater resources than we
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have available, have a more accelerated timeframe for deployment and leverage their existing user base and
proprietary technologies to provide services or a user experience that our consumers may view as superior. We also
compete with regionally focused luxury e-commerce companies who may have a competitive advantage because of
their greater understanding of, and focus on, the local customer, as well as their established local brands.
The trend toward the online adoption of e-commerce platforms by consumers, including in the luxury sector,
could increase competition as retailers and brands that have not typically participated in e-commerce may establish
an online presence, particularly in light of the COVID-19 pandemic. For example, we have seen over the past year a
number of luxury e-commerce players shift, or announce plans to shift, from a wholesale model to a hybrid
wholesale and marketplace model; and have seen brands increasingly focus on prioritizing their own online
channels. This may create new competitors or increase pressure from our existing competitors.
Online retail companies and marketplaces, including emerging startups, and other new entrants, may be able
to innovate and provide products and services faster than we can, and they may be willing to price their products and
services more aggressively in order to gain market share. Additionally, competitors may rely on markdowns or
promotional sales to dispose of excess inventory, which could put pressure on us to follow suit, which could have an
adverse effect on our gross margins and results of operations. As luxury products are often discretionary purchases
for consumers, a reduction in consumer spending or disposable income resulting from the COVID-19 pandemic may
affect us more significantly than competitors with a more diversified product offering. In addition, traditional brick-
and-mortar based retailers offer consumers the ability to handle and examine products in person and may offer a
more convenient means of returning and exchanging purchased products, and are increasingly benefitting from the
implementation of new technologies in-store and from their online presences.
If our competitors are more successful in offering compelling products or in attracting and retaining
consumers than we are, our revenue and growth rates could decline. If we are unable to compete successfully, or if
competing successfully requires us to expend significant resources in response to our competitors’ actions, our
business, results of operations, financial condition and prospects could be materially adversely affected.
We are subject to governmental regulation and other legal obligations related to privacy, data protection
and information security. If we are unable to comply with these, we may be subject to governmental
enforcement actions, litigation, fines and penalties or adverse publicity.
We collect personal data and other data from our consumers and prospective consumers for a number of
purposes. We use this information to provide services and relevant products to our consumers, to support, expand
and improve our business, and to tailor our marketing and advertising efforts. We store, handle, and process personal
data on our own information systems, as well as through arrangements with third-parties and service providers. As a
result, we are subject to governmental regulation and other legal obligations related to the protection of personal
data, privacy and information security in certain countries where we do business and there has been, and will
continue to be, a significant increase globally in such laws that govern, restrict or affect the collection, storage,
sharing or use of data collected from or about individuals and their devices. Existing and future laws and
regulations, or the inconsistent enforcement of such laws and regulations, including with regard to data localization
requirements, could impede the growth of e-commerce or online marketplaces and negatively impact our business
and operations. Moreover, any non-compliance with privacy, data protection or information security laws could
result in proceedings against us by one or more data protection authorities, other public authorities, third-parties, or
individuals.
In Europe, where we have significant business operations, the data privacy and information security regime
has been through a significant change and continues to evolve. The collection and processing of personal data is
subject to increasing regulatory scrutiny in the European Union and the United Kingdom. The EU General Data
Protection Regulation (“GDPR”) and the UK data protection regime (“UK GDPR”) have stringent operational
requirements for companies, including retailers, regarding information practices, such as expanded disclosures to
consumers about how we collect and process their personal data, increased controls on profiling consumers and
increased rights for consumers to access, control and delete their personal data. Recent case law has also increased
requirements in relation to international transfers of personal data. In addition, there are mandatory data breach
notification requirements and significantly increased penalties for non-compliance with each regime. Since January
1, 2021 (when the transitional period following the United Kingdom’s withdrawal from the European Union
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expired), we have been required to comply with GDPR and the UK GDPR. Each regime has the ability to fine us up
to the greater of €20 million (£17.5 million) or 4% of global turnover for non-compliance.
Transfers of personal data from the European Union to the United Kingdom are permitted on the basis of an
adequacy decision from the European Union, although this decision is subject to a time limit of four years (“Sunset
Clause”) and requires that UK legislative developments do not cause the UK GDPR to deviate from certain
protections under the GDPR. The UK government has recently closed a consultation on the simplification of the UK
GDPR, and if certain of the proposed measures are adopted into UK law, it is not clear whether those measures
would constitute a deviation that would impact the adequacy decision. In the event that the adequacy decision is
withdrawn or the Sunset Clause is enforced, the United Kingdom will be considered a third country and we will be
required to implement additional safeguards for personal data transfers from the European Union to the United
Kingdom, which could lead to additional costs and increase our overall risk exposure.
The UK 2018 Network and Information Systems Regulations apply to us as an online marketplace and place
additional network and information systems security obligations on us, as well as mandatory security incident
notifications in certain circumstances with penalties of up to £17 million. Additionally, the EU Directive on
Network and Information Systems also applies to us and requires us, as a digital service provider offering services in
the EEA but with headquarters outside of the EEA, to appoint a representative in one of the EEA member states
where services are offered. This regulation could lead to additional regulatory exposure and compliance costs.
In recent years, U.S. and EU lawmakers and regulators have expressed concern over the use of third-party
cookies and similar technologies for online behavioral advertising, and laws and regulations in this area are also
under reform. In the European Union, regulators are increasingly focusing on compliance with requirements in the
online behavioral advertising ecosystem, and current national laws that implement the existing ePrivacy Directive
will be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for
non-compliance. In the European Union and United Kingdom, informed consent is required for the placement of a
cookie on a user’s device and for direct electronic marketing. The GDPR and UK GDPR impose conditions on
obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents
are sought for each type of cookie or similar technology. While the ePrivacy Regulation is still under development,
recent European court decisions and regulators’ recent guidance are driving increased attention to cookies and
tracking technologies and we are beginning to see regulatory enforcement actions. Changes to how we use cookies
and related technology could lead to substantial costs, require significant systems changes, limit the effectiveness of
our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase
costs and subject us to additional liabilities. Regulation of cookies and similar technologies may lead to broader
restrictions on our marketing and personalization activities and may negatively impact our efforts to understand
users’ online shopping and other relevant online behaviors, as well as the effectiveness of our marketing and our
business generally. The advertising technology ecosystem may not be able to adapt to the legal changes around the
use of tracking technologies, which may have a negative effect on businesses, including ours, that collect and use
online user information for consumer acquisition and marketing. Any decline of cookies or other online tracking
technologies as a means to identify and target potential purchasers may increase the cost of operating our business
and lead to a decline in revenues. In addition, uncertainties about the legality of cookies and other tracking
technologies may lead to regulatory scrutiny and increase potential civil liability under data protection or consumer
protection laws. In response to marketplace concerns about the use of third-party cookies and web beacons to track
user behaviors, providers of major browsers have included features that allow users to limit the collection of certain
data generally or from specified websites, and the draft ePrivacy Regulation also advocates the development of
browsers that block cookies by default. These developments and other privacy-oriented software changes by
operating systems or other third-parties, such as Apple’s app tracking transparency feature, have impaired our ability
to collect user information, including personal data and usage information, that helps us provide more targeted
advertising to our current and prospective consumers, and could adversely affect our business, in light of our use of
cookies and similar technologies to target our marketing and personalize the customer experience.
In the United States, which is also a significant market for our goods and services, federal and state
governments have adopted or are considering, laws, guidelines or rules for the collection, distribution, use and
storage of information collected from or about consumers or their devices. For example, California has enacted the
California Consumer Privacy Act (“CCPA”) which went into effect on January 1, 2020. The law imposes new
requirements on companies doing business in California and meeting other size or scale criteria for collecting or
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using information collected from or about California residents, affords California residents the ability to opt out of
certain disclosures of personal information, and grants non-absolute rights to access or request deletion of personal
information, subject to verification and certain exceptions. In response to the CCPA, we have reviewed and
amended our information practices involving California consumers, as well as our use of service providers or
interactions with other parties to whom we disclose personal information. We have updated our privacy disclosures
to comply with the law, including as these requirements pertain to our California-based workforce. We are
monitoring the CCPA implementing regulations, as they are continually being updated by the office of the
California Attorney General. It also remains unclear how the statute or rules will be interpreted. Additionally, a
recent California ballot initiative, the California Privacy Rights Act (“CPRA”), imposes additional data protection
obligations on companies doing business in California, including additional consumer rights processes and opt-outs
for certain uses of sensitive data and sharing of personal data starting in January 2022, with most provisions not
coming into effect until January 2023. As voted into law by California residents in November 2020, the CPRA could
have an adverse effect on our business, results of operations, and financial condition.
The effects of the CCPA and CPRA are potentially significant and may require us to modify our data
collection or processing practices and policies, incur substantial costs and expenses in an effort to comply and
increase our potential exposure to regulatory enforcement or litigation. Other U.S. states are considering enacting
stricter data privacy laws. For example, on March 2, 2021, the Governor of Virginia signed into law the Virginia
Consumer Data Protection Act (“VCDPA”). The VCDPA creates consumer rights, similar to the CCPA, but also
imposes security and assessment requirements for businesses. In addition, on July 7, 2021, Colorado enacted the
Colorado Privacy Act (“COPA”). The COPA closely resembles the VCDPA, and will be enforced by the respective
states’ attorney generals and district attorneys, although the two differ in many ways; once they become enforceable
in 2023, we would be required to comply with each if our operations fall within the scope of these newly enacted
comprehensive mandates. Similar laws have been proposed in other states and at the federal level, reflecting a trend
toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially
conflicting requirements that could make compliance with such laws challenging.
In the People’s Republic of China (the “PRC,” for the purposes hereof excluding Hong Kong, Macau and
Taiwan), data security has become one of the fastest growing areas for new legislation reflecting the evolving e-
commerce industry. The Standing Committee of the National People’s Congress (“SCNPC”) of the PRC
promulgated the Data Security Law (“Data Security Law”), which became effective on September 1, 2021. The
primary purpose of the Data Security Law is to regulate data activities, safeguard data security, promote data
development and usage, protect individuals and entities’ legitimate rights and interests, and safeguard state
sovereignty, state security and development interests. The Data Security Law applies extraterritorially, and to a
broad range of activities that involve “data” (not only personal or sensitive data). Under the Data Security Law,
entities and individuals carrying out data activities must abide by various data security obligations. For example, the
Data Security Law proposes to classify and protect data based on the importance of such data to the state’s economic
development, as well as the degree of harm it would cause to national security, public interests, or legitimate rights
and interests of individuals or organizations if such data is tampered with, destroyed, leaked, or illegally acquired or
used. The appropriate level of protective measures is required to be taken for each respective class of data. The Data
Security Law also requires important data to be stored locally in the PRC. Such important data may only be
transferred outside of the PRC subject to compliance with certain data transfer restrictions, such as passing a
security assessment organized by the relevant authorities.
Additionally, on August 20, 2021, the SCNPC promulgated the Personal Information Protection Law
(“PIPL”), which became effective on November 1, 2021. Notably, the PIPL, as with the GDPR, applies
extraterritorially. The PIPL clarifies the scope and application of the definitions of personal information and
sensitive personal information (which includes medical and health information), the legality of personal information
processing and the basic requirements of notice and consent, among other things. The PIPL also sets out data
localization requirements for critical information infrastructure operators and personal information processors who
process personal information above a certain threshold prescribed by the relevant authorities. The PIPL includes a
list of rules which must be complied with prior to the transfer of personal information outside of the PRC, such as
compliance with a security assessment, certification by an agency designated by the relevant authorities, or entering
into standard form model contracts approved by the relevant authorities with the overseas recipient. Failure to
comply with the PIPL can result in fines of up to renminbi (“RMB”) fifty million or 5% of the prior year’s total
annual revenue.
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In addition, the government agencies of the PRC promulgated several regulations or released a number of
draft regulations for public comment which are designed to provide further implementation guidance in accordance
with the aforementioned laws. For example, on October 29, 2021, the Cyberspace Administration of China
(“CAC”), the central internet regulator, issued draft Measures for the Security Assessment of Outbound Data (the
“Draft Measures”) soliciting public comments by November 28, 2021. The Draft Measures remain under legislative
review and may be subject to further revisions before being officially enacted. Once the Draft Measures are finalized
and implemented, data processors in the PRC will be required to conduct a self-risk assessment to evaluate the risks
of cross-border data transfer. In addition, we will be subject to the security assessment and approval by CAC with
respect to cross-border data transfer, as we are deemed a “massive volume data processor” pursuant to the Draft
Measures due to our processing of personal information of more than one million people in the PRC.
The evolving data security landscape and potential for heightened government enforcement actions could
lead to compliance risks and increased costs in our operation of Farfetch China in the PRC. Failure to comply with
such requirements may adversely affect our business and operations in the PRC region.
In Brazil, the Brazilian General Data Protection Law (Law No. 13,709/2018) (“LGPD”) that became
effective on September 18, 2020, (with sanctions applying only after August 1, 2021) implemented operational
requirements for the processing of personal data in Brazil. The LGPD’s requirements are substantially similar to
GDPR and we have undertaken similar compliance efforts regarding our Brazilian consumers and employee data,
potentially requiring us to incur substantial costs and expenses and exposing us to increased risks associated with
non-compliance.
Beyond the aforementioned data protection laws, individual jurisdictions continue to pass laws related to
data protection, such as data privacy and data breach notification laws, resulting in a diverse set of requirements
across states, countries and regions. The complexity of navigating these varying data protection laws is particularly
acute for our business due to our global reach; the Farfetch Marketplace connects consumers in over 190 countries
and territories with items from more than fifty countries. In addition, the legal landscape relating to the transfer of
personal data continues to evolve and remains uncertain in many jurisdictions. Many data protection regimes apply
based on where the consumer is located, and as we expand and new laws are enacted or existing laws change, we
may be subject to new laws, regulations or standards or new interpretations of existing laws, regulations or
standards, including those in the areas of data security, data privacy and regulation of email providers and those that
require localization of certain data (such as in Russia, where we have already undertaken localization), which could
require us to incur additional costs and restrict our business operations.
Failures or perceived failures by us (including our acquired businesses which must be integrated into our
privacy framework) to comply with rapidly evolving privacy or security laws such as those in the PRC, policies
(including our own stated privacy policies), legal obligations or industry standards or any security incident that
results in the unauthorized release or transfer of personally identifiable information or other personal or consumer
data may result in governmental enforcement actions, litigation (including consumer class actions), fines and
penalties or adverse publicity and could cause our consumers to lose trust in us, which could have a material adverse
effect on our business, results of operations, financial condition and prospects.
We rely on our luxury sellers, suppliers, third-party warehousing providers, third-party carriers and
transportation providers as part of our fulfilment process, and these third-parties may fail to adequately
serve our consumers.
We significantly rely on our luxury sellers to properly and promptly prepare products ordered by our
consumers for shipment. These suppliers may have a reduced ability to prepare and ship products due to government
mandates, heightened restrictions or reduced capacity to protect the health and safety of their workers. Failures by
these suppliers to timely prepare such products for shipment to our consumers would have an adverse effect on the
fulfilment of consumer orders, which could negatively affect the customer experience and harm our business and
results of operations.
We rely on third-party warehousing providers to receive, store, pack and ship merchandise. We also rely
upon third-party carriers and transportation providers for substantially all of our merchandise shipments, including
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shipments of items from our luxury sellers and warehouses to our production facilities for processing, shipments
returning these items to our luxury sellers and shipments to our consumers after purchase. Failures of our third-party
providers to meet the service levels expected by our consumers, including as a result of any closures, shutdowns,
bankruptcies, disruptions and/or delays related to the COVID-19 pandemic, or to deliver merchandise in optimal
condition, could negatively impact the customer experience, our brand and our business.
Our shipments are subject to additional risks that could increase our distribution costs, including without
limitation cost inflation, rising fuel costs, supply chain delays, labor shortages at transportation providers and
warehouses, the impact of the COVID-19 pandemic, the United Kingdom’s withdrawal from the European Union,
events such as employee strikes and inclement weather, events related to political instability, including, for example,
in connection with the conflict between Russia and Ukraine, or threatened or actual acts of terrorism and security
concerns, any of which may impact a third-party’s ability to provide delivery services that adequately meet our
needs. If we needed to change transportation providers, we could face logistical difficulties that could adversely
impact deliveries, incur costs and expend resources in connection with such change, and such change could divert
the time and attention of management and technology personnel to implement. Moreover, we may not be able to
obtain terms as favorable as those received from the independent third-party transportation providers we currently
use, which would increase our costs. Our third-party carriers and transportation providers may face increased
volumes as a result of increased online adoption stemming from the COVID-19 pandemic or a secular shift from
offline to online consumer activity across industries, which, in turn, could cause a decrease in their service levels or
result in an increase in their prices. If we are unable to negotiate acceptable pricing and other terms with these
entities, if they significantly increase their shipping charges or if they experience performance problems, including
as a result of the COVID-19 pandemic or the conflict between Russia and Ukraine, or other difficulties, it could
negatively impact our results of operations and our customer experience. Increases in shipping costs or other
significant shipping difficulties or disruptions or any failure by our retailers, brands or third-party carriers to deliver
high-quality products to our consumers in a timely manner or to otherwise adequately serve our consumers could
damage our reputation and brand and may substantially harm our business. In addition, if our merchandise is not
delivered in a timely fashion or is damaged or lost during the delivery process as a result of a deterioration of such
third-party services, it could result in our consumers becoming dissatisfied and choosing not to shop on our sites and
our relationships with our payment providers and other third-party providers could be negatively impacted, which
could have a material adverse effect on our financial condition, results of operations and prospects.
We rely on third-parties to drive traffic to our website, and these providers may change their search
engine algorithms or pricing in ways that could negatively affect our business, results of operations,
financial condition and prospects.
Our success depends on our ability to attract consumers cost effectively. With respect to our marketing
channels, we rely heavily on relationships with providers of online services, search engines, social media, directories
and other websites and e-commerce businesses to provide content, advertising banners and other links that direct
consumers to our websites. We rely on these relationships to provide significant sources of traffic to our websites. In
particular, we rely on search engines, such as Google, Bing and Yahoo! and the major mobile app stores and social
platforms, as important marketing channels. Search engine companies change their natural search engine algorithms
periodically, and our ranking in natural searches may be adversely affected by those changes, as has occurred from
time to time. Search engine companies may also determine that we are not in compliance with their guidelines and
consequently penalize us in their algorithms as a result. If search engines change or penalize us with their
algorithms, terms of service, display and featuring of search results, or if competition increases for advertisements,
as it did in 2021, we may incur increased costs to drive consumers to our websites and apps.
Our relationships with our marketing providers are not long-term in nature and do not require any specific
performance commitments. In addition, many of the parties with whom we have online advertising arrangements
provide advertising services to other companies, including retailers with whom we compete. As competition for
online advertising continues to increase, the cost for some of these services may also continue to do so. A significant
increase in the cost of the marketing providers upon which we rely could adversely impact our ability to attract
consumers cost effectively and harm our business, results of operations, financial condition and prospects. Changes
to privacy regulations, and actions by providers with regard to privacy (including GDPR, UK GDPR, CCPA and
changes to Apple’s application tracking transparency framework and IDFA) may impact our ability to attract
customers cost effectively and grow transaction volume from existing customers.
26
Our failure to address the operational, compliance and regulatory risks associated with payment methods
could damage our reputation and brand and may cause our business and results of operations to suffer.
Under current credit card practices, we are liable for fraudulent activity on the majority of our credit and
debit card transactions because we do not obtain a cardholder’s signature nor use strong authentication (such as
Verified by Visa) on all transactions. We are also exposed to financial crime risk and employ certain measures to
identify and mitigate this risk, including utilizing third-party tools and services. We do not currently carry insurance
against this risk. We face the risk of significant losses from this type of fraudulent activity or financial crime as our
net sales increase and as we continue to expand globally. Our failure to adequately mitigate this risk could damage
our reputation and brand and substantially harm our business, results of operations, financial condition, prospects
and our ability to accept payments.
We also accept payment for many of our sales through credit and debit card transactions, which are handled
through third-party payment processors. As a result, we are subject to a number of risks related to credit and debit
card payments, including that we, and the luxury sellers with whom we partner, pay interchange and other fees,
which may increase over time and could require us or our luxury sellers to either increase the prices we charge for
our products or absorb an increase in our costs and expenses. For example, in 2021 a fee introduced by Visa that
applies specifically to marketplaces was applied to us, and other payment processors may do the same in the future.
Our utilization of such payment processing tools may be impacted by factors outside of our control, including
disruptions in the payment processing industry generally.
The United States or other governments may also take administrative, legislative, or regulatory action that
could materially interfere with our ability to offer certain payment methods or to conduct our business in particular
jurisdictions. We cannot predict what actions the United States or other governments, including China, may take, or
what restrictions these governments may impose, that will affect our ability to process payments or to conduct our
business in particular jurisdictions. Further, we may become subject to changing payment regulations and
requirements that could potentially affect the compliance of our current payment processes and increase the
operational costs we incur to support payments. Global laws and regulations that govern payment methods are
complex and subject to change; and we may be required to expend considerable time and effort to determine if such
laws and regulations apply to our business. Any noncompliance by us in relation to such laws and regulations, or
any alleged noncompliance, could result in reputational damage, litigation, increased costs or liabilities, or require us
to stop offering payment services in certain markets.
In addition, as part of the payment processing process, our consumers’ credit and debit card information is
transmitted to our third-party payment processors. We may also be subject to lawsuits or other proceedings for
purportedly fraudulent transactions arising out of the actual or alleged theft of our consumers’ credit or debit card
information if the security of our third-party credit card payment processors is breached. We and our third-party
credit card payment processors are also subject to payment card association operating rules, certification and
classification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to
make it difficult or impossible for us to comply without incurring higher fees, diverting resources to regulatory
compliance or making changes to our business model. If we or our third-party credit card payment processors fail to
comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability
to accept credit and debit card payments from our consumers in addition to the consequences that could arise from
such action or inaction for violating applicable privacy, data protection, data security and other laws as outlined
above, which could have an adverse impact on our business, results of operations, financial condition and prospects.
We depend on highly skilled personnel, including senior management and our technology professionals,
and if we are unable to retain or motivate key personnel or hire, retain and motivate qualified personnel,
our business could be harmed.
We believe our success has depended, and our future success depends, on the efforts and talents of our senior
leadership, particularly José Neves, our founder and Chief Executive Officer, and all of our highly skilled team
members, including our executive team and business unit leaders. Our future success depends on our continuing
ability to attract, develop, motivate and retain highly-qualified and skilled employees. Our ability to do so can be
impacted by a number of factors. For example, our ways of working in an increasingly remote and mobile
landscape, our compensation benchmarks relative to our competitors and the impact of the volatility of our share
price on our equity compensation offering may impact the attractiveness of joining our team.
27
In particular, our data specialists, software engineers and technology professionals are key to designing,
maintaining and improving the code and algorithms necessary to our business. In addition, members of our Private
Client team have a niche skill-set and cater to some of our most important and highest spending consumers. If
members of our Farfetch Private Client team leave Farfetch, they could be difficult to replace, and such departures
could impact the ability of Farfetch to retain consumers associated with such Farfetch Private Client team member.
The New Guards management team is responsible for discovering and developing the brands in the New
Guards portfolio and we will continue to rely on their expertise to drive the expansion of the portfolio. Certain
designers and creators are critical to the success of the brands within the New Guards portfolio and their departure
could have a significant impact on the creative direction of the relevant brand which could have a significant impact
on such brand and New Guards’ business.
Competition for well-qualified employees in all aspects of our business, including software engineers, data
scientists and other technology professionals, is intense globally. Our continued ability to compete effectively
depends on our ability to attract new employees and to retain and motivate existing employees. If we do not succeed
in attracting well-qualified employees or retaining and motivating existing employees and key senior management,
our business, results of operations, financial condition and prospects may be adversely affected.
A failure to comply with current laws, rules and regulations or changes to such laws, rules and
regulations and other legal uncertainties may adversely affect our business, financial performance,
results of operations or business growth.
Our business and financial performance could be adversely affected by unfavorable changes in, or
interpretations of, existing laws, rules and regulations or the promulgation of new laws, rules and regulations
applicable to us and our businesses, including those relating to online intermediation services providers, internet and
e-commerce, including those against geo-blocking and other geographically based restrictions, internet advertising
and price display, consumer protection, anti-corruption, antitrust and competition, foreign investment, economic and
trade sanctions, tax, banking, data security, network and information systems security, data protection and privacy,
platform regulation, including the regulation of providing goods online, marketplace liability for counterfeit or
damaged goods and any litigation resulting therefrom. As a result, regulatory authorities or state and supranational
bodies with relevant powers, including courts, could prevent or temporarily suspend us from carrying on some or all
of our activities or otherwise penalize us if our practices were found not to comply with applicable regulatory or
licensing requirements or any binding interpretation of such requirements. Regulatory reform of the wider digital
sector (including online marketplaces) is increasing the compliance burden on how online marketplaces can operate
and provide services to their business users and customers in the European Union, the United States, China and
beyond. These various laws, regulations and rules, depending on their final scope when passed, could adversely
affect our business, results of operations, financial condition and prospects. Unfavorable new requirements and
regulatory burdens as well as changes or new interpretations of existing laws could decrease demand for our
products and services, limit our ability to expand our product and service offerings, limit marketing methods and
capabilities, affect our margins, increase costs or subject us to additional liabilities or affect our ability to deliver our
growth strategy.
There are, and will likely continue to be, an increasing number of laws and regulations pertaining to the
internet, e-commerce and the regulation of online platforms that may relate to liability for information retrieved
from or transmitted over the internet, display of certain taxes and fees, online editorial and consumer-generated
content, user privacy, data security, network and information systems security, behavioral targeting and online
advertising, taxation, liability for third-party activities and the quality of services. For example, we are required to
implement an additional level of consumer authentication for certain transactions involving parties in the European
Union completed on our Marketplaces under an aspect of the EU Revised Payment Service Directive, which had a
deadline of December 31, 2020, subject to applicable grace periods and ramp-up periods permitted by regulatory
authorities. This additional authentication may deter consumers from completing transactions online, which may
affect our business. Furthermore, the growth and development of e-commerce is prompting calls for more stringent
consumer protection laws and more aggressive enforcement efforts, which may impose additional burdens on online
businesses generally. As we expand our offering, including in respect of highly regulated product categories such as
kidswear and beauty, we expect the compliance burden to increase, and the risk of claims, lawsuits, government
investigations, and other proceedings in respect of product compliance or safety may do the same. Additionally,
changes in government trade policy, including the imposition of tariffs, export restrictions, or other limitations on
28
commerce, may adversely and materially affect our ability to offer certain payment methods or to conduct our
business in particular jurisdictions.
Likewise, the United States, European Union, United Kingdom and other competent regulatory authorities,
including in the case of the United States, the SEC, the U.S. Department of Justice, the U.S. Treasury Department’s
Office of Foreign Assets Control and the U.S. Department of State continue to enforce economic and trade
regulations and anti-corruption laws, as applicable, across industries. U.S. economic and trade sanctions relate to
transactions with designated countries and territories, which currently include Cuba, Iran, North Korea, Syria, the
so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine and the Crimea region of
Ukraine, as well as specially-targeted individuals and entities that are identified on U.S. and other government
blacklists, and those 50% or more owned, individually or in the aggregate, by them or those acting on their behalf.
EU and UK sanctions prohibit the export of luxury goods (including apparel over stated values) to certain countries,
including Syria and North Korea, and transactions with designated persons and entities identified on EU and UK
lists of asset freeze targets and entities majority-owned or controlled by any such designated persons. Anti-
corruption laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and the UK Bribery Act (“Bribery
Act”), generally prohibit direct or indirect corrupt payments to government officials (and, under certain laws, to
private persons) to obtain or retain business or an improper business advantage. Some of our international operations
are conducted in parts of the world where it is more common to engage in business practices that may be prohibited
by these laws. Moreover, in the future additional U.S., EU and UK trade and economic sanctions or regulations,
enacted due to geopolitics or otherwise, and any counter-sanctions enacted by such sanctioned countries, could
restrict our ability to operate or to generate or collect revenue in certain other countries, such as Russia, which could
adversely affect our business. In particular, in relation to Russia, which accounted for 6% of GMV in the year ended
December 31, 2021, recent sanctions are expected to significantly impact the Company’s operations in this and the
wider CIS region.
The policies and procedures we have in place which are designed to promote compliance with laws and
regulations and which we review and update as we expand our operations in existing and new jurisdictions, as well
as new product categories, may not prevent our employees, partners, or agents from taking actions in contravention
of our policies and procedures and may result in a violation of applicable laws or regulations. As regulations
continue to develop and evolve, and, as we expand into new jurisdictions, we may be subject to multiple overlapping
legal or regulatory regimes, the scope of which are regularly changing, subject to uncertain and differing
interpretations and may impose conflicting requirements. We cannot guarantee that our policies and procedures will
ensure compliance at all times with all applicable laws or regulations. In the event our controls should fail, or we are
found to be not in compliance for other reasons, we could be subject to monetary damages, substantial civil and
criminal monetary penalties, withdrawal of business licenses or permits, litigation, investigation costs and expenses
and damage to our reputation and the value of our brand.
As we expand our operations in existing and new jurisdictions internationally, we will need to increase the
scope of our compliance programs to adequately address risks relating to applicable economic and trade sanctions,
the FCPA, the Bribery Act and other anti-bribery and anti-corruption laws and consumer protection and product
safety laws. Further, the promulgation of new laws, rules and regulations, or the new interpretation of existing laws,
rules and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we or
our luxury sellers conduct business, could require us to change certain aspects of our business, operations and
commercial relationships to ensure compliance, which could decrease demand for services, reduce revenue, increase
costs or subject us to additional liabilities.
The increasing impact of and focus on environmental, social and governance (“ESG”) matters could
increase our costs, harm our reputation and adversely affect our financial results.
There has been an increased focus, including by consumers, investors, employees and other stakeholders, as
well as by governmental and non-governmental organizations, on ESG matters generally (including climate change,
diversity and inclusion and responsible sourcing) and with regard to the fashion industry specifically. From time to
time, we announce certain initiatives, including goals, regarding our ESG focus areas, which include matters such as
responsible sourcing and marketing, social investments and inclusion and diversity. Any failure or perceived failure
by us to meet our commitments, or perception that our targets are insufficient, with regard to ESG matters could
negatively affect our brand, the demand for our products, and, therefore, our financial condition and prospects. Our
29
reputation could be damaged if we, our suppliers, and other parties in our supply chain do not (or are perceived not
to) act responsibly regarding ESG standards or if we fail to appropriately respond to concerns raised by our
consumers, investors and other stakeholders, which could have a material adverse effect on our business, financial
condition, access to capital and results of operations. The costs to achieve our ESG goals, the increased costs in our
supply chain in relation to ensuring the ESG performance of our suppliers, and the costs or potential impact from
business decisions informed by ESG matters could have a material adverse effect on our business and financial
condition; and we may decide to pursue less cost-efficient production, packaging or other operational elements of
our business to ensure we are meeting our sustainability objectives. In addition, we and our suppliers may face
increased costs arising from the physical effects of climate change and diminishing energy and water resources.
Further, standards regarding ESG matters could develop and become more onerous both for us and the parties in our
supply chain, which could result in additional costs that have a material adverse effect on our business and financial
condition.
In addition, regulatory and consumer attention to responsible sourcing has placed an increased focus on
supply chain integrity. We expect our suppliers to meet our standards, including those outlined in our Modern
Slavery Statement, Vendor Code of Conduct and Ethical Sourcing Policy; however, we cannot guarantee their
compliance. Increased global scrutiny and regulatory action may result in additional diligence and other
requirements related to the integrity of our supply chain. Such requirements may be burdensome or costly to comply
with and may impact the production strategy for our first-party original merchandise. The dispersed nature of our
Marketplace model will make monitoring supplier compliance with regulatory or Farfetch standards more complex.
As regulations continue to develop and evolve in this area, and as we expand into new jurisdictions or categories, we
may be subject to new regulatory regimes related to supply chain integrity, the scope of which are regularly
changing, subject to uncertain and differing interpretations and may impose conflicting requirements. Challenges in
complying with such regulations and the failure to implement robust diligence processes may result in reputational
damage, business interruption, loss of trust in our brand or other ESG efforts and have a material adverse impact on
our business and financial condition.
The adoption of new ESG-related regulations applicable to our business, or pressure from key stakeholders
to comply with additional voluntary ESG-related initiatives or frameworks, could require us to make substantial
investments in ESG matters, which could impact the results of our operations. Decisions or related investments in
this regard could affect consumer perceptions regarding our brand. Furthermore, if our competitors’ ESG
performance is perceived to be better than ours, potential or current investors may elect to invest with our
competitors instead, which could have a material adverse effect on our business and financial condition.
We are subject to customs and international trade laws that could require us to modify our current
business practices and incur increased costs or could result in a delay in getting products through
customs and port operations, which may limit our growth and cause us to suffer reputational damage.
Our business is conducted worldwide, with goods imported from and exported to a substantial number of
countries. The vast majority of products sold on our Marketplaces are shipped internationally. We are subject to
numerous regulations, including customs and international trade laws, that govern the importation and sale of luxury
goods. Our ability to grow our operations globally may be adversely affected by any circumstances that reduce or
hinder cross-border trade. For example, the shipping of goods cross-border typically involves complex customs and
duty inspections and is dependent on national carrier systems. If jurisdictions become increasingly fragmented by
tariffs and customs that increase the cost or complexity of cross-border trade, our business could be adversely
impacted.
Our consumers in certain countries, such as China and Russia, are also subject to limitations and regulations
governing the import of luxury goods. In addition, we face risks associated with trade protection laws, policies and
measures and other regulatory requirements affecting trade and investment, including the loss or modification of
exemptions for taxes and tariffs, the imposition of new tariffs and duties and import and export licensing
requirements in the countries in which we operate. For example, the United Kingdom’s exit from the European
Union has resulted in, and may result in additional, restrictions, regulations or other non-tariff barriers to trade as a
result, in part, of a divergence in the United Kingdom and the European Union’s respective regulatory regimes, in
each case concerning our cross-border operations between the United Kingdom and European Union. In addition,
any imposition of tariffs by the United States or European Union could result in the adoption of tariffs or trade
30
restrictions by other countries, which could affect the movement of our goods, or potentially lead to a global trade
war. Our failure to comply with import or export rules and restrictions or to properly classify items under tariff
regulations and pay the appropriate duties could expose us to fines and penalties. If these laws or regulations were to
change or were violated by our management, employees, or our luxury sellers, we could experience delays in the
shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for
our services and negatively impact our results of operations.
Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the
ultimate cost of compliance with these requirements or their effects on our operations. We may be required to make
significant expenditures or modify our business practices to comply with existing or future laws and regulations,
which may increase our costs and materially limit our ability to operate our business.
Our business depends on our ability to source and distribute products in a timely manner. As a result, we rely
on the free flow of goods through open and operational ports worldwide. Labor disputes or other disruptions at
ports, including potentially as a result from changes in tariff structures in relation to the United Kingdom’s
withdrawal from the European Union, for example, create significant risks for our business, particularly if work
slowdowns, lockouts, strikes or other disruptions occur. Any of these factors could result in reduced sales or
canceled orders, which may limit our growth and damage our reputation and may have a material adverse effect on
our business, results of operations, financial condition and prospects.
Our global operations involve additional risks, and our exposure to these risks will increase as our
business continues to expand.
We operate in a number of jurisdictions and intend to continue to expand our global presence, including in
emerging markets. We face complex, dynamic and varied risk landscapes in the markets in which we operate. As we
enter countries and markets that are new to us, we must tailor our services and business model to the unique
circumstances of such countries and markets, which can be complex, difficult, costly and divert management and
personnel resources. In addition, we may face competition in other countries from companies that may have more
experience with operations in such countries or with global operations in general. Laws and business practices that
favor local competitors or prohibit or limit foreign ownership of certain businesses or our failure to adapt our
practices, systems, processes and business models effectively to the consumer and supplier preferences of each
country into which we expand, could slow our growth. Certain markets in which we operate have, or certain new
markets in which we may operate in the future may have, lower margins than our more mature markets, which could
have a negative impact on our overall margins as our revenue from these markets grows over time. Additionally, our
operations in certain countries may be adversely affected by the COVID-19 pandemic, which can trigger
government-mandated restrictions and other measures to minimize the spread of COVID-19. These heightened
restrictions have been adopted at the country, state and local level and differ in the various regions in which we
operate, which could make complying with such restrictions complex.
In addition to the risks outlined elsewhere in this section, our global operations are subject to a number of
other risks, including:
• currency exchange restrictions or costs and exchange rate fluctuations;
• exposure to local economic or political instability, including, for example, in connection with the conflict
between Russia and Ukraine, or threatened or actual acts of terrorism and security concerns;
• compliance with various laws and regulatory requirements relating to anti-corruption, antitrust or
competition, economic sanctions, customs, data content, data protection and privacy, consumer
protection, employment and labor laws, health and safety, and advertising and promotions;
• differences, inconsistent interpretations and changes in various laws and regulations, including
international, national, state and provincial and local tax laws;
• weak or uncertain protection and enforcement of our contractual and intellectual property rights;
• preferences by local populations for local providers;
• slow adoption of the internet and mobile devices as advertising, broadcast and commerce mediums and
the lack of appropriate infrastructure to support widespread internet and mobile device usage in those
markets;
• our ability to support new technologies, including mobile devices, that may be more prevalent in certain
global markets;
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• difficulties in attracting and retaining qualified employees in certain international markets, as well as
managing staffing and operations due to increased complexity, distance, time zones, language and
cultural and employment law differences; and
• uncertainty regarding liability for services and content, including uncertainty as a result of local laws and
lack of precedent.
We are subject to regulatory activity and antitrust litigation under competition laws.
We are subject to scrutiny by various government agencies, including competition authorities. Some
jurisdictions also provide private rights of action for competitors, consumers, suppliers or business users to assert
claims of anti-competitive conduct or breach of law. Other companies or government agencies have in the past and
may in the future allege that our actions violate the antitrust or competition laws of the European Union, individual
member states or other countries or otherwise constitute unfair competition. We do not control the pricing strategies
of luxury sellers on our Marketplaces (other than for our Group entities, i.e., Browns, Stadium Goods’ first-party
sales and the New Guards portfolio of brands when sold direct-to-consumer via our Marketplaces), and such pricing
strategies may be subject to challenges from various government agencies including competition authorities. An
increasing number of governments, including the government of the PRC and the member states of the European
Union, are regulating competitive behavior, and are, for example, engaging in increased scrutiny of the way in
which digital marketplaces operate and provide services to their business users and end customers. Our business
partnerships or agreements or arrangements with customers or other third-parties could give rise to regulatory action
or private antitrust litigation. Regulators may perceive our business differently such that otherwise uncontroversial
business practices could be deemed anticompetitive. Certain competition authorities have conducted market studies
of industries in which we are active. Such studies, investigations or potential claims, even if without foundation,
may be very expensive to defend, involve negative publicity and substantial diversion of management time and
effort and could result in significant judgments against us or require us to change our business practices.
Fluctuations in exchange rates may adversely affect our results of operations.
Our financial information is presented in U.S. dollars, which differs from the underlying functional
currencies of certain of our subsidiaries (including New Guards whose functional currency is the euro), exposing us
to foreign exchange translation risk on consolidation. This risk is currently not hedged and therefore our results of
operations have in the past, and will in the future, fluctuate due to movements in exchange rates when currencies are
translated into U.S. dollars. Macroeconomic factors, including geopolitical uncertainty could lead to increased
volatility in the currency markets, which would exacerbate such fluctuations. At a subsidiary level we are exposed to
transactional foreign exchange risk because we earn revenues and incur expenses in a number of different foreign
currencies relative to the relevant subsidiary’s functional currency, mainly the pound sterling and the euro.
Movements in exchange rates therefore impact our subsidiaries and thus, our consolidated results and cash flows.
We hedge a portion of our core transactional exposures using forward foreign exchange contracts and foreign
exchange option contracts; however, we are exposed to fluctuations in exchange rates on the unhedged portion of
the exposures that could harm our business, results of operations, financial condition and prospects. In addition, as
our operational and financial forecasts drive our hedging program, should our results of operations differ materially
from those forecasts, our hedging program may not be sufficient to adequately mitigate the exposure to currency risk
across a given period.
Our consumer concentration may materially adversely affect our financial condition and results of
operations.
For the year ended December 31, 2021, the top 1% of our consumers accounted for 27.5% of our Digital
Platform GMV. Accordingly, our revenue, financial condition or results of operations may be unduly affected by
fluctuations in the buying patterns of these consumers. If we were to lose the business of some or all of these
consumers, it could materially adversely affect our business, results of operations, financial condition and prospects.
We may not accurately forecast income and appropriately plan our expenses.
We base our current and future expense levels on our operating forecasts and estimates of future income.
Income and operating results are difficult to forecast because they generally depend on the volume and timing of the
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orders we receive, which are uncertain, especially in light of the COVID-19 pandemic, and our business is affected
by general economic and business conditions around the world. A softening in income, whether caused by changes
in consumer preferences or a weakening in global economies, may result in decreased revenue levels, and we may
be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in income. Similarly
our expense levels may be impacted by external factors which are uncertain, including the cost of carriers, duty costs
or cost inflation related to global shipping which may lead to variations in our planned levels of expenditure. This
inability could cause our (loss)/income after tax in a given quarter to be (higher)/lower than expected. Further, our
operating results may be impacted by changes in (losses)/gains on items held at fair value and by fluctuations in our
share price, which we are unable to forecast. We also make certain assumptions when forecasting the amount of
expense we expect related to our share based payments, which includes the expected volatility of our share price, the
expected life of share options granted and the expected rate of share option forfeitures. These assumptions are partly
based on historical results. If actual results differ from our estimates, our net income in a given quarter may be lower
than expected.
Our operating results are subject to seasonal and quarterly variations in our revenue and operating
income, and as a result, our quarterly results may fluctuate and could be below expectations.
Our business is seasonal and historically we have realized a disproportionate amount of our revenue and
earnings for the year in the fourth quarter as a result of the holiday season and seasonal promotions, and we expect
this to continue in the future, while our Brand Platform operates to a wholesale cycle with a different seasonal
cadence. If we experience lower than expected revenue during any fourth quarter, it may have a disproportionately
large impact on our operating results and financial condition for that year. Any factors that harm our fourth quarter
operating results, including disruptions in our brands’ or retailers’ supply chains or unfavorable economic
conditions, including as a result of the COVID-19 pandemic, could have a disproportionate effect on our results of
operations for our entire fiscal year.
In anticipation of increased sales activity during the fourth quarter, we may incur significant additional
expenses, including additional marketing and additional staffing in our customer support operations. We also may
experience an increase in our net shipping costs due to complimentary upgrades, split-shipments, and additional
long-zone shipments necessary to ensure timely delivery for the holiday season. At peak periods, there could also be
further delays by our luxury sellers in processing orders, which could leave us unable to fulfill consumer orders due
to “no stock,” or in packaging a consumer’s order once received, which could lead to lower consumer satisfaction.
In the future, our seasonal sales patterns may become more pronounced, may strain our personnel and production
activities and may cause a shortfall in net sales as compared with expenses in a given period, which could
substantially harm our business, results of operations, financial condition and prospects.
Our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including
those described above. As a result, historical period-to-period comparisons of our sales and operating results are not
necessarily indicative of future period-to-period results. You should not rely on the results of a single fiscal quarter
as an indication of our annual results or our future performance.
We are involved in and may pursue additional strategic relationships. We may have limited control over
such relationships, and these relationships may not provide the anticipated benefits.
We are involved in various strategic relationships, including with Alibaba, Richemont and the Chalhoub
Group (all of which are also involved in the sale of luxury goods) to enable or enhance access to geographic markets
such as China and the Middle East. For example, under our strategic partnership with Alibaba and Richemont, our
shopping channel is available on Alibaba’s e-commerce platform, which is intended to provide us access to
Alibaba’s consumers, increase our potential addressable market and give us enhanced access to the China market.
Following the completion of their combined strategic investments of $500 million ($250 million each) in August
2021, Alibaba and Richemont hold an initial combined 25% equity stake in the joint venture, Farfetch China. We
also may pursue and enter into strategic relationships in the future. Such relationships involve risks, including but
not limited to: maintaining good working relationships with the other party; any economic or business interests of
the other party that are inconsistent with ours; the other party’s failure to fund its share of capital for operations or to
fulfill its other commitments, including providing accurate and timely accounting and financial information to us,
which could negatively impact our operating results; loss of key personnel; actions taken by our strategic partners
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that may not be compliant with applicable rules, regulations and laws; reputational concerns regarding our partners
or our leadership; bankruptcy, requiring us to assume all risks and capital requirements related to the relationship,
and the related bankruptcy proceedings could have an adverse impact on the relationship; and any actions arising out
of the relationship that may result in reputational harm or legal exposure to us. Further, certain of these relationships
in the past have not delivered; and current and future such relationships may not deliver the benefits that were
originally anticipated. Any of these factors may have a material adverse effect on our business, results of operations,
financial condition and prospects.
We have acquired, and may continue to acquire, other companies or technologies, which could divert
management’s attention and otherwise disrupt our operations and harm our operating results. We may
fail to acquire companies whose market power or technology could be important to the future success of
our business.
We have acquired and may in the future seek to acquire, collaborate with or invest in other companies or
technologies that we believe could complement or expand our brand and products, enhance our technical
capabilities, or otherwise offer growth opportunities. As part of our business, we consider potential strategic
transactions, any of which could impact our near-term profitability. Pursuit of future potential acquisitions or
investments may divert the attention of management and cause us to incur various expenses in identifying,
investigating, pursuing and seeking to obtain regulatory approval for suitable acquisitions or investments, whether or
not they are consummated. In addition, we may fail to acquire companies whose market power or technology could
be important to the future success of our business, or we may be unsuccessful in integrating our acquired businesses
or any additional business we may acquire in the future. For example, we acquired Browns in 2015, Fashion
Concierge and Style.com in 2017, Stadium Goods, CuriosityChina, Toplife and New Guards in 2019, Luxclusif,
Jetti, Allure and a majority interest in Palm Angels in 2021 and Violet Grey in 2022. In November 2021, we
announced that we were in discussions with Richemont in respect of a number of possible options, including the
leveraging of FPS to power Richemont’s maisons and Yoox Net-a-Porter, the participation of Richemont’s maisons
in the Farfetch Marketplace and a minority investment in Yoox Net-a-Porter by Farfetch. As noted at the time, there
is no guarantee that we will be able to reach an agreement.
We also may not achieve the anticipated benefits from any acquired business, investment, joint venture or
collaboration due to a number of factors, including:
• unanticipated and substantial costs or liabilities associated with the acquisition, investment, joint
venture or collaboration, including: (a) unasserted claims or assessments that we failed to, or were
unable to, identify; (b) costs or liabilities arising from the acquired company’s or counterparty’s failure
to comply with intellectual property laws, tax laws, laws governing the regulation of online platforms
and the licensing obligations to which they are subject, data privacy laws or other relevant laws and
regulations; or (c) costs or liabilities associated with any other litigious matters, including potential
intellectual property litigation, that could be expensive and time consuming and, if resolved adversely,
could harm our business;
incurrence of acquisition or deal-related costs;
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• synergies attributable to the acquisition may vary from expectations;
• diversion of management’s attention from other business concerns;
• regulatory uncertainties (e.g., deriving from obligations under various laws or from any conditions
placed upon regulatory approval that could delay integration, or otherwise restrict our ability to realize
the expected goals of an acquisition);
• harm to our existing business relationships with our luxury sellers as a result of the acquisition, joint
venture or collaboration;
• harm to our brand and reputation, including as a result of actions of our collaborators;
•
the potential loss of key employees or challenges associated with integrating employees from the
acquired company into our business culture;
• use of resources that are needed in other parts of our business;
• challenges in incorporating multiple acquired businesses, investments, or joint ventures into our
business;
• failure to implement or remediate controls, procedures or policies appropriate for a public company at
an acquired company;
• failure to realize anticipated synergies in the timeframe or in the full amount expected;
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• failure to transition targets onto our existing platforms and systems;
• failure to integrate operations across different cultures and languages and to address the particular risks
associated with acquisitions in specific jurisdictions; and
• use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired
goodwill, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield
expected returns, we may be required to take charges to our operating results based on this impairment assessment
process. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which
could adversely affect our operating results. For example, half of the consideration we paid in 2019 in connection
with the New Guards acquisition was paid in the form of shares, resulting in our issuance of 27.5 million Class A
ordinary shares or 9% of the Class A ordinary shares outstanding immediately prior to the acquisition. In addition, if
an acquired business fails to meet our expectations, this may have a material adverse effect on our business, results
of operations, financial condition and prospects.
If we are unable to successfully launch and monetize new and innovative technology, our growth and
profitability could be adversely affected.
We are constantly developing new and innovative strategies, initiatives and technologies, such as our
connected retail technologies which form a part of our LNR initiative. Our ability to bring a product to market in a
timely manner or at all, our ability to monetize these technologies and other new business lines in a timely manner
and operate them profitably and our ability to leverage these technologies to drive customer engagement, depends on
a number of factors, many of which are beyond our control, including:
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our ability to develop fast enough to meet the changing needs and expectations of consumers or FPS
clients;
our ability to manage the financial and operational aspects of developing and launching new technology,
including making appropriate investments in our software systems, information technologies and
operational infrastructure;
our ability to secure required governmental permits and approvals;
the level of commitment and interest from our actual and potential third-party innovators;
the ability of our technology and platform to adapt and scale quickly to support and deliver on innovation;
our ability to maintain our market position in the face of increased adoption of open innovation strategies
and luxury startup-focused M&A activity by our competitors;
competition for certain products, including products from Chinese technology companies, and our
competitors’ (including existing luxury sellers who may launch competing technologies) development and
implementation of similar or better technology;
our ability to effectively secure intellectual property rights to protect our technology and brands and to
manage any third-party challenges to the intellectual property that underpins our technology;
our ability to continue to comply with applicable laws and regulations, including new laws and regulations
relating to the operation of our technologies and platforms;
our ability to attract and retain staff with the skills to deliver technical innovation;
our ability to collect, combine and leverage data about our consumers collected online and through our new
technology in compliance with data protection laws; and
general economic and business conditions affecting consumer confidence and spending, including the
impact of the COVID-19 pandemic, and the overall strength of our business.
We may not be able to grow our new technologies or business lines or operate them profitability, and these
new and innovative technology initiatives may never generate material revenue. In addition, the substantial
management time and resources that our technology development requires may result in disruption to our existing
business operations and adversely affect our financial condition, which may decrease our profitability and growth.
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We may become subject to risks related to accepting cryptocurrencies as a form of payment, building or
exchanging non-fungible tokens, or collaborating in the metaverse.
As part of our business strategy and LNR vision we plan to continue to innovate to meet the changing and
future needs of consumers. Such innovation may include providing consumers the opportunity to transact in
cryptocurrencies (either in-store or online), building or exchanging non-fungible tokens (“NFTs”) or collaborating in
the metaverse through new and emerging digital environments. We may incur significant costs in pursuing such
innovation initiatives, they may not develop in accordance with our expectations, and market acceptance of features,
products, or services we build for use with cryptocurrencies, NFTs or the metaverse is uncertain.
Cryptocurrencies are not considered legal tender or backed by most governments, and have experienced
technological glitches and various law enforcement and regulatory interventions. The use of cryptocurrency, such as
bitcoin, has been prohibited or effectively prohibited in some countries. If we fail to comply with any such
prohibitions that may be applicable to us, we could face regulatory or other enforcement actions and potential fines
or other consequences.
Cryptocurrencies have in the past and may in the future experience periods of extreme price volatility.
Fluctuations in the value of any cryptocurrencies or other digital assets that we might hold would also lead to
volatility in our financial results and could have an adverse impact on our business. In addition, there is substantial
uncertainty regarding the future legal and regulatory requirements relating to cryptocurrency, transactions utilizing
cryptocurrency, NFTs and metaverse-related products and features. Compliance with any such regulations may be
complex and costly. For example, currently there are no specific standards under IFRS regarding the accounting for
cryptocurrencies, NFTs and similar instruments. In the event that the IASB issues new standards or amendments to
existing standards in respect of these instruments, the accounting treatment may differ from the market practice
applied by companies under existing accounting standards and guidance. In addition, governments could choose to
curtail or outlaw the acquisition, use or redemption of cryptocurrency. In such a case, ownership of, holding or
trading in cryptocurrency would be considered illegal and subject to sanction. These uncertainties, as well as future
accounting and tax developments, or other requirements relating to cryptocurrency, NFTs and the metaverse could
expose us to litigation, regulatory action or possible liability, and have an adverse effect on our business.
Governmental control of currency conversion may limit our ability to utilize our cash balances effectively
in the future.
We are subject to governmental regulation of currency conversion and transfers, which may particularly
affect our subsidiaries in certain jurisdictions. For example, the Chinese government imposes controls on the
convertibility of the RMB into other currencies and, in certain cases, the remittance of currency out of China.
Earnings from our Chinese subsidiaries could therefore be impacted. Shortages in the availability of foreign
currency may restrict the ability of our Chinese operations to remit sufficient foreign currency to pay dividends or to
make other payments to us, or otherwise to satisfy their foreign currency-denominated obligations. Under existing
Chinese foreign exchange regulations, payments of current account items, including dividend payments, interest
payments, payments under service agreements or sales of goods and purchase agreements, as well as expenditures
from trade-related transactions, can be made in foreign currencies without prior approval from China’s State
Administration of Foreign Exchange (“SAFE”) by complying with certain procedural requirements. However, for
any Chinese company, dividends can be declared and paid only out of the retained earnings of that company. Under
Chinese laws, rules and regulations, each of our subsidiaries incorporated in China is required to set aside at least
10% of its net income each year to fund certain statutory reserves until the cumulative amount of such reserves
reaches 50% of its registered capital. These reserves, together with the registered capital, are not distributable as
cash dividends. As a result of these laws, rules and regulations, our subsidiaries incorporated in China are restricted
in their ability to transfer a portion of their respective net assets to their shareholders as dividends, loans or
advances.
Furthermore, approval from SAFE or its local branch is required for conversion of RMB into other
currencies and remittance out of China to pay capital expenses, such as for repayment of loans denominated in other
currencies. Without a prior approval from SAFE, cash generated from our operations in China may not be used to
pay off debt in a currency other than the RMB owed by entities within China to entities outside China, or to make
other capital expenditures outside of China in a currency other than the RMB.
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Application of existing tax laws, rules or regulations are subject to interpretation by tax authorities.
The application of the tax laws of various jurisdictions to our international business activities is subject to
interpretation. The tax authorities of the jurisdictions in which we operate have challenged and may continue to
challenge our methodologies for valuing developed technology or intercompany arrangements, including our
transfer pricing, or determine that the manner in which we operate our business does not result in the expected tax
consequences, which could increase our worldwide effective tax rate and adversely affect our financial position and
results of operations.
Significant judgment and estimation is required in determining our worldwide tax liabilities. In the ordinary
course of our business, there are transactions and calculations, including intercompany transactions, royalty
payments and cross-jurisdictional transfer pricing, for which the ultimate tax determination is uncertain or otherwise
subject to interpretation. Tax authorities in any of the countries in which we operate have disagreed and may in the
future disagree with our intercompany charges, including the amount of, or basis for, such charges, withholding
taxes, cross-jurisdictional transfer pricing, indirect tax liabilities and reclaims or other matters such as the allocation
of certain interest expenses and other tax items, and may assess additional taxes.
As we operate in numerous tax jurisdictions, the application of tax laws can be subject to diverging and
sometimes conflicting interpretations by the tax authorities of these jurisdictions. It is not uncommon for tax
authorities in different countries to have conflicting views, for instance, with respect to, among other things, whether
a permanent establishment exists in a particular jurisdiction, the manner in which the arm’s length standard is
applied for transfer pricing purposes, or with respect to the valuation of intellectual property. For example, Italian
authorities are currently reviewing the activities of one of our subsidiaries for the years 2015 through 2020,
including whether that subsidiary had a permanent establishment in Italy and our transfer pricing policies. We are
cooperating with the investigation, but intend to contest any allegation that we have a permanent establishment in
Italy or that our transfer pricing policies were inappropriate. The Italian tax authorities have not issued any
assessments on us or our subsidiaries. However, the matter remains ongoing and if a tax authority in one country
where we operate were to reallocate income from another country where we operate, and the tax authority in the
second country did not agree with the reallocation asserted by the first country, we could become subject to tax on
the same income in both countries, resulting in double taxation. If tax authorities were to allocate income to a higher
tax jurisdiction, subject our income to double taxation or assess interest and penalties, it could increase our tax
liability, which could adversely affect our financial position and results of operations.
Although we believe our tax estimates and methodologies are reasonable, a tax authority’s final
determination in the event of a tax audit could materially differ from our historical corporate income tax provisions
and accruals and/or indirect tax and customs duty liabilities and claims, in which case we may be subject to
additional tax liabilities, possibly including interest and penalties, which could have a material adverse effect on our
cash flows, results of operations, financial condition and prospects. Furthermore, tax authorities have become more
aggressive in their interpretation and enforcement of such laws, rules and regulations over time, as governments are
increasingly focused on ways to increase revenues. This has contributed to an increase in audit activity and more
stringent approaches by tax authorities. Even where we believe our historical tax position to be consistent with
applicable law, we may from time to time enter into agreements with tax authorities or resolve claims regarding tax
matters where we determine that it is in our best interest to do so given the costs and uncertainties inherent in any
litigation or administrative proceeding, including potential proceedings to challenge a tax assessment with which we
disagree. As such, additional taxes or other assessments may be in excess of our current tax reserves or may require
us to modify our business practices to reduce our exposure to additional taxes going forward, any of which may
have a material adverse effect on our business, results of operations, financial condition and prospects.
This risk and the likelihood of a more aggressive approach by tax authorities may be exacerbated by the
COVID-19 pandemic. Across the globe, governments have responded to the COVID-19 pandemic with large public
expenditures; and governments may be considering plans to increase their collection of revenues through a more
stringent approach to the taxation of digital businesses.
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Amendments to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules or
regulations could have an adverse effect on our business and financial performance.
Many of the underlying laws, rules or regulations imposing taxes and other obligations were established
before the growth of the internet and e-commerce. Tax authorities in non-U.S. jurisdictions and at the U.S. federal,
state and local levels are currently reviewing the appropriate treatment of companies engaged in digital activity and
are considering changes to existing tax or other laws that could result in income, consumption, use or other taxes
relating to our activities, and/or impose obligations on us to collect such taxes.
The OECD/G20 Inclusive Framework on Base Erosion and Profit Sharing (“BEPS”) adopted a Programme
of Work to Develop a Consensus Solution to the Tax Challenges arising from the Digitalization of the Economy (the
“Programme of Work”). The purpose of the Programme of Work is to develop international corporate tax reform
proposals, building on two pillars: Pillar One involves revised profit allocation and nexus rules to reallocate taxing
rights to market jurisdictions; and Pillar Two involves rules to ensure a minimum level of effective taxation to
address remaining BEPS concerns. Finally, other reporting obligations have been enacted that may impact the
Group’s processes, such as new mandatory automatic exchange of information rules for digital platforms, country-
by-country reporting and mandatory disclosure rules.
OECD Pillar One and Pillar Two and Digital Services Taxes
On October 8, 2021, most OECD members reached a political agreement regarding a Statement on a Two-
Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy. The Pillar One and
Pillar Two proposals would introduce significant changes to the international tax rules, affecting the allocation of tax
rights across countries and impacting Multinational Groups of Entities (“MNE”).
Amount A of Pillar One, which is aimed to address solutions for the taxation of certain businesses on
revenue streams where there is a market presence including an online presence, involves the creation of a new tax
right and the reallocation to market jurisdictions of a share of residual profit determined at the MNE group level,
based on a formulaic approach. Pillar One is not expected to impact our business in the medium-term, since the
threshold for the application of Pillar One is annual revenue in excess of twenty billion euros. Pillar Two addresses
remaining BEPS challenges and is designed to ensure that large international businesses pay a minimum level of tax
regardless of where they are headquartered or the jurisdictions in which they operate.
At the end of 2021 the OECD published Pillar Two model rules for the implementation of a global minimum
tax rate, however, a number of details remain to be addressed and a detailed implementation framework is still to be
published.
While Pillar One and Pillar Two discussions were ongoing, a number of jurisdictions enacted or maintained
unilateral digital services taxes (“DST”) or similar measures applying to online marketplaces, including the United
Kingdom, Italy, France, Spain, Austria, India and Turkey.
Each DST is calculated differently, although they are generally charged on marketplace revenues without
relief for input costs or expenses. Based on the current law and information released by the local tax authorities, we
were subject to the Italian and Spanish DSTs in the year ended December 31, 2021. These unilateral measures are
likely to be abandoned once the OECD agreement is implemented, which is expected to occur in 2023. We incurred
the full cost of the new DSTs in the year ended December 31, 2021, which is reflected in the audited Consolidated
financial statements included elsewhere in this Annual Report. However, we anticipate that the costs arising from
DSTs will be partially shared with the brands and boutiques for which we have intermediated operations in those
countries.
In 2020, the U.S. Trade Representative launched a “Section 301” investigation into whether certain DSTs
are unreasonable or discriminatory; and whether they burden or restrict commerce in the United States. Included in
the political agreement to implement the OECD’s two-pillar solution to tax the digitalized economy was a
confirmation that unilateral DSTs would be abolished, following which the United Kingdom, Italy, France, Spain,
Austria, India and Turkey have agreed to a transitional approach with the United States, whereby their DST
measures will remain in effect until Pillar One takes effect. To the extent that taxes from the unilateral measures
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accruing to one of these countries in the period before Pillar One takes effect exceeds an amount equivalent to the
tax due under Amount A of Pillar One, the excess will be creditable against the Amount A liability in that country.
In return, the United States has committed to terminate proposed trade actions (and not to impose further trade
actions) against these countries with respect to their existing DST regimes.
In light of the changing regulatory environment, there could be different interpretations of these unilateral
laws that currently remain in effect. We take a conservative approach to tax issues and consult with specialist
external advisors. We cannot, however, anticipate the likelihood, timing or impact of any new regulations, guidance,
laws or interpretations of such regulations, guidance or laws. If such tax or other laws, rules or regulations were
amended, or if new unfavorable laws, rules or regulations were enacted, the new legislation could increase our tax
payments or other obligations, prospectively or retrospectively, subject us to interest and penalties, decrease the
demand for our services if we passed on such additional costs to the consumer, result in increased costs to update or
expand our technical or administrative infrastructure, or effectively limit the scope of our business activities if we
decided not to conduct business in particular jurisdictions. As a result, these changes may have a material adverse
effect on our business, results of operations, financial condition and prospects.
New Mandatory Automatic Exchange of Information Rules for Digital Platforms
The Directive on Administrative Cooperation in the Field of Taxation (the “DAC7”) will allow member
states’ tax authorities to collect and automatically exchange information on income earned by sellers on digital
platforms beginning in 2023.
Operators falling within the scope of DAC7 will be required to collect and verify in-line with due diligence
procedures information from sellers/providers on their online platform. Subsequently, certain information will be
reported to the sellers/providers and to the relevant tax authority. Such information includes, inter alia, an overview
of amounts paid to sellers from the reportable activities and platform fees and commissions incurred.
DAC7 was formally adopted on March 22, 2021. Member states of the European Union were required to
publish any domestic law, regulation, and administrative provisions necessary to comply with the directive by
January 31, 2022, and such rules will apply from January 1, 2023.
We are taking the necessary steps to prepare our information systems to comply with the rules anticipated to
take effect in 2023. Any penalty for non-compliance will be determined by the member state and is not possible to
accurately anticipate at this time; but any such penalty and its costs of implementation could negatively impact our
profitability.
Others
In addition, various governments and intergovernmental organizations could introduce proposals for tax
legislation, or adopt tax laws, particularly with regards to online marketplaces, that may have a significant adverse
effect on our worldwide effective tax rate, or increase our tax liabilities, the carrying value of deferred tax assets, or
our deferred tax liabilities. The OECD continuously monitors key areas of action and publishes reports and guidance
on implementation of the BEPS recommendations. Multiple jurisdictions, including some of the countries in which
we operate, have implemented recommended changes aimed at addressing perceived issues within their respective
tax systems that may lead to reduced tax liabilities among multinational companies. However, other jurisdictions in
which we operate or do business could react to the BEPS initiative or their own concerns by enacting tax legislation
that could adversely affect us through increasing our tax liabilities.
Changes in U.S. tax legislation, regulation and government policy may impact our future financial
position and results of operations.
The U.S. presidential administration and members of the U.S. Congress have proposed significant changes in
U.S. federal income tax law, which could affect us and our business. These proposals include, among others, an
increase in the corporate income tax rate from a fixed 21% to graduated rates of up to 28% and the imposition of
minimum taxes or surtaxes on certain types of income. These proposals are being considered by the U.S. Congress,
but the likelihood of these or other changes being enacted or implemented is unclear. We are currently unable to
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predict whether these or other changes will occur and, if so, the ultimate impact on our business. Accordingly, such
changes may have a negative impact on us, our suppliers or our consumers, including as a result of related
uncertainty, and may materially and adversely impact our business, financial condition, results of operations and
cash flow.
The application of a value-added tax (or similar taxes) and the impact of managing our business model
transition to a commissionaire structure could adversely affect our business and results of operations.
The application of a value added tax (or similar taxes such as a sales and use tax, provincial tax, or goods
and services tax), business tax and gross receipt tax, to our business and to our luxury sellers is a complex and
evolving issue. Significant judgment is required to evaluate applicable tax obligations. As a result, amounts recorded
may be subject to adjustments by the relevant tax authorities. In many cases, the ultimate tax determination is
uncertain because it is not clear how new and existing statutes might apply to our business or to the businesses of
our luxury sellers. A number of jurisdictions globally have introduced (or are considering the introduction of)
additional reporting, record-keeping or value-added tax (or similar taxes) calculation, collection and remittance
obligations on businesses like ours that facilitate or perform e-commerce. Such obligations could require us or our
luxury sellers to incur substantial costs in order to comply, including costs associated with legal advice, local
compliance, tax calculation, collection, remittance and audit requirements, which could make selling in such
markets less attractive and could adversely affect our business.
For example, in certain jurisdictions, rules have already been introduced to hold the online facilitator of sales
of goods and services jointly and severally liable for any under or non-accounted value added tax (or similar taxes)
by the sellers. Such joint and several liability provisions may significantly impact our business where our luxury
sellers have not complied with the local provisions. In addition, new rules for retail and e-commerce sales are being
introduced. For example, across the European Union from July 2021, online marketplaces have been, in certain
situations (where certain thresholds are met), deemed to be the supplier of goods for value-added tax purposes,
which will require them to collect and pay a value-added tax on sales via their platform. Further, in the United
States, states are able to tax their residents on remote sales. Following the U.S. Supreme Court’s decision in 2018 in
South Dakota v. Wayfair, a U.S. state may require by way of economic nexus laws an online retailer to collect sales
taxes imposed by that state, even if the retailer has no physical presence in that state, thus permitting a wider
enforcement of such sales tax collection requirements against non-U.S. companies that have historically not been
responsible for state or local tax collection unless they had physical presence in the U.S. customer’s state.
Given the current complexities for online marketplaces, inconsistencies in interpretation and implementation
of local tax rules, we have transitioned our key business model to one in which we act as an “undisclosed agent” or
“commissionaire” of our luxury sellers. Under this model, for the purposes of calculating value-added tax, our end
consumers will contract with and be invoiced by us and there will be a supply for VAT purposes by us to the end
consumer of goods and other related services, although the legal sale of goods will continue to be between our
luxury sellers and the end consumer. Our transition is intended to simplify and provide greater certainty to our value
added tax accounting position without materially increasing our overall value-added tax liabilities.
Our ability to achieve our business and financial objectives is subject to risks and uncertainties.
Implementing our business model requires a considerable investment of technical, financial and legal resources. If
we are unable to successfully establish our business model, our business, results of operations, financial condition
and prospects could be negatively impacted.
We may be subject to general litigation, regulatory disputes and government inquiries.
As a growing company with expanding operations, including in the highly regulated product categories of
beauty and kidswear, we have in the past faced and may in the future increasingly face the risk of claims, lawsuits,
government investigations, and other proceedings involving competition and antitrust, intellectual and other
proprietary rights and property, privacy, product safety, consumer protection, accessibility claims (including those
relating to our compliance with the Americans with Disabilities Act of 1990), securities, tax, labor and employment,
commercial disputes, services and other matters. The number and significance of these disputes and inquiries have
increased as the political and regulatory landscape changes, and as we have grown larger and expanded in scope and
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geographic reach, and as our services have increased in complexity. Refer to Item 8. “Financial Information —
A. Consolidated Statements and Other Financial Information — Legal and Arbitration Proceedings.”
We cannot predict the outcome of such disputes and inquiries with certainty. Regardless of the outcome,
these matters can have an adverse impact on us because of legal costs, diversion of management resources, and other
factors. Determining reserves for any litigation is a complex and fact-intensive process that is subject to judgment
calls. It is possible that a resolution of one or more such proceedings could require us to make substantial payments
to satisfy judgments, fines or penalties or to settle claims or proceedings, any of which could harm our business.
These proceedings could also result in reputational harm, criminal sanctions, consent decrees or orders preventing us
from offering certain products, or services, or requiring a change in our business practices in costly ways or
requiring development of non-infringing or otherwise altered products or technologies. Litigation and other claims
and regulatory proceedings against us could result in unexpected expenses and liabilities, which could have a
material adverse effect on our business, results of operations, financial condition and prospects.
The profitability of our Browns, Stadium Goods and New Guards businesses depends on our ability to
manage inventory levels and, if not managed successfully, our business and results of operations could be
adversely affected.
Browns and Stadium Goods purchase merchandise wholesale which they then sell via our Marketplaces or
in-store. In addition, New Guards produces merchandise which it then sells via our Marketplaces, its brands’
websites or to retailers. As a result, our profitability depends on our ability to manage these businesses’ inventory
levels and respond to shifts in consumer demand patterns. Overestimating consumer demand for merchandise may
result in Browns, Stadium Goods or New Guards holding unsold inventory, which would likely result in the need to
rely on markdowns or promotional sales to dispose of excess inventory, which could have an adverse effect on our
gross margins and results of operations. Conversely, if Browns, Stadium Goods or New Guards underestimate
consumer demand for merchandise that could lead to inventory shortages, lost sales opportunities or negative
consumer experiences that could adversely affect consumer relationships and our ability to grow in the future. In the
event that New Guards’ business, which was primarily wholesale-focused prior to our acquisition, significantly
grows its e-concession and direct-to-consumer business, this may result in substantially increasing its exposure to
such inventory risks having only had limited prior experience managing such risks. The COVID-19 pandemic may
increase the complexity of forecasting consumer demand and/or impact our ability to source inventory to meet
demand, both of which could adversely affect our operations. Any delays in deliveries of merchandise due to
production slowdowns or other distribution disruptions caused by the pandemic could impact our inventory levels.
Browns, Stadium Goods and New Guards rely on various processes and systems for forecasting,
merchandise planning, inventory management, procurement, allocation and fulfilment capabilities. Our ability to
continue to successfully execute our strategies for these businesses or evolve such strategies with changes in the
retail environment could be adversely affected if such processes and systems are not effectively managed and
maintained.
If any of our inventory management systems were to fail, or if our physical inventory is inaccurate for any
reason, we may not derive the expected sales and profitability of our Browns, Stadium Goods or New Guards
businesses, or we may incur increased costs relative to our current expectations which could adversely affect our
business, financial condition, results of operations and prospects.
The United Kingdom’s withdrawal from the European Union and, in particular, the implementation of
the EU-UK Trade and Cooperation Agreement (“TCA”), or any ancillary arrangements, may have a
negative effect on global economic conditions, financial markets and our business.
We are a multinational company headquartered in the United Kingdom with worldwide operations, including
significant business operations in the European Union. Following a national referendum and enactment of legislation
by the government of the United Kingdom (“Brexit”), the United Kingdom formally withdrew from the European
Union on January 31, 2020, and entered into a transition period. On December 24, 2020, the United Kingdom and
the European Union announced that they had concluded their negotiations relating to the future trading relationship
between the parties. The agreed terms are contained in the TCA, which became binding on both the European Union
and the United Kingdom on January 1, 2021.
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While agreement on the terms of the TCA avoided a “no deal” Brexit scenario, and provided in principle for
quota and tariff-free trading of goods, it is nevertheless expected that the TCA will result in the creation of non-tariff
barriers (such as increased shipping and regulatory costs and complexities) to the trade in goods between the United
Kingdom and the European Union. Further, the TCA does not provide for the continued free movement of services
between the United Kingdom and the European Union. The full impact of such arrangements, on both our existing
processes and our ability to adjust our business and operations to operate successfully in the United Kingdom and
the European Union, as well as more broadly on UK-EU cross-border trade, are expected to become clearer over the
course of 2022. In particular, it remains to be seen whether the initial implementation of, and adjustment of UK-EU
trading processes for, the TCA could disrupt or otherwise negatively impact our business and operations.
Any resulting restrictions on the movement of goods or services could have a material adverse effect on our
operations. For example, we saw production delays from the ongoing effects of the United Kingdom’s withdrawal
from the European Union, and if such delays were to re-appear they could have an adverse effect on our results of
operations. In addition, we may need to alter the geographic locations of, or jurisdiction of entities responsible for,
certain fulfilment, delivery and warehouse services to adjust to the new legal and regulatory landscape resulting
from the implementation of the TCA, which would require time and resources and could negatively affect our
business. To meet these potential increased regulatory complexities, since early 2021 we have migrated Fulfilment
by Farfetch volumes from the United Kingdom to a third-party operated fulfilment warehouse in continental Europe,
but such migration may not adequately address future regulatory developments. These increased regulatory
complexities related to the import and export of products or changes in item pricing may impact the consumer
experience, result in increased costs and have a material adverse effect on our business and results of operations.
The TCA also grants each of the United Kingdom and the European Union the ability, in certain
circumstances, to unilaterally impose tariffs on one another. In the event of such an imposition, any additional tariffs
may have a material adverse impact on us as well as the stability of UK-EU trade more generally. Any uncertainty
as to UK or EU government policy and, in particular, whether any such policy may result in the imposition of
reciprocal tariffs, may depress economic activity or have an adverse impact on our business and operations.
Consumer activity may be further depressed should the costs of purchasing goods increase for consumers in the
United Kingdom or European Union as a result of Brexit, for example, due to higher interchange or other fees levied
by payment processors.
In addition, the TCA has imposed additional restrictions on the free movement of people between the United
Kingdom and the European Union, which could have a material adverse effect on us, since we compete in these
jurisdictions for well-qualified employees in all aspects of our business, including software engineers and other
technology professionals. Any impact on our ability to attract new employees and to retain existing employees in
their current jurisdictions could decrease our competitiveness and have a material adverse effect on our business and
results of operations.
General economic factors, natural disasters, pandemics or other unexpected events may adversely affect
our business, financial performance and results of operations.
Our business, financial performance and results of operations depend significantly on worldwide
macroeconomic conditions and their impact on consumer spending. Luxury products are discretionary purchases for
consumers. Recessionary economic cycles, higher interest rates, volatile fuel and energy costs, inflation, levels of
unemployment, conditions in the residential real estate and mortgage markets, access to credit, consumer debt levels,
unsettled financial markets and other economic factors that may affect consumer spending or buying habits could
materially and adversely affect demand for our products. In addition, volatility in the financial markets has had and
may continue to have a negative impact on consumer spending patterns. A reduction in consumer spending or
disposable income may affect us more significantly than companies in other industries and companies with a more
diversified product offering. In addition, negative national or global economic conditions may materially and
adversely affect our suppliers’ financial performance, liquidity and access to capital. This may affect their ability to
maintain their inventories, production levels and/or product quality and could cause them to raise prices, lower
production levels or cease their operations.
Economic factors such as increased commodity prices, shipping costs, inflation, higher costs of labor,
insurance and healthcare, and changes in or interpretations of other laws, regulations and taxes may also increase our
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cost of sales and our selling, general and administrative expenses, and otherwise adversely affect our financial
condition and results of operations. Any significant increases in costs may affect our business disproportionately
compared to our competitors. Changes in trade policies, increases in tariffs and the imposition of retaliatory tariffs,
including those implemented by the United States, China and Europe, may have a material adverse effect on global
economic conditions and the stability of global financial markets and may reduce international trade. Moreover,
government consumption or socio-economic policies or objectives pursued by countries in which we do business
could potentially impact the demand for our goods and services in certain countries. Natural disasters and other
adverse weather and climate conditions, public health crises, political crises, such as terrorist attacks, war, political
instability, labor or trade disputes or other unexpected events, could disrupt our operations, internet or mobile
networks or the operations of one or more of our third-party service providers. For example, the vast majority of our
production processes take place at our facility in Guimarães, Portugal. If any such disaster were to impact this
facility, our operations would be disrupted.
In addition, rising global average temperatures due to the increased concentrations of carbon dioxide and
other greenhouse gases in the atmosphere are causing significant changes in weather patterns around the globe and
an increase in the frequency and severity of certain natural disasters. Changes in weather patterns and the increased
frequency, intensity and duration of extreme weather events (e.g., floods, droughts and severe storms) could, among
other things, disrupt our logistics operations and our ability to source and distribute products in a timely manner,
impact the operation of our New Guards business’ supply chain, disrupt our brick-and-mortar retail operations,
increase our product costs and impact the types of fashion products that consumers purchase. As a result, the effects
of climate change could have short-and long-term impacts on our business and operations.
We sell certain merchandise via third-party platforms, and our inability to access consumers via these
platforms could adversely affect our business.
We sell certain merchandise via third-party platforms, including, for example, on Tmall Luxury Pavilion in
China. We are subject to, and must comply with, such platforms’ respective terms and conditions for merchants and
their terms of service for consumer rights protection. Such third-party platforms retain the right to remove our
merchandise from their platform or halt our sales on their platform if they believe we have violated their terms and
conditions, the law or the intellectual property rights of other parties, including, but not limited to, allegations that
any goods we offer for sale are counterfeit. Such platforms can halt sales or remove our merchandise at their
complete discretion irrespective of the validity of any claims made against us. Should such third-party platforms
exercise such discretion in a market where we are substantially reliant on the relevant platform it could negatively
impact our business and results of operations in that market, which could have a material adverse effect on our
business, results of operations, financial condition and prospects. Further, should such third-party platforms’ actions
become public it could impact our business and could substantially harm our reputation and adversely impact our
efforts to develop our brands, irrespective of the validity of the claims.
We may be subject to claims that items listed on our website, or their descriptions, are counterfeit,
infringing or illegal.
We occasionally receive communications alleging that items listed on our Marketplaces infringe third-party
copyrights, trademarks or other proprietary rights. We have intellectual property complaint and take-down
procedures in place to address these communications. We follow these procedures to review complaints and relevant
facts to determine the appropriate action, which may include removal of the item from our website and, in certain
cases, discontinuing our relationship with a retailer, brand or other seller who repeatedly violates our policies.
However, such procedures may be subject to error or enforcement failures, may not be adequately staffed and may
not be enough for us to avoid liability under applicable laws and regulations. We also may be subject to erroneous or
fraudulent demands to remove content, and actions we take based on such demands could negatively impact our
relationships with our luxury sellers who were affected. Our success as an online luxury retailer depends on our
ability to accurately and cost-effectively determine whether an item offered for sale or submitted for a return is an
authentic product. While we reject any merchandise we believe to be counterfeit, we cannot be certain that we will
identify every counterfeit item delivered or returned to us. As the sophistication of counterfeiters increases, it may
be increasingly difficult to identify counterfeit products. The sale or return of any counterfeit goods may damage our
reputation as a trusted online luxury retailer, which may adversely affect our reputation, customer acceptance and
relationships with brand partners.
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The legal framework in this area is developing and could move towards an increase in the scope of direct
liability for online platforms and e-commerce marketplaces such as ours. In particular, we may be subject to civil or
criminal liability for activities carried out, including products listed, by our luxury sellers on our platform. While we
aim to remain informed of the latest legal developments and review our procedures accordingly, those procedures
may not effectively reduce or eliminate our liability.
Regardless of the validity of any claims made against us, we may incur significant costs and efforts to defend
against or settle them and such claims could lead to negative publicity and damage to our reputation. If a
governmental authority determines that we have aided and abetted the infringement on or sale of counterfeit goods,
we could face regulatory, civil or criminal penalties. For example, in China, listing an untrue or inconsistent product
description or information, including the listing of counterfeit goods, is considered “false advertising” under the
PRC Advertising Law, subject to an administrative fine up to RMB one million. Furthermore, consumers in China
who purchase items on our Marketplaces may bring a “fraud” claim against us, and if successful they would be
entitled to three times the price of the item as penalty compensation pursuant to PRC law; and for those who
purchase items on our Tmall Luxury Pavilion flagship store and successfully claim with sufficient evidence that a
product is counterfeit, such consumers could be entitled to nine times the price of the item as liquidated damages,
pursuant to the more onerous Tmall Luxury Pavilion rules that apply to our sales through this channel.
Successful claims by third-party rights owners could require us to pay substantial damages or refrain from
permitting any further listing of the relevant items (or similar items from the same source). These types of claims
could force us to modify our business practices, which could affect our revenue, increase our costs or make our
Marketplaces less user friendly. Moreover, public perception that counterfeit or other unauthorized items are
common on our Marketplaces, even if factually incorrect, could result in negative publicity and damage to our
reputation.
If our luxury sellers experience any recalls, product liability claims, or government, customer or
consumer concerns about product safety with respect to products sold on our Marketplaces, our
reputation and sales could be harmed.
Our luxury sellers, including the brands in the New Guards portfolio, and the brands selling kidswear
products, are subject to regulation by the U.S. Consumer Product Safety Commission and similar state and
international regulatory authorities, and their products sold on our platform could be subject to involuntary recalls
and other actions by these authorities. Concerns about product safety, including concerns about the safety of
products manufactured in developing countries, and those that are part of highly regulated product categories such as
kidswear and beauty, could lead our luxury sellers to recall selected products sold on our Marketplaces. Recalls and
government, customer or consumer concerns about product safety could harm our reputation and reduce sales, either
of which could have a material adverse effect on our business, results of operations, financial condition and
prospects. If any New Guards regulated product becomes subject to a recall or government, customer or consumer
safety concerns, we could experience significant adverse effects or reputational harm, face product liability litigation
and governmental investigations and incur costs associated with any remediation actions.
Risks Relating to our Intellectual Property
Assertions by third-parties of infringement or misappropriation by us of their intellectual property rights
or confidential know how could result in significant costs and substantially harm our business and results
of operations.
Third-parties have asserted, and may in the future assert, that we (including New Guards and the brands in
its portfolio) have infringed or misappropriated their trademarks, copyrights, confidential know how, trade secrets,
patents or other intellectual property or proprietary rights. Intellectual property disputes can be costly to defend and
may cause our business, operating results and financial condition to suffer. As the global digital luxury market
expands, the risk increases that there may be patents granted to third-parties that relate to our products and
technology of which we are not aware or that we must challenge to continue our operations as currently
contemplated. From time to time, we face allegations, whether merited or not, that we or our partners have infringed
or otherwise violated the patents, trademarks, copyrights or other intellectual property rights of third-parties. Such
claims have been, and in the future may be, made by competitors seeking to obtain a competitive advantage or by
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other parties, including, most recently, third-parties seeking to use their registered intellectual property rights
aggressively as a form of income stream. We may also face allegations that our employees have misappropriated the
intellectual property or proprietary rights of their former employers or other third-parties. When such claims and
allegations arise, it may be necessary for us to initiate litigation to defend ourselves in order to determine the scope,
enforceability and validity of third-party intellectual property or proprietary rights, or to establish our respective
rights. Regardless of whether claims that we are infringing patents or other intellectual property rights have merit,
such claims can be time-consuming, divert management’s attention and financial resources and can be costly to
evaluate and defend. Results of any such claims or litigation are difficult to predict and may require us to stop using
our products or technology, obtain licenses, modify our services and technology while we develop non-infringing
substitutes or incur substantial damages, settlement costs or face a temporary or permanent injunction prohibiting us
from marketing or providing the affected products and services. We may also have to redesign our products or
services so they do not infringe third-party intellectual property or proprietary rights, which may not be possible or
may require substantial monetary expenditures and time, during which our technology and products may not be
available for commercialization or use.
We cannot predict whether any such assertions or claims arising from such assertions will substantially harm
our business and results of operations, whether or not they are successful. If we are forced to defend against any
infringement or other claims relating to the trademarks, copyright, confidential know how, trade secrets, patents or
other intellectual property or proprietary rights of third-parties, whether they are with or without merit or are
determined in our favor, we may face costly litigation or the diversion of technical and management personnel.
Furthermore, the outcome of a dispute might require us to cease use of some portion of our technology, develop
non-infringing technology, recall or modify infringing merchandise, pay damages, costs or monetary settlements or
enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. Any such assertions or litigation could materially adversely affect our business, results of
operations, financial condition and prospects.
In 2008 and 2009, a party related to Farfetch founder José Neves (the “Related Party”) executed two
agreements (the “KH Licenses”) purporting to license certain know how (the “Know How”) from the Related Party
to two third-party LLPs (the “LLPs”). The Know How was a high level explanation of the Farfetch platform and
business model. The 2008 KH License expired in April 2018, and the 2009 KH License expired in April 2019. The
KH Licenses did not include a license of any software code. The LLPs granted intra-group sub-licenses of the
collective Know How under the KH Licenses, which was then further sub-licensed under two direct “Product and
Development and Marketing Support Agreements” with Farfetch in 2008 and 2009, respectively (the “Direct
Agreements”), in order for Farfetch to, among other services, develop the code, website architecture and brand that
comprised the original Farfetch offering (the “Developed IP”). Under the terms of the Direct Agreements, the third-
party, rather than Farfetch, owned the Developed IP. In 2011, the licensing structure was amended and the intra-
group sub-licenses from the LLPs were superseded by licenses of the Know How granted by each of the LLPs to
Mr. Neves, who licensed such Know How (by way of a sub-sub-license) to Farfetch. Finally, in 2011, the Direct
Agreements were terminated, and the Developed IP was assigned from the third-party group to Farfetch. In 2013,
the Related Party executed a “Declaration regarding copyrights and intellectual property rights” (the “Declaration”),
which declared that, among other things, between the period November 16, 1996 to February 27, 2010, the Related
Party had not created any works or done anything which could originate intellectual property rights (defined to
include know how) in connection with any of the entities in the original license chain (including Farfetch); any
unknown intellectual property generated by the Related Party and used, licensed or in any other way exploited by
those entities (including Farfetch) was transferred in full to Mr. Neves; and the Related Party agreed that any
intellectual property in use by the above entities that were to be recognized by a court as belonging to the Related
Party would be transferred to Mr. Neves for €500. On April 29, 2014, Mr. Neves assigned all of his intellectual
property rights and know how (including that obtained under the Declaration) to Farfetch.com. While seemingly
conclusive, it is possible that the Declaration could be challenged. Although we do not expect our right to use the
Know How to be successfully challenged, any such challenge could give rise to: (1) temporary injunctive relief
which could restrict the use of such Know How by Farfetch and therefore operations of our business;
(2) reputational damage; and/or (3) damages payable by Farfetch to the Related Party for any period of unauthorized
use of the Know How following the expiration of the KH Licenses, any of which could have a material adverse
effect on our business, results of operations, financial condition and prospects.
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Our use of open source software may pose particular risks to our proprietary software and systems.
We use open source software in our proprietary software and systems and will use open source software in
the future. The licenses applicable to our use of open source software may require that source code that is developed
using open source software be made available to the public and that any modifications or derivative works to certain
open source software continue to be licensed under open source licenses. From time to time, we may face claims
from third-parties claiming infringement of their intellectual property rights, or demanding the release or license of
the open source software or derivative works that we developed using such software (which could include our
proprietary source code) or otherwise seeking to enforce the terms of the applicable open source license. These
claims could result in litigation and could require us to purchase a costly license, publicly release the affected
portions of our source code, limit the use of, or cease using, the implicated software unless and until we can re-
engineer such software to avoid infringement or change the use of, or remove, the implicated open source software.
In addition to risks related to license requirements, use of certain open source software can lead to greater risks than
use of third-party commercial software, as open source licensors generally do not provide warranties, indemnities or
other contractual protections with respect to the software (for example, non-infringement or functionality). Our use
of open source software may also present additional security risks because the source code for open source software
is publicly available, which may make it easier for hackers and other third-parties to determine how to breach our
website and systems that rely on open source software. Any of these risks could be difficult to eliminate or manage,
and, if not addressed, could have a material adverse effect on our business, results of operations, financial condition
and prospects.
Failure to adequately protect, maintain or enforce our intellectual property rights could substantially
harm our business and results of operations.
We rely on a combination of trademark, copyright, confidential information, trade secrets and patent law,
and contractual restrictions to protect our intellectual property and other proprietary information. The protection
offered by these has its limitations. Despite our efforts to protect and enforce our proprietary rights and information,
unauthorized parties have used, and may in the future use, our trademarks or similar trademarks, including those of
the brands in the New Guards portfolio (including in the form of counterfeit goods), copy aspects of our website
images, features, compilation and functionality or obtain and use information that we consider as proprietary, such
as the technology used to operate our website or our content.
We do not have comprehensive registered protection for all of our brands, including the brands in the New
Guards portfolio, in all jurisdictions around the world. There is no guarantee that we will be the first to submit
trademark applications in all territories and/or classes for our brands and we have in the past experienced
professional “trademark squatters” actively registering our brands’ marks before we are able to in certain markets,
including China. We cannot guarantee that we will be able to preempt or successfully challenge such bad faith actors
in the future, and we may incur costs in challenging their marks or putting in place preventative measures. In
addition, there is no guarantee that our pending trademark applications for any brand will proceed to registration,
and even those trademarks that are registered could be challenged by a third-party, including by way of revocation
or invalidity actions. Our competitors have adopted, and other competitors may adopt, service, business or trading
names or brands similar to ours, thereby impeding our ability to build brand identity and possibly diluting our brand
or leading to consumer confusion. In addition, there could be potential trade name or trademark ownership or
infringement claims brought by owners of other rights, including registered trademarks, in our marks or marks
similar to ours, including FARFETCH, BROWNS, STADIUM GOODS and marks relating to brands in the New
Guards portfolio and certain intellectual property in China, Macau, Hong Kong and Taiwan relating to the Farfetch
word mark. In addition, we license-in, rather than own, certain intellectual property related to certain brands within
the New Guards portfolio. Any claims of infringement, brand dilution or consumer confusion related to our brands
(including our trademarks) or any failure to renew key license agreements on acceptable terms could damage our
reputation and brand identity and substantially harm our business and results of operations.
In addition to our registered trademark protection we have several granted patents in the United Kingdom,
Europe and the United States. We also have several published and unpublished patent applications in the United
Kingdom, Europe and internationally, for aspects of our proprietary technology, and we may file further patent
applications in the future. There is no guarantee that these will result in issued patents, and even if these proceed to
grant, they and our granted patents could be vulnerable to challenge by third-parties, or their claims could be
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narrowed in scope by the issuing patent office such that they no longer adequately protect our proprietary
technology. Further, we may decide not to pursue a patent application for an innovation due to the high costs,
diversion of management time, and publication of the underlying innovation that arises from an application. The loss
of our material intellectual property as a result of any claims or challenges, or the natural expiration of our
intellectual property registrations, could have a material adverse effect on our business, results of operations,
financial condition and prospects.
Domain names generally are regulated by internet regulatory bodies, and the regulation of domain names is
subject to change. Regulatory bodies have and may continue to establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain names. We may not be able to, or
it may not be cost effective to, acquire or maintain all domain names that utilize the name “Farfetch” or other
business brands in all of the countries in which we currently conduct or intend to conduct business. If we lose the
ability to use a domain name, we could incur significant additional expenses to market our products within that
country, including the development of new branding. This could substantially harm our business, results of
operations, financial condition and prospects.
We rely on multiple software programmers (as employees or independent consultants and third-parties) to
design our proprietary technologies, designers (as employees or independent consultants) to create the products sold
by the New Guards portfolio of brands and photographers (as employees or independent consultants) to capture the
products sold on our platform. Although we make every effort to ensure appropriate and comprehensive assignment
or license terms are included in the contracts with such third-parties, we cannot guarantee that we own or are
properly licensed to use all of the intellectual property in such software, products or images. If we do not have, or
lose our ability to use, such software, products or images, we could incur significant additional expense to remove
such assets from our platform or re-engineer a portion of our technologies.
Litigation or similar proceedings have been necessary in the past and may be necessary in the future to
protect, register and enforce our intellectual property rights, to protect our trade secrets and domain names and to
determine the validity and scope of the proprietary rights of others. Any litigation or adverse priority proceeding
could result in substantial costs and diversion of resources and could substantially harm our business, results of
operations, financial condition and prospects.
We may be required to protect our intellectual property in an increasing number of jurisdictions, a process
that is expensive and may not be successful, or which we may not pursue in every location. In addition, effective
intellectual property protection may not be available to us in every country, and the laws of some jurisdictions may
not adequately protect our intellectual property rights. Additional uncertainty may result from changes to intellectual
property legislation, and from interpretations of intellectual property laws by applicable courts and agencies.
Accordingly, despite our efforts, we may be unable to obtain and maintain the intellectual property rights necessary
to provide us with a competitive advantage. Our failure to obtain, maintain and enforce our intellectual property
rights could therefore have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to our New Guards Business
Our New Guards business is dependent on its production, inventory management and fulfilment processes
and systems, which could adversely affect its business if not successfully executed.
New Guards relies on various processes and systems for merchandise planning, inventory management,
procurement, allocation and fulfilment capabilities. If any such systems were to fail or experience disruptions,
including as a result of the COVID-19 pandemic, we may not derive the expected benefits to New Guards’ sales and
profitability, or may incur increased costs relative to our current expectations, which could adversely affect our
business, financial condition, results of operations and prospects. Refer to “Risks Relating to our Business and
Industry—The profitability of our Browns, Stadium Goods and New Guards businesses depends on our ability to
manage inventory levels and, if not managed successfully, our business and results of operations could be adversely
affected.”
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Our New Guards business relies on contract manufacturing of its products. Our inability to secure
production sources meeting our quality, cost, working conditions and other requirements, or failures by
our contract manufacturers to perform, could harm our business and reputation.
In the year ended December 31, 2021, New Guards sourced all of its products from independent contract
manufacturers who purchase fabric and make its products and may also provide design and development services.
As a result, New Guards must locate and secure production capacity. We depend on contract manufacturers to
maintain adequate financial resources, including access to sufficient credit, secure a sufficient supply of raw
materials, and maintain sufficient development and manufacturing capacity in line with our asset light production
model and in an environment characterized by continuing cost pressure and demands for product innovation and
speed-to-market. In addition, we currently do not have any material long-term contracts with any of New Guards’
contract manufacturers. Significant difficulties or failures to perform by our contract manufacturers, including as a
result of the COVID-19 pandemic, could cause delays in product shipments or otherwise negatively affect our
results of operations. As of December 31, 2021, New Guards had relationships with approximately ninety-five
manufacturers in over ten countries. If we decide to consolidate our production in the future, we could incur
additional costs and such consolidation could increase our reliance on a smaller number of contract manufacturers.
Using contract manufacturers means we incur certain costs. Depending on the particular contract
manufacturer, we may be responsible for paying the customs duties when shipping merchandise from its location of
manufacture. Further, the prices we pay our contract manufacturers for our products are dependent in part on the
market price for raw materials used to produce them, primarily cotton. The price and availability of raw materials
may fluctuate substantially depending on a variety of factors, including demand, acreage devoted to cotton crops and
crop yields, weather, supply conditions, transportation costs, warehouse management, energy prices, work
stoppages, due to the COVID-19 pandemic or otherwise, government regulation and policy, economic conditions,
market speculation and other unpredictable factors. Any and all of these factors may be exacerbated by global
climate change.
A contract manufacturer’s failure to ship products to us in a timely manner or to meet our quality standards,
or interference with our ability to receive shipments due to factors such as port or transportation conditions, security
incidents or as a result of the COVID-19 pandemic or related responsive measures, could cause us to miss the
delivery date requirements of our consumers on the Farfetch Marketplace or of our retail and wholesale customers
on our Brand Platform. Failing to make timely deliveries may cause our consumers or customers to cancel orders,
refuse to accept deliveries, impose non-compliance charges, demand reduced prices, or reduce future orders, any of
which could harm our sales and margins. If we need to replace any contract manufacturer, we may be unable to
locate additional contract manufacturers on terms that are acceptable to us, or at all, or we may be unable to locate
additional contract manufacturers with sufficient capacity to meet our requirements or to fill our orders in a timely
manner.
We require contract manufacturers to meet our standards in terms of working conditions, environmental
protection, raw materials, facility safety, security and other matters before we are willing to conduct business with
them. As such, we may decide to pursue less cost-efficient production to ensure we are meeting our sustainability
objectives. We may also encounter delays in production and added costs as a result of the time it takes to train our
contract manufacturers in our methods, products and quality control standards. In addition, the labor and business
practices of apparel manufacturers and their suppliers have received increased attention from the media, non-
governmental organizations, consumers and governmental agencies in recent years. Failures by our contract
manufacturers or their suppliers or subcontractors to adhere to labor or other laws, appropriate labor or business
practices, safety, structural or environmental standards, and the potential litigation, negative publicity and political
pressure relating to any of these events, could harm our business and reputation.
New Guards may not be successful in discovering, promoting and sustaining the reputation of its brands.
New Guards is known for the brands in its portfolio, and the reputation of such brands relies on the quality
and exclusiveness of New Guards’ products, its distribution networks, as well as the promotional and marketing
strategies applied. Products or marketing strategies not in-line with brand objectives, inappropriate behavior by
brand ambassadors, New Guards’ employees, distributors or suppliers, or detrimental information circulating in the
media may endanger the reputation of such brands and may adversely impact sales.
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The growth of our New Guards business depends in part on our ability to discover, attract and acquire new
brands for its portfolio. Our ability to do so depends on our ability to identify the right designers, creators and brands
with potential and offer them a compelling proposition, including attractive commercial terms when New Guards
acquires existing brands or their intellectual property assets.
If New Guards grows its portfolio through brand collaborations or acquisitions, we may not be successful in
integrating new brands into the New Guards systems and strategy; and we may not achieve the anticipated benefits
from any such collaboration or acquisition. To the extent such collaborations are with third-party licensors, New
Guards may not control the distribution, design and development services, supply chain manufacturing capacity or
timely shipments for any given licensed brand’s merchandise, and as a result may not have access to merchandise
produced by those licensors at our desired volumes or on a timely basis, which could have an adverse effect on our
business and results of operations. For example, in February 2022 New Guards formed a long-term strategic
partnership with Reebok which (i) names New Guards as the core operating partner for Reebok across Europe; and
(ii) appoints New Guards as the exclusive partner to create, curate and bring-to-market luxury collaborations and
distribute premium Reebok products in over fifty countries. New Guards will not have control of the supply chain
lifecycle of the products it distributes as Reebok’s core operating partner in Europe.
The majority of New Guards’ sales are from carefully selected third-party distributors. The reputation of
New Guards’ brands’ products thus rests in part on compliance by all distributors with such brands’ requirements in
terms of their approach to the handling and presentation of products, marketing and communications policies and
with respect to brand image. New Guards’, or third-party distributors’, failure to provide consumers with high-
quality products and high-quality consumer experiences for any reason could substantially harm the reputation of its
brands, which could have a material adverse effect on our business, results of operations, financial condition and
prospects.
New Guards’ brands or products could be counterfeited or copied, which could have a material adverse
effect on its business.
New Guards’ brands, expertise and production methods could be counterfeited or copied. Its products may
be distributed in parallel retail networks, including online sales networks, without our consent.
Counterfeiting and parallel distribution have an immediate adverse effect on revenue and profit. Activities in
these or other illegitimate channels may damage the brand image of the relevant products over time and may also
lower consumer confidence, which could have a material adverse effect on our business, results of operations,
financial condition and prospects.
New Guards licenses, rather than owns, certain intellectual property related to certain brands within its
brand portfolio and it may not be successful in maintaining such intellectual property rights.
New Guards licenses, rather than owns, certain intellectual property related to certain brands within its brand
portfolio, and such licenses generally include expiration dates and termination provisions. For example, New
Guards’ license of the trademarks of the Off-White brand, which accounted for a majority of our Brand Platform
GMV in the year ended December 31, 2021, expires in 2035 and includes a right for either party to opt out of the
agreement effective as of January 1, 2026, subject to notice provisions. The agreement is also subject to standard
termination rights related to unremedied material breaches of the license agreement and insolvency events.
Any failure to maintain or renew key license agreements on acceptable terms could damage our reputation
and brand identity and could have a material adverse effect on our business, results of operations, financial condition
and prospects.
Our New Guards business may be unable to maintain or increase sales through physical distribution
channels.
Revenue attributable to our Brand Platform, which accounted for 20.7% of our total revenue in the year
ended December 31, 2021, is primarily derived from the wholesale distribution of brands in the New Guards
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portfolio to carefully selected third-party distributors. We may be unable to maintain or increase sales of New
Guards’ brands’ merchandise through these distribution channels for several reasons, including the following:
• we may be unable to maintain the popularity of the brands in the New Guards portfolio or discover,
•
•
•
attract and acquire new popular brands;
the distributors may change their apparel strategies in a way that shifts focus away from luxury
streetwear and related categories or away from New Guards’ brands’ typical consumers; or
the distributors, including retailers, may experience competitive pressure, a decrease in orders, financial
difficulties or bankruptcy as a result of the COVID-19 pandemic or the secular shift of consumers’
luxury fashion purchases to other channels, such as e-commerce sites (including the Farfetch
Marketplace); or
the distributors may experience disruptions, delays, slowdowns or other difficulties as a result of the
COVID-19 pandemic and related response measures.
In addition, decisions we make with regard to our distribution strategy may impact our ability to retain or
gain new distributors. For example, we intend to continue to reduce wholesale distribution of brands in the New
Guards portfolio and restrict the geographic distribution by other online retailers to the extent permitted by
applicable regulation, as we move to favor our own direct-to-consumer channels, which could impact our
relationship with existing or future distributors.
If New Guards is unable to maintain or increase sales through its customary wholesale distribution channels,
it could have a material adverse effect on our business, results of operations, financial condition and prospects.
Risks Relating to our Retail Stores
The operation of retail stores subjects us to numerous risks, some of which are beyond our control.
As of December 31, 2021, Browns operated two retail stores, Stadium Goods operated two retail stores and
New Guards operated twelve Off-White stores as well as three Ambush stores, two Palm Angels stores and three
Off-White outlets. In addition, New Guards has over sixty franchised retail stores and four seasonal stores across its
various brands, and anticipates opening additional mono-brand stores in the short-to-medium term.
The operating costs of our retail stores could increase, or stores or facilities may be impacted by changes in
the real estate market, demographic trends, site competition, dependence on third-party performance or the overall
economic environment. In addition, as a result of the COVID-19 pandemic and related government orders we may
be required to, or determine it is necessary to, temporarily close our Browns, Stadium Goods or New Guards brands’
retail stores, as we did at certain points in 2020. Public concern regarding the risk of contracting COVID-19 may
itself materially and adversely affect our business, as consumers may be unwilling to visit many of the high-traffic
locations in which we operate our stores for fear of being exposed to COVID-19. Reduced international travel
stemming from travel restrictions and other measures implemented by governments around the world to reduce the
spread of the COVID-19 pandemic could also diminish consumer traffic at our retail locations.
The success of New Guards’ business is dependent on its ability to develop and execute its growth strategies,
which include the successful development, opening, franchising and operation of new retail stores for brands in the
New Guards portfolio. Successful execution of this strategy, and the success of the retail store operations across our
businesses more generally, depends upon a number of factors, including our ability (and in certain cases the ability
of the New Guards’ franchisees) to identify suitable sites for new stores, negotiate and execute leases on acceptable
terms, construct, furnish and supply a store in a timely and cost effective manner, accurately assess the demographic
or retail environment at a given location, hire and train qualified personnel, obtain necessary permits and zoning
approvals, integrate new store distribution networks and build consumer awareness and loyalty. Construction,
development or refurbishment costs may exceed original estimates due to increases in the cost of materials, labor or
other items, and we may experience permitting or construction delays, which may further increase project costs and
delay projected sales. These risks may be exacerbated to the extent we engage third-party developers or contractors
in connection with such projects or are subject to approvals from regulatory bodies to complete the projects. As each
new store represents a significant investment of capital, time and other resources, delays or failures in opening new
stores, or achieving lower than expected sales in new stores, could materially and adversely affect our growth and
results of operations.
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Furthermore, New Guards’ Stadium Goods’ and Browns’ respective growth strategies may involve
expansion into additional geographic markets in the future. Additional geographic markets may have different
competitive conditions, consumer trends and discretionary spending patterns than the markets in which New Guards,
Stadium Goods and Browns currently operate retail stores, which may cause their operations in these markets to be
less successful than operations in existing markets.
Leasing real estate exposes us to possible liabilities and losses.
Our Browns, Stadium Goods and New Guards businesses lease retail properties including for existing and
under-development retail and consignment spaces. In connection with these properties, we are subject to all of the
risks associated with leasing real estate. In particular, the value of the assets could decrease, operating costs could
increase, or a store may not be opened as planned due to changes in the real estate market, demographic trends, site
competition, dependence on third-party performance, the overall economic environment or may be closed again as a
result of the COVID-19 pandemic. Additionally, we are subject to potential liability for environmental conditions,
exit costs associated with the disposal of a store and commitments to pay base rent for the entire lease term or
operate a store for the duration of an operating covenant.
In addition, we lease office space in twelve countries and territories, and at considerable cost, which we may
be unable to fully utilize, as a result of the COVID-19 pandemic. If we are unable to negotiate changes to the lease
agreements on commercially acceptable terms, if at all, we would remain responsible for the lease obligations and
incur costs with little benefit to us.
New Guards’ franchise business is subject to certain risks not directly within our control that could impair
the value of our brands. New Guards enters into franchise agreements with unaffiliated franchisees to operate
various brand stores in Asia, the Middle East, Australia, Canada, Italy and Greece. Under these agreements, third-
parties operate, or will operate, stores that sell apparel and related products under various brand names. New Guards
may enter into similar agreements in other countries or with regard to other brands in its portfolio in the future. The
effect of these arrangements on New Guards’ business and results of operations is uncertain and will depend on
various factors, including the demand for these products in new markets internationally and New Guards’ ability to
successfully identify appropriate third-parties to act as franchisees, distributors, or in a similar capacity. In addition,
certain aspects of these arrangements are not directly within New Guards’ control, such as franchisee financial
stability and the ability of these third-parties to meet their projections regarding store locations, store openings, and
sales. Other risks that may affect these third-parties include general economic conditions in specific countries or
markets, foreign exchange rates, changes in diplomatic and trade relationships, restrictions on the transfer of funds,
and political instability. Moreover, while the agreements we have entered into and plan to enter into in the future
provide us with certain termination rights, the value of the brands in the New Guards portfolio could be impaired to
the extent that these third-parties do not operate their stores in a manner consistent with New Guards’ requirements
regarding its brand identity and consumer experience standards. Failure to protect the value of New Guards’ brands,
or any other harmful acts or omissions by a franchisee, could have an adverse effect on our results of operations and
our reputation.
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Risks Relating to Ownership of our Class A Ordinary Shares
Our Chief Executive Officer, José Neves, has considerable influence over important corporate matters
due to his ownership of us. Our dual-class voting structure will limit your ability to influence corporate
matters and could discourage others from pursuing any change of control transactions that holders of
our Class A ordinary shares may view as beneficial.
Our Chief Executive Officer, Mr. Neves, has considerable influence over important corporate matters due to
his ownership of us. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares.
Holders of Class A ordinary shares are entitled to one vote per share in respect of matters requiring the votes of
shareholders, while holders of Class B ordinary shares are entitled to twenty votes per share, subject to certain
exceptions. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder
thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.
Upon any transfer of Class B ordinary shares by a holder thereof to any person or other entity, other than an affiliate
of Mr. Neves, such Class B ordinary shares will be automatically and immediately converted into the equal number
of Class A ordinary shares. Due to the disparate voting powers associated with our two classes of ordinary shares,
Mr. Neves holds approximately 71.8% of the aggregate voting power of our company. As a result, Mr. Neves has
considerable influence over matters such as electing or removing directors, approving any amendments to our
Articles and approving material mergers, acquisitions or other business combination transactions. In addition, under
our Articles, our Board of Directors will not be able to form a quorum without Mr. Neves for so long as Mr. Neves
remains a director. This concentrated control will limit your ability to influence corporate matters and could also
discourage others from pursuing any potential merger, takeover or other change of control transactions, which could
have the effect of depriving the holders of our Class A ordinary shares of the opportunity to sell their shares at a
premium over the prevailing market price.
As a public company, we are required to report, among other things, control deficiencies that constitute a
“material weakness” or changes in internal controls that, or that are reasonably likely to, materially
affect internal control over financial reporting. A “material weakness” is a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of our annual or interim Consolidated financial statements will not be prevented
or detected on a timely basis.
In our Annual Report on Form 20-F for the fiscal year ended December 31, 2020 (the “2020 Annual Report”),
we reported two material weaknesses in the design and operation of our internal control over financial reporting that
constituted material weaknesses. The control deficiencies resulted from (1) the operation of effective controls over
information technology systems, including access over those systems, managing system changes and testing of
system generated reports used in the execution of key manual controls; and (2) the implementation and
documentation of internal control over financial reporting at the New Guards business. During the year ended
December 31, 2021, management remediated the material weakness relating to the operation of effective controls
over information systems. Refer to Item 15. “Controls and Procedures” for additional information.
As further described under Item 15. “Controls and Procedures,” management determined that we had one
material weaknesses at December 31, 2021, relating to the operation of internal control over financial reporting at
the New Guards business (Item (2) described above).
If we are unable to remediate our material weakness, our remediation efforts will take longer to remedy, as
we identify new material weaknesses or we are otherwise unable to implement and maintain effective internal
control over financial reporting and effective disclosure controls and procedures and satisfy other requirements as a
public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, and we may be unable to
accurately report our financial results, or report them within the timeframes required by the SEC.
As we continue to evaluate and work to improve our internal control over financial reporting, management
may determine whether to take additional measures, or modify the remediation plan described above or identify
additional control deficiencies or material weaknesses. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues, if any, have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can
52
occur because of a simple error or mistake. Due to these inherent limitations in control systems, misstatements due
to error or fraud may occur and not be detected. We cannot assure you that our remediation plan will be sufficient to
prevent future material weaknesses from occurring. There is no assurance that we will not identify additional
material weaknesses or deficiencies in our internal control over financial reporting in the future.
As our senior management is unable to conclude that we have effective internal control over financial
reporting or to certify the effectiveness of such controls, and as our independent registered public accounting firm
cannot render an unqualified opinion on our internal control over financial reporting and, to the extent that
additional material weaknesses or deficiencies in our internal controls are identified, we could be subject to
sanctions or investigations by the New York Stock Exchange (“NYSE”), the SEC or other regulatory authorities,
investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted
access to the capital markets and our share price may be adversely affected.
We qualify as a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are
subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent
than those of a U.S. domestic public company.
We report under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as a non-U.S. company
with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and
although we are subject to Cayman laws and regulations with regard to such matters and intend to furnish quarterly
financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to
U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of
proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the
Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for
insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the
filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified
information, although we intend to provide selected quarterly information on Form 6-K. In addition, foreign private
issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while
U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within seventy-
five days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to
file their annual report on Form 10-K within sixty days after the end of each fiscal year. Foreign private issuers are
also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material
information. As a result of all of the above, you may not have the same protections afforded to shareholders of a
company that is not a foreign private issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional
costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of
the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private
issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter,
and, accordingly, the next determination will be made with respect to us on June 30, 2022. In the future, we would
lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S.
residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet
additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer
status, we would be required to file with the SEC periodic reports and registration statements on U.S. domestic
issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We would
also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal
shareholders would become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the
Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance
requirements under the listing rules of the NYSE. As a U.S. listed public company that is not a foreign private
issuer, we would incur significant additional legal, accounting and other expenses that we will not incur as a foreign
private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities
exchange. These expenses would relate to, among other things, the obligation to present our financial information in
accordance with U.S. GAAP in the future.
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As we are a foreign private issuer and intend to follow certain home country corporate governance
practices, our shareholders may not have the same protections afforded to shareholders of companies that
are subject to all NYSE corporate governance requirements.
As a foreign private issuer, we have the option to follow certain home country corporate governance practices
rather than those of the NYSE, provided that we disclose the requirements we are not following and describe the
home country practices we are following, and we intend to rely on this “foreign private issuer exemption” with
regard to certain matters. Specifically, the NYSE rules require, in certain circumstances, shareholder approval for
equity compensation plans, material revisions to those plans and equity issuances above specified amounts and/or to
specified persons, which is not required under Cayman Islands law. We intend to follow home country law in
determining whether shareholder approval is required. We may in the future elect to follow home country practices
with regard to other matters. As a result, our shareholders do not have the same protections afforded to shareholders
of companies that are subject to all NYSE corporate governance standards and shareholder approval requirements.
Refer to Item 16G. “Corporate Governance.”
As a public reporting company, we are subject to rules and regulations established from time to time by the
SEC regarding our internal control over financial reporting. If we fail to put in place appropriate and effective
internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately
report our financial results, or report them in a timely manner, which may adversely affect investor confidence in us
and, as a result, the value of our Class A ordinary shares.
Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands
exempted company.
Our corporate affairs are governed by our Articles, the Companies Act and the common law of the Cayman
Islands. The rights of shareholders to take legal action against our Directors and us, actions by minority shareholders
and the fiduciary responsibilities of our Directors to us under Cayman Islands law are to a large extent governed by
the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from judicial
precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding,
authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our
Directors under the laws of the Cayman Islands are not as clearly defined as under statutes or judicial precedent in
existence in jurisdictions in the United States. Therefore, you may have more difficulty protecting your interests
than would shareholders of a corporation incorporated in a jurisdiction in the United States, due to the comparatively
less well-developed Cayman Islands law in this area.
A merger or consolidation may proceed under Cayman Islands law in one of two ways: by a court-sanctioned
scheme of arrangement or by a statutory merger. If a merger is effected by way of a Cayman Islands scheme of
arrangement, shareholders who voted at the scheme meeting(s) (convened by way of an order of the Grand Court of
the Cayman Islands the (“Grand Court”)) may attend and raise objections at the sanction hearing in respect of the
scheme of arrangement, where the Grand Court will consider, amongst other things, whether to sanction the scheme
of arrangement including whether the terms and conditions of the proposed scheme of arrangement are fair to all
affected shareholders. While shareholders may file an objection to the scheme of arrangement with the Grand Court
against the sanctioning of the scheme of arrangement at the sanction hearing, no appraisal or dissenting rights are
available to such holders relating to the value of their shares or payment for them in connection with the scheme of
arrangement.
If a merger or consolidation is effected under the statutory merger regime, shareholders who dissent from the
merger or consolidation will have limited appraisal rights, namely the right to receive payment of the “fair value” of
their shares as determined by the Grand Court in accordance with Section 238 of the Companies Act if the merger or
consolidation is completed, but only if they deliver, before the vote to authorize and approve the merger or
consolidation is taken at a general meeting, a written objection to the merger and subsequently comply with all
procedures and requirements of Section 238 of the Companies Act for the exercise of dissenters’ rights. The fair
value of each of their shares as determined by the Grand Court under the Companies Act could be more than, the
same as, or less than, the per share merger consideration they would receive pursuant to the merger agreement if
they do not exercise dissenters’ rights with respect to their shares. Appraisal rights are ordinarily available where the
consideration offered under the merger is payable in cash or, in some instances, the unlisted securities of a third-
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party. Shareholders of Cayman Islands exempted companies, such as ours, have no general rights under Cayman
Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our Directors have
discretion under our Articles to determine whether or not, and under what conditions, our corporate records may be
inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it
more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to
solicit proxies from other shareholders in connection with a proxy contest.
It should be noted that the Cayman Islands law has no legislation specifically dedicated to the rights of
investors in securities, and thus no statutorily defined private causes of action to investors in securities such as those
found under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act in the United States.
Subject to limited exceptions, under Cayman Islands law, a shareholder may not bring a derivative action against the
board of directors. Class actions are not recognized in the Cayman Islands, but groups of shareholders with identical
interests may bring representative proceedings, which are similar.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in
the face of actions taken by our management or members of our Board than they would as public shareholders of a
company incorporated in the United States.
Anti-takeover provisions in our organizational documents may discourage or prevent a change of control,
even if an acquisition would be beneficial to our shareholders, which could depress the price of our Class
A ordinary shares and prevent attempts by our shareholders to replace or remove our current
management.
Our Articles contain provisions that may discourage unsolicited takeover proposals that shareholders may
consider to be in their best interests. Our Board may be removed by an ordinary resolution of our shareholders. In
addition, Board vacancies may be filled by an affirmative vote of the remaining Board members. In the event of a
conversion of the Class B ordinary shares, the Board of Directors would be divided into three classes designated as
Class I, Class II and Class III, respectively, as determined by the Chairman of our Board at the relevant time, and
directors will generally be elected to serve staggered three-year terms. These provisions may make it more difficult
to remove management.
Our Board has the ability to designate the terms of and issue preferred shares without shareholder approval.
Our Articles contain a prohibition on business combinations with any “interested” shareholder for a period of
three years after such person becomes an interested shareholder unless: (1) there is advance approval of our Board of
the proposed business combination prior to the shareholder becoming an interested shareholder; (2) the interested
shareholder owns at least 85% of our voting shares at the time the business combination commences; or (3) the
combination is approved by shareholders holding at least two-thirds of the votes attaching to the ordinary shares that
are not held by the interested shareholder.
Taken together, these provisions may discourage transactions that otherwise could involve payment of a
premium over prevailing market prices for our Class A ordinary shares.
There may be difficulties in enforcing foreign judgments against us, our directors or our management.
Certain of our Directors and management and certain of the other parties named in this Annual Report reside
outside of the United States. Most of our assets and such persons’ assets are located outside the United States. As a
result, it may be difficult or impossible for investors to effect service of process upon us within the United States or
other jurisdictions, including judgments predicated upon the civil liability provisions of the U.S. federal securities
laws.
In particular, investors should be aware that there is uncertainty as to whether the courts of the Cayman
Islands or any other applicable jurisdictions would recognize and enforce judgments of U.S. courts obtained against
us or our Directors or our management predicated upon the civil liability provisions of the securities laws of the
United States, or any state in the United States or entertain original actions brought in the Cayman Islands or any
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other applicable jurisdictions against us, our Directors or our management that are predicated upon the securities
laws of the United States or any state in the United States.
Farfetch Limited is a holding company with no operations of its own and, as such, it depends on its
subsidiaries for cash to fund its operations and expenses, including future dividend payments, if any.
As a holding company, our principal source of cash flow is distributions or payments from our operating
subsidiaries. Therefore, our ability to fund and conduct our business, service our debt and pay dividends, if any, in
the future will depend on the ability of our subsidiaries and intermediate holding companies to make upstream cash
distributions or payments to us, which may be impacted, for example, by their ability to generate sufficient cash
flow or limitations on the ability to repatriate funds whether as a result of currency liquidity restrictions, monetary or
exchange controls or otherwise. Our operating subsidiaries and intermediate holding companies are separate legal
entities, and although they are directly or indirectly wholly owned and controlled by us, they have no obligation to
make any funds available to us, whether in the form of loans, dividends or otherwise. To the extent the ability of any
of our subsidiaries to distribute dividends or other payments to us is limited in any way, our ability to fund and
conduct our business, service our debt and pay dividends, if any, could be harmed.
We may be treated as a passive foreign investment company, which could result in material adverse tax
consequences for investors in our Class A ordinary shares subject to U.S. federal income tax.
We would be classified as a passive foreign investment company (“PFIC”) for any taxable year if, after the
application of certain look-through rules, either: (1) 75% or more of our gross income for such year is “passive
income” as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended (the “Code”), or (2)
50% or more of the value of our assets, determined on the basis of a quarterly average, during such year is
attributable to assets that produce or are held for the production of passive income. Based on our market
capitalization, and composition of our income, assets and operations, we do not believe we were a PFIC for the
taxable year that ended on December 31, 2021, and we do not expect to be treated as a PFIC in the foreseeable
future. However, our status as a PFIC in any taxable year requires a factual determination that depends on, among
other things, the composition of our income, assets, and activities in each year, and can only be made annually after
the close of each taxable year. Therefore, there can be no assurance that we will not be classified as a PFIC for the
current taxable year or for any future taxable year. If we are treated as a PFIC for any taxable year during which a
U.S. Holder (as defined in Item 10. “Additional Information – E. Taxation – U.S. Federal Income Tax
Considerations”) holds our Class A ordinary shares, the U.S. Holder may be subject to material adverse tax
consequences upon a sale, exchange, or other disposition of our Class A ordinary shares, or upon the receipt of
distributions in respect of our Class A ordinary shares. We cannot provide any assurances that we will assist
investors in determining whether we or any of our non-U.S. subsidiaries are a PFIC for any taxable year. U.S.
Holders should consult their tax advisors about the potential application of the PFIC rules to their investment in our
Class A ordinary shares. For further discussion, refer to Item 10. “Additional Information – E. Taxation – U.S.
Federal Income Tax Considerations.”
If a U.S. person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S.
federal income tax consequences.
Depending upon the aggregate value and voting power of our shares that U.S. persons are treated as owning
(directly, indirectly, or constructively), we could be treated as a controlled foreign corporation (“CFC”).
Additionally, because our Group consists of one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries will
be treated as CFCs, regardless of whether or not we are treated as a CFC (although there is currently a pending
legislative proposal to significantly limit the application of these rules). If a U.S. person is treated as owning
(directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be
treated as a “U.S. shareholder” with respect to each CFC in our Group (if any), which may subject such person to
adverse U.S. federal income tax consequences. Specifically, a U.S. shareholder of a CFC may be required to
annually report and include in its U.S. taxable income its pro rata share of each CFC’s “Subpart F income,” “global
intangible low-taxed income” and investments in U.S. property, whether or not we make any distributions of profits
or income of a CFC to such U.S. shareholder. If you are treated as a U.S. shareholder of a CFC, failure to comply
with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of
limitations with respect to your U.S. federal income tax return for the year for which reporting was due from
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starting. Additionally, a U.S. shareholder that is an individual would generally be denied certain tax deductions or
indirect foreign tax credits that may otherwise be allowable to a U.S. shareholder that is a U.S. corporation. We
cannot provide any assurances that we will assist investors in determining whether we or any of our non-U.S.
subsidiaries are treated as CFCs or whether any investor is treated as a U.S. shareholder with respect to any of such
CFCs, nor do we expect to furnish to any U.S. shareholders information that may be necessary to comply with the
aforementioned reporting and tax paying obligations. The IRS has provided limited guidance on situations in which
investors may rely on publicly available alternative information to comply with their reporting and tax paying
obligations with respect to foreign-controlled CFCs. U.S. investors should consult their advisors regarding the
potential application of these rules to their investment in the Class A ordinary shares.
Risks Related to our Indebtedness
Our indebtedness could adversely affect our financial health and competitive position.
Our indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in
respect of our indebtedness. It could also have effects on our business. For example, it could:
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•
•
•
limit our ability to pay dividends;
increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a material portion of our cash flow from operations to make payments on our
indebtedness, thereby reducing the availability of our cash flow for working capital, capital
expenditures and other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and in the fashion industry;
and
limit our ability to borrow additional funds.
Any agreements evidencing or governing other future indebtedness may contain certain restrictive covenants
that could limit our ability to engage in certain activities that are in our best interest.
To service our indebtedness, we require cash, and our ability to generate cash is subject to many factors
beyond our control.
Our ability to make payments on and to refinance our existing and any future indebtedness, including our
5.00% convertible senior notes due 2025 (the “February 2020 Notes”), 3.75% convertible senior notes due 2027 (the
“April 2020 Notes”) and 0.00% convertible senior notes due 2030 (the “November 2020 Notes”) (collectively, the
“Notes”), and to fund planned capital expenditures will depend on our ability to generate cash in the future. This is
subject, to a certain extent, to general economic, financial, competitive, regulatory and other factors that are beyond
our control.
We cannot assure you that our business will generate sufficient cash flow from operations or that future
borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other
liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity, and we cannot
assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.
Failure to refinance our indebtedness on terms we believe to be acceptable could have a material adverse effect on
our business, financial condition, results of operations and cash flow.
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General Risk Factors
Our operating results and Class A ordinary share price may be volatile, and the market price of our Class
A ordinary shares may drop below the price you pay.
Our quarterly operating results are likely to fluctuate in the future in response to numerous factors, many of
which are beyond our control, including each of the factors set forth above. In addition, securities markets
worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations.
This market volatility, as well as general economic, market or political conditions, could subject the market price of
our Class A ordinary shares to wide price fluctuations regardless of our operating performance. Our operating results
and the trading price of our Class A ordinary shares may fluctuate in response to various factors, including the risks
described above.
These and other factors, many of which are beyond our control, may cause our operating results and the
market price and demand for our Class A ordinary shares to fluctuate substantially. In addition, if any of the
securities or industry analysts who cover us or may cover us in the future change their recommendation regarding
our Class A ordinary shares adversely, or provide more favorable recommendations about our competitors, the price
of our Class A ordinary shares would likely decline. Fluctuations in our quarterly operating results could limit or
prevent investors from readily selling their Class A ordinary shares and may otherwise negatively affect the market
price and liquidity of our Class A ordinary shares. In addition, in the past, when the market price of a stock has been
volatile, holders of that stock have sometimes instituted securities class action litigation against the company that
issued the shares. If any of our shareholders bring a lawsuit against us, we could incur substantial costs defending
the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which
could significantly harm our profitability and reputation.
We have incurred and expect to continue to incur costs as a result of operating as a public company, and
our management will be required to continue to devote substantial time to new compliance initiatives and
corporate governance practices.
As a public company we incur significant legal, accounting, insurance and other expenses. The Sarbanes-
Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE
and other applicable securities rules and regulations impose various requirements on public companies, including
establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
Our management and other personnel devote a substantial amount of time to ensure that we comply with all of these
reporting requirements, rules and regulations, and such requirements, rules and regulations increase our legal and
financial compliance costs and make certain activities more time consuming and costly. In addition, these laws, rules
and regulations also make it more difficult and more expensive for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. These factors could also make it more difficult for
us to attract and retain qualified persons to serve on our Board of Directors, the committees of our Board of
Directors or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company,
we could be subject to the delisting of our common stock, fines, sanctions and other regulatory action and
potentially civil litigation.
Furthermore, as a publicly traded company, we are required to comply with the SEC’s rules implementing
Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other
information in our annual reports and provide an annual management report on the effectiveness of control over
financial reporting. We are required to disclose material changes in internal control over financial reporting on an
annual basis and are also required to complete an annual assessment of our internal control over financial reporting
pursuant to Section 404, and management’s report related to such assessment must be included in our annual reports
on Form 20-F. Additionally, we are required to include an attestation report on internal control over financial
reporting issued by our independent registered public accounting firm.
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To achieve compliance with Section 404 and as part of our efforts to remediate any material weaknesses
identified, we have had to engage in a process to document and evaluate our internal control over financial
reporting, which has been both costly and challenging. In this regard, we have had to continue to dedicate internal
resources and adopt a detailed work plan to assess and document the adequacy of internal control over financial
reporting, continue steps to improve control processes as appropriate, validate through testing that controls are
functioning as documented and implement a continuous reporting and improvement process for internal control over
financial reporting. If we are unable to remediate any existing material weakness and/or identify additional material
weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the
reliability of our consolidated financial statements. As a result, the market price of our Class A ordinary shares could
be negatively affected, and we could become subject to investigations by the NYSE, the SEC or other regulatory
authorities, which could require additional financial and management resources.
We may not pay dividends on our Class A ordinary shares in the future and, consequently, your ability to
achieve a return on your investment will depend on the appreciation in the price of our Class A ordinary
shares.
We may not pay any cash dividends on our Class A ordinary shares in the future. Any decision to declare
and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among
other things, our results of operations, financial condition, cash requirements, contractual restrictions and other
factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends may be limited by
covenants of any future outstanding indebtedness we or our subsidiaries incur. Therefore, any return on investment
in our Class A ordinary shares is solely dependent upon the appreciation of the price of our Class A ordinary shares
on the open market, which may not occur. Refer to Item 8. “Financial Information – A. Consolidated Statements and
Other Financial Information – Dividend Policy.”
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Item 4. Information on the Company
A. History and Development of the Company
Corporate Information
We were incorporated as Farfetch Limited in the Cayman Islands on May 15, 2018 as an exempted company
with limited liability under the Companies Act. Exempted companies are Cayman Islands companies whose
operations are conducted mainly outside of the Cayman Islands. Our principal executive offices are located at The
Bower, 211 Old Street, London EC1V 9NR, United Kingdom. Our telephone number at this address is +44 (0) 20
7549 5400. Prior to our incorporation in the Cayman Islands, we conducted our business through Farfetch.com
Limited, incorporated with limited liability under the laws of the Isle of Man with registered number 000657V, and
its subsidiaries.
For a discussion of our principal capital expenditures, refer to Item 5. “Operating and Financial Review and
Prospects — B. Liquidity and Capital Resources,” Item 4. “Information on the Company — D. Property, Plant and
Equipment” and Note 17, Property, plant and equipment, within our Consolidated financial statements included
elsewhere in this Annual Report.
Our agent for service of process in the United States is CT Corporation, whose address is 28 Liberty Street,
New York, New York 10005.
The SEC maintains an internet site that contains reports, proxy and information statements, and other
information regarding issuers, such as us, that file electronically with the SEC at www.sec.gov. Our website address
is www.farfetchinvestors.com. The information contained on our website is not incorporated by reference in this
Annual Report.
Palm Angels
On July 20, 2021, New Guards completed the acquisition of 60% of the outstanding equity interests of Palm
Angels S.r.l. (“Palm Angels”), the owner of the Palm Angels trademarks. In addition, New Guards agreed to a put
and call option with the remaining shareholders of Palm Angels, which would require New Guards to purchase the
remaining 40% of outstanding equity interests of Palm Angels in 2026, to the extent either the put or call option was
exercised. In conjunction with this transaction, New Guards also increased its total ownership of Venice S.r.l
(“Venice”), the operating company of the Palm Angels brand, to 100% through the acquisition of the remaining 31%
of the outstanding equity interests of Venice.
Farfetch China
In November 2020, we announced a partnership with Alibaba and Richemont to make available our luxury
shopping channel on Alibaba’s e-commerce platform, Tmall Luxury Pavilion. We refer to the joint venture entity
that conducts our Farfetch Marketplace operations in the China region as “Farfetch China.” As part of this
partnership, on November 17, 2020 we issued to Alibaba and Richemont an aggregate of $600 million ($300 million
each) of the November 2020 Notes, and they agreed to make a strategic investment in Farfetch China. In August
2021, together Alibaba and Richemont completed their combined strategic investment of $500 million ($250 million
each) in exchange for a combined 25% ownership (12.5% each) in Farfetch China and its subsidiaries, the group
through which Farfetch Marketplace operations in the China region, including its operations on Tmall Luxury
Pavilion, are conducted.
In addition, under certain specified circumstances Alibaba and Richemont have an option to purchase a
further combined 24% of Farfetch China or convert their existing 25% into our Class A ordinary shares, in each
case, from the third to the fifth year of the joint venture’s formation. Also, under certain specified circumstances, we
can require the conversion of Alibaba and Richemont’s joint shareholding in Farfetch China into our Class A
ordinary shares, in which case Alibaba and Richemont would retain their right to acquire the aforementioned
additional shares in Farfetch China. In addition to the above, from the first to the tenth year anniversary of the joint
venture’s formation, Alibaba and Richemont will have the further right to convert some or all of their joint
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shareholding in Farfetch China into our Class A ordinary shares on the occurrence of certain customary events,
including without limitation a change of control or an event of default.
B. Business Overview
Our Mission
Farfetch exists for the love of fashion. We believe in empowering individuality. Our mission is to be the
leading global platform for the luxury industry, connecting creators, curators and consumers.
Overview
Founded in 2007 by José Neves and launched in 2008, Farfetch is the leading global platform for the luxury
fashion industry. Our businesses include:
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The Farfetch Marketplace – the largest global digital luxury fashion marketplace at scale connecting,
as of December 31, 2021, consumers in over 190 countries and territories with merchandise in more
than 50 countries from over 1,400 brands, boutiques and department stores, delivering a unique
shopping experience and access to the most extensive selection of luxury at a single destination.
Farfetch Platform Solutions – our white-label enterprise offering to the luxury industry, which builds
and operates e-commerce and technology solutions for luxury brands and retailers, utilizing the
proprietary Farfetch platform. FPS also offers our luxury sellers ancillary services, including digital
marketing, production, and customer service. FPS operates as the enabler of our LNR vision,
facilitating the digitization of enterprise clients’ businesses, in addition to commercializing and scaling
solutions developed by Farfetch Future Retail, including Connected Retail, which was previously
called Store of the Future.
Farfetch Future Retail – the retail innovation arm of our LNR vision, which is focused on creating
the customer experience of the future, and develops and implements technology solutions to support
luxury sellers’ retail visions of creating new luxury experiences by seamlessly connecting the digital,
physical and virtual realms with the consumer at the center.
Browns – an iconic British fashion and luxury goods retailer. Browns leverages our digital platform
applications by selling through the Farfetch Marketplace, the Browns website and iOS app, which are
powered and operated by FPS. Browns also operates two physical stores in London, pioneering
Farfetch Future Retail innovations, such as connected retail products, developed in conjunction with
our LNR vision and implemented by FPS.
Stadium Goods – a premium sneaker and streetwear marketplace and retailer connecting
sneakerheads around the world with merchandise primarily supplied by consigners.
New Guards – a platform that uses a single common infrastructure and model to incubate and grow
emerging talent into highly sought-after brands. New Guards designs, manufactures and distributes
sought-after luxury fashion brands including Off-White, Palm Angels, Ambush, and Heron Preston,
among others.
We organize and report our business in three reportable operating segments: Digital Platform, Brand
Platform and In-Store.
The Digital Platform segment activities include the Farfetch Marketplace, FPS, BrownsFashion.com,
StadiumGoods.com, Farfetch Future Retail, and any other online sales channel operated by the Group, including the
respective websites of the brands in the New Guards portfolio. It derives its revenues mostly from transactions
between sellers and consumers or customers conducted on our technology platforms, and primarily operates a
revenue share model where we retain commissions and related income from these transactions. The Digital Platform
segment also includes direct-to-consumer sales of owned product, referred to as “first-party sales,” which include
“first-party original” product developed by brands in the New Guards portfolio, through the Farfetch Marketplace
and New Guards’ brands’ owned e-commerce websites, for which we retain the full amount of the sale.
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The Brand Platform segment is comprised of production and wholesale distribution of brands owned and
licensed by New Guards, and includes franchised store operations.
The In-Store segment covers the activities of stores we operate, including Browns, Stadium Goods and
certain brands in the New Guards portfolio. Revenues are derived from sales made in these physical stores.
We are the leading global platform for the luxury fashion industry, and we take an integrated approach to
operating our businesses across the digital, physical and virtual realms to serve our mission to connect the world's
creators, curators and consumers. These businesses are reflected in our three reporting segments as follows:
Our business has grown significantly, as evidenced by the following:
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As of December 31, 2021, we had 3,687,000 Active Consumers, up 22% since December 31, 2020. As
of December 31, 2020, we had 3,024,000, up 46% since December 31, 2019.
Our GMV for 2021 was $4,230 million, up 33% over 2020, and was $3,187 million in 2020, up 49%
from 2019.
Our revenue for 2021 was $2,257 million, up 35% from 2020, and was $1,674 million in 2020, up
64% from 2019.
Our Digital Platform Services Revenue for 2021 was $1,386 million, up 34% over 2020, and was
$1,033 million in 2020, up 47% over 2019.
For geographical and segmental revenue, see Note 6, Segmental and geographical information included
within our Consolidated financial statements elsewhere in this Annual Report.
Seasonality
Our business is seasonal in nature. Historically, our business has realized a disproportionate share of our
revenue and earnings for the year in the fourth quarter, attributable primarily to the impact of the year-end holiday
season and seasonal promotions. Our Brand Platform segment operates to a wholesale cycle which has traditionally
seen higher levels of sales in the first and third quarters of the year as compared to the second and fourth quarters of
the year. However during 2021 the business moved to the more consistent drop strategy that has flattened the
phasing across the year.
In 2021, our revenues in the first, second, third and fourth quarters represented 22%, 23%, 26% and 29%,
respectively, of our total revenues for the year. This is compared to 20%, 22%, 26% and 32%, respectively, in 2020.
As a result of these factors, our financial results for any single quarter or for periods of less than one year
are not necessarily indicative of the results that may be achieved for a full fiscal year.
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Our Growth Strategies
The key elements of our growth strategies include:
• Strengthening and expanding our luxury partnerships
Adding new luxury sellers and increasing products offered by existing ones. We intend to capitalize on
luxury brands and retailers’ increasing adoption of online channels. As our new and existing brand
partners have taken actions to tilt their distribution strategy away from wholesale towards direct-to-
consumer, our strategy includes continuing to evolve our value proposition and focusing on delivering
full-price sales to further increase the attractiveness of Farfetch’s multi-brand e-concession model. We
expect these strategies will result in more brands, boutiques and department stores and new types of
retailers joining the Farfetch Marketplace, and expanded breadth and depth of supply from our existing
luxury seller base. We have also been able to establish and strengthen our relationships with brands
through Browns, which has a legacy of supporting new talent and works closely with brands through
collaborations. In addition, we plan to launch beauty as a category in 2022, which we expect will further
deepen and expand our relationships with luxury sellers by providing a direct-to-consumer online channel
for their beauty offerings. In January 2022, we announced the acquisition of luxury beauty retailer, Violet
Grey, ahead of the anticipated beauty launch.
Partnering and expanding enterprise relationships with luxury sellers. We plan to continue to grow our
enterprise offerings to luxury brands and retailers as they increasingly prioritize online channels.
Beyond selling products via the Farfetch Marketplace, partnering with Farfetch also enables the
digitization of brands and retailers, powering their own sites, stores and fulfilment operations with our
platform and Luxury New Retail proposition. We will increasingly encourage luxury sellers to utilize our
Platform capabilities, such as Media Solutions and Fulfilment by Farfetch. Media Solutions allows luxury
brands to leverage our highly relevant luxury audience and first-party data to pursue marketing
opportunities on the Farfetch Marketplace, and Fulfilment by Farfetch leverages Farfetch’s logistics and
data capabilities to offer fulfilment solutions for luxury partners. As a step forward for our Fulfilment by
Farfetch initiative, we announced in November 2021 the plan to form a joint venture with Clipper
Logistics.
• Capturing opportunities in China
Attracting the Chinese luxury consumer. Over the next five years, mainland China is expected to become
the largest luxury market and represent more than $100 billion in annual luxury sales by 2025. This
represents a significant opportunity for us, and we have invested in people and technology, centrally and
locally, to support our continued growth. With mainland China as the second largest market by GMV for
the Farfetch Marketplace for the year ended December 31, 2021, we are one of a limited number of
Western e-commerce companies which has demonstrated success in penetrating China. We have
achieved this in part by investing in localization, including a localized website and apps, our storefront on
Tmall Luxury Pavilion, WeChat stores and WeChat Mini programs, private client stylists, customer
service teams, locally preferred payment methods, and a cross-border customs clearance solution. We
intend to continue to build on this success by investing to build our audience as well as increase our
overall brand awareness in China in all channels, including our own apps where most of our business is
conducted. We also plan to invest in innovative new features, pursue exclusive partnerships with luxury
brands in China and further tailor our offering for the Chinese consumer, including bringing products
closer to consumers by leveraging our Fulfilment by Farfetch capabilities in the region.
Establishing partnerships. In August 2021, we announced the completion of the Farfetch China joint
venture, in partnership with Alibaba and Richemont, which includes Farfetch Marketplace operations in
the China region, as well as our operations on Tmall Luxury Pavilion which was launched in March
2021. This channel is intended to drive awareness of the Farfetch brand in China and expand the reach of
our global luxury platform to Alibaba’s Tmall Luxury Pavilion consumers, offering luxury brands an
opportunity to also elevate their brand awareness with Chinese consumers, while also significantly
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expanding their addressable market of luxury consumers through their participation on the Farfetch
Marketplace.
• Pursuing the platform and Luxury New Retail vision
Accelerating the digitization of the global luxury industry. Luxury New Retail is our overarching strategy
aiming to redefine the future of luxury retail for Farfetch and the luxury industry at-large. This strategy is
activated via our Farfetch Platform Solutions business unit which offers a full scale of enterprise
solutions including our connected retail suite of products and other emerging technologies powered by
the Farfetch platform. These solutions are aimed at serving both mono-brand and multi-brand distribution
strategies for luxury brands and retailers, including fully connected e-commerce websites and apps,
connected retail technology, and access to the Farfetch and Tmall Luxury Pavilion marketplaces via a
single integration with our platform. Farfetch Platform Solutions works as our implementation arm of
these solutions, commercializing and enabling these for luxury industry partners. To help advance the
LNR vision, we have formed a steering group comprised of our founder and Chief Executive Officer,
José Neves, Alibaba Chairman and Chief Executive Officer, Daniel Zhang, Richemont Chairman, Johann
Rupert and Artemis Chairman, François-Henri Pinault. With LNR, our aim is to position ourselves as a
digital enabler of brand and retail partners to enable us to not only serve the online luxury market, but to
also address the digital strategies of our enterprise partners’ physical, digital and virtual channels, and
therefore, the wider global luxury industry.
Driving interactions in our platform ecosystem. Initially built for the Farfetch Marketplace, our platform,
consisting of data, technology and operations infrastructure, is now also utilized by Browns, Stadium
Goods and the New Guards portfolio of brands, as well as our FPS partners (as our enterprise solutions
are built on our platform) and underpins our LNR vision. We continue to drive interactions between our
business units to leverage our platform including optimizing our global logistical and operational
capabilities, which include our Fulfilment by Farfetch initiative, which offers fulfilment solutions for
luxury partners. We expect to continue to invest in people, product and infrastructure to drive innovation
and scale, and continue to add platform features to allow brands and retailers that use our platform (as
luxury sellers on the Farfetch Marketplace and as FPS partners) to create and tailor their own digital
experiences online and offline. A key benefit of our platform approach is that new features developed for
our direct-to-consumer channels, including the Farfetch Marketplace and existing FPS partners can
become available to existing and future platform clients. To further strengthen our platform ecosystem,
we also intend to partner with other innovative companies.
• Building the Farfetch brand
Increasing brand awareness. We are building a unique brand with strong cultural relevance by focusing
our messaging on our “only on Farfetch” proposition while also providing our consumers with the most
widely available range of selection. While we have established a significant position in the luxury
industry, we believe we have an opportunity to further increase our market share by growing our brand
awareness. During the year ended December 31, 2021, we launched upper-funnel brand activations in
key luxury markets focused on building brand love and an emotional connection with consumers, with
the intention to build brand awareness, preference, and an emotional connection with our brand. We
believe that with continued investment in brand marketing, data-led insights and effective consumer
targeting, we can expand and strengthen our reach, and we intend to continue a “full-funnel” approach to
marketing to continue to build our brand and capture consumer intent through digital channels.
Growing New Guards. New Guards’ brands bring cultural relevance to the Farfetch brand by
providing sought-after products and exclusive access to merchandise, which can drive significant
visibility and consumer engagement with limited marketing investment. We will continue our initiative to
increase the mix of higher-margin direct-to-consumer revenue across New Guards’ brand portfolio by
enabling multi-brand sales via the Farfetch Marketplace, and mono-brand sales via their direct-to-
consumer channels hosted by FPS, in addition to leveraging our Fulfilment by Farfetch facilities. We
have seen these efforts significantly increase the mix of online direct-to-consumer revenue from 2% of
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New Guards’ revenue for the twelve months prior to the acquisition in August 2019 to 18% for the year
ended December 31, 2021. We see an opportunity to continue to increase this mix by further leveraging
New Guards’ merchandising approach in combination with the digital capabilities of our platform. As
part of this strategy, we also launched Tmall Luxury Pavilion stores for Off-White, Palm Angels and
Ambush in January 2022. In addition, we plan to continue to grow our Brand Platform segment, which
remains profitable and helps expand the relevance of the New Guards brands, while continuing to
implement a thoughtful approach to distribution, including proactively reducing or eliminating product
allocations to non-strategic online wholesale partners in our effort to prioritize long-term brand value
over short-term revenues. In February 2022, New Guards further expanded its portfolio of brands with
the signing of agreements with Authentic Brands Group to become the exclusive partner to curate, create
and bring to market Reebok’s luxury collaborations, as well as a core operating partner for the brand
across Europe and distributor of premium Reebok products in the United States, Canada, Europe and
certain other key markets.
• Delivering an unrivaled global customer experience
Attracting and retaining consumers. Our strategy is to leverage the acceleration of what we believe to be
the sustained adoption of online channels by luxury consumers, to retain our consumers and attract new
ones. This includes ensuring that through the breadth and depth of our curated supply, which is enhanced
by first-party supply from New Guards, Browns and Stadium Goods, as well as our comprehensive
approach to data and analytics, we are able to offer our consumers the merchandise that they want. We
will seek to continue to leverage our vast data resources and refine our approach to data analytics,
allowing us to further optimize and improve our marketing approach and create a more relevant,
personalized consumer experience, with the objectives of bringing new consumers to our direct-to-
consumer channels and motivating existing consumers to visit our apps and sites more often, transact
more efficiently and increase their order values. We will further focus on consumer retention by
optimizing our ACCESS loyalty program to increase awareness of the program and the benefits to
consumers of returning to Farfetch for their luxury purchases. Our strategy also includes specific
activities to attract and retain our private clients, our most valuable consumers.
Expanding into new categories and offerings. We aim to expand our product offering for consumers on
our direct-to-consumer channels and create additional opportunities for luxury sellers on the Farfetch
Marketplace by expanding into other luxury categories and offerings. We will continue to invest in new
categories attractive to our luxury consumers. This includes beauty, which we intend to launch on the
Farfetch Marketplace in 2022 in a manner that enables beauty brands to launch their products on Farfetch
via our e-concession model and benefit from the higher margins that entails. We also intend to expand on
our successes with kidswear, a category that saw faster GMV growth than the Farfetch Marketplace in
the year ended December 31, 2021, and watches and fine jewelry, which has particular appeal to our
high-value private clients and grew faster than Farfetch Marketplace in the year ended December 31,
2021. We also expect to continue to invest in expanding our pre-owned offering category as we amplify
our Positively Farfetch sustainability proposition. In our aim to become the leading global platform for
pre-owned luxury, in December 2021, we acquired Luxclusif, a business-to-business service provider
with a successful turnkey solution enabling the acquisition, authentication and sale of second-hand luxury
goods, which we believe will allow us to significantly accelerate our pre-owned capabilities through the
development of key technology and service features. Where new categories and offerings require
innovation within our platform, we will aim to make such innovations available to our FPS partners.
Our Luxury New Retail Vision
We believe the future of luxury fashion retail will be defined by the reinvention of the customer
experience, through online and offline integrations. Originally, we coined the term ‘Augmented Retail’ to describe
our vision for bringing the online and offline luxury worlds together. We unveiled this vision of Augmented Retail,
taking the magic of the physical store experience and bringing it together with the advantages of the online and
digital experience, underpinned by use of data, in 2017. LNR represents the evolution of this vision. The LNR
vision, announced in November 2020, is our overarching strategy aiming to redefine the future of luxury retail for
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Farfetch and the luxury industry at-large. This strategy is activated via our Farfetch Platform Solutions business unit
which offers a full scale of enterprise solutions including our connected retail suite of products and other emerging
technologies powered by the Farfetch platform.
The LNR vision seeks to enable the digitization of the luxury industry and how customers will shop for
luxury in the future by leveraging Farfetch’s platform elements including our Marketplaces, Farfetch Platform
Solutions, New Guards and our stores.
Our Marketplaces
The Farfetch Marketplace
The Farfetch Marketplace is the largest digital luxury marketplace in the world, connecting two sides of the
luxury fashion market: consumers from over 190 countries and territories and luxury sellers in over 50 countries.
For consumers, we provide curated access to, as of December 31, 2021, over 3,400 different brands from
over 1,400 luxury sellers, including over 820 of the world’s leading luxury retailers and 590 brands. Our
marketplace model allows us to aggregate supply from a large number of globally distributed sources, offering
consumers both breadth and depth of luxury merchandise while incurring minimal inventory risk and without capital
intensive retail operations. Consumers are able to engage with us across our website and iOS and Android apps,
including our apps developed specifically for our consumers in China, as well as on our Tmall Luxury Pavilion
storefront launched in March 2021.
For luxury sellers we facilitate the connection to over three million Active Consumers, as of December 31,
2021. The Farfetch Marketplace is a global multi-brand luxury platform that offers brands direct-to-consumer
distribution via an e-concession model. The proposition for brands includes full control over merchandising and
pricing together with competitive margins vis-à-vis wholesale distribution. In our marketplace model, more brands,
boutiques and department stores on the Farfetch Marketplace increases the choices available to consumers, and more
consumers on the Farfetch Marketplace increases the potential sales for our luxury sellers, with New Guards giving
us the ability to offer the broadest selection of, and exclusive access to, merchandise from the New Guards portfolio
of brands further enriching our offering to consumers.
The Farfetch Marketplace also provides integrated, end-to-end services for luxury sellers, including
content creation and end-to-end logistics and a localized luxury experience and customer care for Farfetch
Marketplace consumers. In-house content creation allows us to achieve a luxury product presentation with a
consistent look and feel, with short lead times and low cost. Our content creation process includes styling,
photographing, photo-editing and content management. We have invested significant resources in developing our
fully integrated logistics network. We have developed smart supply chain algorithms that are built around deep
analytics which make our supply chain scalable, capital efficient and highly agile. These algorithms are developed at
a platform level and therefore can also be utilized by our FPS clients. In addition, through our Fulfilment by Farfetch
proposition we offer logistics solutions tailored to the luxury industry with our third-party logistics warehouses.
The Farfetch Marketplace is built on our modular end-to-end digital platform, which is built on an API-
enabled proprietary technology stack. Our digital platform is built for multi-tenancy and multi-client use. This
allows the same infrastructure and services architecture to support each of our Marketplaces, FPS and Farfetch
Future Retail, as well as the tools we offer to our luxury sellers.
Browns provides a good example of our omni-channel approach in practice. Ownership of Browns has
enabled us to understand the fashion ecosystem through the lens of a boutique. Browns leverages our digital
platform applications by selling through the Farfetch Marketplace, the Browns website and the iOS apps, which are
powered and operated by FPS, as well as operating stores with connected retail technology, developed by Farfetch
Future Retail.
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Farfetch Media Solutions and Partnerships
Farfetch Media Solutions and Partnerships operates at the intersection of luxury e-commerce and
advertising. Through this service we provide luxury sellers advertising products and creative solutions to maintain
authority and build credibility within an elevated, luxury e-commerce environment; drive awareness and
engagement among the next generation of luxury shoppers while in the digital aisle; and create meaningful
connections with customers through unique owned and operated partnerships that align with brand values and drive
transactions. In the year ended December 31, 2021, Farfetch Media Solutions served campaigns for a diverse mix of
over 85 partners.
Performance Marketing and Consumer Acquisition
We are focused on continuing to build brand recognition and a demand generation engine that connects our
consumers with our luxury sellers. Through driving high consumer demand, we aim to create a better proposition for
our luxury sellers.
We principally acquire consumers through online channels, including paid and organic search, metasearch,
affiliate partnerships, display advertising and social channels. We can also use promotions to drive consumer
acquisition (or retention) and sales on the Farfetch Marketplace. In addition, we have invested significant resources
to establish systems that optimize paid search, and our team is highly-skilled at developing programs and algorithms
to maximize our returns.
In 2021 we continued to invest in driving Farfetch app installs on new consumer mobile smartphones – via
both the Apple IOS app store and the Android app store, which we believe drives the efficient growth of our luxury
consumer base. Consumers who purchase through the app have historically had a higher lifetime value, on average,
than consumers who purchase through other mediums.
Brand Marketing
We see a significant opportunity ahead in building awareness of, and engagement with, our brand.
During the year ended December 31, 2021 we continued to build on the efforts initiated on September 2020, with
our re-branding and first global brand campaign, through brand campaigns focused in China, the United Kingdom,
the United States and the Middle East. The focus of these activations was the value of choice and personalization we
offer to consumers and were launched across different channels, both online and offline, with the intention to build
brand awareness, preference, and an emotional connection with our brand. We intend to continue a “full-funnel”
approach to marketing in 2022 for the purpose of continuing to build our brand and develop consumer intent,
leveraging innovation, content, and editorial features, as well as our partnerships with luxury brands.
Retention and Loyalty
We focus on building continuous dialogue with our consumers given their levels of engagement with
luxury shopping. We do this by creating inspiring content and developing personalized and tailored product
recommendations, which we distribute via email, push notifications, social media, display advertising and directly
on the Farfetch Marketplace.
In 2021, we continued to build membership and awareness in our ACCESS loyalty program which
provides consumers with benefits and rewards based on their annual spend on the Farfetch Marketplace. Based on
the success of ACCESS, we have continued to invest in the program, including enhanced features to increase
awareness of program benefits.
Farfetch Private Client
Farfetch Private Client caters to our most valuable and highest spending consumers. Our Private Client
proposition is to make Farfetch the only place these valuable consumers need to go to for all of their luxury fashion
needs.
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We offer high-end services such as a dedicated personal shopper, priority access to a customer service line
and Fashion Concierge services. Fashion Concierge allows Farfetch Private Client consumers to access exclusive
merchandise and to source merchandise from sellers not on the Farfetch Marketplace via our stylists. We also
provide Farfetch Private Client consumers with exclusive benefits, such as access to special items, events and
experiences, early access to coveted items and sales, free shipping and a Farfetch Private Client app.
Stadium Goods Marketplace
Stadium Goods is a premium sneaker and streetwear marketplace specializing in new, never worn,
merchandise for resale. Farfetch acquired Stadium Goods in January 2019 and it continues to operate as a standalone
brand, increasingly leveraging Farfetch’s digital platform and expertise in technology, logistics, data, brand,
marketing and geographic reach.
Stadium Goods operates an online marketplace (stadiumgoods.com) and iOS and Android apps. Stadium
Goods’ stock is also available through third-party platforms, including Amazon.com, and is fully integrated into and
available on the Farfetch Marketplace in all geographies. Stadium Goods has brick-and-mortar retail stores in the
heart of New York City’s Soho neighborhood and in the Gold Coast neighborhood of Chicago. Additionally,
Stadium Goods operates consignment intake centers in Soho, New York and the Bucktown neighborhood in
Chicago.
Our Enterprise Solutions
Farfetch Platform Solutions
FPS is our enterprise offering to the luxury fashion industry, offering a modular suite of white-label
technology solutions and services for luxury sellers. FPS delivers global, multi-channel e-commerce solutions that
enable our brand and retailer partners to drive growth and innovation, seamlessly interact with their customers and
build stronger and closer relationships, while allowing them to focus on the creative aspects of their businesses. In
addition, FPS works as our implementation arm for products developed under Farfetch Future Retail,
commercializing and bringing these solutions to luxury industry partners.
These solutions are built on our digital platform, providing the same capabilities and reach as the Farfetch
Marketplace, and benefitting from innovations and product developments on our digital platform. FPS partners can
choose from specific features or bundles of products and services or a full end-to-end e-commerce experience,
tailored to their customer and business requirements. For our FPS enterprise offering, we have built a team of
channel experts who work with dedicated analysts, data scientists and engineers to manage the full end-to-end
digital marketing strategy for luxury fashion brands and retailers.
Because our FPS offering is built on our fully API-enabled digital platform, partnering with FPS allows for
a flexible front-end suite of products, consisting of global websites, apps, WeChat stores and an in-store app, which
helps in-store staff manage global inventory to enhance in-store engagements. Our back-end infrastructure allows
our brand and retailer partners to synchronize their websites in real time with in-store and warehouse inventory, both
from mono-brand stores and other suppliers in their distribution networks, and to facilitate customer-friendly
services such as in-store pick-up and returns.
FPS currently works with a number of brands and retailers across the luxury fashion industry. In 2020, FPS
launched a new global e-commerce platform for Harrods. Our strategic partnership allows Harrods to use and
benefit from all of FPS’s core components, including e-commerce management, operations, international logistics
and technical support. In addition, the e-commerce channels for Browns and a number of brands in the New Guards
portfolio are powered and operated by FPS.
In China, our CuriosityChina business focuses on amplifying premium and luxury brands across digital
platforms in China. CuriosityChina augments the FPS proposition to include plug-and-play access for luxury brands
to expand rapidly in China via web, app, WeChat Store and WeChat Mini programs.
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In 2022, we are planning to further modularize our FPS offering, being able to offer standalone modules
such as global payments and logistics and e-concessions as a service to luxury industry partners. We believe this will
allow us to broaden our enterprise clients base, as we continue to enable the digitization of the luxury industry.
Farfetch Future Retail
We believe that consumers are channel agnostic, and will increasingly seek ultra-personalized experiences
across physical, online and digital channels, expecting those worlds to be seamlessly connected. Our LNR vision
reflects the retail experience of the future by giving retailers visibility to their customers’ preferences, both in-store
and online, enabling them to enhance the services they can offer. Consistent with this vision, we have developed a
range of services and technologies to progress innovation in the luxury industry. For example, during 2021 we
launched new products and services through our open innovation strategy, which uses a partnership model to deliver
new commercially successful experiences. In 2021 these included an expansion of our virtual try on and our Second
Life service, and new connected retail initiatives. In 2022 we intend to continue to expand our open innovation
strategy to deliver a new wave of digital luxury experiences.
Farfetch Future Retail is our retail innovation arm focused on creating the new customer experience of the
future. We seek to create and initiate new technology solutions that support the transformation of the entire luxury
industry. For example, Farfetch Future Retail has developed technologies designed to merge online, offline and
virtual experiences.
Browns also serves as an incubation space for the Farfetch Future Retail, testing and showcasing
innovative solutions to meet the needs of the multichannel, luxury consumer. Browns opened a new flagship store in
London’s Mayfair in 2021. The new store, which replaced Browns’ previous store in Mayfair, will continue to
pioneer innovations developed under our LNR initiative, including the connected retail solutions (previously called
Farfetch Store of the Future). These solutions are also currently leveraged by CHANEL on its flagship boutique at
19 rue Cambon, Paris and three other CHANEL boutiques in Paris and Monaco, and by Thom Browne, which
utilizes our in-store app.
New Guards
In August 2019, we acquired New Guards. New Guards operates as a platform that uses a single common
infrastructure model to incubate and grow emerging talent into highly sought-after brands. New Guards designs,
manufactures and distributes luxury brands including Off-White, Palm Angels, Ambush and Heron Preston, among
others, through a shared services model. New Guards sources all of its merchandise from independent contract
manufacturers, and, as a result, New Guards is inventory light relative to the scale of its business.
New Guards has the capability to bring creative visionaries’ and designers’ ideas to fruition by offering
infrastructure, including strategy development, design studio, sourcing and production, industrial capabilities, global
distribution channels, merchandising, licensing, marketing and growth planning. We seek to help existing and future
portfolio brands maximize their potential by opening new e-concessions on the Farfetch Marketplace and powering
portfolio brands’ own e-commerce sites and other digital channels through FPS.
New Guards gives us the opportunity to develop and introduce new and highly attractive brands to the
Farfetch Marketplace, along with exclusive capsule collections and collaborations to further enrich the customer
experience and boost consumer engagement with our brand. New Guards continues to elevate our brand and
increase organic traffic and consumer engagement with the Farfetch Marketplace, which we believe will continue to
make Farfetch an even more attractive channel not just for consumers, but also for our brand partners.
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Other Services
Fulfilment by Farfetch
We offer a luxury logistics solution with our third-party logistics warehouses in Italy, the Netherlands, the
United Kingdom, the United States and China, with a new warehouse in Hong Kong to become operational in 2022,
which handle our first-party stock and luxury sellers can utilize to handle their fulfilment and allocate stock closer to
consumers. We use proprietary data insights to predict where the product should be sitting with stock stored in
strategically placed locations. This allows us to service consumers more efficiently, limits the distance our product
travels in carrier networks, provides advantages for consumers, and removes friction from the growth of supply for
our luxury sellers.
Our Stores
While the proportion of luxury sales through e-commerce continues to increase, physical retail remains a
crucial part of the sales journey for the luxury customer. According to Bain, in both 2020 and 2021 approximately
78% of personal luxury goods were bought in physical stores. Bain estimates that approximately 70% of personal
luxury goods will be bought in physical stores in 2025.
We are taking advantage of the power of the physical realm, including leveraging the brand-building and
marketing opportunities afforded by a well-placed and well-presented store, with a number of our businesses,
including Browns, Stadium Goods, Off-White and Palm Angels, operating physical retail locations.
Environmental, Social and Governance – Positively Farfetch
Farfetch aims to be the premier platform for good in luxury fashion, while empowering everyone we work
with to think, act and choose positively. This mission drives our Environmental, Social and Governance (“ESG”)
initiatives. “Positively Farfetch” is the strategy that seeks to embed this mission - through initiatives and a focus on
environmental impact reduction, diversity and inclusion, positive social impact and governance in and across our
business. The strategy has been supported by the findings of a materiality assessment carried out by Farfetch in
collaboration with our internal and external stakeholders.
The Positively Farfetch strategy includes four key pillars, each of which aligns with our core business
drivers. For each strategic pillar we have a clear, long-term, and ambitious goal for 2030 (the “2030 Goals”).
Positively Cleaner is focused on environmental impact reduction and, with a significant need to drive
supply chain efficiency to achieve this, is expected to help us become a more cost-efficient business. Farfetch
continues to work together with other global businesses to help find solutions to tackle climate change, biodiversity
and ocean health as a signatory of both the G7 Fashion Pact and the UN Fashion Industry Charter. We continued to
offset carbon emissions associated with all deliveries and returns related to orders from the Farfetch Marketplace
and Browns. This is communicated to consumers as our Climate Conscious Delivery promise. In addition, we
continued to implement various packaging and logistics efficiency projects and increased our use of sustainably
sourced and fully recyclable packaging globally. Under the 2030 Goals, we are seeking to achieve net zero through a
reduction in our emissions in line with Science Based Targets, by achieving 100% renewable energy use in our
scopes 1 and 2 emissions, driving efficiencies in our scope 3 emissions by collaborating with our suppliers, and
offsetting unavoidable emissions through verified offset projects. We are also supporting our wider value chain,
outside our footprint boundary, to reduce their emissions.
Positively Conscious is focused on helping our consumers to make positive choices that consider the
impact on the environment, society and animal welfare, and helping us become the global destination for more
conscious fashion consumers. We have outlined clear independently backed, “Sustainability Criteria” for what
qualifies as a Conscious product. These are set out publicly on our website and updated to reflect developments in
the industry. As part of this we continue to work with Good on You, an independent agency that rates the
sustainability of fashion brands, and as of December 2021 over 1,000 brands on our marketplace had been rated by
Good on You. Both through the Farfetch Marketplace and Browns we continue to market “Conscious Collections”
for women, men and kids and place “Conscious” labels and information on merchandise, We are also working with
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the New Guards’ group of brands to increase the proportion of products produced with materials that meet our
Group “Sustainability Criteria”. In June 2021, we launched a dedicated 360 Positively Farfetch Campaign for the
Farfetch Marketplace, which highlighted both our Conscious and pre-owned product selections and the different
“Circular” services available to our consumers such as Second Life, Farfetch Donate and Farfetch Fix. This work is
aimed at helping our consumers make socially and environmentally informed decisions about their purchases. Under
the 2030 Goals, we are seeking to achieve 100% of our revenues from products that are independently recognized as
being better for people, the planet or animals and from services that enable positive change. To encourage the
broader industry with this, in April 2021, we published our first Conscious Luxury Trends Report, highlighting how
consumers are engaging with sustainable ways of shopping and how the industry is responding.
Positively Circular is focused on growing new services that help extend the life of clothes and also help us
drive business growth and consumer retention. For example, we are growing Farfetch Second Life, a service that
enables consumers in over 30 countries across the United States, Europe and the Middle East to trade-in their pre-
owned designer bags for Farfetch Marketplace credit. In addition, our Farfetch Donate service, powered by our
partners Thrift+ in the United Kingdom and ThredUp in the United States, allows consumers to donate used clothes
that are then sold, with either a portion or all proceeds from the sale (after partner fees) donated to the consumer’s
chosen charity. The consumer can choose to receive any remaining portion as Farfetch Marketplace credit. Browns
launched a service with Thrift+ that operates in the same way, and both Browns and the Marketplace partner with
the Luxury Aftercare provider The Restory to offer repairs and cleaning services. Browns has also enabled a number
of “Circular” collaborations with designers that specialize in upcycling and pre-owned products. Further, alongside
our in-season selection on the Farfetch Marketplace, we have an extensive pre-owned selection. In December 2021,
we acquired Luxclusif, a business-to-business service provider with a successful turnkey solution enabling the
acquisition, authentication, and sale of second-hand luxury goods, which we believe will allow us to significantly
accelerate our pre-owned capabilities through the development of key technology and service features. Under our
2030 Goals, we are seeking to sell more circular products and uses of circular services, than those made in
traditional, linear ways. We determine whether items we sell or service are circular if they are (i) pre-owned, (ii)
made from recycled material, or (iii) re-sold, donated, repaired, or otherwise have their utilization increased through
our services. In 2021 we continued to increase the number of circular items sold or serviced on the Farfetch
Marketplace, Browns and Stadium Goods.
Positively Inclusive is focused on anticipating and meeting the needs of our diverse community of creators,
curators and consumers that we work with, represent and champion. A critical part of successfully delivering this is
having a diverse and inclusive workplace. We have been driving a number of initiatives to help all Farfetchers to
thrive in a culture of conscious inclusion. This includes supporting our growing number of global People
Communities (Employee Resource Groups), such as our Black Employee Network, Disability Network, FarOut
(LGBTQIA+ Network), FarSan (South Asian Network), Jewish Network, FarLAN (Latinx Network), Farfetch East
Network, Parents Network, Race on the Agenda at Browns and Women in Business Network. We have partnered
with over 50 diversity and inclusion organizations and charities that work to increase diverse representation in the
fashion and technology industry, as well as uplifting and empowering underrepresented communities. Under the
2030 Goals, we aim to be a leader in diversity and inclusion in our workplace and in the global fashion community.
Underpinning our Positively Farfetch pillars is our approach to governance and engagement. Our
governance structure led by our Board of Directors, and supported by its four standing Committees, plays an
essential part in embedding our Positively Farfetch strategy our aim to deliver long-term value. Business ethics, data
privacy, cyber security, risk management, and tax strategy are core elements of our governance framework. Our
policies and management systems set the base for addressing compliance and integrity, as we seek to address risks
across our organization.
The Environmental, Social and Governance Committee of our Board of Directors (the “ESG Committee”)
was formed in 2020. The ESG Committee oversees the development of our Positively Farfetch strategy, ensuring it
takes into account the evolving priorities of our stakeholders. The ESG Committee’s mission is to assist the Board in
leading on issues pertaining to the environment, health and safety, staff development and engagement, ethics,
philanthropy, diversity, equity and inclusion and social justice, and governance amongst other public policy matters
relevant to Farfetch. Our leadership team sets out the strategy and ambitious commitments, and implements best
practices within the Company. The majority of our leadership team have Positively Farfetch related “objectives and
key results (‘OKRs’)”, the accomplishment of which is a factor in determining their respective overall performance
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and thus compensation. These OKRs are then cascaded through the organization, which results in embedding
Positively Farfetch in objectives of their teams across the business.
Through effective stakeholder engagement on ESG we seek to influence positive change in our value
chains and across the fashion industry through clear standard setting and strategic partnerships. We expect our
suppliers to meet our ethical standards, which are outlined in our Vendor Code of Conduct and Ethical Sourcing
Policy. Our engagement strategy includes our public reporting on ESG matters. In 2021 we published our first ESG
report, and we began the process of further developing our ESG program by introducing third-party assurance of
certain metrics tracking our progress in relation to our 2030 Goals.
Security and Data Protection
We are committed to the security and privacy of our consumers’ experience with Farfetch. We undertake
administrative and technical measures to protect our systems and the consumer data that those systems process and
store. We have developed policies and procedures designed to manage data security risks. We monitor our servers
and systems, and we employ technical security measures such as data encryption. We also use third-parties to assist
in our security practices and prevent and detect fraud. Our consumers’ privacy expectations are very important to us
and we have a team tasked with responding to our consumer inquiries regarding their personal data.
As our business is global in nature and we operate in different countries, we are subject to complex and
evolving laws and regulations around the world. In order to allow us to navigate through such a diverse landscape,
which includes, but is not limited to, the GDPR, CCPA, the PRC Data Security Law and PIPL, we have adopted
GDPR as a baseline framework to govern our internal security and data protection practices and procedures, while
complying with specific local law requirements, such as data localization, where applicable.
Competition
We operate in an intensely competitive industry in which consumers have the option to purchase both online
and offline. We compete with other marketplaces and platforms, technology enablement companies and luxury
sellers, including larger competitors with extensive resources that are seeking to establish an online presence in
luxury fashion:
Technology enablement companies:
•
Technology companies that may attract sellers by enabling commerce, such as Shopify Inc., Block,
Inc., Mirakl SAS or Global-E Online Ltd.; and
• White-label service providers, which offer end-to-end solutions.
Luxury sellers:
•
Online luxury retailers that buy and hold inventory and typically ship from a small number of
centralized warehouses;
• Multichannel players, including retailers and brands that have developed an online channel following
the success of their physical retail operations;
Niche multi-brand and streetwear sites;
Luxury department stores; and
Luxury brand stores.
•
•
•
In addition, the brands in the New Guards portfolio of brands face competition from many different luxury
and streetwear brands.
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Our Intellectual Property
Our intellectual property, including copyrights and trademarks, is an important component of our business.
We have registered trademarks in various international jurisdictions for FARFETCH, BROWNS and STADIUM
GOODS, and the marks for the brands in the New Guards portfolio, among other brands. Our intellectual property
portfolio includes numerous domain names for websites that we use in our business. We have several granted
patents in the United Kingdom, Europe and the United States. We also have several published and unpublished
patent applications in the United Kingdom, Europe and internationally, which, if granted, would cover aspects of our
proprietary technology. The software code underlying our proprietary technology is also likely protected by
copyright.
New Guards owns, or is the exclusive licensee of, various intellectual property rights in the brands that form
the New Guards brand portfolio. The existing license agreements, for those intellectual property rights that are
licensed to New Guards, permit New Guards to, among other things, manufacture, distribute, advertise and sell
merchandise of the relevant brand in exchange for the payment of royalties. These existing license agreements
include exclusive, worldwide licenses granted to New Guards for the use of the Off-White, Palm Angels and
Marcelo Burlon County of Milan trademarks. The license for the OFF-WHITE trademark expires in 2035 and
includes a right for either party to opt-out of the agreement effective as of January 1, 2026, subject to notice
provisions. In 2021, New Guards completed the acquisition of 60% of the outstanding equity interests of Palm
Angels S.r.l, the owner of the Palm Angels trademark. Also in 2021, New Guards launched its first private label,
There Was One, which is available exclusively on the Farfetch platform.
As part of our arrangement with Alibaba, we have assigned certain People’s Republic of China, Hong Kong,
Taiwan and Macau-registered and unregistered intellectual property rights to Farfetch China, including the Farfetch
trademarks, the Chinese transliterations of the Farfetch word mark, certain regional domain names and the stylized
“F” logo. The registration of certain of these assignments is still pending. Farfetch China has granted to those
members of the Group who are not part of the joint venture a license to continue to use such intellectual property
rights in the relevant regions.
We control access to, use and distribution of our intellectual property through license agreements,
confidentiality procedures, non-disclosure agreements with third-parties and our employment and contractor
agreements. We rely on contractual provisions with suppliers and luxury sellers to protect our proprietary
technology, brands and creative assets. We use a third-party enforcement tool to monitor online copyright and
trademark infringement across domains, social media and mobile applications, including for BROWNS,
FARFETCH and STADIUM GOODS and the brands in the New Guards portfolio, as well as a trademark watch
service, which notifies us of potentially conflicting trademark applications. We have also registered FARFETCH
and BROWNSFASHIONSTORE with a global domain name watch service and various domain name protected lists
to alert us to third-party domain name registrations that could potentially be infringing or cybersquatting.
Government Regulation
We use consumer data to perform the services available on our platform and conduct marketing activities,
which may involve sharing consumer information with third-parties, such as advertisers. Our activities involving the
use of consumer data are subject to consumer protection, data protection and unfair and deceptive practices laws in
jurisdictions in which we operate. In addition, as we accept credit card transactions, we must comply with the
Payment Card Industry Data Security Standards. The United States, European Union and China, as well as other
jurisdictions in which we operate, are increasingly regulating certain activities on the internet and e-commerce,
including the use of information retrieved from or transmitted over the internet, and are increasingly focused on
ensuring user privacy and information security, which will potentially limit behavioral targeting and online
advertising; and are imposing new or additional rules regarding the taxation of internet products and services, the
quality of products and services as well as the liability for third-party activities. Moreover, the applicability to the
internet of existing laws governing issues such as intellectual property ownership and infringement is uncertain and
evolving.
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In particular, we are subject to an evolving set of data privacy laws in the United States, European Union,
United Kingdom, Brazil, China, the Middle East and other jurisdictions and regions where we operate. To this
effect, GDPR provides for more onerous requirements on companies that process personal data, including, for
example, expanded disclosures to tell our consumers about how personal information is used, and increased rights
for consumers to access, control the use of and delete their data and object to marketing and profiling. Certain
breaches of GDPR may impose fines up to the greater of €20 million or 4% of global turnover on a Group basis. In
addition, specific EU legislation regulating privacy online, including the use of cookies and similar technologies and
online targeted advertising, is also under reform. Regulatory scrutiny is increasing in this area, where we have seen
fines increasing in the advertising space in relation to the use of cookies against the consent requirements of GDPR.
In the United States, the federal government and various state governments have adopted, or are considering
adopting laws, guidelines or rules for the collection, distribution, use and storage of information collected from our
consumers or their devices. The, CCPA, for example, requires, among other things, new disclosures to California
consumers, affords consumers new abilities to opt-out of certain disclosures of personal information and new rights
of data access and deletions, and imposes significant fines and penalties for violations of privacy or data security
provisions. In November 2020, California voters passed the CPRA, which further expands the CCPA with additional
data privacy compliance requirements and rights of California consumers effective January 1, 2023, and establishes
a regulatory agency dedicated to enforcing those requirements. Other U.S. states are considering enacting stricter
data privacy laws, some modeled on the GDPR, some modeled on the CCPA, and others potentially imposing
completely distinct requirements.
In Brazil, LGPD became enforceable on August 1, 2021. LGPD increases the requirements on companies
that process personal data in a manner similar to its European counterpart, the GDPR.
In China, the PIPL went into effect in November 2021. Although it aligns with several principles of the
GDPR, including in relation to consent and data subject rights, the PIPL deviates substantially from the GDPR in
several important areas, including on cross-border transfers, which are subject to a security assessment and
requirements that differ from GDPR.
As a result of Brexit, we are subject to two different statutory regimes in Europe, namely the UK GDPR for
the processing of personal data of UK-based individuals, and the GDPR for the processing of personal data of EU-
based individuals.
China
Our operation of the Farfetch.cn website and the Farfetch China apps in mainland China is subject to a
value-added telecommunication license, which we first obtained in December 2016 and then renewed in December
2019 for another three years. Our value-added telecommunication license is issued by the Shanghai
Communications Administration, which has its approval power delegated from the Ministry of Industry and
Information Technology. Farfetch does not operate in an industry that prohibits or restricts foreign investment under
applicable Chinese laws and the equity interests in all our subsidiaries in the PRC are ultimately owned by Farfetch
Limited without engaging in any variable interest entity (“VIE”) structure.
The Standing Committee of the National People’s Congress (“SCNPC”) of the PRC promulgated the PIPL
on August 20, 2021, which became effective on November 1, 2021. Pursuant to the Data Security Law and the
PIPL, we have updated the relevant privacy policies and user interaction experiences on our China website and apps,
and completed the data security internal assessment to comply with the latest regulatory requirements on the
collection, processing and sharing of personal information and business data.
The Cyberspace Administration of China (“CAC”), the central internet regulator, issued draft Measures for
the Security Assessment of Outbound Data (the “Draft Measures”) on October 29, 2021, soliciting public comments
by November 28, 2021. Once the Draft Measures are finalized and implemented, we would be required to conduct a
self-risk assessment with respect to risks associated with cross-border data transfer and such assessment will be
subject to security assessment and approval by CAC. We will continue to conduct compliance self-review, upgrade
our security capabilities, and implement robust privacy protection mechanisms to reflect the Chinese regulatory
authority’s guidance and the latest regulatory requirements under the applicable laws.
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Many governmental authorities in the markets in which we operate are also considering alternative
legislative and regulatory proposals that would increase the regulation of internet advertising. It is impossible to
predict whether new taxes or regulations will be imposed on our business and whether or how we might be affected.
In many jurisdictions in which we operate, operational licenses are required. In certain jurisdictions, including
China, these licenses must be reviewed annually.
C. Organizational Structure
Refer to Note 32, Group Information, within our Consolidated financial statements included elsewhere in
this Annual Report for a listing of our subsidiaries, including legal name, country of incorporation, and proportion of
ownership interest.
D. Property, Plant and Equipment
Our Facilities
We have offices in Braga, Dubai, Hong Kong, Lisbon, London, Los Angeles, Milan, Moscow, New York,
Porto, São Paulo, Shanghai, Beijing and Tokyo and production centers in Guimarães, Porto, Hong Kong, Los
Angeles and São Paulo. In addition, Browns leases retail properties in London, Stadium Goods leases retail
properties in Chicago and New York and New Guards leases retail properties in Las Vegas, London (including its
Bicester Outlet), Miami, New York, Paris, Milan and Tokyo.
Our London office is our corporate headquarters, housing central support functions, and is leased for a term
of twelve years expiring in December 2027. The lease covers an aggregate of approximately 36,000 square feet,
divided over six floors.
Our two Porto offices together house our largest employee population, including finance, customer and
partner support, operations, and technology. The two offices cover an aggregate of approximately 235,000 square
feet and are leased for periods of seven to eleven years, expiring in 2025.
On April 8, 2019, Farfetch Portugal – Unipessoal, Lda, one of our subsidiaries, acquired approximately
70,000 square meters of land in Matosinhos, Portugal from Medida Gabarito, Lda. We intend to use this land to
build a campus for our employees based in Porto, to support our technology, operational and support functions. The
total cost of the purchase was $18 million including taxes and fees. As of December 31, 2021, we had incurred
additional expenditures of approximately $2.7 million on the campus. Our efforts on this project are ongoing and we
continue to make progress on the planning, project design and preparation of the construction plan, and continue to
evaluate the most effective funding structure before proceeding with further significant expenditures.
Item 4A. Unresolved Staff Comments
None.
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Item 5. Operating and Financial Review and Prospects
You should read the following discussion in conjunction with our Consolidated financial statements included
elsewhere in this Annual Report. This discussion contains forward-looking statements and involves numerous risks
and uncertainties, including, but not limited to, those described in Item 3. “Key Information — D. Risk Factors.”
Actual results could differ materially from those contained in any forward-looking statements.
On May 15, 2018, Farfetch Limited was incorporated under the laws of the Cayman Islands to become the
holding company of Farfetch.com Limited and its subsidiaries. When we refer to the “Consolidated Group” or
“Group” we are referring to Farfetch Limited and its consolidated subsidiaries.
Business Overview
Our mission is to be the leading global platform for the luxury industry, connecting creators, curators and
consumers. Refer to Item 4.B “Business Overview” included elsewhere in this Annual Report for additional
information.
Our core business is focused on generating income from transactions between sellers and consumers
conducted on our platform. Transactions generate GMV, which we collect and remit to sellers after deducting our
commission, fulfilment and other related income, which is based on a revenue-share model. Since the acquisition of
New Guards in August 2019, a portion of our income has been generated from business-to-business transactions
with retailers. A smaller portion of our income is generated from sales made in physical stores that we operate. All
these activities enable us to operate across the global luxury ecosystem.
Business Highlights
On July 20, 2021, New Guards completed the acquisition of 60% of the outstanding equity interests of Palm
Angels, the owner of the Palm Angels trademark. In addition, New Guards agreed to a put and call option with the
remaining shareholders of Palm Angels, which would require New Guards to purchase the remaining 40% of
outstanding equity interests of Palm Angels in 2026, to the extent either the put or call option was exercised. In
conjunction with this transaction, New Guards also increased total ownership of Palm Angels’ operating company to
100% through the acquisition of the remaining 31% of the outstanding equity interests of Venice.
On November 5, 2020, we formed a global strategic partnership with Alibaba and Richemont to provide
luxury brands with enhanced access to the China market as well as accelerate the digitization of the global luxury
industry. Leveraging each company’s respective expertise and extensive reach, the aim of the partnership is to bring
luxury retail to the next generation by seamlessly integrating the digital and physical realms. Alibaba and Richemont
each purchased $300 million of the November 2020 Notes for total gross proceeds of $600 million. The additional
capital will support our long-term strategy of delivering a global technology platform for the luxury industry and
facilitate our continued focus on executing our growth plans and driving towards operational profitability.
Additionally, Artemis purchased 1,889,338 of our Class A ordinary shares for total gross proceeds of $50 million.
Alibaba and Richemont also invested in Farfetch China, taking a combined 25% stake in a new joint venture that
includes Farfetch Marketplace operations in the China region for an aggregate $500 million ($250 million each).
During the year ended December 31, 2021, the investments by Alibaba and Richemont in Farfetch China resulted in
the creation of a joint venture.
On February 5, 2020, we issued $250.0 million convertible senior notes paying 5.00% interest due
December 31, 2025 (“February 2020 Notes”) in a private placement to private investors. On April 30, 2020, we
issued $400.0 million convertible senior notes paying 3.75% interest due May 1, 2027 (“April 2020 Notes”) in a
private placement to qualified institutional investors pursuant to Rule 144A of the Securities Act. On November 17,
2020, we issued $600.0 million convertible senior notes paying 0.00% interest due November 15, 2030 (“November
2020 Notes”) to Alibaba and Richemont. The total aggregate net proceeds from these offerings were $1,240.4
million, after deducting $9.6 million of debt issuance costs in connection with these notes. For further information,
refer to Note 23, Borrowings, within our Consolidated financial statements included elsewhere in this Annual
Report.
76
Sources of Revenue
Our revenue is derived from four streams:
•
•
•
•
Digital Platform Services Revenue, which primarily includes commissions and related income from
third-party sales and to a lesser extent revenue from first-party sales. The revenue realized from first-
party sales is equal to the GMV of such sales because we act as principal in these transactions, and
thus related sales are not commission based. Digital Platform Services Revenue is included in our
Digital Platform segment. Digital Platform Services Revenue was referred to as Adjusted Platform
Revenue or Platform Services Revenue in previous filings with the SEC.
Digital Platform Fulfilment Revenue, which is revenue from shipping and customs clearing services
that we provide to our digital consumers, net of consumer promotional incentives, such as free
shipping and promotional codes. Digital Platform Fulfilment Revenue is included in our Digital
Platform segment. Digital Platform Fulfilment Revenue was referred to as Platform Fulfilment
Revenue in previous filings with the SEC.
Brand Platform Revenue, which is revenue relating to the New Guards operations less revenue from
New Guards’: (i) owned e-commerce websites, (ii) direct-to-consumer channel via our Marketplaces
and (iii) directly operated stores. Revenue relating to its owned e-commerce websites and its direct-to-
consumer channel are recognized as Digital Platform Services Revenue and revenue relating to its
directly operated stores is recognized as In-Store Revenue. Revenue realized from Brand Platform is
equal to GMV as such sales are on a first-party basis and are not commission based.
In-Store Revenue, which is revenue generated in our retail stores which include Browns, Stadium
Goods and New Guards’ directly operated stores. Revenue realized from In-Store sales is equal to
GMV of such sales because such sales are not commission based.
Refer to “Key Operating and Financial Metrics” below for a discussion of the key operating and financial
metrics we use and “Operating Results by Segment” for a discussion of segmental performance and revenues by
segment for the years ended December 31, 2019, 2020 and 2021.
For further information on our principal sources of revenue and how the different types of revenue are
classified in our consolidated statement of operations refer to Note 2.3 (e), Summary of significant accounting
policies - Revenue recognition, within our Consolidated financial statements included elsewhere in this Annual
Report.
For further information on our revenues by geography, refer to Note 6, Segmental and geographical
information, within our Consolidated financial statements included elsewhere in this Annual Report.
Factors Affecting our Financial Condition and Results of Operations
Our financial condition and results of operations have been, and will continue to be, affected by a number of
important factors, including the following:
Growth, Engagement and Retention of Our Consumer Base
Digital Platform
Digital Platform GMV and revenue from our marketplaces primarily grow as a result of acquiring and
retaining Active Consumers, increasing Third-Party Take Rate, increasing the AOV and the volume of orders. At the
onset of the COVID-19 pandemic in 2020, there was an acceleration in the shift of consumer demand to online, from
which we partially benefited. During 2021, we have continued to grow our customer base and. as of December 31,
2021, we had 3,687,000 Active Consumers, up from 3,024,000 as of December 31, 2020.
GMV and revenue also grows when we acquire and retain new FPS partners, as they did in the year ended
December 31, 2021. In 2022, we expect to continue investing in the acquisition of new FPS partners.
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During 2021, we continued to invest in our loyalty program ACCESS which we believe has the potential to
increase consumer engagement and ‘spend per consumer’. This has been a key investment in our loyal consumers,
but we believe will deliver significant returns in the medium-term by differentiating Farfetch as the preferred
destination for luxury fashion online. In addition to driving online adoption by acquiring new consumers via our
performance-marketing led efforts, and retaining them through more personalized experiences and enrolment in our
ACCESS loyalty program, among other actions we also continue to make meaningful investments in brand
marketing to drive brand awareness, and ultimately increase organic engagement.
We expect to continue to invest in our highest-value consumers. During 2021, we expanded our resources to
serve this fast growing and highly valuable consumer, to now have 201 stylists servicing our Private Clients in
twenty cities around the world, compared to 146 stylists in twenty-nine cities in 2020. In 2021, the top 1% of our
consumers represented 27.5% of our revenue.
We have been able to grow Digital Platform GMV from both new and existing consumers since launching
the Farfetch Marketplace in 2008. While we continue to acquire new consumers, the share of Digital Platform GMV
from existing consumers has also continued to increase over time, indicating we have retained existing consumers.
We define new consumers as those who placed their first order on the Farfetch Marketplace in the stated
reporting period.
Brand Platform and New Guards
Brand Platform
Brand Platform revenue growth occurs when there is an increase in popularity of the brands in the New
Guards portfolio and an increase in retailers purchasing our products. During 2020, the COVID-19 pandemic
impacted our Brand Platform customers by forcing many of them to close at various times.
Seasonality of our Brand Platform revenue is guided by timing of designer collections and shows. As
described in Item 4.B, “Business Overview – Seasonality”, our business is seasonal in nature and our Brand
Platform segment operates to a wholesale cycle.
New Guards
New Guards, the business behind our Brand Platform, operates as a platform that uses a single common
infrastructure and model including strategy development, design studio, sourcing and production, industrial
capabilities, global distribution channels, merchandising, licensing, marketing and growth planning for brands in its
portfolio. The success of our Brand Platform segment and of New Guards brands’ product on our direct-to-consumer
channels is dependent on the popularity of the brands in the New Guards portfolio, and the incubation of new
brands. During 2021, New Guards increased its ownership position of the Palm Angels operating company to 100%,
and its interest in Palm Angels, the owner of the Palm Angels trademark to 60%, bringing New Guards majority
ownership of its largest growth contributor.
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We have begun to take actions to reduce wholesale distribution of New Guards brands and restrict the
geographic distribution by other online retailers, as we move to favor our own direct-to-consumer channels, similar
to the broader industry.
Additionally, we have taken actions to expand New Guards distribution channels and in February 2022, New
Guards entered into a significant commercial agreement with Authentic Brands Group LLC to operate Reebok’s
branded retail stores and e-commerce operations and drive wholesale distribution for the brand across Europe. Refer
to Note 34, Subsequent events, within our Consolidated financial statements included elsewhere in this Annual
Report.
Growth and Quality of our Luxury Supply
Our marketplace business model allows us to offer consumers a broad and deep selection of luxury, with a
high stock value while incurring minimal inventory risk, by combining supply from a large number of globally
distributed luxury sellers. This distributed network of sellers ensured Farfetch Marketplace experienced minimal
disruption to our consumer offer during the COVID-19 pandemic, because whilst individual stocking points were
taken offline at the peak of the crisis, a significant majority of products on the Farfetch Marketplace were available
from multiple sellers on the Farfetch platform and could be shipped from different locations, often from different
countries. Our success depends on the participation of these luxury sellers on the Farfetch Marketplace, their highly
curated range of products and our ability to sell these goods effectively.
The breadth and depth of inventory available through the Farfetch Marketplace is reflected in our stock
value. Brands and designers typically have two primary seasonal collections per year, spring/summer and
fall/winter. We expect to continue to grow the stock value and stock units on the Farfetch Marketplace from existing
luxury sellers, adding luxury sellers from new geographies, large multi-brand retailers, new brands and new
categories. We have continued to see increases in stock value year-on-year, with the 2021 fourth quarter stock value
12% above the 2020 fourth quarter value after a 42% increase over the same period to fourth quarter 2020.
The adoption of selective distribution by brands may reduce the Farfetch Marketplace catalogue available to
consumers in particular markets and may, therefore lead to reduced supply and lost sales in key markets, and could
negatively affect our business, results of operations, financial condition and prospects. However, we add value to
our luxury sellers by providing our partners with fashion insight that comes from our analysis of browsing, sales and
returns data trends across the Farfetch Marketplace, as well as the offline sales data points that come from our real-
time integrations with our luxury sellers. This service helps us provide added value to our brand and boutique
partners, enabling better retention.
We have seen luxury brands increasingly move to reduce wholesale in favor of direct-to-consumer
distribution strategies. We believe that our e-concession model has resulted in our being the multi-brand digital
partner of choice. In the year ended December 31, 2021 compared to the year ended December 31, 2020, we
increased our number of e-concessions 5% to 590 at year-end.
As of December 31, 2021, we had more than 1,400 luxury sellers on the Farfetch Marketplace, of which over
820 were retailers and 590 were brands who sell directly on the Farfetch Marketplace. As of December 31, 2020, we
had more than 1,350 luxury sellers on the Farfetch Marketplace, of which just under 800 were retailers and more
than 560 were brands who sell directly on the Farfetch Marketplace. Both the mix of sales from brands versus
retailers and the mix of first-party sales versus third-party sales can impact our results of operations as each attracts
different margins.
Cost of Consumer Acquisition and Engagement
Our Digital Platform financial performance also depends on the expenses we incur to attract and retain
consumers.
Demand generation expense consists primarily of fees that we pay our various media and affiliate partners.
We will continue to invest in consumer acquisition and retention while the underlying consumer unit economics and
79
consumer lifetime value indicate the return on investment is strong. During 2021, we did see an increase in these
expenses, partially due to search engine marketing expense inflation. However, we expect such expenses to decrease
as a percentage of Adjusted Revenue over time as we increase our share of Digital Platform revenue derived from
Farfetch Platform Services and we improve the efficiency of our demand generation activities and the percentage of
our business related to existing consumers increases. In particular, we continue to maximize efficiencies in our
performance marketing spend by leveraging the large volume of product performance data that we have available to
enhance our media bidding decisions across paid search, meta-search and online display.
We are focusing on developing our brand to organically grow the traffic on our Marketplaces. We believe
that with continued investment in brand marketing, data-led insights and effective consumer targeting, we can
expand and strengthen our reach, and we intend to continue a “full-funnel” approach to marketing to continue to
build our brand and capture consumer intent through multiple customer touchpoints.
Changes in our ability to access and process data in relation to our marketing activities have adversely
impacted our ability to target and measure the effectiveness of our new consumer and retention marketing; and
privacy measures by search engine companies could impact our ability to do so in the future, for example, recent
updates implemented by Apple in relation to IDFA caused an increase in Demand Generation costs during 2021
driven by increased numbers of participants bidding for customers in certain ‘lower-funnel’ channels. To gain
efficiencies in Demand Generation spend, we have implemented a full-funnel approach and focus on personalization
and will continue to implement an underlying strategy of leveraging data insights to drive more targeted digital
marketing, and visits from lower cost channels and from existing customers.
We also generate highly attractive consumer economics. While we are continuously focused on adding new
Active Consumers to the Farfetch Marketplace, we are also focused on increasing their purchase frequency and
AOV after their initial purchase, while lowering retention expenditure. In 2021, we continued our focus on acquiring
consumers on our app, as existing app consumers typically generate a higher Digital Platform Order Contribution
Margin over time. We saw an increase in the Marketplace GMV from mobile purchases with a 5-percentage point
increase year-over-year in share of GMV generated by mobile app to 58% in 2021.
Fulfilment
To facilitate and grow our Digital Platform, we provide fulfilment services to Marketplace consumers and
receive revenue from the provision of these services, which is by and large a pass-through cost with no economic
benefit to us, and therefore we calculate our Adjusted Revenue excluding Digital Platform Fulfilment Revenue. We
offer our platform partners access to a fully integrated logistics network, which enables them to ship to consumers in
190 countries and territories. This is an essential part of the consumer and luxury seller proposition and provides an
unparalleled luxury experience.
We have developed a comprehensive cross-border network for delivery, provided by leading third-party
partners globally, which also provides the Farfetch Marketplace consumers with a free, simple and efficient returns
process. Changes in the operations of these third-party partners due to the ongoing impacts of the COVID-19
pandemic, including global supply chain disruption, Brexit in the United Kingdom and Europe and the impact on
supply and demand for delivery services as online adoption accelerates across industries has impacted our service
levels and cost of revenue. However, we have adopted mitigating cost saving strategies to offset the impact of these
factors during 2021 and will continue to do so in 2022. During 2021, our Digital Platform Fulfilment Revenue
increased partially as a result of increased pass-through costs from higher duties due to the factors described above.
Refer to Item 3. “Key Information — D. Risk Factors”, included elsewhere in this Annual Report.
Scaling our Global Platform
We will continue to invest in our smart supply chain management and luxury customer care to provide our
consumers with a differentiated global product offering but localized customer experience. Our end-to-end
operations include in-house content creation to achieve a luxury product presentation, localized interfaces,
multilingual customer service, secure payment methods and seamless customs clearance and tariffs navigation. We
will also continue to evolve our Fulfilment by Farfetch proposition with global distribution facilities located to
optimize our cross-border network. While we expect our operational expenses to increase as we continue to grow,
80
we expect such expenses to decrease as a percentage of Adjusted Revenue over time as we continue to achieve
economies of scale and deliver operating leverage. However, we may experience an increase in certain unit costs of
operating a global e-commerce business in the global retail industry increasingly adopting to e-commerce, creating
an upward pressure on certain costs areas, as we experienced in 2021.
Investments in Technology
We will continue to invest in people, product and infrastructure to maintain and grow our platform. Our
investment in our technology in the year ended December 31, 2021 was $250.1 million, up 22% from $204.5 million
in the year ended December 31, 2020. Our technology expense has increased as we continue to recruit additional
personnel and to develop our technology expertise across the full spectrum of engineering, architecture,
infrastructure, data engineering, integrations, security, agile and project management, and information systems and
planning. As of December 31, 2021, we had 2,086 full-time technology, data and product employees, representing
32.3% of our total headcount. We have adjusted the pace of our increase in technology headcount, by using
outsourcing to create a flexible and adaptable workforce to meet fluctuations in development needs. We expect
to increase our total number of technology, data and product headcount, to approximately 2,350 people by the end of
2022 to address our roadmap of developments for known future programs and categories.
Promotional Activity
The luxury market is subject to promotional activity. Promotions can be company-funded, partner-funded or
a mix of both. We use promotions to drive consumer acquisition, retention and sales. We may elect to engage in
promotional activity at times and at price levels we deem appropriate, or we may engage in promotional activity
when we see market peers doing the same, and our performance may be impacted depending on the level of
promotion and funding driven by Farfetch and the market condition.
When competitors increase promotional activity, we can react to those promotions symmetrically by
increasing our promotional activity. Alternatively, we can decide not to match competitors’ promotional activity,
which we believe improves our relationships with brands and, in turn, supply on the Farfetch Marketplace, as well as
promoting the luxury nature of our brand. Promotional activity also has the potential to impact supply; if we decide
not to incentivize promotional activity by our retailers by not funding, by reducing our funding, by requiring our
retailers to fund promotions in whole or part, or if we increase the mix of partner-funded promotions, it could
adversely impact our relationships with our retailers.
For these reasons outlined above, the level of promotional activity in which the Group engages is considered
a lever that we can use to achieve our strategy.
Investment in Innovation and Profitable Growth
We invest in opportunities to advance our strategic objectives, including acquisitions, investments in our
consumers, and investments to deliver technology and other resources. Whilst these investments present various
levels of risk and may result in lower profitability for Farfetch, we believe they will allow us to widen and leverage
our platform, expand our consumer base and offering and capitalize on other longer term opportunities.
In August 2021, we established our joint venture with Alibaba and Richemont which had previously been
announced in November 2020. Through this joint venture we operate the Farfetch Marketplace business in the China
region, through our existing Farfetch platform, our Farfetch mobile app and through Alibaba’s Tmall Luxury
Pavilion. At the same time we announced the LNR initiative aimed at leveraging our, and Alibaba’s, state-of-the-art
omnichannel retail technologies to serve the needs of luxury businesses, including a full suite of enterprise solutions
powered by Farfetch. These solutions will serve both mono-brand and multi-brand distribution strategies for luxury
brands, including fully-connected e-commerce websites and apps, omnichannel retail technology, and access to the
Farfetch and Tmall Luxury Pavilion marketplaces via a single integration with our platform expertise.
We intend to invest in building our audience in the Tmall Luxury Pavilion channel, as well as overall
Farfetch brand awareness in China in all channels (including our own apps where most of our business is
conducted), as we believe this is the time to invest in brand awareness in the market widely recognized as the key
81
driver of growth for the luxury industry. Globally, we expect to invest in building the Farfetch Brand and customer
proposition, to drive customer growth and retention. We will also continue to invest in platform technology to
deliver functionality to offer new categories, including beauty, and additional enterprise level platform functionality,
particularly supporting the LNR vision.
We have made, and intend to continue to make, strategic acquisitions. During the year ended December 31,
2021, we made a number of acquisitions, comprising:
• September 2021: JBUX Limited, trading as “Jetti”, which provides marketplace technology to multi-
vendor online businesses via a cloud-based Software as a Service (“SaaS”) platform;
• December 2021: Upteam Corporation Limited, trading under the name Luxclusif, a Business-to-Business
(“B2B”) technology enabled seller of pre-owned luxury goods; and
• December 2021: Allure Systems Corp uses artificial intelligence (“A.I.”) to create high-quality on-model
images via 360 degrees renderings, allowing retailers and brands to scale quality imagery with automation.
In early 2022, we also completed the following acquisition:
• February 2022: Violet Grey Inc., a luxury beauty retailer.
Our strategic acquisitions may affect our business growth and the comparability of our financial results.
The effects that these acquisitions had on our overall revenue and profitability during 2021 were relatively small.
When we acquire new businesses, we are required to allocate the consideration payable to the assets acquired. Some
of these assets, such as brand names and licenses, software and customer relationships, need to be amortized over
their estimated useful lives and hence we record an expense to reflect this. This expense impacts our reported results
and if we acquire more businesses, we would expect this expense to increase. Refer to Note 5, Business
Combinations, included within our Consolidated financial statements elsewhere in this report.
Other Factors Affecting Our Performance
Results of our operations are impacted by a number of other factors, including seasonality and foreign
exchange fluctuations:
Seasonality. Our business is seasonal in nature, broadly reflecting traditional retail seasonality patterns
through the calendar year. As such, GMV and revenue have been historically higher in the fourth calendar quarter of
each year than in other quarters. We believe seasonality may continue to impact our quarterly results.
Foreign currency fluctuations. The global nature of our business means that we earn revenue and incur
expenses in a number of different currencies. Movements in exchange rates therefore impact our results and cash
flows. Foreign exchange exposure is created by the currency received, determined by the consumer’s location, and
the currency we pay to the retailer and brand as determined by their location. This results in transactional foreign
currency exposure. Our general policy is to hedge this transactional exposure using forward foreign exchange
contracts and foreign exchange option contracts. We do not hedge translation risk.
Share price fluctuation. We hold multiple financial liabilities for which one of the valuation inputs is our
share price value at period end. Fluctuations in our share price between period ends impact the valuation and as a
result, our results of operations. See Note 28, Financial instruments and financial risk management, within our
Consolidated financial statements include elsewhere in this Annual Report.
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Key Operating and Financial Metrics
The key operating and financial metrics we use are set forth below. The following table sets forth our key
performance indicators for the years ended December 31, 2019, 2020 and 2021.
Year ended December 31,
2020 (2)
2019 (2)
2021
(in thousands, except per share data and AOV)
Selected Other Data:
Consolidated Group:
GMV (1)
Revenue
Adjusted Revenue (1)
Gross Profit
Gross Profit Margin
(Loss)/Profit After Tax (2)
Adjusted EBITDA (1)
Adjusted EBITDA Margin (1)
Basic (Loss)/Earnings Per Share (“EPS”) (2)
Diluted EPS
Adjusted EPS (1) (2)
Digital Platform:
Digital Platform GMV (1)
Digital Platform Services Revenue
Digital Platform Gross Profit
Digital Platform Gross Profit Margin
Digital Platform Order Contribution (1)
Digital Platform Order Contribution Margin (1)
Active Consumers (1)
Average Order Value - Marketplace (1)
Average Order Value - Stadium Goods (1)
Brand Platform:
Brand Platform GMV (1)
Brand Platform Revenue
Brand Platform Gross Profit
Brand Platform Gross Profit Margin
$ 2,139,699
1,021,037
893,077
459,846
45.0%
(393,500 )
(121,376 )
(13.6%)
(1.27 )
(1.27 )
(0.56 )
$
$
$ 3,187,014
1,673,922
1,460,694
770,928
46.1%
$ (3,315,623 )
(47,432 )
(3.2%)
(9.69 )
(9.69 )
(0.60 )
$
$ 1,947,868
701,246
371,913
53.0%
220,563
31.5%
2,068
608
315
$
$
$ 2,759,476
1,033,156
560,206
54.2%
361,419
35.0%
3,024
568
316
$
$
$
$
164,210
164,210
75,007
45.7%
390,014
390,014
190,804
48.9%
$
$
$
$
$
$
$
4,229,874
2,256,608
1,924,104
1,016,511
45.0%
1,470,611
1,638
0.1%
4.02
(1.07 )
(0.55 )
3,677,988
1,385,678
730,253
52.7%
438,432
31.6%
3,687
612
308
467,505
467,505
241,516
51.7%
(1)
(2)
Refer to Item 1 – “PRESENTATION OF FINANCIAL AND OTHER INFORMATION - Defined Terms and Key Performance Indicators” in this Annual
Report for definitions of these measures. See Item 5 – “Operating and Financial Review and Prospects - Reconciliations of Non-IFRS and Other Financial
and Operating Metrics” for reconciliations of these measures.
Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the
revision of prior year comparatives.
83
A. Operating Results
This section on operating results analyzes both the consolidated Group results and the results by segment.
Key Operating Results and Operating Metrics of the Group
Revisions to Previously Reported Financial Information
We have revised previously reported Finance cost, Loss after tax, Loss per share and Non-current
borrowings for the annual period ended December 31, 2020 and Selling, general and administrative expenses, Loss
after tax, and Loss per share for the annual period ended December 31, 2019. Refer to Note 2, Significant
accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for
further information.
The following tables shows our consolidated results of operations for the years ended December 31, 2019,
2020 and 2021 and as a percentage of revenue.
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses (1)
Impairment losses on tangible assets
Impairment losses on intangible assets
Operating loss (1)
Gains/(losses) on items held at fair value and remeasurements
Share of profits of associates
Finance income
Finance costs (1)
(Loss)/profit before tax (1)
Income tax (expense)/benefit
(Loss)/profit after tax (1)
2021
2019 (1)
Year ended December 31,
2020 (1)
(in thousands)
$ 1,021,037 $ 1,673,922
(902,994 )
(561,191 )
770,928
459,846
(889,421 ) (1,351,483 )
(2,991 )
-
(36,269 )
-
(619,815 )
(429,575 )
21,721 (2,643,573 )
(74 )
24,699
(91,294 )
(392,338 ) (3,330,057 )
14,434
$ (393,500 ) $ (3,315,623 )
366
34,382
(19,232 )
(1,162 )
$ 2,256,608
(1,240,097 )
1,016,511
(1,480,968 )
-
(11,779 )
(476,236 )
2,023,743
(52 )
12,599
(86,441 )
1,473,613
(3,002 )
$ 1,470,611
(1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the revision
of prior year comparatives.
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses (1)
Impairment losses on tangible assets
Impairment losses on intangible assets
Operating loss (1)
Gains/(losses) on items held at fair value and remeasurements
Share of profits of associates
Finance income
Finance costs (1)
(Loss)/profit before tax (1)
Income tax (expense)/benefit
(Loss)/profit after tax (1)
84
2019 (1)
Year ended December 31,
2020 (1)
(in percentages)
100.0 %
(53.9 )
46.1
(80.7 )
(0.2 )
(2.2 )
(37.0 )
(157.9 )
0.0
1.5
(5.5 )
(198.9 )
0.9
(198.0 %)
100.0 %
(55.0 )
45.0
(87.1 )
0.0
0.0
(42.1 )
2.1
-
3.4
(1.9 )
(38.5 )
(0.1 )
(38.6 %)
2021
100.0 %
(55.0 )
45.0
(65.6 )
0.0
(0.5 )
(21.1 )
89.7
-
0.6
(3.8 )
65.4
(0.1 )
65.3 %
(1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the revision
of prior year comparatives.
Comparison of Years Ended December 31, 2020 and 2021
Revenue
Revenue
Less: Digital Platform Fulfilment Revenue
Adjusted Revenue
Year ended December 31,
2020
2021
$ Change
(in thousands)
%
Change
$ 1,673,922
$ 2,256,608 $ 582,686
(213,228 ) (332,504 ) (119,276 )
$ 1,924,104 $ 463,410
$ 1,460,694
34.8 %
55.9 %
31.7 %
Revenue by type of good or service consisted of the following components:
Digital Platform Services third-party revenue
Digital Platform Services first-party revenue
Digital Platform Services Revenue
Digital Platform Fulfilment Revenue
Brand Platform Revenue
In-Store Revenue
Revenue
Year ended December 31,
2020
2021
$ Change % Change
(in thousands)
$ 637,568
395,588
1,033,156
213,228
390,014
37,524
$ 1,673,922
$ 845,941 $ 208,373
539,737 144,149
1,385,678 352,522
332,504 119,276
467,505 77,491
70,921 33,397
$ 2,256,608 $ 582,686
32.7 %
36.4 %
34.1 %
55.9 %
19.9 %
89.0 %
34.8 %
Revenue for the year ended December 31, 2021 increased by $582.7 million, or 34.8%, compared to the year
ended December 31, 2020. The increase was driven by 34.1% growth in Digital Platform Services Revenue to
$1,385.7 million and the 55.9% growth in Digital Platform Fulfilment Revenue to $332.5 million. Revenue was
further increased by Brand Platform and In-Store Revenue which increased by 19.9% and 89.0% to $467.5 million
and $70.9 million, respectively.
The increase in Digital Platform Services Revenue of 34.1% was primarily driven by 33.3% growth in
Digital Platform GMV, including growth in first-party Digital Platform GMV, which is included in Digital Platform
Services Revenue at 100% of the GMV. The increase in Digital Platform GMV was driven by a 21.9% increase in
Active Consumers, from 3,024,200 at December 31, 2020, to 3,686,800 at December 31, 2021, and a strong full
price performance. In addition, we benefited from year-over-year growth in transactions through websites managed
by FPS. Digital Platform Services Revenue was further augmented by growth in first-party Digital Platform, where
we saw strong performance of Browns’ products on the Platform. Digital Platform Third-Party take rate has
increased slightly from 29.6% for the year ended December 31, 2020 to 30.2% for the year ended December 31,
2021 reflecting measures implemented to share incremental costs with our partners.
Digital Platform Fulfilment Revenue represents the pass-through to consumers of delivery and duties charges
incurred by our global logistics solutions, net of any Farfetch-funded consumer promotions, subsidized shipping and
incentives. Digital Platform Fulfilment Revenue accounted for 14.7% of revenue in 2021, an increase from 12.7% in
2020. While Digital Platform Fulfilment Revenue would be expected to grow in line with the cost of delivery and
duties, which increase as Digital Platform GMV and order volumes grow, variations in the level of Farfetch funded
promotions and incentives will impact Digital Platform Fulfilment Revenue, as Digital Platform Fulfilment Revenue
is recorded net of such promotions. Digital Platform Fulfilment Revenue increased 55.9%, a higher rate as compared
to Digital Platform Services Revenue growth driven by higher duties due to the regional mix of sales and impacts of
Brexit, as well as an increased pass-through of these costs to consumers towards the end of the year.
85
Cost of revenue, gross profit and gross profit margin
Cost of revenue
Gross profit
Gross profit margin
Year ended December 31,
2020
2021
$ Change
(in thousands)
%
Change
$ (902,994 ) $ (1,240,097 ) $ (337,103 ) (37.3 %)
770,928 1,016,511 245,583 31.9 %
45.0 %
46.1 %
Cost of revenue for the year ended December 31, 2021 increased by $337.1 million, or 37.3%, compared to
the year ended December 31, 2020, ahead of revenue growth. The increase was primarily driven by Digital Platform
with Brand Platform and In-Store also contributing to the increase in cost of revenue.
Our gross profit margin decreased from 46.1% for the year ended December 31, 2020 to 45.0% for the year
ended December 31, 2021. This was driven by a decrease in Digital Platform Gross Profit Margin from 54.2% to
52.7%, partially offset by Brand Platform Gross Profit Margin which increased from 48.9% to 51.7%, driven by a
favorable change in product and customer mix.
Within Digital Platform, we saw a year-over-year decrease in Gross Profit Margins driven by the increase in
mix of Digital Platform Fulfilment Revenue, which is a flow through generating no gross profit margin, plus an
increase in promotional activity.
Selling, general and administrative expenses
The following tables shows our selling, general and administrative expenses for the years ended December
31, 2019, 2020 and 2021 and as a percentage of adjusted revenue:
Demand generation expense
Technology expense
Share-based payments (1)
Depreciation and amortization
General and administrative
Other items
Selling, general and administrative expenses
2021
2019 (1)
Year ended
December 31,
2020
(in thousands)
$ (151,350 ) $ (198,787 ) $ (291,821 )
(131,408 )
(115,227 )
(84,207 )
(196,167 )
(291,633 )
(178,234 )
(251,198 )
(217,223 )
(113,591 )
(591,644 )
(504,346 )
(345,665 )
(18,730 )
(24,267 )
(16,374 )
$ (889,421 ) $ (1,351,483 ) $ (1,480,968 )
2019 vs.
2020
% Change
2020 vs.
2021
% Change
(31.3 %)
(36.8 %)
(63.6 %)
(91.2 %)
(45.9 %)
(48.2 %)
(52.0 %)
(46.8 %)
(14.0 %)
32.7 %
(15.6 %)
(17.3 %)
22.8 %
(9.6 %)
(1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the
revision of prior year comparatives.
Demand generation expense
Technology expense
Share-based payments (1)
Depreciation and amortization
General and administrative
Other items
Selling, general and administrative expenses
% of Adjusted Revenue
2019 (1)
2020
2021
(16.9 %)
(9.4 %)
(20.0 %)
(12.7 %)
(38.7 %)
(1.8 %)
(99.6 %)
(13.6 %)
(7.9 %)
(20.0 %)
(14.9 %)
(34.5 %)
(1.7 %)
(92.5 %)
(15.2 %)
(6.8 %)
(10.2 %)
(13.1 %)
(30.7 %)
(1.0 %)
(77.0 %)
(1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the
revision of prior year comparatives.
86
Demand generation expense
Year ended
December 31,
2020
2021
$ Change % Change
(in thousands)
Demand generation expense
$ (198,787 ) $ (291,821 ) $ (93,034 )
(46.8 %)
Demand generation expense consists primarily of fees that we pay to various media and affiliate partners.
Demand generation expense for the year ended December 31, 2021 increased by $93.0 million, or 46.8%, compared
to the year ended December 31, 2020. Demand generation expense increased as a percentage of Digital Platform
Services Revenue from (19.2)% in 2020 to (21.1)% in 2021, as we saw more competitive market conditions and the
impacts of Apple’s privacy policy leading to higher costs.
Technology expense
Technology expense
Capitalized development costs
Total investment in technology
Year ended
December 31,
2020
2021
$ Change % Change
(in thousands)
$ (115,227 ) $ (131,408 ) $ (16,181 )
(89,282 ) (118,661 ) (29,379 )
$ (204,509 ) $ (250,069 ) $ (45,560 )
(14.0 %)
(32.9 %)
(22.3 %)
Technology expense consists of technology research and of development, staffing costs and other IT costs,
including software licensing and hosting. Technology expense for the year ended December 31, 2021 increased by
$16.2 million, or 14.0% compared to the year ended December 31, 2020. This was primarily driven by a 18%
increase in technology staff headcount from 1,772 to 2,086 during 2021, alongside annualization of headcount
recruited in 2020, as we continued to develop new technologies and enhance our digital platform features and
services, as well as increased software, hosting and infrastructure expenses, to support the continued growth of the
business. We continue to operate three globally distributed data centers, which support the processing of our
growing base of transactions, including one in Shanghai dedicated to serving our Chinese consumers. Technology
expense as a percentage of adjusted revenue decreased from (7.9)% in 2020 to (6.8)% in 2021.
Total investment in technology amounted to $250.1 million during 2020, $118.7 million of which was
capitalized as compared to a total of $204.5 million during 2020, $89.3 million of which was capitalized.
Depreciation and amortization
Depreciation and amortization
$ (217,223 ) $ (251,198 ) $ (33,975 )
(15.6 %)
Year ended
December 31,
2020
2021
$ Change % Change
(in thousands)
Depreciation and amortization expense for the year ended December 31, 2021, increased by $34.0 million, or
15.6%, compared to the year ended December 31, 2020, primarily driven by a $23.7 million increase in our
amortization expenses from $177.9 million to $201.6 million year-over-year. Amortization expense increased
principally due to continued technology investments, where qualifying technology development costs are capitalized
and amortized over a three-year period, which contributed $14.7 million to the increase in amortization expense
year-over-year. Depreciation expense increased by $10.2 million, primarily driven by new leases being entered into
in the second half of 2020 and during 2021.
87
Share-based payments
Year ended
December 31,
2019 (1)
2020
2021
(in thousands)
2019 vs. 2020
%
Change
$ Change
2020 vs. 2021
%
Change
$ Change
Share-based payments (1)
$ (178,234 ) $ (291,633 ) $ (196,167 ) $ 113,399 (63.6 %) $ 95,466 32.7 %
(1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the revision
of prior year comparatives.
Share-based payments for the year ended December 31, 2021 decreased by $95.5 million, or 32.7%,
compared to the year ended December 31, 2020, due to the decrease in cost on employment related taxes and cash-
settled awards primarily as a result of the share price movement and quarterly revaluation. This was partially offset
by an increase on equity-settled awards due to fully vested granted tranches, including the performance-based
restricted share unit ("PSU") award granted to the Company's Founder, Chairman and CEO, José Neves.
Share-based payments for the year ended December 31, 2020 increased by $113.4 million, or 63.6%,
compared to the year ended December 31, 2019, primarily due to a significant increase in the share price during
2020. Employment related taxes and the cost of cash-settled awards contributed to an increase primarily as a result
of the change in share price and quarterly revaluation. New grants of equity-settled awards also contributed to the
year-over-year increase.
General and administrative expense
Year ended
December 31,
2020
2021
$ Change % Change
(in thousands)
General and administrative
$ (504,346 ) $ (591,644 ) $ (87,298 )
(17.3 %)
General and administrative expense for the year ended December 31, 2021 increased by $87.3 million, or
17.3%, compared to the year ended December 31, 2020, which was driven by additional expenses to support the
growth of the business, and an increase in headcount, excluding technology staff who are included in the technology
expense above, from 3,669 to 4,378, an increase of 19.3%. General and administrative costs as a percentage of
Adjusted Revenue decreased from (34.5)% to (30.7)% as we continued to leverage our operations base to efficiently
grow Adjusted Revenue.
Other items
Transaction-related legal and advisory expenses
Loss on impairment of investments carried at fair value
Other
Other items
Year ended
December 31,
2020
2021
$ Change % Change
(in thousands)
$ (24,598 ) $ (18,596 ) $
(134 )
-
$ (24,267 ) $ (18,730 ) $
(235 )
566
6,002
101
(566 )
5,537
24.4 %
43.0 %
n/a
22.8 %
Other items represent items outside the normal scope of our ordinary business activities and non-cash items.
Other items totaled $18.7 million for the year ended December 31, 2021, primarily consisting of transaction-related
legal and advisory expenses that were incurred as a result of the strategic agreement with Alibaba and Richemont.
The December 31, 2020 other items totaled $24.3 million and consisted of transaction-related legal and advisory
expenses that were incurred mainly due to the issuance of the February 2020, April 2020 and November 2020 Notes
88
Impairment losses on tangible and intangible assets
Impairment losses on right-of-use asset
Impairment losses on property, plant and equipment
Impairment losses on tangible assets
Impairment losses on intangible assets
Impairment losses on intangible assets
Year ended
December 31,
2020
2021
$ Change
% Change
(in thousands)
(2,234 ) $
(757 )
(2,991 ) $
- $
-
- $
2,234
757
2,991
n/a
n/a
n/a
(36,269 ) $
(36,269 ) $
(11,779 ) $
(11,779 ) $
24,490
24,490
67.5 %
67.5 %
$
$
$
$
The impairment charge of $11.8 million on intangible assets for the year ended December 31, 2021, is
comprised of a charge related to a reduction in the carrying value of one of the smaller intangible brand assets within
New Guards portfolio.
The impairment charge of $36.3 million on intangible assets for the year ended December 31, 2020, is
primarily comprised of a $30.5 million charge related to a reduction in the carrying value of one of the smaller
intangible brand assets within New Guards portfolio. The remaining $5.8 million impairment charge on intangible
assets related to the closure of our direct consumer-facing channels on JD.com and the associated intangible asset
held for the Farfetch Level 1 access button.
Impairment losses on tangible assets of $3.0 million for the year ended December 31, 2020, primarily related
to one of our smaller retail locations and comprised a reduction in the carrying value of the right-of-use asset by $1.5
million, and property, plant and equipment by $0.8 million. The remaining $0.7 million impairment charge on
tangible assets related to the reduction in the carrying value of the corporate right-of-use assets associated with the
impairment of a smaller intangible brand asset within the New Guards portfolio. There were no impairment losses
on tangible assets for the year ended December 31, 2021.
The above resulted from our annual considerations of potential impairment of assets, including our
intangible assets, whereby indicators of impairment were present.
Gains/(losses) on items held at fair value and remeasurements
Year ended
December 31,
2020
2021
$ Change
% Change
(in thousands)
Remeasurement (losses)/gains on put and call option and
contingent consideration liabilities
Fair value (losses)/gains of convertible note embedded
derivatives
Fair value remeasurement of previously held equity
interest
(Losses)/gains on items held at fair value and
remeasurements
$ (288,853 ) $ 384,122 $ 672,975
233.0 %
(2,354,720 ) 1,638,837 3,993,557
169.6 %
-
784
784
n/a
$ (2,643,573 ) $ 2,023,743 $ 4,667,316
176.6 %
Gains on items held at fair value and remeasurements totaled $2,023.7 million. This was primarily due to a
$1,638.8 million fair value gain on revaluation of the embedded derivatives relating to our February 2020 Notes,
April 2020 Notes and November 2020 Notes compared to a $2,354.7 million fair value loss on revaluation for the
year ended December 31, 2020. In addition, we recorded a $384.1 million present value remeasurement gain for the
year ended December 31, 2021, compared to a $288.9 million loss for the year ended December 31, 2020. In the
year ended December 31, 2021, this primarily relates to Chalhoub Group’s put option over their non-controlling
interest in Farfetch International Limited and the put-call option associated with the strategic agreement with
89
Alibaba and Richemont. In the year ended December 31, 2020 this relates solely to Chalhoub Group’s put option
over their non-controlling interest in Farfetch International Limited. We also recorded a $0.8 million fair value
remeasurement gain of previously held equity interest, related to our step acquisition of Alanui. There was no
change in the fair value remeasurement of previously held equity interest for the year ended December 31, 2020.
Finance income and cost
Unrealized exchange gains
Interest on cash and cash equivalents and
short-term deposits
Finance income
Unrealized exchange losses
Lease interest
Convertible note interest
Other interest expense
Finance costs (1)
Net finance income/(costs)
Year ended
December 31,
2019
2020 (1) 2021
(in thousands)
2019 vs. 2020
%
Change
$ Change
2020 vs. 2021
%
Change
$ Change
$ 22,856 $ 19,729 $ 9,289 $ (3,127 ) 13.7 % $ (10,440 ) 52.9 %
11,526 4,970 3,310 (6,556 ) 56.9 % (1,660 ) 33.4 %
34,382 24,699 12,599 (9,683 ) 28.2 % (12,100 ) 49.0 %
(10,977 ) (39,940 ) (9,135 ) (28,963 ) (263.9 %) 30,805 77.1 %
(3,472 ) (6,684 ) (9,137 ) (3,212 ) (92.5 %) (2,453 ) (36.7 %)
n/a
(25,787 ) (61.6 %)
(531 ) 1,964 41.1 % 2,288 81.2 %
(4,783 ) (2,819 )
(19,232 ) (91,294 ) (86,441 ) (72,062 ) (374.7 %) 4,853
5.3 %
$ 15,150 $ (66,595 ) $ (73,842 ) $ (81,745 ) 539.6 % $ (7,247 ) (10.9 %)
- (41,851 ) (67,638 ) (41,851 )
((1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the revision
of prior year comparatives.
Unrealized exchange gains and losses fluctuate given the global nature of our business, where we earn
revenue and incur expenses in a number of different currencies. For our accounting policy for foreign currency
translations and how these are classified in our consolidated statement of operations, refer to Note 2.3(h) Summary
of significant accounting policies - Foreign currency translation within our Consolidated financial statements
included elsewhere in this Annual Report.
Net unrealized exchange gains for the year ended December 31, 2021 were $0.2 million. This comprised of
gains of $9.3 million and losses of $9.1 million. The net gains were primarily driven by movements in the exchange
rates of EUR, BRL, USD and GBP verses functional currency on intercompany, trading and cash balances not in the
functional currency of the main operating entities.
Interest on cash and cash equivalents and short-term deposits for the year ended December 31, 2021
decreased by $1.7 million compared to the year ended December 31, 2020, primarily driven by lower interest rates
offset by higher average cash balances.
Lease interest expense for the year ended December 31, 2021 increased by $2.5 million to $9.1 million,
primarily driven by new leases starting in the year ended December 31, 2021.
Convertible note interest for the year ended December 31, 2021 increased by $25.8 million to $67.6 million,
primarily due to incurring a full year of interest on our April 2020 and November 2020 notes.
Other interest expense for the year ended December 31, 2021 decreased by $2.3 million to $0.5 million
primarily driven by lower interest rates.
Net unrealized exchange losses for the year ended December 31, 2020 were $20.2 million. This comprised of
gains of $19.7 million and losses of $39.9 million. The net losses were primarily driven by movements in the
exchange rates of EUR, BRL, RUB and GBP verses functional currency on intercompany, trading and cash balances
not in the functional currency of the main operating entities.
90
Interest on cash and cash equivalents and short-term deposits for the year ended December 31, 2020
decreased by $6.6 million compared to the year ended December 31, 2019, primarily driven by lower interest rates
offset by higher average cash balances.
Lease interest expense for the year ended December 31, 2020 increased by $3.2 million to $6.7 million,
driven by new leases starting in the year ended December 31, 2020.
Convertible note interest for the year ended December 31, 2020 amounted to $41.9 million primarily due to
the effective interest on our convertible notes issued in February 2020, April 2020 and November 2020. There were
none for the year 2019.
Other interest expense for the year ended December 31, 2020 decreased by $2.0 million to $2.8 million,
primarily driven by lower interest rates
(Loss)/profit after tax
Year ended
December 31,
2020 (1)
(in thousands)
$ (3,315,623 )
2019 (1)
$ (393,500 )
2019 vs. 2020
2020 vs. 2021
2021
$ Change
%
Change
$ Change
% Change
(2)
$ 1,470,611 $ (2,922,123 ) 742.6 % $ 4,786,234
n.m.
(44.1 %)
(227.0 %)
76.4 %
(Loss)/profit after tax (1)
% of Adjusted Revenue
(1)
(2)
Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the
revision of prior year comparatives.
n.m. = number is not meaningful.
Profit after tax for the year ended December 31, 2021 was $1,470.6 million, up by $4,786.2 million,
compared to the year ended December 31, 2020. The increase was primarily driven by gains on items held at fair
value and remeasurements, which increased $4,667.4 million year-over-year as well as the increase in gross profit
partially offset by an increase in Selling, general and administrative expenses, as explained above.
Loss after tax for the year ended December 31, 2020, increased by $2,922.1 million, or 742.6%, compared
to the year ended December 31, 2019. The increase was primarily driven by losses on items held at fair value and
remeasurements, which increased $2,665.3 million year-over-year as well as increases in general and administrative
expenses, partially offset by an increase in gross profit, as explained above.
Adjusted EBITDA
Adjusted EBITDA
% of Adjusted Revenue
Year ended
December 31,
2020
2021
$ Change
(in thousands)
%
Change
$ (47,432 )
$ 1,638 $ 49,070 103.5 %
(3.2 %)
0.1 %
91
Adjusted EBITDA for the year ended December 31, 2021, increased by $49.1 million, or 103.5%, compared
to the year ended December 31, 2020. This was primarily due to the increase in revenue, as described above.
Adjusted EBITDA as a percentage of Adjusted Revenue increased from (3.2)% to 0.1%, primarily due to the decline
in general and administrative expenses as a percentage of Adjusted Revenue, as described above.
Comparison of Year Ended December 31, 2019 and 2020
For a comparison of our consolidated results of operations for the years ended December 31, 2019 and 2020,
refer to pages 87 through 93 of our Annual Report on Form 20-F for the fiscal year ended December 31, 2020 filed
with the SEC on March 4, 2021, as supplemented by the revisions described above under “—Revisions to
Previously Reported Financial Information”.
Operating Results by Segment
Digital Platform
The Digital Platform segment activities include the Farfetch Marketplace, Farfetch Platforms Solutions,
StadiumGoods.com, Farfetch Future Retail, and any other online sales channel operated by the Group, including the
respective websites of the smaller brands in the New Guards portfolio which are not yet operated through Farfetch
Platforms Solutions. It derives its revenues mostly from transactions between sellers and consumers conducted on
our technology platforms. During 2019 we acquired New Guards, which contributed to the continued scale and
growth of our Digital Platform in 2021.
Brand Platform
The Brand Platform segment is comprised of business-to-business activities of the brands in the New Guards
portfolio. It includes design, production, brand development and wholesale distribution of brands owned and
licensed by New Guards, including the franchised store operations.
In-Store
The In-Store segment covers the activities of Group-operated stores including Browns, Stadium Goods and
stores for brands in the New Guards portfolio. Revenues are derived from sales made in the physical stores.
There are no intersegment transactions that require elimination. Order Contribution is used to assess the
performance and allocate resources between the segments. The operating segment disclosures required under IFRS 8
are provided in Note 6, Segmental and geographical information, to our Consolidated financial statements included
elsewhere in this Annual Report.
92
The tables and discussion below set forth financial information and analysis of our three reportable operating
segments for the years ended December 31, 2019, 2020 and 2021:
Digital Platform:
Digital Platform:
Services third-party revenue
Services first-party revenue
Services Revenue
Fulfilment Revenue
Revenue
Less: Cost of revenue
Gross profit
Less: Demand generation expense
Order contribution
$
$
2019
Year ended December 31,
2020
(in thousands)
$
2021
496,040
205,206
701,246
127,960
829,206
(457,293 )
371,913
(151,350 )
220,563
637,568 $
395,588
1,033,156
213,228
1,246,384
(686,178 )
560,206
(198,787 )
361,419 $
845,941
539,737
1,385,678
332,504
1,718,182
(987,929 )
730,253
(291,821 )
438,432
$
Digital Platform performance reflects the increased scale of our global business, both from a supply and
demand perspective. There has been significant organic growth as we continued to expand our share of the online
luxury market, further supplemented by our continued marketing efforts, which generated growth in new consumers
and demand growth from existing consumers across international markets. During 2019, we acquired New Guards
which contributed to the continued scale and growth of our Digital Platform in 2020.
The increase in Digital Platform Services Revenue of 34.1% was primarily driven by 33.3% growth in
Digital Platform GMV, including growth in first-party Digital Platform GMV, which is included in Digital Platform
Services Revenue at 100% of the GMV. The increase in Digital Platform GMV was driven by a 21.9% increase in
Active Consumers, from 3,024,200 at December 31, 2020, to 3,686,800 at December 31, 2021, and a strong full
price performance. In addition, we benefited from year-over-year growth in transactions through websites managed
by FPS. Digital Platform Services Revenue was further augmented by growth in first-party Digital Platform, where
we saw strong performance of Browns’ products on the Platform. Digital Platform Third-Party take rate has
increased slightly from 29.6% for the year ended December 31, 2020 to 30.2% for the year ended December 31,
2021 reflecting measures implemented to share incremental costs with our partners.
Digital Platform Fulfilment Revenue represents the pass-through to consumers of delivery and duties charges
incurred by our global logistics solutions, net of any Farfetch-funded consumer promotions, subsidized shipping and
incentives. Digital Platform Fulfilment Revenue accounted for 14.7% of revenue in 2021, an increase from 12.7% in
2020. While Digital Platform Fulfilment Revenue would be expected to grow in line with the cost of delivery and
duties, which increase as Digital Platform GMV and order volumes grow, variations in the level of Farfetch funded
promotions and incentives will impact Digital Platform Fulfilment Revenue, as Digital Platform Fulfilment Revenue
is recorded net of such promotions. Digital Platform Fulfilment Revenue increased 55.9%, a higher rate as compared
to Digital Platform Services Revenue growth driven by higher duties due to the regional mix of sales and impacts of
Brexit, as well as an increased pass-through of these costs to consumers towards the end of the year.
Cost of revenue for the year ended December 31, 2021 increased by $301.8 million, or 44.0%, compared to
the year ended December 31, 2020, primarily driven by Digital Platform Revenue growth.
Our Digital Platform Gross Profit Margin decreased from 54.2% for the year ended December 31, 2020 to
52.7% for the year ended December 31, 2021. The decrease was driven by the increasing mix of Digital Platform
Fulfilment Revenue, which is a flow through generating no Gross Profit Margin, plus an increase in promotional
activity.
93
Demand generation expense consists primarily of fees that we pay to various media and affiliate partners.
Demand generation expense for the year ended December 31, 2021 increased by $93.0 million, or 46.8%, compared
to the year ended December 31, 2020. Demand generation expense increased as a percentage of Digital Platform
Services Revenue from 19.2% in 2020 to 21.0% in 2021, as we saw more competitive market conditions and the
impacts of Apple’s privacy policy leading to higher costs.
Digital Platform Order Contribution Margin decreased from 35.0% in 2020 to 31.6% in 2021 as a result of
increased promotional activity and higher demand generation costs
Brand Platform:
Brand Platform:
Revenue
Less: Cost of revenue
Gross profit or order contribution
$
$
2019
Year ended December 31,
2020
(in thousands)
390,014
$
(199,208 )
190,806 $
$
$
164,210
(89,203 )
75,007
2021
467,505
(225,989 )
241,516
Brand Platform contributed $467.5 million of Revenue and $241.5 million of gross profit for the year ended
December 21, 2021 compared to $390.0 million of Revenue and $190.8 million of gross profit for the year ended
December 31, 2020. We continue to see strong demand for products within New Guards brand portfolio, of which a
new permanent collection launched in the last quarter of the year.
In-Store:
In-Store:
Revenue
Less: Cost of revenue
Gross profit or order contribution
$
$
2019
Year ended December 31,
2020
(in thousands)
$
27,621
(14,695 )
12,926
$
37,524 $
(17,608 )
19,916 $
2021
70,921
(26,179 )
44,742
In-Store Revenue increased 89.0% to $70.9 million in the period ended 2021. Growth is primarily due to
additional New Guards’ stores opened in the last twelve months as well as growth from existing stores.
Changes in Accounting Policies and Disclosures
There have been no significant new accounting standards or amendments that have a material impact on the
results in the current year. During the year, as a result of the first conversions of the February 2020 Notes, we
implemented a new accounting policy in respect of how we account for the conversion of convertible notes. New
accounting policies have also been implemented for short-term investments, the acquisition of Palm Angels and the
accounting for the investment by Alibaba and Richemont into Farfetch China Holdings Ltd and its subsidiaries. All
transactions referred to above are new in the current year ended December 31, 2021. For further details, refer to
Note 2.4, Changes in accounting policies and disclosures, within our Consolidated financial statements included
elsewhere in this Annual Report.
94
B. Liquidity and Capital Resources
The following historical consolidated financial data as of and for the years ended December 31, 2019, 2020
and 2021 has been derived from our audited Consolidated financial statements and the notes thereto. Our historical
results for any prior period are not necessarily indicative of results expected in any future period.
Year ended December 31,
2019
2021
2020
(in thousands, except share and per share data)
Consolidated Statement of Cash Flow Data:
Net cash (outflow)/inflow from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
$
(126,642 )
(583,503 )
(15,249 )
$
116,315
(132,641 )
1,261,040
$
(282,154 )
(330,656 )
405,142
Consolidated Statement of Financial Position
Data:
Current assets
Non-current assets
Total assets
Current liabilities (1)
Non-current liabilities
Total liabilities
Share capital and premium
Total equity/(deficit) (1)
$
$
2019 (1)
As of December 31,
2020 (1)
(in thousands)
2021
645,330
1,582,549
2,227,879
467,998
422,049
890,047
891,591
1,337,832
$
$
1,961,000
1,629,871
3,590,871
778,747
4,470,766
5,249,513
942,099
(1,658,642 )
$
$
2,111,680
1,714,834
3,826,514
907,257
2,648,641
3,555,898
1,656,905
270,616
(1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the revision
of prior year comparatives.
General
As of December 31, 2021, we had cash and cash equivalents of $1,363.1 million. Our cash and cash
equivalents consist primarily of cash in bank accounts and short-term deposits in money market funds.
Since our inception, we have financed our operations primarily through equity and debt issuances, and cash
generated from our operating activities. Our primary requirements for liquidity and capital are to finance working
capital, capital expenditures, business combinations and general corporate purposes.
Our total equity increased from a deficit of $(1,658.6) million as at December 31, 2020 to equity of $270.6
million as at December 31, 2021 primarily due to the gains on items held at fair value and remeasurements during
the year. The gains on items held at fair value and remeasurements during the year is primarily driven by the year
end revaluation of the embedded derivatives relating to the convertible senior notes discussed below. Unless earlier
converted, redeemed or repurchased in accordance with their terms, the notes may be settled, at Farfetch’s election
and subject to certain exceptions and conditions, in Class A ordinary shares of Farfetch, cash, or a combination of
cash and Class A ordinary shares of Farfetch. The other significant driver of the gains on items held at fair value and
remeasurements during the year is the put and call option liabilities related to non-controlling interests arising from
the strategic agreement with Alibaba and Richemont. See Note 28, Financial instruments and financial risk
management, within our Consolidated financial statements included elsewhere in this Annual Report.
On February 5, 2020, we completed the private placement of convertible senior notes to Tencent and
Dragoneer, pursuant to which we received $250 million and issued the notes to the purchasers. The notes will
mature on December 31, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms. On
April 30, 2020, we completed the private offering of $400 million in aggregate principal amount of convertible
senior notes for net proceeds of $390 million. The notes will mature on May 1, 2027, unless earlier converted,
95
redeemed or repurchased in accordance with their terms. The notes will bear interest at a rate of 3.75% per year
payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2020. On
November 15, 2020, we completed the offering of $600 million in aggregate principal amount of convertible senior
notes. The notes will mature on November 15, 2030, unless earlier converted, redeemed or repurchased in
accordance with their terms. The notes will not bear any interest.
We believe that our sources of liquidity and capital will be sufficient to meet our business needs for at least
the next twelve months. Our capital expenditures consist primarily of technology development costs, computer
equipment and the fit out and improvements to our offices.
The following table shows summary consolidated cash flow information for the periods presented.
Net cash inflow/(outflow) from operating activities
Net cash outflow from investing activities
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Net cash (outflow)/inflow from operating activities
Year ended December 31,
2020
2021
(in thousands)
$
$
116,315 $
(132,641 )
1,261,040
1,244,714 $
(282,154 )
(330,656 )
405,142
(207,668 )
Net cash outflow from operating activities increased by $398.5 million to $282.2 million in the year ended
December 31, 2021 compared to a $116.3 million cash inflow from operating activities in the year ended December
31, 2020. The increase is primarily due to a working capital deficit of $154.5 million, an increase of $402.7 million
as compared to the working capital benefit of $248.2 million for the year ended December 31, 2020. This primarily
reflects an increase in sales tax receivables (refer to Note 15, Trade and other receivables, within our Consolidated
financial statements included elsewhere in this Annual Report), as well as higher inventory levels to support the
growth in the business.
Net cash outflow from investing activities
Net cash outflow from investing activities increased to $330.7 million in the year ended December 31,
2021, an increase of $198.0 million. The increase was primarily due to the purchase of a $100.0 million short-term
variable Net Asset Value investments and an increase in acquisitions of intangible assets in the year ended
December 31, 2021.
Net cash (outflow)/inflow from financing activities
Net cash inflow from financing activities decreased $855.9 million to $405.1 million in the year ended
December 31, 2021. During the year ended December 31, 2021, Net cash inflow from financing activities primarily
related to the cash proceeds of $500.0 million from the investment in Farfetch China by Alibaba and Richemont
during the year. During the year ended December 31, 2020, Net cash inflow from financing activities primarily
related to the cash proceeds from the issuance of three convertible senior notes during the year for total aggregate
principal amounts of $250 million, $400 million and $600 million.
Indebtedness
On February 5, 2020, we completed the private placement of convertible senior notes to Tencent and
Dragoneer (together, the “Purchasers”), pursuant to which we received $250 million and issued the February 2020
Notes to the Purchasers. The February 2020 Notes will mature on December 31, 2025, unless earlier converted,
redeemed or repurchased in accordance with their terms. The February 2020 Notes are our senior, unsecured
obligations and bear interest at a rate of 5% per year, payable quarterly in arrears on March 31, June 30, September
96
30, and December 31 of each year, commencing on March 31, 2020. The February 2020 Notes may be converted at
any time until the close of business on the second scheduled trading day immediately before the maturity date, at an
initial conversion price of $12.25. Upon conversion, the February 2020 Notes will be settled, at our election, in our
Class A ordinary shares, cash, or a combination of cash and Class A ordinary shares (subject to certain exceptions
set forth in the Indenture). Holders of the February 2020 Notes will have the right to require us to repurchase all or
some of their February 2020 Notes for cash at 100% (or 150%, in the event of a change in control, as defined in the
Indenture) of their principal amount, plus all accrued and unpaid interest to, and including, the maturity date, upon
the occurrence of certain corporate events, subject to certain conditions.
We may not redeem the February 2020 Notes prior to the fourth anniversary of the closing date, unless
certain changes in tax law or other related events occur. We may redeem all, but not less than all, of the February
2020 Notes, at our option, four years after the closing date, but on or before the 35th scheduled trading day
immediately preceding the maturity date, at a redemption price equal to 165% of the principal amount of the
February Notes to be redeemed, plus accrued and unpaid interest to, and excluding, the redemption date.
On April 30, 2020, we completed the private placement of convertible senior notes to qualified institutional
buyers, pursuant to which we received $390 million net proceeds and issued the April 2020 Notes to the institutional
buyers. The April 2020 Notes will mature on May 1, 2027 unless earlier converted, redeemed or repurchased in
accordance with their terms. The April 2020 Notes are our senior, unsecured obligations and bear interest at a rate of
3.75% per year, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on 1
November 1, 2020. The April 2020 Notes may be converted at an initial conversion price of $16.13 per share. The
April 2020 Notes may only be converted under the following circumstances; (i) during any calendar quarter
commencing after the calendar quarter ending on September 30, 2020 (and only during such quarter), if the last
reported sale price per ordinary share exceeds 130% of the conversion price for each of at least twenty trading days
(whether or not consecutive) during the thirty consecutive trading days ending on, and including, the last trading day
of the immediately preceding calendar quarter; and (ii) during the five days immediately after any ten-day period in
which the trading price per $1,000 principal of notes each day was less than 98% of the product of the last reported
share price on such day and the conversion rate. Upon conversion, the April 2020 Notes will be settled, at our
election, in our Class A ordinary shares, cash, or a combination of cash and Class A ordinary shares (subject to
certain exceptions set forth in the Indenture). Holders of the April 2020 Notes will have the right to require us to
repurchase all or some of their April 2020 Notes for cash at 100% of their principal amount, plus all accrued and
unpaid interest to, and including, the maturity date, upon the occurrence of certain corporate events, subject to
certain conditions.
Farfetch may redeem the April 2020 Notes for cash at any time prior to maturity, if certain tax-related events
occur on or after May 6, 2024 and on or before the 35th scheduled trading day before the maturity date, at its option,
if the last reported sale of Farfetch’s Class A ordinary shares exceeds 130% of the conversion price for a specified
period of time. The redemption price will equal the principal amount of the notes to be redeemed, plus accrued and
unpaid interest.
On November 17, 2020, we completed the placement of convertible senior notes to Alibaba and Richemont
for total gross proceeds of $600 million. The November 2020 Notes will mature on November 15, 2030 unless
earlier converted, redeemed or repurchased in accordance with their terms. The November 2020 Notes will not bear
regular interest, and the principal amount of the November 2020 Notes will not accrete. At any time prior to the
close of business on the second scheduled trading day immediately preceding the maturity date, a holder may
convert the November 2020 Notes at its option at an initial conversion price of approximately $32.29, which reflects
a 22% premium to the volume-weighted average price over the trailing 30 trading-day period ended on October 30,
2020. Upon conversion, the November 2020 Notes will be settled in Class A ordinary shares of Farfetch (with our
right, in certain circumstances, to settle the November 2020 Notes in its Class A ordinary shares, cash or a
combination thereof, at Farfetch’s election). If certain events occur that constitute a “fundamental change” (as
defined in the indenture governing the terms of the November 2020 Notes), holders of the November 2020 Notes
will have the right to require the Company to repurchase all or some of their November 2020 Notes for cash at a
repurchase price equal to 100% of their principal amount, plus all accrued and unpaid special interest, if any, to, and
including, the maturity date. Farfetch will, under certain circumstances, increase the conversion rate for holders who
convert the November 2020 Notes in connection with a fundamental change.
97
Alibaba and Richemont may require us to repurchase all or part of their respective November 2020 Notes on
June 30, 2026 at a repurchase price equal to 100% of the principal amount of the November 2020 Notes to be
repurchased, plus accrued and unpaid special interest, if any, to, but excluding, such repurchase date.
We will not be able to redeem the November 2020 Notes prior to November 15, 2023, except in the event of
certain tax law changes. On or after November 15, 2023, we may redeem, for cash, all or part of the relevant
November 2020 Notes if the last reported sale price of its Class A ordinary shares has been at least 130% (or 200%,
if over 5% of the relevant November 2020 Notes are held at the time by Alibaba or Richemont) of the conversion
price then in effect for at least twenty trading days (whether or not consecutive) during any thirty consecutive
trading day period (including the last trading day of such period) ending on, and including, the trading day
immediately preceding the date on which we provide notice of the redemption, at a redemption price equal to 100%
of the principal amount of the November 2020 Notes to be redeemed, plus accrued and unpaid special interest, if
any, to, but excluding, the redemption date.
On May 17, 2021, a total of 3,190,345 shares were issued on conversion of $39.1 million principal amount
of February 2020 Notes. No gain or loss was recognized on conversion. On conversion, non-current borrowings with
a carrying value of $28.4 million and non-current derivative financial liabilities with a fair value of $90.6 million
were reclassified to equity. The increase in equity resulted in an increase to share capital of $0.1 million and to share
premium of $118.9 million.
On August 6, 2021, a total of 7,013,405 shares were issued on conversion of $85.9 million principal amount
of February 2020 Notes. No gain or loss was recognized on conversion. On conversion, non-current borrowings with
a carrying value of $63.1 million and non-current derivative financial liabilities with a fair value of $241.6 million
were reclassified to equity. The increase in equity resulted in an increase to share capital of $0.3 million and to share
premium of $304.4 million.
On October 1, 2021, a total of 6,122,250 shares were issued on conversion of $75.0 million principal
amount of February 2020 Notes. No gain or loss was recognized on conversion. On conversion, non-current
borrowings with a carrying value of $55.2 million and non-current derivative financial liabilities with a fair value of
$152.8 million were reclassified to equity. The increase in equity resulted in an increase to share capital of $0.2
million and to share premium of $207.7 million.
Share-Based Payments
Employees receive remuneration in the form of share-based payments in the form of either equity or cash
settled depending on the scheme. For further details, refer to Note 2.3 (p), Summary of significant accounting
policies – Share-based payments, within our Consolidated financial statements included elsewhere in this Annual
Report.
Off-Balance Sheet Arrangements
In the ordinary course of business, we enter into lease commitments and capital commitments. These
transactions are recognized in the Consolidated financial statements in accordance with IFRS, as issued by the
IASB, and are more fully disclosed therein.
As of December 31, 2021, there were no off-balance sheet arrangements reasonably likely to have a material
effect on the Group.
98
Contractual obligations
The following table sets forth our contractual obligations as of December 31, 2021:
Contractual Obligations
Long term debt
Put and call option liabilities
Finance leases
Purchase Obligations
Total
Payments due by period
Less than
one year
One to three
years
Three to five
years
More than
five years
$
(in thousands)
50,000 $ 1,000,000
- $
-
188,261
90,801
73,685
-
-
$ 230,556 $ 261,946 $ 757,764 $ 1,090,801
- $
8,321
54,216
168,019
656,640
51,124
-
Contractual obligations relate primarily to marketing, consulting, maintenance, license agreements, cloud
services, and other third-party agreements.
C. Research and Development, Patents and Licenses, etc.
See Note 11, Material gain or loss, within our Consolidated financial statements include elsewhere in this
Annual Report.
D. Trend Information
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties,
demands, commitments or events since December 31, 2021 that are reasonably likely to have a material adverse
effect on our revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed
financial information to be not necessarily indicative of future operating results or financial conditions.
E. Critical Accounting Estimates
Our Consolidated financial statements are prepared in accordance with IFRS, as issued by the IASB. In
preparing our Consolidated financial statements, we make assumptions, judgments and estimates that can have a
significant impact on amounts reported in our consolidated financial statements. We base our assumptions,
judgments and estimates on historical experience and various other factors that we believe to be reasonable under
the circumstances. Actual results could differ materially from these estimates under different assumptions or
conditions. We regularly re-evaluate our assumptions, judgments and estimates. Our critical accounting estimates
and judgments are described in Note 3, Critical accounting judgments and key sources of estimation uncertainty,
within our Consolidated financial statements included elsewhere in this Annual Report.
Reconciliations of Non-IFRS and Other Financial and Operating Metrics
We have included in this Annual Report certain financial measures not based on IFRS, including Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted EPS, Adjusted Revenue, Digital Platform Order Contribution and
Digital Platform Order Contribution Margin (together, the “Non-IFRS Measures”), as well as operating metrics,
including GMV, Digital Platform GMV, Brand Platform GMV, In-Store GMV, Active Consumers and AOV. See
the definitions set forth below for a further explanation of these terms.
Management uses the Non-IFRS Measures:
•
as measurements of operating performance because they assist us in comparing our operating
performance on a consistent basis, as they remove the impact of items not directly resulting from our
core operations;
99
•
•
•
for planning purposes, including the preparation of our internal annual operating budget and financial
projections;
to evaluate the performance and effectiveness of our strategic initiatives; and
to evaluate our capacity to fund capital expenditures and expand our business.
The Non-IFRS Measures may not be comparable to similar measures disclosed by other companies because
not all companies and analysts calculate these measures in the same manner. We present the Non-IFRS Measures
because we consider them to be important supplemental measures of our performance, and we believe they are
frequently used by securities analysts, investors and other interested parties in the evaluation of companies.
Management believes that investors’ understanding of our performance is enhanced by including the Non-IFRS
Measures as a reasonable basis for comparing our ongoing results of operations. Many investors are interested in
understanding the performance of our business by comparing our results from ongoing operations period over period
and would ordinarily add back non-cash expenses such as depreciation, amortization and items that are not part of
normal day-to-day operations of our business. By providing the Non-IFRS Measures, together with reconciliations
to IFRS, we believe we are enhancing investors’ understanding of our business and our results of operations, as well
as assisting investors in evaluating how well we are executing our strategic initiatives.
Items excluded from the Non-IFRS Measures are significant components in understanding and assessing
financial performance. The Non-IFRS Measures have limitations as analytical tools and should not be considered in
isolation, or as an alternative to, or a substitute for profit/(loss) after tax, revenue or other financial statement data
presented in our Consolidated financial statements as indicators of financial performance. Some of the limitations
are:
•
•
•
•
•
•
such measures do not reflect revenue related to fulfilment, which is necessary to the operation of our
business;
such measures do not reflect our expenditures, or future requirements for capital expenditures or
contractual commitments;
such measures do not reflect changes in our working capital needs;
such measures do not reflect our share-based payments, income tax benefit/(expense) or the amounts
necessary to pay our taxes;
although depreciation and amortization are not included in the calculation of Adjusted EBITDA, the
assets being depreciated and amortized will often have to be replaced in the future and such measures
do not reflect any costs for such replacements; and
other companies may calculate such measures differently than we do, limiting their usefulness as
comparative measures.
Due to these limitations, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Revenue should not be
considered as measures of discretionary cash available to us to invest in the growth of our business and are in
addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with IFRS.
In addition, the Non-IFRS Measures we use may differ from the non-IFRS financial measures used by other
companies and are not intended to be considered in isolation or as a substitute for the financial information prepared
and presented in accordance with IFRS. Furthermore, not all companies or analysts may calculate similarly titled
measures in the same manner. We compensate for these limitations by relying primarily on our IFRS results and
using the Non-IFRS Measures only as supplemental measures.
Digital Platform Order Contribution and Digital Platform Order Contribution Margin are not measurements
of our financial performance under IFRS and do not purport to be alternatives to gross profit or profit/(loss) after tax
derived in accordance with IFRS. We believe that Digital Platform Order Contribution and Digital Platform Order
Contribution Margin are useful measures in evaluating our operating performance within our industry because they
permit the evaluation of our digital platform productivity, efficiency and performance. We also believe that Digital
Platform Order Contribution and Digital Platform Order Contribution Margin are useful measures in evaluating our
100
operating performance because they take into account demand generation expense and are used by management to
analyze the operating performance of our digital platform for the periods presented.
The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to the most directly
comparable IFRS financial measures, which are (loss)/profit after tax and (loss)/profit after tax margin:
(Loss)/profit after tax (1)
Net finance (income)/expense (1)
Income tax expense/(benefit)
Depreciation and amortization
Share-based payments (1) (2)
(Gains)/losses on items held at fair value and
remeasurements (3)
Other items (4)
Impairment losses on tangible assets
Impairment losses on intangible assets
Share of results of associates
Adjusted EBITDA
Revenue
(Loss)/profit after tax margin (1)
Adjusted Revenue
Adjusted EBITDA Margin
$
2019 (1)
(393,500 )
(15,150 )
1,162
113,591
178,234
Year Ended December 31,
2020 (1)
(in thousands)
$ (3,315,623 )
66,595
(14,434 )
217,223
291,633
(21,721 )
16,374
-
-
(366 )
$
(121,376 )
$ 1,021,037
(38.5 %)
$
893,077
(13.6)%
2,643,573
24,267
2,991
36,269
74
$
(47,432 )
$ 1,673,922
(198.1)%
$ 1,460,694
(3.2)%
2021
$ 1,470,611
73,842
3,002
251,198
196,167
(2,023,743 )
18,730
-
11,779
52
$
1,638
$ 2,256,608
65.2%
$ 1,924,104
0.1%
(1)
(2)
(3)
(4)
Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the
revision of prior year comparatives.
Represents share-based payment expense.
Represents losses/(gains) on items held at fair value and remeasurements. See “gains/(losses) on items held at fair value and remeasurements” below for a
breakdown of these items.
Represents other items, which are outside the normal scope of our ordinary activities. See “other items” below for a breakdown of these items. Other items is
included within selling, general and administrative expenses.
The following table reconciles Adjusted Revenue to the most directly comparable IFRS financial
performance measure, which is revenue:
Revenue
Less: Digital Platform Fulfilment Revenue
Adjusted Revenue
2019
Year ended December 31,
2020
(in thousands)
2021
$
$
1,021,037 $
(127,960 )
893,077 $
1,673,922 $
(213,228 )
1,460,694 $
2,256,608
(332,504 )
1,924,104
101
The following tables reconcile Digital Platform Order Contribution and Digital Platform Order Contribution
Margin to the most directly comparable IFRS financial performance measures, which are Digital Platform Gross
Profit and Digital Platform Gross Profit Margin:
2019
Year ended December 31,
2020
(in thousands)
2021
Digital Platform Gross Profit
Less: Demand generation expense
Digital Platform Order Contribution
Digital Platform Services Revenue
Digital Platform Gross Profit Margin
Digital Platform Order Contribution Margin
$
$
$
560,206 $
(198,787 )
361,419 $
730,253
371,913 $
(291,821 )
(151,350 )
438,432
220,563 $
701,246 $ 1,033,156 $ 1,385,678
52.7%
31.6%
53.0%
31.5%
54.2%
35.0%
The following table reconciles Adjusted EPS to the most directly comparable IFRS financial performance
measure, which is Earnings per share:
Basic (loss)/earnings per share (1)
Share-based payments (1) (2)
Amortization of acquired intangible assets
(Gains)/losses on items held at fair value and
remeasurements (3)
Other items (4)
Impairment losses on tangible assets
Impairment losses on intangible assets
Share of results of associates
Adjusted (loss)/earnings per share
Year ended December 31,
2019 (1)
2020 (1)
2021
$
$
(1.27 ) $
0.56
0.17
(0.07 )
0.05
-
-
-
(0.56 ) $
(9.69 ) $
0.85
0.36
7.69
0.07
0.01
0.11
0.0
(0.60 ) $
4.02
0.54
0.36
(5.55 )
0.05
-
0.03
-
(0.55 )
(1)
(2)
(3)
(4)
Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual Report for detail on the
revision of prior year comparatives.
Represents share-based payment expense on a per share basis.
Represents losses/(gains) on items held at fair value and remeasurements on a per share basis. See “gains/(losses) on items held at fair value and
remeasurements” below for a breakdown of these items.
Represents other items, which are outside the normal scope of our ordinary activities on a per share basis. See “other items” below for a breakdown of these
items. Other items is included within Selling, general and administrative expenses.
102
The following table represents gains/(losses) on items held at fair value and remeasurements:
Year ended December 31,
2019
2020
(in thousands)
2021
Fair value remeasurements:
Shares issued as part of New Guards acquisition
$250 million 5.00% Notes due 2025 embedded derivative
$400 million 3.75% Notes due 2027 embedded derivative
$600 million 0.00% Notes due 2030 embedded derivative
Fair value remeasurement of previously held equity interest
$
$ (21,526.00 )
-
-
-
-
-
(978,254 )
(1,103,944 )
(272,522 )
-
$
-
484,529
724,690
429,618
784
Present value remeasurements:
Chalhoub put option
CuriosityChina call option
Palm Angels put call option and earn-out
Alibaba and Richemont put option
Alanui put option
Gains/(losses) on items held at fair value and remeasurements $
44,853
(1,606 )
-
-
-
(287,927 )
(926 )
-
-
-
21,721 $ (2,643,573 )
156,072
-
(14,190 )
246,105
(3,865 )
$ 2,023,743
Farfetch share price (end of day)
$
10.35
$
63.81
$
33.43
The following table represents other items:
Transaction-related legal and advisory expenses
Release of tax provisions
Loss on impairment of investments carried at fair value
Other
Other items
2019
Year ended December 31,
2020
(in thousands)
2021
$
$
(15,374 ) $
4,000
(5,000 )
-
(16,374 ) $
(24,598 )
-
(235 )
566
(24,267 )
$
$
(18,596 )
-
(134 )
-
(18,730 )
103
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
Executive Officers and Board Members
The following table presents information about our current executive officers and members of our Board of
Directors, including their ages as of January 31, 2022:
Name
Executive Officers
José Neves (4)
Elliot Jordan
Stephanie Phair
Board Members
Dana Evan (1)(2)(4)
J. Michael Evans
Stephanie Horton (4)
Diane Irvine (1)(3)
Victor Luís (1)(3)
David Rosenblatt (2)(3)
Gillian Tans (1)(2)
Age
47
46
43
62
64
50
63
55
53
51
Position
Chief Executive Officer and Chairman of the Board
Chief Financial Officer
Chief Customer Officer
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
(1)
(2)
(3)
(4)
Member of the Audit Committee.
Member of the Compensation Committee.
Member of the Nominating and Corporate Governance Committee.
Member of the Environmental, Social and Governance Committee.
The current business address for our executive officers and members of our Board of Directors is c/o
Farfetch Limited, The Bower, 211 Old Street, London EC1V 9NR, United Kingdom.
Executive Officers
José Neves is our founder and has served as our Chief Executive Officer since 2008. He is also Chairman of
our Board. Mr. Neves has been involved in luxury fashion since the mid-1990s when he launched the footwear
business SWEAR. Mr. Neves later founded SIX London, and in 2001, Mr. Neves opened the B-Store, which won
the British Fashion Award for Retailer of the Year in 2006. Mr. Neves served on the British Fashion Council Board
from 2016 to 2018. Mr. Neves currently serves on the Board of Directors of several private companies. Mr. Neves
studied Economics at the Universidade do Porto in Portugal.
Elliot Jordan has served as our Chief Financial Officer since 2015. Prior to joining us, Mr. Jordan was
Director of Finance at ASOS.com, before which he held various senior finance roles at J Sainsbury plc. Mr. Jordan
is a non-executive Board Member and Chair of the Audit Committee at HM Land Registry. Mr. Jordan holds a
degree from the University of Waikato and is a qualified chartered accountant with the Chartered Accountants of
Australia and New Zealand.
Stephanie Phair has served as our Chief Customer Officer since August 2019, prior to which she had served
as our Chief Strategy Officer since November 2016. Ms. Phair was previously founder and President of
TheOutnet.com and was part of the Executive team of the Net-a-Porter Group from 2009 to 2015. She has more than
twenty years of luxury and e-commerce experience, having worked for Issey Miyake, American Vogue and at
Portero in New York. Most recently, she has consulted with a number of start-ups in the digital space and advised
private equity firms on investments. She is also an advisor for venture capital firm Felix Capital and sits on the
Board of Moncler SpA. In May 2018, Ms. Phair was appointed as Chairman of the British Fashion Council. Ms.
Phair holds an MA in Politics, Philosophy and Economics from Oxford University and speaks four languages.
104
Board Members
Biographical information for José Neves, our Chief Executive Officer and Chairman of the Board of
Directors, may be found above in the section entitled “Executive Officers.”
Dana Evan has served as a non-executive Director since April 2015. Ms. Evan has invested in and served on
the Boards of companies in the internet, technology and media sectors since 2007. Between 1996 and 2007, Ms.
Evan served as Chief Financial Officer of VeriSign, Inc. Between 2013 and 2020, Ms. Evan served as a venture
partner at Icon Ventures. Ms. Evan brings over twenty-five years of executive leadership experience in global
finance and operations management in the technology and media sectors. Ms. Evan currently serves on the Boards
and audit committees of Momentive Inc. (f/k/a Survey Monkey Inc.), Domo Inc. and Box, Inc. Ms. Evan also
previously served on the Board of Directors of Proofpoint, Inc. from 2008 until it was acquired by Thoma Bravo in
September 2021, Criteo S.A. from 2013 to until July 2017, Fusion-IO, Inc. from 2011 until it was acquired by
SanDisk in August 2014, Everyday Health Inc. until it was acquired by Ziff Davis, LLC in December 2016, and
Omniture, Inc., until it was acquired by Adobe Systems Inc. in 2009. In 2019, Ms. Evan was selected as the Director
of the Year by the National Association of Corporate Directors. Ms. Evan holds a B.S. degree in Commerce from
the University of Santa Clara and is a Certified Public Accountant (inactive).
J. Michael Evans has served as a non-executive Director since December 2020. Mr. Evans has been the
President of Alibaba since September 2015 and has served on its Board of Directors since September 2014. Prior to
this, Mr. Evans served as Vice Chairman of the Goldman Sachs Group, Inc. from February 2008 until his retirement
in December 2013. From 2004 to 2013, Mr. Evans served as Godman Sachs Chairman of Asia Operations and was
its Global Head of Growth Markets from January 2011 to December 2013. He also Co-Chaired the Business
Standards Committee of Goldman Sachs from 2010 to 2013. Mr. Evans joined Goldman Sachs in 1993, became a
Partner of the firm in 1994 and held various leadership positions within the firm’s securities business while based in
New York and London, including Global Head of Equity Capital Markets and Global Co-Head of the Equities
Division, and Global Co-Head of the securities business. He is a Board Member of City Harvest, a Trustee of the
Asia Society, a member of the Advisory Council for the Bendheim Center for Finance at Princeton University, and
in August 2014, he joined the Board of Barrick Gold Corporation. Mr. Evans received his bachelor’s degree in
politics from Princeton University in 1981.
Stephanie Horton has served as a non-executive Director since August 2020. A twenty-five-year veteran of
the luxury fashion and marketing communities, Ms. Horton brings extensive experience in delivering creative
marketing solutions for global brands. Ms. Horton has served as the Director of Marketing for Google Shopping
since August 2020. Previously, Ms. Horton served as a consultant Chief Executive Officer at Hemp Tailor, a
designer of sustainable hemp clothing. From October 2017 to December 2019, Ms. Horton served as Chief Strategy
Officer at Alexander Wang, where she was responsible for building international strategic partnerships for business
growth opportunities as well as overseeing a range of strategic global functions. Prior to this, Ms. Horton served as
Chief Marketing Officer at Farfetch from 2013 to 2017. Ms. Horton also served as the Head of Global
Communications and Brand Marketing at Shopbop.com from 2011 to 2013 and served as Executive Director of
Creative Services at Vogue Magazine from 2006 to 2011 and as Director, Marketing Services at The New York
Times, from 2001 to 2005. Ms. Horton also currently serves on the Board of several private companies. Ms. Horton
is also the joint co-founder of Fashion Tech Connects, an initiative created to increase the number of women of
color in fashion and tech positions. Ms. Horton holds a degree from the University of Michigan and an MBA from
DePaul University Kellstadt Graduate School of Business.
Diane M. Irvine has served as a non-executive Director since August 2020. Ms. Irvine previously served as
Chief Executive Officer of Blue Nile, Inc., an online retailer of diamonds and fine jewelry, from 2008 to 2011, and
as President from 2007 to 2008. Ms. Irvine also served as the Chief Financial Officer of Blue Nile from 1999 to
2007. Between 1994 and 1999, Ms. Irvine served as Vice President and Chief Financial Officer of Plum Creek
Timber Company, Inc. and, from 1981 to 1994, Ms. Irvine served in various capacities, most recently as a Partner, at
Coopers & Lybrand LLP. Ms. Irvine has also previously served on the Boards of Directors of the XO Group, Inc.
until its merger with WeddingWire in 2018 and Casper Sleep Inc. until it was acquired by Durational Capital
Management, LP in January 2022. Ms. Irvine currently serves on the Boards and Audit Committees of Yelp Inc. and
Funko, Inc. Ms. Irvine also serves on the Boards of several private companies. Ms. Irvine holds a B.S. in
105
Accounting from Illinois State University and an M.S. in Taxation and a Doctor of Humane Letters from Golden
Gate University.
Victor Luís has served as a non-executive Director since August 2020. Mr. Luís brings extensive luxury
fashion experience to our Board, with prior roles in luxury companies in key regions, including Asia-Pacific,
particularly China and Japan, and North America. From January 2014 to September 2019, Mr. Luís served as the
Chief Executive Officer and on the Board of Directors of Tapestry, Inc. (formerly known as Coach, Inc.), a
multinational luxury fashion company, where he led the transformation into Tapestry Inc., a New York-based house
of modern luxury brands including Coach, Kate Spade and Stuart Weitzman. Previously, Mr. Luís served in a
variety of leadership roles with increasing responsibility at Coach, Inc., beginning as President and Chief Executive
Officer of Coach Japan in 2006, and rapidly assumed additional leadership responsibilities globally, progressing to
President and Chief Commercial Officer of Coach, Inc. in 2013. Prior to joining Coach, Inc., from 2002 to 2006, Mr.
Luís was President and Chief Executive Officer of Baccarat, Inc., where he ran the North American operation of the
French luxury brand. Mr. Luís joined the Moët-Hennessy Louis Vuitton Group in 1995, ultimately advancing to
President and Chief Executive Officer of its subsidiary, Givenchy Japan Incorporated, before leaving in 2002. Mr.
Luís currently serves on the Board and Compensation Committee of Deckers Outdoor Corporation and is an investor
in and advisor to several private companies. Mr. Luís holds a B.A. degree from the College of the Holy Cross in
Massachusetts and an M.A. in International Economics from Durham University.
David Rosenblatt has served as non-executive Director since May 2017. Since 2011, Mr. Rosenblatt has
served as the Chief Executive Officer of 1stdibs.com and also serves on its Board of Directors. From 2004 through
2008, Mr. Rosenblatt served as the Chief Executive Officer of DoubleClick. Following Mr. Rosenblatt’s sale of
DoubleClick to Google in 2007, he served as Google’s President of Display Advertising until 2009. Mr. Rosenblatt
currently serves on the Board of Twitter, where he serves on the Compensation and Nominating and Governance
Committees, and on the Board of IAC/InterActive Corp, where he also serves on the Compensation Committee. He
has previously served on the Board of GSI Commerce. Mr. Rosenblatt has a degree from Yale University and an
MBA from the Stanford University Graduate School of Business.
Gillian Tans has served as a non-executive Director since August 2020. Ms. Tans served as Chairwoman of
Booking.com, an online worldwide travel agency and the largest brand of Booking Holdings Inc., from June 2019 to
July 2021. Previously, Ms. Tans served as the President and Chief Executive Officer of Booking.com, where she
was responsible for overseeing all of Booking.com’s functional departments and operations, from January 2015 and
April 2016, respectively, until June 2019. Ms. Tans served as Booking.com’s Chief Operating Officer from
September 2011 to April 2016 and as Booking.com’s Director of Hotels & Content from 2002 to 2011. Before
joining Booking.com, Ms. Tans served in a variety of roles with increasing responsibility at the Golden Tulip
Worldwide hotel group, where she served as Product Manager, Marketing Manager and Director of Sales. Ms. Tans
has also worked for the Intercontinental Hotel Group and with a number of independent hotels. Ms. Tans began her
career at Hershey Entertainment and Resorts. Ms. Tans also serves on the Boards of multiple private companies.
Director Nomination and Appointment Rights
In connection with Alibaba’s purchase of the November 2020 Notes, Alibaba nominated J. Michael Evans,
Alibaba’s President, to serve on our Board, and Alibaba and José Neves, amongst others, entered into a commitment
agreement, pursuant to which Mr. Neves agreed to exercise all voting rights held directly or indirectly by him in
favor of any shareholder resolution proposing to appoint Mr. Evans, or another designated Alibaba senior executive
as a Director on our Board. This obligation is conditional on Alibaba continuing to hold not less than 75% (based on
its aggregate interest in us and Farfetch China) of its initial interest in us immediately following completion of the
Farfetch China joint venture.
106
B. Compensation
Compensation
We set out below the amount of compensation paid and benefits in kind provided by us or our subsidiaries to
our executive officers and members of our Board of Directors for services in all capacities to us or our subsidiaries
for the year ended December 31, 2021, as well as the amount contributed by us or our subsidiaries to retirement
benefit plans for our executive officers and members of our Board of Directors.
Executive Officer and Board Member Compensation
The compensation for each of our executive officers is comprised of the following elements: base salary, an
annual incentive tied to achievement of Company and individual performance, contractual benefits, and pension
contributions; except that our Chief Executive Officer does not receive a base salary. Total cash compensation paid
and benefits in kind provided to our executive officers and members of our Board of Directors for the year ended
December 31, 2021 was $2,491,865. In addition, excluding the CEO PSU Grant (defined below), our executive
officers and members of our Board of Directors were granted an aggregate of 9,072,806 shares (equivalent to a
value of $115,511,850, based on the accounting fair value as of the grant date), comprised of restricted stock units
and shares subject to stock options, in the year ended December 31, 2021 pursuant to the 2018 Farfetch Employee
Equity Plan (as defined below). The exercise price of the stock options granted to our executive officers and
members of our Board of Directors during the year ended December 31, 2021 was $61.27. These stock options are
subject to varying vesting schedules over a multi-year period.
In addition, in May 2021 Mr. Neves was granted a long-term incentive grant of performance-based restricted
stock units which vest over an eight-year period based on the achievement of certain stock price hurdles (the “CEO
PSU Grant”). The grant was for 8,440,000 performance-based restricted stock units and had a fair value upon grant
of $99 million.
As of December 31, 2021, excluding the CEO PSU grant, our executive officers and members of our Board
of Directors held 5,048,463 stock options on the Company’s Class A ordinary shares; with exercise prices ranging
from $3.60 to $61.27 and expiration dates ranging from May 2026 to January 2031. These options were granted by
the Company pursuant to the 2015 LTIP and 2018 Plan (each defined below). We have not set aside or accrued any
amounts to provide pension, retirement or similar benefits to our executive officers or members of our Board of
Directors.
Long-Term Incentive Plans
Farfetch.com Limited Share Option Scheme
The Farfetch.com Limited Share Option Scheme (the “Share Option Plan”) allows for the grant of options to
purchase Class A ordinary shares to eligible Directors or employees. The Share Option Plan is administered by our
Board of Directors whose decisions on all disputes and matters concerning the interpretation of the rules are final.
Options granted under the Share Option Plan are governed by the rules of the Share Option Plan and an option
agreement entered into with each participant. The options generally vest over four years from the date of grant of the
option, subject to the participant’s continued employment by us. The Share Option Plan is closed to any new grants.
Farfetch.com Limited 2015 Long-Term Incentive Plan
The Farfetch.com Limited 2015 Long-Term Incentive Plan (the “LTIP”) allows for the grant of options to
purchase Class A ordinary shares, restricted shares and linked awards to eligible Directors or employees of Farfetch
or its subsidiaries. The LTIP is administered by our Board of Directors whose decisions on all disputes and matters
concerning the interpretation of the rules are final. No restricted shares have been granted under the LTIP. Options
granted pursuant to the LTIP vest over four years subject to the participant’s continued employment by us. The LTIP
is closed to any new grants.
Pursuant to the LTIP, we entered into linked award deeds (the “Linked Award Deeds”) with certain
employees, which provide the employee with the simultaneous award of an option to purchase ordinary shares and
107
the issuance of restricted linked Class A ordinary shares (together, a “Linked Award”). The restricted linked Class A
ordinary shares are not transferable.
The restricted linked ordinary shares converted into restricted Class A ordinary shares immediately prior to
our initial public offering (“IPO”) in September 2018. On each occasion that an employee proposes to realize the
Linked Awards, a formula (as set out in the applicable Linked Award Deed) is applied to calculate how many linked
shares will cease to be subject to restrictions on transfer to deliver to the employee the “in-the-money value” of the
Linked Award (i.e., the market value of our Class A ordinary shares less the exercise price). If the in-the-money
value of the vested Linked Award is delivered by the release of linked shares, the options purported to be exercised
will lapse. To the extent an employee does not hold a sufficient number of linked shares to deliver the in-the-money
value of the Linked Award being exercised, then the remaining option will be exercised over Class A ordinary
shares.
Additional Individual Option Schemes
We previously entered into letter agreements with certain employees in connection with the acquisition of
Fashion Concierge UK Limited (“the Fashion Concierge letter agreements”) on October 31, 2017, as subsequently
amended in August 2019. Pursuant to such letter agreements, certain employees received a grant of our shares. No
further shares will be issued pursuant to the Fashion Concierge letter agreements.
2018 Farfetch Employee Equity Plan
We adopted the 2018 Farfetch Employee Equity Plan (the “2018 Plan”), under which we may grant cash and
equity-based incentive awards to our eligible employees, consultants and directors. The 2018 Plan is administered
by our Board of Directors with respect to awards to non-employee Directors and by the Compensation Committee
with respect to other participants, each of which may delegate its duties and responsibilities to committees of our
Directors and/or officers (referred to collectively as the “Plan Administrator,” below), subject to certain limitations
that may be imposed under stock exchange rules.
The 2018 Plan provides for the grant of share options, including incentive share options (“ISOs”) and
nonqualified share options (“NSOs”) restricted shares, dividend equivalents, share payments, restricted share units
(“RSUs”), performance shares, other incentive awards, share appreciation rights (“SARs”) and cash awards. All
awards under the 2018 Plan will be set forth in award agreements, which will detail all terms and conditions of the
awards, including any applicable vesting and payment terms and post-termination exercise limitations. Awards other
than cash awards generally will be settled in Class A ordinary shares, but the Plan Administrator may provide for
cash settlement of any award.
Individual award agreements may also provide for additional accelerated vesting and payment provisions.
All awards will be subject to the provisions of any claw-back policy implemented by us to the extent set forth in
such claw-back policy and/or in the applicable award agreement.
UK Sub-plan
The Farfetch Employee Equity Sub-plan for United Kingdom employees (the “UK Sub-plan”) is a sub-plan
to the 2018 Plan for employees who are residents of the United Kingdom. The UK Sub-plan does not increase the
share reserve under the 2018 Plan.
French Sub-plan
Our Compensation Committee approved the 2018 Farfetch Employee Equity Plan French Sub-plan for
French employees on December 21, 2021 (the “French Sub-plan”). The French Sub-plan is a sub-plan to the 2018
Plan which allows for the grant of restricted share unit awards in a tax-efficient manner to employees who are
residents of France. The French Sub-plan does not increase the share reserve under the 2018 Plan.
108
Indemnification
Our executive officers and Board members have the benefit of indemnification provisions in our Articles.
Our Articles provide that our Board and officers shall be indemnified from and against all liability which they incur
in execution of their duties in their respective offices, except liability incurred by reason of such Director’s or
officer’s dishonesty, willful default or fraud.
Insofar as indemnification of liabilities arising under the Securities Act may be permitted to executive
officers and Board members or persons controlling us pursuant to the foregoing provisions, we have been informed
that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
C. Board Practices
Board of Directors
We currently have eight Directors, all of whom, other than Mr. Neves and Mr. Evans, have been determined
by the Board to qualify as “independent” pursuant to the rules of the NYSE. Mr. Neves serves as the Chairman of
our Board. Directors can be appointed and removed and/or replaced by an ordinary resolution of the shareholders. In
addition, Directors may be appointed either to fill a vacancy arising from the resignation of a former Director or as
an addition to the existing Board by the affirmative vote of a simple majority of the Directors present and voting at a
Board meeting, which shall include the affirmative vote of Mr. Neves for as long as he is a Director. Until all of our
Class B ordinary shares are converted into Class A ordinary shares, each of our Directors holds office until his or her
successor has been duly elected and qualified or until his or her earlier death, resignation or removal. Following
such conversion, the Board of Directors will be divided into three classes, with those serving as Class I, Class II and
Class III serving for terms expiring at the first, second and third annual general meetings, respectively, and
thereafter for three-year terms, in each case, until his or her successor has been duly elected and qualified or until his
or her earlier death, resignation or removal.
Board Committee Composition
The Board has established an Audit Committee, a Compensation Committee, a Nominating and Corporate
Governance Committee and an Environmental, Social and Governance Committee. Each of these committees is
governed by a charter that is available on our website at www.farfetchinvestors.com. The information contained on
our website is not incorporated by reference in this Annual Report.
Audit Committee
The Audit Committee currently consists of Ms. Evan, Ms. Irvine, Mr. Luís and Ms. Tans, with Ms. Irvine
serving as Chair. The Audit Committee consists exclusively of members of our Board of Directors who are
financially literate, and each of Ms. Evan, Ms. Irvine and Mr. Luís has been determined to qualify as an “audit
committee financial expert” as defined by applicable SEC rules. Our Board has determined that Ms. Evan, Ms.
Irvine, Mr. Luís and Ms. Tans each satisfies the “independence” requirements set forth in Rule 10A-3 under the
Exchange Act and that the simultaneous service by Ms. Evan on the Audit Committees of three other public
companies would not impair her ability to effectively serve on our Audit Committee.
The Audit Committee is responsible for, among other things:
•
•
•
the appointment, compensation, retention and oversight of the work of the independent auditor and any
other registered public accounting firm engaged for the purpose of preparing or issuing an audit report
or performing other audit services;
pre-approving the audit services and non-audit services to be provided by our independent registered
public accounting firm before the firm is engaged to render such services;
evaluating the independent registered public accounting firm’s qualifications, performance and
independence on at least an annual basis;
109
•
•
•
•
reviewing and discussing with the Board and the independent registered public accounting firm our
annual Consolidated financial statements and quarterly earnings releases prior to the filing of our
annual report and the public disclosure of our quarterly earnings releases;
reviewing our compliance with laws and regulations, including any initiatives or major litigation or
investigations against us that may have a material impact on our Consolidated financial statements,
and assessing our risk management, compliance procedures and hiring of independent registered
public accounting firm employees;
approving or ratifying any related party transaction (as defined in our Related Parties Policy) in
accordance with our Related Parties Policy; and
reviewing with management and the independent registered public accounting firm, at least annually,
our Code of Business Conduct and Ethics and reviewing and reassessing the adequacy of the
procedures in place to enforce the Code of Business Conduct and Ethics.
The Audit Committee meets as often as one or more members of the Audit Committee deems necessary, but
in any event meets at least once during each fiscal quarter. The Audit Committee meets at least once per year with
our independent registered public accounting firm, without our executive officers present.
Compensation Committee
The Compensation Committee currently consists of Ms. Evan, Mr. Rosenblatt and Ms. Tans, with Ms. Evan
serving as Chair. Under applicable SEC and NYSE rules, there are heightened independence standards for members
of the Compensation Committee. All of the members of our Compensation Committee meet these heightened
standards.
The Compensation Committee is responsible for, among other things:
•
•
•
•
•
reviewing and approving corporate goals and objectives relevant to the compensation of our Chief
Executive Officer and evaluating the Chief Executive Officer’s performance in light of these
objectives and goals;
reviewing and setting compensation for our other executive officers and members of our executive
team;
making recommendations to the Board in connection with the long-term incentive component of our
management’s compensation in line with the remuneration policy and reviewing our management’s
compensation and benefits policies generally;
reviewing and making recommendations to the Board of Directors regarding Director compensation;
and
reviewing and assessing risks arising from our compensation policies and practices for our employees
and whether any such risks are reasonably likely to have a material adverse effect on us.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee currently consists of Ms. Irvine, Mr. Luís and Mr.
Rosenblatt, with Mr. Luís serving as Chair.
The Nominating and Corporate Governance Committee is responsible for, among other things:
•
•
•
identifying individuals qualified to become members of the Board of Directors and ensuring these
individuals have the requisite expertise with sufficiently diverse and independent backgrounds;
reviewing and evaluating the composition, function and duties of our Board of Directors;
recommending nominees for selection to our Board of Directors and its corresponding committees;
110
•
•
•
making recommendations to the Board of Directors as to determinations of Board member
independence;
leading the Board of Directors in a self-evaluation, at least annually, to determine whether it and its
committees are functioning effectively; and
developing and recommending to the Board of Directors our Corporate Governance Guidelines and
reviewing and reassessing the adequacy of such Corporate Governance Guidelines and recommending
any proposed changes to the Board of Directors.
Environmental, Social and Governance Committee
The Environmental, Social and Governance Committee currently consists of Ms. Evan, Ms. Horton and Mr.
Neves, with Ms. Horton serving as Chair.
The Environmental, Social and Governance Committee is responsible for, among other things:
• making recommendations to the Board of Directors for our general strategy, and overseeing our policies
practices and performance, with regard to environmental, social and governance matters;
•
•
overseeing our reporting standards in relation to environmental, social and governance matters; and
advising the Board of Directors on shareholder proposals and other significant stakeholder concerns
relating to environmental, social and governance matters.
Duties of Board Members and Conflicts of Interest
Under Cayman Islands law, our Directors have a duty to act in good faith and in what they consider to be in
our best interests. Our Directors are required to exhibit, in the performance of their duties, both the degree of skill
that may reasonably be expected from a subjective perspective determined by reference to each such Director’s
knowledge and experience, and the skill and care objectively to be expected from a person occupying office as a
Director. In fulfilling their duty of care to Farfetch, our Directors must ensure compliance with our Articles. In
certain limited circumstances, a shareholder has the right to seek damages if a duty owed by our Directors is
breached.
Under our Articles, Directors who are in any way, whether directly or indirectly, interested in a contract or
proposed contract with us must declare the nature of their interest at a meeting of the Board of Directors or by notice
in writing to the members of the Board of Directors. If the majority of the Board of Directors determines that there is
a conflict of any Director (or her affiliates) with our general business, then the Board of Directors may determine to
exclude such Director from all further discussions of the Board of Directors and receipt of information, until such
time as it is determined by the Board of Directors that the Director is no longer in such conflict. Subject to the
foregoing, a Director may vote in respect of any contract or proposed contract notwithstanding her interest; provided
that, in exercising any such vote, such Director’s duties remain as described above.
Executive Officer Employment Agreements and Board Member Service Agreements
Each of our executive officers currently has an employment agreement providing for employment for an
indefinite period of time, subject to a six-month (in the case of Ms. Phair and Mr. Jordan) or twelve-month (in the
case of Mr. Neves) notice period upon termination of employment by either the executive or by us, other than
terminations for gross misconduct.
In connection with the CEO PSU Grant, Mr. Neves also entered into a letter agreement pursuant to which he
agreed to waive any cash and equity incentive compensation (other than the CEO PSU Grant) from 2021 through
December 31, 2028.
We have entered into written service agreements with Ms. Evan and Mr. Rosenblatt, each of whom serves as
a Director on our Board, providing for an indefinite period of service and the grant of equity awards. These
agreements provide for a three-month notice period upon termination of service by either party (other than
terminations for gross misconduct), but do not provide for any other benefits upon a termination of service. We have
111
entered into written offer letters with Mr. Evans, Ms. Horton, Ms. Irvine, Mr. Luís and Ms. Tans, each of whom
serves as a Director on our Board, providing for an indefinite period of service, and with the exception of Mr. Evans,
cash and equity-based remuneration. These offer letters provide for termination of service in accordance with our
Articles, but do not provide for any other benefits upon a termination of service.
Alternate Directors
Our Articles provide, as allowed by the Companies Act, that any Director may, with the prior consent of the
Board of Directors, subject to the conditions set thereto, appoint a person as an alternate to act in his or her place.
Unless the appointing Director limits the time or scope of the appointment of the Alternate Director, the
appointment is effective for all purposes until the appointing Director ceases to be a Director or the appointing
Director removes the Alternate Director.
D. Employees
Our People
As of December 31, 2021, we had a total of 6,464 employees, including 321 Browns, 258 Stadium Goods
and 600 New Guards employees and excluding additional people working pursuant to freelance and consultancy
contracts. Our employees are based in nineteen countries and territories, and 53% of our employees were female and
47% were male as of December 31, 2021. The table below sets out the number of employees by geography.
Geography
Portugal
United Kingdom
United States of America
China
Italy
Brazil
Russian Federation
Japan
Hong Kong
United Arab Emirates
India
France
Mexico
Canada
Switzerland
Saudi Arabia
Australia
Total
As of December 31,
2021
3,068
1,246
565
519
510
177
86
84
79
75
24
19
3
2
4
2
1
6,464
112
As of December 31, 2021, approximately 32% of our workforce consisted of technology and product
specialists. The remainder was focused on all other business areas, including marketing, operations, production and
other commercial and support functions. The table below sets out the number of employees, by category, as of
December 31, 2021, 2020 and 2019:
Department
Technology and Product
Operations
Marketing
Commercial
People
Finance and Legal
Data Department
Other
Total
As of December 31, As of December 31, As of December 31,
2020
2021
2019
1,465
1,801
222
213
184
233
92
322
4,532
1,629
2,197
345
285
197
288
143
357
5,441
1,912
2,554
445
306
245
356
176
470
6,464
We believe that we maintain a good working relationship with our employees, and we have not experienced
any significant labor disputes or any difficulty in recruiting staff for our operations. Our employees are not
represented by any collective bargaining agreements or labor unions, other than our employees in Italy and France,
where collective bargaining agreements are mandatory, and in Brazil who are represented by two state-level labor
unions, as required by law.
E. Share Ownership
For information regarding the share ownership of Directors and officers, refer to Item 7. “Major
Shareholders and Related Party Transactions – A. Major Shareholders.” For information regarding our equity
incentive plans, refer to Item 6. “Directors, Senior Management and Employees – B. Compensation – Long-Term
Incentive Plans.”
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
The following table sets forth information relating to the beneficial ownership of our Class A ordinary shares
and Class B ordinary shares as of February 14, 2022, for:
(a)
(b)
(c)
each person, or group of affiliated persons, known by us to beneficially own 5% or more of our
outstanding Class A ordinary shares or Class B ordinary shares;
each of our current executive officers and our Directors; and
all of our current executive officers and our Directors as a group.
For further information regarding material transactions between us and principal shareholders, see “Related
Party Transactions” below.
The number of Class A ordinary shares and/or Class B ordinary shares beneficially owned by each entity,
person, executive officer or Board member is determined in accordance with the rules of the SEC, and the
information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares over which the individual has sole or shared voting power or investment power as
well as any shares that the individual has the right to acquire within sixty days of February 14, 2022 through the
exercise of any option, warrant or other right. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment power with respect to all Class A
ordinary shares or Class B ordinary shares held by that person. As of February 14, 2022, there were 338,457,816
Class A ordinary shares outstanding and 42,858,080 Class B ordinary shares outstanding.
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Unless otherwise indicated below, the address for each beneficial owner listed is c/o Farfetch Limited, The
Bower, 211 Old Street, London EC1V 9NR, United Kingdom.
Name of beneficial owner
Holders of 5% or Greater
T. Rowe Price Associates (3)
Baillie Gifford (4)
Morgan Stanley (5)
Lone Pine Capital LLC (6)
Invesco Ltd (7)
Executive Officers and Directors
José Neves (8)
Elliot Jordan (9)
Stephanie Phair (10)
Dana Evan (11)
J. Michael Evans
Stephanie Horton
Diane Irvine
Victor Luís
Gillian Tans
David Rosenblatt (12)
Officers and directors as a group (10 persons) (13)
Class A ordinary shares
Class B ordinary shares (1)
Number
Percent
Number
Percent
Combined voting
power (2)
35,110,450
30,400,596
30,171,050
24,439,933
20,763,328
10.4 %
9.0 %
8.9 %
7.2 %
6.1 %
-
-
-
-
-
4,638,857
1.4 % 42,858,080
930,183
767,301
609,008
-
9,005
6,557
6,557
6,557
899,283
*
*
*
*
*
*
*
*
*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100 %
-
-
-
-
-
-
-
-
-
7,873,308
2.3 % 42,858,080
100.0 %
2.9 %
2.5 %
2.5 %
2.0 %
1.7 %
71.8 %
*
*
*
*
*
*
*
*
*
71.9 %
*
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Indicates beneficial ownership of less than 1% of the total outstanding Class A ordinary shares.
The Class B ordinary shares are exchangeable for Class A ordinary shares on a one-for-one basis, subject to customary conversion rate adjustments for share
splits, share dividends and reclassifications. Beneficial ownership of Class B ordinary shares reflected in this table has not also been reflected as beneficial
ownership of Class A ordinary shares for which such Class B ordinary shares may be exchanged.
The percentage reported under “Combined Voting Power” represents the voting power with respect to all of our Class A and Class B ordinary shares
outstanding as of February 14, 2022, voting as a single class. Holders of our Class A ordinary shares are entitled to one vote per share, and holders of our
Class B ordinary shares are entitled to twenty votes per share.
Based on information reported on a Schedule 13G/A filed on February 14, 2022, T. Rowe Price Associates, Inc. (“T. Rowe Price”) has sole voting power over
17,290,775 of our Class A ordinary shares and sole dispositive power over 35,110,450 of our Class A ordinary shares. The business address of T. Rowe Price
is 100 E. Pratt Street, Baltimore, MD 21202.
Based on information reported on a Schedule 13G filed on January 19, 2022, Baillie Gifford & Co (“Baillie Gifford”) has sole voting power over 23,923,166
of our Class A ordinary shares and sole dispositive power over 30,400,596 of our Class A ordinary shares. The business address of Baillie Gifford is Calton
Square, 1 Greenside Row, Edinburgh, EH1 3AN, Scotland, United Kingdom.
Based on information reported on a Schedule 13G/A filed on February 9, 2022, Morgan Stanley has shared voting power over 27,161,380 of our Class A
ordinary shares and shared dispositive power over 30,171,050 of our Class A ordinary shares, Morgan Stanley Investment Management Company has shared
voting power over 16,192,180 of our Class A ordinary shares, and shared dispositive power over 17,515,776 of our Class A ordinary shares and Morgan
Stanley Investment Management Inc. has shared voting power over 10,928,548 of our Class A ordinary shares and shared dispositive power over 12,614,622
of our Class A ordinary shares. The respective business addresses of Morgan Stanley, Morgan Stanley Investment Management Company and Morgan
Stanley Investment Management Inc. are 1585 Broadway New York, NY 10036, #16-01 Capital Square 23 Church Street, Singapore and 522 5th Avenue 6th
Floor New York, NY 10036.
Based on information reported on a Schedule 13G/A filed on February 14, 2022, each of Lone Pine Capital LLC (“Lone Pine”), David F. Craver, Brian F.
Doherty, Kelly A. Granat, Stephen F. Mandel, Jr. and Kerry A. Tyler has shared voting power and shared dispositive power over 24,439,933 of our Class A
ordinary shares. Each of David F. Craver, Brian F. Doherty, Kelly A. Granat and Kerry A. Tyler is a member of the Executive Committee of Lone Pine
Managing Member LLC, which is the Managing Member of Lone Pine, and Stephen F. Mandel, Jr. is the Managing Member of Lone Pine Managing
Member LLC. The business address of each of the foregoing is Two Greenwich Plaza, Greenwich, Connecticut, 06830.
Based on information reported on a Schedule 13G filed on February 14, 2022, Invesco Ltd. has sole voting power over 20,239,031 of our Class A ordinary
shares and sole dispositive power over 20,763,328 of our Class A ordinary shares.
As to the number and percentage reflected under the columns “Class A Ordinary Shares,” represents for Mr. Neves (a) 97,355 Class A ordinary shares and (b)
4,397,982 Class A ordinary shares underlying options and 143,520 Class A ordinary shares underlying Performance Share Units (“PSUs”) that are currently
vested and exercisable or that vest within sixty days of February 14, 2022. Does not include shares underlying 8,440,000 PSUs, which are eligible to vest
subject to achievement of stock-price vesting conditions over an eight-year period. As to the number and percentage reflected under the columns “Class B
Ordinary Shares,” represents for Mr. Neves 42,858,080 Class B ordinary shares held by TGF Participations Limited. Mr. Neves exercises voting and
investment power over the Class B ordinary shares held by TGF Participations Limited and may be deemed to have beneficial ownership those Class B
ordinary shares. The business address of TGF Participations Limited is Grosvenor House, 66-67 Athol Street, Douglas, Isle of Man IM1 1JE.
Represents for Mr. Jordan (a) 120,535 Class A ordinary shares and (b) 809,648 Class A ordinary shares underlying options and RSUs that are currently vested
and exercisable or that vest within sixty days of February 14, 2022.
Represents for Ms. Phair (a) 157,476 Class A ordinary shares and (b) 609,825 Class A ordinary shares underlying options and RSUs that are currently vested
and exercisable or that vest within sixty days of February 14, 2022.
Represents for Ms. Evan (a) 29,633 Class A ordinary shares and (b) 579,375 Class A ordinary shares underlying options that are currently vested and
exercisable or that vest within sixty days of February 14, 2022.
Represents for Mr. Rosenblatt (a) 188,298 Class A ordinary shares and (b) 710,985 Class A ordinary shares underlying options that are currently vested and
exercisable or that vest within sixty days of February 14, 2022.
Includes 7,251,335 Class A ordinary shares underlying options, RSUs and PSUs that are, as applicable, currently vested and exercisable or that vest within
sixty days of February 14, 2022.
114
Significant Changes
To our knowledge, other than as provided in the table above, our other filings with the SEC, public
disclosure and this Annual Report, there has been no significant change in the percentage ownership held by any
other major shareholder since January 1, 2019.
As of February 14, 2022, there were 338,457,816 of Class A ordinary shares outstanding. To our knowledge,
328,067,618 Class A ordinary shares, representing 96.9% of our total outstanding Class A ordinary shares, were held
by 13 record shareholders with registered address in the United States.
We are not aware of any arrangement that may at a subsequent date result in a change of control of Farfetch.
B. Related Party Transactions
The following includes, among other information, a description of related party transactions, as defined
under Item 7.B of Form 20-F, since January 1, 2021.
Registration Rights Agreement
On July 21, 2017, we entered into a Registration Rights Agreement with Kadi Group, Condé Nast
International Ltd, Advance Magazine Publishers Inc., CN Commerce Ltd, Index Ventures V (Jersey), L.P., Index
Ventures V Parallel Entrepreneur Fund (Jersey), L.P., Yucca (Jersey) SLP, Farhold (Luxembourg) S.A.R.L., DST
Global IV, L.P., Sebatik Investments Limited, TGF Participations Limited, Republic Technologies Pte Ltd, Advent
Private Equity Fund IV, Advent Industry L.P., Advent Management IV Limited Partnership, Newsight Investment
Holdings I Ltd, Newsight Investment Holdings II Ltd and Legendre Holding 51 SAS, pursuant to which such
investors were granted certain demand registration rights, short-form registration rights and piggyback registration
rights in respect of any Class A ordinary shares and related indemnification rights from us, subject to customary
restrictions and exceptions. All fees, costs and expenses of registration, other than underwriting discounts and
commissions, are expected to be borne by us. There were no continuing obligations under this agreement as of
December 31, 2020.
Relationship with Platforme International Limited
Mr. Neves, the founder, Chief Executive Officer and Chairman of our Board of Directors, is also a Director
of, and holds a beneficial ownership interest in, Platforme International Limited (“Platforme”).
E-Commerce Services Agreements
In October 2015, we entered into an FPS e-commerce services agreement with Platforme for the
development and hosting of the “Swear” branded website. Further, in the second quarter of 2017, we entered into
several standard e-commerce services agreements with Platforme, pursuant to which we make available for sale on
the Farfetch Marketplace products from each of Platforme’s “Swear,” “MySwear” and “B Store” businesses. The
agreements were entered into on our standard terms.
Relationship with Alanui
During the year ended December 31, 2021 up until March 16, 2021, Alanui S.r.L. (“Alanui”) was an
associate (as defined under Item 7.B of Form 20-F) of our subsidiary New Guards, which owns a stake of 53% of
Alanui. Alanui is one of the brands in the New Guards portfolio. New Guards owns the Alanui intellectual property,
and produces and distributes Alanui merchandise. New Guards gained control over Alanui on March 16, 2021
following a change in the shareholder agreement. We recognized sales of $0.2 million to Alanui in the two months
up until consolidation on March 16, 2021. We recognized sales of $1.1 million during the year ended December 31,
2020.
115
Agreements with Executive Officers and Directors
We have entered into service agreements or offer letters with our executive officers and Directors.
Information about these agreements, including the CEO PSU Grant made to Mr. Neves in May 2021, may be found
in this Annual Report under Item 6. “Directors, Senior Management and Employees — B. Compensation” and is
incorporated herein by reference.
Indemnification Agreements
We have entered into indemnification agreements with our Directors and executive officers pursuant to
which we have agreed to indemnify them against a number of liabilities and expenses incurred by such persons in
connection with claims made by reason of their serving as a Director or executive officer of Farfetch. A copy of the
Form of Indemnification Agreement is incorporated by reference as Exhibit 4.1 to this Annual Report. In addition to
such indemnification, we provide our Board of Directors and executive officers with Directors’ and officers’
liability insurance.
Related Parties Policy
Our Board of Directors has adopted a written Related Parties Policy to set forth the policies and procedures
for the review and approval or ratification of related party transactions. This policy covers material transactions or
loans reportable under this Item between Farfetch and a related party, including without limitation our Directors and
senior management as well as their family members, and certain shareholders, and provides that such transactions be
reviewed and approved or ratified by the Audit Committee. Such review shall assess if the transaction is on terms
comparable to those that could be obtained in arm’s length dealings with an unrelated third-party, whether the
transaction is inconsistent with the interest of the Company and its shareholders, the extent of the related party’s
interest in the transaction, and shall also take into account the conflicts of interest and corporate opportunity
provisions of our organizational documents.
C. Interests of Experts and Counsel
Not applicable.
116
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information
Consolidated financial statements
Refer to Item 18. “Financial statements.”
Legal and Arbitration Proceedings
From time to time, we may be involved in various claims and proceedings arising in the course of our
business and operations. The outcome of any such claims or proceedings, regardless of the merits, is inherently
uncertain. For example, in September 2019, following periods of volatility in the market price of our Class A
ordinary shares, two putative class action lawsuits were filed in the United States against us and certain of our
Directors and officers, among others, under the U.S. federal securities laws. The lawsuits are captioned Omdahl v.
Farfetch Limited et al and City of Coral Springs Police Officers’ Retirement Plan v. Farfetch Limited et al, both
pending in the U.S. District Court for the Southern District of New York. On June 10, 2020, the court consolidated
the two lawsuits. On August 10, 2020, plaintiffs filed an amended consolidated complaint, asserting violations of
Sections 10(b), 20A and 20(a) of the Exchange Act, and Rule 10b-5 of the Exchange Act against us and certain of
our current and former officers, as well as violations of Sections 11, 12, and 15 of the Securities Act against us,
certain of our current and former officers and Directors, and the underwriters of our September 2018 initial public
offering. The amended complaint seeks damages on behalf of a proposed class of all persons who purchased or
otherwise acquired our common stock during the period of September 20, 2018 to August 8, 2019, purportedly
caused by alleged materially misleading statements and/or material omissions by us and the individual officers
regarding our business model, growth strategy, and supplemental financial metrics. On October 23, 2020 we filed a
motion to dismiss the amended complaint and briefing on that motion was completed on February 4, 2021. On
September 29, 2021, the court granted our motion and dismissed all of plaintiffs’ claims with prejudice, finding that
our disclosures were thorough and extensive, that no reasonable investor could have been misled by our disclosures,
that none of Farfetch’s officers’ stock sales were suspicious or unusual and that plaintiffs did not otherwise plead
that any Farfetch officers knew that any of the challenged statements were false. Plaintiffs filed a notice of appeal on
October 29, 2021, and, on January 28, 2022 filed their appellate brief. Our responsive brief is due April 28, 2022.
In April 2020, a putative class action lawsuit, captioned Walter v. Farfetch.com US, LLC, was filed in the
United States against Farfetch.com US, LLC alleging violations of Section 632.7 of the California Penal Code. The
lawsuit was mediated on September 29, 2021 and the settlement agreement was fully executed as of January 4,
2022. The settlement remains subject to court approval, which we expect to be sought in early 2022. Under the
terms of the settlement, we continue to deny any liability or wrongdoing and the significant majority of the payment
will be funded by certain of our insurance carriers. We do not expect the payment to be made under this settlement
to have a material impact on our financial position or results of operations.
Dividend Policy
We have not previously paid dividends on our ordinary shares and do not anticipate paying dividends on our
ordinary shares in the foreseeable future. We intend to retain all available funds and any future earnings to fund the
development and expansion of our business. However, if we do pay a cash dividend on our ordinary shares in the
future, we will pay such dividend out of our profits or share premium (subject to solvency requirements and as
permitted under Cayman Islands law).
The amount of any future dividend payments we may make will depend on, among other factors, our
strategy, future earnings, financial condition, cash flow, working capital requirements, capital expenditures and
applicable provisions of our Articles. Any profits or share premium we declare as dividends will not be available to
be reinvested in our operations.
Moreover, we are a holding company that does not conduct any business operations of our own. As a result,
we are dependent upon cash dividends, distributions and other transfers from our subsidiaries to make dividend
payments, which may be subject to withholding and other taxes.
117
Any dividends we declare on our shares will be in respect of both our Class A ordinary shares and Class B
ordinary shares and will be distributed such that a holder of one of our Class B ordinary shares will receive the same
amount of dividends as a holder of one of our Class A ordinary shares. We will not declare any dividend with
respect to our Class A ordinary shares without declaring a dividend on our Class B ordinary shares, and vice versa.
We have not declared or paid dividends in the years ended December 31, 2019, 2020 and 2021.
B. Significant Changes
Please refer to Note 34, Subsequent Events, within our Consolidated financial statements included elsewhere
in this Annual Report for details regarding events subsequent to the reporting period.
Item 9. The Offer and Listing
A. Offer and Listing Details
Our Class A ordinary shares commenced trading on the NYSE on September 21, 2018 under the symbol
“FTCH.” Prior to this, no public market existed for our Class A ordinary shares. Our Class B ordinary shares are not
listed to trade on any securities market.
B. Plan of Distribution
Not applicable.
C. Markets
Our Class A ordinary shares commenced trading on the NYSE on September 21, 2018 under the symbol
“FTCH.”
D. Selling Shareholders
Not Applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
A copy of our Articles is incorporated by reference as Exhibit 1.1 to this Annual Report. The information
called for by this Item is set forth in Exhibit 2.2 to this Annual Report and is incorporated by reference into this
Annual Report.
118
C. Material Contracts
Except as otherwise disclosed in this Annual Report (including the Exhibits), we are not currently, nor have
we been for the past two years, party to any material contract, other than contracts entered into in the ordinary
course of business.
D. Exchange Controls
There are currently no Cayman Islands exchange control regulations that would affect the import or export
of capital or the remittance of dividends, interest or other payments to non-resident holders of our shares.
E. Taxation
The following summary contains a description of certain Cayman Islands, UK and U.S. federal income tax
consequences of the acquisition, ownership and disposition of our Class A ordinary shares. The summary is based
upon the tax laws of the Cayman Islands and regulations thereunder, the tax laws of the United Kingdom and
regulations thereunder, and the tax laws of the United States and regulations thereunder as of the date hereof, which
are subject to change.
Cayman Islands Tax Considerations
The following discussion is a summary of the material Cayman Islands tax considerations relating to the
purchase, ownership and disposition of our Class A ordinary shares. There is, at present, no direct taxation in the
Cayman Islands and interest, dividends and gains payable to us will be received free of all Cayman Islands taxes.
We have received an undertaking from the government of the Cayman Islands to the effect that, for a period of thirty
years from the date of the undertaking, no law that thereafter is enacted in the Cayman Islands imposing any tax or
duty to be levied on profits, income or on gains or appreciation, or any tax in the nature of estate duty or inheritance
tax, will apply to any property comprised in or any income arising under Farfetch, or to our shareholders, in respect
of any such property or income.
No stamp duty in the Cayman Islands is payable in respect of the issue of any Class A ordinary shares or an
instrument of transfer in respect of any Class A ordinary shares.
United Kingdom Tax Considerations
The following discussion is a summary of the material UK tax considerations relating to the purchase,
ownership and disposition of our Class A ordinary shares.
The following statements are of a general nature and do not purport to be a complete analysis of all potential
UK tax consequences of acquiring, holding or disposing of our Class A ordinary shares. They are based on current
UK tax law and on the current published practice of Her Majesty’s Revenue and Customs (“HMRC”) (which may
not be binding on HMRC), as of the date of this Annual Report, all of which are subject to change, possibly with
retrospective effect. They are intended to address only certain UK tax consequences for holders of our Class A
ordinary shares who are tax resident in (and only in) the United Kingdom, and in the case of individuals, domiciled
in (and only in) the United Kingdom (except where expressly stated otherwise) who are the absolute beneficial
owners of our Class A ordinary shares and any dividends paid on them and who hold our Class A ordinary shares as
investments (other than in an individual savings account or a self-invested personal pension). They do not address
the UK tax consequences which may be relevant to certain classes of holders of our Class A ordinary shares such as
traders, brokers, dealers, banks, financial institutions, insurance companies, investment companies, collective
investment schemes, tax-exempt organizations, trustees, persons connected with us, persons holding our Class A
ordinary shares as part of hedging or conversion transactions, holders of Class A ordinary shares who have (or are
deemed to have) acquired our Class A ordinary shares by virtue of an office or employment, and holders of Class A
ordinary shares who are or have been our officers or employees or a company forming part of our Group. The
statements do not apply to any holder of Class A ordinary shares who either directly or indirectly holds or controls
10% or more of our share capital (or class thereof), voting power or profits.
119
The following is intended only as a general guide and is not intended to be, nor should it be considered to be,
legal or tax advice to any particular prospective subscriber for, or purchaser of, our Class A ordinary shares.
Accordingly, prospective subscribers for, or purchasers of, our Class A ordinary shares who are in any doubt as to
their tax position regarding the acquisition, ownership and disposition of our Class A ordinary shares or who are
subject to tax in a jurisdiction other than the United Kingdom should consult their own tax advisers.
The Company
It is the intention of our Board of Directors to conduct our affairs so that our central management and control
is exercised in the United Kingdom. As a result, we are expected to be treated as resident in the United Kingdom for
UK tax purposes. Accordingly, we expect to be subject to UK taxation on our income and gains, except where an
exemption applies.
Taxation of Dividends
Withholding Tax
We will not be required to withhold UK tax at its source when paying dividends. The amount of any liability
to UK tax on dividends paid by us will depend on the individual circumstances of the holder of our Class A ordinary
shares.
Income Tax
An individual holder of our Class A ordinary shares who is resident for tax purposes in the United Kingdom
may, depending on his or her particular circumstances, be subject to UK tax on dividends received from us.
Dividend income is treated as the top slice of the total income chargeable to UK income tax. An individual holder of
our Class A ordinary shares who is not resident for tax purposes in the United Kingdom should not be chargeable to
UK income tax on dividends received from us unless he or she carries on (whether solely or in partnership) any
trade, profession or vocation in the United Kingdom through a branch or agency to which the Class A ordinary
shares are attributable. There are certain exceptions for trading in the United Kingdom through independent agents,
such as certain brokers and investment managers.
All dividends received by a UK resident individual holder of our Class A ordinary shares from us or from
other sources will form part of the holder’s total income for income tax purposes and will constitute the top slice of
that income. A nil rate of income tax will apply to the first £2,000 of taxable dividend income received by the holder
of our Class A ordinary shares in a given tax year. Income within the nil rate band will be taken into account in
determining whether income in excess of the nil rate band falls within the basic rate, higher rate or additional rate
tax bands. Where the dividend income is above the £2,000 dividend allowance, the first £2,000 of the dividend
income will be charged at the nil rate and any excess amount will be taxed at 7.5% to the extent that the excess
amount falls within the basic rate tax band, 32.5% to the extent that the excess amount falls within the higher rate
tax band and 38.1% to the extent that the excess amount falls within the additional rate tax band. From April 6,
2022, these rates are expected to increase to 8.75%, 33.75% and 39.35%, respectively.
Corporation Tax
Corporate holders of our Class A ordinary shares who are resident for tax purposes in the United Kingdom
should not be subject to UK corporation tax on any dividend received from us so long as the dividends qualify for an
exemption (as is likely) and certain conditions are met (including anti-avoidance conditions). Corporate holders of
our Class A ordinary shares who are not resident in the United Kingdom will not generally be subject to UK
corporation tax on dividends unless they are carrying on a trade, profession or vocation in the United Kingdom
through a permanent establishment in connection with which our Class A ordinary shares are used, held, or
acquired.
A holder of our Class A ordinary shares who is resident outside the United Kingdom may be subject to non-
UK taxation on dividend income under local law.
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Taxation of Capital Gains
UK Resident Holders of our Class A Ordinary Shares
A disposal or deemed disposal of our Class A ordinary shares by an individual or corporate holder of our
Class A ordinary shares who is tax resident in the United Kingdom may, depending on the holder’s circumstances
and subject to any available exemptions or relief, give rise to a chargeable gain or allowable loss for the purposes of
UK taxation of chargeable gains.
Any chargeable gain (or allowable loss) will generally be calculated by reference to the consideration
received for the disposal of our Class A ordinary shares less the allowable cost to the holder of acquiring such
Class A ordinary shares.
The applicable tax rates for individual holders of our Class A ordinary shares realizing a gain on the disposal
of such Class A ordinary shares is, broadly, 10% for basic rate taxpayers and 20% for higher and additional rate
taxpayers.
Non-UK Resident Holders of our Class A Ordinary Shares
Holders of our Class A ordinary shares who are not resident in the United Kingdom and, in the case of an
individual holder, not temporarily non-resident, should not be liable for UK tax on capital gains realized on a sale or
other disposal of our Class A ordinary shares unless (i) such shares are used, held or acquired for the purposes of a
trade, profession or vocation carried on in the United Kingdom through a branch or agency or, in the case of a
corporate holder, through a permanent establishment, or (ii) where certain other conditions are met, we derive 75%
or more of our gross value from UK land. Holders of Class A ordinary shares who are not resident in the United
Kingdom may be subject to non-UK taxation on any gain under local law.
Generally, an individual holder of our Class A ordinary shares who has ceased to be resident in the United
Kingdom for tax purposes for a period of five years or less and who disposes of our Class A ordinary shares during
that period may be liable on her return to the United Kingdom to UK taxation on any capital gain realized (subject to
any available exemption or relief).
UK Stamp Duty (“Stamp Duty”) and UK Stamp Duty Reserve Tax (“SDRT”)
The following statements are intended as a general guide to the current position relating to Stamp Duty and
SDRT and apply to any holder of our Class A ordinary shares irrespective of their place of tax residence.
No Stamp Duty will be payable on the issuance of our Class A ordinary shares.
Stamp Duty will in principle be payable on any instrument of transfer of our Class A ordinary shares that is
executed in the United Kingdom or that relates to any property situated, or to any matter or thing done or to be done,
in the United Kingdom. An exemption from Stamp Duty is available on an instrument transferring our Class A
ordinary shares where the amount or value of the consideration is £1,000 or less and it is certified on the instrument
that the transaction effected by the instrument does not form part of a larger transaction or series of transactions in
respect of which the aggregate amount or value of the consideration exceeds £1,000. Holders of our Class A
ordinary shares should be aware that, even where an instrument of transfer is in principle subject to Stamp Duty,
Stamp Duty is not required to be paid unless it is necessary to rely on the instrument for legal purposes, for example
to register a change of ownership or in litigation in a UK court.
Provided that our Class A ordinary shares are not registered in any register maintained in the United
Kingdom by or on behalf of us and are not paired with any shares issued by a UK incorporated company, the issue
or transfer of (or agreement to transfer) our Class A ordinary shares will not be subject to SDRT. We currently do
not intend that any register of our Class A ordinary shares will be maintained in the United Kingdom.
U.S. Federal Income Tax Considerations
The following general summary describes the material U.S. federal income tax consequences to U.S.
Holders (defined below) of owning and disposing of our Class A ordinary shares. It does not purport to be a
comprehensive discussion of all the tax considerations relevant to U.S. Holders.
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The discussion below applies only to U.S. Holders that hold our Class A ordinary shares as capital assets
within the meaning of Section 1221 of the Code (generally, property held for investment). The discussion below is
based on the Code, existing and, in some cases, proposed U.S. Treasury Regulations, as well as judicial and
administrative interpretations thereof, all as of the date of this Annual Report. All of the foregoing authorities are
subject to change or differing interpretation, which change or differing interpretation could apply retroactively and
could affect the tax consequences described below. This summary does not address any alternative minimum tax
considerations, any estate or gift tax consequences or any state, local or non-U.S. tax consequences, nor does it
address the Medicare contribution tax on net investment income.
The following discussion does not address the tax consequences to any particular investor and does not
describe all of the tax consequences to persons in special tax situations such as, but not limited to:
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banks;
financial institutions;
regulated investment companies;
real estate investment trusts;
insurance companies;
broker-dealers;
traders that elect to use a mark-to-market method of accounting;
tax-exempt entities (including private foundations);
qualified retirement plans, individual retirement accounts and other tax-deferred accounts;
U.S. tax expatriates and certain former citizens and long-term residents of the United States;
persons holding our Class A ordinary shares as part of a straddle, hedging, constructive sale,
conversion or integrated transaction;
persons that directly, indirectly, or constructively own 10% or more of the total voting power or value
of all of our outstanding stock;
persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction
outside the United States;
persons who acquired our Class A ordinary shares pursuant to the exercise of any employee share
option or otherwise as compensation;
persons subject to special tax accounting rules as a result of any item of gross income with respect to
our Class A ordinary shares being taken into account in an applicable financial statement;
persons holding our Class A ordinary shares through partnerships or other pass-through entities; or
U.S. Holders whose “functional currency” is not the U.S. dollar.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR
GENERAL INFORMATION ONLY. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR TAX
ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO THEM
OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR CLASS A ORDINARY SHARES.
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The discussion below of the U.S. federal income tax consequences to “U.S. Holders” applies to a holder that
is a beneficial owner of our Class A ordinary shares and is, for U.S. federal income tax purposes,
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an individual who is a citizen or resident of the United States as determined under U.S. federal income
tax rules;
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the United States, any state or the District of Columbia;
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
a trust that (1) is subject to the supervision of a court within the United States and the control of one or
more U.S. persons or (2) has a valid election in effect under applicable U.S. Treasury Regulations to
be treated as a U.S. person.
The tax treatment of an entity or arrangement taxable as a partnership for U.S. federal income tax purposes
that holds our Class A ordinary shares generally will depend on such partner’s status and the activities of the
partnership. Prospective purchasers that are entities or arrangements treated as partnerships for U.S. federal income
tax purposes, or partners in such partnerships, should consult their tax advisers concerning the U.S. federal income
tax consequences of the acquisition, ownership and disposition of our Class A ordinary shares by the partnership.
Dividends
Subject to the PFIC rules discussed below, the gross amount of distributions made by us with respect to our
Class A ordinary shares generally will be includable in a U.S. Holder’s gross income as foreign-source dividend
income in the year actually or constructively received by such U.S. Holder, but only to the extent that such
distributions are paid out of our current or accumulated earnings and profits as determined under U.S. federal
income tax principles. Distributions to a U.S. Holder in excess of current and accumulated earnings and profits will
be treated as a non-taxable return of capital to the extent of the U.S. Holder’s basis in such Class A ordinary shares
and thereafter as a capital gain. In the event we make distributions to U.S. Holders of ordinary shares, we may or
may not calculate our earnings and profits under U.S. federal income tax principles. If we do not do so, any
distribution may be required to be regarded as a dividend, even if that distribution would otherwise be treated as a
non-taxable return of capital or as a capital gain. U.S. Holders should therefore assume that all cash distributions
will be reported as ordinary dividend income. The amount of any distribution of property other than cash will be the
fair market value of that property on the date of distribution. U.S. Holders should consult their tax advisors to
determine whether and to what extent they will be entitled to foreign tax credits in respect of any dividend income
received.
With respect to non-corporate U.S. Holders (including individuals, estates, and trusts), dividends received
with respect to our Class A ordinary shares may be considered “qualified dividend income” subject to lower capital
gains rates, provided that (1) the Class A ordinary shares are readily tradable on an established securities market in
the United States, (2) we are not a PFIC (as discussed below) for either our taxable year in which the dividend was
paid or the preceding taxable year and (3) certain holding period requirements are met. In this regard, our Class A
ordinary shares will generally be considered to be readily tradable on an established securities market in the United
States if they are listed on the NYSE, as our Class A ordinary shares currently are. U.S. Holders should consult their
tax advisors regarding the availability of the lower rate for dividends paid with respect to our Class A ordinary
shares.
Dividends paid by us with respect to our Class A ordinary shares will generally constitute foreign-source
“passive category income” and will not be eligible for the dividends-received deduction generally allowed to
corporate U.S. Holders in respect of dividends received from U.S. corporations.
Sale or Other Disposition of Shares
Subject to the PFIC rules discussed below, upon a sale or other disposition of our Class A ordinary shares, a
U.S. Holder generally will recognize a capital gain or loss for U.S. federal income tax purposes in an amount equal
to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in such Class A ordinary
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shares. A U.S. Holder’s adjusted tax basis in shares generally will be such U.S. Holder’s purchase price for the
shares, unless we make distributions in excess of its current and accumulated earnings and profits. Any such gain or
loss generally will be a U.S.-source gain or loss and will be treated as a long-term capital gain or loss if the U.S.
Holder’s holding period in such Class A ordinary shares exceeds one year. Non-corporate U.S. Holders (including
individuals) generally will be subject to U.S. federal income tax on long-term capital gains at preferential rates. The
deductibility of capital losses is subject to significant limitations.
Passive Foreign Investment Company
We will be classified as a PFIC within the meaning of Section 1297 of the Code, for any taxable year if
either: (1) at least 75% of our gross income is “passive income” for purposes of the PFIC rules or (2) at least 50% of
the value of our assets (determined on the basis of a quarterly average) produce or are held for the production of
passive income. Passive income for this purpose generally includes dividends, interest, royalties, rents and gains
from commodities and securities transactions. For this purpose, we will be treated as owning the proportionate share
of the assets, and earning the proportionate share of the income, of any other corporation in which we own, directly
or indirectly, 25% or more measured by the value of its stock. Under the PFIC rules, if we were considered a PFIC
at any time that a U.S. Holder holds our Class A ordinary shares, we would continue to be treated as a PFIC with
respect to such holder’s investment unless (1) we cease to be a PFIC and (2) the U.S. Holder has made a “deemed
sale” election under the PFIC rules.
Based on the currently anticipated market capitalization and composition of our income, assets, and
operations, we do not believe we were a PFIC for U.S. federal income tax purposes for the taxable year that ended
on December 31, 2021, and do not expect to be treated as a PFIC in the foreseeable future. However, our market
capitalization and the expected income, assets and operations in the future could be significantly different from what
is currently anticipated. In addition, the PFIC determination must be made annually after the close of each taxable
year. Therefore, there can be no assurance that we will not be classified as a PFIC for the current taxable year or for
any future taxable year.
If we are considered a PFIC for any taxable year that a U.S. Holder holds our Class A ordinary shares, any
gain recognized by the U.S. Holder on a sale or other disposition of our Class A ordinary shares, as well as the
amount of any “excess distribution” (defined below) received by the U.S. Holder, would be allocated ratably over
the U.S. Holder’s holding period for such Class A ordinary shares. The amounts allocated to the taxable year of the
sale or other disposition (or the taxable year of receipt, in the case of an excess distribution) and to any year before
we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be
subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an
interest charge would be imposed on the amount allocated to that taxable year. For the purposes of these rules, an
excess distribution is the amount by which any distribution received by a U.S. Holder on our Class A ordinary
shares exceeds 125% of the average of the annual distributions on our Class A ordinary shares received during the
preceding three years or the U.S. Holder’s holding period, whichever is shorter. Additionally, dividends paid by us
would not be eligible for the reduced rate of tax described above if we are a PFIC in the taxable year in which such
dividends are paid or the immediately preceding taxable year.
If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, certain elections may be
available to the U.S. Holder that would result in alternative treatments, such as mark-to-market treatment or
treatment as a qualified electing fund (“QEF”), of our Class A ordinary shares. However, we cannot provide any
assurances that we will assist investors in determining whether we or any of our non-U.S. subsidiaries is a PFIC for
any taxable year, nor do we expect that we will prepare or provide to U.S. Holders a “PFIC annual information
statement,” which would enable a U.S. Holder to make a QEF election.
If we are treated as a PFIC with respect to a U.S. Holder for any taxable year, the U.S. Holder will be
deemed to own shares in any of our subsidiaries that are also PFICs and generally be subject to the treatment
described above with respect to any distribution on or disposition of such shares. An election for mark-to-market
treatment, however, would likely not be available with respect to any such subsidiaries.
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If we are considered a PFIC, a U.S. Holder will also be subject to information reporting requirements on an
annual basis. U.S. Holders should consult their tax advisors about the potential application of the PFIC rules to an
investment in our Class A ordinary shares.
U.S. Information Reporting and Backup Withholding
Dividend payments with respect to our Class A ordinary shares and proceeds from the sale or other
disposition of our Class A ordinary shares may be subject to information reporting to the IRS. In addition, a U.S.
Holder (other than exempt U.S. Holders who establish their exempt status, if required) may be subject to backup
withholding, currently at a 24% rate, on dividend payments and proceeds from the sale or other taxable disposition
of our Class A ordinary shares made within the United States or through certain U.S.-related financial
intermediaries.
Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer
identification number and makes any other required certification or who is otherwise exempt from backup
withholding. U.S. Holders who are required to establish their exempt status may be required to provide such
certification on IRS Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S.
information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited
against a U.S. Holder’s U.S. federal income tax liability, and such holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and
furnishing any required information.
Information Reporting by U.S. Holders
Certain U.S. Holders who are individuals and certain entities holding specified foreign financial assets,
including our Class A ordinary shares, with an aggregate value in excess of the applicable dollar threshold, may be
required to report information relating to our Class A ordinary shares, subject to certain exceptions (including an
exception for Class A ordinary shares held in accounts maintained by certain U.S. financial institutions), for each
year in which they hold such shares. U.S. Holders should consult their tax advisors regarding their reporting
obligations with respect to their ownership and disposition of our Class A ordinary shares.
FATCA
Provisions under Sections 1471 through 1474 of the Code and applicable U.S. Treasury Regulations
commonly referred to as “FATCA” generally impose 30% withholding on certain “withholdable payments” and,
subject to the proposed regulations discussed below, may impose such withholding on “foreign passthru payments”
made by a “foreign financial institution” (each as defined in the Code) that has entered into an agreement with the
IRS to perform certain diligence and reporting obligations with respect to the foreign financial institution’s U.S.-
owned accounts. Under recently proposed regulations, any withholding on foreign passthru payments would apply
to passthru payments made on or after the date that is two years after the date of publication in the Federal Register
of applicable final regulations defining foreign passthru payments. Although these recent regulations are not final,
taxpayers generally may rely on them until final regulations are issued.
The United States has entered into an intergovernmental agreement (“IGA”) with the Cayman Islands, which
modifies the FATCA withholding regime described above. It is not yet clear how foreign passthru payments will be
addressed under FATCA. We could be subject to these diligence, reporting and withholding obligations if it were
treated as a financial institution under FATCA or the IGA. Prospective investors should consult their tax advisors
regarding the potential impact of FATCA, the IGA and any non-U.S. legislation implementing FATCA, on their
investment in our Class A ordinary shares.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX
MATTERS THAT MAY BE IMPORTANT TO YOU. EACH PROSPECTIVE PURCHASER SHOULD
CONSULT ITS TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT IN OUR
CLASS A ORDINARY SHARES UNDER THE INVESTOR’S OWN CIRCUMSTANCES.
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F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are required to make certain filings with the SEC. The SEC maintains an internet website that contains
reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The
address of that site is www.sec.gov.
We also make available on our website, free of charge, our annual reports on Form 20-F and the text of our
reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as
reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is
www.farfetchinvestors.com. The information contained on our website is not incorporated by reference into this
Annual Report.
References made in this Annual Report to any contract or certain other documents are not necessarily
complete and you should refer to the exhibits attached or incorporated by reference into this Annual Report for
copies of the actual contract or documents.
I. Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Our operations are exposed to a variety of financial risks, including foreign exchange and liquidity risks. The
Group has policies in place for managing these risks, which our finance department implements and periodically
reviews. Refer to Note 28, Financial instruments and financial risk management, to our audited Consolidated
financial statements included elsewhere in this Annual Report for a fuller quantitative and qualitative discussion on
the financial risks to which we are subject and our policies with respect to managing those risks.
Market Risk
The Group’s activities expose it primarily to the financial risk of changes in foreign currency exchange rates.
The Group enters into derivative financial instruments to manage its exposure to foreign currency risk.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because
of changes in foreign exchange rates.
The Group uses forward foreign currency contracts and foreign currency option contracts to hedge its
transactional foreign currency risks. Where the criteria for hedge accounting are not met, derivative financial
instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at fair value with movements recorded to the statement of operations. Derivatives are
carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Where all relevant criteria are met, hedge accounting is applied to minimize earnings volatility.
The fluctuation in foreign currency exchange rates exposes the Group to foreign exchange translation risk on
consolidation. This risk is currently not hedged and therefore, our results of operations have in the past, and will in
the future, fluctuate due to movements in exchange rates when the currencies are translated into U.S. dollars. At a
subsidiary level, we are exposed to transactional foreign exchange risk because we earn revenues and incur expenses
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in a number of different foreign currencies relative to the relevant subsidiary’s functional currency, mainly the
pound sterling and the euro. Movements in exchange rates therefore impact our subsidiaries and thus, our
consolidated results and cash flows.
Liquidity risk
The Group monitors its liquidity risk to maintain a balance between continuity of funding and flexibility.
This helps the Group achieve timely fulfilment of its obligations while sustaining the growth of the business.
We believe that our cash and cash equivalents balance as at December 31, 2021 is sufficient to meet our
operating financing needs for at least the next 12 months and will support debt repayments and our currently
planned capital expenditure requirements over the near term and medium term.
Primarily as a result of the gains on items held at fair value and remeasurements during the year, the
Company’s total equity increased from $(1,658.6) million as at December 31, 2020 to $270.6 million as at
December 31, 2021. The gains on items held at fair value and remeasurements during the year were mainly driven
by the year end revaluation of the embedded derivatives relating to the convertible senior notes discussed in Item 5.
“Operating and Financial Review and Prospects — B. Liquidity and Capital Resources”. Unless earlier converted,
redeemed or repurchased in accordance with their terms, the notes may be settled, at Farfetch’s election and subject
to certain exceptions and conditions, in Class A ordinary shares of Farfetch, cash, or a combination of cash and
Class A ordinary shares of Farfetch.
We continuously monitor funding options available in the capital markets and trends in the availability of
funds, as well as the cost of such funding.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
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Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
PART II
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
On November 17, 2021, at our 2021 annual general meeting of shareholders, our shareholders approved the
amendment and restatement of our Articles to, among other things, increase our authorized share capital. A copy of
our Articles is incorporated by reference as Exhibit 1.1 to this Annual Report. Refer to Item 10. “Additional
Information — B. Memorandum and Articles of Association.”
Item 15. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and that such information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required
disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives. Our management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of December 31, 2021. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that, as a result of the material weakness in our internal control over
financial reporting described below, the design and operation of our disclosure controls and procedures were not
effective as of December 31, 2021.
As permitted by related SEC staff interpretive guidance for newly acquired businesses, the internal control
over financial reporting of JBUX Limited (“Jetti”), Allure Systems Corp (“Allure”) and Upteam Corporation
Limited (“Luxclusif”), acquired in purchase business combinations, and Alanui S.r.L. (“Alanui”), acquired and
consolidated in a step acquisition, were excluded from the evaluation of the effectiveness of our disclosure controls
and procedures as of December 31, 2021. Jetti was acquired in September 2021, Allure and Luxclusif in December
2021, and Alanui in March 2021. Collectively, they represented less than 1% of our Group total assets and
consolidated revenue as of and for the fiscal year ended December 31, 2021. Refer to Note 5, Business
combinations, within our Consolidated financial statements included elsewhere in this Annual Report.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our management
conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set
forth in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of
the Treadway Commission.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim
consolidated financial statements may not be prevented or detected on a timely basis.
As disclosed in our 2020 Annual Report, we identified two material weaknesses in the design and operation
of our internal control over financial reporting from (1) the operation of effective controls over information
technology systems, including access over those systems, managing system changes and testing of system-generated
reports used in the execution of manual controls; and (2) the implementation and documentation of internal control
over financial reporting at the New Guards business.
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During 2021, we made a significant effort to implement effective controls over information technology
systems as required in (1) above. These controls have been embedded into the environment to confirm consistent
and continued operation. The changes and updates to our controls included enhanced privileged user activity
monitoring, user recertification supported by reliable and complete data sources, as well as stricter segregation of
duties and monitoring around the change management of our core platform and corporate infrastructure.
Management considers that an appropriate and robust framework of controls particularly around access to our core
platform and corporate infrastructure has now been designed and implemented, and as a result of these actions, has
concluded that all elements of (1) relating to the design and operation of effective controls over information
technology systems have been remediated as of December 31, 2021, to the extent that they are no longer considered
a material weakness.
The component material weakness reported in 2020 relating to the New Guards business covered both
operational and IT general controls. During 2021, we took significant steps to improve the control environment
within the New Guards business. For the operational control elements there has been a significant increase in
awareness and implementation within the New Guards business regarding the standards required for effective
internal control over financial reporting. New roles, responsibilities and compensating controls have been
implemented to reduce the risk created by limited segregation of duties in some areas. Additionally, the quality of
management review controls has been strengthened and the standard and availability of supporting documentary
evidence has been improved. Regarding information technology at the New Guards business, we made significant
progress during 2021 to implement a robust control environment. This has meant extensive work to reconfigure
systems, introduce detailed user profiling, vendor access restrictions, adequate user access segregation and
monitoring as well as incident and change management workflows. As a result, both operational and information
technology controls are now considered to have been designed appropriately, but there remains a need for these
controls to be operating effectively for a period of time for the material weakness to be remediated. Additionally,
these deficiencies mean that the key reports generated by these systems and used in operational controls cannot be
considered effective. Our expectation is that all controls will successfully test as effective in 2022.
As a result, as of December 31, 2021, management concluded that we had one material weakness relating
to the operation of effective internal control over financial reporting at the New Guards business.
As permitted by related SEC staff interpretive guidance for newly acquired businesses, we have excluded
from the scope of our assessment of internal control over financial reporting Jetti, Allure, Luxclusif and Alanui,
collectively they represented less than 1% of our Group total assets and consolidated revenue as of and for the fiscal
year ended December 31, 2021.
Based upon the above evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as
a result of the material weakness described above, our internal control over financial reporting was not effective as
of December 31, 2021.
Attestation Report of Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our
consolidated financial statements included in this Annual Report, has audited our internal control over financial
reporting as of December 31, 2021, as stated in its report on page F-2.
Changes in Internal Control over Financial Reporting
Except for the remediation efforts described above taken to address the material weaknesses, during the
year ended December 31, 2021, there were no other changes in our internal control over financial reporting that
occurred during the period covered by this Annual Report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
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Item 16. Reserved
Item 16A. Audit Committee Financial Expert
Our Board of Directors has determined that Ms. Evan, Ms. Irvine, Mr. Luís and Ms. Tans each satisfies the
“independence” requirements set forth in Rule 10A-3 under the Exchange Act. Our Board of Directors has also
determined that each of Ms. Evan, Ms. Irvine and Mr. Luís is considered an “audit committee financial expert” as
defined in Item 16A of Form 20-F under the Exchange Act.
Item 16B. Code of Ethics
We have adopted a Code of Business Conduct and Ethics (“Code of Conduct”) that applies to all our
employees, officers and Directors, including our principal executive, principal financial and principal accounting
officers. Our Code of Conduct addresses, among other things, competition and fair dealing, conflicts of interest,
financial matters and external reporting, our funds and assets, confidentiality, corporate opportunity requirements,
the process for reporting violations of the Code of Conduct and employee misconduct. Our Code of Conduct is
intended to meet the definition of “code of ethics” under Item 16B of Form 20-F under the Exchange Act.
We intend to disclose on our website any amendment to, or waiver from, a provision of our Code of Conduct
that applies to our Directors or executive officers to the extent required under the rules of the SEC or the NYSE. Our
Code of Conduct is available on our website at www.farfetchinvestors.com. The information contained on our
website is not incorporated by reference in this Annual Report.
Item 16C. Principal Accounting Fees and Services
PricewaterhouseCoopers LLP (“PwC,” PCAOB ID 876) acted as our independent registered public
accounting firm for the fiscal years ended December 31, 2021 and 2020. The table below sets out the total amount
incurred, for services performed in the years ended December 31, 2021 and 2020, and breaks down these amounts
by category of service:
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
Audit Fees
2020
2021
(in thousands)
$
$
3,784 $
231
-
7
4,022 $
4,003
-
-
31
4,034
Audit fees for the years ended December 31, 2021 and 2020 were related to the audit of our Consolidated
financial statements and other audit or interim review services provided in connection with statutory and regulatory
filings or engagements.
Audit-Related Fees
Audit-related fees for the year ended December 31, 2020 were related to services in connection with our
financing activities.
Tax Fees
There were no tax fees for the years ended December 31, 2021 and 2020.
All Other Fees
All other fees in the years ended December 31, 2021 and 2020 were related to services in connection with
non-audit compliance and review work.
130
Pre-Approval Policies and Procedures
The advance approval of the Audit Committee or members thereof, to whom approval authority has been
delegated, is required for all audit and non-audit services provided by our auditors.
All services provided by our auditors are approved in advance by either the Audit Committee or members
thereof, to whom authority has been delegated, in accordance with the Audit Committee's pre-approval policy.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
None.
Item 16G. Corporate Governance
We are a “foreign private issuer” (as such term is defined in Rule 3b–4 under the Exchange Act), and our
Class A ordinary shares are listed on the NYSE. We believe the following to be the significant differences between
our corporate governance practices and those applicable to U.S. companies under the NYSE listing standards. Under
the NYSE rules, NYSE-listed companies that are foreign private issuers are permitted to follow home country
practice in-lieu of the corporate governance provisions specified by the NYSE, with limited exceptions.
Accordingly, we follow certain corporate governance practices of our home country, the Cayman Islands, in-lieu of
certain of the corporate governance requirements of the NYSE. In addition, under the NYSE rules, listed companies
of which more than 50% of the voting power for the election of Directors is held by an individual, group or other
entity are not required to have a majority of independent Directors, as defined by NYSE rules, or to comply with
certain other requirements. Because Mr. Neves beneficially owns more than 50% of our voting power, we are a
“controlled company” within the meaning of the rules of the NYSE.
Under the NYSE rules, U.S. domestic listed, non-controlled companies are required to have a majority
independent board, which is not required under the Companies Act (as amended) of the Cayman Islands, our home
country. In addition, the NYSE rules require U.S. domestic listed, non-controlled companies to have a
Compensation Committee and a Nominating and Corporate Governance Committee, each composed entirely of
independent Directors, which are not required under our home country laws.
We currently follow and intend to continue to follow the foregoing governance practices and not avail
ourselves of the exemptions afforded to foreign private issuers or controlled companies under the NYSE rules. We
may in the future, however, decide to use other foreign private issuer exemptions with respect to some or all of the
other NYSE listing requirements. Following our home country governance practices may provide less protection
than is accorded to investors under the NYSE listing requirements applicable to domestic issuers.
The NYSE also requires that a listed company obtain, in specified circumstances, (1) shareholder approval to
adopt or materially revise equity compensation plans, as well as (2) shareholder approval prior to an issuance (a) of
more than 1% of its common stock (including derivative securities thereof) in either number or voting power to
related parties, (b) of more than 20% of its outstanding common stock (including derivative securities thereof) in
either number or voting power or (c) that would result in a change of control, none of which require shareholder
approval under Cayman Islands law. We intend to follow home country law in determining whether shareholder
approval is required.
131
Due to our status as a foreign private issuer and our intent to follow certain home country corporate
governance practices, our shareholders do not have the same protections afforded to shareholders of companies that
are subject to all the NYSE corporate governance standards and shareholder approval requirements.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
132
Item 17. Financial statements
We have provided Consolidated financial statements pursuant to Item 18.
PART III
Item 18. Financial statements
The audited Consolidated financial statements as required under Item 18 are attached hereto starting on
page F-1 of this Annual Report. The audit report of PricewaterhouseCoopers LLP, independent registered public
accounting firm, is included herein preceding the audited Consolidated financial statements.
133
Item 19. Exhibits
Exhibit
No.
1.1
2.1
Description
Form
File No. Exhibit No. Filing Date Filed/Furnished
Amended and Restated Memorandum and Articles of
Association of the Registrant as currently in effect.
6-K
001-38655
99.1
11/18/2021
Registration Rights Agreement, dated as of July 21, 2017, by
and among Farfetch.com Limited and certain shareholders of
Farfetch.com Limited.
F-1
333-226929
4.1
8/20/2018
2.2
Description of Securities.
2.3
Form of Class A Ordinary Share Certificate.
F-1
333-226929
2.4
Indenture, dated as of February 5, 2020, by Farfetch Limited
20-F
001-38655
and Wilmington Trust, National Association.
4.3
2.5
8/20/2018
3/11/2020
2.5
Indenture, dated as of April 30, 2020, by Farfetch Limited and
6-K
001-38655
4.1
4/30/2020
Wilmington Trust, National Association.
2.6
Indenture, dated as of November 17, 2020, by Farfetch Limited
20-F
001-38655
2.6
3/4/2021
and Wilmington Trust, National Association.
4.1†
Form of Indemnification Agreement.
20-F
001-38655
4.1
3/4/2021
4.2†
Amended and Restated Rules of the Farfetch.com Limited
F-1
333-226929
10.2
8/20/2018
Enterprise Management Incentive Scheme, adopted July 17,
2013.
4.3†
Rules of the Farfetch.com Limited Share Option Scheme,
F-1
333-226929
10.3
8/20/2018
adopted July 18, 2013.
4.4†
Farfetch.com Limited 2015 Long-Term Incentive Plan, adopted
F-1
333-226929
10.4
8/20/2018
February 13, 2015.
4.5†
2018 Farfetch Employee Equity Plan and subplans thereto.
4.6†
Form of Performance-Based Restricted Share Unit Agreement.
6-K
001-38655
99.1
5/28/2021
4.7
Acquisition Agreement, dated as of December 12, 2018,
20-F
001-38655
4.14
3/1/2019
between Stadium Goods and Farfetch Limited.
4.8
Sale and Purchase Agreement relating to the Acquisition of
20-F
001-38655
4.15
3/11/2020
New Guards Group Holding s.p.a, dated as of August 2, 2019,
between multiple sellers, Farfetch Italia S.r.l. and Farfetch
Limited.
8.1
List of Subsidiaries.
12.1
Principal Executive Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
12.2
Principal Financial Officer Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
13.1
Principal Executive Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
13.2
Principal Financial Officer Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
15.1
Consent of PricewaterhouseCoopers LLP, independent
registered public accounting firm.
101.INS Inline XBRL Instance Document – the instance document does
not appear in the Interactive Data File because XBRL tags are
embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
134
*
*
*
*
*
**
**
*
*
*
Exhibit
No.
Description
Form
File No. Exhibit No. Filing Date Filed/Furnished
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
Document.
101.DEF Inline XBRL Taxonomy Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase
Document.
104
Cover Page Interactive Data File (embedded within the Inline
XBRL document).
*
*
*
*
*
*
**
† This document has been identified as a management contract or compensatory plan or arrangement.
Filed herewith.
Furnished herewith.
Certain agreements filed as exhibits to this Annual Report contain representations and warranties that the
parties thereto made to each other. These representations and warranties have been made solely for the benefit of the
other parties to such agreements and may have been qualified by certain information that has been disclosed to the
other parties to such agreements and that may not be reflected in such agreements. In addition, these representations
and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove
to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such
representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the
subject matter of any such representations and warranties may have changed since the date of such agreements.
135
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
Date: March 4, 2022
By:
Farfetch Limited
/s/ José Neves
José Neves
Chief Executive Officer
136
FARFETCH LIMITED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated statement of operations for the years ended December 31, 2021, 2020 and 2019
Consolidated statement of comprehensive (loss)/income for the years ended December 31, 2021, 2020 and
2019
Consolidated statement of financial position as of December 31, 2021 and 2020
Consolidated statement of changes in equity/(deficit) for the years ended December 31, 2021, 2020 and
2019
Consolidated statement of cash flows for the years ended December 31, 2021, 2020 and 2019
Notes to Consolidated financial statements
F-2
F- 6
F- 8
F- 8
F-9
F- 10
F-11
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Farfetch Limited
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statement of financial position of Farfetch Limited and its
subsidiaries (the “Group”) as of December 31, 2021 and 2020, and the related consolidated statements of operations,
comprehensive (loss)/income, changes in equity/(deficit) and cash flows for each of the three years in the period
ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial
statements”). We also have audited the Group’s internal control over financial reporting as of December 31, 2021,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Group as of December 31, 2021 and 2020, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2021, in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Group did
not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2021,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a
material weakness in internal control over financial reporting existed as of that date related to the implementation
and consistent operation of internal control over financial reporting at the New Guards business.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements
will not be prevented or detected on a timely basis. The material weakness referred to above is described in
Management’s Report on Internal Control over Financial Reporting appearing under Item 15. We considered this
material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2021
consolidated financial statements, and our opinion regarding the effectiveness of the Group’s internal control over
financial reporting does not affect our opinion on those consolidated financial statements.
Basis for Opinions
The Group’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in management's report referred to above. Our responsibility is to express opinions on the
Group’s consolidated financial statements and on the Group’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Group in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
F-2
audits also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded
JBUX Limited, Allure Systems Corp. and Upteam Corporation Limited from its assessment of internal control over
financial reporting as of December 31, 2021, because they were acquired by the Group in purchase business
combinations during 2021. Management has also excluded Alanui srl from its assessment of internal control over
financial reporting as of December 31, 2021 as it was acquired by the Group in a step acquisition during 2021. We
have also excluded JBUX Limited, Allure Systems Corp., Upteam Corporation Limited and Alanui srl from our
audit of internal control over financial reporting. JBUX Limited, Allure Systems Corp., Upteam Corporation
Limited and Alanui srl are subsidiaries whose total assets and total revenue excluded from management’s
assessment and our audit of internal control over financial reporting collectively represent less than 1% of the related
consolidated financial statement amounts as of and for the year ended December 31, 2021.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i) relate
to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to
which they relate.
Accounting for the Strategic Investment in Farfetch China and Acquisition of Palm Angels
As described in Notes 3, 16, 28 and 33 to the consolidated financial statements, the Group signed an agreement to
enter into a strategic arrangement with Taobao China Holding Limited (“Alibaba”) and Richemont International
Holding S.A (“Richemont”) in 2021. As part of the arrangement, Alibaba and Richemont invested $500 million in
return for a combined 25% stake in Farfetch China Holdings Limited and its subsidiaries. In 2021, the Group also
completed the acquisition of 60% of Palm Angels S.r.l. for consideration of $131 million. As part of this agreement
and this acquisition, the Group entered into option agreements over the non-controlling interests of 25% and 40% of
the share capital of Farfetch China Holdings Limited and Palm Angels S.r.l., respectively. These option agreements
are separately recognised as liabilities with a combined value of $648 million as of December 31, 2021. The
valuation of these option agreements involves significant management assumptions. Management applied significant
judgment in accounting for this agreement and this acquisition, which involved developing its accounting policies
for (i) accounting for a non-controlling interest which is created through a transaction other than a business
combination; and (ii) accounting for the initial recognition of a non-controlling interest arising from an asset
F-3
acquisition using the proportionate share method. Management also applied significant judgment in estimating the
present value of the option agreements, which involved the use of complex modeling and significant assumptions
with respect to the (i) risk free rate; (ii) credit spread and (iii) revenue compound annual growth rate.
The principal considerations for our determination that the accounting for the strategic investment in Farfetch China
Holdings Limited and acquisition of Palm Angels S.r.l. is a critical audit matter are there was significant judgment
and estimation by management in determining the appropriate accounting for the transactions and the methodology
and valuation models to be used for each option agreement, including the related assumptions. This in turn resulted
in a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate the accounting for
the transactions and the methodology and valuation models to be used for each option agreement, including
significant assumptions, specifically the risk free rate, credit spread and revenue compound annual growth rate.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the consolidated financial statements. These procedures included, among others, reading the
related agreements; evaluating management’s assessment of the accounting for the strategic investment in Farfetch
China Holdings Limited as a partial disposal of a subsidiary without a loss of control and the acquisition of 60% of
Palm Angels S.r.l. as an asset acquisition; assessing the appropriateness of the methodologies used in the valuation
models; agreeing relevant data used in the models to the executed agreements as applicable; assessing the
reasonableness of significant assumptions used by management in the valuation models; and evaluating the
sufficiency of the Group’s disclosures in the consolidated financial statements. Professionals with specialized skill
and knowledge were used in assessing the appropriateness of the valuation models and the reasonableness of
significant assumptions, including the risk free rate and expected volatility. In assessing the reasonableness of
significant assumptions used by management, professionals with specialized skill and knowledge developed an
independent range to value each option agreement and compared management’s estimate to the independently
developed ranges.
Valuation of Embedded Derivatives
As described in Notes 3, 23 and 28 to the consolidated financial statements, the Group issued convertible senior
notes amounting to $250.0 million, $400.0 million and $600.0 million on February 5, 2020, April 30, 2020 and
November 17, 2020, respectively. Each arrangement contains certain conversion options which are bifurcated from
the notes and separately valued. The embedded derivative liabilities are collectively valued at $872 million as of
December 31, 2021. Management applied judgment in estimating the fair value of these embedded derivatives,
which involved the use of complex modeling and significant assumptions with respect to the risk free rate and
expected volatility.
The principal considerations for our determination that the valuation of the embedded derivative is a critical audit
matter are there was significant judgment and estimation by management in determining the methodology and
valuation models to be used for each instrument, including the related assumptions. This in turn resulted in a high
degree of auditor judgment, subjectivity and effort in performing procedures to evaluate the methodology and
valuation models and the significant assumptions, specifically the risk free rate and expected volatility.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the consolidated financial statements. These procedures included, among others, assessing the
appropriateness of the methodologies used in the valuation models; agreeing relevant data used in the models to the
executed agreements as applicable; and assessing the reasonableness of significant assumptions used by
management. Professionals with specialized skill and knowledge were used in assessing the appropriateness of the
valuation models and the reasonableness of significant assumptions, including the risk free rate and expected
volatility. In assessing the reasonableness of significant assumptions used by management, professionals with
specialized skill and knowledge developed an independent range to value each embedded derivative and compared
management’s estimate to the independently developed ranges.
Capitalized Development Costs
As described in Notes 3 and 16 to the consolidated financial statements, the Group capitalizes costs relating to the
development of internal software and the Farfetch websites. Management applied judgment in assessing whether the
F-4
assets met the required criteria for initial capitalization, including the assessment of expected future benefits from
the projects to be capitalized, technical feasibility and commercial viability. The value of development costs
capitalized during the year ended December 31, 2021 was $119 million.
The principal considerations for our determination that capitalized development costs is a critical audit matter are
there was significant judgment by management in assessing whether the assets met the required criteria for initial
capitalization, including assessment of expected future benefits from the projects to be capitalized, technical
feasibility and commercial viability. This in turn led to a high degree of auditor judgment, subjectivity and effort in
performing procedures to evaluate management’s judgment in assessing the capitalization criteria.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the consolidated financial statements. These procedures included, among others, (i) assessing
whether the capitalization criteria, including expected future benefits and feasibility and viability of projects, had
been met through review of project budgets and roadmaps, consideration of historic unsuccessful projects,
corroborating information with the IT project leads and employees working on the projects, and interviewing project
supervisors and development personnel on the nature of each project and the time spent on projects by development
team members; and (ii) testing directly attributable costs to bring the asset to the condition necessary for it to be
capable of operating in the manner intended by management.
/s/PricewaterhouseCoopers LLP
London, United Kingdom
March 4, 2022
We have served as the Group’s auditor since 2015.
F-5
FARFETCH LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31,
(in $ thousands, except share and per share data)
Revenue
Cost of revenue
Gross profit
Selling, general and administrative expenses (1)
Impairment losses on tangible assets
Impairment losses on intangible assets
Operating loss
Gain/(loss) on items held at fair value and remeasurements
Share of results of associates
Finance income
Finance costs (1)
(Loss)/profit before tax
Income tax (expense)/benefit
(Loss)/profit after tax
(Loss)/profit after tax attributable to:
Equity holders of the parent
Non-controlling interests
Net (loss)/profit
(Loss)/earnings per share attributable to owners of the
parent
Basic
Diluted
Weighted-average shares outstanding
Basic
Diluted
Note
8
17,18
16
9,28
2021
2019 (1)
2020 (1)
4 $ 1,021,037 $ 1,673,922 $ 2,256,608
(1,240,097 )
1,016,511
(1,480,968 )
-
(11,779 )
(476,236 )
2,023,743
(52 )
12,599
(86,441 )
1,473,613
(3,002 )
1,470,611
(902,994 )
770,928
(1,351,483 )
(2,991 )
(36,269 )
(619,815 )
(2,643,573 )
(74 )
24,699
(91,294 )
(3,330,057 )
14,434
(3,315,623 )
(561,191 )
459,846
(889,421 )
-
-
(429,575 )
21,721
366
34,382
(19,232 )
(392,338 )
(1,162 )
(393,500 )
10
10
11
12
(405,109 )
11,609
1,466,487
4,124
(393,500 ) $ (3,315,623 ) $ 1,470,611
(3,333,171 )
17,548
33
$
13
13
(1.27 )
(1.27 )
(9.69 )
(9.69 )
4.02
(1.07 )
13 318,843,239 343,829,481 364,696,712
13 318,843,239 343,829,481 472,357,995
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The accompanying notes are an integral part of these Consolidated financial statements
F-6
FARFETCH LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS)/INCOME
for the year ended December 31,
(in $ thousands)
(Loss)/profit after tax for the year (1)
Other comprehensive (loss)/income:
Items that may be subsequently reclassified to the consolidated
statement of operations (net of tax):
Exchange (loss)/gain on translation of foreign operations
Loss on cash flow hedges recognized in equity
Loss/(gain) on cash flow hedges reclassified and reported in
net (loss)/profit
Gain/(loss) on cash flow hedges recognized in equity - time
value
Items that will not be subsequently reclassified to the
consolidated statement of operations (net of tax):
Impairment loss on investments
Remeasurement loss on severance plan
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income attributable to:
Equity holders of the parent
Non-controlling interests
Note
2019 (1)
2020 (1)
$ (393,500 ) $ (3,315,623 ) $ 1,470,611
2021
(7,333 )
(11,863 )
23,903
(4,227 )
(20,017 )
(12,825 )
8,337
17,612
(11,951 )
-
2,552
(2,552 )
(100 )
(58 )
(11,017 )
-
(77 )
(47,422 )
$ (404,517 ) $ (3,275,807 ) $ 1,423,189
-
(24 )
39,816
33
(416,126 ) (3,293,687 ) 1,421,809
1,380
$ (404,517 ) $ (3,275,807 ) $ 1,423,189
17,880
11,609
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The accompanying notes are an integral part of these Consolidated financial statements
F-7
FARFETCH LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in $ thousands)
Non-current assets
Other receivables
Deferred tax assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Investments
Investments in associates
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Short-term investments
Derivative financial assets
Cash and cash equivalents
Total current assets
Total assets
Liabilities and (Deficit)/equity
Non-current liabilities
Provisions
Deferred tax liabilities
Lease liabilities
Employee benefit obligations
Derivative financial liabilities
Borrowings (1)
Put and call option liabilities
Other financial liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Provisions
Current tax liability
Lease liabilities
Employee benefit obligations
Derivative financial liabilities
Put and call option liabilities
Other financial liabilities
Total current liabilities
Total liabilities
(Deficit)/equity
Share capital
Share premium
Merger reserve
Foreign exchange reserve
Other reserves (1)
Accumulated losses (1)
(Deficit)/equity attributable to owners of the parent
Non-controlling interests
Total (deficit)/equity
Total (deficit)/equity and liabilities
Note
December 31,
2020 (1)
December 31,
2021
15 $
26
16
17
18
19
19
14
15
21
28
20
24
26
18
29
23,28
23
28
22
24
18
29
23,28
28
58,081 $
13,556
1,279,328
89,082
179,227
8,278
2,319
1,629,871
145,309
209,946
2,082
-
30,242
1,573,421
1,961,000
3,590,871
129,113
182,463
165,275
26,116
2,996,220
617,789
348,937
4,853
4,470,766
666,144
27,146
3,098
26,128
38,286
17,427
-
518
778,747
5,249,513
31,225
13,334
1,359,657
97,063
195,549
17,937
69
1,714,834
255,664
374,706
10,201
99,971
8,010
1,363,128
2,111,680
3,826,514
60,545
156,025
180,915
12,948
872,428
515,804
836,609
13,367
2,648,641
806,406
14,585
5,189
33,594
8,296
21,118
8,321
9,748
907,257
3,555,898
30
30
30
31
33
$
14,168
927,931
783,529
(7,271 )
467,565
(4,013,120 )
(1,827,198 )
168,556
(1,658,642 )
3,590,871 $
15,231
1,641,674
783,529
(24,544 )
59,520
(2,386,802 )
88,608
182,008
270,616
3,826,514
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The accompanying notes are an integral part of these Consolidated financial statements
F-8
FARFETCH LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY/(DEFICIT) (in $ thousands)
Balance at December 31, 2018
$
11,994 $
772,300 $
783,529 $
(23,509 ) $
67,474 $
(483,357 ) $
1,128,431 $
- $ 1,128,431
Share
capital
Share
premium
Merger
reserve
Foreign
exchange
reserve
Other
reserves (1)
Accumulated
losses (1)
Equity/(deficit)
attributable
to owners of
the parent
Non-
controlling
interest
Total
equity/
(deficit)
Changes in equity/(deficit)
(Loss)/profit after tax for the year (1)
Other comprehensive loss
Total comprehensive (loss)/income for the year, net of tax
Loss on cashflow hedge transferred to inventory
Issue of share capital, net of transaction costs
Share-based payment – equity-settled
Share-based payment- reverse vesting shares (1)
Transaction with non-controlling interests
Non-controlling interest arising from a business combination
Non-controlling interest call option
Balance at December 31, 2019 (1)
Balance at December 31, 2019 (as previously reported)
Correction of misstatement (1)
Revised balance at December 31, 2019
Changes in equity/(deficit)
(Loss)/profit after tax for the year (1)
Other comprehensive income
Total comprehensive income/(loss) for the year, net of tax
Gain on cashflow hedge transferred to inventory
Issue of share capital, net of transaction costs
Share-based payment – equity-settled
Share-based payment- reverse vesting shares
Acquisition of non-controlling interest
Dividends paid to non-controlling interests
Balance at December 31, 2020 (1)
Balance at December 31, 2020 (as previously reported)
Correction of misstatements (1)
Revised balance at December 31, 2020
Changes in equity/(deficit)
Profit after tax for the year
Other comprehensive loss
Total comprehensive (loss)/income for the year, net of tax
Loss on cashflow hedge transferred to inventory
Issue of share capital, net of transaction costs
Early conversion of convertible loan notes
Share-based payment – equity-settled
Share-based payment- reverse vesting shares
Acquisition of non-controlling interest
Dividends paid to non-controlling interests
Non-controlling interest arising on purchase of asset
Share issued on purchase of subsidiary
Step acquisition
Non-controlling interest put option
Farfetch China Holdings Ltd put call option
Capital contribution from non-controlling interests, net of transaction
costs
Other
Balance at December 31, 2021
-
-
-
-
1,590
-
-
-
-
-
13,584
13,584
-
13,584
-
-
-
-
584
-
-
-
-
-
-
-
-
105,707
-
-
-
-
-
878,007
878,007
-
878,007
-
-
-
-
49,924
-
-
-
-
-
-
-
-
-
-
-
-
-
-
783,529
783,529
-
783,529
-
-
-
-
-
-
-
-
-
14,168
927,931
783,529
14,168
-
14,168
927,931
-
927,931
783,529
-
783,529
-
-
-
-
333
653
-
51
-
-
20
6
-
-
-
-
-
-
-
-
630,976
-
54,626
-
-
23,767
4,374
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,333 )
(7,333 )
-
-
-
-
-
-
-
(30,842 )
(30,842 )
-
(30,842 )
-
23,571
23,571
-
-
-
-
-
-
(7,271 )
(7,271 )
-
(7,271 )
-
(17,273 )
(17,273 )
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,684 )
(3,684 )
142
393,105
76,383
(62,834 )
(101,311 )
-
-
369,275
349,463
19,812
369,275
-
15,913
15,913
(1,213 )
4,808
52,690
26,092
-
-
467,565
447,753
19,812
467,565
-
(27,405 )
(27,405 )
2,066
-
-
61,282
(24,486 )
(11,613 )
-
-
-
-
(150,070 )
(744,163 )
(405,109 )
-
(405,109 )
-
-
46,841
-
-
-
(4,322 )
(845,947 )
(826,135 )
(19,812 )
(845,947 )
(3,333,171 )
-
(3,333,171 )
-
-
165,998
-
-
-
(4,013,120 )
(4,010,756 )
(2,364 )
(4,013,120 )
1,466,487
-
1,466,487
-
-
-
159,831
-
-
-
-
-
-
-
-
(405,109 )
(11,017 )
(416,126 )
142
500,402
123,224
(62,834 )
(101,311 )
-
(4,322 )
1,167,606
1,167,606
-
1,167,606
11,609
-
11,609
-
-
-
-
-
158,617
-
(393,500 )
(11,017 )
(404,517 )
142
500,402
123,224
(62,834 )
(101,311 )
158,617
(4,322 )
170,226 1,337,832
170,226 1,337,832
-
170,226 1,337,832
-
(3,333,171 )
39,484
(3,293,687 )
(1,213 )
55,316
218,688
26,092
-
-
(1,827,198 )
332
17,548 (3,315,623 )
39,816
17,880 (3,275,807 )
(1,213 )
-
55,316
-
218,688
-
26,092
-
965
965
(20,515 )
(20,515 )
168,556 (1,658,642 )
(1,844,646 )
17,448
(1,827,198 )
168,556 (1,676,090 )
17,448
168,556 (1,658,642 )
-
1,466,487
(44,678 )
1,421,809
2,066
333
631,629
221,113
30,191
(11,613 )
-
23,787
4,380
-
(150,070 )
(744,163 )
4,124 1,470,611
(2,744 )
(47,422 )
1,380 1,423,189
2,066
333
631,629
221,113
30,191
(18,514 )
(23,016 )
74,240
4,380
2,434
(150,070 )
(744,163 )
-
-
-
-
-
(6,901 )
(23,016 )
50,453
-
2,434
-
-
-
-
15,231 $
-
-
1,641,674 $
-
-
783,529 $
-
-
(24,544 ) $
488,863
(2,519 )
59,520 $
$
-
-
(2,386,802 ) $
474,988
488,863
458
(2,519 )
88,608 $ 182,008 $ 270,616
(13,875 )
2,977
See Note 2, Significant Accounting Policies, for detail on the revision of prior year comparatives.
(1)
(2) The accompanying notes are an integral part of these Consolidated financial statements
F-9
FARFETCH LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended December 31,
(in $ thousands)
Cash flows from operating activities
Operating loss (1)
Adjustments to reconcile operating loss to net cash (outflow)/inflow from
operating activities:
Depreciation
Amortization
Non-cash employee benefits expense (1)
Net gain on sale of non-current assets
Net exchange differences
Impairment losses on tangible assets
Impairment losses on intangible assets
Impairment of investments
Changes in working capital
Increase in receivables
Increase in inventories
Increase in payables
Changes in other assets and liabilities
Decrease/(increase) in non-current receivables
Increase/(decrease) in other liabilities
(Decrease)/increase in provisions
(Decrease)/increase in derivative financial instruments
Income taxes paid
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Payments for property, plant and equipment
Proceeds on disposal of property, plant and equipment
Payments for intangible assets
Interest received
Investment in short-term investments
Dividends received from associate
Payments for investments
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of issue costs
Proceeds from exercise of employee share-based awards
Transaction costs paid relating to capital contribution from non-controlling interest
Repayment of the principal elements of lease payments
Proceeds from borrowings, net of issue costs
Dividends paid to holders of non-controlling interests
Interest and fees paid on loans
Acquisition of non-controlling interests
Settlement of equity-based awards
Capital contribution from non-controlling interest
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Note
2019
2020
2021
$ (429,575 ) $
(619,815 ) $ (476,236 )
17,18
16
28,536
85,055
158,007
(144 )
(842 )
-
-
5,000
17,18
16
39,366
177,857
168,347
-
-
2,991
36,269
235
49,564
201,634
219,932
-
-
-
11,779
134
(51,273 )
(29,723 )
113,716
(15,833 )
(16,471 )
280,454
(164,656 )
(104,838 )
115,025
3,723
11,575
(4,252 )
(117 )
(16,328 )
(126,642 )
(1,453 )
59,640
85,001
(15,052 )
(65,221 )
116,315
13,551
(44,227 )
(68,128 )
5,663
(41,351 )
(282,154 )
17
17
16
5 (461,691 )
(39,512 )
272
(72,985 )
11,259
-
-
(20,846 )
(583,503 )
21
19
33
23
33
-
8,654
-
(19,127 )
-
-
(4,776 )
-
-
-
(15,249 )
(725,394 )
20 1,044,786
3,037
$ 322,429 $
33
(12,016 )
(26,839 )
-
(94,105 )
3,131
-
60
(2,872 )
(132,641 )
(27,295 )
(28,854 )
-
(167,707 )
2,994
(100,000 )
-
(9,794 )
(330,656 )
50,000
62,899
-
(19,051 )
1,241,861
(20,515 )
(54,154 )
-
-
-
1,261,040
1,244,714
-
36,833
(25,000 )
(26,251 )
-
(23,016 )
(32,791 )
(18,514 )
(6,119 )
500,000
405,142
(207,668 )
322,429 1,573,421
(2,625 )
1,573,421 $ 1,363,128
6,278
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The accompanying notes are an integral part of these Consolidated financial statements
F-10
Notes to the Consolidated financial statements
1.
Corporate information
Farfetch Limited (the “Company”) is an exempted company incorporated with limited liability under the
Companies Act (as amended) of the Cayman Islands, as amended and restated from time to time (the “Companies
Act”). The principal place of business is The Bower, 211 Old Street, London, EC1V 9NR, United Kingdom.
Farfetch Limited and its subsidiary undertakings (the “Group”) is principally engaged in the following:
•
•
•
•
providing an online marketplace at Farfetch.com (and related suffixes) as well as the Farfetch app for
retailers and brands to be able to offer their products for sale to the public (including associated
services such as ‘production’, logistics, customer services and payment processing);
web design, build, development and retail distribution for retailers and brands to enable them to offer
their products to the public;
operating the company-owned stores (Browns, New Guards, Stadium Goods) and the branded (Off-
White, Ambush) stores;
providing a platform for the development of global luxury fashion brands.
Effects of the COVID-19 pandemic
Since early 2020, the world has been, and continues to be, impacted by COVID-19 and its variants. The
extent of these impacts on our financial and operating results will be dictated by the length of time that the pandemic
and the related counter-measures continue for, in addition to individuals’ and companies’ risk tolerance regarding
health matters going forward.
The impact of the COVID-19 pandemic and actions taken in response to it had varying effects on our 2020
operating results. Since the onset of the pandemic, there has been an acceleration in the shift of consumer demand to
online, which the Group has partially benefited from. This has continued during the year ended December 31, 2021.
In 2020, this also resulted in Digital Platform revenue growth. This growth in revenue was partially offset by the
performance in Brand Platform revenue which has been impacted by Brand Platform customers having to close at
various times during 2020.
In light of the COVID-19 pandemic, the Group has considered the impact on the Consolidated financial
statements and where appropriate any impacts have been reflected in the financial statements.
These financial statements were authorized for issue by the Board on March 4, 2022.
2.
Significant accounting policies
2.1. Basis of preparation
The Consolidated financial statements of the Group have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These
Consolidated financial statements have been prepared under the historical cost convention, except as modified by
the revaluation of certain financial assets and financial liabilities at fair value through profit and loss and fair value
through other comprehensive income.
The Directors have made an assessment of the Group’s ability to continue in operational existence for the
foreseeable future and are satisfied that it is appropriate to continue to adopt the going concern basis of accounting
in preparing the Consolidated financial statements.
The Consolidated financial statements are presented in U.S. dollars (“U.S. dollars” or “USD” or “$”). All
values are rounded to the nearest 1,000 dollars, except where indicated. The tables in these notes are shown in USD
thousands, except where indicated.
Effective January 1, 2019, we adopted the requirements of IFRS 16 - Leases (“IFRS 16”).
F-11
Notes to the Consolidated financial statements (continued)
Correction of a misstatement in calculating interest expense
During the preparation of the Group’s condensed Consolidated financial statements for the three months
ended March 31, 2021, an overstatement of $17.4 million was identified in relation to the accounting for interest
expense reported in our results for the year ended December 31, 2020, relating to a calculation error.
As compared to what was previously reported, the correction to reduce the Finance costs line item by $17.4
million also results in a $17.4 million decrease in loss after tax, and a decrease in the basic and diluted loss per share of
$0.06 for the annual period ended December 31, 2020. The correction also resulted in the reduction by $17.4 million
of the Non-current borrowings line in the Consolidated statement of financial position on December 31, 2020. The
results for the year ended December 31, 2019 were not impacted by this correction.
This revision had no impact on gross profit or operating loss in the periods mentioned, and had no impact
on total assets, total deficit and liabilities, or total cash flows in the periods mentioned. The Company evaluated
these amounts and concluded that while they are immaterial to reissue the previously reported Consolidated
financial statements, they should be corrected by revising the previously reported financial information when such
amounts are presented for comparative purposes.
Correction of a misstatement in calculating share-based payment expense
During the preparation of the Group’s Consolidated financial statements for the year ended December 31,
2021, an understatement of $19.8 million was identified in relation to the accounting for share-based compensation
expense reported in our results for the year ended December 31, 2019.
This non-cash equity-based compensation error related to the incorrect timing of recognition of expense for
certain awards granted to Stadium Goods and NGG employees when those businesses were acquired. The expense
was initially recognized on a straight-line attribution basis. Upon further review, management determined that the
non-cash equity-based compensation expense for such awards should have been recognized on a tranche-by-tranche
basis ("graded vesting model") because the awards can only be exercised at certain periods if the employee remains
employed with the Company. The impact of correcting the attribution shifts the non-cash equity-based
compensation expense to earlier reporting periods, while the total cumulative expense expected to be recognized
over the service period will remain the same.
As compared to what was previously reported, the correction to increase share-based compensation expenses
recorded within the Selling, general and administrative expenses line item by $19.8 million also results in a $19.8
million increase in operating loss, loss after tax, and an increase in the basic and diluted loss per share of $0.06 for
the annual period ended December 31, 2019. The correction also resulted in offsetting increases by $19.8 million of
both Other reserves and Accumulated losses within equity within the Consolidated statement of financial position on
December 31, 2019. The impacts on the results for the years ended December 31, 2021 and 2020 were insignificant
individually and in the aggregate for adjustment.
This revision had no impact on gross profit, total assets, total equity and liabilities, or total cash flows as of
and for the years ended December 31, 2021, 2020, and 2019. The Company evaluated these amounts and concluded
that while they are immaterial to reissue the previously reported Consolidated financial statements, they should be
corrected by revising the previously reported financial information when such amounts are presented for
comparative purposes.
The error has been corrected by revising each of the affected financial statement line items for the 2019
comparative periods presented.
F-12
Notes to the Consolidated financial statements (continued)
The tables below detail the impact of both revisions on the impacted financial statement line items for the
comparative periods presented.
Year ended December 31, 2020
The impact on our Consolidated statement of financial position was as follows:
December 31,
2020
(as previously
reported)
Share
Based
Payment
expense
Adjustment
Interest
expense
Adjustment
December 31,
2020 (revised)
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Other reserves
Accumulated losses
Total deficit
Total deficit and liabilities
$
$
635,237 $
4,488,214
5,266,961
447,753
(4,010,756 )
(1,676,090 )
3,590,871
- $ (17,448 )
- (17,448 )
(17,448 )
-
-
19,812
17,448
(19,812 )
17,448
-
-
$
-
$
$
$
617,789
4,470,766
5,249,513
467,565
(4,013,120 )
(1,658,642 )
3,590,871
The impact on our Consolidated statement of operations was as follows:
Year ended December
31,
2020
(as previously
reported)
Share
Based
Payment
expense
Adjustment
Finance costs
Loss before tax
Income tax benefit
Loss after tax
(Loss)/profit after tax attributable to:
Equity holders of the parent
Non-controlling interests
$
$
(108,742 ) $
(3,347,505 )
14,434
(3,333,071 ) $
(3,350,619 )
$
17,548 $
The impact on our Basic and Diluted earnings per share was as follows:
Interest
expense
Adjustment
- $ 17,448 $
- 17,448
-
- $ 17,448 $
-
17,448
-
- $
- $
Year ended December
31,
2020 (revised)
(91,294 )
(3,330,057 )
14,434
(3,315,623 )
(3,333,171 )
17,548
Year ended December
31,
2020
(as previously
reported)
Share
Based
Payment
expense
Adjustment
Interest
expense
Adjustment
Year ended December
31,
2020 (revised)
Loss per share attributable to owners of
the parent
Basic
Diluted
(9.75 )
(9.75 )
-
-
0.06
0.06
(9.69 )
(9.69 )
F-13
Notes to the Consolidated financial statements (continued)
Year ended December 31, 2019
The impact on our Consolidated statement of financial position was as follows:
Total liabilities
Other reserves
Accumulated losses
Total equity
Total equity and liabilities
December 31,
2019
(as previously reported)
890,047
349,463
(826,135 )
1,337,832
2,227,879
$
$
Share based
Payment
expense
Adjustment
-
$
19,812
(19,812 )
$
$
-
$
December 31,
2019 (revised)
890,047
369,275
(845,947 )
1,337,832
2,227,879
The impact on our Consolidated statement of operations was as follows:
Selling, general and administrative expenses
Loss before tax
Income tax benefit
Loss after tax
(Loss)/profit after tax attributable to:
Equity holders of the parent
Non-controlling interests
$
Year ended December 31,
2019
(as previously reported)
(869,609 )
(372,526 )
(1,162 )
Share based
Payment
expense
Adjustment
$ (19,812 )
(19,812 )
-
$
$
(373,688 ) $ (19,812 ) $
(385,297 )
(19,812 )
$
11,609 $
- $
Year ended December 31,
2019 (revised)
(889,421 )
(392,338 )
(1,162 )
(393,500 )
(405,109 )
11,609
The impact on our Basic and Diluted earnings per share was as follows:
Loss per share attributable to owners of the
parent
Basic
Diluted
Year ended December 31,
2019
(as previously reported)
Share based
Payment
expense
Adjustment
Year ended December 31,
2019 (revised)
(1.21 )
(1.21 )
(0.06 )
(0.06 )
(1.27 )
(1.27 )
2.2. Basis of consolidation
The Consolidated financial statements comprise the Consolidated financial statements of the Group and its
subsidiaries. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee.
Generally, there is a presumption that a majority of voting rights results in control. To support this
presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
•
•
•
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.
F-14
Notes to the Consolidated financial statements (continued)
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated
financial statements from the date the Group gains control until the date control ceases. Profit or loss and each
component of other comprehensive income (“OCI”) are attributed to the equity holders of the parent of the Group
and to the non-controlling interests. When necessary, adjustments are made to the consolidated financial statement
of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group
assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of
control, is accounted for as an equity transaction.
2.3.
Summary of significant accounting policies
a)
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is
measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of
any non-controlling interests in the acquiree. For each business combination, the Group measures the non-
controlling interests in the acquiree at the proportionate share of the acquiree’s identifiable net assets.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for classification
and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date.
Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date
and is subsequently measured at fair value with changes in fair value recognized in profit or loss.
Refer to Note 5, Business Combinations for additional information.
b)
Investment in associates
The Group recognizes an investment in associate when the Group has a significant influence over that entity.
Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is
not control or joint control over those policies. The Group’s investments in its associates, Farfetch Finance Limited
and Alanui S.r.l (“Alanui”) (up until March 1, 2021 – refer to Note 5. Business Combinations for additional
information), are accounted for using the equity method.
Under the equity method of accounting, the investments are initially recognized at cost and adjusted
thereafter to recognize the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and
the Group’s share of movements in other comprehensive income of the investee in other comprehensive income.
c)
Current versus non-current classification
The Group presents assets and liabilities in the Consolidated statement of financial position based on
current/non-current classification.
An asset is current when it is:
•
•
•
•
Expected to be realized or intended to be sold or consumed in the normal operating cycle;
Held primarily for the purpose of trading;
Expected to be realized within twelve months after the reporting period; or
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
F-15
Notes to the Consolidated financial statements (continued)
All other assets are classified as non-current.
A liability is current when:
•
•
•
•
It is expected to be settled in the normal operating cycle;
It is held primarily for the purpose of trading;
It is due to be settled within twelve months after the reporting period; or
There is no unconditional right to defer the settlement of the liability for at least twelve months after
the reporting period.
The Group classifies all other liabilities as non-current.
d)
Fair value measurement
This section outlines the Group policies applicable to financial instruments that are recognized and measured
at fair value in the Consolidated financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
•
•
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are applicable in the circumstances and for which sufficient data is
available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
•
•
•
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the
entity can access at the measurement date.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognized in the Consolidated financial statements on a recurring basis, the
Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
F-16
Notes to the Consolidated financial statements (continued)
e)
Revenue recognition
Revenue is recognized in accordance with the five-step model under IFRS 15:
1.
2.
3.
4.
5.
identifying the contracts with customers;
identifying the separate performance obligations;
determining the transaction price;
allocating the transaction price to the separate performance obligations; and
recognizing revenue when each performance obligation is satisfied.
Retailing of goods
Revenue, where the Group acts as a principal, is recognized when the performance obligation is satisfied
which is when the goods are received by the consumer. Included within sales of goods is a provision for expected
returns, discounts and rebates. Where these are not known, the Group uses historical data and patterns to calculate an
estimate.
Rendering of services
The Group primarily acts as a commercial intermediary between sellers, being the brands and retailers, and
end consumers and earns a commission for this service.
For these arrangements, the sellers determine the transaction price of the goods sold on the website, being
the purchase price paid by the consumer, with the Group acting as an agent for the sellers and the related revenue is
recognized on a net basis. The Group also charges fees to sellers for activities related to providing this service, such
as packaging, credit card processing, settlement of duties, and other transaction processing activities. These
activities are not considered separate promises to the consumer, and the related fees are therefore recognized
concurrently with commissions at the time the performance obligation to facilitate the transaction between the seller
and end consumer is satisfied, which is when the goods are dispatched to the end consumer by the seller. A
provision is made for commissions that would be refunded if the end consumer returns the goods, and the Group
uses historical data and patterns to estimate its return provision. There are no significant payment terms, with the
Group taking payment in full from the consumer’s chosen payment method at the time the goods are ready for
dispatch by the seller.
The Group also provides delivery services to end consumers, with the Group setting the transaction price,
being the price paid by the consumer for goods purchased on its platform. For these services, the Group acts as the
principal and recognizes as revenue amounts charged to end consumers net of any promotional incentives and
discounts. Revenue for these services is recognized on delivery of goods to the end consumer, which represents the
point in time at which the Group’s performance obligation is satisfied. No provision for returns is made as delivery
revenue is not subject to refund. Promotional incentives, which include basket promo-code discounts, may
periodically be offered to end consumers. These are treated as a deduction to revenue. Cash is collected by the
Group from the end consumer using payment service providers. Within two months of the transactions, this is
remitted to the relevant seller (net of commission and recoveries). Such amounts are presented within trade and
other payables, unless the relevant seller is in a net receivable position and is therefore classified within trade and
other receivables.
f)
Current and deferred tax
Current tax is the expected tax payable based on the taxable profit for the period, and the tax laws that have
been enacted or substantively enacted by the reporting date. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where required on the basis of amounts expected to be paid to the tax authorities.
F-17
Notes to the Consolidated financial statements (continued)
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the
Consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all
taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that there are
sufficient suitable deferred tax liabilities or future taxable profits will be available against which deductible
temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises
from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting profit. Current and deferred tax is charged or
credited in the Consolidated statement of operations, except when it relates to items charged or credited directly to
equity, in which case the current or deferred tax is also recognized directly in equity.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates and in accordance with laws that are expected to apply in the
period/jurisdiction when/where the liability is settled, or the asset is realized.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by
the same taxation authority on either the taxable entity or different taxable entities and where there is an intention to
settle the balances on a net basis.
Uncertainty over Income Tax Treatment: The Group operates across a large number of jurisdictions and
could be subject to periodic audit by local tax authorities on a range of tax matters during the normal course of
business, including transfer pricing, indirect taxes and transaction related issues. Where the amount of tax payable or
recoverable is uncertain, the Group establishes provisions based on either: the Group’s judgment of the most likely
amount of the liability or recovery; or, when there is a wide range of possible outcomes, a probability weighted
average approach.
g)
Foreign currencies
The Group’s Consolidated financial statements are presented in U.S. dollars. For each entity the Group
determines the functional currency and items included in the Consolidated financial statements of each entity are
measured using that functional currency. The functional currency of the Company is U.S. dollars.
h)
Foreign currency translation
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional
currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities
denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting
date. Differences arising on settlement or translation of monetary items are recognized in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss
arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain
or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is
recognized in OCI or profit or loss are also recognized in OCI or profit or loss, respectively).
On consolidation, the assets and liabilities of foreign operations are translated into U.S. dollars at the rate of
exchange prevailing at the reporting date and their statements of profit or loss are translated at average exchange
rates. The exchange differences arising on translation for consolidation are recognized in OCI.
F-18
Notes to the Consolidated financial statements (continued)
i)
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment
losses, if any. All repair and maintenance costs are recognized in profit or loss as incurred.
Items of property, plant and equipment are depreciated with an expense recognized in depreciation and
amortization expense on a straight-line basis over their useful life.
The useful lives of these items are assessed as follows:
Leasehold improvements
Fixtures and fittings
Motor vehicles
Plant, machinery and equipment
Shorter of the life of the lease or useful life
Three to ten years
Four to eight years
Three to ten years
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if necessary.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even
if that right is not explicitly specified in an arrangement.
j)
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses.
Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related
expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of
intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortization period and the
amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting
period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as
changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the
Consolidated statement of operations in the expense category that is consistent with the function of the intangible
assets. Other than goodwill, there are no intangible assets with indefinite useful lives.
Goodwill is not amortized but is reviewed for impairment at least annually. For the purpose of impairment
testing, goodwill is allocated to the relevant Cash Generating Units (“CGUs”) which are tested for impairment
annually. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. On disposal of a cash-
generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Refer to Note 2.3 (n), Summary of significant accounting policies – Impairment of non-financial assets for the
Group’s policy on the impairment of non-financial assets.
F-19
Notes to the Consolidated financial statements (continued)
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognized
as an intangible asset when the Group can demonstrate:
•
•
•
•
•
The technical feasibility of completing the intangible asset so that the asset will be available for use or
sale;
Its intention to complete and its ability and intention to use or sell the asset;
How the asset will generate future economic benefits;
The availability of resources to complete the asset; and
The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any
accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development
is complete and the asset is available for use. It is amortized over the period of expected future benefit. Amortization
is recorded in administrative expenses. Development intangible assets under the course of construction are tested for
impairment annually or more frequently if events or changes in circumstance indicate that they might be impaired.
Once placed into service the asset is tested for impairment whenever events or changes in circumstance indicate that
the carrying amount may not be recoverable.
Subsequent costs
Subsequent costs are only capitalized when there is an increase in the anticipated future economic benefit
attributable to the assets in question. All other subsequent costs are recorded in the Consolidated statement of
operations for the year in which they are incurred.
Acquisition of Palm Angels S.r.l (Palm Angels)
During the year ended December 31, 2021, the Group completed the acquisition of 60 percent of the
ordinary share capital of Palm Angels for upfront cash and share consideration. As IFRS does not directly address
the accounting for a partial acquisition of an asset, management have applied the principles of IFRS 3 - Business
Combinations and IAS 38 - Intangible Assets in order to determine the accounting treatment for this transaction.
Applying the requirements of IFRS 3 - Business Combinations, management have concluded that this transaction
represents the acquisition of an asset rather than a business combination. Given the additional complexity of
accounting for an asset that is 60 percent owned, management have applied both the principles of IFRS 3 - Business
Combinations and IAS 38 - Intangible Assets in order to initially account for this asset purchase. On initial
recognition, the asset has been recognized at cost along with a non-controlling interest in the Consolidated statement
of financial position to represent the portion of the asset that the Group does not own. Subsequently, amortization of
the asset will be recognized in the Consolidated statement of operations over its useful economic life. For further
information, refer to Note 16, Intangible assets.
Amortization
Amortization is charged to depreciation and amortization expense on a straight-line basis over the estimated
useful life of the intangible assets, from the time that the assets are available for use. The useful lives of these items
are assessed as follows:
Development costs
Brand, trademarks & domain names
Customer relationships
Acquired software
Three years
Five to sixteen years
Three to five years
Three to ten years
F-20
Notes to the Consolidated financial statements (continued)
k)
Leases
At the inception date of the lease (i.e. the date when the underlying asset is available for use), a lessee
recognizes a liability for the present value of the lease payments payable over the lease term and a right of use asset
that represents the right to use the underlying asset over the term of the lease. Right of use assets are measured at
cost less accumulated depreciation and impairment losses, and are adjusted for any remeasurement of lease
liabilities. The cost of right of use assets includes the amount of initial direct costs incurred and lease payments
made before the commencement date less incentives received. Right-of-use assets are depreciated on a straight-line
basis over the shorter of the estimated useful life of the underlying asset and the lease term.
The Group does not recognize non-lease components separately from lease components for those classes of
assets in which non-lease components are significant with respect to the total value of the arrangement.
Lease payments include fixed payments (including in-substance fixed payments) less any lease incentive
receivable, variable lease payments that depend on an index or rate, and amounts expected to be paid as residual
value guarantees. Similarly, the measurement of the lease liability includes the exercise price of a purchase option, if
the lessee is reasonably certain to exercise that option, and payments of penalties for early termination, if the lease
term reflects the lessee exercising such cancellation option. For the calculation of the present value of the lease
payments, the Group uses the incremental borrowing rate at the start date of the lease. After the commencement
date, the amount of the lease liabilities is increased to reflect the accrual of interest and reduced for the payment
made. In addition to this, the carrying amount of the lease liability is remeasured in certain cases, such as changes in
the lease term, changes in future lease payments resulting from a change in an index or rate used to determine those
payments. The amount of such remeasurements is generally recognized against an adjustment to the right of use
asset.
The standard includes two recognition exemptions: “low value” asset leases and short-term leases (the Group
uses this exemption for all leases with a term of twelve months or less). In such cases, lease payments are
recognized as an expense on a straight-line basis over the lease term.
The Group determines the lease term as the non-cancellable term of the contract, together with any period
covered by an extension (or termination) option whose exercise is discretionary for the Group, if there is reasonable
certainty that it will be exercised (or it will not be exercised). In its assessment, the Group considers all available
information by asset class in the industry and evaluates all relevant factors (technology, regulation, competition,
business model) that create an economic incentive to exercise or not a renewal/cancellation option. In particular, the
Group takes into consideration the time horizon of the strategic planning of its operations. After the commencement
date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its
control that may affect its ability to exercise (or not to exercise) an option to extend or terminate (for example, a
change in business strategy).
Lessors classify all leases using the classification principles in IFRS 16 – Leases and distinguishing between
operating and finance leases. Leases in which the lessor retains a significant portion of the risks and rewards of
ownership of the leased asset are treated as operating leases. Otherwise, the lease is a finance lease.
l)
Inventories
Inventories are carried at the lower of cost and the net realizable value based on market performance,
including the relative ancillary selling costs. The cost of inventories is calculated according to the First In, First Out
(“FIFO”) method for each category of goods and includes purchase costs and costs incurred to bring the inventories
to their present location and condition. In order to represent the value of inventories in the Consolidated statement of
financial position, and to take into account impairment losses due to obsolete materials and slow inventory
movement, obsolescence provisions have been directly deducted from the carrying amount of the inventories.
m)
Financial instruments—initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability
or equity instrument of another entity.
F-21
Notes to the Consolidated financial statements (continued)
Financial assets
The Groups financial assets comprise cash and cash equivalents, receivables and derivative financial
instruments. Derivative financial instruments are comprised of forward exchange contracts and foreign exchange
option contracts, which are measured at fair value through profit or loss, unless they are formally designated and
measured as cash flow hedges.
Trade receivables are generally accounted for at amortized cost. The Group assesses on a forward-looking
basis the expected credit losses associated with its trade receivables carried at amortized cost.
Financial assets measured at fair value through profit or loss are measured initially at fair value with
transaction costs taken directly to the Consolidated statement of operations. Subsequently, the financial assets are
remeasured, and gains and losses are recognized in the Consolidated statement of operations.
Financial assets measured at fair value through other comprehensive income are measured initially at fair
value. Subsequently, the financial assets are remeasured, and gains and losses are recognized in other
comprehensive income.
Financial liabilities
The Group’s financial liabilities comprise trade and other payables, interest bearing loans and borrowings,
contingent consideration, derivative instruments on convertible notes (embedded derivatives), put and call option
liabilities and foreign exchange contracts.
Trade and other payables are held at amortized cost.
All interest bearing loans and borrowings are initially recognized at fair value net of issue costs associated
with the borrowing. After initial recognition, interest bearing loans and borrowings are subsequently measured at
amortized cost using the effective interest rate method.
Foreign exchange contracts are measured initially at fair value through profit or loss with transaction costs
taken directly to the consolidated statement of operations, unless they are formally designated and measured as cash
flow hedges. Subsequently, the fair values are remeasured and gains and losses from changes therein are recognized
in the consolidated statement of operations.
Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting period.
Where the derivative is not designated as a cash-flow hedge, subsequent changes in the fair value are
recognized in profit or loss.
The group designates certain derivatives as cash flow hedges to hedge particular risks associated with the
cash flows of highly probable forecast transactions.
At inception of the hedge relationship, the Group documents the relationship between hedging instruments
and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset
changes in the cash flows of hedged items. The Group documents its risk management objective and strategy for
undertaking its hedge transactions. Currently the Group has only designated cash flow hedges.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in the cash flow hedge reserve or time value reserve within equity. The gain or loss relating to
the ineffective portion is recognized immediately in profit or loss.
Any gains or losses held in the cash flow hedge reserve are recycled to the Consolidated statement of
operations or inventory in the Consolidated statement of financial position when the related hedged item is
recognized.
F-22
Notes to the Consolidated financial statements (continued)
If a hedge no longer meets the criteria for hedge accounting, or the forecast transaction is no longer highly
probable, the cumulative gain or loss reported in equity is immediately reclassified to profit or loss.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate
derivatives when their risks and characteristics are not closely related to those of the host contracts and host contract
are not carried at fair value, with unrealized gains or losses reported in the Consolidated statement of operations.
Embedded derivatives are carried on the Consolidated statement of financial position at fair value from the inception
of the host contract. Changes in fair value are recognized in the Consolidated statement of operations during the
period in which they arise.
The Company’s convertible notes embedded derivatives are accounted as financial instruments at fair value
through profit and loss (“FVTPL”). The embedded derivatives were recorded at fair value on the date of debt
issuance. They are subsequently remeasured at fair value at each reporting date, and the changes in the fair value are
recorded in the Consolidated statement of operations within gain/(loss) on items at held at fair value and
remeasurements. The fair values of the embedded derivatives are determined using an option pricing model, using
assumptions based on market conditions at the reporting date.
Put and call option liabilities
The Group has put and call option liabilities relating to the non-controlling interests arising from the
transactions with Palm Angels and Chalhoub Group (“Chalhoub”) as well as the strategic arrangement with Alibaba
Group Holding Limited (“Alibaba”) and Compagnie Financière Richemont SA (“Richemont”).
Put and call option liabilities are initially recognized at present value in other reserves within equity at
inception of the option deed. Subsequently, at the end of the reporting period, the liabilities are revalued to present
value with remeasurement gains and losses recognized in the Consolidated statement of operations.
Conversion of convertible notes
When the conversion of the Company’s convertible notes are settled through the issuance of shares in the
Company, the carrying amount of the non-current borrowings and the fair value of the related embedded derivative
at the conversion date are derecognized and reclassified to equity.
n)
Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s, CGU’s or group of CGU’s fair value
less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the
asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and
is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In determining fair value less costs of disposal, recent market transactions are taken into account.
The Group bases its impairment calculation on detailed budgets which are prepared separately for each of
the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations cover a
period of five to eight years, according to the nature and maturity of each CGU. Impairment losses of continuing
F-23
Notes to the Consolidated financial statements (continued)
operations, are recognized in the Consolidated statement of operations in expense categories consistent with the
function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an
indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists,
the Group estimates the asset’s or CGU’s recoverable amount, and reverses the previously recognized impairment
loss to the extent the recoverable amount equals the carrying amount. If the recoverable amount of the cash-
generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of
the carrying amount of each asset in the unit. On disposal of a CGU, the attributable amount of goodwill is included
in the determination of the profit or loss on disposal.
Goodwill and intangible assets are tested for impairment annually as at December 31 and when
circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing
the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. If the recoverable amount
of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to
goodwill cannot be reversed in future periods.
o)
Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
p)
Share-based payments
Employees (including senior executives) of the Group receive remuneration in the form of share-based
payments, whereby employees render services as consideration. The consideration is either equity or cash settled,
depending on the scheme.
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made
using a valuation model. That cost is recognized, together with a corresponding increase in other capital reserves in
equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits
expense. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of
equity instruments that will ultimately vest. The Consolidated statement of operations expense or credit for a period
represents the movement in cumulative expense recognized as at the beginning and end of that period.
No expense is recognized for awards that do not ultimately vest.
Cash-settled transactions
For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured
initially at the fair value of the liability. At each balance sheet date until the liability is settled, and at the date of
settlement, the fair value of the liability is remeasured, with any changes in fair value recognized in profit or loss for
the year.
Employment related taxes
Where the Group has an obligation to settle employment related taxes on share-based payments received by
employees, these are provided for based on the intrinsic value of the vested and un-vested share options at the end of
the reporting period.
F-24
Notes to the Consolidated financial statements (continued)
q)
Cash and cash equivalents
For the purpose of presentation in the Consolidated statement of cash flows, cash and cash equivalents
includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts.
The Group has classified amounts held in money market funds as cash equivalents because those funds are
short term in nature, highly liquid, readily convertible to known amounts of cash, and subject to an insignificant risk
of changes in value. The Group has concluded on this classification because each of these EU-regulated funds have
the highest credit rating available.
From time to time the Group holds amounts of restricted cash. Restricted cash amounting to $2.3 million
(2020: $nil) is classified outside of cash and cash equivalents within trade and other receivables. For further
information, refer to Note 15, Trade and other receivables.
2.4.
Changes in accounting policies and disclosures
The accounting policies applied by the Group in these Consolidated financial statements are the same as
those applied by the Group in its Consolidated financial statements for the year ended December 31, 2020, except
for the accounting for the early conversion of convertible loan notes (refer to Note 9, Items held at fair value and
remeasurements, Note 28, Financial instruments and financial risk management and Note 23, Borrowings
respectively), the accounting for short term investments (refer to Note 21, Short-term investments), the accounting
for the acquisition of Palm Angels (refer to Note 16, Intangible assets), the accounting for the investment by
Alibaba and Richemont into Farfetch China Holdings Limited and its subsidiaries (refer to Note 31, Other reserves
and Note 33, Non-controlling interests) and the adoption of new and amended standards as set out below. Given
that the conversions in May, 2021, August 2021, October 2021 and the short-term investments are new transactions
for the Group during the year ended December 31, 2021, the related accounting policies are new in the year ended
December 31, 2021.
Amendments to IFRSs that are mandatorily effective for the current year
The Group applied the following new and revised IFRS standards from January 1, 2021:
• Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS
16) (effective January 1, 2021)
“Interest Rate Benchmark Reform – Phase 2” includes amendments that address issues that might affect
financial reporting after the reform of an interest rate benchmark, including its replacement with alternative
benchmark rates. The changes relate to the modification of financial assets, financial liabilities and lease liabilities,
specific hedge accounting requirements, and disclosure requirements applying IFRS 7 - Financial Instruments:
Disclosures to accompany the amendments regarding modifications and hedge accounting. This amendment did not
have a material impact on the Consolidated financial statements.
• COVID-19-Related Rent Concessions (Amendment to IFRS 16)
In May 2020, the IASB published “COVID-19-Related Rent Concessions (Amendment to IFRS 16)”
amending the standard to provide lessees with an exemption from assessing whether a COVID-19 related rent
concession is a lease modification. This amendment did not have a material impact on the Consolidated financial
statements.
F-25
Notes to the Consolidated financial statements (continued)
New and revised IFRSs in issue but not yet effective
• Deferred Tax related to Assets and Liabilities arising from a Single Transactions (Amendments to
IAS 12)
In May 2021, the IASB issued an amendment to IAS 12, Income Taxes, requiring companies to recognize
deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible
temporary differences. The amendment is effective for annual reporting periods beginning on or after January 1,
2023, with early adoption permitted. We are currently evaluating the impact of adoption on our Consolidated
financial statements.
• COVID-19-Related Rent Concessions beyond June 30, 2021 (Amendment to IFRS 16)
In March 2021, the IASB extended the application period of the practical expedient in IFRS 16 - Leases,
to help lessees accounting for COVID 19-related rent concessions. We do not expect the impact of adoption to have
a material impact on our Consolidated financial statements.
• Definition of Accounting Estimates (Amendments to IAS 8)
In February 2021, the IASB issued an amendment to IAS 8, Accounting Polices, Changes in Accounting
Estimates and Errors, in order to clarify the difference between accounting policies and accounting
estimates. The changes to IAS 8 focus entirely on accounting estimates and clarify the following:
- The definition of a change in accounting estimates is replaced with a definition of
accounting estimates. Under the new definition, accounting estimates are “monetary
amounts in financial statements that are subject to measurement uncertainty”.
- Entities develop accounting estimates if accounting policies require items in financial
statements to be measured in a way that involves measurement uncertainty.
- A change in accounting estimate that results from new information or new developments is
not the correction of an error. In addition, the effects of a change in an input or a
measurement technique used to develop an accounting estimate are changes in accounting
estimates if they do not result from the correction of prior period errors.
- A change in an accounting estimate may affect only the current period’s profit or loss, or
the profit or loss of both the current period and future periods. The effect of the change
relating to the current period is recognized as income or expense in the current period. The
effect, if any, on future periods is recognized as income or expense in those future periods.
The amendment is effective for annual reporting periods beginning on or after January 1, 2023, with early
adoption permitted. We are currently evaluating the impact of adoption on our Consolidated financial statements.
Certain other new accounting standards and interpretations issued by the IASB that are mandatorily effective
for an accounting period that began on or after January 1, 2021 have not had and are not expected to have a material
impact on the entity in the current or future reporting periods and on foreseeable future transactions.
3.
Critical accounting judgments and key sources of estimation uncertainty
Certain accounting policies are considered to be critical to the Group. An accounting policy is considered to
be critical if, in the Directors’ judgement, its selection or application materially affects the Group’s financial
position or results. The application of the Group’s accounting policies also requires the use of estimates and
assumptions that affect the Group’s financial position or results.
F-26
Notes to the Consolidated financial statements (continued)
Below is a summary of areas in which estimation is applied primarily in the context of applying critical
accounting judgements.
Critical judgements in applying group accounting policies
Intangible assets – development costs capitalization
Assessing whether assets meet the required criteria for initial capitalization requires judgement. This requires
an assessment of the expected future benefits from the projects to be capitalized, technical feasibility and
commercial viability. In particular, internally generated intangible assets must be assessed during the development
phase to identify whether the Group has the ability and intention to complete the development successfully.
Determining the costs of assets to be capitalized also requires judgement. Specifically, judgement and
estimation is required in determining the directly attributable costs to be allocated to the asset to enable the asset to
be capable of operating in the manner intended by management.
Recognition of a deferred tax asset
The Group has accumulated significant unutilized trading tax losses (Note 26, Deferred tax). Deferred tax
assets are recognized to the extent that it is probable that there are sufficient suitable deferred tax liabilities or future
taxable profits will be available against which deductible temporary differences can be utilized. The key area of
judgement in respect of deferred tax accounting is the assessment of the expected timing and manner of realization
or settlement of the carrying amounts of assets and liabilities held at the reporting date. In particular, assessment is
required of whether it is probable that there will be suitable future taxable profits against which any deferred tax
assets can be utilized. The Group reviews this assessment on an annual basis.
Non-controlling interest – Strategic arrangement with Alibaba and Richemont
During the year ended December 31, 2021, the Group formally signed an agreement to enter into a strategic
arrangement with Alibaba and Richemont. As part of the agreement, Alibaba and Richemont invested $500 million
in return for a combined 25% stake in Farfetch China Holdings Ltd. Management have concluded that most
appropriate method to measure the non-controlling interest created from this transaction is to use the proportionate
net assets method. The difference between the investment proceeds received and the non-controlling interest
valuation is recorded within other reserves. For further information, refer to Note 31, Other reserves and Note 33,
Non-controlling interests.
Acquisition of Palm Angels S.r.l (“Palm Angels”)
During the year ended December 31, 2021, the Group completed the acquisition of 60 percent of the
ordinary share capital of Palm Angels for cash and share consideration. Applying the requirements of IFRS 3 -
Business Combinations, management have concluded that this transaction represents the acquisition of an asset
rather than a business combination. As IFRS does not directly address the accounting for the initial recognition of
non-controlling interest on an asset acquisition, management have applied the principles of IFRS 3 – Business
Combinations and recognized the non-controlling interest using the proportionate share of net assets acquired
method. For further information, refer to Note 31, Other reserves and Note 33, Non-controlling interests.
Identification of embedded derivative in borrowing arrangements
During the year ended December 31, 2020, the Group issued senior convertible notes for amounts of
$250.0 million, $400.0 million and $600.0 million. Each arrangement contains certain conversion options that are
bifurcated from the contract and valued separately. For each senior convertible note, there is significant judgement
in determining the options to be bifurcated and valued separately, the valuation model and valuation methodology.
F-27
Notes to the Consolidated financial statements (continued)
Key sources of estimation uncertainty
Business combinations
We use our best estimates and assumptions to accurately assign fair value to the intangible assets acquired at
the acquisition date. The estimation is primarily due to the judgmental nature of the inputs to the valuation models
used to measure the fair value of these intangible asset, as well as the sensitivity of the respective fair values to the
underlying significant assumptions. Where material, we use a discounted cash flow method of the income approach
to measure the fair value of these intangible assets, and use specialists to assist us to develop certain estimates and
assumptions. The significant estimates and assumptions used are in respect of (i) expected future revenue growth
rates; (ii) anticipated operating margins; (iii) the useful lives of the acquired brand names; (iv) the discount rates to
be applied to the estimated future cash flows; and (v) royalty rates used in estimating income savings.
During the measurement period, which may be up to one year from the date of acquisition, the Group may
record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the
corresponding offset to goodwill. The Group continues to collect information and reevaluates these estimates and
assumptions as deemed reasonable by management. The Group records any adjustments to these estimates and
assumptions against goodwill provided they arise within the measurement period. Upon the conclusion of the
measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever
comes first, any subsequent adjustments are recorded in the Consolidated statement of operations.
We also use our best estimates and assumptions to accurately account for the value of put options over non-
controlling interests, when applicable.
For details of business combinations refer to Note 5, Business combinations.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset CGU or group of CGU exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of
disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar
assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is
based on a discounted cash flow (“DCF”) model. The cash flows are derived from the budget and projections for the
next five to eight years, according to the development and maturity of each CGU. The significant judgements and
assumptions used in calculating the recoverable amount are (i) the expected future revenue growth rates, including
the terminal growth rate (ii) the anticipated operating margin and (iii) the discount rates applied to the future cash
flows of the CGUs. These estimates are most relevant to goodwill recognized by the Group.
See Note 16, Intangible assets for further details on the assumptions and associated sensitivities.
Fair value of financial instruments, including embedded derivatives
Where the fair value of financial assets and liabilities recorded in the financial statements cannot be derived
from active markets, their fair value is determined using valuation techniques including the Black Scholes option
pricing model. The inputs to these models are taken from observable markets where possible, but where this is not
feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of
inputs such as the risk-free rate and volatility. Changes in assumptions about these factors could affect the reported
fair value of financial instruments.
F-28
Notes to the Consolidated financial statements (continued)
When measuring the fair value of an asset or liability, the Group uses observable market data to the greatest
extent possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in
the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
For more information, including further details on assumptions and associated sensitivities, please refer to
Note 28, Financial instruments and financial risk management.
2021 CEO Performance-Based Restricted Stock Unit (“PSU”) Award
On May 24, 2021, the Board of Directors (the “Board”) of the Company unanimously approved the
recommendation of the Compensation Committee of the board to grant a long-term PSU under the Company’s 2018
Farfetch Employee Equity Plan (the “2018 Plan”) to José Neves, the Company’s Founder, Chief Executive Officer
and Chairman of the Board (the “CEO”). The grant is 8,440,000 PSUs, which only vest, if at all, based on the
Company’s achievement of pre-determined increases in the Company’s stock price over an eight-year period. For
further information on the stock price targets, refer to Note 29, Employee Benefit Obligations.
Given that the vesting of these awards are subject to the performance against a market-based performance
measure, management have used the Monte Carlo simulation model to calculate the grant date fair value of this
award in line with the requirements of IFRS 2 - Share-based Payment. The requirements of IFRS 2 - Share-based
Payment requires management to estimate the length of the expected vesting period both for the purposes of
calculating the fair value of the award but also to determine the period over which to recognize the expense in the
Consolidated statement of operations. A separate vesting period was developed for each of the eight tranches of
PSUs using the Monte Carlo simulation and set of separate assumptions that were used to estimate the fair value of
the PSUs. The expected vesting period equals the median time needed for the target stock price to be attained in the
iterations of the Monte Carlo simulation in which the tranche of PSUs was earned. The iterations of the Monte Carlo
simulation in which the target stock price was not attained have been excluded from the analysis of the expected
vesting period.
Management have valued the related employers tax liability for these awards using the intrinsic value
method. The intrinsic value method is calculated by reference to the number of awards expected to vest and the
stock price at December 31, 2021. Given that the stock price at December 31, 2021 was $33.43 and the first target
stock price is $75.00, management have concluded that as at the end of the reporting period the number of awards
expected to vest is nil, and therefore the value of the employer tax liability is also $nil.
Revenue
4.
Revenue by type of good or service (in thousands)
Digital Platform Services third-party revenue
Digital Platform Services first-party revenue
Digital Platform Services Revenue
Digital Platform Fulfilment Revenue
Brand Platform Revenue
In-Store Revenue
Total Revenue
F-29
$
2019
496,040 $
205,206
701,246
127,960
164,210
27,621
2021
845,941
539,737
1,385,678
332,504
467,505
70,921
$ 1,021,037 $ 1,673,922 $ 2,256,608
2020
637,568 $
395,588
1,033,156
213,228
390,014
37,524
Notes to the Consolidated financial statements (continued)
Digital Platform services
Digital Platform Services Revenue includes commissions on third-party sales and revenue from first-party
sales.
Commission revenue is recognized on a net basis in the Consolidated statement of operations because the
Group acts as an agent in these arrangements. The Group primarily acts as a commercial intermediary between
sellers and end consumers and earns a commission for this service. Commission revenue is recognized when the
goods are dispatched by the seller.
In first-party sales arrangements, the Group sells inventory directly purchased or created by the Group on the
Digital Platform where the Group is the principal, and therefore related revenues are recognized on a gross basis.
Revenue on the sale of these goods is recognized when the goods are received by the end consumer. For finished
goods that have been ordered on the Digital Platform but not yet delivered to the end consumer at the end of the
reporting period, revenue is deferred until delivery. At December 31, 2021, these deferred amounts were $1.1
million (2020: $1.0 million, 2019: $1.8 million), which the Group expects to recognize within thirty days of
reporting period end. The Group expects to fulfill any remaining performance obligations outstanding at December
31, 2021 within the next ninety days from the reporting period. In 2021, $1 million (2020: $1.8 million, 2019: $2.0
million) of revenue deferred in 2020 (2019 and 2018 respectively) was recognized as revenue.
Digital Platform Service Revenue also includes fees charged to sellers for other activities, such as packaging,
credit card processing and other transaction processing activities.
At checkout, end consumers are charged for delivery, if applicable, in addition to the price of goods in their
basket (refer to Digital Platform Fulfilment Revenue below for a discussion of delivery services). The Group is
responsible for the collection of cash from end consumers with payment typically taken in advance of completing its
performance obligations.
In arrangements where the Group acts as an agent, cash collections are remitted net to the sellers generally
within two months of collection.
Digital Platform Fulfilment Revenue
The Group provides delivery services for goods sold on the Digital Platform, for which revenues are
recognized when the goods are delivered to the end consumers. Revenues for delivery services are stated net of
promotional incentives and discounts. Digital Platform Fulfilment Revenue also includes fees charged to sellers for
the settlement of duties which are recognized concurrently with commissions.
As discussed above, the promise with respect to delivery services is satisfied only when the goods are
delivered to the end consumer. Within Digital Platform Fulfilment Revenue, where the delivery services
performance obligation has not been satisfied by December 31, 2021, revenue of $7.7 million (2020: $5.4 million,
2019: $2.7 million) has been deferred and is expected to be recognized within ninety days of reporting period end.
The transaction price for this performance obligation is the delivery costs charged to the consumer as described
above. In 2021, $5.4 million (2020: $2.7 million, 2019: $0.5 million) of revenue deferred in 2020 (2019 and 2018
respectively) was recognized as revenue. As at December 31, 2021, there were no receivables from contracts with
customers (2020 and 2019: None).
Further detail can be found in Note 2.3 (e), Summary of significant accounting policies – Revenue
recognition.
Brand Platform Revenue
Brand Platform Revenue includes revenue generated by New Guards operations less revenue from New
Guards’: (i) owned e-commerce websites, (ii) direct-to-consumer channel via our Marketplaces and (iii) directly
F-30
Notes to the Consolidated financial statements (continued)
operated stores. Sales are made in the form of first-party sales arrangements to retailers, and therefore related
revenues are recognized on a gross basis. Brand Platform revenue is recognized when the goods are transferred to
the retailer. For finished goods that have been ordered and produced, but not yet delivered to the retailer at the end
of the reporting period, revenue is deferred until delivery. At December 31, 2021, these deferred amounts were $6.5
million (2020: $2.1 million, 2019: $2.9 million). In 2021, $2.1 million (2020: $2.9 million, 2019: $nil) of revenue
deferred in 2020 (2019 and 2018 respectively) was recognized as revenue.
In-store
The Group has a single performance obligation in respect to In-Store Revenue, which is the sale of finished
goods.
5.
Business combinations
Acquisitions in 2021
Luxclusif
On December 6, 2021, Farfetch UK Limited, an indirect wholly owned subsidiary of Farfetch Limited,
acquired 100% of the issued share capital of Upteam Corporation Limited (“Luxclusif”), and its four fully owned
subsidiaries, together a Business to Business (“B2B”) technology-enabled seller of pre-owned luxury goods.
Purchase consideration of $26.8 million was comprised of $7.8 million of cash, $5.9 million of deferred cash
or share consideration and $13.1 million of deferred share consideration based on the Farfetch Limited share price as
at the acquisition date. The share consideration includes a service condition for certain members of the Luxclusif
management team and has been accounted for as post combination remuneration. This did not form part of the
purchase price allocation and is expensed.
The transaction is being treated as a business combination under IFRS 3 and the purchase price is subject to
the finalization of completion accounts. This investment is part of the Group’s strategy of expanding into new
categories and offerings. The primary reason for the acquisition was for the Group to further enhance the Farfetch
Marketplace by continuing to invest in expanding the pre-owned offering.
Details of the purchase consideration, the assets acquired and goodwill are as follows (in thousands):
Cash
Deferred payments
Total cash consideration
Net cash outflow arising on acquisition
Cash and cash equivalent balances acquired
Cash consideration
Net cash outflow
$
$
$
$
7,682
135
7,817
2021
2021
803
(7,682 )
(6,879 )
F-31
Notes to the Consolidated financial statements (continued)
Development Costs
Customer relationships
Tangible assets
Net working capital
Net debt
Deferred tax liability
Total net identified assets acquired
Goodwill
Total net identified assets acquired and goodwill
2021
$
$
2,205
1,611
73
3,461
(2,671 )
(725 )
3,954
3,863
7,817
Goodwill consists of expected synergies to be achieved by combining the operations of Luxclusif with the
Group, as well as other intangible assets that do not qualify for separate recognition under IFRS 3. Goodwill is
expected to be fully deductible for tax purposes. The Development costs and Customer relationships are amortized
over three years and five years respectively.
Acquisition-related costs totaled $1.5 million and are included in Selling, general and administrative
expenses. These costs were recorded in the year ending December 31, 2021.
Allure
On 20 December 2021, Farfetch US Holdings, Inc. acquired 100% of the issued share capital of Allure
Systems Corp (“Allure US”) and its fully owned subsidiary, Allure Systems Research France (“Allure France”)
(together, “Allure”). Allure was established in 2017 and uses artificial intelligence (“A.I.”) to create high-quality on-
model images via 360 degrees renderings, allowing retailers and brands to scale quality imagery with automation.
Purchase consideration of $21.7 million comprised of deferred payments of $1.5 million, cash consideration
of $15.9 million and share consideration of $4.4 million based on the Farfetch Limited share price at the acquisition
date. There is no contingent consideration.
This investment is part of the Group’s strategy of accelerating the digitization of the global luxury
industry. The primary reason for the acquisition was to provide an enhanced customer experience on Farfetch
Marketplace and drive efficiency in our operational processes. The transaction has been accounted for as a business
combination under IFRS 3 and the purchase price allocation is subject to finalization of completion accounts
adjustments.
Details of the purchase consideration, the assets acquired and goodwill are as follows (in thousands):
Cash
Ordinary shares issued
Deferred payments
Total purchase consideration
Net cash outflow arising on acquisition
Cash and cash equivalent balances acquired
Cash consideration
Net cash outflow
F-32
2021
15,858
4,380
1,465
21,703
$
$
$
2021
$
$
1,840
(15,858 )
(14,018 )
Notes to the Consolidated financial statements (continued)
Development costs
Tangible assets
Net working capital
Net debt
Deferred tax liability
Total net identified assets acquired
Goodwill
Total net identified assets acquired and goodwill
2021
5,412
77
118
(1,609 )
(3,364 )
634
21,069
21,703
$
$
Goodwill consists of expected synergies to be achieved by combining the operations of Allure with the
Group, as well as other intangible assets that do not qualify for separate recognition under IFRS 3. Goodwill is
expected to be deductible for tax purposes. Development costs are amortized over three years.
Acquisition-related costs totaled $0.6 million and are included in Selling, general and administrative
expenses. These costs were recorded in the year ending December 31, 2021.
JBUX
On September 14, 2021, Farfetch UK Limited, an indirect wholly owned subsidiary of Farfetch Limited,
acquired 100% of the issued share capital of JBUX Limited, which trades under the name “Jetti”, which provides
marketplace technology to multi-vendor online businesses via a cloud-based Software as a Service (“SaaS”)
platform. Purchase consideration comprised cash of $4.0 million as well as post combination remuneration including
deferred payments based on employment conditions and earnout payments based on employment conditions and
earnout targets. The latter two are accounted for as equity-settled share-based payments. This investment is part of
the Group’s vertical integration strategy of accelerating the digitization of the global luxury industry by acquiring
and developing brands and the Group expect to benefit from Jetti's technology platform and employee skills. This
acquisition will also allow the Group to enhance its marketplace offering.
The transaction was accounted for as a business combination under IFRS 3 and the purchase price allocation
has been finalized. Farfetch UK Limited acquired a 100% shareholding and voting rights of the company from the
previous owners.
Details of the cash paid, the assets acquired and goodwill are as follows (in thousands):
Cash
Total cash consideration
Net cash outflow arising on acquisition
Cash and cash equivalent balances acquired
Cash consideration
Net cash outflow
$
$
2021
4,000
4,000
2021
$
$
48
(4,000 )
(3,952 )
F-33
Notes to the Consolidated financial statements (continued)
Development costs
Tangible assets
Net working capital
Net debt
Deferred tax liability
Total net identified assets acquired
Goodwill
Total net identified assets acquired and goodwill
2021
$
$
2,282
2
(10 )
(17 )
(331 )
1,926
2,074
4,000
Goodwill consists of expected synergies to be achieved by combining the operations of Jetti with the Group,
as well as other intangible assets that do not qualify for separate recognition under IFRS 3. The full goodwill is
expected to be deductible for tax purposes.
Acquisition-related expenses of $0.7 million were recorded in the year ending December 31, 2021, which are
included in Selling, general and administrative costs.
Alanui
On March 16, 2021, New Guards Group Holding, a subsidiary of Farfetch Limited, completed the
acquisition of Alanui, for $nil consideration. The acquisition and control was achieved through the removal of a
shareholder veto from the agreement between New Guards and Alanui’s other shareholders that had previously
prevented the Group from obtaining control of Alanui. New Guards owns 53% of the voting equity interests of
Alanui. Alanui deals with wholesale and retail distribution, as well as sales through their e-commerce platform of
apparel and accessories.
The Group expects continue to benefit from the Alanui brand bringing with them knowledge and creativity
of original solutions for apparel and accessories collections. The transaction was accounted for as a business
combination under IFRS 3 and the purchase price allocation has been finalized.
Details of the purchase consideration and the net assets acquired are as follows (in thousands):
Intangible assets
Brand name
Tangible assets
Other non-current assets
Inventory
Net working capital (excluding inventory)
Non-current liabilities
Deferred tax liability
Total net identified assets acquired
Fair value of previously held equity interest
Non-controlling interest
Purchase consideration
2021
$
$
$
81
7,279
55
291
830
(1,070 )
(28 )
(2,041 )
5,397
(2,963 )
(2,434 )
-
The non-controlling interest acquired is measured at a value equal to the non-controlling interests’ share of
the identifiable net assets acquired. Refer to Note 27, Related party disclosure, for further information on the control
of Alanui.
F-34
Notes to the Consolidated financial statements (continued)
Revenue and profit contribution of the acquisition made in 2021
The results of operations of Luxclusif, Allure, Jetti and Alanui have been included in the Group’s
consolidated Statement of operations since the date of acquisition. Actual and pro forma revenue and results of
operations for the acquisition have not been presented because they do not have a material impact to the
consolidated revenue and results of operations.
Acquisitions in 2020
Ambush
On February 5, 2020, New Guards, a subsidiary of Farfetch Limited, completed the acquisition of 70% of the
outstanding shares of Ambush Inc., the jewelry and apparel line, for cash consideration of $12.1 million. The Group
expects to benefit from Ambush’s brand bringing with them a strong passion for and knowledge of luxury jewelry
and ready-to-wear apparel. This acquisition will also allow the Group to enhance its marketplace and stores offering.
The transaction was accounted for as a business combination under IFRS 3, and the purchase price allocation was
finalized in January 2021.
Details of the purchase consideration, the assets acquired, and goodwill are as follows (in thousands):
Cash consideration
Purchase consideration
Net cash outflow arising on acquisition
Cash and cash equivalent balances acquired
Cash consideration
Net cash outflow
Intangible assets
Brand name
Tangible assets
Right-of-use assets
Other non-current assets
Inventory
Net working capital (excluding inventory)
Non-current liabilities
Deferred tax liability
Total net identified assets acquired
Goodwill
Total net identified assets acquired and goodwill
Non-controlling interest
Net assets acquired
$
$
$
$
$
$
12,142
12,142
2020
2020
126
(12,142 )
(12,016 )
2020
127
4,699
1,365
858
720
3,374
(2,175 )
(5,224 )
(1,311 )
2,433
10,674
13,107
(965 )
12,142
Goodwill consists of expected synergies to be achieved by combining the operations of Ambush with the
Group, as well as other intangible assets that do not qualify for separate recognition under IFRS 3 (amended).
Goodwill is expected to be deductible for tax purposes.
The non-controlling interest acquired is measured at a value equal to the non-controlling interests’ share of
the identifiable net assets acquired.
Acquisition-related expenses of $0.7 million were recorded in 2020, which are included in Selling, general
and administrative costs.
F-35
Notes to the Consolidated financial statements (continued)
Revenue and profit contribution of the acquisition made in 2020
The results of operations of Ambush have been included in the Group’s consolidated statement of operations
since the date of acquisition. Actual and pro forma revenue and results of operations for the acquisition have not
been presented because they do not have a material impact to the consolidated revenue and results of operations.
Acquisitions in 2019
Stadium Goods
On January 4, 2019, Farfetch Limited completed the acquisition of 100% of the outstanding shares of
Stadium Goods, the sneaker and streetwear marketplace, for total consideration of $230.9 million. The Group
expects to benefit from Stadium Goods’ brand, access to supply, and a team who have joined the Group, bringing
with them a strong passion for, and knowledge of, luxury streetwear, further enhancing the company’s marketplace
and stores offering. The consideration payable by the Group was in the form of cash consideration and Farfetch
Limited shares. The consideration payable was split as $150.2 million of cash, and 4,641,554 Class A Ordinary
Shares with a value of $80.7 million based on the Farfetch Limited share price as at the acquisition date.
The transaction is accounted for as a business combination under IFRS 3 and the purchase price allocation
accounting has been finalized. Of the $80.7 million share consideration, $52.1 million includes a service condition
for certain members of the Stadium Goods management team remaining with the Group over a four-year period.
This does not satisfy the IFRS 3 definition of consideration and will be recognized as an expense in the Consolidated
statement of operations over the four-year service period as a share-based payment expense. Therefore, under IFRS
3, the consideration is $178.8 million consisting of $150.2 million cash consideration and $28.6 million share
consideration, none of which is contingent on future performance or service conditions.
Details of the purchase consideration, the assets acquired and goodwill are as follows (in thousands):
Cash consideration
Ordinary shares issued
Total purchase consideration
Net cash outflow arising on acquisition
Cash and cash equivalent balances acquired
Cash consideration
Net cash outflow
2019
150,200
28,600
178,800
2019
1,678
(150,200 )
(148,522 )
$
$
$
$
F-36
Notes to the Consolidated financial statements (continued)
The ordinary shares issued are non-cash investing activities.
The Group finalized its purchase price allocation in the first quarter 2019. The Group recognized the
following assets and liabilities upon acquisition of Stadium Goods (in thousands):
Intangible assets
Brand name
Tangible assets
Right-of-use assets
Other non-current assets
Inventory
Net working capital (excluding inventory)
Non-current liabilities
Total net identified assets acquired
Goodwill
Net assets acquired
2019
2,049
117,300
319
2,802
243
541
(3,642 )
(14,465 )
105,147
73,653
178,800
$
$
Goodwill consists of expected synergies to be achieved by combining the operations of Stadium Goods with
the Group, as well as other intangible assets that do not qualify for separate recognition under IFRS 3. Goodwill is
expected to be deductible for tax purposes. No deferred tax has been recognized however on the basis that
management did not consider there to be sufficient evidence at the time of the acquisition that suitable taxable
profits were expected to arise to support recognition.
As the transaction has been treated as an asset purchase for tax purposes, no deferred tax has been
recognized in respect of the brand name as there is no difference between the tax base and carrying amount at
acquisition, as it is expected that the brand name will be deductible for tax purposes.
Acquisition-related costs of $4.0 million were recorded in 2019, and comprised $2.5 million, which are
included in Selling, general and administrative expenses, and $1.5 million, which are included in the merger relief
reserve.
Toplife
On May 28, 2019, Farfetch (Shanghai) E-commerce Co., Ltd, a wholly owned subsidiary of Farfetch
Limited, acquired 100% of the business of Toplife, a luxury e-commerce platform, from JD Group. The transaction
is being treated as a business combination. The primary reason for the acquisition was for the Group to leverage the
JD App Level 1 Access Button (Farfetch has replaced the Toplife JD Store with level 1 access being a prominent
position on JD App’s homepage) to further enhance the Group’s marketplace business.
Details of the purchase consideration, the assets acquired, and goodwill are as follows (in thousands):
Cash consideration
Total purchase consideration
No cash or cash equivalents were acquired.
2019
$
$
48,503
48,503
F-37
Notes to the Consolidated financial statements (continued)
The Group performed its purchase price allocation, which was finalized in 2020. Details of the purchase
price allocation is as below (in thousands):
Tangible assets
Inventory
Current liabilities
Level 1 access button
Total net identified assets acquired
Goodwill
Net assets acquired
2019
17
131
(1,605 )
9,058
7,601
40,902
48,503
$
$
Goodwill consists of expected synergies to be achieved by combining the operations of Toplife with the
Group, as well as other intangible assets that do not qualify for separate recognition under IFRS 3. Goodwill is not
deductible for tax purposes. The Level 1 access button is amortized over four years.
Acquisition-related costs totaled $0.7 million and are included in Selling, general and administrative
expenses. These costs were recorded in the year ending December 31, 2019.
In November 2020, the Group fully impaired the Level 1 access button due to the closure of our direct
consumer-facing channels on JD.com. At that time, the carrying amount of the intangible asset was $5.8 million.
Refer to Note 16, Intangible assets for more information.
CuriosityChina
On April 3, 2019, Farfetch China (HK Holdings) Limited, a wholly owned subsidiary of Farfetch Limited,
completed the acquisition of 78% of the outstanding shares of CuriosityChina with total cash consideration of $9.0
million. The Group benefits from CuriosityChina's expertise in the China market, including its customer base and
technological capabilities. Upon initial acquisition the Group had an obligation to acquire the remaining 22% of
outstanding shares that it did not initially acquire. On acquisition, the present value of the obligation amounted to
$4.3 million and was accounted for separately from the business combination as a call option liability. In connection
to the purchase obligation, the Group recognized a $0.9 million present value revaluation loss in the Consolidated
statement of operations for the year ended December 31, 2020 and present value revaluation loss of $1.6 million for
the year ended December 31, 2019. In connection with the initial acquisition agreement, in 2020, 3% of the
outstanding shares in CuriosityChina were transferred to Farfetch China (HK Holdings) Limited on May 8, 2020,
taking the non-controlling interest from 22% to 19% as of that date. The aggregate carrying value related to the
remaining non-controlling interest in CuriosityChina, recognized on the Consolidated statement of financial position
and classified within trade and other payables as at December 31, 2021, is $5.7 million (2020: $6.9 million classified
within put and call option liabilities and trade and other payables).
The transaction has been accounted for as a business combination under IFRS 3.
Details of the total purchase consideration, the net assets acquired and goodwill are as follows (in thousands):
Cash consideration
Total purchase consideration
$
$
2019
9,000
9,000
F-38
Notes to the Consolidated financial statements (continued)
Net cash outflow arising on acquisition
Cash and cash equivalent balances acquired
Cash consideration
Net cash outflow
2019
$
$
409
(9,000 )
(8,591 )
The Group finalized its purchase price allocation in the fourth quarter of 2019. The Group recognized the
following assets and liabilities upon acquisition of CuriosityChina (in thousands):
Tangible assets
Current assets
Current liabilities
Customer relationships
Backlog
Technology
Deferred tax liability
Total net identified assets acquired
Goodwill
Total net identified assets acquired and goodwill
Non-controlling interest
Net assets acquired
2019
$
$
78
1,879
(1,005 )
3,878
202
2,059
(921 )
6,170
3,039
9,209
(209 )
9,000
Goodwill consists of expected synergies to be achieved by combining the operations of CuriosityChina with
the Group, as well as other intangible assets that do not qualify for separate recognition under IFRS 3. Goodwill is
not deductible for tax purposes. The Customer relationships, Backlog and Technology are amortized over ten, two
and ten years respectively.
Acquisition-related costs totaled $0.4 million and are included in Selling, general and administrative
expenses. These costs were recorded in the year ending December 31, 2019.
New Guards
On August 2, 2019, Farfetch Italia S.R.L, a wholly owned subsidiary of Farfetch Limited, completed the
acquisition of 100% of the outstanding shares of New Guards and took control of New Guards on the same date. The
acquisition complements the Group's strategy to be the global technology platform for luxury fashion. The
consideration payable by the Group was in the form of cash and Farfetch Limited shares. The total consideration
payable was $704.1 million, split as $358.9 million of cash, and 17,710,526 Class A Ordinary Shares with a value of
$345.2 million based on the Farfetch Limited share price as at the acquisition date. With respect to the share
consideration, 3,554,855 of the shares reflected an estimate at the acquisition date of the shares expected to be issued
based on Farfetch Limited's volume adjusted average share price for the ten-day period ended September 18, 2019
and classified as a liability. In the third quarter of 2020, as part of the post-acquisition working capital adjustments
included in the purchase agreement, the Group transferred an additional consideration of 181,870 Class A Ordinary
Shares with a value of $4.8 million. This resulted in an additional $4.8 million of goodwill being recognized as a
result of the additional consideration transferred.
The transaction was accounted for as a business combination under IFRS 3 and the purchase price allocation
accounting has been completed.
F-39
Notes to the Consolidated financial statements (continued)
Details of the total purchase consideration, the assets acquired, and goodwill are as follows (in thousands):
Cash consideration
Ordinary shares issued
Ordinary shares to be issued
Total purchase consideration
Net cash outflow arising on acquisition
Cash and cash equivalent balances acquired
Cash consideration
Net cash outflow
$
$
2019
358,910
280,705
69,284
708,899
2019
$
$
102,835
(358,910 )
(256,075 )
The ordinary shares issued are non-cash investing activities.
The ordinary shares to be issued reflected the Group's best estimate of the shares it expected to issue as at the
acquisition date as noted above. These shares were issued on September 23, 2019, with a $21.5 million debit
recognized in profit or loss on issue reflecting the fair value remeasurement of the shares on the date they were
issued.
The Group recognized the following assets and liabilities upon acquisition of New Guards (in thousands):
Intangible assets
Brand name
Tangible assets
Right-of-use assets
Deferred tax assets
Other non-current assets
Inventory
Net working capital (excluding inventory)
Non-current liabilities
Deferred tax liabilities
Total net identified assets acquired
Goodwill
Total net identified assets acquired and goodwill
Non-controlling interest
Net assets acquired
$
$
2019
1,382
830,150
2,714
10,727
3,451
2,694
36,757
32,027
(13,698 )
(231,729 )
674,475
192,831
867,306
(158,407 )
708,899
Goodwill consists of expected synergies to be achieved by combining the operations of New Guards with the
Group, as well as other intangible assets that do not qualify for separate recognition under IFRS 3. Goodwill is not
expected to be deductible for tax purposes.
Acquisition-related costs totaled $4.1 million and comprised $2.1 million, which are included in Selling,
general and administrative expenses, and $2.0 million, which are included in the merger relief reserve. These costs
were recorded in the year ending December 31, 2019.
Revenue and profit contribution of acquisitions made in 2019
The results of operations for each of the 2019 acquisitions have been included in the Group’s consolidated
statement of operations since the date of acquisition. Actual and pro forma revenue and results of operations for the
F-40
Notes to the Consolidated financial statements (continued)
acquisitions of Stadium Goods, CuriosityChina and Toplife have not been presented because they do not have a
material impact to the consolidated revenue and results of operations, either individually or in aggregate. Actual
revenue and results of operations for the acquisition of New Guards for the period between the acquisition date and
December 31, 2019, were $183.0 million and $23.1 million respectively. Pro forma revenue and results of
operations for the acquisition of New Guards as though the acquisition date had been the beginning of 2019 is
impracticable because of the lack of financial information at the end of the reporting periods, as the acquired entity’s
reporting periods were misaligned with Farfetch's reporting periods.
6.
Segmental and geographical information
Segmental information
The Group’s Chief Operating Decision Maker, which is deemed to be the Chief Executive Officer, examines
segmental performance and resource allocation from an omni-channel service and product offering perspective,
across the digital and physical realms.
The Group has identified three reportable operating segments:
(A) Digital Platform - comprised of the Farfetch Marketplace, FPS, BrownsFashion.com,
StadiumGoods.com, Farfetch Future Retail, including Connected Retail, (which was previously called Farfetch
Store of the Future), and any other online sales channel operated by the Group, including the respective websites of
the brands in the New Guards portfolio. Revenues are derived mostly from transactions between sellers and
consumers conducted on our technology platforms.
(B) Brand Platform - comprised of business-to-business activities of the brands in the New Guards
portfolio and includes design, production, brand development and wholesale distribution of brands owned and
licensed by New Guards, including the franchised store operations. Revenues are derived from wholesale sales of
goods.
(C) In-Store - comprised of Group-operated stores including Browns, Stadium Goods and certain brands in
the New Guards portfolio. Revenues are derived from sales made in the physical stores.
There are no intersegment transactions that require elimination. All revenues are revenues from external
consumers. No operating segments have been aggregated to form a reportable operating segment. Order
Contribution is used to assess the performance and allocate resources between the segments.
No single consumer accounted for more than 10% of Group revenues (2020: none, 2019: none).
The results of our three reportable operating segments are as follows (in thousands):
Digital Platform:
Services third-party revenue
Services first-party revenue
Services Revenue
Fulfilment Revenue
Revenue
Less: Cost of revenue
Gross profit
Less: Demand generation expense
Order contribution
$
$
F-41
2019
Year ended December 31,
2020
(in thousands)
$
2021
496,040
205,206
701,246
127,960
829,206
(457,293 )
371,913
(151,350 )
220,563
637,568 $
395,588
1,033,156
213,228
1,246,384
(686,178 )
560,206
(198,787 )
361,419 $
845,941
539,737
1,385,678
332,504
1,718,182
(987,929 )
730,253
(291,821 )
438,432
$
Notes to the Consolidated financial statements (continued)
Brand Platform:
Revenue
Less: Cost of revenue
Gross profit or order contribution
In-Store:
Revenue
Less: Cost of revenue
Gross profit or order contribution
$
$
$
$
2019
Year ended December 31,
2020
(in thousands)
390,014
$
(199,208 )
190,806 $
$
$
164,210
(89,203 )
75,007
2019
Year ended December 31,
2020
(in thousands)
$
27,621
(14,695 )
12,926
$
37,524 $
(17,608 )
19,916 $
2021
467,505
(225,989 )
241,516
2021
70,921
(26,179 )
44,742
2019 (1)
2020 (1)
2021
Group:
Revenue
Less: Cost of revenue
Gross profit
Less: Demand generation expense
Order contribution
Selling, general and administrative expenses (excluding demand
generation expense) (1)
Impairment losses on tangible assets
Impairment losses on intangible assets
Operating loss
Gain/(loss) on items held at fair value and remeasurements
Share of results of associates
Finance income
Finance costs (1)
(Loss)/profit before tax
$ 1,021,037
$ 1,673,922
(561,191 )
459,846
(151,350 )
308,496
(738,071 )
(902,994 )
770,928
(198,787 )
572,141
(1,152,696 )
$ 2,256,608
(1,240,097 )
1,016,511
(291,821 )
724,690
(1,189,147 )
-
-
(2,991 )
(36,269 )
(619,815 )
(2,643,573 )
(74 )
-
(11,779 )
(476,236 )
2,023,743
(52 )
12,599
(86,441 )
(392,338 ) $ (3,330,057 ) $ 1,473,613
(429,575 )
21,721
366
34,382
(19,232 )
24,699
(91,294 )
$
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
Geographical information
The Group believes it is relevant to disclose geographical revenue information on both a demand basis,
determined by the billing location of the consumer, and on a supply basis, determined by location of the Farfetch
legal entity which earned the revenue.
The Group is domiciled in the Cayman Islands. For the year ended December 31, 2021, the Cayman Islands
generated revenue from external consumers of $81,000 (2020: $37,000, 2019: $16,000) on a demand basis and $nil
(2020: $nil, 2019: $nil) on a supply basis and is included within Other Countries in the revenue from external
consumers detail below. As at December 31, 2021, the Cayman Islands had $nil non-current assets excluding
deferred tax assets (2020: $nil).
F-42
Notes to the Consolidated financial statements (continued)
The Group’s revenue from external consumers on a demand basis, based on the billing location of the
consumer, is detailed below (in thousands):
2019
2020
2021
Revenue from external consumers (demand basis)
United States
United Kingdom
Other Countries
Revenue
$
210,482 $
78,628
731,927
475,684
221,264
1,559,660
$ 1,021,037 $ 1,673,922 $ 2,256,608
314,596 $
151,875
1,207,451
The Group’s revenue from external consumers on a supply basis, based on the location of the Farfetch legal
entity which earned the revenue, is detailed below (in thousands):
2019
2020
2021
Revenue from external consumers (supply basis)
United Kingdom
Italy
Other Countries
Revenue
$
728,321 $ 1,021,240 $ 1,363,167
624,585
180,988
268,856
111,728
$ 1,021,037 $ 1,673,922 $ 2,256,608
485,882
166,800
The Group’s non-current assets other than deferred tax assets, broken down by geographic location of the
assets, are detailed below (in thousands):
Non-current assets excluding deferred tax assets
Italy
United Kingdom
United States
Other Countries
Total
7.
Employees and directors
2020
2021
$
$
915,553 $
338,015
225,137
137,610
1,616,315 $
917,646
372,889
249,529
161,436
1,701,500
Included within employees and directors expenses are (in thousands):
Wages and salaries
Social security costs
Other pension costs
Share-based payments (equity-settled) (1)
Share-based payments (cash-settled)
Share-based payments (employment related taxes)
Total employees and directors expenses
2019 (1)
2021
2020
$ 206,092 $ 307,527 $ 344,587
56,277
6,393
219,933
(9,265 )
(14,501 )
$ 423,209 $ 646,293 $ 603,424
42,972
4,161
168,347
28,041
95,245
36,314
2,569
170,145
10,675
(2,586 )
These amounts are included within Selling, general and administrative expenses in the Consolidated
statement of operations.
(1) Refer to Note 2, Significant accounting policies, within our Consolidated financial statements included elsewhere in this Annual
Report for detail on this revision oof prior year comparatives.
F-43
Notes to the Consolidated financial statements (continued)
8.
Selling, general and administrative expenses
Included within Selling, general and administrative expenses are (in thousands):
Demand generation expenses
Technology expenses
Depreciation and amortization
Share-based payments (1)
General and administrative
Other items
Selling, general and administrative expenses
2019
2021
2020
$ 151,350 $ 198,787 $ 291,821
131,408
251,198
196,167
591,644
18,730
$ 889,421 $ 1,351,483 $ 1,480,968
115,227
217,223
291,633
504,346
24,267
84,207
113,591
178,234
345,665
16,374
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
Demand generation expense is primarily comprised of fees that the Group pays its various media and
affiliate partners. Technology expense primarily relates to maintenance and operations of Farfetch platform features
and services, as well as hosting and infrastructure expenses. General and administrative expenses consist primarily
of office and warehousing costs, non-technology headcount, marketing and other digital platform operations costs.
Other items primarily consist of transaction-related legal and advisory costs.
9.
Items held at fair value and remeasurements
Included within gain/(loss) on items held at fair value and remeasurements are (in thousands):
Change on remeasurement of put and call option and contingent
consideration liabilities
Change in fair value of convertible note embedded derivatives
Change in fair value of acquisition related consideration
Fair value remeasurement of previously held equity interest
Gains/(losses) on items held at fair value and
remeasurements
$
$
2019
2020
2021
43,247
$
-
(21,526 )
-
(288,853 ) $
(2,354,720 )
-
-
384,122
1,638,837
-
784
21,721
$
(2,643,573 ) $
2,023,743
Change on remeasurement of put and call option and contingent consideration liabilities
The change on remeasurement of put and call option and contingent consideration liabilities during the year
ended December 31, 2021 includes a $156.1 million gain on the remeasurement of liabilities arising as a result of the
partnership with the Chalhoub, and a $246.1 million gain on remeasurement of the put and call option resulting from
the strategic agreement with Alibaba and Richemont and a $3.9 million loss on remeasurement of the put option
relating to the shares that the Company does not own in Alanui.
In addition, during the year ended December 31, 2021, as a result of the acquisition of 60 percent of Palm
Angels S.r.l. (“Palm Angels”) ordinary share capital, the Company entered into an option agreement over the 40
percent of the share capital that it does not own. As a result, the change on remeasurement of put and call option and
contingent consideration liabilities during the year ended December 31, 2021 also includes a $11.3 million loss on
the remeasurement of the put and call option over the 40 percent of the share capital in Palm Angels that New
Guards does not own. There is also a $2.8 million loss on remeasurement of the contingent consideration relating to
this transaction.
The change on remeasurement of put and call option and contingent consideration liabilities during the year
ended December 31, 2020 includes a $287.9 million loss on the remeasurement of put and call option liabilities
arising as a result of the partnership with Chalhoub and a $0.9 million loss on the remeasurement of put and call
option liabilities arising as a result of the acquisition of CuriosityChina.
F-44
Notes to the Consolidated financial statements (continued)
The change on remeasurement of put and call option and contingent consideration liabilities during the year
ended December 31, 2019 includes a $44.8 million gain on the remeasurement of liabilities arising as a result of the
partnership with Chalhoub and a $1.6 million loss on the remeasurement of put and call option liabilities arising as a
result of the acquisition of CuriosityChina.
The valuation of the Chalhoub liability is based on the Monte Carlo simulation, in which the share price of
Farfetch is the significant variable. The valuation of the put and call option liability relating to the strategic
agreement with Alibaba and Richemont is calculated using the present value of future expected payments method,
with the Farfetch share price as the significant variable. The valuations of the put and call option liability relating to
Palm Angels and the contingent consideration liabilities are calculated using the present value of future expected
payments method, with management's internal forecasts and the relevant weighted average cost of capital as the
significant variables. For further information regarding the valuation of these instruments, refer to Note 28,
Financial instruments and financial risk management.
Fair value remeasurement of previously held equity interest
The fair value remeasurement of previously held equity interest relates to New Guards step-acquisition of
Alanui (see Note 5, Business combinations for further detail).
Change in fair value of convertible note embedded derivatives
The change in fair value of convertible note embedded derivatives during the year ended December 31,
2021 includes a $484.5 million gain on remeasurement of the embedded derivative on the $250.0 million convertible
senior notes issued in February 2020 (“February 2020 Notes”), a $724.7 million gain on remeasurement of the
embedded derivative on the $400.0 million convertible senior notes issued in April 2020 (“April 2020 Notes”) and a
$429.6 million gain on remeasurement of the embedded derivative on the $600.0 million convertible senior notes
issued in November 2020 to Alibaba and Richemont. The $484.5 million gain on remeasurement of the embedded
derivative on the $250.0 million convertible note includes a $78.5 million gain on remeasurement relating to the
early conversion of these notes. The valuations of derivatives relating to the February 2020 Notes and April 2020
Notes are based on the Black Scholes model. The valuation of the derivative related to the $600.0 million
convertible senior notes issued in November 2020 is based on the Binomial model. In both the Black Scholes and
Binomial models, the share price is the significant variable. The other assumptions in the Black Scholes and
Binomial models are the risk-free rate and volatility.
The change in fair value of convertible note embedded derivatives during the year ended December 31,
2020 includes a $978.3 million loss on remeasurement of the embedded derivative on the $250.0 million convertible
senior notes issued in February 2020 (“February 2020 Notes”), a $1,104.0 million loss on remeasurement of the
embedded derivative on the $400.0 million convertible senior notes issued in April 2020 (“April 2020 Notes”) and a
$272.4 million loss on remeasurement of the embedded derivative on the $600.0 million convertible senior notes
issued in November 2020 to Alibaba and Richemont. The valuations of derivatives relating to the February 2020
Notes and April 2020 Notes are based on the Black Scholes model. The valuation of the derivative related to the
$600.0 million convertible senior notes issued in November 2020 is based on the Binomial model. In both the Black
Scholes and Binomial models, the share price is the significant variable. The other assumptions in the Black Scholes
and Binomial models are the risk-free rate and volatility. For further information regarding the valuation of these
instruments, refer to Note 28, Financial instruments and financial risk management.
On May 17, 2021, one of the private investors of the $250.0 million convertible senior notes issued in
February 2020 converted $39.1 million of their total $125.0 million convertible notes. This equated to 31 percent of
their overall convertible notes holding. This early conversion was settled in shares in line with the indenture
agreement. As a result, the embedded derivative relating to the portion of notes that were converted was revalued to
a fair value of $90.6 million on the conversion date and the gain on revaluation was recognized within Gain/(loss)
on items held at fair value and remeasurements in the Consolidated statement of operations, this amounted to $41.7
million.
F-45
Notes to the Consolidated financial statements (continued)
On August 6, 2021, the same private investor converted the remaining $85.9 million of their total $125.0
million convertible notes. This early conversion was settled in shares in line with the indenture agreement. As a
result, the embedded derivative relating to the portion of notes that were converted was revalued to a fair value of
$241.6 million on the conversion date and the gain on revaluation was recognized within Gain/(loss) on items held
at fair value and remeasurements in the Consolidated statement of operations, this amounted to $30.1 million.
On October 1, 2021, the other private investor of the convertible senior notes issued in February 2020
converted $75.0 million of their total $125.0 million convertible notes. This equated to 60 percent of their overall
convertible notes holding. This early conversion was settled in shares in line with the indenture agreement. As a
result, the embedded derivative relating to the portion of notes that were converted was revalued to a fair value of
$152.8 million on the conversion date and the gain on revaluation was recognized within Gain/(loss) on items held
at fair value and remeasurements in the Consolidated statement of operations, this amounted to $6.7 million.
For further information regarding the valuation of these instruments, refer to Note 28, Financial
instruments and financial risk management.
10. Finance income and costs
Included within Finance income and Finance costs are (in thousands):
Unrealized exchange gains
Interest on cash and cash equivalents
Finance income
Unrealized exchange losses
Interest on leases
Convertible note interest (1)
Other interest expense
Finance costs
$
2019
2020 (1)
2021
22,856 $
11,526
34,382
19,729 $
4,970
24,699
9,289
3,310
12,599
(10,977 )
(3,472 )
-
(4,783 )
(19,232 )
(39,940 )
(6,684 )
(41,851 )
(2,819 )
(91,294 )
(9,135 )
(9,137 )
(67,638 )
(531 )
(86,441 )
Net finance income/(costs)
$
15,150
$
(66,595 )
$
(73,842 )
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
F-46
Notes to the Consolidated financial statements (continued)
11. Material gain or loss
The Group has identified a number of items which are material due to the significance of their nature and/or
amount. These are listed separately here to provide a better understanding of the financial performance of the group
(in thousands):
Research and development costs expensed
Amortization - Intangible assets
Depreciation - Property, plant and equipment
Depreciation - Right-of-use assets
Impairment losses on intangible assets
Impairment losses on right-of-use assets
Transaction related legal and advisory expenses
(Losses)/gains on items at present value remeasurements
Gains related to conversion of convertible notes
(Losses)/gains from fair value remeasurements of convertible
note embedded derivatives
Change in fair value of acquisition related consideration
12.
a)
Taxation
Income tax expense/(benefit) (in thousands)
Current tax:
Corporate tax
Prior year adjustments
Total current tax
Total deferred tax benefit, net
Income tax expense/(benefit)
Note
2020
(22,484 )
2019
(15,777 )
2021
(13,599 )
16 (85,055 ) (177,857 ) (201,634 )
(15,533 )
17 (8,972 )
(34,031 )
18 (19,564 )
(11,779 )
-
16
-
-
18
(18,596 )
(15,374 )
9 (43,247 ) 288,853 384,122
78,467
(12,094 )
(27,272 )
(36,269 )
(2,234 )
(24,598 )
-
-
9
9 (21,526 )
- (2,354,720 ) 1,560,370
-
-
2019
2020
2021
$ 15,676 $ 32,430 $ 33,105
3,567
36,672
(33,670 )
3,002
(96 )
32,334
(46,768 )
(1,652 )
14,024
(12,862 )
1,162 $ (14,434 ) $
$
b)
Reconciliation of the effective tax rate
The tax on the Group’s (loss)/profit before tax differs from the theoretical amount that would arise using the
weighted average tax rate applicable to profit of the consolidated entities as follows (in thousands):
2019 (1)(2)
$ (392,338 )
(74,544 )
2020 (1)(2)
$ (3,330,057 )
(632,711 )
2021
$ 1,473,613
279,986
(Loss)/profit before tax (1)
Tax at the UK tax rate of 19.00% (2020: 19.00%, 2019:19.00%)
Tax effects of:
(4,414 )
Sundry non-taxable income
6,338
Sundry non-taxable expense
-
Non-taxable items evaluated at fair value
3,853
Taxes paid overseas and rate difference
-
Adjustments in respect of change in tax rates
(1,652 )
Adjustments in respect of prior year
71,581
Unrecognized deferred tax assets
1,162
Income tax expense/(benefit)
(2) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
(3) Previously reported comparatives for the years ended December 31, 2020 and 2019 have been re-presented for comparability with
(9,555 )
22,262
548,524
5,816
-
(96 )
51,326
(14,434 )
$
$
$
(45,567 )
20,493
(311,379 )
(6,260 )
(937 )
3,567
63,099
3,002
condensed disclosure for the year ended December 31, 2021.
F-47
Notes to the Consolidated financial statements (continued)
During the preparation of the Group’s condensed Consolidated financial statements for the three months
ended March 31, 2021, a misstatement of $17.4 million was identified in relation to the accounting for interest expense
reported in our results for the year ended December 31, 2020, relating to a calculation error. During the preparation
of the Group’s Consolidated financial statements for the year ended December 31, 2021, an understatement of $19.8
million was identified in relation to the accounting for share-based compensation expense reported in our results for
the year ended December 31, 2019, relating to a calculation error. The tax impact of both misstatements have been
reflected in the reconciliation table above.
The UK corporation tax rate applicable from April 1, 2020 is 19% therefore, the Group has used a tax rate of
19% for the 2021 financial year. An increase in the main UK corporation tax rate to 25% from fiscal year 2023,
announced in the Budget on March 3, 2021, has been substantially enacted therefore, in calculating UK
unrecognized deferred tax assets on tax losses, the calculation has used the enacted tax rates.
The tax on items presented within other comprehensive (loss)/income is $nil (2020 and 2019: $nil)
F-48
Notes to the Consolidated financial statements (continued)
13.
Loss per share
Basic (loss)/earnings per share is computed using the weighted-average number of outstanding shares during
the year. Diluted loss per share is computed using the weighted-average number of outstanding shares and excludes
all potential shares outstanding during the year, as their inclusion would be anti-dilutive. The Group’s potential
shares consist of incremental shares issuable upon the assumed exercise of share options and warrants, the
incremental shares issuable upon the assumed vesting of unvested share awards, potential shares issuable on the
conversion of the convertible loan notes and potential shares issuable on the conversion of certain put-call options.
The calculation of basic (loss)/earnings per share and diluted loss per share is as follows (in thousands):
In $ thousands, except share and per share data
Diluted (loss)/income
(Loss)/profit after tax attributable to equity holders of the parent:
$
Used in calculating basic (loss)/earnings per share
Adjustments:
Convertible note interest
Gain on items held at fair value and remeasurements
Loss after tax attributable to equity holders of the parent used
in calculating diluted loss per share
$
2019 (1)
2020 (1)
2021
(405,109 ) $ (3,333,171 ) $ 1,466,487
-
-
-
-
67,638
(2,041,013 )
(405,109 ) $ (3,333,171 ) $
(506,888 )
Weighted average number of basic shares
Dilutive securities:
Options
Restricted Stock Units (RSUs)
Other awards
Acquisition related deferred shares
February 2020 notes
May 2020 notes
November 2020 notes
Chalhoub liability
Farfetch China Holdings Ltd liability
Weighted average number of dilutive shares
318,843,239 343,829,481 364,696,712
-
-
-
- 20,257,787
8,014,788
-
1,200,105
-
180,369
- 14,216,896
- 24,794,680
- 18,583,620
3,984,014
-
- 16,429,024
318,843,239 343,829,481 472,357,995
-
-
-
-
-
(Loss)/earnings per share attributable to equity holders of the
parent:
Basic
Diluted
$
$
(1.27 ) $
(1.27 ) $
(9.69 ) $
(9.69 ) $
4.02
(1.07 )
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
Potential ordinary shares excluded from Diluted earnings per share as their conversion would have an
antidilutive effect are as follows (in thousands):
Convertible Notes
Employee options & RSU's
Contingent consideration
Put Call options
2019
-
9,105
-
-
2020
63,758
40,890
-
-
2021
-
1,114
136
3,786
In the year ended December 31, 2019, all warrants above were exercised.
F-49
Notes to the Consolidated financial statements (continued)
Refer to Note 9, Items held at fair value and remeasurements for further detail on the Put Call options and
Convertible Notes included above.
14.
Inventories
Inventories as at December 31 comprised the following (in thousands):
Finished goods
Obsolete stock provision
Total inventories
2020
2021
$ 167,225 $ 278,345
(22,681 )
$ 145,309 $ 255,664
(21,916 )
The total cost of inventory recognized as an expense in the consolidated statement of operations was $516.2
million for the year ended December 31, 2021 (2020: $411.7 million, 2019: $232.6 million). The total provision
against inventory in order to write down the balance to net recoverable value was $22.7 million for the year ended
December 31, 2021 (2020: $ 21.9 million).
15.
Trade and other receivables
Trade and other receivables comprised the following at December 31 (in thousands):
Non-current
Other receivables
Non-current other receivables
Current
Trade receivables
Other current receivables
Sales taxes
Allowance for expected credit losses
Prepayments and accrued income
Current trade and other receivables
2020
2021
$
$
58,081 $
58,081 $
31,225
31,225
$
49,833 $
63,046
179,964
117,234
(5,208 )
19,670
$ 209,946 $ 374,706
123,492
26,642
(4,062 )
14,041
Non-current other receivables is primarily comprised of withholding tax relating to share-based
compensation, deposits for office leases and services and operations-related deposits, which the Group is not
expecting to recover within the next twelve months.
Other current receivables primarily relate to advances to boutique partners, first-party product suppliers and
other suppliers. Included within Other current receivables is $2.3 million of restricted cash (2020: $nil).
Sales tax receivables relate to recoverable VAT arising on indirect exports, including between UK and
Europe, where we have adapted our transactional flows in response to the formal withdrawal of the United Kingdom
from the European Union on January 31, 2020.
The Group has assessed its expected credit loss (“ECL”) estimate in line with the requirements of IFRS 9 –
Financial instruments (“IFRS 9”). As part of this assessment, the Group has performed a recoverability assessment
of its outstanding Trade and other receivables at the reporting date and, where appropriate, made suitable
adjustments to allowances and provisions. In the year ended December 31, 2021, the charge relating to expected
credit losses included within the sales, general and administration in the Consolidated statement of operations is $0.9
million (2020: $4.3 million).
F-50
Notes to the Consolidated financial statements (continued)
16.
Intangible assets
Intangible assets consist of the following (in thousands):
Brand,
trademarks &
domain names
Goodwill
Customer
relationships
Development
costs
Total
Cost
At January 1, 2020
Additions
Additions acquired through business
combinations (1)
Foreign exchange movements
At December 31, 2020
Additions
Additions acquired through business
combinations (1)
Disposals
Foreign exchange movements
At December 31, 2021
Accumulated amortization and impairment
At January 1, 2020
Amortization for year
Impairment for year
Foreign exchange movements
At December 31, 2020
Amortization for year
Impairment for year
Disposals
Foreign exchange movements
At December 31, 2021
Net book value
At December 31, 2020
At December 31, 2021
(1) Refer to Note 5, Business combinations.
Intangible assets with definite useful lives
$ 341,067 $ 965,317 $
14,000
-
6,010 $ 163,933 $ 1,476,327
89,282 103,282
-
15,474
(20 )
356,521
-
4,826
4,265
988,408
131,161
27,006
-
(1,242 )
7,279
(3 )
(2,116 )
382,285 1,124,729
-
-
-
-
-
-
-
-
-
-
(57,014 )
(125,325 )
(36,269 )
1,593
(217,015 )
(132,592 )
(11,779 )
3
1,115
(360,268 )
-
850
-
216
20,300
5,311
6,860 253,431 1,605,220
395 118,661 250,217
1,692
-
(52 )
45,876
(14 )
(3,532 )
8,895 381,858 1,897,767
9,899
(11 )
(122 )
(54,560 ) (113,360 )
(1,786 )
(52,498 ) (177,857 )
(34 )
(36,269 )
-
-
1,594
1,807
(1,806 )
(3,626 ) (105,251 ) (325,892 )
(68,591 ) (201,634 )
(11,779 )
(27 )
1,222
(4,141 ) (173,701 ) (538,110 )
(451 )
-
-
(64 )
-
(30 )
171
771,393
356,521
$ 382,285 $ 764,461 $
3,234 148,180 1,279,328
4,754 $ 208,157 $ 1,359,657
Included within Development costs is $37.8 million (2020: $36.6 million) of assets that are under the course
of construction. Amortization of these assets will commence once they are available for use.
As of December 31, 2021, Brands, Trademarks and domain names primarily include: Off-White brand with
a net carrying amount of $415.1 million and a remaining life of 4 years, Stadium Goods brand with a net carrying
amount of $93.8 million and a remaining life of 12 years, Marcelo Burlon County of Milan brand with a net carrying
amount of $59.3 million and a remaining life of 13.6 years, Palm Angels brand with a net carrying amount of $125.3
million and a remaining life of 9.6 years, Palm Angels license with a net carrying amount of $25.6 and a remaining
life of 4.6 years, Ambush brand with a net carrying amount of $4.1 million and a remaining life of 8.3 years and
Heron Preston brand with a net carrying amount of $21.3 million and a remaining life of 5.6 years. New Guards
Group owned the license to Palm Angels license since 2019, however the Brand was acquired in 2021. Refer to Note
3 Critical accounting judgments and key sources of estimation uncertainty for more information on the Palm Angels
Brand acquisition.
F-51
Notes to the Consolidated financial statements (continued)
Development costs relate to development expenses that meet the capitalization criteria under IAS 38 -
Intangible Assets, acquired software in business combinations, and includes the development of internal software
and technologies related to the enhancement of the Group's Digital Platform.
Amortization for all intangible assets is recognized in Selling, general and administrative expenses within
the Consolidated statement of operations.
During the year ended December 31, 2021 impairment expense of $11.8 million was recognized primarily
relating to a reduction in forecasted sales, which decreased the value-in-use of one of the smaller intangible brand
assets within the New Guards portfolio and is associated with the Brand Platform reportable operating segment.
The impairment charge of $36.3 million on intangible assets for the year ended December 31, 2020, is
primarily comprised of a $30.5 million charge related to a reduction in the carrying value of one of the smaller
intangible brand assets within New Guards portfolio. The remaining $5.8 million impairment charge on intangible
assets related to the closure of our direct consumer-facing channels on JD.com and the associated intangible asset
held for the Farfetch Level 1 access button.
Intangible assets with indefinite useful lives
Goodwill reflects the amount of consideration in excess of the fair value of net assets acquired in business
combinations. The Group tests goodwill annually for impairment, or more frequently if there are indications that
goodwill might be impaired. Goodwill has been allocated to the following CGUs or group of CGUs. New
acquisitions Allure and Luxclusif have been allocated to the Marketplace CGU. JBUX has been allocated to Farfetch
Platform Solutions. For details regarding additions to goodwill refer to Note 5, Business combinations.
The goodwill amounts for each CGU or group of CGU consists of the following at December 31 (in
thousands):
CGU
Marketplace (FF.com)
Browns - Platform
CuriosityChina
Brand Platform - New Guards
Farfetch Platform Solutions
Total Goodwill
2020
2021
$ 153,086 $ 176,776
19,015
19,015
3,039
3,039
181,381
181,381
2,074
—
$ 356,521 $ 382,285
In finalizing the purchase price allocation of the New Guards acquisition, we determined a portion of the
goodwill ($17.7 million) should be allocated to the Marketplace CGU as synergies arising from the acquisition will
benefit the Group’s digital business. Similarly, when finalizing the Ambush acquisition, we allocated $4.4 million
of the goodwill to the Marketplace CGU and $6.3 million to the Brand Platform.
The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions
for the value in use include (i) expected future revenue growth rates, including the terminal growth rate; (ii)
anticipated gross profit margins (iii) anticipated operating margins; and (iv) the discount rates to be applied to the
estimated future cash flows. Management estimates discount rates using pre-tax rates that reflect current market
assessments of the time value of money and the risks specific to the CGUs and the group of units. The growth rates
are based on revenue growth and cost of revenue forecasts.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by
management for the next three years. Forecasts are extended to five or eight years using management’s best
estimates, according to the nature and maturity of each CGU. The Group believes this period range is appropriate to
capture the high growth rates seen in the markets in which our CGUs operate.
The key assumptions for the value in use calculations are the revenue growth rates and the pre-tax discount
rates, plus gross profit margin for selected CGUs. The Group extrapolates the cash flows in the fifth or eighth year
F-52
Notes to the Consolidated financial statements (continued)
based on an estimated growth rate of 2% (2020: 2%). This rate does not exceed the average long-term growth rate
for the relevant markets. The pre-tax discount rate used to discount the forecast cash flows ranges from 8.9% to
10.9% (2020: 9.6% to 11.2%). The pre-tax discount rate applied is derived from a market participant’s estimated
weighted average cost of capital.
The assumptions used in the calculation of the Group’s weighted average cost of capital are benchmarked to
externally available data.
Management has performed sensitivities on key assumptions and based upon these believe that there are no
indicators of impairment.
The recoverable amount of each CGU would equal its carrying amount if the key assumptions were to
change as follows:
Budgeted annual revenue growth (change in pp)
Post-tax discount rate (change in pp)
Budgeted gross profit margin (change in pp)
Long term growth rate (change in pp)
Marketplace
(FF.com)
Browns –
Platform
CuriosityChina
Brand
Platform –
New
Guards
(5.4 )
1.4
(1.1 )
(1.4 )
(3.3 )
1.2
(0.5 )
(3.6 )
(0.7 )
0.2
(3.5 )
(0.3 )
(13.6 )
3.8
(11.9 )
(3.7 )
F-53
Notes to the Consolidated financial statements (continued)
17.
Property, plant and equipment
Property, plant and equipment comprised the following (in thousands):
Cost
At January 1, 2020
Additions
Additions acquired through business
combinations (1)
Disposals
Transfers
Foreign exchange movements
At December 31, 2020
Additions
Additions acquired through business
combinations (1)
Disposals
Transfers
Foreign exchange movements
At December 31, 2021
Accumulated depreciation and
impairment
At January 1, 2020
Depreciation for year
Impairment for year
Disposals
Transfers
Foreign exchange movements
At December 31, 2020
Depreciation for year
Disposals
Foreign exchange movements
At December 31, 2021
Net book value
At December 31, 2020
At December 31, 2021
Freehold
land
Leasehold
improvements
Fixtures and
fittings
Motor
vehicles
Plant,
machinery
and
equipment
Totals
$ 17,818 $
-
43,135 $ 12,968 $
4,799
18,039
193 $ 16,944 $ 91,058
- 4,228 27,066
-
-
-
1,751
19,569
-
-
-
-
(1,545 )
18,024
-
-
-
-
-
-
-
-
-
-
-
1,052
-
(174 )
3,396
65,448
12,264
6
(3,219 )
(2,383 )
(2,851 )
69,265
(10,517 )
(5,175 )
(620 )
-
77
(792 )
(17,027 )
(6,615 )
3,095
919
(19,628 )
-
(80 )
513
995
19,195
8,167
43
(1,045 )
85
(1,370 )
25,075
(4,660 )
(2,605 )
(135 )
83
(14 )
(369 )
(7,701 )
(3,589 )
1,008
446
(9,836 )
313
-
(212 )
-
-
(533 )
8 1,146
1,365
(292 )
(194 )
7,296
201 21,886 126,299
108 7,895 28,434
-
159
208
- (1,037 )
(5,301 )
- 2,305
7
(6,764 )
(991 )
(7 )
302 30,217 142,883
-
-
-
(8 )
(100 ) (7,782 ) (23,059 )
(22 ) (4,293 ) (12,094 )
(757 )
(2 )
272
189
212
150
(1,791 )
(621 )
(130 ) (12,359 ) (37,217 )
(29 ) (5,300 ) (15,533 )
5,101
998
1,829
457
(152 ) (16,204 ) (45,820 )
-
7
19,569
$ 18,024 $
11,494
48,421
49,637 $ 15,239 $
71 9,527 89,082
150 $ 14,013 $ 97,063
(1) See Note 5, Business combinations for details
Included within Leasehold improvements is $9.2 million (2020: $1.7 million) of assets that are under the
course of construction. Depreciation will commence once they are available for use.
Depreciation for all property, plant and equipment is recorded in Selling, general and administrative
expenses within the Consolidated statement of operations.
The impairment charge of $0.8 million during the year ended December 31, 2020, primarily related to a
reduction in the carrying value of Leasehold improvements, Fixtures and fittings, and Plant, machinery and
equipment at one of our smaller retail locations and is associated with the In-Store reportable segment. There were
no impairment losses in the year ended December 31, 2021.
F-54
Notes to the Consolidated financial statements (continued)
18.
Right-of-use assets and lease liabilities
The Group's leasing activities:
The Group leases various offices, retail stores and cars. Lease contracts are typically made for fixed periods
of three to twelve years but may have extension options. Lease terms are negotiated on an individual basis and
contain a wide range of different terms and conditions.
Low-value assets comprise IT-equipment and small items of office furniture.
Right-of-use assets comprised the following (in thousands):
2020
At January 1, 2020
Additions
Remeasurements
Depreciation charge for the year
Impairment charge for the year
Foreign exchange
At December 31, 2020
2021
At January 1, 2021
Additions
Remeasurements
Depreciation charge for the year
Foreign exchange
At December 31, 2021
Property Vehicles
Totals
$ 114,618 $
90,240
13
(27,048 )
(2,234 )
3,149
$ 178,738 $
$ 178,738 $
42,931
15,242
(33,727 )
(8,095 )
$ 195,089 $
558 $
162
(8 )
(224 )
-
1
489 $
489 $
300
1
(304 )
(26 )
460 $
115,176
90,402
5
(27,272 )
(2,234 )
3,150
179,227
179,227
43,231
15,243
(34,031 )
(8,121 )
195,549
During the year ended December 31, 2021, there was no impairment charge recognized in relation to right-
of-use assets. During the year ended December 31, 2020, the impairment charge of $2.2 million was primarily
comprised of a $1.5 million reduction in the carrying value of the right-of-use assets at one of our smaller retail
locations and is associated with the In-Store reportable operating segment. The remaining $0.7 million relates to a
reduction in the carrying value of corporate right-of-use assets associated with the impairment of a smaller
intangible brand asset within the New Guards portfolio, and is associated with the Brand Platform reportable
operating segment.
Lease liabilities comprised the following as at December 31 (in thousands):
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
2020
2021
$
$
26,128 $
165,275
191,403 $
33,594
180,915
214,509
During the year ended December 31, 2021, the Group paid $26.3 million (2020: $19.1 million) in principal
elements of lease payments.
During the year ended December 31, 2021, a charge of $6.7 million (2020: $6.4 million) was recognized in
relation to short-term and low value leases.
F-55
Notes to the Consolidated financial statements (continued)
19.
Investments
In the year ended December 31, 2021, the investments of the Group were comprised of minority equity
interests and convertible loan notes. In the year ended December 31, 2020, the investments of the Group were
comprised of minority equity interests, convertible loan notes and senior secured promissory loan notes. During the
year ended December 31, 2021, the Group made a $9.0 million investment in The Diem Association. The details of
investments are as follows (in thousands):
Investments -
held at fair
value through
other
comprehensive
income
(FVTOCI)
Investments -
held at
amortized cost
Investments -
held
at fair value
through profit
or
loss (FVTPL)
500
2,500
-
-
3,000
9,787
-
12,787
10,588 $
-
-
(10,588 )
-
-
-
- $
At January 1, 2020
Additions
Impairment
Acquisition of intangible asset
At December 31, 2020
Additions
Impairment
At December 31, 2021
Investments in associates
$
$
5,141 $
372
(235 )
-
5,278
40
(168 )
5,150 $
The table below (in thousands) illustrates the summarized financial information of the Group’s investments
in Farfetch Finance Limited and Alanui (up to March 1, 2021). The Group’s shareholdings in Alanui and its
principal activities can be found in Note 32, Group information. In addition, for further detail on Alanui refer to
Note 5, Business Combinations.
At January 1, 2020
Dividends received from associate
Share of loss after tax
Foreign exchange
At December 31, 2020
Step acquisition
Share of loss after tax
At December 31, 2021
At December 31, 2021, no impairment indicators were identified.
$
$
2,466
(60 )
(74 )
(13 )
2,319
(2,198 )
(52 )
69
F-56
Notes to the Consolidated financial statements (continued)
20.
Cash and cash equivalents
For the purpose of presentation in the Consolidated statement of cash flows and Consolidated statement of
financial position, cash and cash equivalents includes cash held in banks, money market funds such as call deposits
held with financial institutions, short-term deposits including highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value, and cash amounts held by payment service providers. Cash and cash equivalents consist of
the following at December 31 (in thousands):
Cash held in banks
Money market funds
Short-term deposits
Amounts held by payment service providers
Cash and cash equivalents
21.
Short-term investments
2020
173,206 $
1,011,330
333,353
55,532
1,573,421 $
2021
141,130
810,453
353,539
58,006
1,363,128
$
$
The short-term investment entered into during the year ended December 31, 2021 relates to variable Net
Asset Value (“NAV”) investments, representing cash investments in variable money market instruments on the basis
of a mark-to-market valuation of an underlying portfolio of money market instruments. These do not meet the
definition of cash and cash equivalents as they are not readily convertible into known amounts of cash and are
subject to significant risk of changes in value. All changes in fair value of these investments are recognized in the
Consolidated statement of operations. Short-term investments consist of the following at December 31 (in
thousands):
Short-term investments
Short-term investments
22.
Trade and other payables
2020
2021
$
$
- $
- $
99,971
99,971
Trade and other payables consisted of the following at December 31 (in thousands):
Trade payables
Other payables
Social security and other taxes
Deferred revenue
Accruals
Trade and other payables
2020
2021
$
$
277,827 $
16,642
76,820
30,957
263,898
666,144 $
342,938
22,208
69,053
60,486
311,721
806,406
Trade Payables primarily relates to supplier invoices for marketing, shipping, inventory, software and
hosting related expenses.
23.
Borrowings
Convertible Notes
On February 5, 2020, the Group issued $250.0 million total aggregate principal amount of 5.00%
convertible senior notes due December 31, 2025 (“February 2020 Notes”) in a private placement to private
investors. On April 30, 2020, the Group issued $400.0 million total aggregate principal amount of 3.75% convertible
senior notes due May 1, 2027 (“April 2020 Notes”) in a private placement to qualified institutional investors
F-57
Notes to the Consolidated financial statements (continued)
pursuant to Rule 144A of the Securities Act of 1933, as amended. On November 17, 2020, the Group issued $600.0
million total aggregate principal amount of 0.00% convertible senior notes due November 15, 2030 (“November
2020 Notes”) to Alibaba and Richemont. The total net proceeds from these offerings were $1,240.4 million, after
deducting $9.6 million of debt issuance costs in connection with these notes.
The February 2020, April 2020 and November 2020 Notes represent senior unsecured obligations of the
Group. With respect to the February 2020 Notes, the interest rate is fixed at 5.00% per annum and is payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, and commenced on March
31, 2020. For the April 2020 Notes, the interest rate is 3.75% per annum and is payable bi-annually in advance on
May 1 and November 1 of each year, and commenced on November 1, 2020. For the November 2020 Notes, the
interest rate is 0.00% per annum.
On May 17, 2021, a total of 3,190,345 shares were issued on conversion of $39.1 million principal amount
of February 2020 Notes. No gain or loss was recognized on conversion. On conversion, non-current borrowings with
a carrying value of $28.4 million and non-current derivative financial liabilities with a fair value of $90.6 million
were reclassified to equity. The increase in equity resulted in an increase to share capital of $0.1 million and to share
premium of $118.9 million.
On August 6, 2021, a total of 7,013,405 shares were issued on conversion of $85.9 million principal
amount of February 2020 Notes. No gain or loss was recognized on conversion. On conversion, non-current
borrowings with a carrying value of $63.1 million and non-current derivative financial liabilities with a fair value of
$241.6 million were reclassified to equity. The increase in equity resulted in an increase to share capital of $0.3
million and to share premium of $304.4 million.
On October 1, 2021, a total of 6,122,250 shares were issued on conversion of $75.0 million principal
amount of February 2020 Notes. No gain or loss was recognized on conversion. On conversion, non-current
borrowings with a carrying value of $55.2 million and non-current derivative financial liabilities with a fair value of
$152.8 million were reclassified to equity. The increase in equity resulted in an increase to share capital of $0.2
million and to share premium of $207.7 million.
February 2020 Notes
Each $1,000 of principal of the February 2020 Notes will initially be convertible into 81.63 shares of the
Group’s common stock, which is equivalent to an initial conversion price of $12.25 per share, in each case, subject
to adjustment upon the occurrence of specified events set forth in the indenture governing such series. Holders of
these notes may convert their notes at their option at any time until the maturity date of December 31, 2025.
Upon conversion of these notes, the Group will pay or deliver, as the case may be, cash, shares of its
common stock or a combination of cash and shares of its common stock, at the Group’s election. If the Group
satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a
combination of cash and shares of its common stock, the amount of cash and shares of common stock, if any, due
upon conversion of the February 2020 Notes, as applicable, will be based on a daily conversion value (as defined in
the indenture governing the applicable series of Convertible Notes) calculated on a proportionate basis for each
trading day in the applicable observation period.
If a change of control (as defined in the indenture) occurs prior to the applicable maturity date, holders of
the February 2020 Notes, as applicable, may require the Group to repurchase all of their notes for cash at a 50%
premium and any unpaid interest, or an equity equivalent based on a pre-set make whole calculation based on the
prevailing share price at the time.
The Group may redeem the February 2020 Notes, in whole, at any time on or after February 5, 2024 at a
price equal to 165% of the principal amount of the February 2020 Notes to be repurchased, plus accrued and unpaid
interest to, but excluding, the repurchase date.
In accordance with the accounting guidance in IFRS 9 on embedded conversion features, the Group valued
and bifurcated the conversion option associated with the February 2020 Notes from the respective host debt
F-58
Notes to the Consolidated financial statements (continued)
instrument, which is referred to as a debt discount, and initially recorded the conversion option at $81.9 million as a
derivative financial liability. The resulting debt discount on the notes is amortized to interest expense at an effective
interest rate of 13.2% over the contractual terms of these notes. The Group allocated $0.8 million of debt issuance
costs to the derivative financial liability component which was expensed immediately to the Consolidated statement
of operations and the remaining $1.7 million of debt issuance costs are amortized to finance costs under the effective
interest rate method over the contractual terms of these notes.
April 2020 Notes
Each $1,000 of principal of the April 2020 Notes will initially be convertible into 61.99 shares of the
Group’s common stock, which is equivalent to an initial conversion price of $16.13 per share, in each case, subject
to adjustment upon the occurrence of specified events set forth in the indenture governing such series. Holders of
these notes may convert their notes after September 30, 2020, if the share price exceeds 130% of the conversion
price consecutively for thirty days prior.
Upon conversion of these notes, the Group will pay or deliver, as the case may be, cash, shares of its
common stock or a combination of cash and shares of its common stock, at the Group’s election. If the Group
satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a
combination of cash and shares of its common stock, the amount of cash and shares of common stock, if any, due
upon conversion of the April 2020 Notes, as applicable, will be based on a daily conversion value (as defined in the
indenture governing the applicable series of Convertible Notes).
If a fundamental change (as defined in the indenture governing these Convertible Notes) occurs prior to the
applicable maturity date, holders of these notes, as applicable, may require the Group to repurchase all of the April
2020 Notes for cash at a repurchase price equal to the principal amount of the April 2020 Notes to be repurchased,
plus accrued and unpaid interest, if any, up to, but excluding, the fundamental change repurchase date. In addition, if
specific corporate events occur prior to the applicable maturity date of the April 2020 Notes, the Group may redeem
the April 2020 Notes in whole, at a cash redemption price equal to the principal amount of the notes to be redeemed,
plus accrued and unpaid interest, if any, up to but excluding, the redemption date. Further, calling any April 2020
Notes for redemption will be subject to a “make-whole” premium and therefore the conversion rate applicable to the
conversion of that note will be increased in certain circumstances if it is converted during a specified period after it
is called for redemption.
In accordance with the accounting guidance in IFRS 9 on embedded conversion features, the Group valued
and bifurcated the conversion option associated with the April 2020 Notes from the host debt instrument, which is
referred to as a debt discount, and initially recorded the conversion option of $113.5 million as a derivative financial
liability. The resulting debt discount on the April 2020 Notes is amortized to finance costs at an effective interest
rate of 9.7% over the contractual terms of these notes. The Group allocated $3.0 million of debt issuance costs to the
derivative financial liability component which was expensed immediately to the Consolidated statement of
operations and the remaining $7.6 million of debt issuance costs are amortized to finance costs under the effective
interest method over the contractual terms of these notes.
The Group may redeem the April 2020 Notes, in whole, at any time on or after May 6, 2024, only if the
share price is 130% of the note conversion price for thirty consecutive trading days prior, in addition to the principal
being subject to “make-whole” conversion rate adjustments. If the Group experiences a fundamental change
triggering event (as defined in the Indenture), the Group might be required by the holders of the April 2020 Notes to
repurchase their notes at a cash repurchase price equal to the principal amount of the April 2020 Notes to be
repurchased, plus accrued and unpaid interest, if any, up to, but excluding, the fundamental change repurchase date.
November 2020 Notes
Each $1,000 of principal of the November 2020 Notes will initially be convertible into 30.97 shares of the
Group’s common stock, which is equivalent to an initial conversion price of $32.29 per share, in each case, subject
to adjustment upon the occurrence of specified events set forth in the indenture governing such series. Holders of
F-59
Notes to the Consolidated financial statements (continued)
these notes may convert their notes at their option at any time until prior to the close of business on the second
scheduled trading day immediately preceding the maturity date of November 15, 2030.
Upon conversion of these shares, depending on the identity of the holder, the Group will pay or deliver, as
the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the
Group’s election. If the Group satisfies its conversion obligation solely in cash or through payment and delivery, as
the case may be, of a combination of cash and shares of its common stock, the amount of cash and shares of
common stock, if any, due upon conversion of the notes, as applicable, will be based on a daily conversion value (as
defined in the indenture governing the applicable series of Convertible Notes).
If certain events occur that constitute a “fundamental change” (as defined in the indenture governing the
terms of the November 2020 Notes), holders of the November 2020 Notes will have the right to require the Group to
repurchase all or some of their November 2020 Notes for cash at a repurchase price equal to 100% of their principal
amount, plus all accrued and unpaid special interest, if any, up to, and including, the maturity date. The Group will,
under certain circumstances, increase the conversion rate for holders who convert November 2020 Notes in
connection with a fundamental change.
Alibaba and Richemont may require the Group to repurchase all or part of their respective November 2020
Notes on June 30, 2026 at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased,
plus accrued and unpaid special interest, if any, up to, but excluding, such repurchase date.
The Group will not be able to redeem the November 2020 Notes prior to November 15, 2023, except in the
event of certain tax law changes. On or after November 15, 2023, the Group may redeem, for cash, all or part of the
relevant November 2020 Notes if the last reported sale price of its Class A ordinary shares has been at least 130%
(or 200%, if over 5% of the relevant November 2020 Notes are held at the time by Alibaba or Richemont) of the
conversion price then in effect for at least twenty trading days (whether or not consecutive) during any thirty
consecutive trading day period (including the last trading day of such period) ending on, and including, the trading
day immediately preceding the date on which the Group provides notice of the redemption, at a redemption price
equal to 100% of the principal amount of the November 2020 Notes to be redeemed, plus accrued and unpaid
special interest, if any, up to, but excluding, the redemption date.
In accordance with the accounting guidance in IFRS 9 on embedded conversion features, the Group valued
and bifurcated the conversion option associated with the November 2020 Notes from the host debt instrument,
which is referred to as a debt discount, and initially recorded the conversion option of $446.0 million as a derivative
financial liability. The resulting debt discount on the November 2020 Notes is amortized to finance costs at an
effective interest rate of 14.9% over the contractual terms of these notes. The effective interest rate previously
disclosed in our Annual Report on Form 20-F for the year ended December 31, 2020, was updated as a result of the
revision referred to in Note 2, Significant accounting policies. The Group allocated $12.2 million of debt issuance
costs to the derivative financial liability component which was expensed immediately to the Consolidated statement
of operations and the remaining $4.2 million of debt issuance costs are amortized to finance costs under the effective
interest method over the contractual terms of these notes.
The convertible borrowings are presented in the Consolidated statement of financial position as follows (in
thousands):
At January 1
Face value of notes issued
Value of embedded derivatives
Transaction costs
Interest expense
Interest paid
Conversion of February 2020 Notes
Total non-current borrowings
2020 (1)
2021
$
$
- $
1,250,000
(641,448 )
608,552
(13,539 )
41,851
(19,075 )
-
617,789 $
617,789
-
-
617,789
-
67,638
(22,950 )
(146,673 )
515,804
F-60
Notes to the Consolidated financial statements (continued)
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The value of the three conversion options discussed above are subsequently remeasured at fair value at
each reporting date, and the changes in the fair value are recorded in the Consolidated statement of operations within
the gain/(loss) on items held at fair value and remeasurements line. The fair values of the embedded derivatives are
determined using an option pricing model, using assumptions based on market conditions at the reporting date. For
further details refer to Note 28, Financial instruments and financial risk management. For the year ended December
31, 2021, the Group recorded a fair value gain on remeasurement of $1,638.8 million (2020: loss on remeasurement
of $2,354.7 million) related to the decrease in the fair value of these conversion options mainly as a result of the
share price decreasing from $63.81 to $33.43.
24.
Provisions
Provisions consist of the following (in thousands):
Dilapidations
provision
Share-based
payments
employment
taxes
provision
Provision
for
withholding
taxes
Other
provisions Total
Current liabilities
At January 1, 2020
Additional provision in the year
Release of provision in the year
Utilized provision in the year
Transfer from non-current provisions
At December 31, 2020
Additional provision in the year
Release of provision in the year
Utilized provision in the year
Transfer from non-current provisions
Foreign exchange
At December 31, 2021
Non-current liabilities
At January 1, 2020
Additional provision in the year
Transfer to current provisions
Release of provision in the year
Utilized provision in the year
Foreign exchange
At December 31, 2020
Additional provision in the year
Transfer to current provisions
Release of provision in the year
Utilized provision in the year
Foreign exchange
At December 31, 2021
$
$
$
$
- $
-
-
-
-
-
178
-
(308 )
277
(5 )
142 $
- $
-
-
-
12,105
12,105
2
(4,427 )
-
-
-
7,680 $
- $
-
- $
- 12,498 12,498
(800 )
(800 )
-
(1,630 )
- (1,630 )
4,100
873 17,078
4,100 10,941 27,146
3,786
(5,011 )
(3,500 ) (9,233 ) (13,041 )
2,178
1,901
-
(473 )
-
(468 )
2,501 $ 4,262 $ 14,585
- 3,606
(584 )
-
7,979 $ 11,500 $
-
(757 )
-
36
3,352 $
3,039 131,836
(12,105 )
(945 )
(11,758 )
25
5,670 115,032
2,135
2,125
-
(277 )
(45,987 )
(284 )
(22,516 )
(4 )
(292 )
(60 )
6,938 $ 48,604 $
(4,100 )
-
-
-
873 $ 23,704
- 1,011 135,886
(873 ) (17,078 )
-
(1,702 )
- (11,758 )
61
-
7,400 1,011 129,113
4,260
(2,178 )
(168 ) (46,939 )
(841 ) (23,361 )
2
(350 )
4 $ 60,545
-
(1,901 )
(500 )
-
-
4,999 $
-
-
The dilapidations provision reflects the best estimate of the cost to restore leasehold property in line with the
Group’s contractual obligations. Based on a detailed analysis the Group has estimated a liability of $7.1 million
(2020: $5.7 million). In estimating the liability, the Group has made assumptions which are based on past
experience. Assuming the leases are not extended, the Group expects the economic outflows to match the
F-61
Notes to the Consolidated financial statements (continued)
contractual end date of the leases. The leases have an average lease term of eight years with an average of five years
remaining.
The share-based payments employment taxes provision reflects the best estimate of the cost to settle
employment related taxes in connection with the Group's share-based payments. This is based on the most recent
share price and the number of share options vested and un-exercised, or expected to vest where the Group has a
future obligation to settle employment related taxes. The Group has estimated a liability of $56.3 million at
December 31, 2021 (2020: $127.1 million). When a share option is exercised, the liability for employment related
taxes becomes due to the relevant tax authority. During 2021, $22.5 million (2020: $11.8 million) was transferred
from provisions to trade and other payables. We expect the provision to be fully utilized in 8.11 years (2020: 8.94
years), being the weighted average remaining contracted life of options outstanding at December 31, 2021. It is
likely that this provision will be utilized over a shorter period, however, this is dependent on when the option holder
decides to exercise, which the Group is not in control of.
25.
Contracted commitments, contingencies and guarantees
Contingent liabilities
Litigation
From time to time we are engaged in disputes and claims. We believe that the ultimate outcome of these
proceedings will not have a material adverse impact on our consolidated financial position or results of operations,
but the outcome of these proceedings is inherently difficult to predict. There can be no assurance that we will prevail
in any such litigation. Liabilities for material claims against us are recognized as a provision when an outflow of
economic resources is considered probable and can be reasonably estimated. Legal costs associated with claims are
expensed as incurred.
26.
Deferred tax
As a result of the acquisition of New Guards and CuriosityChina, the Group in 2019 recognized a deferred
tax liability of $232.6 million on acquired intangibles. The cumulative deferred tax release is equal to $84.2 million
of which $32.2 million in 2021 is the effect of the impairment of the carrying value of the intangible asset associated
with the New Guards brand portfolio.
As a result of the purchase price allocation exercise arising from the acquisition of Ambush, a deferred tax
liability of $1.3 million has been recognized in 2020 as a temporary difference. The cumulative deferred tax release
is equal to $0.4 million, of which $0.3 million is during 2021.
As a result of the purchase price allocation exercise arising from 2021 acquisitions, a deferred tax liability of
$6.5 million was recognized in 2021 as a temporary difference. The deferred tax release in 2021 is equal to $0.2
million.
Deferred tax assets of $12.0 million (2020: $5.7 million) mainly relate to inventory write off provision and
differences between Italian GAAP and IFRS GAAP in New Guards that can be carried forward indefinitely. New
Guards calculates the tax due for financial statements purposes according to Italian GAAP. Deferred tax assets of
$1.3 million (2020: $4.1 million) are related to tax incentives credits available for Farfetch Portugal due to research
and development activity and fixed assets investments, which can be carried forward for ten and eight years,
respectively. The Group has estimated that deferred tax assets will be recoverable using the future taxable incomes
based on the business plans of the Italian and Portuguese subsidiaries.
F-62
Notes to the Consolidated financial statements (continued)
Deferred tax assets and liabilities consist of the following at December 31 (in thousands):
Deferred
tax assets
Note
Deferred tax
liabilities
At January 1, 2020
Deferred tax released to profit or loss(1)
Foreign exchange
Reclassifications to balance sheet
Deferred tax recognized on acquisitions to balance sheet
At December 31, 2020
Deferred tax released to profit or loss
Foreign exchange
Reclassifications to balance sheet
Deferred tax recognized on acquisitions to balance sheet
At December 31, 2021
5
5
$
5,324 $
7,682
614
(64 )
-
$ 13,556 $
219,789
(39,087 )
(4 )
-
1,765
182,463
393 (33,275)
(296 )
(913 )
672
298
6,461
-
156,025
$ 13,334 $
5
Deferred tax, net liability at December 31, 2021
$
142,691
(1) Previously reported comparatives for the years ended December 31, 2020 and 2019 have been re-presented for comparability with
condensed disclosure for the year ended December 31, 2021
Unrecognized deferred tax assets
Unutilized trading tax losses
The Group has accumulated unutilized tax losses carried forward as at December 31, 2021 of $1,487.7
million (2020: $953.1 million). Deferred tax assets are recognized to the extent that it is probable that there are
sufficient suitable deferred tax liabilities or future taxable profits that will be available against which deductible
temporary differences can be utilized. Subject to specific legislation regarding changes in ownership and the nature
of trade, trading losses are available to be either carried forward indefinitely or for a significant time period.
Local
currency
2020
Local
’000
2020
$’000
2021
Local
’000
2021
$’000
UK trading losses
US Net Operating Losses (“NOL”)
Brazil trading losses
Japan trading losses
Hong Kong trading losses
GBP 709,446 739,879 882,753 1,191,629
USD 195,565 195,565 276,649 276,649
13,377
BRL 72,760 14,107 74,570
4,560
JPY 301,340 2,902 525,141
1,512
664 11,795
1,487,727
953,117
HKD 5,149
UK trading losses are available to be carried forward indefinitely. Legislation has been introduced with
effect from April 1, 2017, whereby losses arising after April 1, 2017 can be set against total profits of the Company.
The amount of total profits that can be offset by brought forward losses is restricted to the first £5.0 million of
profits, and an additional 50% of profits that exceed £5.0 million.
US NOL as at December 31, 2021 of $(276.6) million (2020: $(195.6) million) are available to be carried
forward for a period of twenty years. The carry forward NOLs start to expire in different years, the first of which is
December 31, 2030. NOLs generated after January 1, 2018 have an indefinite carry forward period but are subject to
an 80% limitation per year. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (i)
removes the 80% limitation on the use of NOLs enacted by the Tax Cuts and Jobs Act of 2017 (the “TCJA”) with
respect to NOLs carried to any taxable year beginning before January 1, 2021, and thus, NOLs (whether carried
forward or carried back) can generally be used to offset fully taxable income in these taxable years; and (ii) provides
for a carryback of any NOL arising in a taxable year beginning after December 31, 2017 and before January 1, 2021,
to each of the five taxable years preceding the taxable year in which the NOL arose.
F-63
Notes to the Consolidated financial statements (continued)
Brazilian and Hong Kong trading losses as at December 31, 2021 are available to be carried forward
indefinitely but utilization of losses in respect of Brazil are restricted to 30% against taxable income in future
taxable periods.
Japanese NOL carry forward incurred before April 1, 2018 can be carried forward for nine years, incurred
during fiscal years starting on or after April 1, 2018 can be carried forward for ten years and utilization of losses are
restricted to 50% against taxable income in future taxable periods.
Unutilized future tax deductions on employee share option gains
The Group has an unrecognized gross deferred tax asset of approximately $872.8 million (2020: $1,638.8
million) in respect of a future tax deduction on share options that are unexercised as at December 31, 2021 that,
when exercised, will result in a gain and a potential deduction for corporation tax purposes. A net deferred tax asset
of approximately $214.7 million (2020: $319.1 million) will be recognized to the extent that there are sufficient
suitable deferred tax liabilities available.
Unutilized future tax deductions on Goodwill
The Group has an unrecognized deferred tax asset of approximately $5.3 million (2020: $5.3 million) in
respect of goodwill recognized on the acquisition of Stadium Goods. The unrecognized deferred tax asset results
from the future tax deductions available in relation to this item of goodwill exceeding its statements of financial
position value. A net deferred tax asset is only recognized where it can be shown that it is probable that future
taxable profits will be available against which the Group can utilize the asset.
27.
Related party disclosures
Platforme International Limited is a related party of J M F Neves. The Group generated commission of $0.4
million and made purchases of $0.1 million from Platforme International Limited during the year ended December
31, 2021 (2020: commission of $0.6 million). The Group had a $0.2 million receivable as at the end of December
31, 2021 (2020: $0.2 million payable).
In prior periods, Alanui S.r.L. (“Alanui”) was a related party of New Guards Group Holding S.p.A, due to it
being an associate of the Group. New Guards still owns a stake of 53% and gained control over the entity on March
16, 2021 following a change in the shareholder agreement. The Group recognized sales of $0.2 million to Alanui in
the two months up until consolidation on March 1, 2021. The impact of consolidating Alanui’s results from March
1, 2021 rather than March 16, 2021 was immaterial. We recognized sales of $1.1 million during the year ended
December 31, 2020. As at December 31, 2020, we had trade receivables of $0.5 million and trade payables of $0.4
million. Refer to Note 5, Business combinations for further detail.
Key management includes members of the Company’s senior management and the board of directors. The
disclosure amounts below (in thousands) are based on the expense recognized in the Consolidated statement of
operations in the respective year.
Short-term employee benefits
Termination benefits
Share-based compensation
$
$
2020
2021
1,676
$
32
26,300
$
28,008
2,456
36
37,742
40,234
Other than disclosed above, there were no other transactions or outstanding balances, including
commitments, with related parties.
The Group’s ultimate controlling party is J M F Neves by virtue of holding the majority of voting rights in
the Group.
F-64
Notes to the Consolidated financial statements (continued)
28.
Financial instruments and financial risk management
Fair value and present value measurement of financial instruments is presented through the use of a three-
level fair value hierarchy that prioritizes the inputs used in each of the valuation techniques for fair value and present
value calculations.
The Group maintains policies and procedures to value instruments using the most relevant data available.
The Group recognizes the following financial instruments at fair value:
• Short-term investments, being the cash investments in variable net asset value funds, measured using
Level 1 valuation inputs.
• Derivative financial instruments, being forward foreign currency and option contracts, measured using
Level 2 valuation inputs and valued using discounted cash flows and suitable option pricing models
respectively; and
• Derivative financial instruments, being the embedded derivatives relating to the February 2020 Notes,
April 2020 Notes and November 2020 Notes, measured using Level 2 valuation inputs.
The Group recognizes the following financial liabilities at present value:
• Put and call option liabilities, associated with the non-controlling interests arising from the transactions
with Chalhoub, measured using Level 2 valuation inputs; and
• Put and call option liability, associated with the strategic arrangement with Alibaba and Richemont,
measured using Level 2 valuation inputs.
• Put and call option liabilities, associated with the non-controlling interests arising from transactions with
Alanui and Palm Angels using Level 3 valuation inputs.
The forward foreign currency and option contracts are measured using Level 2 inputs with the key ones
being quoted foreign currency exchange rates.
The embedded derivatives relating to the February 2020 Notes, April 2020 Notes and November 2020 Notes
are measured using an option pricing model with Level 2 inputs, with the key ones being the Group’s share price at
the end of the reporting period, the risk-free rate of treasury bonds with similar terms to maturity and the volatility of
the Group’s share price.
The put and call option liability associated with the non-controlling interests arising from the transactions with
Chalhoub and the put and call option associated with the strategic arrangement with Alibaba and Richemont are
measured using appropriate option valuation models. This is a Level 2 measurement with the key inputs being the
Group’s share price at the end of the reporting period, the risk-free rate and credit spread.
The put and call option liability associated with the non-controlling interests arising from the transactions with
Alanui and Palm Angels are measured using appropriate option valuations with Level 3 inputs, with the key one being
future forecast information.
There have been no significant changes in the measurement and valuation techniques used to value
instruments in existence at December 31, 2020, or transfers between levels of the fair value hierarchy used in
measuring the fair value of financial instruments, or changes in the classification of financial assets and liabilities.
The embedded derivatives relating to the February 2020 Notes and April 2020 Notes recognized during the period
ended December 31, 2020 were valued using the Black Scholes option pricing model and the embedded derivative
relating to the November 2020 Notes was valued using the Binomial option pricing model. For both of these models,
the key inputs are the Group’s closing share price at December 31, 2021, share price volatility and the risk free rate
of US treasury bonds of similar terms to maturity.
F-65
Notes to the Consolidated financial statements (continued)
February 2020 Notes assumptions
Embedded derivative
Closing share price
Risk free rate
Expected volatility
Remaining life (years)
February 2020 Notes – sensitivity analysis
Assumption
Share Price increases by $1
Risk free rate increases by 1%
Expected volatility increases by 1%
April 2020 Notes assumptions
Embedded derivative
Closing share price
Risk free rate
Expected volatility
Remaining life (years)
April 2020 Notes – sensitivity analysis
Assumption
Share Price increases by $1
Risk free rate increases by 1%
Expected volatility increases by 1%
November 2020 Notes assumptions
Embedded derivative
Closing share price
Risk free rate
Expected volatility
Credit spread (basis points)
F-66
2020
2021
$
63.81 $
0.36 %
36.93 %
5.00
33.43
1.12 %
38.46 %
4.00
Increase/(decrease)
in profit or loss
2020
Increase/(decrease)
in profit or loss
2021
$
(20,259 ) $
(11,366 )
(633 )
(3,931 )
(1,516 )
(228 )
2020
2021
$
63.81 $
0.65 %
37.22 %
6.33
33.43
1.29 %
36.68 %
5.33
Increase/(decrease)
in profit or loss
2020
Increase/(decrease)
in profit or loss
2021
$
(24,215 ) $
(20,233 )
(2,296 )
(25,113 )
(13,104 )
(2,898 )
2020
2021
$
63.81 $
0.92 %
36.89 %
344.47
33.43
1.56 %
35.97 %
350.00
Notes to the Consolidated financial statements (continued)
November 2020 Notes – sensitivity analysis
Assumption
Share Price increases by $1
Credit spread increases by 50 basis points
Expected volatility increases by 1%
Increase/(decrease)
in profit or loss
2020
Increase/(decrease)
in profit or loss
2021
$
(13,673 ) $
(2,504 )
(5,203 )
(10,044 )
(5,469 )
(2,451 )
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns.
At December 31, 2021, the capital structure consisted of equity and debt, and the Group was not subject to any
externally imposed capital requirements.
The Group has identified two principal risks, being market risk (foreign exchange) and liquidity risk.
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the
basis of measurement and the bases for recognition of income and expenses) for each class of financial asset,
financial liability and equity instrument are disclosed in Note 2, Significant accounting policies.
Categories of financial instruments
Financial assets (in thousands)
Current
Trade receivables
Other receivables
Cash and cash equivalents
Non-current
Other receivables
Total
Foreign currency derivatives - held at FVTPL
Foreign currency derivatives - held as cash flow hedges
Derivative financial assets
Short term investments - held at FVTPL
Short term investments
Amortized
cost
2020
Amortized
cost
2021
$
49,833 $
123,492
1,573,421
63,046
179,964
1,363,128
58,081
1,804,827 $
31,225
1,637,363
$
Fair value
2020
Fair value
2021
1,260 $
28,982
30,242 $
410
7,600
8,010
Fair value
2020
Fair value
2021
- $
- $
99,971
99,971
$
$
$
$
F-67
Notes to the Consolidated financial statements (continued)
Financial liabilities (in thousands)
Trade payables
Other payables
Total
Foreign currency derivatives - held at FVTPL
Foreign currency derivatives - held as cash flow hedges
Current derivative financial liabilities
$250.0 million 5% convertible note embedded derivative - held at FVTPL
$400.0 million 3.75% convertible note embedded derivative - held at
FVTPL
$600.0 million 0.00% convertible note embedded derivative - held at
FVTPL
Non-current derivative financial liabilities
Put and call option liabilities - non-current
Put and call option liabilities - current
Total Put and call option liabilities
Amortized
cost
2020
Amortized
cost
2021
277,827 $
16,642
294,469 $
342,938
22,208
365,146
Fair value
2020
Fair value
2021
238 $
17,189
17,427 $
35
21,083
21,118
$
$
$
$
Fair value
$
2020
1,060,167 $
Fair value
2021
90,682
1,217,491
492,801
718,562
2,996,220 $
288,945
872,428
$
Present value
2020
Present value
2021
$
$
348,937 $
-
348,937 $
836,609
8,321
844,930
At December 31
Non-current borrowings
2020 (1)
Carrying value
2020
Fair value
2021
Carrying value
2021
Fair value
$ 617,789
$ 1,058,306
$ 515,804
$
859,132
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
With the exception of the Group’s non-current borrowings, the carrying amount of the Group’s financial
assets and financial liabilities approximate their fair value.
The notional amounts of the Group’s outstanding foreign currency derivatives at year end are:
Foreign currency derivatives
Notional
2020
Notional
2021
$ 1,120,038 $ 1,616,383
The average exchange rate for GBP:USD forward exchange contracts is 1.37 (2020: 1.31), for EUR:USD
forward exchange contracts is 1.13 (2020: 1.19), for GBP:USD forward currency call option contracts is n/a (2020:
1.35) and for GBP:USD forward currency put option contracts is n/a (2020: 1.28). As at December 31, 2021, these
foreign exchange contracts were in a net liability position.
Financial risk management objectives
The Group’s Corporate Treasury function provides services to the business, co-ordinates access to domestic
and international financial markets and monitors and manages the financial risks relating to the operations of the
F-68
Notes to the Consolidated financial statements (continued)
Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include
market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.
The Group seeks to minimize the effects of these risks, where appropriate, by using derivative financial
instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies
approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk,
credit risk and the use of derivatives. The Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
Market risk
The Group’s activities expose it primarily to the financial risk of changes in foreign currency exchange rates
(see table below, in thousands). The Group enters into derivative financial instruments to manage its exposure to
foreign currency risk.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because
of changes in foreign exchange rates.
The Group uses forward currency contracts and foreign exchange option contracts to hedge its foreign
currency risks. Where the criteria for hedge accounting are not met, derivative financial instruments are initially
recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at
fair value with movements recorded in the Consolidated statement of operations. Derivatives are carried as financial
assets when the fair value is positive and as financial liabilities when the fair value is negative. Where all relevant
criteria are met, hedge accounting is applied to minimize earnings volatility.
Forward foreign exchange contracts
Total
Forward foreign exchange contracts
Total
Liquidity risk
Fair value through profit or loss
Asset
Liability
2020
2021
2020
2021
$ 1,260 $
$ 1,260 $
410 $
410 $
238 $
238 $
35
35
Cashflow hedges
Asset
Liability
2020
2021
2020
2021
$ 28,982 $ 7,600 $ 17,189 $ 21,083
$ 28,982 $ 7,600 $ 17,189 $ 21,083
The Group monitors its liquidity risk to maintain a balance between continuity of funding and flexibility.
This helps the Group achieve timely fulfilment of its obligations while sustaining the growth of the business. We
have policies in place for managing liquidity risk, which our finance department implements and periodically
review.
The table below (in thousands) analyses the Group’s financial liabilities into relevant groupings based on the
remaining period from the reporting date to the contractual maturity date. Amounts due within twelve months equal
their carrying balances, as the impact of discounting is not significant.
Trade and other payables
Put and call option liabilities
Total current
Less than
one year
2020
Less than
one year
2021
$
$
294,469 $
-
294,469 $
365,146
8,321
373,467
F-69
Notes to the Consolidated financial statements (continued)
Put and call option liabilities
Borrowings
Total non-current
More than
one year
2020 (1)
More than
one year
2021
$
$
348,937 $
617,789
966,726 $
836,609
515,804
1,352,413
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The following table analyses the Group’s non-derivative financial liabilities and gross and net settled
derivative financial instruments into relevant maturity groupings, based on the remaining period at the balance sheet
to the contractual maturity date. The amounts disclosed in the table are the contracted cash flows and may therefore
not reconcile to the amounts disclosed in the Consolidated statement of financial position for borrowings and
derivative financial instruments.
At December 31, 2021
Non derivative financial liabilities
Convertible bonds - $250.0 million
Convertible bonds - $400.0 million
Convertible bonds - $600.0 million
Put and call option liabilities
Contingent consideration
Obligations under leases
Trade and other payables
Net settled derivatives
Outflow
Gross settled derivatives
Inflow
Outflow
Less than
twelve
months
Between one
and three
years
Between
three and
five years
More than
five years
$
-
-
-
8,321
8,822
54,216
434,199
1,219
(1,570,026 )
1,590,865
$
-
-
-
188,261
9,064
73,685
-
$
50,000
-
-
656,640
-
51,124
-
$
-
400,000
600,000
-
-
90,801
-
-
-
-
-
-
-
-
-
-
Less than
twelve
months
Between one
and three
years
Between
three and
five years
More than
five years
$
$
At December 31, 2020
Non derivative financial liabilities
Convertible bonds - $250.0 million
Convertible bonds - $400.0 million
Convertible bonds - $600.0 million
Put and call option liabilities
Obligations under leases
Trade and other payables
Net settled derivatives
Outflow
Gross settled derivatives
-
Inflow
Outflow
-
Comparative amounts for gross settled derivatives inflow and outflows were previously disclosed on a net basis and have been represented on a
gross basis. Previously these were disclosed as financial assets of $30.2 million and financial liabilities of $15.5 million.
$ 275,000
30,000
-
-
50,800
-
-
$
422,500
600,000
-
61,430
-
25,000
30,000
-
348,937
61,296
-
12,500
15,000
-
-
33,703
371,289
(1,375,542 )
1,366,819
1,900
-
-
-
-
-
-
-
F-70
Notes to the Consolidated financial statements (continued)
In the tables above, trade and other payables comprises of trade payables amounting to $342.9 million (2020:
$277.8 million), other payables amounting to $22.2 million (2020: $16.6 million) and social security and other taxes
of $69.1 million (2020: $76.8 million).
The put and call option liabilities relate to non-controlling interests arising from the transactions with Palm
Angels and Chalhoub, as well as the strategic agreement with Alibaba and Richemont. The non-current liabilities are
comprised of $150.3 million (2020: $nil) relating to Palm Angels, $188.3 million (2020: $344.4 million) relating to
Chalhoub and $498.0 million (2020: $nil) relating to the strategic agreement with Alibaba and Richemont. The
liability relating to Chalhoub is expected to mature in 2022 and will be settled in the first quarter of 2023. The latest
maturity of the liability relating to Palm Angels is in 2026. The latest maturity of the liability relating to the strategic
agreement with Alibaba and Richemont is in 2026. See Note 33, Non-controlling interests for further information
relating to the movements in the non-controlling interest.
Credit risk
Credit risk is the risk that financial loss arises from the failure of a consumer to meet its obligations under a
contract. Due to the nature of operations the Group does not have significant exposure to credit risk. The trade
receivables balance is spread across a large number of different customers. The Group has policies in place to ensure
that wholesale sales are made to customers with an appropriate credit history. Sales to retail customers are made in
cash or via credit cards. In addition, receivables balances are monitored on an ongoing basis with the result that the
Group’s exposure to bad debts is not significant and default rates have been historically low. A customer is deemed
to have defaulted when the Group considers that it will not be able to make contractual payments when due.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables. The Group applies a loss allowance to trade and other receivables.
As at December 31, 2021 all trade and other receivables were considered current being due within thirty days. The
expected loss rate the Group applies for trade and other receivables is 1.0% (2020: 1.0%). The expected loss rates
are reviewed annually, or when there is a significant change in external factors potentially impacting credit risk, and
are updated where management’s expectations of credit losses change.
The expected loss rates are based on the payment profiles of sales up to a period of thirty-six months before
December 31, 2021 or January 1, 2021, respectively, and the corresponding historical credit losses experienced
within this period which were not significant. The historical loss rates are adjusted to reflect current and forward
looking information on macroeconomic factors affecting the ability of the consumers to settle the receivables. In
addition, certain individual customers (where there is objective evidence of credit impairment) have been identified
as having a significantly elevated credit risk and have been provided for on a specific basis.
The majority of the Group’s cash and cash equivalents balance is held in money market funds which are
regulated by securities and market authorities. These consist of highly rated mutual investment funds which are
permitted to diversify portfolio investments through high quality debt securities meeting regulatory mandated
requirements. As such, the Group is not exposed to any material credit risk in relation to the cash and cash
equivalents balance.
Interest rate risk
The Group is not subject to significant interest rate risk as currently all of its borrowings are subject to a
fixed rate of interest (refer to Note 23, Borrowings for further information).
Capital risk management
The Group’s objective when managing capital is to safeguard the Group’s ability to provide returns for
members and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. The Group manages its capital structure and makes adjustments to it, in light of changes to economic
conditions and strategic objectives of the Group. The Group raises finance through the issuance of equity and
convertible senior notes to private and public investors.
F-71
Notes to the Consolidated financial statements (continued)
In line with the Group’s objectives, during the year ended December, 31, 2020, the Group issued the
February 2020 Notes, April 2020 Notes and November 2020 Notes for total net proceeds of $1,241.9 million.
At December 31, 2021, the Group holds restricted cash of $2.3 million (2020: $nil million).
The Group is not subject to any externally imposed capital requirements. The capital structure is as follows
(in thousands):
2020 (1)
2021
Total borrowings (1)
Less: cash and cash equivalents
Net debt (1)
Total (deficit)/equity (1)
Total
$ 3,805,412 $ 1,602,741
(1,363,128 )
239,613
270,616
510,229
(1,573,421 )
2,231,991
(1,658,642 )
573,349 $
$
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The table below reconciles the movements in our financing liabilities during the year:
Non-cash movements
Borrowings - leases
Non-current borrowings -
convertible notes
Borrowings-related derivative
financial instruments
Financing liabilities
Borrowings - leases
Non-current borrowings -
convertible notes (1)
Borrowings-related derivative
financial instruments
Financing liabilities
As at
December
31, 2020 (1)
Cash
movement
$ 191,403 $ (35,388 ) $
Foreign
exchange
movement
Finance
costs
Fair value
changes &
other
As at
December
31, 2021
- $ (8,111 ) $ 9,137 $
57,468 $ 214,509
Early
conversion
of February
2020 Notes
617,789 (22,949 ) (146,673 )
- 67,638
- 515,805
2,996,220
- (1,638,837 ) 872,428
$ 3,805,412 (58,337 ) (631,629 ) (8,110 ) $ 76,775 (1,581,369 ) $ 1,602,742
- (484,956 )
1
Non-cash movements
As at
December
31, 2019
$ 119,318 $
Cash
movement
(25,808 ) $
Bifurcation
of
embedded
derivative
Foreign
exchange
movement
Finance
costs
- $ 4,539 $ 6,757 $
Fair value
As at
changes &
December
31, 2020 (1)
other
86,597 $ 191,403
- 1,223,042 (641,448 )
- 41,851
(5,656 ) 617,789
$ 119,318 $ 1,197,234 $
-
- 641,448
- 2,354,772 2,996,220
- $ 4,539 $ 48,608 $ 2,435,713 $ 3,805,412
-
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
Mainly as a result of the gains on items held at fair value and remeasurements during the year, the
Company’s total equity increased from $(1,658.6) million as at December 31, 2020 (refer to Note 2, Significant
accounting policies, for detail on the revision of prior year comparatives) to $270.6 million as at December 31,
2021. The total equity previously disclosed in our Annual Report on Form 20-F for the year ended December 31,
2020, was updated as a result of the revision referred to in Note 2.1, Basis of preparation. The gains on items held at
fair value and remeasurements during the year is mainly driven by the year end revaluation of the embedded
derivatives relating to the convertible senior notes discussed in Note 23, Borrowings. Unless earlier converted,
redeemed or repurchased in accordance with their terms, the notes may be settled, at Farfetch’s election and subject
F-72
Notes to the Consolidated financial statements (continued)
to certain exceptions and conditions, in Class A ordinary shares of Farfetch, cash, or a combination of cash and
Class A ordinary shares of Farfetch.
The main purpose of the Group’s financial instruments is to finance the Group’s operations.
The main risks from the Group’s financial instruments are currency risk and liquidity risk. The Board
reviews and approves policies, which have remained substantially unchanged for the year under review, for
managing these risks.
Hedge accounting classification and impact
The Group designates certain forward foreign exchange contracts and foreign exchange option contracts as
cash flow hedges of forecast foreign currency revenue and costs. During the current year, gains of $9.9 million
(2020: losses of $16.4 million) were removed from the cash flow hedge reserve. $nil million (2020: gain of $0.1
million) was taken to revenue, a loss of $1.4 million (2020: gain of $0.8 million) was taken to cost of revenue and a
gain of $13.4 million (2020: a loss of $18.5 million) was taken to selling, general and administration expenses. A
loss of $2.1 million (2020: a gain of $1.2 million) was added to inventories in the Consolidated statement of
financial position.
The Group uses a qualitative method for assessing hedge effectiveness. The hedge is assessed at inception
and throughout the life of the hedge. Effectiveness between the hedged item and hedging instrument is tested by
comparing the critical terms of both items and concluding that they are offsetting. The key sources of risk that could
result ineffectiveness include credit risk, a change in the economic relationship between the hedged item and the
hedging instrument, a potential change in timing in relation to the hedged item, the currency basis risk, exchange
rate volatility and a substantial reduction in the market liquidity for the hedging instrument.
Under the Group’s hedging policy, the critical terms of the foreign currency derivatives must align with the
hedged items. The contracts are denominated in the same currency as the highly probable future sales and purchases,
which are expected to occur within a maximum 24-month period, which determines the hedge relationship to be 1:1.
For further information on the Group’s risk management strategy and hedging activities, refer to Item 3D.
“Risk Factors”.
Fair value hierarchy
The Group recognizes at fair value the derivative financial instruments, measured using a Level 2 valuation
method.
There have been no significant changes in the measurement and valuation techniques, or transfers between
levels of the fair value hierarchy used in measuring the fair value of financial instruments, or changes in the
classification of financial assets and liabilities.
Put and call option liabilities
There have been no significant changes in the measurement and valuation techniques used to value
instruments in existence at December 31, 2020.
The Group records the value of put and call option liabilities at the present value of probability-weighted
future cash flows related to certain performance criteria and the fair value of our common stock at each reporting
date. Further details of the Group’s put and call option liabilities are detailed below:
Chalhoub
The put and call option relating to Chalhoub is over the 20% shareholding in Farfetch International Limited
(“IOM”) that the Company does not already own. The put and call options become exercisable on the earlier of
December 31, 2022 and the date the agreement between Chalhoub and the Company is terminated. The options
F-73
Notes to the Consolidated financial statements (continued)
expire on the 10th day after they become exercisable. The exercise of the options can be settled in cash or shares at
the election of the Company. The estimated value of the put and call option liability related to Chalhoub is based on
the present value of probability-weighted future cash flows related to certain performance criteria and the fair value
of our common stock at each reporting date. Changes in the value of the put and call option liability subsequent to
the acquisition date, such as changes in the probability assessment and the fair value of our common stock, are
recognized in earnings in the period when the change in the estimated present value occurs. During the year ended
December 31, 2019, we recognized initially put and call option liabilities of $105.6 million. Subsequently we
recognized a decrease in the present value of our put and call option liabilities of $43.2 million, in gains on items
held at fair value and remeasurements in our consolidated statement of operations, primarily due to a decrease in the
fair value of our common stock. During the year ended December 31, 2020, we recognized an increase in the present
value of our put and call option liabilities of $288.9 million, primarily due to an increase in the fair value of our
common stock. During the year ended December 31, 2021, we recognized a decrease in the present value of our put
and call option liabilities of $156.1 million, primarily due to a decrease in the fair value of our common stock.
Assumption
Share Price increases by $1
Expected volatility increases by 1%
Credit spread increases by 50 basis points
Palm Angels
Increase/(decrease)
in profit or loss
2020
Increase/(decrease)
in profit or loss
2021
$
(11,196 ) $
(1,776 )
3,413
(6,521 )
(826 )
939
The put and call option relating to Palm Angels is over the 40% shareholding in Palm Angels that the
Company does not already own. The options are exercisable on the fifth anniversary of the acquisition date or in the
event of a certain bad leaver event. The exercise of the option can be settled in cash or shares at the Company’s
election. The estimated value of the put and call option liability related to Palm Angels is based on the present value
of expected revenue for Palm Angels in financial year 2025 and probability-weighted future revenue growth for
Palm Angels between financial year 2021 and 2025. Changes in the value of the put and call option liability
subsequent to the acquisition date, such as changes in the probability assessment and the expected future revenue
growth, are recognized in earnings in the period when the change in the estimated present value occurs. During the
year ended December 31, 2021, we recognized initially put and call option liabilities of $144.6 million.
Subsequently we recognized an increase in the present value of our put and call option liabilities of $11.4 million, in
losses on items held at fair value and remeasurements in our consolidated statement of operations, primarily due to
an improvement in expected performance against the performance criteria.
Palm Angels – Sensitivity analysis
If expected revenue in financial year 2025 increased by 10%, the value of the put and call option would
increase and the related present value remeasurement loss in the consolidated statement of operations would increase
by $15.1 million.
Strategic arrangement with Alibaba and Richemont
The put-call option related to the strategic arrangement with Alibaba and Richemont allows the holder to
either purchase a further 12.5% of Farfetch China after the third year of operations, and an additional option to
potentially convert or require the conversion of the investment in Farfetch China to shares in Farfetch Limited,
under specific conditions. Management have concluded that the fair value of the option to purchase a further 12.5%
of Farfetch China is $nil as the exercise price is at fair market value as at the date of exercise.
The estimated value of the put and call option liability related to the strategic agreement with Alibaba and
Richemont is based on the present value of future cash flows related to the fair value of our common stock at each
reporting date. Changes in the value of the put and call option liability subsequent to the acquisition date, such as
changes in the fair value of our common stock, are recognized in earnings in the period when the change in the
estimated present value occurs. During the year ended December 31, 2021, we recognized initially put and call
option liabilities of $744.2 million. Subsequently we recognized a decrease in the present value of our put and call
F-74
Notes to the Consolidated financial statements (continued)
option liabilities of $246.1 million, in gains on items held at fair value and remeasurements in our consolidated
statement of operations, primarily due to a decrease in the fair value of our common stock.
Strategic arrangement with Alibaba and Richemont – Sensitivity analysis
Assumption
Share Price increases by $1
Risk free rate increases by 1%
Credit spread increases by 50 basis points
Financial instruments sensitivity analysis
Increase/
(decrease)
in profit
or loss
2020
$
Increase/
(decrease)
in profit
or loss
2021
$
-
-
-
(14,899 )
(468 )
6,075
In managing currency risk the Group aims to reduce the impact of short term fluctuations on its earnings. At
the end of each reporting year, the effects of hypothetical changes in currency are as follows.
Foreign exchange rate sensitivity analysis
The table below (in thousands) shows the Group’s sensitivity to U.S. dollars strengthening/weakening by
10%:
10% appreciation of U.S. dollars
10% depreciation of U.S. dollars
10% appreciation of U.S. dollars
10% depreciation of U.S. dollars
Increase/
(decrease)
in profit
or loss
2020
24,118
(29,478 )
$
Increase/
(decrease)
in reserves
2020
$
(133 )
4,920
Increase/
(decrease)
in profit
or loss
2021
$
(7,684 )
9,392
Increase/
(decrease)
in reserves
2021
(55,374 )
67,679
$
This analysis reflects the impact on the Consolidated statement of operations due to financial assets and
liabilities held at the balance sheet date and is based on foreign currency exchange rate variances that the Group
considers to be reasonably possible at the end of the reporting year. The analysis assumes that all other variables, in
particular interest rates, remain constant.
10% appreciation of GBP
10% depreciation of GBP
10% appreciation of GBP
10% depreciation of GBP
F-75
Increase/
(decrease)
in profit
or loss
2020
(21,372 )
17,486
$
Increase/
(decrease)
in profit
or loss
2021
$
2,906
(3,552 )
Increase/
(decrease)
in reserves
$
2020
38,430
(27,550 )
Increase/
(decrease)
in reserves
2021
80,726
(67,223 )
$
Notes to the Consolidated financial statements (continued)
This analysis reflects the impact on the Consolidated statement of operations due to financial assets and
liabilities held at the balance sheet date and is based on foreign currency exchange rate variances that the Group
considers to be reasonably possible at the end of the reporting year. The analysis assumes that all other variables, in
particular interest rates, remain constant.
10% appreciation of EUR
10% depreciation of EUR
10% appreciation of EUR
10% depreciation of EUR
Increase/
(decrease)
in profit
or loss
2020
(17,234 )
14,101
$
Increase/
(decrease)
in reserves
2020
$
(3,570 )
2,921
Increase/
(decrease)
in profit
or loss
2021
$
2,987
(1,858 )
Increase/
(decrease)
in reserves
2021
31,134
(24,887 )
$
This analysis reflects the impact on the Consolidated statement of operations due to financial assets and
liabilities held at the balance sheet date and is based on foreign currency exchange rate variances that the Group
considers to be reasonably possible at the end of the reporting year. The analysis assumes that all other variables, in
particular interest rates, remain constant.
F-76
Notes to the Consolidated financial statements (continued)
29.
Employee benefit obligations
Other non-current liabilities consist of the following at December 31 (in thousands):
Cash-settled awards liability
Employee severance liability
Total non-current liabilities
2020
24,295 $
1,821
26,116 $
2021
10,404
2,544
12,948
$
$
The employee severance liability relates to a severance indemnity obligation under Italian law in respect of
employees of the Group’s Italian subsidiaries.
Current employee benefit obligations of $8.3 million (2020: $38.3 million) relates to employers tax liability
on share based payments (2021: $7.7 million) (2020: $37.3) and cash-settled share based payments due to vest in
less than one year from December 31, 2021 ($0.5 million) (2020: $1.0 million).
The Group has four equity settled share option plans (section a) and a cash settled share option plan (section
b).
a. Equity-settled
During the year ended December 31, 2021, the Group had four equity-settled share-based payment plans
which are described below.
Type of
arrangement
Date of first grant
Number granted
Contractual life
Vesting conditions
EMI approved share
option plan
Unapproved share
option plan
LTIP 2015 plan
LTIP 2018 plan
November 1, 2011
5,505,600
10 years
July 1, 2011
11,332,835
10 years
September 9, 2015
38,174,980
10 years
Varying tranches of
options vesting upon
defined years of
service
Varying tranches of
options vesting upon
defined years of
service
Varying tranches of
options vesting
upon defined years
of service with
certain awards
having non-market
conditions
September 20, 2018
50,669,762
10 years
Varying tranches of
options and
Restricted Stock
Units (RSU) vesting
upon defined years of
service
Movements on the share options were as follows:
2021
Number of
options &
RSUs
2019
Number of
options &
RSUs
2020
Number of
options &
RSUs
44,218,814 39,583,858 43,063,713
13,585,502 19,685,173 13,933,172
(7,503,814 ) (11,817,074 ) (8,677,510 )
(10,716,644 ) (4,388,244 ) (2,011,549 )
39,583,858 43,063,713 46,307,826
10,360,642 11,944,576 18,293,805
Options & RSUs at beginning of year
Options & RSUs granted
Options & RSUs exercised
Options & RSUs forfeited
Options & RSUs at end of year
Options & RSUs exercisable at end of year
F-77
Notes to the Consolidated financial statements (continued)
Weighted average exercise prices were as follows:
Options & RSUs at beginning of year
Options & RSUs granted
Options & RSUs forfeited
Options & RSUs exercised
Options & RSUs at end of year
Options & RSUs exercisable at year end
Weighted average remaining contracted life of options & RSUs
outstanding at year end
2019
2020
2021
$
$
$
$
$
$
6.15 $
8.94 $
5.70 $
1.25 $
8.23 $
6.40 $
8.23 $
5.38 $
7.02 $
5.63 $
8.00 $
8.96 $
8.00
8.72
5.33
4.37
9.01
11.43
9.79 years 8.94 years
8.11 years
2019
Number of
options &
RSUs
2020
Number of
options &
RSUs
2021
Number of
options &
RSUs
Exercise price of options & RSUs outstanding at year end
$0.00 to $0.08
$0.09 to $0.56
$0.57 to $3.52
$3.53 to $5.73
$5.74 to $7.39
$7.40 to $20.00
$20.01 to $27.09
$27.10 to $40.00
$40.01 to $67.99
Weighted average fair value of options & RSUs granted in year
27,340
629,730
27,340
320,944
8,545,400 11,878,888 18,050,469
27,340
184,823
3,225,120 2,020,354 1,293,101
5,873,001 3,385,770 2,386,536
17,402,097 21,965,750 19,389,418
3,881,170 3,423,111 3,028,881
71,784
- 1,875,474
39,583,858 43,063,713 46,307,826
23.33
$
41,556
-
-
15.54 $
8.81 $
Weighted average share price at the date of exercise for options exercised during the year ended December
31, 2021 was $43.36 (2020: $34.66, 2019: $22.62).
Inputs in the Black Scholes model for share options granted during the year and prior year were as follows:
Black Scholes model
Weighted average share price
Weighted average exercise price
Average expected volatility
Expected life
Risk free rate
Expected dividends
2019
2020
2021
$ 21.73 $ 12.44
$ 8.94
36%
$ 5.38
40%
4 years
2.15%
$nil
4 years
1.05%
$nil
$57.40
$22.80
40%
4 years
0.51%
$nil
Expected volatility was determined with reference to historical volatility of publicly traded peer companies.
The expected life in the model has been adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions and behavioral considerations.
The Group recognized total expenses of $219.9 million, $168.3 million and $170.1 million related to equity-
settled share-based payment transactions in 2021, 2020 and 2019, respectively. In 2019, as part of the New Guard’s
acquisition, we recorded a $12.1 million liability for equity settled awards.
2021 CEO Performance Based Restricted Stock Unit (“PSU”) Award
F-78
Notes to the Consolidated financial statements (continued)
On May 24, 2021, the Board of Directors (the “Board”) of the Company unanimously approved the
recommendation of the Compensation Committee of the Board to grant a long-term PSU under the Company’s 2018
Farfetch Employee Equity Plan (the “2018 Plan”) to José Neves, the Company’s Founder, Chief Executive Officer
and Chairman of the Board (the “CEO”). The grant is 8,440,000 PSUs, which will only vest, if at all, based on the
Company’s achievement of pre-determined increases in the Company’s stock price over an eight-year period, as
further described below:
The PSUs are divided into eight tranches that are eligible to vest based on the achievement of stock price
hurdles during each performance period, measured based on the average of our closing share price over a ninety-day
trailing average (“the Average Closing Price”). Each tranche will be earned and vest if the Average Closing Price
exceeds the stock price hurdle on any date within the applicable performance period as follows, subject to the CEO’s
continued employment with the Company:
Tranche
Performance Period
Number of PSUs Eligible To be Earned
Stock Price
Hurdle
1
2
3
4
5
6
7
8
1st - 5th anniversary of the grant
1st - 5th anniversary of the grant
2nd - 6th anniversary of the grant
2nd - 6th anniversary of the grant
3rd - 7th anniversary of the grant
3rd - 7th anniversary of the grant
4th - 8th anniversary of the grant
4th - 8th anniversary of the grant
5% of Total Number of PSUs
5% of Total Number of PSUs
10% of Total Number of PSUs
10% of Total Number of PSUs
10% of Total Number of PSUs
20% of Total Number of PSUs
20% of Total Number of PSUs
20% of Total Number of PSUs
$
$
$
$
$
$
$
$
75
100
125
150
175
200
225
250
Share-based compensation under the 2021 CEO PSU Award represents a non-cash expense and is
recognized as a selling, general and administrative expense in our Consolidated statement of operations. In each
quarter since the grant of the 2021 CEO PSU Award, we have recognized expense, generally on a pro-rata basis, for
only the number of tranches that corresponds to the number of share price milestones that have been determined
probable of being achieved in the future, in accordance with the following principles.
In order to calculate the equity-settled share based payments expense for this award, on the grant date, a
Monte Carlo simulation was used to determine for each tranche (i) a fixed amount of expense for such tranche and
(ii) the expected vesting period for each tranche based on the expected time taken to achieve the share price
milestone. The grant date fair value of this award amounted to $99.0 million. In the year ended December 31, 2021,
we recognized an equity-settled share based payments expense of $15.1 million in selling, general and
administrative expense related to the PSU award in our Consolidated statement of operations.
b. Cash-settled
Since 2016, the Group issues to certain employees share appreciation rights (“SARs”) that require the Group
to pay the intrinsic value of the SAR to the employee at the date of exercise. The Group has recorded liabilities of
$10.5 million in 2021 (2020: $25.3 million) through the grant of 49,000 SARs (2020: 92,000 SARs).
The fair value of the SARs is determined by using the Black Scholes model using the same assumptions
noted in the above table for the Group’s equity-settled share-based payments. The fair value of the liability is then
reassessed at each reporting date. Included in the 2021 credit of $9.3 million (2020: $28.0 million, 2019: $10.7
million), is a revaluation loss of $1.2 million (2020: loss of $28.0 million). The total intrinsic value at December 31,
2021 was $12.7 million (2020: $36.4 million) of which $9.4 million is fully vested (2020: $17.2 million).
F-79
Notes to the Consolidated financial statements (continued)
Share capital and share premium
30.
Ordinary shares issued and fully paid as at December 31, 2021 (in thousands, except number of shares):
Number of shares
Class
337,923,238 Class A ordinary shares
42,858,080 Class B ordinary shares
380,781,318
Par
value
$
Share capital
Share
premium
Merger
reserve
Total
0.04 $
0.04
$
13,517 $ 1,596,165 $ 783,529 $ 2,393,211
1,714
47,223
15,231 $ 1,641,674 $ 783,529 $ 2,440,434
45,509
-
During 2021, 26,571,174 shares were issued. All were fully paid and newly issued Class A ordinary shares.
The nominal value of all shares issued is $0.04 each. The total Class A ordinary shares issued in respect of share
options that were exercised and RSUs that have vested was 8,328,356.
On May 17, 2021, a total of 3,190,345 Class A ordinary shares were issued on conversion of $39.1 million
principal amount of February 2020 Notes.
On August 6, 2021, a total of 7,013,405 Class A ordinary shares were issued on conversion of $85.9 million
principal amount of February 2020 Notes.
On October 1, 2021, a total of 6,122,250 Class A ordinary shares were issued on conversion of $75.0 million
principal amount of February 2020 Notes.
The total Class A ordinary shares issued in respect of acquisitions made during the year was 1,916,818.
Ordinary shares issued and fully paid as at December 31, 2020 (in thousands, except number of shares):
Number of shares
311,352,064 Class A ordinary shares
42,858,080 Class B ordinary shares
Class
354,210,144
Par value
$
0.04 $
0.04
$
Share capital Share premium
Merger
reserve
Total
12,454 $
1,714
14,168 $
882,422
45,509
$ 783,529 $ 1,678,405
47,223
-
927,931 $ 783,529 $ 1,725,628
During 2020, 14,611,136 shares were issued. All were fully paid and newly issued Class A ordinary shares.
The nominal value of all shares issued is $0.04 each. The total Class A ordinary shares issued in respect of share
options that were exercised and RSUs that have vested was 12,721,798.
On November 17, 2020, the Company issued 1,889,338 Class A ordinary shares to Artemis representing
0.5% of existing issued share capital, for total gross proceeds of $50.0 million.
F-80
Notes to the Consolidated financial statements (continued)
31. Other Reserves
Other reserves consist of the following (in thousands):
Warrant
reserve
747 $
$
Changes
in
ownership
Share
based
payments
(8,666 ) $ 72,796 $
Cashflow
hedge
reserve
Merger
relief
reserve
Time
value
reserve Other
436 $ 2,161 $ — $
Total
other
reserves
— $ 67,474
At January 1, 2019
Shares issued - acquisition of a
subsidiary
Movement in cash flow hedge reserve
Loss transferred to the cost of
inventory
Share-based payments - equity-settled
Share-based payments - reverse
vesting shares(1)
Exercise of warrants
Transaction with non-controlling
interests
Impairment loss on revaluation of
investments
Remeasurement loss on legally
required severance plan
At December 31, 2019
Movement in cash flow hedge reserve
Gain transferred to the cost of
inventory
Shares issued - acquisition of a
subsidiary
Remeasurement loss on severance
plan
Share-based payment - reverse vesting
shares
Share-based payment - equity-settled
At December 31, 2020
Movement in cash flow hedge reserve
Loss transferred to the cost of
inventory
Share-based payment - reverse vesting
shares
Share-based payment - equity-settled
Non-controlling interest put option
Farfetch China Holdings Limited put
call option
Capital contribution from non-
controlling interests
Acquisition of non-controlling interest
Other
At December 31, 2021
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- $
-
-
-
-
- 393,853
-
(3,527 )
-
-
- 76,383
142
-
-
(747 )
- (62,834 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 393,853
(3,527 )
-
-
142
- 76,383
- (62,834 )
(747 )
-
- (101,311 ) (101,311 )
-
(100 )
(100 )
-
(58 )
(58 )
- (101,469 ) 369,275
- 15,937
-
-
(8,666 ) 86,345
-
-
(2,949 ) 396,014
- 13,385
- 2,552
-
-
-
-
-
-
-
(1,213 )
-
-
-
-
4,808
-
-
-
-
-
-
(1,213 )
-
4,808
(24 )
(24 )
- 26,092
- 52,690
(8,666 ) 165,127
-
-
-
-
- 26,092
-
- 52,690
-
9,223 400,822 2,552 (101,493 ) 467,565
- (27,328 )
- (2,552 )
- (24,776 )
-
2,066
- (24,486 )
- 61,282
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,666 ) $ 201,923 $ (13,487 ) $ 400,822 $
-
-
-
-
-
-
-
-
2,066
- (24,486 )
-
-
- 61,282
- (150,070 ) (150,070 )
- (744,163 ) (744,163 )
- 488,863 488,863
- (11,613 ) (11,613 )
-
(2,596 )
- $ (521,072 ) $ 59,520
(2,596 )
-
-
-
-
-
-
-
-
-
-
-
(1) Refer to Note 2, Significant accounting policies, for detail on the revision of prior year comparatives.
The warrant reserve represents the cumulative expense of the shares to be issued where the Group has issued
warrants. On exercise, the cumulative warrant expense is reclassified to accumulated losses. During 2019, all the
warrants were exercised.
The changes in ownership reserve represents transactions with former non-controlling interests of the Group.
F-81
Notes to the Consolidated financial statements (continued)
The share-based payments reserve represents the Group’s cumulative equity-settled share option expense.
On exercise, the cumulative share option expense is reclassified to accumulated losses.
The cash flow hedge reserve and time value reserve are used to recognize the effective portion of gains or
losses on derivatives that are designated and qualify as cash flow hedges.
The merger relief reserve represents the excess over nominal share capital where there has been share
consideration as part of a business combination.
Included in other reserves as at December 31, 2021, the transaction with non-controlling interests represents
the initial recognition of the Chalhoub partnership, the non-controlling put option relates to the initial recognition of
the gross liability relating to the put and call options entered into as part of the acquisition of Palm Angels for the
purchase of the remaining 40 percent that New Guards does not already own and the Farfetch China Holdings Ltd
put call option relates to the initial recognition of the gross liability relating to the put and call options entered into as
part of the strategic arrangement with Alibaba and Richemont, net of transaction costs.
32. Group information
Direct Holdings
Legal name of subsidiary
Country of
incorporation
% equity
interest
2020
2021
Principal activities
Farfetch Holdings plc (previously
Hulk Finco plc)
United
Kingdom
100 100
Holding company
F-82
Notes to the Consolidated financial statements (continued)
Indirect Holdings
Legal name of subsidiary
Country of
incorporation
% equity
interest
Principal activities
Italy
Delaware
(USA)
France
People's
Republic of
China
Japan
Italy
Italy
People's
Republic of
China
United
Kingdom
Italy
France
Brazil
People's
Republic of
China
People's
Republic of
China
Australia
United
Kingdom
United
Kingdom
Delaware
(USA)
Alanui S.r.l.
Allure Systems Corp.
Allure Systems Research France
S.A.S.
Ambush (Shanghai) Trading Co.,
Ltd
Ambush Inc.
Ambush Italy S.r.l.
APA S.r.l.
Beijing Qizhi Ruisi Information
Consulting Co., Ltd
Browns (South Molton Street)
Limited
County S.r.l.
F Concierge France S.A.S.
F.F.B.R. Importacao e Exportação
LTDA*
Fafaqi (Shanghai) Network
Technology Development Co., Ltd
Farfetch (Shanghai) E-Commerce
Co. Ltd
Farfetch Australia Pty Ltd
Farfetch Brasil China Exportacao
Ltda
Farfetch Canada Limited
Farfetch China (HK Holdings)
Limited
Farfetch China Holdings Ltd
Farfetch China Ltd
Farfetch China US LLC
Farfetch Europe Trading B.V.
Farfetch HK Holdings Limited
Farfetch HK Production Limited
Farfetch India Private Limited****
Farfetch International Limited
Farfetch Italia S.r.l.
Farfetch Japan Co Ltd
Farfetch Mexico, S.A. de C.V.***
Farfetch Middle East FZE
Farfetch Platform Solutions
Limited (previously Farfetch Black
& White Limited)
2020
2021
53
53
Retail
- 100
E-commerce services
- 100
E-commerce services
70
-
70
70
70
70
100 100
Retail
Retail
Retail
Retail
81
81
E-commerce services
100 100
100 100
- 100
Retail
Retail
Retail
100 100
Import & Export Agent for Farfetch
- 100
E-commerce services
100
75
100 100
Brazil
Canada
75
-
100 100
E-commerce services
Back office support
E-commerce services
Retail
Hong Kong
100
75
Holding company
100
75
100
75
Retail
Retail
-
75
The Netherlands 100 100
100 100
Hong Kong
100 100
Hong Kong
100 100
80
80
100 100
100 100
100 100
80
80
India
Isle of Man
Italy
Japan
Mexico
UAE
E-commerce services
Retail
Holding company
E-commerce and marketing
Back office support
Holding company
Back office support
E-commerce and marketing
Back office support
Back office support
United
Kingdom
100 100
E-commerce services
F-83
Notes to the Consolidated financial statements (continued)
Farfetch Portugal-Unipessoal LDA
Farfetch RU LLC
Farfetch Store of the Future
Limited
Farfetch UK FINCO Limited
Farfetch UK Limited
Farfetch US Holdings, Inc.
Farfetch.com Brasil Serviços
LTDA**
Farfetch.com Limited
Farfetch.com US LLC
Fashion Concierge HK Limited
Fashion Concierge Powered By
Farfetch LLC
Fashion Concierge UK Limited
Heron Preston S.r.l.
Heron Preston Trademark S.r.l.
JBUX Limited
Kicks Lite, LLC
KPG S.r.l.
Laso. Co. Ltd
Luxclusif, Unipessoal Lda.
Luxi (Shanghai) Trading Co., Ltd
Luxis Baltic OÜ
M.A. Alliance Ltd.
New Guards Group Holding S.p.A.
NGG Beauty S.r.l.
OC Italy S.r.l.
Off White (Shanghai) Trading Co.,
Ltd
Off White Operating Holding,
Corp.
Off White Operating London
Limited
Off White Operating Los Angeles,
LLC
Off White Operating Miami, LLC
Off-White Operating Milano S.r.l.
Off-White Operating Paris S.a.r.l.
Off White Operating Soho, LLC
Off White Operating Spain SL
Off-White Operating S.r.l.
Portugal
Russian
Federation
United
Kingdom
United
Kingdom
United
Kingdom
Delaware
(USA)
Brazil
Isle of Man
California
(USA)
100 100
100 100
100 100
100 100
100 100
100 100
100 100
80
80
51
51
100 100
75
75
100 100
- 100
- 100
- 100
- 100
100 100
- 100
100 100
-
75
75
75
75
75
75
75
75
75
75
-
75
75
75
75
75
75
75
75
Hong Kong
Delaware
(USA)
United
Kingdom
Italy
Italy
United
Kingdom
New York
(USA)
Italy
Japan
Portugal
People's
Republic of
China
Estonia
Japan
Italy
Italy
Italy
People's
Republic of
China
Delaware
(USA)
United
Kingdom
California
(USA)
Florida (USA)
Italy
France
New York
(USA)
Spain
Italy
F-84
100 100
100 100
Back office support
E-commerce services and back
office support
100 100
Dormant company
100 100
100 100
Holding company
Marketing, providing editorial and
merchant services
- 100
Retail
Holding company
E-commerce, marketing and
editorial services
Holding company
E-commerce and marketing
E-commerce services
E-commerce services
E-commerce services
Retail
Retail
E-commerce services
Retail
E-commerce and marketing
E-commerce services
Trading company
E-commerce services
E-commerce services
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Notes to the Consolidated financial statements (continued)
Off-White Operating Switzerland
GmbH
Off White Operating Vegas, LLC
Palm Angels (Shanghai) Trading
Co., Ltd
Palm Angels S.r.l.
SGNY1 LLC
Stadium Enterprises LLC
There Was One S.r.l.
Unravel Project S.r.l.
Upteam Corporation Limited
Venice Holding Corp.
Venice Miami LLC
Venice Retail Italy S.r.l.
Venice S.r.l.
Venice Vegas LLC
33.
Non-controlling interests
Switzerland
Nevada (USA)
People's
Republic of
China
Italy
New York
(USA)
Delaware
(USA)
Italy
Italy
Hong Kong
Delaware
(USA)
Florida (USA)
Italy
Italy
Nevada (USA)
-
75
75
75
- 100
60
-
100 100
100 100
- 100
61
- 100
61
- 100
- 100
- 100
69 100
- 100
Retail
Retail
Retail
Retail
E-commerce services
E-commerce services
E-commerce services
Retail
Holding company
Holding company
Retail
Retail
Retail
Retail
The effect of changes in the ownership interest of the Group on the equity attributable to owners of the
Company is summarized as follows (in thousands):
Balance at January 1, 2020
Total comprehensive income/(loss) attributable to
non-controlling interests
Acquisition of non-controlling interest
Dividends paid to non-controlling interests
Balance at December 31, 2020
Total comprehensive (loss)/income attributable to
non-controlling interests
Step acquisition
Capital contribution from non-controlling interest
Non-controlling interest arising on purchase of
asset
Acquisition of non-controlling interest
Dividends paid to non-controlling interests
Other
Balance at December 31, 2021
% of non-controlling interests
Farfetch
International
Limited
(IOM)
New
Guards
Farfetch
China
Holdings
Limited
1,225 $ 168,592 $
Total
- $ 170,226
CuriosityChina
$
409 $
110
-
-
519
(3,412 ) 21,182
965
-
- (20,515 )
(2,187 ) 170,224
- 17,880
965
-
- (20,515 )
- 168,556
(1,657 )
-
-
-
-
-
-
(1,138 ) $
19 %
$
(548 ) 16,220 (12,635 ) $ 1,380
2,434
-
- (13,875 ) (13,875 )
-
-
2,434
- 50,453
-
(6,901 )
- (23,016 )
2,977
-
- 50,453
-
(6,901 )
- (23,016 )
2,977
-
(2,735 ) $ 212,391 $ (26,510 ) $ 182,008
20 %
23 %
22 %
The Step acquisition relates to New Guards’ acquisition of Alanui (refer to Note 5, Business combinations
for further details).
F-85
Notes to the Consolidated financial statements (continued)
On August 1, 2021, Alibaba and Richemont each acquired a 12.5 percent shareholding in Farfetch China
Holdings Ltd for total consideration of $500.0 million. The non-controlling interest recognized of $(13.9 million) as
a result of this transaction was calculated using the proportionate share of net assets method in line with the
requirements of IFRS 10 - Consolidated Financial Statements. Transaction costs of $25.0 million directly
attributable to the investments made by Alibaba and Richemont were treated as a deduction from equity in Other
reserves.
The non-controlling interest arising on purchase of asset of $50.5 million relates to the acquisition by New
Guards on July 20, 2021 of 60 percent of the share capital of Palm Angels.
The acquisition of non-controlling interest of $6.9 million relates to the acquisition by New Guards of the
remaining 31 percent of the share capital it did not own in Venice S.r.l.
The New Guards group comprises numerous legal entities with various non-controlling interests throughout
the group structure, representing the co-founders of the individual fashion brands. During the year ended December
31, 2021, New Guards had paid dividends of $23.0 million to holders of minority interests. During the year ended
December 31, 2020, New Guards paid dividends of $20.5 million to holders of non-controlling interest.
34.
Subsequent Events
On February 1, 2022, the Group completed the acquisition of Violet Grey Inc., a luxury beauty online
retailer, for consideration of approximately $44.4 million, subject to customary completion accounts price
adjustments, comprised of $43.5 million in cash and $0.9 million in Farfetch shares based on the Farfetch share
price at the acquisition date. The share consideration includes service conditions in respect of certain members of the
Violet Grey Inc. management team remaining with the Group after the acquisition.
On February 22, 2022, New Guards Group entered into a commercial agreement with Authentic Brands
Group LLC for the distribution rights of Reebok footwear and apparel ranges within certain countries in the
European region. As part of the arrangement, the Group is committed to minimum royalty payments of
approximately $374 million (€329.9 million) over the 11 year life of the agreement.
F-86