Interim Results Announcement
six months ended 27 August 2005
N Brown Group plc, the Manchester based direct home shopping group, today announces its Interim results for the 26 weeks to 27 August 2005.
Highlights:
- Group profit before tax* up 45.1% to £23.5m (H1 2004: £16.2m)
- Group turnover* improved by 8.6% to £237.3m (H1 2004: £218.6m)
- Core home shopping business increases operating profit by 23.3% to £29.6m (H1 2004 £24.0m) on turnover up 9.4% to £225.6m (H1 2004 £206.3m)
- Clothing and footwear product ranges improve sales by 9%
- Internet sales up 55% to £33m, representing 14% of turnover (H1 2004 internet sales 9.6% of turnover)
- Dividend per share increased by 4.6% to 1.82p
- Earnings per share* up 44.6% to 5.71p
- Current trading for the 6 weeks to 8 October shows group sales growth of 6.6%, with core home shopping sales up 7.4%
*from continuing operations
Alan White, Chief Executive, said:
"This is an encouraging set of results in the current retail environment and we are particularly pleased with the growth across all our core home shopping customer and product segments. We have made good progress rationalising our business to focus on our home shopping catalogues and integrating the House of Bath business acquired at the end of last year. We also continue to exploit opportunities to grow the business through our multi-channel approach, with the internet continuing to be a good source of revenue growth."
Lord Alliance CBE, Chairman, added:
"The Group has demonstrated resilience in challenging markets and following the work done over the past year or so to dispose of non-core activities, we now have a stronger, leaner financial and operational structure which provides an excellent base from which to take the business forward. Whilst we have had a good first half and a solid start to the second half, the wider retail market is depressed. We are therefore cautiously optimistic over the outlook for the full year."
For further information please contact:
N Brown Group plc
Alan White, Chief Executive On the day: 0207 554 1400
Dean Moore, Finance Director Thereafter: 0161 238 2002
Website : www.nbrown.co.uk
Gavin Anderson & Company
Charlotte Stone / Fergus Wylie Tel: 020 7554 1400
CHAIRMANS STATEMENT - INTERIM RESULTS
These results show a continuation of the positive trends evident in last years results. On an International Financial Reporting Standards (IFRS) basis group sales from continuing operations are up by 8.6% to £237.3m and pre-tax profits are up by 45.1% at £23.5m. Most importantly the core home shopping division has seen further strong growth with sales up by 9.4% to £225.6m and operating profits up by 23.3% to £29.6m. On an underlying basis under indicative UK GAAP as at 26 February 2005 the group pre-tax profits from continuing operations are up by 14.9% to £23.9m, including a 7.9% increase in core home shopping operating profit to £30.2m.
In addition we have made good progress in rationalising our other businesses so that we are now totally focused on home shopping activities. The proceeds from disposals have helped to reduce net debt by £11.8m to £114.4m, improving gearing from 58% to 49%.
Earnings per share from continuing operations are up 44.6% to 5.71p and the board is proposing a 4.6% increase in the interim dividend to 1.82p. This will be paid on 6 January 2006 to shareholders on the register at 9 December 2005.
IFRS Impact
The interim results have been prepared under the new IFRS and prior year figures have been restated. The adoption of IFRS has reduced group pre-tax profit from continuing operations of the current period by £0.4m from the result calculated under indicative UK GAAP as at 26 February 2005, but the impact on the same period in 2004 was to reduce pre-tax profit by £4.6m, primarily due to the change in accounting for marketing costs.
Core Home Shopping
The core home shopping division has seen turnover rise by 9.4% to £225.6m. Excluding sales from the House of Bath, acquired in November 2004, turnover is up by 4.9% to £216.5m. This result was delivered against the backdrop of the widely reported consumer downturn elsewhere in the retail sector. The increase in sales has been driven by a clear focus on our target customer groups and improvements in all key product ranges.
Sales increased in all of our customer groups. The midlife titles targeted at customers in the 45-65 age group, which now includes House of Bath, saw sales rise by 9% from £143m to £157m, whilst the catalogue titles targeting customers aged over 65 increased sales by over 6% to £12m, driven by a strong performance from the Special Collection customer file. The strongest growth was achieved by the younger catalogue titles targeted at customers under 45, with a sales increase of 10% to £57m. Simply Be continued to exploit its niche of fashion and footwear for the larger woman in the 30-40 age category, resulting in a 32% increase in sales for the period.
Our sources of customer recruitment continue to become more varied. In addition to the more traditional press advertisements and brochures inserted in newspapers and magazines we are also making good use of direct mail and internet search engine recruitment. The result has been an increase in sales from new customers by 7%. The balance is from established customers where the average spend per customer rose by 4%.
The sales growth was spread across all product groups. The ladieswear ranges were well received, posting an 8% increase in sales to £125m, with the younger fashion ranges and occasion wear doing particularly well. Footwear sales continued the strong trend of recent years with a 15% increase, and menswear was ahead by over 13%. Home and leisure sales were up by 10%, although most of this increase was due to the inclusion of House of Bath. Part of the overall sales increase is due to the concerted efforts to improve product specifications resulting in a 1% decrease in the rate of returns.
We have improved both the quality and frequency of our customer contacts. The main catalogue sales were 10% up on the previous year and mid-season mailings of publications, such as New Now, Classic Detail and Summer Value saw a significant rise in turnover.
Our on-line activity continues to grow with sales up another 55% to £33m. This increase is due to both a higher proportion of customers choosing to key their orders in, instead of using post or telephone, and our targeted email campaigns promoting special offers. The creation of specialist websites, such as VivalaDiva.com and Petfoodnstuff.com show our ability to add range extensions for a modest level of investment and with a broader customer appeal.
The early results from our television shopping joint venture with Northern & Shell, the Express Shopping Channel, indicated that customer acquisition would be slower than we had anticipated, requiring a heavy investment over the medium term. Consequently the channel stopped broadcasting from early October and the assets are being sold. This will result in an estimated loss on disposal of £1m in the second half.
The gross margin on sales in core home shopping rose by 0.8% to 57.3%, due to the higher proportion of clothing in the sales mix coupled with a further reduction in bad debts. Overheads increased by 11.7%, reflecting the marketing investment made to drive the sales and customer acquisition, higher distribution costs and the running costs of House of Bath. The cost savings identified last year have been reinvested to reinvigorate the business.
Door to Door Selling
We have undertaken a major restructuring of House of Stirling, our door to door selling business. The worst performing elements of the debtor book were sold to a third party debt collector for £1.75m. The remaining debtors have been reorganised into a reduced number of sales territories, and as a consequence the headcount for the business has decreased by 140. The net result in the first half are sales of £8.5m, down 7.6%, with the operating loss reduced from £4.2m to £1.6m.
Fulfilment Services
Zendor’s sales of £3.2m and an operating loss of £0.1m were at similar levels to last year. The shift in focus last year from interactive services to the core business of fulfilment has proved successful with a 56% increase in revenue in this area. Activity will continue to focus on providing end-to-end fulfilment services to high street retailers looking to move into multi-channel retailing, with the latest major signing, JJB Sport, being successfully launched online in September this year.
Discontinued Activities
In May 2005 we sold Teleview, our television rental operation, for £6.2m. The operating loss during the period prior to disposal was £0.1m with a loss on disposal of £1.2m.
In June 2005 we sold our personal loans portfolio for £9.95m, and during September 2005 we disposed of our retail credit portfolio for £6.2m. These combined activities made an operating loss of £0.9m during the period, but the disposal proceeds exceeded our expectation allowing £1.1m of the £3m impairment provision taken at the year end to be released.
Prospects and Outlook
The encouraging trends seen in the first half have continued into the second half. During the six weeks to 8 October 2005 core home shopping sales are up by 7.4%, or up by 5.0% excluding House of Bath’s contribution. The strong trading performance during September includes the launch of some new publications and the release of our Home & Christmas Gift catalogue one month earlier than last year. The most positive results continue to come from our ladies clothing and footwear ranges. Group sales from continuing activities are up by 6.6%.
We are mindful of the depressed state of trading elsewhere in the retail sector and the busiest months of the year are still ahead of us. However the group is now wholly focused on home shopping activities and we expect the concentration on targeted marketing of our core product propositions to continue to drive our business performance.
Lord Alliance, CBE
11 October 2005
Please click here for the full version of our 2005 interim results announcement
2005 interim results announcement
