Press releases & News

Interim Results Announcement
26 weeks to 1 September 2001

N Brown Group plc, the Manchester based direct catalogue home shopping company, today announces its interim results for the 26 weeks to 1 September 2001.

The group continues to deliver a strong performance in a highly competitive retail market. Turnover growth in the core home shopping division was ahead of the High Street and distance shopping sectors, reflecting increased customer spending and retention.

Highlights of the results include:

• Turnover £219.3m (2000: £185.9m) up 18.0%
• Operating Profit £28.0m(2000: £24.7m) up 13.0%
• Profit Before Tax £25.3m (2000: £22.7m) up 11.5%
• Earnings per Share 6.28p (2000: 5.55p) up 13.2%
• Interim Dividend per Share 1.65p (2000: 1.45p) up 13.8%

Sir David Alliance CBE, Chairman, said:

"I am delighted to report another strong performance for the six months to 1 September 2001, with profit before tax up by 11.5% and turnover up by 18.0%. It is particularly pleasing that our core home shopping business has performed well with sales and operating profits both up by 16%."

"Sales of household and electrical goods have grown by 31% to £54m, now representing 26% of home shopping turnover. Given the size of this product category in the marketplace we believe there is considerable growth potential for us in sales of these goods in the future."

"Zendor has continued to invest to enable it to offer quality end-to-end fulfilment and consultancy services. It is developing well and has entered into long-term arrangements with several large clients. With an encouraging flow of new prospects into the business, we believe that it will make an early move into profit."

"The second half has begun well and, after making an allowance for the negative effect of last year's petrol shortages, turnover for the first six weeks is up by 12%. Whilst it is too early to assess whether the present uncertainty in world markets will have any impact on our business, I am confident in the ability of our management teams to respond positively to market conditions and I remain cautiously optimistic for the Group's full year results."

For further information please contact:

N Brown Group plc

Gavin Anderson & Company

Websites:
www.nbrown.co.uk
www.zendor.com
www.eunite.co.uk

CHAIRMAN'S STATEMENT

I am delighted to report another strong performance for the six months to 1 September 2001, with profit before tax up by 11.5% to £25.3m on turnover 18.0% higher at £219.3m. Earnings per share rose 13.2% to 6.28p and the board has recommended a 13.8% increase in the interim dividend to 1.65p per share. Most encouragingly, the core home shopping division performed particularly well, with both sales and operating profit up 16%.

Home Shopping

This division has handsomely outperformed both the High Street and distance shopping sectors of the retail market with a 16% increase in turnover to £214m, matched by a similar increase in operating profit to £28m. Most of this increase in turnover has come from our longer established customers, who have grown in number by 6% to just under 2 million with spending ahead by 9%. An increased level of marketing investment has been directed at these customers, offering them a wider range of products, particularly household and electrical goods, which has contributed to the impressive rise in their average spending.

Sales of womenswear, which continues to be the major part of our product offer, increased by 11% to £120m and now represents 56% of home shopping turnover. In a reversal of last year's performance, turnover in menswear has increased by 17% to £18m and footwear is ahead by 9% to £19m.

The growth in sales of household and electrical goods has continued to justify the concentration we have placed on this area of our business, with sales growing by 31% to £54m, representing 26% of turnover against 23% a year ago. Product ranges have been continually enhanced and customers are being offered more flexible credit propositions. Given the overall size of this product category in the marketplace, we believe there is considerable growth potential for us in sales of these goods in the future.

We have a wide portfolio of catalogues directed at discrete groups of customers. The largest of these, aged between 40 and 65 years, increased its sales by 11% to £145m, now representing 68% of home shopping turnover. Consumers in this age category are growing in number and affluence and we are well positioned to benefit from this demographic trend. Additionally, we recognise the opportunity provided by younger consumers aged between 30 and 45 years and we are delighted that sales to this group increased by 30% to £48m. This rise was assisted by the successful launch of our ‘Simply Be' catalogue, which is aimed at the younger, fuller figured woman. Our third group of catalogues, directed at those customers in retirement, increased sales by 10% to £13m. House of Stirling, our door-to-door sales operation, has successfully completed a period of consolidation and performed well with sales up by 31% to £5m.

Sales through our internet sites reached £5m in the period, a tenfold increase since last year and, with a current annualised rate of £12m, we have confidence in the growth potential of this channel. These sales, which have the benefit of reduced transactional costs, came from a wide range of customers who were generally younger and higher spending.

The sustainable competitive advantages that we have in our home shopping business will continue to be based on a highly targeted and cost effective customer contact strategy, a detailed knowledge of product trends and range architecture and a culture of responding rapidly to changes in market conditions and consumer trends.

Fulfilment

Our fulfilment division consists of Zendor, the end-to-end fulfilment solutions company which largely uses the facilities of N Brown, and the recently acquired Eunite, a leading provider of multi-channel e-commerce services.

Eunite has been affected by the downturn in e-commerce and has made an operating loss of £0.9m. We have implemented steps to reduce costs and examine areas for new sales opportunities whilst at the same time augmenting the management team. We still anticipate a small loss in the second half, but remain confident about the long-term future of Eunite as a complementary business to Zendor.

Zendor has continued to invest in its people for the future in order to offer quality end-to-end fulfilment and consultancy services to third parties. It is developing well and has entered into long-term arrangements with several large clients whose expectations of their own home shopping sales, to be serviced through Zendor, amount to £38m in their first year of operation. In line with expectations, Zendor made a small operating loss of £0.3m in the period but, with an encouraging flow of new prospects into the business, we believe that it will make an early move into profit.

Financial Services

First Financial, our financial services division, increased its operating profit by 11% to £0.9m.

Acting as a commission based intermediary, this division offers a variety of financial products, such as life assurance, personal finance and house and contents insurance, sourced from reputable financial organisations. In addition, acting as principal lender, First Financial has recently started to provide unsecured personal loans directly to our customers. We are aware of the need to lend responsibly and, to ensure this, the personal circumstances of applicants are carefully considered by our dedicated financial services team, which has been strengthened with experienced personnel drawn from the consumer credit industry.

Balance Sheet

Net assets increased by 14% to £209m and stocks were up by 5% to £37m. Capital expenditure was broadly similar to last year and the net cash outflow before financing decreased from £15m to £9m. Gearing rose from 34% to 41% due mainly to an increase in interest bearing home shopping debtors, up by 19% to £231m, as a result of customers taking advantage of one or more of our popular credit propositions.

Prospects

The continued success of the Group, against a highly competitive retail background, owes much to our declared strategy of aligning new initiatives to our core skills in home shopping. We believe that the direct distance shopping marketplace, in which we operate, is set for a sustained period of long-term growth and we are well positioned to take advantage of this opportunity.

The second half has begun well, with turnover for the first six weeks up by 12%, after making an allowance for the negative effect of last year's petrol shortages. It is too early to assess whether the present uncertainty in world markets will have any impact on our business. However, I am confident in the ability of our management teams to respond positively to market conditions and I remain cautiously optimistic for the Group's full year results.

On behalf of the shareholders, I would like to thank all of our staff for their unstinting efforts in achieving such a strong set of results.

Sir David Alliance, CBE

To download the full Interim Results in PDF format

N Brown Group plc - Interim report 2001