REG - Brown (N.) Group PLC - Half Yearly Report <Origin Href="QuoteRef">BWNG.L</Origin> - Part 2
14/10/2015 07:01
- Part 2: For the preceding part double click ID:nRSN1685Ca
Net cash used in financing activities (35.0) (37.0) (18.7)
Net decrease in cash and cash equivalents (0.2) (0.5) (4.9)
Opening cash and cash equivalents 40.4 45.3 45.3
Closing cash and cash equivalents 40.2 44.8 40.4
Reconciliation of operating profit to net cash from operating activities
26 weeks to 26 weeks to 52 weeks to
29-Aug-15 30-Aug-14 28-Feb-15
£m £m £m
Operating profit from continuing operations 24.0 45.2 81.2
Operating (loss) from discontinued operations (0.2) - (11.0)
Adjustments for:
Depreciation of property, plant and equipment 3.1 2.9 8.0
Loss/(gain) on disposal of property, plant and equipment 0.7 - (0.1)
Amortisation of intangible assets 9.1 7.3 15.0
Impairment of intangible assets - - 8.0
Share option charge 1.1 1.1 2.1
Operating cash flows before movements in working capital 37.8 56.5 103.2
Decrease/(increase) in inventories 5.8 (1.3) (4.9)
Decrease/(increase) in trade and other receivables 20.9 7.5 (9.9)
Increase in trade and other payables 9.2 17.5 5.1
Pension obligation adjustment 0.2 0.1 0.3
Cash generated by operations 73.9 80.3 93.8
Taxation paid (7.5) (13.0) (20.7)
Net cash from operating activities 66.4 67.3 73.1
Unaudited condensed consolidated statement of changes in equity
Foreign
currency
Share Share Own translation Retained
capital premium shares reserve earnings Total
£m £m £m £m £m £m
Changes in equity for the 26 weeks to 29 August 2015
Balance at 28 February 2015 31.3 11.0 (0.3) 1.0 453.6 496.6
Profit for the period - - - - 15.4 15.4
Other items of comprehensive income for the period - - - - 4.7 4.7
Total comprehensive income for the period - - - - 20.1 20.1
Equity dividends - - - - (24.2) (24.2)
Purchase of own shares by ESOT - - (0.4) - - (0.4)
Issue of own shares by ESOT - - 0.5 - - 0.5
Adjustment to equity for share payments - - - - 0.1 0.1
Share option charge - - - - 1.1 1.1
Balance at 29 August 2015 31.3 11.0 (0.2) 1.0 450.7 493.8
Changes in equity for the 26 weeks to 30 August 2014
Balance at 1 March 2014 31.3 11.0 (0.5) 1.9 441.6 485.3
Profit for the period - - - - 33.4 33.4
Other items of comprehensive income for the period - - - (0.4) (0.6) (1.0)
Total comprehensive income for the period - - - (0.4) 32.8 32.4
Equity dividends - - - - (24.0) (24.0)
Purchase of own shares by ESOT - - (0.2) - - (0.2)
Issue of own shares by ESOT - - 0.4 - - 0.4
Adjustment to equity for share payments - - - - 0.3 0.3
Share option charge - - - - 1.1 1.1
Balance at 30 August 2014 31.3 11.0 (0.3) 1.5 451.8 495.3
Changes in equity for the 52 weeks to 28 February 2015
Balance at 1 March 2014 31.3 11.0 (0.5) 1.9 441.6 485.3
Profit for the period - - - - 49.4 49.4
Other items of comprehensive income for the period - - - (0.9) 1.1 0.2
Total comprehensive income for the period - - - (0.9) 50.5 49.6
Equity dividends - - - - (40.0) (40.0)
Purchase of own shares by ESOT - - (0.2) - - (0.2)
Issue of own shares by ESOT - - 0.4 - - 0.4
Adjustment to equity for share payments - - - - 0.5 0.5
Share option charge - - - - 2.1 2.1
Tax on items recognised directly in equity - - - - (1.1) (1.1)
Balance at 28 February 2015 31.3 11.0 (0.3) 1.0 453.6 496.6
Notes to the unaudited condensed consolidated financial statements
1. Basis of preparation
This condensed set of financial statements for the 26 weeks ended 29 August 2015 has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.
The financial information for the 52 weeks ended 28 February 2015 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of those accounts have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.
The annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the 52 weeks ended 28 February 2015.
2. Risks and uncertainties
There are a number of risks and uncertainties which could have an impact on the group's performance over the remaining months of the financial year and cause actual results to differ materially from expected and historical results. These were set out in detail in the annual report for the 52 weeks ended 28 February 2015 and have been reviewed and updated during the first half of the current year. The risks which could have a material impact on the group's performance for the remainder of the current year
are as follows; Business change/transformation unsuccessful; Competition; IT Systems and cybersecurity; People; Liquidity and Credit risk management, Regulatory environment and taxation.
In light of changes to the regulatory environment the group has undertaken a detailed review of its compliance with the CCA and submitted its application to the FCA for full authorisation. Whilst the group considers that it is compliant, there is a risk that an eventual outcome may differ. As noted at the year end, the group continues to have a number of open taxation positions and the calculation of the group's potential liabilities or assets in the respect of these necessarily involves a degree of
estimation and judgement in respect of items whose tax treatment cannot be finally determined until resolution has been reached with HMRC or, as appropriate, through a formal legal process.
3. Going concern
In determining whether the group's accounts can be prepared on a going concern basis, the directors considered the group's business activities together with factors likely to affect its future development, performance and financial position including cash flows, liquidity position, borrowing facilities and the principal risks and uncertainties relating to its business activities.
The directors have considered carefully its cash flows and banking covenants for the next twelve months from the date of approval of the group's interim results. Conservative assumptions for working capital performance have been used to determine the level of financial resources available to the company and to assess liquidity risk.
The group's forecasts and projections, after sensitivity to take account of all reasonably foreseeable changes in trading performance, show that the group will have sufficient headroom within its current loan facilities of £405m - which are committed until 2020 - and its £20m overdraft facility.
After making appropriate enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in the preparation of the financial statements.
Notes to the unaudited condensed consolidated financial statements
4. Business segments 26 weeks to 26 weeks to 52 weeks to
29-Aug-15 30-Aug-14 28-Feb-15
£m £m £m
Analysis of revenue - Home shopping
Product 299.2 282.1 582.9
Financial services 116.6 117.1 235.1
415.8 399.2 818.0
Analysis of cost of sales - Home shopping
Product (126.3) (115.0) (253.9)
Financial services (50.0) (52.9) (98.7)
(176.3) (167.9) (352.6)
Gross profit 239.5 231.3 465.4
Gross margin - Product 57.8% 59.2% 56.4%
Gross margin - Financial Services 57.1% 54.8% 58.0%
Warehouse & fulfilment (38.4) (35.7) (73.9)
Marketing & production (86.0) (78.7) (154.7)
Depreciation & amortisation (12.2) (10.2) (21.2)
Other admin & payroll (64.1) (61.5) (121.8)
Exceptional items (see note 5) (14.8) - (12.6)
Segment result & operating profit - Home shopping 24.0 45.2 81.2
Investment income - - 0.1
Finance costs (3.8) (3.6) (7.7)
Fair value adjustments to financial instruments (0.8) 1.1 2.7
Profit before taxation 19.4 42.7 76.3
Given the significant change being implemented across our business as we become a digital-first, product-led, specialist-fit fashion retailer, we have sought to enhance our P&L disclosure in several ways:
(1) Changing the allocation of certain cost lines from product gross margin to operating costs, to bring our disclosure more in line with typical retail practice.
(2) Splitting the gross margin performance of Product and Financial Services.
(3) Enhancing our operating cost disclosure to provide further clarity, moving from two categories - Distribution and Sales & Administration costs, to four - Warehouse & Fulfilment, Marketing & Production, Depreciation & amortisation, Other admin & payroll. All the prior year comparatives have been adjusted accordingly.
The group has one significant geographical segment that operates in and derives revenue from the United Kingdom. Revenue derived from international markets amounted to £15.0m (H1 FY15, £14.0m) and incurred operating losses of £0.4m (H1 FY15, £1.2m). All segment assets are located in the UK and Ireland.
5. Exceptional items
26 weeks to 26 weeks to 52 weeks to
29-Aug-15 30-Aug-14 28-Feb-15
£m £m £m
Strategy costs 5.3 - 5.6
VAT related costs 0.6 - 7.0
Clearance store closure costs 8.9 - -
14.8 - 12.6
Strategy costs relate to group re-organisation costs in H1 FY16, and the outsourcing of our Call Centre in H2 FY15.
VAT related costs in H2 FY15 related to a potential settlement with HMRC in respect of VAT recovery on bad debts written off over a number of years. We anticipate that this matter will be settled in the current financial year. The VAT related costs in H1 FY16 are legal costs associated with disputes with HMRC on this and other issues.
In H1 FY16 we closed our retail clearance stores, in line with our strategy to become digital first. The exceptional costs of £8.9m relate to stock write downs, onerous lease provisions and other related closure costs.
Notes to the unaudited condensed consolidated financial statements
6. Discontinued operations
Following a review of the business and its future profit potential, the board decided in January 2015 to close the Gray & Osbourn catalogue business. The process is ongoing and has continued into the current financial year.
The results of the discontinued operation, which have been included in the consolidated income and cashflow statement, were as follows:
26 weeks to 26 weeks to 52 weeks to
29-Aug-15 30-Aug-14 28-Feb-15
£m £m £m
Revenue 4.1 8.1 14.5
Expenses (4.3) (8.1) (17.5)
Brand impairment - - (8.0)
Loss before tax (0.2) - (11.0)
Attributable tax credit
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