REG - Brown (N.) Group PLC - Interim results
10/10/2024 07:00
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RNS Number : 6200H Brown (N.) Group PLC 10 October 2024
10 October 2024
HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 31 AUGUST 2024
Profit growth and strategic progress in H1
FY25 adjusted EBITDA outlook remains unchanged
26 weeks to 31 August 2024 (H1 25) 26 weeks to 2 September 2023 (H1 24) Change
£m
Group revenue 277.2 297.0 (6.7)%
Product revenue 172.7 187.5 (7.9)%
Financial Services revenue 104.5 109.5 (4.6)%
Adjusted EBITDA(1) 18.8 17.5 7.4%
Adjusted EBITDA margin 6.8% 5.9% 0.9ppts
Adjusted profit before tax(1) 3.6 0.1 N/M
Statutory profit / (loss) before tax(2) 0.2 (2.8) N/A
Cash and cash equivalents 66.0 49.1 34.4%
Adjusted net debt(1) (211.6) (258.4) 18.1%
Gross customer receivables 480.2 528.9 (9.2)%
Steve Johnson, Interim Executive Chair & Chief Executive, said:
"We have built on our return to profit in FY24 by delivering year-on-year
progression in the first half of FY25. Our focus on maximising profitable
sales and managing the cost base in a soft trading environment, has ensured we
remain on track to achieve management's full year adjusted EBITDA expectations
and we are encouraged by trading at the start of Q3.
"We have continued to deliver against our self-funded transformational
priorities, including the successful launch of the new JD Williams website and
our Product Information Management system to the remaining strategic brands,
whilst our financial services transformation continues to progress well with
the new platform now in testing. These developments will enhance the customer
experience and will be supported by strengthened marketing activity to help
position the business for sustainable profitable growth."
Highlights
Further strategic progress
· Successful launch of new mobile-first website for JD Williams,
completing the transitioning of our three strategic brands to the new
platform, a key transformational priority
· Product Information Management ('PIM') system, fundamental to our
marketing strategy, now launched on all three strategic brands
· Financial Services ('FS') transformation continues to progress well,
with the testing of the new platform's minimum viable product having commenced
Financial
Gross margin and cost discipline driving H1 EBITDA and PBT progression
· Improved Group revenue trajectory, down 6.7% against prior year, with
product revenue of (-7.9%) and FS revenue of (-4.6%) both also showing
improved trend in H1
· Continued focus on profitable sales in a market which remained
soft(3) and was characterised by unseasonal weather, drove adjusted group
gross profit margin up 1.6ppts to 49.2%, with progression seen across both
product and FS margin
· Adjusted operating costs reduced by £6.2m following planned
management initiatives and despite c. £1m additional marketing spend, as
rebalancing of spend into marketing to support future growth commenced
· Adjusted EBITDA up 7.4% to £18.8m and adjusted EBITDA margin up
0.9ppts to 6.8%, with gross profit margin progress more than offsetting the
impact of operational deleverage from reduced sales
· Adjusted profit before tax of £3.6m, up from £0.1m in H1 24,
reflecting progress in adjusted EBITDA and lower net interest costs
· Statutory profit before tax of £0.2m, up from a loss of £2.8m(2) in
H1 24
Cash generative after self-funded investment, with no unsecured borrowings
· Net cash generation of c. £1m after investment of £14.4m in
progressing the strategic transformation
· Strong balance sheet with significant cash and cash equivalents, and
total accessible liquidity of £150.2m. RCF and overdraft remain undrawn with
limits of £75m and £12.5m respectively
· £66.0m cash and cash equivalents; securitisation borrowings of
£277.6m are well covered by £480.2m of gross customer receivables
· Adjusted net debt of £211.6m reflects the securitisation borrowings
and net cash
Current trading encouraging and FY25 outlook unchanged
· FY25 adjusted EBITDA expected to be in line with management
expectations
· Trading during the first five weeks of Q3 has been encouraging, with
product revenue trajectory improving to -2% against prior year
· Expected continued improvement in product revenue trajectory in H2
supported by delivery of our strategic initiatives and increased investment in
marketing
· Continued management focus on margin rate and operating cost
efficiencies
· Strategic investment will continue to be self-funded through
carefully managed cash flows
· Board has continued confidence that the progress made against the
Group's strategic transformation plans and its differentiated brands leave it
well positioned to deliver future sustainable growth
Webcast for analysts and investors:
A webcast presentation of these results will take place at 9.00am on 10
October 2024 followed by a Q&A conference call for analysts and
investors. Please contact Hawthorn on +44 (0)7719 078 196 or email
nbrown@hawthornadvisors.com for details.
For further information:
N Brown Group
David Fletcher, Head of Investor Relations +44 (0)7876 111 242
Hawthorn
Henry Lerwill +44 (0)7894 608 607
Simon Woods +44 (0)7719 078 196 nbrown@hawthornadvisors.com
Shore Capital - Nomad and Broker
Stephane Auton / Daniel Bush / Rachel Goldstein +44 (0) 20 7408 4090
Fiona Conroy (Corporate Broking)
About N Brown Group:
N Brown is a top 10 UK clothing and footwear digital retail platform, with a
home proposition, headquartered in Manchester and employs around 1,700 people
nationwide. Through our strategic retail brands including JD Williams,
Simply Be and Jacamo, we exist to make our customers look and feel amazing,
and take great pride in passionately championing inclusion and serving the
under-served. Our customer-first shopping experience, supported by our
innovative financial services proposition, is designed to deliver choice,
affordability, and value to our customers, and allows us to be truly inclusive
and accessible.
(1) A full reconciliation of statutory to adjusted measures is included in the
Financial Review.
(2) Loss before tax for the 26 weeks to 2 September 2023 restated from
£(4.1)m to £(2.8)m - see Note 18.
(3) For the 26 weeks ended 31 August 2024, the online pureplay market
according to IMRG declined by 6%.
PERFORMANCE REVIEW
We have continued to make good progress on delivering against our strategic objectives in H1 25 following a return to profit in FY24. The transformation of the business gained pace last year and we have now delivered further enhancements for our customers with the launch of the new JD Williams website and the roll out of our Product Information Management ('PIM') System to the remaining strategic brands. Our new Financial Services platform, minimum viable product ('MVP'), entered testing.
Our assumption entering the year was that macro-economic conditions would remain challenging but that conditions would improve. We are gradually seeing conditions improve through key macro-economic indicators but we have not yet seen a material change in consumer spending habits in our markets. However, despite the market conditions and unseasonal weather in the period, the H1 revenue performance reflects an improvement over FY24's trajectory.
A focus on profitable trade and planned management cost actions have driven progress in profitability in H1, with our full year outlook remaining unchanged. During H1, we commenced the strategic rebalancing of the cost base with greater investment in marketing, and further brand-building activity having commenced in Q3 as we target a continued improvement in product revenue trajectory in H2. We are encouraged by performance at the start of Q3. After increasing the level of capital expenditure deployed during H1, reflective of a business now making change faster, the Group has remained cash generative and maintained a strong balance sheet.
Strategic update
We have continued to focus investment on the following five transformational priorities:
- New websites for all strategic brands - roll out our new
mobile-first website experience and continuously iterate site launches with
new features.
- A technology platform to support our Financial Services
proposition - the platform will enhance the ways in which customers can choose
to pay for the products and will be supported by the launch of a new FS brand.
- Data culture - further empower our colleagues to engage with data
to identify and leverage analytical opportunities.
- A Product Information Management ('PIM') system - providing a
single place to collect, manage and enrich product data, to provide a better
experience for customers and a more efficient process for colleagues.
- A fully embedded agile operating model - evolving our
organisational design so that all relevant colleagues will have moved to an
agile way of working.
The significant further progress which has been made against these transformational priorities is included within the following update against our five strategic pillars. Within this, we have completed the roll out of new websites and PIM to all strategic brands. Our five pillars are underpinned by two key enablers: our people and talent, and a sustainable and efficient operating model.
1. Build a Differentiated Brand Portfolio
Strategic objective: Build two multi brand and category platforms, one for
women (JD Williams) and one for men (Jacamo), as well as one inclusive fashion
brand for young women (Simply Be).
Our differentiated brand portfolio has progressed through evolving our
creative and marketing platforms, as we continue to concentrate on our target
brand positioning.
JD Williams: announced that it was once again to be the headline sponsor for
ITV's popular relationship show, My Mum, Your Dad. Gok Wan was introduced as
the new brand ambassador, a collaboration which is further connecting with,
and inspiring, our customers. This partnership aligns perfectly with JD
Williams' commitment to celebrating midlife and will continue to engage with
its core audience through this platform.
Simply Be: as previously outlined in our focus areas for the year, H1 has been
spent refining the Simply Be proposition. At the start of H2, we saw the
launch of Simply Be's latest campaign 'Find That Feeling'. The campaign
showcases a diverse cast of women, highlighting how fashion can evoke powerful
feelings. It is showing up on a variety of places where Simply Be target
customers spend their time, including mobile streaming services and
terrestrial TV.
Jacamo: the brand's partnership with LADbible has continued to captivate the
target consumer and received a nomination for the upcoming Retail Gazette
awards for the 'Marketing Game-Changer'. The campaign continues to focus on
connecting with our customers through their unique interests and shopping
habits.
In late September Jacamo launched the 'Men's Style. Sorted' campaign to
showcase this year's Autumn / Winter collection. The campaign, aimed at
redefining men's fashion for the season is being displayed across multiple
platforms including billboards, YouTube, Sky Sports and various social media
platforms.
The heritage portfolio continued to focus on stabilising its customer file.
Progress has been made in H1 in both the moderation in decline in heritage
revenue, as described in the Financial Review, and also in the moderation in
total active customer decline, described within the non-financial KPIs.
2. Elevate the fashion and fintech proposition
Strategic objective: Elevate the fashion assortment, integrate the credit
offer into the journey and create a credit brand.
Within women's brands, we continue to evolve our portfolio for JD Williams,
expanding our offerings with brands which resonate most with our customers and
phasing out those that do not. Notably, Adidas and Under Armour have shown
particularly strong progress in H1. Looking ahead to H2, we are excited to
launch Sweaty Betty on JD Williams at the end of October, further enhancing
our successful sportswear branded offerings.
We continued to build the fashion credentials of Simply Be's proposition. Own
brand mix has grown, with a particularly high mix within women's fashion, at
74%. The own brand performance and credibility is reflected through several
third parties, both in the UK and globally, expressing interest in stocking
and selling our brands and we are currently exploring these commercial
opportunities.
We have seen a strong performance from men's brands, particularly on Jacamo.
We have also strengthened our partnerships with premium tech brands such as
Apple and Samsung, enabling us to offer their products at launch, aligned with
market standards.
Work on the new FS platform has progressed with good momentum during H1. The
first round of testing with a small group of colleagues has commenced and we
have an internal rollout roadmap in place for the wider population. We remain
on track to commence the external MVP rollout in FY26, providing a modern,
market-standard credit proposition.
3. Transform the customer experience
Strategic objective: Transform the customer experience, pre and post purchase, and drive conversion at checkout through a personalised experience.
Progress in transforming the customer experience has built on the momentum
gained in FY24. The launch of our new mobile-first website for JD Williams
marked a significant milestone in our transformation, being the last of our
strategic brands to launch. JD Williams was the most complex site to
transition to the new platform, given it has the widest product categories.
However, with the experience and learnings gained from the Simply Be and
Jacamo releases, we were able to deliver the fastest roll out to date - in 14
days compared to over 100 days for Simply Be. The efficient delivery of the
new site is testament to the level of collaboration which our agile ways of
working have unlocked. Google Lighthouse scores, an open-source measure for
site performance and user experience, have more than tripled compared to the
previous website.
Following on from FY24's successful launch of our PIM system on our first
strategic brand, Simply Be, progress has continued with PIM having been
sequentially launched on Jacamo and JD Williams during H1. This marks the
completion of delivery across all of our strategic brands. The Retail Systems
Awards recognised this key milestone in one of our transformational
priorities, by awarding PIM the 'Technology Project of the Year' award in June
this year.
We have enhanced the ability to measure and report investments into our mobile
apps. This has significantly improved our understanding of friction points. As
an example, by testing the app delivery subscription during checkout, we
successfully removed friction from the customer experience, by providing
customers with more choice with delivery options. Additionally, extending the
duration over which app customers remain logged in, from 30 days to 365 days,
has not only reduced friction at checkout but also improved our ability to
target customers more effectively throughout their journeys.
4. Win with our Target Customer
Strategic objective: Grow our customer base through our existing core customer, high value lapsed customers and a new, younger generation.
We continued to increase the focus on the specificity of our target customer.
We have identified a series of virtues, unique to each brand, which align with
our most valuable customers. We have ensured our marketing channels align
with these virtues, which will allow each brand to be more targeted and
personalised in communication, which we believe is ever important in a
challenging consumer market.
One of these virtues, shared by both Simply Be and JD Williams, is being a
member of one of the loyalty schemes. The loyalty programme across the Group
has shown significant growth in H1. The number of engaged accounts increased
by 45% during this period, which has increased our reach and highlighted our
ability to attract high-value customers.
The strategic rebalancing of spend into marketing and production has commenced
in H1 with spend increasing by c. £1m (c. 3)% over prior year. As described
within the non-financial KPIs, there has been an improvement in the retention
of existing customers, performing better than either half within FY24. In
addition to improving retention, management is focused on increasing new
customers recruited and this is supported by marketing activities which have
commenced in H2.
5. Establish Data as an Asset to Win
Strategic objective: Establish data as an asset to drive top line and margin
improvements.
Data continued to underpin our strategy and provide the foundations for
decision making. At the beginning of July, we successfully transitioned from
Google Analytics 3 to Google Analytics 4 (GA4), a move which significantly
enhances our data analytics capabilities. This transition was a critical piece
of work to continue to establish data as an asset to win via our data culture
strategy, resulting in a notable increase in colleagues accessing our data
estate and a reduction in interactions with our legacy data estate.
The completion of GA4 was also pivotal for our shift from third-party cookies
to first-party data collection, ensuring compliance before the upcoming UK
privacy law changes. Additionally, it serves as a gateway to the future
transition to a cloud-native Analytics Platform, which consolidates data,
accelerates analytics, facilitates self-service use cases, and mitigates
compliance risks.
Key Enablers
Good progress continues to be made with the shift to our new agile ways of
working model in our head office, with the anticipated efficiency and
operational improvements coming through. We expect 80% of the retail business
function to be fully embedded in these ways of working by the end of Q3.
In recent years, the business has transformed to become digital and
data-focused, embraced hybrid working, and adopted an equality, diversity,
inclusion and belonging strategy, all while aiming for agile ways of working
across the organisation. To support our evolving culture and growth ambitions,
we collaborated with external consultants over the summer to define the
necessary cultural shifts, involving over 70 colleagues and leadership to
identify strengths and areas for improvement.
Key Performance Indications ('KPIs')(1)
As a digital retailer committed to accelerating our strategy, we continue to report various digital customer metrics, which provide operational measures of how our strategy is progressing. The following disclosure reflects our performance in the half.
H1 25 H1 24 Change
Total website sessions(2) 72.8m 74.9m (2.8)%
Conversion(2) 3.6% 3.9% (0.3)ppts
Total Orders(3) 3.4m 3.7m (8.1)%
AOV £84.1 £83.3 1.0%
Items per order 2.8 2.8 -
AIV £29.8 £29.2 2.1%
Total active customers 2.14m 2.39m (10.5)%
FS arrears 9.3% 9.8% (0.5)ppts
Net Promoter Score ('NPS') 60 62 (2)
(1 KPIs are defined on page 19.)
(2) (Sessions and conversion for H1 24 restated for consistency with
definitions within H1 25 reporting including to reflect the transition to
Google Analytics 4 (GA4).)
(3 Total orders includes online and offline orders.)
( )
Although total orders decreased by 8.1% in the period, this represents a
significant improvement against the prior year trajectory driven by a better
trend in website sessions, benefitting from additional marketing spend. The
lower conversion than prior year includes the impact from a continued soft
market and higher sessions mix within paid traffic, which has a naturally
lower conversion rate. The positive trend seen in Average Item Value ('AIV')
over recent periods has continued, albeit at a more moderate level.
The lower active customers includes an improved performance in H1 25. Of the
c. 250k (10.5%) reduction in active customers against a year ago, c. 60k of
this occurred in H1 25, with the balance reflecting H2 24's movement. This is
driven by better retention of existing customers than seen in either half of
FY24. Marketing activities which have commenced in H2 support management's
intention to increase new customers recruited, in order to drive the total
active customer figure and product revenue.
The Financial Services arrears rate is lower than prior year, reflecting a
lower level of insolvent account balances held. Excluding insolvent accounts,
the arrears rate is 8.9% (H1 24: 8.4%). The business continues to support and
retain customers through times of financial hardship, with the increase in
rate including the impact from a higher mix of payment arrangements held at
the end of the half, due to a later timing of debt sales relative to prior
year.
Our NPS remains strong. The slight reduction against prior year includes a
greater mix of new customers, which inherently score lower than the mature
customer base. Additionally, although maintaining the level of customer
promises met, the average time taken to meet a standard order has slightly
increased. Improvements have been seen in areas including sentiment towards
the product proposition, with enhanced product descriptions enabled by our PIM
system being a contributing factor.
Environment, Social and Governance
We have continued to embed our Environmental, Social and Governance strategy
into the business. Our sustainability plan, SUSTAIN, fully aligns our ethical
policies with our commercial activities and our commitment to Our People and
Our Planet. One of the key commitments for the business is responsibly
sourcing own-brand product. We have reached 53% of own brand designed clothing
and home textile ranges with sustainable properties (from 0% in 2019) as we
target growing this to 100% by FY30 in line with our Textiles 2030 commitment.
FY25 Outlook
FY25 adjusted EBITDA is expected to be in line with management expectations.
Trading during the first five weeks of Q3 has been encouraging, with the
product revenue trajectory improving to -2% against prior year. We expect
continued improvement in the product revenue trajectory in H2 supported by the
successful execution of our strategic priorities, and the scaling of
investment into marketing and production spend, funded by cost efficiencies.
The Board has continued confidence that the investment in the Group's
strategic transformation plan, its differentiated brands and a new credit
proposition in testing, leave it well positioned to deliver future sustainable
growth.
FINANCIAL REVIEW
Financial KPIs
Our non-financial KPIs are contained in the Performance Review. We also use a
number of financial KPIs to manage the business. These are shown below and
will continue to be reported going forwards.
H1 25 H1 24 Change
Product revenue £172.7m £187.5m (7.9)%
Adjusted EBITDA(1) £18.8m £17.5m 7.4%
Adjusted EBITDA margin(1) 6.8% 5.9% 0.9ppts
Adjusted operating costs to Group revenue(1) 42.5% 41.7% 0.8ppts
Cash and cash equivalents £66.0m £49.1m 34.4%
Total Accessible Liquidity(1) £150.2m £133.1m 12.8%
Statutory profit / (loss) before tax(2) £0.2m £(2.8)m N/A
Adjusted EPS(1) 0.61p 0.15p 306.7%
1 A full glossary of Alternative Performance Measures and their definitions is
included on page 20.
2 Prior year loss before tax restated from £(4.1)m to £(2.8)m - see Note 18.
Reconciliation of statutory financial results to adjusted results
The reporting includes Alternative Performance Measures ('APMs'), which are
not defined or specified under the requirements of IFRS. These APMs are
consistent with how the Group measures performance internally and are also
used in assessing performance under the Group's incentive plans. Therefore,
the Directors believe that these APMs provide stakeholders with additional,
useful information on the Group's performance.
The adjusted figures are presented before the impact of adjusting items. These
are items of income and expenditure which are one-off in nature and material
to the current financial year, or represent true ups to items presented as
adjusting in prior periods. These are detailed in note 5.
A full glossary of APMs and their definitions is included on page 20.
H1 25 H1 25 H1 25 H1 24 H1 24 H1 24
£m Statutory Adjusting items Adjusted Statutory Restated(1) Adjusting items Restated(1) Adjusted
Group Revenue 277.2 277.2 297.0 297.0
Cost of sales (140.7) - (140.7) (156.6) 1.0 (155.6)
Gross Profit 136.5 - 136.5 140.4 1.0 141.4
Gross profit margin 49.2% 49.2% 47.3% 47.6%
Operating costs (120.5) 2.8 (117.7) (126.1) 2.2 (123.9)
Adjusted operating costs to Group revenue ratio 42.5% 41.7%
Adjusted EBITDA 18.8 17.5
Adjusted EBITDA margin 6.8% 5.9%
Depreciation & amortisation (10.0) (10.0) (9.9) (9.9)
Operating profit 6.0 2.8 8.8 4.4 3.2 7.6
Net finance costs (5.2) (5.2) (7.5) (7.5)
Profit / (Loss) before taxation and fair value adjustment to financial 0.8 2.8 3.6 (3.1) 3.2 0.1
instruments
Fair value adjustments to financial instruments (0.6) (0.6) 0.3 0.3
Profit / (Loss) before taxation 0.2 2.8 3.0 (2.8) 3.2 0.4
Taxation (charge) / credit - (0.7) (0.7) 1.3 (0.8) 0.5
Profit / (Loss) for the year 0.2 2.1 2.3 (1.5) 2.4 0.9
Earnings / (Loss) per share 0.04p 0.61p (0.33)p 0.15p
Reconciliation of Income Statement Measures
(1) (The adjusting items in the 26 week period to 2 September 2023 have been
restated. Refer to note 18 for further details of the restatement.)
Reconciliation of Cash and cash equivalents and bank overdrafts to Unsecured Net Cash and Adjusted Net Debt
£m H1 25 H1 24
Cash and cash equivalents 66.0 49.1
Unsecured debt and bank overdrafts - -
Unsecured Net Cash 66.0 49.1
Secured debt facility linked to eligible receivables (277.6) (307.5)
Adjusted Net Debt (211.6) (258.4)
Reconciliation of Net movement in Cash and cash equivalents and bank overdraft
to Net Cash generation
£m H1 25 H1 24
Net increase in cash and cash equivalents and bank overdraft 0.8 13.6
Voluntary flexible drawdown of securitisation loan - -
Net Cash generation 0.8 13.6
Overview
Following the return to profit in FY24, we have built on this performance with
progress in adjusted EBITDA, adjusted PBT and statutory PBT in H1 25. Our
Adjusted EBITDA of £18.8m and Adjusted PBT of £3.6m leave us on track for
management's full year expectations.
Although there has been some improvement in macro-economic indicators, the
online pureplay market remained soft during the half and we have kept a strong
focus on profitable trade. Product revenue reduced 7.9% with FS revenue down
4.6%, with the drag continuing to reflect the opening debtor book and the
product revenue. Both product and FS revenue performances reflect an
improvement in trajectory. Alongside this, the focus on profitable trade
helped Group gross margin progress by 1.6ppts versus the prior year.
Planned management actions on the cost base drove adjusted operating costs
£6.2m lower than H1 24 after commencing the rebalancing of spend into
marketing. As a result of operational deleverage, the adjusted operating costs
to revenue ratio increased by 0.8ppts over prior year.
Interest costs were £2.3m lower than prior year due to lower utilisation of
the securitisation facility and greater interest income from cash held on
deposit. The interest rate payable has benefitted from the interest rate hedge
in place and we also remain well hedged on foreign exchange.
Net cash of £0.8m was generated after investing a further £14.4m in the
transformation of the business. Following the proactive intake reductions and
clearance of older stock in the prior year, stock has remained a key focus
area and a lower and cleaner position has been maintained.
Cash and cash equivalents amounted to £66.0m with Total Accessible Liquidity
of £150.2m, which includes the fully undrawn RCF of £75.0m and overdraft of
£12.5m, net of a low level of restricted cash. Our balance sheet remains
strong after continuing to self-fund strategic progress made in the half,
which included the launch of the new mobile-first website for JD Williams and
rollout of our PIM system to remaining strategic brands.
Revenue
£m H1 25 H1 24 Change
Revenue
Strategic brands(1) 128.6 139.4 (7.7)%
Heritage brands(2) 44.1 48.1 (8.3)%
Total product revenue 172.7 187.5 (7.9)%
Financial services revenue 104.5 109.5 (4.6)%
Group revenue 277.2 297.0 (6.7)%
(1 JD Williams, Simply Be, Jacamo.)
(2 Ambrose Wilson, Home Essentials, Fashion World, Marisota, Oxendales and
Premier Man.)
Group revenue declined 6.7% to £277.2m, which represent an improvement of
around 3ppts against the FY24 trajectory. The Group revenue movement reflects
a 7.9% decline in product revenue and a 4.6% decline in FS revenue.
Total product revenue also reflects an improvement in trajectory over FY24's
performance, with a significant moderation in the level of decline in heritage
brands, which are managed for contribution as opposed to growth.
Market conditions have remained challenging, with the online pureplay market
declining by 6%(1), whilst unseasonal weather caused a weaker performance in
seasonal fashion categories. A strong focus on driving profitable sales has
been maintained and we have evolved our approach to discounts and promotions
in the period, leading to the removal of some less profitable sales.
New websites and the PIM system are now in place for all strategic brands,
which provides good foundations for H2. Alongside this, marketing activity is
being upweighted including brand building activity which commenced in
September with campaigns on Simply Be and Jacamo, and JD Williams' second year
as headline sponsor of My Mum, Your Dad.
The reduced level of product revenue during the first half and prior year
resulted in a smaller customer receivables loan book, down 9.2% at the end of
the half. FS revenue experienced a more moderate decrease, of 4.6%, driven
by a higher yield resulting from APR increases applied since the comparative
period. FS revenue performance is consistent with the guidance that FS revenue
would decline at a slightly improved rate.
Our responsible and flexible credit offering remains an integral part of our
customer proposition, particularly in the current macro-economic environment.
(1 IMRG view of online pureplay market.)
Adjusted gross profit(1)
£m H1 25 H1 24 Change
Product gross profit 81.9 88.4 (7.4)%
Product gross margin % 47.4% 47.1% 0.3ppts
Financial services gross profit 54.6 53.0 3.0%
Financial services gross margin % 52.2% 48.4% 3.8ppts
Adjusted Group gross profit(1) 136.5 141.4 (3.5)%
Adjusted Group gross profit margin 49.2% 47.6% 1.6ppts
(1) A reconciliation of statutory measures to adjusted measures is included on page 10. A full glossary of Alternative Performance Measures and their definitions is included on page 20.
Adjusted gross profit margin further progressed over prior year to 49.2%,
reflecting continued growth in both retail margin and FS margin.
Product gross margin improved 0.3ppts to 47.4% driven by good retail
disciplines including benefitting from a cleaner stock package. The
improvement was despite headwinds from foreign exchange, and lower VAT bad
debt relief due to lower write offs(1).
The FX contracts used to hedge US $ spend are described in Note 6 to the
financial statements and we remain well hedged through the remainder of FY25
with nearly 90% of the US $ cash spend hedged.
FS gross margin rate improved by 3.8ppts to 52.2% resulting from the combined
benefit of the higher yield and an improvement in bad debt, particularly seen
in lower write offs following refinements to customer credit scorecards.
(1) Included in product gross margin as they are only recoverable as we are a combined retail and financial services business, and they would not be recoverable as a standalone credit business.
Adjusted operating costs(1)
£m H1 25 H1 24 Change
Warehouse & fulfilment costs (27.0) (27.8) 2.9%
Marketing & production costs (33.6) (32.7) (2.8)%
Admin & payroll costs (57.1) (63.4) 9.9%
Adjusted operating costs(1) (117.7) (123.9) 5.0%
Adjusted operating costs as a % of Group Revenue 42.5% 41.7% 0.8ppts
(1) A reconciliation of statutory measures to adjusted measures is included on
page 10. A full glossary of Alternative Performance Measures and their
definitions is included on page 20.
Total operating costs excluding adjusting items reduced by £6.2m to £117.7m
driven by management initiatives, particularly within admin and payroll costs,
and some volume driven reductions. Within this, the strategic rebalancing of
spend into marketing and production costs has commenced.
Adjusted operating costs as a percentage of Group revenue increased 0.8ppts to
42.5% reflecting the negative operational gearing on fixed costs partially
mitigated by the management cost initiatives.
Warehouse and fulfilment costs were £0.8m (2.9%) lower than the prior year,
benefiting from the flexible cost base, with c. £2m of savings from lower
core volumes. This was partially offset by a headwind of c. £1m inflationary
price impacts on carrier and resource costs.
Marketing and production costs were £0.9m (2.8%) higher than prior year
reflecting the strategic decision to start rebalancing the cost base into
marketing spend. This is with the objective of growing customer numbers
through strengthening the existing customer base and recruiting more credit
customers.
Admin and payroll costs reduced by £6.3m or 9.9%, driven by planned
management initiatives to optimise the cost base.
Statutory operating costs, including adjusting items reduced by 4.4%.
Depreciation and amortisation
Depreciation and amortisation of £10.0m was in line with the prior year (H1
24: £9.9m).
Finance costs
Net finance costs of £5.2m, were lower than the £7.5m in the prior year
reflecting lower utilisation of the securitisation facility due to debtor
balances, and greater levels of cash earning interest from overnight deposit.
The Group has limited its exposure to interest rate movements through interest
rate hedging which it continues to have in place.
Adjusting items
Adjusting items of £2.8m reflect a reduction against the £3.2m incurred in
H1 24 (restated)(1).
During the current year, the Group continues the multi-year transformation of
the business and the ongoing review of the cost base. A restructuring
programme of the Group's operational and head office headcount to reflect the
lower sales orders, was initiated at the end of FY24 and continues through
FY25, with total redundancy costs of £1.0m incurred in the period. Also
included are costs of transferring certain workstreams to an outsourced
company and costs associated with an onerous lease.
Further details can be found in note 5.
During the prior year, the Board approved the rationalisation of the Group's
warehousing facilities following a review of the overall warehouse portfolio
capacity, utilisation and associated operational cost base, resulting in a
£3.3m charge in H1 24 across provisioning and onerous lease impairment.
(1 A)(djusting items in the 26 week period to 2 September 2023 have been
restated. Refer to note 18 for further details of the restatement.)(.)
Profit and earnings per share
Adjusted EBITDA increased by £1.3m to £18.8m reflecting an improvement in
Adjusted EBITDA margin of 0.9ppts, on a reduced level of Group revenue against
prior year.
Statutory operating profit increased by £1.6m against the prior year
(restated), to £6.0m, reflecting the increase in Adjusted EBITDA and £0.4m
lower adjusting items.
Statutory profit before tax of £0.2m, up £3.0m year on year (H1 24: loss
before tax (restated) of £2.8m), driven by the improvement in statutory
operating profit, lower interest costs, partially offset by a fair value loss
on financial instruments as a result of the movement in the US dollar driving
foreign exchange mark to market losses.
The taxation charge for the year is based on the underlying estimated
effective tax rate for the full year of 24.8%. Further tax analysis is
contained in note 7.
Statutory earnings per share increased to a profit of 0.04p (H1 24 (restated):
loss of (0.33)p). Adjusted earnings per share increased to 0.61p (H1 24:
0.15p).
Financial services customer receivables and impairment charge on customer
receivables
Gross customer receivables at the end of H1 25 reduced by 9.2% against H1 24
to £480.2m, driven by the reduced level of product sales in the prior year
and H1 of this year.
Arrears rates are lower than prior year, reflecting a reduction in the level
of insolvent account balances held. Excluding insolvent accounts, the arrears
rate was 8.9% (H1 24: 8.4%) with the increase in rate driven by a higher mix
of payment arrangements held at the end of the half, through later timing of
the debt sale relative to prior year.
Although there has been some more stability in macro-economic conditions,
there continues to be pressure on customers from higher prices and higher
interest rates, which is being carefully monitored as we continue to support
our customers.
The expected credit loss ('ECL') provision ratio improved to 13.5% from 14.3%
in prior year. This reflects an improvement in debtor book quality, as well as
a lower level of insolvent accounts held. These benefits which reduce the
required provision have been partially offset by the later timing of the debt
sale against prior year. Provisions on the normal book are lower at 10.8%
compared to 11.6% in H1 24, reflecting lower insolvency balances held.
£m H1 25 H1 24 Change
Gross customer receivables 480.2 528.9 (9.2)%
ECL provision (64.9) (75.8) (14.4)%
Normal account provisions (45.7) (54.3) (0.7)ppts
Payment arrangement provisions (18.0) (20.4) (0.1)ppts
Inflationary impacts (1.2) (1.1) -
ECL provision ratio 13.5% 14.3% (0.8)ppts
Net customer receivables 415.3 453.1 (8.3)%
The profit and loss net impairment charge on customer receivables for H1 25
was £49.6m, £6.5m lower than last year, driven by debtor book quality, as
seen in lower write-offs and in provision movements.
£m
H1 24 net impairment charge on customer receivables 56.1
Lower write-offs including through book size (3.0)
ECL provision movements (3.7)
Lower recoveries (including lower write offs and timings of debt sales) 0.6
Other (0.4)
H1 25 net impairment charge on customer receivables 49.6
Funding and total accessible liquidity ('TAL')
The Group has the following arrangements in place:
· A £400m securitisation facility (H1 24: £400m) committed until
December 2026, drawings on which are linked to prevailing levels of eligible
receivables but with flexibility around the level which the Group chooses to
draw. The Group has previously chosen to proactively reduce the lender
commitment from £400m to £340m to reflect the accessible funding level and
reduce ongoing fees;
· A RCF of £75m, and an overdraft facility of £12.5m, both fully
undrawn at 31 August 2024 and committed to December 2026;
At 31 August 2024 Group TAL was £150.2m, comprising cash of £66.0m including
restricted cash of £3.3m, the fully undrawn RCF of £75.0m and overdraft of
£12.5m.
Net Cash Generation
£m H1 25 H1 24
Adjusted EBITDA 18.8 17.5
Inventory working capital movement (3.9) 11.6
Other working capital, operating cash flows and provision movement (6.4)) 2.3
Cash flow adjusted for working capital 8.5 31.4
Adjusting items (2.3) (3.1)
Capital investing activities (14.4) (8.9)
Non-operating tax & treasury 0.3 1.4
Interest paid (4.3) (8.1)
Non-operational cash outflows (20.7) (18.7)
Gross customer loan book repayment 36.8 26.3
Decrease in securitisation debt in line with customer loan book (23.8) (25.4)
Net cash inflow from the customer loan book 13.0 0.9
Net cash generation 0.8 13.6
The business generated cash of £0.8m in the half, closing with £66.0m
unsecured net cash. The inflow was driven by positive EBITDA generation and
net cash inflow from the customer loan book, partially offset by self-funded
capital expenditure.
Net inventory levels at the end of the half were down 5.8%, against prior year
at £77.8m (H1 24: £82.6m), remaining well controlled against the year end
position (FY24: £73.9m) having focused on selling through older items last
year.
Capital expenditure of £14.4m reflects a step-up on prior year (H1 24:
£8.9m) and has continued to be self-funded as we invest in delivering the
ongoing digital transformation of the business. We expect to undertake a
similar level of capital investment in H2 as part of the continued
transformation.
The lower interest paid is due to the lower utilisation of the securitisation
facility, reflective of debtor balances, and greater levels of cash earning
interest from overnight deposit
The net inflow from the customer loan book reflects the reduction in the
customer loan book, partially offset by associated lower securitisation
borrowings.
Adjusted net debt
Unsecured net cash / (debt), which is defined as the amount drawn on the
Group's unsecured borrowing facilities less cash balances, closed the half in
a positive position with unsecured net cash of £66.0m (H1 24: unsecured net
cash of £49.1m).
Adjusted net debt reduced by £24.7m in the half against FY24 year end, to
£211.6m (FY24: £236.3m; H1 24: £258.4m). This is the net amount of £66.0m
of unsecured net cash and £277.6m of debt drawn against the securitisation
funding facility which is backed by eligible customer receivables. The
£415.3m net customer loan book significantly exceeds this adjusted net debt
figure. The reduction in net debt in the half reflects the net cash generation
described above and lower securitised borrowings.
Dividend and capital allocation
As previously announced in the Group's FY23 results and in light of the
macro-economic environment, our clear set of investment plans and the number
of competing demands on our cash resources, the Board decided not to
re-introduce a dividend in FY23 or FY24. The Board continues to keep its
dividend policy under review and will evaluate the re-introduction of a
dividend when transformational priorities and business performance allows.
Pension scheme
The Group's defined benefit pension scheme had a surplus of £19.4m at the end
of the half, which is broadly consistent with the prior year (H1 24: £20.0m).
KPI DEFINITIONS
Measure Definition
Total website sessions Total number of sessions across N Brown apps, mobile and desktop websites in
the 6 or 12 month period
Total active customers Customers who placed an accepted order in the 12 month period to reporting
date
Total orders Total accepted orders placed in the 6 or 12 month period. Includes online
and offline orders.
AOV Average order value based on accepted demand(1)
AIV Average item value based on accepted demand(1)
Items per order Average number of items per accepted order
Orders per customer Average number of orders placed per ordering customer
Conversion % of app/web sessions that result in an accepted order
NPS Customers asked to rate likelihood to "recommend the brand to a friend or
colleague" on a 0-10 scale (10 most likely). NPS is (% of 9-10) minus (% of
0-6). NPS is recorded on JD Williams, Simply Be, Jacamo and Ambrose Wilson
FS Arrears Arrears are stated including both customer debts with two or more missed
payments, or customer debts on a payment hold
(1)Accepted demand is defined as the value of orders from customers (including
VAT) that we accept, i.e. after our credit assessment processes.
APM GLOSSARY
The Preliminary Results statement includes alternative performance measures ('APMs'), which are not defined or specified under the requirements of IFRS. These APMs are consistent with how the Group measures performance internally and are also used in assessing performance under the Group's incentive plans. Therefore, the Directors believe that these APMs provide stakeholders with additional, useful information on the Group's performance.
Alternative Performance Measure Definition
Adjusted gross profit Gross profit excluding adjusting items.
Adjusted gross profit margin Adjusted gross profit as a percentage of Group Revenue.
Adjusted EBITDA Operating profit, excluding adjusting items, with depreciation and amortisation added back.
Adjusted EBITDA margin Adjusted EBITDA as a percentage of Group Revenue.
Adjusted profit before tax Profit before tax, excluding adjusting items and fair value movement on financial instruments.
Adjusted profit before tax margin Profit before tax, excluding adjusting items and fair value movement on financial instruments expressed as a percentage of Group Revenue.
Net Cash generation Net cash generated from the Group's underlying operating activities.
Adjusted Operating costs Operating costs less depreciation, amortisation and adjusting items.
Adjusted Operating costs to revenue ratio Operating costs less depreciation, amortisation and adjusting items as a percentage of Group revenue.
Adjusted Net debt Total liabilities from financing activities less cash, excluding lease liabilities.
Net debt Total liabilities from financing activities less cash.
Unsecured net cash / (debt) Amount drawn on the Group's unsecured debt facilities less cash balances. This measure is used to calculate the Group's leverage ratio, a key debt covenant measure.
Total Accessible Liquidity Total cash and cash equivalents, less restricted amounts, and available headroom on secured and unsecured debt facilities.
Adjusted Earnings per share Adjusted Basic earnings per share based on earnings before adjusting items and fair value adjustments, which are those items that do not form part of the recurring operational activities of the Group. These are calculated in note 8.
The reconciliation of the statutory measures to adjusted measures is included
in the Financial Review on page 9.
Unaudited condensed consolidated income statement
for the 26 weeks ended 31 August 2024
26 weeks to 26 weeks to 26 weeks to 26 weeks to 26 weeks to 26 weeks to
31 August 2024 31 August 2024 31 August 2024 2 September 2023 2 September 2023 2 September 2023
Before adjusting items Adjusting items Total Before adjusting items Adjusting items Total
(Note 5) (Note 5)
Restated(1)
Restated(1)
Note £m £m £m £m £m £m
Revenue 4 181.9 - 181.9 197.1 - 197.1
Credit account interest 4 95.3 - 95.3 99.9 - 99.9
Total revenue 4 277.2 - 277.2 297.0 - 297.0
Cost of sales (91.1) - (91.1) (99.5) (1.0) (100.5)
Impairment losses on customer receivables 4 (49.6) - (49.6) (56.1) - (56.1)
4 136.5 - 136.5 141.4 (1.0) 140.4
Gross profit
Operating profit 4 8.8 (2.8) 6.0 7.6 (3.2) 4.4
Finance income(2) 1.4 - 1.4 1.1 - 1.1
Finance costs(2) (6.6) - (6.6) (8.6) - (8.6)
Profit/(Loss) before taxation and fair value adjustments to financial 3.6 (2.8) 0.8 0.1 (3.2) (3.1)
instruments
Fair value adjustments to financial instruments 6 (0.6) - (0.6) 0.3 - 0.3
Profit/(Loss) before taxation 3.0 (2.8) 0.2 0.4 (3.2) (2.8)
Taxation 7 (0.7) 0.7 - 0.5 0.8 1.3
Profit/(Loss) for the period 2.3 (2.1) 0.2 0.9 (2.4) (1.5)
( )
(1. The adjusting items in the 26 week period to 2 September
2023 have been restated. Refer to note 18 for further details of the
restatement.)
(2. The 26 week period to 2 September 2023 has been
re-presented to separately disclose finance income and finance costs.)
Earnings/(Loss) per share from continuing operations
Basic 8 0.04p (0.33)p
Diluted 8 0.04p N/A
Unaudited condensed consolidated statement of comprehensive income
for the 26 weeks ended 31 August 2024
26 weeks to 31 August 2024 26 weeks to 2 September 2023
Restated
£m £m
Profit/(Loss) for the period(1) 0.2 (1.5)
Items that will not be classified subsequently to profit or loss:
Actuarial gains/(losses) on defined benefit pension schemes 1.8 (0.8)
Tax relating to items not reclassified 0.9 0.3
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (0.2) (0.6)
Fair value movements of cash flow hedges (2.2) 0.7
Reclassified from OCI to profit and loss (5.3) (5.0)
Tax relating to these items 1.9 1.0
Other comprehensive loss for the period (3.1) (4.4)
Total comprehensive loss for the period attributable to equity holders of the (2.9) (5.9)
parent(1)
( )
( 1.) (The loss for the 26 week period to 2 September 2023 has been
restated. Refer to note 18 for further details of the restatement.)
Condensed consolidated balance sheet
As at 31 August 2024
As at 31 August 2024 (unaudited) As at 2 September 2023 (unaudited) As at 2 March 2024 (audited)
Restated
Note £m £m £m
Non-current assets
Property, plant & equipment 10 40.3 50.8 47.0
Intangible assets 9 63.9 58.4 60.9
Right-of-use assets 6.1 1.2 6.3
Retirement benefit surplus 19.4 20.0 17.1
Derivative financial instruments 6 - 3.2 0.1
Deferred tax assets(1) 18.6 17.7 15.9
148.3 151.3 147.3
Current assets
Inventories 77.8 82.6 73.9
Trade and other receivables 12 442.1 477.8 468.6
Derivative financial instruments 6 2.9 16.5 8.8
Current tax asset(1) - 1.5 0.2
Cash and cash equivalents 14 66.0 49.1 65.2
Assets held for sale 11 7.8 - -
596.6 627.5 616.7
Total assets 744.9 778.8 764.0
Current liabilities
Trade and other payables 13 (70.4) (75.1) (65.0)
Lease liability (0.9) (0.6) (1.1)
Provisions(1) 17 (4.7) (9.5) (4.9)
Derivative financial instruments 6 (2.2) (0.4) (0.7)
Current tax liability (0.1) - -
(78.3) (85.6) (71.7)
Net current assets 518.3 541.9 545.0
Non-current liabilities
Bank loans 15 (277.6) (307.5) (301.5)
Trade and other payables 13 - - (0.2)
Lease liability (4.8) (0.5) (4.8)
Provisions 17 (6.1) (0.3) (6.6)
Derivative financial instruments 6 (0.4) (0.1) (0.1)
(288.9) (308.4) (313.2)
Total liabilities (367.2) (394.0) (384.9)
Net assets 377.7 384.8 379.1
Equity
Share capital 51.7 51.2 51.2
Share premium 85.7 85.7 85.7
Own shares - (0.1) (0.1)
Cash flow hedge reserve 0.4 11.5 5.4
Foreign currency translation reserve 1.0 1.2 1.2
Retained earnings(1) 238.9 235.3 235.7
Total equity 377.7 384.8 379.1
(1. ) (The balance for the 26 week period to 2 September 2023
has been restated. Refer to note 18 for further details of the restatement.)
Condensed consolidated cash flow statement
For the 26 weeks ended 31 August 2024
26 weeks to 31 August 2024 (unaudited) 26 weeks to 2 September 2023 (unaudited) 52 weeks to 2 March 2024 (audited)
Restated
£m £m £m
Net cash inflow from operating activities(2) 43.8 53.2 92.2
Investing activities
Purchase of property, plant and equipment (3.0) (1.2) (2.9)
Expenditure on intangible assets (11.4) (7.7) (19.8)
Initial direct costs of right-of-use additions - - (0.5)
Net cash used in investing activities (14.4) (8.9) (23.2)
Financing activities
Interest paid(1) (5.3) (8.7) (15.4)
Repayment of bank loans (23.8) (25.4) (31.4)
Principal elements of lease payments (0.5) (0.5) (0.7)
Foreign exchange forward contracts 0.5 3.4 7.7
Proceeds on issue of share capital 0.5 0.3 0.3
Purchase of shares by ESOT (0.5) (0.3) (0.3)
Net cash outflow from financing activities (29.1) (31.2) (39.8)
Net foreign exchange difference 0.5 0.5 0.5
Net increase in cash and cash equivalents and bank overdraft 0.8 13.6 29.7
Cash and cash equivalents and bank overdraft at beginning of period 65.2 35.5 35.5
Cash and cash equivalents and bank overdraft at end of period 66.0 49.1 65.2
( )
(1. ) (The 26 week period to 2 September 2023 has been
re-presented to separately disclose finance income and finance costs.)
(2. ) (The balance for the 26 week period to 2 September 2023
has been restated. Refer to note 18 for further details of the restatement.)
Reconciliation of operating profit to net cash from operating activities
26 weeks to 26 weeks to 2 September 2023 (unaudited) 52 weeks to
31 August Restated 2 March
2024 (unaudited) 2024
(audited)
£m £m £m
Profit/(Loss) for the period(1) 0.2 (1.5) 0.8
Adjustments for:
Taxation (credit)/charge(1) - (1.3) 4.5
Fair value adjustments to financial instruments 0.6 (0.3) 0.5
Net foreign exchange loss (0.5) (0.5) (0.5)
Finance income(2) (1.4) (1.1) (2.6)
Finance costs(2) 6.6 8.6 16.2
Depreciation of right-of-use assets 0.5 0.4 0.8
Depreciation of property, plant and equipment 1.5 1.2 2.6
Loss on disposal of intangible assets - - 0.1
Impairment of non-financial assets - - 3.3
Amortisation of intangible assets 8.0 8.3 17.3
Share option charge 0.9 0.9 1.5
Operating cash flows before movements in working capital 16.4 14.7 44.5
(Increase)/decrease in inventories (3.9) 11.6 21.2
Decrease in trade and other receivables 25.8 26.7 35.6
Increase/(decrease) in trade and other payables 5.2 1.6 (8.3)
(Decrease)/increase in provisions(1) (0.7) (0.2) 1.5
Pension obligation adjustment (0.3) (0.4) (0.8)
Cash generated by operations 42.5 54.0 93.7
Taxation received/(paid) 0.3 (1.4) (3.1)
Interest received(2) 1.0 0.6 1.6
Net cash inflow from operating activities 43.8 53.2 92.2
(1. The balances for the 26 week period to 2 September 2023
have been restated. Refer to note 18 for details of the restatement.)
(2. The 26 week period to 2 September 2023 has been
re-presented to separately disclose finance income and finance costs.)
Changes in liabilities from financing activities 26 weeks to 26 weeks to 2 September 2023 (unaudited) 52 weeks to
31 August 2 March
2024 (unaudited) 2024
(audited)
£m £m £m
Loans and borrowings balance brought forward 307.4 333.4 333.4
Changes from financing cashflows
Net repayment on loans and borrowings(1) (23.8) (25.4) (31.4)
New leases entered in the year 0.2 1.1 6.1
Lease payments in the period (0.5) (0.5) (0.7)
Decrease in loans and borrowings (24.1) (24.8) (26.0)
Loans and borrowings balance carried forward 283.3 308.6 307.4
(1)Repayments relating to the Group's securitisation facility are represented
net of cash receipts in respect of the customer book collections. The
Directors consider that the net representation more accurately reflects the
way the securitisation cashflows are managed.
Unaudited consolidated statement of changes in equity
Share capital Share premium Own shares Cash flow hedge reserve Foreign currency translation reserve Retained earnings Total
£m £m £m £m £m £m £m
Balance at 4 March 2023 50.9 85.7 (0.2) 15.7 1.8 236.8 390.7
Total comprehensive income for the period
Loss for the period(1) - - - - - (1.5) (1.5)
Other items of comprehensive loss for the period - - - (3.3) (0.6) (0.5) (4.4)
Total comprehensive loss for the period - - - (3.3) (0.6) (2.0) (5.9)
Hedging gains and losses transferred to the cost of inventory - - - (0.9) - - (0.9)
Transactions with owners recorded directly in equity
Purchase of own shares(2) - - (0.3) - - - (0.3)
Issue of shares 0.3 - - - - - 0.3
Issue of own shares by ESOT(2) - - 0.4 - - - 0.4
Share option charge - - - - - 0.9 0.9
Adjustment to equity for share payments - - - - - (0.4) (0.4)
Total contributions by and distributions to the owners 0.3 - 0.1 - - 0.5 0.9
Balance at 2 September 2023 51.2 85.7 (0.1) 11.5 1.2 235.3 384.8
Total comprehensive income for the period
Profit for the period - - - - - 2.3 2.3
Other items of comprehensive loss for the period - - - (5.0) - (2.5) (7.5)
Total comprehensive loss for the period - - - (5.0) - (0.2) (5.2)
Hedging gains and losses transferred to the cost of inventory - - - (1.1) - - (1.1)
Transactions with owners recorded directly in equity
Share option charge - - - - - 0.6 0.6
Total contributions by and distributions to the owners - - - - - 0.6 0.6
Balance at 2 March 2024 51.2 85.7 (0.1) 5.4 1.2 235.7 379.1
Total comprehensive income for the period
Profit for the period - - - - - 0.2 0.2
Other items of comprehensive loss/(income) for the period - - - (5.6) (0.2) 2.7 (3.1)
Total comprehensive (loss)/income for the period - - - (5.6) (0.2) 2.9 (2.9)
Hedging gains and losses transferred to the cost of inventory - - - 0.6 - - 0.6
Transactions with owners recorded directly in equity
Purchase of own shares - - (0.5) - - - (0.5)
Issue of shares 0.5 - - - - - 0.5
Issue of own shares by ESOT - - 0.6 - - - 0.6
Share option charge - - - - - 0.9 0.9
Adjustment to equity for share payments - - - - - (0.6) (0.6)
Total contributions by and distributions to the owners 0.5 - 0.1 - - 0.3 0.9
Balance at 31 August 2024 51.7 85.7 - 0.4 1.0 238.9 377.7
1. The loss for the 26 week period to 2 September 2023 has been
restated. Refer to note 18 for further details of the restatement.
2. The 26 week period to 2 September 2023 has been re-presented
to separately disclosure the purchase of own shares and issue of own shares by
ESOT.
Notes to the unaudited consolidated financial statements
For the 26 weeks ended 31 August 2024
1. Basis of preparation
This condensed set of consolidated interim financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting in conformity
with the requirements of the Companies Act 2006. They do not include all the
information required for full annual financial statements and should be read
in conjunction with the consolidated financial statements of the Group as at
and for the 52 weeks ended 2 March 2024. The annual financial statements of
the Group are prepared in accordance with International Financial Reporting
Standards (IFRSs) in conformity with the requirements of the Companies Act
2006.
The comparative figures for the 52 weeks ended 2 March 2024 are extracted from
the Group's statutory accounts for that financial year. Those accounts have
been reported on by the Group's auditor and delivered to the Registrar of
Companies. The report of the auditor was (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by way of
emphasis of matter, and (iii) did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
After making appropriate enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in the preparation of these financial statements. This is
explained in further detail in note 3.
The accounting policies and presentation adopted in the preparation of these
consolidated interim financial statements are consistent with those disclosed
in the published annual report and accounts for the 52 weeks ended 2 March
2024.
At the date of issue of these interim financial statements the following
standards and interpretations became effective in the current financial year,
and have been applied for the first time in these financial statements:
Classification of Liabilities as Current or Noncurrent and Non-current
Liabilities with Covenants (Amendments to IAS 1)
Disclosures: Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
None of these new standards and interpretations have had any material impact
on these financial statements.
Critical judgements and key sources of estimation uncertainty
In preparing the condensed interim financial statements, the areas of critical
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty related to the same areas as those
applied to the consolidated financial statements for the 52 weeks ended 2
March 2024.
The key areas of significant judgements made by management in applying the
Group's accounting policies during the period were as follows:
· Impairment of customer receivables (critical judgement and estimation
uncertainty)
· Software and development costs (critical judgement and estimation
uncertainty)
· Impairment of non-financial assets (critical judgement and estimation
uncertainty)
· Other litigation (critical judgement and estimation uncertainty)
· Defined benefit plan (estimation uncertainty)
· Deferred tax asset for tax losses (estimation uncertainty)
2. Key risks and uncertainties
The Group continues to enhance and embed risk management practices in support
of the N Brown Enterprise Risk Management Framework ("RMF"). The RMF enables
the Group to maintain robust governance and oversight of risk management
activities across the business to underpin a standardised approach to managing
risks and to consider the commercial and regulatory impacts of internal and
external risk events.
Principal risk reporting categories with the potential to impact on
performance and the delivery of the strategic roadmap in year or through the
planning cycle are defined in the RMF as:
1. Conduct and
Customer
6. Strategic and Change
2.
Lending
7. Financial
3.
Data
8. Business Resilience
4.
People
9. Legal and Regulatory Compliance
5. Supplier and
Outsourcing
10. Information, Technology and Cyber Security
The Group Risk Profile remains challenging, principally due to the moving and
uncertain UK economy and related volatilities. Significant activity to manage
the impacts has been established and continues to be delivered across the
Group.
Monitoring activity is undertaken to determine potential impacts of economic
and political factors that influence customer confidence, household budgets
and disposal income (spending on non-essential items).
The Group continues to manage currency and interest rate fluctuations through
hedging in the near term. Currency arrangements expire on a rolling basis with
reducing hedging levels up to 24 months. We continue to monitor rates to
identify the most appropriate hedging strategy going forward.
The cost pressures noted above may create affordability challenges for our
credit customers. Lead Risk indicators are tracked to enable the Group to
react to changes in the lending market. We also ensure that appropriate
forbearance options are in place to ensure good customer outcomes for those
impacted by these issues.
The Board maintains a continuous process for identifying, evaluating and
managing risk as part of its overall responsibility for maintaining internal
controls and the RMF. This process is intended to provide reasonable assurance
regarding compliance with laws and regulations as well as commercial and
operational risks.
Specific review and identification of existing and emerging risks is
facilitated by routine Board-level risk assessment cycles completed during the
year, as informed by a routine of regular risk assessments at business unit
level. Outputs are reported to the Audit and Risk Committee.
In setting strategy, the Board considers Environmental, Social and Governance
("ESG") factors, drivers and impacts on the health and sustainability of the
business. Furthermore, in general terms the strategy is designed to deliver
long term sustainable business success. The RMF has been established to
provide an overview of strategic risk and as such incorporates assessments of
risks that have the potential to create ESG exposures; ESG and related risks
are embedded in the RMF, managed accordingly and are evaluated and reported as
part of the existing Governance routines.
In spite of increased risk in the external environment facing many of our
principal risks, enhancements to the internal control environment are
successfully mitigating many of the threats. This is resulting in a broadly
stable net risk position and has created a positive risk outlook for when the
economic conditions stabilise. Control enhancement potential is examined
routinely and we continue to implement Control Development Plans on a
continuous basis as we test controls, review operational issues and perform
assurance activities.
The Group recognises that no system of controls can provide absolute assurance
against material misstatement, loss or failure to meet its business
objectives.
3. Going Concern
After reviewing the Group's forecasts and risk assessments, including
assumptions around capital and operating expenditure and their impact on cash
flows, the Directors have formed a judgement at the time of approving the
interim financial statements, that there is a reasonable expectation that the
Group has adequate resources to continue in operational existence for the 12
months from the date of signing these financial statements to October 2025.
In reaching their conclusions, the Directors have considered the Group's
cashflow and revenue projections for the 12 months following the date of
signing these results to October 2025, which have been borne out of extensive
scenario testing, based on a variety of end market assumptions, while taking
account of appropriate mitigating actions within the direct control of the
Group. The Directors have had regard to the implications of ongoing market
movements, and in particular, the effect of the rising interest rates on
consumer confidence and the health of its debtor book which affects its
ability to draw down on the securitisation facility and the impact of severe
but plausible downside scenarios on the cash flows. Under the severe but
plausible downside scenario, the Group continues to be in compliance with all
relevant covenants associated with its available facilities.
For this reason, the Directors continue to adopt the going concern basis in
preparing the financial statements.
As at 31 August 2024, the Group had cash of £66.0m, including restricted cash
of £3.3m, in addition the Group had £87.5m of accessible unsecured
facilities that were not drawn. This gives rise to total accessible liquidity
("TAL") of £150.2m (FY24 year end: £148.5m).
4. Business Segments
The Group has identified two operating segments in accordance with IFRS 8 -
Operating segments, Product Revenue and Financial Services ("FS"). The Board
receives monthly financial information at this level and uses this information
to monitor the performance of the Group, allocate resources and make
operational decisions. Internal reporting focuses and tracks revenue, cost of
sales and gross margin performance across these two segments separately.
However, it does not track operating costs or any other income statement
items.
Revenues and costs associated with the product segment relate to the sale of
goods through various brands. The Product cost of sales is inclusive of VAT
bad debt relief claimed of £8.2m (H1 24: £9.8m) as a consequence of customer
debt write off, with the write off presented in Financial Services cost of
sales. The revenue and costs associated with the Financial Services segment
relate to the income from provision of credit terms for customer purchases,
and the costs to the business of providing such funding. To increase
transparency, the Group has included additional voluntary disclosure analysing
product revenue within the relevant operating segment, by strategic and other
brand categorisation.
26 weeks to 31 August 2024 26 weeks to 2 September 2023
£m £m
Analysis of revenue:
Sale of goods 163.6 178.3
Postage and packaging 9.1 9.2
Product - total revenue 172.7 187.5
Other financial services revenue 9.2 9.6
Credit account interest 95.3 99.9
Financial Services - total revenue 104.5 109.5
Total Group Revenue 277.2 297.0
Analysis of cost of sales:
Product - total cost of sales (90.8) (99.1)
Impairment losses on customer receivables (49.6) (56.1)
Other financial services cost of sales (0.3) (0.4)
Financial Services - total cost of sales (49.9) (56.5)
Cost of sales before adjusting items (140.7) (155.6)
136.5 141.4
Adjusted Gross profit(1)
Adjusted Gross profit margin(1) 49.2% 47.6%
Adjusted Gross margin - Product(1) 47.4% 47.1%
Adjusted Gross margin - Financial Services(1) 52.2% 48.4%
Warehouse and fulfilment (27.0) (27.8)
Marketing and production (33.6) (32.7)
Other administration and payroll (57.1) (63.4)
Adjusted operating costs(1) (117.7) (123.9)
Adjusted EBITDA(1) 18.8 17.5
Adjusted EBITDA margin(1) 6.8% 5.9%
Depreciation and amortisation (10.0) (9.9)
Adjusting items charged to operating profit (note 5)(2) (2.8) (3.2)
Operating profit 6.0 4.4
Net finance costs (5.2) (7.5)
Fair value adjustments to financial instruments (0.6) 0.3
Profit/(Loss) before taxation 0.2 (2.8)
(1)A reconciliation of statutory measures to adjusted measures is included on
page 10. A full glossary of Alternative Performance Measures and their
definitions is included on page 20.
(2) Adjusting items for the 26 week period to 2 September 2023 have been
restated. Refer to note 18 for details of the restatement.
26 weeks to 31 August 2024 26 weeks to 2 September 2023
£m £m
Analysis of Product revenue:
Strategic brands(1) 128.6 139.4
Heritage brands(2) 44.1 48.1
Total Product revenue 172.7 187.5
Financial Services revenue 104.5 109.5
Total Group revenue 277.2 297.0
(1)Strategic brands include JD Williams, Simply Be and Jacamo.
(2)Heritage brands include Ambrose Wilson, Home Essentials, Fashion World,
Marisota, Oxendales and Premier Man.
The Group has one significant geographical segment, which is the United
Kingdom. Revenue derived from Ireland amounted to £6.7m (H1 24: £7.8m).
Operating results from international markets amounted to £0.7m profit (H1 24:
£0.5m profit). All segment assets are located in the UK and Ireland. All
non-current assets are located in the UK.
For the purposes of monitoring segment performance, assets and liabilities are
not measured separately for the two reportable segments of the Group.
Impairments of tangible and intangible assets in the current period were £nil
(H1 24: £nil).
5. Adjusting items
26 weeks to 31 August 2024 26 weeks to 2 September 2023
Restated
£m £m
Allianz litigation - (0.1)
Strategic change(1) 2.6 3.3
Other Litigation 0.2 -
Total adjusted items 2.8 3.2
(1) The strategic change adjusting items for the 26 weeks to 2 September 2023
have been restated. Refer to note 18 for details of the restatement.
ALLIANZ LITIGATION
As previously reported, the Group was involved in a legal dispute with Allianz
Insurance Plc ('Allianz'). The matter related to a claim issued against JD
Williams & Company Limited ('JDW'), a subsidiary of the Group, by the
Insurer in January 2020 (claim number CL-2020-000004) and JDW's counterclaims
in that litigation (the 'Dispute'). The claim was settled in FY23. The release
of £0.1m in the prior period relates to amounts previously provided in
respect of legal costs that were no longer required.
STRATEGIC CHANGE
During the current year, the Group continues the multi-year transformation of
the business and the ongoing review of the cost base. Specifically, a
restructuring program of the Group's operational and head office headcount to
reflect the lower sales orders was initiated at the end of FY24 and continues
through FY25. Total redundancy costs of £1.0m were incurred in the period in
relation to the restructuring program.
As part of the on-going review of the cost base, certain workstreams are to be
transferred to an outsourced company. The total cost of the project is
estimated at £0.7m of which £0.1m has been incurred during the period and
the remaining costs relating to pay in lieu of notice (PILON) and redundancy
of £0.6m have been provided.
During the prior year, the Board approved the rationalisation of the Group's
warehousing facilities following a review of the overall warehouse portfolio
capacity, utilisation and associated operational cost base. During the current
period, the costs incurred in relation to the parallel running of the
warehouse were £0.4m and £0.2m following the full warehouse closure where
costs continue during the "mothballing" period to the point of sale. A
provision brought forward from 2 March 2024 of £0.4m was released in the
period in relation to dilapidations of the warehouse following the signing of
a deed of release which extinguished the Group's liability for dilapidations.
Therefore, the net costs included within adjusted items for the period in
relation to the warehouse rationalisation were £0.2m.
A provision of £0.5m has been recognised with respect to a dilapidations
liability under an historic onerous property lease of which the lease will
expire in March 2025. The provision is based on the maximum contractual
liability. £0.2m has also been provided in the period for transition charges
with respect to an existing outsourcing arrangement. The transition charges
relate to historic, completed transition services which are no longer expected
to achieve any future benefits for the Group.
OTHER LITIGATION
During the prior year, the Group provided for potential litigation costs in
relation to legacy customer claims alleging unfair relationships resulting
from undisclosed PPI commission brought under s140A of the Consumer Credit Act
1974. This is not a new exposure and in prior years the Group has settled such
claims on a case by case basis, and the external legal costs resulting from
the change in strategic approach. The Group changed its strategy in 2023 to
robustly defend such claims and put claimants to proof; and engaged external
legal counsel which is reflected in the provision recorded. The Board supports
the strategy to robustly defend and put to proof any past and future claims.
The expected timeline of resolution of the outstanding claims is expected to
be more than 12 months. The provision which has continued to be included as an
adjusting item for consistency with prior years has been increased by £0.2m
in the current period reflecting additional claims received during the half
which have been added to the collective strategy.
6. Derivative financial instruments
At the balance sheet date, details of outstanding forward foreign exchange
contracts that the Group has committed to are as follows:
31 August 2024 2 September 2023
£m £m
Notional amount - Sterling contract value (designated cash flow hedges - 250.0 250.0
Interest rate swap)
Notional amount - Sterling contract value (designated cash flow hedges - 79.2 80.6
Foreign exchange forwards)
Notional amount - Sterling contract value (FVPL) 160.6 160.0
Total notional amount 489.8 490.6
The Group has fair value amounts held for derivative financial liabilities in
the following line items on the Balance Sheet:
31 August 2024 2 September 2023
Current Assets £m £m
Interest rate swap - cash flow hedges 2.8 11.8
Interest rate caps - non designated instruments at FVPL - 2.2
Foreign currency forwards - cash flow hedges 0.1 2.2
Foreign currency forwards - non designated instruments at FVPL - 0.3
Total 2.9 16.5
31 August 2024 2 September 2023
Non-current Assets £m £m
Interest rate swap - cash flow hedges - 2.7
Interest rate caps - non designated instruments at FVPL - 0.4
Foreign currency forwards - cash flow hedges - 0.1
Total - 3.2
31 August 2024 2 September 2023
Current liabilities £m £m
Foreign currency forwards - cash flow hedges (1.8) (0.3)
Foreign currency forwards - non designated instruments at FVPL (0.4) (0.1)
Total (2.2) (0.4)
31 August 2024 2 September 2023
Non-current liabilities £m £m
Foreign currency forwards - cash flow hedges (0.4) (0.1)
Total (0.4) (0.1)
The fair value of foreign currency and interest rate derivative contracts is
the market value of the instruments as at the balance sheet date. Market
values are calculated with reference to the duration of the derivative
instrument together with the observable market data such as spot and forward
interest rates, foreign exchange rates and market volatility at the balance
sheet date.
Changes in the fair value of derivatives not designated for hedge accounting
amounted to a loss of £0.5m (H1 24: £0.5m gain), recognised through the
Income statement in the period.
Changes in the fair value of derivatives designated for hedging purposes
amounted to a loss of £2.2m (H1 24: £0.7m gain) recognised through the cash
flow hedge reserve.
Fair value movements previously held within the hedge reserve were released as
the hedged future cash flows were no longer expected to occur. This resulted
in one off fair value loss of £0.1m (H1 24: £0.2m loss) recognised in the
income statement within the fair value adjustments to financial instruments
line and also included within amounts reclassified from other comprehensive
income to profit and loss line in the statement of other comprehensive income.
There are no balances remaining within the closing hedge reserve balance in
respect of previous hedge relationships where hedge accounting is no longer
applied. There were £nil amounts recognised in the income statement in the
period (H1 24: £nil) for hedge ineffectiveness on either foreign exchange or
interest rate hedges.
Financial instruments that are measured subsequent to initial recognition at
fair value are all grouped into Level 2 (H1 24: Level 2).
Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices).
There were no transfers between Level 1 and Level 2 during the current or
prior period.
7. Taxation
The underlying effective tax rate for the full year is estimated to be 24.8%
(H1 FY24: 38.9%) and this rate has been applied to the profit for the 26 weeks
ended 31(st) August 2024. The Finance Act (No.2) 2023, enacted on 11 July
2023, formalised the increase in UK Corporation Tax from 19% to 25%,
previously confirmed in the Spring Budget on 15 March 2023. In addition, The
Authorised Surplus Repayments Charge (Variation of Rate) Order 2024, enacted
on 11 March 2024, reduced the tax charge on pension surplus payments from 35%
to 25%. Accordingly the effective tax rate has been calculated based on the
enacted UK rate of 25% and taxation for other jurisdictions at the rates
prevailing in those jurisdictions.
The current period effective tax rate is lower than the statutory UK tax rate
of 25% due to the impact of the change in deferred tax rate on pension scheme
assets, mentioned above, which creates a deferred tax credit in the period,
partially offset by the tax charge caused by the impact of permanent and
temporary timing differences on capital assets where tax depreciation exceeds
accounting depreciation as a consequence of accelerated claims made under the
government's 100% first year capital expensing regime.
At the half-year, the Group has no provision (FY24 £0.0m) for potential tax
charges and is not aware of any historic tax issues.
The Group is aware that reporting requirements for BEPS Pillar II may apply in
FY25 and has completed a risk assessment with its external advisors to
establish whether the N Brown Group meets threshold criteria or can apply Safe
Harbour rules for one or more jurisdictions. Whilst the Group does not expect
to meet Safe Harbour rules in all jurisdictions and is expected to exceed
thresholds in others, based on current trading expectations and the bias
towards UK trade taxed at 25%, the Group currently considers the risk that
additional top up taxes will be payable as low.
8. Earnings / (loss) per share
The calculation of earnings per ordinary share is based on earnings after tax
and the weighted average number of ordinary shares in issue during the period.
The adjusted earnings per share figures have also been calculated based on
adjusted earnings, after adjusting for those items of income and expenditure
which are one-off in nature and material to the current financial year, and
for which the Directors believe that they require separate disclosure to avoid
distortion of underlying performance (see note 5), and fair value
adjustments to derivative instruments. These have been calculated to allow the
shareholders to gain an understanding of the underlying trading performance of
the Group. For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. Earnings per share for the prior period have not
been diluted following the loss after tax in the period.
Earnings/(loss) for the purposes of basic and diluted earnings per share: 26 weeks to 26 weeks to
31 August 2 September 2023
2024 Restated
£m £m
Total net profit/(loss) attributable to equity holders of the parent 0.2 (1.5)
Fair value adjustment to financial instruments (net of tax) 0.5 (0.2)
Adjusting items (net of tax)(1) 2.1 2.4
Adjusted profit for the period as used in headline earnings per share 2.8 0.7
(1) Adjusting items for the 26 weeks to 2 September 2023 have been restated.
Refer to note 18 for details of the restatement.
Number of shares for the purposes of basic and diluted earnings per share: 26 weeks to 26 weeks to
31 August 2 September 2023
2024
m m
Weighted average number of shares in issue - basic 462.2 459.9
Dilutive effect of share options 8.9 4.5
Weighted average number of shares in issue - diluted 471.1 464.4
Earnings/(loss) per share
Basic 0.04 (0.33)
Diluted 0.04 N/A
Adjusted earnings per share
Basic 0.61 0.15
Diluted 0.59 N/A
9. Intangible assets
Brands Software Customer database Total
£m £m £m £m
Cost
As at 4 March 2023 16.9 392.5 1.9 411.3
Additions - 8.5 - 8.5
Disposals - (0.1) - (0.1)
As at 2 September 2023 16.9 400.9 1.9 419.7
Additions - 11.5 - 11.5
Disposals - (4.9) - (4.9)
As at 2 March 2024 16.9 407.5 1.9 426.3
Additions - 11.0 - 11.0
As at 31 August 2024 16.9 418.5 1.9 437.3
Amortisation
As at 4 March 2023 16.9 334.2 1.9 353.0
Charge for the period - 8.3 - 8.3
As at 2 September 2023 16.9 342.5 1.9 361.3
Charge for the period - 9.0 - 9.0
Disposals - (4.9) - (4.9)
As at 2 March 2024 16.9 346.6 1.9 365.4
Charge for the period - 8.0 - 8.0
As at 31 August 2024 16.9 354.6 1.9 373.4
Carrying amounts
As at 31 August 2024 - 63.9 - 63.9
As at 2 March 2024 - 60.9 - 60.9
As at 2 September 2023 - 58.4 - 58.4
As at 4 March 2023 - 58.3 - 58.3
Assets in the course of development included in intangible assets at the
period end total £22.6m (H1 24: £9.3m). No amortisation is charged on these
assets.
IMPAIRMENT OF NON-FINANCIAL ASSETS
At half year end, the Group has performed a review in line with the
requirements of IAS 36 Impairment of Assets and IAS 34 Interim Financial
Reporting, for any new indications of a significant increase or reversal of
the impairment loss previously recognised. The assessment took into
consideration both internal and external factors as guided by IAS 36, and has
concluded that there have been no significant changes in any of the factors
that would indicate the requirement of a full reassessment of the VIU model at
half year end. Management considers that the impairment loss of £52.2m
recognised at the previous financial year end continues to represent a
reasonable estimate of the impairment to the Group's net assets. Movement in
the period is due to the disposal of assets which were previously impaired.
10. Property, plant and equipment
Additions to tangible fixed assets during the period of £2.6m (HY 24: £1.1m)
primarily relate to warehousing improvement projects. Depreciation of £1.5m
(HY 24: £1.2m) was charged during the period. Additionally, depreciation
relating to IFRS 16 right of use assets amounted to £0.5m (HY 24: £0.4m)
during the period.
Assets in the course of construction included in fixtures and equipment at the
period end total £1.8m (HY 24: £1.5m), and in land and buildings total £nil
(HY 24: £nil). No depreciation is charged on these assets until they are
available for commercial use.
A warehouse facility with a carrying value of £7.8m has been reclassified to
assets held for sale in the period. Refer to note 11 for further information.
During the period a verification review of existing assets has been performed
to confirm whether all assets remain in use by the Group. Assets with a total
cost of £12.7m were identified as no longer in use, all of which were fully
depreciated, and therefore removed from the fixed asset register.
11. Assets held for sale
During the prior year, the Board approved the rationalisation of the Group's
warehousing facilities. As a result of the rationalisation program, a
warehouse facility owned by the Group was identified for closure. The
warehouse was impaired by £3.3m to a carrying value of £7.8m in the prior
year to reflect the estimated sale proceeds less costs to sell. The property
was not reclassified to assets held for sale at 2 March 2024 as the program to
actively market the property and locate a buyer had not yet commenced. During
the current period, the warehouse has been formally advertised and actively
marketed for sale and as a result the warehouse has been reclassified to
assets held for sale. There has been no change to the assessment of the fair
value of the warehouse at the reporting date. A sale is expected to complete
within 12 months of the reclassification to held for sale.
12. Trade and other receivables
31 August 2 September 2023 2 March
2024 2024
£m £m £m
Amounts receivable for the sale of goods and services 480.2 528.9 517.0
Allowance for expected credit losses (64.9) (75.8) (73.3)
Net trade receivables 415.3 453.1 443.7
Other receivables and prepayments 26.8 24.7 24.9
Trade and other receivables 442.1 477.8 468.6
Income statement impairment charge
Provision movements (8.4) 1.2 (1.4)
Gross write-offs 59.8 55.8 120.7
Recoveries (8.9) (5.6) (23.7)
Other items 7.1 4.7 10.6
Net impairment charge 49.6 56.1 106.2
Other receivables and prepayments include a balance of £0.7m (H1 24: 1.2m)
relating to amounts due from wholesale partners.
Trade receivables are measured at amortised cost.
As at 31 August 2024
Stage 1 Stage 2 Stage 3 Total
Gross trade receivables 340.2 57.2 82.8 480.2
Allowance for ECL (15.9) (13.2) (35.8) (64.9)
Net trade receivables 324.3 44.0 47.0 415.3
ECL % (4.7%) (23.1%) (43.2%) (13.5%)
As at 2 September 2023
Stage 1 Stage 2 Stage 3 Total
Gross trade receivables 351.7 88.5 88.7 528.9
Allowance for ECL (14.9) (20.0) (40.9) (75.8)
Net trade receivables 336.8 68.5 47.8 453.1
ECL % (4.2%) (22.6%) (46.1%) (14.3%)
13. Trade and other payables
31 August 2024 2 September 2023 2 March 2024
£m £m £m
Trade payables 34.8 40.3 30.1
Other payables 4.3 5.2 7.1
Accruals and deferred income 31.3 29.6 27.8
Trade and other payables 70.4 75.1 65.0
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade
purchases, based on invoice date, at H1 25 is 49 days (H1 24: 48 days).
The Group has financial risk management policies in place to ensure that all
payables are paid within agreed credit terms.
The Group continues to have a supplier financing arrangement which is
facilitated by HSBC. The principal purpose of this arrangement is to enable
the supplier, if it so wishes, to sell its receivables due from the Group to a
third party bank prior to their due date, thus providing earlier access to
liquidity. From the Group's perspective, the invoice payment due date remains
unaltered and the payment terms of suppliers participating in the programme
are similar to those suppliers that are not participating.
The maximum facility limit as at 31 August 2024 was £15m (H1 24: £15m). At
31 August 2024, a total of £5.7m (H1 24: £6.8m) had been funded under the
programme. The scheme is based around the principle of reverse factoring
whereby the bank purchases from the suppliers approved trade debts owed by the
Group. Access to the supplier finance scheme is by mutual agreement between
the bank and supplier, where the supplier wishes to be paid faster than
standard Group payment terms; the Group is not party to this contract. The
scheme has no cost to the Group as the fees are paid by the supplier directly
to the bank. The bank has no special seniority of claim to the Group upon
liquidation and would be treated the same as any other trade payable. As the
scheme does not change the characteristics of the trade payable, and the
Group's obligation is not legally extinguished until the bank is repaid, the
Group continues to recognise these liabilities within trade payables and all
cash flows associated with the arrangements are included within operating cash
flow as they continue to be part of the normal operating cycle of the Group.
There is no fixed expiry date on this facility.
14. Cash and cash equivalents
Cash and cash equivalents (which are presented as a single
class of assets on the face of the balance sheet) comprise cash at bank and
other short-term highly liquid investments with a maturity of three months or
less. Included in the amount below is £1.0m (H1 24: £1.0m) of restricted
cash which is held in respect of the Group's customer redress programmes and
£2.3m (H1 24: £2.5m) in respect of our securitisation reserve account. This
cash is available to access by the Group for restricted purposes.
A breakdown of significant cash and cash equivalent balances by
currency is as follows:
31 August 2024 2 September 2023 2 March 2024
£m £m £m
Sterling 50.4 26.9 49.6
Euro 7.3 4.1 2.7
US dollar 8.3 18.1 12.9
Net cash and cash equivalents and bank overdrafts 66.0 49.1 65.2
Made up of:
Cash and cash equivalents 66.0 49.1 65.2
Bank overdrafts - - -
The Group operates a notional pooling and net overdraft
facility whereby cash and overdraft balances held with the same bank have a
legal right of offset. In line with the requirements of IAS 32, gross balance
sheet presentation is required where there is no intention to settle any
amounts net. The balance has therefore been separated between overdrafts and
cash balances.
15. Bank Borrowings
31 August 2024 2 September 2023 2 March 2024
£m £m £m
Bank loans (277.6) (307.5) (301.5)
Repayable as follows:
- Within one year - - -
- In the second year - (307.5) -
- In the third to fifth year (277.6) - (301.5)
Amounts due for settlement after 12 months (277.6) (307.5) (301.5)
31 August 2024 2 September 2023 2 March 2024
% % %
The weighted average interest rates were as follows:
Net overdraft facility 6.7 6.1 6.4
Bank loans 2.9 3.5 3.4
All borrowings are held in sterling.
The principal features of the Group's borrowings are as follows:
The Group has available an RCF facility with a maximum limit of £75m (H1 24:
£75m) and an overdraft facility of £12.5m (H1 24: £12.5m) both respectively
committed to December 2026. The full £87.5m was accessible but undrawn at 31
August 2024 (H1 24: £nil).
The key covenants in respect of RCF are as follows:
(a) Leverage less than 1.5 - representing the ratio of unsecured net
cash/(debt)(1), over Adjusted EBITDA(1) after the deduction of Securitisation
interest; and
(b) Interest cover greater than 4.0 - representing the ratio of Adjusted
EBITDA(1) over finance costs after excluding Securitisation interest and
adding back pension interest credit.
Throughout the reporting period all covenants have been complied with.
The Group has a bank loan of £277.6m (H1 24: £307.5m) secured by a charge
over certain "eligible" trade debtors (current and 0-28 days past due) of the
Group and is without recourse to any of the Group's other assets. The facility
has a current limit of £400m. The maturity of the facility was extended
during the prior year to December 2026. In February 2023, whilst not reducing
the £400m facility limit, the Group pro-actively reduced the lenders'
commitment to £340m from £400m to reflect the smaller customer receivables
book and subsequent reduction in the accessible funding level, so optimising
funding costs by reducing non-utilisation costs. This has not changed the
Group's total accessible funding levels. The securitisation facility allows
the Group to draw down cash, based on set criteria linked to eligible customer
receivables which move flexibly in line with business volumes. Accordingly,
the net cashflows of the facility are treated within working capital rather
than financing cashflows. Amortised fees relating to this facility of £0.9m
are offset against the carrying amount of the loan.
(1) A full glossary of Alternative Performance Measures and their definitions
is included on page 20. A reconciliation of statutory measures to adjusted
measures is included on page 10.
The key covenants applicable to the securitisation facility include three
month average default, return and collection ratios, and a net interest margin
ratio on the total and eligible pool. Through the reporting period all
covenants have been complied with.
There is no material difference between the fair value and carrying amount of
the Group's borrowings.
16. Dividends
No dividends were paid or proposed in either the current period or prior
period.
17. Provisions
Other Litigation Strategic Change Allianz Litigation Other Total
£m £m £m £m £m
Balance as at 2 March 2024 9.2 1.8 0.2 0.3 11.5
Provisions made during the period 0.4 1.5 - - 1.9
Provisions reversed during the period (0.1) (0.4) - - (0.5)
Provisions used during the period (0.8) (1.3) - - (2.1)
Balance as at 31 August 2024 8.7 1.6 0.2 0.3 10.8
Non-current 5.6 0.2 - 0.3 6.1
Current 3.1 1.4 0.2 - 4.7
Balance as at 31 August 2024 8.7 1.6 0.2 0.3 10.8
ALLIANZ LITIGATION
The provision outstanding at 31 August 2024 was £0.2m which relates to
amounts payable to Allianz following the closure of the joint redress account.
OTHER LITIGATION
The other litigation provision is an estimate of the litigation costs in
relation to legacy customer claims alleging unfair relationships resulting
from undisclosed PPI commission brought under s140 of the Consumer Credit Act
1974. This is not a new exposure and in prior years the Group has handled
such claims on a case by case basis and the external legal costs have not been
material. The provision is principally in relation to committed incremental
external legal costs resulting from the change in strategic approach. The
Group changed its strategy in 2023 to robustly defend such claims and put
claimants to proof and engaged external counsel which is reflected in the
provision recorded. The Board supports the strategy to robustly defend and put
to proof any past and future claims. The expected timeline of resolution of
the outstanding claims is more than 12 months. The Group will continue to
defend such claims of unfair relationships and the Board supports a strategy
to robustly defend any past and future claims. £0.1m of the provision has
been utilised during H1 FY25 and a further £0.3m has been provided during H1
FY25.
The provision outstanding at 2 March 2024 of £9.2m also included a provision
of £0.7m in relation to certain PPI related customer redress complaints which
has been utilised during H1 FY25.
STRATEGIC CHANGE
During the period, the Group continues the multi-year transformation of the
business and restructuring program of the Group's operational and head office
headcount following the contraction in revenues. The provision outstanding at
2 March 2024 of £0.5m for redundancy costs has been fully utilised in H1
FY25. As the review of the business continues through FY25, an additional
provision of £0.6m was recognised and remains outstanding at 31 August 2024.
During the prior period, the Board approved the rationalisation of the Group's
warehousing facilities following a review of the overall warehouse portfolio
capacity, utilisation and associated operational cost base. Accordingly a
provision was made during FY24 for incremental costs associated with staff
exits, onerous contracts, inventory utilisation and dilapidations. The
outstanding provision at 2 March 2024 was £1.3m. During the current period, a
total of £0.9m of the provision was utilised against £0.7m redundancy costs
and £0.2m costs associated with inventory rationalisation. £0.4m of the
provision was reversed during the period as a deed of release was signed which
extinguished the Group's liability for dilapidations.
We received notification during H1 FY25 that an historic onerous property
lease would expire in March 2025 and, as a result, our liability to contribute
to the dilapidations costs (if any) would crystallise at that time. A
provision of £0.5m has been recognised which aligns with our maximum
contractual liability for the dilapidations contribution. A further £0.2m has
been provided and £0.2m reclassified from accruals in the period in respect
of transition charges due by the Group for historic, completed transition
services under an existing outsourcing arrangement which are no longer
expected to achieve any future benefits for the Group.
OTHER
The provision held at 31 August 2024 of £0.3m relates to estimated future
costs to restore leased warehouse premises as required by the lease agreement.
This was capitalised to the right-of-use asset at recognition in line with
IFRS 16.
18. Prior Period Adjustment
There have been two adjustments to the H1 FY24 period ending 2 September 2023
as follows:
1) The Group has restated the presentation of deferred tax assets and
liabilities as at 2 September 2023 to correctly present these balances on a
net basis, as they had previously been presented on a gross basis in 2023.
This is to reflect the legal right and intention to offset within the
jurisdiction of the UK, in line with IAS 12 income taxes. This restatement
impacts the condensed consolidated balance sheet only with no impact to net
assets. No other primary statements have been impacted by this restatement.
2) £1.3m was provided during H1 FY24 in relation to costs associated
with the parallel running and mothballing phases associated with the Group's
warehouse rationalisation (further details can be found in note 5). At the
year end, it was determined that these costs did not meet the requirements of
IAS 37 as there was no legal or contractual obligation to incur these costs
and any costs provided in relation to these were released. A prior period
adjustment to the H1 FY24 results has been processed to release the £1.3m
provision associated with the parallel running and mothball costs which aligns
with the adjusted position at the FY24 year end. As a result of the above
adjustment, the tax credit for the H1 FY24 position has reduced by £0.3m.
The impact of the adjustment on the consolidated income statement and
consolidated balance sheet is shown below:
Condensed consolidated income statement
2 September 2023 Adjustment Adjustment 2 September 2023
1 2 Restated
£m £m £m £m
Operating profit 3.1 - 1.3 4.4
Loss before tax (4.1) - 1.3 (2.8)
Taxation 1.6 - (0.3) 1.3
Loss for the period (2.5) - 1.0 (1.5)
Condensed consolidated balance sheet
2 September 2023 Adjustment Adjustment 2 September 2023
1 2 Restated
£m £m £m £m
Non-current assets
Deferred tax assets 29.2 (11.5) - 17.7
Current assets
Current tax asset 1.8 - (0.3) 1.5
Current liabilities
Provisions (10.8) - 1.3 (9.5)
Non-current liabilities
Deferred tax liabilities (11.5) 11.5 - -
Net assets 383.8 - 1.0 384.8
Equity
Retained earnings 234.3 - 1.0 235.3
Total equity 383.8 - 1.0 384.8
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted with the
requirements of the Companies Act 2006
This report was approved by the Board of Directors on 9 October 2024
Stephen
Johnson
Interim Executive Chair and Chief Executive Officer
Dominic Appleton
Chief Financial Officer
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