REG - Brown (N.) Group PLC - Trading Statement

N BrownAnnouncement

12/01/2023 07:00

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RNS Number : 4584M  Brown (N.) Group PLC  12 January 2023

12 January 2023

 

 

Q3 TRADING UPDATE FOR THE 18 WEEKS ENDED 31 DECEMBER 2022

 

Solid trading in a tough environment with balance sheet strength maintained

 

Highlights

·  Q3 product revenue in line with Q2 trends and management expectations,
reflecting a soft and highly promotional market

·  Outlook for FY23 Adjusted EBITDA(1) in line with market consensus(2)

·  Planning for 2023 UK discretionary consumer goods market conditions to be
soft, reflecting ongoing macroeconomic pressures

·  As announced on 9 January 2023, long-standing legal dispute with Allianz
settled

·  Strong balance sheet, with significant liquidity and positive unsecured
net cash, which will be maintained post Allianz settlement

 

Q2 retail trends have continued into Q3
                             Q3 FY23   Change Q3 FY23 v Q3 FY22(3)  FY23 YTD  Change FY23 YTD v FY22 YTD(3)

 
 Product revenue             £166.4m   (9.2)%                       £377.6m   (7.0)%
    Strategic brands(4)      £120.9m   (5.5)%                       £271.5m   (3.7)%
    Heritage brands(5)       £45.5m    (17.6)%                      £106.1m   (14.4)%
 Financial Services revenue  £82.8m    (4.2)%                       £203.1m   (3.7)%
 Group revenue               £249.2m   (7.6)%                       £580.7m   (5.9)%

 

The well-documented cost of living pressures continued to impact our customers
during Q3. Product revenue performed in line with Q2 trends and management
expectations, as set out in the interim results published in October 2022. Our
customers have been more intentional in their spend during the period, buying
what they need or what they love, with a greater focus towards either the
value or premium end of our ranges. We have also seen the impact of the cold
weather, moving outerwear demand later in the season.

Product mix, returns rates and credit arrears rates have broadly returned to
pre-pandemic norms.

Financial Services revenue has reduced, driven by the softening in retail
sales in H1.  This has been partially offset by a greater proportion of
customers utilising our credit option. Our responsible and flexible credit
offering remains an integral part of our customer proposition, particularly in
the current macroeconomic environment.

Strong balance sheet

At 31 December 2022 the Group had unsecured net cash of £82.9m(6), which is
in line with the prior year total of £83.4m (unsecured net cash of £33.5m
and an additional £49.9m voluntarily undrawn on the securitisation facility).
The Group also has access to a RCF of £100m and an overdraft of £12.5m, both
fully undrawn, which combined with the unsecured net cash at 31 December 2022
resulted in period end total accessible liquidity of almost £200m. As
announced on 9 January 2023, a payment of £49.5m is being processed relating
to the settlement of a legal dispute with Allianz. After satisfying this, the
Group will retain a strong unsecured net cash position of c.£30m, with both
the RCF and overdraft facilities remaining undrawn.

FY23 outlook and guidance

The Group's Q3 trading performance has been in line with our expectations.
With peak season behind us, we expect Q4(7) to be softer than Q3, in what are
typically our quietest months of the year. Against this retail backdrop and
assuming a continuation of the trends we have been seeing in Financial
Services revenue and margin, we expect FY23 Adjusted EBITDA(1) to be in line
with market consensus(2).

The Group maintains strong unsecured net cash and total accessible liquidity
positions. At year end we expect net debt to be higher year-on-year after the
cash outflow associated with the settlement with Allianz, with net debt well
covered by the gross debtor book.

We expect the market for UK discretionary consumer goods to be soft in
calendar year 2023, particularly in the first half. This, together with the
difficult trading environment in FY23, means we will commence FY24 with lower
active customers year-on-year. Against this backdrop we will continue to
carefully monitor consumer credit conditions whilst maintaining our focus on
self-help measures through tightly managing both costs and margins, and
continuing to invest in and deliver strategic change.

 

Steve Johnson, Chief Executive, said:

"We have traded in line with our expectations through a challenging period, as
customers continue to be more cautious with their discretionary spending in
the face of the various, well-documented consumer pressures.

Although we are cautious about the macro environment over the next 12 months,
we remain confident in the resilience of our business and in the strategic
investments which we are making for the long term.

With many returning to festive activities for the first time in three years,
we're proud of the role which we played in helping our customers look and feel
amazing during Christmas."

 

1.        Adjusted EBITDA is defined as operating profit, excluding exceptional items, with depreciation and amortisation added back. FY23 is a 53 week financial year, ending 4 March 2023, and Adjusted EBITDA expectations include the 53(rd) week.
2.        The market consensus for FY23 Adjusted EBITDA is £57.5m as at 11 January 2023.
3.        Q3 FY23 is the 18 weeks to 31 December 2022; FY23 YTD is the 44 weeks to 31 December 2022. FY22 product revenue has been rephased to reflect the year end adjustment described in Note 4 to the FY22 Annual Report and Accounts and better reflect the actual returns performance in the year.
4.        JD Williams, Simply Be and Jacamo. Note that Ambrose Wilson and Home Essentials were previously included in Strategic brands but, consistent with the strategic evolution outlined in the FY22 Preliminary Results, are now included in Heritage brands.
5.        Ambrose Wilson, Home Essentials, Fashion World, Marisota, Oxendales and Premier Man.
6.        Based on operational cash reporting as at 31 December 2022, consistent with RNS issued on 9 January 2023. Year end cash is reported on a full statutory consolidation basis.
7.        Reference to revenue is on a comparable 52 weeks basis against FY22, excluding the 53(rd) week in FY23.

 

Conference call

A conference call will be held at 10:00am today for analysts and investors.
To register for access, please contact MHP Communications on +44 (0) 20 3128
8193 or email Nbrown@mhpc.com (mailto:Nbrown@mhpc.com)

 

 

For further information:

 

 N Brown Group
 David Fletcher, Head of Investor Relations       +44 (0)7876 111242

 MHP
 Simon Hockridge / Eleni Menikou / Charles Hirst  +44 (0) 20 3128 8789

                                                  NBrown@mhpgroup.com (mailto:NBrown@mhpc.com)

 Shore Capital - Nomad and Broker
 Stephane Auton / Daniel Bush / John More         +44 (0) 20 7408 4090
 Fiona Conroy (Corporate Broking)

 

 

About N Brown Group:

N Brown is a top 10 UK clothing & footwear digital retailer, with a home
proposition. Our retail brands include JD Williams, Simply Be and Jacamo, and
our financial services proposition allows customers to spread the cost of
shopping with us. We are headquartered in Manchester where we design, source
and create our product offer and we employ over 1,800 people across the UK.

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