TIDMBWNG
RNS Number : 3147N
Brown (N.) Group PLC
17 January 2019
17 January 2019
N Brown Group plc Q3 Trading Statement
Robust online Power Brand growth and stable margin performance
in a challenging market.
Full year expectations unchanged.
N Brown, the online specialist fit fashion retailer, today
announces the following trading update for the 18 weeks to 5
January 2019 ("Q3" or "the period").
Change in revenue* Q3 FY19 YTD FY19 H1 FY19
-------------------- -------- --------- --------
Group -1.6% 0.2% 1.5%
Product -6.0% -4.3% -3.1%
Power Brands 0.1% 1.0% 1.8%
Secondary -5.2% -6.1% -6.9%
Traditional -22.9% -16.2% -11.2%
Financial Services 9.7% 11.5% 12.7%
-------------------- -------- --------- --------
Online performance
Product 1.3% 2.7% 3.8%
Power Brands 6.4% 7.7% 8.6%
-------------------- -------- --------- --------
*All figures exclude stores.
Steve Johnson, Chief Executive, commented:
"The Group delivered robust online Power Brand growth and a
stable margin performance in what was a challenging and highly
promotional peak trading period. We continue to manage the
anticipated decline of our legacy offline business and remain
focused on improving our customer proposition to drive profitable
online growth. Trading over the Cyber and Christmas periods was
relatively consistent and in line with our expectations, with the
Group benefiting from a more targeted and efficient approach to its
promotional activity.
"Based on maintained margin guidance, continued strong Financial
Services performance and improved operating efficiency, our full
year expectations remain unchanged."
Product
Our transformation into a digital retailer continues, with total
online Power Brand revenues increasing by 6.4% during the period.
The Group's digital sales now account for 78.5% of Product revenue
compared to 71.0% for the same period last year.
Encouragingly, despite the highly promotional retail environment
experienced during the period, the Group is maintaining its Product
gross margin guidance at between 0 and -100bps for the full
year.
As anticipated total Q3 Product sales (exc. stores) declined by
6.0% as the Group continued to scale back its expenditure on
offline marketing and recruitment, consistent with its stated
strategy of focusing on online growth and improving its marketing
efficiency. This mainly impacted revenues in its Traditional and
Secondary segments, which were down 22.9% and 5.2%
respectively.
While Power Brand revenues were flat, within this Simply Be and
Jacamo continued to grow despite the challenging market conditions,
with Product revenues up 1.6% and 5.5% respectively, and by 5.9%
and 6.8% for online only. Simply Be's performance reflects the
strong prior year comparator and a more targeted approach to
discounting by the Group during the period.
Although JD Williams declined 3.3%, having been impacted by the
headwind from the migration of Fifty Plus, excluding Fifty Plus it
was up 4.2%. For online sales only, JD Williams was ahead by 6.9%.
The Group is currently re-evaluating its proposition for JD
Williams and will provide further details at its Full Year results
later in the year.
Financial Services
Financial Services continues to perform well, driven by the
improvement in the quality of the customer loan book and a further
reduction in the credit arrears rate compared to the same period in
previous years (excluding the temporary impact of changes to the
minimum payment rate). As a result, revenue was up by 9.7% mainly
driven by increased interest charges, with other non-interest lines
marginally ahead.
International
The Group began to stabilise its International performance, with
revenue down by 5.0% as it began to better re-engage with its
target customer base.
VAT Partial Exemption final ruling
The final ruling on the Group's dispute with HMRC with respect
to the VAT recovery of certain marketing costs has been received
and it is consistent with the draft ruling (as previously announced
in November 2018).
As a result, the Group continues to expect that its marketing
costs will increase by GBP6m to GBP9m p.a. on a full-year basis
from FY20, with a proportionately lower impact anticipated for FY19
of between GBP1.5m to GBP2m. There will also be a non-cash
exceptional charge relating to the partial impairment of the
existing VAT debtor asset. The Group is still considering its
position with respect to an appeal.
Senior Manager & Certification Regime ("SM&CR")
The Group is evaluating the likely impact of the recently
introduced Senior Managers & Certification Regime by the
Financial Conduct Authority ("FCA"). This represents a material
change in how companies govern themselves and how the FCA regulates
people working in Financial Services. SM&CR replaces the prior
"Approved Persons" regime and is to be implemented by December
2019. The Group will update investors more fully on any impact at
its Full Year results.
FY19 Guidance
The following update has been made to FY19 guidance:
-- Group operating costs: down 2% to 4% (was down 1% to 3%) due
to ongoing improved operating cost efficiencies
-- Depreciation & Amortisation: GBP30m to GBP31m (was GBP32m
to GBP33m) due to the Welcom impairment and store closures
-- Exceptional costs: Previous guidance of c.GBP67m will
increase due to an impairment charge on the Group's VAT debtor
asset, to be determined at the year-end
Other FY19 guidance is unchanged:
-- Product gross margin: 0 to -100bps
-- Financial Services gross margin: -100bps to -200bps
-- Net interest: GBP13m to GBP14m
-- Capex: c.GBP40m
-- Net debt: GBP450m to GBP475m
-- Underlying Effective Tax Rate: c.22%
Conference call
Management is hosting a call for analysts and investors at
8.30am today to discuss this statement. Please contact
Nbrown@mhpc.com for further information.
FY19 Results
The Group will announce its 2019 Full Year results on 2 May
2019.
Further information
N Brown Group
Steve Johnson, Chief Executive
Craig Lovelace, Chief Financial
Officer
Simon Bielecki, Investor Relations 0161 238 1845
MHP Communications
Andrew Jaques / Simon Hockridge
/ Ollie Hoare 0203 128 8789
NBrown@mhpc.com
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END
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