TIDMBWNG
RNS Number : 7775L
Brown (N.) Group PLC
15 January 2021
15(th) January 2021
Q3 TRADING UPDATE FOR THE 18 WEEKS TO 2(nd) JANUARY 2021
Highlights
-- Successful completion of fund raising to accelerate strategy and eliminate unsecured debt
-- Product revenue trajectory has shown continued improvement driven by the 5 strategic brands
-- Financial Services cash collection rates remain stable
-- Strong pivot to Home & Gift customer demand enabled by agility of business model
-- Net cash at 2(nd) January 2021 of GBP83.7m(4)
-- Looking ahead the number one priority remains the safety of our colleagues and customers
-- Group continues to trade in line with its expectations and
expects to deliver FY'21 adjusted EBITDA(1) of between GBP84m and
GBP86m
Continued improvement in revenue trajectory
Versus Last Year Q1 FY'21 Q2 FY'21 Q3 FY'21
%
Product revenue (28.8%) (12.0%) (8.9%)
--------- --------- ---------
5 strategic brands(2) (25.1%) (7.2%) (1.4%)
--------- --------- ---------
Other brands(3) (36.5%) (22.4%) (26.1%)
--------- --------- ---------
Financial Services
revenue (8.3%) (15.8%) (8.3%)
--------- --------- ---------
Group revenue (21.9%) (13.4%) (8.8%)
--------- --------- ---------
Q1 FY'21 is the 13 weeks to 30 (th) May 2020, Q2 FY'21 is the 13
weeks to 29 (th) August 2020, Q3 FY'21 is the 18 weeks to 2(nd)
January 2021
All percentage changes reflect FY'21 revenue against the
comparable period in FY'20
1. Adjusted EBITDA is defined as operating profit, excluding
exceptionals, with depreciation and amortisation added back
2. JD Williams, Simply Be, Ambrose Wilson, Jacamo and Home Essentials
3. Fashion World, Premier Man, House of Bath, Marisota, Oxendales, High & Mighty, Figleaves
Product revenue has continued to recover from the sudden and
sharp decline experienced in the first quarter of FY'21 caused by
the impact of Covid-19. Customer trends in the Q3 period continued
to reflect the Covid-19 environment. We experienced particularly
strong demand for computing (+115%), gaming (+50%) and white goods
(+48%), and Home & Gift sales now comprise 42% of product
revenue, compared to 32% in the same period last year. Within
Apparel we saw strong growth in leisurewear and nightwear offset by
a decline in dresses, formalwear and swimwear.
The five strategic brands delivered product revenue down a
modest 1.4%, in a period when Group marketing costs were 40% lower
than the prior year, and we were particularly pleased with the
performance of JD Williams and Home Essentials. Encouragingly, we
saw growth in online customer accounts in JD Williams, Simply Be,
Jacamo and Home Essentials in the period.
Financial Services cash collection rates continue to remain in
line with the prior year and we have seen an improvement in the
quality of the debtor book with arrears rates at 7.0% compared to
7.9% in the prior year. As expected, lower product revenue and
regulatory changes continue to result in lower Financial Services
revenue, down 8.3% against the same period last year. As at 2(nd)
January 2021 the number of customers on a Covid-19 related payment
holiday represented just 0.3% of debtor balances, down from a peak
of 3% in May 2020.
Unsecured debt eliminated
On 23(rd) December 2020 the Group successfully completed its
GBP100m capital raising and move to AIM. The net proceeds of the
capital raise combined with the on-going focus on cash generation
have allowed the Group to repay all unsecured debt and in line with
the targets laid out in November, the Group now has a net cash
position of GBP83.7m. As previously stated, the capital raise will
also enable the business to invest further in its digital
capabilities and accelerate its growth strategy.
GBPm 29(th) February 2(nd) January Change (%)
2020 2021
Drawings under the RCF (125.0) - (100%)
---------------------- -------------------- -----------------
Cash balances 47.5 83.7 76%
---------------------- -------------------- -----------------
Net Cash / (Unsecured Net
Debt)(4) (77.5) 83.7 n/a
---------------------- -------------------- -----------------
Drawings under the securitisation
facility (419.7) (399.6) (4.8%)
---------------------- -------------------- -----------------
Net Debt(5) (497.2) (315.9) (36.5%)
---------------------- -------------------- -----------------
Gross debtor book 656.9 663.6 +1.0%
---------------------- -------------------- -----------------
4 Excludes debt securitised against receivables (customer loan
book) of GBP399.6m and lease liabilities of GBP5.3m
5 Total liabilities from financing activities less cash,
excluding lease liabilities
Environment, Social and Governance
As part of our focus on plastics in year one of our
sustainability plan, we have successfully conducted a trial of
Green Polyethylene (Green PE) despatch bags. This is an important
first step as we progress towards the goal of 100% Green PE
despatch bags by the end of FY'22. We are also proud to have signed
up to the BRC Climate Action Roadmap to help the Retail Industry,
including supply chains, to hit net zero carbon emissions by 2040.
Whilst we continue to focus on our own ESG strategy, we recognise
the huge potential in sharing knowledge and learning from other
retail leaders as we join forces and work collaboratively towards a
Net Zero UK.
FY'21 outlook and guidance
The latest lockdown restrictions will continue to present
opportunities and challenges for the Group, and the number one
priority remains the safety of our colleagues and customers. We
will utilise the experience gained from previous lockdown periods
to ensure the wellbeing of the team, whilst continuing to serve our
customer base. As with a number of other retailers, we are
currently experiencing delays of two to three weeks for many of our
stock deliveries, given global container issues, as well as cost
pressure in the supply chain. We are working through the
operational challenges which this presents us and looking to
minimise the impact on customers.
Based on our current assumptions on the likely impact of
Covid-19 on our operations we provide the following guidance for
the remainder of this financial year:
-- The Group now expects to offset more than 80% of the absolute
gross margin decline, driven by the pandemic's impact on sales and
bad debt provisions, through operational cost savings, with bad
debt provision movements being the main net driver negatively
affecting EBITDA
-- As a result, the Group currently expects to deliver FY'21
adjusted EBITDA of between GBP84m to GBP86m
-- We expect depreciation to be higher than FY'20 as we
accelerate the pace of our strategic change
-- Following the successful equity raise, we are accelerating
our strategy and now expect FY'21 capex to be c.GBP23m
-- FY'21 year-end net debt is now expected to be in the range of
GBP285m to GBP305m, down from GBP497.2m at the end of FY'20
-- Exceptional costs, driven by restructuring costs, are expected to be c.GBP10m
Steve Johnson, Chief Executive, said:
"We remain focused on our number one priority of looking after
our colleagues, whilst ensuring the business has the agility to
respond to the ever-changing external environment and can continue
to serve our loyal customers.
We continue to move through the acceleration phase of our
strategy; simplifying and strengthening our core brand proposition
whilst improving our digital capabilities. This is generating
continued momentum within the business, despite the difficult
macroeconomic backdrop. We saw a continued recovery in product
sales over the key Christmas period with particular strength in our
Home & Gift proposition.
We were pleased to recently complete our successful capital
raise, which will help us continue the acceleration phase of our
strategy and create a sustainable business delivering profitable
growth over the long term. We remain mindful of the ongoing
uncertainty in the UK retail environment, but as a digital
business, we look forward to building on the unique strength of the
Group's brands in 2021 and beyond."
Conference call
A conference call will be held at 8:30am (London time) today for
analysts and investors. To register for access, please contact MHP
Communications on +44 20 3128 8193 or email NBrown@mhpc.com
For further information:
N Brown Group
Will MacLaren, Director of Investor
Relations and Corporate Communications 07557 014 657
MHP Communications
Andrew Jaques / Simon Hockridge 0203 128 8789
/ James Midmer NBrown@mhpc.com
+44 (0) 20 7408
Shore Capital - Nomad and Joint Broker 4090
Dru Danford / Stephane Auton / Daniel
Bush / John More
Jefferies - Joint Broker +44 (0) 20 7029
Max Jones / Harry Le May 8000
About N Brown Group:
N Brown is a top 10 UK clothing & footwear digital retailer.
We are size inclusive, focusing on the needs of underserved
customer groups - size 20+ and age 50+. We offer an extensive range
of products, predominantly clothing, footwear and homewares, and
our financial services proposition allows customers to spread the
cost of shopping with us. We have five distinct brands: Simply Be,
JD Williams, Ambrose Wilson, Jacamo and Home Essentials. We are
headquartered in Manchester where we design, source and create our
product offer and we employ c.2,000 people across the UK.
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