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BWNG Brown (n) Group Plc

16.00
-0.30 (-1.84%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Brown (n) Group Plc LSE:BWNG London Ordinary Share GB00B1P6ZR11 ORD 11 1/19P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.30 -1.84% 16.00 15.55 16.00 16.50 15.55 16.50 351,942 16:35:27
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Catalog, Mail-order Houses 677.5M -51.4M -0.1116 -1.39 71.61M

Brown (N.) Group PLC Half-year Report (3770T)

12/10/2017 7:00am

UK Regulatory


Brown (n) (LSE:BWNG)
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TIDMBWNG

RNS Number : 3770T

Brown (N.) Group PLC

12 October 2017

12(th) October 2017

N BROWN GROUP PLC

FIRST HALF RESULTS FOR THE 26 WEEKSED 2 SEPTEMBER 2017

CONTINUED POSITIVE TRADING MOMENTUM AND MARKET SHARE GAINS

N Brown Group Plc, the online, specialist fit, fashion retailer today announces results for the 26 weeks to 2 September 2017 (H1 FY17: 26 weeks to 27 August 2016).

 
 GBPm                         26 weeks        26 weeks   % change 
                        to 2 September    to 27 August    year on 
                                  2017            2016       year 
--------------------  ----------------  --------------  --------- 
 Product revenue                 323.5           300.9      +7.5% 
--------------------  ----------------  --------------  --------- 
 Financial Services 
  revenue                        129.9           128.5      +1.1% 
--------------------  ----------------  --------------  --------- 
 Group revenue                   453.4           429.4      +5.6% 
--------------------  ----------------  --------------  --------- 
 Adjusted EBITDA*                 49.0            49.1      -0.2% 
--------------------  ----------------  --------------  --------- 
 Adjusted PBT**                   32.2            31.6      +1.8% 
--------------------  ----------------  --------------  --------- 
 Statutory PBT***               (27.6)            21.1          - 
--------------------  ----------------  --------------  --------- 
 Adjusted EPS**                  8.77p           8.95p      -2.0% 
--------------------  ----------------  --------------  --------- 
 Statutory EPS***              (7.50p)           5.98p          - 
--------------------  ----------------  --------------  --------- 
 Net debt                        305.7           286.7      +6.6% 
--------------------  ----------------  --------------  --------- 
 Interim dividend                5.67p           5.67p          - 
--------------------  ----------------  --------------  --------- 
 

* Adjusted EBITDA is defined as operating profit, excluding exceptionals, with depreciation and amortisation added back

** Defined as excluding exceptionals and unrealised FX movement and therefore represents the underlying trading performance

***Includes previously announced exceptional costs of GBP54.9m, predominantly relating to customer redress for historic general insurance products and store closures

First half highlights:

-- Strong Power Brand performance, with revenue +14.3% and active customers +7.5% (excluding Fifty Plus)

o JD Williams brand revenue +12.1%; Fifty Plus -5.2%, migration now complete

o Simply Be +21.0%

o Jacamo +6.7%

o Including the Fifty Plus title, Power Brand revenue +11.5% and active customers +5.9%

   --    Ladieswear revenues +9.5% with 90bps increase in market share (size 16+) 
   --    Continued good progress with brand and retail partnerships: 

o Further new third-party brands added including Levi's, Mango, Oasis, Tommy Hilfiger and Ugg

o Today announcing partnerships with Amazon Fashion (Simply Be and Jacamo), Namshi (Simply Be) and Debenhams (Jacamo) to sell capsule collections online

   --    Product gross margin -190bps to 54.0%, as expected, driven by FX headwinds 
   --    Strong online metrics: 

o Online revenue +14% yoy; online revenue of Power Brands +21%

o Online penetration 72%, +4ppts yoy

o 76% of all traffic from mobile devices

-- Financial Services performance driven by ongoing good quality of the customer loan book, with Financial Services gross margin +150bps to 56.5% and full year gross margin guidance increased

-- High & Mighty now live on new web platform and Financial Services system. Systems investment programme now run in-house by our IT change team, with a focus on commercial return

Angela Spindler, Chief Executive, said:

"I am very pleased to report continued good trading in the half, with Simply Be the standout performer recording 21% growth. We made significant ladieswear market share gains against what remains a subdued consumer backdrop. In line with other retailers, FX rates represent a headwind and this was particularly felt this half.

"Our transformation into a flexible, online retailer continues to benefit all aspects of our business and we are today sharing our three growth levers going forwards. These are continuing to gain share in the UK, growing internationally and working in partnership with other companies to offer even more choice to our customers.

"At this early stage in the second half, current trading is on track with our plan and we are focused and well prepared for the peak trading period ahead. We are confident in our ability to deliver sustainable long-term growth and achieve our international ambitions."

Meeting for analysts and investors:

Management is hosting a presentation for analysts and investors at 10am. Please contact Nbrown@mhpc.com for further information. A live webcast of the presentation will be available at: www.nbrown.co.uk.

For further information:

 
 N Brown Group 
 Bethany Barnes (née           On the day: 07887 
  Hocking), Director of Investor     536153 
  Relations and Corporate 
  Communications 
 Website: www.nbrown.co.uk          Thereafter: 0161 
                                     238 1845 
 
 MHP Communications 
 Andrew Jaques / Simon Hockridge 
  / Gina Bell                       0203 128 8789 
                                    NBrown@mhpc.com 
 

About N Brown Group:

An expert in fashion that fits and flatters, N Brown is one of the UK's leading online retailers. Our key retail brands are JD Williams, Simply Be and Jacamo. We are all about democratising fashion and are size inclusive, focusing on the needs of underserved customer groups - size 20+ and age 45+. 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 are headquartered in Manchester where we design, source and create our product offer and we employ over 2,600 people across the UK.

Next reporting date

The next reporting date is the Q3 trading statement in January 2018.

First half overview

We are pleased to report a good first half performance, as we continue to benefit from the transformative changes we made to the business over the past three years.

Group revenue was up 5.6% to GBP453.4m, with Product revenue up 7.5% and Financial Services revenue up 1.1%. Our three Power Brands all delivered a good performance, with Simply Be the standout with revenue growth of 21.0%. Against a subdued backdrop we delivered significant ladieswear market share gains.

Product gross margin was 54.0%, down 190bps year on year, as expected, due to the headwind from exchange rate differences year on year affecting the cost of goods sold. As previously guided this impact is first half weighted. Financial Services gross margin was up 150bps, driven by the continuing improvement in the quality of the customer loan book. Our underlying operating costs were well managed, with a good performance in marketing efficiency allowing us to continue to invest in talent. Our operating costs were also impacted by IT double running costs, as guided.

Adjusted trading profit before tax was GBP32.2m, up 1.8% year on year. The statutory loss for the half year of GBP27.6m relates to previously announced exceptional costs of GBP54.9m (discussed in more detail below) and largely relate to legacy issues.

The Board recognises the importance of the dividend to shareholders, and accordingly is proposing to hold the interim dividend consistent with last year, at 5.67p, as we continue to invest in the business to drive growth.

Future growth levers

With the business now transformed into an agile, online retailer, we are today laying out our three growth levers, which will incrementally build going forwards.

These are:

-- Gain share in the UK. This will be driven through continual improvement in our customer experience, further development of our product offer and improving our brand cut-through. This growth lever is further driven through increasing the number of third-party brands on our websites, many of which are extended to larger sizes on an exclusive basis, offering more choice to our customers.

-- International expansion. The USA is our first priority, however we also intend to expand to other countries, initially through Global Ship Anywhere technology, which will be live by the end of FY18. In order to achieve our international ambitions we will leverage our current organisational capabilities and embed a global culture throughout our business.

-- Partnerships. This includes selling capsule ranges on other retailers' sites, on both a wholesale and marketplace offering. We also see a significant growth opportunity in influencer marketing, working together with bloggers and opinion formers to improve brand cut-through and further strengthen customer engagement.

Our growth will be further enabled by the loyalty Financial Services engenders, our new systems capabilities and our internal talent. Our objective is to continue to invest in the business to grow revenue.

FY18 Guidance

We have made the following updates to FY18 guidance:

-- Product gross margin -120bps to -70bps, compared to -120bps to -20bps previously

-- Financial Services gross margin +100bps to +200bps, compared to flat to +100bps previously

-- Group operating costs up 4.5% to 5.5%, compared to 3.5% to 5.5% previously

-- Net debt GBP325m to GBP335m, compared to GBP300m to GBP320m previously, reflecting the increased cash flow impacts of exceptional costs, together with the growth of our customer loan book

-- Exceptional costs of an additional c.GBP2m in the second half, as a result of our ongoing tax disputes with HMRC

-- Tax rate c.22%

Other guidance elements are unchanged from previously announced:

-- Depreciation & Amortisation GBP29m to GBP30m

-- Net interest GBP8m to GBP9m

-- Capex of c.GBP40m

First half review

KPI performance

 
                                     H1 FY18   H1 FY17   % change 
----------------------------------  --------  --------  --------- 
 CUSTOMERS 
 Active customer accounts               4.4m      4.2m      +5.2% 
 Power Brand active customer 
  accounts                              2.2m      2.1m      +5.9% 
 Power Brand customers 
  exc. Fifty Plus                       1.9m      1.8m      +7.5% 
 % Growth of our most loyal 
  customers*                           +2.4%     -0.4%    +280bps 
 Customer satisfaction 
  rating**                             83.7%     86.4%    -270bps 
 PRODUCT 
----------------------------------  --------  --------  --------- 
 Ladieswear market share, 
  size 16+                              5.7%      4.8%     +90bps 
 Menswear market share, 
  chest 44"+                            1.2%      1.2%          - 
 Group returns rate (rolling 
  12 months)                           27.2%     27.0%     +20bps 
----------------------------------  --------  --------  --------- 
 ONLINE 
----------------------------------  --------  --------  --------- 
 Online penetration                      72%       68%     +4ppts 
 Online penetration of 
  new customers                          80%       76%     +4ppts 
 Conversion rate                        5.3%      5.7%     -40bps 
 % of traffic from mobile 
  devices                                76%       70%     +6ppts 
----------------------------------  --------  --------  --------- 
 FINANCIAL SERVICES 
----------------------------------  --------  --------  --------- 
 Customer account arrears 
  rate (>28 days)                       9.3%      9.8%     -50bps 
 Provision rate                        10.3%     12.7%    -240bps 
 New credit recruits (Rollers)***       135k      120k       +13% 
----------------------------------  --------  --------  --------- 
 

* Defined as customers who have ordered in each of the last four seasons

**UK Institute of Customer Service survey (UKICS)

***Last six months, rounded figures. Rollers are those customers who roll a credit balance.

Market shares are estimated using internal and Kantar data, 24 weeks ending 27(th) August 2017 compared to 24 weeks ending 28(th) August 2016.

Customer KPI's

Our active customer file increased by 5.2% to 4.42m driven by our successful recruitment campaigns during the season. In line with our strategy of driving our Power Brands, we are pleased with the 7.5% increase in these active customers, or 5.9% if Fifty Plus is included. The migration of the Fifty Plus title into JD Williams was successfully completed at the end of the half.

Our most loyal customers, being customers who have ordered in each of the last four seasons, increased by an encouraging 2.4%, a continuation of the improving trend reported for the second half of last year. This was due to both the good Power Brand performance together with the improvement in our Traditional segment.

At 83.7%, our most recent customer satisfaction score from the UK Institute of Customer Service is 270bps lower than our previous score, however we remain ahead of the sector average. The decline was driven by two factors; firstly, a good season for new customer recruitment, which typically dilutes perception and secondly, a fire at a delivery partner's distribution centre caused significant delivery problems for a small group of customers, having a disproportionate impact on the satisfaction score.

Product KPI's

Market share in Ladieswear (size 16+) was up 90bps at 5.7%, with significant gains across all age ranges. We also gained share in the size 16-18 segment. Our menswear market share was flat at 1.2%, with gains in the younger age groups. Our market share gains are a direct result of the investments we have made in our design team, our merchandising capabilities and our buying skills.

Our returns rate increased by 20bps to 27.2%. This was driven entirely by mix, with Ladieswear, which has a naturally higher returns rate, outperforming. This dynamic was partially offset by the ongoing increase in the proportion of cash customers.

Online KPI's

Online revenue was up 14% year on year, and up 21% in our Power Brands. Online accounted for 72% of our sales during the half, up 4ppts year on year. 80% of sales from new customers were generated online, also up 4ppts on H1 FY17.

Mobile devices (smartphones and tablets) accounted for 76% of online traffic in the half, up 6ppts. Within this, smartphone sessions increased by 54% and now account for over half of all traffic. The increase in smartphone usage continued to cause our overall conversion rate to decline to 5.3% compared to 5.7% last year. This remains encouragingly above the industry average. The conversion rate for smartphones specifically exceeded 4% for the first time.

We are pleased with the performance of our first shopping app for Simply Be. To date we have an average five star rating and our conversion rate is ahead of our expectations. We will continue to improve our app offering in the year ahead.

Financial Services KPI's

We continue to perform well in Financial Services, driven by a continued improvement in the quality of the customer loan book. This resulted in revenue being up 1.1% year on year. Within this, interest payments grew low single digits, whilst non-interest lines were down double-digit. The improvement in the quality of the loan book continues to be reflected in the gross margin performance, which was up 150bps year on year to 56.5%.

Credit arrears (>28 days) were 9.3%, down 50bps year-on-year, driven by the improvement in the quality of the book. The provision rate was 10.3%, down 240bps versus last year. As in FY17, this benefitted from the sale of a small amount of high risk payment arrangement debt, which we were able to sell for a slightly better rate than book value. We expect the rate to remain broadly steady for the remainder of the year.

We had an encouraging performance recruiting new credit customers who rolled a balance, with an increase of 13% compared to the first half of FY17. This was driven by both the good product revenue performance in the half and encouraging early results from the trial offering a lower APR for qualifying new customers on our three Power Brands. This trial continues ahead of the rollout of full variable APR functionality in 2018.

On July 13th we announced a potential customer redress related to historic general insurance products. This was as a result of identifying flaws in certain products which were provided by a third party insurance underwriter and sold by the Group to its customers between 2006 and 2014 and followed a review prompted by an industry-wide request from the FCA that firms ensure that general insurance products and add-ons offer value for their customers. The vast majority of these products were sold to the Group's customers in the period leading up to, and including, 2011. Sales of the relevant products ceased in early 2014. As a result we have incurred an exceptional cost of GBP40m in the first half, in line with our previous guidance of GBP35 million to GBP40 million. We continue to explore mitigating actions to reduce the overall net cost. The cashflow impact of this is forecast to materially occur from FY19 onward, and the Group anticipates funding the full cost of customer redress from existing resources.

Performance by brand

 
  Revenue, GBPm          H1 FY18    H1 FY17    Change 
---------------------  ---------  ---------  -------- 
  JD Williams               81.1       75.8     +6.9% 
  Simply Be                 64.5       53.3    +21.0% 
  Jacamo                    33.5       31.4     +6.7% 
---------------------  ---------  ---------  -------- 
  Power Brands             179.1      160.5    +11.5% 
---------------------  ---------  ---------  -------- 
  Secondary Brands          76.3       75.2     +1.4% 
  Traditional 
   Segment                  68.1       65.2     +4.4% 
---------------------  ---------  ---------  -------- 
  Product total            323.5      300.9     +7.5% 
---------------------  ---------  ---------  -------- 
  Financial Services       129.9      128.5     +1.1% 
---------------------  ---------  ---------  -------- 
  Group                    453.4      429.4     +5.6% 
---------------------  ---------  ---------  -------- 
 

JD Williams

JD Williams' product revenue was GBP81.1m, up 6.9% yoy. Within this, the JD Williams brand was up 12.1% and Fifty Plus was down 5.2%, as expected. The migration of Fifty Plus is now complete.

For the new Autumn Winter season we have refreshed the JD Williams brand proposition, launching JD Williams "The Lifestore". The JD Williams Lifestore brand aims to celebrate the attitudes, interests and ambitions of our female customers and positions the brand as a modern online department store for the 45 - 60 year old woman. Dubbed 'A Colourful Life', the new season advertising campaign stars five female models in a series of life moments including starting a new career, dating and reclaiming the home after children leave the nest, set to an uplifting soundtrack, Woman by the artist Ruelle.

To support the brand's new-look and the AW17 ad campaign, we launched The Midster Report 2017: a state of the nation report surveying over 2,000 women aged 45 - 65, looking into body confidence, style and shopping behaviours, as well as women's attitudes towards key life moments such as relationships, dating, healthy living, life adventures and home and work-life balance. We hope our inspiring campaign will challenge traditional preconceptions of women in their 40s and 50s, redefining what it means to be 'middle aged', or, 'Midster', as we prefer to describe them.

Simply Be is the go-to online brand for 25-45 year old confident curvy women. Simply Be had a very good performance during the half, with product revenue up 21.0%. Our #WeAreCurves campaign resonated strongly with customers, and we have built on the campaign further for the season ahead.

As part of our continued championing of size inclusivity and body confidence, we recently held a Curve Catwalk on the eve of London Fashion Week. This was led by models and influencers including Tess Holliday, Hayley Hasselhoff and Felicity Hayward. The show was shoppable and streamed on the Simply Be site, backed by significant social media activity and had a total media reach of over 10million people.

Jacamo caters for 25-45 year old men of all body shapes and sizes, from small to 5XL. Jacamo product revenue was up 6.7% with active customers growing at almost double this rate.

Our delivery subscription offering Jacamo Unlimited, launched in February 2017, has been very successful, with a double-digit increase in both order frequency and net sales per customer. We will be extending a delivery subscription offer to other brands in the future.

Alongside our successful partnership with brand ambassador Freddie Flintoff, we also teamed up with Tom Morgan from television show The Undateables to promote our Jacamo own-brand summer range, with Tom posing for a series of untouched images to encourage all men to be comfortable in their own skin.

Secondary brands revenue increased by 1.4%. Within this, Fashion World and Marisota both achieved good performances. Figleaves saw a revenue decline, in line with our expectations, as the new management team restructured the business and optimised our marketing approach. Going forwards we are now in a position to drive growth in this business. High & Mighty revenue declined year on year as we reduced marketing spend ahead of the new site go-live.

The Traditional segment recorded revenue growth of 4.4% year on year as the actions we took to address performance worked well. Looking forward, our strategy in Traditional remains unchanged, that is, to hold overall revenues broadly flat through gaining share in this declining market.

Systems investment programme

The new platform is now live on the High & Mighty and USA sites, for High & Mighty this includes our new Financial Services system. As previously described, the programme has now been substantially scaled down, reducing costs, and our in-house IT change team are now delivering enhanced functionality through fortnightly releases. Our approach going forward will be to prioritise and focus on the developments that deliver the highest returns, such as Global Ship Anywhere and mobile Apps. Based on priorities, the timescale for migrating other brands onto the new platform is expected to commence in Q2 FY18. We will optimise the timing of these migrations to minimize commercial disruption.

International

USA revenue was GBP8.1m, up 6.1% year on year (down 4.4% in constant currency terms), as expected. We stepped up our marketing investment towards the end of the period in order to drive new customer recruitment going forwards.

Ireland delivered revenues of GBP8.5m, up 17.3% year on year, or 7.4% in constant currency terms.

Stores

In our first quarter trading statement we announced the closure of five dual fascia Simply Be and Jacamo stores as a result of weak high-street footfall, both current and predicted, together with significant future business rate increases for some stores. Together these five stores contributed GBP5.0m revenue but accounted for the entire GBP2.0m operating loss of our store estate in FY17. The store closures have now been completed, effective end of August, and have resulted in an exceptional cost of GBP13.8m in line with our previous guidance.

Overall, revenue from our store estate was GBP10.6m (H1 FY17: GBP11.5m). As at the end of the first half we had 18 stores open, split 10 dual Simply Be and Jacamo stores (H1 FY17: 15), and eight High & Mighty stores (H1 FY17: nine).

FX sensitivity

For FY18 we expect our annual purchases, net of international revenues, to be c.$125m, on which we have a hedging strategy in place, together with c.GBP130m, where we face indirect cost pressures due to the depreciation of sterling.

Looking at our dollar exposure specifically, we are 100% hedged for the current financial year at a blended rate of $/GBP1.29. This compares to a blended hedged rate of $/GBP1.41 in FY17.

For FY19 we have, to date, hedged 56% of our net purchases at a blended rate of $/GBP1.30. At a rate of $/GBP1.30, and before any mitigating actions, this would result in a c.GBP1m PBT tailwind compared to FY18. Every 5 cents move from this rate in our unhedged position would result in a PBT sensitivity of c.GBP1.7m.

FINANCIAL RESULTS

Revenue performance

Revenue performance by quarter was as follows:

 
  % yoy growth      Q1 (13wks)    Q2 (13wks) 
----------------  ------------  ------------ 
  Product               +10.2%         +4.9% 
  Financial 
   Services              -4.9%         +7.2% 
----------------  ------------  ------------ 
  Group Revenue          +5.6%         +5.6% 
 

The Q2 product performance is impacted by the comparable figures in the prior year, with a 4ppts tougher comparative in Q2 versus Q1.

Revenue by category was as follows:

 
  GBPm                       H1 FY18    H1 FY17    Change 
-------------------------  ---------  ---------  -------- 
  Ladieswear                   143.4      130.9     +9.5% 
  Menswear                      44.9       42.4     +5.9% 
  Footwear & Accessories        38.7       34.2    +13.2% 
  Home & Gift                   96.5       93.4     +3.3% 
-------------------------  ---------  ---------  -------- 
  Product total                323.5      300.9     +7.5% 
-------------------------  ---------  ---------  -------- 
 

Gross margin

Product

Product cost of goods sold (COGS) were GBP148.7m, compared to GBP132.8m in H1 FY17. Product gross margin was 54.0%, down 190bps yoy, in line with our expectations. This was entirely due to the impact of FX rates year on year following the EU referendum. This impact was partially offset by the benefits of lower promotions and better underlying input prices.

Financial Services

Our gross bad debt charge was GBP54.3m (H1 FY17: GBP55.1m). This bad debt charge, together with a small number of other financial services costs, resulted in a Financial Services gross margin of 56.5%, up 150bps year on year. This increase in gross margin is predominantly the result of continued improvement in the quality of the customer loan book, together with the sale of some high risk payment arrangement debt at a slightly better rate than book value.

Operating performance

 
  GBPm                     H1 FY18    H1 FY17     Change 
-------------------------  -------  ---------  --------- 
  Product revenue            323.5      300.9      +7.5% 
  Financial Services 
   revenue                   129.9      128.5      +1.1% 
-------------------------  -------  ---------  --------- 
  Group Revenue              453.4      429.4      +5.6% 
-------------------------  -------  ---------  --------- 
  Product gross profit       174.8      168.1      +4.0% 
  Product gross margin       54.0%      55.9%    -190bps 
  Financial Services 
   gross profit               73.5       70.7      +3.9% 
  Financial Services 
   gross margin              56.5%      55.0%    +150bps 
  Group Gross Profit         248.3      238.8      +4.0% 
  Group Gross Margin 
   %                         54.8%      55.6%     -80bps 
-------------------------  -------  ---------  --------- 
  Warehouse & fulfilment    (42.5)     (38.2)     +11.3% 
  Marketing & production    (88.2)     (87.5)      +0.8% 
  Admin & payroll           (68.6)     (64.0)      +7.0% 
-------------------------  -------  ---------  --------- 
  Total operating 
   costs                   (199.3)    (189.7)      +4.8% 
-------------------------  -------  ---------  --------- 
  Adjusted EBITDA*            49.0       49.1      -0.2% 
  Adjusted EBITDA* 
   margin                    10.8%      11.4%     -60bps 
-------------------------  -------  ---------  --------- 
  Depreciation & 
   amortisation             (12.9)     (13.6)      -4.9% 
-------------------------  -------  ---------  --------- 
  Adjusted Operating 
   Profit**                   36.1       35.5      +1.6% 
  Adjusted Operating 
   Margin**                   8.0%       8.3%     -30bps 
-------------------------  -------  ---------  --------- 
  Net Finance costs          (3.9)      (3.9)      +0.3% 
  Adjusted PBT**              32.2       31.6      +1.8% 
-------------------------  -------  ---------  --------- 
  Exceptional items         (54.9)     (10.2) 
  Unrealised FX movement     (4.9)      (0.3) 
  Statutory PBT             (27.6)       21.1 
-------------------------  -------  ---------  --------- 
 

* Adjusted EBITDA is defined as operating profit, excluding exceptionals, with depreciation and amortisation added back

**Defined as excluding exceptionals and unrealised FX movement and therefore represents the underlying trading performance

Warehouse and fulfilment costs increased by 11.3% to GBP42.5m. This was driven predominantly by volumes, which were up 7% year on year, together inflationary pressures in fuel and labour, and further improvements to our delivery offering, partially offset by continued efficiencies.

Marketing costs were up 0.8% year on year, significantly below the rate of product revenue growth as we drove efficiency. Admin and payroll costs increased by 7.0%, due to double running IT costs, as previously guided, together with our continued investment in recruiting and retaining great talent.

EBITDA declined marginally to GBP49.0m. Depreciation and Amortisation decreased by 4.9% due to timing factors. Our guidance for the full year is GBP28m to GBP29m, implying a step up in the second half. Overall, operating profit before exceptional items was GBP36.1m, up 1.6% year on year.

Net finance costs

Net finance costs were GBP3.9m, flat on the H1 FY17, as a result of lower funding costs on our securitisation facility offset by a slight increase in net debt.

Exceptional items

Exceptional costs totalled GBP54.9m and are in line with prior announcements. The split of these costs is shown below.

 
  GBPm                              H1 FY18 
--------------------------------  --------- 
  Customer redress for historic 
   insurance products                  40.0 
  Store closures                       13.8 
  External costs related to 
   taxation matters                     1.1 
  Total exceptional costs              54.9 
--------------------------------  --------- 
 

The customer redress for historic insurance products is discussed above.

The store closure exceptional cost was announced as part of our Q1 trading statement. Effective end of August we closed five Simply Be and Jacamo dual-fascia stores. This decision took into account weak high-street footfall, both current and predicted, together with significant future business rate increases for some stores. Together, these five stores contributed GBP5.0m revenue but accounted for the entire GBP2.0m operating loss of our store estate in FY17.

Taxation

The effective underlying rate of corporation tax is 23.2% (H1 FY17: 20.0%). The overall tax charge was a credit of GBP6.4m (H1 FY17: GBP4.2m charge), as we recognised a tax credit due to the loss in the period.

Earnings per share

Earnings per share from continuing operations was a loss of 7.50p (H1 FY17: 5.98p). Adjusted earnings per share from continuing operations were 8.77p (H1 FY17: 8.95p).

Dividends

The Board recognises the importance of the dividend to shareholders, and accordingly is proposing to hold the interim dividend consistent with last year, at 5.67p, as we continue to invest in the business to drive growth.

Balance Sheet and Cash Flow

Capital expenditure was GBP21.8m (H1 FY17: GBP19.3m). Inventory levels at the period end were up 5.9%, lower than the product revenue growth rate, to GBP104.7m (H1 FY17: GBP99.0m).

Gross trade receivables increased by 1.5% to GBP611.5m (H1 FY17: GBP601.8m). The provision declined from GBP76.4m to GBP62.8m, driven both by the sale of some high risk payment arrangement debt at a slightly better rate than book value, along with ongoing progress in reducing overall debtor risk. These two factors were partially offset by an increase in new credit recruits and average balance growth.

The group's defined benefit pension scheme has a surplus of GBP8.7m (H1 FY17: GBP0.5m surplus). This surplus is broadly in line with the year-end figure, with the first half of last year being impacted by weaker bond rates as a result of the EU referendum.

Net cash generated from operations (excluding taxation) was GBP43.8m compared to GBP59.2m last year. After funding capital expenditure, finance costs, taxation and dividends, net debt increased from GBP290.9m to GBP305.7m (H1 FY17: GBP286.7m), in line with our expectations. The GBP548.7m net customer loan book significantly exceeds this net debt figure.

Unaudited condensed consolidated income statement

 
                           26 weeks     26 weeks          26 weeks                  26 weeks         26 weeks            26 weeks                   53 weeks 
                           to            to 02-Sep-17      to 02-Sep-17             to                to 27-Aug-16       to 27-Aug-16                to 04-Mar-17 
                           02-Sep-17                                                27-Aug-16 
                           Before                                                   Before 
                       Exceptional      Exceptional                             Exceptional          Exceptional 
                            items     items                     Total                   items      items                        Total                      Total 
                                       (note                                                        (note 
                                       5)                                                           5) 
Continuing     Note             GBPm              GBPm              GBPm                 GBPm                 GBPm               GBPm                        GBPm 
operations 
 
  Revenue        4            453.4                  -            453.4               429.4                      -             429.4                        900.7 
                                                                                                                                                  --------------- 
 
  Operating 
  (loss) 
  / profit       4             36.1             (54.9)            (18.8)                 35.5               (10.2)               25.3                        65.1 
Finance costs                (3.9)                   -           (3.9)                  (3.9)                    -              (3.9)                      (7.7) 
                                                                                                                                                  --------------- 
(Loss) / 
 Profit 
 before 
 taxation 
 and fair 
 value 
 adjustments 
 to 
 financial 
 instruments                 32.2             (54.9)            (22.7)                   31.6               (10.2)               21.4                        57.4 
Fair value 
 adjustments 
 to financial 
 instruments    6             (4.9)                  -           (4.9)                  (0.3)                    -              (0.3)                         0.2 
                     ---------------  ----------------  ----------------   ------------------   ------------------   ----------------             --------------- 
 
  (Loss) / 
  Profit 
  before 
  taxation                     27.3             (54.9)            (27.6)                 31.3               (10.2)               21.1                        57.6 
Taxation        7             (6.3)            12.7                  6.4                (6.2)                  2.0              (4.2)                     (13.3) 
                     ---------------  ----------------  ----------------   ------------------   ------------------   ----------------             --------------- 
(Loss) / 
 Profit 
 for the year                21.0             (42.2)            (21.2)                   25.1                (8.2)               16.9                      44.3 
                     ---------------  ----------------  ----------------   ------------------   ------------------   ----------------             --------------- 
(Loss) / 
 Profit 
 attributable 
 to 
 equity 
 holders 
 of the 
 parent                      21.0             (42.2)            (21.2)                   25.1                (8.2)               16.9                      44.3 
                     ---------------  ----------------  ----------------   ------------------   ------------------   ----------------             --------------- 
 
Loss / 
 earnings 
 per share      8 
Basic                                                             (7.50)  p                                                      5.98  p                   15.67p 
Diluted                                                           (7.50)  p                                                      5.98  p                   15.66p 
 
 
 
    Unaudited condensed consolidated statement of comprehensive 
     income 
 
                                              26 weeks               26 weeks             53 weeks 
                                               to                     to                   to 
                                                  02-Sep-17             27-Aug-16            04-Mar-17 
                                                            GBPm                 GBPm                 GBPm 
 
     (Loss) / Profit for the period                       (21.2)                 16.9                 44.3 
   Items that will not be reclassified 
    subsequently to profit or loss 
   Actuarial gains / (losses) on 
    defined benefit pension schemes                          0.1              (10.7)                 (3.1) 
   Tax relating to items not reclassified                  (0.1)                  1.9                  0.6 
                                            --------------------  -------------------  ------------------- 
                                                               -                (8.8)                (2.5) 
                                            --------------------  -------------------  ------------------- 
   Items that may be reclassified 
    subsequently to profit or loss 
   Exchange differences on translation 
    of foreign operations                                  (0.6)                  0.4                  0.5 
   Total comprehensive (loss) / 
    income for the period attributable 
   to equity holders of the parent                      (21.8)                    8.5               42.3 
                                            --------------------  -------------------  ------------------- 
 
 
    Unaudited condensed consolidated balance sheet 
 
                                                   02-Sep-17            27-Aug-16            04-Mar-17 
                                      Note                 GBPm                 GBPm                 GBPm 
   Non-current assets 
   Intangible assets                   9               153.4                130.5                141.9 
   Property, plant & equipment         10                71.4                 76.7                 73.5 
   Retirement benefit surplus                               8.7                  0.5                  8.3 
   Deferred tax assets                                      2.3                  3.9                  2.4 
                                            -------------------  -------------------  ------------------- 
                                                       235.8                211.6                226.1 
                                            -------------------  -------------------  ------------------- 
   Current assets 
   Inventories                                         104.7                  99.0               105.5 
   Trade and other receivables         11              594.6                561.7                575.4 
   Current tax asset                                        1.5                  9.7                    - 
   Derivative financial instruments    6                      -                  1.9                  2.5 
   Cash and cash equivalents                             59.3                 48.3                 64.1 
                                            -------------------  -------------------  ------------------- 
                                                       760.1                720.6                747.5 
                                                                                      ------------------- 
 
   Total assets                                        995.9                932.2                973.6 
                                            -------------------  -------------------  ------------------- 
 
   Current liabilities 
   Trade and other payables                           (120.4)              (116.9)                (98.9) 
   Provisions                          13               (37.2)                 (7.1)              (15.6) 
   Derivative financial instruments    6                  (2.4)                    -                    - 
   Current tax liability                                      -                    -              (13.4) 
                                            -------------------  -------------------  ------------------- 
                                                      (160.0)              (124.0)              (127.9) 
                                            -------------------  -------------------  ------------------- 
 
     Net current assets                                  600.1                596.6                619.6 
                                            -------------------  -------------------  ------------------- 
 
     Non-current liabilities 
   Bank loans                                         (365.0)              (335.0)              (355.0) 
   Provisions                          13               (29.7)                 (0.8)                (4.3) 
   Deferred tax liabilities                               (8.2)              (11.5)                 (8.2) 
                                            -------------------  -------------------  ------------------- 
                                                      (402.9)              (347.3)              (367.5) 
                                                                                      ------------------- 
 
   Total liabilities                                  (562.9)              (471.3)              (495.4) 
                                                                                      ------------------- 
 
   Net assets                                          433.0                460.9                478.2 
                                            -------------------  -------------------  ------------------- 
 
   Equity 
   Share capital                                         31.3                 31.3                 31.3 
   Share premium account                                 11.0                 11.0                 11.0 
   Own shares                                             (0.1)                (0.1)                (0.1) 
   Foreign currency translation 
    reserve                                                 1.7                  2.2                  2.3 
   Retained earnings                                   389.1                416.5                433.7 
                                            -------------------  -------------------  ------------------- 
   Total equity                                        433.0                460.9                478.2 
                                            -------------------  -------------------  ------------------- 
 
 
    Unaudited condensed consolidated cash flow statement 
 
                                                  26 weeks               26 weeks              53 weeks 
                                                  to                     to                    to 
                                                    02-Sep-17             27-Aug-16             04-Mar-17 
                                                              GBPm                  GBPm                  GBPm 
 
     Net cash from operating activities                      35.3                   50.7                  89.0 
   Investing activities 
   Purchases of property, plant 
    and equipment                                            (1.2)                 (3.0)                 (3.7) 
   Purchases of intangible assets                         (20.6)                 (16.3)                (38.6) 
                                             ---------------------  --------------------  -------------------- 
   Net cash used in investing activities                  (21.8)                 (19.3)                (42.3) 
                                             ---------------------  --------------------  -------------------- 
 
   Financing activities 
   Interest paid                                             (4.1)                 (4.3)                 (7.8) 
   Dividends paid                                         (24.2)                 (24.2)                (40.2) 
   Increase in bank loans                                  10.0                        -                20.0 
   Purchase of shares by ESOT                                    -                     -                   0.1 
   Proceeds on issue of shares held 
    by ESOT                                                      -                   0.1                     - 
                                             ---------------------  --------------------  -------------------- 
   Net cash used in financing activities                  (18.3)                 (28.4)                (27.9) 
                                             ---------------------  --------------------  -------------------- 
 
     Net (decrease) / increase in 
     cash and cash equivalents                               (4.8)                   3.0                  18.8 
   Opening cash and cash equivalents                       64.1                   45.3                  45.3 
                                             ---------------------  --------------------  -------------------- 
   Closing cash and cash equivalents                       59.3                   48.3                  64.1 
                                             ---------------------  --------------------  -------------------- 
 
 
      Reconciliation of operating (loss) / profit to net 
      cash from operating activities 
 
                                                  26 weeks               26 weeks              53 weeks 
                                                  to                     to                    to 
                                                    02-Sep-17             27-Aug-16             04-Mar-17 
                                                              GBPm                  GBPm                  GBPm 
 
     Operating (loss) / profit from 
     operations                                             (18.8)                  25.3                  65.1 
 
   Adjustments for: 
   Depreciation of property, plant 
    and equipment                                              2.8                   2.7                   6.9 
   Amortisation of intangible assets                       10.1                   10.9                  20.7 
   Share option charge                                         0.8                   0.5                   0.5 
                                             ---------------------  --------------------  -------------------- 
 
     Operating cash flows before movements 
     in working capital                                      (5.1)                  39.4                  93.2 
   Decrease/(increase) in inventories                          0.8                   2.5                 (4.0) 
   Increase in trade and other receivables                (19.7)                   (7.6)               (21.6) 
   Increase/(decrease) in trade 
    and other payables                                     20.9                   17.2                   (0.2) 
   Increase in provisions                                  47.2                      7.9                19.9 
   Pension obligation adjustment                             (0.3)                 (0.2)                 (0.2) 
                                             ---------------------  --------------------  -------------------- 
 
     Cash generated by operations                            43.8                   59.2                  87.1 
   Taxation paid                                             (8.5)                 (8.5)                   1.9 
                                             ---------------------  --------------------  -------------------- 
   Net cash from operating activities                      35.3                   50.7                  89.0 
                                             ---------------------  --------------------  -------------------- 
 
 
    Unaudited condensed consolidated statement 
    of changes in equity 
                                                                           Foreign 
                                                                          currency 
                          Share           Share            Own         translation    Retained 
                          capital      premium            shares         reserve        earnings            Total 
                              GBPm            GBPm            GBPm            GBPm            GBPm            GBPm 
   Changes in 
   equity for the 
   26 weeks to 2 
   September 
   2017 
   Balance at 4 
    March 2017              31.3            11.0             (0.1)             2.3         433.7           478.2 
 
    Comprehensive 
    income for 
    the period 
   Loss for the 
    period                       -               -               -               -          (21.2)          (21.2) 
   Other items of 
    comprehensive 
    loss for the 
    period                       -               -               -           (0.6)               -           (0.6) 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Total 
    comprehensive 
    (loss) 
    for the period               -               -               -           (0.6)          (21.2)          (21.8) 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Transactions 
   with owners 
   recorded 
   directly in 
   equity 
   Equity 
    dividends                    -               -               -               -          (24.2)          (24.2) 
   Issue of own                  -               -               -               -               -               - 
   shares by 
   ESOT 
   Share option 
    credit                       -               -               -               -             0.8             0.8 
   Tax on items                  -               -               -               -               -               - 
   recognised 
   directly in 
   equity 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Total 
    contributions 
    by 
    and 
    distributions 
    to owners                    -               -               -               -          (23.4)          (23.4) 
                                                                                                    -------------- 
 
   Balance at 2 
    September 
    2017                    31.3            11.0             (0.1)             1.7         389.1           433.0 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
 
   Changes in 
   equity for the 
   26 weeks to 27 
   August 2016 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Balance at 27 
    February 
    2016                    31.3            11.0             (0.2)             1.8         432.1           476.0 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
 
   Comprehensive 
   income for 
   the period 
   Profit for the 
    period                       -               -               -               -          16.9            16.9 
   Other items of 
    comprehensive 
    income / 
    (loss) for the 
    period                       -               -               -             0.4           (8.8)           (8.4) 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Total 
    comprehensive 
    income 
    for the period               -               -               -             0.4             8.1             8.5 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
 
   Transactions 
   with owners 
   recorded 
   directly in 
   equity 
   Equity 
    dividends                    -               -               -               -          (24.2)          (24.2) 
   Purchase of own               -               -               -               -               -               - 
   shares 
   by ESOT 
   Issue of own 
    shares by 
    ESOT                         -               -             0.1               -               -             0.1 
   Adjustment to                 -               -               -               -               -               - 
   equity for 
   share payments 
   Share option 
    credit                       -               -               -               -             0.5             0.5 
   Tax on items                  -               -               -               -               -               - 
   recognised 
   directly in 
   equity 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Total 
    contributions 
    by 
    and 
    distributions 
    to owners                    -               -             0.1               -          (23.7)          (23.6) 
                                                                                                    -------------- 
 
   Balance at 27 
    August 2016             31.3            11.0             (0.1)             2.2         416.5           460.9 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
 
   Changes in 
   equity for the 
   53 weeks to 4 
   March 2017 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Balance at 27 
    February 
    2016                    31.3            11.0             (0.2)             1.8         432.1           476.0 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
 
   Comprehensive 
   income for 
   the period 
   Profit for the 
    period                       -               -               -               -          44.3            44.3 
   Other items of 
    comprehensive 
    income for the 
    period                       -               -               -             0.5           (2.5)           (2.0) 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Total 
    comprehensive 
    income 
    for the period               -               -               -             0.5          41.8            42.3 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Transactions 
   with owners 
   recorded 
   directly in 
   equity 
   Equity 
    dividends                    -               -               -               -          (40.2)          (40.2) 
   Issue of own 
    shares by 
    ESOT                         -               -             0.1               -               -             0.1 
   Share option 
    credit                       -               -               -               -             0.5             0.5 
   Tax on items 
    recognised 
    directly in 
    equity                       -               -               -               -           (0.5)           (0.5) 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
   Total 
    contributions 
    by 
    and 
    distributions 
    to owners                    -               -             0.1               -          (40.2)          (40.1) 
                                                                                                    -------------- 
 
   Balance at 4 
    March 2017              31.3            11.0             (0.1)             2.3         433.7           478.2 
                    --------------  --------------  --------------  --------------  --------------  -------------- 
 
 
   Notes to the unaudited condensed consolidated financial 
    statements 
 
    1. Basis of preparation 
  This condensed set of financial statements has been 
   prepared in accordance with IAS 34 Interim Financial 
   Reporting as adopted by the EU. 
  The annual financial statements of the Group are 
   prepared in accordance with International Financial 
   Reporting Standards (IFRSs) as adopted by the EU. 
  As required by the Disclosure Guidance and Transparency 
   Rules of the Financial Conduct Authority, the condensed 
   set of financial statements has been 
  prepared applying the accounting policies and presentation 
   that were applied in the preparation of the company's 
   published consolidated financial statements 
  for the 53 week period ended 4 March 2017. The comparative 
   figures for the 53 week period ended 4 March 2017 
   are not the company's statutory accounts 
  for that financial period. Those accounts have been 
   reported on by the company'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 without 
  qualifying their report, and (iii) did not contain 
   a statement under section 498 (2) or (3) of the Companies 
   Act 2006. 
 
    2. Key risks and uncertainties 
  There are a number of potential risks and uncertainties 
   which could have an impact on the group's long-term 
   performance over the next 12 months. The 
  directors routinely monitor all risks and uncertainties 
   taking appropriate actions to mitigate where necessary. 
   The key risks which have been identified as 
  potentially having a material impact on the performance 
   of the group are as follows: business change/transformation 
   unsuccessful; business continuity and 
  cyber-security; regulatory environment; taxation 
   and general competition. 
  A key risk facing the business is the successful 
   delivery of the group's transformation project, Fit 
   4 for the Future. Whilst the implementation continues 
   to 
  be on time and on budget any potential delays could 
   impact on the level of future benefits which are 
   expected to arise from the project. 
  Business interruption events are an ever present 
   possibility for the Group. Potential impacts are 
   broad ranging and include short term disruption to 
   trade and 
  customer service resulting in an impact on revenue, 
   margin and reputation. In addition, our increased 
   online presence and reliance on digital systems raises 
  the importance of cyber security to the Group. Forthcoming 
   regulations in respect of data protection increase 
   the Group's focus in this area. Business 
  continuity plans are in place and the group has further 
   migrated IT systems and data security risk within 
   the business through outsourcing IT services to a 
  specialist IT service provider. 
  Recent and upcoming changes in regulation are a key 
   consideration for the Group. Potential impacts arising 
   from changes in regulation are: increased costs, 
  erosion of margins and potential fines or reputational 
   damage if response plans are not achieved. 
  Competing effectively across the key areas of Product, 
   Financial Services and Customer Services remains 
   a key driver of customer recruitment and retention. 
  Potential consequences of competition include; loss 
   of market share, erosion of margins and a fall in 
   customer satisfaction. Given the uncertain 
  macro-economic backdrop, which particularly impacts 
   on the business though input cost inflation, remaining 
   competitive is even more important in order to 
  deliver growth. 
  The Group has on-going discussions with HMRC in respect 
   of a number of Corporation tax and VAT positions. 
  The calculation of the Group's potential liabilities 
   or assets in respect of these involves a degree of 
   estimation and judgement in respect of items whose 
   tax 
  treatment cannot be finally determined until resolution 
   has been reached with HMRC or, as appropriate, through 
   legal processes. Issues can, and often do, 
  take a number of years to resolve. Further details 
   are included in note 7. 
 
    3. Going concern 
  In determining whether the group's accounts can be 
   prepared on a going concern basis, the directors 
   considered the group's business activities together 
  with factors likely to affect its future development, 
   performance and financial position including cash 
   flows, liquidity position, borrowing facilities and 
   the 
  principal risks and uncertainties relating to its 
   business activities. 
  The directors have considered carefully its cash 
   flows and banking covenants for the next twelve months 
   from the date of approval of the group's interim 
  results. Conservative assumptions for working capital 
   performance have been used to determine the level 
   of financial resources available to the group and 
  to assess liquidity risk. 
  The group's forecasts and projections, after sensitivity 
   to take account of all reasonably foreseeable changes 
   in trading performance, show that the group 
  will have sufficient headroom within its current 
   loan facilities of GBP405m - which are committed 
   until 2020 - and its GBP20m overdraft facility. 
  After making appropriate enquiries, the directors 
   have a reasonable expectation that the group has 
   adequate resources to continue in operational existence. 
  Accordingly, they continue to adopt the going concern 
   basis in the preparation of the interim financial 
   statements. 
 
 
 
     4. Business segments                       26 weeks              26 weeks           53 weeks 
                                                to                    to                 to 
                                                 02-Sep-17            27-Aug-16           04-Mar-17 
                                                           GBPm                GBPm               GBPm 
   Analysis of revenue - Home shopping 
   Product                                            323.5                300.9              635.9 
   Financial services                                 129.9                128.5              264.8 
                                            -------------------  ------------------  ----------------- 
                                                      453.4                429.4              900.7 
                                            -------------------  ------------------  ----------------- 
 
     Analysis of cost of sales - Home 
     shopping 
   Product                                            (148.7)              (132.8)            (288.2) 
   Financial services                                  (56.4)               (57.8)            (117.3) 
                                            -------------------  ------------------  ----------------- 
                                                      (205.1)              (190.6)            (405.5) 
                                            -------------------  ------------------  ----------------- 
 
     Gross profit                                       248.3                238.8              495.2 
   Gross margin - Product                              54.0%               55.9%              54.7% 
   Gross margin - Financial Services                   56.5%               55.0%              55.7% 
   Warehouse & fulfilment                              (42.5)               (38.2)             (81.3) 
   Marketing & production                              (88.2)               (87.5)            (165.4) 
   Depreciation & amortisation                         (12.9)               (13.6)             (27.6) 
   Other admin & payroll                               (68.6)               (64.0)            (130.6) 
                                            -------------------  ------------------  ----------------- 
 
     Operating profit before exceptionals                 36.1                 35.5               90.3 
   Exceptional items (see note 5)                      (54.9)               (10.2)             (25.2) 
                                            -------------------  ------------------  ----------------- 
 
     Segment result & operating (loss) 
     / profit - Home shopping                            (18.8)                25.3               65.1 
   Finance costs                                          (3.9)               (3.9)              (7.7) 
   Fair value adjustments to financial 
    instruments                                           (4.9)               (0.3)                0.2 
                                            -------------------  ------------------  ----------------- 
   (Loss) / Profit before taxation                     (27.6)                21.1               57.6 
                                            -------------------  ------------------  ----------------- 
 
 
   The group has one reportable segment in accordance 
    with IFRS8 - Operating Segments which is the 
    Home Shopping 
   segment. 
   The group's board receives monthly financial 
    information at this level and uses this information 
    to monitor the performance 
   of the Home Shopping segment, allocate resources 
    and make operational decisions. Internal reporting 
    focuses on the 
   group as a whole and does not identify individual 
    segments. To increase transparency, the group 
    has decided to include 
   an additional voluntary disclosure analysing 
    product revenue within the reportable segment, 
    by brand categorisation and 
   product type categorisation. 
                                      26 weeks        26 weeks           53 weeks 
                                       to              to                      to 
                                         02-Sep-17      27-Aug-16       04-Mar-17 
                                               GBPm           GBPm           GBPm 
   Analysis of product revenue 
    by brand 
   JD Williams                                 81.1           75.8          160.5 
   Simply Be                                   64.5           53.3          115.8 
   Jacamo                                      33.5           31.4    66.2 
                                     --------------  ------------- 
   Power brands                               179.1          160.5          342.5 
   Traditional segment                         68.1           65.2          136.1 
   Secondary brands                            76.3           75.2          157.3 
                                     --------------  ------------- 
   Total product revenue - Home 
    shopping                                  323.5          300.9          635.9 
                                     --------------  ------------- 
 
   Analysis of product revenue 
    by category 
   Ladieswear                                 143.4          130.9          260.0 
   Menswear                                    44.9           42.4    87.0 
   Footwear and accessories                    38.7           34.2    70.0 
   Home and gift                               96.5           93.4          218.9 
                                     --------------  ------------- 
   Total product revenue - Home 
    shopping                                  323.5          300.9          635.9 
                                     --------------  ------------- 
 
     We have reclassified accessories from ladieswear 
     to footwear and accessories in H1 FY18 and 
     FY17 and restated the 
   comparatives for HYE FY17 by GBP3.4m. 
   The group has one significant geographical 
    segment, which is the United Kingdom. 
   Revenue derived from international markets 
    amounted to GBP18.7m (H1 FY17, GBP17.2m). 
   All segment assets are located in the UK, 
    Ireland and USA. The assets in USA and Ireland 
    total GBP8.5m (H1 FY17, GBP7.9m) 
   5. Exceptional items 
                                      26 weeks        26 weeks           53 weeks 
                                       to              to                      to 
                                         02-Sep-17      27-Aug-16       04-Mar-17 
                                               GBPm           GBPm           GBPm 
   External costs related to 
    taxation matters                            1.1            1.2            2.5 
   Store closure costs / (credits)             13.8              -          (0.2) 
   Financial services customer 
    redress                                    40.0            9.0    22.9 
                                     --------------  ------------- 
                                               54.9           10.2    25.2 
                                     --------------  ------------- 
 
     Following a recent industry-wide request from 
     the FCA that firms ensure that general insurance 
     products and add-ons offer value 
   for their customers, the Group identified 
    flaws in certain insurance products which 
    were provided by a third party insurance 
   underwriter and sold by the Group to its customers 
    between 2006 and 2014, with the majority sold 
    up to and including 2011. 
   Following an assessment of the cost of potential 
    customer redress, an exceptional charge of 
    GBP40.0m was recognised during the period. 
   During the previous year, an exceptional charge 
    of GBP22.9m (H1 FY17 GBP9.0m) was recognised 
    reflecting costs incurred or expected 
   to be incurred in respect of payments for 
    historical financial services customer redress. 
   External costs related to tax are in respect 
    of on-going legal and professional fees which 
    have been incurred as a result of the 
   Group's on-going disputes with HMRC regarding 
    a number of historical tax positions. 
   In line with our strategy of reshaping our 
    retail offering, during the period five loss 
    making retail stores were closed which has 
   resulted in non recurring cost of GBP13.8m 
    in respect of asset write offs, onerous lease 
    provisions and other related store closure 
    costs. 
   Following the closures in 2016 of the clearance 
    stores, the credit in FY17 represents lease 
    exit costs being lower than originally anticipated. 
 
 
 
     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: 
                                                  26 weeks                  26 weeks              53 weeks 
                                                   to                        to                    to 
                                                     02-Sep-17                 27-Aug-16             04-Mar-17 
                                                              GBPm                  GBPm                  GBPm 
 
     Notional Amount - Sterling contract 
     value                                                   148.5                  45.5                  94.2 
                                           -----------------------  --------------------  -------------------- 
 
     Fair value of asset recognised                              -                   1.9                   2.5 
                                           -----------------------  --------------------  -------------------- 
   Fair value of (liability) recognised                      (2.4)                     -                     - 
                                           -----------------------  --------------------  -------------------- 
 
     Changes in the fair value of assets / (liabilities) 
     recognised, being non-hedging currency derivatives, 
     amounted to a charge of GBP4.9m 
   (H1 FY17, GBP0.3m) to income in the period. 
 
     The fair value of foreign currency derivatives contracts 
     is their market value at the balance sheet date. Market 
     values are based on the 
   duration of the derivative instrument together with 
    the quoted market data including interest rates, foreign 
    exchange rates and market 
   volatility at the balance sheet date. 
   The financial instruments that are measured subsequent 
    to initial recognition at fair value are all grouped 
    into Level 2 (H1 FY17, same). 
 
     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 the liability, either directly (ie as prices) 
    or indirectly (ie derived from prices). There were no 
    transfers between Level 1 and 
   Level 2 during the period (H1 FY17, same). 
 
     7. Taxation 
   The taxation credit for the 26 weeks ended 2 September 
    2017 is based on the estimated effective tax rate for 
    the full year of 23.2% 
   (H1 FY17, 20%). 
 
     The Group has on-going discussions with HMRC in respect 
     of a number of Corporation tax and VAT positions. The 
     calculation of the 
   Group's potential liabilities or assets in respect of 
    these involves a degree of estimation and judgement 
    in respect of items whose tax 
   treatment cannot be finally determined until resolution 
    has been reached with HMRC or, as appropriate, through 
    legal processes. Issues 
   can, and often do, take a number of years to resolve. 
   In respect of Corporation tax, as at 2 September 2017 
    the Group has provided a total of GBP4.6m (FY17: GBP3.6m) 
    for potential corporation tax 
   future charges based upon the Group's best estimation 
    and judgement and, where appropriate, legal counsels 
    opinion. 
 
     In respect of VAT, the Group has provided a total of 
     GBP5.4m (FY17: GBP5.4m) in respect of future payments 
     which the Directors' have a 
   reasonable expectation of making in settlement of these 
    historical positions. 
 
     In addition, and separate to the above positions, the 
     Group continues to be in discussion with HMRC in relation 
     to the VAT consequences 
   of the allocation of marketing costs between our retail 
    and credit businesses. At this stage it is not possible 
    to determine how the 
   matter will be resolved. 
 
      However, within our half year end VAT debtor is an asset 
      of GBP36.0m (FY17: GBP36.0m) which has arisen as a result 
      of cash payments 
    made under protective assessments raised by HMRC and 
     the Group estimates that a further GBP10m could be paid 
     under this assessment 
    in the forthcoming year. Based on legal counsel's opinion, 
     we believe that we will recover this amount in full 
     from HMRC and we 
    are engaged in a legal process to do so. 
   The inherent uncertainty regarding the outcome of these 
    positions means the eventual realisation could differ 
    from the accounting estimates 
   and therefore, impact the Group's future results and 
    cash flows. Based upon the amounts reflected in the 
    balance sheet as at 
   2 September 2017, the Directors estimate that the unfavourable 
    settlement of these cases could result in a charge to 
    the income 
   statement of up to GBP46.8m (including the full write 
    off of the VAT debtor noted above) and a cash payment 
    to HMRC of up to GBP22.7m. 
   The favourable settlement of these cases would result 
    in a repayment of tax of up to GBP53.1m and an associated 
    credit to the income 
   statement of up to GBP29.0m. 
 
 
 
     8. (Loss) / Earnings per share 
   Earnings                                    26 weeks                26 weeks            53 weeks 
                                                to                      to                  to 
                                                  02-Sep-17              27-Aug-16            04-Mar-17 
                                                          GBPm                  GBPm                    GBPm 
   Total net (loss) / profit attributable 
    to equity holders of the parent for 
    the purpose of basic 
   and diluted earnings per share                       (21.2)                  16.9                 44.3 
 
     Fair value adjustment to financial 
     instruments (net of tax)                              3.8                   0.2                   (0.2) 
   Exceptional items (net of tax)                        42.2                    8.2                 20.2 
   Total net profit attributable to equity 
    holders of the parent for the purpose 
    of basic 
                                             -----------------      ----------------      ------------------ 
   and diluted adjusted earnings per share               24.8                   25.3                 64.3 
                                             -----------------      ----------------      ------------------ 
 
 
 
     Number of shares                            26 weeks                26 weeks            53 weeks 
                                                 to                      to                  to 
                                                  02-Sep-17              27-Aug-16            04-Mar-17 
                                                No. ('000s)             No. ('000s)          No. ('000s) 
    Weighted average number of shares in 
     issue for the purpose 
    of basic earnings per share                      282,795                282,613              282,701 
   Effect of dilutive potential ordinary 
    shares: 
   Share options                                             -                   101                     252 
   Weighted average number of shares in 
    issue for the purpose 
                                             -----------------      ----------------      ------------------ 
   of diluted earnings per share                     282,795                282,714              282,953 
                                             -----------------      ----------------      ------------------ 
 
     (Loss) / Earnings per share 
   Basic                                                (7.50)   p              5.98   p           15.67       p 
   Diluted                                              (7.50)   p              5.98   p           15.66       p 
 
     Adjusted earnings per share 
   Basic                                                  8.77   p              8.95   p            22.74      p 
   Diluted                                                8.77   p              8.95   p            22.72      p 
 
 
 
     9. Intangible assets 
 
                                                                                      Customer 
                                    Brands          Software          database          Total 
                                         GBPm              GBPm        GBPm               GBPm 
   Cost 
   At 27 February 2016                 16.9             256.7           1.9            275.5 
   Additions                              -               16.5           -               16.5 
                           ------------------  ----------------  -------------  -------------- 
   At 27 August 2016                   16.9             273.2           1.9            292.0 
   Additions                              -               21.2           -               21.2 
                           ------------------  ----------------  -------------  -------------- 
   At 4 March 2017                     16.9             294.4           1.9            313.2 
   Additions                              -               21.6           -               21.6 
                           ------------------  ----------------  -------------  -------------- 
   At 2 September 2017                 16.9             316.0           1.9            334.8 
                           ------------------  ----------------  -------------  -------------- 
 
   Amortisation 
   At 27 February 2016                   8.0            140.7           1.9            150.6 
   Charge for the period                  -               10.9           -               10.9 
                           ------------------  ----------------  -------------  -------------- 
   At 27 August 2016                     8.0            151.6           1.9            161.5 
   Charge for the period                  -                9.8           -                9.8 
                           ------------------  ----------------  -------------  -------------- 
   At 4 March 2017                       8.0            161.4           1.9            171.3 
   Charge for the period                  -               10.1           -               10.1 
                           ------------------  ----------------  -------------  -------------- 
   At 2 September 2017                   8.0            171.5           1.9            181.4 
                           ------------------  ----------------  -------------  -------------- 
 
   Carrying amounts 
                           ------------------  ----------------  -------------  -------------- 
   At 2 September 2017                   8.9            144.5            -             153.4 
                           ------------------  ----------------  -------------  -------------- 
   At 4 March 2017                       8.9            133.0            -             141.9 
                           ------------------  ----------------  -------------  -------------- 
   At 27 August 2016                     8.9            121.6            -             130.5 
                           ------------------  ----------------  -------------  -------------- 
 
     Assets in the course of construction included 
     in intangible assets at H1 FY18 total GBP106.1m 
     (H1 FY17, GBP69.3m), of 
   which GBP100.4m relates to the Fit for the Future 
    project (H1 FY17, GBP65.7m). No amortisation is 
    charged on these assets 
   until they are available for use. 
   In addition the Group has spend of GBP16.7m (H1 
    FY17 GBP16.7m) that relates to F4F assets which 
    are now in use and 
   therefore being amortised. 
 
     10. Property, plant and equipment 
 
     Additions to tangible fixed assets during the 
     period of GBP0.6m (H1 FY17, GBP2.7m) primarily 
     relate to warehousing. 
   Depreciation of GBP2.8m (H1 FY17, GBP2.7m) was 
    charged during the period. 
 
     Assets in the course of construction included 
     in fixtures and equipment at H1 FY17 total GBP0.4m 
     (H1 FY17, GBP0.9m), 
   and in land and buildings total GBPnil (H1 FY17, 
    GBP21.5m). No depreciation is charged on these 
    assets until they are 
   available for commercial use. 
 
 
 
     11. Trade and other receivables 
 
                                           02-Sep-17              27-Aug-16           04-Mar-17 
                                                   GBPm                  GBPm                GBPm 
 
     Amount receivable for the 
     sale of goods and services                   611.5                 601.8               599.5 
   Allowance for doubtful debts                 (62.8)                (76.4)               (64.7) 
                                   --------------------  --------------------  ------------------ 
                                                548.7                 525.4               534.8 
   Other debtors and prepayments                 45.9                  36.3                 40.6 
                                   --------------------  --------------------  ------------------ 
                                                594.6                 561.7               575.4 
                                   --------------------  --------------------  ------------------ 
 
 
     Movement in the allowance for doubtful debts 
   Balance at the beginning of 
    the period                                   64.7                  97.6                 97.6 
   Amounts charged to the income 
    statement                                    54.3                  55.1               113.5 
   Amounts written off                          (56.2)                (76.3)             (146.4) 
                                   --------------------  --------------------  ------------------ 
   Balance at the end of the 
    period                                       62.8                  76.4                 64.7 
                                   --------------------  --------------------  ------------------ 
 
 
 
      12. Dividends 
    The directors have declared and approved an interim 
     dividend of 5.67 pence per share (H1 FY17 5.67p). 
    This will be paid on 12 January 2018 to shareholders 
     on the register at the close of business on 13 
     December 2017. 
    During H1 FY18 dividends of GBP24.2m relating 
     to FY17 were paid. 
 
      13. Provisions 
                                        Customer               Store 
                                         Redress                Closures                Total 
                                               GBPm                 GBPm                 GBPm 
    Balance at 27 February 2016                   -                    -                    - 
    Provisions made during the 
     period                                     9.0                    -                  9.0 
    Provisions used during the 
     period                                   (1.1)                    -                (1.1) 
    Provisions reversed through                   -                    -                    - 
     the period 
                                  -----------------  -------------------  ------------------- 
    Balance at 26 August 2016                   7.9                    -                  7.9 
    Provisions made during the 
     period                                 13.9                       -                 13.9 
    Provisions used during the 
     period                                   (1.9)                    -                (1.9) 
    Provisions reversed through                   -                    -                    - 
     the period 
                                  -----------------  -------------------  ------------------- 
    Balance at 4 March 2017                 19.9                       -                 19.9 
    Provisions made during the 
     period                                 40.0                    13.8                 53.8 
    Provisions used during the 
     period                                   (6.5)                (0.3)                (6.8) 
    Provisions reversed through                   -                    -                    - 
     the period 
                                  -----------------  -------------------  ------------------- 
    Balance at 2 September 2017             53.4                    13.5                 66.9 
                                  -----------------  -------------------  ------------------- 
 
 
 
      Non Current                             25.0                   4.7                 29.7 
    Current                                 28.4                     8.8                 37.2 
                                  -----------------  -------------------  ------------------- 
    Balance at 2 September 2017             53.4                    13.5                 66.9 
                                  -----------------  -------------------  ------------------- 
    Store Closures 
    During the period, the decision was made to close 
     five loss making stores and these were subsequently 
     closed in August 2017. 
    The costs have been treated as an exceptional 
     item and detailed separately on the income statement 
     as per note 5. The provision is 
    made in respect of onerous lease obligations 
     and other related store closure costs. It is 
     expected that the majority of these costs will 
    have been settled by the year end other than 
     the onerous lease provision which will run to 
     the earlier of the break clause or lease expiry 
    for all five stores. The provision is net of 
     an estimate of potential sub- letting income. 
    Customer redress 
    The provision relates to the Group's liabilities 
     in respect of costs expected to be incurred in 
     respect of payments for historic 
    financial services customer redress, which represents 
     the best estimate of the known regulatory obligations, 
     taking into 
    account factors including risk and uncertainty. 
    As at 2 September 2017 the Group holds a provision 
     of GBP53.4m (H1 FY17, GBP7.9m) in respect of 
     the anticipated costs of 
    historic financial services customer redress. 
     Of this amount GBP40m relates to certain insurance 
     products where management 
    have identified flaws in the product design, 
     the remaining GBP13.4m relates to historical 
     customer redress. These amounts include 
    a provision of GBP2.1m in relation to administration 
     expenses. 
    There are still a number of uncertainties as 
     to the eventual customer redress costs, in particular 
     the total number of claims 
    and the cost per claim, however the Directors 
     believe that the amounts provided at the half 
     year end, based on historical 
    and forecasted claim rates and amounts, along 
     with known legal and regulatory obligations, 
     appropriately reflect the cost 
    to the Group. 
 
      The principal sensitivities in the customer redress 
      calculation are: volumes of policies affected, 
      claim rate, uphold rate 
    and average redress amount. 
                                    26 weeks            26 weeks             53 weeks 
                                     to                  to                   to 
                                      02-Sep-17           27-Aug-16             04-Mar-17 
                                               GBPm                 GBPm                 GBPm 
 
     +/- 10% in claims volumes              +/- 0.7             +/- 0.4               +/- 0.7 
                                  -----------------  -------------------  ------------------- 
   +/- 5% in uphold rate                  +/- 0.5             +/- 0.3               +/- 0.5 
                                  -----------------  -------------------  ------------------- 
   +/- 10% in average redress 
    amount                                +/- 0.7             +/- 0.4               +/- 0.7 
                                  -----------------  -------------------  ------------------- 
 
 
 
     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 
    by the EU 
 
      *    the interim management report includes a fair review 
           of the information required by: 
   (a) DTR 4.2.7R of the Disclosure Guidance and Transparency 
    Rules, being an indication of important events that 
    have occurred 
    during the first 26 weeks of the financial year and 
     their impact on the condensed set of financial statements; 
     and a description of 
    the principal risks and uncertainties for the remaining 
     26 weeks of the year; and 
 
     (b) DTR 4.2.8R of the Disclosure Guidance and Transparency 
     Rules, being related party transactions that have taken 
     place in the 
    first 26 weeks of the current financial year and that 
     have materially affected the financial position or 
     performance of the 
    entity during that period; and any changes in the 
     related party transactions described in the last annual 
     report that could do so. 
 
     This report was approved by the Board of Directors 
     on 12 October 2017. 
 
     Angela Spindler                        Craig Lovelace 
   Chief Executive                        Chief Financial Officer 
 
 
   Independent review report to N Brown Group plc 
   Conclusion 
   We have been engaged by the company to review the condensed 
    set of financial statements in the half-yearly financial 
    report for the 26 weeks ended 2 September 2017 which comprises 
    the condensed consolidated income statement, the condensed 
    consolidated statement of comprehensive income, the condensed 
    consolidated balance sheet, the condensed consolidated cash 
    flow statement, the condensed consolidated statement of 
    changes in equity and related explanatory notes. 
 
     Based on our review, nothing has come to our attention that 
     causes us to believe that the condensed set of financial 
     statements in the half-yearly financial report for the 26 
     weeks ended 2 September 2017 is not prepared, in all material 
     respects, in accordance with IAS 34 Interim Financial Reporting 
     as adopted by the EU and the Disclosure Guidance and Transparency 
     Rules ("the DTR") of the UK's Financial Conduct Authority 
     ("the UK FCA"). 
   Scope of review 
   We conducted our review in accordance with International 
    Standard on Review Engagements (UK and Ireland) 2410 Review 
    of Interim Financial Information Performed by the Independent 
    Auditor of the Entity issued by the Auditing Practices Board 
    for use in the UK. A review of interim financial information 
    consists of making enquiries, primarily of persons responsible 
    for financial and accounting matters, and applying analytical 
    and other review procedures. We read the other information 
    contained in the half- yearly financial report and consider 
    whether it contains any apparent misstatements or material 
    inconsistencies with the information in the condensed set 
    of financial statements. 
   A review is substantially less in scope than an audit conducted 
    in accordance with International Standards on Auditing (UK) 
    and consequently does not enable us to obtain assurance 
    that we would become aware of all significant matters that 
    might be identified in an audit. Accordingly, we do not 
    express an audit opinion. 
   Directors' responsibilities 
   The half-yearly financial report is the responsibility of, 
    and has been approved by, the directors. The directors are 
    responsible for preparing the half-yearly financial report 
    in accordance with the DTR of the UK FCA 
   As disclosed in note1, the annual financial statements of 
    the group are prepared in accordance with International 
    Financial Reporting Standards as adopted by the EU. The 
    directors are responsible for preparing the condensed set 
    of financial statements included in the half-yearly financial 
    report in accordance with IAS 34 as adopted by the EU. 
   Our responsibility 
   Our responsibility is to express to the company a conclusion 
    on the condensed set of financial statements in the half-yearly 
    financial report based on our review. 
 
     The purpose of our review work and whom we owe our responsibilities 
   This report is made solely to the company in accordance 
    with the terms of our engagement to assist the company in 
    meeting the requirements of the DTR of the UK FCA. Our review 
    has been undertaken so that we might state to the company 
    those matters we are required to state to it in this report 
    and for no other purpose. To the fullest extent permitted 
    by law, we do not accept or assume responsibility to anyone 
    other than the company for our review work, for this report, 
    or for the conclusions we have reached. 
   Stuart Burdass 
   for and behalf of KPMG LLP 
   Chartered Accountants 
   1 St Peter's Square 
   Manchester 
   M2 3AE 
   12 October 2017 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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